Archive | July, 2013

Just Compensation Problems with the City of Richmond’s Plan to Use Eminent Domain to Condemn Mortgages

In my previous post on the the California city of of Richmond’s plan to use eminent domain to condemn underwater mortgages, I noted that the plan is likely to be permissible under the Supreme Court’s decision in Kelo v. City of New London, which says that a taking is for a constitutional “public use,” so long as it might advance some “public purpose” that isn’t “pretextual.” It may well also be permissible under California courts’ lax interpretation of of public use under their state constitution. But I didn’t consider another possible constitutional problem with the Richmond plan: undercompensation [HT: multiple VC readers who have directed my attention to this problem]. When the government condemns private property, the Fifth Amendment requires it to pay “just compensation,” which the Supreme Court has long interpreted as “fair market value.” As Matthew Yglesias sugggests, in many cases the formula used by Richmond would result in compensation below FMV (which is usually defined, roughly, as what the value of the asset in question would be if offered up for sale on the open market).

Here’s the compensation Richmond is offering, as described by the New York Times:

The city is offering to buy the loans at what it considers the fair market value. In a hypothetical example, a home mortgaged for $400,000 is now worth $200,000. The city plans to buy the loan for $160,000, or about 80 percent of the value of the home, a discount that factors in the risk of default.

If the home is worth $200,000 on the open market, as in the hypothetical example above, it is likely that the fair market value of the $400,000 mortgage should be at least that much, or close to it. Even if the owner defaults, the lender can recover that [...]

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Poverty and Child Custody

An interesting Appellate Court of Illinois decision, Cole v. Johnson (Ill. App. Ct. July 23, 2013) (some paragraph breaks rearranged); see, in particular, the last three paragraphs:

The petitioner is Cody Cole, and the respondent is Kathryn Anne Johnson. They live in Paris, Illinois, and have a two-year-old son, L.C. They were engaged to be married, but they broke off the engagement and ended their relationship, and now they live apart. Neither earns enough to support a household.

[Mother], who has custody of L.C., met an oilfield engineer from Albany, Texas, Steven Sutton, who is about her age and earns $130,000 a year. He can earn this kind of money only in the oilfields of Texas. As of the date of trial, he and [mother] were engaged to be married ….

Pursuant to section 609 of the Illinois Marriage and Dissolution of Marriage Act (Marriage Act) (750 ILCS 5/609 (West 2010)), [mother] filed a petition to remove L.C. from Illinois to Texas, so that she and L.C. could live with her soon-to-be husband, in Albany. After hearing evidence, the trial court denied the petition, finding that the proposed removal would not be in L.C.’s best interest. [Mother] appeals.

The best-interest finding is against the manifest weight of the evidence, considering the extent to which the proposed removal would improve the quality of life for both [mother] and L.C. Therefore, we reverse the trial court’s judgment and remand this case with directions to (1) grant the petition for removal and (2) craft a reasonable and realistic visitation schedule based on L.C.’s residence in Texas….

[Father], who is 23 years old, lives with his mother, stepfather, brother, and sister in a house in Paris, Illinois….

[Father] has a high-school diploma and one year of community college. He would like to attend a

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Third Circuit Upholds New Jersey’s Highly Restrictive Scheme for Gun Carry Licenses

The case is today’s Drake v. Filko (3d Cir. July 31, 2013), a 2-1 decision. I agree with the dissent, except that I think intermediate scrutiny isn’t the right standard to apply to such a broad restriction on the right to carry guns for self-defense.

My guess is also that there’s a decent chance that the Supreme Court will agree to hear the case (I doubt that the Third Circuit will rehear it en banc). There is something of a split between the circuits and state supreme courts that have upheld such restrictive schemes, and the Seventh Circuit, which struck down the Illinois law; and while the Illinois law was an unusually broad carry ban, I think the logic of the Seventh Circuit decision is indeed contrary to that of the other decisions. And the fact that there’s a dissent on the panel also cuts in some measure in favor of a grant of certiorari. The odds are still against cert — they almost always are — but I’d say that there’s at least a 25% chance or so of the Supreme Court agreeing to hear this case, assuming plaintiffs petition for review (and I expect they will). [...]

