FedSoc Blog

Ruth Wisse writes in the Wall Street Journal:

Four years ago at the beginning of Harvard's school term, I was going over an assignment with a freshman when she confessed that she was feeling guilty—because she was working for the Obama campaign. I assumed she meant that her campaign work was taking too much time from her studies, but she corrected me: She was feeling guilty because she supported John McCain.

So why, I asked, was she working for his opponent? She answered: "Because I wanted so badly to get along with my roommates and with everyone else."

Few of us survive adolescence without some conflict of the kind experienced by this freshman and dramatized by Tom Wolfe in his novel "I Am Charlotte Simmons" (2004): the conflict between the demands of new surroundings and the moral beliefs and values one brings from home. Every environment dispenses its conventional wisdom, and swimming against the current is always hard. But our freshman's predicament was driven by an exaggerated impression of "everyone else."

In fact, student opinion at elite schools has lately been growing more varied. Conservatives in particular have become more outspoken. Harvard's Republican Club includes libertarians, fiscal conservatives, and social conservatives, who sometimes find common cause and sometimes don't. The Right to Life caucus is a natural ally, though not all Republicans support its views on abortion.

Then there is the True Love Revolution, a Harvard group formed in 2006 "to give students a moral and political option in issues relating to sex and marriage." Its members believe that liberationist attitudes toward sex, sexuality, and relationships damage students' health and well-being.

At Yale, where the Party of the Right has been a conservative and libertarian redoubt since the 1950s, feisty undergraduates have founded a new group to promote "genuine intellectual diversity" in the face of excessive ideological uniformity. Named for one of Yale's most famous mavericks, the William F. Buckley Jr. Program takes its motto from the mission statement of Buckley's magazine, National Review, standing against "the conformity of the intellectual cliques," and supporting "excellence (rather than 'newness')" and "honest intellectual combat."

In brief, political independence is alive and well, at least among students.

Nowadays, the pressure for conformism comes more from the faculty, which tips Democratic like the Titanic in its final throes. Programs that once upheld the value if not the practice of intellectual diversity tend to function more like unions, trying to keep their membership in line. Some professors make a habit of insulting Republican candidates and conservative ideas with the smirking assurance of talk-show hosts, unaware that their laugh lines reap from some students the contempt that they sow.

The increased political conformism at universities may be traced in part to the redefinition of diversity that accompanied the introduction of group preferences, aka "affirmative action." Schools instituting this policy never acknowledged that it conflicted with competing commitments to equal consideration "irrespective of race, religion, or gender," or that at least half the country questioned its wisdom.

In part the policy has become a joke, with claimants to 1/32nd Cherokee heritage gaining preferential treatment as minority hires. What is not a joke is that the meaning of "diversity" has shifted from the intellectual to the racial-ethnic sphere, foreclosing discussion of certain subjects like affirmative action, gender differences and everything considered politically incorrect.

Thus, the current Guide to the First Year at Harvard alerts incoming students to orientation programs in diversity designed to build connections within and across "nationality, race, ethnicity, gender, sexual orientation, class, physical ability, and religion." Characteristically and tellingly absent from the list is political or intellectual diversity.

Those who established higher education in this country knew that constitutional democracy was not biologically transmitted, but would have to be painstakingly nurtured in every new cohort of students. When schools dropped requirements for compulsory attendance at religious services and subjected all certainties to critical scrutiny, the schools may have assumed that faculty would find more creative ways of teaching the foundational texts and of rehearsing the debates inspired by those texts. Conservative students—and not they alone—long for exposure to the ideational diversity of Jefferson and Hamilton, Jesus and the Grand Inquisitor, Marx and Hayek, liberal and conservative. They want a campus where a professor who says he votes Republican isn't considered either courageous or crazy.

The pity is that, so far, students who desire such a campus will have to work for its transformation on their own.

The Washington Post reports:

A federal appeals court on Friday upheld the life sentence given to a former Osama bin Laden aide who stabbed a federal prison guard in the eye even though it agreed there should have been greater efforts for him to attend his sentencing so he did not have to watch the proceeding on a video monitor.

The 2nd U.S. Circuit Court of Appeals in Manhattan said Mamdouh Mahmud Salim’s right to be present at his resentencing hearing two years ago was violated but that the error was not severe enough to warrant another sentencing.

U.S. District Judge Deborah Batts had imposed the life sentence for what she called his “unusually cruel, brutal” attack in 2000 on guard Louis Pepe. The attack occurred at the Metropolitan Correctional Center in lower Manhattan as Salim awaited trial in the August 1998 bombings of two U.S. embassies in Africa. The attacks killed 224 people, including a dozen Americans. Before the Sept. 11 attacks, Salim was believed to be the highest-ranking al-Qaida member held in the United States.

Salim, 54, challenged the fact that he only appeared at sentencing on video and said there were technical difficulties in the videoconference link from the prison where he was housed.

“Although it is an issue of first impression in this circuit, every federal appellate court to have considered the question has held that a defendant’s right to be present requires physical presence and is not satisfied by participation through videoconference,” the appeals court wrote. Still, it added: “In these circumstances, Salim was not prejudiced.”

A defense lawyer and prosecutors did not immediately comment on the ruling.

The stabbing left Pepe brain-damaged and blind in one eye. Besides the prison sentence, Batts had ordered Salim to pay $4.72 million in restitution to cover the medical expenses for Pepe’s continuing rehabilitation.

The resentencing occurred because the appeals court found that the judge’s original sentence in 2004 of 32 years in prison did not properly consider the terrorism aspects of the offense.

The Huffington Post reports:

The youngest juror, a 24-year-old whose favorite court attire was T-shirts bearing the names of rock bands, chose a Beatles sweatshirt for Friday's dramatic unveiling of the $1.05 billion verdict in favor of computer titan Apple Inc. One of the oldest was a retired electrical engineer who, as foreman, signed the unanimous verdict that South Korea's Samsung Electronics Co. copied Apple's patented technology for the iPhone and iPad. Among the other seven jurors were a homemaker, a bicycle shop manager and a U.S. Navy veteran.

The decision Friday by this panel of people from many walks of Silicon Valley life was one that experts say could dramatically alter the future of computer tablet and phone design if the verdict stands. But the case also is part of a trend that has accompanied an explosion in the number of patent infringement cases, especially in the technology sector.

Increasingly, these highly complex disputes are being decided by juries, rather than judges, and the juries tend to issue more generous awards for patent violations.

