Legal

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.

[click to continue…]

New Jersey’s anti-bullying law, which applies to the state’s schools and universities, is so overly broad that a fourth-grader was punished just for noting, in response to a question, that a classmate had suffered from head lice. A civil-liberties group called the Rutherford Institute is now representing that student in a First Amendment challenge to the law, notes the Newark Star-Ledger in an article titled, “Civil liberties organization asks federal court to declare NJ’s anti-bullying law unconstitutional.” Another civil-liberties group, FIRE, has also concluded that the law violates the First Amendment.

The Rutherford Institute explains:

Attorneys for The Rutherford Institute have asked a federal court to declare a New Jersey anti-bullying law unconstitutional in light of its chilling effect on students’ free speech rights. The Institute’s latest brief, which counters a move by the New Jersey Commissioner of Education to have the lawsuit dismissed, argues that the state’s enforcement of the anti-bullying act represents a violation of students’ rights under the First and Fourteenth Amendments to the U.S. Constitution and the New Jersey state constitution. Institute attorneys filed the First Amendment lawsuit in Lim v. Board of Education of the Borough of Tenafly in December 2013 on behalf of a 4th grade boy who was punished under the act for truthfully stating that a fellow student had head lice.

“What school officials conveniently seem to keep forgetting is that students do not shed their constitutional rights at the schoolhouse gate,” said John W. Whitehead, president of The Rutherford Institute and author of A Government of Wolves: The Emerging American Police State. . . Rutherford Institute attorneys argue that while the purpose of the law is admirable, the law’s scope is unconstitutionally broad and the language is too vague to give parents or students adequate notice about what statements will or will not be prohibited.

Highlighting the potential absurd applications of the law, Institute attorneys draw attention to an incident that took place in September 2011, when a 4th grade boy was punished under the act for correctly stating that a fellow student had head lice. A few days after a note was sent home to the parents of a class of 4th grade students, warning them that one of the students had head lice, several students were sitting at a group table completing an assignment together. During the discussion, one student asked a female student why she had dyed her hair. After she failed to respond to the question, one young boy, L.L., correctly replied that she had done so because she was the student who had head lice. The female student complained to the teacher who in turn instructed L.L. to apologize, and the class lesson continued uninterrupted. The teacher then reported the incident to the school’s “Anti-Bullying Specialist,” who filled out a bullying report and informed the Superintendent about the incident. As a result of the finding, the student was forced to undergo a special sensitivity assignment, and the entire class was reminded about the need to be kind to each other, which further embarrassed the fourth grader. L.L.’s parents appealed the bullying determination first with the local school board, and then with the state Board of Education, both of which affirmed the decision.

Arguing that the statute punishes any speech deemed “hurtful,” even if factually true and non-disruptive, attorneys for The Rutherford Institute filed a First Amendment lawsuit in federal court, asking that the statute be struck down, and that students like L.L. not be penalized in accordance with the statute for exercising their constitutional rights.

[click to continue…]

“In this case the EEOC sued the defendants for using the same type of background check that the EEOC itself uses.” So began a 3-to-0 ruling Wednesday by the Sixth Circuit Court of Appeals in EEOC v. Kaplan Higher Education Corp. (Apr. 9, 2014). CEI joined the Pacific Legal Foundation’s amicus brief in support of the employer sued by the EEOC, the federal civil-rights agency. (EEOC stands for Equal Employment Opportunity Commission.) As former assistant attorney general Roger Clegg (now at the Center for Equal Opportunity) notes,

The Obama Administration sued Kaplan for running credit checks on employee applicants – similar, by the way, to the ones the EEOC itself uses. Kaplan had learned that some of its employees had misappropriated student payments and, to provide safeguards against this behavior, it began screening its applicants for major red flags in their credit history. The EEOC sued Kaplan, arguing that it cannot use credit checks, because use of credit checks has a disparate impact on black applicants.

Anyway, putting aside the inherent dubiousness of the whole lawsuit, there were also severe methodological problems with the Obama Administration’s evidence, which relied on “race raters” to determine, by scrutinizing driver’s license photos, the race of the applicants. So the trial judge threw out the case. Today, I’m happy to report, the court of appeals affirmed that decision – and in no uncertain terms, I might add, much I’m sure to the Obama administration’s chagrin.

