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Douglas Smith

Appeals Court Passes Buck on Individual Mandate

By Douglas Smith

July 5, 2011, 4:37 pm

Last week’s decision by the U.S. Court of Appeals for the Sixth Circuit regarding the constitutionality of the new healthcare law was a disappointment. The decision in many ways passes the buck to the Supreme Court, declining to strike down the law’s requirement that individuals purchase health insurance or face a financial penalty based on the “presumption” that legislation is constitutional. The reliance on this presumption, however, is particularly inappropriate in the context of the new healthcare law. While the court noted that the presumption is based on the “deference due to deliberate judgment by constitutional majorities of the two Houses of Congress,” media accounts at the time make clear that few, if any, legislators actually reviewed the bill, much less engaged in “deliberate judgment” regarding its contents. Moreover, application of a presumption of constitutionality is questionable where, as here, “Congress has never directly addressed” the precise question at issue—i.e., “whether Congress may use its Commerce Clause power to regulate inactivity,” in this case the decision by individuals across the country to refrain from purchasing health insurance. On the bright side, however, the majority’s opinion is significant in that it recognizes that the new healthcare law is not merely seeking to regulate the market in health insurance, but also healthcare delivery. The court’s decision thus implicitly acknowledges that in seeking to require individuals to obtain health insurance, the legislation directly impacts an area—personal healthcare decisionmaking—that the Supreme Court has previously held is subject to special protection.

Douglas Smith

Administration Picks Wins and Losers, Creates Uncertainty

By Douglas Smith

June 9, 2011, 3:37 pm

University of Pennsylvania Law Professor David Skeel makes some critical points regarding the government bailout of the automobile industry in his op-ed in the Wall Street Journal this week. Skeel argues that the bailouts were associated with significant costs that President Obama and his administration have ignored in their recent comments praising those programs. In particular, Skeel questions the use of the bankruptcy system in a way that favored certain politically connected groups such as unions, whose claims in the Chrysler bankruptcy were given preferential status above that which they would normally receive under the ordinary rules. As he correctly observes, such preferential treatment not only erodes the rule of law, but may make it more difficult for other companies to receive financing on favorable terms in the future, given that creditors will know that there is a possibility that the normal rules may be jettisoned, which in turn may lead to additional government bailouts as financing dries up. The economy is already suffering from the uncertainty occasioned by the administration’s penchant for enacting massive new regulatory structures. That uncertainty should not be compounded by disregarding established rules and regulations in an arbitrary manner to pick winners and losers when it suits the administration’s purposes.

Douglas Smith

Administration Considering Big Payback to Trial Lawyers

By Douglas Smith

September 16, 2010, 10:16 am

Trial lawyers are among President Obama’s biggest supporters, contributing millions of dollars to his presidential campaign. Now it appears that it is payback time. During one of the worst recessions in recent history and in the face of an exploding federal budget deficit, the administration is considering a change in existing law that would subsidize new litigation and give trial lawyers millions of dollars in unwarranted tax deductions.

The Treasury Department recently indicated that it was considering a change in existing law that would allow trial lawyers to deduct the up-front costs they incur in contingency fee litigation. Under current tax laws and regulations, these costs are treated as loans to the lawyers’ clients and are not deductible. The proposed change in the law would give the trial bar a massive new tax break.

Congress has already rejected the trial lawyers’ efforts to change existing law. Last year, Senator Arlen Specter (R-Pennsylvania) and Representative Artur Davis (D-Alabama) introduced legislation that would authorize the deduction. However, that legislation failed to pass, and now the trial lawyers are appealing directly to the administration.

This massive new tax break is a bad idea for several reasons. First, as the U.S. Chamber of Commerce has observed, the proposal “amounts to a subsidy for more lawsuits at the expense of the American taxpayer.” The subsidy would encourage and expand contingency fee litigation at a time when the U.S. economy can scarcely afford it.

The adverse effect on the federal budget would be significant. A 2008 congressional analysis estimated that the deduction would cost the government approximately $157 million each year. This is money the government can ill-afford to spend given the unprecedented federal budget deficit—and particularly as it is an expenditure that will benefit some of the richest Americans. At a time when Congress is considering increasing taxes on middle-class families, such a windfall for the trial bar is unwarranted.