That has companies on the receiving end of successful patent infringement lawsuits crying foul and calling for reform in the patent system, but it also has some legal experts questioning whether ordinary citizens should be rendering verdicts and fixing damages in such high-stakes, highly technical cases.

"That's a great question ... and it's the subject of a fair amount of current debate," said Notre Dame University law professor Mark McKenna.

Deliberations in the Apple v. Samsung battle were far more challenging than most. The jury was confronted with hundreds of questions on a 20-page verdict form that was more complicated than a U.S. tax return. They had in the jury room more than two dozen electronic devices at issue, 12 patents to decipher and 109-pages of instructions from the judge on rendering a verdict.

"This case is unmanageable for a jury," Robin Feldman, an intellectual property professor at the University of California Hastings Law School, said before the verdict. "There are more than 100 pages of jury instructions. I don't give that much reading to my law students. They can't possible digest it."

"The trial is evidence of a patent system that is out of control," Feldman said. "No matter what happens in this trial, I think people will need to step back and ask whether we've gone too far in the intellectual property system."

Apple filed suit in April 2011, accusing Samsung of essentially selling illegal knockoffs of its popular iPhones and iPads. Apple demanded $2.5 billion in damages and an order barring U.S. sales of the Samsung products in question. Samsung countered with its own claims, accusing Apple of using wireless technology it owned.

The jury rejected Samsung's claims and refused to award Apple the maximum amount demanded, finding that fewer Samsung products violated Apple's patent than alleged.

The jury arrived at its verdict after less than three days of deliberations, far swifter than many experts thought in view of the many complex issues.

The foreman, Velvin Hogan, a 67-year-old electrical engineer, told the San Jose Mercury News on Saturday that the panel was methodical. "We didn't whiz through this," said Hogan, who relied on his own experience patenting inventions. "We took it very seriously."

Hogan, who does not own Apple products, said the first task was to determine if Apple's patents were valid. Using his own experience getting a patent, Hogan said he had a revelation on first night of deliberations while watching television. "I was thinking about the patents, and thought, 'If this were my patent, could I defend it?'" Hogan recalled. "Once I answered that question as yes, it changed how I looked at things."

The jury did not completely grant Apple's demand for at least $2.5 billion, Hogan said, but they "wanted to send a message to the industry at large that patent infringing is not the right thing to do, not just Samsung."

Although the jurors all promised to weigh the evidence fairly, jury consultant Ellen Brickman said Samsung started out the underdog for several reasons. Apple is based just 10 miles (16 kilometers) from the courthouse, jurors have a predisposition to side with patent holders, and Samsung is a foreign-based company fighting a domestic outfit during tough economic times.

Finally, she noted that many Americans view Apple and its late founder Steve Jobs as legendary innovators. "Apple changed the world when it came to computers. Apple changed the world when it came to phones," she said.

Samsung has vowed to fight the case all the way to the U.S. Supreme Court. It will first ask the trial judge to toss the verdict. Failing that, Samsung will appeal to the Court of Appeals for the Federal Circuit in Washington D.C., a specialized court that hears nearly all patent appeals.

Apple itself benefited from a judge last year reversing a jury's verdict in a patent trial in Tyler, Texas. A jury had awarded software company Mirror Worlds $625.5 million after concluding Apple infringed three patents related to how documents are displayed on computer screens.

"Mirror Worlds may have painted an appealing picture for the jury, but it failed to lay a solid foundation sufficient to support important elements it was required to establish under the law," U.S. District Judge Leonard Davis wrote in April 2011 in tossing out the jury's verdict.

The number of jury trials, as opposed to "bench" trials presided over exclusively by a judge, has greatly increased in the last 20 years, a 2011 PriceWaterhouseCoopers study concluded. It found that only 14 percent of patent trials were held before juries in 1980, 25 percent in 1990 and nearly 60 percent since 2000.

The consultants attributed that dramatic rise in part to a tendency of juries to award higher damages than judges. The average jury award was a little more than $10 million during the last decade while the average award after a bench trial was barely more than $1 million.

According to the Associated Press:

A federal appeals court on Friday refused to order the Obama administration to stop funding embryonic stem cell research, despite complaints the work relies on destroyed human embryos.

The U.S. Circuit Court of Appeals for the District of Columbia upheld a lower court decision throwing out a lawsuit that challenged federal funding for the research, which is used in pursuit of cures to deadly diseases. Opponents claimed the National Institutes of Health was violating the 1996 Dickey-Wicker law that prohibits taxpayer financing for work that harms an embryo.

But a three-judge appeals court panel unanimously agreed with a lower court judge's dismissal of the case. This is the second time the appeals court has said that the challenged federal funding of embryonic stem cell research was permissible.

"Dickey-Wicker permits federal funding of research projects that utilize already-derived ESCs — which are not themselves embryos — because no 'human embryo or embryos are destroyed' in such projects," Chief Judge David B. Sentelle said in the ruling, adding that the plaintiffs made the same argument the last the time the court reviewed the issue. "Therefore, unless they have established some 'extraordinary circumstance,' the law of the case is established and we will not revisit the issue."

Researchers hope one day to use stem cells in ways that cure spinal cord injuries, Parkinson's disease and other ailments. Opponents of the research object because the cells were obtained from destroyed human embryos. Though current research is using cells culled long ago, opponents say they also fear research success would spur new embryo destruction. Proponents say the research cells come mostly from extra embryos that fertility clinics would have discarded anyway.

The lawsuit was filed in 2009 by two scientists who argued that Obama's expansion jeopardized their ability to win government funding for research using adult stem cells — ones that have already matured to create specific types of tissues — because it will mean extra competition.

President George W. Bush also permitted stem cell research, but limited the availability of taxpayer funds to embryonic stem cell lines that were already in existence and "where the life and death decision has already been made." Obama's order removed that limitation, allowing projects that involve stem cells from already destroyed embryos or embryos to be destroyed in the future. To qualify, parents who donate the original embryo must be told of other options, such as donating to another infertile woman.

Sentelle also rejected the opponent's two other arguments: that the same federal law prohibits funding for projects where embryos are "knowingly subjected to risk of injury or death," and that NIH issued guidelines on the funding without responding to complaints about the research.

CNBC reports:

A U.S. appeals court on Friday struck down a law that requires tobacco companies to use graphic health warnings, such as of a man exhaling smoke through a hole in his throat.

The 2-1 decision by the court in Washington, D.C., contradicts another appeals court's ruling in a similar case earlier this year, setting up the possibility the U.S. Supreme Court will weigh in on the dispute.

