Alito Teases a Judicial Revolution

By David B. Rivkin Jr. and Lee A. Casey

23 June 2019 in the Wall Street Journal

The Supreme Court’s decision last week in Gundy v. U.S. was deceptively anticlimactic. The vote was 5-3, but there was no majority opinion and the decision made no new law. Justice Samuel Alito’s lone concurrence, however, suggested that a major break with precedent—and a return to the Constitution’s original meaning—will soon be in the offing.

The Constitution’s first clause after the Preamble states: “All legislative Powers herein granted shall be vested in a Congress of the United States.” Since 1935 the justices have ignored that provision and permitted lawmakers to delegate their authority to the executive branch. At issue in this case was a provision of the Sex Offender Registration and Notification Act of 2006, or Sorna, that directed the attorney general to “specify the applicability” of the law’s registration requirements to offenders, like Herman Gundy, whose crimes predated the act. Mr. Gundy, who was sentenced to 10 years in prison for failing to register, claimed this delegation was illegitimate.

The case was heard four days before Justice Brett Kavanaugh’s confirmation. Had Justice Alito dissented, the resulting 4-4 split would have upheld the lower court’s ruling against Mr. Gundy without any opinion being issued. Instead, Justice Alito joined his four liberal colleagues in rejecting Mr. Gundy’s appeal but said he was prepared to switch sides: “If a majority of this Court were willing to reconsider the approach we have taken for the past 84 years, I would support that effort.” A dissent from Justice Neil Gorsuch, meanwhile, set forth the case for nondelegation.

In their quest to control governmental power and protect individual liberty, the Framers separated federal power among three branches of government. As Justice Gorsuch notes, they also “went to great lengths to make lawmaking difficult,” requiring consent of both houses of Congress and the president, or legislative supermajorities. The veto was the executive branch’s only role in the legislative process.

That was deliberate. Justice Gorsuch quotes Montesquieu, who was quoted by James Madison in Federalist No. 47: “There can be no liberty where the legislative and executive powers are united in the same person, or body of magistrates.”

For more than a century after its creation, the high court actively policed the separation of executive and legislative powers, requiring Congress to make the hard, politically risky policy decisions and permitting only limited delegation of operational details. But in the 1930s, under pressure to uphold the vast delegations of the New Deal, the justices changed course and held that delegation was permissible so long as an “intelligible principle” could be discerned to govern how that power was exercised.

Gundy offered an excellent opportunity to begin reasserting the original constitutional design. Sorna’s delegation of power was extreme. While setting up an elaborate registration system for sex offenders convicted after its enactment, the law granted the attorney general “authority to specify the applicability of the requirements of this subchapter to sex offenders convicted before the enactment of this chapter.” A single official in the executive branch was given the power to impose requirements carrying severe criminal penalties on more than 500,000 Americans, and then to carry them out.

Justice Elena Kagan, who wrote the plurality opinion, struggled mightily to find an intelligible principle. She wrote that the court had interpreted Sorna as requiring applicability “to all pre-Act offenders as soon as feasible.” But as Justice Gorsuch noted, that language appears neither in the statute nor in the Justice Department’s implementing regulations.

Justices Gorsuch’s and Alito’s opinions, together with Justice Kavanaugh’s strong separation-of-powers jurisprudence as an appellate judge, suggest that a majority of justices are prepared to reimpose proper constitutional restraints on congressional delegations. All they need is a suitable case.

Messrs. Rivkin and Casey practice appellate and constitutional law in Washington. They served in the White House Counsel’s Office and Justice Department under Presidents Reagan and George H.W. Bush.

Source: https://www.wsj.com/articles/alito-teases-a-judicial-revolution-11561317002

A Facebook Deal That Needs Unfriending

Time to end class-action settlements that only reward lawyers, not plaintiffs.

By David B. Rivkin Jr. and Lee A. Casey 

The Supreme Court will soon decide whether to hear a case that could determine the future of particularly abusive class-action settlements. Not abusive in the usual sense, where a class of injured plaintiffs is awarded an exorbitant amount. Instead, these settlements are abusive in that absolutely nothing goes to the injured plaintiffs. At issue is whether federal courts may approve such agreements rewarding lawyers and defendants, leaving plaintiffs out in the cold.

The case is Marek v. Lane, and it arose out of Facebook’s notorious 2007 “Beacon” program. Beacon gathered and published information about Facebook users’ other Internet activities as an advertising and marketing tool, invading the privacy of millions. It may also have violated a number of state and federal laws, including the 1988 Video Privacy Protection Act, which includes a liquidated-damages provision of $2,500 for each offense. A class-action suit was filed in 2008 on behalf of as many as 3.6 million injured social networkers.