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Government Releases “Primary Order” for Telephony Metadata Under FISA Section 215

Readers will recall that when Glenn Greenwald released the FISC order indicating that the NSA was getting all domestic telephony metadata, that order was designated the “secondary order.” We have since heard that there was a “primary order” covering what the government is allowed to do with the data obtained under the “secondary order.” The DNI has today released a somewhat redacted version of the primary order: You can see it here.

A few thoughts on the “primary order”:

1) Although billed as imposing minimization procedures, the “primary order” strikes me as more like its own surveillance statute: Starting on page 4, it lays out in detail what the government can and can’t do and what procedures they must follow.

2) As has been widely reported, the basic standard for querying the database is reasonable suspicion. More specifically, on page 7, we learn that there are 22 people at the NSA that are empowered to make the call as to whether there is reasonable suspicion to query the database with a “seed” query. The NSA General Counsel’s Office also gets involved if the selection term is reasonably believed to be used by a U.S. person, in order to block queries based on 1st Amendment activities.

3) Specifically, the standard to be applied according to the primary order is whether

based on the factual and practical considerations of everyday life on which reasonable and prudent persons act, there are facts giving rise to a reasonable, articulable suspicion that the selection term to be queried is associated with [redacted].

(p.7) I assume the redacted part here is something like Al Qaeda and its associates, but who knows. If you’re wondering where they’re getting this standard, it’s from two lines of Fourth Amendment cases. The first part is from an oft-repeated Supreme [...]

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Using Eminent Domain to Condemn Mortgages

The New York Times has an interesting article describing one California city’s plan to use eminent domain to condemn and restructure mortgages [HT: numerous readers who have written me requesting that I do a post about this issue]:

The power of eminent domain has traditionally worked against homeowners, who can be forced to sell their property to make way for a new highway or shopping mall. But now the working-class city of Richmond, Calif., hopes to use the same legal tool to help people stay right where they are.

Scarcely touched by the nation’s housing recovery and tired of waiting for federal help, Richmond is about to become the first city in the nation to try eminent domain as a way to stop foreclosures…

Richmond is offering to buy both current and delinquent loans. To defend against the charge that irresponsible homeowners who used their homes as A.T.M.’s are being helped at the expense of investors, the first pool of 626 loans does not include any homes with large second mortgages, said Steven M. Gluckstern, the chairman of Mortgage Resolution Partners.

The city is offering to buy the loans at what it considers the fair market value. In a hypothetical example, a home mortgaged for $400,000 is now worth $200,000. The city plans to buy the loan for $160,000, or about 80 percent of the value of the home, a discount that factors in the risk of default.

Then, the city would write down the debt to $190,000 and allow the homeowner to refinance at the new amount, probably through a government program. The $30,000 difference goes to the city, the investors who put up the money to buy the loan, closing costs and M.R.P. The homeowner would go from owing twice what the home is worth to having $10,000

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Doubling McDonald’s Salaries

Let’s say McDonald’s decided to double all its salaries, so that the entry-level wage became $16 an hour instead of $8 an hour. Why would McDonald’s continue to employ their $8 an hour workers when instead they could hire “better” workers who are worth more? (And those of you who think that the skills, linguistic abilities, experience, intelligence, etc. of fast-food workers makes no difference in service don’t eat in McDonald’s much.) [...]

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When writing the Brewington amicus brief, which we filed before the Indiana Supreme Court, I used the term “Indianan” in my first draft. Yes, I’d heard of “Hoosier,” but I thought it was a jocular colloquialism, and “Indianan” was the Proper Dignified Lawyerly Way to say it.

Boy, was I wrong, as Michael Sutherlin, Dan Brewington’s lawyer (who has done an excellent job in the case, ably assisted by his associate Sam Adams), pointed out. Indeed, when I checked on Westlaw, I found only one case in the Indiana Cases database mentioning “Indianan” — and that was a typo. I found 192 cases mentioning “Hoosiers,” even limiting it to the plural so as to avoid various organizational names that contain “Hoosier”; the great bulk of these cases indeed referred to Indiana residents.