The court's majority in the latest ruling found the label requirement from the U.S. Food and Drug Administration violated corporate speech rights.

"This case raises novel questions about the scope of the government's authority to force the manufacturer of a product to go beyond making purely factual and accurate commercial disclosures and undermine its own economic interest -- in this case, by making 'every single pack of cigarettes in the country mini billboard' for the government's anti-smoking message," wrote Judge Janice Rogers Brown of the U.S. Court of Appeals for the District of Columbia Circuit.

The FDA "has not provided a shred of evidence" showing that the graphic labels would reduce smoking, Brown added.

Five tobacco companies representing most of the major cigarette makers in the United States challenged the FDA rules: Reynolds American Inc, Lorillard Inc; Commonwealth Brands Inc, which is owned by Britain's Imperial Tobacco Group Plc; Liggett Group LLC and Santa Fe Natural Tobacco Co Inc.

The FDA has argued the images of rotting teeth and diseased lungs are accurate and necessary to warn consumers -- especially teenagers -- about the risks of smoking.

The health agency said on Friday that it does not comment on possible, pending or ongoing litigation. The U.S. Department of Justice, which argued the case for the FDA, said it needs to review the ruling before deciding on next steps.

The Campaign for Tobacco-Free Kids, which has vigorously supported stricter cigarette laws, urged the government to appeal.

"Today's ruling is wrong on the science and law, and it is by no means the final word on the new cigarette warnings," said Matthew Myers, the group's president, in a statement.

YOUTH EPIDEMIC

The Centers for Disease Control and Prevention estimates some 45 million U.S. adults smoke cigarettes, which are the leading cause of preventable death in the United States. And the World Health Organization predicts smoking could kill 8 million people each year by 2030 if governments do not do more to help people quit.

The U.S. Surgeon General warned in March that youth smoking has reached epidemic proportions, as one in four U.S. high school seniors is a regular cigarette smoker, paving the way to a lifetime of addiction.

Judge Judith Rogers, who wrote the dissenting opinion, said the FDA warnings were factual, and necessary to counter tobacco companies' history of deceptive advertising.

"The government has an interest of paramount importance in effectively conveying information about the health risks of smoking to adolescent would-be smokers and other consumers," she wrote.

Congress passed a law in 2009 that gave the FDA broad powers to regulate the tobacco industry, including imposing the label regulation. The law requires color warning labels big enough to cover the top 50 percent of a cigarette pack's front and back panels, and the top 20 percent of print advertisements.

The FDA released nine new warnings in June 2011 that were meant to go into effect this September, the first change in U.S. cigarette warning labels in 25 years. Cigarette packs already carry text warnings from the U.S. Surgeon General.

The ruling against the FDA means tobacco companies will likely not have to comply with the requirements for now, given divergent court rulings.

The U.S. Appeals Court for the 6th Circuit, based in Cincinnati, upheld the bulk of the FDA's new tobacco regulations in March, including the requirement for warning images on cigarette packs.

The difference in the two cases is that the FDA had not introduced the specific images when the companies filed the 6th Circuit suit. While the Washington suit focused on the images, the appeals court in Cincinnati addressed the larger issue of the FDA's regulatory power.

Most countries in the European Union already carry graphic images to illustrate the health risks of smoking. Earlier this month, Australia took a further step to limit smoking advertising by banning company logos on cigarette packs, and the EU said it was considering a similar ban.

October 1st marks the first day of the 2012 Supreme Court term. Thus far the docket includes major cases about affirmative action, international law and the alien tort statute, national security, criminal law, and others.  A few notable cases include Fisher v. University of Texas at Austin, concerning a public university use of race in undergraduate admissions decisions and the Equal Protection Clause; Kiobel v. Royal Dutch Petroleum, about the application of the Alien Tort Statute to human rights abuses abroad, and whether the statute covers corporations; Clapper v. Amnesty International USA, regarding the right to challenge the constitutionality of a global terrorism wiretapping program; Amgen Inc. v. Connecticut Retirement Plans and Trust Funds, concerning the proof that investors need to pursue a securities fraud claim by class-action lawsuit; and Florida v. Harris and Florida v. Jardines, about police use of a drug-sniffing dog to search the exterior of a private residence under the Fourth Amendment, and whether the dog’s “alert” constitutes probable cause for search of a private vehicle.  The Court is also likely to add other significant cases, including a case filed by proponents of California’s “Proposition 8” challenge, which now has a cert petition pending. In addition to these cases and others, the panelists will discuss the current composition and the future of the Court, a particularly timely topic in light of the upcoming Presidential election.

On September 27, 2012, the Federalist Society will be hosting a panel on the October term.

Featuring:

• Mr. Tom Goldstein, Founding Partner, Goldstein & Russell P.C.
• Prof. Nicholas Quinn Rosenkranz, Professor of Law, Georgetown University Law Center
• Ms. Carrie Severino, Chief Counsel and Policy Director, Judicial Crisis Network
• Mr. Stuart Taylor, Columnist, National Journal
• Hon. Kenneth L. Wainstein, Partner, Cadwalader, Wickersham & Taft
• Moderator: Mr. Pete Williams, NBC News Justice Correspondent

Start : Thursday, September 27, 2012 12:00 PM

End   : Thursday, September 27, 2012 2:30 PM

Location: National Press Club, 529 14th Street NW, Washington, DC 20045

Registration details: The cost to attend this event is $25. Lunch will be included. There is no cost for press. Please register online as space is limited.

CBS News reports:

A federal appeals court ruled late Tuesday that Texas can cut off funding for Planned Parenthood clinics that provide health services to low-income women before a trial over a new law that bans state money from going to organizations tied to abortion providers.

The 5th U.S. Circuit Court of Appeals in New Orleans lifted a federal judge's temporary injunction that called for the funding to continue pending an October trial on Planned Parenthood's challenge to the law.

State officials sought to cut off funding to Planned Parenthood clinics that provide family planning and health services to poor women as part of the Texas Women's Health Program after the state's Republican-led Legislature passed a law banning funds to organizations linked to abortion providers. No state money goes to pay for abortions.

The appeal's court decision means Texas is now free to enforce its ban on clinics affiliated with abortion providers. Planned Parenthood provides cancer screenings and other services — but not abortions — to about half of the 130,000 low-income Texas women enrolled in the program, which is designed to provide services to women who might not otherwise qualify for Medicaid.

