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2018 National Lawyers Convention

Good Government through Agency Accountability and Regulatory Transparency

November 15 — 17, 2018

The 2018 National Lawyers Convention was held on Thursday, November 15 through Saturday, November 17 at the Mayflower Hotel in Washington, D.C. The theme for the convention was: Good Government through Agency Accountability and Regulatory Transparency. Video is now available on the agenda tabs.

LodgingFeesCLE


2018 Antonin Scalia Memorial Dinner
SOLD OUT

Union Station
50 Massachusetts Avenue NE
Washington, DC 20002
Thursday, November 15, 2018
Reception - 6:00 p.m.
Dinner - 7:00 p.m.
(ticketed event) BLACK TIE OPTIONAL


Eighteenth Annual Barbara K. Olson Memorial Lecture

Featuring:


Hon. Jeffrey S. Sutton

United States Court of Appeals,
Sixth Circuit

The Mayflower Hotel
1127 Connecticut Avenue NW
Friday, November 16, 2018
5:00 p.m.
(ticketed event)


Eleventh Annual Rosenkranz Debate

RESOLVED: District courts do not have the authority to enter universal injunctions.

Featuring:

John HarrisonProf. John Harrison
James Madison Distinguished
Professor of Law,
University of Virgina
School of Law
 

          and

 

 

 

 

 

Neal KatyalMr. Neal Katyal
Partner,
Hogan Lovells US LLP


 

The Mayflower Hotel
1127 Connecticut Avenue NW
Saturday, November 17, 2018
12:30 p.m.


Showcase Sessions Discussing the Convention Theme:
"Good Government through Agency Accountability and Regulatory Transparency"

  • What is Regulation For?
  • Balancing Insulation and Accountability of Agency Decisions
  • The States & Administrative Law
  • Does Agency Regulatory Power Extend Beyond its Formal Power, and Should It?

Practice Group Breakout Sessions

  • Independent Agencies: How Independent is Too Independent?
  • Say What You Will?: Government Compelled Speech
  • Rulemaking by Adjudication: Who Am I to Judge?
  • Discrimination Against Minorities
  • A New Approach to Antitrust Law: Transparency
  • The Pros and Cons of Plea Bargaining
  • Climate Change Nuisance Suits
  • Revisiting the Community Reinvestment Act
  • Artificial Intelligence and Big Data Innovation: Navigating the Technology World of the Near Future
  • National Security Law & Doing Business Abroad
  • Joint Employment: The Unintended and Unpredictable 'Employment' Relationship
  • The Future of the Past: Stare Decisis
  • Technology, Social Media and Professional Ethics
  • The Current Landscape of Telecommunications Law
  • Masterpiece Cakeshop and its Implications

Up to 20 hours of Continuing Legal Education (CLE) credits available. Direct all CLE inquiries to the Federalist Society's national office - (202) 822-8138 or email cle@fedsoc.org.


Lodging

Reserve early! Washington, DC hotels are becoming booked very quickly for the fall convention season. To reserve overnight accommodations for the Convention, please contact The Mayflower directly:

The Mayflower Hotel
1127 Connecticut Avenue, NW
Washington, DC 20036

Reservations Toll Free: 877-212-5752
Reservations Local Phone: 202-347-3000

Reservation Link: https://book.passkey.com/event/49723797/owner/1261/home

Cut off Date: October 22, unless rooms sell out sooner.

Inquire about the special rate of $270 per night offered to Federalist Society Convention registrants. Specify "Federalist Society" when contacting the Mayflower.


Convention Fees

Convention Package* 
Private Sector
Non-Member
$625
Private Sector
Active Member
$500
Student/Non-Profit/Government
Non-Member
$400
Student/Non-Profit/Government
Active Member                                                
$300


*The Convention Package includes all three days of sessions, CLE, and lunches as well as the Barbara K. Olson Memorial Lecture & Reception.  Please note that the Convention Package does not include the Antonin Scalia Memorial Dinner.

 Individual Day**
Non-Member$250 per day
Active Member$200 per day
Student Non-Member$60 per day
Student Active Member                                                $50 per day


**Individual day purchase includes that day’s sessions, CLE and lunch.  It does not include social events.

Social Events 
Annual Dinner - SOLD OUT
Non-Member
                  $250
Annual Dinner - SOLD OUT
Active Member
$200
Barbara K. Olson Memorial Lecture & Reception
Non-Member
$150
Barbara K. Olson Memorial Lecture & Reception         
Active Member
$100

CANCELLATION FEE OF $100 AFTER MONDAY, NOVEMBER 5.
NO REFUNDS WILL BE GIVEN AFTER MONDAY, NOVEMBER 12.


Media inquiries should go to Peter Robbio at probbio@crcpublicrelations.com.

 

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9:00 a.m. - 9:45 a.m.
Opening Address by Mike Lee

2018 National Lawyers Convention

Topics: Administrative Law & Regulation • Federalism • Federalist Society • Regulatory Transparency Project
The Mayflower Hotel - Grand Ballroom
1127 Connecticut Avenue, NW
Washington, DC 20036

Event Video

Listen & Download

Description

On November 15, 2018, Sen. Mike Lee (UT) gave the opening address at the Federalist Society's 2018 National Lawyers Convention. Lee discussed the sharp divisions in modern politics and the role of conflict in our constitutional republic.

  • Hon. Mike S. Lee, United States Senate, Utah
  • Introduction: Mr. Leonard A. Leo, Executive Vice President, The Federalist Society

Speakers

Event Transcript

2018 National Lawyers Convention

Opening Address

November 15, 2018 at 9:00am

 
 

 

 

 

Featuring

Hon. Mike S. Lee - United States Senate, Utah

Moderator: Leonard Leo - Executive Vice President, Federalist Society

 
 

 

 

 

 

Leonard Leo:  Good morning, ladies and gentlemen. If you could all please take your seats. If we could close those doors in the back, please. Good morning, ladies and gentlemen. My name is Leonard Leo, and on behalf of all of us at The Federalist Society it is my privilege to welcome all of you to this year’s annual convention. It is inspiring and exciting to see so many of you who have travelled so far to be here today, and whether you are from outside our nation’s capital or not, it is a real testament to the strength of our movement for limited constitutional government that all of you would take time away from work and family to spend these next several days together.

 

You know, it’s hard to believe how The Federalist Society has flourished over the years. I remember not all that long ago when we used to space out the chairs in this room to make the crowd seem bigger.

 

[Laughter]

 

Now, we squeeze seats together as tightly as possible to accommodate an ever-growing community of citizen lawyers committed to the rule of law. The audience here today in terms of its size, and distinction, and geographic reach is representative of a flourishing movement of people that places a premium on the free exchange of ideas and on the structural limits on government power contained in the Constitution that are ultimately most important for the preservation of human dignity and freedom.

 

The overall theme for these next several days is "Good Government through Agency Accountability and Transparency." The subject is right now at the intersection of the most important constitutional flash points we face today. Debate about the administrative state played an unprecedented part in the last two Supreme Court confirmations, and President Trump has stated that judicial selection is inextricably intertwined with this issue. We’ve witnessed over the past few years a growing number of lawsuits initiated by an historic number of states that challenge administrative action as a means of drawing clearer federalism boundaries. And at the heart of any current debate about repairing the legislative process is a serious inquiry into the proper limits of congressional delegation of power to administrative agencies. These and other issues will feature prominently in the programs you attend here.

 

I know of no better person to launch this year’s convention than U.S. Senator Mike Lee. Almost all of you, if not all of you, know him. He has been a mainstay at these gatherings. He has served in Federalist Society leadership, and as a senator he has been an irrepressible advocate for insuring respect for a structural constitution. He is a man of tremendous principle and courage. He is a man who takes seriously his oath of office to preserve and defend our constitution. He is sincere, candid, generous, and earnest. He is the kind of public servant our Founding Fathers envisioned. Please join me in welcoming Senator Mike Lee.

 

Hon. Mike Lee:  Thanks so much, Leonard. Thanks to all of you for joining us this morning. It’s a pleasure and an honor to be at The Federalist Society in any form, but I especially like this annual gathering. I wanted to start today by telling you a story that I heard just a couple of days ago by a friend and neighbor of mine back in Utah. He told me about a nephew of his who’s in medical school. His nephew’s married. His nephew and his nephew’s wife don’t have any children, but they were the loving parents of a dog, a large dog who tragically passed away recently. Well, his nephew was at medical school the day the dog passed away, so his nephew’s wife started to try to figure out what to do about the dog who had just tragically died.

 

They lived in a small apartment in an urban area. They didn’t have a yard, so they didn’t know where to bury the dog. They couldn’t just take it outside and bury it anywhere since they didn’t have their own yard, so she called the vet and said, “What do I do?” The vet suggested, at one point, that she just bring the dog down to the vet’s office, and the vet would arrange for disposal of the dog’s body. Fair enough. Then she remembered, “Well, we don’t have a car, so I’m gonna have to take the subway to get to the vet, but this is a large dog. I don’t really want to walk onto a subway train holding a large dead dog. That could be kind of awkward.”

 

So she did what any rational person would do in that circumstance. She got out a very large suitcase and put the large dead dog inside the very large suitcase. And she lugged the large, heavy suitcase containing the large, heavy, dead dog onto the subway train. A chivalrous gentleman seeing her carrying this very heavy suitcase, obviously not knowing what was inside, said, “May I help you with that, ma’am?” And she said, “Yes, please. Thank you.” He lifted it, and upon hefting this object asked, “What on Earth is in there? That’s heavy.” She was too embarrassed to admit what it actually contained, and so she said, “Oh, it contains computer equipment.”

 

So he went ahead and put it up on a shelf. When she got to her intended stop on the subway, she got out to lift this heavy suitcase off of a shelf, and lo and behold the guy, it turns out, was still there. And he very chivalrously, again, got up and lifted the suitcase down. She thought, “This man is so helpful. I’m glad he’s still here.” But then something unexpected happened. The guy took off with the suitcase. I can’t exactly count how many ways this is analogous to today’s political environment, but there’s definitely a close corollary to what the Democrats tried to do to Brett Kavanaugh.

 

      Now, Congress has just returned to Washington after a legislative recess of a few weeks during the election, at which time I’m sure Washington breathed a lot easier during that recess. But then we had the split results of this election that have caused a lot of people to panic. Everyone in the media, most people on Capitol Hill, and people within the Administration are wondering all kinds of questions like, "What’s going to happen with the new Democratic House of Representatives?" Whether it be gridlock, there is all this handwringing going on. I’m glad that at least one thing stays consistent, and that is that The Federalist Society continues to meet in Washington in November, shortly before Thanksgiving. At least we’re still here.

 

      Now, I obviously had some disappointments on election night, a lot of them, in fact. Some good friends came up short in their races, and losing the Republican majority in the House of Representatives obviously hurts. It hurts a lot, but I’m not going to lie. I’m really, really going to like being able to call Mitt Romney the 'junior Senator from Utah.'

 

[Laughter]

 

That takes some of the sting out of it actually, but no one enjoys that more than Mitt Romney himself, who, every time he speaks, refers to himself as the 'junior Senator from Utah.' He tells me, “At my age I really like any term that comes with the word junior in it.”

 

      It is those elections that we have just experienced and that are causing so much uncertainty in this town right now, and the ambiguous message that was sent through those elections that I’d like to talk about and think about a little bit today in my conversation with you. To constitutional conservatives, the election results and the split Congress that those election results will produce have to be seen as an opportunity to learn some lessons that both parties, especially my own party, have been ignoring for far too long. Obviously, I was strongly rooting for Republicans to win across the board Tuesday night, but from my perspective divided government need not be a problem in and of itself.

 

The House and Senate are going to be divided because the country itself is divided. In that sense the election results again affirmed some of the genius of the Founding Fathers’ framework. Now, in the media division is often lamented and feared as if it were some sort of disease that needs curing, ideally by conservatives just giving up and going along with whatever progressives want. A lot of them, and a lot of people in Washington, tend to view the job of the Republican is to just split the difference from our position and the goal, and meet them half the distance to the goal. In other words, allowing progressives to continue to set the agenda and move us in their direction. All too often that happens.

 

Disagreement, especially in the United States is not a disease. It’s not something that we need to avoid just for the sake of avoiding it. It's a sign, actually, of health. Conflict, even an especially deep and bitter conflict, is innate really to all of human relationships. And it’s certainly an innate part of any society, and of any system of government, in which the system calls itself a republic. The Founding Fathers understood this. They had to or they never would have gotten out of Philadelphia in one piece, much less with a document that would foster the development of the greatest civilization the world has ever known. From the day it was first conceived, the United States was among the most ideologically diverse nations in the world. Our Constitution was written specifically for a people divided on political, regional, cultural, and religious questions. It serves as a road map for resolving disputes peaceably through mechanisms designed to best facilitate the happiness, and freedom, and prosperity of its people on all questions, really.

 

When people ask today how Americans can overcome differences and come together as one nation, the answer remains today, in many, many respects, the same as it was back in 1787. You see, the Constitution’s system of separated powers and of federalism not only made the United States vibrant, and flexible, and resilient, but what the scholar Nassim Taleb calls anti-fragile. Ours is a system made stronger by tension and by division. Thanks to our constitution, diversity really is a strength because of the common gratitude Americans can take from the freedom to govern their unique communities according to their own particular values. Under the alchemy of the constitution, America’s wild differences are transformed into a source of national unity.

 

Now, each year for the last few years I’ve tried to throw in a story about my daughter, Eliza. My daughter, Eliza, is now 17 years old. She’s a senior at Lone Peak High School in Highland, Utah, near our home in Alpine, Utah. And she often says things that are sometimes unintentionally profound, sometimes just profound in and of themselves. Eliza recently had her wisdom teeth removed. As she was coming out of anesthesia, while heavily sedated, the oral surgeon brought my wife and me into the operating room to help her recover. And she was coming out of the anesthesia. She sat there; it turns out, she would be a happy drunk, a nice drunk, a loving drunk. “I love you, man.” She was sitting there saying, “Mom and Dad, I love you. You’re just the best parents in the world. You’re so nice.” And then she paused, and she looked over at me, and she said, “And I love federalism, and I love separation of powers." The oral surgeon, knowing me as he does, looked over at me and he said, “That must be your proudest moment, too,” and indeed it was.

 

Today, though, it doesn’t always seem like division is in fact our greatest source of strength even though it can be, even though it should be, even though it in fact is under our constitutional system. Today, our disagreements sometimes seem to be pulling us apart and not together. But it doesn’t have to be that way. Take for example, the character assassination of Brett Kavanaugh, or, excuse me, Justice Brett Kavanaugh.

 

[Applause]

 

Six weeks after he was confirmed, I still can’t completely get my head around what happened. My Democratic colleagues on the Senate Judiciary Committee deliberately withheld material evidence from committee and FBI investigators for weeks so as to maximize the cruelty visited upon Justice Kavanaugh, visited upon Justice Kavanaugh’s family, visited upon Dr. Christine Blasey Ford. They used a nationally televised hearing to ask Justice Kavanaugh about such weighty matters as flatulence and drinking games. They attempted to launder vile accusations raised by Michael Avenatti, and they uncritically repeated other unsubstantiated, uncorroborated, specious allegations. It justified their stunning, bold, and deliberately cruel abandonment of the presumption of innocence by saying blithely that the confirmation process was merely a job interview, as if that somehow disposed of any kind of a need for fairness, or kindness, or decency.

 

The truth is that Democrats were acting irresponsibly even before Dr. Ford’s letter was leaked to the press. My friend, the junior senator from New Jersey, declared that Justice Kavanaugh’s supporters were quote, unquote "complicit in evil" and urged protestors to get up in the face of Congress people. Now, we’re told that this is somehow payback for Judge Merrick Garland’s nomination and what happened there. "At least Brett Kavanaugh had a hearing," the left would tell us, as if that would somehow justify a deliberate effort to destroy a man’s life. In any event, that excuse can in no way, shape, or form justify or explain the smears against the other highly qualified nominees, those possessing exemplary character that we’ve seen over the last few decades.

 

So while the Democrats’ treatment of Judge Kavanaugh is perhaps the worst, and the most recent, the most current manifestation of this phenomenon, while it was shocking and disgusting, let’s be honest, it was neither completely unprecedented, nor entirely surprising, given what we’ve seen from them in the past few decades. In any event, we need to find a way to prevent things like this from happening again, ever. I applaud Chairman Grassley for investigating every lead and making criminal referrals where appropriate. It’s one very important way to deter people from making false accusations like these and engaging in this awful pattern of conduct.

 

But there’s an even deeper problem, I think. From the perspective of raging extremists who control the left’s agenda, what happened earlier this year, as evil as it was, was entirely rational, as they see it. For decades, we have pulled powers constitutionally reserved for the states and for the people into the federal government. Then once they’re here, we have transferred those from the people’s elected law makers over to unaccountable, unelected bureaucrats, over to the administrative state. Today more and more decisions are made in Washington rather than in city halls and state capitols. And more and more of Washington’s decisions are made by unelected judges and unaccountable bureaucrats, not senators and representatives, as they are supposed to be.

 

This anti-constitutional project has hacked away at the bonds of trust formed long ago between the American people and their government. By seizing power from more politically homogenous local governments and communities, Washington denies the American people the ability to govern by consensus. A government designed to be by the people, of the people, and for the people, all people is too often instead run for fifty-one percent of the United States, and against the other forty-nine percent.

 

This approach artificially raised the stakes of federal policymaking, and, therefore, raises the temperature of our national political discourse to an unacceptable degree. As long as Supreme Court justices anoint themselves as philosopher kings issuing moral decrees, to use Nancy Pelosi’s words, “Almost as if God has spoken”—how is that not blasphemy? But anyway—the total political war we saw this fall is going to continue as long as that continues to be our mindset because that’s what happens when you raise the political stakes and the political temperature to the degree that we have in recent decades by concentrating this much power as we have. As long as the federal government blithely asserts the power to regulate, to penalize, to tax, or to subsidize any and all behavior, our politics will incite the very impulses that constitutions were written specifically to overcome.

 

When we saw that leftist mob just a few blocks from here, driving Ted Cruz and his wife from a restaurant while they were just out on a nice date together one evening, or violent criminals terrorizing Tucker Carlson’s poor wife at her own home, this is just the beginning. Increasingly, the left treats politics like a religion and conservatives not as loyal opponents, but as heretics and infidels. On college campuses and other institutions where the left holds unchallenged power, the right is not questioned, but anathematized. Conservative arguments are denounced as hate speech, as illegitimate, as undeserving somehow of first amendment protection.

 

Many students today are being taught the foolish theory that some speech is violence, and by extension, the evil corollary, that some violence is speech. The popularity on the right of a more combative style is only further evidence that Americans have simply accepted the unhappy consequences of Washington’s bipartisan consensus that all politics is now necessarily, unavoidably national.

 

As we’ve seen in recent elections, very much including last week’s midterms, our growing ideological divide mirrors a hardening geographic divide. Look at any electoral map today and you’ll see the same thing. America is split in two. Democrats are increasingly clustering in densely populated cities, and in and near suburbs, mostly on the coasts. Republicans are winning in exurban and rural America.

 

After last week’s elections, for the first time in the century only one state in the union will have a divided legislature. Red and blue America see the country and see the world very, very differently. So differently, in fact, that our rhetoric today seems often to be less about Option A versus Option B, or even about correct versus incorrect, or ideal versus sub-optimal, and more in the realm of good versus evil. Such stridency makes moral consensus rare, and makes federal compromise very, very difficult. Taken together, these three trends –bitter philosophical disagreement, stark geographic division, and the bi-partisan embrace of winner-take-all, necessarily national politics – compromise has become a sort of constitutional crisis. In other words, these things taken together make up a constitutional dirty bomb that threatens the foundations of our republic.

 

Terms like bitter clingers or deplorables, the Kavanaugh nomination, the religious inquisition of Amy Coney Barrett and of Russ Vought, even worse Charlottesville and the congressional baseball practice, even the institutions set up to shield Americans from this sort of mob behavior that’s always threatened the stability of republics are coming today increasingly under attack. The Electoral College, the legislative filibuster, even the Senate itself, freedom of speech, freedom of religion, the presumption of innocence, the right to bear arms, in today’s all-or-nothing national politics, especially on the left—but sometimes also on the right—these bulwarks of liberty are too often too casually dismissed as obstacles of progress.

 

Meanwhile, proponents of these principles are not just dismissed, but they’re often downright vilified and cast out as some sort of demons. This toxicity of our national politics and revolt against our institutions is itself the fruit, the inevitable, foreseeable fruit of centralized power. This is what centralized power does, and we, therefore, shouldn’t be surprised when this comes about as a result of many decades of power centralization in Washington, D.C.

 

Centralization, you see, has not made us stronger. It has not made us happier. It has not made our economy stronger, or more dynamic, or more likely to promote economic mobility among the poor and middle class, which, by the way, has always been one of the distinguishing features of our economy. Sure, there are lots of countries where some people are prosperous. America has been relatively unique in that this is a land where you can be born into poverty and have the reasonable hope and expectation that if you work hard and play by the rules, one day you’ll be able to retire comfortably. Centralization tends to produce the exact opposite of these very things that we have come to identify so closely with who we are as a nation.

 

Meanwhile, and for many of the same reasons, it’s making our politics weak, and coarse, and raw, and brittle. Where do we think this is going to take us next if and when the opportunity comes to replace one of the Supreme Court’s liberals? In 2020, as Democrats jockey to see which one can be their successful Trump candidate, where is it going to take us? Bear in mind, we’re at this fever pitch, emotionally, in our rhetoric and at a time of relative peace and economic prosperity within our country, thanks in large measure to President Trump’s economic reforms and a sense of optimism that those reforms have created within our economy. Our economy’s at full employment, and it’s growing fast enough to distract us, at least temporarily, from our $21 trillion national debt and our $800 billion annual deficit. Perhaps it shouldn’t be enough, but for the time being it is.

 

But my big concern is when the next bubble bursts, when the next recession hits, when the multi-trillion debts accrued by state and local pension funds come due, what happens when next we face a genuine international crisis? What happens when treasury yield rates return to their historic average, and we see our national debt service payments go from where they are today, which is about $300 billion a year, which is not that much higher than they were 20 years ago when our nation debt was one seventh of its current size, to where they’ll go within a couple years after treasury yield rates return to their historical average, which will be around a trillion dollars a year, forcing us to find another roughly $700 billion per year in federal revenue, more than our entire budget for the Department of Defense, within a surprisingly short period of time. What happens then?

 

You get the idea. According to any reasonable measuring stick, the dysfunctional status quo is unsustainable, even in good times like those we’re experiencing right now. It’s driving our government toward insolvency and our politics toward violence. Realistically, Americans have two options. Either we’re going to once again embrace the Constitution’s vision of a diverse, tolerant, pluralistic union of states and of communities each governed according to the values and priorities of its own citizens, or this fundamentally un-American contest, one recklessly designed to determine which half of our nation will have the power, at least temporarily, to unilaterally impose its will and its values on the other half, will escalate violently out of control.

 

Ultimately, this will come down to a binary choice, a simple binary choice. Federalism or violence. Many on the left don’t seem too concerned about any of this. They believe demographic and historic trends, coupled with what many see as the inherent rightness of their leftist cause make their ultimate victory over red America inevitable and morally justifiable. They believe every lever of federal power will one day soon, and permanently, be in their hands. They are content with non-stop political total war because they’re sure they’re going to win it, blind to the fact that such a victory would come at the expense of the American experiment itself, unless or until this changes, unless or until we change this. It, therefore, falls to conservatives to chart a new course. Not simply to turn away from disaster, but to turn America toward something better, toward a genuinely happy and sustainable future, one of tolerance and diversity of viewpoint.

 

Beginning this project is going to be my focus for the upcoming Congress. Pundits expect the next two years to be legislatively thin, you might say. The Democratic House is expected to focus on investigating the Trump Administration, while the Senate will be spending a lot of its time confirming the President’s nominees.

 

Now, confirming judges and confirming executive branch nominees is critically important work, and I look forward to continuing to do that. It’s especially important if we hope to restore localism and subsidiarity to our republic, but it by itself is not enough and never will be. Conservatives also need a vision of America that can itself transcend total war, and an agenda to help us get there; a new sustainable politics of subsidiarity and localism in the service of diversity and tolerance. Federalism is the answer. It’s not just the best answer. It’s not just a convenient answer. It is the only answer.

 

Setting aside for a moment that it happens to be required by the Constitution, federalism offers several unique advantages for us today, specifically in our time, more now than ever before. First, if fully embraced, it would allow each state to govern itself according to its own values. Federal policies that have usurped local autonomy and imposed one controversial set of ideas on the entire country should be rethought and reformed and the corresponding power returned back to the states or to the people. We have to devolve the federal programs necessary to once again let Vermont be Vermont, and let Utah be Utah.

 

Second, we must allow the states to be more than laboratories of Republican democracy. Too often when Washington does speak of federalism, it does so not only with lip service, but it does so in terms of temporary experimentation, as if the only goal were to figure out which state’s approach might be the right one, the magical one that is later to be scaled-up and then forced on the entire country. This is the absolute wrong approach. It is the opposite of federalism, just as kitsch is the opposite of art and not merely a cheap substitute therefore.

 

Instead, we should allow each unique community to develop unique solutions according to unique local preferences and then leave it at that. In every instance, some states are going to do that better than others. The beauty of governing locally is that if you really don’t like one community, you don’t necessarily have to run for office, or sue anyone, or protest, or write editorials. You can just move. Move to another place where they adopt policies more to your liking. This is how it was always designed to work.

 

Third, we should not think of federalism as merely a devolution of power, but the re-personalization of American politics. How much of the toxicity of our national debate is due to its forced impersonal anonymity? Few people treat their neighbors or their family members the way activists tend to treat each other on social media. Politics, you see, is an innately, inherently human activity. It's meant to take place eyeball-to-eyeball, not iPhone-to-iPhone. Glad you liked that. I was really proud of that one.

 

[Laughter]

 

Getting decisions out of Washington will not just make Americans happier by giving the power to run their own communities back to them, it will also make them nicer by forcing them to engage in politics as human beings again instead of digital 'Skolls' and online virtue signalers.

 

Now, I want to be very clear about something. We should harbor no illusions about state and local governments always being virtuous and pure, or always necessarily even being more efficient or less wasteful than the federal government. They’re often not. But sovereignty and civility are more important than efficiency, and you can turn a state around a lot faster than you can a national government. You can turn a city government around a lot faster than you can turn around a state government.

 

States and localities have two other advantages over Washington. First, they’re close to their voters and policymakers are more accountable, more easily pressure-able, and fire-able than they are here in this town. And second, of course, most states are required to balance their budgets, either by operation of a state constitutional amendment or otherwise. In any event, there is not state in this union, not a single one, that has the option of perpetual deficit spending on the scale seen here in Washington, D.C.

 

There’s nothing wrong with a state’s voters choosing to have a big government, or a small government for that matter, especially because they tend and their elected representatives and governors tend to bear the cost for their choices, and they don’t have the option of transferring those costs to another state, or in some cases, even worse, to another generation. The low hanging fruit is obvious: the Interstate Highway System, K-12 public education, the federal higher accreditation cartel, early childhood education, the Department of Commerce, the huge glut of federally owned land and real estate, housing policy, workforce regulation.

 

These and the knotty, interconnected problems of welfare dependents and healthcare would all be more easily untied if 50 diverse and motivated states were working on them; 50 diverse states where, by the way, populations disperse differently, healthcare is provided differently in each locality, and each state has more of an ability to decide what solutions will most benefit their respective populations. In Washington because of America’s deep red-blue divide, these are very controversial issues. They are less so within our increasing dark red and dark blue states.

 

When there is no national consensus or federal imperative, there should not be federal law, especially if there is a greater degree of consensus within each state. Just because New York, Massachusetts, and California may agree on something doesn’t mean the rest of the country has to go along, has to be forced to go along or suffer grave penalties under federal law. Insisting otherwise is not constitutional republicanism. It is in fact, cultural imperialism.

 

By clearing Washington’s decks of these smaller issues, we can finally begin to regain the trust necessary to deal with the bigger ones, the ones that we can’t return to the states and localities, the ones that are distinctively made part of our federal panoply of responsibilities, things like national security, like immigration, trade, localization, and also things that have become federal, and therefore have to be addressed federally, like senior entitlements and like the debt.

 

The good news is that thanks to President Donald Trump, and the Republican Senate majority, we have a Supreme Court that should be ready to do its part on this project. Today the Court stands ready to allow, and, I would add, indeed to require the elected branches of the federal government to once again do their jobs instead of having the Supreme Court arrogate to itself the authority to permanently settle important national issues. And for that, of course, no one deserves more credit, or more thanks, than the men and women of The Federalist Society. Thank you.

 

Leonard Leo: We have time for two or three questions. They should be crisp. They should end with a question mark. There are mics on either side. Senator Lee enjoys a legislative filibuster, but not a convention filibuster.

 

Questioner 1:  Good morning. So what concerns me about everything that you’re saying is one thing that is missing, especially in this voting, is what about accountability for when we see all this type of voter fraud that we’re seeing in Broward County, etc., etc., all the investigations we’ve had. How are we going to help this if we are not seeing accountability?

 

Hon. Mike Lee:  I want to make sure I understand your question. Not seeing accountability, you mean from state and local election officials?

 

Questioner 1:  Federal. Anything that goes on, the people that go after Kavanaugh, Benghazi, you name it, the voter fraud in Broward County right now. I mean, what the public sees time, after time, after time, the last six years specifically, I think, is that all this goes down, no one’s held accountable – Hillary Clinton, servers, you name it.

 

Hon. Mike Lee:  Yep. Alright. Look, it’s a great question, and it’s a question that inheres in the republican form of government itself. The very best thing we can do to promote greater accountability is to protect the people from the risks inherent in the excessive accumulation of power in the hands of a few. So the fact that -- a lot of the accountability issues that you’ve mentioned—not all of them, but a lot of them—are, in fact, federal issues. And the larger the government in question, the more the layers of insulation you will necessarily see between the government and people to whom it’s supposed to be accountable.

 

Leonard Leo:  Over here. Do you have a question?

 

Questioner 2:  What’s your reaction to people who are starting to use city governments for social engineering and that kind of tinkering and then state governments usually trying to preempt it and to stop that? Because I think I hear on the left also, they claim to be in favor of local governance, and that’s kind of what they’re actually trying to do.

 

Hon. Mike Lee:  I’m not sure I understand your question. So you’re asking, "What do I think about people who try to use state governments for the purpose of social engineering?"

 

Questioner 2:  City governments, usually more left-wing governments, and state government trying to use that power to stop that over-regulation.

 

Hon. Mike Lee:  Okay. I would a whole lot rather -- look. The progressive worldview is such that progressives do, and probably always will, view government as a vehicle through which to achieve social engineering. That’s yet another reason for localism, yet another reason why we need to turn back to it. Look, most of the people in the state of Vermont would, I’m told, prefer a single-payer, government-run, government-funded healthcare system, one that would not only make going to the doctor a government experience, but one that would also inevitably involve all kinds of social engineering by promoting, rewarding some approaches to life and punishing and discouraging others.

 

If the people of Vermont want to do that, let them knock themselves out doing it. That should be their prerogative under our Constitution. It’s probably what they would do if we didn’t already have such a huge federal footprint in the area of healthcare, for example. Vermont would probably turn to that very quickly. It’s my view that they should be able to do that. It’s my view that there’s nothing in the Constitution that prevents a state from choosing to use the machinery of the state to engage in social engineering. It’s also one of the reasons I’m likely never to live in Vermont.

 

[Laughter].

 

Leonard Leo:  Senator Lee, thank you very much for joining us again this year. We’re truly grateful for your leadership. Thank you very much. If everyone could please stay seated, we’re going to go directly to our next panel, and I’d like to welcome the panelists up at this point.

 

 

 

 

 

 

 

 

 

 

 

9:45 a.m. - 11:30 a.m.
Showcase Panel I: What is Regulation For?

2018 National Lawyers Convention

Topics: Administrative Law & Regulation • Regulatory Transparency Project
The Mayflower Hotel - Grand Ballroom
1127 Connecticut Avenue, NW
Washington, DC 20036

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The administrative state, with roots over a century old, was founded on the premise that Congress lacked the expertise to deal with the many complex issues facing government in a fast-changing country, and that it was unhelpfully mired in and influenced by politics, leading to bad outcomes when it did act. The alternative was to establish administrative agencies, each with assigned areas of responsibility, housing learned experts qualified to make policy decisions, deliberately insulated from political accountability. The Administrative Procedure Act (APA), passed in 1946, both governs the manner in which agencies may adopt and enforce regulations, and provides for judicial review of agency action. Supporters of the administrative state point to the successes of agency actions leading to a cleaner environment, more sensible use of finite resources, healthier foods, safety on the roads and rails, and many other areas of improved quality of life. But even looking past structural separation of powers issues written into the bones of the administrative state, critics assert that in the ensuing 70 years the APA has become an ineffective limitation an agency power, as agencies bypassed its requirements by issuing sub-regulatory guidance, letters, FAQs, and more. Compounding the problem, the critics continue, the courts have adopted a policy of deference to agency actions that grant agencies even more latitude. Is it time to revisit the APA? If so, how should it be updated?

  • Prof. Richard Epstein, Laurence A. Tisch Professor of Law and Director, Classical Liberal Institute, New York University School of Law
  • Prof. Philip Hamburger, Maurice & Hilda Friedman Professor of Law, Columbia Law School
  • Prof. Kathryn Kovacs, Professor of Law, Rutgers Law School 
  • Prof. Jon Michaels, Professor of Law, UCLA School Of Law
  • Moderator: Hon. Britt Grant, United States Court of Appeals, Eleventh Circuit

Speakers

Event Transcript

Hon. Britt Grant:  Hi, everyone. I think we're ready to get started with our first panel. It's like a family reunion in here, so you'll get to see your good friends after this. Thanks, everyone. My name is Britt Grant. I'm a judge on the Eleventh Circuit Court of Appeals in Atlanta, Georgia. I'm pleased to be here to present our first panel, What is Regulation For? These panels have a lot of interesting ideas. It'll give us a lot of starting point and background for so many of the discussions about the administrative state and regulation that we're going to be having over the next few days. There are robust debates, which we will experience first-hand here today about whether the administrative state in its most perfect form is a threat to liberty or a guarantor of liberty, whether the direction that the administrative state had gone is a turn away from its originally correct role as a less politically-oriented, policy-making body, or as the inevitable fulfillment of the headless monster that is the fourth branch of government.

 

      Our panelists, again, have interesting and innovative ideas on these topics and more. So let's go ahead and get started. After introductions, to give you all a path for this panel, I'll introduce in brief each of our panelists, and then each will give a five to ten-minute thesis, the backbone of their comments for today. After that, I'll give them a chance to ask each other a few questions. I'll interject as necessary, and then we'll get to the audience for some of your fantastic questions.

 

      First, to my left, is Professor Jon D. Michaels. He is a Professor of Law at the UCLA School of Law where he teaches and writes about administrative law, national security law, bureaucracy, privatization, and the separation of powers. He's a graduate of Williams College, Oxford University as a Marshall Scholar, and Yale Law School. He clerked for Judge Guido Calabresi of the U.S. Court of Appeals for the Second Circuit, and then for Justice Souter. His current book project, I think, is going to be the basis of his remarks today, and it's called Constitutional Coup: Privatization's Threat to the American Republic.

 

      Next, we have Professor Philip Hamburger. He's a scholar of constitutional law and history at Columbia Law School where he serves as the Maurice and Hilda Friedman Professor of Law. He's also President of the New Civil Liberties Alliance, which is a civil rights organization dedicated to protecting all Americans from the administrative state and other threats to constitutional rights. His books include Liberal Suppression: Section 501(c)(3) and the Taxation of Speech, The Administrative Threat, Is Administrative Law Unlawful?, and among his recent articles is "Chevron Bias" in the George Washington Law Review, which explains how Chevron deference violates due process.

 

      Next is Professor Kathryn Kovacs of the Rutgers School of Law. She's a graduate of Yale University and Georgetown University Law Center. She currently teaches Administrative Law, Natural Resources Law, Environmental Law, and Property. And before joining the Rutgers faculty, she spent 12 years in the DOJ Environment and Natural Resources Division, Appellate Section. And most recently in the government, she was a political appointee serving as Senior Advisor to the Director of the Bureau of Land Management in the U.S. Department of the Interior.

 

      Professor Epstein, last but not least, is the inaugural Laurence Tisch Professor of Law at NYU School of Law. He is also Senior Fellow at the Hoover Institution and the James Parker Hall Distinguished Service Professor of Law Emeritus and a senior lecturer at the University of Chicago. His first law school appointment was at the University of Southern California. I will not be able to list all of his publications without taking up our entire time here, so I'll note that his newest book is called The Classical Liberal Constitution: The Uncertain Quest for a Limited Government.

 

      With that, I will kick it off to Professor Michaels to get us started.

 

Prof. Jon Michaels:  Thank you very much. It's a pleasure to be here and a privilege to be on this panel. As I see it, there are two principal sets of challenges to the administrative state today. First, there are those who see the modern administrative state as a threat to the constitutional separation of powers. And second, there are those who are more or less okay with a modern administrative state as a constitutional matter, but they are nevertheless distressed by our administrative state which they see as hopelessly inefficient, sclerotic, or unresponsive. And both camps, by my estimations, are seemingly gaining ground. The first, whom I'll call constitutional conservatives, are not only influencing but also reshaping academic debates, as evidenced by this panel, but they're also obviously influencing American jurisprudence. And the second camp, whom I will call neoliberal, have been wildly successful in reconfiguring the administrative state along more businesslike lines.

 

      By and large, the liberal response to these challenges has been a bit dismissive, from my perspective. This is especially true with respect to responses to the first camp. Many of my fellow travelers will point to history, settled practices, reliance interests, and long-standing and capacious holdings to essentially tell conservative critics to get over it -- the administrative state's here to stay. And as for responses to the second group, many will try to meet the neoliberals halfway. They'll say, "Okay, it's okay in these contexts, but not in these contexts," or they'll appeal to values that are, by my estimation, too abstract or contested – 0the various symbolism of being in the public sphere and things like that. Or they'll work to refute the businesslike government crowd empirically, documenting waste, fraud, and abuse that, say, privatization or outsourcing engenders.

 

      In both cases, I feel as if my team is playing defense, as it were. And this is a mistake. It's a mistake for us because it isn't working. As I said, both camps are gaining ground. But more to the point is a missed opportunity. It's a missed opportunity for folks who believe in the administrative state to reaffirm and strengthen the constitutional bona fides of the administrative states, and to do so in ways that would buoy progressive regulation.

 

      So that's what I've been working on. As Judge Grant mentioned, I'm developing an affirmative constitutional theory of the administrative state that responds to both of these camps, and the crux of my argument is that we have, right now, something -- what I call the administrative separation of powers. In brief, I agree that the advent of the modern administrative state involved the collapsing of the traditional separation of powers. And I also agree that that's highly disconcerting. An early phase of modern administration in which essentially lawmaking, law adjudication, and law enforcing powers were given over to largely monolithic agencies was a problematic one, but in short order, we've redeemed and refashioned the constitutional commitment to checking and separating state power.

 

      And we did so by disaggregating that administrative power among three sets of rivalrous, diverse stakeholders. Specifically, power was—and today it still is—triangulated among three sets of actors: the presidentially appointed political leaders atop the agencies, the career, politically insulated civil servants who carry out much of the day to day work of the agencies, and thirdly, the public writ large, that's all of us who have been long authorized to participate meaningfully in many facets of administrative government. The triangulation, for me, redeems and revitalizes federal governance in an era far different from that imagined by the Framers.

 

      And to be clear, this triangulation is not just a thin reproduction. I'm not just saying, "Oh, we had three great constitutional branches, and now we have three administrative rivals." I'm not trying to make -- I'm not suggesting something as empty or formalistic as that. But rather, there's a lot that connects the old and the new separation of powers, most obviously, the agency heads are apt stand-ins for the president herself, insofar as they are appointed by and answerable to the president. Less apparent, but I think that still has an analogy, is the public writ large, whom I compare to Congress. Like Congress, the public's participation is multi-polar. It's pluralistic, at times scatter shot, at any moment some are favoring and other are disfavoring any given proposal or initiative.

 

      Last, I analogize the civil service to the judiciary. Like the judiciary, the civil service may act as a counter-majoritarian check. But precisely because of its distance from the people, the civil service's legitimacy cannot be taken for granted. Thus, like judges, the civil servants earn their legitimacy through careful, robust engagement, through the articulation of reasons, and through consistency across time and across political movements.

 

      The interplay of these three sets of actors ensure that administrative government is the product of broad based and pluralistic buy-in. Specifically, we have two sets of political actors. One that's unitary, like the president, and the other that's heterogeneous, more like the Congress, and a counter-majoritarian one, again, not unlike the judiciary in disposition and orientation. As a result, administrative power, by my light, isn't a runaway train because there are multiple veto points. It isn't a tool of naked presidentialism because the agency heads need to secure buy-in from civil servants and the public writ large. And it isn't a coven of some Deep State because the bureaucracy, to an even greater extent, needs support from its rivals, namely, the agency heads and public participants.

 

      It is, instead, a rough reproduction of what happens, or more often, doesn't happen, under traditional constitutional governance with its checks and balances. So administrative separation of powers, at least, is my answer to those worried about all-powerful, all-concentrated administrative power, which I would agree, were it to exist, would be out of step with our constitutional commitments.

 

      Now, if may take a minute to turn to how administrative separation of powers also responds to the neoliberal critique, it's -- the way I formulate that is that administrative separation of powers helps explain why framing administrative government in blunt, businesslike terms is actually on constitutionally shaky footing. Businesslike government seeks, among other things, to replace civil servants with private contractors. Most recently, businesslike government proponents have also been seeking to convert the civil service itself into more of an at-will workforce, which may be justified as keeping up or keeping in tandem with what we'd find mostly in American private sector. These efforts, let me just be clear, are overwhelmingly bipartisan, and they're pitched as nonideological, technocratic fixes. They're ways to speed up and streamline administrative government. So this critique is really coming from kind of the opposite side of kind of the administrative state compared to the what I call the Constitutional conservatives.

 

      But think about what these fixes do vis-à-vis the administrative separation of powers. So let's start with government outsourcing, wherein all sorts of administrative responsibilities are contracted out to the private sector. Again, this is bipartisan, but it's also pervasive. In many instances, the contractors directly will replace civil servants. All the reasons folks like contractors are also all the reasons why they're constitutionally dangerous. Because they're hired and fired by the agency leadership, they, unlike civil servants, have every incentive to be yes-men and women to the political leadership.

 

      Civil servants, by contrast, are servants of the state, not any particular administration. They thus provide a meaningful check and do so in Republican and Democratic administrations alike. And it isn't just liberal bureaucrats who check a conservative presidential administration, as some may be seeing today. But Democrats, too, also run into all sorts of problems with civil servants uneasy with hyper-partisan or unsubstantiated directives. Again, so the use of contractors weakens one of the important dimensions of the administrative separation of powers, namely that between the political leaders and the civil servants. And this is also true when we talk about converting the civil service into an at-will work force. It would, again, flatten that line of rivalry and consolidate power more in the hands of political leaders.

 

      Also, just one last point on the contractors -- to the extent that responsibilities are being outsourced to private firms and private institutions, that also limits the opportunities for public engagement because the public sector is much more amenable to the engagement from members of the public writ large, and that's not necessarily true in the private sector. So to the extent policy is also being driven externally, that limits the degree to which that third set of rivals, the public writ large, is able to participate.

 

      Okay. To sum up, though the administrative separation of powers has been largely overlooked, it is this scheme, this fragmented tripartite scheme, that serves as a constitutional salve as it takes a good deal of the sting out of an otherwise unitary and, thus, hyper-potent or unfettered agencies. It serves as a constitutional adhesive, binding the administrative state to the underlying and similarly fragmented and triangulated Framers' scheme, and it serves as a constitutional emulsifier, mixing the administrative regime into what Professor Thomas Merrill calls an overarching separation of powers doctrine that is more than the sum of the specific clauses that govern relations among the branches. I'll end there.

 

Hon. Britt Grant:  Thank you. Professor Hamburger?

 

Prof. Philip Hamburger:  Well, thank you very much. It's a great pleasure to be here with such a distinguished panel and such a distinguished audience. And I might say, it's particularly a pleasure to follow Jon, whose new book on privatization is very, very interesting. As you'll see, I do not agree with some of it, particularly the administrative side of it, but it's an interesting book. And he's a thoughtful critique of the position taken by those of us who are doubtful about the administrative state.

 

      Now, forgive me. As a preliminary matter, I just want to mention that the New Civil Liberties Alliance is continuing to hire more lawyers. Our director, Mark Chenoweth, is in the room, and if you're interested, by all means, speak to him. That is, if you're a superb litigator. We've been busy with a wide range of litigation, and where we cannot get standing, where we can't sue, we've been doing other amusing things. For example, we just recently petitioned about 20 agencies to adopt administrative rules barring administrative guidance. And since we're inviting the administrative state to cannibalize itself, the movement against administrative power is growing.  There'll be plenty of opportunities for everyone in this room. I know many of you already are fighting the administrative state, and I encourage everyone here to participate in one way or another. It's going to be fun.

     

      Now, I have two points today. First, administrative power threatens civil liberties. Second, administrative theory is a fig leaf, a fig leaf that covers up the reality of lost freedom. Now, first, and you've heard this from me before, but I want to reiterate, even if only briefly, administrative power is a profound threat to civil liberties. No other development to contemporary American law threatens more civil liberties of more Americans.

 

      I'm just going to run through the list here. Administrative power -- there could be a longer list, this is just the short version -- administrative power denies due process, both in the agencies and later in the courts. The courts, essentially, are corrupted by administrative process because they end up also denying due process because of their deference. Administrative power denies jury rights. And again, that is echoed in the courts on appeal. In fact, administrative tribunals give government ambidextrous power. The government can proceed in the courts with the full due process of law and all of the other constitutional rights of procedure, or it can proceed in administrative tribunals and take a little shortcut and avoid all of that nonsense, that silliness, those niceties, those mere formalities.

 

      Administrative power thereby transforms procedural guarantees in the Constitution. It changes the very nature of these rights. No longer are they guarantees. They're merely options for power, and our Bill of Rights is thereby been entirely eviscerated. You say, "Well, that's just the procedural rights. What about the substantive rights, free speech and religion?" Them, too, because administrative power is a profound threat to the substantive rights such as speech and religious liberty. We now have full-scale licensing of speech in about half dozen agencies. We've revived the 17th Century. The Star Chamber could not have been more efficient.

 

      And then, just to mention one that is particularly curious, administrative power undermines equal voting rights. Now, that may seem a bit of a puzzle, so I'm going to linger on that one. I want to linger on the point about voting rights. There have been two preeminent developments in federal law since the Civil War, voting rights and the administrative state. And of course, this is not a coincidence. There's a profound connection between the two. Although educated Americans increasingly welcomed equal voting rights, they had misgivings about the results. People who are less clean than them, the great unwashed masses, were suddenly controlling power, and that didn't seem so good to people who went to Yale, and Harvard, and the like. And Princeton, Princeton, of course.

 

[Laughter]

 

      Woodrow Wilson -- never forget Woodrow Wilson -- Woodrow Wilson complained about the diversity of the nation, which meant that the reformer, and I'm quoting now. Do not attribute these words to me. The reformer needed to influence, and I quote, "the mind of not only Americans of the older stocks only, but also of Irishmen, of Germans, and of Negroes." That's the granddaddy of the administrative state speaking. He said, "In order to get a footing for new doctrine, one must influence minds cast in every mold of race, minds inheriting every bias of environment, warped by the history of a score of different nations warmed or chilled, closed or expanded by almost every climate of the globe." He liked immigration, right? Rather than try to persuade such persons, Wilson welcomed administrative governance. The people could still have the Republic, but much legislative power be shifted out of an elected body into the hands of the right sort of people.

 

      Now, far from being narrowly a matter of racism, this has been the transfer of legislative power to the knowledged class, to a class that finds authority in their knowledge and that therefore feel empowered to disempower other Americans. But of course, even if it's just a matter of class, and it hasn't just been a matter of class, but even if it were, when legislative power is removed from the representatives of a diverse people, there are implications for minorities. So leaving aside Wilson's overt racism, the problem is the relocation of legislative power a step further away from the people into the hands of a relatively homogenized class. I know many of us are part of that class, but we at least have false consciousness.

 

      So even when this is exercised with solicitude for minorities, it's a sort of power exercised from above. And those who dominate the administrative state have always been, if not white men, then at least members of the knowledged class. Administrative power thus cannot be understood apart from equal voting rights. The redistribution of legislative power has gratified the knowledged class, but it makes a mockery of the struggle for equal voting rights. It reduces equal voting rights to a bait and switch, and it confirms how seriously administrative power threatens civil liberties.

 

      And all of this brings us back to Jon's comments. He writes a book about a constitutional coup, and it's a very eloquent book, but I wonder why he objects to a small, private coup, if that's the language he wants to use, it's not my language, but not a huge, administrative one. I'm sure he cares about retail assaults on due process, jury rights, equal voting rights, and so forth, but why not care about the wholesale assault on such rights? I suspect he does care but is still evolving his views, I trust. Administrative power is the primary threat to our freedom, and the apologists for administrative power have said nothing about that, absolutely nothing.

 

      Now, my second point is very simply that administrative theory stands in contrast to administrative reality and is a sort of fig leaf that covers it up. And it's not just me who says this. Daniel Farber, Anne O'Connell—and they're not conservatives—say that there is, and I quote, "a gap between theory and practice which leads to an increasingly fictional yet deeply ingrained account of administrative law." That's right, administrative theory is largely fictional, and that includes a lot of judicial doctrines. Rather than justify the realities, it disguises them, and not very well.

 

      Now, how is this so? I'm just going to run through a few of many possible examples. We could spend an hour on this, but I don't want to do that to you. First, nondelegation -- Jon very candidly, and I appreciate him saying this, says that it's a fiction to say Congress isn't delegating legislative power to agencies. And of course, even the word delegation is a misnomer. It's a distraction. The Constitution vests legislative power in Congress, and the reality is that Congress is divesting itself of that power. We should all stop using the word delegation. The Court may use it, but we have to press them not to because the constitutional word is vest and divest, and once you think about that, you realize the violation of the Constitution.

 

      Then there's the intelligible principle test. Congress supposedly uses intelligible principles to guide agencies. But such principles often do nothing of the sort, as Jon says, and again, I appreciate being able to quote him, "This test is flabby." That's a bit of an understatement, but I appreciate the thought.

 

[Laughter]

 

      And of course, Congress often doesn't even offer an intelligible principle. See the Gundy case, right? Administrative power is said to be democratic. No kidding. That's the standard academic justification for it, allegedly because it comes with notice and comment, oh my. Jon writes about this as, and I quote, "meaningful and truly" -- it's not just democratic, it's "truly democratic public participation."

 

      Well, on this, I want to just rely on Justice Kagan. That's right, Justice Kagan has described notice and comment as a charade. That’s her word. And then it said—and this comes in some of the theories of our colleagues on this little bench here—Jon -- the theory is that agencies unbiased both in regulation and adjudication, Jon writes about the civil servants as the administrative state's judiciary. Really? This is clearly false. The overwhelming majority are on one side of the political spectrum. He said that civil servants have treated Democratic and Republican administrations alike. Really? Well, I leave you to judge that.

 

      And then when we get to adjudication, it's all the more curious. We have to have neutrality in adjudication. But of course, administrative adjudication is profoundly biased. ALJs are often chosen to favor their agencies, notwithstanding the theory, their decisions ultimately decided by or viewable by agency heads who are political appointees who adopt administrative rules and set prosecutorial policy. ALJ procedures are slanted to favor the agencies. An SEC ALJ recently boasted that he has never held against the agency. He told this to a defendant, trying to get them to settle. "I've never held against the agency. Now what are you going to do?"  And I won't bore you with all of this. If you want to read more about ALJ bias, read the NCLA's brief in Lucia v. SEC. It's sort of a Brandeis brief just documenting layers and layers of bias just at one agency. And then, of course, there's the separation of functions in agencies. Well, that's not the Constitution's separation of powers, but what's more, it's not even the reality because there is not really separation. This is clear from the agency adjudication.

 

      Okay, I'm not going to keep on going. We all know all this stuff. To sum up, administrative power is a profound threat to civil liberties and has to be understood not as a separation of powers problem, not as a delegation problem, but as a threat to civil liberties. We need a civil liberties movement against this great threat to our freedom. And then, second, administrative theory is just a fig leaf. It covers up the reality of lost freedom. Thank you.

 

Hon. Britt Grant:  Thank you. We'll move to Professor Kovacs.

 

Prof. Kathryn Kovacs:  Good morning. Thank you. Thank you for the introduction. Thank you so much for the invitation to be here. I'm really delighted to be one of the only light gray suits in the room. And I feel like being on the jumbotron, I should get up and dance. But instead, I'm going to talk about the Administrative Procedure Act. So as Judge Grant pointed out, I've practiced law for a long time. I've practiced in the government for 15 years, and that experience puts me at the more practical end of the continuum in legal academia, makes me kind of a weirdo, actually, in legal academia.

 

      So I take the fourth branch as a fait accompli, and I write about the Administrative Procedure Act of 1946 which embodies the compromise liberals and conservatives reached to constrain federal administrative agencies. The APA treated the New Deal as a done deal and created a framework for agency procedure and judicial review that balances the values of regulatory programs and private interests. Unfortunately, the courts never really implemented the APA as written. I think we should try it. And today, I'd like to talk about just one aspect of that.

 

      So in 1933, of course, Franklin Delano Roosevelt became President and kicked off the New Deal. And of course, that entailed tons of new agencies and regulatory programs that brought with them the question of how to control them. At the same time, agencies in Europe were becoming tools of fascist autocrats, and there was a widespread fear here in the United States that FDR would go down the same road. So the desire to avoid totalitarianism became one of the driving forces behind administrative reform. Then during the war, the federal bureaucracy exploded and began to impact people's everyday lives through things like rationing and price controls, and the belief that agencies could pave the way for totalitarianism went mainstream. And that concern infused the entire debate on administrative reform from 1933 to 1946. The APA's legislative record is riddled with arguments based on the need to avoid totalitarianism.

 

      Well, the Administrative Law Section of the American Bar Association took the lead in this effort. At the time, it was a very conservative section. Now, it's delightfully bipartisan, multi-partisan. I see a bunch of members in the audience and hope you'll all consider joining us. Two weeks after D-Day, the ABA Ad Law Section bill was submitted in Congress. It was designed as a compromise between the conservative and liberal approaches. And in 1946, 17 years after the first administrative reform bill was introduced in Congress, the APA passed unanimously, and President Truman signed it. The debate leading up to this moment was lengthy and intense, and the public was involved. It was a truly deliberative process, a really remarkable moment of civic republicanism in our history.

     

      Much of the APA was controversial. It contains lots and lots of compromises and lots of language that's murky at best because that's the only way the bill would pass. But other things in the APA are clear. For one thing, the same standard of review applies to all agencies. No agency should get super deference under the APA. There was also a consensus that rulemaking should be pretty simple. Congress intentionally left a lot of the rulemaking process to agency discretion in order to encourage rulemaking, to give regulated parties more certainty, and to avoid what Congress saw as the separation of powers concerns with courts making the law.

 

      Well, since then, rulemaking has become intensely resource intensive because of additional rules imposed by Congress, by the courts, by the president, and by the agencies themselves. The upshot is it's hard for agencies to make policy in a timely fashion, to respond to new circumstances, and to respond to elections. Government power in the United States can be seen as a hydraulic system. The Supreme Court is often concerned about one branch aggrandizing its power and putting pressure on the other branches. Now we're seeing the opposite. We see a Congress that is abdicating its power. When one branch allows its power to atrophy, another branch will fill the void. If Congress nor agencies can make policy efficiently, then the president and the courts will.

 

      So the difficulty of rulemaking is one of the reasons why presidents have increasingly made policy themselves. Of course, there are other reasons for presidential direct action. Presidents can no longer rely on Congress to make policy. Presidents prefer to take the political credit for policy decisions, and in this tech crazy and media savvy world, it behooves a president to take ownership of policy decisions. But also, rulemaking is just too difficult and time consuming. In the very least, if rulemaking were easier, the pressure on the president to make decisions himself would decrease.

 

      Now, this kind of unilateral presidential action is certainly not new. I'm sure most of you remember President Clinton's memos directing agencies to take specific action. You remember President Bush's signing statements. Obama took up both of those tactics and had some 38 czars in the White House. President Trump has taken presidential control to a new level. He makes policy every week that previously would have come from agencies in rulemaking. And in a sense, this is good because it responds to elections. President Trump was elected.

 

      On the other hand, presidential policy making entails little transparency, public participation, or deliberation. There is no requirement that the President obtain feedback from interested parties to hone his policy. Presidential decision making limits the parties engaged in presidential -- in policy discussions. Sometimes even the relevant cabinet officer is excluded. There is no way to know who or what he consulted in making his decision. The President is less accountable than agencies. He's often not subject to judicial review, and aside from quadrennial elections in which the President need not even obtain a majority of the vote, he's only removeable via impeachment or the Twenty-fifth Amendment. And finally, the President lacks the expertise of agencies.

 

      Now, ideally, Congress would make policy decisions, and I'm an optimist, but I'm also a realist, so absent that, for all of its flaws, notice-and-comment rulemaking is superior to rule by presidential fiat. Taking agencies out of the policymaking game eliminates one mechanism for checking presidential aggrandizement. Certainly, it's not enough standing alone to make agencies more agile, but it is a necessary component of a balanced government.

 

      So I think—and I'm glad there are so many federal judges in the audience to listen to me today—I think we should stick to the APA. We should preserve the balance Congress struck in 1946. We should hold agencies accountable. We desperately need to update the law, but let's not take agencies out of the game, or we will fall into the trap the APA was designed to avoid.

 

Prof. Richard Epstein:  Thank you very much for the opportunity to be here with old friends and new. It's always a great pleasure to speak to The Federalist Society. The question is what can I do to rile you up a bit?

 

[Laughter]

 

      And in order to answer that particular question, what I'm going to do is to point out a deep contradiction in the program. The way in which it's done on the title is to say What is Regulation For? And that should be intelligently understood, a discussion of the aims of regulation and the possibility of its abuse. The body of the text starts to talk about the APA and its internal structures, and I think it's fair to say that three panelists have fallen into the trap of speaking about the content. And I'm going to fall into a different trap in speaking about the title.

 

      And I think that this is extremely important because when you're trying to ask the question of what agencies are for, one of the things that you have to ask, particularly in connection with the New Deal, is what agencies cannot do well, where they should never be used at all. There is no question that the 1946 APA was a kind of a peace treaty in which you accepted the legitimacy of the administrative state and then tried to prevent some of its great abuses, and so forth. I am not bound by that sort of paltry convention, and so I think it's important to ask well, what is the legitimate functions of an administrative state?

 

      And here, I think that you have to divide the world into two substantive cases. Case number one are cases where competitive markets work, and case number two is situations where competitive markets do not work. And if, in fact, you have a competitive market that works -- this does not mean an utterly unregulated market. It means one with statutes of frauds, with recordation statutes, parol evidence rules and the like, the basic function of the administrative state is to do nothing whatsoever because there's nothing it can do to improve upon what Mother Nature has created.

 

      And so if you start looking at the way in which the Roosevelt cartel machine was put into place, virtually all of the codes of fair competition and similar devices which give rise in the end to such notable organizations as the National Labor Relations Board, the Civil Aeronautics Board, the Motor Vehicle Act, and so forth, these are all things that should simply be outside the ken of the administrative state because the simple way to understand them is what you're doing is you're taking a competitive market with high output, try to put in a cartelized market with lower output, then adding to the insult by increasing the administrative cost, and then creating, in addition, the massive possibilities for redistribution through the state, not on any intelligible principle which is worried about differentials in wealth, and so forth, but simply to help your friends as opposed to your enemies.

 

      And as far as I'm concerned, if you have an administrative state which is doing everything wrong and doing everything wrong for all the wrong reasons, there is no way that you're going to purify this particular situation through a system of notice-and-comment hearing, public participation, administrative expertise, and the like. All of those things may be fine under other circumstances, but here, if you know that the nature of the game is negative sum from the day in which it starts, it seems to me to be utterly futile to argue how it is that we ought to run this thing.

 

      The real intellectual urge should be for massive deregulation. And indeed, if you go back to the great Chicago economists of the 1940s and 50s, Milton Friedman, George Stigler, and so forth, they all grew up in that particular area. And the reason why they wrote the way in which they did is they saw a world in which it turned out that competitive industries were turned upside down by administrative regulation. And the great tragedy of the APA by implication, therefore, is that it entrenched this particular kind of situation and created some of these great difficulties.

 

      So let me just give a couple of examples of this. If you're talking about healthcare, and you're trying to figure out the way in which the system should run, and you put in a system of community rating in a competitive market, you destroy the particular market because it requires massive cross subsidies from the young to the old. And that has the ironic consequence of taking those people who have limited means and asking them to basically subsidize the wallets of those people who've been able to accumulate wealth for many, many years. I see no particular virtue in a particular cross subsidy that runs in that operation.

 

      If you look at something like the Fair Labor Standards Act that has exactly the same characteristics, you put in a minimum wage law, it blocks the low productive workers from getting into the workplace and protects those with higher levels of skill. It works a huge degree of redistribution, but it requires no benefit, and there's nothing about the various new cases that come down from the Fair Labor Standards Board, from the Department of Labor, which will cure that difficulty. So you don't want any administrative state there.

 

      The question then is, is there a place in which you need it? And I think it would be utterly foolish to say that you can live a world without an administrative state because there are too many cases in which markets do fail, and it's important to understand exactly what those cases are. Well, one of them is the situation with respect to natural monopolies. It turns out a single supplier can outperform multiple suppliers in a market, and so one has developed a particular formula on how to deal with that. And that's basically the formula which says you need fair, reasonable, and non-discriminatory rates. It's somewhat difficult to apply in context, but nonetheless, it's an important notion because you know what it is you're trying to achieve, which is to eliminate the dead weight losses associated with monopoly. And you hope that you could get a system in place whose administrative costs are low enough that you could get some net social gain coming out of the operation.

 

      So I don't think that you can look at this particular system and simply rule it out of bounds, saying we just can't live with an administrative state. What you really have to do is to figure out how it's going to work. And here, there's the basic problem that you could see in other areas as well, which is you never quite know when you're putting one of these systems into place as to whether or not it's going to be tool for redistribution and, therefore, upset markets in much the way that regulation of competitive markets do, or whether or not what it's going to do is secure some kind of a Pareto improvement. That is a situation in which, by putting the regulations in place, you raise the level of all individuals, so it becomes a positive as opposed to a negative sum game.

 

      In a competitive market, it's easy. You just don't allow the regulation to begin, at least as a matter of first principle. But in a natural monopoly market, you can't do that. So then one of the things you have to worry about, not a lot of time here, so I'll just mention one of them, and that's the question of implicit cross subsidies that come through rate regulation. And it is very easy under these circumstances to try to put the majority of the cost on one group of users and give the majority of benefits to another use of users. And the system of rate regulation that was understood in the pre-New Deal era always considered any cross subsidies created in a regulatory environment as off limit. And so what you were trying to do was to imitate a competitive market, and a competitive market never allowed for those particular things to take place.

 

      A secondary in which you could start to worry about these kinds of externalities has to do with areas associated with environmental control of one sort or another. And I have a very naïve view of what it is that environmental regulation is supposed to do. You look at a well understood system of common law nuisances which talks about various kinds of emissions and pollutions that take place, fill, smoke and all the rest of this stuff, realize that trying to control pale pipe admission through private rights of action is going to be utterly fatuous.

 

      What you're then trying to do is to put into place a public agency that replicates what it is that a private rights of action will do, namely tries to get that appropriate mix of damages—now we call them fines—injunctions—now we call them general prohibitions—so that you can optimize the total amount of wealth that comes from the use of various kinds of pollution emitting kinds of devices. That means that you can never get your pollution levels down to zero, but what you're trying to do is to maximize the total kind of output that can come from any given level of pollution, which starts to make it seem like in certain markets, like with sulfur dioxide, and so forth, tradeable emissions permits and taxations are perfectly legitimate situations.

 

      The danger here, however, is exactly the same as the dangers that you have in other kinds of areas. You can start to regulate where there is no danger on the one hand, and thereby distort markets, or you could have differential regulation so that you could prefer your red state friends to your blue state enemies, or the other way around. And environmental regulation is certainly very rife with all of these kinds of problems. So if you start to take something like global warming, one of the things that you must always worry about is whether or not when you start to regulate something in the name that you're trying to control this sort of situation, whether you've got the right cause which is being the subject of regulation, or whether or not it's misguided. And it turns out the climate situation is strongly complicated to understand, and many of the things that are attributable to carbon dioxide changes have nothing to do with carbon dioxide. They may have to do, for example, with volcanic activity under the Antarctic which creates much more heat than you could ever get by the change of temperatures of one tenth of a degree.

 

      And then if you start to look to other kind of emissions like coal, and so forth, it's extremely important that when you tax the emissions, what you don't use is a differential tax rate in order to subsidize one kind of performance vis-à-vis another. And when we start dealing with coal regulations, started dealing with water regulation, and so forth, there is a great deal of temptation of the part of many people to either overrate the kind of peril that is being regulated so as to suppress activities which are worth having, or to have a differential form of regulation so that the pollution that comes out of one set of states as opposed to that coming out of another set of states gets differential treatment. And for example, when you start looking at the Obama Clean Power Plan, much of the difficulties associated with this operation was the differential

      impact by location rather than having a consistent theory, which says that when you regulate, you always want the regulations in question to be calibrated to the severity of the particular harm, and again, to avoid the cross subsidies that come when you put governments into power.

 

      So the basic position that I would take about this is that one of the problems that we have with the administrative state is that it simply tries to do too much, and that if you get all of the competitive markets out from under it, you can shrink its particular size, and then you could concentrate resources on those particular areas where they're likely to be good. And then when you start talking about the particular areas in which regulation is appropriate, I think what you have to do is to pay much more attention to the substantive organization and program that are put into place than is currently done. And when you do that, and you understand what it is that you're trying to achieve and what not, then you can have intelligible standards, to use the famous word, of what kinds regulations are and are not permissible. And if, in fact, you can identify certain ends as being illegitimate and others as being proper, then the task of judicial review is going to be made more simple because what you actually do is you now know what you're going after and knowing the things that you're willing to tolerate.

     

      So essentially what happens is to understand administrative law, you have to go back to the old conceit with respect to civil procedure and private law. And to realize that private law in procedural matters is adjectival to the substantive law, meaning, in effect, it's the substantive law that defines the right, and it's the adjective law that modifies those rights, like an adjective modifies a noun, in order to make sure that the system is going to be put together in a reasonably coherent fashion. And you should treat the administrative law as a substitute for ordinary civil procedure devices, and if you do that, many things about the system will start to change.

 

      I'll just mention one that particularly bothers me. Right now, one of the standard ploys of every administrative agency is to give series of inquiries to the regulated parties that require eons of energy in order to do. And there's nothing comparable to the rule in civil litigation which says that we can stop vexatious discovery. And so in environmental cases having to do with pipelines, and so forth, you can spend years upon years looking at this stuff which is of no particular relevance. And so what you need to do in the administrative state is to have the same kind of limits on government inquires for fact collecting that you would use in connection with private discovery actions, and that would change things.

 

      So the key element is if you've got the substance right, then what you have to do is to modify the procedures in the administrative state so as to prevent its abuse and strategy in the same way that you prevent abuses that take place in ordinary private litigation. And if you put that program into place, I think you could do much better than we're currently doing today. And I regard this as a bipartisan program. When I say bipartisan, I sometimes mean that it's a program which is likely to be rejected by both parties. Thank you.

 

[Laughter]

 

Hon. Britt Grant:  Thank you all.  I'll confess that I have a few questions of my own that I'm dying to ask scribbled down here, but in order to keep my promise to the panelists, I will give you the opportunity to ask each other questions that have popped into your head during these presentations.

Prof. Kathryn Kovacs:  I'd love to start, if that's okay, to ask -- I wonder, Richard, if common law itself is not a form of regulation, it is a form of government intervention in the free market. Clearly, in order for a free market to work, we need some mechanism for dispute resolution, so I wonder what makes common law judges preferable to agencies whose powers, and procedures, and budgets are controlled by Congress?

 

Prof. Richard Epstein:  Mine is not an argument about whether you have bad administratives and bad common law judges. You could have both. I'm thinking of the common law here as a system of substantive rights, and it is a system of substantive rights that supports competitive markets, as I've mentioned. But the thought that you could have a competitive market with no form of regulation whatsoever is slightly crazy, so a common law system which not only has a system of contract, it also has a system of tort law. The system of tort law is designed to prevent the use of force by one individual against another, and its primary application typically a stranger. And so the particular end that you want the common law to enforce, the control of trespass, the control of nuisance, for example, the control of monopoly, those become the same ends for the administrative state.

 

      So the key element to understand about this is you never want to create a system where you have two sets of substantive rights. You've got a common law set of rights which stresses freedom of contract. Then you get something as misguided as the Civil Rights Act of 1964, which tries to impose comprehensive duties of non-discrimination in competitive markets. And I would not want that to come out of a common law rule. I would not want it to come out of a statutory rule. The point here is nobody should understand the common law rule as being sort of abstractly given by God or so forth. What you have to do is to make a substantive case—which on another occasion, I'm happy to do—as to why it is that the distribution of these rights starting from my favorite period, to wit, Roman law, and moving forward, pretty much got it right on those things, and that becomes a template for which you can then do the rest of the stuff.

 

      And so the whole point about this is administrative law ought to take over where there's enforcement breakdown in the common law, and its function should be to lower the transactions cost to vindicate these particular rights. It should not be to put into place a new set of rights that make no sense. And nothing is more dangerous than imposing regulations on either labor, or capital, or real estate markets in competitive situations. The appropriate place for regulation is always those situations in which it turns out that you have a single supplier of good for which the FRAND obligations – fair, reasonable, and non-discriminatory things –should take place. That was the common law rule a long time ago. That should be the administrative law rule. So the question is you want perfect translation, and the problem about the progressives is somebody as dumb as Wilson always thought he knew more than everybody else.

 

[Laughter].

 

Prof. Philip Hamburger:  So I have a question for my colleagues on my physical right and left.

 

Prof. Richard Epstein:  That does not include me.

 

Prof. Philip Hamburger:  That does not include you, actually, in this case --

 

Prof. Kathryn Kovacs:  -- I get the left.

 

Prof. Philip Hamburger:  -- which is why are you content with the loss of civil liberties?

 

Prof. Kathryn Kovacs:  Why what?

 

Prof. Philip Hamburger:  Why are you content with the loss of civil liberties that comes with the administrative state? If the administrative state essentially guts the procedural rights in the Bill of Rights, and if it increasingly threatens freedom of speech and freedom of religion, which it does through a host of agencies -- we've given up our right in jury, our right of due process, the burdens of proof derive from due process, and so forth, even the right to have an unbiased decision maker, even if you accept an ALJ. Why are you content with this?

 

Prof. Kathryn Kovacs:  I just don't think it's done that.

 

Prof. Philip Hamburger:  Oh, okay.

 

Prof. Jon Michaels:  So I, too, would kind of challenge the underlying presumptions that are built into the question. But I would say that to the extent that this ties into one of the larger themes that Philip emphasized in his opening remarks about the relocation of power from, say, more democratic entities to administrative entities, which he cites as starting around the progressive era, I would say a couple of things about that, if I may. First, one of these questions or these absolutes are these comparative questions. Are we going to feel differently about state power and be more concerned, of course, about the exercise of state power as opposed to exercise, of course, of market power?

 

      And so I would start by saying that to the extent there are, even conceding the point, to the extent there are some intrusions on liberty in this space, if you're talking about the access to opportunities for redress, for dispute resolution, for empowerment when the market has failed you, or the state has failed you, are folks who are already disempowered and marginalized, which I think is the group that Philip was referencing in his opening remarks, at least, are they going to have more of an opportunity to have their voice heard in administrative agencies before a Congress or within the market? And I think I would take the administrative agencies nine times out of ten on that --

 

Prof. Philip Hamburger:  -- I could not disagree more.

 

[Laughter]

 

Prof. Jon Michaels:  I'm not surprised, but I just, I think we're talking about different groups of disempowered and different groups of marginalized Americans.

 

Hon. Britt Grant:  Let me ask you, Professor Michaels, does your supposition depend on -- or does your theory depend on a supposition that the civil service doesn't politically skew in one direction or the other, or would a different presumption interrupt your conclusions?

 

Prof. Jon Michaels:  Okay, so, and that's come up, so I'm glad that was asked. First of all, I'm not so sure that the bureaucracy as an empirical matter is as skewed as commonly believed. It's -- many studies by political scientists have suggested that the median bureaucrat is closer to the median American than are either presidential -- the presidents from either set of parties. It doesn't skew as democratic as suggested because there are also many parts of the federal government that skew quite conservative. But the larger point is simply that to the extent that the bureaucracy has been skewed, if that's right, it doesn't have to be that way. It's not -- it wasn't designed to be that way. It has to do with, presumably, preferences, choices, opportunities, and whatnot.

 

      So to the extent an institution skews in a particular direction, as long as it's open, I encourage, especially there's a lot of students here. We talked -- Katie gave a shout out to judges. I'll give a shout out to law students. Go join the government. Go help counter that progressive or democratic tide, and join the EPA, and join the Department of Interior, and tell the liberals where they're getting things wrong and where they're overreaching. So I think the point is, one, is whether it's built in. I don't think it's built in. And to the extent it is this way empirically, Congress skews, the courts skew, these things kind of come and go over different moments in time, and they're not inherently so.

 

Prof. Richard Epstein:  Can I get --

 

Prof. Philip Hamburger:  Can I just get -- I just have one little bit.

 

Prof. Richard Epstein:  I have a long bit. You have a short bit.

 

Prof. Philip Hamburger:  This will be very short. Then you can have a long bit. I just want to observe the nature of the responses. I'm not going to try to respond to them in detail, I just want to observe. The first response is, "Oh, there is, in reality, no loss in our freedoms." That is just an illusion that we should believe all those doctrines. And I don't think anybody who has practiced in this field would really conclude that unless they've spent too long in academia. Think there's a lot of second-hand smoke perhaps --

 

[Laughter]

 

Prof. Kathryn Kovacs:  I might be the only one on the panel who actually did practice for 15 years.

 

Prof. Philip Hamburger:  Well, I used to be a tax lawyer, and I must say, the closer you get to this, the more frightening it is. And then the other answer, one is, I think, a denial of reality. And the other one, I think, was a very candid and, I think, welcome concession that, in fact, yes, our rights may be lost, but that's okay. The government will take better care of us than we knew. And I just want to observe the nature of the answers, that's all. Thank you.

 

Prof. Richard Epstein:  I want to criticize the answers.

 

[Laughter]

 

Prof. Philip Hamburger:  Division of labor.

 

Prof. Richard Epstein:  I'm not a simple observer. There's the following dichotomy. If you have a competitive market, each individual has a majority of one, and that's a perfect majority, and can take resources and devote them to whatever offers on the other side of the market become available without having to consult and gain the approval of all of his citizens. What the administrative state does is it puts all of these individuals into a collectivity, then uses a system of participation to discuss what goes on, and it's a system of majority vote to figure out what is going to happen.

 

      This is the classic situation with labor unions and collective bargaining. And it turns out that the dissenters are represented by the majority, and the question is how powerful are the fiduciary duties that are put into place? And if the unions are organized by bargaining unions designated by the state, the answer is very different from the situation if the unions had purely voluntary creation. So I'll give you one example. Back in 1920s, there was a great deal of racial segregation in the United States, as I'm sure you're all aware. And there were black unions, and there were white unions. And what happened is the employers would play one off against the other, and the black workers roughly did as well as the white workers.

 

      Railway Labor Act comes along—this is a Coolidge confection, so it's not an anti-democratic attack—and they put everybody into a single union. And the single union is dominated by white workers, and they then enter a master agreement with all of the railroads relegating black workers to inferior positions. And somebody says, "Wait, you can't do this." We then have a case under the theory of fair representation, which was invented for the occasion in Steele v. Louisville and Nashville Railroad in 1944, one year after Justice Jackson celebrated the wonderful glories of collective bargaining. And they said, "Yes, you really owe fiduciary duties."

 

      1955 comes along. We have the great case of Conley v. Gibson which you think of as a civil procedure case, but it's a Railway Labor Act case because they're still trying to push these guys into the situation where they'll do honest representation of the minority situation. And so the problem that you have, quite simply, is if you've got a hostile trustee put into place against your own will representing your interests, you're not going to be nearly as well off as if you could fashion your own voluntary organizations by unanimous consent.

 

      And that's the tradeoff that the administrative state made, and it is a damnable mistake, and there's no way that you could soft pedal it, and by next year we'll get better trustees, and by next year we'll put other people on the National Labor Relations Board. It is a fundamental structural error. The best it could do is equal a competitive market, probability .001. The worst it could do is a lot worse than that, probability 99.999.

 

[Laughter]

 

Prof. Kathryn Kovacs:  Well, I guess my thought is that the extent to which the administrative state interferes with fundamental rights depends on what you define as a fundamental right. I take it as a fundamental right that we've all agreed to live as Senator Lee said, under a Constitution that enshrines a manner of disagreeing and learning to live with each other. And so due process rights may -- if your conception of due process rights is at one end of the spectrum, then you will see the administrative state as interfering with those rights.

 

      My conception of due process rights, I think, accords with Justice Kennedy's, and I feel like he fought a one-man battle for many years to try to bring due process concerns into administrative law. I hope somebody will take up that banner. But his view of due process was not so extreme that it eliminated the possibility of having a fourth branch of the government to assist Congress and the President in administering the law. And I would say that the same thing applies to religious rights, and so on. It depends on what your conception of the right is. I think my fundamental right as an American is to have a government that functions to protect me and to help me live with everyone else in the country, and we've made decisions about how to do that.

 

Prof. Richard Epstein:  May I say a terrible word about Justice Kennedy? His conception of civil rights is so thin that perhaps the worst decision of his administration was the thing he wrote, that opinion in the Masterpiece Cake theory, where he had no idea what the substantive rights are, who should do anything, picked a narrow ground on which to decide a case instead of trying to say much more powerfully, in a competitive market, if some people have strong religious beliefs and you do not wish to patronize them, bless you. And if he does not wish to serve you, then bless him. There are many other people nearby in which to do that.

 

      And the moment what you do is you empower a commission of the federalist state to tell you which religious beliefs matter and which ones do not, the moment you get some federal officer saying, "Oh, we're going into a commercial transaction is as far as we're concerned business with no religious oversight," then you're replacing individual judgement on those issues with collective judgement, and that is necessarily a losing situation. We can live in a society where .01 percent of the people don't want to make wedding cakes of same-sex couples. It's much more difficult to live in a society in which the 99.9 percent of people can say, "We are so concerned with absolute unanimity on all of these points that we're going to reeducate you or drive you out of business if you don't agree with us." Justice Kennedy was the handmaiden in that terrible opinion that he wrote to very strong forms of totalitarian rule with respect to matters that should have been left in businesses and other areas of life to private choice.

 

[Applause].

 

Hon. Britt Grant:  Let's hear from Professor Michaels -- I think we'll have a different view, and then Professor Hamburger.

 

Prof. Jon Michaels:  So I just wanted to respond a little bit to Philip and Richard on this point about rights and liberty and pick up where I think Katie left off. Just to note where I stand, although it may not be any surprise, I consider rights and liberties to be completely tied up with the ability to have clean air, safe workplaces, economic autonomy, reproductive autonomy. And those too matter, and those may not be provided for through the vicissitudes of the market. And it again, I think, is a definitional question about kind of what notion of ordered liberty all of us have and where we disagree.

 

Hon. Britt Grant:  Professor Hamburger?

 

Prof. Philip Hamburger:  Thank you. So first, Jon, I appreciate your concern for a whole host of goods. Your list of goods may be different from others. Your list of goods may not be listed in the Constitution, but let's give you your goods and acknowledge that they matter to you. Would you want those goods to be treated with the solicitousness that due process rights get under the Constitution, or religious liberty, or freedom of speech? And I think we all know the answer. We can all judge that for ourselves.

 

      I want to get back to Kathryn's comments. She talked about fundamental rights, especially due process. And I want to pick up her line about one end of the spectrum. That's right. My view of this stands at one end of the spectrum. Which end is that? The Constitution.

 

[Laughter]

 

      I respect all the Justices. They all are serious people pursuing serious ideas, but Justice Kennedy is not the people. Justice Kennedy did not write the Constitution. The Constitution is different from what any one Justice --

 

Prof. Richard Epstein:  -- He didn't read it, either.

 

[Laughter]

 

Prof. Philip Hamburger:  So I want to talk about those rights that are not, in reality, affected. I want to talk about due process in particular. So the phrase due process comes out of a series of 14th Century English statutes. Most largest one was 1368, and it's summarized as none shall be put to answer without due process, meaning due process in the courts of law. They had administrative evasions of the courts then. The statute was designed to defeat that. This is echoed by American judges. American judges and the people who draft the Bill of Rights understood this perfectly. It was well-known history. St. George Tucker says that due process is the right to be heard by a judge or judicial magistrate. Chancellor James Kent says the same thing, just as Story says the same thing. In fact, until the administrative state came along and had to -- needed, required an adjustment of due process, due process was the right to be heard in a court and have the processes of the court, not any substitute.

 

      The modern response of the administrativists is, "Oh, but it's fair. It's fair." Really? Okay. Let's take your standard that it's fair. Let's just throw away due process of the courts and see how fair it is. In front of an ALJ, that's not a judge. Whoops. There's no jury. Whoops. Only limited discovery for defendants. Whoops. There's discovery for the government even in cases that are criminal in nature. Whoops. There are -- the final decision, in fact, is actually not made by the ALJs because their final decision, or review of it, goes to the commissioners, and mind you, ALJs have admitted that they look to that in making their decisions because they don't want to be reversed, right? And so --

 

Prof. Richard Epstein:  -- You're talking about --

 

Phillip Hamburger:  -- Hold on, I haven't even finished.

 

Prof. Richard Epstein:  All right.

 

[Laughter]

 

Prof. Philip Hamburger:  You took -- Richard, you took the bait on Justice Kennedy. I want to talk about the Constitution.

 

[Laughter]

 

Prof. Richard Epstein:  They have nothing in common.

 

[Laughter]

 

Prof. Philip Hamburger:  So let's -- so you might say, "But it's still fair because you get a judicial review in the courts." But when you get to the courts—and you judges in the room, please, please, listen to this—when you get to the courts, what happens to that fairness and due process? Well, the judges will defer to the agency and the law, and where the government is a party in the case, that means the judges are systematically, institutionally biased in favor of the government again, and again, and again. That's called Chevron, and Auer, and so forth, all of which is grossest violation of due process and notices barred by the conduct -- the judicial code which requires you to recuse yourself in cases of bias. And of course, you say, "Well, I can at least argue in the facts." Oh, whoops, there's deference in the facts, too. And you might think at least in a court, you get a jury, but you don't because it's all set up so you appeal to a circuit court, so there is no right to a jury.

 

      And then last but not least, there's the great unspoken elephant in the room. Most companies are never -- and personal defendants -- are never going to appeal their agency. The cardinal rule -- I've talked to a lot of corporate counsel about this -- is you do not fight your agency that much because they can come back and screw you. Retaliation can almost not be documented because people will talk to you about it in whispers. Even in private, they'll go into hushed tones because they cannot be seen as resisting their agency. And the fear of retaliation is used by agencies to control people, and it's a gross impediment to due process because you cannot regularly get review.

 

      And so I ask you, you judge, is this the Constitution? Is this fair? So, yeah, if this is your definition of fairness, then do apply it to the rights you love, and then we'll see how happy you are.

 

[Applause].

 

Prof. Kathryn Kovacs:  I just want to point out that I carry a copy of the Constitution with me at all times.

 

Prof. Richard Epstein:  I wanted to make a slightly different point. There are some pretty terrible judges out there who share many of the values associated --

 

Prof. Kathryn Kovacs:  Not you. [Pointing to Britt Grant]

 

Prof. Richard Epstein:  -- save you -- with the administrative state, and so forth, and so it's not here a question of sort of picking the institution. You'll never get one institution which is filled with flawless individuals and another which is filled with people wholly retrograde. What you're trying to do in the abstract is to put together a system of organization which on average will do better than any other, even though in particular cases it may make mistakes. And so this is the basic problem with the administrative state at that level. We know what the sensible distribution is, we think, when you're dealing with civil trials, and so forth. You give a great deal of discretion on particular evidentiary facts that try a fact, a little bit less discretion with respect to whether or not the ultimate facts are made up. Is or is there not negligence? And no discretion on having de novo review with respect to the way in which legal questions are decided.

 

      And the structural differences that you see with the administrative state is all of this stuff can easily get whacked up. If it turns out that an administrative agency approves a sensible private project, you get now hard look review. And that stuff is often completely corrosive because what it means is, given the rules on standing, is that the strongest objector can now have the largest say on whether or not a collective project should take place. And so what you do is you put the locus of power on one extreme, which is what you have when you can challenge things not on grounds of ultra vires but on the grounds that you disagree with it. So you look at all the nature of the environmental protesters. They're the same guys all the time, and it's always the same mistakes all the time because they want to kill everything. And the moment you have hard look review, they have a very good chance of succeeding. Then on the legal questions, you defer to agencies with the aggrandizement of its own power being very much at issue, and that's backwards as well.

 

      So what you have to do, again, is to try to think of an administrative agency in a judicial situation as being a trial court, and the courts then having appellate responsibilities. And by that test, basically both the two great mistakes are transitional cases in the early Reagan years. Chevron – too much deference on questions of law, State Farm – too much of a hard look in a case by Justice White whose ignorance about how you make automobiles was so colossal that you're trying to basically -- what he said is, "You know what you should have done? We don't know whether airbags work. Let's put them in every car." And that was what he said in the case, so you have to basically take the pattern of adjudication you see in ordinary civil litigation and think of it as a template for administrative state, and then you'll do a lot better.

 

      And the problem with all the modern judges is they're tinkerers in the Wilsonian tradition. They always think that they have something better that they could come up with. And it's not the question of administrative failure. State Farm, last I looked, was a Supreme Court decision. Chevron was a Supreme Court decision. If you get the wrong theory, you're always going to get the wrong result. And then the problem of an academic is they tend to celebrate error, whereas what we have to do is to deplore the kind of mistakes that we see on matters this structural and this fundamental.

 

Hon. Britt Grant:  Professor Kovacs, we've obviously got sustained and strong disagreement about whether it is, in fact, too difficult for agencies to regulate. But supposing we agree with your theory that it is too hard, could that be a feature rather than a bug in terms of a reflection of the type of tension that Senator Lee said is built into our system overall? A feature rather than a bug, a good part of the process that reflects the difficulty in reaching agreement that's baked into our structure?

 

Prof. Kathryn Kovacs:  Oh, sure. And I think that the APA was designed so that rules -- agencies couldn't just roll out rules. They do have to go through a notice-and-comment process. I would add a little bit to it now to reflect modern realities, but that process was meant to build in a deep deliberation before the rule is rolled out. I think the problem is that we have a Congress that for, what, 80 years now, has been delegating broad authority and responsibility to make policy to agencies, and yet, the agencies are not able to do that job in an efficient fashion. And in this world, we need policy fast and now, and we expect, when circumstances change, that we get a new rule reflecting those circumstances. We expect that when an election is had that policies will change in response to that election, and yet, the mechanism that our Congress set up to do that is broken.

 

      So what happens is that the system is askew. We have the Supreme Court making decisions that go beyond its expertise. I love the example of the five-member majority in State Farm that said rescinding the rule about those idiotic automatic seatbelts -- I love showing my students the video. You remember those seat belts from the 80s, and when you tried to get out of your car in a rush, it would strangle you? And the Court said, "Oh, but you didn't consider the value of inertia." Inertia? With seat belts? Those things were never sitting still. So I think that that's the problem. It was not -- yes, there certainly are and should be constraints on agency policy making, but the system has become askew.

 

      And I think one of the ways to get it back into balance is to convince the courts to try what Congress wanted us to try in 1946, which we've never really tried because we have SEC v. Chenery. We have pre-enforcement review, thanks to Abbott Labs. We have all these common law doctrines that came out of nowhere, that came out of pre-APA law, and we've never actually implemented the APA as written. I would really love for us to try that.

 

Prof. Richard Epstein:  I agree with this on many --

 

Hon. Britt Grant:  Professor Hamburger, I think, was going to --

 

Prof. Philip Hamburger:  -- Who's going to invite you? I appreciate your comments on APA. I want to invite you to consider the possibility of signing briefs against Chevron on the grounds that it violates the APA.

 

Prof. Richard Epstein:  That would be wonderful.

 

[Laughter]

 

      I have another operation. Look, some of the great problems that you have are because you try to get an administrative agency to do what it cannot do. Agencies are good at enforcement. They're very bad at giving away public goods to private individuals. So when you start with one of the early pre-APA cases, the NBC case, how do you allocate the spectrum in the public interest convenience and necessity? There is no metric that you can use to figure out which of your favorite friends ought to get something. You need to use a bid system. And so what you did is you had Felix Frankfurter coming up with his typical ignorance on these things, saying, "Well, the market can't possibly allocate resources when they are scarce," not having studied Economics 101.

 

[Laughter]

 

      I mean, it's just an amazing statement. And so we're going to have the agency do more than set the rules of the road. They're going to determine the composition of the traffic. And they have 80 years to try, and they've never been able to do that. And so that one has to recognize that if you have a valuable resource in public hand, the way to maximize it is to figure out whether you sell it off in bits and pieces, lease it, or whatever it is to maximize its net value, and use a market mechanism over publicly owned rights rather than to try to use an administrative procedure to determine which person should get them and why. And that's one of the fundamental conceits of administrative state is it gets itself out of enforcement mode where it actually can have some sensible things to do. And it starts to distribute goodies to its friends, and that's a massive situation of corruption and favoritism.

 

Hon. Britt Grant:  Well, we've had all the fun up here, so I trust that this has inspired a lot of questions from our audience. Over here?

 

Steve Calabresi:  Hi, I'm Steve Calabresi. I'm the Chairman of The Federalist Society Board of Directors. And I had a question for --

 

Prof. Kathryn Kovacs:  His microphone doesn't appear to be on, for anybody who can do that.

 

Steve Calabresi:  -- essentially a separation of powers -- the separation of power issue raised by agencies. You have in one building agency commissioners making rules. In the same building, enforcement personnel executing those rules. And in the same building, administrative law judges appointed by the agency deciding cases that are being prosecuted by the agency with a right of appeal to the agency. And this makes a complete mockery of the separation of powers. I think there are two simple reforms which the Supreme Court in a 5-4 decision could impose on the system that would help a lot.

 

      On the problem of agencies having too much rulemaking power, it seems to me that part of the problem is that Congress likes to delegate power to agencies because it doesn't want to have to make hard decisions. And so it's constantly throwing hot potatoes to agencies rather than making hard decisions. I don't think we'll ever get Congress to stop doing that, and I don't think we'll ever get the President to stop signing bills that do that. The courts had been unwilling to use the nondelegation doctrine -- apologies, Philip, for using that label -- the courts have been unwilling to use the nondelegation doctrine because they can't figure out how to draw a clear line between what delegations are excessive and what aren't.

 

      What I'd like to suggest is a very clear line that could be drawn, and that is any time Congress attaches an unconstitutional legislative veto to a bill, it should be presumed that it's delegating legislative power, and the bill should be struck down and sent back to Congress. INS v. Chadha striking down legislative vetoes was a huge victory for the separation of powers, but it was also a huge victory for the administrative state because all this power that had been delegated since the 1930s subject to legislative vetoes was suddenly no longer subject to legislative vetoes. And looking at whether there's a legislative veto in the statute or not would provide the Supreme Court and other federal courts with a clear line for enforcing the nondelegation doctrine.

 

      With respect to adjudication, I cannot fathom how anyone could think that administrative law judges ought not to be life tenured Article III judges with a right to jury trial. And I cannot fathom the notion that administrative law judges shouldn't be housed in a separate building of administrative courts rather than where they're rubbing shoulders with prosecutors and agency commissioners in the cafeteria. So those are my questions for Professor Michaels.

 

      My question for Professor Kovacs goes to her work in the Interior Department. And my big complaint with the Interior Department is that it owns 80 percent of Montana, 80 percent of Wyoming, 80 percent of Idaho, 50 percent of California, 95 percent of Alaska, and whole lot of other land. Back in the 19th Century, we passed homesteading laws and we privatized a lot of land. We stopped doing that in 1970. It seems to me we should go back to doing that. I know the current outgoing Secretary of the Interior has been opposed to privatization of land, but I wonder what your thoughts are on that. If we can't privatize land, can we at least sell drilling and gas rights permanently to individuals who can buy them so that future administrations can't rescind those rights?

 

Prof. Jon Michaels:  Katie, do you want to go first? You've got the question.

 

Prof. Kathryn Kovacs:  I think I'd like to decline to talk about public lands because it's a different form of regulation. I think there are historic reasons why the government owns so much land in the West. There are subsidies that western states get for that land, so privatizing -- selling off the land, giving it to the states, would throw a lot of historic compromises way out of balance. It is possible to do it, but the states east of the Mississippi would need to be involved because it would rebalance a lot of historic compromises.

