Tag Archives: SCOTUS

The Case Against Deference

Judges should be unafraid to review government actions

Jun 10, 2013, Vol. 18, No. 37

By David B. Rivkin Jr. and Elizabeth Price Foley

For at least half a century, judicial restraint has been the clarion call of the conservative legal movement. After the Warren Court era, Roe v. Wade, and very nearly a “right” to welfare benefits, it was not surprising that conservatives would seek to rein in judicial self-aggrandizement.

The principal conservative response was to promote judicial deference: Judges should resist the temptation to legislate from the bench and “defer” to the political branches. Unfortunately, time has shown that this response was too blunt. Particularly in constitutional cases, judicial deference has led to a steady expansion of government power. This, in turn, has undermined the delicate constitutional architecture, which calls for a federal government of limited and enumerated powers.

Fortunately, a younger generation of conservative lawyers has come to recognize that there is no principled distinction between inventing new rights, unmoored from the Constitution’s text or history, and refusing to uphold constitutionally anchored limits on government power. In both instances, judges are ignoring the Constitution and engaging in—for lack of a better term—judicial activism. Judicial deference may have reined in judicial power, but at an unacceptable constitutional price. For both doctrinal and pragmatic reasons, the concept needs rethinking.

First, the “counter-majoritarian difficulty” that lies at the heart of judicial restraint has been oversold. The label itself suggests that judges should esteem current majoritarian preferences and be loath to overturn them. But why, when the Constitution instructs otherwise? Article VI declares that the Constitution is the “supreme law of the land,” and trumps conflicting ordinary laws. Judges take an oath to “support this Constitution,” reflecting their duty to heed the constitutional language. Enforcing the written Constitution—not reflexively deferring to extant legislative majorities—was (and still is) the will of We the People. If the people desire constitutional change, Article V provides the mechanism, allowing every generation to put its stamp on our fundamental legal charter.

In Federalist 78, Alexander Hamilton described the crucial judicial role in ensuring that the Constitution reigns supreme, explaining that judicial independence was “peculiarly essential in a limited Constitution,” where the government possessed only enumerated powers. In such a government, he observed, “[l]imitations of this kind can be preserved in practice no other way than through the medium of courts of justice, whose duty it must be to declare all acts contrary to the manifest tenor of the Constitution void. Without this, all the reservations of particular rights or privileges would amount to nothing.” Hamilton and other Framers understood that robust judicial review was essential to enforce limited and enumerated powers.

Second, the virtues of judicial deference have declined over time. Early Supreme Court decisions justified deference as necessary to ensure that the newly established federal government could fulfill its essential responsibilities. As Chief Justice John Marshall explained in the famous 1824 case Gibbons v. Ogden, a “narrow construction” of government powers “would cripple the government, and render it unequal to the object for which it is declared to be instituted.” Accordingly, the Court concluded “we cannot perceive the propriety of strict construction, nor adopt it as the rule by which the Constitution is to be expounded.”

Deference to exercises of government power arguably made more sense in the republic’s early days, to ensure that federal power could accomplish the Constitution’s basic, enumerated ends. But as the administrative state has matured, the sheer weight of government has grown exponentially, and every new accretion weighs more heavily on individual liberty. Complex statutory frameworks increasingly operate at cross-purposes, and statutes rarely get repealed, with new regulations being piled on top of old ones. Today, the cumulative reach of government power is far more than adequate to counsel judges against knee-jerk deference to all exercises of government power. The unfolding IRS scandal, accompanied by the Obama administration’s remarkable claim that the president should not oversee the federal government’s law enforcement activities, makes the need for vigorous judicial review of governmental actions all the more apparent. The courts must unapologetically enforce constitutional boundaries to facilitate trust in, and accountability of, government.

Third, the early Court’s notion of deference was distinct from its modern incarnation. Today’s judicial deference is the product of the progressive era of the late 19th and early 20th centuries. Judges schooled in the original understanding had no qualms about being perceived as “counter-majoritarian,” conceptualizing their role as enforcing the written Constitution against the daily assaults of ordinary legislation. Progressives, who wanted to remake American society, viewed such judges and the written Constitution as an impediment. Achieving progressive goals was possible only if judges could be restrained from scrutinizing ordinary laws for adherence to higher constitutional principles.