The ruling is the latest in the ongoing fight over Texas' efforts to halt funding to clinics affiliated with abortion providers. The federal Centers for Medicare and Medicaid Services has said that the new state rule violates federal law. Federal funds paid for 90 percent, or about $35 million, of the $40 million Women's Health Program until the new rule went into effect. Federal officials are now phasing out support for the program.

Gov. Rick Perry has promised that Texas will make up for the loss of federal funds to keep the program going without Planned Parenthood's involvement. State officials have said ending the program would result in more unplanned pregnancies that would cost the state much more than self-financing the program.

In a statement, Perry called Tuesday's ruling "a win for Texas women, our rule of law and our state's priority to protect life."

"Texas will continue providing important health services for women through this program in spite of the Obama Administration's disregard for our state law and unilateral decision to defund this program," the governor said.

Perry's office referred questions about continued funding for the Women's Health Program to the Texas Health and Human Services Commission, which said it would move to begin enforcing the ban.

Cecile Richards, president of the Planned Parenthood Action Fund, said the case "has never been about Planned Parenthood — it's about the women who rely on Planned Parenthood for cancer screenings, birth control and well-woman exams."

"It is shocking that politics would get in the way of women receiving access to basic health care," Richards said in a statement.

The case began when Planned Parenthood sued, saying the new Texas law violated its rights to free speech. Texas Attorney General Greg Abbott countered by arguing that lawmakers may decide which organizations receive state funds.

A federal judge in Austin ruled in May that the funding should continue pending the trial on Planned Parenthood's lawsuit, saying there's sufficient evidence the state's law is unconstitutional.

But the three-judge appellate panel disagreed, unanimously finding that Planned Parenthood was unlikely to prevail in future arguments that its free-speech rights were violated.

David Skeel, professor at the University of Pennsylvania Law School, writes in the Wall Street Journal:

No one doubts that the coming election will be the most important referendum on the size and nature of government in a generation. But another issue is nearly as important and has gotten far less attention: our crumbling commitment to the rule of law.

The notion that we are governed by rules that are transparent and enacted through the legislative process—not by the whims of our leaders—is at the heart of that commitment. If legislators exceed their authority under the Constitution, or if otherwise legitimate laws are misused, courts must step in to prevent or remedy the potential harm.

During the 2008 financial crisis, the government repeatedly violated these principles. When regulators bailed out Bear Stearns by engineering its sale to J.P. Morgan Chase, they flagrantly disregarded basic corporate law by "locking up" the transaction so that no other bidder could intervene.

When the government bailed out AIG six months later, the Federal Reserve funded the bailout by invoking extraordinary loan powers for what was clearly an acquisition rather than a loan. (The government acquired nearly 80% of AIG's stock.)

Two months later, the Treasury Department used money from the $700-billion Troubled Asset Relief Program fund to bail out the car companies. This was dubious. Under the statute, the funds were to be used for financial institutions. But the real violation came a few months later, when the government used a sham bankruptcy sale to transfer Chrysler to Fiat while almost certainly stiffing Chrysler's senior creditors.

According to two leading legal scholars, Eric Posner and Adrian Vermeule, rule-of-law violations are inevitable during a crisis. The executive branch takes all necessary steps, even if that means violating the law, until the crisis has passed. The argument is powerful, and its advocates are correct that presidents and other executive-branch officials often push the envelope during a crisis.

Yet pushing the envelope isn't the same thing as flouting the law. Even in a crisis, jettisoning legal constraints can have enormously destructive consequences. Investors are likely to flee, for instance, precisely when continued confidence in the markets is essential.

Though one might excuse departures from the rule of law at the height of a crisis, one would expect to see a prompt reversion to rule-of-law principles immediately thereafter. The most famous 20th-century illustration was the Supreme Court's invalidation, in the 1952 case Youngstown Sheet & Tube Co. v. Sawyer, of President Harry Truman's attempt to take over the steel industry during the Korean War.

By far the most disturbing element of recent trends is that precisely the opposite seems to be taking place. The commitment of government officials to the rule of law has continued to crumble—even after the crisis has subsided.

Consider the litigation that led to the recent $25 billion National Mortgage Settlement, which was brought by the state attorneys general and quarterbacked by the Obama administration. The plaintiffs alleged that five of the nation's largest banks used "robo-signers"—law firms that filed large numbers of foreclosure documents without bothering to check the details—and added unnecessary fees such as overpriced insurance during the real-estate bubble.

These actions deserved to be punished, but the settlement had almost nothing to do with the allegations. A large majority of the settlement will go to mortgage relief for homeowners who weren't affected by the robo-practices, or to provide a bailout to the states. Both steps are illegitimate uses of the judicial process.

Or consider the Dodd-Frank Act's new resolution rules. They require the Federal Deposit Insurance Corporation to liquidate the troubled financial institutions it takes over.

The liquidation requirement is a bad idea, but its purpose is clear. When California Democratic Sen. Barbara Boxer proposed the requirement, she insisted that the rules would only be used to shut down the institution. All "financial companies put into receivership . . . shall be liquidated," she insisted in May 2010. "No company is going to be kept afloat."

Yet as the FDIC has made plans for implementing the resolution rules, it has simply ignored the requirement, announcing that it will use the new rules to reorganize institutions and keep them going.

A sad irony of these developments is that rule-of-law values have been one of America's greatest contributions to world-wide economic development in recent decades. When the economist Hernando de Soto tried in the 1990s to determine why economic growth is so limited in much of the world, he concluded that respect for basic property rights is essential.

America, where this commitment gradually emerged in the 19th century, was Exhibit A in Mr. de Soto's story. In the years after the Berlin Wall fell in 1989, American markets served as a model of the importance of privatization and protection of property rights as the nations of Eastern Europe charted a new economic future. Now we increasingly are the ones that need to learn these lessons.

Rule-of-law matters cannot be separated entirely from questions about the size and role of government. The more government grows, the harder it is to preserve rule-of-law virtues like transparency and clear rules of the game. But the rule of law is nevertheless a distinct and extraordinarily important concern, and it deserves separate consideration as the presidential campaign begins in earnest.

Each candidate should be asked: Do you believe that the rule of law was abused during the recent crisis, and what would you do to protect it in the future?

FOX Business reports:

Fearing that the legal playing field could be tilted against consumers, a group of federal and private consumer agencies have filed briefs in a U.S. Supreme Court case that threatens to shift the cost of a lawsuit to consumers in debt collection cases.

Collectors have in the past absorbed court costs in "good faith" suits by consumers, even if the consumer loses. It's an exception, written into federal rules, to the usual "loser pays" rules that apply to most lawsuits. Without it, people would be discouraged from suing debt collectors, say the Federal Trade Commission, the Consumer Financial Protection Board and a group of private consumer advocacy groups in legal briefs filed this month.

