Property Rights

Argentina President Cristina Kirchner

Argentina President Cristina Kirchner

Can a country seeking to welsh on its debts invoke sovereign immunity to evade not just court orders to pay those debts, but also post-judgment discovery aimed at collecting on those judgments? Can it do so to prevent not just discovery directed at it, but also at third-party banks? Most importantly, perhaps, can it do so even though it contractually waived sovereign immunity? The answer is yes, according to Argentina, which is seeking to stiff many of its bondholders. Thankfully, the U.S. Court of Appeals for the Second Circuit disagreed with this attack on property and contract rights in a 2012 decision.

But amazingly enough, the Obama administration has taken Argentina’s side at the Supreme Court. It is joined by the government of France, which has experienced downgrades in its credit rating due to stubbornly-high government spending under Socialist Francois Hollande that consumes well over half of France’s economy. The willingness of the Obama administration to take Argentina’s extreme position is disturbing given that the Second Circuit’s ruling was unanimous.

CEI and several former State Department officials have filed an amicus brief asking the Supreme Court to uphold the appeals court’s ruling, and reaffirm the availability of the post-judgment discovery needed to protect property and contractual rights. The former State Department officials include counsel of record John Norton Moore, former Counselor on International Law to the Department of State; Robert F. Turner, former Deputy Assistant Secretary of State for Legislative Affairs; Abraham D. Sofaer, a former federal judge and former Legal Adviser to the Department of State; Professor Malvina Halberstam, former Counselor on International Law to the State Department; and Davis R. Robinson, former Legal Adviser to the State Department. John Norton Moore, who teaches international law and national-security law at the University of Virginia, was extensively involved in drafting the Foreign Sovereign Immunities Act (FSIA) involved in the case. Judge Sofaer was appointed by President Carter to the federal bench in 1979.

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Earlier, I wrote about how Obama administration officials have been very “tight-lipped in response to FOIA requests” about their “government shutdown shenanigans,” such as closing private businesses and non-profit tourist attractions out of spite, and blocking access to private homes and tourism sites within or merely next to public land. I have now appealed the National Forest Service’s very scanty response to my FOIA request about the planning and implementation of those closures both before and after the shutdown, in an administrative appeal you can view at this link.

Although I submitted FOIA requests about the October 2013 government shutdown to both the National Park Service and the National Forest Service, the Park Service hasn’t produced any documents at all, while the Forest Service produced only emails for the period after the shutdown ended (and nothing from the email accounts of Forest Service employees who were discussing with the press the very issues covered by my FOIA request). The National Park Service has also apparently stonewalled other FOIA requestors.

The Forest Service has not explained how it could only have emails sent after, but not before or during, the shutdown, a suspicious fact that indicates that it did not comply with FOIA. Under FOIA, the agency has to show that it has conducted a thorough search; it is not my burden as the requester to prove the opposite. (See, e.g., Carney v. U.S. Dep’t of Justice, 19 F.3d 807, 812 (2d Cir.1994) (citing 5 U.S.C. § 552(a)(4)(B)).

Under FOIA, an agency must demonstrate that “each document that falls within the class requested either has been produced,” or is “exempt from” FOIA. (See Goland v. C.I.A., 607 F.2d 339, 352 (D.C. Cir. 1978)). The Forest Service has not done so, as I explained earlier.

Under FOIA, a search must be “reasonably calculated to uncover all relevant documents.” (See, e.g., Nation Magazine v. U.S. Customs Serv., 71 F.3d 885, 890 (D.C. Cir. 1995)).

A reasonable search means that “all files likely to contain responsive materials . . . were searched.”  See Cuban v. SEC, 795 F.Supp.2d 43, 48 (D.D.C. 2011); see also Landmark Legal Foundation v. E.P.A., 2013 WL 4083285, *6 (D.D.C. Aug. 14, 2013) (rejecting agency’s attempt to dismiss FOIA lawsuit against it, and finding inadequate search, where “EPA did not search the personal email accounts of the Administrator, the Deputy Administrator, or the Chief of Staff,” but rather only searched only “accounts that were in its possession and control,” despite the existence of “evidence that upper-level EPA officials conducted official business from their personal email accounts”); Yonemoto v. Department of Veterans Affairs, 686 F.3d 681, 689 (9th Cir. 2012) (Freedom of Information Act lawsuit against agency should not be dismissed if additional emails could be uncovered through a more thorough search; dismissal is inappropriate where “the agency produces what it maintains is all the responsive documents, but the plaintiff challenges ‘whether the [agency's] search for records was adequate,’” quoting Nw. Univ. v. Dep’t of Agric., 403 F.Supp.2d 83, 85–86 (D.D.C.2005).

