Verdict Legal Analysis and Commentary from Justia Fri, 19 Sep 2014 13:26:06 +0000 en-US hourly 1 Copyright © Verdict 2013 (Verdict) (Verdict) 1440 Verdict 144 144 Legal Analysis and Commentary from Justia Verdict Verdict no no Resurrecting the Dubious State Secrets Privilege Fri, 19 Sep 2014 04:01:22 +0000 Continue reading →]]> Private EnvelopeIn an unusual move, the U.S. Department of Justice has filed a motion to make a private lawsuit simply disappear. While the U.S. Government is not a party to this defamation lawsuit—Victor Restis et al. v. American Coalition Against Nuclear Iran, Inc.—filed July 19, 2013, in the U.S. District Court for the Southern District of New York, Attorney General Eric Holder is concerned that the discovery being undertaken might jeopardize our national security.

This lawsuit is a fight between private parties: Victor Restis, a Greek shipping magnate, who claims he was defamed by United Against Nuclear Iran, a group lobbying against businesses it believes are facilitating Iranian nuclear ambitions. The group claims Restis has been doing embargoed business with Iran, but Restis denies the allegation. Holder’s Justice Department is not saying exactly what the problem might be with the discovery in this action; rather it has simply turned to the Bush II administration’s favorite post-9/11 device for protecting information by ending lawsuits: the “state-secrets privilege.”

When reporting this story, the New York Times noted that the use of the state secrets privilege had surprised attorneys across the political spectrum given Attorney General Holder’s efforts to distance his Justice Department from the tactics and practices of his immediate Bush II administration predecessors. Slightly contrary to the reaction of plaintiff Victor Restis’s lead attorney, Abbe D. Lowell, who claims there is “no precedent, literally, for what the government is attempting to do,” there are a handful of instances reaching back to the early 1900s, even before the state secrets privilege had been blessed by the U.S. Supreme Court, where the executive branch of government intervened to protect secret information. But calling for dismissal of a private lawsuit, based on the always dubious state secrets privilege, is throwing the baby out with the bath water.

Precedents for Government Intervention in Private Litigation

The government’s argument for intervening in this lawsuit is technical and thin. They assert that pursuant to Rule 24(a) of the Federal Rules of Civil Procedure, which provides: “Intervention of right. Upon timely application anyone shall be permitted to intervene in an action: . . . (2) When the applicant claims an interest relating to the property or transaction which is the subject of the action and he is so situated that the disposition of the action may as a practical matter impair or impede his ability to protect that interest, unless the applicant’s interest is adequately represented by existing parties.” The government says it has a unique and important interest in protecting the information set forth in its (classified) State Secrets Privilege Declarations.

Because it is such a terrible idea to expand this fuzzy and often abused privilege into the area of a private defamation lawsuit, I am almost reluctant to mention that Lou Fisher’s book, In The Name of National Security: Unchecked Presidential Power and the Reynolds Case, sets forth the long history of this privilege (or its earlier incarnations) being invoked when the government is not a party to the litigation. While there are some distinctions, Lou, a leading constitutional authority on national security law and separation of powers, found a case as early as 1912, Firth Sterling Steel Co. v. Bethlehem Steel Co., which is cited in Reynolds; in this case the federal government intervened in private litigation between two steel companies, when one company had been given secret drawings of Navy Department projectiles as part of a government contract. Similarly in Pollen v. Ford Instrument Co. (1939) the federal government intervened in a private lawsuit to block the disclosure of secret military drawings.

The strongest precedent in the government’s brief in the current case is the 1985 case of Fitzgerald v. Penthouse Intern., Ltd. Fitzgerald had sued Penthouse Magazine for an allegedly libelous article, but the U.S. Navy moved to intervene on the ground that the government had a national security interest which would not be adequately protected by the parties, so the government requested the action be dismissed, after invoking the state secrets privilege. The federal district court granted the motions and dismissed the case, which the U.S. Court of Appeals for Fourth Circuit affirmed. So there is precedent for this unusual action by the government in a private lawsuit, but the legitimacy of the state secrets privilege remains subject to question.

The State Secrets Privilege and the Reynolds Case Fraud

The Justice Department’s memorandum of law accompanying its motion to intervene states that once the state secrets privilege has been asserted “by the head of the department with control over the matter in question . . . the scope of judicial review is quite narrow.” Quoting from the U.S. Supreme Court ruling establishing this privilege in 1953, U.S. v. Reynolds, the brief adds: “the sole determination for the court is whether, ‘from all the circumstances of the case . . . there is a reasonable danger that compulsion of the evidence will expose military [or other] matters which, in the interest of national security, should not be divulged.’”

In short, all the Justice Department need claim is the magic phrase—”state secrets”—after assuring the court that the head of department or agency involved has personally decided it is information that cannot be released. That ends the matter. This is what has made this privilege so controversial, not to mention dubious. Indeed, invocation by the executive branch effectively removes the question from judicial determination, and the information underlying the decision is not even provided to the court.

Lou Fisher looked closely at the state secrets privilege in his book In The Name of National Security, as well as in follow-up articles when the Reynolds case was litigated after it was discovered, decades after the fact, that the government had literally defrauded the Supreme Court in Reynolds, e.g., “The State Secrets Privilege: Relying on Reynolds.” The Reynolds ruling emerged from litigation initiated by the widows of three civilian engineers who died in a midair explosion of a B-29 bomber on October 6, 1948. The government refused to provide the widows with the government’s accident report. On March 9, 1953, the Supreme Court created the state secrets privilege when agreeing the accident report did not have to be produced since the government claimed it contained national security secrets. In fact, none of the federal judges in the lower courts, nor the justices on the Supreme Court, were allowed to read the report.

In February 2000, Judith Loether, a daughter of one of the three civilians killed in the 1948 B-29 explosion, discovered the government’s once-secret accident report for the incident on the Internet. Loether had been seven weeks old when her father died but been told by her mother what was known of her father’s death and the unsuccessful efforts to find out what had truly happened. When Loether read the accident report she was stunned. There were no national security secrets whatsoever, rather there was glaringly clear evidence of the government’s negligence resulting in her father’s death. Loether shared this information with the families of the other civilian engineers who had been killed in the incident and they joined together in a legal action to overturn Reynolds, raising the fact that the executive branch of the government had misled the Supreme Court, not to mention the parties to the earlier lawsuit.

To make a long story short, the Supreme Court was more interested in the finality of their decisions than the fraud that had been perpetrated upon them. They rejected the direct appeal, and efforts to re-litigate the case through the lower courts failed. As Fisher notes, the Court ruled in Reynolds based on “vapors and allusions,” rather than facts and evidence, and today it is clear that when it uncritically accepted the government’s word, the Court abdicated its duty to protect the ability of each party to present its case fairly, not to mention it left the matter under the control of a “self-interested executive” branch.

As Fisher and other scholars note, there is much more room under the Reynolds ruling for the court to take a hard look at the evidence when the government claims state secrets than has been common practice. Fisher reminds: “The state secrets privilege is qualified, not absolute. Otherwise there is no adversary process in court, no exercise of judicial independence over what evidence is needed, and no fairness accorded to private litigants who challenge the government . . . . There is no justification in law or history for a court to acquiesce to the accuracy of affidavits, statements, and declarations submitted by the executive branch.” Indeed, he noted to do so is contrary to our constitutional system of checks and balances.

Time to Reexamine Blind Adherence to the State Secrets Privilege

In responding to the government’s move to intervene, invoke state secrets, and dismiss the Restis lawsuit, plaintiffs’ attorney Abbe Lowell sent a letter to Judge Edgardo Ramos, the presiding judge on the case on September 17, 2014, contesting the Department of Justice’s ex parte filings, and requesting that Judge Ramos “order the Government to file a public declaration in support of its filing that will enable Plaintiffs to meaningfully respond.” Lowell also suggested as an alternative that he “presently holds more than sufficient security clearances to be given access to the ex parte submission,” and the court could do here as in other national security cases, and issue a protective order that the information not be shared with anyone. While Lowell does not so state, he is in effect taking on the existing state secrets privilege procedure where only the government knows what is being withheld and why, and he is taking on Reynolds.

Lowell states in his letter: “By relying solely upon ex parte submissions to justify its invocation of the state secrets privilege, especially in the unprecedented circumstance of private party litigation without an obvious government interest, the Government has improperly invoked the state secrets privilege, deprived Plaintiffs of the opportunity to test the Government’s claims through the adversarial process, and limited the Court’s opportunity to make an informed judgment. “ Lowell further claims that in “the typical state secrets case, the Government will simultaneously file both a sealed declaration and a detailed public declaration.” (Emphasis in Lowell’s letter.) To bolster this contention, he provided the court with an example, and offered to provide additional examples if so requested.

Lowell explains it is not clear—and suggests the government is similarly unclear in having earlier suggested a “law enforcement privilege”—as to why the state secrets privilege is being invoked, and argues this case can be tried without exposing government secrets. Citing the Fitzgerald ruling, Lowell points out dismissal is appropriate “[o]nly when no amount of effort and care on the part of the court and the parties will safeguard privileged material is dismissal warranted.”

No telling how Judge Ramos will rule, and the government has a remarkable record of prevailing with the deeply flawed state secrets privilege. But Lowell’s letter appears to say, between the lines, that he has a client who is prepared to test this dubious privilege and the government’s use of it in this case if Judge Ramos dismisses this lawsuit. The U.S. Court of Appeals for the Second Circuit, where that ruling would be reviewed, sees itself every bit the intellectual equal of the U.S. Supreme Court and it is uniquely qualified to give this dubious privilege and the Reynolds holding a reexamination. It is long past time this be done.

John W. Dean, a Justia columnist, is a former counsel to the president.
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Mr. President: The Islamic State Is a Religion Thu, 18 Sep 2014 04:01:56 +0000 Continue reading →]]> The White HouseLast week, President Barack Obama addressed the nation to outline the measures the United States is using to deal with the latest terrorist threat, the Islamic State (“ISIS” or “ISIL,” as the Administration calls it). Here is where he veered off path, early in his speech:

My fellow Americans, tonight I want to speak to you about what the United States will do with our friends and allies to degrade and ultimately destroy the terrorist group known as ISIL. . . . Now let’s make [this] clear: ISIL is not ‘Islamic.’ No religion condones the killing of innocents.

Actually, Mr. President, ISIS is a religion, and to label it in any other way is to underestimate its drive and determination to destroy nonbelievers, or infidels, or, as we call it, Western culture.

I am sure you are familiar with European and American history. It was religion that “condone[d] the killing of innocents” during the Spanish Inquisition and the Protestant Reformation and the Catholic Counter Reformation. The Tower of London is a monument to killing infidels, whether the throne was occupied by Catholic Queen Mary or Protestant Queen Elizabeth. The Salem Witch Trials in Massachusetts led to the execution of nonbelievers for supposed “witchcraft.” The Massachusetts Puritans killed Quakers, Mr. President, because of their beliefs.