In doing so, they say they're attempting to preserve a delicate legal balance between consumers, who sometimes fail to pay their debts, and debt collectors, who occasionally break the law by harassing or threatening consumers who are behind on their bills.

There has been a surge in the number of cases filed against debt collectors under the Fair Debt Collection Practices Act, the 1977 federal law that regulates the activities of third-party debt collectors.

The one that made it to the Supreme Court, though, could discourage such suits, the agencies say. The case, known as Marx v. General Revenue Corp., revolves around the experience of Olivea Marx, a Colorado woman who racked up student debt and failed to pay it, then was contacted by a debt collector. Marx, a single mother with two young children and a low-paying job, claimed the collector's vigor went beyond the limits of the law. It called her several times a day, she said, and illegally threatened to garnish half her wages and sent a collection-related fax to her employer. She sued.

The court disagreed, finding that the debt collector's contact with the woman's employer did not violate the law because it did not specifically mention her debt. The court ordered her to pay $4,543 in costs -- nearly all of which compensated the debt collector for hiring a court reporter and bringing in witnesses.

In a typical lawsuit, that wouldn't be unusual. Ordinarily, the prevailing party in American courts is entitled to recoup the costs of the case -- a venerable legal concept that discourages frivolous suits by making the loser pay, and one which General Revenue Corp. argued was only fair to apply to Marx.

A lawyer for General Revenue Corp. could not be reached. But in a statement, Mark Schiffman, vice president of public affairs for ACA International -- The Association of Credit and Collection Professionals, a trade group, says having the losing side pay in debt-collection cases "is a matter of fairness and consistency."

The association, he says, "supports the position that the law does not prevent a successful defendant in an FDCPA action from recovering costs, even if the action is not brought in bad faith and for the purposes of harassment."

The case hinges on the court's interpretation of how the Fair Debt Collection Practices Act applies to the issue of litigation costs: Consumer groups say Congress crafted an exception for debt-collection cases. Industry groups say it didn't.

Debt collectors in the past have had to absorb the costs of cases filed under the Fair Debt Collection Practices Act (FDCPA) unless the debtor was found to have filed under bad faith or with harrassment in mind. Though the judge in Marx's case ruled her suit was not frivolous or in bad faith, it still ordered her to pay costs. In December, the 10th Circuit Court of Appeals upheld the ruling. In May, the Supreme Court agreed to hear the case. Arguments are scheduled for November, on the single narrow question of "whether a prevailing defendant in an FDCPA case may be awarded costs where the lawsuit was not 'brought in bad faith and for the purpose of harassment.'"

Professor Hadley P. Arkes' book, Constitutional Illusions & Anchoring Truths: The Touchstone of the Natural Law, stands against the current of judgments long settled in the legal academy in regard to classic cases such as Lochner v. New York, Near v. Minnesota, New York Times Co. v. United States (the Pentagon Papers case), and Bob Jones University v. United States.  Arkes takes concepts long regarded as settled principles in our law--"prior restraints," ex post facto laws--and he shows that there is actually a mystery about them, that their meaning is not as settled or clear as we have long supposed. Those mysteries have often given rise to illusions or at least a series of puzzles in our law.  They have at times acted as a lens through which we view the landscape of the law.  We often see what the lens has accustomed us to seeing, instead of seeing what is actually there.  Arkes tries to show that the logic of the natural law provides the key to this chain of puzzles, after which he will answer questions from our audience.

Tomorrow August 24, 2012, FedSoc's Religious Liberties Practice Group is hosting a teleforum with Arkes about his book.

Agenda: Call begins at 2:00 p.m. Eastern Time.

Registration details:  Teleforum calls are open to all dues paying members of the Federalist Society. To become a member, sign up here. As a member, you should receive email announcements of upcoming Teleforum calls which contain the conference call phone number. If you are not receiving those email announcements, please contact us at 202-822-8138.

Richard A. Epstein, professor at NYU Law School, writes at SCOTUSblog:

The recent announcement that Republican presidential nominee has tapped Republican Congressman Paul Ryan of Wisconsin as his vice-presidential running mate is widely noted for its short-term political implications: Mitt Romney has not decided to drift back to the center on economic, fiscal, and budgetary matters.  Instead in choosing Paul Ryan he has signaled that he plans to continue on the limited government approach that stresses dollars-and-cents issues over the social issues – think abortion and gay rights – that have for so long divided the social conservatives from the more libertarian wing of the Republican Party.

As might be suggested, this choice hints that Romney, if elected president, might well choose judges, and particularly Justices of the Supreme Court, who tend to hew to his vision of the world. In so doing, he has created a clear demarcation from Obama, whose own two nominees Sonia Sotomayor and Elena Kagan have proved reliable supporters of Obama’s Progressive agenda, most notably during the recent battles over the Affordable Care Act.

It takes little persuasion that the biggest difference between the left and the right is over these issues, and it is on these that I shall focus, putting to one side important issues that deal with other areas like the death penalty or the legality of searches and seizures.   It also takes little imagination to perceive that the reelection of Barack Obama in 2012 will solidify his hand in getting the Supreme Court to go along with his general position, which means that the major function of the court will be to insulate large economic reforms from judicial nullification.

But the question is how to think about the conservative wing of the court. In dealing with the split between the Court’s Progressives and Conservatives, the issue has often been cast in the somewhat misleading terms of judicial restraint.  The progressive Justices will give a pass to virtually any major form of economic regulation, while the Conservatives will engage the question of whether either the structural or individual rights provisions of the Constitution impose some discernable limitations on the exercise of federal (and in some instances) on state power.

These differences are real enough to matter.  In general, the progressive Justices (often joined by some conservative Justices) will give both the federal and state government carte blanche on general economic regulation.  In the field of individual rights that attitude is captured in the generous rendering of public use which was endorsed unanimously in Hawaiian Housing Authority v. Midkiff, decided in 1984, written by then-Justice Sandra Day O’Connor.  It is a measure of the modest shift in sands that the 2005 decision in Kelo v. City of New London generated four dissents, including one by Justice O’Connor that indicated her clear change of heart from what went before, even though she distanced herself from her earlier Midkiff opinion without disavowing it.  Similar attitudes can be found in some of the takings cases such as Nollan v. California Coastal Commission (1987) and Dolan v. City of Tigard (1994), where five-four decisions sustained challenges against various forms of land-use regulations that conditioned the granting of development permits on surrendering to the state easements that allowed for general public use over formerly private land.