Post image for Agencies Withhold Documents about Closures of Private Businesses in Government Shutdown

In last October’s government shutdown, the Obama administration closed down, or blocked access to, many private businesses that had been allowed to operate in earlier shutdowns, such as during the Clinton administration.  After lawyers and legal commentators suggested that these closures of private businesses were illegal, and pointed out that they were an unexplained departure from past agency practice, I filed a series of Freedom of Information Act (FOIA) requests with the agencies that carried out these closures — the National Forest Service, the National Park Service, and the Department of the Interiors — seeking to find out which officials were responsible for these improper closures, and how the decision to close them was made.

(Testimony by CEI’s Myron Ebell suggests that the National Park Service was probably the worst offender among all the agencies. A judge later ruled in favor of parents’ legal challenge to the National Park Service’s closure of a state park used by their children, and other judges apparently issued temporary restraining orders against things like the suspension of timber operations. A Federal judge was apparently about to issue an injunction against the closure of private concessions in National Forest Recreation Association v. Tidwell when the shutdown finally came to an end on October 17.)

In FOIA requests submitted on October 9 and 10, I sought information about the orders closing down these businesses, how the targeted private businesses were selected (some politically connected businesses were spared being closed), and about the policies the government relied upon in shutting them down. Months later, long after the legal deadline for responding to my FOIA request, the National Park Service and the Department of the Interior still have not produced any documents at all, even though they were legally required to respond within 20 working days after I made my request.

In March, the Forest Service did finally respond, but its response — producing only agency communications that occurred after the shutdown ended – suggests that it has withheld, or failed to search for, the most interesting (and potentially incriminating) documents.

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Post image for Supreme Court Overwhelmingly Votes to Uphold Rights of Private Property Owners

The Supreme Court has decided an important property rights case in favor of the private property owners and against the claim of the federal government by an eight-to-one majority. Surprisingly, the Court’s liberal Justices, with the exception of Justice Sonia Sotomayor dissenting, signed Chief Justice John Roberts’s March 10 decision. In reversing the Tenth Circuit Court of Appeals, the Court ruled, in Brandt Revocable Trust et al. v. United States, that a right of way granted to a railroad in 1908 did not revert to the federal government when the railroad abandoned the tracks in 2004.

The original right of way was over federal land, but 83 acres of that land were patented in 1976 in a land swap with the U. S. Forest Service. The Department of Justice argued that even though those 83 acres had been turned over to private owners, the right of way over that now-private land had reverted to the federal government when the railroad stopped running. Arguing for the Brandts, Steven J. Lechner of Mountain States Legal Foundation stated that the right of way was an easement granted for a particular use, and therefore had expired when its intended use, operation of a railroad, had ended.

The Chief Justice’s opinion relies heavily on the 1942 Supreme Court decision, Great Northern Railway Company v. United States (315 U. S. 262), in which the Court agreed with the federal government’s argument that the General Railroad Right of Way Act of 1875 only conveyed easements. The majority opinion stated:

More than 70 years ago, the Government argued before this Court that a right of way granted under the 1875 Act was a simple easement. The Court was persuaded, and so ruled. Now the Government argues that such a right of way is tantamount to a limited fee with an implied reversionary interest. We decline to endorse such a stark change in position….

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Post image for Is FCC Chairman Tom Wheeler for or against Net Neutrality? Yes

In what the Washington Post referred to as Federal Communications Commission (FCC) Chairman Tom Wheeler’s strongest endorsement yet of net neutrality, he said:

Public policy should protect the great driving force of the open Internet: how it allows innovation without permission…. This is why it is essential that the FCC continue to maintain an open Internet and maintain the legal ability to intervene promptly and effectively in the event of aggravated circumstances.

Other outlets regard Wheeler’s recent pronouncements as being more ambiguous. Does he favor the right to offer variations in prices and services, or not?

I see matters opposite from the proponents of net neutrality; I think variations in pricing and service are essential, as is the creation of future generations of networks, which can’t happen optimally without such fundamental property rights. (Yes, property rights.)

I recently cosigned with a group of economists a letter of congratulations to Wheeler in which we stressed:

The economic evidence…is clear: in all but a few areas, communications networks no longer have the characteristics of natural monopolies, and should no longer be regulated as public utilities. Indeed, the convergence of the communications sector into the dynamic, intensively competitive Internet ecosystem is now virtually complete.