Our founding fathers were familiar with the dangers of religiously fueled violence. In fact, the framer of the First Amendment, James Madison, in his justly famous Memorial and Remonstrance, explicitly cited the Inquisition when he decried the Virginia bill to use state funds to support Christian teachers. He believed state financial support for religion was the first step toward intolerance, persecution, and the Inquisition:

Instead of holding forth an Asylum to the persecuted, it is itself a signal of persecution. It degrades from the equal rank of Citizens all those whose opinions in Religion do not bend to those of the Legislative authority. Distant as it may be in its present form from the Inquisition, it differs from it only in degree. The one is the first step, the other the last in the career of intolerance. The magnanimous sufferer under this cruel scourge in foreign Regions, must view the Bill as a Beacon on our Coast, warning him to seek some other haven, where liberty and philanthropy in their due extent, may offer a more certain repose from his Troubles.

But long-past history is not the only marker of the capacity of religion to kill innocents. How about our own home-grown American citizens who view killing as the straightest path to salvation and integrity? The murders of abortion providers are religiously motivated. The murder of ordinary citizens last April by a Neo-Nazi white supremacist in Overland Park, Kansas, which I discussed here, was motivated by his religious worldview.

You lead the United States down a primrose path when you attempt to paint ISIS as anything other than an organization that is religious. Sure, it is not composed of mainstream Muslims. But that is not the only category to check off. There are good religious actors and bad religious actors, and it is time this Administration abandoned the mistakes made by Presidents Clinton and Bush, who publicly bought into the Pollyanna view of religion as a way of appeasing religious lobbyists. We were burdened with the Religious Freedom Restoration Act (RFRA) as a result and continue to pay the price for treating religion as a collection of mild-mannered folks who would never hurt anyone.

Just say the truth, which is that religion can be a force for transcendent good and gargantuan evil. That is why we have the rule of law, the separation of church and state, and the Supreme Court has never applied the warped reasoning of RFRA in its First Amendment free exercise cases. Religious actors are humans who do wrong in the name of their God or gods, and who must be named as criminals and terrorists when they are.

There is no force in the history of the world like religious believers who see destruction of nonbelievers—infidels—as the only path to goodness and virtue, and that is what we face in ISIS. You, as Commander in Chief, are facing irrational, implacable believers. Name them honestly, Mr. President, and then destroy them.

Marci A. Hamilton is the Paul R. Verkuil Chair in Public Law at the Benjamin N. Cardozo School of Law, Yeshiva University, and the author of God vs. the Gavel: The Perils of Extreme Religious Liberty and Justice Denied: What America Must Do to Protect Its Children. She also runs two active websites covering her areas of expertise, the Religious Freedom Restoration Acts,, and statutes of limitations for child sex abuse, Professor Hamilton blogs at Hamilton and Griffin on Rights. Her email address is
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Is It Arbitrary to Distinguish Incest From Homosexuality? Wed, 17 Sep 2014 04:01:51 +0000 Continue reading →]]> Scales of Justice ConceptEarlier this month, in a unanimous opinion by Judge Richard Posner for a three-judge panel in Baskin v. Bogan, the U.S. Court of Appeals for the Seventh Circuit struck down Indiana and Wisconsin laws denying recognition to same-sex marriages (SSMs) in those states, as violations of the Equal Protection Clause of the Fourteenth Amendment. Judge Posner’s opinion does an excellent job of refuting the various arguments that the ban’s defenders presented in their briefs and in court, including the proposal that the purpose of marriage is to serve as insurance for accidental procreation and that because same-sex couples necessarily cannot “accidentally” procreate, they have no need for such insurance. Readers can find an outstanding review of Judge Posner’s opinion (as well as of a less distinguished district court opinion going the other way) in Michael C. Dorf’s Verdict column on the subject.

In the course of responding to the defenders of SSM bans, Judge Posner’s opinion points out a flaw in the argument that the purpose of marriage (and, according to the government of Indiana, its only purpose) is to serve as accidental procreation insurance. The flaw emerges in the observation that although both Indiana and Wisconsin prohibit incestuous marriage (in particular, marriage by first cousins), each suspends its respective prohibition for some couples (those ages 65 and older in Indiana and those that include a female 55 or older in Wisconsin, as well as younger couples in Wisconsin with a doctor’s note attesting to sterility in one of the parties). While gay people cannot marry because they cannot accidentally procreate, it thus seems that straight first cousins may marry only if they cannot procreate, a situation in which they would plainly need no insurance against accidental procreation. The laws governing incest thus provide a useful means of testing the sincerity of government rationales offered in defense of SSM bans.

In this column, I will take up the question of incest/incestuous marriage prohibitions for a different purpose. Defenders of anti-gay legislation have often invoked incest laws as part of making their case. The claim is that laws against incest (or against incestuous marriage), which garner little controversy, are in fact indistinguishable from laws against gay relationships or SSM. Justice Scalia famously said in his angry dissent from Lawrence v. Texas that “[s]tate laws against bigamy, same-sex marriage, adult incest, prostitution, masturbation, adultery, fornication, bestiality, and obscenity” all rest on the same basic principles as laws against sodomy between two people of the same sex. Putting aside the other items in the list, this column asks whether Justice Scalia was right in his claim with respect to incest or whether there is in fact a real difference between banning incest (including through prohibitions against incestuous marriage) and banning homosexuality (through SSM bans).

Different Ways of Thinking About the Question

There are at least two distinct ways in which we might assess the legitimacy of distinguishing between bans on SSMs and bans on incestuous marriages. The first would involve focusing on the interest, if any, that the government might have in barring the type of marriage in question. Put differently, we could dwell on the negative impact, if any, that society experiences from the practice at issue. Second, we might consider the harm that the prohibition in dispute inflicts on the population to which it applies; that is, we might ask how much of an interest people have in being free to enter into the marriages that the laws, respectively, seek to ban.

The Governmental Interest Served

The first approach is to consider what legitimate goals a government might have in prohibiting incestuous and same-sex marriages, respectively. A common argument that people have long made in favor of (consensual adult) incest prohibitions is that incestuous unions are far more likely than other, non-incestuous, unions to produce offspring with serious genetic anomalies. A society has an interest, along these lines, in trying to maximize the odds of producing healthy offspring and therefore in preventing unions that are more likely than others to yield genetic abnormalities. An analogous argument for prohibitions against SSM might be that same-sex unions are unlikely to produce children (a proposition that no longer remains true but that used to be relatively accurate) and that society has an interest in encouraging unions that will produce the next generation of (healthy and productive) societal members.

For different people, these two rationales may sound more or less reasonable. Let us begin with the incest ban. Most of us feel some revulsion at the idea of incest, perhaps because evolution has programmed us to feel this revulsion, given the increased odds of negative genetic consequences when close relatives find each other sexually attractive. As a result of our revulsion, we might find ourselves relatively uncritical of the genetic-anomaly-avoidance rationale (or any other rationale, however weak) offered in defense of a ban.

One problem with the genetic rationale, however, is its under-inclusiveness. If government were truly trying to prevent couplings at increased odds of producing offspring with genetic anomalies, then it would hardly seem optimal to begin with incest (which most people find unappealing already). We might instead prohibit unions of people over a particular age, given that older eggs and older sperms are far more likely to yield genetic anomalies than their younger counterparts. We might also require that people seeking to marry first undergo genetic testing and evidence a genetic “clean bill of health.” If testing revealed genetic risks to a union, the law could then either prohibit marriage or require sterilization for that couple as a precondition to marriage.

The sorts of laws we would pass if we were truly serious about preventing genetic-anomaly-producing couplings would plainly be extremely intrusive. It is far easier to implement an incest ban, because the government can readily determine whether two people are siblings or first cousins. But if it were really important to protect the gene pool, then even such intrusive laws would perhaps be acceptable to us, and the reality is that genetic testing could prove necessary to determining that a couple would be incestuous, especially if the parties were not raised as part of one household.

More importantly, legislation of this sort (including the incest ban) is expressly eugenic in nature: that is, the government is imposing prohibitions on the population as a means of improving its “quality.” Outside of the incest context, we tend to find eugenics legislation offensive. Though the U.S. Supreme Court has given its stamp of approval to the forcible sterilization of “imbeciles,” concluding that “[t]hree generations of imbeciles are enough” in Buck v. Bell, modern audiences likely find this language and ideology appalling and far too resonant with the policies of Nazi Germany.

For homosexuality, the concern about wanting to ensure procreation seems, on its face, less convincing than the eugenics rationale for incest prohibitions. It appears, first, that we have lots of people voluntarily procreating with members of the opposite sex—so many, in fact, that Indiana and Wisconsin are expressing worries about “accidental procreation.” If the only way to motivate gay people to produce offspring were to prohibit SSM (or same-sex relationships more generally), moreover, it would appear terribly intrusive into their lives to do so.

The stigma that once attached to homosexuality and that motivated many gay men and lesbians to be closeted and to (unhappily) marry members of the opposite sex to gain social acceptance is surely not something that any compassionate person would want to resuscitate, even if it were necessary to building our numbers. And a prohibition on SSM would be under-inclusive, because heterosexuals are not required by law to reproduce. Finally, of course, gay men and lesbians are now reproducing without having to sacrifice their authentic sexual identities, through artificial insemination and other reproductive technologies, so prohibiting SSM does nothing to increase their reproductive prospects and might instead diminish them.

If one were focusing on societal rationales, then, one might say that incestuous marriage prohibitions serve a somewhat more plausible benefit than SSM prohibitions but that neither is truly necessary or essential, as evidenced at least in part by under-inclusiveness (apparent in the lack of general eugenics laws or procreation mandates for heterosexuals).

Harm to Targets

Another way to assess differences between incest bans and SSM bans would be to think about them from the perspective of their targets. The targets of (adult consensual) incestuous marriage bans are adults who might wish to have sex with and marry one of their close relatives, a sibling or a first cousin, for example. For someone who is already in love with a sibling, such as the fictional Siegmund and Sieglinde, the prohibition could be quite burdensome. However, most of the people who might feel attraction to a sibling or a cousin would likely have learned early in life that such relationships are prohibited and would probably direct their sexual feelings toward a non-relative instead. That is, people who might commit incest or marry incestuously if it were not prohibited by law are, for the most part, going to be capable of sexual relationships with other people. To my knowledge, people do not generally have an exclusively incestuous “sexual orientation.”

Along similar lines, Judge Posner says in one part of his opinion that prohibitions against interracial marriages were, despite their racist ugliness, “in one respect less severe” than bans on SSM, because “[m]embers of different races had . . . abundant possibilities for finding a suitable marriage partner,” even under the anti-miscegenation regime. Laws prohibiting interracial marriage thus left African Americans with many potential marriage partners with whom they could fall in love.

By contrast, a prohibition against SSM has the effect—for the many people whose sexual orientation is toward only people of the same sex— of “prevent[ing] a homosexual from marrying any person with the same sexual orientation, which is to say (with occasional exceptions) any person a homosexual would want or be willing to marry.” Judge Posner makes this point to argue that SSM bans are, in this sense, more onerous than anti-miscegenation laws, which were ruled unconstitutional in Loving v. Virginia and which are almost universally condemned.

The point that Judge Posner makes is arguably even more applicable when SSM is compared to the case of incest. Anti-miscegenation statutes (in addition to having extremely destructive symbolic meaning) made huge numbers of potential marriage partners unavailable to a given individual, whereas the prohibition against incestuous marriages leaves in place almost all of the potential partners from whom one might want to choose a person to marry. A SSM prohibition effectively prohibits gay men and lesbians from marrying any member of the entire population of potentially desirable partners. The same likely cannot be said of a man who would, absent the incest laws, be inclined to fall in love with his first cousin.