Finally, a change like this should be made—if at all—by elected members of Congress, not unelected federal bureaucrats. The fact that elected officials are unwilling to vote for this massive tax break speaks volumes. The trial bar should not be allowed to circumvent the legislative process by appealing directly to their friends in the administration. This potential new subsidy for litigation is not only bad policy, but is emerging from a process that is fundamentally flawed.

The last thing the economy, or the country, needs at this time is a massive subsidy for more litigation. There is no shortage of litigation in the United States; there is no reason to force American taxpayers to subsidize it. One can only hope that the administration will think twice before pushing forward with this profoundly misguided proposal.

Douglas Smith is an adjunct scholar at the American Enterprise Institute.

Douglas Smith

The Court, Kagan, and the Right to Bear Arms

By Douglas Smith

July 12, 2010, 7:55 am

handgunThe Supreme Court’s decision in McDonald v. Chicago underscores just how close this country came to losing the fundamental right to bear arms and just how important the debate over President Obama’s nominee to the Supreme Court, Elena Kagan, will be.

By a narrow 5-4 margin, the Supreme Court held that the Second Amendment guarantee enshrined in the Constitution applies equally to state and local governments. In an earlier decision, District of Columbia v. Heller, the Court held by a narrow 5-4 margin that this fundamental guarantee applies to the federal government.

After Heller, the application of the Second Amendment to the states should have been a no-brainer. The Court in Heller declared that the Second Amendment right to bear arms is a “fundamental” right firmly rooted in our nation’s history and traditions. In the past, the Supreme Court has held that such “fundamental” rights apply equally to state and local governments.

Nonetheless, the fight to water down the right to bear arms continued in McDonald. There, the City of Chicago and Village of Oak Park sought to preserve ordinances that essentially prohibited the possession of handguns within city limits. In Heller, the Supreme Court held that a similar handgun ban in the District of Columbia violated the Second Amendment. However, the Court did not specifically address whether the Second Amendment prohibited states from enacting similar restrictions.

The Court in McDonald confirmed that its prior decision in Heller applied equally to state and local governments. In so ruling, it provided a powerful affirmation of the fundamental nature of the right to bear arms. Analyzing the plain language and history of the Constitution, Justice Samuel Alito reiterated that the right to bear arms was a “basic” and “fundamental” right that enjoyed full constitutional protection, refusing to treat it as a “second-class right, subject to an entirely different body of rules than the other Bill of Rights guarantees.”

This ruling, however, drew strongly-worded dissents. For example, Justice Stephen Breyer wrote that he could “find nothing in the Second Amendment’s text, history, or underlying rationale that could warrant characterizing it as ‘fundamental’ insofar as it seeks to protect the keeping and bearing of arms for private self-defense purposes.” Likewise, Justice John Paul Stevens wrote that “the Second Amendment differs in fundamental respects from its neighboring provisions in the Bill of Rights” because “firearms have a fundamentally ambivalent relationship to liberty” and may be “misused.” Accordingly, he refused to adopt a “rigid historical methodology” that applied the Second Amendment to the states, arguing that such an approach would be “unfaithful to the Constitution’s command.”

Thus, the decision in McDonald demonstrates, once again, that the Court is deeply divided over gun rights. Moreover, this debate is likely to continue as courts struggle with the permissible scope of state regulation of the fundamental right to bear arms. As Justice Stevens observed in his dissent, “it is far from clear that proponents of an individual right ought to celebrate today’s decision.” The battle over Second Amendment rights is likely to drag on.

The McDonald decision also underscores the importance of each nomination to the Supreme Court, and in particular the pending nomination of Elena Kagan. Already, many have raised questions regarding Kagan’s commitment to Second Amendment rights, citing her role in promoting gun control during her time in the Clinton White House and a memo she wrote as a law clerk for Justice Thurgood Marshall in which she stated that she was “not sympathetic” to a litigant’s claim that the District of Columbia had violated his right to bear arms.

While she stated during her confirmation hearings that the Supreme Court’s decision in Heller is “binding precedent,” this answer cannot give supporters of the Second Amendment much comfort. Such precedents may be “binding” on the lower courts, but the Supreme Court is always free to reverse its existing precedents. As a sitting Justice, Kagan and her colleagues would have the power to undo Heller. Accordingly, given Kagan’s record, each Senator must ask whether this risk is worth taking.

Image by kcdsTM.

Douglas Smith

Is Taking Aim at High Court Conservatives Politically Prudent?