Whatever happens with Verizon’s challenge to the FCC’s December 2010 Order on “Preserving the Free and Open Internet” in the United States Court of Appeals for the D.C. Circuit, the “openness” doctrine will persist, potentially holding competitive networks (yes, plural) and critical infrastructure advances down to the speed of government.

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Post image for Hypocritical New Yorkers Whine about High Housing Prices while Supporting High-Price Policies

The New York Post today has a story on what it describes as “new hipsters fight[ing] old hipsters in Brooklyn.” The gist of it is that a wave of relatively wealthy gentrifiers moved into the neighborhood of Bushwick a decade ago and now a second wave of even wealthier residents is flocking to the hip neighborhood, driving up housing prices.

The first wave is not happy with the rising rents associated with the second wave, and is demanding “affordable housing” concessions from developers who dare build middle-upper income rental units. This response is sadly typical. Rising real estate prices are a natural consequence of urban redevelopment. But the real estate market in New York City is anything but natural and a large share of the sky-high housing prices can be attributed to land-use controls such as zoning and rent stabilization laws. Unfortunately, those who advocate for “affordable housing” (note: this is not housing affordability) often make the problem worse by supporting policies that actually further reduce the stock of available housing — artificial supply restrictions that drive up prices.

Neighboring Manhattan has been a favorite research subject for economists seeking to understand the impact of land-use regulations on the real estate market. Economists Edward Glaeser, Joseph Gyourko, and Raven Saks authored an influential study that appeared in the October 2005 issue of the Journal of Law and Economics. They concluded that upwards of 50 percent of the price of a Manhattan condominium could be thought of as a hidden land-use regulatory tax due to policies that restrict the construction of new housing units.

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Post image for Is the FTC Already Capable of Regulating Patent Demand Letters?

The answer is no, except under special circumstances. The question itself arises from comments by Julie P. Samuels of the Electronic Frontier Foundation at last week’s panel held by the Senate Committee on Commerce, Science and Transportation over demand letters from patent assertion entities (PAEs), commonly known as patent trolls. Samuels proposed new legislation to expand the Federal Trade Commission’s (FTC) Section 5 authority, which allows the FTC to regulate “unfair or deceptive acts” by businesses.

PAEs are companies which buy patent rights from other companies and then sell licensing rights for those patents to other third party companies to produce products using said patents. Patent demand letters are letters sent by PAEs to companies which are accused of violating the patents held by a PAE in question.

Section 5 is codified in 15 U.S.C. § 45(a). It gives the FTC has the authority to regulate “unfair or deceptive acts or practices” by businesses. The FTC enforces Section 5 either by reporting such acts to relevant agencies, or bringing violators to court. The FTC issued a deception policy statement in 1983 in which it clarified its understanding of unfair and deceptive acts. Deceptive acts were defined as acts in which “representation, omission or practice” by a business would mislead consumers about the product they intended to buy. Furthermore, such deceptive acts don’t have to be intentionally deceptive. There merely has to be a consumer who is being deceived in order for the FTC to act as a regulator.

So the real question is, is there a consumer involved with patent demand letters? The problem here is that the FTC Act never gives a legal definition for what a consumer is, so a new law or policy statement would have to provide one. I argue that because there is no product being exchanged between a PAE and the letter recipient, demand letters are therefore not within the FTCs jurisdiction.

There is more to the story, though. As FTC Commissioner Joshua D. Wright has described in this speech, the PAE’s do have a consumer base that could enable regulation by the PAE: the companies which license the patent rights to create material products. The FTC could intervene, via anti-trust, if the PAE does not describe the details of patents accurately to licensees. That is, if patent licenses are sold with details omitted or lied about, then the FTC would have authority to intervene. Or, in Wright’s words:

To fulfill their notice function, patent claims must delineate the scope of patent rights with sufficient clarity that a person skilled in the relevant art can reliably determine whether planned activities would infringe. Many panelists declared that patents often provide little guidance as to their coverage because they lack “clarity,” i.e., they are “vague,” “ambiguous,” or otherwise difficult to interpret. Some of this testimony addressed patents across the board. [See here.]

Thus, the deception would not focus so much on demand letters, except as those letters are tied into protecting the patents that have been licensed to other companies from the PAEs.

antitrustAs is now commonplace, American Airlines needed to relent to conditions imposed on the merger with US Airways to secure Department of Justice approval, primarily relinquishing airport slots. Rivals like JetBlue are happy about that. I would be too; can I have slot space?

Regulators should refrain from their habit of using the merger review process to extract a parade of concessions in virtually every business combination. That is not a free market, it is not capitalism. Antitrust policy should allow aggressive competitive responses to every combination.