Alas, on these issues, it is important to understand just how little separates the two sides on property issues, for the conservatives will not raise so much as a peep about such manifest disregard of property rights that are embodied into most (but not all) zoning ordinances, and in the various rent control schemes that still are in place in such cities as Escondido, Santa Barbara, and Goleta, and of course New York City, with its rent stabilization program that has weathered many a judicial challenge.

The willingness of all judges to find a categorical distinction between physical entries and regulatory takings makes it crystal clear that the Supreme Court as a unit does not think that the ordinary laws of property still apply.  Tenants are now allowed repeatedly to hold over against their landlords at the expiration of a lease, at rents set well below market value.  The law of nuisance does not provide any limitation on the ability to zone, for it is commonplace that towns can protect their “character” and their “views” without compensating the individuals who are asked to bear the special burdens in the form of stringent building restrictions and exactions. Keep within this framework and local governments can tie up land use tighter than a drum.

The same level of judicial nonengagement of the conservative Justices with fundamental principles applies to governance structure in the administrative state.  Just this issue was raised in Free Enterprise Fund v. Public Company Accounting Oversight Board (2010). There the conservative Justices struck down a statute that insulated members of the PCAOB by two levels of delegation, first by the President to the Securities and Exchange Commission, and by the SEC to the PCAOB. But that constitutional intervention was only interstitial.  So long as the President cannot remove members of the SEC except for cause, narrowly defined, the PCAOB is insulated from presidential oversight 99.9 percent of the time, even though it has vast powers to investigate and charge the firms within its oversight jurisdiction.

This modest slap on the wrist is strong evidence that the current conservative Justices will not take on the constitutional status of independent agencies, which were accepted in Humphrey’s Executor v, United States (1935), even though these could be challenged on the ground that the so-called “fourth branch” of government does not fit into the tripartite constitutional structure with its legislative, executive, and judicial branches.

In dealing with the Commerce Clause they are willing to entertain, as they did in NFIB v. Sebelius (2012), the view that Congress does not have the power to force people to enter into a line of business so that they can then regulate it.  But at the same time, they did not express the slightest uneasiness about upholding the expansive view of the commerce power in Wickard v. Filburn (1942), which held that substantial indirect effects from local activities in agriculture, mining, and manufacturing offered a sufficient warrant for federal regulation

Finally, in dealing with the powers to tax and spend, all Justices on both sides of the political spectrum thought that the power to tax for the “general welfare” gave the federal government “broad discretion” in the nature and objects of taxation. None of them were prepared to even consider the possibility that the “general welfare of the United States” was in fact intended to limit the use of taxes to secure transfer payments that could give voice to the powerful factions that a sensible federal government should start to limit.

In dealing with these issues, the current conservative passivity is a combination of two different sources. The first is the shrug of resignation that comes from being beaten down on these issues consistently for a period of close to seventy-five years.  No point for the faint-hearted originalist in trying to fight the inevitable when all the political forces are so clearly aligned against it.  The second, however, is a belated assertion that a richer sense of constitutional interpretation – what Jack Balkin calls Living Originalism – shows that the Wickard decision was consistent with the original meaning of the Constitution after all, even though there is not so much as a glimmer of support for that position in any of the decided cases from Gibbons v. Ogden (1824) on forward.

The implications of these two positions are vastly different.  If the first one is correct, it is always open for someone to challenge the status quo in two ways.  First, it is now respectable to say that this (as I call it) “prescriptive constitution” should not be extended beyond the scope of its current use.  That position follows from the usual rules of prescriptive easements that allow long usage to protect only the rights used (e.g., walking over another’s land) and not other uses (e.g., driving trucks over it) that were not so protected.  Second, if the rule is prescriptive only, it is fair game to ask whether long usage has had such a deleterious effect on the overall system that it makes good sense to edge back to the original position by the usual, if messy, common law method of incremental interpretive adjustments, which could well include overruling cases that some regard as landmarks in the law.

I do not think that this second option should be regarded as off the table. The current economic situation in the United States is recognized on all sides to be grim, and not getting better any time soon.  The only question is whether the current institutions lead to economic stagnation or contraction.  Many people think, wrongly, that greater expansion of government power can cure the current malaise, which is largely attributable to the expansion of government power. Have a large government and all resources are now put into public solution, where political pressures can lead to their major reassignment.  There is in practice no upper bound on the ability to shift property rights through regulation of urban land and open spaces. Nor is there any limitation on the differential taxes that can be imposed on some activities relative to others.  That vast political discretion results in a massive shift from the use of taxation and regulation to create public goods that benefit all in roughly even measure, to a world in which political majorities are at liberty to raise their taxes on the top one percent to whatever level they see, as has been done.

It is for this reason that the nomination of Paul Ryan is instructive for the long-term political dynamic.  He is clearly someone who, on at least some issues, is willing to think out of the box.  He is not one, or at least has not revealed himself as someone, who thinks that it is possible to make major reforms without trenching on some vested rights.  But it looks as though he is prepared to make some of those painful political choices.  In the short term, the likely approach is to attack some of the privileges that come from this capacious use of state power within the political framework.  But the appointment of Justices who are sensitive to these issues in the next four years could lead to an instructive break from the cautious conservatism on the Court today, to a more full-throated classical liberal view that does nothing to deny the need for the state to supply defense and infrastructure, but looks with disdain on the raft of transfer programs that today sap the strength of a nation.

What will the future bring?  My hope is that the Republicans will run a principled campaign that stresses the need for sustainable social institutions, so that the task of national repair can take place not only on the executive and legislative fronts, but on the judicial front as well. There are many domestic issues that command attention but none is more important than the simple question of how big a government? And for what ends?  Much of the blame for the current economic impasse comes from the Supreme Court’s penchant to defer to the political branches when they hatch their multiple schemes of special taxation and special subsidy.  Change that attitude and over time a profound reorientation of our constitutional culture might help the United States get out of its current economic and social malaise. Do business as usual and there will be economic stagnation – the new normal – stretching into the indefinite future.

The Federalist Society's New York City Lawyers Chapter cordially invites you to a luncheon and book signing with the Honorable Antonin Scalia.  
 
Justice Antonin Scalia will discuss his new book (co-authored with Bryan A. Garner), Reading Law: The Interpretation of Legal Texts. A book signing will follow. Here are the details:
 
Date: Tuesday, September 18, 2012

Time:
11:30 a.m. - Registration
12:00 p.m. - Lunch & Discussion
(Book signing to follow.)