Incest and SSM Redux

If we have a law that rests on a very weak foundation, in terms of governmental interests furthered, and imposes great harm on its targets, it is plain that such a law cannot be justified. We can say this clearly of SSM bans, as the rationales that people have put forward (such as “insurance against accidental procreation” or “we need more procreation”) are silly and weak, while the impact of the ban is to make marriage a celebrated societal benefit that is completely off-limits to everyone with an exclusively same-sex sexual orientation. My hope is that at least five Justices on the U.S. Supreme Court are able to appreciate this reality and find SSM bans unconstitutional under the Equal Protection Clause.

With respect to incest bans, I have suggested here that they are not as harmful as SSM bans because they still leave people who would have liked to marry a relative with plenty of alternative partners. In other words, if it is necessary to distinguish the destructiveness of SSM bans from the destructiveness of (adult consensual) incest bans, one can easily draw that distinction based on the differential burden that the two bans respectively impose on their targets. To the extent that the U.S. Supreme Court is not yet ready to strike down incest laws, this differentiation may prove helpful.

Nonetheless, I do not wish to be read in this column to be suggesting that incestuous marriage bans are necessarily legitimate. Indeed, I think they have serious problems in that they prohibit consensual activity on the basis of a rationale (eugenics) that is both troubling and—because it is so troubling—unenforced in virtually any other area of law. It is also true that some people who did not know in advance that they were close relatives (perhaps because they were each adopted and grew up in different families) have fallen in love only to learn later that the law prohibits the celebration of their union (and whatever children they might have already brought into the world) in marriage. For such couples, the incest prohibition could be devastating. The fact that one could in theory fall in love with someone else does little to relieve the hurt involved in finding out after the fact that the actual individual whom one has chosen as one’s partner turns out to be forbidden.

For this reason, I would leave open the possibility that one day, the U.S. Supreme Court will see fit to hold that as a matter of fundamental liberty, any competent adult should be free to marry any other competent adult, if the two wish to marry. Rationales for stopping them have tended to be weak, and the prohibitions themselves are quite costly for the few people who find themselves in relationships generally frowned upon but innocent of any harm to unwilling others.

I will leave arguments about this for another day. For now, the argument before our society and the courts is about bans on SSM, and the balance between the tremendous harm of such bans and the triviality and foolishness of their putative justifications makes clear that whatever one thinks of incestuous marriage bans, it is time for SSM bans to go.

Sherry F. Colb, a Justia columnist, is Professor of Law and Charles Evans Hughes Scholar at Cornell Law School. Her most recent book, Mind If I Order the Cheeseburger?: And Other Questions People Ask Vegans, is currently available on Amazon.
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If She Don’t Win It’s a Shame: Female Executive Sues New York Mets for Pregnancy Discrimination Tue, 16 Sep 2014 04:01:50 +0000 Continue reading →]]> Pregnant EmployeeLeigh Castergine was the first woman to become a Senior Vice President in the Front Office of the Mets, a once-beloved, but now losing Major League Baseball team in New York. She was in charge of ticket sales and was rewarded over the years for innovations and successes to the tune of multiple $50,000 raises and a $125,000 bonus. But she met her glass ceiling when she, an unmarried woman, announced her pregnancy in 2013.

According to the complaint she just filed in federal court, the Mets’ Chief Operating Officer, Jeffrey Wilpon, looked none too favorably upon her pregnancy. She alleges that he humiliated and embarrassed her, making no secret of his disdain for her decision to have a baby without being married. And when she complained to human resources about his behavior, she was fired.

In this column, we’ll consider the nature of the discrimination Castergine alleges and explain why it is part and parcel of a matrix of biases and stereotypes that pregnant women still face in the workplace.

The Allegations in Castergine’s Complaint

An Ivy League graduate and former Division 1 student athlete, Castergine had worked her way up from low-wage ticket sales jobs with other clubs to a high-ranking position in the Mets’ Front Office. She specialized in data analytics and pricing strategy, key skills for a team with high costs and a waning fan base. The job was a challenge, given the team’s poor performance over many years and what she describes as “a series of public relations blunders that too frequently led to the franchise being ridiculed in the sports pages.” Often told that her job was like selling “tickets to a funeral” or “deck chairs on the Titanic,” Castergine persevered and was recognized repeatedly and lucratively for excellent work.

When Castergine announced that she was pregnant in September 2013, the whole tenor of her worklife changed. Before revealing her pregnancy, Castergine sat in on a meeting where her superiors discussed another woman who had recently given birth. They complained that she “hasn’t been the same since she had children” and discussed moving her to a different department.

Upon revealing her pregnancy, Castergine, who had once been profiled in an industry publication and described as “the next female President in the sports industry,” was subjected to a strong of torments by Wilpon, who became “fixated on the idea that Castergine would have a child without being married.” (All facts mentioned in this column are based on the allegations in Castergine’s lawsuit; the defendants have publicly denied them and stated that they are opposed to all forms of discrimination.) He would repeatedly and obviously look at her finger for an engagement ring and told her expressly that she would make more in salary and bonuses if only she would get a ring.

Wilpon’s alleged comments were often made to or in front of others. He told one colleague that he is “old fashioned” and thinks she “should be married before having a baby.” He told another that “she is a senior vice president now; people would respect her more if she was married.” He announced at a meeting that there were “two rules” regarding her pregnancy: “don’t touch her belly and don’t ask how she’s doing; she’s not sick, she’s pregnant.” He later told her: “I am as morally opposed to putting an e-cigarette sign in my ballpark as I am to Leigh having this baby without being married.” Although six other senior executives were present, including the team’s general counsel, no one objected to Wilpon’s comment.

Castergine complained to her immediate supervisor about Wilpon’s comments. He acknowledged the conduct (some of which he had heard in person), but took no action. She alleges Wilpon’s treatment of her became more hostile after the complaint, rather than designed to remediate the situation. She later complained to the Executive Director of Human Resources, Holly Lindvail, who urged Castergine to quit.

After a difficult pregnancy, Castergine gave birth in March 2014 and returned to work three months later. In July she again approached Lindvail about the hostile environment, and Lindvail again urged her to quit. In August, citing “issues” with “her performance,” the Mets fired Castergine. Wilpon claimed she failed to meet her sales goals, but also shared his belief that “something changed” when she gave birth, and she was no longer “as aggressive as she once had been.”

Castergine filed suit alleging violations of the federal Family and Medical Leave Act, the New York State anti-discrimination law, and the New York City anti-discrimination law. She alleges interference with her right to take job-protected leave for childbirth, discrimination against her on the basis of pregnancy, and retaliation.

A Classic Case of Pregnancy Discrimination: “Animus” and Hostility Toward Pregnant Employees

The hostile response of Castergine’s superiors to her pregnancy is not unique. It was exactly this type of animus and bias against pregnant, working women that led Congress to enact the Pregnancy Discrimination Act (PDA) of 1978. The PDA amended Title VII of the Civil Rights Act of 1964 to clarify that pregnancy discrimination is a form of prohibited sex discrimination. The PDA was necessitated by a Supreme Court decision two years earlier, General Electric v. Gilbert, which failed to recognize this core connection between pregnancy discrimination and sex discrimination. Many state fair employment statutes, including New York’s, track the PDA in banning discrimination because of pregnancy, alongside other forms of prohibited discrimination.

While courts have long struggled to determine whether some forms of the unequal treatment of pregnant women are discriminatory (more on that below), Castergine’s allegations, if proven true, are precisely the kind that courts have most easily grasped as discriminatory. The different treatment of an employee once she is known to be pregnant, combined with derogatory remarks about her pregnancy, register easily as discriminatory and present the easiest cases for plaintiff to win.

In our review of cases decided under the federal Pregnancy Discrimination Act, we found that the vast majority of successful cases involved a discernible anti-pregnancy “animus,” typically involving explicit statements by decision-makers making derogatory comments about the plaintiff’s pregnancy. With this type of fact pattern, courts can’t help seeing the employer’s negative reaction to the plaintiff’s pregnancy, combined with an adverse employment action resulting from it, as a form of pregnancy discrimination. So if the allegations are true, the case is a home run.

A Common Core of Stereotyping, but Inconsistent Results

But courts do worse when examining forms of pregnancy discrimination that do not neatly fit this precise paradigm, despite their underlying similarities. While many pregnant women, like Castergine, are punished for becoming pregnant, despite their undiminished ability to do the job, others require some—often modest—accommodation to keep working while pregnant, and seek equal treatment in how the employer treats non-pregnant employees in similar need of accommodations. In this class of cases, courts have done a terrible job of recognizing the unequal treatment of pregnant workers as unlawful discrimination, despite clear language in the PDA directing them to do so and despite the similarity in stereotyping that lies behind the treatment of pregnant workers in both types of cases.

These cases often involve women in much-lower paying jobs than Castergine, jobs with rigidly structured workdays and no flexibility, where pregnancy requires modest allowances to continue working. In one such case, a pregnant store clerk needed—but was refused—permission to carry a water bottle on her shift, per her doctor’s orders. In another, a pregnant stocker sought, but was denied, a shift change to be permitted to stock only lighter-item shelves. The refusal-to-accommodate cases also arise frequently when women hold nontraditional jobs, jobs held predominantly by men and with a history of excluding women, and become pregnant. Police work, firefighting, and construction work are common settings for this class of pregnancy discrimination cases.

In all of these cases, the pregnant worker seeks the kind of accommodation that the employer would have provided to a non-pregnant worker with a limitation that has a similar effect on the employee’s ability to work. Sometimes the employer accommodates similarly situated but non-pregnant workers because of the employer’s own policy (as in policies granting light-duty work for on-the-job injuries), sometimes because of an agreement with the union, and sometimes because of another legal mandate (as with the Americans with Disabilities Act, which requires reasonable accommodations for a broad range of disabilities, even temporary ones, but has been interpreted not to cover normal pregnancy). But whatever the employer’s reason for accommodating the limitations of non-pregnant workers, the PDA specifically directs them to treat pregnant workers no worse than they treat other employees similar in their ability to work. Oddly, courts confronted with an employer’s refusal to provide such equal treatment have refused to recognize it as unlawful pregnancy discrimination.

What makes the courts’ myopia so stark is not just that the statute clearly prescribes the equal treatment of pregnancy, or even that the cases predominantly involve lower-wage workers and women holding nontraditional jobs—precisely those workers most in need of the protections of the law. Especially anomalous in the courts’ very different approaches to the unequal accommodation cases versus the type of discrimination Castergine alleges is that the very same gender stereotyping and gender ideologies underlie both types of discrimination. They should not be seen as occupying opposite ends of the spectrum, but as flip sides of the same coin. In both classes of cases, stereotypes about women, work, and maternity are at the heart of the matter.