 

      As for permit -- well, here I am, answering the question anyway. I think permanently giving away federal mineral rights -- if there is a public trust in the federal fiduciary obligation vis-à-vis the ownership of land, I think the Illinois Central case made it pretty clear that giving away permanent rights to the federal mineral estate would be unlawful. So that is something that can certainly be changed, but it would be a big job to do it, and it wouldn't just be between the Department of the Interior and the Governor of Utah.

 

Prof. Richard Epstein:  One comment on that -- two things. One, on the public trust doctrine, the great mistake that was made in that case was to assume that things were held in public trust were inalienable, at which point you have to figure out the line between a short-term lease and a long-term ownership interest. The correct rule was always you could get rid of it, but you can't give it away. You have to receive fair value back, and you scrutinize the transaction to see that that's done. And at that point, getting these mineral rights out would be good. You also have to worry about externalities, what easements you get to go in and all the rest of that stuff. As far as the west of it, on western lands, the whole point of selling it off is it's going to have a huge allocative efficiency instead of having the worst-run departments running these things, it's going to be privately owned. Just think of the number of fires that you could protect against if you had Georgia Pacific instead of the Department of Interior running some of these forest lands. So I think one really ought to try and do that.

 

Hon. Britt Grant:  Professor Michaels?

 

Prof. Jon Michaels:  Yeah. So I'm not sure exactly what the question was other than why do I believe what I believe? But I will say that I have deep misgivings about the politicization of agency adjudicators. If I suggested otherwise, I apologize. I think that agency adjudicators should be much more insulated than they currently are, as evidenced just a couple of weeks ago by the decision to -- in the Veteran's Administration to allow some adjudicators to continue in their job and others not. That seemed to fall entirely on partisan lines. Whether they're housed in the same office or elsewhere, again, I don't have a problem with that, and I think it probably would be healthy for the reasons that Professor Calabresi suggested.

 

      On the legislative veto issue, if that's a helpful touchstone, it probably would -- even if it were a helpful touchstone, I imagine Congress would pick up on it pretty quickly. So I don't know how much that would help us if we were truly concerned about overbroad delegations of that sort, given that most members of Congress presumably know now that those provisions would be struck down.

 

Prof. Philip Hamburger:  Just one sentence, if I may, about Steve's point concerning ALJs. It's a very serious problem. The solution's not that difficult. By one estimate, this is Bill Funk's estimate, there are 257 ALJs that exercise significant binding power. Another estimate puts it more like 150. We're not talking about that many judgeships. And of course, one can take a Burkean step by step approach. Imagine if the SEC, under pressure from judges, recognized how prejudiced its proceeding are. Imagine that the SEC were simply to send its cases to court. It only has five ALJs. The burden on the judges spread across the United States would not be that great. It would be a very good experiment in shifting to real judges.

 

Hon. Britt Grant:  We --

 

Prof. Richard Epstein:  Can I ask one question?

 

Hon. Britt Grant:  Sure.

 

Prof. Richard Epstein:  I disagree with Steve on one point. I quite agree that the current ALJ system with rotating judges, Lucia, the situation in Oil States, is unforgiveable. I have no particular objection to, and in principle, prefer the kind of Article I judges with 15-year terms and think that federal judges should be subject to similar kinds of restraints because I don't see any abuse coming in long-term appointments, and I see having a rotation in offices being something good. And I would rather amend the United States Constitution, for example, to limit Supreme Court judges to 18-year terms, something of that sort, to get rid of some of the huge pressure that takes place on the confirmation value battles.

 

Hon. Britt Grant:  Thank you. And we've only got a few minutes left, so I'll encourage all of our questioners to keep your questions brief and make sure that we can get to as many of you as possible.

 

Art Macomber:  I think next time we'll get Steve on a panel. My name's Art Macomber from Coeur d'Alene, Idaho. And briefly, with all due respect to Professor Kovacs from my home state of New Jersey, if New Jersey was 65 percent owned by the federal government, you might see fit to change your view on public lands.

 

      My question is on judicial function for Professor Epstein. Professor, in many states, administrative rules are not -- they say they don't rise to the level of law. They're not law, they didn't go through the presentment process, the Executive didn't sign them. And my question is to you, as a judge, say a state judge, and I'm confronted with an administrative rule, is this a case where we apply law, or is it a case where we apply equity? Or from a judge's perspective, what is the approach to taking on an administrative rule case? Thank you.

 

Prof. Richard Epstein:  Well, I think if you're talking about a question of law, I would generally favor de novo review on those things, which is, I think, consistent with the original design of the Administrative Procedure Act. Remember in Chevron, this great case of statutory construction, Justice Stevens does not cite the provision, Section 706(a), at all.

 

Hon. Britt Grant:  Next question.

 

Brian Bishop:  Yeah. Brian Bishop from the Stephen Hopkins Center for Civil Rights in Rhode Island, and certainly a salute to Philip's recognition of the civil rights issues here. I'd actually like to ask Professor Kovacs and Mr. Michaels if they see a point that Richard has made that judicial review in this case is reversed, that individual cases are subject to extreme precautionary principle advanced with almost limitless standing, whereas the ability to challenge and obtain hard look on the broader regulatory questions has been exceedingly constrained. Could you agree with Richard that that is an area that might deserve address?

 

Prof. Richard Epstein:  What do you think about hard look?

 

Prof. Kathryn Kovacs:  I'm not sure I really understand the question, but I can tell you I was employed for 15 years based on hard look review and the courts. I don't think I agree with you that the ability to challenge government policy is constrained in that way.

 

Prof. Jon Michaels:  Yeah, and I would just say that one of the bases for deference, which isn't always met or satisfied, but one of the bases for deference by my lights is that the process is rigorous. And I know folks can say, "Well, what does rigorous mean?" But it means that there is an extensive record with opportunities for all different viewpoints to be heard, and for those viewpoints to be vetted and presented to political leadership for the ultimate kind of curation and generation of rules in those cases.

 

      And so if a challenge comes under those terms, I think it is appropriate for courts to give a look, but not de novo, kind of readdress or reexamine a rule from scratch because we pay respect to that process that, again, is open and it is one that is both met with political and expert input. You may not like the outcome, but that is the process that engenders the most deliberative framework. And I think that's a lot better than just having maybe no process, just a black box, and then whatever judicial panel you get maybe saying, "Yeah, I like that," or "Yeah, I don't like that, but we're going to substitute our best preference for your best preference."

 

Prof. Richard Epstein:  But, I mean, look, what happens is the hard look review is imposed in those cases where administrative agencies have actually granted an approval. And what happens is you fly speck this thing, find something which you think is -- should have been considered that was ignored or something that was ignored that should have been considered, it turns out in any complex proceeding, you always miss something or add something in, and so you can negate it. The illustration of a simply dreadful opinion on this was the recent decision that took place with respect to the Keystone Pipeline in Montana where they vetoed it because of the ostensible effects on mitigation plans and on climate change. And this is something which had been reviewed 15 times, and a judge basically has one unreasoned paragraph that says, "I need a full statement," and then they give me another one, and it's just a de facto veto of a project which essentially has passed all sorts of sensible administrative rigor.

 

      So I think hard look situation makes the extremists in the general population rule what the court is doing, and I don't think that that is an appropriate way in which to run an administrative state. So that, I think, is the difficultly with hard look review. It's doing it on the wrong question. De novo for law, deference for questions of fact.

 

Prof. Kathryn Kovacs:  I just have to take up the Keystone Pipeline point. As a matter of fact, the federal government, federal agencies win, I think, somewhere in the neighborhood of 75 percent of APA cases, and the Keystone -- the problem in the Keystone case was not the court fly specking. The problem that the court identified was that the administration changed positions without justifying the change in position.

 

      And that's one of the things we've seen so much in the past year and a half, the administration trying to change policy and getting struck down some, what is it, 38 times now in attempting to change policy because they're not supporting the decision enough. And yes, I think agencies should have to justify their decisions, but I do agree with Richard that hard look review -- the Supreme Court has never used that term. And I think the courts of appeal should probably get the message. Arbitrary or capricious was meant to be quite deferential.

 

Prof. Philip Hamburger:  I just want to observe that Kathryn earlier said that when there's a change of election, the President should be able to get his policies carried through quickly.

 

Hon. Britt Grant:  I shall now exercise my moderator's prerogative and move to the next question.

 

Questioner 3:  Yeah, I was wondering to what extent the psychology of the regulator comes into play? And what I mean by that is I spend my days litigating for and against decisions of a particular state agency in my home state that is almost exclusively populated by engineers and scientists. And no offense to engineers and scientists, but I tend to find that by education, training, and temperament, they're particularly resilient to the idea that deliberative processes can come up with a better solution to problems. They tend to grab a solution and stick with that, and they view the APA and the due process requirements as merely check boxes on the way to get to where they ultimately want to go, and not as the notice, and the hearing, and the deliberative process to try to get to a better decision or to consider alternative viewpoints. And so I'm just curious -- how do you see that as an -- how do you create a structural system whereby you get the benefit of their expertise and their knowledge of the agency, but actually temper that so that they're not just checking off the boxes of the APA rules and the due process requirements?

 

Prof. Philip Hamburger:  So I think that's a profoundly important question. I think we can question expertise. Expertise is usually old science. We all know about expert bias, right? Experts fall in love with their area, and they don't adequately consider other matters. And the solution to all of this, I think, is to distinguish between expertise and expert decision making. The administrative state has justified on the grounds of expertise, and it's assumed that experts should then decide. But the reality is we need scientific input -- whether that's expertise is a different matter -- but experts surely should be able to talk, but that doesn't mean experts should decide.

 

      And we have a solution to this, oddly enough. It's actually up to date, even if old. It's called the Constitution. We can have agencies that can be filled with experts, hopefully more expert than we have since they produced orange rivers and the like, but we should have expert decision -- input. Experts can draft bills if they wish and just send them up to Congress to decide. And then we get more balanced decision making that's more responsive to the people.

 

Hon. Britt Grant:  Do you have a response?

 

Prof. Jon Michaels:  Yeah. So I'll just say that I think that's right to focus on there's certain technical aspects where, for instance, lay participation wouldn't be particularly useful. And in those cases, one way to think about this is that what are the private interests that are mobilized to care about a particular technical question? And one of the issues to think about is are those private interests better able to be heard and dealt with within an administrative proceeding or within a legislative proceeding?

 

      And my general sense of this, and my general take on this is that agencies are much more amenable to hearing from all different sides on an issue, particularly because of judicial review, because someone's going to say, "Well, did you -- why didn't you take into consideration this comment?", or "Why didn't you take into consideration this position?", which the legislature never has to justify. And secondly, as it turns out that we do have a Congress, but that Congress is beholden to special interests of a monied sort, and so it's not clear that everyone would get the same fair shake. I could submit comments on rules every single day. I can't get a meeting with members of Congress, probably, any day.

 

Hon. Britt Grant:  We have time for one last brief question with a brief answer.

 

Mark Chenoweth:  Mark Chenoweth with the New Civil Liberties Alliance. I wanted to come back to Professor Hamburger's earlier question to Professor Michaels and Professor Kovacs and just narrow it a little bit. And that's to say why are you comfortable with the loss of civil liberties in administrative adjudication? He went through all of the things that you lose. There's no jury. You can't even contest constitutional problems with the prosecutions being brought against you. There's no federal rules of evidence, et cetera, et cetera. There's also no expertise with administrative law judges. None of the five ALJs at the SEC practiced securities law before they became judges at the SEC. That's crazy, right? So there's no positive tradeoff with expertise. Why are you willing to give up all of the due process rights in order to have administrative adjudication when we could just get rid of those 200 judges and put all these cases into Article III courts?

 

Prof. Kathryn Kovacs:  Well, the Supreme Court has decided that post-deprivation process is sufficient. Now, I think that it's been a very long time since the Supreme Court has taken procedural due process doctrine to task. I think there are -- the way agency adjudication has developed and the role that -- and this gets back to the earlier question about separation of functions within agencies, an issue that Congress hasn't addressed since 1976, I agree that post-deprivation process is sufficient in most cases. If the --

 

Mark Chenoweth:  -- Then the process is the punishment because it takes a decade --

 

Prof. Kathryn Kovacs:  -- Yeah. And I take --

 

Mark Chenoweth:  -- and no one can afford it.

 

Prof. Kathryn Kovacs:  And Philip's point is well taken that a lot of litigants may be afraid to go to court because it gets them on the bad side of the regulating agency, but I do think that procedural due process doctrine is ripe for a new look from the Supreme Court, and I sure wouldn't be surprised to see it.

 

Prof. Richard Epstein:  One sentence on this, which is what you do is you take all the adjudicative function outside the administrative agencies and to put them into either Article I or Article III Courts. Period. Nothing else will do.

 

[Applause].

 

Prof. Kathryn Kovacs:  Look, there are good reasons why Congress --

 

Prof. Richard Epstein:  -- Not in this case.

 

Prof. Kathryn Kovacs:  -- put these adjudications into agencies, including not just adjudications about public rights --

 

Mark Chenoweth:  -- But why does the agency get the choice to go to Article III courts? How about you let the defendant have the choice about going to Article III courts --

 

Prof. Kathryn Kovacs:  -- But it's not the agency's choice, it's Congress's. It's Congress that made the decision to do this and the Supreme Court that gave it its blessing.

 

Prof. Richard Epstein:  So both take a pass on a serious structural issue.

 

Hon. Hon. Britt Grant:  This question is a great example of our commitment to debating ideas freely here. I think we've done a lot of that on this panel, and I thank you all for your attention. Thank you to all of our panelists. And those of you who have questions, I hope you'll approach them outside and pose them.

11:45 a.m. - 1:30 p.m.
The Future of the Past: Stare Decisis

2018 National Lawyers Convention

Topics: Federal Courts • Litigation • Supreme Court
The Mayflower Hotel - State Room
1127 Connecticut Avenue, NW
Washington, DC 20036

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Stare decisis – “to stand by things decided” – is the doctrine under which courts follow their own precedents, and precedents of superior courts. Proponents of stare decisis assert that it promotes predictability in the law, reduces revisiting settled issues, and increases reliance on judicial decisions, all while enhancing the legitimacy of the judicial branch. Critics of stare decisis assert that a court decision in error should not be followed blindly, and over-reliance on stare decisis can cause errors to become set in concrete. A handful of recent opinions suggest that some in the judiciary might be open to revisiting the contours of the doctrine of stare decisis. Should it be reevaluated? Does it matter whether the issue under consideration is statutory or constitutional? Does the time in history of the original decision matter? What is the future of this doctrine?

  • Prof. John S. Baker, Jr., Visiting Professor, Georgetown University Law Center
  • Hon. W. Neil Eggleston, Partner, Kirkland & Ellis LLP
  • Mr. Kannon K. Shanmugam, Partner, Williams & Connolly LLP
  • Moderator: Hon. Amy Coney Barrett, United States Court of Appeals, Seventh Circuit

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2018 National Lawyers Convention

The Future of the Past: Stare Decisis

November 15, 2018, at 11:45am

 

 

Featuring

Prof. John S. Baker, Jr. - Visiting Professor, Georgetown University Law Center

Hon. W. Neil Eggleston - Partner, Kirkland & Ellis LLP

Mr. Kannon K. Shanmugam - Partner, Williams & Connolly LLP

Moderator: Hon. Amy Coney Barrett - United States Court of Appeals, Seventh Circuit

 

 

 

Hon. Amy Coney Barrett:  We're going to go ahead and get started, if everyone's ready. I'm Amy Coney Barrett, and I am a judge on the Seventh Circuit. I am particularly delighted to moderate this panel because before I was a judge, I was a law professor. And I spent some of my time thinking and writing about our topic for today, stare decisis.

 

      So stare decisis is a bedrock principle of our system, and it has many benefits. It produces stability in the law. It promotes efficiency because judges don’t have to reinvent the wheel. And it increases the public's confidence in the impartiality of the law. But stare decisis also has its kinks. And so we're going to solve all of stare decisis's problems today with our all-star panel.

 

      We've got John Baker, who is a distinguished scholar and long-time law professor himself. John has written about former-Chief Justice Rehnquist's approach to precedent. We have Kannon Shanmugam, who is a Partner at Williams & Connolly and one of the nation's most prominent appellate lawyers. And we have Neil Eggleston, who is a Partner at Kirkland & Ellis and has an impressive record of public service, most recently as President Obama's White House Counsel. I'm going to keep each of them, to the best of my ability, to eight minutes because we’d like to save the balance of the time for Q&A from the audience. We're going to start with John.

 

Prof. John S. Baker:  Thank you, Judge Barrett. A couple of years before he was confirmed as Chief Justice, then-Justice Rehnquist came to the LSU law school, and one of my colleagues asked him about his views on precedent and stare decisis. Well, it's obvious that the Justice had been asked this question before because he had a very ready reply. He said, "Well, if a case has been decided a year or two ago by 5-4, I don't give it much weight. But you better have a very good argument if you want to overturn Marbury v. Madison."

 

[Laughter].

 

      Thank you for the laugh. I appreciate that. But more than the laugh, there're actually a couple of important lessons from what he said. For one thing, not long after, his famous opinion in National League of Cities v. Usery, decided 5-4, was overturned by Garcia v. San Antonio Metro 5-4. Now, I think the only thing that he agreed on with the 5 that voted against him was they all agreed that a recent precedent doesn't have a whole lot of weight in the Supreme Court if it's decided 5-4. But there's also something else that you may not have noticed. At least implicit in what he said about Marbury is that it's primarily a precedent. And, indeed, law schools for 90 years or more have really approached it this way, and a lot of people often don’t even think about it. And it's both on the right and the left. Is -- what we’ve called judicial review since the beginning of the 20th Century -- is that really grounded just in Marbury? Or is it grounded in the Constitution?

 

      There're many on the right who believe, at least historically, that it's illegitimate, and therefore we have to restrain it. And there're many on the left who believe it's illegitimate and we need to expand it. But either way, they don’t think it's really legitimate. On the contrary, however, Justice Scalia used to say—quite rightly—that Marshall merely plagiarized Marbury from Federalist 78. Now, you may wonder, since this is the section on litigation, what all this has to do with most of you because most of you are actually litigating in the lower federal courts and the chance of getting to the Supreme Court is very slim. (And I'm being told I better speed up).

 

[Laughter].

 

      I hope to tell you, lead you to the notion that there's a lot you can do with precedent if you understand its background. So three quick points I want to go over. Understanding the nature of precedent and stare decisis at the time the Constitution was written; two, how separation of powers changes our understanding; and three, what you can do with this in the lower federal courts.

 

      At the time of the Founding—first point—there's a broad common law background, yes. But Britain has moved from the notion of precedent as primarily customary to really that it is tied to Parliament; that is, after the Revolution of 1688-89, the notion of precedent hardens. And it hardens because when a court has a holding and the Parliament does nothing, the precedent becomes law—not because of the courts, but because of Parliament's inaction equated with action.

 

      Going along with this was their attitude about opinions. Opinions were, essentially, seriatim – each judge wrote an opinion. And what was the holding was the holding that they basically agreed on. The rest of it was opinion, just opinion. That's all it was.

     

      Well, when we get to the Constitution, yes, it is true that, of course, Hamilton says in Federalist 78 that judges are to be bound down strictly by precedent. But what did he mean? Well, for one thing, all of the Federalists thought that the common law background was actually in some way incorporated into the Constitution. That was one thing. Two, separation of powers obviously changes that link to Parliament. Parliament's no longer. Courts in the federal system are now, under separation of powers, distinct. Instead of answering to Parliament, they're supposed to be answering to the Constitution.

 

      But this posed a problem for Marshall. What's the common law of the Constitution? The Constitution doesn't explain itself. It's like a blueprint, that's all. Marshall set out to have unanimous opinions in which he explained everything. And later, Story wrote his Commentaries on the Constitution, which according to -- his son said that Story set out to combine the Constitution, the Marshall Court decisions, and The Federalist. The Federalist explains the blueprint. And so you had that background that educated lawyers, until at least the Civil War, because of the Commentaries on the Constitution. But all of that gets replaced beginning at the end of the 19th Century with progressivism and Holmes and others talking about law as judge-made law. That's the biggest change that occurs. It comes through all of the law schools.

 

      Now, what can you do as lower court litigators and lower court judges? And I have one minute to tell you this. You may have noticed that we have a number of new originalist court-of-appeals judges. Given a narrow understanding of holding, which you already know anyway when you try to distinguish facts and holdings, it would be useful to many of these judges if, not only in plotting the holdings of the existing precedents from the Supreme Court in your circuit, you try to give them alternative explanations that are originalist in nature so that what comes from the lawyers will go through the lower courts and they in turn will feed it up to the Supreme Court. Thank you very much.

 

Mr. Kannon K. Shanmugam:  Great. Well, good afternoon. My name is Kannon Shanmugam, and it's a great pleasure to be back at the National Lawyers Convention and to be a part of this really incredible panel. And it's a particular pleasure to be here with Judge Barrett, who clerked for Justice Scalia the year before I did, and who, in fact, interviewed me. Judge, welcome back to Washington, and I hope you'll come back for good sometime soon.

 

[Applause].

 

      There's this cliché that everyone will be aware of about eating Chinese food. And I was sort of reminded about that cliché when I was asked to serve on a panel about stare decisis. I think attending a panel on a subject like this will be satisfying while you're here, but you'll probably be hungry in about 30 minutes because this is one of those hopelessly amorphous topics—no criticism of The Federalist Society. It's just inherent in the nature of this concept. And so I thought I'd start by offering a few reflections as a practicing lawyer and as a lawyer who practices, perhaps most visibly in the Supreme Court, but really primarily in the courts of appeals and occasionally in district courts as well.

 

      Perhaps it makes sense to just sort of start with some thoughts about what we are talking about here. I'm a former Latin major, so I always love it when I'm asked to talk about a subject in Latin. And stare decisis is, of course, a Latin phrase. And it literally means to "stand by what has been decided." Actually, for the people who are real Latin nerds, decisis is in the ablative form and that can actually mean a variety of things. It can mean to stand by your decisions or with your decisions, or best of all, to stand on your decisions. And that is really what we're discussing today, and it's an issue that can arise, as Professor Baker said, in a wide range of contexts.

 

      Historically, scholars have distinguished between vertical stare decisis and horizontal stare decisis. In my view, I'm not sure that vertical stare decisis is really stare decisis at all. It's just the basic notion that lower courts are bound by decisions from higher courts. And that is a principle that is effectively embedded in the Constitution. It's really embedded in Article III Section 1, which distinguishes between the Supreme Court and inferior courts – the implication being that inferior courts really ought to listen to the Supreme Court. And at least most courts of appeals tend to do that.

 

      What we're really talking about when we're talking about stare decisis, I think, is horizontal stare decisis. As Judge Barrett has pointed out in her really thoughtful articles on this subject, what that means really varies depending on the level of court that you're at. If you're a district court, it doesn't really mean very much at all because district judges are not bound, even by decisions by other judges within their districts. And, similarly, the Supreme Court applies stare decisis in a less than entirely binding way, and I'll talk about that in a minute. I think where stare decisis has the most force in our system is at the court-of-appeals level, where there is a pretty established rule that, where a prior panel has decided a question of law, a subsequent panel is bound by that decision, and that rule of law can only be overturned by the en banc court. And we'll come back to that in a minute as well.

 

      I really want to talk about two aspects of stare decisis in my opening remarks, and I'm sure we'll talk about others as the panel proceeds. First, let me talk about the Supreme Court, and in particular about stare decisis in the constitutional area of this subject that Professor Baker focused on. This is usually what people are talking about when they talk about stare decisis. And it is, of course, the most visible area in which stare decisis is discussed, and the Supreme Court has articulated a set of factors to be taken into account in the analysis.

 

      Now, the Supreme Court standard is a notoriously pliable one, and that is probably inevitable because as nice as it would be to reduce stare decisis to a set of scientific criteria, that would probably be a hopeless aspiration. And one might wonder why we have a doctrine of stare decisis at all. After all, our judges and justices take an oath to uphold and defend the Constitution. They don't take an oath to uphold and defend the United States Reports or the Federal Reporter. And yet, if we were not to have stare decisis at all, I think we would all agree that that would be an unfortunate outcome because after all, as Judge Barrett put it in one of her articles, "a new majority cannot impose its vision with only votes." If judges gave no heed to prior precedents, the law would be uncertain. There would be a constant vacillation depending on the preferences of individual judges and justices. And so I think all agree that stare decisis serves important values.

 

      The challenge, of course, is in figuring out how to apply the criteria, and the Supreme Court has articulated criteria that sort of fall into two categories. The Court has made clear that merely concluding that a decision is incorrect is insufficient. You have to have a special justification to overturn a prior precedent. And those justifications have fallen into two categories. There are those that relate to the merits of an underlying decision: Was the decision not just incorrect but profoundly so? Has it been called into question by subsequent decisions? Did it employ an improper methodology in reaching its result? And the Court has sort of focused on those considerations to some extent.

 

      And the Court has also focused on more pragmatic considerations, such as the workability of past precedent and the issue of reliance. And the Court has uniformly held that reliance is a relevant consideration, even though it's a consideration that, by definition, comes into play only in a subset of cases. And really only primarily in cases involving individual rights. And really only in cases where prior decisions have recognized individual rights. It's hard to know how the concept of reliance would apply in the context of structural constitutional principles. You know, if you're dealing with, say, a question of administrative law is the reliance of a low-level administrative officer on a deference doctrine reliance in the sense that the Supreme Court thinks? I think probably not, but that is a consideration that, again, the Court has uniformly applied.

 

      I want to offer a quick thesis, and then I'll just identify with the Judge's leave one thought about the other principle area of stare decisis. I think that a lot of the Supreme Court's considerations really boil down to a focus on notice, and a focus on notice to parties and to the world at large that the Court is reconsidering a past precedent. And I think that that is really what animates a number of the factors in the Court's stare decisis framework. The Court really wants the world to be aware of the possibility that it's going to reconsider a precedent so that parties can adjust their behavior and to give parties and amici the opportunity to weigh in before the Court, in fact, does so.

 

      Let me say just a word about the other principle area of stare decisis – courts of appeals. It is true that the articulated rule at the court-of-appeals level is that a panel will not revisit a prior legal holding without en banc review. But in my experience as a litigator, that is a rule that is very much honored in the breach rather than the observance. In the words of one commentator, panels often make nit-picky distinctions about cases, aggressively characterized statements in prior opinions as dicta, ignore inconsistent authority, or reject or disregard such authority without expressly overruling it. And, again, in my experience I think that where panels want to avoid earlier decision on the court-of-appeals level, they have many ways of doing so.

 

      And I think one of the real problems in our system at the court-of-appeals level is that court of appeals do not police inconsistencies among panel decisions as aggressively as, in my view, they should. The en banc mechanism exists, both to police those inconsistencies and to revisit prior incorrect decisions. But it is used incredibly sparingly. In this country last year there were only 36 en banc oral arguments. That's fewer in the entire country—en banc arguments—than there were cert grants at the Supreme Court level. And as a result, I think one thing that we see is continued disuniformity and an unwillingness of courts of appeals to correct incorrect decisions, and instead a desire to leave that to the Supreme Court.

 

      So I'm sure we'll discuss all these topics as we get into the discussion. But, again, it's great to be here. Thank you very much.

 

Hon. W. Neil Eggleston:  I'm a little taller, so I'll raise this a little bit. So I'm Neil Eggleston. I mentioned to Dean Reuter before I got up here that -- obviously I'm out of the Obama administration; I probably otherwise would not be attending these lunches except for being invited periodically to be on the panels. I've told Dean before -- as I said, before we started, that people always treat me politely in these circumstances, but they always look at me in bemusement about how wrong I am.

 

[Laughter].

 

      So I anticipate that will happen again, and I'll tell you I'm fine with it as long as you are.

 

[Laughter].

 

      So as you might guess, I'm thinking about this topic a little differently over the last year because of the recent installation of two Justices. And I want to talk a little bit about that. Judge Barrett gave some reasons for the rationale for stare decisis. I actually think about it in a little more of a global sense, which is that it's a recognition that the Supreme Court is an institution. And that it's been around for hundreds of years, and it’s had -- you Supreme Court-wonks are probably better at this than I am, but I think the Chief Justice may have changed how to count Justices recently. He's counting Chief Justices differently than Associate Justices. But I think there've been 110, roughly, Justices of the Supreme Court. They were all -- got their seats through the same constitutional process that the current group of nine has. And I think part of the concept of stare decisis is a recognition that the Court does not exist for the current members at all, but it exists in a continuum. And at the risk of using a little of my time…

 

      So I was in the Clinton administration in the White House Counsel's Office and left and then had the fortune to come back and work in the Obama administration. And the first time I didn’t sense this, but the second time I very much sensed this, which is it’s the same building that we left at the end of the Clinton administration. The Bush administration occupied it in between. In the Clinton administration, we were just temporary tenants; the Bush administration was temporary tenants; and in the Obama administration, we were temporary tenants; and we had a duty to the institution. I felt much more strongly, I think, having come back again. And I would just urge people to think about the value of the institution and how important stare decisis is to that.

 

      Now, let me make one other point which I think may sound simplistic but I think also matters, which is all nominees at their confirmation hearings talk about how important stare decisis is. That's one of their key notes. And it's because the Democrats are all worried about certain cases and the Republican senators don’t really care as long as they get confirmed if they're Republican nominees. But stare decisis applies when the Justice would not decide the case the same way. That's what it means. You don't need stare decisis if you're the Justice and you would decide the case the same way without stare decisis. This is a reason to go a different direction than you might have been. That's the whole function of stare decisis. And the Court has developed a whole series—a cannon set—of precedents about how to deal with that and how to think through when a separation from a prior precedent might be appropriate.

 

      I'm a little worried, having read a fair amount of the literature related to stare decisis that's come out in the last couple of years, that stare decisis and originalism are starting to interact with each other; that there has become a sense that the prior Justices didn't recognize this superior method of interpreting the Constitution. I think Professor Baker made some reference or an oblique reference to this -- that somehow the prior Justices didn't have the benefit of this superior method of interpreting the Constitution, which is originalism. And so the prior decisions are not as worthy of respect as other decisions might be in the originalist era. I just want to warn everybody: theories come and theories go and Justices get appointed and Justices don’t get appointed. But it remains the same institution throughout and decisions that are rendered now will be subject to review in the future and disrespect for stare decisis is not limited only to the current time.

 

      I guess the other thing, just talking a little bit about the institution -- and I really think the Supreme Court is at a bit of a fork in the road, if you will, which is we've seen -- and it's not just over the last two years. It's over a period of time -- but that the other two branches of government aren't really functioning very well. I don't think that Congress is going to function any better, frankly, with a Democratic House and a Republican Senate – in fact, it may in some ways function even worse than it would before. The presidency, obviously, is an area that we read about in the paper every day.

 

      I think this Supreme Court has to think very hard about whether it is going to become enmeshed in the partisan morass or whether it's going to continue to be an institution of enormous respect. And I think that how the Court deals with stare decisis, particularly in cases that the public might otherwise think of as essentially partisan cases, it is important. If they start reversing a bunch of decisions by 5-4, whether they're recent decisions or not recent decisions, then I think that the Court has a real risk of losing what I still think is quite a high stature and position in the country. And I think that one of our institutions should have that. And I would really not like the Supreme Court to delve down to the level of the other two at the moment.

 

      So anyway, I care enormously. I also clerked in the Supreme Court, although many Chief Justice's ago, for Chief Justice Burger. And I'm enormously fond of that year, and I'm enormously fond of the institution. I recommended Merrick Garland to President Obama to be a Justice, and there are a lot of people who think the latest—nobody in this room, obviously, but a lot of people in the country—think the latest two Justices shouldn't actually be sitting in their seats. And I just think we have to be really careful at this time because I think the institution could suffer for lack of recognition, frankly, of the importance of stare decisis. So thank you.

 

Hon. Amy Coney Barrett:  Well, I'm going to exercise the moderator's prerogative of asking each of our panelists a question, and then we can open the floor and take some questions from the audience that the panelists can then answer and get a conversation going.

     

      So I'll start with John Baker, and my question for you, John, you talked about The Federalist Papers and a historical view of stare decisis. So do you think that stare decisis is constitutionally required?

 

Prof. John S. Baker:  Do you mean constitutionally required in that we would put it to a decision or do you mean that it is part of the constitutional framework?

 

Hon. Amy Coney Barrett:  Part of the constitutional framework in the sense that if courts, as part of the judicial power under Article III, -- so that if they entirely ignored precedents, that they would actually be acting contrary to the Constitution.

 

Prof. John S. Baker:  I believe that. And that -- Federalist 78 is an answer to Brutus. And Brutus, the anti-federalist, was arguing they would be the supreme power. And that's why Hamilton is assuring them they are going to be tied down. My point only was that our understanding of precedent today and their understanding was not the same.

 

Hon. Amy Coney Barrett:  Okay. So this next one is for Kannon. Kannon and I talked a little bit about this before the panel, so I thought I would ask him to speak a little bit about it now. And that is how, as a litigator who practices in the courts of appeals, he finds unpublished opinions and their role and precedent?

 

Mr. Kannon K. Shanmugam:  Yeah, I think the practice of unpublished opinions, which does vary considerably from circuit to circuit—there's some circuits that do it quite often; there's some like Judge Barrett's circuit that do it virtually never—I think that subject is very much wrapped into this subject of stare decisis for the simple reason that the availability of unpublished opinions gives judges a mechanism for avoiding the effects of stare decisis on both ends. It allows judges to, say, if there's an earlier decision with which they disagree that their subsequent decision isn't going to have any precedential effect, and so you don't need to worry about any inconsistency. And conversely, if a judge has a really difficult or uncomfortable question of law, they can issue a decision knowing that it is not going to bind subsequent panels.

 

      And, again, I think that all of this comes back to an unwillingness to use the available mechanism – the mechanism of en banc review – to ensure the consistency and rectitude of the court-of-appeals' decisions because, after all, we indulge this fiction that a three-judge panel of a court of appeals is the court.

 

      But where the court as a whole takes a different view, it seems to me that particularly given the stare decisis rules in effect, a court really does have a duty to correct the incorrect panel decision. And I think that that is an outcome that also, I think, would really aid the Supreme Court in its own decision making because one thing the Supreme Court doesn't do is to police internal inconsistencies within particular circuits. And in some circuits in particular, the panel that you draw can be very significant to the outcome.

 

Hon. Amy Coney Barrett:  Okay. So my last one is for Neil. So I entirely agree with you, Neil, about the importance of stare decisis in maintaining an institution, and the obligation that judges—and you were referencing the Supreme Court in particular—to the Justices’ responsibility to the institution itself. At the same time, stare decisis itself is a doctrine to which the Justices owe stare decisis effect. And as the Court as always articulated that doctrine, it's always said that it’s not absolute, that there's a time when cases should be overruled and errors corrected. And if that weren't true, Plessy v. Ferguson would still be the law of the land. So there has to be some times in which precedent ought to be overruled. So I wondered what thoughts you might have about when overruling would not betray a Justice's institutional obligations.

 

Hon. W. Neil Eggleston:  So that's a good question. And thanks for giving me the opportunity to elaborate on that. Obviously, I think there are cases -- and there're a whole series of them, Plessy would be one; and in the -- the Supreme Court in the travel act -- or I'm sorry, the travel ban case, maybe overruled Korematsu, or wrote a note about it. I don't know what exactly you'd say they did. But there're certainly occasions where prior precedent are so undermined that overruling them would be completely appropriate. And I think, actually, much of the -- there's the Dickerson, I think it's called -- the Miranda case, where it decided not to overturn Miranda and went through a number of these various different factors. I think the factors are basically accurate. I think, as Kannon said, the problem with the factors and whenever -- I think, as usual, Justice Breyer in one of his opinions had a six-part test. So when you have a six-part test, the only thing longer than that would be his hypotheticals.

 

[Laugher].

 

Mr. Kannon K. Shanmugam:  I had one last week that apparently weighed in a three minutes and eight seconds total, so…

 

Hon. W. Neil Eggleston:  Unfortunately, that was out of your time, right?

 

Mr. Kannon K. Shanmugam:  It's his time, not my time.

 

Hon. W. Neil Eggleston:  So…now I forgot where I was headed. Anyway --

 

Mr. Kannon K. Shanmugam:  Like Justice Breyer.

 

Hon. W. Neil Eggleston:  -- with his six-part test. The problem with it is the courts can then manipulate it anyway they want, really, to come out with a conclusion.

 

      I think that, as an institution, the Court should be very cautious about overturning prior decisions. And I think things like overturning a 5-4 decision with a 5-4 decision because there've been changes in two Justices since the last opinion, I think that's a place where they should think to themselves, “Are we actually applying our precedent or are we just exercising power?” And if they're just exercising power, as they now have five -- and, frankly, the Justices on the Supreme Court I think for 50 years have been majority appointed by Republican presidents. What hasn’t been true -- and I don't know this to be true, but I think we all suspect that this five will be more unified than the groups in the past that have had various different Justices who went various different directions. And so what I'm worried about is that those factors will be manipulated to really, essentially, just justify an exercise of power.

 

Mr. Kannon K. Shanmugam:  Can I just respond to one thing --

 

Hon. Amy Coney Barrett:  Absolutely.

 

Mr. Kannon K. Shanmugam:  -- that Neil said earlier. I would respectfully disagree with the proposition that there is some particular tension between originalism and the doctrine of stare decisis. And, actually, I would point to Judge Barrett and my former boss, Justice Scalia, as sort of an example of that. Justice Scalia once did famously refer to stare decisis as an exception to originalism. But I think in practice, he was a big believer in stare decisis, certainly more than other originalists, like Justice Thomas, on the Court. And I don't think that there's anything inherent in that particular theory of constitutional interpretation that puts it more than—stare decisis—than any other theory, other than the fact that it's a -- it has been in the ascendency, comparatively recently, across the grand arc of constitutional interpretation.

     

      And so I think that the question of how to apply stare decisis is one that should really be considered kind of independent of one's substantive theory of constitutional or statutory interpretation. And very similar issues can arise in the context of statutory interpretation as well. The Court recently had a case, Kimble v. Marvel [Entertainment], where there was a very vigorous back-and-forth about a prior Supreme Court precedent on statutory interpretation that, I think it’s fair to say, was decided before 1986. And there was a debate about whether to adhere to that decidedly non-textualist decision. And, again, I think you have to try to come up with a theory of stare decisis that is a neutral one without regard to substance to the extent possible.

 

Hon. W. Neil Eggleston:  Can I --?

 

Hon. Amy Coney Barrett:  Yeah, absolutely.

 

Hon. W. Neil Eggleston:  Do you mind? Sorry. So I understand completely that there's not an inherent inconsistency between originalism and stare decisis. And I really wasn't referring, as much, to Justice Scalia as to some recent scholarship in the area, which, as I said, suggests a little bit that because the oath is to the Constitution and not to precedent and because the prior precedent didn't have the benefit of originalism, there's less need to do it.

     

      And let me just say on Justice Scalia, the fact that he recognized stare decisis as an exception has actually been one of the criticisms of his adoption of originalism as a -- if it's a doctrine, why do you have exceptions to your doctrine? You know what I mean? If that's what you think the appropriate interpretive doctrine is, then how can you admit that there is an exception? And he plainly acknowledged there were a number of exceptions. I'm not getting into originalism, but I do think that, at least in the recent scholarship, this is a sort of joining of concepts that I think we're going to continue to hear about.

 

Mr. Kannon K. Shanmugam:  Yeah, and I think if he were here, I think what he would say is that there are the values that Judge Barrett articulated at the outset that stare decisis serves, you know, these values in consistency and uniformity and predictability in the law. And those do count for something. I think that was very much his view.

 

Hon. Amy Coney Barrett:  Well, and I think he also said -- so Kannon, I'm just going to engage in channeling the Justice, now.

 

[Laughter].

 

Hon. Amy Coney Barrett:  But he did say, explicitly, that it's an exception to all theories because all theories would militate, sometimes, in favor of a result that's at odds with the precedent. But that all theories required Justices, as Neil said early on, to decide cases in ways that they would not otherwise decide if there wasn't precedent on the books. And so that can be true of a more pragmatic approach to interpreting the Constitution as well as to an originalist approach. Stare decisis truly is an independent or more neutral doctrine in that regard.

 

      I'm also going to give the panelists—we've had a little bit of conversation back and forth—a chance to ask each other any questions they would like before we open the floor.

 

Prof. John S. Baker:  I just wanted to say that I don't refer to originalism as a theory. I think of it as the oath that you take; that is a judge takes an oath to the Constitution as written. That's what originalism is. It's not that you take an oath to whatever vision you have of the Constitution. And that has to undergird the doctrine of precedent and stare decisis. And the problem is that for too many judges—and Justices—they're in the school of legal realism, otherwise known as what the judge had for breakfast that morning.

 

      And that kind of unprincipled—and it's not just on the left—that kind of unprincipled decision making creates a lot of these problems because they're not fitting it to the Constitution. Sometimes they're simply solving the particular problem, which is a common law way of acting in a certain sense. But as Justice Scalia said in his first book, the one published by Princeton, "We're common-law [lawyers] in a civil-law system." What he meant by that was a written text, which is what the common law did not have.

 

Hon. Amy Coney Barrett:  Okay, well, how about if I open it up? I don't think -- Dean, we don’t have a microphone that people can use? Is there hand-held? Okay, well, we have a hand-held microphone right over here, so if anyone would like to ask a question, can feel free. And if not, I'll fill some air time by coming up with some more.

 

      We have one, right -- yeah.

 

Clarke Forsythe:  Clarke Forsythe with Americans United for Life. Given the six factors of stare decisis -- as you alluded to, [those] are: settled, wrongly decided, workable, legal erosion, factual erosion, and reliance interests -- is there really any hope for much coherence between the Justices? Wouldn't it be better for the Court, perhaps, to say, “Was there error? How big was the error? And what's the cost of overruling the error?”

 

Hon. Amy Coney Barrett:  Kannon, I think that one was for you.

 

Mr. Kannon K. Shanmugam:  I'm not sure that there's that much daylight between the first way you articulated this standard in the second, which is to say that as I indicated at the outset, I do think that the Court's factors really boil down to the merits and how wrong was the decision. And there are various ways of articulating that. And then the more pragmatic factors that relate to the effects of the decision.

 

      And I do think—and this is somewhat in response to Professor Baker, who I largely agree with much of what he's had to say—I do think that this issue of whether the prior decision was not just wrong in terms of the outcome that a Justice looking at the issue today would reach free of precedent. But whether it reached that result for a methodologically inappropriate outcome is part of the analysis.

 

      And I'll say with regard to Justice Scalia that an example of this, I think, is -- there was a case that was decided the year that I clerked called Troxel v. Granville. It's not a case of particularly great broad or jurisprudential significance, but it was interesting because it was a case involving grandparent's rights and substantive due process. And Justice Scalia wrote a very short but I think very telling separate opinion in that case, where he said: Look, I, Justice Scalia, am obviously not a believer in substantive due process. There are these earlier cases like Pierce v. Society of Sisters in the context of parental rights. And I'm not sure that those decisions are right, but I'm just not going to be willing to extend them. I'm willing to abide by them, but I'm not going to be willing to extend them. And I think that that sort of reflects the way that he approached the balance between originalism and stare decisis. I think in his view if there was a decision on the books that he thought was wrong but that was not working much broader mischief in the law, he was perfectly happy to say that decision can remain in effect.

 

Prof. John S. Baker:  I would make the distinction there that he would do that on Bill of Rights questions but not on structural questions. On structural questions, he was ready to overturn Humphrey's Executor. That'd be pretty big.

 

Mr. Kannon K. Shanmugam:  Yeah. And I think that reflects his view that those are questions on which -- I mean, for one thing, again, as I indicated at the outset, I don't know that you can really readily apply the reliance factor as a thumb on the scale on those sorts of structural questions.

 

Prof. John S. Baker:  The only people relying on it are Washington law firms --

 

Mr. Kannon K. Shanmugam:  Right.

 

[Laughter].

 

Mr. Kannon K. Shanmugam:  I would that that were a significant factor in any of the Court's analysis.

 

Hon. W. Neil Eggleston:  And let's just say whatever the law is, it doesn't really matter to us. We'll deal with it.

 

[Laughter].

 

Hon. Amy Coney Barrett:  Next question. I think right behind you.

 

Joe Cosby:  Joe Cosby from Washington, D.C. I am kind of struck -- I mean, it's particularly when you're talking about the reliance factor, I don't think there could be a better example than Erie v.... the Railroad, overturning Swift because that was a bolt of thunder out of the blue. I mean, nobody was looking to overturn Swift. I don't think at the oral arguments that anybody suggested that. And that's clearly one of the most important precedents that we have now. And the reliance factor in that one . . . completely out. And I'm wondering as I'm listening to this, it sounds to me as though there may be a tension between those who'd want to rely on stare decisis in order to protect the practical questions that you seek to protect and someone who would be more inclined to be uncomfortable with stare decisis if it involves a logical issue, that it then becomes very difficult to fit the pieces of the law together under the particular approach or theory that you're using to interpret it because…

 

      So to kind of boil it down, what's more important when you're talking about stare decisis? Is it the practical factors and the things that you've got in front of you right now? Or is it the theoretical or the logical consistency in being able to have a rule that can be understood and applied along those lines?

 

Hon. Amy Coney Barrett:  John is eager to answer this.

 

Prof. John S. Baker:  Well, a couple of things. Again, to quote then-Justice Scalia -- I'm sorry, Rehnquist, who said to his student who asked a similar question, he responded, he says, "If you're looking for consistency, you're in the wrong business."

 

[Laugher].

 

      And the problem here is that, as wonderful a Justice as I think Rehnquist was, he was the ultimate legal realist. I mean, he was a federalist, but he was an ultimate legal realist. And he was just better at it than some of the other legal realists on the Court. You point to Erie. Erie was the only case, as far as I know, to ever declare a prior decision of the Supreme Court unconstitutional. And what that really marked was this huge shift from the way the Court had viewed things, and Swift says Court opinions are not law. Okay? And that drove Holmes nuts, and Brandeis vindicated Holmes in the Erie case. That foundation has a lot to do -- where you're stepping as to how you view precedent and stare decisis.

 

Hon. Amy Coney Barrett:  I'll interject one thing there too. One thing about Erie that is very interesting is that it overruled Swift, distinguishing between statutory and constitutional precedents, saying that only a question of statutory interpretation where involved and we might let it lie. But because this is a question of constitutional interpretation, then we're going to overrule it. And the Court has distinguished between statutory and constitutional cases because in constitutional cases, if it doesn’t correct the error, it can be corrected only by constitutional amendment, which is, of course, an onerous process. So the Kimble case that Kannon was mentioning earlier -- that was one of the reasons to not overrule it. It was a case of statutory interpretation -- the baseball antitrust exemption is an example of that. So I don't know if you all have views on that.

 

Mr. Kannon K. Shanmugam:  I wonder if there'll be some softening in that, and that may be reflected in the views of the dissenters in Kimble, in part because as Judge Barrett says, the rationale for this distinction is that amending the Constitution is really hard; amending a statute in theory should be easy. But as we see Congress getting ever and ever more dysfunctional and unable to pass even the most basic legislation, I wonder whether there'll be a sense that even amending a statue is not an easy thing to do. And I think that that has kind of effected the Court's statutory interpretation more generally. But I think on the specific question of statutory/stare decisis one could see that having an effect as well, particularly where you do have -- there're a lot of statutory interpretations, decisions on the books that bear no resemblance to how any of the current members of the Court would approach the statutory interpretation. If you go into that pre-1986 era, it's not hard to find decisions that don’t even attempt to confront the text of the statute at all. And I think Kimble and other cases reflect the problem of what happens when the modern Court encounters a precedent of that variety.

 

Hon. W. Neil Eggleston:  So let me sort of, frankly, agree with that. And it may be partially from my perch in the White House for the last three years of the Obama administration. But the civics class teaches you that Congress can change statutes if it sees fit, and both Houses pass a bill, and it gets put on the president's desk. But unless it's included in the Omnibus, which funds the government at the end of the year, it's just not really happening. I'm sure people in the room will know lots that has happened, but Lilly Ledbetter is probably the last one that I actually remember, which was early in the Obama administration, where the Ledbetter's decision was overturned by statute.

 

      I can't really think of one since. There probably are. There may be some in the sort of national security area, where the Court every once in a while does things that Congress doesn't like. But that sort of civics class approach, I think -- and particularly people like now-Justice Kavanaugh, who spent a fair amount of time in that milieu as well, is probably skeptical, that not to worry if this is a problem, Congress can just fix it. I think that people are unlikely to continue to think that.

 

Mr. Kannon K. Shanmugam:  I mean, think back to Northern Pipeline where the Court actually, famously and somewhat controversially, stayed its hand on a statutory interpretation question so that Congress could have a chance to amend the Bankruptcy Act. I'm not sure that the Court would ever do that nowadays because they would have no confidence that Congress was going to act if there was a problem that needed Congress to address.

 

Hon. Amy Coney Barrett:  Right there in the back.

 

John Giokaris:  Thank you. I'm John Giokaris. I'm with the Chicago Federalist Society. I'm going to ask you guys to handicap the Court on stare decisis going forward. Up until now, the Roberts Court has sort of established a reputation for being the stare decisis Court. Previous Courts, according to an analysis from the Volokh Conspiracy, the Burger, Warren, and Rehnquist Courts would overturn a precedent of about -- an average of two to three per term. And the Robert's Court, at least up until recently was an average of about one per term. This past term was an exception. I think they overturned three major precedents, which was a lot of for them. But going forward do you still see the Roberts Court as being the stare decisis Court, or is that average going to bump up more? And what do you say to the theory that a lot of the bad cases have already been overturned at this point so there might not be many left to have to do it?

 

Hon. W. Neil Eggleston:  So I'm certain people could think of others they don’t like, actually.

 

[Laughter].

 

      But look, my opening remarks were largely a cry to the Court to be cautious about exercising its newfound power. I don't really know how it's going to come out. I'm going to quote something that I read getting ready for this, but I want to be quite clear that I've not checked it myself, so it may not be accurate. So if people are tweeting, don’t be too vicious about it. But there is something that I read that said that Justice Gorsuch in 60 cases suggested that 10 of the Court's precedent should be reconsidered last term. That's a lot. They weren't all at issue precisely in the case that was under decision, but that's a lot to suggest should be reviewed. And so, look, I hope that the Court will recognize the situation that it's in at the moment and will proceed with great caution. And ever since November of 2016, I'm out of the prediction business.

 

[Laughter].

 

Mr. Kannon K. Shanmugam:  I have a couple of thoughts, but John, do you have any?

 

Prof. John S. Baker:  I was just going to refer to the Wayfair case which overturned things on a non-ideological, basically, issue. Internet taxation – a lot at stake in there. But it's also ripe for further overturning because Thomas and Gorsuch went along with the narrow holding, but it's pretty clear that they basically don’t agree with the dormant commerce clause. So what does that portend? A lot more unsettled precedent.

 

Mr. Kannon K. Shanmugam:  Yeah, and I would just add a couple of things. First of all, I think it really is true, just as an empirical matter that the Court overturned precedents more frequently in the pre-Roberts years. The irony is that the very first case that the Chief Justice argued, a fairly quotidian question involving the Double Jeopardy Clause, was a case where the Court overturned its decision, like, eight years later. And this was, of course, in the days of the Rehnquist Court. And I think it's largely because, I think, the Chief Justice is very reluctant to overrule precedent unless there's really no choice but to do it. And there're a number of areas of the law in which you could argue that the Court, under his leadership, has sort of gutted prior precedents without expressly overruling them and then conversely cases where the Court has said that prior precedents are overruled in the Court of history – a Court that I hope to appear in front of one day --

 

[Laugher].

     

      -- since that's not -- that's still one on my bucket list. But I think in all seriousness, I think that the Chief Justice doesn't -- I think he doesn't like the optics of the Court being seen to overrule prior precedent. Sometimes there's no choice because that's the sole question before the Court, as was true in South Dakota v. Wayfair. And, of course, there he famously dissented from the overruling of Bellas Hess and Quill.

 

Hon. Amy Coney Barrett:  I'll add—and I know Kannon won't disagree with this—that the Court does have a choice; it just happens earlier, in the cert grant. So a way that the Court, I think actually a primary way that the Supreme Court contributes to stability is not to grant cert when the question presented is, “Do you want to overrule a precedent?” And I think that if the Court is looking to keep things calm, it will be in the nature of that and just declining to take up cases in which overruling precedent would be on the table.

 

Mr. Kannon K. Shanmugam:  Can I also defend Justice Gorsuch from what Neil said a little bit? I do think that when a Justice is writing separately, it's pretty rare for a Justice to confront the hypothetical question of whether those decisions, in fact, are now overruled. There would be something artificial about doing that. And so I think that when Justice Gorsuch or Justice Thomas writes a separate opinion that attempts to kind of reason from first principles, I don't think that you can always say that if the Justice was confronted with the question of whether or not to overrule the precedents, the Justice would, in fact, do so. I think those sorts of opinions, obviously, are very influential in directing the law, and I would respectfully submit that there's probably no Justice who's been more effective in that regard than Justice Thomas over the last 20 or so years. But I think that it's sort of a quite separate question when you're actually confronted with a binary choice, because that's where all these other considerations come into play.

 

Hon. Amy Coney Barrett:  Another question? There's one in the back of the room.

 

Ian Millhiser:  Thanks. Ian Millhiser with ThinkProgress. I think this is primarily a question for you, Kannon, but if other folks want to weigh in, I'm open. You drew this distinction between structural decisions and not-structural decisions, and how there might be less of a call for stare decisis in structural cases because there's fewer reliance interests. And I just wanted to tease that out because I'm not sure if that's empirically true. Like, I mean, it is the case that if we're talking about changing administrative law that the defendant might be the United States or might be a federal agency, but if it's an environmental case, like power plants have built their plants relying on this interest and they would've -- relying on the regulation being there and they would've had a different -- they would've built it differently otherwise. And I could give an example from the labor context. I could give an example from the healthcare context. So I'm just trying to figure out how do you draw that box when there will always be third parties who, even if they aren't involved in this particular litigation, have made decisions based on the regulation and, in some cases, have benefited tremendously from the regulation?

 

Hon. Amy Coney Barrett:  Well, I'll add onto the end of Ian's question, too. Wickard v. Filburn – is that structural?

 

Mr. Kannon K. Shanmugam:  Well, to sort of tackle the first part of that, I think what makes questions of administrative law a little bit different, at least if you're thinking about sort of the questions about Auer, and Chevron, and the like that have been very much in the news, is that those questions seem one step removed from the immediate question that a court is considering, which is, of course, is this particular regulation valid? Should this particular statute be interpreted in a particular way? And, obviously, the interests of private parties comes into play in a very real sense with regard to that specific question. That individual litigant, presumably, doesn't care so much about whether or not Auer is still a good law, except insofar as it implicates their particular interest in that particular regulation or statute. So I think that that's one potential ground for distinction.

 

      I won't profess to be enough of an expert in the Court's overall stare decisis jurisprudence to know, for instance, how the Court has looked at reliance interests in the Commerce Clause context and whether they've taken into account the interests of individual parties in those particular contexts. But I do think it's fair to say that when you're dealing with these structural constitutional questions, at a minimum—and, again, subject to exception—those individual interests tend to be a little more indirect.

 

Hon. Amy Coney Barrett:  Go ahead, John.

 

Prof. John S. Baker:  I want to talk about Wickard for a minute. I'm glad you brought up Wickard.

 

Hon. Amy Coney Barrett:  I thought it might stir things up a little bit.

 

[Laugher].

 

Prof. John S. Baker:  I think that's a good example of how you can -- and I've done it before. I've gone back and looked at all the Commerce Clause cases leading up to Wickard. And if you take a narrow approach to the holding, you can uphold all of those cases before Wickard without all the language in those cases. You can leave those cases standing; you can't leave Wickard standing if you really want to go back to an understanding of the Commerce Clause as you find in Gibbons, which was extremely textual. It actually read the words and applied the words – an unusual thing.

 

      There is no such thing as the Interstate Commerce Clause. That's a term that comes from a statute. Go back and read the text. Reread Gibbons, and then you can look at those cases differently.

 

Hon. Amy Coney Barrett:  I think reliance interests, too, can be structural or government. The government can have reliance interests, not just individuals. And I think that the formulation of stare decisis doctrine is capacious enough to encompass the reliance of institutions on doctrines, like Commerce Clause doctrine, for example.

 

      Next question.

 

Questioner 5:  So there was some discussion before on how, if there was a 5-4 decision, it would, more or less, be a show of raw judicial power. And my question is this, how do we reconcile if the 5-4 decision was to actually punt some questions of law to states or to other branches of government to handle? Would that, in essence, not be a raw judicial exercise of power? It would rather be the Supreme Court decentralizing its power to other branches.

 

Hon. Amy Coney Barrett:  Takers?

 

Hon. W. Neil Eggleston:  One of you two should do that.

 

Prof. John S. Baker:  Without something more specific, I don't know how to answer that question.

 

Hon. W. Neil Eggleston:  Yeah, I'm sorry. I'm a little bit in the same boat. I wasn't quite sure where you were headed with that. And so it leaves Kannon to give the smart answer.

 

[Laughter].

 

Prof. John S. Baker:  [Indiscernible 01:09:08]

 

Mr. Kannon K. Shanmugam:  I think we're unanimous on that.

 

Hon. Amy Coney Barrett:  Right in front of you.

 

Questioner 6:  Quick question for Mr. Eggleston. So it seems like everybody on the panel agrees, including you, if I understand you correctly, that nobody wants an all-powerful or political Supreme Court, a judicial aristocracy legislating from the bench, for example. But originalism, as I understood you describe it, sounds a little bit more like a passing trend or fad. What are your thoughts on, I guess, the decisions that were made that are -- previous decisions made by the Supreme Court that are at odds with the Constitution? Would that be an occasion where, in your opinion, it would be appropriate to reverse previous decisions?

 

Hon. W. Neil Eggleston:  So I missed a critical word. Did you say previous decisions that are at odds with originalism? Was that --?

 

Questioner 6:  Previous decisions that are at odds with the Constitution.

 

Hon. W. Neil Eggleston:  So --

 

Questioner 6:  Or I'll add to that. Either at odds with the Constitution or just written in to the Constitution, but not actually formally written into it.

 

Hon. W. Neil Eggleston:  Well, so look. Obviously, the Constitution controls. The danger in this area, I think -- and let me just correct one thing. I have no idea if originalism is going to be a passing fad or not. And I didn't mean to suggest that. It could be that it's going to catch on. All I meant is that if it is, then people who are advocating a particular way of dealing with it are going to have to accept the blowback if it goes a different direction. So I was making no prediction about that at all.

 

      Obviously, the Constitution controls. I think that the danger in this area is the sense that a particular Court can get it right and the prior Court got it wrong. Do you know what I mean? So what your question implies is a certainty about how the case should come out. And it rarely exists. All the cases that are high profile are 5-4, basically, or 6-3 – even the Justices rarely agree. And so the notion -- and look, this last term we saw Justice Thomas and Justice Gorsuch fight about originalism and where originalism would take them in various different cases. And I thought to myself, well, look, I thought this was a doctrine that all you had to do was apply neutrally and the answer would come out. How can two people who are espousing the same philosophy actually disagree with each other on where this whole thing ends up? I thought the neutrality of it was one of the things that was to its benefit.

 

      So I think that the assumption, really, of the question is sort of what I was worried about, which is a notion that originalism -- they'll all disagree with me.

 

[Laughter].

 

      They'll do it if we're having lunch.

 

Mr. Kannon K. Shanmugam:  We're just lining up.

 

[Laughter].

 

Hon. W. Neil Eggleston:  So I think the danger -- and as I said earlier, the thing about stare decisis is it is an agreement that the prior decisions is going to be sustained even if the current Justices don’t agree with it. That's the whole theory of it. You don’t need stare decisis if you agree with a prior decision. And I think that there's a certainly of rightness that comes out of that, and I think that's a dangerous place to be. Very few of these cases is there a certainly of rightness basically. The courts are always split and disagreeing with prior Justices. I just think that there is a hubris that comes with that, that the Justices should be very careful about.

 

Prof. John S. Baker:  There's a misunderstanding on your part and many people's part about what originalism is. I mean, it's not the notion that because you apply neutral principles that every originalist is going to come to the same conclusion and the same set of facts and law. I mean, Scalia and Thomas didn't always agree. So that's not the principle.

 

      And the real principle, I think, was best expressed by Lincoln regarding Dred Scott, and he said, the reason why normally we adhere to precedent is because when things are ambiguous and the people don’t object to it, we settle it and it becomes approved by the people—he substituted the people for Parliament—it becomes accepted as part of the fabric of the law. But there are certain few decisions that are so disruptive and rejected by ordinary citizens that they cannot be regarded as a precedent. So he urged his party members in the Congress to certainly respect the judgment in Dred Scott – you couldn't free him – but reject the precedent.

 

Mr. Kannon K. Shanmugam:  Yeah, and I would just add, first of all, I would just underscore that regardless of one's methodology, there are hard cases, and there are hard cases for originalists where originalists can disagree. And that certainly is also true in the area of statutory interpretation where there are often very hard cases for texualists and even with the constraining mechanism of textualism, there are cues on the face of the statute that might point in different directions. So I don't know that that has much of a bearing on the appropriate role of stare decisis; it's just a reflection of the fact that regardless of one's approach, there are cases that a judge or justice is going to struggle with.

 

      I do think that the reality is that regardless of whether you characterize originalism as a methodology or not, there are different methodological approaches on the current Supreme Court – constitutional interpretation, which will probably be the most obvious of the many obvious things I've said today. And that is really the reason why I would respectfully submit that stare decisis is a relatively weak principle in the constitutional area. And Judge Barrett has written very thoughtfully about this precise issue where you have Justices who have deep methodological commitments. That tends to cause them to think that prior precedents may not just be incorrect, but be profoundly so, because the Court was using the wrong approach in those prior decisions. And so I think that that explains the reality that we live in a world in which stare decisis, again, is not a mechanical or inexorable command. You have a variety of prudential factors that different judges and Justices are going to balance differently.

 

Prof. John S. Baker:  I would agree, but I'd just add this: the methodological differences are tied further back to different visions of what the Constitution is, because you can't have a methodology unless you know what the method is all about. Now, some of them I know, historically, had not a clue about what it was about. Justice Blackmun, I heard him famously say, he said, "Until I got to the Supreme Court, I had no idea what my constitutional philosophy was." Well, when you start from ground zero when you get there and you just start with a methodology, you're putting it together and you don’t have any real clear idea, and then you become terribly unpredictable.

     

Hon. Amy Coney Barrett:  I'll just add the footnote to say that I don't think methodological disagreement alone, though, is a reason for overruling cases. In many ways, stare decisis mediates that because if everyone on the Court had the same approach to constitutional interpretation, we'd probably see very few cases. I mean, you'd have some cases where Justices Thomas and Gorsuch might be duking it out over what was the right interpretation, but one of the great functions of stare decisis, I think, is to mediate methodological disagreement because it is methodological disagreement that provides the occasions for overruling.

 

      Is there a question ready to go over there? I also can't see because of the light from that side so…Okay, right there.

 

Ilya Somin:  Ilya Somin, George Mason University. The panelists and also the Supreme Court talks about reliance interests and how sometimes we might need to stick to a flawed precedent to protect people who've been relying on it. I wonder if the panel could talk about the flip side, which is situations where a longstanding but flawed has caused harm, potentially even great harm. Should that harm be considered? Should it be weighed against the benefits to those who have reliance? And if so how would you do that cost benefit analysis? Like, obviously one reason why we think it was correct to get rid of Plessy v. Ferguson, I think, is precisely because of the great harm and not merely because there was flaws in the Court's logic. But if that was true of Plessy, maybe it can be true of other decisions. Wickard was mentioned before – clearly some people benefit from it, but there're also others who are harmed. The whole purpose of the law upheld there was to raise food prices in the midst of a depression where people were already suffering from malnutrition in many cases. So should both benefit and harm be weighed, and if so is there any kind of neutral calculus that can be used to do that?

 

Prof. John S. Baker:  I think Wayfair was a good example of that, where Justice Kennedy was looking at harms. He did a calculation, which was disputed by Roberts, and Roberts was going on the other side – reliance. And the question is, should that case have been decided at all? Should it have been decided that way? Or should it have gone to Congress? Congress had the opportunity before; they didn't do anything. But does that mean because they didn't do anything, something should've been done?

 

Mr. Kannon K. Shanmugam:  In Wayfair, there was a debate between the majority and the dissent about how expensive it was going to be for parties to comply with the rule, right? And that they were going to have to get software to keep track of the state and local tax regime, the patchwork that was going to result. And so I think you don't get much more brass tacks then that.

 

Prof. John S. Baker:  And they didn't do a very good job with it because they can't do what a congressional committee can do.

 

Mr. Kannon K. Shanmugam:  I mean, one of my favorite random facts about that case was I saw something on Twitter -- and so, therefore, it must have been true -- that in the immediate aftermath of the decision, the value of the stock of the company that produces the software for companies to account for this tax soared. And so maybe that vindicated the concern and maybe it didn't. I don't know.

 

Hon. W. Neil Eggleston:  So I agree with you. I think that the existing jurisprudence, though, sort of accounts for that. I think workability of a rule is typically one of the places they look. The difference is that the reliance interests are people who -- the case comes down and they conform their conduct to benefit from the rule. So they've actually -- I think the thought is they've acted in a way that assumes that the rule is going to be in existence, which is different. The people who are being harmed, at least they know what the rule is, and so they know how to adjust their conduct in a way to maybe have less harm. And I think that's why, the reason that we talk more about reliance interests because those are the ones, presumably, who've actually organized their affairs in conformance with what they thought the law was going to be. And then for the Supreme Court to change it means that whatever investment they did, and as my colleagues have said, there's a significant amount of back and forth between the majority and the dissent in Wayfair.

 

Hon. Amy Coney Barrett:  We have one up here.

 

Questioner 8:  Thank you to the panel. This is a question for Mr. Eggleston. I want to extend the earlier question. I didn't take your prepared remarks to mean that you're concern about the shoving aside of stare decisis would mean that you would never overrule a prior case. I mean, I suspect in 1954, you probably would've not extended the principles underlying Plessy v. Ferguson. But what criteria would you actually use, like two or three bullet points, that would guide you in a decision whether or not to overrule?

 

Hon. W. Neil Eggleston:  Well, I actually don’t think I can do any better than the Supreme Court precedent, the Dickerson, the legging or whatever the case…you guys are better at case names than I am, I'm sure, by a long shot. But sort of the three or four cases that discuss—and I think we talked about some of them: Justice Breyer's six-part test, which is how fundamentally wrong the prior decision is, reliance interests we have talked about – there's a whole series. I think that's pretty much where I would be.

 

      Where I would not be is we got five now so we should do it. That's where I would not be.

 

Hon. Amy Coney Barrett:  There's one right here.

 

Microphone Person:  Perfect.

 

Josiah Kollmeyer:  Thank you to the panel for coming here and speaking. I'm Josiah Kollmeyer. I'm a law clerk on the Fifth Circuit. And my question is specifically for Dr. Baker. You're idea of "popular acquiescence" and --

 

Prof. John S. Baker:  It's Lincoln's, not mine.

 

Josiah Kollmeyer:  Oh, yes, absolutely. Lincoln's. How can we guard and weigh that against the idea that oftentimes important Supreme Court decisions defend the unpopular? How do we ensure that the populace can't, in essence, overrule the Supreme Court?

 

Prof. John S. Baker:  Well, we have to look beyond just the courts. I mean, that's why we have a separation of powers system. We don’t just have a court system. And as the Framers understood, you needed the three separate branches to maintain that kind of stability and justice in the country. I mean, that's the short answer to your question.

 

Hon. Amy Coney Barrett:  There's one right there.

 

Questioner 10:  You know, I'd like the panel if they could to talk about the negative effects of stare decisis on individual liberty. It seems to me that the imposition of a past case to a present case forecloses the fact patterns of an individual case in controversy. And I'm just really concerned that while it may bring court stability, it may bring stability to the law, it may bring stability to actors that rely on the law or that consider it a law and not simply an opinion, that individual liberty is watered down, is negatively impacted by this idea that the judges could make a pronouncement, for example, on a Texas case that applies across the whole country and not only to that case in controversy [and] the parties before it. And I'm looking for some discussion on that.

 

Prof. John S. Baker:  The person who's done the most on this is Judge Barrett.

 

[Laugher].

 

Hon. Amy Coney Barrett:  I'm the moderator not the panelist. [Laugher].

 

Prof. John S. Baker:  I've experienced that very frustration that you're talking about. Yes, it is extremely frustrating. And the difficulty in our federal system is when the Supreme Court went from being a court of errors to being a court that resolves conflicts, it's in the nature of the structure, and there is no good answer to what you say. But, yes, having experienced it -- of arguing a case dependent on another case that was previously argued and decided before I had my brief in. That was very frustrating. Because I thought I had arguments that weren't considered in the case that resolved my case. Yeah, I don’t have an answer to that.

 

Mr. Kannon K. Shanmugam:  And that does happen all the time. And to pick up where Professor Baker started, there's no better place to start in thinking about this issue than I think Judge Barrett's first article on stare decisis, which talks about kind of the due process aspect and looks at this from the perspective of individual litigants. And to pick up on something I said at the outset, I think that if you are in a world in which it is practically impossible to raise your arguments because of the way in which the rules are being applied, that that is a very real problem.

 

      And I think that where that really does, typically, meet the road is at the court-of-appeals level, where you can have a situation much like the one Professor Baker has indicated where there may be another case that is right out in front of yours. It may have worse lawyers; the arguments may be presented worse. And you may be the victim of stare decisis rules in that context, simply by virtue of having come second. That seems like a context in which the unfairness seems at its peak. But I think in particular, again, at the court of appeals level, if that en banc mechanism is not available, a party can very easily be out of luck if there is a prior precedent from the circuit, and there may not be a circuit conflict because if you can't get to the en banc court, you can't necessarily get anywhere. The district court's going to be bound by that prior precedent, you won't be able to get en banc review and you probably won't be able to get cert unless you have a circuit conflict. And, again, that's a context in which that unfairness seems at its greatest.

 

Hon. Amy Coney Barrett:  Did you want to add, Neil?

 

Hon. W. Neil Eggleston:  Well, so I've also read your article and since Kirkland's based in Chicago, I think I won't comment on it more than that.

 

[Laughter].

 

      But I do think in some ways on the court-of-appeals level, if you think about the other way it would work, which is that every panel gets a new shot at every new issue, they would be en banc all the time. And so it's a -- I guess I'm not that troubled. It works in the district court level, obviously, as everybody up here knows, which district courts in a district are not bound by decisions by other district courts in their district. So you're not -- if some district court rules against you, the next district judge isn't really bound. But as a matter of how you would proceed, you would have a lot of en bancs. And I guess it sort of presumes that the court of appeals is not properly exercising its en banc capability. And maybe that's the real solution to it.

 

      I agree people -- I mean, technically, people aren't precluded. They can bring their action, they can lose in whatever panel they have. They can seek en banc review and they can seek Supreme Court review. Nobody stops them from making all those attempts up the line. There's no, in my view, deprivation of due process. They can do it. It's just, because the way our system is worked, the likelihood of getting a real review is much less because, unfortunately -- I actually think -- although, and Ken and I talked about this a little bit, even in the Ninth Circuit, en banc isn't really en banc; it is a subset of en banc. And I don't quite know how they've sorted through all those issues. But I think there's a practicality to this, and without significantly more en bancs, I don't know how else that you would really do it.

 

      And court -- well, Judge Barrett is here. Courts of appeals tend not to like en bancs because it is so time-consuming for the judges because then all the judges have to get ready on any particular issue, which has always struck me as the reason they don’t particularly do it.

 

Mr. Kannon K. Shanmugam:  I think there are ways of dealing with that, and the Seventh Circuit has, I think, an excellent way of dealing with that. I'm not just saying that because we have cases in the Seventh Circuit and Judge Barrett's here. They have an internal en banc mechanism that I think they use to kind of police intra-circuit conflicts or inter-circuit conflicts where opinions are circulated internally, and I think that addresses a lot of the efficiency concern.

 

      But it's really striking when you look at the statistics, actually, by far, the majority of en bancs in the country occur in the Ninth Circuit, and it's a strange kind of mechanism where en banc doesn't really mean en banc. There're other circuits where they -- there were at least three circuits last year where there weren't any en banc reviews at all. And I've heard judges say that, you know, it's sort of viewed as discourteous when you're reviewing your work of your peers, and it creates internal fractiousness. And to me, that may be true, but I don't know that that rises to the level of a constitutional value that we're concerned that judges might not get along as well if they en banced each other more often.

 

Hon. Amy Coney Barrett:  Another question?  We have one right here.

 

Hon. W. Neil Eggleston:  [aside] Is this person going to be right in the light? No, good.

 

Questioner 11:  So this is the elephant in the room, and I think, Judge, you probably will not want to respond to this one. But I hear in the panel today, one of the things that they look at is whether the impact of applying stare decisis is going to be: constitutional or legislative? The biggest case we hear this discussed about is Roe v. Wade. And it appears that on both sides of Roe v. Wade, a number of Justices and judges have commented that it was not a well-decided decision, wasn't well-based. And then when you add to that the changes in science and other issues, it seems that it would be one that would be ripe for a court to want to revisit. And so my question is, how does the impact of the political issue -- because the third part of that is, do we allow the legislature, which is supposed to be reflecting the interests of its people, make these kinds of decisions or do we allow the courts to make these decisions? But if it's constitutionally determined to have been a poor decision, then it's no longer really a decision for the courts; it's a decision for the legislature. So how do we balance that with the horrendous, political atmosphere that then deals with a decision like this and makes it very difficult to ever revisit? Kannon?

 

[Laugher].

 

Mr. Kannon K. Shanmugam:  Why me?

 

[Laughter].

 

Questioner 11:  Because I heard you agree that if it's a constitutional issue, it's more likely to be visited than if it's a statutory issue.

 

Mr. Kannon K. Shanmugam:  So I will say this. Look, there are obviously hot-button areas of the law, and I think you just mentioned one, but there are numerous others where people feel very strongly about the rights and wrongs of prior decisions. I think it's all the more reason why it's important to try to articulate these principles neutrally. This is part and parcel of the exercise of the rule of law that you've got to try to come up with the best possible, most objective principles for stare decisis. I just think, however, that when it comes to something this broad, this is really sort of, on some level, a methodological question in and of itself, and it's just really hard. I think really smart people have tried to come up with more concrete standards for stare decisis, and it has just -- it just is not susceptible to that. So I wish there were a clear answer, whether in that context or any other, but I just think that the best that judges and Justices can do is to try to articulate those principles neutrally. And I think there's been a lot of thoughtful scholarship, again, including Judge Barrett's articles, on the broader subject.

 

Hon. Amy Coney Barrett:  Nothing to add?

 

Prof. John S. Baker:  I would fall back on Lincoln's statement.

 

Hon. Amy Coney Barrett:  Neil?

 

Hon. W. Neil Eggleston:  Well, I mean, I don't know that anybody in this room cares about what I think about this, but I will --

 

[Laughter].

 

      -- but I'll offer a few thoughts very quickly to let you get back to your dessert, or something. Look, the case has been unreversed for 40 years -- I don't know how long, maybe longer than that. Somebody can do the math. And it has been upheld over and over and over again. I know there's a significant portion of the populous that don’t like it and have never liked it. I think there's a significant reliance interest – I think that's what he meant by the Lincoln comment. I think it's an accepted right, at this point, in that it would be inappropriate for this Court to overrule it; that it satisfies all the conditions of being sustained. And that's where I am on it.

 

Hon. Amy Coney Barrett:  And with that, we've hit 1:30. So thank you to our panelists.

11:45 a.m. - 1:30 p.m.
Independent Agencies: How Independent is Too Independent?

2018 National Lawyers Convention

Topics: Administrative Law & Regulation • Federalism
The Mayflower Hotel - East Room
1127 Connecticut Avenue, NW
Washington, DC 20036

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Justice Scalia put it bluntly in Morrison v. Olson: “There are now no lines.” Morrison, 478 at 726 (Scalia, J., dissenting). This is, perhaps, an unsurprising observation, considering the majority in Humphrey's Executor v. United States recognized that, “between the decision in the Myers v. United States case, which sustains the unrestrictable power of the President to remove purely executive officers, and our present decision that such power does not extend to an office such as that here involved, there shall remain a field of doubt." Humphrey's Ex'r, 295 U.S. at 632. How do courts navigate this field?  

In Humphrey's Executor, for-cause removal was approved as applied to the five-member FTC, which exercises powers the Court described as "neither political nor executive, but predominantly quasi-judicial and quasi-legislative." Id. at 624. In Morrison, the Court approved for-cause removal—by the Attorney General—as applied to an independent counsel. In so doing, it walked back its emphasis on the character of an agency's or officer's functions and expressly noted there was "no real dispute that the functions performed by the independent counsel [were] 'executive.'" Morrison, 487 at 691. But "the real question," the Court reasoned, "is whether . . . removal restrictions are of such a nature that they impede the President's ability to perform his constitutional duty" to take care that the laws be faithfully executed. Id. Then, in Free Enterprise Fund v. PCAOB, the Court invalidated a two-layer system of for-cause removal that over-insulated PCAOB members. Free Enter. Fund, 561 U.S. at 495–508. Combining the lessons of Humphrey's Executor and Morrison, the problem was that the act in question "grant[ed] the Board executive power without the Executive's oversight, [thereby] subvert[ing] the President's ability to ensure that the laws are faithfully executed." Id. at 498.

While Myers and Free Enterprise teach that limits do exist on Congress's ability to isolate executive functions from executive oversight, a clear articulation of those limits has so far eluded the Court's jurisprudence in this area. And with an active Special Counsel and several recent lawsuits challenging the structural design of various independent agencies, the question remains: how independent is too independent? Is there any unifying principle for lower courts to apply? Does the character of an agency's/officer's functions matter? May an agency's director be removable only for cause if it is a single director? The D.C. Circuit said yes to the latter while sitting en banc in PHH Corp. v. Consumer Financial Protection Bureau, but what if there were no Financial Stability Oversight Council with veto power over the CFPB's policies? Or, what if there is such a veto-wielding council but the agency is not subject to funding via the normal budgeting process over which the President holds veto power?

Different agencies are structured differently, so certainly we are stuck with an ad hoc inquiry. But how is a judge to know when Congress has placed one straw too many on the camel's back?

  • Prof. William W. Buzbee, Professor of Law, Georgetown University Law Center
  • Prof. John Eastman, Henry Salvatori Professor of Law & Community Service and former Dean, Chapman University's Fowler School of Law; Senior Fellow, Claremont Institute
  • Hon. Henry Kerner, Special Counsel, Office of the Special Counsel
  • Prof. Jennifer Mascott, Assistant Professor, Antonin Scalia Law School, George Mason University
  • Moderator: Hon. Diane Sykes, United States Court of Appeals, Seventh Circuit

Speakers

Event Transcript

2018 National Lawyers Convention

Independent Agencies – How Independent is Too Independent

November 15, 2018 at 11:45 A.M.

 

 

Featuring

Professor William W. Buzbee - Professor of Law, Georgetown University Law Center

Professor John Eastman - Henry Salvatori Professor of Law & Community Service and Former Dean, Chapman University’s Fowler School of Law; Senior Fellow, Claremont Institute

Honorable Henry Kerner - Special Counsel, Office of the Special Counsel

Professor Jennifer Mascott - Assistant Professor, Antonin Scalia Law School, George Mason University

Moderator: Honorable Diane Sykes - United States Court of Appeals, Seventh Circuit

 

 

 

Hon. Diane Sykes:  Alright. Good afternoon, everyone. Good afternoon, everyone. If I could ask you to please quiet down. And please, if you haven’t finished eating feel free to continue to finish your lunch, but I’d like you to quiet down now, if you would, so we can get our program started.

 

      Welcome, everyone. This is the Administrative Law and Regulation Practice Group. This is our topic on administrative law today, "Independent Agencies: How Independent Is Too Independent." I’d like to welcome you all here this afternoon, and also welcome those of you who are listening in in the overflow rooms and online. Everyone is most welcome.

 

The Supreme Court has lately shown a greater interest in the constitutional limits on our independent agencies. Statutory limits on the president’s authority to remove agency officials raise questions under the Appointments Clause, the Take Care Clause, and the doctrine of separation of powers. Our panel today will take up this topic under that broad heading of the question, how independent is too independent? As always, The Federalist Society has assembled a panel of all-stars for our discussion here today. Distinguished scholars in the fields of administrative and constitutional law who will discuss and debate the law of independent agency accountability and oversight.

 

      First up this morning will be John Eastman, Professor of Law at Chapman University Law School, where he teaches constitutional law and legal history and runs the Constitutional Jurisprudence Clinic. Professor Eastman is also a Senior Fellow at The Claremont Institute and Director of its Center for Constitutional Jurisprudence. He holds a PhD from Claremont and a JD from the University of Chicago Law School. He clerked at the Fourth Circuit for Judge Michael Luttig and at the Supreme Court for Justice Thomas.

 

      Next up, this afternoon, will be Jennifer Mascott, Assistant Professor of Law at George Mason’s Antonin Scalia Law School, where she teaches administrative law. Professor Mascott graduated Summa Cum Laude from the George Washington University Law School and clerked for then-Judge Brett Kavanaugh of the D.C. Circuit, and at the Supreme Court for Justice Thomas.

 

After Professor Mascott presents her opening remarks, we’ll hear from Henry Kerner who     serves as Special Counsel in the Office of the Special Counsel.

 

[Laughter]

 

      No. It’s not what you’re thinking about. Mr. Kerner runs the United States Office of Special Counsel, an independent federal investigative agency whose basic legislative authority is found in four federal statutes: the Civil Service Reform Act, the Whistleblower Protection Act, the Hatch Act, and the Uniformed Services Employment and Reemployment Rights Act, or USERRA. The agency is charged with safeguarding the integrity of the merit system in federal employment by protecting employees and applicants from prohibitive personnel practices, including retaliation for whistleblowing. He’ll tell you more about it in his remarks here this afternoon. Mr. Kerner is a graduate of Harvard Law School and spent 18 years as a prosecutor in California before coming to Washington, D.C. to serve in a series of positions on Capitol Hill, as an investigator for the House Committee on Oversight, and for the Senate Permanent Subcommittee on Investigations.

 

      Rounding out our discussion this afternoon, we’ll hear from William Buzbee who is Professor of Law at Georgetown University Law Center, where he teaches administrative law, legislation and regulation, and environmental law. Professor Buzbee came to Georgetown from Emory Law School, where he had similar academic interests and teaching loads. He earned his law degree at Colombia and clerked on the Second Circuit for Judge Jose Cabranes.

 

      With that I’ll turn the podium over to Professor Eastman who will get us started today.

 

Prof. John Eastman:  Thank you, Judge Sykes, and before I give my comments about this panel, I’m also the chairman of the Federalism & Separation of Powers Practice Group, so I have duties with that. For anybody interested in being considered for joining the executive committee of that practice group, please let me know, or Juli Nix, or Dean Reuter know. We’re always looking for new blood and people to help share the work of that important practice group.

 

      So for many years, I’ve thought about getting one of those Powerball glass bowls, and putting letters into it, and reaching in and grabbing any five out, and seeing who could make the most number of federal agencies out of the random number we have. You’d have to have a C in there for commission, and a B in there for Board. They all seem to have those. FEC, or SEC, or FTC, or NLRB, or FERC, or CFPB. We’re very keen on acronyms in this town. But it, I think, indicates a deeper constitutional structure problem that we have.

 

"How Independent Is Too Independent?" is the topic of the panel. My short answer is any independence is too independent—any from constitutional officers. But I think Dean and Leonard would not be happy if I left it there, so let me elaborate a little bit. We’re trying to look at these things after 200 years. Sometimes our ship of state has grown layers, and layers, and layers of barnacles, and until you start carving those away, it’s a little hard to see what the real question, the underlying, fundamental questions are. So I always like to return to first principles on these things. Right there, it’s buried deep in the Constitution, Article I, Section 1, Clause 1: “All legislative powers herein granted shall be vested in a Congress of the United States.”

 

From that we get the non-delegation doctrine. It’s largely been dead since 1935, but 15, 18 years ago, Justice Thomas in the Whitman v. American Trucking case, invited us to reconsider the intelligibility principle doctrine. He says even when it’s met, it allows delegation of lawmaking power. So, “I would be willing to address the question whether our delegation jurisprudence has strayed too far from our Founders’ understanding of separation of powers.” And then, of course, a few years ago, in a series of cases, he really made good on that promise to reconsider these things – Department of Transportation v. Association of American Railroads, “We never even glance at the Constitution to see what it says about how this authority must be exercised and by whom.” And he offered a blunt assessment of the competing visions at stake.

 

He said, “We should return to the original meaning of the Constitution. The government [must] create generally applicable rules of private conduct," through the Legislative Branch, not through the Executive Branch. "We have too long abrogated our duty to enforce the separation of powers required by our Constitution,” he said. “We’ve overseen and sanctioned the growth of an administrative [state] system that concentrates…power to make laws and the power to enforce them in the hands of a vast and unaccountable administrative apparatus that finds no comfortable home”—I would say, not even an uncomfortable home—“in our constitutional structure. The end result in that case may be trains that run on time, although,”—this wonderful little paraphrase—“although I doubt it, but the cost is to our Constitution and the individual liberty [that] it protects."

 

      He’s done this a number of times, and he ties this, in another case, Perez v. Mortgage Bankers, that same year, to kind of an outgrowth of the Woodrow Wilsonian Progressive Movement, that we’re going to staff-up these agencies with experts. We’re going to get beyond any political accountability because they’re more than just standing in the way; they create a clumsy nuisance. He quotes Woodrow Wilson, “a rusted handling of delicate machinery.” We need these experts to figure this stuff out better for us. It really is a dramatically different understanding of government and the role of the people and the ultimate authority of the people in deciding the course of our government. So the notion of independent agencies -- this is true even when an executive agency, pure and simple, is getting delegations of lawmaking power. It's even more true with even less accountability when it’s a so-called administrative agency.

 

So piece one of this is the fundamental violation of the Article I command that the lawmaking power be exercised by Congress. Not to be left out, we have that first clause of Article II. The executive power shall be vested in a president of the United States. Full stop. The entire executive power. Now, the Constitution mentions other executive officers. It mentions heads of departments. It mentions the vice-president. It mentions ambassadors, and councils, and military officers, but all of them exercise their executive power derivative of the president. Jennifer Mascott’s wonderful piece, and I commend it to your attention. I’ll do this so she doesn’t have to. Her piece on the definition of officer recently published in the Stanford Law Review, I think, conclusively demonstrates that we’ve been much too stingy with that understanding. And why is that important? Well, the broader the understanding of officer, the more accountability there is to the president for the basic, ongoing functions of the Executive Branch.

 

Principle officers and inferior officers cover a lot more ground than we’ve come to realize. And because we’ve too stingily interpreted those requirements, we’ve left whole aspects of executive authority immune from, or largely immune from, presidential control. We get these cases coming up in, who do you get to fire, and how many layers of for-cause removal must be there for it to be constitutionally valid? But the fact of the matter is, we give much more protection to independent agencies and officers than the Constitution allows. And we ought to revisit that fairly quickly.

 

So the short answer is Myers was right, Humphry’s Executor was wrong, and Justice Scalia got it right in his descending opinion in Morrison v. Olson. And it's time for us, I think, to revisit those. What would be left in such a world? Well, you could have commissions that make legislative recommendations without binding force. You might have commissions that could offer recommendations on the exercise of executive powers, such as when to use the pardon power and when not, or the use of prosecutorial discretion, as long as those also don’t have binding force. But if these unelected and unaccountable officers, unappointed by the constitutional process, are making judgements with binding force without the oversight of the president, you’ve got a real problem under Article II, it seems to me. I won’t get into the details on the cases. The other panelists will go into more detail about the current state of affairs, but things like the CFPB, and what have you. These are front and center on those cases right now.

 

      Now, I don’t want to leave the judiciary out of that because we also have a problem there. Article III, Section 1, Clause 1. I know they buried them all right at the beginning of each section. “The judicial power of the United States, shall be vested in one Supreme Court, and in such inferior courts as the Congress may from time to time ordain and establish.” That’s a full stop as well. All of the judicial power is specified, that is then enumerated, is vested in the courts. So we now have agencies, though, that write their own rules from a delegate of lawmaking power. They enforce their own rules without oversight from the duly elected executive. And then they adjudicate the enforcement of their own rules. I’d say that fits a little less comfortably within our constitutional design than the Founders had in mind, like not at all.

 

So for example, the case last term of Lucia—I’ve never gotten the pronunciation properly conveyed to me. I don’t know which it is. The phase two litigation of that idea ought not to be whether the officers were properly appointed—that’s our Article II issue—but can we be adjudicating private rights from within an executive, or worse, an independent agency completely removed from the judicial power of the United States? I think under our constitution the answer to that is easy as well. No. We cannot. After all, it was Madison in Federalist 47 that reminded us that, “The cumulation of all powers legislative, executive, and judiciary in the same hands whether of one, a few, or many, and whether hereditary, self-appointed, or elective, may justly be pronounced the very definition of tyranny.”

 

Of course, he gets that from Montesquieu. And let me just close with this wonderful passage from Montesquieu that should be familiar to many.

“When the legislative and executive powers are united in the same person, or in the same body of magistrates, there can be no liberty…Again, there is no liberty if the judiciary power [be] not separated from the 0 and executive. Were it joined with the legislative, the life and liberty of the subject would be exposed to arbitrary control; for the judge would then be the legislator. Were it joined to the executive power, the judge might behave with violence and oppression. There would be an end to everything, were the same man, or the same body, whether of the nobles or of the people, to exercise those three powers, that of enacting laws, that of executing the public resolutions, and of trying the [causes] of individuals.”

Our administrative state has violated this principle routinely over the last half century. I’m so excited to see the large number of Justices on the Supreme Court now engaging and revisiting some of those questions and starting to strip away some of the barnacles that have grown up on our ship of state. Thanks so much.

 

Prof. Jennifer Mascott:  I’m Jen Mascott. Thanks, John, for those nice words. Thanks Judge Sykes for moderating the panel, and The Federalist Society for all the time that it takes to put this convention together every year. I’m really thankful to be here. And I’m going to start similar to how John started with, how independent is too independent for agencies? And as John said, I think really in a certain sense, the bottom line answer is that any independence is too much. That doesn’t mean that government should neglect impartiality. Our elected leaders and all governmental actors need to serve everyone fairly, fulfill their oaths to the Constitution, and everybody in the Executive Branch and administrative agencies needs to seek to faithfully execute the law. But independence within our current governmental structure has come to mean independent from the control of the Executive and thus from electoral accountability. Independent agencies today are wielding significant power, and we’ve somehow gotten this idea in our modern system that we want a government staffed by scientific experts who are going to somehow independently do the right thing irrespective of direction from the politically elected Executive. And this is just flat wrong within our constitutional structure.

 

      It’s clear from the text of the Constitution itself, its structure, founding-era documents, like the ratification debates, that the federal government derives its power from the consent of the governed. The federal government’s supposed to have three branches, just three, no more. The Executive and Legislative Branch in particular, are to gain authority to exercise power by being elected. One reason I belabor this point a little bit is that some contemporary scholars say that maybe now we need a new, kind of an updated separation of powers framework, maybe within administrative agencies themselves. And so these scholars acknowledge perhaps administrative agencies might be able to do things more efficiently, and so maybe if we if give agencies their own internal, soft, separation of powers-like constraints, that will be adequate to mimic the constitutional structure.

 

So perhaps notice-and-comment rulemaking can be like the public input required from elections, these scholars say. Maybe the tenured, protected civil service can act like a non-partisan, mini Article III judiciary. Well, this misunderstands the key point, I think, that James Madison makes about separation of powers in Federalist 51. And that is that the branches get their ability to be able to check each other by being accountable back to the people through elections. Madison wrote, “A dependence on the people is, no doubt, the primary control on the government.” And so there cannot be a floating set of key administrative entities that lack accountability back to their elected head.

 

If some of our modern agencies fit anywhere within our constitutional structure, it would naturally be within the Executive Branch, as they are in theory executing or carrying out the law. And if that’s the case, that means every action that they take needs to be subject to the authority of the Executive. Somehow down to every level of power exercised within the Executive Branch, there needs to be a line of accountability back up to the president. And so as John mentioned a bit, the accountability of appointments and the ability to be able to remove and supervise officials and personnel within the Executive Branch are all key for accountability. This is important to preserve the role of self-governance within our system and to preserve individual rights, quite frankly. If our governmental system intrudes on the president’s ability to exercise proper authority over the Executive Branch, then ultimately the people are going to lose some of the say in their governance.

 

      So I think there are at least two areas of law that have recently been before the courts that relate to this issue of independence in administrative agencies, and I think provide a real opportunity for us to reinvigorate discussion about the proper size and scope of agencies overall, reevaluate really whether there’s any proper role for modern independent agencies within our constitutional structure as they’re now designed, and reexamine whether agencies right now are properly being limited to the exercise of executive functions for which they’re accountable, at least indirectly, back to the people through the chief executive.