At the Washington Post, UCLA Law Professor Eugene Volokh provides these excerpts from the court’s ruling:

The EEOC’s personnel handbook recites that “[o]verdue just debts increase temptation to commit illegal or unethical acts as a means of gaining funds to meet financial obligations.” Because of that concern, the EEOC runs credit checks on applicants for 84 of the agency’s 97 positions. The defendants (collectively, “Kaplan”) have the same concern; and thus Kaplan runs credit checks on applicants for positions that provide access to students’ financial-loan information, among other positions. For that practice, the EEOC sued Kaplan. Specifically, the EEOC alleges that Kaplan’s use of credit checks causes it to screen out more African-American applicants than white applicants, creating a disparate impact in violation of Title VII of the federal Civil Rights Act. See 42 U.S.C. § 2000e-2(a)(1), (a)(2), (k). Proof of disparate impact is usually statistical proof in the form of expert testimony; and here the EEOC relied solely on statistical data compiled by Kevin Murphy, who holds a doctorate in industrial and organizational psychology. For two reasons, however, the district court excluded Murphy’s testimony on grounds that it was unreliable. First, the EEOC presented “no evidence” that Murphy’s methodology satisfied any of the factors that courts typically consider in determining reliability under Federal Rule of Evidence 702; and second, as Murphy himself admitted, his sample was not representative of Kaplan’s applicant pool as a whole. The district court therefore granted summary judgment to Kaplan. The EEOC now argues that the district court “erred” — a telling, oft-repeated, and mistaken choice of word here — when it excluded Murphy’s testimony. We reject the EEOC’s arguments and affirm.

  . . . . . . . .

The EEOC brought this case on the basis of a homemade methodology, crafted by a witness with no particular expertise to craft it, administered by persons with no particular expertise to administer it, tested by no one, and accepted only by the witness himself. The district court did not abuse its discretion in excluding Murphy’s testimony.

[click to continue…]

Obama RacineAlthough President Obama occasionally clings to the claim that his administration is the “most transparent” in history, with more and more revelations, this gets farther and farther from the truth. Clearly, we have an epidemic on our hands.

Over the past couple years, I have uncovered case after case of federal government officials, particularly those at the Environmental Protection Agency (EPA), knowingly and willingly moving select correspondence “off-line”, away from required, official email accounts. We have even found senior appointees at EPA, Department of Energy, and the White House Office of Science and Technology Policy using email accounts controlled by environmental pressure groups.

Regardless of intent, although I would argue these practices on their face indicate a desire to evade disclosure, the use of non-official email accounts for work purposes circumvents federal-recordkeeping responsibilities. Since employees have chosen to not search them in response to Freedom of Information Act (FOIA) requests or congressional oversight requests, this allows government officials to avoid revealing their actions to taxpayers who finance their salaries.

These corrupt practices are not isolated to the federal government. In requests the Competitive Enterprise Institute (CEI), assisted Colorado’s Independence Institute with, we show the practice extends to activists employed in state government. In Colorado, this means Gov. John Hickenlooper’s Chief-of-Staff, the governor’s Chief Strategy Officer and Director of the Office of Policy and Research to Colorado, Alan Salazar, and the Director of Environmental Programs for the Colorado Department of Public Health and Environment (DPHE), Martha Rudolph.

On October 15, 2013, I filed a FOIA request on behalf of CEI for all non-official account emails of former EPA Region 8 (Rocky Mountain West) administrator James Martin, a former Environmental Defense (ED) lawyer who we had already showed was using a private account to correspond on work-related issues with former ED colleagues and state officials. After these revelations, like another high-level EPA official — former administrator Lisa Jackson, also known as “Richard Windsor” in a false-identity account I also discovered — Martin resigned from his post in February 2013. Under congressional scrutiny after these revelations, he turned over more emails, which I obtained from the EPA.

[click to continue…]

Earlier, we wrote about a Wisconsin town whose ordinance holds parents liable for bullying by their children, including certain speech. We and law professor Eugene Volokh noted that this raised serious First Amendment issues. Now, a New Jersey judge has done the same thing by judicial construction, by allowing New Jersey school districts to drag students and their parents into lawsuits brought against school districts by alleged victims of bullying or discriminatory harassment. (New Jersey’s anti-bullying law is so broad that it violates the First Amendment by banning non-violent speech, notes the civil-liberties group Foundation for Individual Rights in Education.)