Recognizing the continuity between overtly pushing women out of their jobs when they become pregnant and accomplishing the same result more subtly by denying pregnant workers the same benefits and treatment afforded non-pregnant workers with similar work capacity, Congress proscribed both forms of discrimination in the PDA. The latter is encapsulated in the PDA’s second clause, which requires pregnant workers to be treated “the same . . . as other persons not so affected but similar in their ability or inability to work.” As Congress rightly understood, that clause was necessary because denying pregnant workers the same benefits, privileges and accommodations available to other workers with conditions similarly affecting work functioned to push pregnant workers out of the workforce as effectively as more blatant discriminatory exclusions. That such discriminatory policies were justified by “cost” rather than outright animus was of no matter; “cost” predictions themselves for pregnant workers were often tainted by stereotypes predicting that women would eventually leave the workforce or be less competent workers upon becoming mothers.

Historically, employer policies that denied accommodations for pregnancy, but provided them for other conditions similarly affecting work, were based on both descriptive and prescriptive stereotypes. Descriptively, such policies were predicated on stereotypes about pregnant workers as fungible, less valuable, and less deserving of accommodation than non-pregnant workers. Prescriptively, the differential treatment of pregnancy reinforced a judgment that women should not combine work and maternity, or if they do, not at the same level of workplace attachment as the worker held before the pregnancy.

Such stereotypes continue to have force in the differential treatment of pregnant workers today. Scholars who study work and pregnancy have found that pregnant workers’ requests for even minor accommodations—accommodations readily available to others with similar work capacity—are often met with outright hostility. They are treated as fungible, not worth the kinds of investments routinely made in other workers.

The Anomaly Reaches the High Court: Young v. U.P.S.

A case now pending before the U.S. Supreme Court, Young v. United Parcel Service, Inc., involves precisely this type of “second-class” pregnancy discrimination. Peggy Young was fired when she presented a health care provider’s note restricting her from lifting heavy packages. In actuality, it would have been a minor accommodation, since she almost never had to lift heavy packages in her day-to-day job, though her job description mentioned it as part of the job, and on the rare occasions when she did, she could always find a helpful coworker. More to the point, the U.P.S. policy would have accommodated the same request had it come from a disabled worker covered by the ADA, an employee whose on-the-job injury necessitated such a request, and even a driver who lost his or her license for any reason and needed alternative work, pursuant to a collective bargaining agreement between the company and the union. But a pregnant worker whose pregnancy required such an accommodation had no option but to leave her job. She lost her case in the lower courts because they failed to see any anti-pregnancy animus in what U.P.S. had done, and instead saw the company policy as a “pregnancy neutral” rule that favored some classes of workers while leaving out pregnancy.

Increasingly, lower courts have taken this approach to deny the claims of pregnant workers seeking treatment equal to that of similarly affected workers whose non-pregnancy conditions are accommodated. In doing so, they completely miss the overlapping gender stereotypes behind the unequal accommodation cases and the more blatant hostility to pregnancy alleged in Castergine’s case against the Mets. While the fate of Peggy Young’s claim now rests with the Supreme Court, Castergine’s case, if proven, should be an easy run around the bases.

Joanna L. Grossman, a Justia columnist, is the Sidney and Walter Siben Distinguished Professor of Family law at Hofstra University. She is the coauthor of Inside the Castle: Law and the Family in 20th Century America (Princeton University Press 2011), co-winner of the 2011 David J. Langum, Sr. Prize for Best Book in American Legal History, and the coeditor of Gender Equality: Dimensions of Women's Equal Citizenship (Cambridge University Press 2009). Her columns focus on family law, trusts and estates, and sex discrimination.
Deborah Brake is a professor of law and Distinguished Faculty Scholar at the University of Pittsburgh. Her research focuses on sex discrimination in employment, education, and athletics. Her book, Getting in the Game: Title IX and the Women's Sports Revolution (NYU Press 2010), was recently released in paperback.
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IRS Monitoring Religious Groups Mon, 15 Sep 2014 04:01:47 +0000 Continue reading →]]> Scrutiny ConceptWhat would you think if the federal government announced that it would send in federal officials to monitor what Muslim mullahs preach during religious services to determine whether the sermons opposed federal policy or had other political ramifications? In 2008 we learned that one individual “posed as a Muslim convert at the request of the FBI” to gather information that might aid investigators. When this information came to light, the government refused to stop this monitoring, even though the vast majority of Muslims want nothing to do with terrorism.

The Council on American-Islamic Relations (CAIR) joined with the ACLU and sued, claiming that this government monitoring violated the First Amendment rights of worshipers who attended several California mosques. Similarly, the ACLU, CAIR, and other human rights groups have challenged the New York Police Department’s blanket surveillance of New York mosques. Should government agents monitor to see whether any preachers instructed their congregations to tell the government that they object to U.S. troops in Muslim lands?

Such religious profiling is troubling, and in response to these lawsuits, the NYPD agreed to stop its monitoring of mosques. In the case of federal monitoring, Freedom of Information Act (FOIA) requests produced documents showing that the FBI monitored mosque sermons at least from 2004 to 2008. In 2011, Attorney General Eric Holder and the Department of Justice urged the court to dismiss a lawsuit objecting to the FBI’s use of a paid informant to monitor mosques in 2006. News reports later told us that since 2011, perhaps in response to these disclosures, the federal government sharply limited its monitoring of mosques and the mullahs’ sermons.

However when the government closes one door, it opens another. In this case, it is increasing its monitoring of Christian churches. In particular, it is focusing on 99 churches that it labels “high priority examination.” The particular IRS office monitoring churches is the Exempt Organizations section of the IRS. You have heard of that office before; it is the office that the Treasury Inspector General for Tax Administration found was inappropriately targeting “tea party” and similar organizations based on their policy positions or names.

The Freedom from Religion Foundation, Inc. (FFRF) sued the IRS Commissioner, objecting that the IRS was not monitoring the content of sermons. The IRS settled the suit in July 2014, and agreed that it would monitor the content of sermons to make sure that churches are not engaging in “political activity,” which could cause them to lose their tax status. “This is a victory,” said FFRF Co-President Annie Laurie Gaylor. The IRS agreed to monitor churches to make sure that they do not engage in “electioneering.” For example, the FFRF objected to the IRS that a Wisconsin Catholic Bishop wrote, “No Catholic may, in good conscience, vote for laws or candidates who would promote laws that would infringe upon our liberties and freedom of conscience.” That apparently is unlawful electioneering.

The IRS, by settling this lawsuit, appears to agree to do that which the First Amendment forbids. Many churches have religious views about political issues because politicians have made the law govern churches. For example, the Equal Employment Opportunity Commission sued the Hosanna–Tabor Evangelical Lutheran Church and School because it fired a minister. The Supreme Court, with no dissents, held that the “ministerial” exemption, “grounded in Religion Clauses of the First Amendment” bars an employment discrimination suit brought on behalf of a minister, challenging her church’s decision to fire her. More recently, the Supreme Court held that regulations promulgated pursuant to the Affordable Care Act that required for-profit closely held corporations to provide insurance coverage for contraceptives violated the Religious Freedom Restoration Act of 1993.

In Harris v. McRae (1980), plaintiffs argued that the Hyde Amendment, which severely restricted the use of federal funds to pay for abortions, is unconstitutional because opposition to abortion was based on religious views. Hence, they argued, the abortion restrictions violated the Establishment Clause. Granted, many people base their opposition to abortion on their religious views. However, the Court rejected that argument. Laws do not become unconstitutional because they happen “to coincide or harmonize with the tenets of some or all religions.” Some religions object to usury, but the state may still enact (or refuse to enact) laws that prohibit usury. And churches can say that usury is (or is not) moral. Since the United States began, churches have preached openly about moral issues that public policy affect, such as slavery, racial discrimination, child labor, and prison reform.

The usual rule is that government may not forbid or punish speech based on its content. The IRS could not take away the tax-free status of United Way simply because it preaches that people should voluntarily give to the less fortunate and not just rely on government to help the poor. Similarly, the IRS should not have the power to take away the tax-free status of a church because it preaches a comparable gospel—particularly because the First Amendment guarantees a right of free exercise of religion, in addition to the right of free speech, which it grants to all of us.

Of course, many people may object to these religious beliefs and those who preach them. They have the right to do so. However, that is quite different from the IRS taking away the tax-exempt status of a church because it proselytizes religious beliefs that are not in accord with government policy. The IRS may not engage in viewpoint discrimination. That was the conclusion of the Treasury Inspector General for Tax Administration.

The IRS appeared to understand the free speech and free exercise problems, because, for over a half-century, it did not monitor the content of church sermons in order to evaluate churches’ tax-exempt status; then, came the passage of the 1954 federal Johnson Amendment, which one could read to authorize the IRS to do so. Now, such monitoring has a new lease on life because the IRS can say that it settled the lawsuit and that settlement requires them to monitor sermons.

The IRS has not learned much from the Inspector General report. In addition to targeting the Tea Party, we know now that that the IRS also appeared to monitor political groups that do not support the president’s policies on Israel. In 2009, the “Z Street” group applied for §504(c)(4) tax-exempt status. The IRS tax-exempt office, we later learned, had a “Be On the Lookout” list that included red flags for groups referencing “disputed territories.” We know that the IRS asked such questions as, “Does your organization support the existence of the land of Israel?” and “Describe your organization’s religious belief system toward the land of Israel.” Z Street is now suing the IRS for viewpoint discrimination. The Department of Justice (which is supposedly investigating the IRS’s targeting of conservative groups) is also defending the IRS in this case. We know that the IRS created a special category for reviewing organizations engaged in “disputed territory advocacy.”

We also know that the IRS may be getting very tired of the Inspector General’s investigation of it. The Tax Inspector General has joined with 46 other Inspectors General—a majority of the 73 Inspectors General—in signing an unprecedented letter complaining that the Obama administration is obstructing their investigations into government corruption. The Inspectors General are nonpartisan; indeed, President Obama appointed many of them. They are the watchdogs, and their complaint is that government agencies refuse to give them access to the documents to which they are entitled under the law. This obstruction extends beyond the IRS. For example, the Peace Corp refuses to provide the Peace Corps Office of Inspector General with full access to sexual assault records, thus obstructing the IG investigation. The Justice Department has refused to turn records over to its IG even though “such records had been produced to the DOJ OIG by the agency in many prior reviews without objection.”

Do these agencies have something to hide? We do not know if we cannot see the records, but we do know this: if you had something to hide, this is exactly the way you would act. If you have nothing to hide, then why hide?

Ronald D. Rotunda is The Doy & Dee Henley Chair and Distinguished Professor of Jurisprudence, Chapman University, The Dale E. Fowler School of Law. He is coauthor of six-volume Treatise on Constitutional Law: Substance and Procedure (5th ed., Thomson-West, St. Paul, Minn. 2012-2013), and Legal Ethics: The Lawyer's Deskbook on Professional Responsibility (ABA Thomson-West & ABA, 11th ed. 2013), a one-volume treatise on Legal Ethics.
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What Would a Better Ferguson Response Have Looked Like? Fri, 12 Sep 2014 04:01:40 +0000 Continue reading →]]> Riot PoliceAs scenes of heavily armed and armored police officers standing shoulder to shoulder on the small streets of Ferguson, Missouri, played out in the news, people not just in the United States but around the world were shocked and dismayed. Personally, I was appalled by what I was seeing. But it isn’t because I don’t like police or understand police tactics. To the contrary; I was stunned because what I was seeing flew in the face of what I had learned in the five years I served as a city police officer, including two years on a Special Response Team that received advanced training in crowd control and riot response tactics.