Embarrassed (if unrepentant) and under media pressure, Facebook entered settlement negotiations, ultimately agreeing to pay $9.5 million. Of this, about $3.1 million (later reduced to $2.3 million) would go to the class-action lawyers, and the rest would be used to create a Digital Trust Foundation, controlled in part by Facebook. The DTF would sponsor programs and education regarding online threats to personal information and identity—including through funding consumer groups, such as the Electronic Frontier Foundation, that Facebook already supports and are often allied with Facebook on matters of regulation and public policy. Members of the class of injured plaintiffs, meanwhile, would get nothing and, unless they took action to “opt-out” of the settlement, their individual claims would be forever barred.

Such arrangements, through which a class recovery is diverted to purposes other than actually compensating the claimants, are known as “cy pres” awards, a term derived from the French legal expression cy pres comme possible (as near as possible). The idea is that where a court cannot directly achieve some remedial goal, such as meaningful payments to the injured parties, it may adopt other measures that, as nearly as possible, have the same compensatory result.

Cy pres remedies are very much an exception in the law, and are ordinarily subject to significant judicial policing due to the risk that defendants and class-action attorneys will use cy pres to cut a deal that benefits them both but gives plaintiffs little or nothing. For this reason, federal courts carefully assess whether proposed settlements are “fair, reasonable, and adequate” to the injured class members. A cy pres award can be approved only if a court finds that granting the recovery to a third party best advances member interests.

The Facebook settlement, however, provides zero benefit to class members. Breaking with all the other appeals courts to consider cy pres settlements, in February the U.S. Court of Appeals for the Ninth Circuit upheld a ruling that an award of millions to a foundation controlled in part by Facebook was good enough because it was not entirely “unrelated to the class’s interests.”

Yet the Ninth Circuit’s six dissenting judges wrote: “The DTF can teach Facebook users how to create strong passwords, tinker with their privacy settings, and generally be more cautious online, but it can’t teach users how to protect themselves from Facebook’s deliberate misconduct. Unless, of course, the DTF teaches Facebook users not to use Facebook. That seems unlikely.”

Nevertheless, both the trial court and the Ninth Circuit Court of Appeals approved this agreement, without assessing the value of class members’ claims. The agreement did not even forbid Facebook from reinstituting a program identical to Beacon under a different name in the future and injuring class members in the exact same fashion. If that’s “fair, reasonable, and adequate,” then anything goes.

The Ninth Circuit’s decision opens new vistas in class-action litigation, where lawyers (in the form of fat fees) and defendants (in the form of resolving expensive lawsuits on the cheap) could reap rich rewards simply by stiffing those actually injured. Sadly, even courts have been known to get in on the action by helping to choose the institutions or causes to receive cy pres payments—including awards to the alma mater of a plaintiffs’ lawyer, in one case, and to schools where judges either taught or served as a trustee, in others.

Only the Supreme Court can remedy this, by hearing Marek v. Lane and reversing a decision that carries the real and immediate danger of promoting significant abuse nationwide. Class actions should compensate the victims of genuine injuries, not promote some social good as defined by lawyers, defendants and judges.

Messrs. Rivkin and Casey served in the U.S. Justice Department under Presidents Reagan and George H.W. Bush. They are partners in the Washington, D.C., office of Baker & Hostetler LLP, representing claimants opposed to the Facebook settlement and who are now seeking Supreme Court review.

Source: http://online.wsj.com/article/SB10001424052702303796404579101271549128990.html#articleTabs%3Darticle

The True Lesson of the IRS Scandal

There should be less federal regulation of political speech.

By David B. Rivkin Jr. and Lee A. Casey

President Obama and his political allies have dismissed as “phony scandals” mounting evidence that the Internal Revenue Service and other federal agencies hindered and punished conservative advocacy groups. Meanwhile, efforts are under way to impose even more regulation on core political speech.

The government’s abuses are very real, but the scandal’s lessons are not appreciated: The federal regulation of political speech has already gone further than can be justified by existing law, let alone the Constitution.

The debate about political speech has so far focused on a particular type of nonprofit entity: social-welfare organizations exempt from federal income tax under section 501(c)(4) of the Internal Revenue Code. A group qualifies for this exempt status if it is “operated exclusively for the promotion of social welfare.” This means its efforts cannot inure to the benefit of specific individuals, members or private clubs.

