Topic: Law and Civil Liberties

The Long Path to Director Cordray’s Removal

I have been vigorously recommending that President-elect Trump replace Richard Cordray as director of the Consumer Financial Protection Bureau (CFPB). I still think that replacing Director Cordray is necessary for reasons I’ve enumerated elsewhere; but on Friday the CFPB filed a petitionfor a rehearing of a recent and crucial case. So it’s time to talk about the legal hurdles President Trump will have to clear before he can install a new director. It is possible that there will be a long road ahead.

To understand these hurdles, we have to go back to the CFPB’s founding document, the Dodd-Frank Act. In Dodd-Frank, the Bureau was established as an independent agency. That means that although the President appoints the Director, and although that appointment must be confirmed by the Senate, the President’s ability to remove the director is very limited. Under Dodd-Frank, President Trump would be able to remove Director Cordray only for cause — e.g., for neglecting his duty or actual bad behavior. He would not be able to remove him because the two disagreed on policy or the direction the agency should take.

The rules for an independent agency can be contrasted with those for an executive agency, such as the Department of Justice or the Department of the Treasury. The Attorney General, for example, can be removed by the President at will. And there have been examples in the past when a cabinet member has resigned over policy disagreements with the sitting President.

The CFPB is not the only independent government agency. But it is unusual in that it is headed by a single individual. The Securities and Exchange Commission (SEC), for example, is an independent agency. Its Commissioners can be removed by the President only for cause. The Chair of that agency, however, serves as Chair at the President’s will. If President Obama wanted to remove the current Chair Mary Jo White, he could remove her from her position as Chair but could not prevent her continuing as a member of the Commission for the duration of her term.

All of this changed, however, last month when a federal appeals court ruled the CFPB’s structure unconstitutional. In that case, the court found that, unlike a multi-seat commission where commissioners must work together, there is no check on the Director’s power. The court ruled that, to cure the constitutional defect, the Director must serve at the will of the President. That is, the court said that the President can fire the Director for any reason at all, including a disagreement on policy.

Supreme Court Takes on the Empire State’s Language Police

In Federalist 10, James Madison warned of “a number of citizens, whether amounting to a majority or minority of the whole, who are united and actuated by some common impulse of passion, or of interest, adverse to the rights of other citizens or to the permanent and aggregate interests of the community.” These groups—“factions” in Madison’s terms—come together to seek concentrated benefits from favorable legislation and regulation rather than competing in the marketplace, while spreading the costs throughout society.

While Madison conceded that such interests could not be stopped completely, he suggested that certain steps could be taken to mitigate the “effects” of these groups, and the damage that they can do to the public interest. The First Amendment is one such protection.

The New York legislature, however, ignored the First Amendment rights of both merchants and consumers when—at the behest of the credit-card lobby—it passed a law restricting how retailers can convey pricing schemes, as well as the public’s right to know about them. New York’s no-surcharge law—like those in 10 other states—insulate credit-card companies from consumer knowledge about who is actually causing the higher prices on goods when they use their credit card (“swipe fees”). The law does this not by restricting the merchants’ ability to charge different prices as between cash and credit payments—that’s legal everywhere—but by regulating the communications about the different prices.

To put it simply: the law allows merchants to offer “discounts” to cash-paying customers, but makes it a crime to impose economically equivalent “surcharges” on those who use plastic. By mandating how these merchants convey their pricing structure, New York is restricting speech on the basis of its content, which would seem to be an obvious First Amendment violation.

A federal district court agreed—as have two other federal courts, including the U.S. Court of Appeals for the Eleventh Circuit when it struck down a similar Florida law. The district court held that the law “plainly regulates speech”—not conduct—by drawing a line between prohibited “surcharges” and permissible “discounts” based solely on words and labels. The Second Circuit disagreed, however, holding that the law regulates “merely prices,” not speech. Cato filed an amicus brief urging the Supreme Court to take up this important case, and the Court has agreed to do so.

Along with the Pacific Legal Foundation, we have now filed another brief asking the Court to rule that collusion between business interests and state government can’t be used to circumvent constitutional rights. Indeed, the Framers sought to protect speech from the type of cronyism and rent-seeking the New York’s no-surcharge law manifests.