One of the most powerful early advocates of judicial deference was progressive Harvard law professor James Bradley Thayer, who, in 1893, argued in the Harvard Law Review that judges “can only disregard [an] Act when those who have the right to make laws have not merely made a mistake, but have made a very clear one, so that it is not open to rational question.” He justified this “rational basis” review by asserting that the Constitution “often admits of different interpretations; that there is a range of choice and judgment,” and that a judge’s role “is merely that of fixing the outside border of reasonable legislative action.” Thayer remarkably asserted that, in applying such light judicial review, “virtue, sense, and competent knowledge are always to be attributed to that [legislative] body.” It is ironic that modern conservatives, concerned about the freewheeling behavior of liberal judges during the Warren Court era, have chosen as their principal bulwark against activism a doctrine of judicial deference whose genesis lies in the progressive era’s desire to expand government power.

The fourth problem with judicial deference is pragmatic, stemming from the judiciary’s inconsistent application of restraint. Since the New Deal, economic regulations, for one example, have received the utmost deference. Yet when it comes to so-called individual rights—a category that, for some inexplicable reason, does not include economic rights—courts jettison deference and apply heightened scrutiny. This bifurcation between “individual” and “economic” rights makes zero sense, as neither the Constitution itself, nor any theory of individual rights, suggests that the former are more important than the latter, or indeed that they are different in kind. The artificial distinction, moreover, invites judicial manipulation and selective invocation of aggressive scrutiny.

In 2005, for example—after over 200 years of constitutional history—the Supreme Court, in Roper v. Simmons, determined 5-4 that the death penalty for 17-year-olds violated the Eighth Amendment’s prohibition of cruel and unusual punishments. Just 15 years earlier, in Stanford v. Kentucky, the Court had decided precisely the opposite. According to the Roper majority, the Constitution’s meaning changed in the intervening 16 years because a “majority of States have rejected the imposition of the death penalty on juvenile offenders under 18, and we now hold this is required by the Eighth Amendment.”

Since 20 of the 38 states that allowed the death penalty at the time of Roper also allowed it for 17-year-olds, the Court cooked the numbers. It included in its calculations 12 states that prohibited the death penalty altogether, leading it to find a “consensus” of 30 states against the juvenile death penalty. As Justice Scalia’s dissent observed, this “is rather like including old-order Amishmen in a consumer-preference poll on the electric car. Of course they don’t like it, but that sheds no light whatever on the point at issue,” because a total prohibition on the death penalty reveals nothing about whether juveniles should receive an exemption.

The Roper decision disregarded the policy preferences of at least 20 states—policy preferences that neither the Constitution’s text nor its historical context condemned—based on the “evolving standards of decency” that five justices wanted the Eighth Amendment to reflect.

Similarly, in the 1980 decision Stone v. Graham, a 5-4 Supreme Court concluded that requiring display of the Ten Commandments in public schools—funded entirely by private dollars—violated the First Amendment’s Establishment Clause. The Stone majority believed posting the commandments had no secular educational purpose, despite the fact that they are the foundation upon which much of the Western world’s legal codes rest.

The Stone and Roper decisions did not “defer” to the reasoned policy judgment of legislators; quite the opposite. Even though legislators had rational reasons for believing that a 17-year-old is capable of cold-blooded murder and deserving of the death penalty, or that posting the Ten Commandments may have a positive, nonreligious educational effect, the Supreme Court was eager, under the guise of constitutional construction, to impose its own views and stifle further democratic debate.

In contrast to the overly aggressive scrutiny applied in “individual rights” cases such as Roper and Stone, the Supreme Court has shirked its duty to scrutinize many other exertions of government power. The net result is an odd mixture of judicial activism and restraint, whereby judges actively and unapologetically overturn laws purported to infringe certain favored individual rights, yet simultaneously espouse a duty to be restrained in reviewing laws alleged to exceed the proper scope of government power.