 

      So I think most obviously one line of cases that jump to mind are the cases dealing with the constitutionality of the structure of the Consumer Financial Protection Bureau. These cases have been in the news a lot because of the D.C. Circuit reviewing the constitutionality of the CFPB now on two occasions – [the] opinion finding it unconstitutional first at the panel level by then-Judge Kavanaugh. And so this issue of the CFPB and its structure came up a little bit even during the confirmation hearings recently. And the idea, basically, of the case—and of then-Judge Kavanaugh’s opinion—is that, as John mentioned, in 1935 the Supreme Court in Humphrey’s Executor, gave what, in theory, is the constitutional justification for, in general, independent  agencies. It's very inconsistent with the decision nine years earlier in Myers that gave executive accountability in large measure to the president.

 

But in Humphrey’s Executor, the Court went a different way. It said, we’ve got these commissions. They’re headed by multiple people at the top representing both political parties. And so we want these scientific experts at the top over their large substantive policy areas to be governing in a way that’s not beholden to the politics of the president. And what Judge Kavanaugh said in his opinion, basically, is that even if you agree with the Humphrey’s Executor decision and give stare decisis affect to it, that now Congress is structuring agencies in ways that go many steps even beyond the independence and the lack of executive control over commissions in Humphrey’s Executor. And so he pointed out that with the Consumer Financial Protection Bureau, it’s headed by one director, who's subject to removal only for cause. And so instead of even having the accountability of having to work together as a team with folks at the top to govern this entity, this director’s able to go on his or her own, not really subject to presidential control, and run this big agency.

 

Because the director has a five year term, in theory, a president may not even ever have a chance to pick the head of the CFPB on the appointment side in the president’s term. The CFPB has a lot more power even than some other agencies because it’s in charge of helping implement 18 consumer financial protection statutes that previously had been administered by multiple agencies. Then one of the other key things that Judge Kavanaugh pointed out is that the CFPB does not have to report to Congress and get annual appropriations through the congressional process. It can sort of on its own, up to a point, decide how many funds it needs from funding within the Federal Reserve. And so Judge Kavanaugh said even if you buy into the Humphrey’s Executor line, this goes quite a bit beyond that, and this is unconstitutional.

 

As you all probably know, the D.C. Circuit, sitting en banc, disagreed squarely with Judge Kavanaugh. But the PHH regulated entity in the case did not challenge this case and bring it up to the level of the Supreme Court and give them a chance to review it because the D.C. Circuit, at the same time that it found the CFPB’s structure to be fine, it found the penalty that the CFPB imposed to be problematic. And so PHH never had any incentive to go up to the Supreme Court.

 

      But over the summer in a case involving State National Bank of Big Spring, which is being litigated by former Ambassador Gray’s, also White House Counsel’s firm, the D.C. Circuit summarily affirmed its reasoning. And the PHH case, again, found the CFPB’s structure to be constitutional. And so now the Big Spring Bank has filed a petition before the Court. The government’s response is not due until December 10th, but perhaps if the Court decides to take that case, the constitutionality of the CFPB will be squarely before it.

 

      Also this summer, showing how pressing of an issue these new agencies are, in the Fifth Circuit there’s arguably been a circuit split created in the case Collins v. Mnuchin, dealing with the constitutionality of the Federal Housing Finance Agency, which was created in 2008 to oversee Fanny Mae and Freddie Mac in light of some of the problems with mortgages. And so similarly to the CFPB, here’s another agency that’s headed by one person who’s subject to for-cause removal protections. It’s not easy for the Executive to supervise what’s happening within the agency – another agency that does not have to report to Congress for annual appropriations.

 

      And so the Fifth Circuit in a per curiam opinion found that this structure was unconstitutional. The opinion is written in a way to try to suggest maybe that there’s not a circuit split with the PHH decision because the court pretty clearly says in the Collins case that they’re not holding that just the removal protections alone are unconstitutional; it’s the combination of all these factors that makes it very hard for the Executive to supervise the agency at stake.

 

      But I think if the Court were to look at this, it’s likely that they would find the two decisions to be in conflict. That decision’s not being petitioned right now to the Supreme Court because there are pending petitions for en banc rehearing within the Fifth Circuit. But there’s just case after case because obviously regulated entities are facing lots of consequences, penalties, fines from these agencies and are trying to figure out where in the Constitution there’s supervision of what’s happening. So I think before long these issues will come before the Court.

 

      Also, to tie in to what John said about Lucia v. SEC, I actually think the Lucia decision is another key way in which the Court will have to look at removal protections. As John mentioned, that case found that administrative law judges, who preside over formal agency hearings, are officers of the United States, so they’ve got to be appointed by the president with Senate consent, the president alone, a department head or a court of law. And so I think in reaching that decision, the Court very clearly put the ALJ’s under-executive accountability in the front end. And the question will be, now that the Court has caused us all to look again at these agency adjudicators who are exercising significant authority -- that case came up because Mr. Lucia received a $300,000 penalty and was told that he has a lifetime bar from practicing in the securities industry. This is by an administrative official who had not been appointed really by any other officer.

 

These are becoming big issues, and I think the Court’s going to start maybe seeing litigation over the years on the back end. Are ALJ’s removal protections too tough under Free Enterprise Fund, which suggests that perhaps at some point there are too many layers of removal protections, where the president’s authority to take care that the law be faithfully executed is restrained too sizably. ALJ’s are subject by statute to removal for cause as determined by the Merit Systems Protection Board. So these officials who are presiding over arguable big issues—touching possibly on private rights—to remove them if there was misconduct, you’d have to get with an independent agency, the commissioners, to find good cause. And then that finding would have to be approved by layers of people protected by for-cause removal within the Merit System’s Protection Board.

 

      So I think litigants probably will, and hopefully will, start to challenge on the back end as the Solicitor General tried to get the Court to take a look at in Lucia whether there’s some trouble with supervision over agency adjudication as well, which might cause us in general, as John said, to question, are adjudicators within agencies just perhaps hearing too many issues and cases to begin with? So thanks a lot. I’ll look forward to the Q & A discussion.

 

Hon. Henry Kerner:  Good afternoon. As I was listening to these two excellent presentations I was wondering whether they’re talking about me. I was thinking, “Am I just Exhibit A of this unaccountable bureaucrat who has way too much power and is accountable to no one?” And I’m feeling very constitutionally infirm at the moment.

 

[Laughter]

 

However, as my prepared remarks will hopefully illustrate, I think there’s a very good reason why we have independent agencies. So I’m here to advocate on behalf of some independent agencies. One hint: CFPB – they’re over there; we are over here.

 

[Laughter]

 

      So, first of all, it’s really a great honor to be here. I appreciate being here. I’ve been coming to these The Federalist Society Lawyer’s Conventions for many, many years. I was the vice president in law school of The Federalist Society, and I’ve always been a very proud member. It’s also a real honor to be among such distinguished panelists, so thank you for inviting me.

 

      Some time ago I completed a quiz asking me which Supreme Court justice’s philosophy was most similar to mine. And I was really pleased when Antonin Scalia’s picture popped up on my Facebook page. I didn’t know about all those privacy things then, but…

 

[Laughter]

 

      Today, however, I’ll be advocating a position that the late, great Justice would likely disagree with, and supporting the constitutionality, and the importance of for-cause removal protections for some single independent agency heads.

 

      Most of us are familiar with the expression "where you stand depends on where you sit," which I recently learned is apparently called Miles’s Law, after some bureaucrat in the Truman administration. So it’s obviously in my own self-interest, as a single head of an independent agency, to favor for-cause-only removal. But I would support this position, at least in our case, even if I wasn’t the head of the agency. For OSC see to do its job credibly, it needs to truly be independent.

 

      So let me begin a little bit just to give you some background about the OSC. I appreciated the Judge laying out some of what we do. My job is enshrined in statute, it’s at 5 USC § 1211, which establishes the Office of Special Counsel, which shall be headed by the Special Counsel. You will note the definite article before the words "Special Counsel" which are distinguished from that of the other Special Counsel we hear so much about in the news, and with whose investigation I have nothing to do with.

 

[Laughter]

 

      That’s very important for people who call our office—we don’t do anything with that—which happens a lot.

 

      Instead, the Special Counsel is appointed by the president with the advice and consent of the Senate for a fixed term of five years and heads up the United States Office of Special Counsel – a permanent, independent, federal investigative and prosecutorial agency whose primary mission is the safeguarding of the merit system in federal employment. It does so by protecting employees and applicants from prohibitive personnel practices, also known as PPP’s – special reprisals for whistleblowing. The agency also operates as a secure channel for federal whistleblower disclosures of violations of law, rule, or regulation, gross mismanagement, gross waste of funds, abuse of authority, and substantial and specific danger to public health and safety. In addition, OSC issues advice on the Hatch Act and enforces its restrictions of partisan political activity by government employees. Finally, OSC protects the civilian unemployment and reemployment rights of military service members under USERRA, but once again, only against federal agencies.

 

So in fulfilling its oversight and prosecutorial responsibilities, Congress intended OSC to be independent of any direction or control of the president. Because OSC is charged with oversight of the Executive Branch and prosecuting wrongdoing, such independence is crucial to fulfilling our mission. The principle mechanisms that Congress’s utilized to ensure that OSC’s decisions were unbiased and free of undue influence were to impose a five year fixed term of office, and to restrict a president’s power to remove the Special Counsel to instances of inefficiently, neglect of duty, or malfeasance in office. The Supreme Court has recognized Congress’s power to enact statutes that restrict the president’s removal of power in ways that are compatible with the president’s constitutional duty to faithfully execute the laws.

 

In Morrison v. Olson, the Court ruled that Congress may impose for-cause removal restrictions up until they are of such nature that they impede the president’s ability to perform his constitutional duty. As we have learned from the presentations prior to this, however, some jurists and academics have criticized the independent, single head agency structure as unconstitutional. In his dissent to the D.C. Circuit’s en banc decision in PHH Corp. v. CFPB, now-Justice Kavanaugh argued that consecrating power in a single director as the structure of the CFPB—and also ours—creates a greater "risk of arbitrary decision making, abuses of power, and threats to liberty." To Kavanaugh, the overarching constitutional concern with independent agencies, like the CFPB, is that they exercise executive power but are unchecked by the President, who is the only official imbued with the executive power by Article II and directly accountable to the people.

 

Some commentators argue that the CFPB’s constitutional woes could be cured by transforming the agency into a bipartisan, multi-member body like the Federal Trade Commission, but because the president alone has the power to choose whom to appoint, bipartisan requirements are arguably on even shakier constitutional grounds than for-cause removal. A bipartisanship requirement forces the president to appoint agency leaders from the opposing political party who may not be his preferred candidates and may not be in line with his policy directives. By contrast, allowing the president to remove an independent agency head for inefficiency, neglect of duty, or malfeasance at least preserves the president’s ability to ensure that the laws are faithfully executed.

 

Of these three grounds, inefficiency may be the broadest, as Judge Griffith in his concurrence in PHH articulated. He went further to say that it wouldn’t take much for a president to dismiss a recalcitrant agency head as being ineffectual so long as the president didn’t specify that it was because of a policy disagreement, like in a careless tweet, for example, or something. Of course, there could be some costs associated with that removal, such as Congressional hearings or a negative headline in the press. “President Fires Special Counsel”.

 

[Laughter]

 

At least I hope that would be a disincentive. Of course, if he so chooses, the president can always fire the agency head anyway and remove him from office. A likely lawsuit, even if it were to get past Justice Kavanaugh, would many years later at most result in backpay, as the remedy for the wrongly fired head. So in any event, the president can shed himself of an independent head.

 

As I said from the outset, I support the structure of a single agency head with for-cause removal protections for independent agencies that have oversight responsibilities with limited power over private citizens. The calculus is quite different when it comes to more intrusive and powerful agencies like a CFPB. It might, therefore, be instructive to illustrate the critical differences between OSC and the CFPB.

 

First, OSC’s different from CFBP in that OSC cannot act alone to enforce any of our statutes. At OSC we’re wholly dependent on the Merit Systems Protection Board, MSPB, to adjudicate our complaints and to issue orders. If we seek any corrective or disciplinary actions, we must either try to settle the case or file a complaint with the MSPB. And the MSPB is always free to reject our reasoning and rule against us. Unlike CFPB, OSC is by no means judge, jury, and executioner. We do not have quasi-legislative or judicial powers.

 

Second, OSC’s independence is at the heart of OSC’s mission. OSC’s charged [with] policing Executive Branch employees. For example, OSC has exclusive jurisdiction to enforce the Hatch Act, a law that prohibits all federal employees, with the exception of the president and vice-president, from using their job or tax payer dollars for partisan political purposes. If an administration could fire the Special Counsel at will for investigating these lawful activities, then the Hatch Act is rendered toothless.

 

A third important distinction between CFPB and OSC is that OSC’s sole focus is on wrongdoing within the federal government. We have no authority over private citizens or corporations, we cannot bring enforcement actions against the public, and we cannot issue law-like regulations. Even our Hatch Act regulations reside within the Office of Personnel Management. This narrow focus on government misconduct underscores the need for OSC’s independence. OSC’s mission would be compromised if the Special Counsel were subject to at-will removal. And unlike CFPB, the statutes we enforce have very limited impact on the U. S. economy.

 

Fourth, unlike CFPB or the Fair Housing Finance Agency, a single-director-lead agency, whose structure was recently found unconstitutional by the Fifth Circuit, OSC’s not completely unmoored from the Executive and Legislative Branches. The MSPB is made up of presidentially appointed members with staggered term limits. We, at OSC, also rely on budgetary appropriations from Congress, and even submit our annual budget justification to OMB for review. With our purse strings held by Congress, and the commissioners of our adjudicatory board appointed by the Executive, OSC’s only independent in that the Special Counsel enjoys some protection from at-will termination by the president – a small but necessary protection that allows OSC to fulfill its mission. Independence allows me to stand firm when making what could be politically unpopular decisions.

 

Finally, restructuring always seems to be run by a bipartisan, multi-member board, as has been suggested for CFPB, is incompatible with OSC’s mission and function as a prosecutor. As I’ve said a few times by now, OSC’s main authority to investigate cases of prohibitive personnel practices and Hatch Act violations and try those cases before the MSPB. In my first year as Special Counsel, I’ve seen how decisions need to be made quickly and efficiently. In the past our process has been rightly criticized as at times being too slow. Once a case is finally ready to be closed or a complaint for corrective action filed, having multiple principals at OSC would be inefficient and burdensome.

 

Just like the structure of the Executive Branch, having a single, independent principal at OSC facilitates faster decision making while also maintaining built-in checks and balances. The bottom line is that not all independent agencies are alike. OSC’s mission is uniquely nonpartisan and the Special Counsel needs to be free from political pressure exerted by the Executive Branch. Having a single agency head who can only be removed for cause is a protection vital to OSC’s ability to uphold the law and fulfill its mission. Thank you very much.

 

Professor William W. Buzbee:  Greetings, everyone. Nothing like being the last speaker after everyone’s eaten lunch, so I hope everyone’s having a good nap now.

 

[Laughter].

 

      Well, first, I guess I look at my name and it says William Buzbee, Federalist Society, and I suddenly wonder what’s happened. Just to be clear, I think I was asked to be here as a sort of counterpoint. And I don’t agree with much of what I’ve heard, but let me reason my way to my conclusions, suggest that there’s some important parts of the Constitution and our laws development that are being neglected in some of these discussions, and suggest why the view that almost any agency is constitutionally problematic is itself constitutionally problematic and unfaithful to the bargain we see in the Constitution.

 

      And I guess I’d start off by saying I think Special Counsel Kerner’s points here are really a perfect example. At one point I think everyone has concerns with lack of accountability, but then when you start looking at each agency and try to understand what they do, you can see why radical Justices, like Justice Scalia, were very concerned with making sure agencies abide by their statutory substantive criteria and procedural criteria, which is about much more than just a president’s power to appoint or remove. And I would say that the discussion of CFPB, and the Free Enterprise case, and Lucia are really important here today, not so much just for those cases, which mostly can be formally worked around without radical disruption of the federal government, but the next steps – the way in which they are a sort of toehold for reversals of long-standing administrative law and constitutional law.

 

      I think, starting right off, just as far as historical understandings, which are an underpinning of the first two speakers, I just commend to you two really great pieces of work. Jerry L. Mashaw’s book, Creating the Administrative Constitution: the Lost One Hundred Years of American Administrative Law, is a really important counterpoint to this idea that the world of our country is just courts, legislatures, and presidents, in fact pointing out that variance of the administrative state emerged immediately in the post-founding era. And he has a wonderful chapter, if you’ve never read it, on steamboat regulation, a very early form of health and safety regulation that was enacted when some of the Founders were probably getting quite long in the tooth, but some of them would have still been around at that point.

 

      The other is, I know some of you -- I know Professor Mascott’s familiar with the work of John Mikhail, a colleague of mine at Georgetown, and I know that there’s a lot of reliance on The Federalist Papers as people talk through these issues. And he’s done some really fascinating work on The Federalist Papers themselves and their reliability, and it’s in several of his pieces, including a very good article on the Necessary and Proper Clause. But what’s interesting is he’s pointed out when you start looking at The Federalist Papers, they were, as we all know, they were advocacy pieces written for different states’ debates over the Constitution at different points in time. And what he found is that they are often, actually, inaccurate in describing the Constitution as it stood at that point. That is, they were themselves strategic statements and documents. So themselves, when we look at The Federalist Papers, or return to Montesquieu, we have to be wary of that problem Justice Scalia liked to quote, “We should always be wary of any approaches to law where we're just looking over the crowd and picking out our friends.” Okay?

 

So let’s look at the Constitution here. First, we have to be careful about adding in the word "only" in connection with key clauses. But more importantly, people quickly move to say the president is critical to accountability. And the president is critical to accountability, but there’s no way in which you can look at the Constitution as saying it is the exclusive source of accountability. Most important, of course, is the legislative power, which people did mention. That was good. I was glad. But legislative supremacy has, going back to the earliest Supreme Court decisions, been viewed as the core principle under our Constitution. That is, when it comes to making policies, and handing authority out, and requiring action, legislative supremacy is really the critical source of legitimacy and accountability in our government. And for reasons I’ll talk about, that ties in with long-standing views about the administrative state and reasons it should be subject to law and constraint in addition to oversight by the president.

 

So moving on, of course, there is this provision which is also talked past, the Necessary and Proper Clause. You have to think about the fact that the Constitution conferred Congress with broad power in making laws to structure the government that resulted. And if you look at the earliest cases that have sort of worked through the development of the administrative state and the permissible bounds of the administrative state, some of the earliest decisions point that out. Congress chooses to make policy and how to structure how the government works. That is the fundamentals of the Necessary and Proper Clause.

 

And along those lines, for those of you who are eager to go back and read these key Supreme Court decisions, in the Free Enterprise Case, Justice Breyer’s dissent, he has a whole first section where he’s not taking on the decision, but where he reviews the law as it stands and as it still stands, since no cases were overruled in Free Enterprise. And he goes through really the many forms of agencies over time, their structures, the forms of check that are on the agencies, the ways they’re appointed, the functions they fulfill. And it’s an important -- and he cites the cases by the Supreme Court that still stand that have upheld these many different forms of agencies. And that ties in, again, with legislative supremacy, and the Necessary and Proper Clause.

 

Then, very importantly, the president has an obligation to take care that the laws be faithfully executed. Okay? Now, one approach to that is that the president, and the president alone, decides what that means. That’s pretty antithetical to the development of administrative law going back to Marbury v. Madison. There is a role of the courts in overseeing the functions of the government, the work of the government, the appointments, and the faithful carrying out of the functions handed out by the legislature. And that is very critical to the president’s obligation that the laws be faithfully executed. When you look at the dozens, probably actually hundreds of cases that have upheld the very basics of the modern administrative state, that is also a critical element here; that our system under the Constitution and under still standing law, we do not have a president who is a free-standing, I guess, uncheckable king or queen, but instead, is an actor subject to law and who must act in conformity with the law.

 

This is, in fact, the fundamental virtue of modern administrative law. And I think, actually, that if—I won’t spend a long time quoting the many cases—but probably the strongest voice in favor of this idea that the administrative state needs to be judicially checked and needs to be subject to law, both in its substantive criteria and its procedures, were dozens of cases by Justice Scalia where he emphasized this. The problem, of course is, if you start saying that every member of every agency is subject to unfettered, uncheckable removal, then you weaken all of those systems – every substantive criteria and every procedural choice becomes subject to intimidation or concerns. I think Special Counsel Kerner’s mentions here of his role if his role were subject to unfettered removal by the president at any point, it would be a completely different agency, and it would really be unable to fulfill its functions.

 

Moving on, I guess another really important point here is, I think there is a practical point which is if agencies are viewed as fundamentally antithetical to the administrative state and we go, as Professor Mascott suggested, to something where there could be commissions that could make recommendations, then you start having just huge amounts of power being wielded, I suppose by—I wasn’t clear who the commission would be making recommendations to—whether it be --

 

Prof. Jennifer L. Mascott:  It was John Eastman.

 

Professor William W. Buzbee:  Okay, sorry, John. Sorry, Professor Eastman -- whether it be to Congress or to the president. But then the question is -- so then you have essentially fleshing out of instructions by either Congress or perhaps the White House. But then judges, who are generalists—and talented generalists, of course—but judges tend not to know the particulars of the fields in which regulation works. And so it would require a very heroic conception of judicial knowledge and especially expertise in often very technical areas if you started just having commissions making recommendations, and then the details being worked out in front of Article III judges.

 

So my sense here—and I gave some comments at the recent law professors' convention here a few weeks ago—I think it’s really helpful to look at these questions of administrative law structure through a "bad-man" perspective. You’re probably familiar, or remember Justice Holmes and his view that you need to look at the law from the perspective of the "bad man." That is someone who would be inclined not to abide by it and then the question is, is it structured well when a person or people you don’t think highly of wield that power?

 

I think when you look at administrative law and it’s many, many choices and Congress’s many choices about regulation of the administrative state, what we have is, fundamentally, an extensive web of constraints to constrain – the bad regulator, the bad president, the bad or ignorant judge. And so what do we have? The Administrative Procedure Act, one of the most enduring bodies of law going back to the mid-1940’s, which was a compromise really intended to protect business from unfettered and unchecked arbitrary power of agencies. The APA itself is the underpinning of many of the sources of concern we’re talking about today. Similarly, concerns about partisanship and concerns about political favoritism, and corruption, especially in regulated industries, led to the creation of the independent agencies. Again, a desire to remove decisions from partisanship, corruption, and perhaps other venal motive.

 

Procedural rigor, statutes—dozens of them—they’re wonderful to teach to students because the procedural intricacies of the modern administrative state before different agencies show really quite nuanced and different understandings of the best way to attack challenging social ills. But all of those procedural mandates, again, are very specific to different agencies and tasks. If they all become, essentially, secondary to presidential whim, everyone should be concerned.

 

      The partial for protection from politics is one of the points I was going to make. Special Counsel Kerner, I think, made the point well. For-cause protection is not complete protection from removal. That is, if it were the case, no one would ever be fired in much of the world where for-cause protection is the norm in private employment. What it is, it is partial protection. It is, essentially, protection if you are doing your job. It is protection from dismissal for wrongful reasons. And so that is an important part of protection from politics and raw use of power. In addition, independent agencies, especially those agencies that are structured to have bipartisan members, they also are an effort to create some insulation from partisan politics and rancor.     

 

      I won’t go into depth here, you’re all lawyers, or I guess. Is everyone lawyers? Almost everyone here’s a lawyer. It doesn’t get better.

 

[Laughter]

 

So the abundant law about reasoned decision making is really something that everyone should celebrate. This whole body of law going back to State Farm, including also cases that have allowed shifts, to say market-based permits, and the like, the whole idea that agencies are held to an obligation to engage in reasoned decision-making where they engage with facts, they engage with criticism, they engage with the statutes, they use the procedures required by law. This whole body of law really hinges on courts and forcing structures set up by Congress, which again, involve presidential oversight of certain forms, but not unfettered power of the president to remove based on whatever factors the president chooses.

 

Consistency doctrine, I’ll also point out, again, the key precedents here were both the State Farm case, and FCC v. Fox with the main opinion, although it’s partially a splintered court, by Justice Scalia and then the 2016 opinion by Anthony Kennedy in Encino Motorcars. Those cases collectively say agencies can change policy, but they have to engage with facts. They have to engage with science. They have to offer good reasons for change, and they cannot leave unexplained inconsistency. Again, a fundamental rule of law, virtue, which requires respect for the rule of law. The basic idea that regulations are standing and binding until validly changed is a very important tenet, which also disappears if removal is, again, at the whim of a president.

 

I should stop there. I guess my sense here is, whenever I think through administrative law -- I worked in a public institution environmental group and I represented industry for years in New York City. And I always think back to what most of my business clients wanted. And they were some of the most sophisticated businesses in the country. [What] they always wanted was, they wanted stability. They wanted known law. They didn’t want to have a law where they could not find out what it was. So things like agencies, they always wanted to know what the guidance document said. They wanted to narrow the range of uncertainty. They wanted some stability. They were always concerned with regulators that had unfettered power and could act in unpredictable sorts of ways.

 

So my sense here is that before moving too fast, we have to remember there is a really vast body of law that is about the regulatory rule of law, and it’s worth celebrating. And that body of law itself has a virtue I just want to close with which is administrative law is a body of constitutional common law. It is a body of law that has built up for several centuries now, and it is pragmatic, sequentially developed, fact-bound, looking at particular statutes, thinking about how they work. And it is in that sense a bipartisan, sequentially developed, and handed off body of law. It has a lot of wisdom in it, and it’s filled with compromises. And I think we should all be wary of theories or approaches that allow sort of leap-frogging backwards in time past these compromises and pragmatic solutions that have been worked out. So thank you.

 

Hon. Diane Sykes:  Alright. If you would all start thinking about what questions you’d like to ask the panel, I’d like to -- just by way of summarizing the positions that you’ve just heard, we have one group of panelists that have argued that independent agencies are essentially unconstitutional all the way down under the Constitution’s explication of the executive power, legislative power, and the judicial power. And on the other end, we have the position that independent agencies are meaningfully constrained and that the congressional choice to insulate them from direct accountability is justified by the need to keep them free to bring their expertise to bear on difficult and complex social and economic problems free from partisan influence. Then we have sort of a middle ground being occupied by Henry Kerner, who has taken the position that regardless of the relative merits of both of those more polar opposite positions, that his agency, the Office of Special Counsel, has only limited independence protections and is, therefore, sort of the Goldilocks of independent agencies --

 

[Laughter]

 

      -- with just the right amount of independence protections, in kind and degree, if I could, by way of summary.

 

All right. Now, while you’re thinking about your questions, I don’t think we have a standing mic. I think we’re going to have a handheld mic for questions. But before we get to that let me pose a question to the panel, which is particularly from my perspective as a judge watching what the Supreme Court has recently done and may be about to do. As I look over the Supreme Court’s recent reentry into this field in the Free Enterprise Fund case and the Lucia case, or Lucia case, I am struck by a distinct impulse of minimalism perhaps, probably springing from the concern about consequences of a shakeup of our modern administrative state that would involve anything more than incremental approaches to these problems as they arise and find their way to the Supreme Court. That’s especially evident, I think, in Justice Kagan’s decision in the Lucia case which was very narrow, and to a lesser degree in the Chief’s decision in the Free Enterprise Fund case. And with that in mind, I’d like you to address -- both sides to address that reality and whether it’s likely to continue or whether we’ll see some more rapid acceleration in the Court’s willingness to address these issues at a deeply theoretical space.

 

Prof. John Eastman:  I'll start. I think you saw this in the PCAOB case, initially. We’re going to set down a constitutional marker here, but we’re going to cure the problem to stop the hemorrhaging on the consequences while we work through this revisiting, as some of the core doctrines. So I think you’re right. And I think this is particularly true of Chief Justice Roberts, to a lesser degree of Justice Alito. This kind of incrementalism to revisit some of these questions, not quite so bold and all at once as Justice Thomas has become famous for. But remember he’s laying down markers to force people to reconsider things. So I’m not sure he would disagree with that more incremental approach as well.

 

      But I do think there’s some problem. And I share Professor Buzbee’s notion that there are other mechanisms of accountability as well. Statutes can do that. But the problem is the statutes aren’t being complied with. And part of that is some of the deference doctrines that arose to defer some of the fundamental questions that those statutes are supposed to have settled to the very agency that they’re supposed to be making accountable. And Justice Scalia points this out in the Perez case. You know, we’ve got the APA, and it says the courts are supposed to be the ones that give the interpretive answer to an ambiguous statute, and yet, we’ve got doctrines, Chevron deference, that in fact do the opposite. And so the various doctrines in conjunction have magnified the separation of powers problems. And I’m not sure adding more statutes is going to solve that. Maybe giving teeth to the statutes we have and faithfully employing them. But that’s not going to get to the incremental piece that you want. That’s almost an all-or-nothing, black-and-white rule. It could have some pretty severe consequences.

 

Prof. Jennifer Mascott:  I do agree that, I think, the Court’s likely to continue in the minimalist approach, as John said. I think that’s one reason why then-Judge Kavanaugh probably wrote his opinion, PHH, the way that he did, is that he’s trying to frame the issue so that there doesn’t have to be any overruling or overcoming of precedent like Morrison v. Olson, or Humphrey’s Executor. [He's] looking for these places where there’s an innovative new structure that seems to take things one step too far, and maybe hoping when he was a judge on the D.C. Circuit, that the Court, if it ever got the case, would do something similar to what it did in Free Enterprise Fund which was say we’ve got all this precedent on the books, we’re keeping that in place, but we’re just not going to extend it.

 

In the Lucia decision, with the administrative law judges, the Court definitely had a very fact-bound limited decision. It didn’t even want to decide things like, on remand does there have to be a totally new adjudicator in place? Maybe in that particular case it did. The Court wasn’t going to require that moving forward. It wrote its opinion narrowly to really just talk about the SEC ALJ’s. And so I think it’s going to be to the lower courts and the agencies to realize, okay, analogously, what are all the positions that come under Lucia? On the removal side, I do thing that’s a place where litigation’s going to head, but even there, the Solicitor General actually did not ask the Court to strip the ALJ tenure protections. The SG said, “Could the Court read them narrowly so that ALJ’s could be removed for misconduct, failure to follow lawful agency directives, or failure to perform adequately."

 

The SG was very careful to say it would not be appropriate to have a situation where you’re just sort of willy-nilly removing an ALJ or threatening removal based on how one particular case is going to come out. I think there’s some language to that effect, even in the Myers Supreme Court opinion from 1926, and in faithfully executing the laws. We’re not talking about this kind of idea of threatening people if they’re not going to do a politically charged thing of being fired. We’re talking about everybody remaining faithful to their constitutional duties, but to the extent that people are not following the agenda set by Congress, the Executive, and doing their job that there does need to be some way to be able to bring supervision and removal.

 

      The other piece the SG asked the Court to revisit is the MSPB’s role and narrow it to just determining that there’s a factual basis for the removal rather than a multiple level of an appeals structure. Whereas, I think now you get your case heard, first, by an administrative judge within the MSPB, and then it would go up to the board. So I that could be an incremental way in which litigants who are being strategic will bring these carefully framed, minimalist, fact-bound questions to the Court and enable the Court to sort of reach a decision that’s maybe right in its view of the Constitution, but doesn’t necessarily have one hundred immediate implications down the line.

 

Hon. Diane Sykes:  Professor Buzbee, any response?

 

Professor William W. Buzbee:  One, I agree. I think that you see in these cases, especially in Lucia, a very minimalist approach. Free Enterprise has some much broader language within it, but in the end what the Court actually does is limit it in the scope and carefully says it’s not doing somethings. So I think you see it. So there’s one way to look at it as that’s just how they got to the majorities in those cases. That is limiting the reach of them, leaving some questions undecided was just strategic, so it doesn’t tell you next. It’s a question of where the votes stand. I think there is some truth to that.

 

But the other is kind of, I think, an interesting big question. We’ll see. Chief Justice Roberts and Justice Kagan analytically approach statutory interpretation in very similar ways. They are both very thorough readers of statutes in their entirety, in their functioning, putting provisions together. And I think for this reason, I think Chief Justice Roberts, who’s a key vote here, I think he understands that different choices and statutes matter and should matter. And I think he would be concerned with too readily jettisoning a body of law or embracing an approach which makes all statutes just about arbitrary power.

 

      You look back at his D.C. Circuit decisions, he is genuinely concerned about arbitrary wielding of power, and if you allow agencies to be subject to threats, reprisals, or dismissals, or the same thing at other officials subject to that, then there’s concerns of that. So I think you have the issue of the administrative state, you have maybe the minimalist approach to create majorities, but maybe also just a respect for and an understanding of the rich choices Congress makes over time in structuring statutes and a desire not to create overly broad rules.

 

      The other Court watchers—my friends who are much more day-in-and-day-out watchers of the Court—I think people view Chief Justice Roberts, who again is a key vote here, as truly being an institutionalist, very concerned about the Supreme Court’s integrity. And so part of his reason for embracing more minimal approach is a radical upheaval and jettisoning of whole bodies of law would be inconsistent with, I think, his view of what the Court needs to be respected as a legitimate institution.

 

Hon. Diane Sykes:  I know this isn’t a panel on agency deference, but Professor Eastman brought this up about the likelihood that the Court may more readily embrace a revisitation of agency deference doctrine as more within the comfort zone than some of these more radically consequential, structural, constitutional decisions. And I’d like to hear the other panelist’s responses to that idea, and also whether that’s more comfortably within the Court’s vision of its own role as an institution that has Republican legitimacy.

 

Hon. Henry Kerner:  Who wants to go first?

 

Prof. John Eastman:  It exacerbates -- I mean, you’ve got both an Article I problem and an Article III problem. I think Justice Thomas’s opinion of Michigan v. EPA—I forget which one—points out the Article III problem with these deference doctrines. The agencies are themselves interpreting statutes. That’s the role of the courts. And it’s not just him. There’s --Bill Eskridge and Cass Sunstein both criticize Chevron deference on those grounds. But it exacerbates the consolidation of power problem and the lack of accountability problem. You’ve got the non-delegation on the front end that allows them to make laws. You’ve got the lack of direct supervision from the elected executive that allows them to force laws maybe contrary to the policy of the administration. And then you’ve got the deference doctrines that allow them to interpret the laws while they are also adjudicating them. This seems to me just a huge problem from separation of powers perspective. And that’s with an executive agency, quite apart from an independent agency.

 

Hon. Diane Sykes:  Anybody else?

 

Hon. Henry Kerner:  I have one thought, if I may.

 

Hon. Diane Sykes:  Sure.

 

Hon. Henry Kerner:  So I know Professor Buzbee was talking about rules and how folks don’t like vague rules. So one of the things that’s really important in our world is we try to have as clear rules as we can. So we get very clear rules, and we try to work on, for example, the Hatch Act area. There’s regulations promulgated by OPM, but within these, especially with social media and other new developments, how do you get a law from 1939 to apply to Twitter? Right? And so you come up with these, and to go back to what [John] Eastman said, at some point when you work out with practitioners who’ve been in this field for 20 years, I think they have an expertise that ought to be given some credence because they’ve been working on this, they’ve thought this through, they work very hard on this. And when you come up with rules that are clear, then you have robust training, and then you have accountability, you set up sort of a three-legged stool that I think really works. And when that gets into the courts and judges at that point aren’t second guessing these rules or giving you no deference on them, how can judges have that kind of expertise when you’ve worked on these? So I do thing that there’s a need for technicians, essentially, and experts to work through difficult problems. And obviously if they run violative of statutes or the Constitution that’s one thing, but at least giving them some deference and to appreciate the technical expertise.

 

Hon. Diane Sykes:  All right, let's go -- oh, you have a response? Sure. Absolutely.

 

Professor William W. Buzbee:  So a couple things, one is, there’s kind of Chevron as a kind of toehold, or a claim generally, about excessive agency power, and then there’s Chevron the actual case what it says as it currently stands. And so I think there are two issues and people sometimes shift from Chevron as sort of a place holder for the problem with the administrative state and then Chevron as it actually stands today. So most importantly is Chevron itself has been subject to substantial limitations. The Mead case comes in. There’s kind of a Swiss-cheese aspect to Chevron where very little is left of Chevron as more broadly parodied, or caricatured, when people say it creates kind of unfettered power. Where Chevron stands now is effectively rewarding agencies that use notice-and-comment rulemaking and who, in the end, come up with a promulgated rule through a transparent and open process subject to judicial review that is reasoned and responds to all salient criticisms. And if an agency doesn’t do that, on any of those fronts, you’re not in the world of Chevron step two deference.

 

And so I think it’s important to remember that Chevron is not a permission to agencies to do whatever they want. It is in fact, a regime which is built on the idea that Congress does hand authority to agencies, and agencies then, with their expertise about the field, the law, related statutes, they come up with regulations. And again, my sense is what business clients, especially—which I think is a traditional concern of The Federalist Society—what they want to do is they don’t want to have a statute where everyone’s guessing how it should be read. In general, people want greater clarity, and notice-and-comment rulemaking is a source of such clarity and also legal stability. So I think it needs to be read for what it actually says.

 

Also, just along those lines, there’s a wonderful, famous article for those of you who really want to get some good reading today. Right before the Chevron case came out, Henry Monaghan, who’s a professor at Columbia wrote an article called Marbury and the Administrative State. And he basically thought about the nature of authority conferred on agencies and explained why some degree of deference to agencies is basically a constitutional necessity and logically unavoidable, and kind of worked his way through it. And although the Chevron case did not cite to that article, it really anticipated the logic of Chevron, and I think it still is, for people trying to understand Chevron, it’s probably the best article about Chevron, although it was published before it.

 

Hon. Diane Sykes:  All right. Professor Mascott.

 

Prof. Jennifer Mascott:  Well, I guess just responding to what Bill just said about stability, I do see your point about stability and notice-and-comment rulemaking. I think ultimately the most stability, of course, would come from clear laws being passed by Congress. I mean, the virtue that we’d have if more detail was in congressional legislation as well is -- you know, we’ve got 435 member, 100 Senators; they’re representing interests geographically all over the country, and so it’s just able to represent the interests of the people in a way that any agency, whether it’s headed by a commission or one person, is just not going to be able to do, in as much of a way. So I think a lot of the problems that we’re seeing here and talking about whether people are concerned about the whims of Executive Branch actors, or whatever it may be, could be solved by Congress taking a larger role.

 

Bill also earlier talked about the Necessary and Proper Clause and saying with the congressional role and the executive role, I think the suggestion is, that if the two politically elected branches reach a compromise under the Necessary and Proper Clause, the idea is we should sort of defer to that. And so not be too quick to have courts or ad law scholars or whoever else step in and say, “Well, that’s an unconstitutional arrangement. That violates Take Care Clause, or the Appointments Clause, or whatever.” I think the one thing to keep in mind, though, with that, is if we see the Constitution as being the document that brings into being this federal government, and we’ve still got states who are supposed to be operating in the background, if we too much defer to the Necessary and Proper Clause and say that Congress and the Executive can do anything they want, even if it’s outside of the text of constitutional restraint, such as the Commerce Clause, then Congress and the Executive might be happier with the arrangement. But I think people, the states, there are others, whose interests also need to be looked out for.

 

So obviously we don’t want to be willy-nilly, second guessing the elected branches, but the Constitution does have constraints, one of which fundamentally, of course, is the Commerce Clause and limiting federal power just in general. And so I think we need to have comfort where the Constitution does speak clearly to things, coming in and saying that is a limitation that needs to be abided by and adhered to, even if sometimes it means we’re saying that various governmental actors have gone outside of those constraints.

 

Hon. Diane Sykes:  All right. Thank you. Let’s go to your questions. Yes, sir?

 

Randy May:  Do you want me to use the mic?

 

Hon. Diane Sykes:  If we have one. Oh, it’s right over here. There is a standing mic right under the light so it’s hard for me to see it. There we go. If others have questions you can line up next to the microphone stand.

 

Randy May:  Thank you to all of you. Randy May from the Free State Foundation. Judge Sykes was inching up to the question and a point I want to make, and then Professor Eastman came even closer in inching up, but here’s the point, and I think the answer to the incrementalist question. Why can’t the Judicial Branch -- why doesn’t or can’t the Judicial Branch impose a less deferential standard in reviewing the actions of the truly independent agencies? I’m talking about the FCC, and so forth.

 

      I’ve written a couple law review articles suggesting that—published in the Administrative Law Review—but more importantly, in Justice Kagan’s presidential administration article, you know that mammoth article. It is in footnotes, but she basically says that the independent agencies, because they’re less accountable than the true Executive Branch agencies, because of the lack of the termination ability under the for-cause one, that they should receive less deference from judges like Judge Sykes and others, because of that lack of accountability and because Chevron, which Professor Buzbee just talked about, is really based, at the core of it, on the notion of political accountability. I know there’s a nod to agency expertise, but political accountability. So maybe Professor Eastman, or anyone else, could talk about whether you think that that might be an incremental step towards holding the independent agencies more accountable?

 

Hon. Diane Sykes:  That’s a really good question, distinguishing between truly independent agencies and other executive agencies for purposes of deference.

 

Prof. John Eastman:  At least it’s a first step. I’m willing to take a cut back on deference where ever I can get it. So I think that’s a very good step. I think—and I’d love to hear from Professor Buzbee on this—the notion that the statutes themselves provide some level of accountability if we properly enforce them in the Judiciary. I think he would share that view.

 

Professor William W. Buzbee:  The Supreme Court has been confronted with this question. They’ve declined to approach deference differently for independent agencies and executive agencies.

 

Randy May:  [indiscernible 01:15:00]

 

Professor William W. Buzbee:  I guess I would say it’s been mentioned. It’s in the opinions. Has there been a clear majority that has said in recent cases that there should be no deference? But I think kind of for the same reasons that Justice Scalia’s opinion in the Arlington [v.] FCC case when he said the difference between a standard question of interpretation and regulation and a jurisdictional question is a hard line to draw. Agencies come in many forms. There're degrees of independence and degrees of executive-ness in agencies, and my sense is this would be kind of unworkable and could become itself very political. So I think it would be a bad idea.

 

      I still think agencies should be scrutinized closely. I think agencies that don’t follow the law, that don’t offer good reasoning and basis for their decisions, should be quickly rejected by the courts. I just don’t think the deference regime should change.

 

Hon. Diane Sykes:  Anybody else at this point? All right, next question.

 

Paul Kamenar:  Yes. I’m Paul Kamenar, a D.C. lawyer. Just a quick comment and a question with respect to the for-cause removal. That issue is before the D.C. Circuit regarding the other Special Counsel, Mueller. That’s a case I argued last week before the D.C. Circuit and whether that for-cause removal under the DOJ regulations can be immediately revoked and thereby revert Mueller to an inferior officer. And I cited Jen’s article in the case that if he is an inferior officer, he has to be appointed by the head of the department, which was Jeff Sessions. But my question is with respect to the CFPB case. What—anybody on the panel—what would be the minimalist solution or answer to that to reverse the D.C. Circuit case, and how do you do a head count on that knowing that Justice Kavanaugh would recuse himself because he ruled on the issue below? Do we have the five votes up there to reverse the D.C. Circuit case?

 

Hon. Diane Sykes:  Anybody?

 

Prof. Jennifer Mascott:  One answer to that might be maybe, who knows -- maybe the Court -- I’ve heard some scholars speculate maybe the Court won’t take the case as a result. Maybe the Court will wait for some others to come up. Possibly this Collins decision from the Fifth Circuit might be a way to get at the idea of tenure protections for single directors. To me it seems like, because in Free Enterprise Fund, the Court already demonstrated willingness to cut back some for-cause removal protections that my sense is that the Court’s minimalist approach would be to strike the removal protections for the single director rather than doing something more dramatic like making it a multi-member commission because it seems to me, at least, that requires a lot more rewriting of the statute than just severing one portion of it. But who knows? My suspicion is that we might see the Court rule on this, not in a CFPB case, or not at least in a D.C. Circuit case, but in something else within the next couple of years.

 

Prof. John Eastman:  I will add one point, and I agree with Special Counsel Kerner. I don’t see the constitutional difference on the separation of powers question between a multi-member independent commission and a single member. The theory that the multi-member commission would check each other doesn’t provide the constitutional check that’s required. It may create a greater opportunity for mischief than a single member, but I don’t think it cures the constitutional problem. So I’m agreeing with you. There’s no difference, but where I’m disagreeing with you is I think that they’re all unconstitutional rather that all constitutional.

 

Hon. Diane Sykes:  Okay. Next question.  Yes, sir?

 

Devin Watkins:  Hi. My name’s Devin Watkins. As an originalist, I look closely at what James Madison said and some of the other Founders. But James Madison advocated that the Comptroller of the Treasury have for-cause protection. And so I wonder if we should instead be looking at what that for-cause protection means. Should the president be able to remove a policy-creating officer for not creating policy that follows faithfully the law? Or as Myers said an adjudicary officer, a quasi-judicial officer, be removed after the adjudication for lack of wisdom, or other reason that Myers talks about?

 

Hon. Diane Sykes:  Alright. Anyone want to take that one on? I think you’ve stumped them.

 

[Laughter]

 

Hon. Diane Sykes:  Go ahead, Professor Eastman.

 

Prof. John Eastman:  This often comes up in the context of certain government functions are just too technical for the people to understand, and therefore the constitutional system of accountability to the people through their elected officials just doesn’t work. We need to bring in the experts. And I think a hundred years of experience with that progressive doctrine has proved that that doesn’t work very well, in fact, often times catastrophically much worse. We, after all, had experts at Fanny Mae and Freddie Mac that gave us the greatest recession since 1929. So I guess I would challenge the very basic assumption that if we get unaccountable experts in these technical fields, we’ll all be better off. I just don’t think that experience has borne that out.

 

Hon. Diane Sykes:  All right. Yes, sir.

 

Mike Daugherty:  I’m Mike Daugherty. I’m the CEO of LabMD and a business owner. I just won in Eleventh Circuit, and I just want -- this is about accountability and specificity of accountability to the panel, especially Professor Buzbee. I’ll just read four sentences from this.

 

So the court had said, “Doesn’t that underscore the importance of significance of rulemaking? Otherwise you’re regulating data security on a case-by-case basis.”

And the FTC said, “We are regulating data security case-by-case basis. And that’s exactly what the Supreme Court says in Bell Atlantic and Chinery.”

And then the Court says, “It doesn’t matter whether the subject has any notice at all?”

And the FTC says, “Correct. Correct.”

He says, “Okay, notice becomes irrelevant.”

And the FTC says, “You can adopt new rules in adjudication. The Supreme Court’s made that very clear.”

And the court says—this is Judge Tjoflat—“I appreciate your concessions.”

 

Now, we won. The company’s dead. 700,000 cancer patients have to shift medical. There’s carnage everywhere, which never comes up in the legal system. How do you hold these people accountable for gun-to-the-head regulatory when they’re off the chain and they have qualified immunity? How would you in specificity hold agencies off the chain accountable?

 

Hon. Diane Sykes:  I think that was to you, Professor.

 

[Laughter].

 

Professor William W. Buzbee: Honestly, I have not seen the case. Part of what you were reading is part of longstanding --

                     

Mike Daugherty:  It’s oral argument from --

 

Professor William W. Buzbee:  -- constitutional doctrine which is going back to the Chinery case, which is agencies have procedural choice, how to make -- it's not allowed to make rules, but how to make policy, and they can act through notice-and-comment rulemaking. They can develop policy on a case-by-case basis, and this discretion --

 

Mike Daugherty:  Well, they will just reject it flat out in that case.

 

Professor William W. Buzbee:  But in this whole body of law, which is longstanding, and actually one of the areas of law that the most conservative wing has most ardently adhered to over the decades, the idea is that courts should not be second guessing agencies' choices of how to proceed. So I think what you’re suggesting is you think there should be more done by notice-and-comment rulemaking, I would guess.

 

Mike Daugherty:  Well, I think knowing the laws is a really nifty concept.

 

Professor William W. Buzbee:  I think that you should know that there has been a longstanding that more should be done by notice-and-comment rulemaking. That is more knowable law is better than law that can be wielded an announced for the first time in adjudications. And so I think, if that’s what you’re getting at, then --

 

Mike Daugherty:  No, what I’m getting at is there’s no accountability when we have an agency parachuting in saying, “This is what you’ve got to do for cybersecurity.” And it’s gotten worse for 20 years and there’s no accountability. They’ve completely screwed it up without saying what the law is which is the fundamental thing. They’re not saying what you’re supposed to do, which is what you earlier said your clients want to know.

 

Professor William W. Buzbee:  Right. Again --

 

Mike Daugherty:  How do you hold them accountable if you’re for agencies being held accountable? There’s mass destruction.

 

Professor William W. Buzbee:  What is the name of the case? I look forward to reading it.

 

Mike Daugherty:  LabMD. It's FTC v. LabMD. In the Eleventh Circuit. They did not seek cert.

 

Professor William W. Buzbee:  I look forward to reading it.

 

Hon. Diane Sykes:  Thank you, sir. Next.

 

Stephen Casey:  Thank you so much. Stephen Casey from the Austin area. This question would be for Professor Eastman and Professor Buzbee. And this sort of steps forward from the point the previous person brought up. I’ve been in criminal defense before, and also did some mortgage defense, so civil and criminal issues. The question is, laws are out there. People can go into the books and look at them. But with respect to notice, I represented people, plenty of mortgage owners for a house at foreclosure that had not idea of the protections that were in Regulation Z. There’s no ability for them to know where they were protected. On the other hand -- because when someone buys a house, they’ve got to sign tons of disclosures. You see them just flying through there. There’s a huge body of them that they’re not made aware of. On the flip side of that, on the criminal side, you want to be able to adjust your behavior so you run afoul of the laws.

 

Hon. Diane Sykes:  We are running out of time, so I need you to connect this up to the independent agency issue.

 

Stephen Casey:  How does someone know on the civil side or the criminal side – on the criminal side how to protect themselves from not violating one of these massive ten thousand sets of regulations; and on the civil side, what substantive rights have been created when it’s just experts in a notice-and-comment period?

 

Hon. Diane Sykes:  I guess it’s a question about inscrutability of the modern regulatory state and what do consumers do about that?

 

Prof. John Eastman:  I think Senator Lee offered a very good answer to that in the opening remarks of this convention – that we have allowed so much accretion of power over so many areas that are not constitutionally enumerated to the federal government that we’ve destroyed the subsidiarity principles where a lot of this stuff ought to have been resolved in a much more local state level, where you do have a greater capacity to keep track of what’s going on. So it’s a much bigger problem than just administrative agencies, or deference, or what have you.

 

Professor William W. Buzbee:  I guess [what] I’d just say is the complexity of law is a problem. It does mean we need lots of lawyers. That’s not necessarily a bad thing. But I think the reality is that most people in businesses are more concerned with the broad stroke law. That is, law that is vague and really are hoping there will be more specific instructions. The downside there is it does begin to accrete and can be hard to sort out. And so I do think that finding ways to make sure people know about their key legal rights and their obligations is essential. And 9I think that’s someplace where maybe the web will in time help us on that front. But that is a critical need for law to work.

 

Hon. Diane Sykes:  All right. Last one. Go ahead, sir.

 

Jimmy Conde:  I'm Jimmy Conde. I’m a lawyer here in D.C. And I think my question is really for John Eastman and Jennifer Mascott. And the question is, is the Federal Reserve’s Federal Open Market Committee constitutional?

 

Hon. Diane Sykes:  Well?

 

Prof. John Eastman:  My intuition is to say, no, but I don’t know enough about the intricacies of that particular authorizing statute to be able to answer definitively. Sorry to duck it. I’m going to pass it to Jennifer.

 

[Laughter].

 

Prof. Jennifer Mascott:  I will just say on a closing note, Bill recommended this book by Jerry Mashaw, which does give a lot of rich history of administrative a law in the first few years. And I would commend -- we’re heading up to winter break. I think pairing that book with Joe Postell’s recent Bureaucracy in America, which goes over the same history and from a slightly different constitutional view would be excellent reading for those of you who are interested enough in these issues to come to the panel. And that's my last word.

 

Hon. Diane Sykes:  That’s a great way to close with a reading list. Let’s thank the panel.

11:45 a.m. - 1:30 p.m.
General Luncheon

2018 National Lawyers Convention

The Mayflower Hotel - Various Rooms
1127 Connecticut Avenue, NW
Washington, DC 20036

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Lunch Buffet:
Cabinet, East, Senate and State Rooms 

Practice Group Sessions & Lunch:
Federalism Panel - East Room 
Litigation Panel - State Room 

1:45 p.m. - 3:15 p.m.
Artificial Intelligence and Big Data Innovation: Navigating the Technology World of the Near Future

2018 National Lawyers Convention

Topics: Intellectual Property
The Mayflower Hotel - Grand Ballroom
1127 Connecticut Avenue, NW
Washington, DC 20036

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Technology progress in recent years has been driven in large part by the continuous generation of massive amounts of data (“Big Data”) and its processing by means of Artificial Intelligence (“AI”). Self-driving cars, personalized advertising, and automated medical diagnostics are examples of a technology trend that will accelerate in the future, creating unseen before opportunities for innovation, along with serious legal and regulatory pitfalls. This panel will focus on practical matters concerning AI and Big Data related innovation, including (a) protecting of related intellectual property (“IP”) and (b) handling of data ownership and privacy issues. It will tackle problems such as: who owns AI-generated IP?; who owns personal or test data?; who is liable if something goes wrong?; and what role, if any, should the government(s) have in regulating the flow and use of data-driven information?

  • Address: Hon. Andrei Iancu, Under Secretary of Commerce for Intellectual Property and Director of the U.S. Patent Trademark Office
  • Mr. James C. Cooper, Deputy Director for Economic Analysis, Bureau of Consumer Protection, Federal Trade Commission
  • Mr. Shawn D. Hamacher, Assistant General Counsel, Steelcase 
  • Hon. Michelle K. Lee, Former Under Secretary of Commerce for Intellectual Property and Director of the U.S. Patent and Trademark Office
  • Dr. Ognian “Oggie” Shentov, Of Counsel, Jones Day
  • Moderator: Hon. David J. Porter, United States Court of Appeals, Third Circuit

Speakers

Event Transcript

Hon. David J. Porter:  -- AI might be defined as the science that enables machines to do things like understand language and logic, make decisions, engage in conversations, and recognize images. In this panel, we'll be considering how the growth of Big Data and AI will affect and be effected by legal issues, such as tort liability, IP ownership and infringement, regulatory activity, ethical questions—like human agency and mens rea—privacy, security, competition, and consumer protection.

 

      We have a terrific lineup on this panel. To kick things off, Andrei Iancu will begin. He's the Under Secretary of Commerce for Intellectual Property and the Director of the U.S. Patent and Trademark Office. Before that, he was Managing Partner of Irell & Manella. I'm just going to give very brief introductions. There's, obviously, more bio in the guidebook if you want to see those.

 

      After that, Oggie Shentov will go next. He's Of Counsel at Jones Day and Vice-Chair of the International Patent Law and Trade Committee of the Intellectual Property Owners Association.

 

      During the Obama administration, from 2014-2017, Michelle Lee had the same job that Andrei has. She was Under Secretary of Commerce for Intellectual Property and Director of the U.S. PTO. Interestingly, she wrote her graduate thesis on artificial intelligence at MIT's AI Laboratory.

 

      Shawn Hamacher is Assistant General Counsel of Steelcase Inc. in Grand Rapids, Michigan. Steelcase offers architecture, furniture, and technology products and services designed to help people work and learn.

 

      And next to me, Dr. James Cooper is Deputy Director for Economic Analysis in the FTC's Bureau of Consumer Protection. He is on leave from the George Mason University Antonin Scalia School of Law.

 

      So, Director Iancu, would you like to begin?

 

Hon. Andrei Iancu:  Hi. Thank you, Judge Porter. I thought I would stand up over here for my remarks. It's a bit easier. It's an honor to be here with you and all the panelists this morning. I'm especially honored to share this stage with my immediate predecessor, Michelle Lee, who—among many other things—initiated a Big Data Program that not only supports what we currently do at the USPTO, but also serves as the foundation of future AI at the agency.

 

      And thank you to the board, the officers, and staff of The Federalist Society, and especially Dean Reuter, for the invitation to be here today and for organizing this incredible event that takes place every year.

 

      As Judge Porter noted in his introduction, I have the honor of leading the USPTO at this time with nearly 13,000 employees, including some 9,000 examiners—patent and trademarks—who work tirelessly every day to secure the intellectual property rights of inventors and brand owners.

 

      As you can imagine, the USPTO has vast reserves of scientific data contained in the more than 1 million patent and trademark applications we receive every year. Indeed, our patent, trademark, and other types of data are among our most important assets. Many depend on our data. Whether it's an independent inventor working in her garage or lab to better understand her inventions compared to the existing landscape, or a large multi-national corporation considering whether to invest in developing new technologies to create new brands or acquire existing patent portfolios, just about everyone uses the USPTO's data to keep up with a pace of innovation and entrepreneurship.

 

      We, too, as an agency at the PTO, are leveraging this invaluable data source so we can more efficiently and effectively fulfill our constitutional mandate "to promote the progress of science and useful arts." So on that front, let me share with you just a few ways we are doing this within the agency.

 

      At the PTO, we have a "Big Data Reservoir" that contains over 8 million patent office actions, for example. This empowers us to harness data to measure work product consistency across our entire patent core and systematically focus our quality improvement efforts.

 

      For instance, our "Big Data Reservoir" has enabled us to answer fundamental questions, such as, how many and what types of rejections under the different statutes are our examiners making and consistently applying throughout the examination corps? How can examiners more effectively use non-patent literature in priority rejections? And what impact has our guidance and training had on examination outcomes? Efforts like these, as well as other patent quality studies, have resulted in reallocating millions of dollars in training expenses to more localized areas for optimal rates of return.

 

      Moreover, by identifying how and what priorities used by our examiners and comparing that too, for example, the outcomes of AIA trials before the PTAB—our Patent Trial and Appeal Board for those new to the PTO jargon—we can begin to measure and qualify the accuracy of the searches we conduct during examination, as compared to the art an opponent might find during litigation or another dispute after issuance. Enhancing search during the original examination, in particular, is an area that we expect AI could yield tremendous results. Indeed, it's a tool we hope that can help us narrow the gap between the search done during examination and the search done post-issuance.

 

      To that end, we've developed, and we are actively beta testing right now, a new cognitive assistant called "U" or "Unity," which leverages AI and machine learning in a way that augments our existing next-generation patent tools. For example, the tool is intended to allow patent examiners, through a single click, to conduct a federated search across patents, publications, non-patent literature, and images. And through AI and machine learning-based algorithms, this would present to the examiner the results in the form of a pre-search report.

     

      We're also exploring semi-automated tools for search query expansion, trained to mine technology-specific synonyms with the help of crowd, or examiner, sourcing. This new capability holds the potential to promote consistency in searching and to more quickly surface prior art that may be located in any of several separate databases. And that's important because one of the benchmarks of a high-quality patent is whether it can withstand fair challenge down the road. And surfacing the best prior art early helps to increase the likelihood that this will happen. AI can help us do that.

 

      We’re also testing new AI tools and technologies such as robotic processing automation that could potentially generate smart office action templates that are automatically populated based on the interactions between examiner and attorney, saving our examiners time from some of the more tedious clerical tasks when generating office actions.

 

      And in an effort to reduce the costs of manually classifying patents, we’re exploring the use of AI technology to ensure that we route the right case to the right examiner. This, in turn, enables us to organize our workforce more effectively and as a result conduct a more effective examination. These are just a few of the many ways we’re using Big Data and AI within the institutional walls of the USPTO.

 

      Now, outside our agency, AI has significant implications for the law, the economy, and America’s position as the global leader on innovation. Not surprisingly, AI is changing the landscape of intellectual property policy, and in doing so, it is raising real legal, regulatory, ethical, and moral questions for us to grapple with.

 

      I am sure that other panelists today will address many of these issues in their own remarks, but let me share some IP-related examples. Will the legal concepts of inventor, author, and creator be fundamentally changed by AI? Does use of copyrighted works to train AI systems constitute fair use? How will firms, both large and small, protect AI-related inventions and how does patent subject matter eligibility impact those strategies? What are the disclosure requirements in a patent for a machine-learning algorithm, when the human inventor may not know exactly how the machine will perform a given task after it has learned from training?

 

      Such questions cut across industrial sectors and national boundaries, and many do not have viable answers yet. But how we choose to answer them will have major national economic impact and implications. The good news is that we are working on these issues right now as we speak. And, in fact, these and similar issues will be examined in an all-day conference organized by the USPTO to take place on December 5th at the USPTO. It's called "Artificial Intelligence: Intellectual Property Policy Considerations. Please attend.

 

      Needless to say, AI has evolved from the obscure to the mainstream, and it’s taking the use of computers to a new level, at an awe-inspiring speed. Some have even characterized this fusion of technologies that blur the lines between the physical, digital, and biological spheres as the “Fourth Industrial Revolution.” As with the prior industrial revolutions, these new technologies, which include robotics, autonomous vehicles and quantum computing—among many others—hold the promise to improve and lengthen lives, generate higher income levels, dramatically increase productivity and efficiency, and—critically important—vastly increase the speed of innovation itself. But they also pose substantial risks, particularly if the United States is left behind in the innovation race.

 

      Countries around the world are adopting and implementing long-term, comprehensive strategies designed to increase their prominence and leadership in innovation. For example, the “Made in China 2025” initiative is aimed at transforming China into a global leader in strategic industries, such as AI and 5G telephony, that are critical to competitiveness and innovation in the Fourth Industrial Revolution.

 

      In recent years, there has been dramatic growth in Chinese patent filings in such key technologies as next generation IT, computerized numerical control and robotics, and advanced transportation. When we look at patent applications in the technology areas largely covered by the “Made in China 2025” initiative, we see that filings by Chinese nationals to China’s IP office have grown at an annual rate of 24 percent between 2006 and 2016. By comparison, such applications filed by U.S. nationals to the USPTO grew at an annual rate of only 3 percent. Patent filings are not fully determinative of innovation, and some have questioned the quality of some Chinese applications, but these statistics are one measure and a potential leading indicator. Other indicators point to similar trends.

 

      And China is not the only innovator in the technologies of the Fourth Industrial Revolution. From the smallest countries like Singapore to the largest like China, many nations around the world have become extremely competitive in the innovation ecosphere.

 

      Only by innovating faster and in key areas will the United States continue to lead. We must harness our long history of innovation, born of our nation’s founding document and perpetuated by our people’s innovative spirit since then, and apply the same spirit to this new Fourth Industrial Revolution. As director of the USPTO, one of my top priorities is making sure the United States remains the market of choice when it comes to innovation, especially in the emerging technologies of the future, including AI and machine-learning technologies.

 

      This administration is committed to protecting and promoting American innovation and entrepreneurship, as symbolized, by the way, by President Trump’s recent signing of Patent Number 10 Million. This was only the second time a president signed a patent document since John Quincy Adams, and it evidences the importance and innovation in today’s economy and to this administration.

 

      So with that, I want to thank you for the invitation to speak on this important topic, and I very much look forward to continuing the conversation with all of you during the panel discussion. Thank you all.

 

Dr. Ognian “Oggie” Shentov:  I will be next, then. That's a terrific and wonderful speech by Director Iancu, which I'd like to pick up on some themes that he already outlined. And in particular, I'd like to show a red flag—a warning bell, if you'd like—that the United States' decade-long leadership position in areas of innovation is -- and protection of intellectual property rights is slipping. And it's slipping, in some instances, rapidly, precisely at the wrong time when we are in the midst of a gigantic technological revolution the likes of which we have never seen, at least since the invention of the personal computer in the '70s and the internet in the '90s. The most profound changes are happening technologically in virtually every area of our daily life and touches it practically every day.

 

      Obviously, I'm talking about artificial intelligence, about Big Data, and just in passing about block chain, which I guess we have to leave at this conference for another time, although I know it is hugely important. So as a definitional matter, artificial intelligence is the theory and development of computer systems that perform tasks that are normally associated with human intelligence. And those can be something like sensing, like visual interpretation. You can have comprehension, a natural language processing, understanding foreign language and translating, or action, in terms of -- the best example being robotics, where a machine feels its environmental and wants to navigate and can navigate around it.

 

      Big Data is a very closely associated concept. I understand about some months ago when, according to IBM, 90 percent of all data generated at any time was created in the past two years. The rate of growth is so tremendous it is overpowering. And Big Data and artificial intelligence are clearly going to determine the winners and losers, if you like, of the coming century. So it's critically important to make sure that the United States retains its leadership position. And there are certain cracks in this thing to which Director Iancu pointed to already.

 

      So I'd like to start a little bit with the type of problems that I have, and others have identified in the protection of intellectual property. And the major problems can be characterized one way in two categories. One of them is sort of procedural and the other one is systemic, sort of the nature of the beast type of problem. The procedural problem, and what I refer to is probably best illustrated in a Supreme Court decision in Alice about four years ago, which attempted to clarify what is patent-eligible subject matter.

 

      So four years ago, they came up with a two-part test that was supposed to clarify for people—and particularly the examiners in the Patent Office—how to ensure that the particular concept is, in fact, patent eligible and can proceed. Well, I'm afraid the Supreme Court in that particular case, and subsequent cases, really kind of failed. The two-part test involves in the first step the determination as to whether a particular idea is directed to patent ineligible concept, such as an abstract idea, loft nature, or something to that effect. And if so, then it goes to a second step where it is looked into the question of whether there is sufficiently more added in the claim language to make an otherwise non-eligible idea into patent-eligible idea.

 

      Unfortunately, it seems like it's a practical matter. The result of the Supreme Court decision at the time is largely uncertainty and confusion, particularly in the areas of software where I practice as an attorney. Some software portfolios, as I understand, have dropped in value by 80 percent, primarily because you really don’t know whether something is patent eligible or not. And even if you get a patent, you may get it invalidated because for a somewhat simple reason the two-part test is something, an abstract idea, that the Supreme Court did not give a definition—and could not give a definition—of what's an abstract idea. And as a result, it's very difficult to apply. Examiners have problems, practitioners have problems, everybody has a problem. So the problems surrounding patent eligibility are—what we call one-on-one patent practitioners—are very well known.

 

      I'd like to finish my portion of the presentation with some aspects of the systemic issues that are relevant to artificial intelligence. And by that, what I mean is artificial intelligence is really -- could be looked at something like a black box that in general tries to simulate the performance of the human mind on a particular task, or in the case of general artificial intelligence to simulate a human being or even exceed the human being. Well, the problem in having a black box, and Director Iancu already mentioned this thing, is that it is a black box, and we don’t really know exactly how it works. We don’t have time to show slight presentation to see what the typical structure looks like. But it's basically, there's a lot of input, tons of data coming in from one place, it goes through this box, it is massaged, coefficients are being adjusted properly or improperly to come up with a result. How exactly that works is something of a mystery, and if you look at it from the perspective of a person who wants to draft a patent application, it's not real clear how you do it. There are instances in which -- for example, there have been suggestions that you do a full term disclosure, like literally the entire code of the machine. Others suggest that in addition to the machine – the artificial intelligence engine –you also have to provide the data because, frankly, the data that is put into the algorithm to train it to perform a particular task could be hugely important. And it, in some cases, may be outcome determinative.

 

      So the net result of this thing is that we have a position where written description and enablement requirements—they're part of what the Patent Office does every day—are kind of put on restrain. It is not exactly clear how people will go about complying with these requirements.

 

      Number two: to have a patentable invention, you need -- we deal with concepts of novelty and obviousness. Well, obvious to whom? And that's a very interesting question. I understand the European Patent Office in October, just last month, actually, had a directive in which they defined three categories of person of ordinary skill in the art, only one of which is sort of something that we are familiar with, generally, people who are knowledgeable about concepts and the lingo of artificial intelligence. The second category is teams of experts. So one of the biggest applications of artificial intelligence is in medical sciences, and so you need probably a medical expert to figure out if you have lung cancer or that sort of information to put the right medical data into the training algorithm. And then you may need a computer scientist who can figure out what the purpose of this data is and how to make sense of it.

 

      So we see a diffusion in which it's not even clear who the invention is directed to because the person of ordinary skill may be one person, it may be two persons, and here's the kicker: according to the European Patent Office, the person of ordinary skill in the art could be artificial intelligence machine. So that's a third option, which is now provided, and it is kind of in the context of should we be giving personal rights to machines and so on.

 

      So problems with figuring out how to describe and how to enable patent inventions: what is obvious and what is not obvious, and to whom it is obvious – how do you go about enabling it? And the flip side of it is, for example, who infringes? Suppose that you are lucky enough to get yourself a patent. How do you know that someone infringes? And, again, we don’t have the slide presentation, but do you see that artificial intelligence systems are generally diffused? They have data owners, you have the engine that runs the data, and you have feedback mechanisms, and you have a variety of things. So who is the infringer, and how do you make sure they infringe?

 

      Furthermore, because it's the nature of artificial intelligence that it changes over time, well, maybe something that didn't infringe in the past after a while, after some adjustments are made to the coefficients of the artificial intelligence becomes infringing. Who is going to determine that? And, of course, another problem in this regard is who's responsible if something goes wrong? At the moment, I think we are dealing with it at a very basic level. It is like if you order something on Amazon and you get something wrong, you kind of know how to deal with it. But what if a robot hits somebody on the street, then who's going to be responsible? The people who created the robot? The people who tested it or put the data in?

 

      I will conclude my opening remarks with, again, it is -- there are warning signs the United States is losing some of the innovative leadership that it has had for years. I had data, for example, that in the area of natural language processing, patent applications in China exceed those filed in the United States six times. So you can argue whether these are good or bad applications, but you cannot argue that the focus of the business community is probably slowing drifting away from the United States, which not only provides procedural problems, such as the Supreme Court decisions on patent eligibility, but also makes it difficult to enforce certain actions.

 

      I hope that The Federalist Society is one of the societies that is deeply involved in the solution of societal and legal problems [and] will take an active role in the formulation of this. Thank you for your attention.

 

Michelle K. Lee:  So I think I'm up next. I'm Michelle Lee. It's a privilege to be here. Thank you to The Federalist Society, and thank you to my co-panelists. It's a privilege to be on the panel with my successor as well. During my comments, I'm going to give you a glimpse into the novel legal issues, to the extent already addressed by Oggie, as well as the novel ethical issues posed by artificial intelligence.

 

      So as with any introduction of any new, disruptive technology, as majorly disruptive as artificial intelligence, it will pose new legal, ethical, policy, regulatory issues that will have to be addressed by all of you in this room are courts, federal and state legislatures, and the alphabet soup of federal administrative agencies who are and will increasingly feel the urge to jump in.

 

      So before I discuss some of these novel, legal issues, it's important to understand the difference between artificial intelligence when I was a graduate student at the MIT AI Lab—I'm not going to say how many decades ago—and today. And there are really two main differences. One is that computers are now much faster and much more powerful. Number two is that computers -- the memory storage price has plummeted, so that basically everything that you do on a computer, every click you make, every purchase you make online, is now electronically recorded, essentially, forever. You combine those two facts and you have computers now who can pour over vast amounts of data to identify patterns and trends leading to intelligent action. Computers can now learn, based upon data provided to it, to take action beyond that which they were explicitly programed to do by the computer programmer. They're drawing inferences.

 

      And why is this important? Well, it's important because it affects the issue of liability, as Oggie, mentioned. If there's a harm, do you trace it back to the computer programmer, or the computer programmer's employer, who wrote the lines of code? But then what happens if it resulted from the machine learning part of the code, where you have data combined with the explicitly programmed code to arrive at the conclusion? Or what happens if you have combinations of systems with program code, machine learning, producing output combined with another output from program code, machine learning, and output. How do you trace liability? And transparency is going to critical to tracing liability.

 

      Keep in mind that for a tort, there are four elements: duty of care, breach, causation, and harm. And the third element, causation, is based upon proximate cause. But proximate cause depends heavily on foreseeability. But foreseeable by whom and by what? By the computer programmer? By the computer robot? By the robot's owner? What's reasonable?

 

      So these are all new issues that we will have to address on a going forward basis. And Oggie touched upon some of the IP-related issues raised by AI, including obviousness, which I think are all completely valid. Let me just highlight another new novel, legal issue, and that deals with protection.

 

      So who is eligible for protection? The Patent Act—35 U.S.C § 101, all of you know it well, states that "whoever invents [or] discovers any new [and] useful process, machine, [or] manufacture…may obtain a patent therefore." But it anticipates a human being. And, thankfully, when I was head of the patent office, no application came in for an invention created by a machine; however, perhaps in Andrei's term, that might happen, and I'll leave it to him to formulate a solution for that one. But, basically, machines in the future will be able to create artistic works and invent as well. So those will be issues, including infringement -- what if a computer, machine, or an algorithm infringes – again, who is liable, and was it foreseeable, and how do you trace liability?

 

      So let me turn to the ethical issues, particularly ethical issues related to a subset of artificial intelligence, which is driverless cars or autonomous vehicles. So what happens if a self-driving car has to decide between one of two unavoidable harms: to kill a pedestrian, to save the occupant in the driverless car, or vice versa. Human drivers have had to make this decision on occasion, sometimes with split-second notice. Often times, there's no consistency in the decisions from person to person. But how should we program computers to make those decisions? And this is not a theoretical issue because computer programmers today are writing code to identify target objects and to take different actions depending upon its classification of that object. For example, whether the object is stationary or mobile; whether it's a bus or a car; whether it's a hard object or a soft object—a soft object, presumably, being some sort of living thing. So with the enhancements of machine vision, with facial recognition combined with databases linked to biometric data, like facial features, AI systems will be able to identify gender, age, and other attributes. So, again, should the driverless car sacrifice the passenger to save the pedestrian?

 

      And what if, instead of a person, it's a cat or a dog? Does it matter whether, if it is a person, it's an elderly person or a young person, male or female? And what if the numbers are different? One person versus a bunch of school children on a bus or crossing a street. It turns out that according to a study conducted by the MIT Media Lab asking some 4 million people across the globe, answers to these ethical questions are anything but clear cut. There seems to be more consensus or stronger consensus of saving young versus old, humans versus pets or animals, more lives versus fewer lives, except, of course, when it's your life or your pet.

 

      So in order for us to feel like these driverless cars have made the best decision, these cars will need to make decisions that comfort with our values. But who is making these decisions? Engineers? And if so, what, if any, training do they have and what ethical rules are they applying? And if it's the car manufacturers, what incentives do they have to protect the car purchaser or the car occupant as opposed to the pedestrian or the public at large? And how should these cars be programed to comply with whose sets of ethical values?

 

      It turns out that Germany's Federal Ministry of Transport has promulgated the first ethics code related to autonomous vehicles, which states that "any distinction based on personal features (age, gender, physical or mental constitution) is strictly prohibited." In the U.S. or any other country, to my knowledge, there are no similar such restrictions. The closest that I've found was that the U.S. National Highway Transportation Safety Administration promulgated federal autonomous vehicle policies containing, for now, non-binding and voluntary guidance and asking for input of information. And under the first version of this policy published in 2016, NHSTA sought input on ethical issues, specifically asking automotive manufacturers how vehicles are currently programed to address conflict dilemmas on the road.

 

      Now, under the second version, which was published in 2017, NHSTA removed the inquiry on the ethical issues, which I think is the proper approach, given the nascency of the technology and the products as well, given the proper role of administration agencies, such regulations, although well-intentioned, stifle innovation, impede the role of the free-market forces to guide and define optimal products and services, waste resources, and quite frankly and importantly, do not reflect the values of the public at large. As a former head of a governmental agency, I think these agencies are woefully ill-equipped to come up with these rules. And if rules are promulgated, they should be enacted by the legislative bodies rather than administrative agencies to really capture the full sentiment, by elective officials, of all of us and all of our values.

 

      Now, let me pivot to the criminal side before I end. On the criminal side, there is an interesting case—Loomis v. Wisconsin. Some of you may have followed it because there was a petition filed at the Supreme Court. And in that case, the defendant's jail sentence had been determined in part by considering the results of a software algorithm which produced a recidivism risk score. The algorithm predicted that the defendant posed a high risk of recidivism, but the defendant was not permitted to determine how the algorithm arrived at the conclusion due to concerns about confidential proprietary intellectual property. The defendant argued that the Court's consideration of the AI generated risk assessment violated his due process because the use of the risk assessment was used without his ability to challenge its validity, and also because the assessment took into account his gender.

 

      The Supreme Court ultimately denied the request for review, and so the sentence stood. But this case raises interesting questions about the use of AI algorithms in deciding, or at a minimum, informing whether and how long people are sentenced or put on probation. And keep in mind that AI algorithms may also reflect biases of the programmers as well as the data fed to it.

 

      So from an ethical perspective, how do we feel about an AI system influencing, or even making, decisions to curtail our liberty and possibly even our life? Although I am an IP lawyer, I believe that defendants should have the right to know how these algorithms work to determine how these risk scores are computed so that they may have the opportunity to rebut it with facts if necessary. And machines do not do well with the notion of judicial discretion. But maybe that's the idea – to ensure greater consistency and less bias. I will say that while judges may be subject to bias, computer AI systems can and should do better in terms of accuracy, fairness, accountability, and transparency; otherwise, why have them? So let me end by quoting a famous proverb: "to err is human." But for a computer, systematically programed, broadly, powerfully, and efficiently propagated across the country, across the world, to err is unacceptable. Thank you.

 

Mr. Shawn D. Hamacher:  So I think that's my cue. Good afternoon. It's an honor to be with you and thank you, also, to the co-panelists. Now, you may have glanced at your list of speakers and wondered what's so remarkable about a 100-year-old furniture manufacturer, a company that's largely known for manufacturing desks, chairs, and architectural office furniture/office products when the topic of discussion today is artificial intelligence and Big Data innovation. You probably don’t feel like you're navigating the technology world of the future when sitting in your elegant, new Gesture chair behind a beautifully designed desk, unless, perhaps, if the desk is height adjustable. That's technology, right? I'd like to take a few minutes, though, to highlight Steelcase's digital transformation strategy, bringing AI and machine learning into the workplace environment.

 

      The reality is that digital transformation is happening everywhere and affecting everybody. AI and access to smart data will, just like everything else, transform the future of work, workers and the workplace. Steelcase's transformation involves the integration of digital and emerging technologies to bring systems of intelligence to our customers which empower their employees, help them engage their own customers, optimize their operations, and transform their own products and services.

 

      I tuned in the last couple of days to the Federal Trade Commission's seventh session of its Hearings Initiative with the two-day nearing taking place at Howard University Law School here in D.C., the focus being on algorithms, artificial intelligence, and predictive analytics. It's fascinating to listen to major industry players, especially in technology, healthcare, and financial services describing the different challenges they confront with their own uses of AI and Big Data, where autonomous decisions affect basic individual rights and/or consumer safety.

 

      In February of this year, the Subcommittee on Information Technology of the House Committee on Oversight and Government Reform also held a series of hearings on AI. Leading experts from academia, industry, and government gave their reports. Several points became evident. First, AI is an immature technology. It's abilities in many areas are still relatively new. Second, the workforce is affected by AI. Whether the effect is overall positive, negative, or neutral remains to be seen. Third, AI requires massive amounts of data, which may encroach upon privacy or perpetuate bias, even when using data for good purposes. And, finally, AI has the potential to disrupt every sector of society in both anticipated and unanticipated ways.

 

      Now, chief among the Subcommittee's concerns, of course, are policy questions. It's dialing up the appropriate regulatory approach to AI to solve for the tensions between technological advancement and the legal and ethical considerations involved. It's examining whether the risks fall within any existing regulatory frameworks, and if so, whether those existing frameworks can adequately address the risks. Where a risk falls outside of an existing framework, an approach should consider whether modifications or additions to the existing framework are needed or better account for the addition of AI.

 

      So what is AI anyway? Oggie gave his definition. You'll hear it defined many different ways because it's, essentially, a computational technology that works and reacts in human-like ways. The idea is to train AI algorithms on vast amounts of collected data and to keep learning as they affect decisions going forward. Machine learning is one subfield of AI, where machines take data they learn for themselves. Where AI involves hard coding software – the specific instructions for a system to carry out – machine learning allows a system to learn and recognize patterns on its own and make its own predictions. This is often called predictive analytics or predictive modeling.

 

      Fast forward and let's look at how AI, smart data, and the gig economy will transform the future of work. In another ten years, the integration of AI, virtual reality, augmented reality, and human analytics will make your current office look as quaint and unrecognizable to you as the rotary phone. In the future, you may walk about an office full of computers. But these computers will look and feel profoundly different. Virtual reality headsets will create immersive holographic experiences. While less isolating, augmented reality glasses will layer virtual information atop the physical plane. Rooms and furnishings will feel different – more intuitive and designed to accommodate diverse networks of people who come together to solve difficult problems.

 

      Perhaps the most notable change will be that the lines between technology and space will blur. Embedded with smart sensors and speech recognition software, your workplace will take care of much of the administrative day-to-day – transcribing meeting notes, scheduling conference calls, responding to your routine emails, and generally serving as a dutiful member of your team. Spaces designed for your well-being will accommodate the very work styles, privacy expectations, and personality types of the teams that occupy them.

 

      We are already seeing today's companies adapting spaces to align with human needs and constantly changing workplace demands. Tomorrow organizations will be able to manage buildings, desks, and computers as never before. Supporting employees by giving them greater control over their environments, the data and AI brokered to orchestrate these changes will teach machines to anticipate and predicate desired future states – to go beyond sensing and responsiveness, to be able to speak to us intimately, assist with our projects and tasks, and radically improve our workplace fitness and augment performance.

 

      For illustration, imagine an application that relies on AI and smart data to report room occupancy, especially in real time. Think of your conference rooms and other meeting spaces – how valuable it would be to enter a building or an area and know what spaces are available by looking at a digital floorplate. To do this autonomously requires training machine learning algorithms to determine, based on sensor inputs, whether a person is in the room. The AI becomes better at guessing correctly with the more sensor data you feed it. Confidence levels are important here as you're asking Outlook, for example, to release a room reservation so someone else may use the space. It's also important to be able to differentiate people from other objects in the room, so training machine learning algorithms, or machine vision, to detect uniquely human features can improve accuracy. Once the AI can detect humans, then it can count how many people are present and so on. So you see how this goes, and it builds on itself.

 

      Other applications involve the use of sensor data to empower better human decisions effecting space allocation and furnishings in the workplace. These would be referred to as human-in-the-loop type applications, where the decision making is not totally autonomous. Sensor data about how frequently meeting spaces with certain attributes are used in comparison to others gets reported out through a web-based dashboard tool. Measuring space performance allows a facilities manager, then, to make more informed decisions about their capital spent to better meet the specific needs of employees as expressed through their own interactions with the space. It's collecting and making sense of high volumes of unstructured data about how space is used in the workplace.

 

      Now, transparency is trust when entering this realm. AI systems raise questions about permissions and data ownership, privacy and security. Privacy engineering and risk management jump to the forefront. Anonymization techniques are used to design around employee perceptions of individual monitoring or workplace surveillance. Other organizational and technical measures must be put in place to secure data. Cyberattacks are more likely to exploit vulnerabilities in AI systems. How far must one go with systems hardening and penetration testing in view of all the likely threat vectors in order to satisfy a commercially reasonable standard? At a minimum, a widely agreed upon standard for measuring the safety and security of AI products and applications should proceed any new regulations. The National Institute of Standards and Technology, or NIST, seems situated to be a key player in developing these standards, and I see a lot of government deferment to the NIST initiatives. However this shakes out, AI solutions require accountability, which means they should be able to demonstrate that they have the right processes, policies, and resources in place to minimize potential risks and adverse impacts to the individual and the public at large. Thank you.

 

Mr. James C. Cooper:  Thank you. I want to thank The Federalist Society for inviting me and it is a great honor to be on such an august panel. I'm, as you heard in the introductory remarks, I'm from the Federal Trade Commission, and we're a unique agency in the sense that we have both the consumer protection and a competition commission. In fact, the FTC, as probably many of you know, has been really the leading privacy and data security enforcer at the federal level since the dawn of the internet age, really the late 1990s until today. So in that vein, I want to talk about some of the privacy and Big Data issues -- or privacy and competition issues that Big Data raises. Before I do that, let me give my disclaimer that these remarks are mine and shouldn't be attributed to the Federal Trade Commission or any individual commissioner. In fact, much of what I want to talk about today is work that I'd developed while I was actually at Scalia Law School before -- I'm currently on leave at the FTC.

 

      So with those caveats out of the way, let me first talk a little bit about privacy and Big Data. And Michelle touched on this. The benefit of Big Data is the three to five V's. We have this these gigantic data sets – volume, veracity, variety, and some other V's that are escaping me right now. But the idea is that you can gain with these giant data sets -- you have a lot of statistical power to tease out unknown associations or correlations. And that is really the promise of Big Data, in the sense -- probably everyone has heard about one of the -- Google Flu Trends. That's an example. There've been methods that have been used to try to predict potential bad outcomes in a neonatal ICU setting. And then there's the more mundane – Netflix and Netflix recommendations and Amazon recommendations. But those are all applications of Big Data and algorithms. 

 

      So this same promise, though, of Big Data, which we've heard a lot about on the panel so far, also is the same -- you know, there are two sides to this coin. The other side gives rise to privacy concerns. The worry is that these large data sets coupled with powerful algorithms, machine learning, are going to able to suss out private, characteristics about us that we don’t want out there, that we want to keep private.

 

      One of the, perhaps what I call, the poster child for Big Data gone bad, is the Target example. Perhaps maybe some of you are aware of that, that several years ago, Target -- a father began seeing ads sent to his teenage daughter for cribs or prenatal vitamins, things like that, coupons, and he was offended. And so he went into Target and said, "How dare you send my daughter these things?" And they said, "Well, she was on our list because we thought she was pregnant." Turned out, she actually was pregnant. And what had apparently happened is that some clever analytics guy at Target said, well, we've got a baby shower registry, and so we know -- we have a set here, and then on the other side we can see what these people purchase in their daily lives. So we know a set of pregnant people and what they purchase, so we can kind of run that through some analytics and come out with a predication and then apply that to our larger population. And that's what they had done here. So Target is often held up as the poster child, again, for, as I said, Big Data gone bad – a reason we need to really clamp down.

 

      And while I think there are some legitimate fears, I want to highlight a couple of places where I think we should -- a couple reasons why I think we should proceed cautiously before we look at examples like that and say, hey, we have to stop.

 

      First, I think it's important to distinguish between two types of harms that can arise from a Big Data scenario like we just talked about. So imagine an algorithm that crunches a variety of data, whether it's purchasing habits or Fitbit feed or social media, for whatever reason, to predict diabetes risk. Okay? And there're two possible distinct harms that could be suffered someone who's been predicted, say, accurately so to actually be a diabetic. All right? So first, that person may feel there may be sigma, there may be some sort of embarrassment because this is a sensitive, personal, health condition. We all have different thresholds for what we are okay with being public or private, and that may very well be something that this person would want to keep private – that they have a medical condition. In fact, we have a law called HIPPA that is all about that, and one of other medical privacy laws at the state level. This type of intangible privacy harm is really no different than the type of intangible privacy harm that is covered by the normal privacy torts – intrusion into seclusion, publication of private facts, the Brandeisian torts.

 

      But there's a second type of harm, and this is, I think, the one that often gets more of the attention, but I don't necessarily categorize this as a privacy harm. The second -- that this person who's been accurately predicted to have diabetes may end up with, say, higher insurance rates, right? Somehow this data ends up in their insurance. So is this a harm to that consumer? Yes, it is. But is it a privacy harm? Is it something that falls under the ambit of privacy? Well, I would say that they're subtly different, and it leads to important policy conclusions, I believe. So what's happened here is a third party has taken some action based on accurate information, right? Now this, unfortunately, for the person who's been found out to have diabetes and now, perhaps, pays a higher health insurance rate, he's been on the bad side of what we call separating equilibrium. Before that, we had pooling – non-diabetics and diabetics together pay one rate. Now, I can more accurately figure out whose diabetic and give them a higher rate. Bad news for that person, right?     

 

      But there's a flip side, and the flip side is what we have to be cognizant of. The flip side is the people without diabetes now pay a lower rate, okay? The other part of that is that to the extent that this ameliorates what are called adverse selection problems, then you actually make the pie bigger. You've actually -- to the extent that people are kept from a market because they can't accurately signal their true type, that their actually a good type – that's called adverse selection. And that leads to the "Lemons Market" to the extent anyone's heard of that before – George Akerlof, Nobel Laureate. The notion that once you can get this separation, now you can draw more people into the market because prices go down, demand curves slope down, and you increase social welfare.

     

      So to the extent that this sort of separation that Big Data allows this type of separation by sussing out previously hidden characteristics, there's winners and there's losers and they offset. But it can also make the pie bigger. I say this as an economist – the pie, the social welfare. It actually can increase social welfare to a very old result. So to the extent that we think that these are harms, we have to realize that on the other side there's a game.

 

      There's an interesting paper a couple years ago by Liran Einav—he's an economist at Stanford—along with some various co-authors -- actually, two different versions, looking at this data set—one published in Rand, one published in American Economic Review, look at a situation where you have a group of subprime lenders -- or I should say a used car dealer that deals with a subprime market. So these are very -- we're almost at the usury cap. These are high default rates. They couldn't really tell -- everyone who came into their -- to apply for a loan essentially looked the same on paper. Very similar zip codes, same income, everything. It was impossible to tell the good credit risks from the bad credit risks within that pool. They were pooled together. This used car -- it's apparently -- it's anonymized, but it's a very large chain in Southern California that -- a used car dealer. Once they got the ability to create credit scoring, which is just another type of very early Big Data, or now one of the earliest types of Big Data, they were then able to suss out who in this pool of relatively large credit risks were actually, compared to the rest of the population, but within their population was actually very good credit risks. They just maybe had transitory bad luck. But then there are the deadbeats.

 

      So what happens? What happened is the good -- the more people came into the market because they could credible signal that they were actually good credit risks, even though they looked like bad credit risks. Bad credit risks no longer got loans. So people got better cars, more money, and the car dealer made more profit. This is the idea of the pie getting larger – more people were drawn into the market when you can get this type of separation.

 

      So let me say that just because this is, perhaps, the economics of the situation is not to say that we shouldn't be concerned about the person who's on the bad side of this separation, but I think it's important that we don’t deal with this through privacy laws. These really should be dealt with -- these are the areas of non-discrimination. They're important areas. And I think the good news is that we have, already on the books, a lot of laws that deal with this. The FTC, for instance, enforces the Equal Credit Opportunity Act, which prohibits basing credit on a whole bunch of characteristics we find that -- you know, race, gender, religion, age. Can't do that. There're also fair housing laws. There are employment laws. There's GINA, the Genetic Information Nondiscrimination Act, which prevents using genetic information for insurance or employment. Those could actually be very valuable when we talk about separation. But we, again, as a society, say there are limits. We can maybe suss this out, maybe we can get some efficiency, make the pie bigger, but we're okay by saying you use genetics to make decisions. Again, these are cuts. But these aren't necessarily privacy issues. I think they're more in the domain of -- should be dealt with more in the domain of non-discrimination.

 

      Finally, the FCRA, the Fair Credit Reporting Act—really the first Big Data statute that is also designed to -- it limits the ability -- it limits who can use credit reports. It limits how you can use credit reports, and it provides consumers with the ability to -- it provides transparency. It gives consumers the ability to look at and correct their credit reporting and get notified with adverse actions, why didn't I get this loan? So those sorts of things.

 

      We have a lot of things on the books. We may not have a specific privacy law like the GDPR or the upcoming California law, but I don't think -- what I'm really trying to say here is I don't think the U.S. should necessarily be pillaring for that because we have sectoral laws that are really risk based, okay? And we look at areas where we say this kind of discrimination on this sort of private information, even if we can figure it out, even if it creates efficiencies, we don’t want it. It may not be written into a grand federal privacy law, but nonetheless, these protections are there, and if we feel that there're gaps, it's an issue for Congress and we can think about that. When I say "we," I don't mean the Federal Trade Commission. I want to make that clear. I'm speaking only for myself.

 

      So, second—we're still thinking about Big Data and privacy—another thing I want to be hesitant and you see this in some of the calls for regulation in this area, is the notion of data minimization, meaning when you're going out and collecting data, just take what you need. Don’t take anything else at all. And I understand that and that makes sense from a privacy perspective, right? But when you, I think that the restrictions -- we come up with restrictions, they probably should be on the use of the data rather than on the collection side. It's not to say that there are some data that we don’t want to limit or make harder to collect. We already do that – again, healthcare. We do that with children. We already have protections on the books and if we want more protections, that's fine. But I think what we have to be careful with because of all the promise of Big Data and AI that's out there is we don’t know what these data may be able to do. We don’t know what could be left on the cutting room floor if we don’t collect it. So I think it's not to say that there shouldn't be reasonable limits on collection, but I don't think that data minimization is necessarily the way to do this. I think there's probably a smarter balancing of collection and use.

 

      And let me move -- a final thing I'll just quickly say on privacy, and Michelle touched on this, on some of these really interesting ethical issues that when I go back across the river as a law professor, these will make great law final exam questions. But I think that there are certainly very legitimate concerns about algorithmic bias. The idea of what are the training sets. You, perhaps, have heard the story about Amazon in the news. Amazon used an algorithm to help hiring decisions, and it was trained on the set of Amazon employees, which were mostly while males. And so they ended up picking out white males, and then they realized -- someone realized, like, hey there's something wrong here. We're not getting the diversity that we thought we would. And the reason is the training set. And that may be an apocryphal story. It was in the media. It doesn't necessarily mean it's true, but it's one of those, kind of like the Target example, that's held up there.