Delete NSEERS Before Trump Takes Office

This week Kris Kobach, Kansas Secretary of State and Trump transition team adviser, told Reuters that Trump’s team had discussed his plan to restore a registry of immigrants from predominantly Arab and Muslim counties. The registry, which was part of the National Security Entry-Exit Registration System (NSEERS), operated from 2002 until 2011. The Obama administration suspended it, citing efficiency issues. Although NSEERS was suspended it could very easily be resuscitated and made worse. This is by design. A 2012 Department of Homeland Security Office of Inspector General (OIG) report reveals that the Department of Homeland Security (DHS) rejected a recommendation to terminate the NSEERS program, saying that the system would allow DHS to register “a category of aliens” in the future.

In the wake of 9/11 the Department of Justice (DOJ) built NSEERS. DHS took control of the program after it was established in 2003. Under NSEERS, nonimmigrant aliens from 25 countries were fingerprinted, interviewed, photographed, and required to check in with officials at regular intervals. Twenty-four of these 25 countries were majority-Arab and Muslim (North Korea was the other country).

Although in place for almost a decade, NSEERS was ineffective as an anti-terrorism tool. Because of the inscrutable rules associated with NSEERS, thousands of men and boys were deported while the system was up and running.

It shouldn’t come as a surprise, then, that in February 2012 a DHS OIG report found that, “The NSEERS program for special registration of certain categories of aliens from predominantly Arab and Muslim countries, and the database that supports this program, is obsolete and should be terminated.”

Political Violence and Domestic Surveillance: Has The Fuse Been Lit?

Ben Schreckinger at POLITICO has a story out today that every American concerned about the current political climate in our country should read. With the lede of “Trump Protesters Plan to Build ‘Tea Party’ of the Left,” Schreckinger quotes several progressive activists, including former Occupy Wall Street veteran Micah White. It’s worth quoting White in full, because his comments will absolutely draw the attention of officials at the FBI and DHS:

American activists are finally starting to understand that protest is broken. The people cannot attain sovereignty over their governments by collective protest in the streets. There are only two ways to achieve sovereignty in this world: Win elections or win wars. Now that street protest is not an option, we will see the Trump resistance split into these two fronts. Some will pursue the strategy of using social movements to [win] elections while others go down the dark path of ’70s guerrilla insurrection. I advocate winning elections.

Without question, the Founders would agree with much of what White says. American colonists spent over a decade trying to get Crown authorities to understand that every new tax or regulation imposed on them without their consent was creating resentments and opposition to British rule that, if not resolved peacefully, would lead to armed conflict.

Some in Parliament understood the dangers and sympathized with Americans—but not enough. It’s worth remembering that the Continental Congress was formed almost a full year before the Declaration of Independence was issued. The warning signs were there, but George III doubled-down on repression rather than negotiate with the colonists. The rest, as they say, is history. The question raised by White’s comments and the rest of Schreckinger’s piece is whether that history is about to repeat itself, this time with the federal government in the lead role of political oppressor.

Chris Christie Bets on Federalism

While he may be in the news for being on the outs from the Trump transition, as well as for legal troubles regarding Bridgegate, New Jersey Governor Chris Christie is also leading a challenge to federal law that could have a quite beneficial effect in rebalancing federal-state relations.

First, some background. Why do we even have states? While a fairly common question now in light of the federal Leviathan, it likely would have seemed quite foreign to the Constitution’s authors. The Framers saw federalism’s decentralization of government authority as a central bulwark of ordered liberty, preventing any one entity or bloc from gaining too much power over the nation while encouraging innovative competition among the several “laboratories of democracy.”

Unfortunately, federalism’s safeguards against centralized authority have slowly eroded, particularly since the New Deal Supreme Court’s expansive reinterpretation of the Commerce Clause paved the way for aggressive federal expansion under Presidents Roosevelt, Johnson, and beyond. One firewall that has survived, however, is the anti-commandeering doctrine: the idea that the federal government may not compel states or state officials to implement federal policies. In other words, states cannot be made into mere “puppets of a ventriloquist Congress.” Printz v. United States (1997).

It is this anti-commandeering doctrine that is under threat in Christie v. NCAA. The Professional and Amateur Sports Protection Act (PASPA) is a federal statute that does not allow states to “authorize” sports gambling “by law.” So when New Jersey wanted to repeal some of its old gambling laws, it was stopped from doing so by PASPA, prompting Gov. Christie to sue on the grounds that the law infringes on New Jersey’s sovereignty and further undermines the United States’ federalist structure.

The U.S. Court of Appeals for the Third Circuit interpreted this prohibition to bar states not just from affirmatively licensing sports gambling, but also from repealing or modifying preexisting state prohibitions. It held that PASPA did not violate the anti-commandeering doctrine because New Jersey wasn’t being compelled to pass new legislation, just forbidden from repealing existing laws. In doing so, it accepted an argument based almost entirely on semantics. Regardless of whether the federal government compels or forbids particular action, the result—a state’s being forced to regulate behavior that its duly elected representatives prefer to leave unregulated—is the same.