Take the case of Grutter v. Bollinger (2003), in which the Court was asked to determine the constitutionality of the University of Michigan law school’s use of race as a “predominant” admission factor. An unsuccessful white applicant asserted that such a race-conscious policy violated the Constitution’s guarantee of equal protection.

The law school claimed race-based admissions were needed to achieve a “critical mass” of minority students, needed for the educational benefit of “diversity.” A five-justice majority agreed, concluding, “The Law School’s educational judgment that such diversity is essential to its educational mission is one to which we defer.”

The Grutter majority did not see the case as involving an individual’s right to be free from state-sponsored racial discrimination, but instead as one involving the right of a public university to define and implement its educational mission. Consequently, the Court deferred to the university, allowing it to exercise its power the way it saw fit. The Grutter Court’s choice—to view affirmative action as an exercise of power requiring deference rather than an individual right requiring scrutiny—emphasizes the manipulability inherent in the modern deference doctrine.

The Supreme Court’s decision last year in National Federation of Independent Business v. Sebelius, upholding the Affordable Care Act, further shows the extent of modern judicial contortions to uphold aggressive exercises of government power, even when it harms individual liberty. A 5-4 majority upheld the act’s mandate for individuals to buy health insurance as a “tax,” even though the president and congressional leaders repeatedly and publicly denied that the mandate was a tax, and the law specifically denominated the mandate as a “penalty” while simultaneously labeling multiple other provisions as taxes.

The NFIB majority opined that the mandate “may be reasonably characterized as a tax” even though it was not “the most natural interpretation” of it. And since the Constitution allows Congress to impose taxes, the majority concluded, “it is not our role to forbid it, or to pass upon its wisdom or fairness.”

Like GrutterNFIB v. Sebelius demonstrates the breadth of deference in cases viewed by the Court as challenges to government power. And the NFIB majority didn’t merely defer, it rewrote a statute to survive constitutional attack. Leaving aside the fact that functioning as the legislature’s scrivener is not a proper judicial role, the Court was oblivious to the fact that forcing the political branches to articulate what they are enacting is essential to accountability, one of the key purposes of the Constitution’s separation of powers. Indeed, had the Obama administration publicly described the mandate as a tax, it would never have passed, even in a Democratic Congress.

The NFIB decision also illustrates the fifth problem with judicial deference: It has decayed into virtual rubberstamping. Courts bless government actions using either the rationale advanced by the government or—if that proves unsatisfactory—a rationale the courts themselves concoct. This is a far cry from relying on reasons advanced by the government at the time a statute or regulation was adopted.

For example, in Williamson v. Lee Optical Co. (1955), the Supreme Court upheld an Oklahoma law that made it illegal for anyone other than an optometrist or ophthalmologist to replace eyeglass lenses. Opticians challenged the law, asserting that it violated both the Equal Protection Clause and the liberty protected by the Due Process Clause. They offered evidence that opticians could just as safely make replacement lenses, and that optometrists and ophthalmologists received no special training in lens making. The evidence suggested that the law was not designed to guard the public from poor quality lenses, but to protect optometrists and ophthalmologists from the healthy competition of less expensive opticians.

The Williamson Court nonetheless deferred to the legislature, opining it “might have” concluded that limiting lens replacement to optometrists and ophthalmologists was a good thing and that the legislature “need not be in every respect logically consistent in its aims to be constitutional.” It was sufficient that the Court itself could imagine some rational basis for the law, even if the legislature did not actually rely on the basis identified by the Court.

As cases like Williamson show, modern judicial deference doesn’t require the government to prove anything at all to justify exertions of power. Judges must uphold the law if the legislature could have theoretically believed that the law serves a legitimate purpose (even if it actually doesn’t).

Upholding laws if judges can dream up some legitimate justification for them is not being deferential; it is being biased in favor of the government and against the citizen. The net effect is to rubber-stamp government power. Reflexive deference to the government in constitutional cases has undermined the chief goal of originalism—the preservation of the architecture and original meaning of the Constitution—by a steady and inevitable aggrandizement of government power.