 

      So I think that these are legitimate questions, but I do think we have to be careful when we think in this area not to commit with the Nirvana fallacy, that we have to look at what is the benchmark. Often algorithms are more accurate and have less bias than the human counterparts. And I, again, will return to credit. Prior to credit scoring coming along, how were loans given out? Loans were given out by people who would -- you would go and you would ask for a loan, and they would look at you and look at some of your documents. But there're biases, conscious or unconscious, built into all of us.

 

      What we saw empirically is that once credit scoring came along and it became anonymous vision, it was done based on a number -- now, it's not to say that there's not discrimination in lending. I'm not saying it's been purged, but the data are pretty convincing that the biggest gainers from credit scoring were women minorities. That's who gained. People who previously were judged not credit worthy by human, now you have a score. The credit explosion that we saw in the '70s and '80s from credit reporting is mostly not from the while college educated male who could always get the loan; it's from the people who couldn't previously prove that they could get the loan. That's where we see it.

 

      I want to mention, just quickly, I said I'd talk about competition. I do want to just make a couple quick points on competition that Big Data is often looked at -- giant data sets are looked at as a barrier to competition. I think, and you see this, perhaps, because some of the largest tech platforms who live on data, they seem to have dominant positions, it seems to lead to the conclusion that well, these giant data sets are one of the problems. We need to do something about that. Often because of the notion of network effects, which leads to increasing returns to scale which may mean we end up with one dominant player in, say, the social media or search industries, to pull two out of the air. But I also think we need to be careful by merely focusing on large data sets as the key to dominance. I would say that a large data set is definitely not a sufficient condition to succeed and probably not even necessary. Look at the startups like—you may have heard of them—Uber, Airbnb, Instagram, Snapchat, just come to mind. None of those came with giant data sets. But yet, they rose to create industries—sharing industries—and dominate the sharing industries. And at the same time to post serious challenges in social media.

 

      I think the key—and this is some of the -- we're, at the FTC, holding these hearings on the competition and consumer protection in the 21st century, and we had some on Big Data last week. And one of the themes that came out of that is that the key, the Big Data in and of itself, the giant data sets of the billion observations are useless unless you have a smart, clever team who knows how to ask the right questions. And that's probably the key to being a competitor, not necessarily sitting on a billion data points because if you don't know what to do with them -- in fact, how Hal Varian, the Chief Economist of Google, had written a couple years ago in an article that Google, when they were doing their AB testing, are pooling to experiment, they pool a sample of less than 1% pf their data. They don’t need -- they have tons of data; they don’t need all of it to figure out how to hone their algorithms.

 

      The final thing I'll say on the competition side when it comes to Big Data is we just want to be careful not to punish success, and from a static -- we have to be careful about dynamic incentives from a static view. It's really easy to look at the large, entrenched social media or search platforms and say, "We have a problem and they all have data. We need to do something about it. Perhaps make them share their data sets." That's been out there as a possible solution. But just like intellectual property—that's really the only think I'll say about intellectual property here on this panel because I'm already getting out of my lane a little bit—we give exclusivity to create incentives. And this is a big -- incentives to produce dynamically. And this is a theme that runs through all of antitrust law, that you don’t punish the firm after you've encouraged them to compete and win. Now they've won and now you're going to punish them. Well, what sort of ex ante incentive does that provide to the marketplace? I think we have to be very cognizant of that as well.

 

      So just to sum up, we've seen throughout this panel and at least specifically privacy and consumer protection, that Big Data raises some really important issues. And this is why at the FTC we're holding the series of hearings, where we did the -- we just finished up with the AI hearings, two days of AI hearings yesterday. Last week, we did three days on Big Data and competition and consumer protection, and early next year, we'll be focusing on privacy, which'll probably touch on some of these issues as well. So with that, I'll yield my time over. Thank you.

 

Hon. David J. Porter:  Thank you, everyone. I'd like to give the panelists an opportunity to ask each other any questions they might have or to react to each other's comments, and then we'll open it up to the audience for questions. Anything from the panel? Okay, audience members? There are microphones on either side here. It's on.

 

James Boyajian:  Good afternoon. James Boyajian with Palace Entertainment. My question is about urgency. The leading innovators and disruptors of our time seem to disagree about how urgent we need to pass news laws and regulations to address gaps in the law in dealing with things like AI and Big Data. Two examples are Elon Musk, who recently stated that artificial intelligence is the greatest single existential threat to human life. On the other side of the table, you have Mark Zuckerberg, founder of Facebook, who disagrees with that view and believes that passing new regulations would stifle innovations in these areas. So what position would you take in terms of urgency in passing new laws? Would you say that it's urgent that we have new laws to address the threats posed by these new technologies, and if so, which law makers would be best positioned to do so? Would it be a proactive act of Congress? Would it be your agencies passing administrative regulations? Or would it be courts or the Executive Branch? Thank you.

 

Hon. Andrei Iancu:  Okay, well, since nobody's jumping in, let me just start by from an IP point of view to say that what I think is urgent is to make sure that the United States keeps innovating at the highest level possible as fast as possible. We need to stay competitive technologically in the first place in order to even get to the question you're posing about whether AI is a threat and regulations can benefit or stifle because if we don’t do that and we fall behind or meaningfully behind in some or all of these areas, we have significant other issues, including national security issues. So that's first and foremost.

 

      And second, so whatever we do from a government point of view, I think, needs to aim towards making sure we stay competitive technologically. In terms of whether and when we regulate the various issues presented by the panelists, whether they're legal or moral and ethical issues or the like my own personal view, speaking in my own personal capacity—I'd be thrilled to see what others think—I think we need to take it one step at a time. We need to see exactly what are the technologies we're dealing with and be very specific. Let’s not paint with a broad brush because if we do so, we could potentially create additional obstacles instead of solving problems, so let's be specific. What is the technology at issue? What threats to society does that technology pose? And then balance the pros and cons of regulation. The interference with the speed of innovation versus the need to protect society from the potential risks. So that's the kind of balanced approach I would take.

 

Michelle K. Lee:  I'm glad to jump in with some additional thoughts, adding to what Andrei said. It's interesting, Elon Musk – he believes that AI will lead to dystopia along with Stephen Hawking as well. And a bunch of other technologists believe that it will lead to utopia, meaning none of us will have to work. We can maintain the same quality of life and life will be lovely. I think it is all up to us. Technology can be used for good or bad, and it depends upon how we guide its use and what we permit it to do and how we permit it to enter our lives and control our lives. So that's just a point on that comment there.

 

      In terms of regulations and laws, it really does depend upon the technology area. So, for example, in the area of driverless cars, I mean, the safety of the vehicle tended to be regulated by the alphabet soup of federal agencies – National Highway Transportation Safety Administration, and the list goes on and on and on. The licensing and the insurance and operation of a vehicle tended to be state level. So you saw a whole bunch of states enacting legislations from these super permissive -- we really have no restrictions on autonomous vehicles in Arizona—which is why all the autonomous vehicle manufacturers test in Arizona and why you saw the accident, I think it was by Uber or whatever – that was in Arizona—versus New York which is extremely restrictive. And then, of course, local governments will have their restrictions as well.

 

      So it really depends upon, again, what issue you're trying to solve for and is it a medical AI system and what regulation would be appropriate. But to my points earlier and to Andrei's points, the technology is so new. I mean, if you talk about autonomous vehicles, we don’t even know what the form factor is. Some vehicles are completely -- aiming for complete autonomy. Others, more moderate, level three, user-driver intervention. And so how is any federal agency, with that many different solutions, able to regulate for all of that? And I think we need time. So in any new developing industry, my thought is is that you let the market forces define, you try to allow the innovation to move forward, you allow the free market forces to define the products and services, and eventually as it ripens, then there may be consideration for legislation and so forth.

 

Hon. David J. Porter:  The question included the Judiciary as a potential actor. I would just say that I think that's probably the least capable branch. I mean, of all the panelists here, I'm certain that I know less about this subject than any of them. Judges decide particular cases in controversies using existing laws. Judges don’t look prospectively and try to fashion rules, typically, to address existential problems. So I would think that the Judiciary would be the last place you'd look.

 

Michelle K. Lee:  What I will say is the issues are going to the courts, though, because --

 

Hon. David J. Porter:  They are.

 

Michelle K. Lee:  -- we saw that in terms of the iPhone and accessing the data through the back door. So all these issues are going to the courts, I think, at every level.

 

Hon. David J. Porter:  Yeah.

 

Mr. Shawn D. Hamacher:  I would just reiterate, also, being on the other side of the table from the regulators in the private sector, reiterate the comments that to some degree with have the cart before the horse. I think you have align on a set of standards first before you know what you're going to regulate, and therefore enforce. So that's important.

 

Hon. David J. Porter:  Can we go to this side?

 

Questioner 2:  I have a question about block-chain technology. I know it's not AI, but I'm hoping it's close enough. And my question simply is what does the panel see is the pressing intellectual property issues that are going to develop to -- going to affect the development of that technology?

 

Dr. Ognian “Oggie” Shentov:  I can address this thing in part. Block chain is a terrific algorithm that provides for decentralized and confident -- for decentralized distribution of data that is very difficult to fake, to alter, or to change. And the good part about it is that it is not central, so it is distributed in a manner that really prevents, almost prevents, alteration. And the other good side of it is that is essentially avoids the middle man. So the chances are that a lot of transactions that took a long time in the past would probably need a handshake at the end and you may avoid lawyers, actually, frankly, if the mechanism is set up [for] people to transact in a way that allows them to do it with no fear of alteration. I think that may be a great idea.

 

      Specifically in the context of intellectual property, I think it probably has application in areas where it's important when some concept was invented, who invented that concept? So potentially to resolve ownership issues, which we all -- it appears that all of us anticipate that the ownership issues could be pretty big. So if you use block chain, you may be able to establish exactly who said what to whom and when. I think it is a terrific prospect. We probably may need to have another session specifically on this one. Thank you.

 

Hon. David J. Porter:  Yes, ma'am.

 

Michelle Roberts:  Good afternoon. Michelle Roberts of the New York Young Lawyers Chapter. Many of the panelists talked about who are the winners and who are the losers from Big Data. One of the winners, I hope, will be investors who can achieve better outcomes and better financial futures with more information and more transparency related to their investments. And certainly Wall Street is licensing and aggregating the Big Data sets that we've been discussing and mining them and harvesting them for clues about the economy and markets. And that begs the question from government and regulators as to whether or not this information is disclosed. Is it possibly material, non-public information if it needs to be licensed and mined and aggregated in some of the ways that we've been discussing today? So my question to the panelists is have you considered Big Data and its implications as it relates to regulation FD or insider trading? Thank you.

 

Hon. David J. Porter:  You need an SEC commissioner.

 

[Laughter].

 

Hon. Andrei Iancu:  Okay, well, just to have somebody speak on the panel, again, I'm at the U.S. Patent and Trademark Office. I don’t view us a regulator, per se. I will say you raise a very important question. From an IP point of view, IP is based in large part on disclosure. Usually there is a quid pro quo. This is in the traditional patent sense, copyright sense, even trademark sense, as opposed to a trademark secret sense. So when applications are made for patents, a requirement is to disclose, publicly, the basis for the patent and exactly what you have come up with. If that is -- it is going to raise issues because if we're talking about machine learning, especially vis-à-vis Big Data type of inventions, sometimes that might call into a disclosure question -- into question the disclosure requirements, and that could be quite problematic from a privacy point of view. It hasn't really come up yet, I don't think, in any meaningful way because we're not quite there for those types of innovations.

 

      The other side of intellectual property that we do have to be mindful of is trade secrets, and for the entities and the people who want to protect that type of data, we do have to have appropriate laws in place to protect its secrecy. And that is another form of intellectual property. Luckily, we do have the Defend Trade Secrets Act that Congress passed a few years ago. I think Michelle was in position at that time, and it is a very good piece of legislation that can help in this regard.

 

Hon. David J. Porter:  I had a follow-up question on that for the two PTO directors. In copyright law, the fundamental distinction is between ideas and expression. And if you have, through AI machines generating expressions, what would -- I guess the point of that distinction is to protect the unique human agency that's involved in expressing particular propositions. But if it's a machine generating that proposition, what would be the point of giving it copyright protection?

 

Michelle K. Lee:  So there's a case, a copyright case, Naruto v. Slater, and I think some of you may have heard about it. Basically, of all things, a monkey took a selfie, photograph of himself, and the question is, who has copyright ownership to that photograph? And the court held that the non-human monkey could not. But that's the issue which is who will have ownership to these non-human created expressions, inventions, and so forth. And I think what we need to do is we need to look back at the underpinning of our intellectual property system. And it's, according to the Constitution, right, "to promote the progress of science and the useful arts." So what does our system need to look like in order to best promote the progress of science and the useful arts?

 

Hon. Andrei Iancu:  So, Your Honor, let me just address -- to piggyback on Michelle's last point. First of all, Naruto's lawyer was sitting here. I saw him. He must have just left probably before you asked the question. But Naruto did have a lawyer that represented him in the action. And it was a fun case. But it addressed the question under the current statute, who is an author? Can an animal, a non-human—well, an animal in that case—be an author? I would say that that's a different question from whether a machine can be an author or an inventor because while we might not have an interest as a society to promote creative acts by monkeys taking selfies, for example, or creating art, we might have an interest as a society in promoting, and therefore protecting and rewarding machines created by humans to create further technology or further art. That is a policy debate that needs to be had. I don't think we've had it yet as a country. The statutes are currently as they are, but in decades or hundreds of years now -- but it is a different question—also from a judiciary's point of view if a case comes up—I do think it's a different question from whether the animal, who was not created in any way or programed in any way by a human, has those rights.

 

Hon. David J. Porter:  Okay. Yes, sir?

 

Questioner 4:  So this is drawing from Mr. Cooper's comments, but certainly happy to hear from anyone. If we're talking about restricting the use of data versus the collection of data, how do you strike the balance between doing that approach and protecting trade secrets? If we're talking about things that are difficult to patent, I can understand not wanting people to have to put too many cards on the table. But at the same time, we're talking about applications that seem difficult or maybe even impossible to detect if they're not being disclosed to the FTC or whomever else. So how do you strike that balance?

 

Mr. James C. Cooper:  So is the question -- when you're talking about use and disclosure, I'm talking about collection of data from consumers. And so you're talking about trade secrets or…? I'm sorry, I just want to make sure I understand the question.

 

Questioner 4:  Yeah, so if the method of analyzing or using data is what we're regulating versus regulating the collection, how do you do with without making someone disclose too much --

 

Mr. James C. Cooper:  Oh, I see. Yeah, okay. I understand. Yeah, no, that's a good question as far as -- and I don't think I'm necessarily saying -- what you're talking about may be—I don't want to put words in your mouth—something like algorithmic transparency, that, okay, so this how we're -- this is what we're doing with the data, and we want to make sure that's transparent, and we want to disclose that to a regulator. I don't think you need to look at what's in the black box and necessarily have that disclosed. I think you just want to look at what the outcomes are.

 

      So going back to my privacy versus discrimination dichotomy. If you're having disparate outcomes from an algorithm, well, you'd look at the outcomes. You don’t necessarily need to know -- in fact, I think that algorithmic transparency is somewhat overrated because consumers don’t read a privacy policy. Consumers don’t read anything. Are they going to really -- because there're lots of calls, and I don’t want to pick on certain laws of other jurisdictions, but that these algorithms—even down to the code—need to be transparent. I'm not really sure how useful that would be.

 

      So the same token, I don’t necessarily -- when I say the difference between restriction and use, what I really mean is you want to focus on—I'm sorry, between collection and use—is you want to focus on practices that end up being harmful to consumers in some ways. So you want to focus on harm to consumers, not ex ante, prohibits certain uses in sort of per -- the analogy in antitrust would be like a per se rule – we're not going to allow anyone to do this; it's just illegal – as opposed to let's let you collect data. But if you use it in a way that harms privacy, that is discriminatory in a way that we as a society don’t like, then we'll go there. But I don't think that necessarily would require disclosure. Now, maybe if you got into the nuts and bolts of an FTC action, maybe it would -- or any action, it would be part of discovery. But we can already deal with that stuff through the normal courts. I don't know if that answers your question, but that's my answer.

 

Hon. David J. Porter:  I received, about two minutes ago, I received a signal that we have five minutes left. So let's try to handle the next few questions in about a minute each if possible. Yes, sir.

 

Carl Domino:  Thank you. Carl Domino. There's much news about a possible trade war with China. That has two dimensions, what is physical goods—which is handled by tariffs or competitive nature—but the other is intellectual property, which we read is mandated transfers by companies that want to go over there and/or stealing IP. In your comments, Director, you indicated that they were increasing their patents by 24 percent a year for over a decade. Are they getting anywhere near the patent portfolio where it's no longer their interest not to obey international norms of IP patent protection?

 

Hon. Andrei Iancu:  It's a good question. And they have -- so in China, they have changed their IP system and their patent protection system over the past number of years. They have continuously, in some respects, improved their system. In many respects, the Chinese IP regime has come closer to international standards. In other respects, the IP protection regimes in China are still lacking. And we still see significant issues vis-à-vis the treatment of IP, especially IP from foreign companies, such as U.S. companies. So we're paying very close attention to that aspect. And my main point in my opening remarks is that irrespective of all that—and all that is really important—irrespective of all that, the United States must continue to innovate on our own terms to make sure that we stay competitive no matter what they do over there.

 

Michelle K. Lee:  If I could add one quick point to that, on the issue of China and the U.S. and the number of patents, I think it's important not to just look at the numbers because there are patents that can be filed in China that are unexamined and you have some rights. So our patents are examined, and it is true that the Chinese government has been setting quotas and incentives for local industries in given areas and they have been giving subsidies to folks to file patents. Well, if you're a communist system and you're going to incentivize a quota, you will get what you ask for, just like they had in the system where they had to meet a certain quota of nails. So people produced lots of nails that were really tiny that didn't serve the purpose.

 

      So all I would say is let's be careful. I mean, we clearly need to focus on the innovation in our country and incentivizing it and keeping it strong. But on the other hand, the mere number alone is not enough. And I would commend you to look at a book called AI Superpowers: China, the Silicon Valley, and the New World Order. And we are in the first of nine innings in the area of artificial intelligence. And what the book says is that in the area of novel inventions, the U.S. is still ahead. In the area of implementation, China is ahead. But who will prevail at the end? Still to be determined. We're only in the first inning.

 

Hon. David J. Porter:  I'm sorry, we are out of time. But thank you to our panelists for a great discussion.

1:45 p.m. - 3:15 p.m.
Joint Employment: The Unintended and Unpredictable 'Employment' Relationship

2018 National Lawyers Convention

Topics: Labor & Employment Law
The Mayflower Hotel - East Room
1127 Connecticut Avenue, NW
Washington, DC 20036

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The vast web of federal and state laws protecting employees stands or falls on a single concept: Is there an employment relationship? Payment of overtime, responsibility for employment taxes, union obligations, responsibility for workplace discrimination, workers compensation – every employment law obligation depends on the existence of an employment relationship. 

Thus, it may be surprising to some that most employment laws do not define who is an employer or who is an employee. The Fair Labor Standards Act, for example, defines an “employer” as “any person acting directly or indirectly in the interest of an employer in relation to an employee,” and an “employee” is “any individual employed by an employer.” The National Labor Relations Act also makes us dizzy with circular definitions: an “employer” is “any person acting as an agent of the employer, directly or indirectly” and an “employee” is “any employee.”  

The result: Whether an employment relationship exists has been left to the vagaries of agency guidance and decisions. In its 2015 Browning-Ferris decision, the NLRB expanded the definition of “joint employment” to include employers who share direct, indirect, potential or even “ultimate” control over a worker. In a 2016 Administrator’s Interpretation, the Labor Department similarly expanded the definition of joint employment, declaring that “employment generally should be defined expansively” under the FLSA, unrestrained by the concept of control found in the common law concepts of employment. Suddenly, many businesses faced investigations regarding activities of subcontractors, and franchisors were named as defendants for alleged violations by franchisees.   

DOL has withdrawn its 2016 Administrator’s Interpretation, but has yet issued no replacement guidance. Browning-Ferris still stands, although the NLRB has announced its intention to issue regulations regarding joint employment. This panel will explore whether and how the key concepts of employment, employer and employee should be defined under our nation’s employment laws: By Congress, the Courts, or agencies? Adopting one definition or many? Based on statutory definitions or the common law?

  • Prof. Richard Epstein, Laurence A. Tisch Professor of Law and Director, Classical Liberal Institute, New York University Law School
  • Mr. Richard F. Griffin, Jr., Of Counsel, Bredhoff & Kaiser, PLLC  
  • Hon. Philip A. Miscimarra, Partner, Morgan & Lewis
  • Moderator: Hon. Timothy M. Tymkovich, United States Court of Appeals, Tenth Circuit

Speakers

Event Transcript

Hon. Timothy M. Tymkovich:  Let’s go ahead and get started. Good afternoon. If somebody could get the doors, please, that would be helpful. My name is Tim Tymkovich. I’m the Chief Judge of the Tenth Circuit Court of Appeals, headquartered in the Wild, Wild West, Denver, Colorado, and it’s a pleasure to have a panel like this because it’s a bit of a Wild, Wild West in labor and employment. It’s also interesting to come off a panel discussion on stare decisis, our lunchtime topic, because there’s going to be many elements of that in today’s discussion. The issue that we’re going to discuss is the vast web of federal and state laws protecting employees stands or falls on a single concept: Is there an employment relationship? Payment of overtime, responsibility for employment taxes, union obligations, responsibilities for workplace discrimination, worker’s compensation, every employment law obligation depends on the existence of the employment relationship.

 

      That may be surprising to some that most employment laws do not define who is an employer or who is an employee. The Fair Labor Standard Act, for example, defines an employee as any person acting directly or indirectly in the interest of an employer in relation to an employee, and an employee is any individual employed as an employee. The National Labor Relations Act also makes us dizzy with circular definitions. An employer is a person acting as an agent of the employer directly or indirectly, and an employee is any employer, and on, and on, and on.

 

      Well, today’s panel is going to try to make some sense of that. As you can see our three member panel is only two, at this point. And so, we’ve had to juggle things a bit. We’re going to start with Professor Richard Epstein of the NYU Law School, a prolific writer and thinker in this area. And he’s going to offer some broad topics about the subject matter before we get into the weeds. Our second speaker’s Dick Griffin, who has joined us as a former member of the Nation Labor Relations Board, and in 2012 he was the recess appointment to the NLRB by President Obama. He was then nominated by President Obama and confirmed by the U.S. Senate as General Counsel of the Board where he served until October 2017.  Our missing speaker is Phil Miscimarra. He’s a partner Morgan & Lewis and has a long history working on employment matters. He’s the former chairman of the U.S. National Labor Relations Board, and he currently leads Morgan & Lewis’s NLRB practice. With that, let’s begin with Professor Epstein.

 

Professor Richard Epstein:  I have to stand because I can’t look into the light. Well, now that I’m going first I will give a slightly different speech than the one I was intended to. And I’ve given an immense amount of thought and preparation to this. This is actually a topic of great importance in terms of what’s happened, and the judge, I think, actually laid on the line how much churns on so much little. The first thing I want to do is to pose a kind of a paradox, and then ask yourself how it’s resolved in one system or another. And the paradox is that the question about the relationships between an independent contractor and an employee, for example, is something which exists in common law as well as existing in circumstances under these variety of statutes.

 

      If you look at all of the literature that has accumulated, it turns out that 99 percent of the literature that accumulates is on the statutory definition, and there seems to be nothing close to the level of angst that exists on this same question when you start to look at it as a common law matter. That doesn’t mean that there are no issues of common law, and I’ll try and describe what they are in a second, but I think it’s important to ask the question: Why is it that the problem seems to be relatively easily solved in the private law context, and solved only with enormous difficulty when we start to move to the public law context? And so let me -- so back to the topic, which begins, "What do we think about the categorization of relationships as a matter of common law and how does it work?"

 

      And you could go way back, not only to common law, but to Roman law and what you typically see in virtually all of these areas is that there are kinds of stark oppositions that are described by the particular doctrines in question. So, for example, in property we have the difference between a licensee and a lessee. And in employment we have employee and the independent contractor. And in other kinds of areas we have contracts for sale and contracts for hire. And it turns out that these are defined as relatively pure types, and what you then do, very usefully, is to attach various incidents to these things so that when you’re trying to solve particular disputes, you will know what’s going to happen with respect to unallocated terms. And so you’d have to ask such questions, "Which way is the risk of all this going to go under a bailment contract?" or something of the sort.

 

      And what happens is, for the most part, when people are organizing their private affairs, what they tend to do is to stay with relatively clear and polarizations because it is generally easier to work through something in the standardized form than it is to try and create some blend that’s going to sit in the middle. And so what happens is you develop a fairly large body of law dealing with these pure cases filling in, by implication, the terms that are needed, and to the extent that you have judges whose sole concern is trying to figure out how you make these more efficient kinds of relationships, there is, generally, a tendency for these things, when they start to fill in, to be sensible default terms.

 

      Once the default terms turn out to be sensible, there is now less and less desire to get rid of them. Sometimes they are going to be codified. And when they’re codified, they are basically taking the common law stuff and putting it in a tidy bundle. And so you can see in partnership agreements, for example, “All the terms that are not specified in this agreement shall be governed by the California Partnership Act.” Basically you incorporate the defaults into the basic arrangement.

 

      Now, that’s the basic rule, but what happens is sometimes when people want to engage in various kinds of situations, they would like to innovate. And in order to innovate it sometimes turns out that you cannot keep these pure cases together and you have to roll kind of complicated situations. This problem first arose very early on in connection with the forms of action. If you have a kind contract in which there’s a lease with an option to purchase, and you had to bring an executory action, is it a contract for sale or hire? And if you guess the wrong form you could be out of court.

 

      Well, we cured that problem with a single form of action under the federal rules. And then what happens is you start to deal with these mixed cases. You’re doing so under a principle of freedom of contract, and if the parties decided that they want to create some kind of intermediate form, it’s perfectly easy for them to do so. They draft something, and they then create whatever relationship they want. And so what will happen is they say, “With the exception of A, B, and C, the relationship here is that of an independent contractor, or with the exception of D, E, and F, the relationship here is one of an employment relationship.”

 

      And the only thing that a court has to do under these circumstances, for the most part, is to figure out what the base is and then to make the particular corrections. And it turns out it doesn’t matter how many times you have to do this, you can do it in all these cases. If firm A, or line of business A, goes in one way or firm B, and line of business B goes another way, there’s no need to have a reconciliation of the two positions. It turns out that what you now do it develop a divergence of forms, and for the most part these, then, become paradigmatic types—in some cases themselves—and the system goes on quite merrily. And so within the private kind of framework the borderline question, essentially, yields for the most part to the general principle of freedom of contract.

 

      Now, there is an exception to this. And the exception in many of these cases has to do with externalities. So one of the common questions that you’ve had about independent contractors, an employee, is if you call somebody an employee, you’re responsible for the actions that take place outside the scope of the arrangement. And so people would have a tendency to try to call people independent contractors in order to avoid the vicarious liability implications. And then you would have problems similar to those that take place with respect to the kinds of statutes that we’re talking about that just [inaudible 12:15].

 

      But on the other hand, there’s also a relatively simple problem, a solution to that particular problem when you’re talking about tort liability. What you want to do is to make sure that the relationships between the two parties are not altered by this externality. And so what you do is you get an insurance policy, which covers both the employer and the employee, no matter how they’re designated, so that when an outsider is injured it’s not as though you have to sue one or the other. What you do is you have this particular governance relationship in place with the insurance contract. Those monies are free and clear for outsiders. So, by using insurance, you separate the internal relationships from the external relationships, and you can organize the contracts exactly the way that you want it to be. And this is, generally, a very good kind of solution because insurance means that you can protect contract creditors from tort creditors, and you can sure that the tort creditors have a guaranteed fund to which they’re looking.

 

      Now, when you come to the situation where you have the National Labor Relations Act, or you have something like the Fair Labor Standards Act, and so forth, these options are not open to you. Now, why do I say that? Because one of the things that you can see in many of these contracts -- for example, if you look at the Uber contract that it enters to with its various employees, it says, “It is understood by virtue of this contract that the employee who drives the car is an independent contractor and not an employee of the Uber Corporation.” And then somebody who’s a labor lawyer looks at this and sees the Fair Labor Standards Act and what we now immediately note is that anytime you make a designation of that sort, it has, at most, presumptive weight in favor of what’s done. And if you think that what somebody is trying to do is to get out of a statutory obligation, the presumption in favor of that is going to be enormously thin. And if it’s going to be thin, that means that it’s then going to be something which can be contested by the various sorts of people who are involved in the situation.

 

      And, at this particular point, the thing that was a virtue in private law, namely the ability to take two extreme forms and then to mix and match them and to combine them to an intermediate position that you want, that becomes a fatal vice. And the reason it becomes a vice is that the closer you get to that line between an employee and an independent contractor the more difficult, the more complicated, the more uncertain it is under these circumstances about which side of the line that you’re going to fall on. And, whereas, in the private law if there’s some kind of a dispute between these two things, it’s going to be an incremental dispute, and, occasionally, it might manifest itself one way or another in a contract, but if you’re doing this in a regulatory environment, you’re not faced with a gentle slope, you’re faced with an absolute cliff. And you’re going to find yourself in really desperate situations because coverage is going to turn on something as nebulous and uncertain as the kinds of definitions that we heard thus far.

 

      And so the regulatory scheme, for the most part, is going to be doomed to failure under these circumstances. It's not the function of this, that, or the other rule. What is always going to have to happen in these cases, necessarily, is you’re not going to be able to find a single litmus test that will solve this problem. You will, therefore, put forward a list of factors as you always do. And then you will have to decide on the strength of those factors whether a relationship is or is not on this side of the line or the other side of the line.

 

      Now, at this particular point, there is a real fork in the road that has to take place, and that’s the question of whether or not when you’re doing these things, you do the factor balancing, however it’s accomplished, on a case-by-case basis, or in the alternative, whether you try to do it on a class basis. This is the way the administrator should think about it, and this is the way that the doctrine starts to work. As the good administrator trying to think about something, you immediately realize that you have, with respect to the question of whether or not an Uber driver is an independent contractor or an employee, or whether or not certain people who work on various kinds of contracts for software company or one or the other, you have thousands upon thousands of these particular cases, and there’s no sane administrator who thinks that what we really want to do under these circumstances is to try to do this thing by a case-by-case adjudication.

 

      Being wise, sage, and altogether prudent individuals, what we would like to do is to have ourselves some kind of a per se rule. That comes becomes the sort of gold standard. But on the other hand, if you look at one of these hapless individuals known as judges, who have to sit there—you notice all the sudden he perks up, right? What? Me? A hapless individual judge?

 

[Laughter]

 

      If you have to do in that particular way, what happens is what do they do? Are they trying to make life easy for the administrator, or are they trying to do justice in the individual case?

 

      And so if you just look, for example, at this problem in connection with the Uber drivers, this is the intellectual problem that starts, and the lack of solution in the following way. What happens is, perhaps the single most important element in deciding whether or not somebody is or is not an independent contractor is to ask who has control over the operations of a particular person. And what happens is in many business circumstances somebody like Uber really does want to have some degree of control who these particular drivers are. It’s worried about the question that if there’s some kind of violence, or some kind of unreliability, or some kind of bad behavior, an individual driver could tarnish the brand and cause them all sorts of harm, and so they want to exert some kind of control.

 

      On the other hand, the way in which they attract their employees is to give them options in individual case to turn down an assignment, but they also control that because if you turn down the assignment you have to let us know within 15 seconds, and you don’t have any longer period of time. And so now what you do is you start at looking at all of these cases and you see that contracts are always different a little bit between two firms, between the same company in two different cities, and so forth. And you’re trying to do the control test and what you’ve now discovered is it’s not a zero-one kind of operation. That for all sorts of reasons, as a market situation you want to be able to divide the control. And if control turns out to be the test, and it turns out it’s going to be divided, you’re going to get very radical differences in opinions.

 

      So if you go to California and you’re asking this question, all of the sudden these Uber drivers become employees because you have the right to strike them off the roles if they don’t behave in the correct fashion. You go to the Second or the Third Circuit, and then on a very narrow facts and circumstances case they go exactly in the opposite direction. And they say, “We think here that this person turns out to be an independent contractor because of their ability to accept or decline various kinds of situations.”

 

      And then you start to ask, "What happens if you move something one inch or the other inch?" And it seems to me what happens is we will never be able to get a sensible set of resolutions so long as we are treating the employee/employer relationship as a matter of public concern, and that the freedom of contract arrangement will actually solve the problem. But what I see happening in these cases is that you will get litigation after litigation, and the only way that this thing will settle down is when you get enough of these cases all coming out the same way that is starts to look, as a business proposition, that it’s not worth fighting city hall on this case. You might as well accept that.

 

      But that’s not going to be the same result in some courts as it is in other courts, Texas or in California, whatever the difference might be. So, essentially, the regulatory framework, when it rejects freedom of contract creates a system of perpetual disequilibrium, and it’s not as though any individual judge or any individual rule is going to be in a position to solve this.

 

      Now, what are the sort of consequences for this? Well, in some cases they can be disastrous—and I have what? Two more minutes, three more minutes? I just want to talk about the joint-employer problem with respect to unions, and Fair Labor Standards Act, and the questions as to whether or not MacDonald’s is the employer of everybody who works for one of its franchisees. And it turns out the division of authority between the head company and the local company is based largely on efficiency kinds of concerns. You would have to standardize the product that is being sold because otherwise the brand is going to take a hit if somebody chintzes on the kind of quality of work that’s being done.

 

      On the other hand MacDonald’s knows absolutely nothing about the conditions and labor markets locally, and so it doesn’t want to have anything to do with setting the wages and terms of employment with respect to people, much of which are going to do business under local law. The standard established rule, before the Obama administration started to intervene, was to say, “This arrangement is working extremely well. We’ll just leave it at that particular way,” which I thought was the correct answer. And they did it by way of a per se rule. And under the Obama administration the challenges started to come up on the ad hoc basis. We’re going to look at McDonald’s franchisees and contracts. Twenty-seven of them are bad. Five of them turn out to be good. And we’re going to prosecute one or the other.

 

      The danger of having that ad hoc approach, as opposed to the per se rule, is that essentially what happens is you will destroy the franchising industry if essentially you make a franchiser liable for the unfair labor practices of its franchisees. Because at that time it then has to exert an enormous control over it, and we know from business experience that the reason they use the franchise model is that putting employees in charge of individual outlets is a much lower productivity arrangement than it is going in the opposite direction.

 

      So the plea that I would have in all of these cases is the success of regulation depends exclusively on one proposition. We must have clear and consistent exemptions to know what’s going on. We have to keep these joint situations in the labor cases very separate so we never have a joint liability. You have to keep the Uber drivers as independent contractors. You have to make sure that the research assistants at Columbia University, who ironically is very anti-government in that case, that they are not going to be employees. They’re going to be students. You have to have the same thing with respect to football players, and so forth. Same thing with respect to interns.

 

      So I hate to say it, but the success of the labor statute is there are cases of clear employees. I would repeal the statutes on all of them, but that’s not one on the table at the moment. But the only way the statute will work is if the exemptions are clear. And if we don’t do that we will basically kill the goose that lays the golden egg because we can’t solve the definitional problem which is built into the statute at the ground level. Thank you.

 

Hon. Timothy M. Tymkovich:  All right. We can get back on track. Mr. Miscimarra. Our next two speakers are going to talk about, in part, the 2015 decision in Browning-Ferris where the NLRB expanded the definition of joint employment. Phil, you want to take us through that?

 

Hon. Philip A. Miscimarra:  Sure. Everybody, it’s great being here. I recognize many friends in the audience, including NLRB member Bill Emmanuel that’s in front of us. Also, it’s an honor to be here with Judge Tymkovich. Also, I’m here with my friends, Professor Epstein and former NLRB General Counsel, Dick Griffin, although I suspect that we have different views when it comes to joint-employer status, particularly the NLRB standard governing joint-employer status.

 

      The title of this session suggests that joint employment involves an unintended and unpredictable employment relationship. And I agree with both of those characterizations, but I’ll start out with a little bit of background, and then I’ll make three points that I think, at least for me, summarize the nature of the expanded joint-employer definition that has become the standard, at least under National Labor Relations Board law. And, when you talk about laws governing employment, nothing’s more fundamental than determining who is an employer and who is an employee.

 

      And for many decades the laws governing employment recognized some situations where two different employer entities might jointly determine the wages, and benefits, or working conditions for certain individuals. And in this situation, when two entities co-determine essential employment terms, the law would sometimes consider both entities, collectively, to be a joint employer of the employees. Now, until 2015 the concept of joint-employer status was extremely unusual, and it was something that people almost never encountered. And before I was appointed to the National Labor Relations Board in 2013, I had been an attorney practicing labor and employment law in private practice for 30 years, and I never had a client that was deemed to be a joint employer.

 

      But in 2015, the National Labor Relations Board decided a case called Browning-Ferris Industries, or BFI. And the Board substantially expanded joint-employer status in three different ways. Expansion number one, in BFI the Board majority held that two entities would be joint employers, even if they never exercised joint control over one another’s employees. And here, the Board in BFI held that two or more entities could be joint employers merely if vendor contracts or other documents indicated that one party had a reserved, potential right to control employment matters for the other party’s employees.

 

      Expansion number two, in BFI the Board majority held that this never-exercised joint control, if it was reserved in contracts or vendor agreements, would result in joint-employer status based merely on an indirect impact on employment matters. In previous cases the NLRB had indicated that joint-employer status would only result from joint control that would directly affect essential employment terms. And the expansion number three in BFI involved the Board’s holding that two entities would be joint employers, even if their never-exercised, reserved, joint control, which only indirectly effected employment matters, had an impact that was only limited and routine. And in prior cases the NLRB held that two entities would not become joint employers based merely on joint control effecting matters that were limited and routine.

 

      So, again in summary, what BFI introduced as an expansion of joint-employer status were three things. Two entities could be joint employers, even if they never exercised joint control, if the joint control was potentially reserved, or reserved as potential control in relevant documents. Number two, the potential, never-exercised, joint control could result in joint-employer status, even if it only indirectly effected wages, hours, or other employment terms. And number three, this never-exercised, potential, reserved joint control, which only indirectly effected employment matters, could still result in joint-employer status if the potential impact was only limited and routine.

 

      Full disclosure: I disagreed with this expanded concept of joint-employer status, and I dissented from the Board’s majority decision in Browning-Ferris Industries. And in my BFI dissent, which I jointly authored with former NLRB member Harry Johnson, who is also now one of my current partners, I indicated, and this is a quote, “No bargaining table is big enough to seat all of the entities that will be potential joint employers under the majority’s new standard.” I also indicated that the expansion in joint-employer status exceeded the Board’s authority under the National Labor Relations Act, which, as many of you know, has important provisions added to the Act in 1947 and 1959 – secondary boycotts provisions that had the overt purpose and design to prevent different businesses from being enmeshed in one another’s labor disputes based merely on their commercial relationships with one another. And at the beginning of the BFI dissent jointly written by Johnson and myself, we started out by saying in our conclusion, “The Board is not Congress.”

 

      So I’ll now proceed to make three points that, from my perspective, summarize the problems that have developed in this area based on the expansion of joint employment. And I’ll make three points. Point number one, the expanded NLRB joint-employer standard is truly unpredictable. And here I’ll mention one case called Cable News Network. And in the CNN case, Cable News Network had a 20-year history of using two vendors who supplied technical personnel to CNN in New York and Washington, D.C. And these technical personnel were camera operators, audio technicians, and engineers. And over the 20-year history when CNN used these two vendors, everybody regarded only the vendors as the employers for the technical personnel, these technical employees.

 

      In fact, each vendor was unionized, and the collective bargaining agreements recognized each vendor as the employer. In fact, there were also NLRB proceedings over the 20-year period, and the NLRB, in multiple cases including union certification proceedings, the NLRB only recognized the vendors as the employer of these technical people. So after 20 years, CNN decided to discontinue its vendor relationships and to bring this technical work in-house. And the NLRB majority decided over my dissenting opinion, that CNN was actually a joint employer over the technical personnel, and as a joint employer CNN had a legal obligation to engage in bargaining with the vendors’ unions before CNN could decide to discontinue its commercial relationship with the two vendors.

 

      I dissented in CNN based, in part, on the 20-year history when everybody, including the Nation Labor Relations Board, regarded only the vendors as the employers. And I said, this is a quote, “Employer status does not arise as the result of spontaneous combustion.” In CNN, in fact, the Board evaluated Cable News Network, found that CNN was a joint employer of the vendor employees, even though that had not been recognized over a 20-year period. And the result was improbable. The result was, I believe, a surprise, not only to CNN, but to CNN’s unions and the technical employees that previously had recognized only the vendors as their employers. This is an outcome that I believe was truly unpredictable.

 

      Point number two, the NLRB, and other agencies, and courts, in my view, don’t have and will never have the resources necessary to adjudicate all of the situations where different clients, and customers, and vendors, and suppliers, and franchisors, and franchisees are joint employers under the expanded joint-employer standard adopted by the NLRB in the Browning-Ferris Industries case. And just to give you an example, again pointing to CNN. That case involved only three entities, CNN and two vendors, two locations, and the litigation required 82 hearing days before an administrative law judge. It produced a transcript that exceeded 16,000 pages, and there were more than 1,300 exhibits in the case. On appeal, the CNN case was also reversed and remanded based on uncertainty regarding what joint-employer standard was even applied by the Board in the case. And as many of you may know, there’s also been highly publicized joint employer litigation against MacDonald’s USA and thirty or thirty-one McDonald’s franchisees. And in that case, there has been more than 140 hearing days before an administrative law judge, and the case remains pending.

 

      My third point is, I have sympathy for the considerations that may have prompted my former colleagues on the NLRB to expand the concept of joint employment in Browning-Ferris Industries and in a number of other cases. We live in a complicated economy. It would be nice if we could unscramble the economy and eliminate business constraints that prevent conventional employers from being more generous in the wages, and benefits, and hours worked by their employees. But that type of simple economy has not existed in this country for more than 200 years, and I think you could make a fair case that that type of simple economy has never existed. We live in an economy that has many different types of interrelationships between different businesses. We live in an economy that involves a great deal of specialization. Everybody in this room has benefitted, and all of the employees in the United States have benefitted from the way that our economy has developed.

 

      But it’s also important in this complex economy for people to be able to determine for themselves, without assistance from the courts, and without assistance from the National Labor Relations Board, who is their employer and who is an employee. And under the current, expanded definition of joint-employer status, I believe that the outcome in many of these cases is certainly unintended by Congress, and it’s also extremely unpredictable. And I hope that we’ll end up with greater certainty and more restraint and understandability in this important area of law. Thank you.

 

Hon. Timothy M. Tymkovich:  Let’s hear from Dick Griffin.

 

Richard F. Griffin, Jr.:  So in light of my complete, and utter, and total disagreement with almost everything said by the two predecessors, it’s a little difficult for me to determine how to order my remarks, but I’m going to try and do a little bit of a seriatim review and rebuttal. The first thing is I was very interested to hear Professor Epstein’s discussion about how the common law got this right and the administrative agencies and the statutes got it wrong. And part of the reason that that’s interesting to me is because the lead case on employee status, under the National Labor Relations Act, originally, was a case that was decided by the Supreme Court involving the Hearst Corporation.

 

      And that was a case that involved newspaper—they called them newsies or newsboys, although they were, for the most part, older people not boys. The question was whether or not those folks were employees of the Hearst Corporation or not. And the Board, with approval from the Supreme Court, said using what the Supreme Court called an economic realities test, that they were employees. And you had to look to the purposes of the National Labor Relations Act, what policies it was trying to promote, when you interpreted whether or not these people were employees because the question of whether or not they were employees -- what turned on that status was whether or not they had the protections of the National Labor Relations Act and could engage in certain types of activity without being discharged or disciplined.

 

      And in response to that—and Phil is one of the great proponents of this point, and I was a little surprised that he didn’t emphasize it in his remarks because I’ve heard him emphasize it many times before, and I am in complete agreement with him on this point—in response to that the Congress in 1947, as part of the Taft-Hartley Act, excluded specifically independent contractors from the definition of employee under the National Labor Relations Act, and specifically said the Board had to, in doing so, that the Board had to apply a common law test. So the test that the Board is supposed to be applying is, in fact, the common law test developed over the years and, in fact, sort of accumulated in the Restatement of Agency. And so the fight actually in Browning-Ferris, the case that Phil described, is actually a fight between the majority and the dissent, about what you can look at under the common law to make a decision about whether somebody is an employee or not.

 

      And the fact is that the Restatement of Agency talks about the right of control. And implicit in the right of control and explicit in the various aspects of the Restatement of Agency’s discussion of the right of control is there will be times when an entity has control that it has not exercised, but it has a right to exercise, and that right to exercise control under the Restatement of Agency is sufficient to establish an employment relationship.

 

      Before, many years ago in the earlier days of the Board, there were a number of cases where there was a contract between one entity and another entity. And there’s no question that the contractor employed the employees, but the other entity that retained the contractor retained within the contract the control to determine wages, hours, and other terms and conditions of employment. And it's that type of right of control, if none the less unexercised, that the Board majority in Browning-Ferris said is one factor to take into account.

 

      So, I think, there isn’t such a large difference between the court’s interpreting the factors under the common law and the agency, in terms of what the standard is supposed to be. The one thing about the National Labor Relations Act that was the reason for its adoption in the first place, was a recognition that employment contracts between a company and an individual employee are not agreements where there is an equivalency of bargaining power on both sides of the equation where the nature of the relationship can be reordered so nicely as described by Professor Epstein. In fact, in the preamble to the National Labor Relations Act, it is a specific Congressional purpose for its adoption recognition of the results, the adverse results that that inequality of bargaining power has led to in the national economy of the 1930’s.

 

      Second point, with respect to the McDonald’s litigation. In each of the pieces of litigation that were mentioned, there were a few things that were left out that I think are important for understanding context. I’ll actually get to McDonald’s third. Phil mentioned the CNN case, and I’ll just make two points about the CNN case. CNN was found, including by Phil in his capacity as a Board member, to have seriously violated the National Labor Relations Act because when they terminated those vendors, they decided to take the work in-house and specifically determined not to hire any of the people who had been doing work for them for 20 years through the vendors, specifically decided not to hire those people, or a certain number of those people, because if they did they would have had a successor bargaining obligation with respect to the unions that represented those folks. And so they hatched a scheme whereby they hired a certain number of people, but stayed underneath the 50 percent number plus one that would make them obligated to bargain with the union that had historically represented these individuals doing this work through the vendors.

 

      So much of the litigation in the CNN case involved subpoena enforcement fights over the documents that described the hiring scheme. And that part of the decision is not, I don’t think, at issue. There was a violation with respect to CNN. There was an issue, and Phil is quite right, about the joint-employment aspect of it, but to attribute the length of the litigation, the number of pages of documents, the length of the hearing, to attribute it to the joint-employer issue, I think is frankly not an accurate characterization of the litigation.

 

      Second point -- and it should be noted that the CNN decision was a joint employer decision that came from before Browning-Ferris that ostensibly applied the prior standard that Phil would like the Board to go back to, but it included some of the factors that ultimately ended up in the Browning-Ferris decision. And the D.C. Circuit said, “Hey, if you’re going to revise the standard you got to be explicit about it. You can’t do it sub silencio.” And so that’s why the case came back, and it’s in fact in mediation as we speak.

 

      The second case that I’d like to mention is Browning-Ferris. I just want to make one point about Browning- Ferris, and that has to do with what the people were actually doing in the case. Browning-Ferris runs a waste recycling center. Browning-Ferris has quite a few employees of its own who are represented by a union. And Browning-Ferris used a temporary agency to supply them with a large number of people whose job was to sort recyclables on a conveyor belt. Okay? And these people were essentially perma-temps. They were not there for two or three days. They were there for extended periods of time, working on the Browning-Ferris property, under the supervision of Browning-Ferris, doing Browning-Ferris work.

 

      A union sought to represent these people and filed a petition with the NLRB for an election to represent these temporary agency employees working at Browning-Ferris, and named the temporary agency as an employer, but also named Browning-Ferris as a joint employer. What happens when you have an NLRB election, if the union wins and the employer has an obligation to bargain with the union over wages, hours, terms and conditions of employment, and the end result of that, if things work out well, is there’s a collective bargaining agreement that covers wages, hours, and terms and conditions of employment. And one of the primary things that is grist for the mill of collective bargaining is a disciplinary procedure.

 

      So put yourself in the position of the individual employee working on that conveyor belt, sorting the recyclables, and supervised by Browning-Ferris supervisors. And assume for purposes of discussion, that you screw up and you are told to leave the property. You will not be allowed back on the property by a Browning-Ferris supervisor. You think what you did is a relatively minor-league thing. Maybe you should be suspended for a day. Maybe you should get a warning. You should not be fired from a job that you’ve had for 14 months or more.

      If the collective bargaining agreement where you voted for a union to represent you is just with the temporary agency, what can the temporary agency do about that? They can’t reinstate you to the line. They can’t talk to Browning-Ferris to try and work something out to lessen your level of discipline. You need Browning-Ferris to be at the table because Browning-Ferris is controlling that aspect of your employment. So the concept of joint employer and the Browning-Ferris decision is that if there are two entities that share or co-determine your essential terms and conditions of employment, they should both be at the bargaining table.

 

      It has been stated that this is too complicated. How are you going to ever negotiate a contract with two people on the other side? Browning-Ferris is an incredibly successful large corporation—one minute. Oh, well, I guess I’ll speed up, so I won’t get to my third point which was rebut the MacDonald’s problem Browning-Ferris is a very large, very successful corporation, deals with multiple suppliers, engages in complex business transactions. The notion that once they sit down at the bargaining table with a temporary agency next to them they can’t walk and chew gum at the same time, strikes me as underestimating the sophisticated nature of the Browning-Ferris corporate enterprise. And I’ll end on that note.

 

Hon. Timothy M. Tymkovich:  Thank you, Dick. I guess since you went last that would make you the appellee in my court, which means you would have won below and so I guess I’ll give Phil a little bit of rebuttal. And as part of your rebuttal could you give us what the current status of the BFI case is and the joint-employer issue is before the NLRB?

 

Hon. Philip A. Miscimarra:  I’d be happy to. And with respect to the points that Dick made, I will only say two or three things. But I’ll spend forty minutes saying them. The one thing is, just as a technical point, in Cable News Network, in the CNN case, there are number of findings of the Board majority that I happen to agree with. I agreed that CNN was a successor employer. And I also agreed that there were some individual hiring decisions that constituted unlawful, anti-union discrimination. But I dissented strongly from the NLRB finding that CNN pursued an overall plan or scheme to engage in discriminatory hiring in order to defeat a finding of successorship.

 

      And on appeal, one of the judges on the D.C. Circuit, who is now Justice Kavanaugh, agreed with my dissenting opinion that CNN did not engage in an overall plan to pursue discriminatory hiring. And he actually quoted my statement in my dissenting opinion in CNN, “If CNN was trying to avoid successorship, their overall plan or design was an abject failure,” because in fact a majority of the people that they did hire were former employees of the vendors that were also union represented. But Dick is correct that there are aspects of the CNN case that involved other issues, and I agreed with some of them, but I disagreed strongly with the finding of joint-employer status. And I also disagreed strongly with the finding that there was an overall plan or scheme to engage in discriminatory hiring.

 

      The one other point that Dick made that I think warrants attention is it’s true that CNN involved issues arising from alleged joint-employer status. There were successorship issues in the case. There were other allegations of anti-union discrimination in hiring. But every case that involves alleged joint-employer status will also involve additional alleged violations. The joint-employer status standing alone is not unlawful. And part of the problem, from my perspective in these cases, is to throw on top of the substantive allegations in the case extensive proceedings over simply defining who the employer is, I think detracts from the merits of the underlying other claims.

 

      And I think that was most of it, for example, in the MacDonald’s litigation, where the entire case was structured in the order of evidence placed, the question of joint-employer liability first before there was any attention or the introduction of evidence regarding whether any substantive violations of the Act even occurred by anybody.

 

      And with respect to the status of Browning-Ferris Industries, the case has gone back and forth a little bit between the court of appeals for the D.C. Circuit and the NLRB, but it remains pending in the Court of Appeals for the D.C. Circuit. And, as many of you know, the Board in the interim has indicated and has promulgated a notice of proposed rulemaking, a proposed regulation regarding the proper standard to apply in joint-employer cases. And that NPRM remains pending. The Board’s comment period was recently extended and I think it continues until December 18th, if memory serves me right.

 

      So -- excuse me?

 

Richard F. Griffin, Jr.:  Thirteenth.

 

Hon. Philip A. Miscimarra:  Oh, December 13th. I stand corrected. But so with respect to joint-employer status rulemaking is currently underway at the NLRB, but Browning-Ferris Industries and the appropriateness of the Board’s decision in BFI remains pending in the Court of Appeals in the D.C. Circuit.

 

Hon. Timothy M. Tymkovich:  You played no role in the Browning-Ferris litigation, but is there some consistency with the Browning-Ferris approach and your common law notion?

 

Prof. Richard Epstein:  Oh, yes. I have two things to comment on. One is that, first of all, I think Dick is a hundred percent wrong to say that what they did was to simply incorporate common law tests in the statute. Because the common law had a freedom of contract override which would allow people to figure out these intermediate cases in which ever way they wanted to do so except to the extent that there were third-party issues for which the insurance was the coverage. And you don’t have that degree of flexibility. And so what the Supreme Court does is it decides to call these newsboys employees, and then you get a statutory override, which is imperfect and creates just another level of situation. None of this would happen in the contractual world. And so the point that I wanted to make, and I will continue to make, is that if you try to use these tests to override voluntary arrangements between the parties, it will always be a failure.

 

      The second point I want to make is there is no stupider statute, no more ignorant set of preambles than you find in the National Labor Relations Act of 1937. And the thought that a serious academic discussion should take as a given that there is inequality of bargaining power between unions and workers without any demonstration to that fact strikes me as one of the fatal conceits of the New Deal. If you look at wage patterns before then, they are quite consistent. What happens is they move up consistently with productivity because employers, wholly without the benefit of the union, bid up wages.

 

      If you start talking about inequality of bargaining power as a serious conception, you never come up with contractual equilibrium because it means every time it turns out that the employer says that I want this they say, “Well, I’ve got inequality of bargaining power. You can’t get that. You’ll bid the wages down to zero.”  That doesn’t happen. What happens is that these employers need these workers as much as these workers need their employment. And in terms of wage increases in the period between say 1870 and 1935, it’s the greatest advance in the condition of the working man in the United States that we’ve ever seen.

 

      And it’s only the genius of the New Deal that basically takes the competitive market, treats it as though it’s a form of oppression, and announces that it’s a failure, and then puts into place a system, which is so rigid. And the great problem that one sees with this is evident, even if we do, as I think we ought to do, take the traditional doctrines of success and liability. What labor markets need is flexibility. What the successor document does is it means that you always have to have a bilateral monopoly negotiation to get yourself out of a losing deal. There is no more systematic set of inefficiency than are associated with the National Labor Relations Act.

 

      And so the question to Dick quite simply is we’re trying to figure out this as a social allocative mechanism. Given any amount of money that we spend on this stuff, what improvement in output do we create by putting into place a system of rigidity? We lose two ways under the National Labor Relations Act. It costs a fortune to administer a statute that always comes out with the wrong result, and I fail to see why it is because some guys put together a preamble—all labor guys in 1935—that somehow or other everything we know about industrial organization should yield to a set of congressional finding that are simply unmatched for ignorance on the topic on which they address.

 

Hon. Timothy M. Tymkovich:  Before I open—

 

Richard F. Griffin, Jr.:  Could I respond to that?

 

Hon. Timothy M. Tymkovich:  I’ll open up to the audience in a minute, but I’ll let Dick get the last word.

 

Richard F. Griffin, Jr.:  Not to put too fine a point on it, but this country teetered on the brink in the middle of the 1930’s. There was mass unemployment. There were, in order to come up with the aforementioned language of the preamble, Senator La Follette held a series of hearings about the bases for the economic situation of the country that lasted over an extended period of time, and is frankly fairly unmatched in Congressional history. And I just couldn’t disagree with you more. And if I may finish, I didn’t interrupt you, the notion that the labor market is efficient and that wages rise with productivity is completely belied by the last 30 years of experience where you have very substantial increases of productivity, not matched in the least by wage increases. And the statistics on that, the empirical evidence on that is fairly irrefutable.

 

Hon. Timothy M. Tymkovich:  I like the adversary system here. Let’s go ahead and open up to the audience. We have two mics going around. Any questions?

 

Questioner 1:  As a non-employment and labor relations lawyer, I do a lot of commercial real estate and construction. I can’t find a scenario—I was taking notes—in which it would be possible to fully protect one my developer clients or myself in development from being held to be a joint employer under some of these decisions. But from an historical standpoint, to address both of you, the lessons of history are the oppressed eventually become the oppressors, and we have seen that I think go both ways in the United States. If you take everything into account employers and then the unions, in the end there’s a lot of balance. But I also have to say that I agree with Professor Epstein.

 

Prof. Richard Epstein:  Could you repeat the question? I didn't quite get it.

 

Hon. Timothy M. Tymkovich:   I think she said she agreed with you.

 

Prof. Richard Epstein:  Oh.

 

[Laughter]

 

Richard F. Griffin, Jr.:  Take yes for an answer.

 

Prof. Richard Epstein:  I always do. I’ll be silent. 01:00:13

 

Hon. Timothy M. Tymkovich:  Let’s see. There’s a couple back there.

 

Questioner 1:  Thank you. Good afternoon. Thanks for coming. I’m actually an employment lawyer, one of the many The Federalist Society members who actually represents Federalist Society, but anyways. I have a question regarding the joint employment. This is specifically for Professor Epstein. This is a hypothetical dealing with one of my cases currently pending before an agency. So you have an agency official who touches the breast of an employee who’s hired by a defense contractor. How does that change the analysis as far as—I’m not sure I understood the insurance analysis—but how does that inform you as far as whether or not that should be considered a joint-employment relationship where you’ve got a private contractor providing an employee to work directly for the federal government agency. She reports the bad behavior of the government person to her boss and then gets fired.

 

Prof. Richard Epstein:  I’m not quite sure what the particulars are, but let me give a general answer which I think that goes with what Phil said earlier on. If you look at a case like Browning-Ferris, and it turns out you take the pre-Obama Board redefinitions of it, and it turns out under the statute it’s a joint-employment relationship that’s fine. It seems to me that what one ought not to do it to expand the definitions by using all of these indirect tests and hypothetical control-type cases to situations where historically it was never implied. And I think it’s extremely important to understand that if you have a set of statutory definitions that are so utterly porous, what you’ll never want to do is to change by administrative fiat those definitions to something which has never been tested and implied.

 

      I think that’s also true with respect to many constitutional questions. Accumulated practice gets a very heavy situation in its favor. Certainly the franchising industry grew mightily under these particular rules. So I would say, I don’t comment on individual cases. What I do comment on very strongly is the notion that an administrative agency, which is largely ignorant of the multiple facts on the ground, would change a rule that has worked to something which has never been tried or explicated. I regard that, even within the administrative state, as form of recklessness. And on this particular point, the older views on administrative law were always to the affect that if there’s an earlier practice by those who knew and were familiar with the statute, that that ought to prepare against a sudden change of policy later on. That was the 19th-century view consistently exercised. That is, I think, the correct way to look at these questions.

 

Hon. Timothy M. Tymkovich:  Dick.

 

Richard F. Griffin, Jr.:  I agree very strongly with that preposition because the test that the Board moved to in BFI was actually a reformulation of the test that was applied without full articulation for the basis from 1935 to 1984. And then in 1984, in a series of cases that I think Phil would agree formed the basis for the current doctrine that BFI reacted against, the two main cases, TLI and Laerco. The Board started to say that a number of factors that it had looked at before were insufficient. What you needed to have was direct, immediate, substantial involvement for the putative joint employer to be held to be the joint employer. Now, I may be overstating a little bit, but we’ve filed a brief before the Board in BFI arguing that they should return to what we articulated as the traditional test, that 1935 to ‘84 test. There was not a lot of articulation in those cases, I’m prepared to concede. But they did look at these other factors that the Board did expand back in that direction in BFI.

 

Hon. Timothy M. Tymkovich:  Phil, there was actually a subsequent case, Hy-Brand, that was then vacated. Are there other cases that might challenge the Browning-Ferris logic before the Board?

 

Hon. Philip A. Miscimarra:  I’m no longer a member of the National Labor Relations Board, or chairman, but I understand that there are—so I don’t know what’s currently pending before the agency—but I believe there are other joint-employer cases that have been brought before the agency and happen to be pending at the level of the NLRB. I’d also say that I don’t agree, although Dick suggested I would, with his characterization of the law preceding Browning-Ferris Industries.

 

      But I would note that in the 1950’s the Supreme Court held, in the Denver Building Trades case, that a construction industry general contractor is not the employer of its sub-contractor’s employees, even though in the construction industry—and we’re talking about the real estate industry from one of the questioners—even though a construction industry general contractor obviously exercises control over virtually everything that goes on at a construction site. So some of the lines that exist in this area aren’t the result of what I think is a good idea, or what others think is a good idea. I mean, there are very strong benchmarks in the underpinnings to the law that have been created, not only by Congress, but by the Supreme Court. And that’s one example where I think it’s clear that long-standing, existing law is incompatible with where the BFI decision went when it was decided by the Board majority in 2015.

 

Richard F. Griffin, Jr.:  I’d just like to say one thing because I didn’t really get a chance to address this franchisor/franchisee issue, and I’ll be brief about it. The basis for franchising is, essentially, the ability to license your trademark. Historically, it was unlawful to license your trademark. That got changed, and that means that you can now license the trademark. You have a duty, though, to police the brand and to make sure that the trademark is not adulterated. In the 1970’s, during the Ford administration, the General Counsel of the Board, John Irving, brought a series of cases against franchise industry franchisors/franchisees alleging sort of an enterprising liability theory.

 

      And coming out of those cases—including single employer, joint employer, there are a bunch of stuff thrown into those cases—but what came out of those cases was, if what the franchisor is doing is policing the brand, pursuant to its legal obligation to do so, that engagement with the franchisee is not a basis for holding the franchisor to be a joint employer. In the McDonald’s case, the General Counsel’s complaint and theory of the case acknowledges that and agrees that that type of activity is insufficient to convey joint-employer status. It's going beyond that in your involvement in the operations of the franchisee that is the basis for the McDonald’s case, and we could spend a lot of time, and I’ll stop there.

 

Prof. Richard Epstein:  Can I comment on that?

 

Hon. Timothy M. Tymkovich:  Yeah, quickly.

 

Prof. Richard Epstein:  I mean, policing the brand is a deceptive term. You also have to police the quality of the work that come out underneath the brand. And that means you have to have some degree of control of the way in which the product is presented, and prepared, and so forth. So every single franchisee, in a non-union situation where there’s no risk of a union, has much more comprehensive control other than that. It seems to me that what you really want to do is to take your benchmark, not off of this artificially narrow definition of what a franchiser does, but off of the standard practices of contracting that take place when there’s no union issue involved. And the McDonald’s contracts don’t differ very much from those.

 

Hon. Timothy M. Tymkovich:  I think there was another question over here.

 

Questioner 2:  Yes, Mr. Griffin, you referred to the hiring practices of CNN with respect to vendor employees to keep those hires down to not hit a certain statutorial level to thereby impose successor coverage. You referred to that as a scheme. But why would trying to avoid a statutory number to implicate the application of the statute, why would that be a scheme?

 

Richard F. Griffin, Jr.:  Because if—and let’s just talk about it in the abstract. If the reason you make a hiring decision is based on someone’s support for or non-support for a labor organization, that’s a violation of the National Labor Relations Act. And if you are seeking to—if you make a decision not to hire Sam, not based on Sam’s merits, but because if you hire Sam you will have an obligation to bargain, and you think Sam supports the union, that’s what I’m talking about.

 

Prof. Richard Epstein:  That is an unfair labor practice and that’s the problem. My basic view is yellow door contracts, which require you to demand unquestioned loyalty from all employees, are the essential free market organization and that’s why the National Labor Relations Act is wrong because it makes sure that every employee now has dual loyalties.

 

Hon. Timothy M. Tymkovich:  We have a question on this side of the room.

 

Questioner 3:  [Inaudible 01:09:59]

 

Prof. Richard Epstein:  Get a microphone.

 

Hon. Timothy M. Tymkovich:  Get a microphone.

 

Prof. Richard Epstein:  Where’s the microphone?

 

Hon. Philip A. Miscimarra:  It’s coming.

 

Hon. Timothy M. Tymkovich:  It’s coming.

 

Richard F. Griffin, Jr.:  Roger, wait till you get the mic.

 

Questioner 3 (Roger):  Alright. Thank you. Given the disputed jurisprudence in this area, I’d like the panel’s thoughts on the desirability and the feasibility of rulemaking to address this problem from a prospective, and hopeful -- thoughtful conclusion format.

 

Hon. Timothy M. Tymkovich:  Phil, do you want to start with that?

 

Hon. Philip A. Miscimarra:  Yeah. Well, the Board obviously has the authority under the National Labor Relations Act that’s expressed to engage in rulemaking. In fact, in 2014 I participated in rulemaking that produced regulations relating to the NLRB’s election procedures that ran 735 pages. I’m told the best part of that regulation started on page 494, which is where the dissenting views of former member Miscimarra and Johnson started. But the Board is engaged in rulemaking, rarely, but it’s I think clearly appropriate. And I think that it’s clearly appropriate for the Board, if it chooses, to engage in rulemaking, which is commenced regarding the proper joint-employer standard.

 

Hon. Timothy M. Tymkovich:  Dick.

 

Richard F. Griffin, Jr.  Yeah. As you know, Roger, because you were involved in the healthcare bargaining unit rulemaking, the Board has on a couple of occasions abjured its usual establishment of rules through case-by-case adjudication, and has chosen to engage in rulemaking. And I agree with Phil that there’s statutory authority to do it. Whether or not this particular issue is a good one for rulemaking, I think I disagree with Phil. I think there’s a good argument that the prior law, both the stuff I referred to pre-1984 and the 1984 up to BFI law—really the basis for the Board’s position—was not very thoroughly articulated. I think it was very thoroughly -- whether you agree with it or not, the Browning-Ferris decision on both sides, the majority and the dissent, articulates very thoroughly the basis for why the majority believes the rule it adopted was within the scope of the common law and why the dissent finds it not appropriate.

 

      And that’s really the first full articulation of the basis in the history of the Board on the subject, and it’s pending in the D.C. Circuit. So my view would be, particularly because on questions of common law, the Board is not entitled to really much deference. It’s only entitled to, "If there are equivalent views, defer to otherwise equivalent views." So I would --my own feeling is, that a Board should wait and see what the D.C. Circuit thinks about BFI rather that embark on --

 

Hon. Timothy M. Tymkovich:  Has there been an increase in litigation post-BFI?

 

Richard F. Griffin, Jr.:  No. There are very few cases that alleged joint employer post-BFI, and there’s no indication that there are more joint-employer allegations post-BFI than pre-.

 

Hon. Philip A. Miscimarra:  And may --

 

Prof. Richard Epstein:  That's the [inaudible 01:1:40] thing I’ve heard. May I make a comment on the general point? I think that, generally speaking, in a context like this, you do not want to use rulemaking because you will never come up with a rule. What will happen is you will have rulemaking as long as you said, and the rule will be, “Here are the 16 factors you have to take into account in order to figure out whether or not somebody is -- under this circumstance is a. . ." And there’ll be choices: employer, independent contractor, employee student, employee intern, and so forth, under this statute or any other. So I don’t see the gain in that because it’s going to take a long period of time.

 

      I would rather, therefore, that the Board take its position and do it that way. But again, let me be very clear, this is the question of second and third best. The first best is, “I can stipulate my contract in one paragraph. You will be my employee. You will be my independent contractor.” And we don’t need to go through any of this stuff. And it’s the reason you have the problem of choosing between two and three is we completely reject the freedom of contract approach for reasons that the Lafayette Commission, I did not think, understood. And when you’re trying to figure out the Depression, it wasn’t labor markets that did it. It was monetary markets and foreign trade. And you can’t cure those two defects by mucking up the labor rules. And so this whole thing’s been a completely misguided enterprise from the beginning.

 

Hon. Timothy M. Tymkovich:  There's a question over here.

 

Hon. Philip A. Miscimarra:  If I may just make two quick points and then go to the question. One, the absence of a flood of cases and litigation regarding joint-employer status, from my perspective, is indicative of the problem. It’s not indicative of the lack of a problem because we have articulated these very broad, expansive standards now that suggest that many, many companies that have business relationships with one another are thereby joint employers. And to the extent that they are only very few isolated cases that litigate that status, that means this entire area is going to be populated with arbitrary questions about who gets their ticket punched and who doesn’t. Most parties are trying to comply with the law, and it’s only feasible to expect that parties can comply with the law if they understand the standards without the assistance of litigation or cases that go to the NLRB. So the absence of a lot of cases in this area, to me, with an expansive standard, is indicative of a problem, not the absence of a problem.

 

      The only other thing is I disagree with Richard’s description of the rulemaking because, number one, we don’t know where the rule is likely to end up. And, number two, I think, unlike Browning-Ferris Industries, which adjudicated a particular situation that Dick described in his own comments, the proposed rule that is promulgated not only articulated a standard that resembled the state of the law prior to the 2015 BFI case, it also included 11 different examples, and a final rule might even include more examples. And one of the benefits of rulemaking is you can end up having an agency address a range of different situations that, in many respects, can be much quicker and much more expansive than what an agency like the Board can do in any one particular case.

 

Hon. Timothy M. Tymkovich:  Let’s get a question.

 

Pepper Crutcher:  Hi. Pepper Crutcher from Mississippi. Among other things, for about forty years I’ve been negotiating labor contracts, and it’s very common that the union and the employer to get together and agree that these perma-temps working here in our organization, they are not the employer’s employees. And there are good, sensible reasons from the union’s point of view why they would agree to that. Is that agreement between the union and the employer, although it binds people not represented by the union, is that deserving of a deference from the National Labor Relations Board? And if it is, why is it?

 

Hon. Philip A. Miscimarra: Well, it did not receive deference in the CNN case because there was a collective bargaining history that spanned two decades where the only employer named in the collective bargaining agreements, each of them, were the respective vendors. And with respect to what the Board would do if they had a similar situation prospectively, that would be up to the current members of the NLRB, but I thought that the parties’ practice and who the parties, historically, regarded as the employer was a very important consideration, at least from my perspective, in the CNN case.

 

Richard F. Griffin, Jr.:  I would agree with that, and I think, for the most part, when people are excluded pursuant to agreement, that’s something that historically in most situations has been honored. The CNN case is different in that regard, but I don’t think, as a general matter, people ought to be concerned about the nature of those type of arrangements. I would say, just for one second, the Board actually—of the employment statutes, the definition of the employment relationship under the National Labor Relations Act, is the narrowest. The Fair Labor Standards Act, where the definition of employ is “suffer or permit to work”, has been held by the Supreme Court to have a broader-than-common-law definition.

 

      And so, when you’re thinking from a defensive standpoint, with respect to how employers should arrange their relationships, and you’re looking at a statute that has a private right of action, that has attorney’s fees for the prevailing party under the Fair Labor Standards Act, and a broader definition, versus National Labor Relations Act where there’s not independent investigatory authority in the agency, there is no private right of action, and you have the narrower common law definition, I think from the employer’s standpoint, what they want to be more concerned with, just my own view, is that the FLSA potential liability is a more likely legal question to arise than the NLRA issue.

 

Prof. Richard Epstein:  It’s complicated because in areas where unionization is possible, it is generally regarded with greater dread, but in those cases where it’s not possible, particularly with respect to the overtime provisions, which do not have a minimum wage associated with them, the liabilities are indeed enormous under these circumstances. And, yes, there are private rights of action, and indeed many of the cases having to do with Uber and these various kinds of interns, are all FSLA actions, they’re not otherwise. Again, my view is I’m adamantly opposed to all these statutes, but I agree with Dick that the differences that he makes are really relevant. I don’t think it’s a uniform rule, but I do think it’s presumptively one that, if you looked at all of America’s employees, the FSLA is probably the more dangerous, particularly since its definitions are broader and joint control, or joint status in laboratories, and so forth is very, very common.

 

Hon. Timothy M. Tymkovich:  We have time for a couple more.

 

Questioner 5:  Professor Epstein, you emphasize the importance of the uniformity of freedom, but I assume that the constituents in California have different preferences with respect to their labor laws from the constituents in Texas, for example. Shouldn’t companies like Uber be expected to conform their businesses and their practices to the preferences reflected by those very different citizenries?

 

Prof. Richard Epstein:  Well, this is not an argument about the substance. This is an argument about federalism. And I think the answer is, yes. If there are variations in state law where the federal government doesn’t apply, any national corporation has to be able to yield to what is going on locally. But the point that I was arguing with respect to the California case is that they got the wrong definition on the merits, and there was nothing about the situation in California which justified a different rule from the one that you started to see elsewhere. The cost, of course, if California is an outlier, but a very large state, now it’s going to be that much more difficult to run one of these companies if you have to worry about the way in which things are going.

 

      But, yes. I do agree with federalism, but let me be very clear. In the morning sessions, and some of these sessions you hear all the wonderful encomiums with respect to federalism. I regard those as essentially somewhat optimistic. To me the real problem is you can get abuses at the federal level, and you can also get abuses at the state level. And a system of federalism, which allows each state to go its own way, creates a problem that you haven’t alluded to, but which I’ll briefly mention, which is mainly suppose 60 percent of the people in the state think one way and 40 percent of the people think the other way. If you just have strict majoritarianism under there, there’s going to be a real danger of expropriation. And the basic scheme of the civil rights amendments, all of which took place 1865 to 1870, the whole purpose of those things, ironically, was not to tell the federal government that it could regulate in areas reserved to the state, but it was to put a huge filter so as to strike down many of these things under privileges and immunities, due process or equal protection so that there’s kind of a federal constitutional veto right. And that’s a very different arrangement than the one that’s commonly understood today.

 

Hon. Timothy M. Tymkovich:  Okay. I think we have time for one more question.

 

Prof. Richard Epstein:  There must be somebody.

 

Hon. Timothy M. Tymkovich:  Come on. Somebody’s got to finish this up for us.

 

Hon. Philip A. Miscimarra:  I have—

 

Prof. Richard Epstein:  Why don’t we have one minute rebuttals?

 

Hon. Timothy M. Tymkovich:  We’ll do one minute rebuttals.

 

Hon. Philip A. Miscimarra:  Thank you very much. I’ll just make two quick points that haven’t been addressed, and they’re both related. One is, part of this session’s topic talks about unintended consequences.  And I think many companies that have, not only tried to do the right thing for their employees, they have received pressure, and many of them have aspired to do things and use whatever purchasing power they have to further objectives associated with social accountability, corporate responsibility. And this push to suggest that any type of potential control that a major business or a major employer might exercise on somebody else’s employees converts that larger corporate entity into a joint employer really subverts many of the objectives that I think people have been trying to advance when talking about significant businesses and companies over time. And even in the collectively bargained sphere, there are the Supreme Court, and other courts have recognized the validity of union-standards clauses involving subcontracting where employers are permitted to engage in subcontracting to other entities that pay their employees the same standards that are applicable to the parent employer. And those are additional consequences, I think, that are ill-advised and that are associated with where the law has gone in this area.

 

Hon. Timothy M. Tymkovich:  Dick.

 

Richard F. Griffin, Jr.:  I would say the argument that Phil just made is what I characterize as the "Bad Samaritan" argument. That is, you want to be involved, you want good things to happen, but if you get involved and good things don’t happen, you don’t want to be responsible for the consequences. And that’s typically the argument that’s made in some of these instances where you have large corporate actors who want to appear, from a public relations standpoint, as though they’re trying to do the right thing, but if they don’t make sure that the result occurs, and somebody says to them, “You need to get involved and make sure that this good thing that you’re professing out in public, you’re promoting, needs to happen.” They say, “Oh, no. It’s not our responsibility. We don’t want to have anything to do with it.” And so my own view is if you’re going to take the thing on, and you think it’s a good idea, you ought to see it through and make sure it happens. In the legal tradition of the Good Samaritan, you don’t have a responsibility, but when you take it on, you have a responsibility to see that the appropriate standard of care is exercised, period.

 

Prof. Richard Epstein:  The basic position that I would want to start with is that competitive markets will outperform any unionized markets. One cannot make that argument in the abstract with respect to a National Labor Relations statute, which starts from the opposite premise. And so what you have to do is start thinking about more limited arguments that will address some of these issues. And I disagree with Dick that when you start talking about these cases of divide and control by McDonald’s and so forth, all they’re trying to do is keep the control on the one hand and to keep their hands clean on the other hand, when it turns out that something works. I think that would be true, if in fact, this was all a sham arrangement, but they’ve discovered through bitter experience that they cannot possibly try to run, given what was said later of the local conditions and labor law and zoning law and all the other stuff, from the center.

 

      So if there’s a bona fide separation with respect to the activities in question and you have a labor statute, it seems to me that the labor statute should follow the business separation and you can try to unionize the subunits, but you can’t try to unionize McDonald’s. And in fact, the bargaining implications for that would be there are 3,000 McDonald’s factory or outlets, or 10,000, 20,000 around the country. If they were joint employer with all of their particular franchisees, I have no idea of what kind of negotiations they’re going to be entered into.

 

      It is important to have employers who are close to the ground. It is important to have employers have relatively homogenous relationships. It’s important to have the situation where there’s only one possibility for unionization, not two, three, four, or five. And what the new rules on the joint-employer situation do is to change that. And it cannot be that these rules are just going back to the earlier situations because I’m not aware of any case, and McDonald’s has been around for a very long time, where it has ever been exposed to a threat of joint-employer situations since 1962. So that would be my last word.

 

Hon. Timothy M. Tymkovich:  Who knew that the joint employer could be that interesting and lively? Please join me in thanking the panel.

 

 

1:45 p.m. - 3:15 p.m.
A New Approach to Antitrust Law: Transparency

2018 National Lawyers Convention

Topics: Corporations, Securities & Antitrust
The Mayflower Hotel - State Room
1127 Connecticut Avenue, NW
Washington, DC 20036

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Antitrust enforcers in the post-Microsoft era, under both Republican and Democratic administrations, have been under more or less continuous criticism as insufficiently active. Proponents of this view have offered a number of routes to more vigorous and creative enforcement, ranging from re-writing the core statutes to address high tech industries and following the lead of the European Commission to adopting a “Brandeisian” approach, which focuses on a variety of concerns beyond consumer welfare, including employment, privacy, and environmental sustainability.

As an alternative to these “tear it all down” approaches, could greater transparency be a more effective response? Concerns regarding the level and type of enforcement activity are arguably rooted in widespread misunderstanding of the process, particularly with respect to merger review. Has the time come to update the DOJ/FTC guidelines on horizontal mergers, the licensing of intellectual property, the operation of information exchanges, and other issues? Are agency processes and decisional factors sufficiently well understood? Has the Supreme Court’s antitrust docket hampered or improved transparency? Such questions are particularly timely in light of the FTC’s ongoing hearings on Competition and Consumer Protection in the 21st Century.

  • Hon. Frank Easterbrook, United States Court of Appeals, Seventh Circuit 
  • Ms. Deb Garza, Partner, Covington & burling
  • Mr. Eric Grannon, Partner, White & Case 
  • Prof. Douglas Melamed, Professor of Law, Stanford Law School
  • Moderator: Hon. John B. Nalbandian, United States Court of Appeals, Sixth Circuit

Speakers

Event Transcript

Hon. John B. Nalbandian:  Are we good? Okay, I think we're going to go ahead and get started. One of our panelists is running a bit late, but I think we'll be okay, and we'll slot him in here when he gets here. I want to welcome everybody. My name is John Nalbandian. I'm a judge on the Sixth Circuit. And the title of this panel today is A New Approach to Antitrust Law: Transparency. As many of you are aware, antitrust law has seemingly come back into vogue, at least in some circles, in light of the recent FTC hearings and ongoing hearing on competition and consumer protection in the 21st century and renewed publicity in generalist publications, like the New York Times and The Economist, with a particular focus these days on the so-called FANG companies – Facebook, Apple, Amazon, Netflix, and Google.

 

      I have to confess, however, that much of this is new to me. My antitrust experience as a private practitioner and as a one-time summer intern in the Antitrust Division was firmly rooted in traditional markets for goods and services and basic, good-old horizontal conspiracies and price fixing. Indeed, a day when lower prices were actually a good thing. I was, what you might say or what I call myself, a widget-antitrust lawyer.

 

      Now, these days, at least, it seems as if many people are calling for a reinvigoration of traditional antitrust law and also, in fact, for new concepts of antitrust law that will carry even more weight to address perceived problems with things like labor markets and wages, income inequality, privacy, and, naturally—because Godwin's law apparently has no bound—to prevent the rise of fascism itself.

 

      Although I expect that our panelists may touch on some of these broader themes, our focus today is a little more narrow. Our panelists are specifically going to address the role, or possible role, of greater transparency in the implementation and enforcement of antitrust laws – something that, arguably, European and the EU have been doing a better job of than we have. One question here is whether greater transparency combined, perhaps, with current law is a better way to incrementally address calls for the greater reform and use of antitrust laws, perhaps a scalpel on a tray of otherwise blunt instruments.

 

      Federalist Society panels, of course, are well-known for their quality, and this one is no exception. And I will introduce our panelists briefly, and then they will each give opening remarks, and then, hopefully we can have some back and forth, and then, obviously, we'll take questions from the audience.

 

      Our first speaker is Deborah Garza, who is a partner at Covington & Burling, where she co-chairs the firm's Global Antitrust and Competition Law Practice Group. Ms. Garza has extensive antitrust experience, which includes, in addition to her current work in private practice, past service in the Department of Justice's Antitrust Division as an Acting Assistant AG, Deputy Assistant AG, and Chief of Staff and Counselor to the Assistant AG. And she will chair, or perhaps is currently chairing, the Antitrust Section of the ABA during the 2018-2019 year.

 

      Next, we have Eric Grannon, a Partner at White & Case, where he has built an impressive practice focused on helping clients with antitrust matters, including both civil and criminal defense. And I believe Eric is going to talk to us a little bit about the criminal aspects of antitrust as well as his work counseling for mergers and acquisitions and settlements of pharmaceutical patent litigation. A former prosecutor, Mr. Grannon also served as Counsel to the Assistant Attorney General in charge of the Antitrust Division during 2003-2004, where he helped formulate U.S. antitrust enforcement policy and managed civil and criminal investigations and court cases brought by the Antitrust Division.

 

      To my left here is Judge Frank Easterbrook, who is, of course, a familiar face to The Federalist Society. Judge Easterbrook serves as a Circuit Judge on the Seventh Circuit, where he served as Chief Judge from 2006-2013. He is also a senior lecturer at the University of Chicago's Law School. Before joining the court in 1985, he was a professor at the University of Chicago, where he taught, wrote, and published prolifically in a variety of areas including antitrust securities and corporate law. In addition, Judge Easterbrook previously served as Deputy Solicitor General of the United States.

 

      Finally, we have an empty chair. That will be, hopefully, Professor Douglas Melamed from the Stanford Law School, where his principle areas of research and writing are antitrust law and the intersection of antitrust and patent law. Prior to joining the Stanford faculty, Professor Melamed practiced law for 40 years, including serving as Senior Vice President and General Counsel of Intel Corporation, chair of the Antitrust and Competition Practice Group as a partner at Wilmer Hale, and service at the Department of Justice as the Acting Assistant Attorney General in charge of the Antitrust Division, and as Principle Deputy Assistant Attorney General.

 

      So please help me welcome our panelists and thank you. And I'll turn it over to Ms. Garza.

 

Deb Garza:  Okay, great, thanks. So if the question is transparency, to me the answer is yes. I want it now, and I want it fast. When I talk about transparency, I'm talking about transparency and antitrust investigations and enforcement, and not so much -- transparency, of course, is relevant to U.S. enforcement. And it has been particularly relevant for jurisdictions outside the U.S. in the past and, in particular, in Europe, but also in Asia, and in newly emerging jurisdictions that don’t have as well-established rule of law as do we. Or that have different systems of administering antitrust that don’t involve the courts. So it's been a major objective of the U.S. government and the antitrust community to promote transparency for many years. It's been a bipartisan effort, and it's continued through this administration. So I thought I would talk in my opening remarks very briefly about what we mean by transparency, why we value it, where it becomes an issue, and then a little bit about what some of the efforts are that are going on now to try to ensure, promote transparency, several of which I've been personally involved in.

 

      So the benefits of transparency are really many. For one thing, it's necessary for the free flow of capital and investment because you need certainty and you need predictability. And transparency in the rules that are applied and in how they are applying it, both in the investigation context and the enforcement context, is critical to businesses and planning transactions to do that. It's important to efficient enforcement, it's important to maximum compliance. Companies are better able to comply with the law, whether it's in structuring their transactions in a way that will be approved or determining what their conduct will be, transparency allows them to conform their behavior more closely to the law. It allows for efficient enforcement as well if, one, people know what the standards are. But two, also, because as I'll get to, transparency enables the agencies to be better informed about the decision-making process.

 

      Transparency is good for accountability. If you're transparent about the rules that you apply, the procedural rules and the substantive rules, then you can be held accountable. And we want our enforcer to be accountable. It's important to confidence in enforcement; it's important that people understand—the antitrust community and others—understand what the rules are, how they're applied, that they're applied impartially. It protects against corruption. It protects against special-interest capture. It protects against capriciousness and just plain bad decision making. It protects against partial enforcement, which is something that's been a big concern for the business community, particularly in jurisdictions like China, but other jurisdictions where you can never be sure whether the action that's being taken is based off of complaints by competitors or national champions.

 

      It can be situational or it can be systematic. And the way to sure ensure transparency, I think -- there're number of ways to do it. One is by requiring, by agencies being, as I said, clear about what the standards are that they're applying through the issuance of guidelines, through written case law, through statements – policy statements – by articulating what their decisions are and how they went about it. It's transparency with the parties that are subject to investigations, letting parties know when an investigation has been opened, what the basis of the investigation is, what the allegations are, in some sense what the evidence against them is, all of which allows parties, obviously, to better defend themselves. And, actually, it enables the agencies to get evidence and information that will enable them to make smarter decisions. So those are some of the -- I mean, there are more reasons why, but that's why we value transparency.

 

      But let me tell you just a little bit about a number of the efforts that are going on by international, multi-national organizations. One is the OECD, the Organization of Economic Co-operation and Development—I think that's what it stands for. In June of 2018 -- and I should say that the thing I'm going to talk about that the OECD is doing is really prompted by the U.S. as a champion of this. But in June of 2018, the OECD issued a scoping note. The OECD committee that looks at competition law issued a Scoping note on Transparency and Procedural Fairness as a long-term theme for 2019-2020. That's the title, and it's actually pretty important because the U.S. has been trying to get the OECD to do exactly that, which is to focus on transparency as a long-term theme. And part of the rationale for this scoping document and for the work that the OECD will being doing is the belief that transparent and fair process helps to ensure the impartial and reasonable treatment of subjects and at the same time, helps to improve the quality, accuracy, incomprehensiveness of analysis and decisions. So that's one effort: the OECD.

     

      The ICN, which is the International Competition Network, which is an organization of almost all of the national competition authorities around the world. It's an informal organization of these countries to exchange best practices and talk. And there is a document called The Competition Agency Transparency Practices document, which is part of the Agency Effectiveness project. And that, too, is about urging all competition authorities to adopt practices, not just transparency, a whole host of processes that are aimed at preserving due process but that include transparency.

 

      The ABA Section of Antitrust Law. I know the ABA isn't very popular among everybody at FedSoc, and I'm not so wild about some of the ABA activities myself, but I am the Chair of the Antitrust Section. And we have done two things in this area: one, there is an International Task Force that has adopted best practices for antitrust procedures. That includes a number of things, including transparency. And probably more important than that, we have an International Procedural Transparency Task Force. This task force was established to study and report on implementation. So they have been, basically, talking to folks around the world, talking to the business community and others in the antitrust community to see to what extent that people -- have competition agencies actually implemented these best practices, and where they haven't, to kind of name and shame them.

 

      Another thing that I've been involved in, that Doug Melamed was also involved in with me, is the International Competition Policy Expert Group, which came about when the U.S. Chamber of Commerce invited a bipartisan group of competition and trade law experts to make recommendations to the then-incoming president and Congress about how to align trade and competition law. And one of the things that we did recommend was to take action to promote transparency. The real issue for that group was that we have lots of guidelines and suggestions about transparency and other elements of due process, but we really don’t have any enforcement mechanism. And so we focused on what the administration could do to actually make this concrete. And some of our recommendations were to try to expand the World Trade Organization, the WTO's regular assessment of members by the Trade Policy Review Group to expressly include an analysis of how well they're doing in terms of due process, including transparency.

     

      Another thing that we recommend was that the OECD be encouraged to do specific peer reviews of participating countries and specifically focusing on their processes and whether they provide transparency. And a third was to encourage the OECD to adopt a code that would enumerate transparent and partial procedures.

 

      And, finally, I want to talk about what the current administration is doing. Makan Delrahim as the Assistant Attorney General for Antitrust at the Department of Justice has adopted something that's called the MFP, which is the Multi-lateral Framework on Procedures in Competition Law Investigation and Enforcement—much easier to say MFP. And his objective, which I like think follows a little bit on the recommendations on our policy expert group, was to try to ensure meaningful compliance with standards beyond the suggestions, and guidelines, and recommendations. And the theory that they were working on—and, again, this goes beyond transparency, but transparency is part of it—the theory they were working on is that you can obtain compliance in one of three ways: by threats of retaliation, by promises of reciprocity, and by potential harm to reputation. And the MFP is really focused on the reputational part of it. So he's been going around the world, trying to get people to sign onto this procedural framework with the idea of tying it to your reputation as an agency for providing these protections, including transparency.

 

      And, finally, finally, I will say that some of the competition chapters in the Free Trade Agreements have included, and are increasingly including references to due process, including transparency, and I know it's not called NAFTA 2.0; I've forgotten what it's called, but NAFTA 2.0 and the Korean Free Trade Agreement both include chapters that have pretty good provisions on transparency.

 

Eric Grannon:  Thank you. Okay. Yeah, I'm going to stand and hope that this light won't be directly in my eye. I actually feel like I'm going to confess to an antitrust crime or something up here.

 

[Laughter].

 

      Hopefully, that won't happen. So good afternoon. I'm Eric Grannon. I'm going to focus on some transparency issues in the DOJ Antitrust Division's Criminal Enforcement Program. And my first suggestion is quick and mostly symbolic, but I think nonetheless important. The Division should put the briefs for both sides of its litigated cases, in criminal matters and civil matters, up on the Division's website. The Division is not just another litigant; it's the government, and with that special role comes a special responsibility of keeping the public fully informed about the Division's cases, and putting up only the Division's briefs for the public to see does not live up to that responsibility.

 

      Second, the Division needs to rethink what I call the batting average mentality for criminal antitrust enforcement that's applied for about the last 20 years. Each year, the Division reports on its criminal enforcement activity, and it seems like the Division is only happy if it can report ever-increasing totals of fines and annual jail time obtained. Now, I think that may have made sense for the first 10 or 15 years of the amnesty program. But we're now in the 25 anniversary of the amnesty program. We've succeeded, not just in exporting antitrust and competition law all over the world, but almost every major jurisdiction follows our amnesty and leniency paradigm, even if the penalties are only civil or administrative rather than criminal.

     

      So in reality, the whole world has drunk our Kool-Aid when it comes to competition enforcement. And to boot, all of these enforcers around the world are now cooperating together in enforcement, which is something that Deb alluded to. The enforcement network has never been stronger. As a result, companies operating in European, Asia, and developing parts of the world are internalizing the same cultures of competition compliance that have been strong in the United States for close to a hundred years.

 

      Now, if we've done all of that, folks, and we don’t start to see a decline in cartel activity, then something is very wrong. Now, the Division is always going to report on fines and jail time, which is appropriate for a public agency. But what I'm suggesting is that the headlines, if you will, of Division reports, the focal points of Division speeches might benefit from some new metrics. So, for example, the Division has 50 or 60 PhD economists. They could start headlining the millions, if not billions of dollars consumers are saved as a result of Division prosecutions. The Division could use its international DAAG as an ambassador to top-tier companies throughout Asia, for example, and report on how many of those companies have adopted what we would consider to be "gold star" antitrust training and compliance programs. Now, these are just a couple of examples and I'm sure there're other meaningful metrics for success beyond fines and jail time.

 

      Third, the Division should reassess amnesty plus and in particular, its implications for follow-on class actions in the United States. So I'm going to give a little background for this. Amnesty Plus applies in this scenario: my company has been fingered by an amnesty applicant in, let's say, the widget industry, for example. And I agree that my company will plead guilty, pay a substantial fine, and agree that some number of my executives will be carved out of the company's plea agreement and prosecuted for having price-fixed widgets. I, then, get to say, "Oh, Mr. or Ms. Division Prosecutor, while you're prosecuting me for widgets, I want to tell you about another cartel I'm involved in in the sprockets industry, for example. Now, if I convince you, I, then, become the Amnesty Plus applicant on sprockets, which means I get a complete pass from prosecution for my company and our executives on sprockets. But additionally, I get a substantial discount on my corporate fine for the original widget conspiracy."