On Wednesday, Rep. Chris Van Hollen (D., Md.) filed a federal lawsuit seeking to force the IRS to tighten the eligibility rules for politically active groups seeking 501(c)(4) status. Yet “social welfare” is a capacious term that includes many policy and political goals—from preserving historic battlefields to repealing laws for or against same-sex marriage.

The IRS has long recognized this by permitting such groups, if consistent with their stated social-welfare purpose, to engage primarily or even wholly in public-issue advocacy or lobbying. In other words, they are permitted to engage in political speech directed at government officials. At the same time, however, the IRS says that political campaign activities cannot account for more than half of a 501(c)(4)’s expenditures. But the statute itself contains no such limitation. In short, the IRS effectively robs social-welfare organizations of one half of their potential political speech.

This distinction between lobbying and election advocacy is entirely arbitrary. Electing candidates who support an organization’s principles and goals may be the most effective (and in some cases the only) means of achieving that organization’s social-welfare purpose. Yet the IRS rules here are consistent with the federal government’s overall approach to regulating elections since at least the 1970s. Bizarre as it may be in the world’s leading democracy, federal election laws treat the most effective form of political speech as the most disfavored. Stricter regulations like those sought by Rep. Van Hollen and others would only worsen the problem.

Until recently, the Supreme Court largely supported this system, interpreting the Constitution’s free-speech guarantees to permit these limitations in order to avoid corruption or its appearance. Even so, the court rejected efforts to control political activities, including expenditures, in support of a candidate but made independently of a candidate’s own campaign organization. The exception was corporations, which could not make independent expenditures.

In Citizens United v. FEC (2010), a majority of the court more sensitive to the First Amendment invalidated restrictions on independent political campaign expenditures by corporations, associations and labor unions. Since Citizens United, the use of 501(c)(4) organizations to engage in political speech has burgeoned—largely because such groups need not disclose their donors as purely political organizations still must. Calls for the IRS to close this supposed “loophole” also have multiplied.

That is a bad idea, not supported by the statutory language, and it is unconstitutional to boot. Although the Supreme Court has held that there is no duty to subsidize political speech through tax exemptions, there is no plausible basis on which the IRS (or Congress) can limit tax-exempt status to groups that eschew independent campaign spending while permitting other forms of political speech, such as lobbying.

Where the potential for corruption—for example, giving money to a candidate in exchange for favors—is absent, as the Citizens United ruling found with regard to independent expenditures, treating one form of political speech differently than others is not rational. It fails even the most deferential judicial review standard, much less the more exacting compelling governmental interest ordinarily applied under the First Amendment. The IRS-created 50% limit is vulnerable to challenge on the same grounds. It should make no difference under the existing statutory language what form the political speech of a 501(c)(4) takes; the organization should be able to spend 100% of its funds on independent campaign spending.

There also are sound policy reasons to cut 501(c)(4)s loose from such regulations. Such groups allow ordinary people to compete with the better-funded media industry, political parties, celebrities and other wealthy players, in the marketplace of ideas. Constraining the activities of 501(c)4s would not, as “progressives” claim, protect the little guy and level the playing field. Instead it would protect entrenched interests and, most of all, incumbents who can raise money simply because they hold public office.

Congress could abolish the 501(c)(4) status entirely. However, neither the IRS nor Congress can produce a result in which some groups, whose social-welfare purposes can be advanced through nonpolitical speech (such as promoting botany or historical research), can use 100% of their resources to do so, while others groups, whose social-welfare purposes can be advanced only through political speech, cannot.

To conclude otherwise would enable the government to engage in content-based restrictions on speech that have always been viewed as the most insidious violation of the First Amendment. The Supreme Court also has long made clear that Congress cannot deploy tax subsidies as a means of suppressing “dangerous ideas.”

The IRS scandal is a moment of reckoning. It offers the country a unique opportunity to free a substantial portion of political speech from government regulation.

This is an opportunity not to be wasted. Republicans should broaden their oversight inquiries into the constitutional and statutory basis on which the IRS has limited 501(c)(4) expenditures in the past—and force the agency to justify any plans it has to continue or expand those limits.

Messrs. Rivkin and Casey served in the Justice Department during the Reagan and George H.W. Bush administrations. They are partners in the Washington, D.C., office of Baker & Hostetler LLP.

Source: http://online.wsj.com/article/SB10001424127887323477604579001263134291446.html