It is high time for judges to abandon reflexive deference. Judges should be unafraid to review government actions and defend constitutional principles. This would entail, among other things, beefing up the “rational basis” review of government actions and making it a serious examination of both the government’s ends—are they properly derived from the government’s legitimate purposes?—as well as the government’s means—do they rationally advance the ends that the government articulated at the time it undertook the action being challenged? By making these important shifts in the way constitutional cases and the facts underlying them are viewed, judges can best live up to their obligation to uphold the Constitution—a goal judges of all political stripes should be able to embrace

David B. Rivkin Jr., a veteran of the Reagan and George H. W. Bush administrations, has represented 26 states challenging the constitutionality of Obamacare. Elizabeth Price Foley, a professor of constitutional law at Florida International University, is the author, most recently, of The Tea Party: Three Principles (Cambridge).

Source: http://m.weeklystandard.com/articles/case-against-deference_732052.html?page=1

Corporate crime and punishment

Fines levied by the SEC against a corporation for long-ago wrongdoing do not protect current investors.


Two weeks ago, a unanimous Supreme Court rebuffed the Securities and Exchange Commission Gabelli v. SEC. The SEC maintained that its enforcement actions for fines under the Investment Advisers Act weren’t subject to the five-year statute of limitations. This wasn’t the first time the courts have pushed back a federal agency for overreaching. It won’t be the last.

But the SEC’s audacity prompts a broader policy question: What good is accomplished by imposing monetary penalties on corporations, as the agency attempted to do in Gabelli? The answer is that when such penalties are sought by the government, they probably do more harm than good.

Monetary damages, including penalties, that are awarded in private lawsuits are an attempt to compensate victims of corporate fraud and other unlawful behavior, usually shareholders or customers, making them as “whole” as the law can approximate. The SEC doesn’t seek monetary fines in most cases—it has an array of other enforcement options including injunctive or remedial relief. When it does pursue a fine, however, the purpose is solely punitive.

In Gabelli, for example, the SEC brought two sets of claims against principals of an investment firm who countenanced a client’s “market timing” scheme. The first claim sought disgorgement of profits to the government—a remedy that Gabelli didn’t appeal. But the SEC also sought large monetary fines designed solely to punish the defendants and brand them as wrongdoers.

Who is the wrongdoer in such a situation? The company officials who made the bad decisions? The board of directors? The shareholders? Pinning a wrongdoer label on the corporation as a whole or fining a corporation in this way—years after any alleged wrongdoing—punishes current shareholders for conduct that benefited a largely different group of shareholders, if any benefit was conferred at all.

From a current shareholder’s point of view, government-imposed corporate fines are virtually indistinguishable from a tax on investing, and are thus a disincentive for doing so.

Gabelli isn’t the only case when the SEC sought penalties involving ancient conduct. In January 2006, McAfee, the software company, consented “without admitting or denying the [SEC's] allegations” to pay a civil penalty of $50 million for unlawful conduct alleged to have occurred between 1998 and 2000.

Similarly, in August 2003, UBS PaineWebber agreed to a $500,000 fine in connection with its unacknowledged failure to supervise a former registered representative who served jail time for defrauding certain clients. The conduct ended by March 1998, approximately five and a half years before the SEC instituted administrative proceedings.

More recently, the SEC fined Eli Lilly $29 million in December 2012 for alleged misconduct that purportedly began more than a decade ago.

The principal rationale for levying fines is to deter corporate wrongdoing. The mismatch between the shareholders that benefit from misconduct and those that are ultimately punished undermines this rationale.

Corporate fines are equally problematic when considered as punishment for a manager’s bad conduct. Fine an individual for his conduct, and you are likely to deter him from doing it again. Fine a corporation, and the managers responsible for the misconduct have almost always left or been fired long beforehand. New managers are in place, and for them the tab is just a price of doing business.

Moreover, even the threat of government fines or penalties puts immediate, intense pressure on a corporation to settle, regardless of the merits. A protracted legal fight means a public-relations nightmare. It could also impinge on corporate earnings, the reputations of current executives, and relationships with regulators and other business concerns.