 

      Now, you can imagine the incentives that creates for companies to come up with conduct that will effectively injure other industry participants. And the Division has reported in recent years that more than half of its prosecutions are coming from Amnesty Plus applications – more than half. Now, my concern on this is not at all hypothetical. I've worked defending a company that was a target of an Amnesty Plus investigation. After granting Amnesty Plus, however, the Division never indicted anyone and obtained no guilty pleas. That means the Amnesty Plus had been improvidently granted in the first instance because it's only supposed to apply to hard-core cartel conduct.

 

      Now, you might ask, "So what? You're client never got prosecuted. It had the hassle of a criminal investigation, but no harm, no foul, right?" Wrong. The rub is that as soon as the grand jury investigation starts for the Amnesty Plus industry, like night follows day, here come the treble-damage class action cases. And because of the in terrorem threat of treble-damage jury trials, and not to mention the expensive, drawn-out nature of antitrust litigation and discovery in particular, many companies end up settling non-meritorious claims. And I can say specifically that in that investigation and the follow-on class actions I'm referring to, several companies paid settlements in the tens of millions of dollars as a result of the Division's grant of amnesty plus but where no company or individual was ever prosecuted.

 

      The Division should announce a public workshop on Amnesty Plus—including its civil litigation implications—schedule the workshop for some time in 2019, and use the intervening months to solicit speakers and papers from prominent practitioners, economists, and academics. And most importantly, go into that kind of public workshop with an open mind rather than seeking justification for current practices.

 

      Fourth, it's time for an honest determination of what antitrust defenses constitute crimes involving moral turpitude. The Division's prosecutions of individuals are overwhelmingly of non-U.S. nationals, almost all of whom have pleaded guilty rather than been convicted at trial. Now, one reason for all the guilty pleas is that the Division leverages a 1996 MOU with a former INS—now ICE—that "considers antitrust defenses to be crimes involving moral turpitude." Now, the consequence of that MOU, which has no valid legal authority whatsoever, is that any foreign national convicted under the Sherman Act can thereafter be excluded from the United States for up to 20 years. Now, that's a career killer for a lot of non-U.S. business people. But the Division generously says, "If you plead guilty, rather than go to trial, we will waive the application of our MOU that we made up, then you can serve your two or three years in one of our comfy, minimum security prisons and travel freely the United States once you're done serving your time."

 

      Now, I've researched on this, folks, I've published on this issue. My article is in your CLE materials, and there is no precedent whatsoever for antitrust defenses to be considered crimes involving moral turpitude, which is a category of depraved crimes, most of which existed in common law. The Division should publicly commission an independent, legal opinion from the Office of Legal Policy on whether antitrust defenses constitute crimes involving moral turpitude and let the chips fall where they may based on OLP's opinion.

 

      My final point is that career-Division prosecutors should not be the only candidates for the criminal-DAAG position in the front office. The AAG in charge of the Antitrust Division is a presidential appointee and all of the other DAAGs, historically, have turned over with each new administration. We have 93 U.S. Attorneys across the country who dole out much larger sentences than available under the Sherman Act, and those U.S. Attorneys all turn over with each administration and the Republic is still standing. The Division's criminal DAAG should also be a political appointee. This is not a job application on my part, by the way, but it should be someone who can bring the perspective of both criminal and civil antitrust defense from the private sector and someone who won't be beholden to the views and practices of the career staff. I think that perspective might help mitigate some of this overreaching and lack of transparency that, at least, I've addressed.

 

      So with that, I think I'll hit pause and look forward to any questions or comments you all have.

 

Hon. Frank Easterbrook:  Thank you. The premise of this panel is that antitrust enforcement needs change. If not something substantive, then more transparency. I'm here as the stick in the mud. I agree with Edmund Burke: "Don't talk to me of reform. Things are bad enough as they are."

 

[Laughter].

 

      Antitrust law does not need new enforcement or new objectives. It should not be invoked to improve the environment or promote racial justice or help small businesses. It needs accurate enforcement to better the lot of consumers, which is its goal. Other statutes have different goals. Trying to load multiple goals into one law produces a muddle, and you're bound to get less of the main objective – competition that drives prices toward marginal cost.

 

      More litigation doesn’t promote better enforcement. Antitrust helps consumers when used properly, but it's also an attractive nuisance. Litigation provides a means for firms to raise their rival's costs. Even the threat of litigation is costly. It also helps politicians strike at out-of-state or otherwise unpopular producers. Used that way, antitrust can become a tool to stifle competition and harm consumers.

 

      Chicago's prescription, also the prescription of this man—this is my Adam Smith tie—is to bust cartels and prevent mergers to monopoly, open up markets—domestic and international—reduce regulation, let competition to do its job. If we had data showing that consumers lose from other things, and if we can be confident that judges could reliably find those other things, then by all means expand the portfolio of antitrust. But there are no such data and there's no reason to believe that judges, whose principle portfolio in life is managing cocaine prosecutions are very good at economic managers.

 

      We've been asked to talk about transparency, which sounds like a goal of window design rather than a legal regimen. True, it's become a catch phrase. Everyone is for it. But what is it? Transparency is very trendy in Europe, which leads me to worry that it's a code word for a European fair competition model. In other words, be kind to one's rivals. That doesn't help consumers. The goal of competition is to hurt rivals. As Joseph Schumpeter put it, "to be a gale of creative destruction." Anything providing comfort to producers will harm consumers by keeping the inefficient in business.

 

      Perhaps transparency is something producers offer each other – complete statements of their prices and sales or how they make their products. We've seen that before. The usual understanding in antitrust circles is that transparency at the industry level is a cartel-promoting device. If everyone can see what everyone else is charging, and to whom everyone else is selling and how much, it becomes easier to coordinate prices and output. Secrecy, by contrast, is the enemy of cartels because it becomes possible to cheat on the cartel price without being caught. So we ought to oppose transparency for producers.

 

      Perhaps, though, transparency means openness at the enforcement level when deciding what cases to bring. I'm skeptical of that understanding too. Prosecutors need a deliberative process privilege and the ability to offer confidentiality to informants and potential witnesses. Ordinary criminal prosecutors don’t announce what cases they are considering and how they decide among them. To the contrary, both state and federal systems have powerful rules of grand jury secrecy that not only protect the interests of persons who are considered but ultimately not charged, but also improve the ability of prosecutors to make decisions free from political influence.

 

      The guidelines issued by the FTC and the Department of Justice afford some general notice. But they're explicit that they don’t bind either the enforcers or the courts. Otherwise, they would offer opportunities for business planning. In tax law, those opportunities are generally referred to as loop holes. But loop holes go with any detailed system of regulation. They inhere in systems of detailed rules. And I don't think they should spread to antitrust in the name of transparency.

 

      More than that, transparency interferes with James Madison's prescription for good government. This guy, Madison, his essay known today as Federalist No. 10 contends that the power of faction—what we today call interest groups—can be diminished by breaking government into smaller segments with different constituencies, and by making creative use of silence. In modern language, he argued that civic-minded representatives needed agency space to do their work. If they are always being monitored, all they can do is react to the demands of factions, which all of the Framers agreed were baleful. Factions in the antitrust world consist of producers, who are always trying to find ways to compete less and charge more. We need to do more to insulate enforcers from them rather than make enforcers more readily controllable through political pressure. And it's transparency that gives producers the time to bring political pressure to bear on enforcers.

 

      This is a long-standing problem in American law. The Administrative Procedure Act of 1946 requires agencies to publish detailed proposals, then wait for comments. That exposes the whole administrative process to the power of faction. The Administrative Procedure Act was sold in the name of transparency. You could see what you're government is doing, but the result has been to magnify the power of interest groups. In 1946, people thought that rules could be adopted under the APA's procedure in a month. Now they take years, sometimes decades, because interest groups tie up the process in knots while bending it to their own ends.

 

      A vital feature of independent agencies, such as the FTC, is not the tenure of its members, but their isolation from the rest of the Executive Branch. A president can resist claims by interest groups in the way Madison envisaged, by adding other items to the agenda. But agencies devoted to single purposes like antitrust, lack threats. They can't promise to veto 'Bill X' on response if some committee in Congress or interest group takes 'Step Y.' The absence of log rolling means that factions in committees in Congress have extra influence. More to the point, that power has been transferred from the president, with a national constituency, to commissioners and committee chairman who have different constituency and are less responsive to the public as a whole.

 

      Even the Antitrust Division has a limited agenda, which makes it hard to control the thread of factions and their legislative supporters. More transparency makes this problem of control even harder. The Administrative Procedure Act, the Freedom of Information Act, the Government in the Sunshine Act, and extensive provisions for judicial review all ensure that interest groups have many points of access and influence. They monitor intensively. Insolation from their influence has become an objection to the behavior of public officials, and that's what we hear in the name of more transparency. Failing to wait for group monitoring and input is seen as a bad thing, rather than as Madison argued: a good thing. From a public choice perspective, it can be no surprise that those members of Congress with the most seniority vigorously resist presidential efforts to coordinate public policy.

 

      So I urge you to resist the call of transparency, no matter how much extra sunshine seems beneficial. Always remember that sunlight is full of ultra-violet radiation. And our goal is not to have more in the abstract, but to have the right amount and always carry a bottle of sunscreen. Thank you very much.

 

      Now, before I sit down, I should say that I've talked to Professor Melamed. We're sorry he isn’t here, but he told me to say that his whole talk would be "what it was that Judge Easterbrook just said, that's exactly right." [Laughter]. Thank you very much.

 

Deb Garza:  So do I get to respond?

 

Hon. John B. Nalbandian:  Yeah, it looks like we aren't going to have Professor Melamed, so why don’t we go ahead with panelists who want to comment.

 

Deb Garza:  I do, I do. So, look, I don't disagree with everything that Judge Easterbrook said, but I want your telephone number because the first time that I sit across from someone at -- the Chinese competition authority who wants to explain to me why they think it's appropriate to operate behind a veil of secrecy, they tell me it's because Judge Easterbrook urged me to resist the call for transparency.

 

      I think, as a practical matter, it may not resonate as much with us in the U.S. because we understand that our antitrust enforcers, ultimately, have to go to a court of law to stop a transaction, to punish a cartel, to punish other anti-competitive activity. But we live in a world where everybody has—almost everybody—has a competition regime but not everybody has the kind of systems that we have. Not everybody has guarantees. In some cases, the prosecutor is the court. And in other cases, there isn't a well-established rule of law.

 

      So we've seen situations in China, for example, where companies do not know what rules are being applied to them, do not know what evidence is being provided to the enforcers, do not know what is deciding the future of their transaction or their ability to keep doing business, or to prevent their intellectual property from being expropriated. And that's a problem. That's a problem if we want to live in a world with free trade. It's an issue for a lot of my clients that happen to be companies that engage in mergers and acquisitions. I happen to think it's a good thing to have a free flow of capital, cross boarders included.

 

      Companies can't make decisions about transaction and the risks, etc. if they don’t know what the rules are. If there's no transparency into how the various competition authorities around the world are going to look at their transaction. If they don’t know how they define relevant markets, if they don’t know what the standards are, if they don’t know what the rules are in terms of divestitures and fixes, if they don’t know what the timelines are…

 

      So there's a lot of, to me, there's a lot of good transparency. If you think that markets function most efficiently when people are aware of what the rules of the road are, when the road are when they can be assured that the rule of law will be applied to them, I think it's a good thing. And Eric mentioned the criminal context. It's also important there. You're the subject of a criminal investigation, you have no idea -- obviously, there're going to be some -- transparency doesn't mean standing naked, right? So there's going to be some things that you're going to not do. You're not going to breach privilege, you're not necessarily going to reveal all confidential sources.

 

      But companies that are being criminally prosecuted have the right to know, "For what?" Basically, "For what? What are you looking at? What are the relevant products? What's your key evidence?" Otherwise you can't defend yourself; otherwise -- you know, if we don't have that kind of fundamental basic transparency, you cannot be sure that you're getting impartial treatment. You cannot be sure that there's no corruption. You cannot be sure that there's no political influence. You cannot be sure that you'll be able to defend yourself. And there's no accountability at all for the enforcers.

 

      And I've been on the other side as an enforcer, and I believe in the integrity of our enforcers, but I also know that's a hell of a lot easier to do your job if you never have to explain it; if you never have guidelines that you know that you've put out that you have to explain to people that you're following; if you never have to prove your case. It's a lot easier, certainly. It's a lot easier to get lazy, so I actually do think that transparency is essential to protecting individual rights. It's essential to allowing for the free flow of capital. It's essential for a rule of law. And so I say put your sunscreen on and go forth. I think we do need -- I think we need to ensure that the rest of the world provides transparency, and we need to keep doing that here in the US.

 

Hon. John B. Nalbandian:  Deb, can I ask you a question? Just a little bit more concrete. Are you suggesting that there needs to be more formal statements in the context of, let's say in civil context, in the context of individual mergers where the government is explaining why or why not they approved it? Or are you talking, also, about -- are you looking for more or broader guidelines, policy statements, in more and more, I guess, formalized broad-based statements? Or are you looking at kind of more granular things?

 

Deb Garza:  Well, so most of my efforts have actually been focused outside the U.S. Inside the U.S., the issue for people has been guidelines and, frankly, guidelines that are relevant. So, for example, today we have vertical merger guidelines that actually were adopted in 1984 that are no longer really instructive. But we have significant enforcement matters on vertical theories like the AT&T–Time Warner Theory. Frankly, that's probably a very good example of how current vertical merger guidelines would have been a help because I do think that the Antitrust Division had a legitimate basis to taunt challenge that transaction. It was the same basis of a challenge Comcast–NBCU. They have a different view of the efficacy of consent decrees.

 

      But there was a lot of finger-pointing in that case. People claiming that the reason that the Antitrust Division brought that case had nothing to do with legitimate antitrust trust concerns and were more driven by the views of the president and his supposed animosity towards CNN. Had the Division had in place merger guidelines that they could have pointed to, I think they could have resisted more of that kind of finger-pointing because it would have been clear the kinds of evidence that they looked at in the theories that they were following, and it would have been much more clear that this case was not aberrational but it was consistent with their own guidelines. So that's an example where the guidance would have been helpful, frankly, to maintaining confidence in the enforcement.

 

      I will say there is a bit of a difference and this has been discussion in the U.S. about the degree to which you explain enforcement matters. So in the U.S., obviously, if you challenge a transaction, either you have to go to court and prove your allegations. And when you go to court, you review your theories and your evidence, etc. Or you settle the case with the parties, in which case you do provide some explanation of, again, what your theories are, some of what the evidence is, why you think the remedy is sufficient because you have to do that under the Tunney Act. If you don’t challenge a transaction, most of the time there isn't an explanation in the U.S. And in some cases, there has been. When I was at the Antitrust Division and the FTC has done that, where there was a potential public expectation that a transaction would be challenged, and it wasn't, then there have been short statements explaining that. I can think of one instance being SiriusXM where the Antitrust Division did not challenge. And so we issued those statement so the people would understand why not. Again, the reason we did that was to try to maintain confidence in our system.

     

      In Europe—and this may be why you said -- although I generally don’t agree that Europe is better on transparency than we are in the U.S.—but in Europe, they issue some kind of statement with respect to every transition they look at, including if they don’t challenge it. So there's a somewhat more transparency there. I do think that there are downsides to issuing statements, even when you don't challenge a transaction because it does tend to set a precedent and bind you in a way, when you maybe haven't -- it binds you in the future and that has both upside and downside. But on balance, I think there are some reasons why wouldn't necessarily want to adopt the European style here.

 

Hon. John B. Nalbandian:  There has been some suggestion that if a merger is not challenged— and let's say there's a certain threshold the company is a billion dollars in market cap or has 1,000 or more employees, and it's not challenged—that the FTC or DOJ should explain why they didn't, and, in fact, solicit public comment on that merger. Is that something that --

 

Deb Garza:  I don't think that that's a great idea, but there're also have been cause that have said if you engage in, what we call a second request, if you engage second request examination, which is usually a three-, to six-, to nine-month investigation, and then you close without challenging that you should give some explanation. And I think there's some basis for that. I don't think you want to open it up to public comment, but I will say that the Antitrust Division and the Federal Trade Commission, when they look at transactions, they don’t ask for public comments but they do reach out to suppliers, to consumers, to business partners. So there is some collection of evidence from people. But not a general request for comment. I don't think that would be very fruitful.

 

Hon. John B. Nalbandian:  Do you -- Professor Melamed, would you like to give you remarks?

 

Prof. Douglas Melamed:  Well, I'll say just a couple of things. First, I apologize for being late. I actually had this on my calendar for tomorrow until I got a text a few minutes ago. I have an excuse, but I won't bore you with all that.

 

      I just wanted to say that—I hope this isn't completely out of context here—the topic initially, at least, was framed in terms of the role of transparency as an antidote to some of the unrest about competition law, you know, the populist movement and all of that. And my reaction was basically that I think that misdiagnosis is a problem. That the problem I think from the critic's perspective is not that they don’t understand antitrust law—although I think they often don’t—but they perceive outcomes that are worrisome to them – increased industrial concentration, or economic power, wealth distribution, whatever. I don't think a greater transparency about how antitrust works is going to answer their concern with these problems still happening in the world. So I think what's needed is a substantive engagement on the question of whether these are real problems. And if so, whether intervention by the government is called for. Antitrust guidelines and closing statements and all that seems to me are largely beside the point. That was just a basic point I wanted to start with.

 

Hon. John B. Nalbandian:  Let me ask you this, Professor Melamed, because I know you've written about the -- responding to the criticisms of the existing consumer welfare paradigm, and the idea that actually the consumer welfare paradigm might be a little bit more flexible than we give it credit for, right? That it does deal with more than pricing. Why isn't it that greater transparency wouldn't be a part of working within that paradigm to kind of address whatever these perceived issues are? Or are you just completely rejecting that there are any problems right now?

 

Prof. Douglas Melamed:  No. I'm not rejecting that there are any problems. I think, yes, I'm not saying -- when I say transparency is not a problem, I'm not saying we should not engage in conversation with the critics and attempt to disabuse them of some of their concerns. I think to those who articulate the concern in the form of an argument that says we should abandon the consumer welfare standard in antitrust and move onto some more populist, new-Brandeis, multifaceted set of criteria, I think as to them, yes, we should respond, at least to the extent -- and the response I made in a couple of papers does say, among other things, many of the criticisms you make at the consumer welfare standard focuses on price. It ignores innovation, and so forth are simply wrong and reflect the misunderstanding of consumer welfare standard.

 

      But, ultimately, I don't think that's going to end the debate because it will just -- I think it was cause the debate to be focused probably where it should be focused, on the larger, political economy question of do we have issues of concentration of economic power and wealth in this country that ought to be addressed by some form of government policy.

 

Hon. John B. Nalbandian:  Judge Easterbrook, I don't know whether you had a response to what was said before Professor Melamed came in. I'm imagining that -- well, let me ask you. What's wrong with more guidelines, or policy statements, or fair notice to criminal defendants?

 

Hon. Frank Easterbrook:  As I said in my opening remarks, part of the problem is that transparency as become a word that doesn't have that much content. It is being used for all good things. The proposition that the law should be knowable, judicial opinion should be accessible was a proposition that was embraced when this country was created in the 1780s. It was thought to be absolutely essential. This was long before anybody invented the word 'transparency.' So if the problem with foreign antitrust enforcement is that nobody knows -- that producers and consumers don’t know what they are supposed to be doing, even approximately, that's a serious problem. But dealing with it is not -- the word transparency doesn't describe how you deal with it.

 

      After the Sherman Antitrust Act was passed in 1890, I think it's fair to say that very few people knew what it was or what it did. Judge Taft on the Sixth Circuit writes the first great opinion in Addyston Pipe & Steel and begins to give content to it. That content is expanded through the decades, and we now have a very good idea what antitrust did. That was all achieved without resort to transparency. The concern I was expressing, particularly about Madison's concern, is making the process of antitrust enforcement more open to the influence of interest groups. That, it seemed to me, was one that will do harm to consumers. And that's not something that Deb Garza dealt with in response to my comments.

 

      So in addition to worrying about the access of interest groups to enforcement policy, I'm also worried just about loading too many things into one word because then it's very hard to have a conversation about whether that word is good or bad.

 

Hon. John B. Nalbandian:  Eric, did you have a comment?

 

Eric Grannon:  Yeah, just briefly. I guess in thinking about this idea about transparency being potentially bad. You know, there's a whole side to this also, which is antitrust lawyers play a very important role in counseling clients on how to conduct their businesses. And if in your role as a counselor, you don’t have good visibility into decisions will be made and what type of analysis will be followed by the enforcers, then your role as a counselor is really handicapped quite poorly. I think, respectfully, a lot of Judge Easterbrook's comments assume the safety valve that we have in the United States, and that makes sense – a hundred years of common law development of antitrust principles as well as the sort of safety value of federal courts for relief.

 

      So I'll just give an example. My firm just recently won a price-fixing jury trial against the Antitrust Division in the Southern District of New York in the area of alleged foreign-exchange manipulation. The Division gave our team access to some pretty important file materials, including interview notes, the Friday before the trial was to begin on Monday. So I guess I would challenge Judge Easterbrook or anybody who says that that is a good thing. I don't think James Madison would agree with that.

 

      But, nonetheless, we have the backstop of federal courts, and we won that case. Had we been in a different jurisdiction, had we be Europe or had we been in China, the prosecutor is also, then, acting as the fact finder. And I think those types of failure of transparency can have all kinds of even greater concerns. So I guess that would be my one brief response to that.

 

Hon. John B. Nalbandian:  Let me ask you, and we'll open it up to audience questions here in a second. But let me ask you, Eric, you had a lot of suggestions for and some points about what maybe we're doing wrong in the area of criminal enforcement. I'm curious whether you have some thoughts on what we're doing right, and if there are things that are maybe a model for the rest of the world or whether we're at least on the right track on some things. Can you talk about that maybe?

 

Eric Grannon:  Yeah, I guess I can address that briefly and say that we certainly deserve credit, as I said, for exporting antitrust around the world, for exporting the efficacy of the amnesty model, which is the greatest deterrent to cartel activity is to provide incentives to companies to report themselves. I am also a very of firm believer that criminal penalties, meaning jail time for individuals, is the greatest, single deterrent to anti-competitive conduct.

 

      So for example, in Europe they have really, really, really big fines. But that's not the same thing as an individual having to face the prospect of up to 10 years in prison. So I'm a believer in our criminal enforcement system. I guess where my comments were going were more along the lines of -- having worked there, I saw this. That was 15 years ago, but I don't think the Division needs to be apologetic at all or have an apologetic attitude about the number of total months in jail they obtain against defendants going down. Or fines going down. I think that is a consequence of our success. So that's what more of my comments were about.

 

      There's plenty of things that I think we do right. There are other things that need to be worked out along the way, like for several years, I mentioned these carve outs. Well, what would happen is the Division would publish the names of the carved-out individuals. So here's a corporate plea agreement, again, for widgets, and ACME Company pleads guilty to widgets. And then here are six or seven executives that are then carved out for prosecution. Those names are out there for everyone to see. Those individual's reputations are severely impacted by that. And in many, many innumerable investigations, those individuals were never prosecuted. No indictment, no plea agreement. But their names were nonetheless published.

 

      Now, it took about, I don't know, seven or eight years before that finally trickled up to the front office to stop doing that, and now they don’t do that any longer. That's a positive step. But many people had their careers, and their families, their personal lives severely impacted by this practice. And those of us in the antitrust defense bar raised that issue, and, again, we got the correct outcome, but it shouldn't have taken as long as it did. And many people suffered under that policy. So that's the kind of thing I think we need to be more responsive to.

 

      And I can tell you, I say this with all due respect, but the comments I made about the Amnesty Plus regime and how that works, that's anathema to so many people at the Antitrust Division. "How dare you question this model that we have that garners more than 50 percent of our prosecutions?" Well, because there's problems with it, and when you give Amnesty Plus in an industry and you never prosecute, you never indict anyone, and you never get a plea agreement, that means you did something wrong. So that's where my comments were going about why, much like the other U.S. Attorneys all over the country, I think we should have a politically appointed criminal DAAG who could be a little more distant and maybe not so captured by some of the views of the career staff that, hey, we've been doing it this way for the past 10 years. It's got to be right.

 

Hon. John B. Nalbandian:  Comments?

 

Hon. Frank Easterbrook:  We can go to the floor.

 

Hon. John B. Nalbandian:  Why don’t we open it up to questions? Do we have a microphone? Okay, there we go.

 

Hon. Frank Easterbrook:  [Aside] Uh, oh.

 

Questioner 1:  This question is addressed to Judge Easterbrook. You had mentioned earlier about transparency making antitrust conspiracies more amenable. And I just was wondering if you could address the contrast, for instance, of the airline industry where there are very few major players, but the price of that is immediately available, courtesy of the internet, compared to, say, the consumer healthcare market where prices are inscrutable, but there are literally hundreds of thousands of players, and what your thoughts might be as to transparency in those instances, and how that affects competitive conduct among the players.

 

Hon. Frank Easterbrook:  I can't talk about particular industries in the abstract. I know that there are data suggesting that the airline industry, precisely because of both the publication of its prices and because of the way in which a Hub and Spoke System gives economic power at the places where the hubs are, has been thought to be more likely to be able to raise its prices. And you see dramatic changes in price in that industry when a new low-cost competitor comes in. Sometimes it's very difficult to do anything about public prices and about the role as a cartel-inducing device. An airline industry is probably one of those where you couldn't make the prices secret without making it very difficult for people to buy the product. But there are lots of industries where secrecy is both achievable and beneficial. And that's part of the point that I was trying to get across.

 

Questioner 2:  Thank you. Well, the first panel that I went to this morning was very concerned about the role of the administrative state based on the fact that it was not democratically grounded. And also the fact that there is an inherent bias perceived, both observed and theoretical in the way government officials make decisions, and this was mildly offset by notice-and-comment exposure to the public for rulemaking. Now, it sounds as if Judge Easterbrook is, in fact, expressing confidence in the ability of government officials in the administrative state to make good decisions if they are given space and removed from exposure to the public, which comes in the form of interest groups.

 

      And it seems to me that these two ideas are in conflict with each other. I may not have understood what you said, Judge Easterbrook, but I also have to take this in the context of public-choice area, which I think indicates that the government official that is making the decision, whatever agency, they are their own interest group. And they will have a certain predilection to decide, which will, in fact, govern that decision-making authority even more if they are somehow removed from the interest-group politics.

     

      So, as you suggested, not looking at the question of transparency, but I'm intrigued by your comment about trying to remove these officials from factions. I'm not sure that's the way James Madison thought it would play out, that he thought that two factions were responsible for balancing each other in the debate.

 

Hon. Frank Easterbrook:  This is probably not the place to have a full explication of Madison's theory of government. But it was important to his theory that public officials be protected, in part, from faction in a variety of ways. One was indirect representation instead of having direct democracy. We have an indirect representative system. Madison and his colleagues arranged for different centers of power with different electoral bases and different times in office. And the idea was that power would be set up against power. You don’t rely on everybody being an angel. But you rely on some insulation from factions and some opposing centers of power within the government.

 

      The concern about transparency that I was expressing was that transparency in enforcement is often understood as a program of exposing the decision directly to factions in the way that the Administrative Procedure Act exposes regulation directly to factions as if this whole Madisonian process were to be bypassed. I think the Madisonian process is, by and large, a good one, which should be implemented rather than our trying to find a way to bypass it.

 

Prof. Douglas Melamed:  Let me add a thought or two. It's a bit ironic in a way to hear the notion that we have to worry about the administrative state because it's not democratic enough. In the context of an antitrust discussion when some of the leading challengers to the consumer welfare standard and the inheritance, in a sense, from then-Professor and then-Judge Bork is that, well, it has led to an antitrust that is not democratic because it's in the hands of technocrats. I'm a big believer in technocrats and I guess a republican form of government rather than a democratic one because there are useful roles for people with superior expertise.

 

      But I just want to share one thing about antitrust in this larger conversation. The antitrust agencies, even the FTC, although there's some roughness about the edge, are not regulators. They're not part of the administrative state. They're part of a law enforcement apparatus, and ultimately, they can't do anything unless the parties expect that they will get or they do get the blessing of an independent, Article III court. So that's an enormously valuable check, both on the public-choice problems and on the lack of -- and on sort of the broader administrative state non-democratic problem.

 

Hon. Frank Easterbrook:  If I could say a bit in opposition to that. The Federal Trade Commission Act gives the Commission the power to define unfair methods of competition. That's actually a regulatory power. It's often used in connection with the consumer protection side. But it can be and has been used in connection with the antitrust side. And when the FTC exercises its regulatory power, a court is going to say something like, "Well, they're a political agency. They've made their decision. Unless they've taken leave of their senses, it's going to be enforced."

 

Prof. Douglas Melamed:  I'm sorry. That's all true, in a way, except the last empirical proposition. While the FTC has not passed rules, and that may change the game, expanding the notion of unfair competition beyond the bounds of the Sherman Act, it has tried to do that by adjudication. And it's lost almost every case because the courts have basically said, "You don’t have a coherent theory for justifying an interpretation of anticompetitive -- unfair competition that goes beyond antitrust principles." And, indeed, it's said -- and whatever it is, it must include competition injury to competition within the meaning of the Sherman Act. So that's what I meant by the roughness around the edges of the FTC. But I just think it's a much less serious problem than, perhaps, Judge Easterbrook's comments might have suggested.

 

Dan McGinnis (sp):  Good afternoon. Dan McGinnis. I have a question going back to the AT&T case. So this year, the Antitrust Division tried and lost the first vertical merger case that's been litigated in 30 years. There's now a rumor that the Antitrust Division is thinking about issuing new, vertical merger guidelines. I suspect a lot of people in this room have a healthy skepticism of the federal government, a healthy skepticism of federal regulators interpreting their own rules. Why shouldn't we have a healthy skepticism, even in this administration, of the Antitrust Division in this context issuing new rules for vertical mergers where we have a court that interpreted the law in the D.C. Circuit who is now hearing that case on appeal?

 

Hon. Frank Easterbrook:  I have to bow out. The rules of ethics applicable to judges say I can't say anything about something that's in litigation. So everybody else can talk; I can't.

 

Deb Garza:  Is it a statement, Dan, or is it a question?

 

Dan McGinnis:  It's a question. Why should we support new vertical merger guidelines at this particular time? Are we better off with speeches, cases, interpretations rather than policy guidelines that, frankly, at least in my view, get over-interpreted by courts as statements of law rather than just simply policy statements?

 

Deb Garza:  So whether it's guidelines or something a document called guidelines that explains how they look at things, or it's a statement, or it's a speech, it's all an explanation of what you're doing, right? And to Judge Easterbrook's point, we're talking about transparency as a label but it covers a lot of different things, and you can go look at the specific things, if you look at the ICN and OECD and the policy framework. But the idea is that what you don’t want is a U.S. Justice Department challenging the AT&T merger case or challenging any other merger case on a whim, as a matter of capriciousness. What we don’t want is to have a Justice Department challenging transactions in a situation where we don’t know why, right? We don’t know the basis, where you can interpret it as a political move rather than as a law enforcement move.

 

      So whether it's guidelines or anything else, I think, to me, it still makes the case for transparency. And while it's true that ultimately the Justice Department or the Federal Trade Commission has to go to a court of law in a separate transaction, the AT&T case was a very unusual case in the sense that most companies do not have the luxury of going to court, or they can't go to court, right, because you can't -- I don't remember exactly the timeline, but it's not frequent that you can actually sustain a transaction through the investigation under the Hart-Scott- Rodino Act and through a court trial. So as a practical matter, most companies, frankly, are not going to get their day in court on transactions.

 

      So, therefore, I think what you really would rather have as a company and as a counselor is for the agencies to put out in advance at least, "Here's how we're going to look at things," so that you don’t necessarily have to wait to get to a court of law a year and a half after you announce your transaction. But you can argue to the guidelines, you can -- you know what their evidentiary standards are, so you martial the evidence. You're much better able to deal with getting your transaction cleared, it seems to me, if you know what the procedural rules are and you know what the substantive rules are.

 

      What I would fear is the case imagine that we didn't value transparency whatsoever. Then nobody would know whether the merger was going to get through; if they're merger didn't get through, why it didn’t get through. No one would be able to plan for a transaction. No one would be able to allocate risk. No one would be able to invest freely, understanding what the rules were. In this day and age, in this administration, people would be claiming that every single thing the Antitrust Division did, as they did in AT&T, was politically motivated.

 

      You can't have, in my view, an effective legal regime if nobody has confidence in what people are doing. If nobody has confidence that you've got standards that you're abiding by, whether or not people agree with the standards, if nobody has confidence that you're applying the law impartially, if nobody has confidence that parties are going to know that the target is in answer, you're not going to have any confidence at all in that legal regime. And I think that's a problem. I think that's a problem for larger society. You might say, "Well, I don't really care about antitrust law, so who cares? Maybe we won't have antitrust enforcement." But it's part of the rule of law, to me, and it's part of our faith in our institution. So I won't be backed down to saying that transparency is not a laudable goal, including in this country.

 

Eric Grannon:  I'll just briefly agree with Deb's point that she made earlier, that had guidelines been in place that would've helped the Division deflect the perception that the challenge of the AT&T merger was politically motivated. But I think my agreement stops there because when you put that kind of more maybe prudential concern aside and go to the merits, I share your very healthy and well-founded skepticism that if vertical merger guidelines were written right now they would be written with the overriding goal of giving the Antitrust Division a thumb on the scale in its next challenge and ability to cite those guidelines to a federal judge as to why the Division should be prevailing in the action. So I'm very concerned with the content of those guidelines. The existence of them would, to me, certainly address the concern that you said before.

 

      But the content of those guidelines, I don't have any confidence that it would be written in a way -- to be fair to your earlier comment about things that would bind the agency going forward, I want my agency to want to be bound going forward to fair rules of the road. I don't want my agency to think, well, I don't want to write something that's going to tie my hands in the next case if I want to do that. I'd want my prosecutors to put rules out there that say, "Yeah, these are the rules of the road, and I'm going to follow them, even if it's not something that's going to help me win the next case."

 

Deb Garza:  Eric, to your point, if to the extent it's a problem now and difficult for them now to put out vertical guidelines because people will be suspicious or cynical about what they're doing, all the more reason for them to have done it before. For it not have had guidelines that were irrelevant for so many years, from 1984. And I think that the reason we didn't see guidelines previously is because the agencies didn't want to be bound. It's hard for an agency to put out guidelines, to be honest. I've been there before, and we've done a lot of guidelines. And it's always been, believe me, it's never been the career staff that wanted guidelines. God forbid. It's always been the political leadership that has said, "We want guidelines."

 

      Why is that? Because the political leadership understood the importance of accountability and the importance of the process that you go through when you look at guidelines because it exposes your precepts. It exposes you to criticism before you send your guidance out. So the guidelines have always been motivated by political leadership that felt it was an important part. It's never been -- the career staff has never seen guidelines as being helpful, a help-mate to them in bringing cases.

 

      I do think the other thing about vertical guidelines, even if they do them now, there is a culture internationally of putting guidelines out for comment. So anything that the Justice Department or the Justice Department and the Federal Trade Commission would put out now would be subject to robust review and criticism, which is also good because that continues the debate and the questioning about the validity of the guidelines themselves.

 

Eric Grannon:  My very first antitrust case was the first time that Staples tried to buy Office Depot back in 1997, and back then, merger challenges were not litigated very often. And we litigated that challenge, and we lost. What happened during the pendency of the investigation and second request and all that leading up to the DOJ's enforcement challenge in court was they revised the guidelines in 1997 to change the description of the efficiencies defense that we had been pursuing. So they changed the guidelines specifically in response to the dialogue that we were having before the case was brought. And they changed it for their advantage.

 

Prof. Douglas Melamed:  Let me just add, if I can very briefly. I agree with everything Deb Garza's said. Her last point about the tension between the political or senior folks who want guidelines and the staff that always says, "Don't tie our hands," is very real and very illuminating. And I think we have to distinguish two very different questions. Do we agree with the guidelines and do we think that they are the product of an honest, serious, good-faith effort to promulgate standards that can inform and imprudent government policy, attempting as best human beings can do to serve the public interest?

 

      In my experience, the guidelines are, if not uniformly, almost always fall into the second category. Certainly, the horizontal guidelines, with whatever changes Eric had in mind, have been an enormous contribution for all the agency constraining and signal-giving reasons Deb talked about, and also because they have educated a large community about how to think about horizontal mergers. I don’t doubt that if the agencies could come up with vertical merger guidelines, which would require some kind of a consensus among the people who are there, across disciplines, the economists, and the lawyers, and across agencies, that they would be a big plus, not only in terms of the institutional considerations Deb was talking about but in terms of advancing a shared understanding of the some of the issues that need to be addressed when we think about vertical mergers, even though I am certain I would not agree with every part of them. I don't think that's the test of where the guidelines are desirable enough.

 

Hon. John B. Nalbandian:  Do we have any more questions? We've got one more in the back.

 

Bob Popper:  Hi, I'm Bob Popper from Judicial Watch. And it's at least been implied a couple of times in this panel that a belief in transparency is typically held by people who do not share a belief in the classic, consumer welfare model of antitrust. And so I wanted to ask the two practicing lawyers from the big firms whether they would describe themselves as individuals who do not believe, or who have serious criticisms or questions about, the classic, consumer welfare model of antitrust, and whether they believe the EU does?

 

Eric Grannon:  [To Deb Garza] Do you want to go first?

 

Deb Garza:  Well, I testified in the FTC hearings in favor of the consumer welfare standard, although I do agree with Doug Melamed that it's been -- that some people sort of caricature it in order to not get down. I think it has some flexibility, and I don't agree with the criticism that it's focused solely on price and static competition. But I do believe in the consumer welfare standard, and I don’t -- and I do agree that there are limits to antitrust, and I don't agree that antitrust is the hear-all for everything. I agree with Judge Easterbrook on, and his concerns about the expansion of antitrust. Antitrust law was never meant to cure income disparity or anything else like that. So, yes.

 

      In Europe, I know that, just having come back from an ICN merger workshop in Tokyo, I know that outside the -- inside the U.S., but also outside the U.S., I know that there is a lot of sentiment for expanding the standard of their -- so there's a feeling that the consumer welfare standard is too inhibiting. There's a real concern in parts of Europe that they literally want to use competition law to get at a lot of perceived ills, which is, to me, a concern. And that's why I think transparency is also important because there are people over there who would use the antitrust laws to enforce some paternalistic standard of what privacy should be, or to deal with income inequality, or to deal with a lot of other things that I don't think the antitrust laws are well fit to serve.

 

      And, again, going back to the theme of the panel, the transparency that we've brought about over the last few years is good because we know that's happening. I think it's important to understand and to have people discussing those things and have them be subject to debate and testing because I'm concerned that if we didn't have that kind of culture, what you would have is decision making that was tainted by not just fuzzy thinking and not by bias, but by concerns that had nothing to do with antitrust. And we will see that creeping in, I think, if we start to allow enforcers to operate in the shadows.

 

Eric Grannon:  I agree with all of that. And I just -- I don’t think we should be apologetic about it at all. I guess I would say that when I hear comments like, "Well, the consumer welfare standard has some flexibility to it," flexibility for what? Because the Sherman Act is not concerned with whether people will lose their jobs. The Sherman Act is not concerned with data privacy or anything like that. The Sherman Act is concerned with whether this certain proposed transaction will make things better or worse for consumers. And that's not just prices. That might be things like choices or the ability to innovate. So it's not singularly focused on price. There's all kinds of elements of consumer welfare – quality, that type -- quality of the product.

     

      But if anyone ever suggests to me that it's an appropriate consideration in a merger view to consider whether people are going to lose their jobs or not, I'm going to tell that person that they're absolutely wrong. And luckily in the United States, I think there's enough of a settled, established view in courts that that view would not hold any sway to the question or the extent that argument were made somewhere else, like in Europe. Then I think there is a little more potential for it to have transaction because they don’t have a hundred years of the traditions that we have. And by the way, I'm completely in favor of transparency.

 

Hon. John B. Nalbandian:  I think with that we are concluded, and I'd just like to thank our panelists.

3:30 p.m. - 5:00 p.m.
Rulemaking by Adjudication: Who Am I to Judge?

2018 National Lawyers Convention

Topics: Administrative Law & Regulation
The Mayflower Hotel - East Room
1127 Connecticut Avenue, NW
Washington, DC 20036

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When Congress delegates to a federal agency the responsibility for implementing, administering, and enforcing a law, it also authorizes the agency to make and promulgate rules about how it will do that.  These rules will often be issued first as a notice of proposed rulemaking, giving the public the opportunity to comment before the regulation becomes final and goes into effect. Many agencies, however, also avail themselves of another, less well-known rule-making tool: adjudication.  Rather than promulgate a regulation, these agencies often announce and apply new policies - even ones that will have broad applicability – in the form of decisions resolving disputes with the agency. These decisions are then applied as precedent by the agency. Some agencies including the National Labor Relations Board, the Federal Elections Commission, the Equal Employment Opportunity Commission, and other federal agencies, essentially announce and implement all policies this way. That agencies use adjudication to announce and implement policy is not new, but critics contend that it eliminates fair notice of the rule and avoids public participation in its development.

Policy implemented through notice-and-comment rulemaking is generally applied prospectively only, and has the benefit of the agency having solicited and, ideally, responded to public comments. Policy implemented through adjudication, however, has not had the benefit of public input. Further, the application is generally retroactive. To avoid retroactive application of a rule, regulated parties can be inclined to simply comply with an agency's demands, thus depriving the public of a fair test of the agency’s position. Finally, agency adjudication – performed by an agency’s administrative law judge, and appealable to agency leadership who may wish to use the case to make new policy - can be seen to be biased.

How weighty are these concerns? What is the proper role of agency adjudication? What deference, if any, should courts give policies agencies announce through adjudication? What safeguards could be designed and implemented to prevent the misuse of agency adjudication?

  • Prof. Jack Beermann, Professor of Law, Boston University School of Law
  • Mrs. Allyson N. Ho, Partner, Gibson, Dunn & Crutcher
  • Mr. Stephen A. Vaden, Principal Deputy General Counsel, United States Department of Agriculture
  • Prof. Christopher J. Walker, Associate Professor of Law, The Ohio State University Moritz College of Law
  • Moderator: Hon. Gregory G. Katsas, U.S. Court of Appeals, District of Columbia Circuit

Speakers

Event Transcript

Dean Reuter:  Good afternoon and welcome. Thank you all for coming to this panel. I think it will be great. I'm Dean Reuter, Vice President, General Counsel, and Director of Practice Groups. I'm also in charge of cleaning up the dishes after this event, so please be kind. Normally, we would have (Elieen) "Lee" O'Connor, who is Chairman of our Administrative Law Practice Group introduce this panel and our moderator, but she's not able to join us today, so I am substituting for her.

 

      I'll make a brief announcement about the Practice Groups. They are the entities within The Federalist Society that plan the National Lawyers Convention and each one of the practice groups puts on a special breakout session, and this is the Administrative Law Practice Group session. So I wanted to be clear about that and wanted to let you know that each one of those practice groups is led by an executive committee, a volunteer committee of our best and brightest leaders. We've lost a few of those people in the past 24 months or so. They seem to be cycling into government. So we're actively recruiting new members in leadership. So if you're interested in that, you can find -- well, email Lee O'Connor or find me, email me, and we'd be happy to discuss the possibilities.

 

      So, now, it's my honor to introduce Judge Greg Katsas. He is our moderator today. I think he's known to many of you so I will be brief. He was a law clerk to Justice Clarence Thomas, both at the D.C. Circuit Court and during Clarence Thomas's first term on the Supreme Court. And he has this habit now of following Justice Thomas, so he's gone to the D.C. Circuit himself and who knows where from there. From 2001-2009, he was a Department of Justice Assistant Attorney General in the Civil Division and Acting Associate Attorney General. And there he supervised most of the federal government's appellate litigation. He's been a partner at Jones Day as well, and most recently before his nomination and confirmation to his current job, he was a Deputy White House Counsel doing good work there. So without further ado, please join me in welcoming Judge Greg Katsas.

 

Hon. Gregory G. Katsas:  Thank you, Dean. It's great to be here. I know no one ever comes to events like this to listen to the moderator, so I will just introduce our very distinguished panel, and then we'll get going.

 

      Christopher Walker is an Associate Professor of Law at the Ohio State University Moritz College of Law. Before joining the faculty, he clerked for Judge Alex Kozinski on the Ninth Circuit and for Justice Anthony Kennedy on the U.S. Supreme Court. He also worked on the appellate staff of the Civil Division of the Justice Department, a group for which I have particularly fond affection. His publications have appeared in the Michigan, Minnesota, Stanford, and University of Pennsylvania Law Reviews among others. He serves as a public member of the Administrative Conference of the United States and on the governing counsel of the ABA's Section on Administrative Law and Regulatory Practice.

 

      Professor Jack Beermann is the Henry Elwood Warren Scholar and Professor of Law at the Boston University Law School. His scholarship focuses on civil rights litigation and administrative law. Professor Beermann has authored, or co-authored, four books on administrative law, including a widely used case book. He's written extensively on judicial deference to agency legal determination, on the problem of midnight rulemaking, and on legal aspects of the funding crisis facing public-sector unions. His articles have appeared in BU, Duke, Stanford, and UCLA Law Reviews among others. He clerked for Judge Richard Cudahy on the Seventh Circuit, and he, too, serves as a public member of ACUS.

 

      Allyson Ho is a Partner in the Dallas office of Gibson Dunn, where she heads the firm's Appellate and Constitutional Law Practice Group in Texas. She's widely regarded as one of the nation's top appellate litigators. She's presented over 50 appellate arguments, including ones in the Supreme Court and every federal court of appeals. She has previously served as a Special Assistant to President George W. Bush, a counselor to Attorney General John Ashcroft, and a law clerk to Judge Jacques Wiener on the Fifth Circuit, and Justice Sandra Day O'Connor on the Supreme Court. She's a member of the American Law Institute and on the Legal Policy Advisory Board of the Washington Legal Foundation.

 

      Stephen Vaden is Principal Deputy, General Counsel for the U.S. Department of Agriculture. He previously practiced law at the great firm of Jones Day, where he litigated, represented clients during government investigations, and counseled clients on a wide range of political law issues. He clerked for Judge Samuel Mays of the U.S. District Court for the Western District of Tennessee and Judge Julia Gibbons on the Sixth Circuit.

     

      Our panel will begin with eight-minute presentations, and I will strive to enforce the red light more vigorously than we do in the D.C. Circuit.

 

Prof. Christopher Walker:  All right, we're standing up. It's so great to be here and to talk about agency adjudication. And I want to kind of take a step back and frame this more as the federal judiciary more broadly to kind of give you a sense of where most judging happens these days. I looked it up, and apparently we have 748 active Article III judges in the United States today. And this is kind of one way to get a sense of the volume, or at least the aspect of that. By contrast, we have almost 2,000 administrative law judges in the United States. Of those, I don’t want to make this seem too -- most of those are at the Social Security Administration, so they're doing something a little bit different than the administrative law judges at the SEC are doing. And that's kind of the old world of agency adjudication. The thing is if you took administrative law in law school you learned about the Administrative Procedure Act, administrative law judges, and that's kind of, hopefully, what you're thinking about when you hear agency adjudication.

 

      There's a new world of agency adjudication as well. It's not actually that new, but it's new to a lot of us as scholars that are exploring it. These are agency adjudicators that are not administrative law judges but still hold evidentiary hearings as required by statute or regulation. And to give you a sense of that, Kent Barnett in the Administrative Conference did a survey this last year, and of the agencies surveyed, they found over 10,000 agency adjudicators that aren't ALJs at these agencies. So in other words, if you're kind of comparing the federal judiciary today, the Article III judiciary: we're talking about 750 judges; the administrative judiciary: we're talking about well over 13,000.

 

      And if I want to complicate things even more, when I gave this pitch at the ABA Administrative Law Conference law week, or two weeks ago, a number of law professors and agency officials said, "Well, there's this whole other layer of agency adjudicators – the folks at the IRS, the folks at the border that are deciding whether someone comes in or not." And I kind of conservatively, then, put that number at 50,000, and they were like, "It's in the hundreds of thousands" of agency adjudicators that are judging claims and the like there.

 

      So when we talk about the judiciary in the United States today, I really hope that we'll spend more time than we're going to do on this panel, talking about the administrative judiciary and its role in our constitutional structure.

 

      In this last year at the Supreme Court, we had a chance to really explore a lot of the constitutional attentions in agency adjudication in these contexts through two cases that came before the Court. I want to spend just a little bit of time on that, and then I'll sit down and let other people jump in with more profound comments. But I think through these two cases you see, especially seeing them through the eyes of Justice Gorsuch who wrote a concurrence in one -- or joined a concurrence in one of the cases and wrote a dissent in the other, you really see this tension in agency adjudication between there needs to be political control of the administrative judges and there's a lot of danger in having political control over administrative judges.

     

      So the first case in one, hopefully, you're all pretty familiar with, which is the Lucia v. SEC case. In that case, the question is whether administrative law judges at the Securities and Exchange Commission, of which there're I think only a half dozen, whether they are officers of the United States or not. And the Supreme Court said that they're at least inferior officers of the United States, and hence they have to be appointed by a head of the Department, a president, or Congress under the Constitution. And Justice Kagan, when I saw that she was writing the majority opinion, I knew it was going to be a really narrowing opinion that, basically, just applied Supreme Court precedents saying these tax judges are inferior officers, so are the patent administrative judges that were under review there -- sorry, so are the SEC administrative law judges that were under review in that case.

 

      But what I found most interesting was the concurrence by Justice Thomas, which was joined by Justice Gorsuch. And in this concurrence Justice Thomas fully embraced the terrific work that's been done by Professor Jen Mascott looking at the original understanding of the term "officer" in the Constitution, and said that this includes administrative law judges, and it includes a lot of other types of officers that hold -- exercise a "continuing duty" under a statute. And so what I liked about it, though -- there's one quote from that that I just kind of want to highlight. And this is Justice Thomas joined by Justice Gorsuch. It says, "The Appointments Clause maintains clear lines of accountability—encouraging good appointments and giving the public someone to blame for bad ones." In other words, in Lucia for Justice Gorsuch and Justice Thomas, it was critical that these judges were politically controlled; that, ultimately, the Commission would have the final call on the ultimate outcome of the case.

 

      All right. Let's switch over to Oil States v. Greene's Energy Group. This is the constitutional challenge to the Patent Trial and Appeal Board, and I can go long and long on this because I have an article coming out with Melissa Wasserman in the California Law Review about this. I'm not going to go on and on. It's a fascinating, new type of agency adjudication where you can basically re-litigate the issuance of a patent at the agency level instead of having to go to district court. In that case, the question presented was whether those rights are public or private. If they are public, they can be adjudicated under Supreme Court precedent by an agency; if they're private, they need to be adjudicated in an Article III court with a jury.

 

      The Supreme Court—Justice Thomas wrote the majority opinion—says the public under the precedent, under the original understanding for that matter as well -- and so we don’t have a problem. Justice Gorsuch, joined by Chief Justice Roberts in the dissent – it's a fascinating read. It's, actually, probably my favorite opinion of the term, just the structure and style of it. First, of course, makes the argument that these are actually private rights, at least for Article III purposes, and so they need to be adjudicated by an Article III tribunal. And then they go through and explain the dangers of political control. And I just want to kind of—think of the quote I had before and juxtapose it with this from Justice Gorsuch. "Powerful interests are capable of amassing armies of lobbyists and lawyers to influence (and even capture) politically accountable bureaucracies." In other words, the problem with agency adjudication, at least with private rights or with things that may be quasi-private rights, is the political control.

 

      And so you have these tensions that we're going to see continued to be worked out at the Supreme Court. And we're going to see them because Lucia didn't answer the question of removal, and that question is going to come back to the Court, probably in the very near future. And this debate between political control that they think we have to have under the Appointments Clause and the dangers of political control, the reasons why we have an Article III court -- judiciary that is insulated from political control, and those are really the dangers.

 

      Do I have -- oh, I have one minute. I'm going to do just really quickly: so what are the solutions? One solution last year that Steven Calabresi made at this convention was to just get rid of non-Article III adjudicators that adjudicate private rights or issue penalties and the like. He calculates that being like 160 administrative law judges that he would just convert into spaces on the federal judiciary. That kind of broke Twitter. I'm not really sure -- it was a court-packing play. It wasn't too well received by those on the left and the right because it seemed like a little bit of a too cute move, but that would definitely solve it, right? The problem of adjudication of private rights by agencies.        

 

      The second one, which I might spend more time in the Q&A thinking about, the exception that we have in Crowell v. Benson that the Chief Justice Roberts rearticulated in Stern v. Marshall was if you're a true adjunct, if they agency adjudicator is a true adjunct of an Article III court, then it's okay.

 

      What would a true adjunct look like? It's complicated. In fact, there's not a lot of guidance on that. But it seems like they have to make very narrow, factual determinations, and that the district court has to enter the order. So I would suggest that that would be at least getting rid of Chevron deference in the adjudication context. And it might be, at most, also getting rid of anything that looks like a rulemaking power in adjudication. So to channel Dan McGahn from last year's convention, it might be requiring to get rid of Chenery and the idea that an agency could make policy, especially retroactive policy, through adjudication.

 

      So, again, this is just dealing with more private or quasi-private adjudication, not your Social Security side. But there's still a vast amount that's done in that context by federal agencies instead of Article III courts.

 

Prof. Jack Beermann:  You can applaud for Chris. It won't take any of my time, I promise. [Applause] I want to say that I'm going to focus on what I thought was a more direct question to this panel which is the appropriateness of making policy through adjudications as opposed to rules. And I just want to say that -- I have a paper coming out in the George Mason Law Review on the Article III questions, and one thing that -- I just want to say one thing, which is that if you actually thought you could accountability by having the secretaries of cabinet departments appointing the administrative law judges, that's all they would be doing, if they actually were going to read even one paragraph on each of them that they would have to appoint. So there's a little bit of an issue of whether that idea needs to be at least updated somewhat in the way our Constitution works.

 

      But I want to say that in terms of idea of whether policy by agencies ought to be made by rulemaking and adjudication, I think the Chenery Court got it exactly right, which is it is an normative question for both Congress and the agency to decide. And there's pros and cons and different situations. And I think that there's sometimes when they ought to do it one way and sometimes when they ought to do it the other way. And other times when maybe either way is fine.

 

      But I think that really what's underlying the proposal of this panel is that policymaking shouldn't be happening by agencies at all. And so I don't really understand why this is an issue unless this is just another in the shotgun blast against the administrative state. The same people who question policymaking by adjudication probably also don’t like policymaking by rulemaking. And I think they raise all kinds of frivolous non-delegation doctrine and other separation of powers issues. And I think it just illustrates that the people that want to dismantle the administrative state they want some other constitution. They don’t want the Constitution of the United States. They want some other constitution.

 

      And so as a matter of separation of powers, I suppose the argument is that when an agency adjudicates, it's usurping the judicial power as assigned by Article III to the federal courts. And this just isn't consistent with the way the U.S. Constitution has ever been understood by the Supreme Court. As understood by the Supreme Court, the Constitution creates a flexible government with divided and blended powers. And Justice Thomas in the patent case was exactly right. When an agency uses and adjudicative procedure, it's executing the law. When an agency does a rulemaking, it's executing the law. The agencies cannot exercise any of the judicial power and they can't any of the legislative power. When they do these things, they're executing the law. That's the U.S. Constitution. Maybe there's some other constitution that would have a stricter or different separation of powers. But that's not the one we have.

 

      Now, historically, policymaking through adjudication has always been considered the most legitimate method of policymaking by agencies. It's got a much longer pedigree than legislative rulemaking. It goes back to the state and early federal rate making agencies, which even Professor Epstein seemed to think was okay for agencies to deal with. I say that with all affection. I had him for several courses in law school, and it always makes me feel good when I hear him on a panel. Nothing worked. But like the Interstate Commerce Commission, the result of adjudication are perfectly legitimate because they're part of the executive process and they are subject to judicial review just like rules created by rulemaking.

 

      Now, policymaking by adjudication has some advantages that I think even people who are concerned about the administrative state ought to recognize. And that's why Congress has adopted it in so many situations. It allows for policymaking in the context of a specific dispute with an adversarial process for arguing the issues in light of a particular factual, economic circumstances. It resonates with the way that the original regulatory agencies proceeded, and it was viewed as a more legitimate process than setting agencies lose to make broad, abstract pronouncements of rules in a legislative-like process. It's more confined. An actual case has to come before the agency, although they can pick what case by enforcing -- they can't just go out and set their own agenda and make a rule, which is actually why the current rulemaking at the NLRB—that deal with the joint-employer issue—is controversial because it's the NLRB's stepping out of its usual role, which is to only make policy in the course of an actual enforcement action. And they make these policies through adjudication. Most of them are multi-member agencies, and it's bipartisan, so you have debate and you have broad consideration.

 

      On the law, the Supreme Court in the Wyman-Gordon case, 8-1 the Justices agreed that policymaking by adjudication was fine under the Administrative Procedure Act and under the Constitution. Only Justice Douglas disagreed. There was a little bit of disagreement about the prospectivity issue, and what's interesting is one of the attacks on adjudication policymaking is that it's retroactive. But actually, when it's prospective, it looks fishy because it looks like they're avoiding the rulemaking procedures by dressing up what's actually a rulemaking procedure in the guise of an adjudication.

 

      Now, I know that one of the big advantages to rulemaking is public participation. And so I don't think that advantage is as significant as it was before. We have now -- everything's on the internet. We have the 24-hour news cycle. Within an hour of a major issue coming before an agency in an adjudicatory proceeding, Fox News can have a fake story out about it. [Audience murmurs] Oh, that was the wrong audience. CNN can have fake, or MSNBC can have a fake news story about it. [Laughter]

 

      Now, there's this special case about cabinet-level agencies with appeal to the secretary, and that still exists at the Department of Agriculture. Am I correct about that with the judicial officer hearing those cases? And I actually think that secretaries of various departments can really efficiently use adjudication to state agency policy and set it up for judicial review. Recently, former-Attorney General, Jeff Sessions, took some immigration cases for himself because he wanted to state clearly the Department of Justice's position on certain issues about immigration law. Now, I don’t agree with his particulars that the fear of gang violence and sexual violence is not a ground for -- ought not be a ground for asylum, but I think it's an efficient and appropriate way for him to articulate the Justice Department's policy. And he can tee it up for a relatively quick and definitive answer on judicial review.

 

      So where Congress has -- and the other thing is that rulemaking can also play a role in adjudication, and it's somewhat controversial. Congress sometimes creates adjudicatory agencies, and then they allow the agency also to have rulemaking power. And agencies use that rulemaking power to narrow the issues that are going to be decided in the adjudicatory proceeding. And that's actually controversial because the people -- like this happened with the Federal Communications Commission; it happened with the National Labor Relations agency; it happened with other agencies, which ones are escaping me at this moment. But there's an argument that this deprives people of their full hearing on all issues that they're supposed to have in the adjudicatory process. And they have a good point. But the courts have approved it, sometimes on the condition that the agency allow for the subjects of these enforcement actions to argue that the particular rule that was made shouldn't apply to them. And I think that's a good compromise on forfeiting your full-hearing rights.

     

      There's a special case of agencies that are supposed to be primarily, or almost only, adjudicatory agencies. So we all know the NLRB has only made two rules in its history, it's working on its third. One of those rules was a rule requiring employers to post rights under the NLRA. But that rule came before two courts of appeals and both held that it was unlawful because the NLRB doesn’t have regulatory power to reach out and address issues that aren't relevant to the adjudications that it's going to hear. It would never be considered a violation of the National Labor Relations Act not to put up that poster, whereas the typical things the NLRB hears are allegation that some conduct by a union or by management violates some principle of the National Labor Relations Act. I'm not sure what's going to happen with this current rule that they're engaged in on the joint employer. I think they've got some problems with the evidence that they're going to present to justify that rule. It'll be subject to judicial review, and it's actually more controversial to do it by rulemaking than it would be by adjudication.

 

      So now, my bottom line. Of course, it's up to Congress to decide whether to create an agency with rulemaking as the primary form of policymaking or whether adjudication can also be that. In many ways, adjudication is less efficient, more incremental, and depends on cases arising that raises the issues that the agency wants to address. And this may be a good thing, especially if you're concerned with agencies overreaching by creating broad policies in rulemaking without clear statutory support.

 

Allyson N. Ho:  Thank you, Judge Katsas. This is such a pleasure to be with everyone here today and be part of the discussion. I would like to begin as the person who argued Oil States in the Supreme Court by expressing my violent agreement with the that Justice Gorsuch's dissent is my favorite opinion from last term too.

 

      No one should be the judge of his own cause. That principle pervades our legal tradition. Yet, it seems to apply everywhere except in the administrative state, which considers itself immune from not only constitutional requirements but also fundamental legal principles, like this one. Let me begin a little over a year ago when my team and I were preparing for oral argument in the Oil States case before the Supreme Court. Now, the issue, as the professors explained, before the Court in that case concerned whether an administrative proceeding know as inter partes review, or IPR, violated Article III by allowing a dispute between two private parties to be adjudicated by a non-Article III tribunal.

 

      So we were anticipating and preparing for questions about whether striking down IPR would put all administrative adjudication in the crosshairs, even though the configuration of IPR was different. And IPR, as we've talked about, you have an agency resolving a dispute between two private parties, where in most administrative adjudications, you have the agency on one side of the 'V' and a private party on the other side of the 'V.' My team—shout out to Judd Stone and James Nelson on this—spent weeks searching through agency after agency for proceedings similar to IPR – that is where the agency was resolving disputes between two private parties as opposed to between a private party on one side and the agency on the other.

 

      And what we found was just a monumental labyrinth of agency proceedings that took weeks to disentangle and track down. And even then, my team eventually said that while they thought they had covered the waterfront as best they could—and they couldn’t find any parallel to IPR—they couldn't be sure there wasn't something out there in this labyrinth of adjudications that they missed. The administrative state was simply too large.

 

      And indeed when the opinion in Oil States took longer than we were expecting to come down, we used to joke that the delay must be a law clerk or two must still be searching through the morass, looking for an analog to IPR to waive in our faces. They must not have found one either. But perhaps that's because all of us were looking for a needle in a haystack. And until then, I really had not grasped the sheer size and scope of administrative adjudication until being confronted with the thing writ large as it were.

 

      When we talk about Article III's guarantees that disputes will be adjudicated by judges with life tenure and salary protection, we're talking about structural protections designed to safeguard independence and impartiality. But when agencies engage in policymaking by adjudication, the risk of arbitrariness and unfairness is, at the very least, apparent. And that should be troubling to all of us, if not as a matter of constitutional magnitude, then at least as one of good government.

 

      Take, for example, the IPR proceedings at issue in Oil States. The agency decides how many judges will sit on an IPR panel, which judges will sit on which panels, and can decide to seat the director himself on a panel. The agency also engages in a practice known as panel stacking, where after one panel of judges has rendered a decision, the director selects judges to add to an expanded panel in the same case with the express intent to ensure that the director, and I quote the agencies position on this, "must be able to make sure that her policy judgments are enforced by the board in any given case."

 

      Now, if administrative adjudication is just another way for an agency to make policy no different from rulemaking, then all is fine and well with the state of affairs. But I think there is something deeply troubling about this state of affairs. Agency policymaking through adjudication raises serious separation of powers concerns rooted in the notion that there is something fundamentally distinct between policymaking and between adjudicating in our constitutional system. Judges don’t make policy from the bench, and no one should be a judge in his own cause. This is precisely the danger that the Founders sought to avoid by means of structural protections. Where you have schemes that allow the agency itself to initiate an action and prosecute the action, and then decide the action, that is precisely the accumulation of power that the Founders sought to separate by structural means. As Justice Gorsuch has put the question in his Oil States dissent, "Can there be any doubt that [this] represents a retreat from the promise of judicial independence?"

 

      I want to close by focusing on the Lucia v. SEC opinion that, Professor [Walker], that you touched on and look at it in a little different way. Again, the question there -- that was an Appointments Clause case. And so the question there was whether the SEC's ALJs are officers of the United States such that they have to be appointed by the president, or courts of law, or heads of departments.

 

      As the Professor mentioned, Justice Kagan writing for a 7-2 majority rejected the agency's position. She began her opinion by outlining the extensive powers wielded by SEC's ALJs in enforcement actions – powers comparable to those of a judge conducting a bench trial. The description of the extensive court-like powers wielded by the ALJs essentially decided the case. But the same reasons that ALJs can be said to exercise significant authority for Appointments Clause purposes are the same reasons that agency adjudications, more broadly, raise serious concerns for Article III purposes. In other words, the solution for the Appointments Clause purpose, ensuring a check on the significant authority vested in SEC ALJs by requiring them to be appointed by politically accountable actors, underscores the Article III problem of how to ensure the impartiality and independence of decision makers within and answerable to the Executive Branch.

 

      So to sum up, the administrative adjudication implicates some of the most serious concerns about the administrative state. Concerns about the separation of powers, as the agency is, quite literally, the judge of its own cause without the structural protections of independence and impartiality that are the hallmark of Article III courts. Given the vast extent of administrative adjudication, the significant authority wielded in these adjudications and the serious consequences for citizens that flow from these adjudications, even if we disagree about whether they transgress constitutional limits, we should all agree they raise serious concerns worth meaningful consideration from a good government perspective.

 

Stephen A. Vaden:  Well, what I want to talk about this afternoon is to play off of the concerns raised by all three of the prior speakers, and also talk a little about the practicalities of what it is that agencies and departments of the federal government are seeking to do. And some of the -- and that will take the form of a discussion about first principles that we've been hinting at. And then, we're going to talk about some of the private-sector interests and how things actually work in the form of my suggestion to you of a process we use at the Department of Agriculture but has largely fallen into disuse in our other fellow cabinet departments as a way to perhaps, if not solve, help out some of the concerns that have been raised here today.

 

      First, we'll start off with first principles. What we're all talking about here, what the concerns that have been raised are around due process and whether or not regulated parties and citizens of the United States have appropriate notice and clarity of what the law requires of them, and what will happen to them if they run afoul of the law. And the debate that we have heard is between whether it is possible to have that as part of a case-by-case adjudication process, or, perhaps, whether we need to have some type of rulemaking under the Administrative Procedure Act be our preferred method. Because without that notice and public comment, and public interaction, and the agency having to show its work in written form before the law is enforced, whether the public who has to live under these laws is being adequately suited, perhaps constitutionally, but certainly as a matter of normative principles.

 

      Certainly, in this administration we favor notice-and-comment rulemaking and we disfavor guidance and other forms that do not allow for public participation. But that is not necessarily to say that adjudication is always bad or should always be disfavored, although it's not necessarily the first option. The concern that we're dealing with here is a concern about retroactivity that you heard mentioned by a couple of the professors. Is it really fair for someone to go before an administrative law judge, or another type of adjudicatory panel in an agency, and to have his or her case heard, and perhaps be the person who gets to have the fun of having a new principle of the law or further explanation explained and then be subject to the penalties for that new principle of law? And certainly at first blush in the enforcement mechanism, it does strike us as unfair. If it wasn't clearly laid out, how is it that we can so quickly hold them accountable for this principle that, at the very least, hadn't been written down in nice form before?

 

      And yet, that happens every day in many other areas that we don’t consider necessarily to be of grave constitutional concern. Indeed, Judge Katsas's colleagues on courts throughout the country, particularly state-level courts or when he is sitting in diversity jurisdictions, do that all the time in such run-of-the-mill legal matters as tort suits. You cannot go to the statute books and find out what all of your legal duties are between strangers. Those are elucidated over many years by courts acting in the common law fashion. And there are many people who have had to pay out very large judgments on principles that, at the very least, had not been laid out quite so clearly before their case reached the court.

 

      We do not think of that, typically, as a travesty or of a constitutional concern. Perhaps it is the case that if it's a judge, it's somewhat different than if it's an agency doing the enforcement. But, nonetheless, the retroactivity concern is there.

 

      Individual issues do raise issues of unfairness, and there are questions about whether the relief should be prospective or retrospective. But, ultimately, what we're all talking about here is transparency and how transparent your government, whether state or federal—although we're talking about the federal government primarily here—should be when it sets out duties that it expects its citizens to follow. Certainly, there can be no argument that the notice-and-comment process through informal rulemaking is designed for that transparency. The agency has to lay its cards on the table and tell you what it wishes to do, the legal principles that allow it to do it, and the policy considerations that it factors most strongly, and why it is making its proposal. The public then gets the period to tell the agency why it's right or wrong, make suggestions for alternative policy positions, and then the agency has to respond in writing after a respectful period of time of consideration of those comments – respond to those comments thoughtfully. And it will have its answers challenged in courts throughout the country if people think the agency has failed to follow the guidelines of the law, interpreted the law improperly, or failed to follow the procedures of the Administrative Procedures Act.

 

      But there is another way that it is possible to engage in rulemaking that we engage in at the Department of Agriculture that has fallen into disuse, which I would suggest might perhaps mill the best of both works here, and that is formal rulemaking; that is rulemaking involving an administrative law judge; that is rulemaking that is done completely in public, where any member of the public may come forward and present their testimony; the government, the agency comes forward and presents what it believes are the rationale, supporting its decision. And then each of those persons who present the testimony is subject to cross examination from any other participant who wishes to ask them a question or challenge the premises on which they are basing their argument.

 

      The ex parte rule applies. That means that everything involved in a proceeding must take place in what amounts to the open hearing presided over by the ALJ. You can't have, what you so often do in the informal notice-and-comment process, where people who can't afford very expensive lobbyists, come to the department in order to whisper in the ears of policymakers. And they jot a little note in summary of it, but not getting too specific and stick that in the record, and say that's good enough. You can't do that. Another federal agency -- the ex parte rule is so powerful another federal agency can't even come in and talk to the department about their concerns. They have to do it on the record in front of the public and face cross examination.

 

      There can be nothing more transparent than formal rulemaking. Indeed, Justice Thomas in some of his recent concurring opinions thinking about Chevron and its propriety has noted that if there were a case to be made, in Justice Thomas's mind, for when an agency should receive deference, it should be when it uses formal rulemaking. He has also suggested and noted quite readily that when the APA was originally passed, they thought that formal rulemaking would be way that most rules were made. That is not the case at all. It is basically a dead letter outside the Department of Agriculture and a few specific circumstances in fellow federal agencies.

     

      And one reason I would suggest to you is for all the talk about transparency and due process is because perhaps it is what we're really after is not too much transparency. You note that I noted that it's very common in the informal rulemaking process for lobbyists and others with interests before the agency to come whisper in policymaker's ears. I would also point out, for all those who love to talk about notice-and-comment and how public it is, the strange phenomenon that we in federal agencies see that people who wish to file comments don’t file their comments early in the process so that everyone can have a chance to look at them and comment on them. Instead, they wait until, oh, I don't know, about an hour before the thing closes and then file them all so that we have to read them but no one else can carp at what they have said.

 

      These private interests and private desires are what cause people to pay excellent attorneys, like Ms. Ho, to make their case in federal court. Those private interests should be kept in mind when you hear people carping about the need for transparency. But I would suggest to you that if transparency is what you're after, and openness is what you want, and you want your rules promulgated in a way where we know what our responsibilities are before we act, then perhaps formal rulemaking is for you. Thank you.

 

Hon. Gregory G. Katsas:  So why don’t we begin by giving each of our panelists a couple of minutes to respond to anything else they heard that interests them?

 

Prof. Christopher Walker:  Well, I didn't think we'd get, "Let's go back to formal rulemaking. Let's get rid of Chenery and Chevron and adjudication." This is great. That's a lot. The one thing I've struggled with in our conversation and just kind of more generally is the world of agency adjudication is just so broad and diverse. And, again, I think Justice Gorsuch is struggling with this. In the one context, do we want -- like in immigration, is that the type of world where we think that should all go to an Article III court? Or do we want an attorney general to be able to have final policymaking authority?

 

      Where I am most concerned in areas that touch on private rights or where the agency official has to be able to give out civil penalties, but that's a very, very, very, small segment of the agency adjudication landscape. And in the rest of it where you're dealing with it generally public benefits, I think immigration is a hard area. But other ones, like Social Security, I can't imagine we'd want all those to go to Article III courts, right? I'm just kind of curious for -- I mean, obviously Jack doesn't. I don't know, Allyson, if you have a sense of where would you draw the line between your arguments that this is, if not unconstitutional, at least really bad governance and not? I guess that was my question.

 

Allyson N. Ho:  Yeah, and I think you really, actually, kind of hit the nail on the head when you were talking about this whipsaw in terms of areas where you want political accountability versus the political -- to the extent political accountability starts to sound like policymaking and impartiality. And so I think from my perspective, and I agree, I agree that the issue's really come to a nub with that strata of proceedings that -- like SEC ALJs, right? Which was what made Lucia such an interesting case.

 

      But I do think there is this, certainly -- and I think we can have meaningful discussions about at what point an adjudication crosses the line, if not an Article III line, then a good government line. But I think from the standpoint of policymaking, I think anytime you have an adjudicator making policy in a process that is deciding rights between individuals, I think that raises the concerns, exactly the concerns, that the Founders had when they ensured structural protections.

 

Prof. Jack Beermann:  So I had three quick points in reaction to some of what was said. The first thing is I just think it's plain wrong to say that when agencies are doing adjudication, they're subject to Article III. And the reason I say that is because, basically, as Justice Thomas says, they're executing the law. They're using an adjudicatory form. And I'll give you an example that I hope people would agree with. Prosecutors all the time have to make decisions about what crime to charge, and they have to make sometimes broad policy – we're not going to charge these petty crimes; we're going to focus our resources on this kind of crime, or whatever.

 

      Now, suppose a prosecutor decides that he's not sure what to charge someone with. So he says to the person, "Okay, come in and bring your lawyer, and I'll have one of my prosecutors in my office and let's argue it out about what level I should charge you with." Is that prosecutor suddenly exercising Article III judicial power? It's one of the most important, consequential effects you can have on someone's private interests. It's about liberty and I think that the answer is obviously no. they're not exercising Article III power. They've just decided to exercise their executive power using what looks like an adjudicatory form.

 

      Now, the rub is deference. And as my colleagues know, I've written papers about why Chevron is such a terrible doctrine. I haven't really focused that much on this issue, but in my new paper where I talk about Article III adjudication, I say that the Constitution does not allow for deference to the decisions of the prosecutor for reasons I think Allyson said about that you shouldn't be a judge in your own case.

 

      But now, it's interesting because when the agency is adjudicating a case between two private parties, it's actually not a judge in its own case; it's judging two different parties. And that's the case where I think there's the most difficulty. The agencies are always judges in their own case when they're doing benefits determinations, for example, and that's where Article III has no effect at all, that the Social Security Administration can go ahead and have non-Article III people holding those hearings because that's a public right that's traditionally been understood to not be subject to Article III.

 

      So I think that Justice Thomas is exactly right on this and that the people that are trying to do something else in terms of expanding this preemptive scope of Article III, they don’t like the U.S. Constitution. They want some other constitution.

 

      Now, the last thing I would say, I just want to respond to the issue of late comments. And I understand it's a problem. And the agencies are always free, of course, to reopen the comment period. So if people put in important comments at the last minute, the agencies that are smart about it will then reopen the comment period and allow people to respond to them. And I'm as concerned as anybody about arbitrary agency action, whether it's using a rulemaking form or an adjudicatory form. But I think that, ultimately, Congress is responsible for creating this whole administrative state, and it's been done in a democratic fashion. And so really the complaint about this is not that it's undemocratic or unaccountable. It's that Congress made bad choices. And they seem to be really experts at doing that, regardless of which party has the power in Congress.

 

Hon. Gregory G. Katsas:  Allyson? Anything else?

 

Allyson N. Ho:  No.

 

Hon. Gregory G. Katsas:  Steven?

 

Stephen A. Vaden:  Well, I think first of all -- let me turn that on. Hello? There we go. First of all, I would like to thank the Professor for shouting out our judicial officer at the Department of Agriculture. She will be thrilled that she got a mention here, so I will let her know that when I get back to the Department.

 

      I think that the task that agencies have before them is quite difficult. And the rulemaking process is one where it truly is better not to know how it goes on within the agencies. But public comment does play an important role, and one thing that I think is very clear from this administration is it is always better, as imperfect as this system is, for agencies to hear from the people whom they are regulating before they go forward. Those comments are taken into account. I know there can be skepticism about that. I can't speak for all my federal colleagues, but I can assure you that at the Department of Agriculture if you submit a comment, even though we may not agree with you, it does have an effect on what we do and how we think about the issues.

 

      As far as the roles that agencies have, I certainly want to agree with Professor Beermann one of his main points. The larger role that agencies have is a creature of congressional decision. And speaking as someone who has to deal with the issues which Congress so frequently punts to the administrative state, I, for one, would like them to decide many more things and leave us with less things to do and fewer decisions to make. Unfortunately, they often find that the easiest thing to do is to identify the problem, identify ten factors that they would like for someone to consider, and then pass it to someone else for them to make the decision. And at the heart of the debate that we are having here today is the fact that Congress is deciding less and less, and yet, there is more and more we want our federal government to do. And someone is expected to pick up the slack.

 

Hon. Gregory G. Katsas:  So let me begin with some questions for the panel, and then we'll throw it open to you all. So, first, Chris, you began on Lucia. You suggested that there was some important connection between converting the ALJs into officers of the United States and putting them on the political side of the line, making them accountable. Could you elaborate on that? It strikes me that -- I'm not sure why that's right insofar as the Appointments Clause governs both the appointment of the quintessentially political actors like the heads of executive agencies, but it no less governs the appointment of quintessentially independent actors like Article III judges. And isn't it really more important if you're figuring out are these people going to be politically responsible or not, really the answer to the removal question which the Court reserved?

 

Prof. Christopher Walker:  Yeah, I think it's hard to for the administration to figure out what to do now because really the removal question is, I think, the much more important and going to be the more transformational question. I think on the ALJ side, I think having the head of the department be the one that's appointing instead of the Merit Protections Services Board, ultimately -- I mean, you've seen how the administration's rolled it out. It actually is going to end up, I think, with ALJs that are more expert in the agencies where they work because now that's actually one of the requirements at Labors and some of these others where they have it. But I don't necessarily think, like in the Thomas and Gorsuch line, that it's ultimately going to end up being, like the political accountability arguments, not going to be as strong as I think they probably see it as like an original matter.

 

      I do think that agency final policymaking role is, though. I mean, that for me is really, from a constitutional perspective, stepping back from the Appointments Clause issue and just talking more generally about political accountability. The fact that the agency head has the final say is what makes it an agency adjudication in my mind. And so whether the original administrative law judges are appointed or not, as long as the agency head has the final say, I think kind of resolve some of those issues of accountability that the Framers were concerned about with the Appointments Clause.

 

Hon. Gregory G. Katsas:  Any reactions? Okay. Jack, we'll stipulate that some people in the room might view this as just one of many concerns about the administrative state. But let's just, for the sake of argument, assume that rulemaking is generally fine, and you've made a compelling case that adjudication has a lot of upsides to it. But let's just narrowly focus on one situation in which there may be a downside, which is—I think Steven mentioned it—it's the retroactivity and fair notice points. So take the case where an agency has been given the choice to act by rule of adjudication, and there's a perfectly respectable policy debate. They could say "X;" they could say not "X." And it turns out they have said "X," and they want to change sides. And they do it in an adjudication and try to make that retroactive. Do you see any sort of -- to what extent do you see something like that as problematic, and if so, is it just a policy question for Congress and the agencies to work out, or are there any judicially enforceable limits on agencies' ability to impose that kind of liability on folks?

 

Prof. Jack Beermann:  Okay, so what you didn't mention is what the consequences were to the private parties. So if there's a massive fine --

 

Hon. Gregory G. Katsas:  Fair enough. Severe.

 

Prof. Jack Beermann:  There's a massive fine that's going to be imposed based on something that was announced to have been legal and it's going to be retroactively made illegal and then a big fine, I think that it would take about five seconds for a district judge or a circuit judge to say that that's arbitrary and capricious. That's not appropriate. For example, in the Fox Television case where Justice Scalia, I think, so smartly explained that the standard of review for changes in policy is virtually the same for the standard of review for imposing initial policy. In that case, the FCC explicitly said they weren't going to impose any fines at that point. They were just going to tell the people what you did was wrong and in the future people would be subject to fines. And I think any sensible agency is going to do it that way.

 

      Now you have a different situation, for example, something about whether it's an unfair labor practice, for example, and it was clearly allowed and then the NLRB says, "No longer is this clearly allowed. It's going to be, either under some circumstances or maybe across the board, it's not going to be allowed." Now there, what you have is the agency ordering someone to act in a different way than they were allowed to. But it's not a penalty. And so I think that to say that they can never do it retroactively would unduly hamper the agencies' ability to adjust its policies.

 

      I should point out that in the federal Congress, Congress passes retroactive laws. And what I mean by retroactive laws is they pass laws, let's say in September, saying if anyone did this as of last April, here are the consequences. And the standard of review for that is minimal scrutiny, rational basis. Now maybe you think that's wrong, but I think that those are situations in which the legislation can have a much more severe effect than what agencies are likely to be doing in their retroactive decision making. And I'm only talking about cases where there are strong private interests, where there's penalties involved.

 

      When it comes to benefits and that sort of thing, I think it's even less scrutiny on the agencies. So I would think that I would favor not allowing an agency to put severe penalties on somebody, but in terms of telling them, "We said it was okay, but actually it's not okay," if it's just a question of ordering them to make up for something or obey it in the future like a new kind of bargaining or some other sort of new adjustment to what you can do in your television station, I think that that's fine. I mean, unless you go with Jeremy Bentham and think that all retroactive law is wrong. And that attacks the common law, which I know is not really on the table.

 

Prof. Christopher Walker:  I guess just to respond to it. One, Congress is elected, right? And they can be unelected -- not voted back in. But even on the agency side, I think this is the real debate is if it's in a rulemaking or a formal rulemaking—which, by the way, Aaron Nielson's just loving this right now. He has a great paper, "In Defense of Formal Rulemaking," that you should all read—but at least there, the public is getting input. There's notice and the like. And in adjudication, it's oftentimes just between that private party. . . I don't know. You had mentioned before, also, oh, well, everyone knows about it. Well, I did a lot of secure [inaudible 01:04:10] in private practice. No one knows about it. You don’t tell people as a client. That's not something you broadcast. You work that out and try to. . . So it is done in a real private setting. I just worry that any type of retroactive application, through adjudication, could have some kind of serious good governance problems and arguably some -- at least some constitutional tensions if that's the role that the agency is doing.

 

Prof. Jack Beermann:  I just don’t see it. I don’t see -- what are the constitutional tensions that would make common law unconstitutional? And I think that the idea of -- first of all, it's not administrative law judges that are making agency policy. They're required to follow agency policy. They can't question what the agency tells them. So it's only agency heads. And so those are politically appointed people that are accountable, presumably, by the fact that they went through a political appointment process. So I just don't -- and, again, because agency's generally use their discretion to not impose severe penalties when they're doing something new and where I think if they did that, courts would be there to say that it's arbitrary and capricious to tell someone that they're going to get a massive fine for something that at the time the agency had already announced was legal. I just don’t see it as a serious problem. It's a more theoretical problem, I think, than a real problem.

 

Hon. Gregory G. Katsas:  All right. Allyson, let's talk about another one of your great cases, which is Perez v. Mortgage Bankers. So that was a case about the line between legislative and interpretive rules. And so my court got upset at agencies changing their interpretations of regulations and came up with a somewhat creative view that an interpretative rule becomes a legislative rule when the agency is changing an interpretation. And you had the unenviable task of trying to defend that. We got slapped down pretty hard.

 

      But a lot of the opinions in that case said, look, you can't mess with what the APA says about interpretive versus legislative, but there is an underlying problem. And the underlying problem flows from judicial deference to the agencies. So I wonder to what extent you think there might be a similar dynamic going on right here, which is we're talking about agency adjudication, but maybe the real problem is that once the agency does the adjudication and then you go on judicial review, you don’t get a clean shot at the agency's legal rulings, And how much of your concern would be assuaged if, say, we didn't have Chevron or Seminole Rock in a particular category of adjudication?

 

Allyson N. Ho:  You know, I think that's a really insightful question. And I think part of my concern -- to the extent that my concern is structural—it's kind of baked into policymaking by adjudication—it wouldn't. But it certainly would go a long way toward mitigating the problem. If you didn't have a system set up where you're essentially judicial deference to the enforcer, which is sort of a strange thing when you think about it.

 

      And bringing up Mortgage Bankers, I mean what I thought was so interesting about that case, and I completely agree with you, that I think the court perceived that there was this doctrine -- and it was essentially honored in the breach -- there was this doctrine that had existed for decades that allowed a court to basically invalidate agency action where it's been a reversed course, and it was substantially important. And I think in decades, it had only actually been applied to invalidate a rule very rarely. And I just always thought of it that as the D.C. Circuit, they're the beat cops of the administrative state.

 

      And the doctrine, which was called the Paralyzed Veterans doctrine—terrible name for the doctrine—but it was called the Paralyzed Veterans doctrine. I always saw it as this was just how the D.C. Circuit, in a world where they were post-Auer—and it developed not long after the Auer decision came down requiring deference to agency interpretations of their own rule— as sort of the break the glass, pull the alarm for just the most egregious cases. And I think what we saw when that case was litigated was the court, across the board, saying, look, the APA doesn't allow this, but this is an understandable response to a serious problem of Auer deference that the Court should deal with. And I'm hopeful that we'll see action on that front soon.

 

Hon. Gregory G. Katsas:  All right, Steven, one for you, and then we'll throw it open for the audience. Formal rulemaking. Supreme Court has construed the APA in a way that will almost never compel agencies to do formal rulemaking. So I guess my question is how much of it are you all doing? To the extent you know, how much is the administration doing, more broadly? I didn't really see any when I was in the White House Counsel's Office. And it's fine in academic forms like this to talk about good government interests of it. But it would seem like there're pretty huge incentives not to do it if you don’t have to do it.

 

Stephen A. Vaden:  I'll address your question, and then I'd like to, with your permission, circle back on some things Ms. Ho said about deference --

 

Hon. Gregory G. Katsas:  Sure.

 

Stephen A. Vaden:  -- because I think that's also framing much of the discussion. So with regard to formal rulemaking, the Department of Agriculture engages in it with a weird structure that we have on marketing and regulatory boards. And these are the boards that exist that basically set standards. And in certain cases, in statutes dating all the way back to the Great Depression, prices for some of the commodities that you purchase on an everyday basis, things like milk, for example, might be one of the larger ones. And we engage in a formal rulemaking process. As a matter of fact, during this administration we finished a marketing order for California. That hearing went 50 days and was held on site in California to allow the California producers to actually be able to attend and participate in the hearings.

 

      Now, you raise an interesting point about how formal rulemaking is not as high profile. And there is an interesting reason for that. So Executive Order 12866 was promulgated by President Clinton, and it sets out much of the current review process by the Office of Management and Budget and what has to go through the Office of Management and Budget, i.e. the While House, to make certain that the administrative state is to the extent that we can, moving in one direction in accord with administration policy. But if you read Executive Order 12866 carefully, you will see that it sets out some exceptions for items that don’t come under its terms in OBM's review. And one of those items, which was confirmed in a side letter that was issued by President Clinton's OBM director, is formal rulemaking. So if an agency decides to engage in formal rulemaking, OBM is kept at bay.

 

      Now, you are correct that most agencies do go, almost always, to informal rulemaking. But there is nothing to stop an agency from deciding that it would like to engage in a formal rulemaking proceeding. Indeed, I think it would be a wonderful practice and one that has crossed my mind, which is why I made the comments here today for an agency that has some experience with formal rulemaking to show that, yes, indeed it is possible for this methodology to work and to pick a rule to go through formal rulemaking.

 

      And I think one of the advantages might be if an agency were to go through formal rulemaking is because it is ordered. There is a judge, an administrative law judge, on the dais who is keeping control and making rulings about what is appropriate to hear or not. It does have the advantage of preventing an agency's rulemaking proceeding from being hijacked by interests who may indeed care about the issue at play. But their greatest objection to it has nothing to do with what the agency actually has jurisdiction over. That happens quite often in proceedings and oftentimes in formal rulemaking. And you get letter writing and other campaign stirs up members of Congress, and yet it really isn't relevant to the point that the agency has within its jurisdiction.

 

      In a formal rulemaking proceeding, all that heat and light would go away because the judge would rule it out of order and that would be the end of it. I think that's one particular circumstance where if an agency were considering formal rulemaking, it might want to go that route.

 

      With regard to deference, I think it's important to keep in mind both sides of the ledger. There are problems with deference; there are advantages to deference. One of the things that I think is important for anyone to keep in mind when considering what a rule should be is that the person who is going to be administering this rule is not always going to be someone who thinks like you. And so you should think about, regardless of what side of the political spectrum you sit on, how do you feel about this particular principle when someone who believes the exact opposite of you is the one pulling the levers?

 

      Chevron was a case that came around in the early 1980s. If you think about the world of the early 1980s, you had a brand new president who was an actor, who had come into office saying that we needed to deregulate after a decade of onerous regulations being passed by presidents of multiple parties. You had a judiciary that looked very different than our judiciary today, in some respects. On Judge Katsas's court still sits Skelly Wright. And he had a particularly different point of view as to what the province of power of the judiciary is than most of the people who sit in this room. And Judge Wright would be the one who would be determining whether or not the agency's deregulatory actions, or change in regulatory posture, was appropriate as a matter of first instance with nothing to guide him and no tip of the hand to the agency in a world where Chevron did not exist.

 

       Now, that may make some people comfortable; that may make others uncomfortable. I think whatever becomes of Chevron and its progeny, one thing that we should try not to do is create a system where whatever the agency puts down the pipe the first time it does a rulemaking on a new statute does not become ossified because some court somewhere says, "That was exactly the right way you should've done it. You followed the statute incredibly well. Good job, agency." Or, "That was entirely the wrong way to do it. The only possible answer is 'X' and it will be 'X' forever more unless Congress acts." There is something to be said for administrative flexibility. It allows for elections to have consequences, and that is not a bad thing.

 

Hon. Gregory G. Katsas:  All right. We are more or less on time so we have plenty of time for questions. I see there's mic over there. Like Amy Barrett, I'm having trouble with the lights. There's one over there too, so the floor is open. Yes?

 

Brooks Harligh (sp):  I haven’t got it live yet. Thank you. Brooks Harligh. I'm a communications attorney in the area. Do any of you have any kind of predication or expectations with the shifting makeup of the Supreme Court whether it's possible they're going to reach out and take a fresh look at Chevron deference? And a follow-up question, assuming they do, just for fun, which agency would you like to see that review come out of.

 

Prof. Jack Beermann:  You know, there's sort of a joke about Chevron. Justice Gorsuch and the Tenth Circuit probably has the most explicit rejection of Chevron deference. And, of course, in the Chevron case itself, they were deferring to his mother. So there's always this, you know, maybe there's some family dynamic going on there. But that's just a silly, inappropriate comment. [Laughter]

 

      But I actually agree that Chevron is open for reexamination. I don't think they're ever going to have an opinion, at least not very soon, where they say, "Oops, we were wrong in Chevron." What we've seen is a narrowing of Chevron, and especially with the Chief Justice's opinion in the Affordable Care Act case where he reinvigorated the major questions exception to Chevron to be what the Court had previously rejected, which is any sort of big rule with major economic consequences is no longer going to get Chevron deference. I think that is a major hit on Chevron.

 

      And I think that -- you know, it's interesting. I would really respect—this is the administration—if the administration itself went into courts saying we should overrule Chevron or we should get rid of Chevron because that would be arguing against their own interest in terms of winning a particular case. My prediction is they're not going to do that. But I would really respect that.

     

      And I think to answer the issue about flexibility, and I won't give you the citation, but in my paper where I say get rid of Chevron, I also say that the replacement of Chevron ought to be something where the Court uses the factors that were announced in the Skidmore case to determine how much deference to give to an agency decision and that it's consistent with the principles underlying that that an agency can subsequently change its mind and still be subject to that sort of deference.

 

      And it has to do with a slightly repositioned theoretical basis for Chevron, which is I don't think it's correct to say that every time that Congress does something that's ambiguous it means to give this strong form of discretion to the agencies. I do think, though, that very often Congress has prescribed a range within which the agency action is appropriate. And in a case like that, the fact that the agency under one administration decides it one way, that as long as the subsequent administration is within that range that it would be appropriate to defer to that decision also, even under the original Skidmore factors. So I disagree with Justice Scalia when he says that if you apply Skidmore, you're ossifying the law; you're saying it's this for all time.

 

Hon. Gregory G. Katsas:  Okay. Yes?