If allowed to stand, this absurd loophole may have wide-ranging implications across many policy areas and poses a serious threat to what remains of state sovereignty. Cato has joined the Pacific Legal Foundation and the Competitive Enterprise Institute on a brief supporting New Jersey’s petition for Supreme Court review.

We urge the court to take up the case so that it can clarify the proper scope of the anti-commandeering doctrine and ensure that the sovereignty of the individual states—so critical to the republic’s constitutional system of checks and balances—is not further eroded by an overreaching national government.

The Battle for the Court Takes Shape

As votes in a few places are still being counted, the battle to fill Justice Antonin Scalia’s empty seat on the Supreme Court is already taking shape. Speaking on MSNBC last night and again this afternoon on WBUR’s “Here & Now” (NPR), Oregon Senator Jeff Merkley, a member of the important Senate Democratic Caucus, set forth what is likely to be a main line of argument going forward for Senate Democrats.

In a nutshell, given the failure of Senate Republicans to hold hearings on President Obama’s nominee, Judge Merrick Garland, the seat “is being stolen,” rendering anyone that President Trump might put forward “illegitimate.” As Merkley put it last night:

The seat that’s sitting empty is being stolen. It’s being stolen from the Obama administration and from the construct of our Constitution, and it’s being delivered to an administration that has no right to fill it. And we have to understand that this is about the Koch Brothers cartel working with the Republican majority to say that they want to basically pack the Court. … There’s no legitimacy to a Supreme Court justice in a seat that’s being stolen from one administration and handed to another. We need to do everything we possibly can to block it. … This is a theft being delivered to the Koch Brothers, and the Koch Brothers are not interested in We the People. It’s turning the Constitution on its head. This is government by and for the most powerful. It locks in Citizens United, which is completely against the mother principle that Jefferson laid out for an equal voice for citizens, and this is going to corrupt our political system in a way never envisioned or intended by our Constitution for a generation to come.

Asked if he would keep that seat open for as long as Democrats could, even if it took the entire duration of a term and keep a 4-4 Court, Merkley answered that first he would “call upon the majority leader that Merrick Garland gets a legitimate shot at a vote here in the lame duck, and then the Trump administration, if they want to see partnership and cooperation, if he puts forward a nominee it should be Merrick Garland.”

Doubling down on those points on NPR this afternoon, Merkley charged that “for the first time in history the Republican leadership failed to fulfill their responsibilities” and this “delegitimizes any nominee that Trump might put forward”—adding that “there’s still time to salvage this,” but “we’re facing a real problem … in terms of legitimacy of whoever Trump might put forward. So we really have a deep corruption that is occurring through this stolen Supreme Court seat.” He concluded that “absolutely,” he would filibuster a nominee, adding that “we changed the application of the rules back in 2013. We left in place the filibuster on the Supreme Court.”

The “we” Merkley references was not the Senate as a whole, of course, but Senate Democrats, led by Harry Reid, who exercised the so-called nuclear option in order to “pack” the appellate courts with Obama nominees unacceptable to the Senate Republican minority. Doubtless, Reid and company wanted to keep the filibuster in place for Supreme Court nominations just in case they lost the Senate, which happened only a year later. But in the process, they lost the principle, even as the appellate courts they filled were upholding Obama’s rule by executive diktat.

Litigation Policy In the Trump Administration

For a quarter century Republicans in American politics have broadly campaigned on a promise of reducing the volume and cost of litigation. At first glance, it might seem that the rise of President-elect Donald Trump might signal a discarding or even a reversal of this position. As a businessman, Trump has been an intensive, sometimes zealous litigant; unlike earlier GOP candidates he has said little about lawsuit reform on the campaign trail; and some of what he has said, especially his instantly famous remarks about “opening up” libel law to allow more damage suits against the press, is in tension with the goal of a less costly and more predictable legal system. 

At the same time, there are reasons to believe that a Trump administration will maintain considerable continuity with the positions of earlier GOP administrations as well as of Congressional Republicans. Here are some of those reasons. 

* Both sides of the “v.” Trump has been in court frequently as plaintiff and defendant alike. While he may be nobody’s idea of a critic of litigiousness, there is little reason to believe that his instincts about the legal system are systematically pro-plaintiff or pro-trial-lawyer in the manner of some Capitol Hill Democrats.