What does good policing look like after an officer-involved shooting? Local and federal investigators are continuing to look into the many problems that bubbled up and boiled over in Ferguson, and it may be months before we get a coherent picture of everything that happened. Here are some preliminary thoughts on what went wrong and how the Ferguson and St. Louis police could have gotten it right.

The Police Department Needed to Engage With The Community

No community and no police department should ever be comfortable with officer-involved shootings. They are often justified, sometimes even unavoidable, but when an officer takes a life there should be an uncomfortable reverberation—it is not something to take lightly. The agency must explain what happened not just to the public but also to its own officers, the better to understand how to avoid it in the future. Those explanations take time and require meticulous investigation, and by all reports, the Ferguson police had started that process. They had secured the area around the scene of the shooting to take the many measurements that forensic analysis requires. In the process, however, they left Michael Brown’s body sprawled in the street. I’ve been on shooting scenes, so I understand that it was, in all likelihood, necessary—no one wanted to risk throwing off the measurements that a forensic reconstructionist would use. But no one explained that to the community, who saw only a young man’s body lying uncovered on the ground. For hours. This wasn’t the only example of such extreme insensitivity that it borders on being sociopathic. When the officer’s name was finally provided six days later, it was accompanied with information implicating Michael Brown in a strong-arm robbery that occurred shortly before the shooting. Although relevant to the investigation into the shooting itself, the release of that information could not have been more poorly timed, further outraging the community—a prediction made by federal authorities, who were opposed to the release.

Immediately after medical issues were dealt with and the scene was secured, officers should have been making contact with everyone in the immediate neighborhood. They should have asked witnesses for information, of course, but they also should have told non-witnesses that there had been a shooting, explained that information was limited, and described both what the department was doing right then and where people could go or whom they could talk to for additional information in the future. The police chief and his immediate subordinates should have been talking with community leaders and arranging public conferences and town hall meetings, telling the public that although they didn’t have all the information yet, it was being gathered as quickly as possible and it would be provided soon. The ranking officers should have worked with community leaders to set up safe spaces for people to gather to mourn, to wait for information, and to protest. Part of the police response should have been to take steps to make people feel that they were being respected, that their frustrations and concerns mattered to the police department and local political leaders.

The Aggressive Police Response Was Too Quick and Too Broad

According to a visual timeline of the events, the day after Michael Brown was killed a candlelight vigil turned ugly, with several cars damaged and stores looted. The police response was swift, but not targeted. People who had not even heard about the looting were suddenly looking at lines of officers with snarling canines, gas masks, riot batons, body armor, Pepperball guns, tear gas launchers, and, most shockingly, rifles. As in “put a bullet downrange at over 3000 feet per second” rifles. What may have started as a laudable effort to prevent looting and violence became the draconian imposition of control. For a community that was reacting in anger and frustration to an officer’s shooting, the display of force was like pouring fuel on the fire. Worse yet, the police provided no clear direction or explanation about what was allowed and what wasn’t. There was no clear objective or consistent strategy. Some crowds were scattered by tear gas and rubber bullets, some not. People were pushed out of areas officers didn’t want them to be in, but without being told where they could go. Others—including the now-famous example of two journalists working in a McDonald’s—were taken into custody even though they weren’t part of a crowd.

Crowd control and riot response is a delicate balancing act. Officers must distinguish between looters and protestors, and they must prevent or apprehend the former while respecting the latter. This is rarely easy, but the collective experience of law enforcement agencies nationwide has provided some basic ground rules. The Ferguson police should have kept the displays of force to a minimum. A few officers in normal uniforms—not Deltoid combat body armor—should have been monitoring the crowds, ideally acting as liaisons for the public, community leaders, and protest organizers. Officers in riot gear should have been staged in tactically appropriate areas, close enough to respond quickly to actual disturbances but out of sight of the crowd—a crowd that was, after all, protesting police violence.

When an aggressive response was called for (and make no mistake, it was called for when a store was looted or a car burned), officers in riot gear should have moved in quickly in a phalanx formation designed to clear the immediate area. When it was clear that the protestors themselves were opposed to the looters, officers could have been used in surgical teams to go around or, when appropriate, into the peacefully protesting crowds to apprehend the individuals engaged in criminal behavior. Tear gas, smoke, and rubber bullets should have been used to supplement, not replace, officers moving in to physically clear an area, and then only reluctantly.

There was no reason—and I cannot emphasize this enough—for officers in the front lines to have been holding rifles, let along aiming rifles at anyone. An officer with a rifle might take an unobtrusive position overlooking the area, but that officer should not be among the guys and gals who are potentially going to be going “hands on” with protestors. What were they going to do with them, shoot into the crowd? If rifles were needed near the front lines, they should have been secured out of sight (perhaps in one of the many police vehicles) or, at most, carried unobtrusively by a few officers in the back rows, not staged on top of armored cars in the middle of the street. That was pure intimidation, and intimidation is not good policing.

The Community Did Not Trust the Police, and the Police Did Not Trust the Community.

The approach that I’ve suggested in this article isn’t exactly mind-blowing. It is, I think, a fairly basic mix of common sense and tactical training, and it is reasonable to assume at least someone in Ferguson or St. Louis had at some point received tactical training. So happened? Why did the Ferguson Police Department and St. Louis County Police Department react the way they did? To understand that, we have to appreciate the nature of the police/community relationship. Like any long-term relationship, the bond between a law enforcement agency and the community it serves must be built on communication, respect, and trust. And like any long-term relationship, it takes a great deal of work to make it succeed.

In Ferguson, that bond had broken down long before Michael Brown was shot. Broken relationships change the way people behave. In a broken marriage, bitter spouses are quick to see the worst in each other. The same thing happens in a broken police/community relationship. When there is mutual distrust between the community and the police, officers expect the worst from the community. That, in turn, changes policing tactics, increasing the frequency of force and discretionary arrests. In Ferguson, officers viewed the community as hostile. That led them to be afraid. Afraid that they would not be able to handle the situation. Afraid that the protests would spiral into uncontrollable riots. And so, expecting the worst, they reacted not to the situation they were actually faced with, but to the situation they feared.

This, of course, brings us back to broader questions about police/community relations. The loss of public trust is the most critical problem facing police officers today. It makes officers and communities less safe. It gets in the way of criminal investigations. And it reduces officer morale and increases the potential for misconduct. The loss of trust is a tremendous problem, but there is no simple solution. The racial tension in modern policing has been built on generations of bad experiences, and it will take generations of good experiences before the chasm can be bridged. But those good experiences will not happen if police continue to use strategies that alienate communities and tactics that are unnecessarily antagonistic. Ferguson and every other city and town in the country need police to make both strategic and tactical decisions with a long-term community relationship in mind.

Seth Stoughton is a law professor at the University of South Carolina School of Law, where he is affiliated with the Rule of Law Collaborative. He served as a city police officer and state investigator for more than seven years and recently spent two years teaching at Harvard Law School as a Climenko Fellow and Lecturer on Law.
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Airplane Seatbacks, the Coase Theorem, and Simplistic Solutions to Difficult Questions Thu, 11 Sep 2014 04:01:52 +0000 Continue reading →]]> Airplane SeatsLast week, a minor national debate erupted regarding the etiquette of reclining one’s seat while flying in the economy section of an airplane. With the miserable conditions in coach class becoming ever less tolerable, tempers are flaring, and there were reports of flights being disrupted by physical confrontations between passengers.

Everyone, it seems, has an opinion. Although there are plenty of issues facing the country that are far more important than this one, it is nonetheless interesting to see whether there might be more general lessons to be learned from this blip in the news cycle.

Along those lines, one business reporter for The New York Times attempted to broaden the conversation by claiming that the seatback controversy is actually “an excellent case study for the Coase Theorem.” That theorem might be vaguely familiar to many readers of Justia’s Verdict, because it has become ubiquitous in Property Law classes in the first year curriculum of American law schools. It is also frequently taught in undergraduate economics courses.

I will explain below what the Coase Theorem says, and what it does not say. More importantly, I will show that the seatback controversy is most definitely not a good case study for what most people think the Coase Theorem says. Indeed, the misapplication of the Coase Theorem to this controversy provides a window into the more general emptiness of the “law and economics” project, which has had so much influence in law schools over the last generation.

Coase and Property Rights

Ronald Coase was a professor for many years at the University of Chicago. His work has been highly influential, especially in analyzing how business firms operate and evolve. Unfortunately, he also wrote a 1960 article, “The Problem of Social Cost,” that has become one of the least understood papers in the history of economics.

Coase started from the simple fact that a well-defined property right will set the stage for possible bargaining between two parties. For example, if I want to run a pipeline across the country, I will need to determine who could legally prevent me from doing so. If my proposed path crosses a piece of land that another person owns, then that person will be legally able to stop me from using his land for my project.

Of course, I might be able to convince him to allow me to proceed, even if he is otherwise not inclined to do so, by striking an acceptable bargain, either offering money or any other consideration that the property owner might value. On the other hand, if my pipeline company owns the land, but nearby landowners do not want the pipeline to be built, then those landowners could pay me to stop construction.

It has become fairly typical for a law professor to describe this as a “Coasean” insight, but Coase certainly would not have claimed that he was the first to notice that the assignment of property rights matters in determining how negotiations might proceed between interested parties.

Quite simply, the assignment of every property right has consequences. It has consequences for the relative wealth of the parties, for their bargaining positions, and for the “economic efficiency” of the resulting transactions.

The popular, bastardized version of the Coase Theorem says that “if trade in an externality is possible and there are no transaction costs, bargaining will lead to an efficient outcome regardless of the initial allocation of property rights.” The author of the New York Times article noted above approvingly quotes that definition, which comes from Wikipedia.

That, however, is most definitely not what Coase said. In a widely-read 1998 article, the economist and historian Deirdre McCloskey claimed that only about a dozen people in the world understand what Coase’s theorem really said. Coase’s argument was that transaction costs are ubiquitous and important, so that it very much matters (even on narrow efficiency grounds) which party holds a property right.

That might initially appear to be a distinction without a difference, but in fact, it is essential to understand that Coase’s message was not: “If you assume there are no transaction costs, it does not matter who owns the property right.” On the contrary, he said that it is always important to look at transaction costs in order to determine who should be awarded property rights.

Property Rights Are Not as Obvious as They Seem

To be less theoretical, we can bring this back to the specific example of seatbacks on airplanes. A person in a seat could own the “property right” to recline that seat, or the person sitting behind that seat could own the right to the (minimal) legroom that exists when the seat is upright. So far, so good.

But what would make the analysis “Coasean” is not merely saying that those two possibilities exist. Instead, one must ask what reality looks like, and then ask whether we can say anything useful about transaction costs that could enhance our analysis of the issue.

The author of the Times piece mocks the people who invoke manners and civility in the debate over seatbacks: “I fly a lot. When I fly, I recline. I don’t feel guilty about it.” In an earlier column for National Review, the same author scoffed at an activist’s creation of “a passive-aggressive card that you can hand to your fellow passenger, scolding him for being so rude as to recline.”

Instead, we are told, this is simply a straightforward application of the Coase Theorem, analyzing how an analysis of property rights can help us understand and solve the problem.