 

Curt Levey:  If I've understood this debate correctly, the people who object to the status quo are objecting to two things. One, just agencies adjudicating cases, adjudicating their own rules, even if it doesn't affect other parties outside of the case. And the other is using adjudication to do policymaking. First, I'm assuming it isn't going to change much any time soon. And second, it strikes me as something where there could be maybe some reform or incremental change. And so my question is what could the change be? I guess it could come from the White House. Certainly, the White House can make changes with regard to rulemaking, although a little harder with regard to adjudication. Certainly, the Court could say something. Congress could do something. Maybe an adjudication version of the Reins Act. I mean, it's harder than the Reins Act because it's -- there's a thin line between, again, adjudicating a particular case and policymaking. But in any case, do you have any reforms in mind?

 

Prof. Christopher Walker:  So I think, again, for me it's we're kind of conflating adjudication generally with adjudication of private rights or quasi-private. . . I think in the smaller subset of cases, if you read Chief Justice Robert's opinion in Stern v. Marshall, he lays out a roadmap for getting rid of adjudication of private rights entirely, and that could have some pretty dramatic effects to how that goes. And he justifies Crow v. Benson, which is like the classic private rights adjudication case from the '30s, on the ground that you're a true adjunct. And what I was trying to tease out of my last 45 seconds of my opening was if we're going to try to play around with what a true adjunct is -- and we don’t really have a great intellectual foundation for what that means. The courts haven't really spent too much time talking about that.

 

      One thing that it could mean, though, is that in those contexts, there's no policymaking authority in the context of private rights. I think that's probably a pretty reasonable interpretation of what a true adjunct to an Article III court is. And so I do think those are moves the Court could make on its own as it grapples with adjudication of private rights when that comes up. Otherwise I think you're left with Congress or the president, with the president's one just being voluntary. And Congress the chance that they'd pass agency adjudication reform any time soon is probably really low.

 

Stephen A. Vaden:  I would just say that one thing that the administration can do, and is doing, is forcing agencies to think about these questions and the interagency process as they go about making policy decisions. These are questions that when you talk to our wonderful career employees in the federal government have not frequently been asked before by administrations of both political parties. In other words, really questioning isn't this something that should go through rulemaking? Isn't this something that you go through notice-and-comment? Why do you want to just publish something in the Federal Register and think that everyone's going to read that or go to your website and think that they're going to be able to find the page where this magical list, which will tell you what's in and what's out, is posted. These are discussions that are happening. It's not always evident to those who are not within the administration.

 

      But here I will give credit to the Office of Management and Budget, and there will be people at my department who will want to club me over the head for saying this, but I do think that they do a very good job from a legal policy standpoint of forcing agencies to confront that the easiest thing for the agency to do is not always the best thing for the agency to do when it comes to providing notice and providing public input.  And rulemaking truly is favored in this administration for making any type of policy determination. And requiring notice-and-comment beforehand is a must. So I have to tip my hat to Ms. Rao and her colleagues at OIRA for seeing to it that that really has had some bite.

 

Hon. Gregory G. Katsas:  Okay --

 

Prof. Christopher Walker:  Can I make one more quick point on this?

 

Hon. Gregory G. Katsas:  Sure.

 

Prof. Christopher Walker:  I think one thing we saw at the end of the Obama administration and that we've seen a lot of in the Trump administration is actually not making policy, and instead saying that the law controls. I think that's one interesting dynamic. I mean, you think through a lot of the Trump administration's deregulatory or rollbacks has been, "We can't do anything here. What the Obama administration did was not lawful." And, similarly, in the Obama administration, "We have to do this. This is the only interpretation of the statute." And they're still making policy, but they're doing it in a way that gets around Chevron. I think that's another fascinating development, if we're going to see this more.

 

      Obviously, it has great benefits because if the Supreme Court says that the Affordable Care Act means 'X,' it's going to be 'X' forever, whereas suppose if they say Chevron deference, a new administration can reverse field, right? But I do think that's an interesting future you've seen, I think amped up more in the Trump administration, is the answer isn't, "This is a better policy," it's, "We can't do what the prior administration did." I think that's an interesting development if we're going to see more of that go along those lines.

 

Prof. Jack Beermann:  Can I just say one thing about that?

 

Hon. Gregory G. Katsas:  Sure.

 

Prof. Jack Beermann:  That's a relatively high-stakes strategy. I've published a piece where I said that if courts disagree with them on their view of what the Clean Air Act means, for example, then they lose their repeal of the Clean Power Plant. But they did it that way, I assume, to avoid having to go through years of research to show that all the research that the Obama administration had done was wrong.

 

Hon. Gregory G. Katsas:  Okay. Next question.

 

Devon Watkins:  Hi. Devon Watkins. Excluding for a moment the Social Security Administration and adjudications like that, imagine if we just replaced the ALJs with federal magistrates selected by Article III judges. And then you can still appeal to the head of the agency, and policymaking, if they have to do it through adjudication, will be clearly done by the head of the department, then. And when they appeal, then, to the judiciary, the difference, if they disagree with facts or something, may not be given the deference that is given now where the magistrate and the head of the agency disagreed as to what the factual situation would be. In a situation like that, do you think that would solve your problems with the current adjudication system?

 

Allyson N. Ho:  Well, I think it would certainly go a long way toward doing that, and I think you highlighted a point that the Professor was making and that the Chief Justice made in the Stern case, which is about Article III supervision. In other words, if you have these agency proceedings, and they're true adjuncts, like in bankruptcy, say, they're true adjuncts of the federal district court and you have meaningful, Article III supervision, then I do think that goes a long way towards addressing some of the structural concerns that we've talked about today that are currently baked into the system.

 

Prof. Jack Beermann:  I'm a little unclear. They would be appointed by the courts --

 

Devon Watkins:  Yes.

 

Prof. Jack Beermann:  -- which is, under the Appointments Clause, if they are inferior officers, then the Appointments Clause says they can be appointed by a court of law. And there's some disagreement about whether that would apply to administrative law judges. Basically, you're just renaming the administrative law judges "magistrate judges," I suppose. I'm trying to -- are you talking about further supervision than just the fact that the court -- that their decisions are appealable to the court the way they are now by administrative law judges?

 

Devon Watkins:  Well, I assume they would get appointed by a court of law and not the agency themselves. And that that court of law would then oversee those magistrate judges if they are not following the law in some way and can remove and replace them if necessary.

 

Prof. Jack Beermann:  I'm actually -- I've come out in favor of having courts of law appoint administrative law judges. It doesn't matter to me what you name them. I think it makes sense because I'm a little concerned -- and I can't pre-judge this because I'm actually doing an administrative conference report on this issue with Jen Mascott, together, but I'm a little concerned that under the other possible processes to replace the current way they're appointed, that it would become too political and they would be less trustworthy and less -- and they would be more prone to bias.

 

Hon. Gregory G. Katsas:  Yes, sir?

 

Questioner 4:  Yeah, if you need more context, I can provide it. But my question is in, say, like the National Labor Relations Board announces rules in adjudication, are those considered final agency action under the Administrative Procedure Act that can be challenged?

 

Prof. Jack Beermann:  I mean, generally, rulemaking is final agency action. And then you have to meet the Abbott Lab's fitness and hardship test to get immediate and judicial review as opposed to waiting, postponing it. And there are plenty of situations where you would postpone it, when you weren't exactly sure how the agency was going to apply it. But the Court in the Abbott Labs case said that is was final for the purposes of the APA, but that there was a separate ripeness inquiry, which was whether there's fitness—it's a purely legal issue versus factual issue involved, and whether there's hardship in postponing review to a future adjudication.

 

Questioner 4:  Right. But that would apply to rules that are made in adjudication as well as rulemakings.

 

Prof. Jack Beermann:  No, no. If the agency issues an order against someone at the end of an adjudication, that's going to always be immediately reviewable. Always.

 

Questioner 4:  Well, under Section 9 of the National Labor Relations Act, those cases aren't always reviewable. They're committed to agency discretion. So say the NLRB comes up with a rule that's just completely outside of the statute. I mean, you could try and bring a case in court under (litem), but that's tough. So they announce a rule, they apply it to your case, you have no judicial review, except in (litem), could you challenge the rule itself as a final agency action?

 

Prof. Christopher Walker:  This is why I always say "Don't know," when people ask about the NLRB because it's a weird agency with a very, very strange organic statute compared to most agencies.

 

Hon. Gregory G. Katsas:  Yeah, I not an expert by any means, but we review NLRB orders all the time.

 

Prof. Jack Beermann:  I mean, at the end of this process, have they issued an order that applies to someone telling them to do something or stop --

 

Questioner 4:  Yeah, in the 1940s, the Supreme Court said that those cases aren't reviewable by district courts. And if you're an employee, they said that your avenue is through unfair labor practice under Section 10. If you're an employee that's filed a decertification petition, you can't do that. You have no review under Section 10. So you're just stuck. So I'm just wondering if there's a way to challenge the rule as being final agency action.

 

Hon. Gregory G. Katsas:  I think they just come into the D.C. Circuit from agency orders. They don’t have to go to district court to be reviewable.

 

Questioner 4:  Not under Section 9. But it's a little bit of a complicated question. I was trying to make it easy. If an agency announces a rule in adjudication, would that be considered final agency action under the APA? They have made a rule --

 

Prof. Jack Beermann:  If they issue an order to someone, which normally happens at the end of an adjudication, that's the process for issuing an order, then that order would be subject to judicial review. Either the party could challenge it or if the agency tries to enforce it, they could defend based on the invalidity of the legal principle that it was based upon. I mean, there are some weird situations where they deny a petition to do something that's committed to agency discretion by law. I understand that. But that affects both rulemaking and adjudication. If somebody petitions an agency to do something, which is committed to agency discretion by law, it doesn't really matter what process they use. It's just not reviewable.

 

Hon. Gregory G. Katsas:  Anybody else, maybe time for one more? If not, please join me in thanking our panelists.

3:30 p.m. - 5:00 p.m.
The Pros and Cons of Plea Bargaining

2018 National Lawyers Convention

Topics: Criminal Law & Procedure
The Mayflower Hotel - State Room
1127 Connecticut Avenue, NW
Washington, DC 20036

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The Black’s Law Dictionary defines Plea Bargaining as: “[t]he process whereby the accused and the prosecutor in a criminal case work out a mutually satisfactory disposition of the case subject to court approval. It usually involves the defendant’s pleading guilty to a lesser offense or to only one or some of the counts of a multi-count indictment in return for a lighter sentence than that possible for the graver charge.” Plea Bargaining as a concept dates farther back than the American justice system itself. However, over the past few decades it has occurred with more and more frequency to reach its’ current unprecedented level in our criminal justice system. 

Today, over 95 percent of criminal convictions are a result of Plea Bargaining, which has contributed to an evolving and controversial national debate over whether Plea Bargaining has gone too far. The positives of Plea Bargaining are apparent. It is a much more efficient process than juries, and a much more inexpensive process than trials. However, some opponents of plea bargaining point to the dangerous potential for coercion, insisting that the imbalance of power between prosecutor and defendant can often lead to a miscarriage of justice. Additionally, some criticize Plea Bargaining because it infringes upon the right of the American citizen to participate in the jury process. The debates over the correct response to the frequency of Plea Bargaining will continue to grow as the effects are felt by the entirety of the American Criminal Justice System.

  • Hon. Stephanos Bibas, United States Court of Appeals, Third Circuit
  • Mr. Greg Brower, Shareholder, Brownstein, Hyatt, Farber, Shreck
  • Prof. Carissa Hessick, Anne Shea Ransdell and William Garland "Buck" Ransdell, Jr. Distinguished Professor of Law, University of North Carolina School of Law
  • Mr. Clark Neily, Vice President for Criminal Justice, Cato Institute
  • Moderator: Hon. Lisa Branch, United States Court of Appeals, Eleventh Circuit 

Speakers

Event Transcript

John Malcolm:  So very briefly, my name is John Malcolm. I am the Chairman of the Criminal Law Practice Group, and so this is my plug for the Practice Group. We have a very active executive committee. We put on programs and write articles on a whole variety of areas. And if you are interested in criminal law, and interested in learning more about the Practice Group, or possibly getting involved in the Practice Group, I would urge you all to either catch me while I’m here during the Convention. I’m also at the Heritage Foundation. You can track me down there, and I would love to hear from you.

 

      I’m going to turn this over, in just a moment, to my friend Judge Lisa Branch. Lisa and I have actually known each other for a number of years. We were in Atlanta together, and we came up to work in the Bush administration, and a whole contingency of us came up, and we referred to it at the time as the Atlanta Mafia. I’m, of course, here. She has gone back to Atlanta and on to greater things and is a brand-new judge on the Eleventh Circuit, Court of Appeals. So please join me in welcoming Judge Lisa Branch.

 

Hon. Lisa Branch:  Thank you. And thank you for coming to our panel today -- our criminal law panel. And we’re going to be talking about the pros and cons of plea bargaining. Today, approximately 95 percent of criminal convictions are obtained through plea bargaining. And our panelists today are going to talk about the tensions that are inherent in this increasing frequency of such a practice.

 

      Are plea bargains a necessary part of the criminal justice system? In his dissent in Lafler v. Cooper, Justice Scalia noted that the ordinary criminal process has become too long, too expensive, and unpredictable. And really, could the system function if these numbers were to decrease? But are plea bargains too coercive? And is there a solution that’s needed? Or is there a solution that’s even possible? And our panelists are going to shed light on these issues.

 

      Just to give you an idea of how we’re going to proceed with this panel, I’m going to introduce them, and they’re in the order they’re going to speak. They’ll present their arguments, briefly, on the topic. And then they may have questions of each other, and I may have questions for them. And I hope to leave about 15 to 20 minutes for the audience to ask some questions, and you’ll see we have two microphones set up. Because of that light, I can’t really see that one, but I’ll just go back and forth between the two.

 

      And let me start with Greg Brower. He’s a shareholder at Brownstein, Hyatt, Farber, and Shreck, and he focuses on civil and criminal litigation. Most recently, he served as the Assistant Director for the Office of Congressional Affairs at the FBI.  He’s also served as the FBI’s Deputy General Counsel, and he’s had many other important roles. He was the U.S. Attorney for the District of Nevada. He served five terms in the Nevada legislature, and he’s an adjunct professor of law at the University of Nevada. And before he attended law school, he served in the U.S. Navy as a surface warfare officer. Greg, as a former prosecutor, is going to be the most pro-plea bargain of the panel.

 

      Clark Neily is the vice president for criminal justice at the Cato Institute. Before he joined Cato, he was a senior attorney and constitutional litigator at the Institute for Justice. And he’s an adjunct professor at the University of Texas School of Law. He will be the most critical of plea bargains.

 

      Professor Carissa Hessick is the Ransdell Distinguished Professor of Law at UNC Law. She clerked for Judge Barbara Jones on the Southern District of New York and Judge Randolph on the D.C. circuit. She also has served in private practice in New York City. In her discussion today, she’s going to talk about how plea bargains are not the cause of the dysfunction in the criminal justice system.

 

      And last, but not least, we will get to Judge Stephanos Bibas. He is a U.S. circuit judge for the U.S. Court of Appeals for the Third Circuit. He clerked for Justice Kennedy. He’s also served as an AUSA for the Southern District of New York, and he was a professor of law and criminology at the University of Pennsylvania Law School. And what he’s going to talk about, today, he’s going to focus on the balancing of these competing interests. So how plea bargaining avoids democratic oversight, but it also responds to problems for judges, like mandatory minimums.

 

      And, so, with that, I will turn it over to Mr. Brower.

 

Greg Brower:  Well, thank you very much, Judge, and I’m sure everybody can hear me okay. And thanks, John, for kicking this off. It’s great to see so many people here late in the day. I was reminded, as I walked in today, that this is my first time speaking on a panel at the Lawyer’s Convention, but it’s not my first Convention. I was able to recall that my first was the fall of 1989 when I was a 1L at GW Law here in town, and I was a volunteer here for the Convention. And so, it’s been almost 30 years, and I guess that says a lot about The Federalist Society’s staying power and something about me getting old as well. But it is very much a privilege for me to be here. So thank you.

 

      So plea bargains. Controversial. Traditionally, law and order conservatives would like to criticize plea bargains as evincing a soft-on-crime approach by too many prosecuting officers. More recently, those on the other side of the spectrum have been known to criticize plea bargains as being unfair to defendants.

 

      I would submit that neither is quite accurate. It is true, as the judge mentioned, that upwards of 95 percent of cases are resolved by way of plea bargains or some other type of plea. It’s rare to see defendants just do what we call a “straight-up” plea, but that happens from time to time. Most plea deals are done by way of a deal, a bargain.  

 

      But I would submit that not only is that reality okay, but that it is actually a good thing. And in fact, I would submit that given the realities of our criminal justice system, it’s more than a good thing, it’s a necessary thing. The system simply could not survive, could not exist, could not be efficient without most cases being resolved by way of a plea deal.

      Nevertheless, criticism persists from, as I said, the left and the right. So what I thought I would do today is just tee-up a few of those critiques and try to offer my response. And then I look forward to, of course, other points of view and to questions if we have time.  

 

      So let me talk about a few of the more popular criticisms of the system of plea bargaining. The first criticism that we hear is that the jury trial is the anchor of our criminal justice system, and so the fact that there are so few jury trials means there must be something wrong with the system.

 

      Actually, I think it’s more accurate to say that the right to a jury trial is the anchor of our criminal justice system. And that is the defendant’s right, as we all know. The people have no right, I would submit, in seeing criminal cases tried. Of course, let me modify that. When criminal cases are tried, of course, the people have a right to see those trials.

 

      But the people do not have a collective right that those cases be tried. It’s the defendant’s right. And when the defendant, in agreement with the government, decides that accepting a plea deal is preferable to going to trial—again, when an agreement is reached—the right of the defendant has been satisfied.

 

      Now, let me say that as a trial lawyer—and I’ve done my share of jury trials—and as a litigator, I think it’s the most fun that one can have as a litigator, is to try a case. I would also observe that for each case one tries, one loses about a year of one’s life on the back end.

 

      But it's not about the prosecutors or the defense lawyers having fun. And it’s really not even about, as some judges, although a minority, would suggest -- It’s not about judges wanting to see more jury trials. It’s really about the defendant’s right to decide whether he or she wants to go to trial.

 

      The second criticism we hear is that plea deals are done in the back room. They’re secretive, and there’s no transparency. For any of us who have been involved in the process, we know that that’s not exactly how it works. There may be backroom negotiating, but there inevitably is, with every plea bargain, an on-the-record, in-open-court recitation of the deal; with very careful cross examination by the judge of the defendant in terms of the voluntariness of the plea, and the details of the plea; and, at the end of the day, approval by the judge of the deal. So at the end of the process, it is a very transparent, on-the-record, in-open-court, part-of-the-docket process.

 

      Third, there is the criticism that plea deals are somehow coercive and, as a result, unfair as against the defendant. And I just have to say, in my experience, I’ve not seen that. I’ve heard about it. It no doubt happens from time to time. Probably at the state level more than the federal level. But it is a rare, rare thing, I would submit, at the federal level.

 

      The fundamental reasons why it’s rare is because DOJ policy prohibits it and ethical rules also prohibit it. So the AUSA who tries to engage in coercive plea bargaining will likely be revealed to be engaged in such an improper practice, and won’t get away with it, and won’t be around long. And so it’s just not something, I think, that is a problem such that it suggests there’s a problem with the system.

 

      So the bottom line, for me, is that the Constitution provides, in two ways, for the propriety of plea bargains. The first is that, given the Constitution’s separation of powers, it is, as we all know, exclusively within the executive branch -- the decisions with respect to how to prosecute, when to prosecute, and whom to prosecute are exclusively within the executive branch’s power.

 

      And secondly, the right to go to trial—the criminal defendant’s right, the constitutional right—is exclusively with the defendant. And so between those two constitutional realities, I would suggest that the right to plea bargain is something that is constitutionally sound and, moreover, it is something that common sense and the reality of our criminal justice system mandate be available to the parties in every criminal case.

 

      Thank you very much.

 

Hon. Lisa Branch:  Thank you, Greg. And now we will turn it to Mr. Neily.

 

Clark Neily:  Well, thank you. I really appreciate the opportunity to be here. I don’t know if anybody remembers Joe Pesci’s opening argument in My Cousin Vinny, but I want to assure you that that is not going to be my opening argument in this case.

 

[Laughter]

 

      The status of the jury trial in American law is somewhat unique. Article III, Section 2 provides that “the trial of all crimes shall be by jury.” The Bill of Rights spends more words on the subject of juries than any other topic. The right to a jury trial is the only right that is mentioned both in the body of the Constitution and in the Bill of Rights.

 

      It is literally impossible to overstate the Founders’ commitment to the proposition that the administration of criminal justice should be one in which the public is intimately involved. Intimately involved. It depends on public participation for legitimacy, for transparency, for accountability, and for people to have faith in the integrity of the system.

 

      I want to read a quote from the Supreme Court in a case called In Re Winship from 1970. The Court said: “It is critical that the moral force of the criminal law not be diluted by a standard of proof [or a procedure for conviction] that leaves people in doubt [about] whether innocent men are being condemned.” And we know, to an absolute certainty, that innocent people routinely plead guilty to crimes in America. And I’ll get to how we know that in a moment, but it is absolutely true, and that’s problematic.

 

      I want to read another quote. I was actually just chatting with Judge Elrod out in the hallway, and I had the great pleasure of being able to tell her that I had literally, this morning, copied out of a judicial opinion, a quote—not her opinion, another opinion—a quote from a 2011 law review article that she wrote responding to the assertion that the criminal justice system would essentially grind to a halt without plea bargaining. And here’s what Judge Elrod said about that: “When the myth of a backlogged court, or judicial—” so sorry. “When the myth of backlogged courts is raised as the reason for forsaking the jury, we must correct them. It is not the case that America’s criminal justice system would come to a grinding halt without plea bargaining. It is simply the case that plea bargaining is more efficient than jury trials are.”

 

      Well, there’s no question about that. But the question is whether that is a feature or a bug. And I submit that the Founders would clearly have said that it is not a feature but that it is a bug. Let me say this, about plea bargaining: it was unknown at the founding era. It is virtually alien to the entire history of the common law. By the way, it was well known on the continent where judicially sanctioned torture was permitted through much of the middle ages. They know a lot about plea bargaining on the continent, but not in Anglo-American law.

 

      And I want to just quickly run through what some of the problems are. Let’s talk about, just first, these numbers: 97.4 percent of all federal criminal convictions are obtained through plea bargain. Is that not an incredibly suspicious number? Why are on earth are so few people interested in exercising one of the most hallowed and hard-won rights in the entire Constitution.

 

      I too got my start as a trial lawyer. I have tried cases to a jury. I understand that they can sometimes be unpredictable, and they are certainly inefficient. But to the party that does not bear the burden of proof, a trial is extraordinarily beneficial. All kinds of things can happen that can cause your opponent to fail to carry their burden, especially when it’s a burden of proof beyond a reasonable doubt. Witnesses can forget or not show up. The chain of custody can be broken. Juries can just take an unpredicted lik[ing] to one of the parties. So there’s lots of reasons why you would go to trial even if you were guilty.

 

      So why do so few people in our system go to trial anymore? And there’s one word—there’s exactly one word—that explains why, and that is coercion. The lifeblood of American criminal justice today is coercion.

 

      It is very difficult to define the difference between an appropriately attractive inducement on the one hand and an inappropriately coercive offer on the other. But let me give you one example.

 

      There was a young man who was an internet genius named Aaron Swartz. He helped invent Reddit when he was 19 years old. He, as a graduate student at Harvard, had access to the JSTOR database, the academic database. He was only allowed to download three articles per day. He felt that the result was that a bunch of human knowledge was being held up behind this arbitrary dam. And so, he created a computer program to download, essentially, the entire body of articles from JSTOR. He broke into a computer closet at MIT, hooked up a laptop, and began running the program.

 

      He was originally prosecuted by the Commonwealth of Massachusetts, but then the federal government took over. By the time they got done charging Aaron Swartz, he was facing a 13-count federal indictment that exposed him to 35 years in prison and a $1,000,000 fine.

 

      Does anybody know what his plea offer was? Six months. Six months. Tell me that’s not coercive. By the way, we don’t know what his sentence was because he killed himself during plea negotiations.

 

      What makes plea bargaining coercive? Well, there’s a number of factors that come together. I don’t have time to go through all of them. But the three major factors are these: First, pre-trial detention. If you are sitting in Riker’s Island, which is hell on earth, having a very difficult time connecting with your defense counsel, helping to participate in your defense, finding documents, identifying witnesses, sharing phone numbers, etc., just getting a face-to-face meeting is very difficult. It’s hard to participate in a vigorous defense. It’s also a very, very unpleasant place to be.

 

      Second, we have woefully inadequate defense counsel in most jurisdictions. Eighty percent of people who are prosecuted in American have a public defender, and in many jurisdictions, they are wildly under-resourced. And here’s a secret—conflicted. Why? Because they have to maintain a good relationship with the prosecutors in that jurisdiction. Why? To ensure they get favorable plea offers for all of their clients. So it can be dangerous for a public defender to dig in hard, or too hard in some cases.

 

      And finally, we have the infamous trial penalty which is the difference between the sentence that you are offered if you take the plea, and the sentence that will be imposed if you go to trial and lose. And the National Association of Criminal Defense Lawyers just came out with a study this year called the Trial Penalty. Look it up. Read it. You should know about it. If you are an American citizen, you should know about the trial penalty. It is horrifying.

 

      All right. So what problems are there with coercive plea bargaining? Well, first, there’s the innocence problem I eluded to before. What percentage of people who plead guilty to crimes are, in fact, innocent? The answer, of course, is we have no idea.

 

      The innocence project has exonerated about 300 people using DNA evidence. That’s not perfect, but it’s as close as we can get in our system. Fully, 10 percent of those 300 exonerees confessed to crimes that they did not commit. A deeply, deeply troubling number.

 

      Another problem is a supra-optimal amount of prosecution. As I suggested earlier, the inefficiency of jury trials is not a bug, it is a feature of the system. It imposes discipline, or is meant to impose discipline, on the prosecution about what cases they bring, and only bring the most serious cases against the people who really shouldn’t be out on the street. There, also, are problems with accountability and transparency that we can get into in a moment.

 

      And finally, legitimacy: a system in which we cannot have faith in the integrity of any particular conviction. And I would say that a conviction that is obtained through plea negotiations that take place behind closed doors, and where the government is not required to put its evidence out in public for all of us to see, is a process in which we cannot have faith in the integrity of any particular conviction, and that is a huge problem for the legitimacy of the system. Thank you.

 

Hon. Lisa Branch:  Thank you, Clark. I feel certain that, at the end, we’re going to look back to Mr. Brower. I feel certain you may have some things you want to say.

 

Greg Brower:  I took some notes.

 

Hon. Lisa Branch: [Laughter] Great. We’re going to turn over to Professor Hessick right now.

 

Prof. Carissa Hessick:  Great. Thank you very much, Judge Branch, and thank you all very much for being here today. I’m working on a big project about plea bargaining, and I’ve just been annoying my friends and family talking to them, and now you can all share in that, and maybe I can talk about something else at dinner.

 

      So I agree with a lot of what Clark had to say. I consider myself to be a critic of the plea-bargaining system that we have in this country. But I think that I view it through a slightly different lens than he does.

 

      So, for example, I don’t think that the problem is simply defendants who are facing incredibly, incredibly long sentences who are offered incredibly, incredibly short sentences. Like the example that he gave of the young man who had downloaded all of the documents from JSTOR.

 

      For this book project I’m working on, I was speaking to a public defender in the Bronx, and he told me that he has never been able to convince a client to reject a plea deal, no matter how bad that plea deal was, if it included immediate release from detention.

 

      He told me specifically about one client, who, because he was on probation, if he pleaded guilty without trying to negotiate further and get the charge dropped down from a misdemeanor to a -- I forget what it’s called. Like a sanction. Essentially to a ticket. Something that the defense attorney thought that he’d be able to do, but he needed two more days. He wouldn’t stay in jail for two more days knowing he would be revoked on probation for another case that he was on. He ended up spending an additional year in prison. 

 

      I give that example because I think when most people talk about plea bargaining, they want to think about plea bargaining in terms of the rational actor. They want to say we should only have plea bargains where a rational innocent person wouldn’t take them. I’m just not so sure that we can use the frame of rationality when we’re talking about these sorts of things.

 

      I think that we have to be worried about the idea that defendants are acting irrationally. And we should be especially concerned about that because the idea of plea bargaining is premised on the idea of negotiation and contract. And if we know—if we have very good evidence—that one side in that negotiation is not looking out for their own interests, then maybe we should stop thinking of it as a negotiation and a contract.

 

      I also think about plea bargaining, not just as something that’s problematic in individual cases, but I think about it in terms of a culture. We have a system of plea bargaining not just because of the statistics that have been mentioned, but because the default assumption in our system is that a case will be negotiated, that a defendant will take a guilty plea, and that a trial will not occur.

 

      So another story from the book. There’s a young man: relatively recent graduate from law school, went to go work for a public defender’s office. As he was negotiating with the prosecutor, if he didn’t get a good enough deal for his client, he would set the case for trial. Pandemonium ensued. The prosecutor’s office was very upset; but so was the public defender’s office.

 

      His supervisors came to him, and said, “What are you doing?” He’s like, “I’m setting these cases for trial.” They’re like, “Why are you doing that?” he’s like, “Well, I can’t get a good plea offer from the prosecutors.” They’re like, “Right, but you’re setting them for trial,” and he’s like, “Right. Isn’t that what we’re supposed to do if we can’t get a good enough plea bargain?” And they said, “No. That’s not what we’re supposed to do. Our office can’t do that. The prosecutors will be angry with us. The judges will be angry with us. That’s not what you do.” And so, he got moved to appeals, and now he’s very happy. 

 

      [Laughter]

 

      But I do want to be clear, the problem with plea bargaining isn’t new. The assumption that cases will plead isn’t new. It’s gotten worse. The percentages that Clark mentioned have gone up. But the assumption that cases would plead has been around for quite some time.

 

      So Albert Alschuler, he’s a law professor. He did this big study of plea bargaining in the ‘70s and the ‘80s. And he’d go around the courtrooms—and he tells this story of multiple judges telling defendants, “Look, the prosecutor’s given you an offer.” This wasn’t mandatory minimums. This wasn’t sentencing guidelines. This was before all of that. “And so, the prosecutor’s giving you an offer. If you plead guilty, I will give you this sentence. If you go to trial, and the jury convicts you, I will give you this sentence.”

 

      And the only reason, I think, that judges could do that—because I think most judges are good people and don’t think of themselves as sitting around violating people’s rights—is that we actually assume that most cases will plead guilty. We assume that that’s what’s going to be happen in particular cases. And the sentences that we give out to people for pleading guilty are actually the sentences that we think are appropriate.  

 

Hon. Stephanos Bibas:  Yes.

 

Prof. Carissa Hessick:  Now, here’s where I do disagree with Clark. I think that Clark thinks what we need to do is we need to get rid of plea bargaining, or we need to just take steps that will discourage plea bargaining. Okay. He and I will fight about this later at the reception if you guys want to come find us.

 

      [Laughter]

 

Prof. Carissa Hessick:  Here’s my concern. Look, I think plea bargaining is a big problem. I’m writing a whole book about it. But I don’t think that it’s our only problem, and if we were to get rid of plea bargaining, I don’t think that it would really fix the criminal justice system. In fact, it could very well make things worse. The really harsh sentences that we have enacted, the mandatory minimums, they’d apply to a whole bunch of people and not just the people who decided to go to trial.

 

      The defense attorneys, who don’t have the time and resources to plea bargain cases, certainly aren’t going to have the time and resources to bring those cases to trial. I’m actually just not sure that trials are a panacea.

 

      So last story from the book, I promise. A couple of weeks ago I was out in Western North Carolina interviewing a man who pleaded guilty to a crime he didn’t commit. A murder. He pleaded guilty to a murder that he didn’t commit. And we go through the whole interview, and at the very end, I think to myself, “Oh, I forgot to ask the golden question. I’ve got to get the sound bite.” And I say to him “Do you regret pleading guilty?” And he said, “No.” And I was shocked. And I was like, “I don’t understand. Why do you not regret pleading guilty? You didn’t commit this crime.”

 

      And he really didn’t commit the crime. He’s subsequently been exonerated. They found DNA evidence. His conviction was vacated. The actual murderer has been found. He did not do it. And I was just flummoxed. How on earth could he not regret pleading guilty to a crime he didn’t commit?

 

      He said he expected that he would’ve been convicted. He—to this day—thinks that he would have been convicted had he gone to trial. His only regret was that he didn’t get a better plea bargain from the prosecutors. He didn’t trust the system to sort the innocent from the guilty, and you know what? I’m not so sure he’s wrong. He’s a poor kid in Western North Carolina with a court-appointed attorney who told him he’d taken three cases like that to trial before and lost.

 

      I don’t think that plea bargaining’s very good, but I don’t think that we should kid ourselves that trials are magic and that they necessarily allow us to figure out who’s innocent and who’s guilty. Guilty people get acquitted; and innocent people get convicted. The 90 percent of other people on the Innocence Project’s website, they went to trial, and they didn’t do it, and they got convicted.

 

      So I guess my point is—I’ll end on a very happy note by saying plea bargaining is bad, other things are also very bad.

 

      [Laughter]

 

Hon. Lisa Branch:  Thank you, Carissa. I feel like Clark may have some response to you later. But we’ll get to that in a second. Let me turn, last but not least, to Judge Bibas.

 

Hon. Stephanos Bibas:  Thank you. How many of you have seen those black and white drawings or illusions where you look at it one way, it’s a rabbit, the other way, it’s a duck? You look at one way, it’s a young woman. The other way, it’s a woman. People in The Federalist Society tend to be pretty supportive of free-market logic. It seems pretty intuitive.

 

      But we also get the idea of separation of powers, checks and balances, and the rule of law for individual liberty. And so, I think a lot of you in this room can see both sides of why I think Mr. Brower, Mr. Neily are both right. But it depends on how you look at it. And we should be not so troubled from one point of view and pretty troubled from another point of view.

 

      So the private-market perspective. Plea bargaining makes all the people in the courtroom better off. The defendant gets a lower sentence. He gets his case over with. He gets predictability. The prosecutor gets to pursue more cases, ensure more public safety. The judge clears his or her docket. What’s there not to like? In terms of coercion . . . private market transactions make parties better off. It’s Economics 101, right? Well, how could anyone argue with that?

 

      Well, here’s the other thing. We’re not selling a sack of potatoes. We’re selling justice. So from a public governance-perspective -- from the private perspective, it can’t be coercive if people agree to it. From a public governance respect, and from the point of view of the outsiders, the victims, the citizens who are wondering what’s going on here, it looks pretty different.

 

      So you heard there was a discussion about whether or not this is consistent with the Constitution. Well the Sixth Amendment says the defendant has a right. Mr. Brower says it’s waivable. But Article III, Section 2 doesn’t say the defendant shall have the right. It says “the trial of all criminal cases shall be by jury.” The wording is “non-waivable” in the body of the Constitution, all right?

 

      Then you look at the issue about secrecy. Well, to the people inside the process -- I was a prosecutor. The prosecutors understand. The defense lawyers understand. The judges understand. I’m not so sure the defendants always understand what’s going on. But the victims and the public wonder: “Why has my case been bartered away? Did I have any say? Did I understand what’s going on?” So it depends on who’s looking at it.

 

      Take this issue of what’s coercive. Again, market participants inside the system, from a lawyer’s point of view, it’s not coercive, better off. But what about a different definition of coercion? What about taking Professor Hessick’s point? Who’s setting the baseline here? Well, when prosecutors persuade legislatures to stack up more sentences, they stack up more plea-bargaining chips.

 

      If your baseline were a common law, kind of a retributively proportional sentence, yeah, you just look at it as a discount that makes people better off. But when the person who’s bargaining has influence over what the baseline sentence is, suddenly you’re in a world where, as Professor Hessick said, the default sentence is not “what was the right sentence for someone who went to trial?” but “what’s the right sentence for someone who pleads guilty?” And then we’re going to flack the few people who are obstinate enough to go to trial.

 

      And I think that the fact that it is rational for a number of innocent people to plead guilty should be a canary in the coal mine. I probably wouldn’t have a lot of problems with plea bargaining if the discount were really proportional to the chance of acquittal and the time saved. A modest discount—10 percent, 20 percent—probably not going to tempt innocent people to plead guilty.

 

      But there are plenty of cases out there, like the case of Weldon Angelos out in Utah, where the prosecutors are happy to take a plea to 15 years, I think it was, or 20—something like that—but he refuses to play ball, and suddenly it’s an 85-year sentence they’re looking at after trial because of stacking mandatory minima, and enhancements, and things like that. So the power over the baseline should give us pause. Is the baseline retributive or is the baseline purely being used to stack up plea-bargaining chips?

 

      And what’s troubling about this is: the way that the Constitution sets up its criminal justice system creates a popular check on all three branches of government. The legislature can criminalize something, but the jury has to make sure it fits. The prosecutor can push it ahead for this defendant, but the jury can say no. And the judge doesn’t get to direct a verdict of guilty. So all three branches, still, are subject to a communal check. Someone who’s not professionalized; someone who’s not jaded.

 

      And that has some public benefits. The quotation from Winship, I thought, was apposite. But there’s the benefit of seeing justice done, of having one’s day in court. And there’s the benefit of making sure there are adversarial checks on what actually happened so the truth wins out.

 

      I think from the point of view of non-lawyers—and I’m setting aside—we prosecutors understand this—ex-prosecutors understand this better. To non-lawyers, to victims, to members of the public, to a fair number of defendants and their families the system looks hidden; it looks insular.

 

      And there’s a lot of discretion. I’m not so troubled by discretion per se. What troubles me is idiosyncratic, unchecked discretion. If the discretion is reviewable, if it’s tethered to common sense notions of blame and culpability that are verified through a fact-finding process, I’m not so troubled. So what -- we historically did that through the adversarial process. We’ve bypassed that in most cases. It’s kind of a bastardized inquisitorial process, some scholars argue. But it doesn’t really have the checks of continental accusatorial system either because it doesn’t really involve a neutral adjudicator.

 

      Again, I’m less troubled in some categories of cases than others. I was a little surprised -- Mr. Brower and I both served in the federal system. Mr. Brower thought the problems were fewer in the federal. I’m going to suggest some reasons why I think the problems are worse in the federal system than the state system. First of all, the sentences are higher, a lot higher, in the federal system. And there are more mandatory minima, which I’m going to come back to, and recidivism enhancements and the like.

 

      Second, more importantly, the bread and butter of what state courts deal with are mala in se, inherently wrongful actions. There’s an intuitive sense of justice the individual prosecutor has, that the prosecutor’s supervisor has, that the victim has, that the judge has that they’re constrain the prosecutor from giving away the store in a murder case, for example, right?

 

      In federal court, a lot of what we’re dealing with are mala prohibita. There’s widely, much more widely, varying perceptions of how wrongful the acts are. So there’s not the same kind of intuitive, shared baseline—that Paul Robinson and psychologists and people have documented—that we all share our sense of how much punishment this should get. And that probably has some tempering effect in a state system with mala in se, without a lot of sentencing rules.

 

      The other reason that there’s more checks in the state systems is the states, some of them, don’t have sentencing guidelines. And those that do, don’t tend to have ones that are as rigid as the federal ones are. Even post-Booker, the federal guidelines still pack a lot of punch. More than in most states, as I understand it.

 

      So the moral of the story is, I don’t think we’re getting rid of plea bargaining. And I’m too realistic to suggest otherwise. I also don’t think all pleas are bad, but I think the amount of leverage that goes way out of proportion or retributive culpability is the kind of thing we ought to check and balance.

 

      So judges are one possible check. Judges at sentencing do much more in state systems than federal systems do. And other possible checks are -- how could we have some jury-like input into the system? I don’t think we’re re-creating jury trials for 95 percent of cases. And I do think there’s something to the critique that we’ve made jury trial so long, and so cumbersome, and so ornate that we can’t afford to give them to people. But I also seriously doubt, with the precedents and all, that were ever going to the streamlined jury trials of the 18th century.

 

      So could we think about sentencing juries? Could we think about sentencing juries for sentences over a certain level? Are there ways in which we could husband our criminal justice punishment and stigma for the more serious cases and triage more of them out of the criminal system or, at least, use pre-trial probation to hold it over people’s heads such that they’re not going to get the book thrown at them unless they persist with a -- in the state system if you’ve had a minor crime, that might be enough of a deterrent to going and committing a more serious crime. I don’t have the answers here.

 

      The point is the Framers had their eye on the dangers of royal oppression, and they’re not exactly the same. History doesn’t repeat itself, but it sometimes rhymes. And I understand why some people fear that this hidden, low-visibility discretion that’s largely unchecked without a lot of rules and standards is something to be feared and something that occasionally results in abuse or even the conviction of the innocent.

 

Hon. Lisa Branch:  Thank you, Judge. And because you had to go first, why don’t we offer you a rebuttable?

 

Greg Brower:  Sure. Sure. Thank you very much, Judge. And thank you for those perspectives. Let me try to just hit on a few points that were mentioned, and then we’ll do some Q & A.

 

      With respect to the public participation issue that has been raised, as I mentioned at the outset, it is nice, in theory, that we would have more trials, that the populous would be more engaged in serving on juries and watching trials, etc. And that was a big point as many of you I’m sure know in—that Judge Goodwin from West Virginia has made in a couple of decisions in which he’s rejected plea deals in drug cases.

 

      But again, there is no constitutional right that belongs to the people to watch jury trials or to have them happen in cases where the parties don’t want to have them happen. And let’s face it—and this may sound a little cynical—but those of who have made our livings in and around the courthouses know this to be true: if we were all of a sudden to have 90 percent jury trials as opposed to 90 percent guilty pleas, no one would show up to watch those trials.

 

      The typical trial includes in the audience, maybe, one of the lawyer’s mothers, and a couple of interested people who may have wandered by, and maybe a couple of high school students who were there to get extra credit for their civics class. But there’s not a clamor, I would respectfully submit, on the part of the public to be able to watch more jury trials.

 

      In fact, if you’ve ever encountered a friend or a neighbor who received a jury summons to serve on a jury, what’s the first thing you hear? A complaint about having to serve on the jury. Forget about them going to watch one voluntarily. So I just think again, though, all snarkiness aside, it’s a matter of a defendant’s right, not the public’s right, that we’re talking about here.

 

      The innocent defendants “problem”—I’ll put that in quotes—is troubling, to say the least, to the extent it occurs, and we know it does occur, but in very, very isolated situations. It’s a one-off. It’s anomaly. It’s not, by any stretch, the norm. Certainly not in the federal system. And I would submit in the state system it’s far from the norm as well. That doesn’t mean it’s not a problem when it does exist, but it’s not a problem that, in my view, results from the proliferation of plea bargaining.

 

      With respect to the coercive argument, what makes some deals seem coercive—because of the great disparity between the sentence agreed to, or the charge agreed to, and the potential charges, and the potential sentence—is simply a function of what the statute -- the relevant statute provides, combined with what the sentencing guidelines suggest. You put those two things together, and if you have multiple counts, that’s a big number.

 

      The fact that the prosecution’s oftentimes—most oftentimes—willing to accept a smaller number for the certainty of a plea, in my mind, doesn’t constitute a defect in the system. In fact, that’s a very good thing for most defendants to have the ability to not face the maximum possible sentence and instead agree to something that’s much, much more reasonable and less onerous.

 

      The public defenders’ issue is interesting to me because I can tell you -- and I’m sure Judge Bibas had a similar experience with public defenders in the Southern District. They are, for the most part, very good, very aggressive lawyers for whom I have the upmost respect. They weren’t afraid of me when I was U.S. Attorney. They weren’t afraid of my AUSAs. And they were not afraid of the judges. If they thought a case had to be tried, they tried it. Even if they thought the case couldn’t be tried or shouldn’t be tried, but their client wouldn’t agree to a plea, they tried it. They did their best.

 

      The last case I tried personally as U.S. Attorney was a bank robbery case. The defendant, long story short, had robbed, I think, three banks, a credit union, two 7-Elevens, and a casino cage—this was in Las Vegas—in the span of about a week. Most of those robberies were captured on surveillance video. Public defender couldn’t get his guy to plea, and it went to trial. Judge wasn’t unhappy. He just saw at as part of the job. It’s probably a slam-dunk winner for the government, but if the defendant wants to try it, let’s try it.

 

      So I just don’t think there’s this built-in resentment or reluctance on the part of the system participants—the judge, the government, the public defender’s office—to take cases to trial when the defendant wants to exercise that right.

 

      The trial penalty issue is interesting as well. So as much as there arguably is a trial penalty, there’s also a trial bonus. And we’ve eluded to that. If the defendant feels as though he or she is innocent and wants to go to trial—yeah, the odds are stacked against the defendant in most criminal cases.

 

      But there’s a case right now somewhere in this country where a jury’s deliberating, and it looked like it was probably going to be a slam-dunk for the government, and that defendant’s going to be acquitted today. It happens all the time. And so, that’s the trial bonus, I would submit, that exists when a defendant exercises his or her right to go to trial.

 

      I would also point out that what we haven’t talked about here—and I know there’s a difference here, so I want to acknowledge that right up front. In the civil system, the civil litigation system, mandatory settlement conferences, and mediations, and everything that can be done to try to get the parties to settle their disputes is just part of the system now.

 

      And if someone were to suggest, “Well, too many civil cases are settling,”—and it’s also 90 percent plus—I think that would be laughable, right? We all like the idea that civil cases typically settle. It’s more efficient. And some would say, “Well, in the criminal system, the difference is, of course, we’re talking about somebody’s liberty.” But again, I get back to that someone is the defendant, and it is his or her right to decide whether to roll the dice or to work out a deal.

 

      And so, finally, I would—let me just look at my notes here. I don’t want to go on too long. The Sixth Amendment issue. So the Sixth Amendment provides for a trial by jury, but case law, of course, as we all know, has over time really explained that to mean that in serious felonies there’s a jury-trial right. And even then, the defendant can waive their right to a jury trial and choose a bench trial. But even then, the defendant can simply accept a deal and avoid trial altogether.

 

      So the Sixth Amendment, I think it’s clear, does not mandate that criminal cases be tried against the wishes of the defendant. So again, I would just finally submit that the bottom line is that with no constitutional defect undermining the plea-bargaining system, that common sense and the simple realities of our system dictate that it has to be part of the system, and it has to be up to the parties, with approval by the court, as an option in every criminal case.

 

Hon. Lisa Branch:  Thank you. And now for the panelists. Do you have any questions you would like to ask each other, or I can proceed to my questions?

 

Prof. Carissa Hessick:  I’d be curious what the ethics rules and the DOJ rules are that Greg referred to.

 

Greg Brower:  Yeah, sure. Just in general, I would say that the ethical rule is that a lawyer simply can’t charge a case without having the evidence to support that case. And that’s just, I think, fundamental. And I wouldn’t want to be the AUSA who goes before DOJ’s OPR for having indicted cases with no evidence. And that’s just, I think, Ethics 101.

 

      And beyond that, look, the department policy —unless it’s changed recently, and I don’t think it has—it has for some time been that the U.S. attorneys will charge the most serious readily provable offense that they can. No less and no more.  

 

      And so, within those confines, the idea of overcharging or charging to obtain leverage, despite not having the facts to prove those counts to trial, is simply unethical.

 

Prof. Carissa Hessick:  So I think I’d just add, I think, when Clark and others use the phrase “coercive pleas,” they’re not talking about prosecutors who are making up facts that don’t exist. Instead, they’re talking about prosecutors who are threatening to bring charges that they otherwise wouldn’t bring or offering to dismiss charges that they aren’t actually interested in getting convictions for in order to pressure people to plead.

 

      So, for example, the U.S. Sentencing Commission issued a report a few years ago on child pornography offences, because there’s this weird thing where possession of child pornography has no mandatory minimum, but receipt of child pornography has a five-year mandatory minimum. Can you possess child pornography without having knowingly received it? I don’t know. That sounds like a fun law school hypothetical.

 

      The point is, the sentencing commission, they did a huge study of thousands of cases across the country. And they found the only distinctive factor—the only thing that distinguished possession cases from receipt cases, as charged by U.S. attorneys offices across the entire country—was how quickly the defendant offered to plead guilty.

 

      And from my perspective, that suggests that (a) they’re not following the most serious readily provable offense, and (b) that that charge is being used only to pressure people to plead guilty. And I haven’t seen the Sentencing Commission do a similar study about 924(c) charges. That’s the additional five-year mandatory minimum that has to run consecutively to any sentence if you use a—or possess a gun in connection with a drug crime or what have you.

 

      But when I was clerking, that was the only time that those charges showed up. They showed up in superseding indictments where people wouldn’t plead to everything. 

 

Hon. Stephanos Bibas:  I’ll just add, there’s another common—federal prosecutors all know about the phone count. This almost never gets charged against a defendant initially. What happens is the defendant is charged with actual drug dealing, and then mysteriously when he agrees to plead guilty, there’s a superseding indictment where he pleads guilty to using a phone in a drug deal. And the only reason for that is the phone count has—at the time, I think, it was a four-year maximum sentence instead of the 20-year minimum sentence. So that the -- strong correlation with whether you went to plea or trial that you got that count.

 

      I’d like to add in another thing. You notice we’ve been talking about the rights of defendants, but I almost -- absent from our conversations have been the rights of victims. And since I’m a judge, I need to be careful to say: I’m not saying as a matter of positive law or normatively they ought to be symmetrical. And I do recognize that there are victims’ bills of rights out there, but they’re kind of tepid. But there are some rights to, at least, be notified of plea bargains, etc.

 

      But even if you think the defendant can make the right decision for himself or herself, you might be concerned, as a matter of agency cost, why the prosecutor is necessarily making the right decision that at least takes into account the victim’s interest as well as the public. A lot of people here get the problem of agency cost with administrative agencies. Well, the prosecutor’s another kind of agent, and may wear the white hat, may be the good guy. I’m not saying anything otherwise.

 

      But I do think that the interest of the victim and whether they’re being translated properly in a plea bargain is an important concern, and there’s not a lot of structure to the way that the prosecutor takes those interests into account.

 

Greg Brower:  If I could just respond to the last point, Judge.

 

Hon. Stephanos Bibas:  Sure.

 

Greg Brower:  That’s a very good point, Judge—the rights of the victims. You’re right, we have not talked about that, and that’s a significant and difficult dilemma for prosecuting offices. Because as much as prosecuting offices, and police departments, federal law enforcement agencies do care deeply about victims’ rights and try their very best to take care of victims, inform victims, and notify victims—in fact, every U.S. Attorney’s office has a victims’ rights coordinator who does nothing but that—it’s still tough.

 

      I can recall accepting a plea in a white-collar, Ponzi-scheme sort of case—a Madoff type case on a much smaller level—and hearing from victims who lost their life savings, in some cases. And the plea was absolutely the right thing. I think we were getting a 20-year sentence, if I recall.  

 

      But from the victims’ perspectives—and I heard this from more than one victim—the question was, “Well, I think that the defendant should get the death penalty.” And it’s a tough thing to respond to as a prosecutor. And, of course, I would say something like, “Well, you know, we don’t do that. The system doesn’t allow for executing fraud defendants. That’s just not” -- And the response routinely would be, “Why not? That was my life savings.”

 

      And so it is a very difficult thing. And I think offices do their very best to take into consideration the victim’s concerns. But again, it’s really, at bottom, the defendant’s right, not the victim’s right.

 

Hon. Lisa Branch:  Yes, Mr. Neily.

 

Clark Neily:  At the risk of giving opposing counsel more time at the podium, I have a question as well.

 

      [Laughter]

 

      For those who are familiar with this area of law, there’s a famous 1978 Supreme Court case called Bordenkircher v. Hayes. The question in that case was whether the following series of events was or was not unconstitutional.  

 

      A man in Kentucky was prosecuted for passing an $88 bad check for which the statutory range was 2 to 10 years. The prosecutor offered 5 years in a plea and told the defendant, “If you don’t take that plea, I will go and re-indict you as a habitual offender because you have two prior convictions, and that will be life.”

 

      In the case, it is acknowledged that the prosecutor made that threat for the express purpose of discouraging the defendant, Mr. Bordenkircher, from exercising his constitutional right to a jury trial. And I ask, Greg, putting aside ethics and law, would you—just descriptively—would you say that that is or is not coercive?

 

Greg Brower:   It could certainly be interpreted that way and –

 

      [Laughter]

 

Greg Brower:   - and I’ll rely on my counsel to the right of me to tell me I don’t have to say anything further if I don’t want.

 

      [Laughter]

 

Greg Brower:   Yeah. Especially, in the state systems, historically, we can point to any number of what might seem, to most in this room, as abusive tactics by prosecutors. That also is probably happening somewhere in this country today, somewhere. It shouldn’t, but it is. It’s part of the system. But again, it’s not the way the system is supposed to work. Those things, I think, are rare and should be called out when they’re discovered.

 

Hon. Lisa Branch:  And I have a question for Mr. Neily and Professor Hessick. We were talking about the most serious readily provable offense. Does that in and of itself set up the concerns, that you’re expressing with the plea-bargaining system? That if a prosecutor is going to be charging with that standard, is that what’s causing all of the issues you’re talking about or at least contributing to them?

 

Prof. Carissa Hessick:  So that standard is one that makes sense, right? If we have a set of statues that tell us what’s good and bad, and how much to punish them, it seems like in a rule-of-law system we would tell prosecutors, “Maybe you don’t to have charge every single crime that occurred, but you should find the one that’s most serious, that you think you could actually prove at trial, and that’s the one you should charge.” That makes perfect sense.

 

      What doesn’t make sense, to me, is that if you look in the congressional record, you will find efforts being made to either establish mandatory minimum sentences, or efforts pushing back against reform to repeal or reduce those mandatory minimum sentences. And you will see people from the Department of Justice say that those mandatory minimums can’t be repealed, that you shouldn’t be bamboozled by the fact that the text would seem to reach very low-level players.

 

      They use those statutes to pressure people to cooperate. So don’t think to yourself, “Is a five-year mandatory-minimum sentence the appropriate sentence for this crime?” Think to yourself, “Do we want people who do really bad things to go to prison? If you give us this mandatory minimum, we will let people plead to a lower crime, and we can use this sentence to pressure them to cooperate.” Literally in the congressional record.

 

      So I guess that’s where I find myself saying I appreciate that that’s the memo that the U.S. Attorney’s office has received from the Attorney General. But at the same time, you have DOJ telling Congress, “Give us mandatory minimums that we actually don’t expect to use. We aren’t going to argue that they’re appropriate sentences. We are going to use them to pressure people to flip.”

 

Hon. Lisa Branch:  Mr. Brower.

 

Greg Brower:  Yeah. If I could. Excuse me, Clark, just real quick.

 

Clark Neily:  Please take all the time you need.

 

      [Laughter]

 

Greg Brower:  Filibuster till five here. It’s a great point, Professor. It really is. And that leads me to a thought that I’ve had as we’ve been here today, and as I’ve been preparing for this, that a lot of the criticism of the system really points back to the legislature and the mandatory minimums, the statutory ranges, etc. And as the Judge mentioned in my introduction, I, at the state level, had the privilege of serving five sessions in my home-state legislature in Nevada. And if for every jury trial I’ve done, I’ve lost a year of my life. For every legislative session I’ve done, I’ve lost two years of my life, I’m afraid.

 

      But that really is, I think, a big part of what we’re talking about. This sounds, maybe, like a cop-out, but it’s, I think -- we all know what I’m talking about when I say that DOJ just takes what’s given by Congress in terms of everything from the mandatory minimums that exist, to statutory ranges, to the guidelines themselves, which are approved by Congress, and has to work within those constraints.

 

      Now, DOJ has a lot of latitude and a lot of discretion within those constraints. But a lot of the anomalies that some of us think we see when it comes to plea bargaining that relate to the threat of the mandatory minimum—let’s go talk to Congress. And that debate is actually happening right now on the Hill with respect to this piece of legislation that’s pending.

 

      But that’s where that buck stops, in my opinion.

 

Clark Neily:  I –

 

Hon. Lisa Branch:  And—oh, go ahead.

 

Clark Neily:  I have to say, I think that really sells DOJ too short. I think it really sells the creativity of DOJ lawyers far too short, that they’re just stuck with what Congress hands them. Let’s talk about whether readily provable offense—what that actually means by way of disciplining DOJ conduct. And we’ll do it in the form of an audience quiz.

 

      Who can tell me what the following have in common? Senator Stevens, Yates, Bond, Salman, Bundy, Enron. These are all cases that DOJ prosecuted, and went to trial, and resulted in debacles. Debacles for DOJ. DOJ took the position in all of those cases that presumably they had a readily provable offense and, oh, my, no.

 

      Some of them went down the tubes because of extraordinarily creative interpretations of law such as that a fisherman who threw fish overboard was engaged in document destruction.

 

      The Bond case, of course, was a woman who smeared some caustic element on a doorknob to get back at a friend who had become pregnant by the other woman’s husband. They charged that under the international chemical weapons treaty.

 

      Noor Salman was the wife of the Orlando night club shoot[er]. She was acquitted by a jury. The federal district judge was very angry at the prosecution in that case for some information they withheld.

 

      The Bundy case, of course, was an unlosable case in Nevada that the trial judge, the federal district court judge, dismissed with prejudice because of prosecutorial misconduct.

 

      And for those who forget the Enron case did result mostly in plea convictions. But there were six cases that went to trial and resulted in convictions and five of those were reversed on appeal.

 

      Consider what we are missing when 97 percent of criminal convictions are obtained through plea bargain, and we don’t get an opportunity to see how many of those cases would have blown up just like the ones that I listed. I’d like to know.

 

Greg Brower:  And –

 

Hon. Lisa Branch:  And—no, go ahead.

 

Greg Brower:   I was just going to say, Clark, and I’m afraid to say that I could add to your list.

 

Clark Neily:  [Laughter] Please do.

 

Greg Brower:   There are more than that unfortunately. Certainly, those in the department, and those who of us who are veterans of the department wince, to say the least, every time we see one of those situations. It does happen from time to time. Sometimes, I have to say, it’s a judge that just got it wrong—but vociferously got it wrong—and is out to get the department. But sometimes the department just screws up; that is absolutely true.

 

      But those are outliers, and though, they don’t really –

 

Clark Neily:  Well, are they outliers, by definition, because they went to trial?

 

Greg Brower:   Well, no. [Laughter] The defendant, again, has that—I get back to it’s the defendant’s right. I don’t know what we do with that other than let the defendant decide if they want to roll the dice or take a deal. And I’ll stop there.

 

Hon. Lisa Branch:  And, Mr. Brower, I have one question for you before I’m going to turn it over to the audience. So you’ve listened to the other panelists, and they have identified what they perceive to be problems with the plea-bargaining system. Are there any solutions that you see? Is it a legislative fix?

 

Greg Brower:   It’s hard, frankly, to see a solution. It’s interesting to talk about potential solutions. But I think if we had another couple of hours, we could run each potential solution to ground and find that we probably agree that wouldn’t quite work.

 

      I think there are two solutions that I would throw out there. They aren’t really solutions. But they’re principles that, I guess, the executive branch and the legislature branch need to keep in mind as we talk about this problem that the third branch has—arguably.  

 

      The first is the absolute necessity to ensure that the U.S. attorneys making these decisions are the best possible people that can be put into those positions. And I know that’s a very fuzzy concept that sounds great in principle. But I will tell you—and we all know this—the U.S. Attorney in any particular district has enormous power over all of these issues.

 

      I’ll let others judge my tenure. But let me just say that the U.S. Attorney who doesn’t make it his or her mission to closely supervise what his or her AUSAs are doing—and it’s hard to supervise. In the Southern District, Judge, 100s of AUSAs? In Nevada, 50 AUSAs. And districts in between. It’s hard, but it’s—and mistakes will be made, and the U.S. attorney can’t catch everything.

 

      But it’s just got to be the mission of every administration, every DOJ, to do its very best due diligence to make sure that those U.S. Attorneys, that are being selected, are the best and that their checks and balances on their powers. That’s number one.

 

      Number two, I get back to the first branch. If mandatory minimums, for example, are a big part of the perceived problem here—yes, there are arguments in favor of the necessity of mandatory minimums. But there’re also good arguments in favor of eliminating or reducing the number of statutes with mandatory minimums. And I think Congress needs to take a hard look at that.

 

Hon. Lisa Branch:  Well, thank you, and I’d like to turn it over to the audience. We have two microphones, and I will tell you if—good, I see some people standing up. If you weren’t going to stand up, there are people from Atlanta in the audience, and I was just going to start calling on them.

 

      [Laughter]

 

Hon. Lisa Branch:  So you’re helping all of those who are members of the Atlanta Mafia, whether they knew so or not. And I’m going to start over here.

 

Questioner 1:  So the quick preface, back in 1986 –

 

Hon. Stephanos Bibas:  Can you introduce yourself?

 

Questioner 1:  - Senator Thurmond and Senator Kennedy got together, and there was a bi-partisan agreement that we were going to create what became the sentencing guidelines. And one of the primary underlying reasons for that was it was considered wrong on a bi-partisan or a bi-ideological basis for person A to go to prison for 10 years and person B to get probation. Even sometimes in the same courthouse. There were all kinds of racial permutations to that. But there were also the problems that different judges have very different philosophies of what is deserving of a particular sentence.

 

      And post-Booker, we are now back in that universe. To the extent we are talking about sentencing guidelines and not mandatory minimums, we are seeing judges engage in the exact same behaviors that the guidelines were designed to ameliorate or eliminate. And I was wondering what any of the panelists think about that, particularly in the context of has it affected plea bargaining?

 

Hon. Lisa Branch:  Who would like to take that?

 

Greg Brower:   I could try to start.

 

Hon. Lisa Branch:  All right.

 

Greg Brower:   And then I would be happy to hear from others. I don’t know—that’s a great question. And, look, the genius of the guidelines—especially when they were mandatory, despite the eventually revealed constitutional infirmities—was that they did, in effect, ameliorate the problem that was eluded to.

 

      Let’s just say, for example, the African American bank-robbery defendant in Alabama would no longer receive a harsher sentence than the same sort of defendant in San Francisco. That was the idea. And there’s a certain genius to the way that was done. In fact, in my home state of Nevada, we don’t have sentencing guidelines, and I’ve long been a proponent of going to a federal-type system.  

 

      I don’t know that there’s enough evidence yet to know what, if any, the effect Booker has had on—and its progeny have had on that. My sense is that judges are more-or-less following the guidelines despite their advisory nature. But I would be open to suggestions to the contrary by those who may have studied it recently.

 

      Just in general, the system of uniform guidelines guiding judges in very different parts of the country to deal with similarly situated defendants who have committed similar crimes the same makes a lot of sense, and should be the way it works, in my view.

 

Prof. Carissa Hessick:  Yeah. I would just add, I think, that what’s happened in the wake of Booker really depends on where you are. Some districts, judges vary more than others. I’d say I think one big problem with the sentencing guideline is once we sat down and tried to figure out what made people similarly situated and what made them differently situated, we actually realized it was a way more complicated task.

 

      And the guidelines that ended up being written -- if you’re interested in this, I highly recommend—it’s a bit dated at this point—the book by Professor Kate Stith and Judge Jose Cabranes that talks about the particular guidelines that were chosen, and why they were so problematic, and how more happened with the adoption of the guidelines than just trying to make sentencing similar -- was also made significantly more severe.

 

Hon. Lisa Branch:  All right. Let’s take a question from over on that side.

 

Questioner 2:  Yes. Thank you for coming here and speaking today. A number of scholars have pointed out that federal enforcers rely heavily on the resources of local police officers and enforcers. For example, local officers make most of the arrests for convictions at our current federal court. They convey a lot of the information that is used by federal prosecutors. How, if at all, does this interaction play positively or negatively into plea bargaining?

 

Hon. Stephanos Bibas:  Well, there’s really very little in the way of rules that governs when a joint federal–state task force decides to take something federal rather than state. And so, you might imagine that the principle would be what has the most inter-state effects? And sometimes that’s true. If a conspiracy spans several states, it’s easier—as a matter of venue and subpoenas and things—to get the witnesses together in federal court.

 

      Sometimes it’s a matter of, well, who deserves the most punishment? Or who has the longest criminal record? Or where do we need to draw cooperators or witnesses from? And the federal system is more set up for multi-defendant cases involving cooperation.

 

      The evidence I’m aware of suggests a fair amount of randomness or chance in terms of whether the tip happened to come to the cop or the FBI agent and whether that person had a good relationship with somebody in the DA’s office or the federal office. My sense is, more often, the feds get first dibs. But there’s not a lot of good rules or policies to structure this.

 

      It went so far that, 30 years ago, Rudy Giuliani, when he was U.S. Attorney in Manhattan, announced Federal Day. There was going to be one random day a week where all the drug cases were going to go federal. And, well, he was going to show off that he was doing a lot. The problem is it’s actually the worst way to deter because the people just put off their drug deals till the next day.

 

      [Laughter]

 

Hon. Stephanos Bibas:  But it doesn’t strike me as a really measured, respectful-of-federalism-and-the-commerce-clause kind of way to allocate which cases go federal and which cases go state.

 

Hon. Lisa Branch:  Anyone else? We’ll take over here.

 

Questioner 3:  And thank you. Mr. Brower, you said something that was very intriguing. I’ve had dozens of cases where it got to the point where the defendant did not accept the plea. And then—I’m from Kentucky, so I’m very familiar with that case—he commonwealth’s attorney says, “Oh, well, I’ll just indict you for a persistent felony offender, which takes a 1 to 5, then to a 5 to 10 on a low-level felony.”

 

      You mentioned that, well, if the prosecutors are doing that, you should go report it, but if you have—in our state, we have elected prosecutors, and the prosecutors—that may be what they do. And that may be how they run their office with their assistant prosecutors. So when you have situations like that that obviously are putting it in a coercive nature and situation, what do you do as a member of the defense bar when that is the policy of the office of the elected commonwealth’s attorney?

 

Greg Brower:  Yeah, that’s a great question, and if it doesn’t otherwise constitute a violation of some state bar rule, or some ethical rule, or a court rule -- that’s the problem with elected prosecutors, in my view. My FBI SAC and I in Las Vegas used to talk often about how lucky we were, frankly, that unlike the elected DA and the elected sheriff in Clark County, we didn’t have to worry about politics or what people thought. We just did the right thing every day, as best we saw it, and didn’t have to worry about that nonsense.

 

      But as a result, we were under the umbrella of DOJ that enforced that we did the right thing, right? With an elected DA, yeah, that’s an interesting dilemma.

 

Questioner 3:  Because if you do take it to the next level, and file—sorry, Judge, I don’t mean to ask a follow-up. But –

 

Hon. Lisa Branch:  But I am.

 

      [Laughter]

 

Questioner 3:  If the only remedy –

 

Clark Neily:   It’s an actus reus, not a mens rea.

 

      [Laughter]

 

Questioner 3:  If the only remedy is to, then, file something with the disciplinary council, as someone who may practice criminal law on a frequent basis, you’re kind of that guy who did that, and your clients are never going to—there will be other repercussions if you do that.

 

Greg Brower:   And compound that with elected judges who may be afraid to reign in that elected DA –

 

Clark Neily:  Right.

 

Greg Brower:   - because they have to run again, and they don’t want to appear to be against law enforcement. Yes.

 

Hon. Lisa Branch:  And I hope I’m not going to have jump in here as a former elected judge, but I’ll [crosstalk 1:20:51]

 

Clark Neily:  Judge, can I respond to this –

 

Hon. Lisa Branch:  Yeah.

 

Clark Neily:   So it turns out there’s actually an app for this.

 

[Laughter]

 

Clark Neily:   And it’s this wonderful thing called a founding-era jury. And actually, during the founding era, jurors were told something that modern-day jurors are not, and that is the punishment that the defendant will likely receive if they convict. And this was to enable them to exercise the two roles that juries have, throughout 1000 years of Anglo-American history, exercised—and used to exercise in America up until less than a century ago. And that is the fact-finding role that they still exercise, and the injustice preventing role that is sometimes referred to as jury nullification, but is more accurately referred to as conscientious acquittal.

 

      This was a founding-era practice that was very much in the mind of the people who wrote our Constitution. And the idea was that if the prosecution cannot go to bat for the punishment that they are threatening the defendant with, then it is permissible, and indeed perhaps even laudable, for the jury to acquit even a factually guilty defendant.

 

      And what I would propose—and I think is coming regardless of how prosecutors feel about it—is that juries from now on should be informed of the likely punishment for the defendant if they convict. There are two ways to do that, by the way. One is to request that the judge give the instruction. That is impermissible in some jurisdictions, actually. In other jurisdictions, it’s an open question. The other way is for ordinary citizens to simply communicate that information.

 

      My wife was called for jury duty in—ironically enough in front of the very judge that I clerked for, Royce Lamberth. So she didn’t get seated. But if that had been a drug—let’s say a drug prosecution, and she came home one night, and said, “I’m really troubled. This guy’s definitely guilty. He was definitely selling drugs, but he seems like a good guy. It seems like, maybe, he just fell off the wagon. He’s selling a few drugs to support his habit. I’m not sure I feel comfortable convicting him. Can you figure what’s likely to happen to him if we convict?” If I go and get that information and share it with my wife, that is felony jury tampering.

 

      And that raises very serious First Amendment concerns. Just sharing truthful information with my wife about that case could be prosecuted by the government as jury tampering when I’m doing something that is precisely consistent with founding-era practice. They would essentially be trying to impose a completely novel vision of the jury as being solely about fact finding that is inconsistent with 1000 years of Anglo-American precedent. I would like to tee that issue up in court as a First Amendment issue. And in fact, my colleagues and I, at Cato, are working on doing that.  

 

Greg Brower:  Interesting. Of course –

 

Prof. Carissa Hessick:  I know we need to get to the next person. But I study elected prosecutors, can you find me after?

 

Questioner 3:  Yes, ma’am.

 

Prof. Carissa Hessick:  Thank you.

 

Hon. Lisa Branch:  And I would like to find out how a former prosecutor feels about the issue of jury nullification. Mr. Brower.

 

Greg Brower:   Conscientious acquittal. Yeah. I was just going to—Clark, as you know your wife violated the judge’s admonition when she came and talked to you as well.

 

      [Laughter]

 

Greg Brower:   That’s not a felony though.

 

Clark Neily:  To be clear, she was never seated.

 

      [Laughter]

 

Greg Brower:  Jury nullification. Yeah. I’d like to think that good prosecutors make the best call they can on whether and how a case should be indicted. But good prosecutors also know that it’s never a slam-dunk. And sometimes juries, for whatever reason—a witness goes south on you. A jury just sees the evidence differently than the lawyers and the government office saw it. The jury can do that. It does do that. It’s the de facto—as was mentioned—a de facto option, the jury has, if not, a completely legal one. So I’m not sure what I think of it other than I always tried to avoid it. [Crosstalk 1:24:43]

 

      [Laughter]

 

Hon. Lisa Branch:  All right. And let’s go over here.

 

John Hayes:  Yes. My name is John Hayes, and I’m from Austin, Texas. And I would like to initially address this to Mr. Neily, and then hear what the others may have to say. I’m a civil lawyer. I think I’ve been involved in one criminal case in my entire career, where I was appointed by the federal judge to be the assistant attorney to defend someone. And that did go to trial because he would not—over our advice—would not agree to the plea bargain.

     

      But I was struck and would like to hear the comments on the validity of the analogy to just civil settlements. Because I’ve been involved in countless civil settlements over the years. Both of lawsuits and with regulatory agencies. And a couple of things strike me as radically different, and I’d like to hear the comments on.

 

      One, in civil settlements I’ve been involved in, nobody was facing time behind bars. And at least to most of us, that’s far more serious than just facing paying out money even if it’s most of my life’s savings.

 

      And secondly, when we do a civil settlement, including a mediation—we heard analogy to that—I tell my clients we don’t want to go into mediation until we’ve done full discovery and gotten the information from the other side. And it’s my understanding, we normally don’t have that in the criminal process. And I tell them that we need to have a heads-up. You also need to make sure that nobody’s bought off a witness against us, if we can, by offering favorable terms and another deal. And I’d like to hear the comments on that. Thank you.

 

Clark Neily:  Thanks, John. You and I are both from Texas, so I’m going to share an expression I learned when I was practicing law in Dallas from my mentor. It was a different setting, but I’m going to adopt it for this setting.

 

      “In a criminal plea negotiation, the role of the defendant is very much like the role of the pig in a ham and egg breakfast. The chicken participates, but the pig is fully committed.”

 

      [Laughter]

 

      Prosecutors have, basically, no skin in the game during a plea negotiation. And we know this based on the number of years that they’ll offer up. The Aaron Swartz, where they charge him with 35 years, and the prosecutor’s like, “But, you know, well, let me just give you 34-and-a-half years.” It’s like they’re playing with Monopoly money. That’s not a true negotiation because the defendant absolutely has skin in the game.

 

      Think about if you were involved in a plea negotiation, what the value—or the cost that you would assign to every additional year in prison. You’re probably looking at $500,000 or $1 million per extra year in prison. That is a very real, tangible cost to you. And you’ve got a prosecutor across the table who’s basically playing with Monopoly money. What do they care if it’s 30 years or 20?

 

      And so, they have this tremendous ability to go up and down that is not matched by your ability to go up down. And Judge Bibas mentioned that, I think, during his talk. And so, the other thing that I want to underscore, that he pointed out as well, is that in a negotiation, in a true negotiation, the counter-party doesn’t have the ability to just arbitrarily set whatever it is you’re negotiating over at whatever level they want to. We could probably get to a 100 percent plea-bargain rate in this country if we just made the penalty for every crime life without the possibility of parole. Ninety-seven percent? Those are rookie numbers.

 

      So that’s the, I think, one of the biggest differences between a true—and I was a civil lawyer throughout my career, and I’ve been in plenty of negotiations. And I didn’t get to just move the goal post whenever it served my negotiating position. But that’s exactly what the government gets to do in the criminal justice system writ large. Not necessarily in the—well, actually, yes, necessarily in the context of a specific plea negotiation. You can always go back and re-indict for conspiracy or a habitual offender if you want to up the cost to the defendant.

 

      So I think there’s basically zero comparison between a civil negotiation and a criminal plea negotiation.

 

Prof. Carissa Hessick:  But there doesn’t have to be, right? You could have motions to dismiss. You could have complete discovery and depositions. You could have motions for summary judgement. You could have all of these rules. And, in fact, when the federal rules of criminal procedure were initially written, they were written by the same folks who wrote the federal rules of civil procedure, and they were going to do them the same. And then at the last minute they decided not to because they thought it might be too onerous for one side. I’m happy to refer you to a law review article about that if you’re interested.

 

      But you might think to yourself, “Well, that sounds crazy. Why would you have a real motion to dismiss? How would you have full discovery with depositions? How would you have summary judgment in a criminal case?”

 

      But actually, if you look around the country, in different state systems, you can find pieces of these things in different systems. So our system, if we want our criminal justice system to be a system like the civil system, where the assumption is we really hope that you settle, we could change the procedures to look like that instead of wholly failing to regulate it, which is what we do right now. And we can see it actually happen in other courtrooms in different places, at least piecemeal, if we want to.

 

Greg Brower:   Yeah. Now, just two things, real quick, to my civil colleague. Thank you for that question. So first of all, in the federal system anyways, the defendant does have discovery before a plea deal is typically done. That’s what forces most plea bargains is the case is indicted, discovery is provided, the defense lawyer looks at the discovery, and says, “Holy cow. We need to get you a deal. Let me tell you what the government has.” And a plea bargain is worked out. At least, in the federal system that’s the normal way things are done.

 

      To your first point, I’ve litigated more civil case than criminal cases, like you. And I’ll tell you that you’re right about the difference in exposure. In civil cases, the exposure is typically money, sometimes a lot of money. And in the criminal case, it’s much more important. It’s one’s liberty, perhaps one’s life.

 

      That is why, in my view, it is so important to allow the defendant facing that exposure to make the decision on whether to accept the deal or go to trial. And again, for me—if I’ve said it twice, I’ve said it three times now—that’s the bottom line. This is a right the defendant has along with the executive. They come together. They reach a deal. Judge doesn’t find it’s defective. That’s got to be the way the case ends.

 

Hon. Lisa Branch:  Let’s go over here.

 

Questioner 5:  Thank you. I have a question about, maybe, the potential costs of separation of powers in this system. I guess among the legislators, who write those statutes in the guidelines, and the prosecutors, who are doing their best to follow them -- and then there are the public defenders, jurors who aren’t told the punishments, etc. I wonder if whether, and to what extent, the responsibility to do justice is so dispersed that the substantive of moral order that the criminal law system is trying to uphold gets lost in the shuffle. And only more so thanks to negotiations being put into the mix.

 

Clark Neily:  Why –

 

Hon. Stephanos Bibas:  I think –

 

Clark Neily:   Go ahead.

 

Hon. Stephanos Bibas:  That’s a hard one.

 

Greg Brower:   That is a hard one.

 

Clark Neily:  A very fascinating argument that some have made is that in fact the jury can best be seen as a fourth branch of government, and that in order for the government to convict anybody of a crime, they should have to clear all four gates. So you should have to have the legislature decide to criminalize the conduct. You have to have the executive decide to prosecute it. You have to have the judiciary willing to not dismiss it, at least in theory.

 

      But then, an absolutely vital part of the system was meant to be that you don’t get that conviction unless you can get a super-majority of 12 members of the community to be the final gate, and say, “Yep. That’s an appropriate thing to convict somebody of.” So in a sense, you could see the jury as a fourth branch of government. And if that is a potentially valid way of looking at it, to almost completely eliminate from the process this kind of quasi-fourth-branch of government should trouble us, at least as much as the separation-of-powers issues that you have raised in terms of the elimination of a mechanism that is absolutely at the heart of American criminal justice, and that’s public participation.  

 

Hon. Stephanos Bibas:  de Tocqueville actually calls it the judiciary bicameral, and the upper house is the judge, like the senate, more removed from the people, and the lower house is the jury. It’s more directly popular responsive. And you have to get the ascent to both before the government can exercise its coercion.

 

Clark Neily:  I’m tempted to run out the clock because I see Orrin at the microphone, but I won’t.

 

      [Laughter]

 

Hon. Lisa Branch:  We’re actually only going to take one more question because we’re running out of time. We’re going to take one over here.

 

Questioner 6:  So this has been a terrific panel, and there’s been some discussion of the difference between the federal system and state systems. And I was hoping there could be a little bit more discussion of it specifically on the issue of—is there any particular system that you think is best? We’ve got 52 jurisdictions, right? That’s 50 states and the District of Columbia and the federal system that are all dealing with these questions. Is there any one that you think handles these intractable problems better than the others and, if so, why?

 

Hon. Stephanos Bibas:  So what I’m aware of—I don’t know a lot about military justice. But my understanding is the military justice system has serious plea review. It has vigorous adversarial combat on both sides with a rigorous -- very good lawyers and a very professional judiciary that is skeptical and tosses some cases out. Military juries toss some cases out.

 

      The problem is the difference between trial and plea is so great. The chances that we’re going to make our trials in the civilian system so much less costly and safeguarded are almost nil. But the chances we could bring the level of safeguard up in pleas is substantial. So I really like the late Bill Stunz’s idea that, let’s have judges inquire more deeply into the factual basis of pleas than they do in the typical state courthouse in America where pleas are entered in a minute or two, and sometimes there’s much of a factual basis. And when you get to an Alford—a no-contest—plea -- and I know these are not common in the federal system, but a lot of states, 5, 10 percent of convictions come from people who either say, “I’m not contesting this,” or affirmatively, “I’m innocent, but I’m pleading guilty.” Well, you don’t get to do that in the military system. You really have some rigorous checks to make sure that this is not just a collusive deal or made-up facts, but the judge finds this is what actually happened.

 

Clark Neily:  So I’m not sure that there’s any state that’s exactly getting it right. But I do want to end on a really—what I hope is a very optimistic note. And I want to pick up on something that Greg said, which is that it’s so common—t’s part of our cultural ethos—that you complain when you get the jury summons. Everybody complains; and that’s probably true.

 

      But, you know what? Talk to somebody who’s served on a jury and see if they’re complaining then. They don’t. What people who have served on juries say is that it is one of the most profound experiences that they have ever had in their entire life, and it served to reconnect them to this country and to the wonderfully exceptional place that America is and was meant to be. And it is jury service for many people that does that for them. If for no other reason, that is a reason to try to push down the amount of plea bargaining and bring that back, the criminal jury trial. Because it connects people to what is special about this country, and we’ve basically eliminated it.

 

Hon. Lisa Branch:  I really think we have ended on the perfect note with that. And thank you all. Thank you all for being here. And thank you to the panel.

3:30 p.m. - 5:00 p.m.
Masterpiece Cakeshop and Its Implications

2018 National Lawyers Convention

Topics: Religious Liberty • Religious Liberties
The Mayflower Hotel - Grand Ballroom
1127 Connecticut Avenue, NW
Washington, DC 20036

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The Supreme Court’s decision in Masterpiece Cakeshop v. Colorado Civil Rights Commission was unexpectedly based on religious free exercise (rather than free speech) and the evidence of bias in the proceedings of the state commission. This panel will explore the opinions in Masterpiece Cakeshop and the implications of the case for the First Amendment’s religion and speech guarantees. Among the topics discussed will be the differences among the majority and concurring opinions on the free exercise and free speech issues, whether the free exercise holding will have wider reach beyond the specific facts about the Colorado commission’s handling of the case, and implications of Masterpiece Cakeshop for other cases involving freedom of speech or religion and anti-discrimination laws, such as Arlene’s Flowers Inc. v. Washington, which was remanded for consideration in light of the Masterpiece decision.

  • Prof. Thomas C. Berg, James L. Oberstar Professor of Law and Public Policy, University of St. Thomas, Minnesota School of Law
  • Prof. Gerard V. Bradley, Professor of Law, University of Notre Dame Law School
  • Ms. Louise Melling, Deputy Legal Director and Director of Center for Liberty, ACLU
  • Moderator: Hon. Andrew S. Oldham, United States Court of Appeals, Fifth Circuit

Speakers

Event Transcript

Bill Saunders:  Hi. My name is Bill Saunders. I am the Chairman of the Religious Liberties Practice Group, and I welcome you all to this session. Thank you for coming. I want to just say two things. Number one, if you're interested in these issues, please join our practice group and participate as much as you'd like. We'd love to have many of you. This may be an issue you have been involved in. Please join us. The second thing is I just want to turn the program over to the Judge Andrew Oldham from the Fifth Circuit Court of Appeals who will introduce the panel and conduct the session. But again, thank you for coming.

 

Hon. Andrew Oldham:  Thank you very much, Bill. I am going to give just a brief introduction for our various panelists. In typical Federalist Society form, we have an all-star lineup to talk about a very important case today. The full bios for our illustrious panelists are in your handout materials, also on the app and on the website, so you can read more about them.

 

      But first is, to my left and your right, is Tom Berg. Professor Berg is a Professor of Law and Public Policy at the University of St. Thomas School of Law. He is the author of several casebooks, including perhaps the leading casebook on today's topic entitled Religion and the Constitution, which he published with Michael McConnell and John Garvey through Aspen Press. And he clerked for Judge Alvin Rubin on my court, the U.S. Court of Appeals for the Fifth Circuit. So thank you for joining us, Professor Berg.

 

      To his left is Gerry Bradley. Professor Bradley is a Professor of Law at the University of Notre Dame, where he also co-directs with John Finnis the Natural Law Institute. He's written numerous articles that bear on today's discussion, including a book entitled Challenges to Religious Liberty in the Twenty-First Century, published by the Cambridge University Press in 2012. He also participated in the Masterpiece Cakeshop case. He signed an amicus brief, along with 33 other legal scholars, in support of the petitioners.

 

      And then last, but certainly not least, Louise Melling. Louise is the Deputy Legal Director for the ACLU and the Director of its Center for Liberty. She served as counsel for the Obergefell petitioners in the landmark 2015 decision of Obergefell v. Hodges. And she served as counsel for Charlie Craig and David Mullins, the two individuals who asked Jack Phillips to create a wedding cake in the Masterpiece Cakeshop case.

 

      So without further ado, I'm going to turn it over to Professor Berg who's going to give a brief overview of the case, and then his take on it.

 

Prof. Thomas Berg:  Thank you, Judge Oldham. Jack Phillips, the owner of Masterpiece Cakeshop in suburban Denver, designs and creates custom wedding cakes and other baked goods. He declined a request for a wedding cake from a couple, Charlie Craig and David Mullins, on the ground that he does not design cakes to celebrate same-sex weddings because of his religious belief that marriage is only for one man and one woman. The Colorado Civil Rights Commission held Phillips liable for sexual orientation discrimination, ordering him to design same-sex wedding cakes if he designs wedding cakes at all. The state courts upheld the order, but the Supreme Court reversed, seven votes to two.

 

      Phillips had presented two First Amendment arguments. First, that penalizing him for his refusal to create the cake compelled him to express a message that he opposes, namely, celebration of a same-sex marriage. And second, that it violated his right to the free exercise of religion. The Supreme Court ruled based on free exercise. The standard for the Free Exercise Clause under the Court's precedents is that the law in question must be, quote, "neutral toward religion and generally applicable," end quote.

 

      The Court held that the State, in applying its non-discrimination law, had acted not neutrally, but with hostility towards Phillips's religious beliefs and actions in two ways. The first aspect of hostility involved statements by two commissioners denigrating Phillips's beliefs in ways that the Court held were improper for officials charged with adjudicating his case fairly. For example, one commissioner said that Phillips's acts were an example of, quote, "using your religion to hurt others," which she called a "despicable piece of rhetoric" and analogized to religious defenses of slavery and the Holocaust.

 

      The second evidence of non-neutrality toward religion was that the State had earlier allowed three other bakers to refuse a fundamentalist Christian's requests for cakes with religious messages against same-sex relationships. The State had said that those refusals did not discriminate against the customer's religious belief, but that Phillips's refusal to create a cake celebrating a same-sex marriage discriminated against same-sex couples. So the Court noted particularly that the State had reasoned inconsistently about the two sets of bakers. For example, one of three or so, four inconsistencies – the Commission and courts had said that the wedding cake would reflect the customer's message, not Phillips's, the baker's, but treated the anti-gay cake as reflecting the other baker's message, not the customer's, which they, they other bakers, could decline to send that message; so an inconsistency.

 

      All right. There's a very quick summary of the case and what the Court held. Let me give my own very quick thoughts. I approach the conflicts between same-sex marriage and religious liberty from the perspective of having supported both rights in Supreme Court briefs and in articles. The Court was correct to hold that same-sex couples should be able to live consistently with their identity by being civilly married. Jack Phillips, likewise, claimed the right to live consistently with his identity, his religious belief about the nature of marriage.

 

      The very arguments that underly protection of same-sex marriage also support strong protection for religious liberty. Both same-sex partners and traditional religious believers seek to protect a fundamental component of their identity, including freedom to pursue conduct that flows from that identity, whether it's marrying a life partner or living according to God's principles. Both also claim the right to live their identities in public settings, not just in the closet, so to speak. Same-sex couples should have access to civil marriage and to goods and services in the marketplace. But religious believers, likewise, have a strong interest in living out their beliefs, not just in church, in the house of worship, in the closet, so to speak, but in their daily lives, in religious charities, and in their livelihoods.

 

      So many folks, perhaps some on this panel, think that one side in this struggle, same-sex couples or religious conservatives, must significantly prevail and restrict the other. That is a recipe for dangerous cultural conflict and resentment, and for human suffering either way. Religious freedom exemptions in the for-profit sphere do need to be limited and carefully defined, but Jack Phillips fit within a limited category: small vendors forced to provide, in this case, expressive goods or services to endorse or celebrate an event, here, a wedding—and in the vast majority of cases, it's a wedding—to which they deeply object and where other providers are readily available.

 

      So the Masterpiece opinion fits the project of protecting both sides, especially in its holding that states must protect religious objectors to gay marriage if they allow secular objections to anti-gay messages -- well, or could be religious objections to anti-gay messages, too. I don't mean to label that only as a secular position by any means. This principle of consistency of no double standards is potentially powerful. Left-leaning states and cities will be unwilling to force socially liberal vendors to produce goods with conservative religious messages in violation of their conscience. Those states cannot then turn around and require religiously conservative vendors to produce goods with messages in violation of their conscience.

 

      But it's unclear whether courts will enforce this requirement of consistency seriously. Four Justices in Masterpiece signaled that they would not. Justice Kagan in concurrence, Justice Ginsberg, dissent, each joined by another Justice, argued that these two sets of bakers were actually different, even though the State hadn't reasoned correctly about them, as Justice Kagan said. But they were different and could be distinguished if you reasoned it through correctly because the protected bakers refused to make—this is mostly a quote from Justice Kagan—to make a cake, that is one with an anti-gay message, that they would not have made for any customer, while Phillips refused to sell same-sex couples a cake, a wedding cake, that he would have made for an opposite-sex couple.

 

      But that ignores that a custom-designed wedding cake has a message, too. The content of that wedding cake might be explicit, even if it's symbolic because symbolic content is protected speech as well, protected message as well. A rainbow design, for example, on a wedding cake, and that is a cake with a rainbow design that Jack Phillips would not sell to anybody. Now his design process -- they never got to the point of discussing that with the couple, Craig and Mullins, but his design process seems very likely to produce such symbolism because he testified that his process involves learning his customer's, quote, "desires, their personalities, their personal preferences," so as to, quote, "design the perfect creation for the specific couple," end quote. That process aims to present the marriage in an affirming light, which Phillips said he could not do here.

 

      Even without explicit symbols, a wedding cake still sends an affirming message. The cake says, explicitly or implicitly, this marriage is to be celebrated, and in context, that is a same-sex marriage. Context matters to determining the cake's message. As Justice Alito observed in a hypo at oral argument, if you have a cake that says "November 9, A Great Day," that cake means something very different when it's provided for a birthday party on that day versus provided for an anniversary celebration of Kristallnacht on November 9th. So it's a strong case that the custom-designed wedding cake is expressive.

 

      I don't believe that that opens the door to widespread denials of wedding services, for example, say, by the tailor, or the hair stylist, or some of the other hypotheticals that were brought up at oral argument. Couples cut the wedding cake as a symbol of their union. There is nothing like that for tuxedos or hairdos. Making people look good is not a celebration of the marriage. Now, we have another case coming up, back to -- coming back to the Court at some point, the Arlene's Flowers case about a florist, and we can talk about that in the, I'm sure, in the question and answers.

 

      This discussion is about the cake's message, which sounds -- in Phillips's compelled speech claim, but the Court decided based on free exercise. In fact, his free exercise claim overlapped with the free speech claim because the other bakers were allowed to refuse cakes with messages, and so Phillips's claim for consistent treatment depended on showing that the custom wedding cake has a message, too. And I think that will usually be the case in these situations where the claimant appeals to the treatment of other similar cases.

 

      Now, there are multiple other reasons besides whether the activity is expressive or not why we're not -- I don't think we are going to have a lot of refusals that will present a constant case of indignity for gay and lesbian couples. Businesses have commercial incentives against turning away customers. In jurisdictions where non-discrimination laws exist, which is, after all, what we're talking about because we're talking about exemptions from non-discrimination laws, in those jurisdictions, the dissenters from gay marriage are likely to be a minority in the first place. And they may also face boycotts and other pressures if they refuse. There are lots of other incentives to not refuse. And in those cases where refusal would cause material loss of access to goods or services because of a lack of alternative providers, I'd say there'd be a compelling interest.

 

      An exemption means that same-sex couples will very occasionally be referred elsewhere and feel insulted and demeaned. That harm is real, but it can't be considered in isolation. The baker forced to violate his faith suffers dignitary harm, too, and materially, his harm is greater. If Craig and Mullins lose -- I'm speaking in present tense, the case is still going on -- they still get to live their lives by their own values. They will still celebrate their wedding, still love, each other, still be married, and still have their occupations. If the baker loses, by contrast, he will not get to live his life by his own values. He will have to violate his conscience repeatedly, making wedding cakes for every same-sex couple who requests, or else abandon his occupation. Those permanent harms on the objector's side are greater than the short-term dignitary harm on the couple's side. And I'll stop there.

 

Hon. Andrew Oldham:  Thank you very much.

 

Prof. Gerard Bradley:  Religious liberty was planted in America by Protestants working on distinctly Protestant soil. Their handiwork was, nonetheless, supple enough to absorb the shock of Roman Catholicism during the 19th Century and to survive the death of the implicit Protestant establishment by the beginning of the 20th. By the end of World War II, American religious liberty had successfully incorporated Judaism into the new tri-faith America, thus the Judeo-Christian tradition.

 

      And by that time, American religion had Balkanized into some 250 different sects, at least according to one Supreme Court Justice. According to another Justice, Robert Jackson, who observed in 1944 in U.S. v. Ballard, he observed that "in this country, scores of sects flourish by teaching what, to me, are queer notions." Now these sects included Jehovah's Witnesses, who characteristically believed no human government. God's sovereignty over the universe is undivided. They refused to salute the flag, and they bitterly denounced Catholics, yet the Witnesses won big religious liberty victories in the Supreme Court in cases where they did these things.

 

      Now, in the 1960s, American religious liberty digested religious individualism. What I mean is that existentialists who doubted God and other loners who professed no creed and belonged to no sect won Supreme Court victories, too. And here I'm thinking of the United States v. Seeger and Illinois v. Frazee. Now, each of these encounters left its mark. Religious liberty in America changed, but grew stronger and more inclusive as it encountered each of these new challenges, even in the 20th Century as America experienced profound secularization. But the American institution of freedom of religion weathered that challenge, too.