Interestingly, outside Indiana state courts and federal district courts the ratio was closer, 9 “Hoosiers” — counting only courts using that term to refer to residents of Indiana — to 7 “Indianans.” But I was filing in an Indiana court, and when in Indianapolis, do as the …. [...]

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Lawmakers Upset with PPACA as It Applies to Them

Today’s NYT had an amusing story about how members of Congress and their staffs are concerned about a provision in the PPACA that requires them to obtain insurance through exchanges because, among other things, it will require a substantial increase in out-of-pocket costs.

Under a wrinkle that dates back to enactment of the law, members of Congress and thousands of their aides are required to get their coverage through new state-based markets known as insurance exchanges.

But the law does not provide any obvious way for the federal government to continue paying its share of the premiums for the comprehensive coverage.

If the government cannot do so, it could mean an additional expense of $5,000 a year for individuals and $11,000 for families under some of the most popular plans.

Not surprisingly, that idea is unpopular on Capitol Hill. . . .

With the exchanges scheduled to open in just nine weeks, the Obama administration is struggling to come up with a creative interpretation of the health care law that would allow the federal government to kick in for insurance as private employers do, but so far an answer has proved elusive.

The issue is politically charged because the White House and Congress are highly sensitive to any suggestion that lawmakers or their aides are getting special treatment under the health law. The administration is already under fire from Republicans for delaying a requirement that larger businesses offer insurance to their full-time employees.

The article also provides a useful reminder that what became the PPACA was a draft bill that its supporters never intended to become law. The Senate-passed health care reform bill was intended to serve as the Senate’s contribution to a House-Senate conference that would iron out all the final details. Yet after Scott Brown was elected to [...]

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Sixth Circuit Affirms Dismissal of Suit Against Cooley Law

Today, in MacDonald v. Thomas M. Cooley Law School, the U.S. Court of Appeals for the SIxth Circuit affirmed the dismissal of a suit by several former students at the Thomas M. Cooley Law School. Here’s the court’s summary of its opinion.

The plaintiffs, twelve graduates of the Thomas M. Cooley Law School, sued their alma mater in district court, alleging that the school disseminated false employment statistics which misled them into deciding to attend Cooley. The graduates relied on these statistics as assurances that they would obtain full-time attorney jobs after graduating. But the statistics portrayed their postgraduation employment prospects as far more sanguine than they turned out to be. After graduation, the Cooley graduates did not secure the kind of employment the statistics advertised—or in some cases any employment at all. They claimed that, had they known their true—dismal—employment prospects, they would not have attended Cooley—or would have paid less tuition. Because their Cooley degrees turned out not to be worth what Cooley advertised them to be, they have sought, among other relief, partial reimbursement of tuition, which they have estimated for the class would be $300,000,000. But because the Michigan Consumer Protection Act does not apply to this case’s facts, because the graduates’ complaint shows that one of the statistics on which they relied was objectively true, and because their reliance on the statistics was unreasonable, we AFFIRM the district court’s judgment dismissing their complaint for failure to state any claim upon which it could grant relief.

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Hearing on IRS Health Insurance Tax Credit Rule

Tomorrow the Energy Policy, Health Care and Entitlements subcommittee of the House Oversight and Government Reform Committee is holding a hearing on “Oversight of IRS’s Legal Basis for Expanding ObamaCare’s Taxes and Subsidies.” The issue is whether the IRS rule purporting to extend tax credits and cost-sharing subsidies for the purchase of qualifying health insurance in federal exchanges comports with the PPACA. (My answer: No.) I am scheduled to testify, along with Oklahoma Attorney General Scott Pruitt, Dr. Charles Willey (a plaintiff in the D.C. case against the rule), Simon Lazarus of the Constitutional Accountbility Center, and Emily S. McMahon, Deputy Assistant Secretary for Tax Policy at the Department of the Treasury. My testimony is here. It draws upon my article on this issue with Michael Cannon. These posts provide more background. [...]

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Civil Unions and Federal Law

A commenter to my last DOMA/choice-of-law post asks– why not just have federal law recognize all state-law civil unions? Why insist that a legal union be labeled “marriage” to count federally as a marriage? There are two slightly different versions of this question, which in my view have different answers.