Investors, consumers, already-poised rivals, newly energized rivals, advertisers, entrants, and the possibility of less-than-cordial takeover prospects collectively can discipline a combined entity more thoroughly than, in this case, the Department of Justice. Of course, the “antitrusters” interfere with the competitive responses too. Antitrust is kind of like an end in itself.

A better full-time emphasis for our so-called enforcers is economic liberalization such that upstream and downstream threats and pressures keep companies in line instead of Washington. Any enterprise that attempts to monopolize faces collective wrath; there’s no necessary governmental policing role otherwise, and no need for “conditions” which merely put a veneer of authority on an anachronistic oversight process that keeps regulators overly engaged and delays real infrastructure and other liberalization.

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Post image for Enflaming, Not Enlightening: George Monbiot on Investment Treaties

George Monbiot in The Guardian, in his usual hyperbolic and specious way, describes the proposed U.S.-EU trade agreement’s purpose as to attack national sovereignty through a secret plot by big businesses and corporate lawyers to sue governments and overturn nations’ laws.

Monbiot starts his diatribe by asking a set of rhetorical questions. A bit irritating, but maybe that’s his way of getting readers involved. Then comes his first substantive sentence: “The purpose of the Transatlantic Trade and Investment Partnership is to remove the regulatory differences between the U.S. and European nations.”

That is a misstatement. TTIP’s purpose is to promote freer trade between two of the largest trading blocs in the world by removing tariffs, addressing non-tariff barriers, and attempting to streamline differing regulatory schemes that impede trade. Through reducing or eliminating trade barriers, the overarching purpose is to increase economic growth and create new jobs on both sides of the Atlantic.

But Monbiot ignores those purposes, of course. Instead, he focuses on the nefarious goal of big business — “to kill regulations protecting people and the living planet” through promoting investor-state dispute settlement in TTIP. And Monbiot says that this mechanism is powerful, subtle, and secretive:

The remarkable ability it would grant big business to sue the living daylights out of governments which try to defend their citizens. It would allow a secretive panel of corporate lawyers to overrule the will of parliament and destroy our legal protections.

What Monbiot is referring to are investment treaties or provisions between countries that attempt to attract investment in those countries through providing clear and non-discrimatory rules for how one country treats investors from another country. Those investor-state rules obviously have to incorporate provisions dealing with disputes, that is, when an investor from another country believes his property has been expropriated or reduced in value by the other country’s actions. When that occurs, the dispute would be arbitrated, generally by an international panel.

Again, that approach makes sense. If the dispute were decided by the domestic courts of law, varying legal systems would complicate the process. Plus, there would be a greater likelihood of discriminatory treatment against the foreign country.

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Post image for More Bipartisan Opposition to Obama Administration’s Move to Block Airline Merger (Including Rahm Emanuel)

Another day, another round of public bipartisan opposition to the Obama Department of Justice’s lawsuit to block the pending American Airlines and US Airways merger. In today’s edition, a coalition of big city mayors wrote to Attorney General Eric Holder expressing their collective concern that blocking the merger will harm their cities’ economic growth and airline industry employees. The letter concludes:

By attempting to block the proposed combination, the Department has needlessly added to the uncertainty that these employees and their families must endure and has put jobs at risk.

Our cities rely on the airline industry to support existing businesses, attract new businesses and to keep our local economies moving forward. e health and well-being of our cities and our citizens depends on this combination moving forward.

For these reasons, we ask you to settle your lawsuit with American Airlines and US Airways and allow the combination to proceed.

It was signed by seven mayors: Patsy Kinsey (D-Charlotte), Michael Nutter (D-Philadelphia), Greg Stanton (D-Phoenix), Mike Rawlings (D-Dallas), Betsy Price (R-Fort Worth), and Carlos A. Gimenez (R-Miami-Dade County). In a surprising twist, former Obama White House chief of staff and current Democratic Chicago Mayor Rahm Emanuel also signed the letter.

It was announced this afternoon that Oklahoma Attorney General Scott Pruitt (R) intends to file an amicus brief supporting the merger, which will likely be joined by other states.

I previously noted the dwindling support for the Justice Department’s deeply flawed lawsuit and recommended two real pro-competitive policy reforms Congress and the president ought to pursue. President Obama’s most important constituency, organized labor, has strongly opposed the merger lawsuit since its filing. As the ranks of opponents from both sides of the aisle grow, it is becoming unclear what the Obama administration hopes to accomplish by continuing forward with its misguided attack on the American Airlines-US Airways merger.