 

      But I think that identity politics, which suffuse the same-sex wedding vendor cases, poses a grave threat to religious liberty. Indeed, for the first time in American history, it recently became respectable to publicly oppose religious liberty and its overarching value in our polity. Now, this unprecedented turn is ominous. It will not only -- or is not only already diminishing our constitutional law, it will remap our common life, for religious liberty has always been a strategic lynch pin of our political culture. Now, of course, Americans in the past often opposed particular claims of religious liberty by Latter-day Saints concerning polygamy, by Catholics who resisted Protestant observances into public schoolrooms, and by Native American parents claiming their rightful authority to direct the religious upbringing of their children.

 

      In past debates about the precise scope of religious liberty, though, no one publicly questioned the great and general value of religious liberty itself. But what's happening now is different. Opposition back then was to a specific activity of a particular religious group, say Mormon plural marriage. What's happening now is happening to religion across a broader front of issues, while the percentage of Americans who belong to some sort of religious body or church, or even say that they believe in God, are at all-time lows.

 

       And the brunt of this new hostility to religious liberty is not being borne by religious minorities, either. Christians who adhere to what was, until recently, America's common morality are instead its chief victims. Besides, when Mormons, and Catholics, and Indians found themselves on the short end of the religious liberty stick, no one associated religious liberty itself with unjust discrimination or with demeaning anyone's dignity. Much less did anybody associate religious liberty with hatred or bigotry, but now many people do.

 

      Now, someone might be thinking that all this really means is that the sexual revolution is threatening religious liberty, and what's new about that? Well, think again. The Religious Freedom Restoration Act passed unanimously in the House and with just three dissenting votes in the Senate in 1993. I noticed the rebellion against sexual morality when I was in high school. How could any teenage boy not notice? And I discovered that college life was in full debauch mode when I enrolled at Cornell in 1972. No, the sexual revolution is part of the gale force headwind buffeting religious liberty, but sexual freedom itself is not nearly sufficient to threaten religious liberty. Only identity politics could do that.

 

      And here are three illustrations of what I mean. And I speak here not exactly of implications of the Court's decision in Masterpiece, which decision was narrow and rooted in contingent facts. I speak rather of the way the wedding vendor cases, all of them, really, are litigated, and how may of them, if not most of them, have been decided, again, based in and on identity politics. Okay, three illustrations of what I mean. One is that what believers invariably understand themselves to be doing, which is steering clear of their own immoral involvement in the bad conduct of other persons, is in these cases, at least if they're litigated, by forced reconceptualization replaced with a substitute, namely, the personal status or identity of some punitive victim, of some person self-identifying or presenting as a member of a supposedly vulnerable group.

 

      Thus, Jack Phillips's refusal to supply anyone, straight or gay, with a cake for celebrating what he regarded as an ersatz marriage is reconceptualized as discrimination against his gay customers. Innkeepers who refuse to rent to fornicators are charged with discriminating on grounds of marital status. Employers who cannot conscientiously distribute contraceptives discriminate against women. Well, you get the idea. Now, this override of the believer's self-understanding amounts to religious stereotyping. Indeed, a religious stereotyping which I used to think would not happen again in an American courtroom.

 

      Now compounding this first error is the prevalent notion that where public authority recognizes or would recognize the religious liberty of, say, Jack Phillips, the State would be putting its own imprimatur on Phillips's unjust discrimination. And the thought even often is that the State would be putting and imprimatur not only on his discrimination, but even on the normative premise that Jack holds, namely that marriage between two men or two women is morally impossible.

 

      But it doesn't work that way, as I at least partly just suggested. Besides, no one ever suggested that when the Jehovah's Witnesses won the flag salute case, the Supreme Court was endorsing their denial of United States sovereignty in favor of God's undivided sovereignty. Lawmakers who recognize Amish claims about limited schooling do not thereby ratify Old Order Anabaptist beliefs. You do not profess, endorse, ratify, or show the slightest real sympathy with Native American beliefs by supporting their right of access to peyote-infused rituals. Now this claim about a state imprimatur is, I think, jerry-rigged to make the facts of the wedding vendor cases fit an identity politics morality tale.

 

      Now, the third area, the third illustration builds upon these first two mistakes. This one is often styled dignitarian harm. And the idea, as far as I can tell, seems to be that when one is refused a service due to the provider's -- to the service provider's moral qualms about what you're doing, your person or identity is demeaned, and your dignity is attacked. Now, there are many mistakes in this way of thinking. One mistake is about dignity itself, which has to do with the inherent qualities of persons which make them rights bearers and worthy of respect. Dignity, properly understood, is not prone to be compromised by other's bad behavior toward you, or even their bad opinion of you.

 

      But let's leave this mistake aside. In this context, what we're really talking about is perceived insult, about a same-sex couple's feeling that they have been humiliated or demeaned, even though no word has been spoken, no gesture made, that means anything more than it's against my conscience to participate in what you're doing. Then again, we are here securely in the realm of identity politics, where self-esteem, at least for those who happen to be in favor, rules. Now, of course, Obergefell trafficked promiscuously in this same identity politics. The opening sentence of that case introduces a liberty which includes, and here's the court speaking, "which includes the right of persons within a lawful realm to define and express their identity." And surely the center of gravity in Obergefell is the idea that the law can and should express the community's affirmation of each person's intimate and self-defining choice of a companion, of that companion to ward off what Justice Kennedy described as "the universal fear that a lonely person call out, only to find no one there."

 

      Now, no doubt, the appeals of aggrieved sexual minorities are very powerful these days, but I think even they could not threaten religious liberty if identity politics had not already infiltrated and hollowed out religious liberty itself. Before sexual identity could emerge as the colossus that it is in our political culture, religion had to be reduced from a set of beliefs and truth claims about the way the cosmos really is to nothing more than one singular expression of ineffable spiritual experiences, and/or the collective identity creed, the collective of one's religious tribe. Religion had to be re-described over against a self-understanding of many, but far from all believers as raw subjectivity, as a realm of faith conceived itself as feeling and emotion, of faith as some inner domain of me outside the domain of rationality and of the objective order of things. Indeed, I submit that only after the public realm in America was secularized, and religion privatized, and further, that religion in the private sphere be treated as just one of many possible sources of personal identity, only then could American religious liberty be threatened by the rival claims of others to define themselves sexually, and to do so without having to endure the moral criticism of others, including believers.

 

Hon. Andrew Oldham:  Thank you, Professor Bradley. Ms. Melling, thank you.

 

Louise Melling:  Thank you. Thank you for having me. One of the things about going last is that some of my points have been made. So I'm not so much going to talk about doctrine. I think I really just want to pose sort of five questions for you, so as you think about the questions presented in Masterpiece and similar cases, and some of them may now just be obvious either because you came in knowing about it, or because you've now sat through these other four panelists.

 

      So the first is just to put this in perspective, which is, I think, that these conversations are genuinely hard. And I think they're genuinely hard because when conversations arise about a conflict between religion or speech and LGBT people, or the Hobby Lobby variety, it's because we're at a moment of change in society, and usually at a moment of profound change. The conversation around LGBT rights and the advances for LGBT rights are sometimes referred to as like a tectonic plate shift in terms of where we've been, that we've had a long time, maybe forever, with societal norms looking one way, and then the norms looking another way. I think change is actually just incredibly hard, and people of faith are on both sides of those debates. People of faith have strong feelings of faith against, for example, serving a same-sex couples, and people of faith are supportive of laws to further same-sex couples.

 

      In that change, though, I just want to go a little bit to Dale's point about how big is the disruption in some sense, or how robust is the resistance, and note that there are the cases about public accommodations and resistance to serving LGBT people in weddings services because of faith. But it's not limited in that way to wedding services. There are also cases arising, for example, about a right to fire an employee because of somebody's faith—in that case, the employee was a transgender individual—to refuse healthcare, including in the LGBT context because of faith, as well as to refuse to place children who are up for adoption or foster placement with certain families because of faith objections. So the question isn't limited to the public accommodation sphere.

 

      So really, at the end of the day, I think it's just a question about whether we're going to accept into the law and the culture the LGBT rights in full form and what the Constitution says about that. Remember that the claims in Masterpiece -- we're not talking about a legislative debate. We're talking about a constitutional debate. The question is whether the Constitution protects the right of Jack Phillips in Masterpiece to say no, as in you don't go back to the legislature and keep having your debate in the legislature. It's a constitutional debate.

 

      Second, and this has already been eluded to, this conversation -- we're having conversation about LGBT rights or sexual revolution, but this debate is in no way limited to the context of LGBT rights. I'm sure by now, many of you, because you pay attention to these issues, have heard about the Piggy Park case. Piggy Park, the case of a barbecue franchise, South Carolina, soon after passage of the Civil Rights Act of 1964, refused to comply. And the owner talked about his faith, and his faith telling him that integration was contrary to his faith, so he wouldn't serve black customers in his restaurant.

 

      I think we know about Bob Jones University. Bob Jones University case in the Supreme Court, I believe, decided as late as -- I know, it was a long time ago -- 1980 where Bob Jones was arguing, based on his faith, the right to refuse to admit students who believed in, or advocated, or practiced inter-racial dating. And there are a series of other cases, they don't go to the Supreme Court, but there are cases where women can attest that they're paid less than men. And in those cases, those are religious schools, and the religious schools said, "It's my faith that men should be head of households, and therefore, that's my justification for this."

 

      In all of those cases, the courts said no to the question of a religious exemption. And so the question I just say would be why should LGBT rights be different? Why should today's debates be different? And if you think they should be different, what is the rationale for the difference? And that, I think -- Tom's offered one version of a rationale for that. I think both Alliance Defending Freedom and the U.S. Department of Justice in Masterpiece said they should be different. And I say I think it's a struggle to articulate that.

 

      Third, Tom's touched on this a little bit -- I mean, because Tom and I do this roadshow together with some regularity, and in terms of Tom as well as Dale, we land in the same place, sometimes different places, sometimes, I think it's fair to say. Maybe I land more with Dale than with Tom. But in terms of talking about equality, I think there are plenty of people who believe in LGBT rights and want, in a real sense, as well as in the claims advanced by Jack Phillips. And I would just ask you to think about that and think about what equality means.

 

      You may make decisions about costs and where you want to land, but what does equality mean if after you sit down and Jack says to you -- and Dave and Charlie were there with Charlie's mother -- "For whom is this cake?" And Dave and Charlie say, "Oh, for us." And Jack says, "I can't make that cake." So what does it feel like to be turned away in that context? Debbie, Charlie's mom, describes it -- Debbie's mom talks about going out to the car after they've been -- after Jack has said no, and looking -- she's in the back seat, and she sees her son's shoulders shaking, and he's crying. And he said, "I feel like I'm just not good enough." We have to put that in the mix, as we also do have to put in the mix the cost to Jack Phillips and Masterpiece, and what it means to be told that you must sell wedding cakes for all if you're going to sell wedding cakes, that you can't discriminate based on that.

 

      Fourth, I think, in terms of the speech protections, I think there are -- Tom is arguing that there can be limited claims for speech. Keep in mind, I think that the speech claim in Masterpiece was informed and infused by religion, but the speech claim is independent, I think, of religion when you really look at the claim. So the argument in the case, I think, in many ways came down to an argument that custom made was different. Custom made was art and custom made was speech and therefore different. And the Justice Department tried to narrow that further to say the speech claim was about custom made for celebratory events -- I'm not saying that that's expressive about something. I know I don't have the exact word, but I have the concept.

 

      I respect that effort for people to try to figure out the narrow argument for this claim. I think it's a huge challenge, and I ask whether that enterprise, whether that claim is A) it's constitutional, so by that sense it's not narrow, but B) can it really be that narrow? I think if you look and read the transcript of the oral argument, you'll see that the Justices -- I don't think they were just playing. I think they were struggling with what the parameters would be in that case. And I also think when we look in other context, the conversation about being seen as participating is much broader than art. The conversation about do I -- when I show up and I set up the chairs, I'm participating in the event. That, I think for some people, really is also a violation of conscience, and so how far does that go?

 

      Which brings me to my last point which is about the argument about having exemptions will, what I say, sort of quiet the storm, that that's the way that we could reduce conflict. And I think that argument often comes from a very good place, a very good place in terms of a conflict -- I know I'm a litigator, but not always fun, very hard on society -- and also an optimism, that we can find a way to understand one another through that process. I have much less faith that that is, in fact, true, that granting exemptions will quiet the storm. And I think there's a difference, sometimes, between legislative and constitutional exemptions, and I understand that the context I'm going to talk about is different.

 

      But if you look in the reproductive rights context, very, very soon after Roe, I think it's more than 40 state legislatures all provided protections for doctors and institutions that did not want to participate in abortions. We all know that hasn't quieted the storm in any way. That hasn't quieted the storm in terms of a debate about abortion, as well as a debate about the reach of conscience claims. With the conscience claims, as we all know, running now to contraception, running not to providing contraception, but now providing insurance coverage for contraception, running to certifying that you don't want to provide insurance coverage for contraception, at least if you think that triggers contraceptive coverage, running also to referrals, running to information, and I think the instance that I find most surprising, I'll say, running to providing treatment for somebody following an abortion.

 

      I point that out -- you don't have to -- where you stand on the core question of what's right is different from the point I'm trying to make, which is that the exemption, the call for the exemptions has continued to expand in that context, and I think that is a very real possibility in the context of LGBT rights, or the rights in which we're continuing to have debate. So I think this is about LGBT rights. This is about speech. This is about religion. But at the end of the day, I think this goes, really, back to some core points that ran through. This is about how we think about anti-discrimination norms and how we think about anti-discrimination law.

 

Hon. Andrew Oldham:  Wonderful. Thank you very much. Good arguments. So we're going to have some Q&A in a minute. Before that, I'm going to ask our panelists to engage on a couple of questions with each other so they can have a chance to respond to some of the points that have been made. But we will break right at 5:00 so that everybody can be prepared for the evening's activities.

 

      So why don't we start where, Louise, where you sort of ended, which is this concept of exemptions. So in the context of free exercise, the Supreme Court has set out a standard about neutral rules of general applicability in the Smith case, which I think Professor Carpenter had mentioned earlier. And in recent years, we have seen a couple of exemptions to the Smith test for neutral rules of general applicability. So a couple terms ago, there was the Hosanna-Tabor case that recognized administerial exemption to the employment laws, and then now we have Masterpiece Cakeshop.

 

      And one of the things that's interesting in the Masterpiece Cakeshop case is that it's barely cited by the majority opinion. I think Professor Carpenter says that it's a reaffirmed, but Justice Gorsuch writes a separate opinion, joined by Justice Alito, pointing out that it is, in his words, "controversial amongst some of the Justices." In the context of the Masterpiece Cakeshop case, I'm wondering what you all think about the receptiveness of the Smith neutral rules of general applicability test and how it sits at 1 First Street.

 

Louise Melling:   First?

 

Hon. Andrew Oldham:  Sure.

 

Louise Melling:  One of the cert petitions now before the Court -- there are two cases that are similar to Masterpiece in their sort of basic facts where their cert petitions now pending before the Supreme Court. One comes out of Oregon, Sweet Cakes by Melissa -- and if I am off on names of the cases, feel free to correct me -- and then there's one out of Ohio involving a bed and breakfast. One of those cases squarely presents in the cert petition the question of whether Smith should be overruled. I will say, I was actually surprised in Masterpiece that that was not one of the cert questions.

 

Hon. Andrew Oldham:  And how do you think about where this doctrine stands today, in particular, in the Supreme Court?

 

Prof. Thomas Berg:  When Justice Alito was on the Third Circuit, he wrote two or three opinions that rested on the following proposition: When the government makes an exception for one secular interest that similarly undermines the state interest as a religious exception would, then the law is not neutral or generally applicable. The classic case of this is a Muslim police officer in Newark who wore a beard as a command of the Koran and violated a department rule that was just simply no beards. However, the department had made an exception for officers with a medical reason, and that was growing out of the condition that is especially common among African-Americans, but some others have it too, where your skin is really sensitive, and you need a beard, really, to protect your skin. So the department had made that exception. Judge Alito said that exception undermines the government's interest in uniformity the same way that a Muslim claim would. Therefore, the law is not generally applicable. It is not neutral toward religion because it treats a medical reason as more important than a religious reason. Whereas, the Constitution says that a religious reason is really important. You have to treat the religious reason the same.

 

      Now, in that case, I think Judge Alito was trying to give as much protection for free exercise as he could within the Smith rule, and I've actually argued in favor of that rule. Doug Laycock and I -- the approach of the Newark case -- Doug Laycock and I filed a brief in Masterpiece arguing for it. I think it makes a lot of sense. But it also shows, I think, a lower court judge who's now on the Court with a sense that maybe the Smith rule, taken in its broadest terms, is not real good for religious freedom. There was a different attitude towards this, I think, among conservatives in 1990 when Justice Scalia wrote the Smith case than there is now. I think there was more of a sense that judicial restraint limits on what judges do to overrule majorities that that was a more central part of conservatism at the time. That's a much bigger topic, of course, of which many of you are interested in in various areas.

 

      Now conservatives tend to emphasize more the need to restrain government through Constitutional norms, I think. including the free exercise of religion. So what the Court does with it, I don't know. Could they move in the direction of a Newark kind of rule without totally overruling Smith? I think that's possible. They don't like to completely overrule a decision, but there are certainly ways to temper the Smith decision. And in fact, you can read Laycock's and my scholarship, the Smith rule couldn't have been read as hard-nosed as it was thought to be in the first place because it would be inconsistent with precedent before it. So yeah, I think there's definitely the possibility that the Court will temper Smith further.

 

Hon. Andrew Oldham:  Please.

 

Prof. Gerard Bradley:  Well, I don't think Smith will be overruled. I don't think it ought to be. I guess I'm a kind of duck that goes "meow" because I'm one of the very few people who's considered to be a religious conservative, or at least a friend of religious liberty, who's argued in print and in lectures that Smith was rightly decided. And I continue to think it was rightly decided. I don't think the Court's going to tinker too much with that.

 

      I also would suggest, as a kind of going beyond Judge's question, I suppose, that the better way to think about the issues that we've been talking about during this symposium, or this exchange, really is probably better spoken about as an initial matter and mainly not in terms of exemptions from non-discrimination laws or anything else. But rather, I think the best way to go about thinking about this is to just think that one, a lawmaker, a generic lawmaker with care of the common good, and really, part of that care involves taking everyone's interests seriously and respecting their rights, how does that person think all the way through to a statute or some provision of law concerning the wedding vendors and like cases?

 

      And I don't think that it helps to sort of start by thinking, "Well, here is the norm of justice that applies to the case, non-discrimination across the board." And there may be some exceptions to that. Rather, I would say that's not the way to think about it but to think your way through to what the law should be once everyone's interests and rights are fully specified. And to think as respecting Jack Phillips's rights, for example, is part of that process. And I think if we do that, we can work then to the institutional questions and treat them as the secondary and derivative questions that they are.

 

Louise Melling:  I just have to note for the record that the ACLU -- here you have -- you were happy with Smith, and we were opposed; we thought Smith was wrongly decided as providing too little protection for religious liberty.

 

Prof. Gerard Bradley:  Well, who'd have thunk it? Chuck Schumer introduced RFRA. Who'd have thunk it?

 

[Laughter]

 

Louise Melling:  But I do think taking account, obviously, taking account of everybody's interest produced the same kind of vibrant debate that we have now. That's true whether you call it exemptions. That's true whether you call it a constitutional right. We're just going to continue to have those vibrant debates. That was true in terms of if you look back at the claims, for example, in Obergefell, in terms of several briefs being filed saying even if the Court were to recognize LGBT equality, that will be a threat to religious liberty. So people have deep commitments and deep faith on both sides, and so the discuss -- that will be no more simple than this conversation about Masterpiece.

 

Hon. Andrew Oldham:  If we could back up a little bit to sort of how the Court actually decided the Masterpiece Cakeshop case. It's something we talked about a little bit at the beginning. Professor Berg mentioned it. But I'm sort of curious what your take on it is. As Professor Berg mentioned, the Court honed in on one set of comments by one of the members of the Colorado Civil Rights Commission, and then Justice Kennedy in his majority opinion says that, quote, "the record shows no objection to these comments from other commissioners." And later, state court ruling, reviewing the Commission's decision does not mention those comments, much less express concern with them.

 

      And in the way that the Colorado Civil Rights Commission litigated the case in the Supreme Court, Justice Kennedy continues that they did not disavow those comments in their briefs filed in this Court, that is, the Supreme Court. So I'm curious, what, if anything, we take away from Masterpiece Cakeshop in this treatment of those comments from the commissioner to infer discriminatory animus or intent of a multi-member body from the comments of one of, in this case, commissioners. We can start with Professor Berg.

 

Prof. Thomas Berg:  Jurisprudentially, the conservatives on the Court are not generally in favor of relying on statements of individual decision makers to show intent and strike down an otherwise valid action on that basis. That was one of Justice Scalia's bugbears, and I think others feel the same way. So what was is about Masterpiece that would make that different? The opinion points out that it's an adjudication. These commissioners were deciding the case as judges, and we don't want to walk into court and the first thing the judge says to you is, "I think your position in this case is one of the most despicable pieces of rhetoric I can think of." Even the appearance of bias by a judge is a problem.

 

      I think you could think of Masterpiece as, in a way, a case about the administrative state because the same commissioners who prosecute civil rights actions, who bring in -- okay enforcement actions and are tasked with the job of enforcing it fully are also the judges to decide the fair interpretation of the law. That's the kind of melding of functions that is common in the administrative state, and whether this Court will -- what this Court will do about that -- I know there are a bunch of other panels that are likely to talk about that, but I think you could read Masterpiece that way.

 

      So in the Washington florist case called Arlene's Flowers, there are arguments about statements by the Attorney General of Washington who made it a sort of mission to go after Barronelle Stutzman, the florist. And so does Masterpiece with it's focus on the adjudication context have the kind of traction to go beyond that? I don't know. It would be a change in jurisprudence for conservative Justices to go a long way with that.

 

Hon. Andrew Oldham:  Care to respond, anyone?

 

Prof. Gerard Bradley:  I don't think it's clearly mistaken to do what the Court did. I do think, as many people do—this is not imaginative or creative on my part—I think the Court kicked the can down the road because it didn't know what to do with the issue.

 

Louise Melling:  I totally agree.

 

Hon. Andrew Oldham:  Louise, anything?

 

Louise Melling:  I completely agree with that. Completely agree with that.

 

Hon. Andrew Oldham:  I see we have very healthy queues at both of the stand-up mics, so why don't we open it up to questions for the panelists from the audience? We can just alternate between the two mics. And I'd just ask the panelists to try to keep your answers, obviously, responsive and powerful, but short so that everyone can ask their questions. Why don't you start on this side?

 

Questioner 1:  Hello. Thank you for the panel. This question goes to Ms. Melling, but any of the panelists can feel free to weigh in. You mentioned in the wake of the Civil Rights Act of 1964, there were cases where there was an individual who, I guess, claimed that he was religiously compelled to discriminate on the basis of race, something to that effect. But I guess, in that situation, you had, really, a conflict of rights. I mean, you had the First Amendment on the one hand protecting religion, but you also had the Civil Rights of Act of 1866 and '64, 1964, not to mention the 14th Amendment. So it was a conflict of rights there where the people spoke on both issues. Assuming the Cakeshop case had to do with discrimination on the basis of sexual orientation, which I don't accept, but assuming that's the case, where exactly are the rights of gays and lesbians protected anywhere?

 

Louise Melling:  So in Colorado, they're protected --

 

Questioner 1:  Federally. Federally speaking, yes.

 

Louise Melling:  Oh. Well, in Colorado, they're protected, so that was the predicate. They're expressly protected under Colorado's Civil Rights Statute. Federally, under the Public Accommodations Law, there is no protection for sex, period, in the Federal Accommodations Law. Under the other -- under -- well, we'll see. There are cases now up before the Supreme Court about whether the prohibitions on sex in employment law, in particular in employment law, reaches discrimination based on sexual orientation and gender identity. Several lower courts and court of appeals have held it does. The question is being teed up for the Supreme Court.

 

Questioner 1:  Okay.

 

Louise Melling:  There was kind of -- there are also -- there's a very interesting body of cases before '64, one even in the '50s which are just -- they're just surprising, where even the Court talks about God wanting the races to be separate. Now, these are all very, very old, but they're surprising.

 

Questioner 1:  Okay.

 

Hon. Andrew Oldham:  Please?

 

Prof. Thomas Berg:  Yeah, I mean, I think the Piggy Park case is a red herring. Nobody has made a claim or is arguing seriously a claim to refuse all service to gay people in sort of generalized commercial contexts, which is what the claim in Piggy Park was. However you put that, you could put that in terms of the breadth of that claim would activate a much more compelling interest in access to goods and services as well as the basic dignity of people. You make a distinction between refusing the person over all and refusing, on the other hand, a particular form of conduct or a particular religious norm based on disagreement about the nature of something like marriage. I mean, to refuse to serve anyone in any context is—I don't know what Gerry would say about this—it seems is more of an attack on dignity. I think I agree with Gerry that that can't take away your dignity, but we don't really want to protect attacks on dignity. But it's different. It's just very different from anything that's been claimed in any of the wedding cases.

 

      And then, the tougher question, I guess, is whether race and sexual orientation should be treated the same if you're talking about analogous cases, like refusing to bake a cake for an interracial wedding versus a same-sex wedding. That's the real comparison. Piggy Park, I think, is a red herring. But there, the way I look at it is not that sexual orientation is lower than all the other forms of discrimination; it's that race is the highest, higher than all the others. We have virtually no exemptions for race discrimination in any law anywhere. We have exemptions for sex discrimination. Yes, some of those claims have lost -- claims for sex discrimination have lost, as Louise pointed out, but we also have exemptions for sex discrimination based on religious grounds. We have all sorts of exemptions for religious discrimination based on religious grounds. So to me, the better argument is that race is constitutionally unique, and it would take a longer time to lay that all out, but I'll stop there.

 

Hon. Andrew Oldham:  Thank you. Over here?

 

Questioner 2:  To what extent do you believe the holding of Masterpiece is limited by the special facts of the case, namely the discriminatory application by the Colorado Civil Rights Commission of the Colorado law? Would, in another state that applies its anti-discrimination law evenly, a service provider be protected similarly to Mr. Phillips if he refused to provide service on religious grounds?

 

Prof. Gerard Bradley:  No, I think it depends -- the holding is limited to its facts, and the facts could be replicated, but they would be replicated contingent facts. So I don't think there's anything that as a matter of principle or general legal protection that can be generated from Masterpiece. I do think the Court just left that matter entirely open. And people, including maybe people on this panel, although not myself, have tried to read the tea leaves as best they can as to what a majority probably would do on the basic question in a case that didn't involve these unpleasant facts. And I think that's maybe worth doing, but highly speculative.

 

Louise Melling:  I think the piece of Masterpiece that may wind up generating the most debate going forward is the discussion about William Jack versus Jack Phillips. And I think that was probably the point -- that was where Dale was going.

 

Prof. Gerard Bradley:  Yep. Um-hmm.

 

Louise Melling:  But yet, the big question just remains.

 

Hon. Andrew Oldham:  Please.

 

Questioner 3:  Right. I'm wondering if the -- this hasn't been spoken about by the panel as a matter of discrimination versus discrimination. Gerard brought up kind of, well, we're going to have a rule against discrimination, and then make exceptions. And I don't think that that would be a positive regime. I'm concerned that there's not enough consideration of this, Smith notwithstanding, and the notion the neutrality as a question of discrimination against discrimination, it's simply all right to discriminate against people who are characterized as intolerant as a class. And that's something that, obviously, due to the narrow facts and decisions, wasn't addressed here, but I'm wondering as a kind of a theoretical question if that doesn't concern the panel.

 

Louise Melling:  So I think there are two things to say. Certainly, as a matter of fact, I think the public discourse about the case often is framed in terms of the dignity interests, both -- I'll just say both sides articulating the dignity interests, and both sides articulating the ways in which they feel subject to discrimination in culture, and who does and doesn't have a place in public society. And so I think those frames exist. There are cases certainly arising, early cases challenging contraceptive coverage rules, for example, where parties—I believe it was the Bishops or Catholic Conference—argued that the laws may have been discriminatory because they were passed with an eye toward who wasn't providing contraception, or because of how they were enforced. And so that frame that I think you're suggesting has been argued in the courts before, and I assume that that will continue to be argued.

 

Hon. Andrew Oldham:  Tom, did you want to say anything?

 

Prof. Thomas Berg:  Yeah. I mean, part of the logic, actually, of the unequal enforcement point was that William Jack, who wanted the anti-gay cake, had brought a claim of religious discrimination when his request was refused. And the Commission said that wasn't religious discrimination but refusing the same-sex cake was sexual orientation discrimination. And one point here, I guess, is one of the things that the Commission said was -- well, let me summarize. I think one way to describe what happened in the Commission in Masterpiece, and in Colorado law, and in general, I would say the progressive side of these analyzing -- how the progressive side analyzes these cases is that they read sexual orientation discrimination broadly to encompass conduct that is inextricably tied to orientation, like relationship, like marriage, which I support that. But they read religious discrimination narrowly.

 

      In other words, it's not religious discrimination if it's not against just your affiliation, just because you're a Christian, just because you're a Muslim. If it's anything about your conduct, then that's totally different from your religion because conduct and religion don't really go together. I mean, it's just -- I don't think it's consistent. I would -- the burden, the gravamen of my argument is that in the parallels between these two situations are that conduct and an identity—in a good sense, I want to say, Gerry, not the awful sense of identity—are inextricably tied together, but they are tied together for the religious believer, too. And that's the point.

 

Louise Melling:  I have things to say, but I'll wait till we hear from other questions.

 

Hon. Andrew Oldham:  Are you sure?

 

Louise Melling:  No, it's okay. I'll wait. They'll probably come out.

 

Questioner 4:  This sort of builds off the question. So what does the anti-discrimination law, like, favoring non-discrimination, what does that mean for the use of religious neutrality by the Court in the future?

 

Prof. Thomas Berg:  I'm not sure I get the -- can you maybe pinpoint that question a little more?

 

Questioner 4:  All right. Sorry. I won't take everyone's time. I guess just kind of like, you know how the Court, like, desires judges to be kind of neutral in deciding religious matters, not being like, "Yeah, we believe your beliefs. We don't believe your beliefs. Are they sincere? Not sincere? We want to be neutral." That kind of …

 

Prof. Gerard Bradley:   I mean, this is only a part, and probably a small part of a fuller response, but I would note that there's two senses of neutrality in play in almost any Supreme Court discussion of issues like this. And in almost any discussion like ours of these issues, namely the neutrality among religions and between and among the different religious sects and individual religious world views, that's one thing. But there's also the neutrality, so-called, between religion as such and what's often not always called non-religion, occasionally called irreligion. Now that latter, I think, is unfounded and ought to be ripped out of the constitutional law as soon as possible. But I do think a more cautious statement than that would be that the Supreme Court, I think, is indicating its dissatisfaction with that broader neutrality between religion and non-religion.

 

      Now it's not ready to articulate a doctrine or actually say it's rejecting this larger neutrality between religion and non-religion, but if you look at the results of cases including Hosanna-Tabor, Greece v. Galloway, Trinity Lutheran, the Court's decisions, the result in these cases are hard to square with this broader neutrality. And one thing that's telling, I think, is that the Court in Hosanna-Tabor, speaking through the Chief Justice, took up an argument made by the EOC, I think here during the Obama administration, I think representing the administration's views. But the EOC arguing that case that the Lutheran Church in that case, Lutheran Church School, had rights, it had rights over personnel, but they just didn't have any rights over personnel as a church. They had the same rights as any other expressive group, like the Boy Scouts or a Republican Party, for example.

 

      And what's telling about it -- so this was a view that was truly religion neutral. There was nothing special about the religious character of this expressive association. It was just an expressive association. And the Court dismissed that, simply saying, "Well, there is a Free Exercise Clause, you know." And religion is singled out for a special positive treatment in the Constitution. That's just one example of many where I think the Court continues to stand by this broader neutrality as a matter of doctrine. It will recite it in a case at the appropriate early moment but is not behaving as if it's bound by it.

 

Hon. Andrew Oldham:  Thank you. Mr. Mitchell?

 

Mr. Mitchell:  I'm wondering if the panelists could comment on the Religious Freedom Restoration Act, both at the federal and state level, and the way it applies to the dignitary and stigmatic harms inflicted on same-sex couples who are told, "Sorry, I'm not going to bake a cake for your wedding." And specifically, I think most people on the left would agree that there is a compelling governmental interest in preventing these dignitary and stigmatic injuries that occur when wedding vendors turn aside same-sex couples.

 

      If that's true, I can think of things that are far more stigmatizing and demeaning to homosexual couples than that. For example, Fred Phelps and the Westborough Baptist Church when they show up at funerals with the signs. We know what the signs say. Pastors who preach from the pulpit that homosexual behavior is a sin, that homosexuals are going to hell if they don't repent. If there's a compelling governmental interest in stopping Jack Phillips from inflicting these dignitary harms on his customers, doesn't it logically follow that there's a compelling governmental interest in censoring the sermons of pastors who denounce homosexual behavior from the pulpit or censoring the behavior of Fred Phelps? Or is there a way to distinguish the two?

 

Louise Melling:  So, first of all, I think, under the—and I'm interested in what other people think—I think under RFRA, you see, at least when Kennedy was on the Court, the same struggle between religious liberty assert claims and anti-discrimination claims as in Hobby Lobby. He has his out, in a sense—and yes, I'm talking as if the Court was all Kennedy because in some ways it was, in many cases—where he says we will certainly countenance the claim of Hobby Lobby, first of all, take it seriously, take seriously the assertion of the substantial burden, but we have a way both to recognize Hobby Lobby's harm and to continue to provide contraception, or this is what they thought on that day, by saying that the government could instead have offered the accommodation to the for-profit businesses, the same process that was available to the religiously affiliated non-profits. That was hotly contested, but still…

 

      And then, in the case challenging the accommodation, that decision is sort of just like Masterpiece in the sense of the Court saying, "Well, we have people of faith objecting to providing the coverage, and we have the potential harm if the coverage isn't provided, but I think we see some -- there might be an agreement, so go back down." So I don't know that we know yet. There was a RFRA claim that might have presented that question in the Harris Funeral Home case where there's now a cert petition pending, but they didn't -- the RFRA claim isn't asserted in that case. They dropped that one going up.

 

Prof. Thomas Berg:  When what's going on is speech, the First Amendment says that there cannot be a compelling interest in preventing the communicative impact of the speech. That's Fred Phelps, etc., where the harm comes through the message. It's different, maybe, in cases of conduct, so I think the progressive line drawn there is to say that Jack Phillips's action is conduct, not speech. That doesn't work, even on its own terms, I think, if you see his conduct in making a cake as expressive because the Supreme Court has a doctrine about expressive conduct, the flag burning cases. There, it's burning a flag, but it's communicating a message, and the Court's twice struck down laws that were based solely on the communicative impact of expressive conduct. So if that's how you see Jack Phillips, as expressive conduct, then I think it's squarely within other cases. We are talking about the line between speech and conduct, so I think his case is very strong. So I basically agree with your point, but that, I think, is the way it all kind of shakes out in terms of doctrines.

 

Louise Melling:  I just want to say three things back to Tom. So first is what the law regulates is what you do when you make a product. So to my mind, the focus on the case is almost like diverting your eye from what the law was intending, what the law targets. The law targets the fact that if you have a product, the question is whether you will sell it -- whether you discriminate in the person to whom you sell it. The law is regulating that conduct, first. Second, in some sense, every act of discrimination is expressive that somebody is motivated by some expression to say no to somebody for some reason. Three, if we think about the case coming out of, I think it's Washington, lots of conduct is expressive, but that doesn't put it squarely in the free speech doctrine, so I mean the—I'm blanking on the name of the case—but the case where there was a tent city, basically, set up in D.C. to protest homelessness. That was expressive, but that was treated as expressive conduct, not expression, even though it had a robust message.

 

Hon. Andrew Oldham:  Over here, please.

 

Questioner 6:  Yes, for Ms. Melling. I was interested in what I take to be, in essence, kind of policy arguments. What kind of a world do we want to live in? Do we really want to have a rule where the state can't come in and defend certain rights? But let me try to turn it around a little bit, that the position that Colorado is taking is that it is necessary for Colorado to mediate between claims, rights claims, from two private parties that are at loggerheads with each other. And this is substantially different from a claim in which the state is asserting its own interest or its own rights, that if the issue is about the rights of an individual against the state, then the worst thing that happens for the state is the state loses and has to make some accommodation.

 

      But if the state's argument is that it is mediating rights claims among individuals, then doesn't that put the state in the position of being able to hide behind somebody's rights claims using what may be, at the time, the most kind of popular or politically useful position in order to grow the power of the state? Shouldn't we be concerned about inviting the state into mediating these individual rights disputes, and shouldn't that be a reason to treat the state's arguments more suspiciously?

 

Louise Melling:  So, mega question. I think that depends on -- obviously, it depends on how you think about the state. So if -- I see anti-discrimination laws, obviously, as to the extent they're passed. They're passed by a majority but about trying to tip a balance so as to protect a minority, and therefore, see the state power is often necessary to make advances in different ways. I'm not sure I answered your question.

 

Prof. Gerard Bradley:  Well, there is something distinctive. You put your finger on something distinctive about many of the contemporary arguments about religious liberty and other person's rights. At least, typically, in the past, the religious claimant, whether it was Jehovah's Witnesses, or Christian Scientists, or somebody else, was stacked up against the state itself, insofar as they were seeking relief of some institutional regularity, or rule keeping, or a norm, like police officers must not have beards, but some men, many Muslim men want to have a beard. So there's a way in which it wasn't pitting one person against another. Whether we describe it a clash of interests or a clash of rights at this point, I think, doesn't matter. And that is new, newish, in our situation. Although I think in -- fundamentally, it doesn't present a new sort of normative challenge because I think always in questions involving the kinds of things we're talking about, the question is whether the resolution in mind is fair to everybody, fair to everyone. Not so much fair to the state, but state insofar as the state is the political community.

 

      So even an institutional context, just for example, the question would be about, let's say a prisoner wants kosher food. You'd say, "Well, it's really between the prisoner and the chef in the kitchen at the prison." Well, yes and no. It is that, but it's also a matter of fairness to other people, namely, is it fair for me claiming a religious reason to get better food that everybody would want but aren't going to get because they're not asserting a religious reason? So I think, actually, at the bottom of almost all religious liberty disputes and questions is a matter of fairness between and among people, especially if you consider the fairness of favoring religious reasons for doing something as opposed to non-religious. So I think that there is this new surface feature, which is a challenge to our thinking. But I think, fundamentally, it remains the same question of fairness to everyone, which doesn't mean by any means, the believer always wins. That's not true at all, but it is a matter of being fair to Jack Phillips as well as everybody else.

 

Hon. Andrew Oldham:  I think we have just time for Tom to respond, and then we'll have to break. So apologies to those who didn't get to ask questions. We'll try to be available after the panel. Tom gets the last word.

 

Prof. Thomas Berg:  Yeah, really quickly, I would not yoke and tie the effort for religious liberty to an effort to repeal the active welfare state, or the intrusive state. That's a much bigger battle for conservatives to win. The good thing about accommodations is they make it possible to protect religious liberty, an important constitutional value, even as we go on and fight in other forums about whether we're going to have big government or small government over all. If religious conservatives have to overturn the New Deal in order to get religious liberty protected, that's not a good strategy.

 

[Laughter]

 

Hon. Andrew Oldham:  And with that, we'll conclude. Please join me in thanking our panelists for their time.

 

6:00 p.m. - 7:00 p.m.
Madison Club Reception

2018 National Lawyers Convention

Union Station - Columbus Club
50 Massachusetts Avenue NE
Washington, DC 20002

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6:00 p.m. - 7:00 p.m.
Lawyers Convention Reception

2018 National Lawyers Convention

Union Station - East Hall
50 Massachusetts Avenue NE
Washington, DC 20002

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7:00 p.m. - 10:00 p.m.
Antonin Scalia Memorial Dinner

2018 National Lawyers Convention

Union Station - Great Hall
50 Massachusetts Avenue NE
Washington, DC 20002

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10:00 p.m. - 11:00 p.m.
Closing Reception

2018 National Lawyers Convention

Union Station - East Hall
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9:00 a.m. - 11:15 a.m.
Showcase Panel II: Balancing Insulation and Accountability of Agency Decisions

2018 National Lawyers Convention

Topics: Administrative Law & Regulation
The Mayflower Hotel - Grand Ballroom
1127 Connecticut Avenue, NW
Washington, DC 20036

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Many federal government decisions that affect Americans’ day-to-day lives are made by agencies. Agency decisions, therefore, should maximize net benefits to society. For over 37 years, every president has directed executive agencies to do that through a cost-benefit decisional rule. However, regulatory agencies have sometimes interpreted their authorizing statutes to limit or prohibit this approach, and they may enjoy deference from courts when doing so. Many regulatory experts, including the current Administrator of the Office of Information and Regulatory Affairs, have expressed concern over agencies’ failure to ensure that their decisions do more good than harm.

How do we guarantee that all executive and independent agencies are accountable for their actions, while preserving needed insulation from overbearing political pressure? Does the answer change depending on the mission of the particular agency? Are there problems with the cost-benefit analysis model that create opportunities for agencies to manipulate and justify their actions?

  • Hon. Steven G. Bradubury, General Counsel, United States Department of Transportation
  • Dr. Cary Coglianese, Edward B. Shils Professor of Law and Professor of Political Science; Director, Penn Program on Regulation, University of Pennsylvania Law School
  • Prof. Susan Dudley, Director, GW Regulatory Studies Center & Distinguished Professor of Practice Trachtenberg School of Public Policy & Public Administration, George Washington University
  • Prof. Catherine M. Sharkey, Crystal Eastman Professor of Law, New York University Law
  • Moderator: Hon. Michael B. Brennan, United States Court of Appeals, Seventh Circuit

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Event Transcript

Dean Reuter:  Good Morning.  I very much appreciate our obedient Federalist Society crowds. Thank you all for being here this morning. I'm Dean Reuter, Vice President, General Counsel, and Director of Practice Groups at The Federalist Society. Thank you all, again, for being here, and welcome to the second and best day of The Federalist Society's National Lawyers Convention. We did have a great first day, I will admit, and a great night last night. It should be observed: we had four Justices in the room at dinner, so, of course, that means we couldn't really decide a case, but you might look for a cert grant coming out of dinner last night.

 

And there's some additional good news and bad news from the dinner last night. I don't know if everyone was able to hear the announcement last night that Justice Brett Kavanaugh—that's an applause line, by the way: Justice Brett Kavanaugh [Applause]—that Justice Brett Kavanaugh will be next year's dinner speaker, so that's the good news. The bad news, of course, is that dinner is sold out.

 

I want to bring to your attention a schedule change that you can find on your Convention app if you've downloaded the Convention app, and that's this panel has been extended by 15 minutes. And it's going to be followed by a longer-than-usual break of about 30 minutes. And then we'll begin lunch service at about 11:45.

 

The theme of this year's Convention is, of course, Regulatory Transparency and Good Government. And that's something I'd like folks to keep in mind as we move forward through the Convention content. At least one aspect of the discussion on regulatory transparency and good government, I think, is being deliberate about taking stock of where we are. Are we moving forward? Are we making progress? Or is the administrative state moving past us, maybe even overtaking us? And, of course, when I think of things like that, that reminds me of a very brief story.

 

My mother told me this story about 30 years ago or so, and she told it to me as a true story. So you have to picture me 30 years ago, and I looked pretty much the same then as I do now. [Laughter] That's not supposed to be a joke. [Laughter] Anyhow, my mother was a Ph.D. psychologist, and my parents were, at the time of this story, living in northeast Ohio. And that's the part of the state that gets the lake-effect snow, where they measure snow in feet rather than inches. I don't know if you've been there. But my mother was not the most confident or comfortable driver. And to get back and forth to her job, she had to brave the Ohio Turnpike, often on dark, snowy, wintery nights all by herself to get home from her day's work.

 

She recalled to me this story: one particular nighttime drive, she had a white-knuckle grip on the steering wheel. Her headlights were piercing the otherwise pitch-black void ahead of her. Large snowflakes were careening past. Her windshield wipers were thumping rhythmically. She was following the car ahead of her, led by its dimly visible hazard lights. And she was keeping a safe distance, trying to see through the blowing snow, which was accumulating on the road surface. She had her radio off and her concentration was all focused on the road ahead. And her speedometer showed a steady 35 miles an hour.

 

And then she was nearly startled out of her mind when there came a knock at her driver's side window. And a state trooper was standing there, gave her the universal signal for roll your window down, which she did. And he said, "Are you okay?" And she said, "Yes," mystified. She took a quick glance at the speedometer, and it still said 35 miles an hour. And, of course, she wasn't moving forward at all. She had, for some indeterminate period of time, been stuck in a literal rut. Her speedometer cable linked to the front tires that were spinning, registering the false 35 miles an hour. And the car in front of her was stationary with its hazard lights on. But the snow blowing across and over her windshield gave her the illusion—only the illusion—of forward progress. So I'd like us to keep that in mind. [Laugher]

 

Hon. Steven G. Bradbury: Hey, Dean?

 

Dean Reuter:  Yeah?

 

Hon. Steven G. Bradbury:  You'll be happy to know that NTSA has a rule for that.

 

Dean Reuter:  They do? Just the one rule, Steve?

 

Hon. Steven G. Bradbury:  Never just one.

 

Dean Reuter:  So, yeah, do keep in mind, as you go through and hear things today and tomorrow, whether we're making progress. I think it's important to keep that on track.

     

Anyhow, I'm very pleased to introduce the moderator for our second Showcase Panel, Judge Michael Brennan. I think this is his first time moderating a panel at the Convention. And Judge Brennan is true Federalist Society family having, years ago, deftly wooed and then married, not just a Federalist Society member, but a Federalist Society staff member. And that, alone, I think is a very concrete demonstration of the power of The Federalist Society network.

 

Mike went to Notre Dame Law School -- I'm sorry, Notre Dame undergrad, and then graduated from Northwestern University Law School. It's a very fine law school indeed. Reviewing his bio, I realized for the first time that we overlapped for a year there, Mike. And I'm going to tell you which of us is the younger, whether he's younger or I am. But, of course, you're all lawyers, so you know if I was younger, I would claim that. Judge Brennan clerked on the district court and then he clerked for Judge Manion on the circuit on which he serves today. He's served in private practice. He served for nearly a decade as a Milwaukee circuit court judge. And we're just very pleased to have him with us as our moderator, so please join me in welcoming the very youthful, Judge Mike Brennan.

 

Hon. Michael B. Brennan:  Good morning. Welcome to our second Showcase Panel: Balancing Insulation and Accountability of Agency Decisions. Since 1981, by executive order, which was renewed in 1993, each U.S. President has directed executive agencies to maximize net benefits to society through a cost-benefit decisional rule. Regulatory agencies have sometimes interpreted their authorizing statutes to limit or prohibit this approach. And they may enjoy deference from courts when doing so.

 

Many regulatory experts have expressed concern over agencies' failure to ensure that their decisions do more good than harm. This state of affairs raises certain questions, some of which we're going to discuss today. I'd like to list three of them. The first, how are executive and independent agencies to be held accountable for their actions while also preserving needed insolation from overbearing political pressure? Second, does the answer change depending on the mission of the particular agency? And third, are there problems with the cost-benefit analysis model that create opportunities for agencies to manipulate and justify their actions?

 

Our four distinguished speakers will speak to these and related questions. I'm going to begin with some brief biographies, and then we're going to move to short presentations by each of the speakers at their seats on their initial thesis statements on our topic. That will be followed by a roundtable discussion and then questions from the audience.

 

Our first speaker is Steve Bradbury. After confirmation by the United States Senate, Mr. Bradbury was sworn in in November of last year as the 23rd General Counsel of the United States Department of Transportation, which has more than 55,000 employees and a $79 billion budget. Before joining DOT, Mr. Bradbury was a litigation partner at Dechert LLP in Washington, where his practice focused on regulatory enforcement and investigations, rulemaking and judicial review of agency actions, appellate cases, and antitrust matters. From 2005-2009, Mr. Bradbury headed the Office of Legal Counsel at the United States Department of Justice, where he advised the Executive Branch on a wide range of constitutional and statutory questions. He served as a law clerk for Justice Clarence Thomas on the U.S. Supreme Court and for Judge James Buckley on the D.C. Circuit.

 

Second, we'll hear from Dr. Cary Coglianese. Dr. Coglianese is the Edward B. Shils Professor of Law and Professor of Political Science at the University of Pennsylvania Law School, where he currently serves as the Director of the Penn Program on Regulation. He specializes in the study of regulation and regulatory processes, with an emphasis on the empirical evaluation of alternative regulatory strategies and the role of public participation, negotiation, and business government relations in policymaking. Before joining Penn Law, Dr. Coglianese spent a dozen years on the faculty at Harvard University's John F. Kennedy School of Government, and he also has taught at Stanford and Vanderbilt. He's a public member of the Administrative Conference of the United States, and chairs its committee on rulemaking. He's also co-chair of the American Bar Association's Administrative Law Section, Committee on E-Government. He received his Master's in Public Policy, his law degree and his doctorate in political science from the University of Michigan.

 

Third, we will hear from Prof. Susan Dudley, who is the Director of the George Washington University Regulatory Studies Center, which she established in 2009 to raise awareness of regulations’ effects and improve regulatory policy through research, education, and outreach. Ms. Dudley is also a Distinguished Professor of Practice at the Trachtenberg School of Public Policy & Public Administration at George Washington University. From April 2007 through January 2009, Professor Dudley served as the presidentially appointed administrator of the Office of Information and Regulatory Affairs, OIRA, which you will hear about, obviously, this morning, in the U.S. Office of Management and Budget. Prior to that office, Professor Dudley directed the Regulatory Studies Program at George Mason University and taught courses on regulation at the George Mason School of Law. Earlier in her career, Professor Dudley served as an economist at OIRA, as well as the EPA, and the Commodity Futures Trading Commission. Professor Dudley holds a Master of Science degree from the Sloan School of Management at MIT.

 

Fourth, you'll hear from Catherine Sharkey, who is the Crystal Eastman Professor of Law at New York University School of Law. Professor Sharkey was a Guggenheim Fellow and a Rhodes Scholar. She received a Master's in Economics with distinction from Oxford University and her law degree from Yale, where she was the Executive Editor of the Yale Law Journal. After clerking for Judge Guido Calabresi on the U.S. Court of Appeals for the Second Circuit and Justice David Souter of the U.S. Supreme Court, she practiced appellate litigation before joining the faculty at Columbia Law School. Professor Sharkey has taught at NYU School of Law since 2007. Professor Sharkey is an appointed public member of the Administrative Conference of the United States, and she previously served as an academic consultant to the Administrative Conference.

 

So we'll begin with short statements from each of our speakers beginning with Mr. Bradbury.

 

Hon. Steven G. Bradbury:  Thank you very much, Judge Brennan. It's very much an honor to be here this morning, and I'm very impressed to see how many folks turned out for the early morning panel. I apologize: you may have known that the original speaker for the panel in this slot was going to Neomi Rao, but she's otherwise occupied with looking toward her new post, which is wonderful, awesome for the country. So you'll have to put up with me as a second best, I guess. I'll try.

 

I want to make three points to kick off the discussion this morning to address the Executive Branch-wide interagency review process that Judge Brennan referred to. And the first point is that it's a proper exercise of the president's authority as chief executive officer for the federal government to require, as all presidents since President Reagan have done, that executive agencies submit proposed significant rules to the Office of Management and Budget, specifically to the Office of Information and Regulatory Affairs, OIRA, within OMB—that's the office that Neomi Rao currently heads up—for a consistent, rigorous, interagency review of the proposed rule, and, specifically, an analysis of the cost impact of the rule, and the benefits of the rule, and a determination that the measurable benefits expected to result from the rule will justify—or in the words of President Reagan's original version of the Executive Order 12866, “outweigh”—the expected cost impact of the rule.

 

It's viewed as -- and the Supreme Court has recognized this. It's viewed as an inherent component of the reasonableness of rulemaking that there is a rigorous attention given in analysis, economic analysis, of the costs and benefits of proposed regulations and a determination made that the benefits expected to flow from the regulation outweigh or justify the expected costs of the regulation.

 

And in addition to the 12866 cost-benefit analysis, of course, President Trump has introduced two additional, structural requirements in the management of the interagency process for reviewing proposed rules. Those are Executive Orders 13771 and 13777. Those are the rules that require departments and agencies of the Executive Branch to ensure that for every new, cost-imposing, significant regulation—that's one that's expected to have a very substantial cost impact for the most part—the agency must identify two deregulatory actions it's going to take.

 

And this so-called "two-for-one" rule imposes structural discipline on the management of each department and agency because, for the first time, they are required to do this on an agency-wide basis. So sort of managing their own internal, regulatory process. There're lots of agencies like ours, the Department of Transportation, that have a lot of sub-agencies and sub-components. And now those sub-components in their regulatory rulemaking activities are not isolated islands. They are to be managed across the whole department by the department head.

 

Second, the President requires, as part of this Executive Order, that there be zero net-costs imposed by new regulations in this administration. Again, a structural, Executive Branch-wide, and for each department, department-wide management tool for ensuring a reasonable, thoughtful, and rigorous review of proposed regulations. And, also, the President in 13777 required agencies to set up regulatory-reform task forces and to designate regulatory-policy officers and regulatory-review officers that manage this process on a department-wide basis. Again, imposing that structural rigor.

 

These tools are a matter of management process – process management tools. They do not at all negate the statutory discretion of agencies to exercise substantive judgments about what is a proper use of their regulatory authority. They don't prevent agencies from developing and relying on technical information, specialized information, that's within the expertise of the agency.

 

So, for example, at the Department of Transportation, where we have a critically important safety mission, these regulatory management tools do not at all interfere with our ability to carry out that important statutory mission. Even though, as a department, we have achieved not just a two-for-one record in this administration in terms of deregulatory-to-regulatory actions, but a twenty-three-to-one record, so we're pretty proud of that.

 

These Executive Branch-wide management tools that the president imposes through OIRA and OMB are critical to the president's ability to supervise the efficiency of the Executive Branch. And that leads me to my second point, which is that it's consistent with the Constitution and with statutory law for the president to require that all agencies of the Executive Branch submit their significant regulatory proposed rules to OIRA for this interagency process. And that includes the agencies whose heads are insulated from removal by for-cause removal restrictions, sometimes referred to as independent regulatory agencies – typically, multimember commissions or bodies, often with a party diversity requirement in the appointment.

 

And the point I'm making is that the president can require those agencies to submit their significant rules to the same interagency review process without -- and this does not require the Supreme Court to reverse its decision in Humphrey's Executor that upheld the constitutionality of those for-cause-removal restrictions. And I think that's easily understood if you realize that this interagency review and cost-benefit-analysis process is the way the president ensures that the Executive Branch is operating efficiently. And if you look at those for-cause-removal restrictions that Congress has put in place, they typically empower the president to remove the heads of those agencies for dereliction of duty, which means not following a correct interpretation of the law; for malfeasance in office—for corruption, not acting for the right reasons, for example; and three, for inefficiency.

     

So the president has statutory authority consistent with those for-cause removal restrictions to ensure that those regulatory agencies—we're talking about, like the Federal Trade Commission, Federal Communications Commission, SEC, for example—are operating efficiently. And that means he could require them to submit their rules to interagency review to ensure that they are applying a consistent and rigorous cost-benefit analysis to determine the justification for their rules, and they are coordinating that review across the Executive Branch to ensure there's consistency across the Executive Branch and there's not interference with the programs and activities of other departments and agencies. So other agencies can have a chance to communicate through OIRA and comment on the proposal. And OIRA can review the consistency and rigor of the cost-benefit analysis.

 

That would be a change. It's been discussed a lot. ACUS has analyzed it, commented, and recommended this. President Obama actually amended the cost-benefit executive order to say that these independent regulatory agencies should submit their significant rules to OIRA. And what I'm saying is I think the president could require that they do so, consistent with the law.

 

The last point I want to make quickly is that it's a critical element of the president's management of the process to ensure the integrity of the interagency communications, of that process. And to the extent there are confidential, deliberative communications between agencies and the Office of Management and Budget, or between agencies that are reviewing proposed rules, the president has to be able to protect the confidentiality of those communications when they are sensitive and when the disclosure would compromise the integrity of the process.

 

So I know Judge Brennan introduced the question of transparency and open disclosure. And certainly, in rulemaking we want the agencies to disclose the basis for their decisions, the information they rely on, and the comments that they receive from outside parties that they do rely on. That's an important part of the process. But at the same time, the deliberative, interagency back and forth, particularly with the Office of Management and Budget, is important. And the confidentiality of that is often important to protect the integrity of the process.

 

And therefore, statutes passed by Congress that would purport to require the disclosure of all of those interagency communications, or communications between the agency and OIRA as part of the interagency review process, that would require those communications to go into the rulemaking docket, raise serious constitutional issues. And to the extent the president determines that that requirement would be inconsistent with preserving the integrity of the decision-making process, I think there's a strong argument that those requirements would be, to that extent, unconstitutional.

 

So with those, perhaps, provocative points, I will rest my case. Thank you.

 

Hon. Michael B. Brennan:  Dr. Coglianese.

 

Dr. Cary Coglianese:  Thank you very much for the opportunity to be back here at The Federalist Society to speak today. I'm going to talk also about independent agencies, and I'm going to get around to talking about the application of regulatory analysis requirements to so-called independent agencies. I'll have, I think, a different proposal to put out on the table than to bring the so-called independent agencies under the rubric of the executive order on regulatory analysis.

 

But really what I want to do is I want to talk today about the distinction between so-called independent agencies and executive agencies. And I want to suggest that the better concept as we are discussing on this panel, balancing insulation and accountability, the better concept is probably one that might be labeled or thought of as “autonomy” rather than having a strict binary distinction between independent and executive agencies.

 

And that probably is -- An even still better way to think about this concept of autonomy is, as Harvard anthropologist Sally Falk Moore once wrote, is a notion of “semi-autonomy.” And so what I'm going to do is try to explain what I think would be different about thinking about autonomy as the focus, and semi-autonomy. And then what that might say about how to approach the issue and concern that so-called independent agencies are not doing as thorough or thoughtful regulatory analysis before issuing new regulations.

 

Let me just suggest at the outset that the focus of autonomy is intended to go beyond formal structures of agencies, like the for-cause removal protection. It is a way of capturing a broad theme within administrative law that focuses on the importance of neutral expertise and not partisan ideology as a driver of decisions within administrative government. In fact, once could say the notion of a government of laws and not of men, or women, suggests an autonomy to law itself that is often viewed as highly desirable and valuable. But it's that same separation, that same autonomy, that is also valuable within administrative government. The carrying out of law enforcement and administrative functions in a neutral, expert manner that advances public value choices that are reflected in law, but that doesn't really -- it's not driven by -- government is not driven at the administrative level by personal or political preferences, at least not of the prosecutors or administrators.

 

And I think much of administrative law reflects this desire for autonomy. One can take a look at the Supreme Court decision in the State Farm case, for example, and we may hear and discuss more about that. But in that case the Court made clear that the arbitrary and capricious standard in the APA calls for agencies to make decision based upon reasons and a careful consideration of evidence, and not necessarily just on a political decision from a change, say, in administration in that case. So in other words autonomy is important to ensure that administrative government is based upon sound science, on evidence, and expertise. That is what we're really after.

 

And then I think once we begin to focus on that operational autonomy as a value for government, we can look at the formal distinctions between independent and executive agencies that -- again, often characterized or distinguished based upon the presence of a good-cause or for-cause removal limitation. We can view that formal distinction as having a contingent relationship with autonomy -- that it may or may not advance autonomy.

 

I think this is important for a couple of reasons. First, moving past that formal distinction is important because both—under the traditional dichotomy between executive and independent agencies—both kinds of agencies should have some degree of autonomy. That's important for both types of agencies. And that contingent relationship between the formal structures and the actual level of autonomy suggests that we should look beyond that formal distinction and ask what's really happening. And I think a good bit of current research on the nature of agency independence is showing us that. Ricky Rivesz and Kirti Datla have a nice article that show, even at a structural level, what constitutes independence of an agency is continuous, not necessarily a binary, distinction. And autonomy itself is definitely on a continuum.

 

For many years, the OECD has been recommending to governments around the world that they promote independence of regulatory authorities by using formal structures. But most recently -- [in] their most recent report on agency and regulatory independence, the OECD has recommended not focusing solely on the formal structures, but recommending a shift to thinking about the de facto independence or autonomy.

 

Autonomy also is helpful, I think, in expanding the scope of the pressures that can affect -- that we need to be concerned about effecting governmental performance. The formal, independent–executive distinction really focuses squarely on the president's role in the day-to-day shaping of administration. And that's one facet of autonomy. But so, too, is autonomy from pressures from special interest groups, as well—concerns about regulatory capture —as well as pressures from unrepresentative congressional committees—Hugh Heclo's notion of "iron triangles." It may also help us think harder about, and understand more clearly, the calls to separation, or a degree of insulation, from judicial oversight, at least in the Vermont Yankee sense that the Court said that the judiciary—an unelected, undemocratic institution—should not be adding to procedural requirements or otherwise driving the direction of the administrative state.

 

So both as, I think, a positive or explanatory or descriptive matter, and as a normative or legal matter, agencies, I think, should strive toward autonomy. Yet they should not be fully autonomous. They should be accountable as well. And this is where I think the notion of semi-autonomy comes in, a notion that goes back at least to 1973 in a famous article by Harvard anthropologist Sally Falk Moore, who spoke about law itself as a semi-autonomous force within society, an institution that is both shaped by society—social and political factors—at the same time, it is also trying to shape society—social relations, political conduct, and so forth. Law in a semi-autonomous sense is much like the bank of a river. A river bank does shape the direction of the flow of the water. But sometimes that water itself—if that is a metaphor for society and social pressures—bumps up against the river bank, maybe overflows it, and shapes the direction and shape and angle of the river bank itself.

 

The challenge with semi-autonomy, then, is finding what one might consider the optimal degree of semi-autonomous administrative agencies. It recognizes the mix that Chris Edley spoke of when he talked about the trichotomy of administrative law – of law, science, and political mixed in there together. I think this notion of semi-autonomy, of breaking free of the binary distinction between independent and executive agencies, also can give us some purchase and some direction with respect to questions of the design of the administrative state, and particularly with this issue about regulatory analysis.

 

So let me just close briefly with a different way of approaching the need for and desire for improving regulatory analysis at the so-called independent agencies: the Securities and Exchange Commission, Federal Communications Commission, Federal Trade Commission, and so forth. Lots of studies have shown that these agencies don’t do as much regulatory analysis, as best we can tell, as so-called Executive Branch agencies. And that gives rise to, as I think Steve articulated well, a call for thinking about applying the OIRA review process to these so-called independent agencies.

 

But there's another approach that I think is something that can go beyond this. Either -- what we have right now is no requirements for regulatory analysis before the so-called independents adopt rules, or a full OIRA review. And if we look at another option, it would be -- and one thing I would say about this option, by the way, is that we've been living with the world with no requirements, really. And presidents, notwithstanding recommendations from organizations like ACUS and good scholarship that suggests presidents could, indeed, subject independent agencies to an OIRA-like review process, it hasn't happened.

 

I think a way of thinking about something beyond the all or nothing would be to take a modest step, a semi-step if you will, toward requiring agencies that are defined as independent under the Paperwork Reduction Act to [comply with] the requirements of the Unfunded Mandates Reform Act, which is a statute that requires agencies to conduct benefit-cost analysis before issuing rules that will impost significant costs on the private sector. The advantage of this approach, of withdrawing the exemption that's in UMRA, the Unfunded Mandates Reform Act, for the so-called independent agencies, is that it removes any excuse that independent agencies might have for not doing this kind of regulatory analysis. But it doesn't go all the way to subjecting them to  White House scrutiny, which would—I think as Steve acknowledged—be a big change in our prevailing norms and practices in the federal government.

 

So I think recognizing the semi-autonomous nature of the administrative state is important both descriptively -- it does better describe what's going on at both executive and so-called independent agencies. But it is also something that can help us break free of binary distinctions with respect to policy interventions; get beyond an all-or-nothing approach with respect to regulatory analysis; and impose the requirement that is judicially enforceable under UMRA, that agencies conduct better analysis; and in that way, strike a better balance between insulation and the kind of accountability that comes from good regulatory analysis. Thank you.

 

Hon. Michael B. Brennan:  Thank you. Professor Dudley.

 

Prof. Susan Dudley:  Thank you, Judge. Am I on?

 

Hon. Michael B. Brennan:  You are.

 

Prof. Susan Dudley:  So I'm very interested in this panel, and am very happy to be here. When I was asked to think about what I would say, the first thing that came to mind was Hamilton's, "If men were angels," quote. So I think, as several people have mentioned, presidents have recognized that their appointees are not angels. And so for almost four decades, they've tried to exert some accountability and control over the regulatory process through the OIRA review that Steve talked a lot about and through the requirement to conduct regulatory impact analysis of proposed rules.

 

So this is bipartisan. Just a couple of months ago, we celebrated the 25th Anniversary of Executive Order 12866, which President Clinton signed and which is still in place today. And what it does is it tells agencies first to identify the compelling public need that requires a government solution. For those of you who were enjoying the fire-hose talk yesterday morning from Richard Epstein, he talked a lot of about: when markets work, let's leave them alone; but if there's market failure, that's a compelling public need. And that's something that presidents have directed, as the Judge said, since 1981. And actually even before.

 

And then once you've identified that need, then analyze the benefits and costs of alternatives, including the alternative of not regulating -- talking about that test.

 

So why is it not enough? And I think I'm answering Judge Brennan's third question. Why is that analysis not enough? In a forthcoming article in the UVA Journal of Law and Politics, Brian Mannix and I identify both institutional and technical explanations. So I'm going to quickly try to go through those.

 

On the institutional barriers, the first is that executive orders are limited to the extent permitted by law. And often Congress in writing the statutes that give agencies regulatory authority do not -- they pass laws that are silent on benefit-cost analysis. And as the Judge mentioned, agencies tend to interpret that silence as prohibiting benefit-cost analysis. In some cases, like American Trucking, the Supreme Court has agreed with them. But more recently, courts are finding that not only are agencies not prohibited from considering cost and benefits, but that it may be arbitrary not to consider costs. Michigan v. EPA – that was an important decision.

 

The second institutional barrier is that it's the agencies themselves that conduct the analysis. And it often looks more like an advocacy tool than a transparent accounting of the alternatives available. These regulatory impact analyses can be dense and complex, possibly deliberately so. They can run into the thousands of pages. And they often seem to be done after-the-fact to justify a decision rather than in advance to evaluate different alternatives.

 

Third, efforts to counter agencies parochial perspectives, such as oversight and public comment, haven't been fully effective. Except for the Congressional Review Act last year, Congress oversight of regulation really is pretty weak. OIRA, I think, is a very important office, obviously, since I worked there as a young economist and was the head of it more recently. But it's a very small office. And as we've heard from both Cary and Steve, not all rules and not all agencies, independent agencies in particular, are subject to those requirements.

 

Public input, public comment, is important. Yesterday morning, Professor John Michaels said that public comment was the equivalent of Congress providing oversight within the Executive Branch. But it comes very late in the process, often too late to change the policy direction. And courts do provide checks, but as I said, compliance with the executive orders isn't judicially reviewable. And I think will hear more from Catherine about deference that courts provide to the agencies.

 

And then my fourth, and final, institutional constraint is that the government rarely looks back to evaluate their regulations after they're in place. So the analyses that they do, these thousand-page analyses, are essentially hypotheses of what the world will look like after we’ve implemented a regulatory solution. But we rarely go back to test that hypothesis, so you're missing that feedback loop. Agencies do not have the incentives. They're not required to. You have to do that ex ante analysis, or OIRA won't clear your rule. But after the rule is in place, it's not that much fun to go back and look at an old rule. It's way more fun to think about what the next problem is to solve.

 

And it's not just the agencies, but regulated parties as well often are not as interested in review—evaluation review of rules. Once they complied, they may even put up a competitive barrier to others who might want to enter the business. And so they also are not always interested in retrospective review.

 

[Drinks a sip of water] Sorry, I'm getting a cold, I think.

 

So now to the technical barriers, and this I think is really starting to answer Judge Brennan's third question. I think the way benefit-cost analysis is applied may systematically bias its results. First, agencies don’t start by identifying that compelling need for the government intervention. So they often start with the presumption that economic markets are fragile and prone to failure, but that regulatory solutions will work exactly as planned, and that regulated parties and private decision makers are subject to all kinds of cognitive biases that somehow the regulators themselves don't share.

 

Second, they often don’t approach benefits and costs in an objective manner. A large percent of the total benefits -- OMB every year tallies up agencies' estimates of the total benefits and total costs of regulations issued over the last decade, and more than 80 percent of those benefits come from what are known as co-benefits, which means their serendipitous side effects of a regulatory action that is achieving a statutory goal. Sometimes analyses seem to search for every possible co-benefit without looking to see, “Are there also indirect costs or unintended costs?” In fact, the word co-cost is never used in an agency analysis. So there're people who think you should never use co-benefits. I think my perspective is different. It's more that you need to be balanced when you're doing that analysis.

 

Third, the underlying risk assessments—the science Cary mentioned. The importance of the science -- and I agree that goes into a lot of these decisions. But the way it's done is incompatible with benefit-cost analysis. The practice of estimating public health and environmental risks is to err on the side of safety versus providing an objective estimate. So that approach not only hides uncertainty in the estimate, but it deliberately overstates risk, which unintentionally will misdirect resources. That raises costs, but it also may be making public health worse. If you're biasing -- purposefully overstating some risks and not others.

     

And then, finally, as I said before, retrospective analysis is very important. But not only are the incentives not there, but it's really hard to do. You don’t know what the counterfactual was. Once a regulation is in place, what would the world have looked like without it? What are the opportunity costs? What unseen inventions and benefits did we not get because we took a particular path?

 

So I have -- let me offer a few solutions to both these institutional and technical problems. Institutionally, I think independent agencies should be subject to OIRA review, and I expect we'll have some more discussion on that. I would like to see Congress pass legislation that codifies these bipartisan executive orders that require that analysis. I think legislation could provide for judicial review. We need more vigorous and meaningful public input earlier in the process. I'd love to talk more about that, if you're interested. I think it would be great if agencies could be required to, before they issue a new regulation, evaluate whether their last regulation addressing that problem -- evaluate how that worked.

 

And then, finally, regulatory budget. Steve mentioned President Trump's executive orders requiring costs to be offset. That can counteract some of those institutional incentives that I talked about.

 

On the technical side, if I were king, I would require agencies to consider how the regulation will affect competition. That should be an important part, is recognizing that competition can sometimes be a better regulator than government action. Recognize that behavioral insights apply to regulators as well as those being regulated. Examine benefits and costs in a consistent manner. Provide expected values when doing this underlying science and estimates of risk, and ranges based on probabilistic analysis rather than precaution. And then, finally, to design regulations to facilitate natural experimentation and learning. Yesterday, there was a lot of talk about federalism, and I think that's a great way to address that.

 

So bottom line, and I'm maybe going over my time, but when collective action is necessary, benefit-cost analysis is a valuable tool from forming policy decisions. But it's not a replacement for the market process, which is dynamic and responsive to diverse preferences and changing conditions. It's necessarily a static exercise, and it depends on assumptions and models about how the world would look in the future with and without a regulation. Those assumptions are often highly uncertain and not transparent to decision makers or the public. So if we could address both these institutional and these technical barriers that I've talked about, I think we might better balance the concerns of this panel: agency insulation and accountability.

 

Hon. Michael B. Brennan:  Thank you. Professor Sharkey.

 

Prof. Catherine M. Sharkey:  Thank you. Good morning. It's a real privilege to be here this morning. And actually I'm still thinking over Dean Reuter's story of the snow, and I'm thinking about my experience getting here from New York last night. And, Steve, I wonder if NTSA has some rules that might help -- I'm typically sensitive to federalism concerns and leaving local and states to handle local problems. But Manhattan was in a complete shutdown with externalities going well beyond just the transportation system, so I wonder if NTSA has some rules that could've helped --

 

Hon. Steven G. Bradbury:  You want NTSA to fix Manhattan? It ain't going to happen. Sorry.

 

Prof. Catherine M. Sharkey:  I'm wondering -- as you'll see in my remarks, I'm quite interested in thinking about various, both institutional design questions and features. What I'm going to talk about today if judicial review in a kind of information-forcing, incentive-forcing framework. So maybe NTSA could come up with something that would have a good, local incentivizing effect on transportation in the city.

 

So I want to talk about a few things briefly. So first, I want to go back -- and it's going to seem a little bit self-referential, but in 2014 I wrote a law review article with what I thought had a catchy title, but I've been castigated for it, called "State Farm with Teeth," and then it's called, "Heightened Judicial Review in the Absence of Executive Oversight." And notwithstanding that I got lots of mockery about defanging State Farm etc. -- maybe it's because I'm "Sharkey." I'm sticking with the teeth metaphor there. But the premise of that article, it actually used -- I was inspired to write it by the business roundtable decision, the D.C. Circuit decision by Judge Ginsburg that struck down the proxy access rule—the first SEC rule coming out of Dodd-Frank. And I was intrigued because there was a lot of controversy over that opinion, lots of people focusing about whether the proxy access rule was good or bad, etc. And what I was intrigued by was it looked to me like it was a use of this judicial doctrine, State Farm, that's supposed to be interrogating, as Cary alluded to, the -- making sure that there's reasonableness and reasons given in the underlying agency rule.

 

And to my mind, it suggested an interesting scheme whereby courts might use what I was calling this "heightened judicial scrutiny," State Farm with teeth. Particularly in instances -- this being the SEC, an independent agency that did not subject this rule to OIRA cost benefit analysis -- that it might be an added justification for more heightened judicial scrutiny.

 

And I was not only interested in making that claim, but also thinking about what the incentive effects would be on the agency. So the article goes through and looks at how some of the federal, particularly banking, regulatory agencies decided to take some action in the shadow of that ruling, beefing up their internal departments that were engaging in cost benefit analysis. Certain agencies, like the CFTC, going and having a memorandum of understanding with OIRA that wasn't subjecting it legally to that structure, but was actually seeking to do the kind of rigorous analysis.

 

And I guess I was playing in that article, from the agency's incentive perspective, a possibly Faustian bargain. They could choose their poison, executive oversight or more heightened judicial scrutiny. And I was intrigued by that concept.

 

I think all of us are coming back to this notion of what does it mean to have reasonable regulations. And just as a footnote, in addition to being an administrative law person, I teach tort law. And I don't understand, actually, in the academy why more people who are interested in health and safety regulations and the like don’t bridge the private tort-law perspective with a public administrative-law perspective. My colleague, Richard Epstein, certainly does. I unfortunately missed his "fire hose." But he's my colleague, and I'm a co-author, now, in his case book. So I think I can imagine a few of the things in his perspectives of what he had said yesterday. But I actually want to, for the moment, just say I think he has a particularly interesting perspective, and one that is not shared by enough academics about understanding which types of things private law and markets, etc., can handle, and where you need the public regulatory sphere.

 

But my point here, to bring up tort law, is tort law is, of course, obsessed with reasonableness. And we have all of these different tests for how can we give some kind of content to it. And the economists like the Hand formula, which is a cost-benefit kind of formula. And there's a lot of similar kinds of talks with how judges can come up with standards that would maybe help us, from this perspective, com[e] up with better types of rules. And so I guess I share that kind of framework. And I think that judicial review, while it's not necessarily a panacea—it's not going to solve all of the problems—[it] can be helpful there.

 

So after writing that article, everyone was waiting with bated breath for the sequel. This is what law professors like to think. And the sequel has come out. So don't worry if you missed the original because the sequel recaps it. But the sequel that I've written is called "Cutting in on the Chevron Two-Step." And so the most recent article -- it's in Fordham, 2018. So it took me four years. Every four years -- I guess it's like -- I don't know how often Star Wars came out when it was coming out with the sequels. But this article tries to actually make the point that while State Farm has been thought of as this doctrine really interrogating the policy analysis of agency regulations, and Chevron has really been thought of as a deference doctrine when agencies are interpreting statues, this article tries to suggest that the policy interrogation and the statutory interpretation perspectives should be merged.

 

So the "Cutting in on the Chevron Two-Step" doesn't take a lot to figure out. I want State Farm to cut in at Chevron Step Two, and I think this would be a good development. I trace in the article, for example -- there was a case coming out of the Second Circuit called Catskill Mountains. I use that as a showpiece because the district court in that case—it had to do with the Water Transfers Rule, which was a rule by the EPA about whether it needed permitting when water was being transferred. Actually, Cary, you brought up this water with the murky banks? And, of course, I was thinking about, "What are the social, economic effects if this water is getting murky in one and transferred to another basin," because this is what is at issue with the Water Transfers Rule.

 

And the district court did an interesting thing in that case and basically said that the EPA, when it came forward with its water-transfers rule that it didn’t require permitting, hadn’t provided any of the underlying, empirical evidence. And it was just really a legal analysis that the agency had given to justify what it was doing. And so it was rejecting it on that ground.

 

This gets overturned by the Second Circuit, and it was the cleanest example I could find. I actually came up with lots of examples where I was having to force this analysis onto whether courts of appeals were or were not doing State Farm policy-level review. Because, of course, in the D.C. Circuit, a kind of typical framework is they'll do Chevron Step One and Step Two, and then get to State Farm review and do it as a kind of "step three." In some jurisdiction they’ll do State Farm as a kind of step one and then get to Chevron. But this was the cleanest example that showed how it might matter. It might be outcome determinative. Because the Second Circuit overturned the district court saying, "Boy, that's too much judicial scrutiny at Step Two of Chevron. Once you get past Chevron Step One, where you say that this statute is ambiguous and we're therefore going to look to whether what the agency is doing is ‘reasonable,’ that's too much scrutiny. And we don't want to import State Farm-level scrutiny at that step.”

 

And I think that's, actually, exactly wrong. I think that the worry if you don’t do that is that agencies might be incentivized to use what I call "legal" or "Step One-type analysis." Namely, agencies would be using all of the kinds of statutory interpretation legal arguments—the text of the statute; if it's allowed, legislative history; purpose of this statute, etc.—and they would use those arguments, the same arguments that they're using to say this statute is ambiguous, and once they get past that level—so that A, B, or C would be a reasonable, possibly, interpretation of that statute—at Step Two, they do nothing more. They just default back to their legal analysis. "We think B is the right legal answer."

 

And what I would like to happen at Step Two instead is that the agency would have to put forward their scientific, empirical evidence for their policy preference for B over A and C. And if it doesn't come in, and the courts don't interrogate that, I think that the agencies wouldn't be incentivized to do that. So that's what I did in that.

 

Now I know. Some of you are at the edge of the seat: what's the third going to be? Or I'll pretend so that I can give some kind of normative justification for gathering at this hour of the morning.

 

I've become really intrigued at thinking about what is going on at the state level. Because I've, so far, done a lot of looking at how the federal courts, and in particular the courts of appeals, might harness this kind of Chevron/State Farm framework.

 

Actually, before I get to the states, one other interesting point I think: one of the other reasons importing State Farm into the Chevron Two-Step is really important is when these issues come up in cases involving private parties. So the idea is that when private parties have litigation and the agency isn't a party to that case, there's actually some really interesting things that go on in terms of courts giving what I think is too much deference to an agency position that hasn't been interrogated.

 

And so this importation of State Farm into the Chevron framework will allow for that level of review to happen where the parties wouldn't be able to bring a direct State Farm kind of challenge right there. So it's an indirect way of challenging some agency actions. And I have -- in some previous work, I've talked about how federal preemption cases give us a really good lens into looking at this. Namely, we have private parties. An injured plaintiff is suing a manufacturer of a drug, etc. But what's at issue is what the FDA thought in terms of how much of a rigorous review it did of the particular drug label, let's say, or what have you. And this kind of State Farm into Chevron analysis, I think, allows for a good doctrinal framework for courts to be interrogating the underlying basis for the agency's judgment and perspective, even when the agency's not before it. We can talk some more about that if you're interested.

 

But the third in this series, if I get around to writing it, and anyone other than my family is wondering when the next Star Wars is coming out, has to do with looking at the states. And, of course, this is an interesting year to be thinking about that. There's some recent commentary that has suggested that this is the year of Chevron revolt, and there's some interesting things happening at the state level. Just very recently, we saw in Florida there was an amendment passed to the constitution that is doing away with Chevron. Arizona amended their state procedural rules. I'm at the beginnings of looking -- it's actually very fascinating that there's a wide array of state practices, going from the "throw Chevron out the window" to "maximal deference, no judicial scrutiny, no interrogation." I'm, for obvious reasons, very intrigued with the states that are in the messy middle. Here I have to allude to Richard Epstein. He always says, "I'm searching for the Aristotelian golden mean, but it's usually a bad endeavor in the kinds of issues I'm thinking about." So I guess he's right here, too, at least that I'm searching for the "Aristotelian golden mean," I think embedded. . .

 

It's a little difficult because the state court analyses look a little different from the federal court analyses of these issues. But there are some states—so far I've identified Kansas and Idaho—in this intermediate space where they seem to be embracing a kind of Skidmore, power-to-persuade-type standard as opposed to the Chevron standard, but allowing for the possibility that there could be some judicial scrutiny of the underlying scientific and empirical basis of an agency regulation.

 

So I'm very intrigued with trying to think about if this might be a good approach. It obviously is, in my mind, a kind of "Aristotelian golden mean," because I'm not ready to embrace the "throw Chevron out the window" approach, although we could talk about that in Q&A, etc. So I think I will end there. Again, I'm really excited about being on this particular panel with colleagues who have thought a lot about various aspects of this area of the law. And I look forward to your questions as well. Thank you.

 

Hon. Michael B. Brennan:  So thank you to the panelists. We've heard a call for large change; we've heard a call for a more modest step. We've also heard discussion of both institutional restraints and technical barriers with some proposed solutions. And then, finally, some discussion of a proposal with regard to judicial review and the doctrinal framework that these circumstances are analyzed under.

 

      This is the part of the program where the commentators will have a chance to comment on each other. So I will turn it over to the panel and see if there are certain responses or observations that anyone might have on each other's comments.

 

Hon. Steven G. Bradbury:  Can I jump in?

 

Hon. Michael B. Brennan:  You may.

 

Hon. Steven G. Bradbury:  Thanks, Judge. I want to disagree with Cary, here, on the discussion of autonomy—agency autonomy—in a couple of respects.

 

First, I do think that the distinction between an agency that we recognize as fully within the Executive Branch and under the management-controlled supervision of the president fully, and a commission or multi-member agency that we refer to as an independent, regulatory agency -- I do believe that distinction really is binary. And I do think it turns on the for-cause-removal restrictions that Congress, by statute, puts in place for the removal of the heads of those agencies or members, which insulates them from full, presidential supervision and control.

 

I think that in the real world, inside government, that's a critical, critical distinction. Where the agency head serves at the pleasure of the president, is fully part of the president's policy and management team, the agency head and everybody who works for the agency head knows that when the White House calls and there's an issue of concern to the White House and something the president is focused on as an initiative or a priority, you really do need to attend to that. And you do need to participate in the president's discussion of those issues and respond to input from the White House, and the president, and other agencies of the Executive Branch. And if you don't, it can be an immediate action the president takes to remove the agency head.

 

Now, that doesn't happen every day. And there is a political cost to that for a president. But it's an enormous leverage in terms of management control and supervision. It really is the key instrument the president has to ensure reasonable actions and efficient actions across the Executive Branch. And for-cause removal restrictions are interpreted to impose real limits on that ability of the president to remove the agency head. And they are interpreted to impose some due process requirement, in terms of notice to the agency head, some reasons given, and opportunity to respond, etc. And courts have upheld that in terms of agency heads who've been removed seeking reinstatement, etc. And it does create a real-world insulation and distance. So I do think that's the critical distinction, and it is largely a binary one.

 

In terms of autonomy, I think with autonomy there is a greater risk, actually, of regulatory capture with agencies. They have the tendency to be more responsive to the industries and actors that they regulate than to a unitary view from the top down in the Executive Branch as to what is the right approach on issues. And, also, a greater risk of congressional interference and micromanagement or management of the actions of the agency. And those tendencies can really undermine the effectiveness of the unified Executive. We only have three branches of government under our Constitution. The Executive Branch is under the supervision of the president. To the extent agencies are actually autonomous and independent of that supervision, they are less accountable to the political will of the citizens. And that is a real danger.

 

Lastly, I'd say Congress can achieve a modicum of real autonomy by specifying in statute what factors and what technical requirements, etc., the agency head needs to address in any particular regulatory action. Congress, by statute, can place the authority to make the decision in the agency head. It's not the president's; it's the agency head created by statute. And Congress can specify, specifically, what information and factors that decision must be based on. The president can't override that. The president can supervise the exercise of that authority. But it does reside with the agency head, and it must be based on the statutory factors. That can achieve a degree of autonomy that I think addresses the institutional concerns that Cary raised. Thank you.

 

Hon. Michael B. Brennan:  Cary, the floor is yours.

 

Dr. Cary Coglianese:  Yeah, actually, I don't disagree with most of what you said, Steve. I have a paper called, "The Emptiness of Decisional Limits." So on the last point, for example, I think it is very clear that statutory authority delegated to an administrator must be exercised ultimately by that administrator. But there's lots of opportunities for presidents as a practical matter to shape and direct that. And I think, quite frankly, that happens with the so-called independent agencies as well. It was hardly a surprise in the last administration when the Federal Communications Commission seemed gridlocked on the net-neutrality rule that, after President Obama gave an address, calling for the net-neutrality rule, that's what was enacted. But also it was not a surprise that a new administration comes in and puts in place a new Chair of the Federal Communications Commission, and the net-neutrality rule disappears.

 

So I think, certainly as a formal matter, we can say that there are 19 agencies listed in the Paperwork Reduction Act that are defined as independent agencies, and we can look and say there are agencies that have for-cause protections and some that don’t. But I think what that means at an operational level, is much murkier and less clear cut than a binary distinction would mean. Again, the Rivesz and Datla paper does a nice job of showing that even with respect to for-cause protections, there's different language. There're also some agencies that have independent litigating authority and others that don't. There're some like the Federal Reserve or the Food and Drug Administration that have some non-appropriations sources of funding. So there are ultimately different formal structures that break down even a formal binary distinction.

 

But what I want to suggest is we need to think about what this means at an operational level. And it's at that level that I think it's really a continuum. There are some agencies that as a practical matter are harder for presidents, even presidents that can remove at will from directing, than there are others. And that is ultimately, I think, the direction to go in, is to think about not just these formal structures, but think about: what is actually the problem with respect to too much autonomy? With respect to the regulatory-analysis front, I certainly get that, and I think that's fixable by amending UMRA rather than going ahead and extending the executive order.

 

Hon. Michael B. Brennan:  Susan or Catherine, do you have comments on that?

 

Prof. Susan Dudley:  Maybe this is a question for other panelists. One of the things you said upfront, Judge, was: does the question of an agency independence depend on its mission, and do we care? So are there any things, I wonder, that Steve would say maybe that should be more independent than other?

 

      Now, yesterday we heard -- there was a panel on independent agencies, and we heard from Henry Kerner, who is the Special Counsel in the Office of Special Counsel, which I learned yesterday has nothing to do with that other Special Counsel that's been in the news.

 

Hon. Michael B. Brennan:  It's the Special Special Counsel.

 

Prof. Susan Dudley:  He is The Special Counsel. And it was pretty clear to me that maybe that shouldn't be covered. But then, again, it's not regulatory. The Federal Reserve is another one that does issue some regulations. So I wonder, maybe, Steve, Cary, Catherine, do you think there are some agencies that should be completely independent, maybe not even subject to UMRA?

 

Hon. Steven G. Bradbury:  Well, I will say that Congress -- as I indicated, Congress by statute could identify certain decisions, certain types of exercises of government power that Congress has determined should be made on the basis of certain considerations and can ensure that the integrity of that decision is maintained, and that the public can have confidence in the reliability of it because it is focused on those types of factual, technical, scientific determinations, for example. That kind of statutory specification to that extent insulates, or is designed, I think appropriately, to insulate that decision from other considerations that maybe are viewed as not legitimate for that particular exercise of authority.

 

In addition, we of course have important due process principles when it comes to an enforcement action against an individual employee of the government, for example; for corruption; violation of statutory restrictions like the Hatch Act; or an agency for discriminating in the hiring of employees or promotions. Those are the kinds of issues, enforcement matters, that the Office of the Special Counsel is empowered to enforce. And we want to protect the due process rights of the individuals who are the subject of those actions and also of the integrity, and reliability, and public confidence in the decision making that's done. And so it's appropriate to treat them as outside the, maybe, political influence and management -- influence of the president.

 

But the ultimate goal is accountability for government action and confidence that the public has in the government action. And I think the Constitution recognizes that the primary channel for achieving, maximizing political accountability and confidence in executive actions is by concentrating management and supervisory authority in a single person, the President of the United States, who is, along with the Vice President, the only officer of the United States who's elected by the entire country.

 

Hon. Michael B. Brennan:  Catherine.

 

Prof. Catherine M. Sharkey:  This is a fascinating discussion, and I guess there are just two aspects or dimensions that I'd like to put on the table as well. So first, as I alluded to quite quickly, but I'm quite intrigued -- Cary mentioned that for a long time there's been this debate about subjecting independent agencies to OIRA review. There's actually some really good work -- he alluded to my colleague Ricky Rivesz and Kirti Datla's work about blurring distinction between these. I'm intrigued by this idea of agencies voluntarily submitting to OIRA and having appropriate incentives, as I mentioned before -- maybe judicial review would incentivize -- the threat of heightened judicial scrutiny might incentivize that more. And that would be a kind of other proposal that I think would be interesting to talk about.

 

And then the second dimension to that is I think increasingly agencies are working together, doing joint rulemaking. And we have independent agencies, so-called, working with Executive Branch agencies. And this raises really intriguing judicial deference-type questions. So the D.C. Circuit has this strain in their doctrine that if you're dealing with more than one agency, then none of them would get Chevron deference. And it seems like that might not be the exact right solution to that. But I don't think a lot of thought is being placed into what kind of deference will be given in these kinds of increasing, I think, terrain where we have multiple agencies acting together.

 

Hon. Michael B. Brennan:  Susan, one of the things you've written about is the Independent Agency Regulatory Analysis Act of 2017, which was a submission—I believe it's in bill form at the moment—for regulations that would have an annual economic impact of $100 million or more, OIRA would not have the power to reject the rule, but they would certainly do that kind of analysis. Perhaps you can give us a little bit of your thoughts on that bill and the status of it?

 

Prof. Susan Dudley:  Okay, yeah. So I'm curious about Cary's suggestion of using the unfunded mandates, and maybe I'll get too much into the weeds if I ask him questions about that.

 

So right now, OIRA reviews the information collection of independent agencies under the Paperwork Reduction Act. And the way that they do that—and I think this is a model for maybe having OIRA review independent agencies' regulations as well—the way they do that is they review the information collection, give the agency feedback, and they can disapprove that collection the way you might disapprove a rule. But a vote of the commission can override that. So to me, that strikes a good balance. It keeps -- that commission has some independence and can override OIRA's review. But it does add that additional accountability that I think can be valuable.

 

I just want to respond to Steve a little bit. I'm concerned a little bit about the notion that Congress can specify in statutes, and they do. But that is often part of the problem. They'll say in a statute, and tell their constituents, "We are issuing this statute to protect public health with an adequate margin of safety." And that's what the statutory language says. And then when the agencies interpret that, and the courts do, as, “Well, that means you can' consider tradeoffs about how much it's going to cost to achieve that.” Congress can then take credit again by holding hearing and exclaiming how awful the agencies are. So to me, saying, "Well, we can get around this by letting Congress pass statutes" -- they tend to do it in a way that allows them to shirk responsibility. Set high-minded goals in their statutes and then leave to the agencies the difficult parts, which when they don’t work—which they won't—then Congress gets another opportunity to be high-minded.

 

Prof. Catherine M. Sharkey:  Can I pile on that? Because I want to bring up the example of the Motor Vehicle Safety Act. So this is something I've thought a lot about, too, in the preemption realm, where there's this strong view that agencies shouldn't be giving any input whatsoever to courts. Think about the Geier case where the Court said they're going to give some weight to what NTSA thought. And there're some individuals who have the view that agencies need to be entirely out of this. They aren't the right entity to be doing this. Congress has to specify clearly in statutes. Well, the Motor Vehicle Safety Act is not uncommon in the realm of products-liability spheres where Congress will either speak out of both sides of its mouth—have a preemption provision and a savings clause. And it's -- overtime, as preemption has been put before Congress in a variety of realms, of different areas, Congress never clearly -- or very, very rarely will clearly articulate what the effect of a federal rule or regulation should be on state tort law. And so one might think that Congress, actually, is affirmatively punting to another institution, and maybe is affirmatively punting to an agency to be able to inform some of these kinds of decisions.

 

Hon. Michael B. Brennan:  Steve.

 

Hon. Steven G. Bradbury:  May I respond?

 

Hon. Michael B. Brennan:  You may.