By Douglas Smith

April 14, 2010, 12:04 pm

obama-robertsFresh off their claims that the public actually favors the massive takeover of the healthcare system that they recently passed into law (when in reality polling shows strong opposition that is only increasing with time), Democratic leaders now apparently seek to turn the upcoming hearings on a replacement for Justice John Paul Stevens into a “referendum” on allegedly “controversial” decisions by the “conservative majority” on the Supreme Court. In the process, they seek to demonize respected jurists such as Chief Justice John Roberts and Justices Samuel Alito, Antonin Scalia, and Clarence Thomas as “conservative activists” who side with “corporate” interests. However, by widespread margins, the American public strongly supports the traditional approach to judging followed by these justices, which views judges as faithfully adhering to the plain language of the constitutional or statutory text they are interpreting, rather than biasing their decision making based on their personal policy preferences. In particular, the Democrats apparently seek to harp on the Supreme Court’s recent decision in the Citizens United case striking down certain provisions of the McCain-Feingold campaign finance laws. However, when President Obama sought to call the Court on the carpet for that decision, in an unprecedented attack during his State of the Union address, the public reaction was almost uniformly negative. Yet again, the Democratic leadership appears to be deceiving itself and demonstrating that it is profoundly out of touch with the American public.

Image by the Obama-Biden Transition Project.

Douglas Smith

The EPA’s Endangerment Finding Is Deeply Flawed

By Douglas Smith

February 26, 2010, 4:19 pm

The Environmental Protection Agency’s endangerment finding is under attack. Both private industry organizations and individual states, such as Texas and Virginia, filed petitions last week questioning the EPA’s determination that carbon dioxide is a “pollutant” that endangers human health. These groups object to the EPA’s ruling on both procedural and substantive grounds. They argue that recent events demonstrate that the climate science upon which the EPA based its finding is unreliable and that the process the EPA employed in reaching its determination was deeply flawed. In particular, they point to the recent disclosure of emails indicating that researchers at the University of East Anglia Climate Research Unit ignored flaws in data and methods that served as the basis for the EPA’s endangerment finding.

Those attacking the EPA’s finding have a point. In particular, the way in which the EPA issued its ruling is deeply troubling. In the context of agency rule making, procedure is often as important as substance. Here, the EPA rushed through its finding despite recent disclosures indicating that the science upon which it relied was not sound. Moreover, it continues to defend its finding even as new revelations emerge regarding the flawed science it cited in support of its conclusions.

The EPA’s reaction to the controversy is, to say the least, counterproductive. The EPA is an organization whose determinations should be based on sound science. It should be open to reconsidering its determinations when new evidence emerges that calls them into question. Instead, the EPA attacks its critics, asserting—despite the recent evidence to the contrary—that the “science is settled” and that the critics are trying to “stall progress.”

The EPA’s reaction is particularly disturbing given the magnitude of the issue and the significant implications of its finding. The EPA’s endangerment determination opens the door to a range of new federal regulations that will significantly affect not only certain targeted industries, but the entire U.S. economy. Federal regulation of climate emissions will impose enormous costs on energy producers, which inevitably will be passed on to businesses and consumers. In seeking reconsideration of the EPA’s determination, Virginia’s attorney general recently described the impact of the EPA’s ruling as imposing a “staggering burden.” Such decision making should be based on sound science and a process in which all affected parties have an opportunity to participate.

Douglas Smith

Why the Healthcare Overhaul Is Almost Surely Unconstitutional

By Douglas Smith

February 18, 2010, 3:36 pm

supreme_court2Given that the Obama Administration recently reaffirmed its commitment to pass healthcare reform, the constitutionality of such legislation is sure to be a subject of continuing debate. Many commentators, for example, doubt the constitutionality of the plan’s “individual mandate,” which would require individuals to purchase health insurance if they do not have it. Such an unprecedented requirement likely exceeds the limited and enumerated powers delegated to Congress under the Constitution. Congress can exercise only those powers that the Constitution expressly delegates to it, and it doubtful that Congress has the authority to require individuals to purchase goods or services. While proponents of the legislation point to the congressional power to regulate interstate commerce, it is difficult to see how requiring individuals to purchase health insurance when they are currently not doing so constitutes regulation of interstate commerce.