Location:
New York Athletic Club, 180 Central Park South, New York, NY 10019
 
Cost:
The cost of the luncheon is $50. Students may pay a discounted rate of $25.
(No refunds will be given after September 14.)
 
Books will be available for purchase.
 
Space is limited. Pre-registration is required. Click here to register today.

The Associated Press reports:

A federal appeals court ruling that has taken key civil service protection away from government employees involved in national security work will have far-reaching implications, advocates for federal workers say.

Tom Devine, legal director of the Government Accountability Project, a whistle-blower advocacy group, said Tuesday that the appeals court has given agencies "a blank check to cancel all government accountability in civil service law."

In a 2-1 decision Friday involving two Defense Department employees, the U.S. Court of Appeals for the Federal Circuit said the Merit Systems Protection Board is prohibited from reviewing dismissals and demotions of government employees who hold "noncritical sensitive" positions, regardless of whether those jobs require access to classified information.

The dissenting judge in the case said the decision "effectively nullifies" the 1978 civil service law. Advocates for federal workers point out that federal employees in "noncritical sensitive" jobs work at many federal agencies, making the impact of the ruling government-wide.

The Defense Department welcomed the decision.

"The court acknowledged the agency heads' expertise related to national security matters," the Defense Department said. "This decision clarifies that the MSPB plays a limited role in its review of agency determinations concerning eligibility of an employee to occupy a sensitive position that implicates national security."

Created by the Civil Service Reform Act of 1978, the Merit Systems Protection Board is an independent, quasi-judicial agency in the executive branch that serves as the guardian of fair employment rules.

Lynne Bernabei, a Washington attorney who defends employees in personnel actions, said the decision "and the Obama administration's support of this position is an integral part of the administration's increasing secrecy and support of a national security system that is unaccountable."

Bernabei called it "a very dangerous decision because it expands the class of cases that are no longer under the jurisdiction of the board."

According to the dissenting judge and the advocates, whistle-blower protection for workers who are targets of retaliation after reporting waste, fraud and abuse in government operations would be affected by the ruling. The Office of Special Counsel, which handles whistle-blower cases, declined to comment Tuesday.

Noncritical sensitive posts are positions that federal agencies deem as having the potential to cause serious damage to national security. However, the designation covers a wide swath of job types across the federal workforce. The current case involves an accounting technician and a commissary management specialist. Neither of the two employees occupied a position that required access to classified information.

In its decision, the appeals court invoked a 1988 Supreme Court ruling that limits the board's role in cases involving national security concerns. However, that decision 24 years ago involved a man who lost his laborer's job at a naval facility when he was denied a security clearance, a requirement for access to classified information.

In the current case, the Merit Systems Protection Board ruled that it could conduct a review since accounting technician Rhonda Conyers, who was suspended indefinitely, and commissary management specialist Devon Northover, who was demoted, did not occupy positions that required access to classified information.

The Office of Personnel Management, which manages the federal workforce, took the case to the appeals court.

Writing for the majority, Judge Evan Wallach said eligibility to occupy a sensitive position is principally within "the purview of the executive branch, the merits of which are unreviewable by the board."

National security concerns make the positions of the board, Conyers and Northover "untenable," Wallach wrote. "It is naive to suppose that employees without direct access to already classified information cannot affect national security."

"The advent of electronic records management, computer analysis and cyber-warfare have made potential espionage targets containing means to access national security information vastly more susceptible to harm by people without security clearances," added Wallach, who was appointed by President Barack Obama last year. Joining Wallach's opinion was Judge Alan Lourie, an appointee of President George H.W. Bush.

In dissent, Judge Timothy Dyk said the ruling means that "hundreds of thousands of federal employees—designated as holding national security positions—do not have the right to appeal the merits of adverse actions to the board simply because the Department of Defense has decided that such appeals should not be allowed."

Dyk agreed with the board's argument, writing that the appeals court's position also would bar review by the board and the courts of "whistle-blower retaliation and a whole host of other constitutional and statutory violations" against federal employees.

Dyk added that with the exception of agencies such as the CIA, FBI and intelligence components of the Defense Department, Congress has said that employees may challenge disciplinary action before the Merit Systems Protection Board.

"It is not the business of the Department of Defense, the Office of Personnel Management or this court to second-guess the congressional decision to provide board review," wrote Dyk, an appointee of President Bill Clinton.

The purpose of the Civil Service Reform Act is to protect against arbitrary action, personal favoritism and partisan political coercion and the court ruling "effectively nullifies the statute," Dyk wrote.

Fox News reports on a decision available here:

The U.S. Court of Appeals in the District of Columbia said the rule affecting power plants "exceeds the agency's statutory authority" and sent the rule back to the EPA to revise. The decision was backed by two judges on a three-judge panel that heard the case. A third judge dissented.

The decision stops the clock on the EPA's Cross-State Air Pollution Rule, a set of regulations that limit emissions of nitrogen oxide and sulfur dioxide--a key component of acid rain. The rule was a revision of a Bush-era regulation that set state-by-state limits on the pollutants in an effort to keep them from blowing across state lines.

The same appeals court suspended the rule in late December, a few days before it was set to take effect early this year, bolstering the confidence of some states and power companies who argued that the rule is heavy-handed and illegal.

The indefinite suspension of the Cross-State Air Pollution Rule is a victory for utilities and other companies that own aging coal-fired power plants and have sought to weaken or postpone federal air pollution limits. But the reprieve may not be enough to protect those plants from fierce market forces and a separate set of EPA pollution rules that together could force many aging coal plants to shut down.

A U.S. natural gas production boom, coupled with slow demand growth, has driven down natural gas and power prices to historic lows, making coal expensive by comparison and giving gas-fired power plants a competitive edge. The EPA Cross-State Air Pollution Rule and a second set of regulations that limit emissions of mercury and other toxic substances from power-plants has increased pressure on coal plants, particularly older, less efficient plants that emit more pollution than newer plants.

American Electric Power Co. (AEP), which owns a large fleet of coal plants in Ohio and neighboring states, has installed pollution control equipment at several of its plants and the company plans to shut down about 6,000 megawatts of aging coal plants over the next few years. The driving force for those plans is the EPA's Mercury and Air Toxics Standards rule, finalized last year, which requires power plants to cut mercury and other emissions by 2015.

AEP spokeswoman Melissa McHenry said it was too early to say how Tuesday's court ruling would affect AEP's plans. The company is focused on complying with the mercury rule, which "has a significant impact on our fleet of coal-fueled power plants and is driving much of the capital investment that we need to make at our facilities," Ms. McHenry said.