But who owns the property right, the reclining passenger, or the passenger with bruised knees? Supposedly, this is easy: “When you buy an airline ticket, one of the things you’re buying is the right to use your seat’s reclining function.”

How does the author know that? Note that I am not saying that people would not generally agree that the person with access to the button is the one who can control the operation of the seat. I am asking how one can assert with utter confidence that the property right belongs to one passenger and not another. Only by answering that question could we know that the person who prevents another passenger from reclining her seat is “usurping his fellow passenger’s property rights.”

One could invoke social norms, saying that “everyone knows” it to be true that a person has the power to recline her seat. But if we are going to invoke social norms rather than legal rules, then we are back to questions of civility, rudeness, manners, and all of the other things that the writer wishes to dismiss. It cannot simultaneously be true that the analysis is impervious to social norms and the property right is only a “right” in a non-legal sense.

It might also be possible to claim that the technology itself gives the person the right to recline the seat. The button is right at her fingertips, after all. That, too, fails as an argument, because there are plenty of situations in which the person with the technical ability to do something is prevented from doing so. Cigarette smokers have cigarettes and lighters at their fingertips, too, but they do not necessarily own the right to light up. Possession is most definitely not nine-tenths of the law.

Transaction Costs and Reality

We are not, therefore, in a clear-cut situation in which the would-be reclining passenger owns the legal right to recline. Even if we were, however, Coase’s analysis is important precisely because it asks whether it might be better to assign the property right, clearly and unambiguously, to the other party. The answer will depend on the relevant transaction costs.

It is important to note here just how broadly “transaction costs” is defined for Coasean purposes. Anything that prevents parties from seamlessly and effortlessly (and immediately) solving a dispute by reaching an agreeable deal is categorized as a transaction cost. That is why Coase was so focused on transaction costs, and why it is so wrong to imagine that he was willing to assume away or minimize those ubiquitous costs.

The largest transaction cost here is, as I discussed above, determining who actually holds property right. But even if that could be easily and conclusively determined, the process of negotiation itself is hardly costless, in the Coasean sense. People might find it socially awkward to offer to pay a stranger money, and no matter how much one might wish to mock such concerns, anything that impedes easy and immediate transactions is a cost. (Put differently, the attempt to dismiss manners as mere social niceties ultimately fails, because such “soft” concerns make it more difficult for human beings to negotiate with other human beings.)

In response to such a concern, the author of that article in the Times retorted: “I understand people don’t like negotiating with strangers, but in hundreds of flights I have taken, I have rarely had anyone complain to me about my seat recline, and nobody has ever offered me money, or anything else of value, in exchange for sitting upright.”

But that is no answer at all. In response to the claim that people do not negotiate because it is costly (in a sense that is meaningful to them), that author’s response is that no one has ever tried to negotiate with him? That assertion clearly supports the claim that people find negotiating costly, not that it is trivial.

Beyond that, however, consider two further transaction costs. First, there is the question of how to enforce the agreements that might be reached between fliers. If B agrees to pay $10 to A for not reclining his seat, and B pays up, what happens next? A is still in a position to act opportunistically. For example, he can niggle over whether the “contract” specified how long the seatback had to remain upright. “You didn’t say for the whole flight!”

More to the point, A could simply take the $10, sit back down, and recline his seat. What could B do? B could try to get the flight attendant to force A to honor the contract, but the flight attendant is unlikely to have witnessed the negotiations. (And, in any case, underpaid and overworked flight attendants have better things to do.) Or B could try to get other people on the plane to shame A into compliance. Oh, but wait. We have already mocked social norms, saying that “I don’t feel guilty about it” when other people disapprove. In Coasean terms, enforcing the contract is costly.

Second, consider the incentives that are created by claiming that reclining one’s seat is a property right, and that people can purchase that right for money. At that point, the money-maximizing strategy for everyone would be to immediately recline his seat after takeoff, and then to wait for the person behind him to offer to pay him money to put the seat upright. This would be the “smart” strategy even for people who have no desire to recline their seats, because they might find that they were lucky enough to sit in front of someone who will pay them to do what they would have been willing to do for free.

In other words, the net number of costly transactions would be higher in a world where people could sell their supposed right to recline their seat, compared to a world in which people could sell the right to their legroom. If legroom were for sale, there would be no incentive for people opportunistically to force transactions that they did not really care about. People who wanted to push their seats back could ask to do so, and those who did not wish to do so would not need to engage in a costly negotiation.

In short, even if one thinks only in the most narrow economic terms about the problem of reclining seatbacks, the “Coasean” solution is either ambiguous or the exact opposite of what those who tend to invoke Coase think is obvious. Far from proving that this is an easy and straightforward question, a true Coasean analysis would lead us to conclude that we really do not know how to make the “seatback market” efficient.

In an interview very late in his life, discussing the distorted theorem that bore his name, Coase said: “I think the success of the Coase Theorem . . . is an interesting illustration of what’s wrong with economics . . . . I think it’s useful because you can show, using it, the type of contracts that would have to be made in order to have an efficient economic system. But then you have to introduce, having done that, the obstacles to doing it.”

Coase’s frustration with simplistic “Coase Theorem” answers was palpable, and for good reason. Having said, in essence, “Life is complicated, and we need to be careful to remember that,” he was amazed to discover that people had heard him to say, “When life is uncomplicated enough, things are simple.” This is worth remembering in all of the many areas in which legal scholars and others try to apply something that is wrongly called the Coase Theorem. Problems are solved not by assuming them away, but by confronting them and thinking about them clearly.

Neil H. Buchanan, a Justia columnist, is an economist and legal scholar, a Professor of Law at The George Washington University, and a Senior Fellow at the Taxation Law and Policy Research Institute, Monash University (Melbourne, Australia). He blogs at, and he is the author of The Debt Ceiling Disasters: How the Republicans Created an Unnecessary Constitutional Crisis and How the Democrats Can Fight Back.
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Two New Rulings Unmask the Weakness of the Case Against Marriage Equality Wed, 10 Sep 2014 04:01:28 +0000 Continue reading →]]> Same-Sex MarriageA headspinning pair of decisions regarding state same-sex marriage (SSM) bans last week may have brought the issue one step closer to the Supreme Court. On Wednesday, Federal District Judge Martin Feldman upheld the Louisiana ban in Robicheaux v. Caldwell. Snapping a remarkable winning streak for plaintiffs challenging state bans, Feldman’s ruling was the first decision by a federal court upholding a state SSM ban since the Supreme Court invalidated Section 3 of the Defense of Marriage Act in United States v. Windsor in June 2013.

But if marriage equality advocates were left reeling by Robicheaux, they did not need to wait long for reassurance. The very next day the U.S. Court of Appeals for the Seventh Circuit invalidated the Indiana and Wisconsin bans in Baskin v. Bogan. Judge Richard Posner wrote the opinion for a unanimous three-judge panel.

The 80-year-old Judge Feldman and the 75-year-old Judge Posner were both appointed to the federal bench by President Ronald Reagan, and each wrote a spirited opinion. But despite superficial similarities in background, the two jurists are very different in outlook and stature, as their opinions reflected.

Feldman’s Robicheaux opinion is an eloquent if reactionary potpourri, trotting out claims that conservative judges and commentators have made for at least last six decades to oppose everything from racial desegregation to women’s rights: that tradition suffices to support state legislation on social matters; that courts should not interfere with fractious state democratic processes; and that judges who rule for civil rights plaintiffs give in to “empathy” and “pathos,” rather than being guided by the cold hard logic of the law.

But a side-by-side comparison of the judges and their opinions shows Feldman to be overwhelmingly outgunned by Posner. Feldman is a capable wordsmith repeating tired bromides that have little purchase on the issue of SSM bans. Posner is the greatest judge of his generation and one of the two most influential American judges never to sit on the Supreme Court. (Learned Hand was the other.) His careful dissection of the states’ arguments in support of their SSM bans reveals that it is the supporters of such bans, not the judges who find them unconstitutional, who are governed by pathos and unreason.

Grounds for Invalidating SSM Bans

The many judges who have voted to strike down state SSM bans since Windsor have relied on a number of rationales, singly and in combination: Supreme Court case law recognizes marriage as a “fundamental right” that can only be subject to the most compelling limitations; distinctions based on sexual orientation are subject to exacting scrutiny because LGBT Americans are a traditionally subordinated minority, similar in important respects to African Americans and women; and most commonly, laws barring SSM lack even a rational basis, the minimum requirement for all legislation.

Judge Posner’s Baskin opinion does not address the fundamental right issue, and while it strongly gestures in the direction of treating sexual orientation as a suspect classification, it ultimately rests on the sheer irrationality of the Indiana and Wisconsin bans.

Under a line of Supreme Court precedents that includes the leading gay rights cases, mere prejudice against a minority group cannot count as a rational basis for legislation. Accordingly, lawyers charged with defending SSM bans in court cannot and generally do not point to ugly stereotypes of gays and lesbians. But that has left them struggling to come up with any rational explanation for the bans.

For a time, lawyers argued that SSM bans served to “protect” or “defend” traditional opposite-sex marriage, but states have lately dropped this argument because, on inspection, it is simply an indirect means of expressing prejudice. SSM is only a threat to opposite-sex marriage if the participation in marriage by gay and lesbian couples somehow taints the institution of marriage, but how can that be so, unless one thinks that there is something debased about same-sex couples or same-sex attraction?

Three Weak Arguments for Upholding SSM Bans


Lawyers defending the SSM bans have thus shifted to three chief claims. First, following a strategy laid out in the Windsor dissent of Chief Justice John Roberts, they point to language in the majority opinion in that case reaffirming the state’s traditional role in defining marriage. Although Judge Feldman accepted this reasoning in Robicheaux, most judges have rejected it, and with good reason. In Windsor, considerations of federalism aligned with the plaintiffs’ interests in equality; yet, even then, as I explained recently on my blog, the case makes the most doctrinal sense if the federalism interest is understood as subsidiary to the equality interest. Where federalism cuts against constitutional protection for equality—as it does in the cases challenging state SSM bans—equality properly prevails.

Second, lawyers defending SSM bans point to an undifferentiated interest in “tradition.” Yet Judge Posner’s Baskin opinion explains that traditions may be beneficial, harmless, or harmful; tradition qua tradition is not a state interest. He notes that the longstanding tradition, dating to colonial times, of laws banning interracial marriage, did not prevent the Supreme Court from invalidating an anti-miscegenation statute in the 1967 case of Loving v. Virginia.

Judge Feldman writes that Loving can be distinguished from the SSM cases “because the Fourteenth Amendment expressly condemns racial discrimination as a constitutional evil,” but that the Amendment says nothing about sexual orientation. That would be a fair point if it were true, but it is obviously false, as readers can confirm for themselves simply by reading the Fourteenth Amendment. It does not “expressly” mention race at all. The best that can be said about Judge Feldman’s gross error is that Justice Antonin Scalia made the same blunder long before he did.

When pressed for some concrete justification for SSM bans beyond the airy invocations of federalism and tradition, the bans’ defenders have offered a third claim—that marriage can be restricted to opposite-sex couples because only opposite-sex couples can procreate accidentally, and state recognition of marriage is designed to ensure that the accidental offspring of heterosexual sex will be raised in stable two-parent homes.