Whether the corporation is actually culpable of wrongdoing is a consideration, but it may not be a major one. That question can be beside the point of getting back to business and avoiding a prolonged battle with the SEC. In the large number of settlement scenarios where actual guilt isn’t the most pressing or relevant consideration, the fines don’t by definition deter any future misconduct.

In any event, when the government obtains fines from corporate wrongdoers, the monies rarely go to any ascertainable “victims”—they merely transfer funds from businesses to an already bloated public sector. With the aggregate penalties often running into the billions of dollars, the economic distortions involved are substantial.

Notwithstanding the Supreme Court’s rap on the SEC’s knuckles for its behavior in Gabelli, this agency and others, both federal and state, are increasingly aggressive in seeking fines. Last month the SEC’s website touted the $1.53 billion in penalties that it has accrued from enforcement actions related to the 2008 financial crisis. The reported monetary relief to victims amounted to $1.15 billion. Stated another way, the government recovered 33% more for itself than for investors.

The SEC has the authority to return some of those fines it collected to injured investors, but the agency website is silent on that point. Bigger fines may demonstrate an agency’s prowess or increase its bragging rights. But that has nothing to do with whether any given amount is appropriate or just punishment—or indeed, any punishment at all.

There is a better way, and it doesn’t mean letting corporations off the hook for bad behavior. In addition to victims’ private lawsuits that hold corporations accountable, government actions can pursue wrongdoers in a variety of ways, including: disgorgement of ill-gotten gains to victims, injunctions to curtail harmful conduct, and the imposition of examiners and monitors, all of which can adequately address and cure the underlying misconduct.

For any government agency—but in particular for the SEC, which supposedly seeks to protect investors—these types of equitable remedies, not punitive monetary fines, should be the remedies of first resort.

Messrs. Rivkin and Carney practice law at BakerHostetler. Mr. Rivkin served in the Justice Department and the White House Counsel’s Office in the Reagan and George H.W. Bush administrations. Mr. Carney served in the SEC’s Division of Enforcement and the Justice Department as a Securities Fraud Chief.

Source: http://online.wsj.com/article/SB10001424127887324128504578344502420815488.html?KEYWORDS=Rivkin

The opening for a fresh ObamaCare challenge

By defining the mandate as a tax, one that will not be uniformly applied, the Supreme Court ran afoul of the Constitution.


ObamaCare is being implemented, having been upheld as constitutional by the Supreme Court in June in a series of cases now known as National Federation of Independent Business v. HHS. It is becoming increasingly clear, however, that the court took a law that was flawed but potentially workable and transformed it into one that is almost certainly unworkable. More important, the justices also may have created new and fatal constitutional problems.

ObamaCare, or the Affordable Care Act, was conceived as a complex statutory scheme designed to provide Americans with near-universal health-care coverage and to effectively federalize the nation’s health-care system. The law’s core provision was an individual health-insurance purchase mandate, adopted by Congress as a “regulation” of interstate commerce. The provision required most Americans to buy federally determined minimum health-care insurance, or to pay a penalty more or less equivalent to the cost of that coverage.

Equally important were provisions requiring creation of state-run health-care insurance exchanges (where middle-income earners could obtain the prescribed coverage) and an expanded Medicaid program (also administered by the states) to cover people with incomes up to 133% (later upped to 138%) of the federal poverty level. An income of up to $31,809 for a family of four would qualify for Medicaid. States that failed to join in the Medicaid expansion were threatened with the loss of all federal Medicaid dollars, nearly a quarter of all state expenditures.

In the ObamaCare ruling, the Supreme Court correctly held that Congress could not impose the individual mandate as a constitutional regulation of interstate commerce and that Congress could not constitutionally use its spending power to coerce the states to expand Medicaid. Rather than strike down the law, however, the court construed the insurance-purchase mandate and its penalty as a “tax” on the failure to have health insurance. The justices also interpreted the Medicaid-expansion requirements as optional—permitting states to opt out of these provisions while staying within the traditional Medicaid program. Given that interpretation, the court’s majority upheld the statute as constitutional.