On March 12, a New Jersey Superior Court Judge ruled in V.B. v. Flemington-Raritan Regional School District that that school district, and the Hunterdon Central Regional High School, “could name 13 students and their parents as third-party defendants in a bullying suit,” dragging them into a lawsuit against the school districts, and potentially forcing them to share the massive cost of paying any damages awarded by a judge or jury against the school district. Judge Yolanda Ciccone allowed the parents to be sued based on conduct and offensive comments both in school (where teachers and schools officials, not parents, were in charge) and outside of school. She based this ruling partly on speech that is protected by the First Amendment outside the schoolhouse, such as unkind remarks on Facebook, writing that “Plaintiff’s complaint includes several allegations of that acts of bullying and harassment took place on Facebook, and that plaintiff had to contact Facebook directly to have to [sic] offending statements removed.”

Never mind that federal judges have ruled that the First Amendment applies with added force to students’ speech outside of school, meaning that vulgar speech that is banned in school may be protected speech when it occurs away from school, as cases like Klein v. Smith (1986) illustrate. Similarly, the federal appeals court in New Jersey has issued two First Amendment rulings in favor of students disciplined for creating fake web profiles lampooning their principals, holding that the speech was protected outside of school even if it would be unprotected in school, in Layshock v. Hermitage School District (2010) and J.S. v. Blue Mountain School District (2011).

[click to continue…]

Post image for Taxable Bitcoins: Property or Money?

Is Bitcoin currency or property? It depends on which parts of the federal government you ask. Last week the Internal Revenue Service (IRS) announced that bitcoins are taxable and how it would implement such taxation. While the rule could have been much worse, the manner in which the IRS went about doing so brings up many more legal questions.

In context, the fluctuating exchange rate between bitcoins and dollars does cause the cryptocurrency to behave more like property in terms of valuation. The IRS merely took its explanation on “virtual currencies” from the current definition of taxable bartering:

Bartering is an exchange of property or services. You must include in your income, at the time received, the fair market value of property or services you receive in bartering. If you exchange services with another person and you both have agreed ahead of time on the value of the services, that value will be accepted as fair market value unless the value can be shown to be otherwise.

This is clearer when seeing the IRS’s answer to how Bitcoin values must be calculated for tax purposes:

…A taxpayer who receives virtual currency as payment for goods or services must, in computing gross income, include the fair market value of the virtual currency, measured in U.S. dollars, as of the date that the virtual currency was received.

This classification of Bitcoin as non-currency for tax purposes isn’t that new. Back in January 2014, Sweden’s Tax Agency moved to classify bitcoins as assets rather than currency itself. In Australia, this month, the tax authority announced Bitcoin transactions person-to-person would be subject to a “goods and services” tax, similar to the IRS classification, as well as a capital gains tax for profits made through Bitcoin. It is not unusual for bitcoins to be treated as non-currency for tax purposes.

[click to continue…]

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 Draconian Dodd-Frank Durbin Debit Controls Need Not Be More Destructive, Court Rules

As the weather finally turns to spring, the D.C. Circuit Court of Appeals today blew a nice cool breeze of common sense.

A bipartisan three-judge panel unanimously overturned district Judge Richard Leon’s July 31 ruling that the Federal Reserve had not made the price controls stemming from Dodd-Frank’s Durbin Amendment draconian enough. Today’s decision by Clinton-appointed Judge David Tatel found that the Federal Reserve “reasonably construct[ed]” the law in considering costs in setting the price caps, and the ruling in fact opens the door to allowing banks and credit unions make retailers pay more of the costs of processing debit cards.

In the wake of cybersecurity attacks on credit and debit cards, this ruling came in the nick of time. In what I had called incredible chutzpah, the trade associations for some of the nation’s largest retailers argued in federal court even after the Target breach that retailers should pay less for fraud prevention and cleanup after fraud losses. That, of course, would mean that innovation would continue to lag behind and even more of the costs of payment processing would be shifted to consumers, as they had ever since the passage of this amendment, which had been inserted into the 2010 Dodd-Frank financial overhaul by Senate Majority Whip Dick Durbin.

The interchange fees that banks and credit unions charge merchants for debit card transactions — what retailers pejoratively call “swipe fees” — have been subject to price controls ever since then. Dodd-Frank’s Durbin Amendment, which came about as a result of heavy lobbying by Target, Wal-Mart and other big retailers, states that the debit interchange fees charged to retailers must be “reasonable and proportional to the cost incurred by the issuer [bank or credit union issuing the card] with respect to the transaction.”

CEI opposed the Durbin Amendment from the start, because we believe price controls are a violation of individual property rights and turn out to be impractical. But many who voted for the Durbin Amendment believed that the price-setting process would be similar to rate regulation of electricity and phone service, in that the fee set would allow for infrastructure and service costs plus what is judged as a “reasonable rate of return.”

[click to continue…]

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.

[click to continue…]

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….

[click to continue…]