In an effort to be charitable to the accidental procreation argument, Judge Posner draws an analogy: Even though bicyclists might want the benefits of driver’s licenses, the state only issues such licenses to motorists, because the state’s safety interest in licensure only extends to the relatively more dangerous motor vehicles, not to the relatively benign bicycles. Nonetheless, Judge Posner ultimately shows that the accidental procreation claim has no more merit than the federalism or tradition claim.

Judge Posner’s Judicial Jujitsu

The accidental procreation argument is difficult to take seriously because most people understand the contemporary institution of marriage as serving many other functions. And Judge Posner shows that the states themselves do not really take the argument seriously. All states permit infertile opposite-sex couples to marry. Moreover, as Judge Posner notes, in Indiana, “elderly first cousins are permitted to marry because they can’t produce children [but] homosexuals are forbidden to marry because they can’t produce children.”

Following up on a line of questioning he initiated at oral argument late last month, Judge Posner, in a kind of judicial jujitsu, turns the accidental procreation argument against the proponents of SSM bans. If the state is concerned about providing stable two-parent homes for the children produced by accidental procreation, he says, then it should permit same-sex couples to marry, because same-sex couples are in fact the adoptive parents of thousands of those very accidentally created children. The fact that it does not is further evidence that the state does not really deny the right to SSM out of concern about accidental procreation.

I have no doubt that when a SSM case reaches the Supreme Court—very likely in the upcoming Term—lawyers defending the bans will concoct some answer to Judge Posner’s unmasking of the accidental procreation argument. Perhaps they will say that under traditional rational basis scrutiny, a state may tackle a social problem one step at a time, and that the state’s SSM ban is a step that rationally addresses only the initial predicament of accidental procreation.

Such an answer would be flawed on its own terms, as I elaborate in a blog post accompanying this column. But there is a much more fundamental problem with the accidental reproduction argument and, indeed, with all of the arguments state lawyers have lately invented to defend SSM bans: they are, quite obviously, post-hoc rationalizations for state policies that are motivated by prejudice against gay and lesbian couples, plain and simple.

In a justly famous 1960 law review article, the late civil rights lawyer and legal scholar Charles Black answered the contention that Jim Crow was separate but equal in this way: “if a whole race of people finds itself confined within a system which is set up and continued for the very purpose of keeping it in an inferior station, and if the question is then solemnly propounded whether such a race is being treated ‘equally,’ I think we ought to exercise one of the sovereign prerogatives of philosophers—that of laughter.”

The denial of the right to marry to same-sex couples is not Jim Crow, but it is no less obviously a denial of the equal protection of the laws. As Judge Posner’s opinion shows, the arguments against marriage equality are laughably bad. They would be funny, if their consequences were not so serious.

Michael C. Dorf, a Justia columnist, is the Robert S. Stevens Professor of Law at Cornell University Law School and the principal author of The Oxford Introductions to U.S. Law: Constitutional Law. He blogs at
]]> 1 0:10:31 Cornell University law professor Michael Dorf comments on two recent rulings on state bans on same-sex marriage—one by the U.S. District Court for the District of Louisiana upholding that state’s ban and the other by the U.S. Court of Appeals for th[...] Cornell University law professor Michael Dorf comments on two recent rulings on state bans on same-sex marriage—one by the U.S. District Court for the District of Louisiana upholding that state’s ban and the other by the U.S. Court of Appeals for the Seventh Circuit striking down bans in Indiana and Wisconsin. Dorf explains how a comparison of these two rulings reveals weaknesses in the case against marriage equality. no no
Is Bitcoin Money? Lawmakers, Regulators and Judges Don’t Agree Tue, 09 Sep 2014 04:01:01 +0000 Continue reading →]]> Golden BitcoinsBitcoin confounds lawmakers as they try to figure out what it is and how it should be regulated. The Bitcoin Foundation notes that Bitcoin is an innovative payment network and a new kind of money. But is it money? Some call it a new form of virtual currency. Others have lauded it as a new type of payment system. So what is it? And why does it matter?

What we call it may not matter much in casual conversation, but how it is categorized does have significant implications when it comes to regulation. If it is “money” or “currency,” then existing laws and regulations may apply to businesses and consumers who issue, sell, or transact with Bitcoin. From banking laws to anti-money-laundering laws and tax regulations—whether these laws apply to the use of Bitcoin depends on how Bitcoin is classified.

At present there is no consensus as to what we should call Bitcoin or how it should be defined for purposes of applying legal rules. As I will discuss in this column, courts and regulators are coming up with different theories and classifications as a way of figuring out whether this new product/payment vehicle is or is not covered by different laws.

As I will also discuss, it appears that lawmakers, at times, restrict the term “money” or “currency” to refer only to government-issued money or legal tender. This conflicts with basic definitions of money, found in both economics texts and in dictionaries. If certain laws are meant only to deal with government-issued currencies, then perhaps we should revise statutory definitions to make such distinctions clearer. In the meantime, we will need to sit back and watch regulators around the globe grapple with whether or not Bitcoin is “money.”

What Is Bitcoin?

I have discussed how Bitcoins are generated in prior columns. As for a definition, Bitcoin does refer to itself as money or currency—issued, however, not by a government, but instead in a decentralized manner.

The Bitcoin Foundation’s Frequently Asked Questions (FAQ) page states that Bitcoin is “a consensus network that enables a new payment system and a completely digital money. It is the first decentralized peer-to-peer payment network that is powered by its users with no central authority or middlemen. From a user perspective, Bitcoin is pretty much like cash for the Internet.”

The FAQ page also notes that “Bitcoin is the first implementation of a concept called “crypto-currency,” which was first described in 1998 by Wei Dai on the cypherpunks mailing list, suggesting the idea of a new form of money that uses cryptography to control its creation and transactions, rather than a central authority.”

So—does Bitcoin qualify as money or currency? Its proponents believe that it is. But to answer that question, one needs to first consider how money is defined.

What Is Money or Currency Anyway?

The International Monetary Fund (part of the World Bank) defines money generally as a “store of value,” which means people can save it and use it later—smoothing their purchases over time; other definitions refer to money as a:

Unit of account, that is, provide a common base for prices; or

Medium of exchange, something that people can use to buy and sell from one another.

Popular definitions of money also focus on the idea of a purchasing unit—often denominated in bills and coins that can be used to purchase goods and services. The key distinction is that money allows for transactions that move beyond barter (where parties exchange goods and services for other goods and services).

So—when looking at definitions—money does not need to be linked to a sovereign or government issuer. It just has to be something that is circulated and is used for exchange.

Currency, by contrast, appears to have a link to a particular country. The Oxford English Dictionary refers to currency as a “system of money in general use in a particular country,” or as another dictionary states, “money that a country uses.” While there is a link to a particular country or state, the term does not require that it be a government-issued currency—just widely used as the medium of exchange by a particular country.

So upon first glance, Bitcoin, would qualify as money or currency; it is a medium of exchange and a unit of account. It just has no link to a particular sovereign.

The question remains, however, whether Bitcoin qualifies under legal definitions of money. And this is where lawmakers and judges have diverged.

Two U.S. Courts Find That Bitcoin Is Money

In 2013, Trendon Shavers, the founder of Bitcoin Savings & Trust (BTCST), an online investment fund, was accused of defrauding his customers out of $4.5 million worth of Bitcoin. Shavers promised investors an incredible weekly return of 7 percent, according to a federal criminal complaint, but shut down his site after collecting more than 700,000 Bitcoins. When the U.S. Securities and Exchange Commission (SEC) charged Shavers with operating an illegal Ponzi scheme, his response was that Bitcoin was not actual currency and therefore his actions were not covered by SEC regulations.

United States Magistrate Judge Amos Mazzant of the Eastern District of Texas ruled that the SEC could proceed with its lawsuit against Shavers because “Bitcoin is a currency or form of money.”

Judge Mazzant wrote: “Shavers argues that the BTCST investments are not securities because Bitcoin is not money, and is not part of anything regulated by the United States. Shavers also contends that his transactions were all Bitcoin transactions and that no money ever exchanged hands. The SEC argues that the BTCST investments are both investment contracts and notes, and, thus, are securities.”

Mazzant disagreed with Shavers’s contentions.

“It is clear that Bitcoin can be used as money,” Judge Mazzant opined. “It can be used to purchase goods or services, and as Shavers stated, used to pay for individual living expenses. The only limitation of Bitcoin is that it is limited to those places that accept it as currency. However, it can also be exchanged for conventional currencies, such as the US dollar, Euro, Yen and Yuan. Therefore, Bitcoin is a currency or form of money, and investors wishing to invest in BTCST provided an investment of money.”

The judge also concluded that Bitcoin investments “meet the definition of investment contract, and as such, are securities.”

More recently, in August 2014, another federal judge, Katherine Forrest, of the U.S. District Court for the Southern District of New York found federal money-laundering statutes “encompass use of Bitcoin”—and that “any other reading” of the law would be “nonsensical.”

“There is no doubt that if a narcotics transaction was paid for in cash, which was later exchanged for gold, and then converted back to cash, that would constitute a money-laundering transaction. One can money launder using Bitcoin,” Forrest said. Based on this conclusion, she denied a defendant’s motion to dismiss a federal money laundering charge.

The defendant, Ross Ulbricht—the creator of the infamous website for trade in illegal goods and narcotics, Silk Road—was charged in 2013 with unlawfully operating an unlicensed money transmitting business. (Silk Road accepted Bitcoin as means of payment.) Ulbricht argued that the charge should be dismissed because Bitcoin is not “money” within the meaning of the federal anti-money laundering statute.

The court disagreed, relying upon the dictionary style definition of “money” to conclude that Bitcoin “clearly qualifies as ‘money’” as it “can be easily purchased in exchange for ordinary currency, acts as a denominator of value, and is used to conduct financial transactions.” The court additionally relied on Congress’s intent that anti-money laundering statutes keep pace with new threats and techniques and cited SEC v. Shavers.

So in at least two instances, judges have interpreted federal statutes to encompass a more general definition of money that does not restrict the term solely to government-issued money.

Some Regulators and Judges Think Bitcoin Is Not Money

In June 2014, a court in the Netherlands issued a ruling in a civil lawsuit as to that has how Bitcoin should be treated under Dutch law. Notably, the court found that Bitcoin does not meet the definitions of “common money,” “legal tender,” or “electronic money,” ruling that Bitcoin is a commodity-like medium of exchange like gold.

The Dutch case involved a 2012 Bitcoin sales transaction and contract between two unnamed parties that was not fully performed. The buyer had attempted to buy 2,750 Bitcoins from the defendant seller but only received 990 Bitcoins.

At the time of the attempted sale, the buyer prepaid the full contract price of €22,000 for the entire purchase, (about €8 per Bitcoin). After repeated delays in the delivery of the remaining Bitcoins, the buyer sued the seller. The Dutch court ruled in favor of the buyer and ordered the defendant to pay back the original value of the 1,760 Bitcoins that were not delivered (worth approximately €14,000 at the time).