However, the proposed legislation raises another, perhaps more compelling, constitutional objection. Requiring individuals to purchase healthcare insurance may violate their constitutional right to individual liberty. Several decisions issued by the Supreme Court hold that individuals have a fundamental right to reject medical treatment. For example, in Cruzan v. Director, Missouri Department of Health, a case involving the right to cease life-sustaining medical treatment, the Supreme Court held that individuals have a “constitutionally protected liberty interest in refusing unwanted medical treatment.” Likewise, in Washington v. Harper, the Court held that prison inmates have a “significant liberty interest” in refusing antipsychotic medication. Indeed, in Parham v. J.R., the Court held that children have a significant liberty interest in refusing medical treatment that they do not want even though their parents request it. Thus, the right to make individual choices regarding medical care is firmly rooted in the Constitution.

By extension, individuals should have a right to reject medical insurance. If individuals have a constitutional right to reject treatment, surely they have the right to reject paying significant sums for insurance. The government could not, for example, force citizens to subscribe to National Review or The Nation. Such a law would plainly violate the right to free speech under the First Amendment. Just as individuals have a right to speak freely themselves and to choose the newspapers or magazines they read, so too they have a right to be free from laws that would require them to purchase materials with which they disagree.

This issue, however, has received relatively little attention given that the attacks on healthcare reform generally come from the right, which has not been as eager to advocate an expansive interpretation of such individual rights. However, the debate over the constitutionality of healthcare reform should not be limited by ideological viewpoints. The sweeping proposals that Congress and the administration continue to pursue despite significant public opposition are bound to raise significant constitutional concerns that deserve serious consideration. Moreover, such concerns only underscore the need to give any proposal careful consideration and not to rush it through Congress without an opportunity for an open and honest debate on the implications of the legislation.

Douglas Smith

Three Cheers for Anastasia Kelly

By Douglas Smith

December 31, 2009, 2:51 pm

This week Anastasia Kelly resigned from her position as general counsel of American International Group after the Obama administration’s pay czar threatened to cut her compensation. While certain commentators have criticized her resignation, and in particular her severance package, rumored to be around $2.8 million, it is to be applauded. The government’s attempt to impose limits on the compensation of individuals in the private sector constitutes a gross form of overreaching. It also points out the hazards of the government’s recent bailouts to private industry. The government should not be in the business of “bailing out” certain favored companies. Once it does, however, it should not seek to impose limitations on compensation that are inconsistent with what the market is willing to pay. Doing so only risks losing talent needed to turn these companies around and recoup the government’s investment.

Douglas Smith

A Powerful Critique of Modern Class-action Practice

By Douglas Smith

October 19, 2009, 11:54 am

In honor of the Federal Trade Commission’s proposed guidelines regulating blogger speech (just kidding), I would like to put in a plug for a great new book, which I received free of charge. Martin Redish’s Wholesale Justice: Constitutional Democracy and the Problem of the Class Action Lawsuit (Stanford Law Books 2009) provides a powerful critique of modern class-action practice. Redish argues that the class action raises not only practical concerns given widespread abuses, but also constitutional concerns by effectively changing substantive law through a purportedly procedural device, and by sweeping large numbers of individuals into litigation without their explicit consent, thereby violating their due process rights. His work provides a basis for reforming the federal rules to limit the use of class actions. It is a work that is accessible to a general audience and yet at the same time makes a valuable contribution to civil procedure scholarship, one that Redish has already built upon, undertaking an empirical study demonstrating the abuse of charitable grants in class-action practice and associated constitutional problems.

Douglas Smith

Plaintiffs Groups Seek to Repeal Iqbal

By Douglas Smith

September 22, 2009, 10:12 am

Apparently, the plaintiffs’ bar is refocusing its efforts on “repealing” the Supreme Court’s recent interpretation of the federal pleading standard in Ashcroft v. Iqbal, which brought a measure of needed rationality to judicial review of civil lawsuits. Reports note that a meeting was held on September 14 in Washington, D.C., to discuss ways of using the legislative and federal rule-making process to overturn the decision.

It will be interesting to see how these efforts pan out. While the critics of Iqbal argue that it represents an illegitimate rewriting of the federal rules of civil procedure that will make it harder for plaintiffs to pursue civil lawsuits, in fact the decision is consistent with the text of the rules and is likely to have beneficial effects by weeding out weak and frivolous claims at an early stage in the litigation, thereby reducing unnecessary litigation costs as well as the burdens on the federal judiciary.

Not only defendants will benefit from this ruling, but also those plaintiffs with legitimate claims who will no longer have to wait in line to have their cases heard behind those of dubious merit.

In addition, the Iqbal ruling should streamline litigation civil litigation in the federal courts by giving plaintiffs an incentive to define their claims at the outset of the case and include sufficient detailed allegations in their complaints to meet the requirements the Supreme Court articulated in its decision.