Tuesday's court decision is good for owners of older coal plants in Texas, which the court found should have lower emissions limits, but it won't help companies that operate cleaner gas-fired and nuclear power plants, or coal plants with pollution-control equipment, said Julien Dumoulin-Smith, an analyst at UBS AG (UBS).

Energy Future Holdings of Texas is likely to benefit from the decision, but the ruling is negative for gas-fired power-plant operator Calpine Corp. (CPN), nuclear-power giant Exelon Corp. (EXC) and companies that already have cleaned up their coal fleets, such as FirstEnergy Corp. (FE), PPL Corp. (PPL), Public Service Enterprise Group Inc. (PEG) and NRG Energy Inc. (NRG), Mr. Dumoulin-Smith said.

It was unclear how the court ruling might help Edison Mission Energy, a unit of California-based Edison International (EIX), which was the first to sue the EPA to block the Cross-State Air Pollution Rule. Edison Mission owns about 45 power plants across the U.S., including six aging coal plants in Illinois that will need to install costly pollution-control equipment or be shut down to comply with both state pollution limits and the federal mercury rule.

Todd Zywicki, professor at George Mason University School of Law, writes for Forbes:

After seven years of legal wrangling, 50,000 pages of deposition testimony, and millions of dollars in fees for over 200 attorneys from over 90 law firms, the massive class action lawsuit brought by retailers challenging the process by which Visa and MasterCard set interchange fees for credit cards was finally settled this summer. Under the settlement, Visa and MasterCard will pay $6.6 billion in damages to class members and merchants extracted concessions on many of the terms of the contracts between the networks and merchants that they found objectionable.  Merchants will now be permitted to surcharge consumers for transactions made with credit cards, will be permitted to band together to negotiate rates with the card networks, and also receive a temporary decrease in interchange fee rates worth another one billion dollars.  In exchange, Visa and MasterCard gain peace: the settlement prevents future legal challenges and puts the issues to rest.

But the biggest winners from the settlement are ordinary consumers.  Although some of the settlement’s terms are potentially prone to abuse by retailers, most notably their new right to impose surcharges on those who use credit cards, it does affirm the core principle that interchange fees should be set by free markets and consumer choice rather than by judges or politicians, thereby preserving the engine behind one of the marvels of the modern age: the evolution of a 24-hour globally-connected system of instantaneous, secure, and ubiquitous payments system.

Moreover, by the merchants signing onto the agreement consumers can hope that the resolution of the legal case will also foreclose future political meddling.  The disastrous effects of the Durbin Amendment to the Dodd-Frank Financial Reform legislation, which imposed price controls on debit card interchange fees, illustrates the damage that results from interest-group driven interventions into an economic ecosystem as complex as the payment cards industry.  By slashing debit card interchange fees nearly in half the Durbin Amendment has transferred an estimated $8 billion in revenues from banks to retailers.  To recoup those losses banks have reimposed fees on checking accounts that had disappeared over the past decade as debit cards grew in popularity—although the percentage of bank accounts eligible for free checking rose from under 10% in 2001 to 76% 2008, since then that figure has plunged to 45% and is predicted to fall still further this year  In turn, these new fees on bank accounts have driven many low-income and younger consumers out of the mainstream banking system and into the arms of check cashers and payday lenders.

Yet, astonishingly, Senator Durbin is doubling-down on his blunder, blasting the class action settlement as a “stunning giveaway” to Visa and MasterCard—and taking the extraordinary step of intervening in a private legal action to lobby retailers to reject the settlement.  In addition, Dan Swanson, Senator Durbin’s senior Judiciary Committee counsel, has participated in conference calls with retailer groups where he reportedly has tried to persuade them to reject the proposed settlement.

Senator Durbin’s intervention is unlikely to succeed—under its terms, the settlement agreement is binding unless more than 25% of it members opt-out, which is unlikely given the generous terms of the agreement to retailers.  Nevertheless, several big box store chains (including Target and Wal-Mart) have opposed the settlement, as has the National Association of Convenience Stores (which includes 49 of the 50 largest convenience store chains in the country) and the National Retail Foundation (which includes Best Buy, Macy’s, Safeway, and Walgreen, among others).

What explains the opposition of this group?  Most likely, simple self-interest.  Earlier this month a group of large merchants announced that they were banding together to develop the Merchant Customer Exchange mobile-payment network to compete with emerging smartphone payment technologies and traditional credit card issuers.  The group which includes—yep, you guessed it—Wal-Mart, Target, and 7-Eleven among its members, aims to leverage its existing retail relationships with customers to expand into the payments sphere.  By blowing up the litigation settlement, the big box retailers can perpetuate litigation uncertainty and preserve the political option of extending the Durbin Amendment’s punitive price controls to credit cards, giving them a regulatory edge as they roll out their new payment network.

Moreover, the big box retailers probably have the most to lose if the litigation settlement deflates future political efforts to impose punitive regulations on credit card interchange fees.  Although small businesses were promised that they would share in the gains from the Durbin Amendment, in fact many smaller retailers have actually seen increases in the fees they pay while the benefits have been reaped disproportionately by the same players leading the opposition to the settlement. Meanwhile there is no evidence that the big box retailers have passed on any of their windfall to customers.  Moreover, it is smaller retailers that benefit the most from a well-functioning and high-quality credit card system, which enables them to compete on an even footing with their larger rivals by enabling shoppers to make credit purchases without having to bear the risk and cost of running its own proprietary credit operation.

Senator Durbin, of course, has his own interests in keeping alive the threat of legislative intervention, which likely would be thwarted if the settlement is accepted. The retailers have spent millions of dollars lobbying for new regulations on payment cards, much of it flowing to Senator Durbin and his allies in Congress (of course, the financial industry has spent millions in response to try to fend off price controls).  But this is only the tip of the iceberg Senator Durbin’s cozy relationship with the mega-retailers: it was reported that on the eve of the vote on whether to attach the Durbin Amendment to Dodd-Frank, Wal-Mart announced that it would spend $20 million donating to charities and opening new stores in Durbin’s home state of Illinois.

Consumers and businesses, especially small businesses, benefit when competition and consumer choice decides winners and losers in the marketplace, not politicians.  It is time to put the endless interchange litigation and ancillary political efforts to rest.

In 2010, Professor Zywicki and Jeffrey Frank published two FedSoc white papers on the regulation of credit card fees.  You can read them here and here.