The court, however, did not award the buyer the €130,000 in damages he sought as lost profits that he would have earned during Bitcoin’s rapid price surge last year. The court discussed the nature of Bitcoin in its ruling, noting that it is neither electronic money nor legal tender in the Netherlands. This definition of electronic money, the court ruled, is limited to Euros issued by the European Central Bank (ECB).The court reportedly cited statements made by the Dutch Minister of Finance when ruling that Bitcoin does not meet the definition of electronic money.

Ultimately, the judge concluded that none of the definitions of common money under the Dutch Civil Code apply to Bitcoin. The judge did acknowledge that Bitcoin can be accepted as a form of payment in the Netherlands. Had Bitcoin been deemed money, the transaction would have been considered a foreign exchange contract, and thus the buyer might have been entitled to exchange rate loss.

In the United States, the IRS announced that it would treat Bitcoin as property rather than currency for tax purposes. The IRS pointed out that “it does not have legal tender status in any jurisdiction.” The IRS, it seems, was connecting currency to legal tender and as such would not equate it with other forms of money.

In a similar move, the Australian Taxation Office (ATO) stated that it will not treat Bitcoin transactions as money. In August 2014, the ATO released guidance on “crypto-currencies,” stating that saying Bitcoin will be taxed like a non-cash barter transaction.

A Bitcoin transaction was akin to a barter arrangement, whether conducted online or in brick-and-mortar shops, and therefore had similar tax consequences, the ATO said. “The ATO’s view is that Bitcoin is neither money nor a foreign currency and the supply of Bitcoin is not a financial supply for goods and services tax purposes,” it said. “Bitcoin is, however, an asset for capital gains tax purposes.”

According to news reports, some Australian businesses that accept Bitcoin as payment for goods or services had been hoping that it would be treated under tax law as an equivalent to money. This is because it would make record keeping and tax compliance easier.

What Is the Way Forward?

Lawmakers will be examining their laws on the books to see whether Bitcoin transactions will be covered by different types of statutes and regulations—for civil, criminal, and administrative purposes. As they do so, it will be important for policymakers to reexamine their statutory definitions of money and currency—to see whether they are being used in a way that makes sense.

If lawmakers intend for certain rules to apply only to legal tender—that is, government-issued money—then perhaps statutes should be clear on this point.

And Bitcoin fans and proprietors will continue to pursue the “Bitcoin is money” argument. A Bitcoin company called Bitonic has launched a crowd-funded campaign aimed to support efforts to define Bitcoin as money in the Netherlands.

The campaign has been dubbed Bitcoin is Geld (“Bitcoin is money”) and has so far raised more than 30 BTC. The cause enjoys the support of the Dutch Bitcoin Foundation.

Bitcoin is Geld will use the funds to promote legislation beneficial to Bitcoin users in the Netherlands, effectively defining Bitcoin as money in that country.

The campaign website indicates that the campaign was formed after a Dutch judge stated that Bitcoin is not considered “real” money, and the campaign now plans to take “the judge’s statement to a higher court by giving reasons as to why Bitcoin should be defined as money.”

As legislators and agencies across the world attempt to understand, classify, and regulate Bitcoin, one can only hope that they will provide clearer guidance so that those who engage in Bitcoin transactions can anticipate how the law might affect those transactions.

Anita Ramasastry is the UW Law Foundation Professor of Law at the University of Washington School of Law in Seattle, where she also directs the graduate program on Sustainable International Development. She is also a member of the Law, Technology and Arts Group at at the Law School. Ramasastry writes on law and technology, consumer and commercial law, and international law and globalization.
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Getting Away With Literary Fraud Fri, 05 Sep 2014 04:01:05 +0000 Newsweek story by David Cay Johnston highlighting the noted and untruthful biographer C. David Heymann. Dean explains how the dysfunctional body of First Amendment law has allowed Heymann to get away with publishing many lies and false information about a handful of public figures. Continue reading →]]> U.S. ConstitutionLast week Newsweek published a story by David Cay Johnston with a striking headline: “C. David Heymann’s Lies About JFK and Jackie, Marilyn Monroe and Elizabeth Taylor.” Having long been concerned with the publication of false information about public people, the story caught my attention. C. David Heymann, as his New York Times obituary noted, was a “biographer of the rich and famous,” who died in May of 2012 at 67 years of age from heart failure after collapsing in the lobby of his New York City apartment building. David Heymann remains relevant because his books continue to sell—they are even recommended for students—and his last book was published posthumously.

In fact, Heymann was a fraud, and his biographies of high profile people are filled with sensationalized falsehoods and flat-out lies. Newsweek’s account seeks to pound a few nails into his coffin, but try as it might, it can’t manage to drive a stake through the heart of his body of work. Rather, Heymann’s vicious and malicious gossip-mongering lives on; his big-money trash-for-cash scam from which he profited handsomely while alive is now providing residuals for his estate.

David Cay Johnston, who has been tracking and reporting Heymann’s frauds for decades, writes in the Newsweek account: “For 30 years, I watched with astonishment and then bemusement as major publishers gave Heymann big advances, and respected media outlets—The New Yorker, The New York Times, People, Vanity Fair, USA Today and NPR—praised and promoted his books.” While others have largely ignored this ongoing literary fraud, based on the Newsweek piece and his Twitter account—@DavidCayJ—it appears David Cay Johnston is now pressing Heymann’s publishers to explain why they continue to promote his fraudulent works.

David Cay Johnston knows what is going on here: it is all about making money at the expense of the reputations of both living and dead celebrities. Under the current law, it is easy to do. Because Johnston did not address the remarkably dysfunctional body of American First Amendment law that provides a safe harbor for scoundrels like Heymann, as well as his facilitators and benefactors, I thought it should be mentioned.

Clemens Claude Oscar Heymann

Almost everything about bestselling author David Heymann and his work is phony. His true name was Clemens Claude Oscar Heymann. The consistent dishonesty of his work reveals he was a man who knew no shame, and his persistent slandering and misquoting shows him a person without conscience.

Long-time Heymann nemesis David Cay Johnston is a seasoned investigative journalist and author, not to mention a Pulitzer Prize winner (2001). He has been on Heymann’s cases since he busted Heymann for literary fraud on the front page of the Los Angeles Times with his first celebrity biography in 1983, Poor The Life and Legend of Barbara Hutton. Johnston reported on Heymann’s Hutton book after it was withdrawn by the publisher. That happened because our legal system at that time still provided some remedies for dealing with such false stories. In that instance, Heymann claimed, among countless other false statements, that Hutton’s Beverly Hills doctor, Edward Kantor, had over-prescribed drugs for her as early as 1943. Kantor had threatened legal action given that he was only 14 years old in 1943 and had yet to even attend medical school, so Random House recalled the book for which $100,000 had already been paid for the film rights.

Heymann claimed he was so humiliated over the PoorLittle Rich Girl incident that he attempted suicide yet had a second thought and simply left the country instead, joining the Israeli intelligence agency Mossad. (Not even his surviving third wife appears to believe that fanciful contention.) After Heymann cleaned up some of the more conspicuous falsehoods in Poor Little Rich Girl, he found another publisher to issue it in time for the 1987 made-for-TV movie with Farrah Fawcett playing Barbara Hutton. Undoubtedly he profited nicely on his bogus story.

Soon after, he was back in the USA and back in business: A Woman Named Jackie (1989) reached the top of the New York Times bestseller list; Liz: An Intimate Biography of Elizabeth Taylor (1995), another bestseller; The Georgetown Ladies’ Social Club: Power, Passion, and Politics in the Nation’s Capital (2003), which was a more moderate commercial success, as was American Legacy: The Story of John and Caroline Kennedy(2007). But he was back on the bestseller list with Bobby and Jackie: A Love Story (2009) in falsely claiming an affair between them. His posthumous work, Joe and Marilyn: Legends in Love (2012), probably did not earn back the advance paid by the publisher but did save his estate from having to pay it back.

David Cay Johnston, who had examined these works, found them so “riddled with errors and fabrications,” it “would fill a book” to catalogue and explain them. He provides a brief but pointed summary in his Newsweek account. I am familiar with two of Heymann’s fraudulent works: Liz: An Intimate Biography of Elizabeth Taylor (1995), for I knew her attorney, and The Georgetown Ladies’ Social Club: Power, Passion, and Politics in the Nation’s Capital, because I know a couple of his targets. Elizabeth Taylor filed a lawsuit to block publication of the unauthorized fictitious and slanderous account of her life, only to have the case tossed out of court. Several of those who were the focus of The Georgetown Ladies’ Social Club as well as persons falsely or inaccurately quoted as sources for Heymann, considered legal action but on the advice of counsel—and the futility of succeeding despite spending a lot of time and money—took no action. Rather they hoped that by not giving the book attention it would sell fewer copies—and that appears to have worked. In fact, today there is no effective remedy (in most cases) for dealing with fabulists and slanderers.

Getting Away With False and Defamatory Statements

Only a few centuries ago, the likes of a David Heymann could be dealt by physically: Arrange to have them attacked or do it yourself, including challenging them to a duel. For the good of all, this less-than-civilized solution gave way to civil and criminal causes of action where courts provided a remedy to deal with persons like Heymann. At the time our Constitution was adopted (1788), along with its First Amendment (1791), and then for the next 175 years, false and defamatory statements were handled regularly and with dispatch by state laws that would have made it impossible for a David Heymann to operate.

Everything started to change in 1964, when the U.S. Supreme Court sought to protect northern newspapers that were writing articles about southern injustice during the Civil Rights Movement. Southern officials started suing for defamation, and southern juries, who did not want their way of life changed, were giving out large damages awards that could have put the northern newspapers out of business. The situation came to a head when the Commissioner of Public Safety in Montgomery Alabama, L. B. Sullivan, filed an action against the New York Times in an Alabama court regarding a slightly inaccurate full-page advertisement he considered improperly criticized his supervision of the police department, thus in his view, libelous. Notwithstanding the fact Sullivan was unmentioned in the advertisement, an Alabama court awarded him $500,000 (between three and four million in today’s dollars).

When the U.S. Supreme Court resolved this landmark case in 1964, New York Times v. Sullivan made all state defamation (and related) laws subject to the U.S. Constitution. It federalized this entire body of law, and thus began a process where high-profile people would soon lose a legal remedy to deal with false and defamatory statements. Examination of that law is beyond the scope of today’s column. Suffice it to say the Supreme Court has for decades incorrectly believed that high-profile people have access to the media, so they can correct the record in the “marketplace” of public opinion. This is simply untrue. Rather, the High Court has created a safe harbor for scoundrels like Clemens Claude Oscar Heymann and their publishers, who simply look the other way when confronted with the bogus nature of their work.

Today, the First Amendment is totally out of balance in protecting false and defamatory speech at the expense of reputation and truth. This has created endless cesspools of misinformation about public people that have become increasingly accessible through the Internet. Not only does such information distort history, resulting in misunderstanding of both past and present, but it causes no small amount of harm to persons without any remedy. Sooner or later, persons who are not provided a legal remedy will find their own remedies, which will not be for the greater good.

In short, in the name of free speech, our First Amendment today fosters false and defamatory speech. The fact that David Cay Johnston had pointed out to David Heymann’s publisher(s) that they were promoting lies for students to read shows that the marketplace of public opinion does not self-correct. The lies live on, particularly when they are making someone money.

John W. Dean, a Justia columnist, is a former counsel to the president.
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