The court’s determination to preserve ObamaCare through “interpretation” has exacerbated the law’s original flaws to the point that it has become palpably unworkable. By transforming the penalties for failing to comply with the law’s requirements into a “tax,” the court has given the public a green light to ignore ObamaCare’s requirements when it is economically beneficial. Law-abiding individuals, who might otherwise have complied with the law’s expensive purchase mandate to avoid being subjected to financial penalties, can simply now choose to pay a tax and not sign up for coverage. There is certainly no stigma attached to simply paying a tax, and noncompliance with the law’s other requirements—such as those imposed on employers—is arguably made more attractive on the same basis. This effect fundamentally undercuts Congress’s original purpose, which was to expand health-care coverage to the greatest number of people, not to improve federal revenues.

Similarly, having reviewed the likely costs and benefits, states are now taking advantage of the court-granted flexibility. Seven states, including Texas, Mississippi and Georgia, have so far opted out of the Medicaid-expansion provisions, and eight (with more certain to come) are refusing to create the insurance exchanges, leaving this to a federal bureaucracy unequipped to handle these new administrative burdens. As a result, a growing number of low-income Americans will be unable to obtain the free or cost-effective insurance that Congress originally meant them to have, although they remain subject to the mandate-tax.

Policy problems aside, by transforming the mandate into a tax to avoid one set of constitutional problems (Congress having exceeded its constitutionally enumerated powers), the court has created another problem. If the mandate is an indirect tax, as the Supreme Court held, then the Constitution’s “Uniformity Clause” (Article I, Section 8, Clause 1) requires the tax to “be uniform throughout the United States.” The Framers adopted this provision so that a group of dominant states could not shift the federal tax burden to the others. It was yet another constitutional device that was simultaneously designed to protect federalism and safeguard individual liberty.

The Supreme Court has rarely considered the Uniformity Clause’s reach, but it cannot be ignored. The court also refused to impose meaningful limits on Congress’s power to regulate interstate commerce for decades after the 1930s, until justices began to re-establish the constitutional balance in the 1990s with decisions leading up to the ObamaCare ruling this summer. And although the court has upheld as “uniform” taxes that affect states differently in practice, precedent makes clear that a permissible tax must “operate with the same force and effect in every place where the subject of it is found,” as held in the Head Money Cases (1884). The ObamaCare tax arguably does not meet this standard.

ObamaCare provides that low-income taxpayers, who are nevertheless above the federal poverty line, can discharge their mandate-tax obligation by enrolling in the new, expanded Medicaid program, which serves as the functional equivalent of a tax credit. But that program will not now exist in every state because, as a matter of federal law, states can opt out. The actual tax burden will not be geographically uniform as the court’s precedents require.

Thus, having transformed the individual mandate into a tax, the court may face renewed challenges to ObamaCare on uniformity grounds. The justices will then confront a tough choice. Having earlier reinterpreted the mandate as a tax, they would be hard-pressed to approve the geographic disparity created when states opt out of the Medicaid expansion. But that possibility is inherent in a scheme that imposes a nominally uniform tax liability accompanied by the practical equivalent of a fully off-setting tax credit available only to those living in certain states. To uphold such a taxing scheme would eliminate any meaningful uniformity requirement—a result that the Constitution does not permit.

ObamaCare was always a poorly conceived and constitutionally deficient statute. The Supreme Court’s ruling upholding the law has simply made it worse. In the future, that decision is likely to be seen as a prime reason that the federal courts should judge and never legislate—even in the cause of rescuing an otherwise unconstitutional law from oblivion.

Messrs. Rivkin and Casey are lawyers in the Washington, D.C., office of Baker & Hostetler LLP. They pioneered the constitutional arguments against the individual mandate and represented 26 states in challenging ObamaCare before the trial and appellate courts.

A version of this article appeared December 6, 2012, on page A17 in the U.S. edition of The Wall Street Journal, with the headline: The Opening for a Fresh ObamaCare Challenge.

Source: http://online.wsj.com/article/SB10001424127887324705104578151164101375482.html?mod=djemEditorialPage_h