Version one: Under current law, do federal laws referring to “marriage” include unmarried couples in civil unions? My view is “no,” as a simple matter of statutory text. There are a lot of couples in various kinds of close relationships, but for whatever reason (presumably some combination of tradition and simplicity) lawmakers often choose to single out “marriage” when giving special legal status to a relationship. Indeed, for better or worse, that special legal status has become an important part of what marriage is. So when Congress refers to couples who are married, we ought to take it at its word. Civil unions, while functionally very similar to marriage, are formally not marriage. Indeed, that is often the very point of a civil union. If one thinks that the legislature is constitutionally permitted to regulate access to marriage in this way (a big if, these days!), then one ought to respect the choice of forms.

That said, here’s version two of the question: Ought we to amend federal law, so that wherever possible, couples in state-law civil unions have all of the same benefits as couples in state-law marriages? My view is “maybe so!” At the outset I’ll say that I’m strongly in favor of amending federal law to provide some predictable and consistent way of deciding what couples are married for purposes of federal law. Bills providing a federal choice of law rule have been introduced in both the House and Senate and would help avoid exactly the kind [...]

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New Draft Article: The Next Generation Communications Privacy Act

I recently posted a new draft article, The Next Generation Communications Privacy Act, forthcoming in the University of Pennsylvania Law Review. I wrote the draft during the winter and spring, before the Edward Snowden NSA disclosures, although some aspects of the Snowden disclosures echo the themes of the article. Note that this article is only about the criminal surveillance statutes, however, not the national security surveillance statutes. Here’s the abstract:

In 1986, Congress enacted the Electronic Communications Privacy Act (ECPA) to regulate government access to Internet communications and records. ECPA is widely seen as outdated, and ECPA reform is now on the Congressional agenda. At the same time, existing reform proposals retain the structure of the 1986 Act and merely tinker with a few small aspects of the statute. This Article offers a thought experiment about what might happen if Congress repealed ECPA and enacted a new privacy statute to replace it.

The new statute would look quite different from ECPA because overlooked changes in Internet technology have dramatically altered the assumptions on which the 1986 Act was based. ECPA was designed for a network world with high storage costs and only local network access. Its design reflects the privacy threats of such a network, including high privacy protection for real-time wiretapping, little protection for non-content records, and no attention to particularity or jurisdiction. Today’s Internet reverses all of these assumptions. Storage costs have plummeted, leading to a reality of almost total storage. Even United States-based services now serve a predominantly foreign customer base. A new statute would need to account for these changes.

The Article contends that a next generation privacy act should contain four features. First, it should impose the same requirement on access to all contents. Second, it should impose particularity requirements on the scope

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Andrew McCarthy’s Fundamental Error


It is entirely understandable that libertarian-minded conservatives should distrust the Obama administration and resist endowing it with unnecessary additional powers. But the NSA programs are not new – they long predate Obama. And they are – the NSA, the administration, and informed members of Congress attest – highly effective efforts to map terror networks and prevent terrorist attacks. They do not ask us to trust the Obama administration. Indeed, the built-in layers of judicial and congressional oversight reflect the fact that the Congresses that first approved these programs were full of Democrats who deeply distrusted the Bush administration.

Here’s the thing: “a libertarian-minded conservative” should, and likely does, distrust ANY administration with the sort of power that both the Bush and Obama administrations have been acquiring since 9/11.

It’s a fundamental error partisans on both sides make to believe that problems with abusive government arise only or primarily when the “bad guys” are in power. It’s not surprising that strong partisans tend to be more forgiving when their own side is in control. But if you are a “libertarian-minded” conservative, that means that you have an underlying ideology beyond mere partisanship, and that ideology, if nothing else, cautions against giving the government too much power, especially when that power is exercised in secret and reviewed only in secret hearings and by secret courts. So, in fact, “it is entirely understandable that libertarian-minded conservative should distrust [ANY] administration” and not only “resist endowing it with unnecessary additional powers,” but try to check the abuse and potential abuse of powers already granted.

The fact that so many Republicans were willing to vote against NSA surveillance despite the argument that they were voting against policies advocated and implemented by the Bush Adminsitration and therefore were undermining the Bush-initiated War on Terror [...]

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