Douglas Smith

Sotomayor on Corporate Rights

By Douglas Smith

September 17, 2009, 1:32 pm

In her first appearance on the Supreme Court bench, newly minted Justice Sonia Sotomayor made some comments that have renewed questions regarding her judicial philosophy.

During oral argument on the campaign-finance case Citizens United v. Federal Election Commission, she suggested that the Court should revisit more than 100 years of precedent, questioning whether corporations were properly considered “persons” entitled to rights under the Constitution. However, the reasoning behind this suggestion is questionable, given that it is based on the contention that judges created corporations as “persons” and thus can reverse that decision. This assertion is inaccurate as a matter of history and current practice. Corporations are chartered by state legislatures and are “creatures” of the legislative branch—not the judiciary. From the founding period, they have been considered artificial “persons,” a doctrine that has strong roots in the common law. Arbitrarily depriving them of their long-possessed rights through judicial decision making would constitute an improper intrusion on the authority of both the states and the legislative branch. Accordingly, it again raises the question whether Justice Sotomayor’s view of the judicial role is consistent with what was contemplated by the Constitution. Only time will tell.

Douglas Smith is an adjunct scholar at the American Enterprise Institute.

Douglas Smith

Is Obamacare Constitutional?

By Douglas Smith

August 25, 2009, 6:51 am

Over the weekend, David Rivkin and Lee Casey published a thought-provoking piece on the Obama administration’s proposed healthcare plan. They argue that the plan’s “individual mandate,” which would require individuals to purchase health insurance if they do not have it, would exceed the limited and enumerated powers delegated to Congress under the Constitution.

While this argument is not entirely new and has already received some criticism (here and here, among other places), the sweeping proposals that Congress and the administration have outlined are bound to raise significant constitutional concerns. Whether it is the individual mandate provision or the proposal to invest governmental powers in an unelected board or commission that would make payment decisions, at a minimum these proposals raise serious questions. Such concerns only underscore the need to give any proposal careful consideration and not to rush it through Congress without an opportunity for an open and honest debate on the implications of the legislation. Such scrutiny has been sorely lacking not only in the healthcare context, but in many other areas in which the Obama administration has taken actions that raise concerns that the federal government is exceeding the scope of its constitutional authority or abridging individual rights.

Douglas Smith

Congress Should Not Meddle with Federal Pleading Standards

By Douglas Smith

August 18, 2009, 12:47 pm

The Supreme Court’s recent decisions in Bell Atlantic Corp. v. Twombly and Ashcroft v. Iqbal have received
significant attention, with many arguing that they will revolutionize the standards for bringing civil lawsuits in the federal courts, making them much more stringent. In these decisions, the Supreme Court held that a plaintiff’s complaint must contain allegations that are “plausible” on their face, and that a mere possibility that a defendant might be liable is not enough to state a claim in federal court.

The attention these decisions have received has spurred Congress to act, but not in ways that will be productive for the legal system. Senator Arlen Specter has introduced legislation entitled “The Notice Pleading Restoration Act” that would “overrule” the Supreme Court’s decisions in Iqbal and Twombly, and replace the standards articulated by the Supreme Court.

Such legislation is problematic for several reasons. First, as a matter of core competency, it is the courts—not Congress—that is in the best position to determine pleading standards. In both Iqbal and Twombly, the Supreme Court relied on nearly a century of precedent interpreting the Federal Rules of Civil Procedure. Moreover, Twombly at least was the result of a solid consensus, with seven of the justices joining in a majority decision authored by former Justice Souter.

The proposed legislation is also bad policy. As the Supreme Court observed in its decisions, defendants
often face significant burdens if litigation progresses past the pleading stage, given the broad-ranging
discovery authorized under the Federal Rules. Accordingly, there is a need for stringent judicial
scrutiny to ensure that, before these burdens are imposed, plaintiffs can at least articulate a plausible
claim.

Finally, the proposed legislation seeks to utilize procedural rules as a vehicle for substantive outcomes.
Indeed, as many commentators have observed, it is only the most recent in a series of proposed measures
Congress has floated that are designed to make it easier for plaintiffs to prevail in civil lawsuits.
Congress should think twice before amending broadly applicable procedural rules to achieve such
results-oriented outcomes.

Douglas Smith is an adjunct scholar at the American Enterprise Institute.


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