 

Hon. Steven G. Bradbury:  Thank you. I think what I was trying to describe was something that's very different, and maybe the opposite of what your concern is, Susan, that you raised. I think you're talking about a statute that does not at all specify the particular factors and technical facts or considerations that the agency needs to limit its review to or its consideration of in making a decision, but rather has a very broad amorphous standard, like achieve public safety or advance public safety based on actions in the public interest. So that's not an uncommon type of very broad delegation of regulatory authority, which I think leaves the president a very broad scope of supervisory -- to exercise his supervisory authority based on a wide range of public interest related factors: economics, how markets work, the practical and feasibility implications of decisions. And really, there's a wide compass there.

 

And I was suggesting that Congress could exercise more judgment and specificity in directing a particular regulatory delegation. And if Congress did that, those factors would be factors that as a statutory matter the agency would need to focus on. So I think it's consistent with the concern you raised that a more specified or specific exercise of legislative judgment would be an effective way for Congress to go.

 

May I say something about judicial review, which obviously is critical and important to the process? But the Judiciary is not part of the Executive Branch. And I always viewed that Chevron, and deference standards like Chevron, are standards that are addressed to the court and help to frame the role of the court in reviewing an executive action or regulatory action or administrative action by an agency. And as a general counsel of a department, I don't actually view Chevron as the roadmap for how the agency should exercise its substantive authority in an area. I still think the agency should do the right thing, should make the best judgment, should apply the statute in the most faithful way, and should take into account the practical implications, the economics of the markets involved, the need for the regulation, and should try to ensure—unless a statute clearly and expressly says otherwise—that the benefits, the measurable benefits, of that proposed regulation outweigh the costs and continue to do so after the fact. I mean, there should be periodic reviews of that regulation.

 

And it's not just a matter of “What can we get away with in the courts? Is there an argument that this statute is ambiguous? And is there a good chance that a court will let us get away with this particular interpretation because it's within some broad range of reasonableness under the statute?” I don't really think the Chevron framework should dictate, or should guide, how the agency exercises its authority. But it is an important restriction of the role of a court in terms of not replacing the technical subject-matter judgment of the agency—in authority delegated to it by Congress under the supervision of the president—with the courts' judgment as to what that better answer is.

 

Because the court is not accountable to the public. It's not politically accountable because judges have life tenure and their salaries cannot be reduced during their service. So [it’s] critically important that courts play the proper role under our system that they should play, consistent with their judicial function, and that the Executive Branch under the president’s supervision has the authority, as delegated by Congress, to make those subject-matter judgments in exercising statutory authority.

 

Hon. Michael B. Brennan:  Cary, do you have thoughts on that?

 

Dr. Cary Coglianese:  Yeah, just want to pick up a little bit on what Steve was just saying, and again emphasize how I think that's exactly the reason why all agencies need some level of autonomy. A semi-autonomous agency is one that is not being over-micromanaged by the Judiciary, for one. But it's also an agency that has the space and the degree of autonomy that's needed to make that good-faith determination of what the statute calls for them to do, what the evidence says. And I think it's why all agencies, again, should have some degree of autonomy in that sense that it allows them to do the kind of analysis that's required to advance the public interest.

 

Now, Susan, I think you certainly called attention to some of the political-economy phenomena with Congress and delegating authority and trying to claim credit for solving a problem at a very high level of abstraction, and then also being able to blame the agency again when something goes wrong. And that's certainly a concern. I see that more as a concern with delegation in general. And I think that it's possible for Congress to do that with respect to an agency that has an administrator that's headed with for-cause protection or not. So I think if we're talking about insulation in the sense of a formal structure, or a degree of autonomy, which agencies should have more autonomy than others, then I mean -- I don't know if this exactly was your point, Steve, I do think that Congress can make that decision too. That's certainly something that can go into how Congress decides to structure the agency. Again, with all caveats that those structures don’t necessarily always equate at an operational or decisional level with real autonomy.

 

But it's also from a policy standpoint I think your question, there, raises: what are those decisions that should be made more on the basis of a fair assessment of the benefits and the costs, the co-benefits and the co-costs, right? And to get to that kind of vision of an administrative state where there's expertise that's being pursued in good faith, and in a balanced, neutral, nonpartisan, manner -- that, too, will require more autonomy, I would say, than less autonomy.

 

Hon. Michael B. Brennan:  Susan.

 

Prof. Susan Dudley:  And I'm concerned about that, and it gets back -- if the experts in the administrative state were angels, I would agree with you. But the political-economy points, I think, apply there too. Their incentives are to grow their area of responsibility. They're drawn to an agency because they have -- they care more about that issue than other issues. And so, in my experience, if you're in an agency, you tend to think that the problems that you're trying to address are more important than any other problems. And therefore we should spend a lot of society's resources to address those. I think we can't trust -- I think the autonomy troubles me because we can't assume that they're going to be acting in the best interests of the public at large. There's a principle–agent problem unless there are these institutional constraints. And that's why I think we need to think more about how to constrain them so that we can trust the decisions that they make.

 

And the way I would start would be the way Richard Epstein was saying yesterday. First, let's not regulate unless you've identified a compelling public need: a material failure of private markets. So that's language from the Executive Order. And if we start there, then at least that's one area of things that those experts—who probably have the tunnel vision that Justice Breyer talked about—maybe can't get too carried away.

 

Dr. Cary Coglianese: Well, there are non-angels floating all around, right? Whether it's in the bureaucracy, or in the Congress, or in the White House, or in OIRA --

 

Prof. Susan Dudley:  Oh, except OIRA. OIRA's only --

 

Dr. Cary Coglianese:  Let's just --

 

Prof. Catherine M. Sharkey:  Law schools, too.

 

Dr. Cary Coglianese:  In the academy, you bet. But, actually, this is why I think that UMRA would be the better first step, at least. Because, quite frankly, there hasn't been an administration that's yet taken on the full step to applying the executive order and its market failure requirement to the so-called independent agencies. And there's a lot of reasons why it would be hard to apply that just in terms of the resources and the like as well, that would need to be devoted to increasing the staffing at OIRA and so forth.

 

But if we got rid of that exemption in UMRA, then there's a requirement for a statement in UMRA that is very similar to the market-failure test. And it seems to me that if you've got a statute that's requiring -- and this is Congress, by the way. So we don’t get into any of the issues about presidents interfering too much with these agencies that are so-called independent. If we just amended UMRA, it'd be very clear. It would also be very clear if Congress passed the kind of independent agency legislation that you're calling for too. And I think you're right that the kind of up or down approval or disapproval is another way of making that work. I just think that this would at least provide every agency a requirement to do some consideration of what the benefits and the costs are of a rule.

 

Hon. Michael B. Brennan:  And for those who are looking for further study, that Unfunded Mandates Reform Act is at 2 U.S.C. § 1501, where you can review some of the provisions that Cary's been mentioning.

 

We are going to move shortly to questions from the audience. Before we do, though, I want to recognize the panel, if there's any other comments they'd like to make beforehand.

 

Prof. Catherine M. Sharkey:  I have one. Steve, your perspective is very welcome. It was interesting, particularly when you said, within the agency, it's not as if rulemaking is proceeding kind of -- I think you said how to evade various requirements with Chevron in mind. But I'm guess what I'm interested in, you didn't mention whether State Farm and State Farm­-type review could incentivize agencies in a particular way. And, again, I guess the example that I have in mind is -- it's not a NTSA example, or the one where you say the agency is going to be focused on the impacts and the empirical evidence. But in Catskill Mountains what the EPA did, in their rulemaking, was specifically use what I'll call “legal arguments” that would come in at Chevron Step One and say, "We don't have to actually vet the impacts, the economic effects, etc. of that." And that's what I worry about, that it does -- it's back to your angels point. But if Chevron is supposed to be giving deference for policy analysis by the agency but instead it becomes a way where their legal analysis is deferred to, that doesn't seem right to me. So I was just curious your thoughts there.

 

Hon. Steven G. Bradbury:  Yeah. Well, State Farm, which basically said agency decisions may not be arbitrary and capricious. Agencies need to consider the material, relevant factors and acknowledge and address significant comments received from interested parties. And the decision making must be reasoned and reflect a reasonable process. I think that is an appropriate statement of a standard that does apply to the agency. And it is a judge-made encapsulation of a standard that is one that should guide the agency in all decisions as part of a regulatory process. So I do think that's fundamental.

 

I guess I would also just add that, in terms of the "men are not angels" concern, I think the concern that agencies with the delegation of very significant, sometimes very significant, regulatory power from Congress, that may have the tendency to think, "This regulatory proposal is the most important one, and we have policy objectives that, in our view, override economic considerations or some practical considerations that may be flowing from the proposal,” is exactly why I think it's critically important for significant agency rulemaking proposals to go through the interagency process and to have the more independent and technical expertise of the OIRA staff review the proposal and to subject it to an interagency review and comment process within the government as a tool for the president to ensure the more efficient supervision of that exercise of authority. Precisely because sometimes the outposts within the Executive Branch tend to get caught up in their own field of responsibility and what their objectives are.

 

And the interagency review process, the OIRA cost-benefit analysis process, helps to ensure consistency and that some of these major proposals are seen in light of how they impact what other agencies are doing and the overall costs and benefits of the Executive Branch functions and actions. And so that's exactly why it's a tool that helps ensure political accountability and helps address the kinds of risks that I think could come into play to the extent that the agencies are more autonomous and separated from that consistent, unified, review and management process that the president can carry out.

 

Hon. Michael B. Brennan:  Thank you. I trust, obviously, these comments have engendered a lot of questions from our audience, so you should, obviously, feel free to line up at the microphone. Three requirements, though, as we go forward. First, please give us your name and affiliation. Secondly, I'll exercise the moderator prerogative that, if it's a long preface, we need to move from a declarative sentence to an interrogative sentence at some juncture. And, third, if there's a particular speaker to whom you are addressing the question, try to fold that into the beginning of your remarks. Or if it's to the entire panel, let us know.

 

Let's start with the first microphone.

 

Kai Allbrook (sp):  I'm Kai Allbrook from the state of Washington. And my question is directed more at state-level agencies. In our state we have a Department of Ecology that issued a rule that shut down building in large parts of the state to protect the salmon. And to justify that, they had a cost-benefit analysis where they said, "Each salmon is worth $5,000, and if we don’t issue this rule, we'll be sued by environmental organizations, which will cost us $50 million; therefore, given these costs, the benefits outweigh. We have to issue the rule." Judges don’t want to touch these numbers because they're factual and they give deference to the agency. How can one correct such abuse, I would call it, without just getting rid of the agency?

 

Hon. Michael B. Brennan:  Catherine, do you want to take that one? Or. . .

 

Prof. Catherine M. Sharkey:  Yeah . . . So I do think numbers -- I don't know, where'd the gentleman go? Oh, there you are. Sorry. I do think that numbers can be challenged. So I think you're right -- just to broaden your question a bit. There's a way in which -- and this came up in the proxy access rule that was the subject of business roundtable. It's not as if all the weight of the evidence is on one side. There are competing empirical studies: facts are complicated, science is complicated. But the core was able -- and, of course, Judge Ginsburg said this was because the D.C. Circuit is like an administrative law court with the expertise to do this. So I recognize you might have some judicial competency, institutional concerns about the ability of judges to interrogate this.

 

But I actually think parties can challenge the underlying facts, science, etc., and that that should happen, and then the court is able to review that. So I don't think it means that you have to abolish the agency. I do think, though, that it matters. So this is kind of a case example I'd love to look into because I don't think -- you said apart from abolishing the agency or throwing Chevron out the window kind of approach, I do think there's some problems in state court jurisdictions that are giving mandatory Chevron deference, not looking at anything just because an agency is saying so. So in this intermediate sphere, I actually think judges could use judicial scrutiny to do some good. But I don't have great -- I'm in the process of exploring this and finding some pretty shocking case examples of this as well.

 

Dr. Cary Coglianese:  Can I just say briefly that there is a transparency element to benefit-cost analysis as well? It allows people to step up at conferences like this and point to absurd numbers and maybe build some public pressure that might act as a check.

 

Hon. Michael B. Brennan:  Let's move to the second microphone back there. Sir?

 

Harry Lewis:  Harry Lewis from New York. The Roman poet, Juvenal, famously asked, "Who will guard the guards themselves?" This panel, it seems to me, is asking the question, "Who will regulate the regulators themselves?" But to my comment and question, in New York, at least, we are fortunate to have the participation of members of the federal judiciary at our events, and Chevron has been extensively discussed, Chevron deference. The concern I've heard from those judges in informal settings is that Chevron really is, in some respects, a floodgate protection for the federal judiciary. And, of course, Justice Scalia famously was very concerned that loosening federal jurisdictional requirements, things of that sort, would inundate the federal Judiciary with literally a flood of cases in these areas, which it would be unable to manage or to handle.

 

So my question is: if Chevron deference is a kind of floodgate control on inundation to the federal judiciary, is it realistic to consider repeal since . . . And you have to consider prudentially the question of how is the federal Judiciary going to handle a massive influx of cases of this type, reviewing regulatory decisions? So my question is the prudential question: How would that happen? Giving them more law clerks? How would that happen?

 

Hon. Michael B. Brennan:  Maybe we can send this to Cary. Cary's written an article on the Chevron staircase and, obviously, Catherine's written as well with regard to that second step. Cary?

 

Dr. Cary Coglianese:  Sure. I would just say that I think getting rid of Chevron is a nice rallying cry. But the actual empirical evidence shows that there really was very little change in the amount of deference that courts afforded agencies, or at least the win rates, before Chevron versus after Chevron. And as your question, I think, suggests, there's strong, compelling, prudential reasons for judges to defer to agencies, even in the absence of Chevron. And those reasons pre-dated Chevron. In some sense, Justice Stevens's decision was really trying to wrap up, in a framework, prevailing understandings of how courts should respond when agencies have interpreted a statute. And those prudential reasons will still exist, even if Chevron is somehow overturned.

 

Hon. Michael B. Brennan:  Catherine?

 

Prof. Catherine M. Sharkey:  Judge, I was going to encourage you to say a word or two because before the panel, we talked a little bit about this. And I think it's a really interesting question, and one actually that might really affect state courts as well. So do you want to. . . I would characterize what you said, but maybe you want to say it.

 

Hon. Michael B. Brennan:  Sure. At state court level, you're seeing this change. In Wisconsin, of course, we have decisions, the most recent called Tetra Tech, where they're grappling with this level of control and where people are going to defer or not. I think, on the state court level at least, having been a former state court judge, it's much more a circumstance of time and resources to be able to address the complexity of the question. And once those exist, then those types of arguments, especially by strong advocates, might have purchase with regard to the state courts.

 

Let's go back to the third microphone in the far back. Sir?

 

Tony Francois:  Tony Francois with the Pacific Legal Foundation. My question has to do with cost-benefit analysis that perhaps follows up on a question about the fish. It seems there's potentially a couple of ideas that are in tension. First, with the proposition that regulation should be reserved for cases where there are market failures. So regulation is necessary. But on the other hand, cost-benefit analysis is an important part of how to regulate. And I'd be interested in Susan Dudley and the other panelist's thoughts on how you do cost-benefit analysis—how you assign costs and benefits—in an area where there isn't a clear market value that itself precludes the need for regulation.

 

Hon. Michael B. Brennan:  Susan?

 

Prof. Susan Dudley:  Yeah. That is challenging. EPA has been working on that challenge for decades now. How to -- different ways of measuring by observing other markets to be able to understand what the costs and benefits are. It's never going to be perfect.

 

And I do want to just reiterate and agree with what Cary said about -- one of the real values of doing that analysis is the transparency. So it's a transparent accounting of what you know and what you can anticipate about what will happen under different scenarios. So I definitely don’t want to be criticizing benefit-cost analysis. I think, to paraphrase Winston Churchill, it's the worst of all possible tools except for everything else we've tried. But I do think that first step is very important, and that's where sometimes we go wrong. We jump straight to the benefit-cost analysis, which really -- it's a socialist planning tool. And we should start with, we only need to do that after we've asked that first question of: do we need to be -- does this need to be a collective decision in the first place?

 

Dr. Cary Coglianese:  And first, in addition to the preference solicitation, the contingent evaluation techniques—and we can get into the weeds with all of those that are available—it's also true that even under Executive Order 12866, a benefit-cost analysis of a perspective rule doesn't need to be one which has monetized estimates of benefits or costs. Qualitative benefit-cost analysis in some circumstances may be the best that one could do.

 

Hon. Michael B. Brennan:  Let's go to the first microphone. Sir?

 

Questioner 4:  Thank you so much, Judge. So as Professor Sharkey prepares for her trilogy and tries to explain both the Arizona revolt and also the muddle in the states that have yet to revolt, I have a theory that I'd like her and perhaps the other panelists to comment on. My theory is it's the tyranny of the poorly prepared judicial law clerk. I'll give my own state as an example. And I'm a state ALJ.

 

Our state APA, our Administrative Procedures Act, pre-dates Chevron by nearly a decade. It comes from a very different political tradition, very different features, very different incentives, very different assumptions about the differences between the Executive and Legislative Branch relations, as opposed to the federal APA. However, you get a poorly trained judicial law clerk who goes to clerk for a state court—not in Wisconsin --

 

Hon. Michael B. Brennan:  Thank you.

 

Questioner 4:  And says, “So I have an administrative law question from a state agency. And there's this often-cited case, Chevron. Hundreds of cases have been cited. And it's from the Supreme Court, so it must be binding authority. And so we assume that the relationships between Congress and the federal Executive Branch are the same, not only in every state of the Union, but in this particular state. And in Minnesota, nothing could be further from the truth. So the states that have realized this, like Arizona, are revolting, and the others are muddled because they haven't yet revolted. So what say you?

 

Prof. Catherine M. Sharkey:  Yeah, that's very -- I thought you'd be in the movie version of this. But maybe I'll want you on the trailer when somebody wants the movie -- when somebody wants to buy these rights. In all seriousness, it's an intriguing question. Judge Brennan and I were discussing this a little bit, too. Because as I said, in my early review of this mass of state cases, I've been intrigued that there seems to be a replication of many of the arguments that are made at the federal level, but very little analysis about how these factors could differ when we're talking about state relationships. And I was intrigued as to why that would be. So the tyranny of the poorly trained law clerk could be one hypothesis. And all I can say at the moment is I, too, have recognized that there's dramatically little discussion about how we might agree with Chevron at the federal level, but things are different here, and here's why. So I appreciate the comment, and I think it's a very interesting one.

 

Hon. Michael B. Brennan:  Other commentary from the panel? Let's move to the second microphone. Sir?

             

Questioner 5:  Thanks. So my question is born out of just some day-to-day experience wrestling with the Leviathan -- and I guess what I hope for is some empirical comfort that having the independent agencies conduct more formal cost-benefit analysis wouldn't backfire. So what, at least, it feels like very much when you deal with some of these agencies day-to-day is that they see making you spend money as a benefit. And I think the logic goes something like, "You're spending money. You're contributing to the economy, and therefore the federal income tax revenue will go up in some downstream way." I'm pretty sure that's why they're doing it unless they're just crazy or counting beans or something like that. But they definitely seem to see imposing costs as a benefit in-and-of-itself of regulation. So is there any study that would say making them actually estimate how much money they've made people spend would have them do less of that as opposed to more?

 

Dr. Cary Coglianese: Well, I think the research that we have doesn't really apply to the so-called independent agencies because they haven't been subjected to these requirements. Although, I do think there's some -- I think Jerry Ellig at Mercatus --

 

Prof. Susan Dudley:  GW

 

Dr. Cary Coglianese:  Or GW.

 

Prof. Susan Dudley:  He's my colleague.

 

Dr. Cary Coglianese:  Okay. At GW, now, has some papers that suggest that the SEC, since the Chamber of Commerce litigation, that they've really ramped up—I think Cathy referred to this as well—have ramped up. But in terms of whether benefit-cost analysis can make a difference, most of that research has been focused at the Executive Branch agencies. Dick Morgenstern has a nice book about the role of economic analysis in EPA rulemaking. And he points to -- the book contains 12 case studies, only one of which, apparently, did the benefit-cost analysis really affect the decision in a very meaningful way. But it was an important one. The elimination of lead from gasoline came about precisely because the benefits so much outweighed the costs in an administration that would otherwise probably would not have been inclined to impose another regulatory burden on industry.

 

Hon. Steven G. Bradbury:  May I --

 

Hon. Michael B. Brennan:  Yes, Steve.

 

Hon. Steven G. Bradbury:  -- jump in just quickly. I think the question tends to underscore the benefits of subjecting those regulatory agencies' rulemaking and cost-benefit analysis to OIRA review. Because that kind of benefit analysis, claiming those cost expenditures and secondary effects in the economy as a benefit of the regulatory decision, would be—correct me if I'm wrong—would be rejected by OIRA as an improper analysis of the -- or measurement of benefits from the rule.

 

So at the Department of Transportation, we issue a lot of rules. It's a heavy, regulatory department. And a lot of them have impacts on the economy. And some of the deregulatory actions we're taking—for example, the current proposal for a new, comprehensive reset of the CAFE standards, Corporate Average Fuel Economy standards for motor vehicles—we believe will have very significant, positive economic implications for the economy as a whole. But we don't try to capture those and measure those secondary economic effects—stimulating economic effects—as a benefit of the rule.

 

You've got to confine an appropriate cost-benefit analysis to the direct cost effects that you're imposing from the rule and the direct policy objective measurable benefits that flow from the purpose of the rule and the market failure or compelling need that you've identified to address, and not all of the secondary and ripple effects. And I just think it's too easy for an agency that's not subjected to the rigor and consistency of OIRA interagency review to justify a rulemaking action based on its interpretation of the benefits and the secondary benefits and the whole broad sphere of benefits that it imagines from a proposal. And it's just too easy for the agency in that case, based on its own view of its own little area of concern, to justify almost any regulatory decision it might want to make. So I think it's a good example of why interagency review through OIRA is important for the integrity and consistency of the process, the reasonableness.

 

Hon. Michael B. Brennan:  Can I just add, without really disagreeing with that, and with all due respect to anyone from OIRA, I think it's also important just to be honest that it's no panacea, and that there's a lot of analyses that do go through OIRA that maybe are ones that could've been done better. At least that's the upshot of some research that Bob Han and Patrick Dudley did. They published some papers. Now, it's going back some years, and it was surely before Susan was at OIRA. But they showed that a surprising number of the benefit-cost analyses that agencies put forward, even under the 12866 framework, don't really meet the standards that OIRA really puts out as to what would count as a good regulatory analysis. Maybe, I think, sometimes that's just because of the inherent nature of the problem. I think John Graham found that when the Department of Homeland Security had to put out a lot of security regulations very quickly after 9/11, there wasn't time, or maybe even the research base, yet, to develop the kind of sophisticated, regulatory impact analyses.

 

But surely it's not a perfect process either. But the question really, I think, always should be against what counterfactual -- and is this institutional structure better than the alternative.

 

Hon. Steven G. Bradbury:  Well, the process can always be improved. And I would just offer that it's the president's responsibility to improve the process and to achieve the strongest, most efficient management process for the Executive Branch. And if the president fails at that, the public should punish the president in the next election. And, obviously, OIRA is never going to be a big campaign issue in a presidential election. Nevertheless, I think the public generally has an impression and can understand when the Executive Branch is functioning efficiently, when agencies, as a general matter, are overreaching and overregulating, and that's having a stultifying effect on the economy. And I do think those are issues the public is aware of and that are important in presidential election years and should be.

 

Prof. Susan Dudley:  I don't know why presidential elections don't win and lose on regulation. 

 

Dr. Cary Coglianese:  Or OIRA.

 

Prof. Susan Dudley:  Or OIRA. But OIRA—and getting back to Cary's point—OIRA is a very small staff. It's fewer than 50 people to review all of the significant regulations that the Executive Branch -- and it does wear -- it wears three hats. One is the analytical hat, reviewing the analysis. President Obama called it a "dispassionate and analytical second opinion" on agencies' analysis. The second is the interagency coordination, which is very important to make sure that agencies aren't doing things that conflict or overlap. Plus, you can get real insights from broadening the number of people who look at something. But then the third is that it is part of the Executive Office of the President. And so it ensures that the elected president can hold agencies accountable.

 

So I agree that it's not perfect. But I think the counterfactual is "What would things look like without OIRA?" And I know agencies will tell me that "the way I can make my own agency do better analysis”—so the economists and agencies—“is because I can tell them this is not going to pass muster with OIRA.” The type of analysis you described, the economists and agency could've stopped it by saying we're never going to get that through OIRA.

 

The other thing is that you don't know what goes on behind the scenes. And there're a lot of times when during the interagency process, things always could've looked worse. And so that's the thing, if you talk to folks at OIRA, they say, "Yeah, it may not look great the way it came out. But you should've seen what it looked like when it came in."

 

Hon. Michael B. Brennan:  Let's go to the first microphone.

 

Jeff Bristol:  Yes. Hello. My name's Jeff Bristol and I'm a J.D. candidate at University of Michigan. But for much longer, for longer than I care to think, I've been an anthropology candidate at Boston University. So my question is addressed to Professor Coglianese.

 

Dr. Cary Coglianese:  Go blue.

 

Jeff Bristol:  Yeah, go blue. So my advisor at BU is actually Shahla Haeri, who's a student of Falk Moore's. And so when you use the term semi-autonomous, I think it's interesting. I'm a little confused by exactly what you mean. So Falk Moore when she was looking at the semi-autonomous social fields, she was looking particularly at societies that didn't have a state. And so the semi-autonomous social fields were kind of incorporated into her idea of reg limitation, legal orders that kind of competed with one another on more or less equal terms, and therefore balanced each other out.

 

But if we look at the bureaucratic structure of the federal government, clearly, it's routinized; it's rationalized in kind of a barbarian sense that allows power to be concentrated and competed with. And so I have a difficult time seeing exactly how that idea of semi-autonomy transfers from a kind of laissez-faire context where powers can balance each other out through competition into a more centralized, routinized context that we have in the federal government. Because, technically, one could argue that the independent agencies are already semi-autonomous. They compete with one another, with the public opinion, through Congress to police and control their own power.

 

So I guess what are the exact bureaucratic ligatures or things like that that you think would really make these agencies truly semi-autonomous according to your understanding?

 

Dr. Cary Coglianese:  Well, I think if you go back to Falk Moore's 1973 paper in the Law and Society Review, she actually, very explicitly, says this notion of semi-autonomous nature of law applies in complex societies as well as the more developing parts of the world at the time she was studying. So it's not a notion that is time-bound or culture-bound; it is a notion about law and its relationship to society. She even quotes Philip Selznick, who wrote in a 1959 article even before her, that we should abandon the argument of independence between law and society. And probably Selznick was reading legal realists before that. What I mean by it is simply to say that when we look at actually the behavior and the incentives, the pressures, the forces that are influencing and shaping behavior of folks at agencies, that law is one force. And those formal structures that we associate with an independent agency are certainly one factor.

 

But they're not alone. And that there's a degree -- so independent agencies are not really as independent as they make out. But also, on the flip side, is that non-independent agencies are, at times, much more independent. The Food and Drug Administration has for years inculcated a degree of independence about its drug approval process that is not what you would expect from an agency that has an at-will administrator. So the point is that there is autonomy in both kinds of agencies, but it's a semi-autonomous nature -- and, in fact, that's really what we're aiming for maybe as a normative or moral matter when it comes to the administrative state. Yes, bureaucracies that have routines, bureaucracies that have a degree of autonomy to do credible, good faith, solid analysis, but also agencies that are answerable to presidents, to members of Congress, to the public. And they are operating, going forward, in a manner very similar to I think what Falk Moore was talking about, about complex societies in general.       

 

Hon. Michael B. Brennan:  Thank you. Our last question here in the front.

 

Adam Griffin:  Thank you, Judge Brennan. My name is Adam Griffin. I am the Student Chapter President at North Carolina School of Law. My question is for Mr. Bradbury. But if anybody has comments, that'd be great. It's related to the constitutionality of interagency communications and transparency requirements. Mr. Bradbury, I think you made a statement to the effect that requirements that mandate interagency communications be transmitted to OIRA for review might be unconstitutional or something of that nature. And I was wondering what requirements on transparency and interagency communications would be beneficial and why certain ones might violate the Constitution?

 

Hon. Steven G. Bradbury:  I was referring to a statute that would purport to require public disclosure in the rulemaking docket of communications within the government and between an agency and OMB on a rulemaking matter, for example. So it's just simply the notion that there's a deliberative process within the Executive Branch, and the integrity of decision making is often dependent on preserving the confidentiality of candid, deliberative interactions, pre-decisional.

     

So what you want is to encourage all participants in the decision-making process to share their most candid assessments, their most candid recommendations and concerns in terms of the upside and downside of taking certain actions. And to the extent that there is a requirement that those interactions and assessments will be publicly disclosed, and if the communicator knows that in advance, there's necessarily be some dampening of the willingness to share candid assessments. It's just [a]basic, fundamental principle behind the process privilege within the Executive Branch, which is a legitimate, recognized basis for the president to assert executive privilege, for example, in response to an oversight request from Congress.

 

It's also protected in the Freedom of Information Act. Interagency and intra-agency deliberative communications that are confidential in nature and that are reflective of these candid back-and-forths in a pre-decisional process, are protected from disclosure. And to the extent you have a statute—and there are some—that would require that all communications between the agency and OMB within the government, as part of the interagency review of the rule, must be disclosed publicly in the docket of the rulemaking -- that's something the president could require, something the president could see fit to institute. And OIRA does have a process for doing that. But to the extent Congress would require it for all communications and purportedly leave the president no discretion to determine the certain, deliberative, confidential communications need to be protected to protect the integrity of the process, then I think it would raise—it does raise—serious constitutional concerns.

 

Hon. Michael B. Brennan:  That's all the time we have. I'm sure you can all see why these excellent speakers were chosen for the Showcase Panel. Please join me in thanking them.

 

 

 

 

 

 

 

     

 

11:45 a.m. - 2:00 p.m.
General Luncheon

2018 National Lawyers Convention

The Mayflower Hotel - Multiple Rooms
1127 Connecticut Avenue, NW
Washington, DC 20036

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Lunch Buffet:
Cabinet, Chinese, East, Senate and State Rooms 

Practice Group Sessions & Lunch:
Civil Rights Panel - State Room
Financial Services Panel - Chinese Room 
Telecommunications Panel - East Room 

11:45 a.m. - 2:00 p.m.
The Current Landscape of Telecommunications Law

2018 National Lawyers Convention

Topics: Telecommunications & Electronic Media
The Mayflower Hotel - East Room
1127 Connecticut Avenue, NW
Washington, DC 20036

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The Trump administration has emphasized the importance of ensuring existing regulations are not stifling innovation or foreclosing economic opportunities. Earlier this year, under Chairman Ajit Pai’s leadership, the FCC modified several of its internal processes to further promote transparency and public engagement. The FCC has also continued on a path of eliminating outdated regulations. During this event, Chairman Pai will deliver remarks about his work to-date at the Commission and his plans for the coming year. He will give his take on the current telecommunications marketplace and how federal, state, and local governments can best respond to ever-changing technologies. A panel discussion will follow Chairman Pai’s remarks with reactions. Panelists will also share their views of the current telecommunications landscape and the regulatory path to continued American industry leadership.

  • Keynote: Hon. Ajit Pai, Chairman, U.S. Federal Communications Commission

  • Ms. Kathleen Ham, Senior Vice President, Government Affairs, T-Mobile
  • Ms. Nuala O'Connor, President and CEO, Center for Democracy and Technology
  • Mr. K. Dane Snowden, Chief Operating Officer, NCTA - The Internet & Television Association
  • Ms. Jamie Susskind, Chief of Staff and Legal Advisor, Office of Commissioner Carr, Federal Communications Commission
  • Moderator: Hon. Jerry E. Smith, United States Court of Appeals, Fifth Circuit

Speakers

Event Transcript

Bryan Tramont:  If I can have everyone's attention, we'll go ahead and get started. Thank you. I want to -- good afternoon, everybody. I'm Bryan Tramont. I'm the Managing Partner at Wilkinson Barker Knauer and the Chair of the Telecommunications & Media Practice Group at The Federalist Society. I want to welcome you all and thank you all for joining us both here in the room as well as on the live stream around the country. I also want to take this opportunity to encourage folks, practitioners as well as law students, to join our practice group. We do a lot of interesting programming in this area, and you would be very much welcome to join us. I also would be remiss if I did not thank Dean and Erica who do such an amazing job with the Telecommunications Practice Group and all the practice groups at The Federalist Society, so thank you for your support, for making today possible.

 

      Today it is my honor to kick off our discussion of the current telecommunications landscape by introducing FCC Chairman Ajit Pai. Ajit -- the Chairman hails from the great state of Kansas where he continues to -- and he continues to be a die-hard Chief's fan. Prior to joining the FCC, he held a number of posts both in the private sector as well as in the Executive, Judicial, and Legislative Branches. Or an alternative interpretation is he couldn't hold one job, depending on how you think about it. He has been a Commissioner at the FCC since 2012, and its Chair since January of 2017. He's an extraordinary leader and friend both to the Bar, to me personally, and to The Federalist Society. In support of the Society, he has participated in both student chapter visits, a number of teleforums, National Press Club events, and this, indeed, marks his second appearance here at the National Lawyers Convention. So it is a great honor to introduce FCC Chairman Ajit Pai.

 

Hon. Ajit Pai:  Thank you so much, Brian, for that kind introduction, notwithstanding the fact that you briefly channeled my mother and her constant concerns that I just can't keep a job for more than two years. But I did introduce her to Judge Judy, so I think I'm clear for the next couple of years, at least.

 

      I also want to note the passing -- the unfortunate passing this morning of Oscar-winning screenwriter William Goldman. Mr. Goldman, as you know, was the screenwriter behind some of the greatest films of all time: All the President's Men, Butch Cassidy, and one of my personal favorites, The Princess Bride. And as an homage, there are many ways I was thinking of kicking off my remarks. "Inconceivable!" or "My name is Inigo Montoya. You killed my father. Prepare to die." Instead, I thought I would just stand before you for the next sixty minutes and try to deliver the classic line, "Mawage. Mawage is wot bwings us togeder…" But in the interest of time, though, I'll try to speed things up a little bit.

 

      I also want to recognize one of the legends of the bench and a tremendous public servant, Judge Jerry Smith of the U.S. Court of Appeals for the Fifth Circuit. In addition to being the first employer for my law school roommate, he also was the employer of our current General Counsel at the FCC. He also celebrated his birthday recently -- belated happy birthday. You only turn 29 once, so I hope you make it count. And thank you for moderating the panel which is to follow. And thanks as well to the panelists who are just spectacular. They have forgotten more about this field than I'll ever know, so I'll probably just end up vamping for the next 15 minutes.

 

      Anyway, to the prepared remarks. Much to my chief staff's chagrin, I've been ad-libbing thus far. It is great to be with you at The Federalist Society National Lawyers Convention. Now, the theme of this convention is "Good Government Through Agency Accountability and Regulatory Transparency." And that's exactly what we have been aiming to do with the Federal Communications Commission over the last 22 months that I've had the privilege of serving as the Chairman. For example, the FCC now publicly releases drafts of the items that we're going to be voting on at our monthly meetings at least three weeks ahead of time. Now, that seems like a common-sense step to most average Americans, but it is actually quite radical. Before I became Chairman, the FCC had refused to release these drafts publicly. Instead, the Commission had to pass an order before the American people could see what was in it, and we have changed that, I think, much to the better.

     

      To say the least, I think it would be scintillating for you to hear at length the various process reforms we've introduced in Part 47 of the Code of Federal Regulations to improve accountability and transparency, but the so-ons at The Federalist Society have given me a different a charge, to give you an overview of some of the big, substantive issues that we're working on at the Commission. The panel to come is going to dive into some of the legal issues that are involved, so I will focus on, instead, what the FCC is doing to promote American leadership in some of the most promising sectors in the digital economy. And in particular, I'd like to talk about next generation wireless technology and the space industry, which some of you may be surprised, has key tie-ins with the FCC.

 

      Before getting into the specifics, I thought it would be helpful to walk through some of the first principles that inform and guide my approach to the job as FCC Chairman. First off, I deeply believe in the importance of regulatory humility. History has shown us, without a doubt, that markets deliver far more value than preemptive regulation, and that a competitive free market is probably the most powerful force we have for driving technological innovation and producing consumer benefits. The public interest, in my view, is best served when the private sector has the incentives, and the ability, and the freedom to create and to invest. And instead of micro-managing markets, I think that the government should eliminate unnecessary regulatory barriers that can stifle new discoveries and services. And in particular, the government should strive to minimize regulatory uncertainty which can deter long-term investment decisions.

 

      Now, talk of regulatory red tape may seem small-bore and a bit clichéd at this point, but just this past week, my former law school professor, Cass Sunstein, published an op-ed that does a great job of illustrating the scale and the costs of this challenge. Meeting the paperwork burdens imposed by our government annually requires 9.78 billion—with a B—hours of labor every year. That's over 1 million years, at an estimated cost of $215 billion. So streamlining government regulations isn't an ideological position or a luxury. It's an imperative that serves our public interest.

 

      Now, returning to this notion of regulatory humility, I also believe that we should be skeptical towards preemptive regulation of new technologies, rules that try to predict market failures before they actually occur. Instead, I believe that a careful case-by-case approach to evaluating new technologies is more likely to maximize consumer welfare in the long run. Give innovators a chance to create and allow case-by-case enforcement after the fact. This is the best way to secure technological progress and consumer protection at the same time.

 

      Now, let me talk about how we're trying to put these principles into place, starting with our work to promote 5G wireless technology. For those of you who don't live, sleep, eat, and breathe telecom policy, which would probably guarantee your sanity, 5G is the next generation of wireless connectivity. And it promises dramatic improvements over 4G LTE, which most of us know. How dramatic, you might ask? Think of speeds up to 100 times faster, if not faster than that. The lag time between a device's request for data and the network's response will be less than one-tenth of what it is today. Wireless networks that today support 1000 connected devices per square kilometer could instead support 1 million. So basically, a 5G world will effectively remove speed, and responsiveness, and capacity as meaningful constraints on wireless innovation.

 

      And this is going to open the door to many new services and applications that will help grow our economy and improve our standard of living. For instance, think about smart transportation networks that could link connected cars, reducing traffic, preventing accidents, and limiting pollution. Think about ubiquitous wireless sensors that enable healthcare professionals to remotely monitor your health and intervene quicker if they see that your vital signs are heading south. Think about connected devices that empower farms to apply precision agriculture. Or something that's a little bit personal to me, think about apps that alert you to the possibility that drafting a hold-out running back in the first round of your fantasy football draft might be a bad idea, and I say that as a very bitter Le'Veon Bell drafter in one of my leagues. I haven't heard the rest of it from my in-laws, but I will over Thanksgiving.

 

      Anyway -- not that I'm bitter -- these and even more applications, some of which we can't even conceive today, are on tap if we get it right with respect to 5G. And these breakthroughs are going to boost our economy on a macro level. One study by Accenture, for instance, pegs 5G's potential at 3 million new jobs, $275 billion in private investment, and $500 billion in new economic growth. And so this is not chump change that we're talking about. To seize the opportunities of next generation wireless technology, the FCC is pursuing what we call our 5G FAST Plan, a plan to facilitate America's superiority in 5G technology.

 

      And this approach includes three key components. Number one, freeing up spectrum for the commercial marketplace; number two, promoting wireless infrastructure; and number three, modernizing our regulations. And let me briefly walk through each of those areas with a few highlights, first, of course, being spectrum.

 

      The FCC has been extremely aggressive in making more airwaves available for the commercial marketplace. This week, for example, we launched the first of two options, the first ever in America, of high-band spectrum that was previously thought to be useless but now can be used for 5G, thanks to advances in technology. And we're on track to auction off three more spectrum bands next year.

 

      We're also exploring how to repurpose mid-band spectrum for new wireless applications from rural broadband coverage to the next generation of Wi-Fi. And we're working hard with other federal agencies to make available spectrum that's currently held by the federal government, which has held a majority of lower band airwaves for some time. Now to put all of these efforts into perspective, we are aiming to free up more spectrum over the next 15 months or so than is currently held by every mobile broadband provider in the United States combined. So this is a massive influx of supply into the spectrum that we currently have available.

 

      The second part of our 5G FAST Plan is infrastructure. All the spectrum in the world won't make any difference if we don't have the physical networks, the infrastructure that is necessary to carry 5G traffic. And that's going to be a challenge, to be candid with you. And that's because the 5G networks of the future will look very different from the 4G networks that we know today. Today, we see 200-foot cell towers intermittently dotting the landscape. Tomorrow's 5G networks will rely more heavily on smaller infrastructure, things called small cells, less conspicuous equipment, sometimes no bigger than a backpack, and equipment that's more densely deployed and operating at lower power. And that's because the closer an antenna is to a phone, the less power is required to connect the two of them. So we'll need and estimated 800,000 new cell sites by 2025. And for context, we barely have over a quarter of that toady. So we'll also need a lot more fiber optic lines to connect all those small cells to the core of these networks.

 

      Now the problem is that the hundreds of thousands of small cells and the many miles of fiber needed for 5G will not be deployed unless we have a regulatory approval process that encourages build-out. Just to give you a sense of the problem, consider this. When I came into office, it took, and still does take, roughly one or two hours to install a small cell on a utility pole. But it can routinely take one or two years or more to get the regulatory approval to install that antenna, especially at the state and local level. Another problem is shortsighted local arbitrage on fees. Siting fees can be as low as $50 in a forward-thinking, investment-friendly place like Phoenix, Arizona, but it can be as high as $5000 elsewhere. And those fees can quickly add up and deter investment altogether. And so that is why the FCC has modernized its wireless infrastructure rules, and why we will keep doing so.

 

      Earlier this year, we reformed our environmental and historic preservation regulations to make clear that small cells do not have to jump through the same regulatory hoops that have applied to a 200-foot cell tower. In September, we approved an important order promoting 5G infrastructure. We set a reasonable 60-day shot clock for cities to rule on small cell siting applications, and a reasonable time limit on siting fees, limits that allow localities to recover their costs. So that's spectrum and infrastructure.

 

      That takes me to the third leg of the 5G stool, which is modernizing our regulations. As you might have heard, the FCC has been pretty busy revising or repealing outdated regulations to promote investment in the wired backbone of these 5G networks. For instance, when I became Chairman, we had regulations on the books that made it too hard for carriers to transition from the fading copper networks of yesterday toward the more resilient fiber networks of tomorrow. And so we've updated those rules to help companies focus on fiber deployment. After all, by definition, every dollar that is spent maintaining a fading copper network cannot be spent deploying next generation fiber. In addition to that, we've also adopted a bold, new policy called one-touch make-ready, essentially, which makes it easier for competitive fiber entrance to attach equipment to utility poles, and to do so much more quickly. And this is a critical step toward carrying 5G traffic to and from small cells.

 

      And we also overturned the previous administration's decision to heavily regulate the internet, including the wireless networks, like a slow-moving utility under rules developed in the 1930s for Ma Bell. And we've replaced that with a consistent national policy for broadband providers, one that protects the free and open internet we all love and encourages infrastructure investment. In my view, the internet should be run by engineers and entrepreneurs and technologists, not by politicians and bureaucrats and lawyers, no offense. [Applause] The lawyers out there who are not clapping, I suspect you're probably on the other side of that.

 

      But I'm happy to report that our policies are working. For example, amidst the prior administration's regulatory onslaught, infrastructure investment in broadband declined in 2015 and 2016, which was the first time we'd ever seen such declines outside of the context of a recession. But in 2017, we reversed that trend. Investment increased and our preliminary signs from 2018 is that trend is increasing. In addition, the internet remains open and free. As I've recently told a number of people who've asked me about how things are going, the internet still works. You can still hate tweet your favorite FCC Chairman, [Laughter] or post your screenshots of your favorite Judge Smith opinion on Instagram. Whatever floats your boat. It all works.

 

      So now I'd like to shift gears a little bit and talk about the main thing the FCC has been focusing on this month, which is not something that people think naturally of when they think of the FCC, and that is space and the space industry, in particular. Some quick background here. The global space economy generated about $350 billion of revenue in 2017, and the biggest share of this sector by far is the satellite industry, which accounts to about 75 to 80 percent over time. Now, what raises my antenna—See what I did there?—is the prediction in separate reports by Morgan Stanley and by Goldman Sachs that this industry will grow to be a trillion-dollar sector by 2040. And so this is a really big market opportunity for the United States and for U.S. companies to innovate and to drive the market.

 

      So how exactly does the FCC fit into this? Well, the FCC regulates a variety of aspects of communications services that are provided in outer space, notably the use of spectrum and the way that certain satellites operate and transmit information back to the Earth. And I talk a lot about the need for the FCC to constantly be evaluating and updating our rules to reflect changes in the marketplace, and it occurred to me last year that it had been almost a generation, in some cases, since the agency had taken a look at, a fresh look at some of the regulations surrounding space. And when you add in the fact that the space industry represents a huge growth opportunity, you find a ripe opportunity to update our rules and to promote investment and innovation in the American space industry. We voted just a few days ago on a number of these proposals. Actually, it was just yesterday which is -- I've been aging in dog years, I suppose. During the Commission's monthly meeting for November, we adopted about nine or ten proposals during something that we called Space Month. And the launch of the FCC's space agenda yesterday was a huge success.

 

      So you might ask what exactly did we do? Well, if you remember those reports I mentioned earlier about how the space industry could be a trillion-dollar sector, those same reports identified satellite delivered internet access as the biggest growth opportunity. And it makes sense when you think about it. I mean, the big potential breakthrough here is a new technology that involves launching a constellation of hundreds of small satellites into low Earth orbit—so not into deep space—and they'll create enough of a mesh network, if you will, of these smaller satellites that internet access could be delivered back to the Earth at a price point, and with a speed, and with a latency that would be comparable to something you could get from a company operating here on Earth. And that could be a dramatic game changer, especially for the millions of Americans who are on the wrong side of the digital divide in rural areas, in remote areas, and in tribal areas.

 

      In December 2017, the FCC approved the first of these new constellations of non-geostationary satellite orbit companies, or NGSOs, as they're called. Some of them are from some companies you might know like SpaceX and OneWeb. Yesterday, the FCC approved four separate petitions from companies seeking to initiate or to expand services that rely on these low Earth satellite constellation systems. And our hope is that this will transform the internet access situation for undeserved or unserved rural areas which could soon enjoy new options for high-speed broadband service, something that they are yearning for.

 

      Also, one satellite-based technology that's already proven to be a game changer is the global positioning system, or GPS. Now, what some may not know is GPS is actually a U.S. based system. There's also a similar European system called Galileo, and I won't sing the Queen song lyric, just to spare you my pipes, but just trust me, it's a system that actually works. But for many years, we haven't allowed what are called non-federal devices, essentially your smart phone and mine, to receive signals from that Galileo system. Well, yesterday we voted to change that. The FCC voted to allow these devices to receive the signals and send them to Galileo, and as a result, GPS should become more precise, more reliable, and more resilient for millions of U.S. consumers and businesses. And hopefully, this will also enable brand new applications for things like precision agriculture.

 

      Another issue we looked at yesterday is the issue of space debris. Most of you probably saw the movie Gravity – Sandra Bullock, George Clooney, you remember this from a few years ago? Well, as you recall, the incident that doomed them when they were on their space flight was getting hit by debris from a dormant satellite. Now, this issue isn't just something that Hollywood imagined. It is quite real. Even something as small as a centimeter of space debris can cause catastrophic damage to a satellite or to a spacecraft. And as I just said, the Commission has authorized the launch of many satellites into space. So to mitigate the risks of catastrophic accidents, the FCC yesterday voted to launch the first review and update of our orbital debris rules since 2004.

 

      Along with some regulatory streamlining, rounding out our Space Month agenda yesterday was an update of our rules for what are called earth stations in motion, or ESIMs. We just love the acronyms. I don't know why we do that. But anyway, ESIMs involve, essentially, people who are on the go. It could be in a plane, a train, or an automobile. No John Candy references, I promise, but it is a great movie. But anyway, people in these ESIMs often want a connectivity. So yesterday we advanced a proposal to make it a lot easier to deliver high-speed access in these mobile entities. And that could be a dramatic change, especially if you anticipate the era of connected cars and the like. When people are always on the go and aren't actually driving the cars, they could have a lot more free time that they could use to do work, to play, to do whatever it is they like to do.

 

      So I'd like to close, if I might, by coming back to The Princess Bride. One of my favorite lines in that movie is when Buttercup tells Westley, "We'll never survive." And to that, Westley replies, as you might remember, "Nonsense. You're only saying that because no one has." One of the things I love about the tech sector, whether it's space or terrestrial innovation, is that this is the default attitude of Americans writ large and of tech innovators in particular. You often give them a whole bunch of reasons why things can't be done, and they just say, "Nonsense," and they do it anyway. And from my perspective, at least, that is what the FCC is charged with doing, creating a regulatory framework that allows all of the innovators out there to channel Westley and to tell the naysayers, "Nonsense. We are determined to innovate. We're determined to invest. We're determined to promote American leadership in all these next generation technologies."

 

      And so, from our perspective, at least, so long as I have the privilege of serving as the Chairman of the agency over the next couple of years, we need to modernize our rules to make this kind of attitude easier to execute, to make business plans real, and to make the consumer benefits that they promise a reality as well. Thank you so much for your attention. Thank you for the work The Federalist Society is doing to highlight these issues. I look forward to working with all of you in the years to come to secure the benefits of the digital revolution for millions of Americans. Thanks.

 

Bryan Tramont:  Thank you, Chairman Pai. I would now like to invite up our panelists, as well as our moderator. The panel will be reacting to Chairman Pai's remarks, as well as engaging in a broader discussion of the issues facing this sector. So with that, it is my honor to sort of reintroduce Judge Jerry Smith on the Court of Appeals in the Fifth Circuit who will be moderating our all-star panel.

 

Hon. Jerry Smith:  Thanks to Chairman Pai. What a treat this is for a panel discussion to be led by a keynote from someone as distinguished as he is. This is a great way to launch our panel discussion, and we have a fantastic group of panelists here to discuss all of the things that Chairman Pai mentioned to us, as well as other aspects of telecommunications. So our topic is about as broad a topic as I could possibly imagine. It's called "Telecommunications & Electronic Media: The Current Landscape of Telecommunications Law." That's not very restrictive, and I look forward to the insights from each of our members of the panel. I will introduce our four panelists now, and then turn it over to them for introductory remarks.

 

      We will begin with Jamie Susskind, who is the Chief of Staff to FCC Commissioner Brendan Carr. She was formerly Chief Counsel to Senator Deb Fischer. Before that, she was detailed from the FCC to be Counsel to the Senate Commerce Committee, Subcommittee on Communications. She has her undergraduate degree from the University of Michigan and her law degree from the Antonin Scalia Law School. Next, we'll -- they're already clapping.

 

Jamie Susskind: I didn't say anything. [Laughter]

 

Hon. Jerry Smith:  You're doing great. We will then hear from Kathleen Ham, who is Senior Vice President for Government Affairs at T-Mobile. She regularly interacts with Congress and the FCC on regulatory and policy issues. She previously served 14 years at the Commission, including Deputy Chief of the Wireless Telecommunications Bureau, and she's been named four times as one of the Most Influential Women in Wireless. How about that? She has her undergraduate degree from the University of Colorado and is a graduate of the Catholic University School of Law.

 

      Next is Dane Snowden, who is the Chief Operating Officer of NCTA – The Internet and Television Association. He was previously with The Wireless Association as Vice President of External and State Affairs. From 2001 to 2005, he was Chief of the Federal Communications Commission's Consumer and Government Affairs Bureau. Before that, he served in leadership roles in numerous charitable and civic organizations, including the United Negro College Fund. He's a graduate of William and Mary College. I should say the College of William and Mary. I got -- I'm sorry.

 

      And our final panelist is Nuala O'Connor, who is President and CEO of the Center for Democracy & Technology, a non-profit that's committed to advancing digital rights. She's had extensive private and public sector legal work including technology, and she was Associate General Counsel of Amazon. She's worked in various public agencies including the Commerce Department and Homeland Security. She has her B.A. from Princeton and her J.D. from Georgetown Law School.

 

      Welcome to all the panelists. Jaime Susskind?

 

Jamie Susskind:  Thank you. Good afternoon. Thank you to The Federalist Society for inviting me to participate on today's panel with such other distinguished members and moderator. You just had the chance to hear from Chairman Pai about steps that the FCC has taken under his leadership to encourage innovation and investment in the tech and telecom space. I'd first like to commend the Chairman on the many accomplishments achieved during his tenure. I will not repeat them here since you just heard them from him, but it's an agenda to be proud of, and I've enjoyed my time back at the agency under his chairmanship.

 

      As many of you know, Chairman Pai asked my boss, Commissioner Brendan Carr, to lead the agency's efforts on wireless infrastructure in particular, so I'm going to chat a bit more about what you heard Chairman Pai say on that front. The goal that we have had is to make sure that our regulatory structures going forward are ready for 5G and for the new influx of small cells, which we have termed 5G ready.

 

      The U.S. is on the cusp of a major upgrade in wireless technology to 5G. The Wall Street Journal has called it transformative from a technological and economic perspective, and it's true. Winning the global race to 5G, seeing this new platform deployed in the U.S. first, is about economic leadership for the next decade. The U.S. won the race to 4G. No country had faster 4G deployment and more intense investment than the U.S. Winning this race added $100 billion to our GDP. It led to $125 billion in revenue for U.S. companies that could have gone abroad. It grew wireless jobs in the U.S. by 84 percent. And our world leading 4G networks now support today's $950 billion app economy.

 

      That history should remind policy makers at all levels of government exactly what is at stake. 5G is about our leadership for the next decade. But we're not the only country that wants to be first to 5G, as I'm sure many of you know. One of our biggest competitors is China. They're moving aggressively to deploy the infrastructure needed for 5G. Since 2015, China has deployed 350,000 cell sites. We've built fewer than 30,000 in the U.S. Right now, China is deploying 460 cell sites a day. That's 12 times our pace. Commissioner Carr believes we need a concrete plan to close the gap with China and win this race to 5G. He, along with his colleagues at the Commission take this challenge very seriously. That means the FCC is working to get the government out of the way so the private sector can deploy the hundreds of thousands of small cells needed for 5G deployment in the U.S.

 

      In March, as the Chairman mentioned, we updated federal, historic, and environmental reviews to reflect new coming 5G technology. While the old rules were written for 200-foot towers, the majority of wireless infrastructure being built nowadays is made up of small cells, often the size of a backpack. These outdated reviews were not providing any real benefit to Americans, and they had real costs in both dollar figures and in the race to 5G. A couple of particularly egregious examples: at last year's Superbowl, one wireless provider spent nearly $180,000 in historic preservation review fees to put small cells on the stadium and on poles in the parking lot of the stadium, even though the construction of the stadium itself involved no federal historic review. Another provider paid $12,000 just for a review of a small cell placed between a sidewalk and a highway in Ohio.

 

      There's countless examples like this. Our record is full of them, so we knew something had to be done. The FCC stepped in to fix that broken federal review process, and we held that small cells should not go through the costly and lengthy reviews designed for 200-foot towers. And we're already seeing results. That decision alone cut $1.5 billion in red tape, and one provider reports that it's now clearing small cells for construction at 6 times its pace as before. So this is great progress, but there are still challenges.

 

      The FCC for a long time has heard from mayors, local officials, and state lawmakers who understand the economic opportunity that comes with next-gen networks, but they worry that the investment dollars needed to deploy those networks will be consumed by the high fees and long delays imposed by big, must-serve cities. They worry that without federal action, they might not see 5G. So in September, the FCC built on the many smart infrastructure policies championed by state and local leaders. We ensured that every city is compensated for its costs in reviewing and approving small cell deployments while putting guard rails in place to address these excessive fees. We updated our shot clocks that have long applied to local reviews to account for the lower impact of new small cell technology, and we ensured that local governments can take reasonable aesthetic considerations into account when reviewing small cell deployments.

 

      These policy changes will equate to about $8000 in savings per small cell on top of the $10,000 in savings from our March decision on federal historic reviews. It's expected to stimulate $2.4 billion dollars in new small cell build-out, and that new investment is enough to cover $1.8 million -- or, excuse me, 1.8 million more homes and businesses with 5G, 97 percent of which are in rural and suburban communities. That means that next-gen connectivity will not be limited just to places like New York City and San Francisco. It will come to places like Pensacola, Florida, and Sioux Falls, South Dakota, which is a win for everybody. This means that all Americans, no matter where they live, will have a shot at next-gen connectivity.

 

      So thanks again to The Federalist Society for hosting this panel today, and I look forward to taking your questions.

 

Kathleen Ham:  Hello. Good afternoon. I'm Kathleen Ham. I head up government affairs for T-Mobile here in D.C., so you can imagine I'm pretty busy right now. But when Bryan asked me, and others asked me to speak before The Federalist Society, I thought, This is cool. He throws great wine tastings, so -- but this is my first time at your event. And wow, there's a lot of you, so be kind.

 

      I'm going to keep my remarks short because I think we'll probably get into it, but I want to thank Jamie, and I want to thank her boss, Commissioner Carr. They've done just fantastic work, as has the Chairman and the FCC as a whole, just recently on infrastructure reform. 5G is coming, and when people think about 5G, just so you know, that means it's the fifth time we've built out, or built over, our networks. That's what 5G is about. Very expensive prospect, and it is going to require a lot more siting, a lot more small cells, as opposed to those big towers, and there's a cost to that. And we also have to have the spectrum to go along with it.

 

      And it's taken just great leadership at the FCC, I think, in moving on some of these things, looking to the future, and making sure we have the correct deregulation in place as well as the spectrum assets in place for that future because the U.S. is competing globally on this issue. There's no question about it. And countries like China don't have to worry about localities and ordinances. They just do it, and the same thing with spectrum, making that available. So, I mean, I love our democracy, I love everything about it. But sometimes, things are slower, and the world is competing very fast on 5G.

 

      So, from T-Mobile's perspective, we're very excited about 5G. We're looking to roll it out, and we're also hoping to merge with Sprint. We have that pending before the FCC right now, the Department of Justice, and a number of other government agencies at the state level. That combination, the benefit that comes to us with that combination is -- and what you really do need for successful 5G deployment, and I'm sure we'll talk about this, is a multi-band approach. So what T-Mobile's doing right now is rolling out in what we call the 600-megahertz band which was returned TV channels.

 

      You might have heard about the auction that occurred there. We had tremendous results in that auction, and the benefit of 600 is it enables you to build out -- you think about your TV set and being able to penetrate deep into buildings. That's what low-band spectrum can enable you to do. It also enables you to go further with the spectrum with fewer cell sites, so it's great for rural coverage. And so T-Mobile now is moving into markets that we've never served before. We just built out Montana. T-Mobile was never in Montana, so that spectrum was really important to us from a competitive standpoint.

 

      Sprint has a lot of mid-band spectrum. That spectrum is also very valuable. And then there is high-band spectrum, what we call millimeter wave spectrum. And all of these spectrum bands have different characteristics, and really, for 5G to get a very fulsome, broad, high capacity capability, because of all the cool things the Chairman said that you're going to be able to do with this, you need those assets. And so that's a big part of why we want to merge with Sprint because we're bringing together low-band spectrum, which we have, they don't have, with that mid-band spectrum that helps us kind of build that broad, deep capacity.

 

      Then other thing I would say is it's going to enable us to do new things, to break into new areas. There's some really -- I've been asked to talk a little bit about convergence, and Dane may talk about this, too, but cable and wireless are bucking up against each other more and more these days, whether it's for spectrum, whether it's for back haul. And Comcast actually added more post-paid customers than AT&T and Verizon combined last year. So they're breaking into wireless in a big way, and they have the capability to do it. They have existing customers, they have spectrum and a great network, so the two worlds are converging, and it will be really interesting.

 

      Things are moving very fast on the technology side. It's very exciting. And T-Mobile's trying to get itself in a good position to be able to compete. A lot of people think that our merger is about going from four to three. We see it as going from two to three because we want to be a stronger third competitor to AT&T and Verizon for certain, and also to Comcast, and Charter, and Altice, all of whom filed in our merger docket, by the way, which was interesting, too, as they enter this space. So there is convergence going on. There is -- the world is changing. It's all very exciting, and I'm very pleased with what the FCC's been doing, both in terms of trying to create the right incentives for investment, trying to create the right incentives to deploy more spectrum in the marketplace, and some of the infrastructure reforms that they've been doing.

 

      So more to come on all that, and I'm happy to join the conversation.

 

Dane Snowden:  Well, good afternoon, everyone, and thank you for having me here. I am the, I think, the non-lawyer on the panel, and probably in the room, so I thought of my favorite quote from Princess Bride, and it is, "Life isn't fair. It's just fairer than death."

 

[Laughter]

 

      Picking up where Chairman Pai left off, I would say that on behalf of the Internet & Television Association, the NCTA, we actually support and applaud what he's doing in terms of openness, transparency, and the collaborative approach that this Commission has taken with our industry, I think with Kathleen's industry as well. It's great to have that spirit of "let's come together and let's have a dialogue to figure out how we move these issues forward." 9The Pai Commission has done a great job on media modernization, and this is something that definitely needs to happen. As we can -- I think there's a clear recognition that over the past 20 years, the media landscape has changed, but the rules and regulations have not. And I think what's going on right now at the Commission is the right approach looking at where we're going as we go forward. 

 

      I'll be very brief today because I know we want to get to your questions, but I must talk about the 5G. Everyone seems to be wanting to talk about that today. And as I think T-Mobile and the wireless industry, they build out their 5G plan, we will continue to work hard on building the key infrastructure we need to get us to where we are now. We have -- about 70 percent of our companies offer a gig to their consumers, and we're quickly going towards a 10-gig world. Our infrastructure will be needed for what they want to do in the 5G world, and so there is a lot of this competition growing. There's collaboration going, there's you need us, we need you, we all work together, and that's the way it should go. But I think as we think through the 5G plan, I want to remind everyone there's a plan on the wire line side that needs to make sure that we have the regulatory barriers taken down, making sure local franchise authorities aren't getting in the way of the development of what we need to do to ensure that we're providing the services from 1G to 5G -- 1G to 10G for our consumers.

 

      And with that, I look forward to answering your questions when we get to that point. Thank you.

 

Nuala O'Connor:  Dane, that was remarkably great. I'm not sure I'm going to be able to beat that. And I was thinking I've got lots of Princess Bride cred, but my favorite quote is, "Have fun storming the castle." That might make sense, given where I work now and what we do. But thank you to Judge Smith. Thank you to our beloved Bryan Tramont for the invitation. I'm delighted to be back here again. It's been a while since I've been with you.

 

      We at the Center for Democracy & Technology are working on a number of relevant issues including privacy, and free expression, and anti-surveillance, and the open, and innovative, and free internet that the Chairman talked about, and we are very much in sync with many of the voices represented on this panel. And so I thought I'd talk a little bit about our current framework and thinking around individual privacy. But it's very much deeply informed by my time in the Bush administration as the first Statutory Chief Privacy Officer at the Department of Homeland Security, and the Department of Commerce, and the Head of Delegation to the International Privacy Commissioners Conference, a body that was not that significant, perhaps, in the 1990s and the 2000s when we were going but has taken on a new life in the post-Cambridge Analytica era.

 

      And trying to explain to the rest of the world what the United State's framework is on individual privacy -- and it's not to say we don't have one. We certainly have a good one. It's a sectorial approach, but it took me, one time, 55 minutes and almost got me booed off the stage in Sydney, Australia, for trying to explain in great depth our terrific enforcement mechanisms. But it really does speak to this new convergence that we're all talking about. The consumer no longer understands whether they're addressing or working with a telecom company or an internet company, or whether they're covered by the laws of Delaware or of California. They just want to get online and get their stuff done. And as the internet becomes more and more embedded in the walls of our house, and in the dashboards of our cars, and in our children's schools, the time, I think, has long passed for more notice, more transparency, more little pieces of paper in your bank statements. I've written more of those in my career as a junior lawyer. I like to say I'm the Mark Twain of privacy policies.

 

[Laughter]

 

      But that's not a workable solution anymore, given the speed and the efficiency that we all want to see from a company perspective or from an individual perspective. So I think these are exciting times. I mean, we're certainly thrilled by the interest our corporate partners and the current White House have shown for a simple, an actionable, an easy to understand for both the smallest institutional actor and the largest framework that can both respect the rights of the individual and allow for a robust and vibrant internet in the years ahead. So a single, clear standard, one that's across all industry sectors, one that creates an open and level playing field, these are all the questions we are trying to answer.

 

      And then what really matters? What matters to the individual? And we've kind of congealed around two words I want to leave you with, and one is immutable. The data that I cannot change about myself, whether it's my fingerprint, or my iris scan, or my DNA, perhaps deserves a higher level of protection in the internet age. The most intimate of our details, those within the curtilage of homes and our family lives, also probably does deserve and require additional scrutiny and additional protections, both from a security and a privacy standpoint. So these are the sorts of questions we're trying to answer, again, across civil society and corporate America and create a better and more durable solution.

 

Hon. Jerry Smith:  So thanks for all these opening remarks. The only thing that's disappointing is that our panelists didn't disagree enough with each other. Usually we have these opening remarks, and the panelists are going at each other's throats, and they want to do a response. And we certainly want to let any of you comment on what the others have said, or anything else that you'd like to add as we go along. We're going to have plenty of time for questions from all of you.

 

      Let me just throw out one for the reaction from any of you. There's been mention here of state and local impediments in terms of fees and regulations that may arguably be hindering some of the development for 5G or in other areas. And a lot of the discussion at this convention this year has been over the question of federal authority versus state. I even heard Professor Richard Epstein yesterday criticize the Interstate Highway System, so I guess we're going back to first principles about what should be done at the state and local level as opposed to federal. So my question for any of you that would like to comment, and I hope some of you will, is in an ideal world, should there be more or less federal preemption in the telecommunications field?

 

Kathleen Ham:  Yeah, you go. You take that one.

 

Dane Snowden:  I think you have to start and look at how consumers use products as well. Speaking specifically about some of the impediments from the cable side, we recently filed a further notice on Section 621. We pay $3 billion in state and local fees, and some of the local franchise authorities are trying to add on additional fees for things we've already paid for. And that just doesn't make any sense. All that does is add more cost of doing business, which doesn't add up. But when you think of preemption, you look at privacy. You can't have privacy rules in one state that are different than another state because that doesn't make sense. It doesn't make sense for the consumer. Net neutrality is another example of that. You -- we're just talking about regulatory uncertainty. You cannot have a system where you have 49, or 50, or even 4 different rules in place because it hurts the consumer in the long run.

 

Kathleen Ham:  Yeah, I would agree with that. I think there's nothing more inherently interstate than the internet. And so what we're facing as carriers now is not only state by state regulation, but locality by locality. New York City has a net neutrality rule. So it just -- it's not great for business, and it's not great for consumers. It creates a lot of uncertainty, a lot of costs and burdens. So I think preemption has its place, and I know it tends to be controversial, but I think in the area of the internet and some of the uses that Dane is talking about, I think preemption should be something that should be under consideration.

 

Hon. Jerry Smith:  Anyone else on preemption?

 

Jamie Susskind:  I mean, it's tricky. So when I worked on the Hill, I think that probably our caucus members were sort of split, and it would come up in different areas. Data breach was a big issue where people would sort of say, "Do we want 50 different state laws or one national standard?" And to this day, that's sort of not settled at this point. I think there's ways to do preemption, but there's ways to also respect state and local decisions in a way.

 

      And so, for example, the FCC September decision which, yes, was a preemption decision based on what the statute prohibits states and localities from doing, also tried to respect the, I believe it's 20, and Kathleen can keep me honest, I believe it's 20 states around the country that had already passed small cell legislation that was reasonable and that wasn't effectively a tax on 5G infrastructures. So I think we have to be mindful of what state governments are doing and how they represent their constituents because that's also important. But we also have to be mindful about what federal laws like the Communications Act direct us to do, and what they say that states and localities are prohibited from doing.

 

Nuala O'Connor:  I think it's worth noting that preemption's not a black and white issue, that there are spectrums available -- sorry to use the word spectrum in this room -- that would still allow enforcement at the state level but would provide the regulatory certainty and the international certainty. We're looking at threats from the Chinese model of the internet, so I think we need to figure out a U.S. model that works and is sustainable.

 

Hon. Jerry Smith:  So another question that's more a technical or science question than a legal or structural one is—and I'm an absolute novice and don't understand any of this technology—but the world in this area is moving so fast. I'm just wondering is it possible to start working on 5G and that's immediately lapped by some other technology that we don't really know about? I guess my question, to be more specific about it, is if we went back three years, or five years, or ten years, how predictable would it have been what has happened in telecommunications? Are there ways of predicting this and anticipating it, not only for the industry but for agencies such as the FCC?

 

Kathleen Ham:  That's a really good question. It's funny -- I was at a dinner last night that we hosted with the Economic Club, and one of the women, my Chief Technology Officer there, and she asked him, "Does T-Mobile have a futurist that works for you?" And he was sort of taken aback, and he said, "No, not really. No, we don't have a futurist." But it's -- looking into the future can be very tough. And I'm convinced that we're going to start talking about 6G before we've even built out 5G. That's the way it seems to be going.

 

      But looking back, for example, on 4G, the U.S. lead in 4G deployment, and what did that lead to? It led to Uber. You wouldn't have Uber but for LTE networks. The whole app community and everything that that brought to the economy came from those bedrock LTE networks, particularly as usage is going up. And one thing I think we do look to is that there are things that going to come on the horizon that we wouldn't have anticipated, but we know that usage is going up. Video is exploding on our networks, for example, more and more video. We're going to have more connected devices, and you're going to have driverless cars, you're going to have all these things, and they're going to need a network -- the backbone of a network to actually make it run.

 

      And so it's difficult to predict these things, but you do want to make sure that we have, as a country, I think, the assets out there. It takes a long time to make spectrum come available to market, for example. It's really a 10-year window because the problem is there is no -- in the U.S., there is no available spectrum, really. It's all about re-farming the existing spectrum. And right now, for example, with the 600-megahertz spectrum that we bought—we bought that at an auction—broadcasters are on that spectrum now, and T-Mobile's been actively clearing them and moving them to other frequencies, or some of them have chosen to go dark. So that is a process. And so whether you're clearing broadcasters or you're clearing federal spectrum, that takes time. And so we need to make sure that we have those spectrum assets available to us because we do know usage is going to go up, and we need to plan for it accordingly.

 

Dane Snowden:  Just to add a little bit, the one thing that is not -- you don't look at is the regulations that are out there. Regulations don't keep up at all with the way technology is going. They can't. We rebuild our networks almost every year and take a lot of capital to do that, and so when we look at what's happening and where society's going -- Kathleen mentioned Uber all the way to the increasing video -- but also where we see the future in terms of smart cities and what's going to be needed to have smart cities. You're going to need a robust network that's building, and rebuilding, and rebuilding every single year. And that takes a lot of money, of course, but there is a long-range plan that we have in our industry to make sure that—and I'm sure Kathleen does, too—to ensure that we are providing the network that is needed for today and tomorrow.

 

Jamie Susskind:  So Dane is obviously totally right. Government, as everyone in this room knows, does not keep pace with technology. It's not designed to do that. Unfortunately, we are behind, so I actually think that the best thing that the FCC, under Chairman Pai, has been doing is rolling back regulations. We've been streamlining. We've been cutting the red tape to get the innovators and the investors up front again. We need to just clear the way so all of the creative innovations that Kathleen mentioned, things like Uber, can develop without us getting in the way.

 

Nuala O'Connor:  It's such a terrific question and something we grapple with at CDT because we've had lawyers and technologists proximate to each other now for almost 25 years. We're -- and I think that's a ripe question. We are, as humans, really bad at predicting what 25 years is going to look like from now, even more, 5 years from now. We're adding to our staff exactly that kind of -- sociologists, and psychologists, and human behaviorists to say what impact is technology having on our communities, or cities, our institutions, and our lives? But we are tremendously, under-equipped to predict what the impact is going to be on society of a lot of our new inventions and innovations. And it's almost a meme at this point to say the law has not kept up. It's certainly not kept up with internet growth and the destabilization, frankly, to the democracy.

 

Jamie Susskind:  I should also add that -- sorry -- as a government official, I'm not endorsing Uber. I'm just giving an example of ride sharing, so lots of great developments.

 

Kathleen Ham:  There's also Lyft.

 

Dane Snowden:  I like Lyft, too.

 

Jamie Susskind:  I like all of them. No, actually, I think they're all great. So -- have to be careful. So all of them, yes.

 

Hon. Jerry Smith:  So Dane Snowden mentioned smart cities. So I'm going to ask the question that everyone in the room wants to ask, which is smart cities are fine. When are we going to have smart airplanes? That is to say, is there a problem with conflicting federal agencies in terms of being able to sit on an airplane 30,000 feet in the air and have the same kind of connectivity that we would have in our living room or our office? Where is this going? I think people have a hard time understanding exactly whether this is some kind of a risk adverse bias to improvements in connectivity on airlines. Is it jealousies among federal agencies? Everybody here flies, so I'm just wondering what's going to happen and what's the answer?

 

Dane Snowden:  I wish I had the answer. I may turn to Jamie and see if she has any comments, but I can tell you from when I was at the FCC, when this issue came up of connectivity on the planes, particularly voice calls on planes, I think I found myself on the third level of hell dealing with this issue. And this is -- [I've] never seen flight attendants in the Flight Attendant Association so angry before in my entire life. We all want to stay connected, and it's something -- I spend my life on planes as well, and use the Gogo -- whatever it's called, Gogo Inflight --

 

Kathleen Ham:  Inflight, yeah.

 

Hon. Jerry Smith:  Which doesn't work. [Laughter] Half the time it doesn't work. Even if you want to pay for it, it doesn't work. Go ahead.

 

Dane Snowden:  I think the technology is getting better and better every day, and I think we'll be amazed in time as it goes. But a lot of it is federal agencies, and a lot of it is just what consumers themselves want. I'm sidestepping that, basically.

 

Jamie Susskind:  I have no update about Snakes on a Plane, I'm sorry to say. I do laugh because, actually, I know Commissioner Carr has strong feelings. I hope he's not watching the live stream. I'm not going to share them, but I would urge those of you who get in a room with him to ask him about it because he might tell you about it.

 

Hon. Jerry Smith:  All right. We're going to open the floor to questions, and the only rule is that these have to be real questions and not statements. And with that -- yes, sir? And actually, there is a microphone here, so. . .

 

Questioner 1:  I'm a consumer class action lawyer, and virtually all of our clients are having huge problems with the Telephone Consumer Protection Act. The guidance from the FCC is outdated, it's unclear, it doesn't allow companies to come up with polices that allow them to avoid these lawsuits. And now there are all these new technologies coming into play that the rules really don't address, like direct to voicemail messages, for example. And I'm just curious—and I suppose this is probably a question for Jaime—is this something that's high on the agenda at the FCC? Can we look forward to some reform?

 

Jamie Susskind:  So our office has to defer to Chairman Pai to set the agenda. That's not me sidestepping. It is to say I hear you. I take many, many, many meetings on this with many associations and many companies, and I have now for many years. We hear you, and obviously, with the ACA International decision a few months ago in the D.C. Circuit, there is some lingering uncertainty, so I believe at some point the Commission will have to step in to clarify said uncertainty. But I'm not able, because I don't work for the Chairman, to share when that will be and what that will look like. But we hear you, and I understand nobody wants robocalls, but there are legitimate business purposes and there are consumer-friendly ways to receive said calls and texts. I get them myself. So we hear the concerns and I don't think they're falling on deaf ears.

 

Hon. Jerry Smith:  Anyone want to comment on that? All right. Other questions? Okay, right over here against the side. Yes.

 

Questioner 2:  Hi. I'm not a lawyer, so you're not alone. I am, however, an engineer, and I work for a company that makes products. And so my question, I think, is more directed towards Jaime, and that has to do with harmonization of standards. So if we make a product that we need to get permission from the FCC for the U.S., and we do that exact same product with similar but yet different rules for like Europe, and again, for other countries, having to do the exact same thing four different ways makes it relatively expensive. We're talking tens of thousands of dollars per country. So in the idea or the vein of trying to relax some of the standards, how closely is the FCC working with other countries to harmonize standards so we can do the test once and ship to multiple countries rather than having to do it over, and over, and over again?

 

Jamie Susskind:  So I will fully admit to you that this is not an issue that I've heard too much about. We have excellent, excellent staff in our Office of Engineering & Technology that deal with questions like this, and I don't want to say -- to refer you to them to make this sound like I'm not listening, but they're actually very, very good. And so I think that they would be the proper people to address an inquiry like that. And to the extent that this is something they don't know about, I think they'd probably be open to hearing your concerns and chatting with you about them.

 

Dane Snowden:  Just to put a plug for my industry, we have CableLabs, which is based out in Denver, and they do a lot of these standards and look definitely in the U.S. and also beyond. So I'm not sure what field you're looking into, but I would point you in that direction as well.

 

Nuala O'Conner:  I think the question highlights a very significant issue that folks in all parts of technology are facing, which is, perhaps, a lack of representation of our country in some of the bodies that are making these standards, so it's something to watch out for.

 

Hon. Jerry Smith:  I'll also just comment that 40 percent of the world still drives on the left side and 60 percent on the right side. And if you take your electric shaver to Europe and plug it in, it'll melt. So I'm not sure that it's fair to lay that blame on telecommunications.

 

[Laughter]

 

      Questions? Yes.

 

Questioner 3:  Does anyone have a proposed solution, short-term, that also works in the long-term to protect individual privacy in the electronic communications world?

 

Nuala O'Conner:  Yes, we do.

 

[Laughter]

 

Hon. Jerry Smith:  Huge question, and I'm sure each of you will have some salient comments on privacy. What's happening?

 

Nuala O'Conner:  So the Center for Democracy & Technology has advocated for omnibus federal privacy law in the United States for all of its 25 years of existence. When I was in the Bush administration, we worked on this. When I was at General Electric, and Amazon, and DoubleClick, and a number of other companies, [they] all support some measure of baseline, harmonized standards for all of the reasons that we've already discussed here – a lack of certainty, not only for the consumers, but for companies in the United States and the growing lack of harmonization worldwide on these standards. So we have a draft bill and actually will be introducing it in the next several weeks. We've been working with companies including some represented here, other members of civil society, academia, and a number of members of Congress.

 

[Inaudible question from the audience]

 

      It will put some limitations on onward transfer, secondary use, and third-party transfers of data. And as I said, it will discuss issues of both intimate and immutable details of inhuman existence, so with -- any more than that, you'll have to come to some of our meetings.

 

Dane Snowden:  We've made the point on privacy over and over again that no matter what happens -- and we want consistency with everyone, so it has to include the entire ecosystem. It doesn't make sense for a regulatory agency, or the Congress, or whomever it might be, to put rules on, say, our industries and then leave the back door open with the big tech. It does not add up. Consumers don't go online that way. We've even seen one of our companies, Charter Communications, has gone as far as to say that they would even support and opt-in strategy for data. So we are being aggressive on this issue. We think it's a very serious one. We think consumers are much more aware of this than they were before, but what I think gets lost is the whole ecosystem, not just one segment of it. And we have to have the whole ecosystem for this to work.

 

Kathleen Ham:  Yeah, I would totally agree with that. And I think consumers really don't know -- they don't understand what's the carrier versus what's the tech piece on the privacy. And I do think there needs to be a holistic approach to privacy. And California just passed a very comprehensive and, frankly, very burdensome privacy law that I think has forced the tech community, in particular, to rethink their positioning on privacy. And so I'm hopeful that maybe we'll see federal legislation in this space, too, because I think it's needed.

 

Dane Snowden:  And this is also an area where -- I'm sorry, Jaime -- this is also an area where the Federal Trade Commission plays a significant role, or can play a significant role, because they have jurisdiction over everybody in this particular area. The FTC has certain jurisdiction, but the FTC is an area that should look at this issue, and I believe they are starting to look at this issue as well.

 

Jaime Susskind:  So yeah, I will second the FTC mention. So, as Chairman Pai mentioned and you all know, last year we repealed the 2015 net neutrality rules that had been put in place by the Wheeler administration. And sort of as a corollary to that, through various legal finagling, the FTC now has its rightful spot back as, as my boss would say, the premier consumer protection agency in the country, rightfully so. So I think from the FCC eighth-floor perspective, people are interested in this topic, but we believe the FTC is the agency best positioned to work with the industry. This is what they've been doing for years. They're the most knowledgeable. And frankly, I think Congress sent us a strong message a year or two ago back when we dealt with the broadband privacy CRA legislation that this was not our space, so clearly it is very important. And I think we're all following it closely, but. . . the FTC.

 

Hon. Jerry Smith:  Question? Yes, over here.

 

Questioner 4:  Hi there. I was wondering if some of you could speak to the issue of the European Union aggressively pursuing U.S. companies such as, for example, trying to apply the right to be forgotten to worldwide tech searches, to worldwide internet searches as well as trying to levy fines on worldwide revenue. What do you guys think the appropriate private and public sector responses are to that?

 

Nuala O'Connor:  Well, I'm happy to start with that. We are deeply concerned about the right to be forgotten framework in Europe. CDTs other half of the house, in addition to privacy, is freedom of expression and First Amendment issues. And the idea that one can delete one's own history, including truthful, accurate information about yourself -- we've already seen in the metrics about who has required or requested those takedowns of Google and other search engines. It's been mostly people of privilege, people with the money to make those requests, people with the time and the resources, and high-level members of governments who want things embarrassing to their reputation erased. We certainly also don't want private-sector actors to become the librarians of history, so we're very concerned about putting the burden and onus on private-sector actors to engage in censorship that would really be troublesome, certainly if it was engaged in by a government actors as well.

 

      I think the speech issues that we deal with and the speech issues that confront companies of all kinds in the coming decades are going to be among the hardest for the internet community. And you've seen just in recent days Facebook saying it's not going to go back into China because of the concerns around free expression and privacy requests from the government. That's sort of a moot issue since they're currently banned in China, but it's still a good statement. And so these are the hardest. And the move kind of away from traditional notions of the First Amendment in our own country is a concerning trend as well.

 

Hon. Jerry Smith:  All right. Let's see. Right here, yeah.

 

Questioner 5:  To take the question -- to move a little from privacy toward security, kind of the other side of the coin, 5G, while incredibly exciting—we've heard a great deal of it—poses very serious real-life consequences to security – smart cities, connected cars, and kind of more connectivity than we've ever thought of. What can we do to, not to get kind of technical here, but big security into the spectrum, into that connectivity, SecDevOps in the real world, if you would? Because if we don't, it seems to me that we're going to have very serious consequences in the real world from cyberspace. Thank you.

 

Hon. Jerry Smith:  Anybody?

 

Kathleen Ham:  Well, I am not an engineer. I'm a lawyer, okay? But I do know in the standards process around 5G, some of those issues are being taken into consideration. And you're right, security is really important. There's a lot of overlap between security and privacy in these areas. So my understanding is that 5G is a more secure technology than we have today, and so -- but those issues are important.

 

Dane Snowden:  One of the areas that we have supported is the focus of legislation that will allow the companies to share this information among themselves. That will help us curtail some of this. It will help us understand more of this as a collective community. So that is one step, but it's -- you're raising a -- there's a larger issue here, but that is one step to get us closer to where you're trying to go.

 

Hon. Jerry Smith:  All right. Question? Here.

 

Questioner 6:  Thank you. For both privacy and data security, I was wondering what is the market failure that requires strong government regulations, central planning? Normally, in any other industry, if a company doesn't cater to my needs, I'll go to another company, and it'll go out of business. What's the reason that people seem to think that strong regulation is needed here?

 

Nuala O'Connor:  I would argue the tipping point really came with the Cambridge Analytica revelations. The data had gone so far afield from the primary purpose of the transaction for which the individual had given their data to the first party. That was so far removed from the intent of the individual and the opacity of the relationship. So as I said before, I think the notice and choice regime, while helpful in helping companies understand how they're using their own data and what data assets it has, it's become untenable for the individual consumer to read. You would spend literally days, a year, reading privacy policies to truly understand, and then not have adequate choice, really, to do business with enough alternatives in some of the markets we're talking about. But I do see it as a failure to respect and understand the rights of the individual in that transaction and the kind of contract of adhesion that we have with most of the larger companies that we do business with.

 

Kathleen Ham:  The only thing that I would say in this space from a company standpoint, having some certainty -- I mean, this is an area where I think at least we may embrace regulation because otherwise we're dealing with a class action bar and a lot of uncertainty. And if there is some guidance given to business on what they have to do to stay out of trouble, I think businesses would welcome that in this area, given the litigious nature that's out there.

 

Dane Snowden:  I would just add that I think what people are looking for mostly is transparency and understanding what is happening to my data.

 

Hon. Jerry Smith:  All right. Who's furthest in the back? I'm trying to see here. All right. Yes.

 

Questioner 7:  Good afternoon. This question is more for Ms. Susskind. Yesterday, Mercatus blogged about an interesting case involving microsatellites, involving -- there was a company that had applied to the FCC. The FCC turned them down. There were some issues they thought was corrected. They then -- because it was taking too much time, they went to India and launched the satellite. Needless to say, the Indian Space Agency sent a memo to all American companies saying, "Please talk to the FCC. We don't want this to happen again." Given the fact that Chairman Pai had talked about the regulations and improving the regulations, with the issue of satellites in space, you also have to deal with -- not only with foreign countries, but you also have to deal with export and import control issues. How does the F -- what is the FCC's approach, or what are you envisioning to try to address these issues now that we are talking about microsatellites going into orbit now? Thank you.

 

Jamie Susskind:  So I don't want to tell you that this isn't my portfolio, but it's not my portfolio. [Laughter] If you want to talk about TCPA, I can talk about TCPA. So I'm unfamiliar with the Mercatus blog, but I will look at it and I will refer it to my boss. And I'm happy to take your card after and get back to you with an answer to your question. I just hadn't heard of it before, but it sounds like an interesting one worth looking into.

 

Hon. Jerry Smith:  Anyone have a comment on that? Okay, yes.

 

Kathleen Ham:  T-Mobile's not in space yet. Yet.

 

Questioner 8:  So this 5G is basically like a much bigger pipe that's going to allow a lot more data to go to our devices. Have you thought at all about the potential implications for denial of service attacks, or worms, or viruses that could overload the systems of our devices with these larger pipes?

 

Kathleen Ham:  Yeah. Well, it is more lanes, that's for sure. But I think some of those problems exist today, even with smaller lanes so absolutely, that's an important area. It's an area where we have teams of people who work that, who make sure that the bad guys don't get in. But it's tough. A lot of this is coming from overseas. I do think -- I think Dane made this point that some good practices shared amongst the carriers and with the government is another area of, I think, strength here if we can ensure that there's more cooperation across and learnings from some of this. In the past, there's been more of a -- if you encounter that problem, you're going to get punished, and believe me, the carriers don't want these bad people coming in their back door. Believe me, we don't. But it's tough, it's tough.

 

Dane Snowden:  And this goes back to my point about needing legislation to make sure we can share information because the more information we can share, the more we can handle these issues on a more timely basis. In our offices -- by the way, if anyone's near 25 Massachusetts, please swing by our offices. We have in our, one of our innovation centers, this big monitor that shows you all the attacks that are going on, and it's amazing. And you see them concentrated in certain parts of the world, certain governments of the world who are doing these attacks. You know who they are. And it is something that as we build out and move from the 1-gig world that we're in, all trying to move to the 10G world that we're going to, we are concentrated on this issue every single day. But it is something that I'd say that all the companies are involved in, but also the government's involved in as well. But we need to be able to share information with each other.

 

Hon. Jerry Smith:  Okay. Here.

 

Questioner 9:  So my question is something of a compliment to the questions about cybersecurity, and that is would anyone like to speak to hardening of physical infrastructure? And that could be something as kind of out there as EMP or something as relatively common as hurricanes. A few million cell phones lose signal, that's an inconvenience. A few million autonomous vehicles lose signal, and that could obviously be much more significant.

 

Jaime Susskind:  So Commissioner Carr actually went, I guess it was two weeks ago now, down to the Florida panhandle following the damage from Hurricane Michael. And what he saw, I think, was astounding, just the level of damage. And he was able to spend some time with some of the providers that are on the ground and trying to get the networks up and running. I will refer you to -- he put a media post out that sort of shares his thoughts in more detail. But one observation that he made, and he reiterated yesterday to some members of the press, was dealing with basically line cuts when the networks are being restored, that there needs to be better coordination between the telecom providers and the electric utility so you don't get your telecom network back up and running, and then, by mistake, an electric utility comes and cuts the line because we do actually see that with various hurricane situations. I understand that was a problem down in Puerto Rico last year during the horrific hurricanes they had down there.

 

      So I think that's something he actually would like to look into further. Not to say that there's regulation needed, but to the degree that we can help with coordination or help people figure out what's what, that's something that he mentioned is important.

 

Kathleen Ham:  Yeah, I would agree with that. I mean, from our experience in the panhandle there as well, I think a lot of these cell sites have to be connected to electricity, and we do have backup power, but having better coordination with the utility companies, I think, would be helpful a lot of times. And it varies. It's utility by utility, depending on the locations. So there are some good practices out there. I do know that from T-Mobile's philosophy on this that we look to work with the other carriers during this time. Numerous occasions, we've opened up our network to roaming. There's a lot of good practices out there across just the carriers helping each other, and there's a lot of benefit to that.

 

      So I'm not sure regulation is the solution there because you want to make sure that the carriers are incented to use the very best practices, and sometimes regulation is not going to deal with the next new thing that's out there to solve these things. So there are a lot of -- CTIA has an industry pact, if you will, to deal with these sort of things, which the carriers have all signed up to help coordinate and work with each other on disasters. But we don't have the equivalent of that with the utility companies, and that's kind of a gap.

 

Jaime Susskind:  I understand that Chairman Pai is looking into the wireless resiliency framework, correct, yeah?

 

Kathleen Ham:  Yes.

 

Jaime Susskind:  Yeah. And so my boss is interested in following that and sort of seeing where that goes.

 

Hon. Jerry Smith:  All right. Any in front?

 

Patricia Paoletta:  Patricia Paoletta here, Harris, Wiltshire & Grannis. It's not a question, but just since there were a couple of 5G security questions, I just -- it's a public service announcement that there's a trade association called 5G Americas. Its operators and vendors. T-Mobile's one of them. And they've just put out a white paper on 5G security, and even though it is written by engineers, the intent is that it's comprehensible to a layperson --

 

Kathleen Ham:  Not a layperson, just lawyers. [Laughter]

 

Patricia Paoletta:  -- probably most of you lawyers. No, lawyers, too. I had to read it. I understood it. So you can get that on their website, 5GAmericas.org, for those of you who have questions about how 5G will be more secure and some of the technology involved in that.

 

Kathleen Ham:  Oh, that's great, Tricia. Yeah, that's great. Yeah.

 

Hon. Jerry Smith:  Anyone else toward the back? I just want to be sure I see hands back there. All right, this gentleman here.

 

Questioner 11:  Does the advent of 5G effectively end the net neutrality debate? And I want to premise that by reminding us of the fact that we're going to be enjoying far greater access to spectrum bands that were not available in the past for 3G and 4G and the exceptionally higher speed internet that we're all going to be enjoying. So will carriers like T-Mobile and others even need to throttle, even need to block abusers of bandwidth? Will you need to have fast lanes, and slow lanes, and paid prioritization? And if not, do we even -- is there any argument left in favor of pro-net neutrality side?

 

Kathleen Ham:  Well, just to be clear, we don't throttle, and we don't block, okay?

 

[Laugher]

 

      So we do manage our networks, and you're right, you have limited capacity based on -- look, everybody's network is different. We're using different frequency bands, we have different spectrum in different locations, we have different number of cell sites, and so this is the real difference, actually, between a wire and a wireless on some level because our networks are constrained by those assets. And if you have a situation where you have a lot of people highly concentrated -- we have, for T-Mobile, like in New York City, I think we have cell sites literally on every block in New York City. We have multiple cell sites on every block in New York City, and we need that dense network because there're a lot of people using, thank God, they're using our phones. So that is something that spectrum helps, it definitely does help.

 

      And I think some of the technologies leading to more spectral efficiency help, too, with our -- the handsets are getting better, the technology is getting better. Whether it will mean that we don't have to manage our networks anymore in terms of the use of that spectrum, I don't think so. I think it will still -- but again, I don't see those as blocking and throttling. It's when you're in a congested cell site and everybody gets on, you sometimes have to limit the availability just to -- we call it prioritization, so that everybody gets on. It's like, I'd like to talk about the food line, the all-you-can-eat food line. And one guy comes in and eats all the food and there's nothing left for anybody else. That's what we call good network management to make sure everybody gets some food from the table. So anyhow…

 

Dane Snowden:  Just to be clear, from the ISP point of view, we don't block, and we don't throttle either. Don't want anyone to be confused by that. To answer your question, will this solve the net neutrality debate? No. What will solve it is a bipartisan approach looking at the substantive policy issues that we're talking about versus the political side that this has developed into. That will help solve this issue. We need something. I think we as -- you all as lawyers, and we all as consumers, we need something that will survive a regime change, no matter which regime that is. It is time. This issue has been going on for close to 20 years. I've had three different jobs, and the same issue, and with the exact same result. And so that's what we need to have. It's time for us to actually roll our sleeves up, stop making this a political issue, and focus on the policy issues of how we go forward. No one's into blocking and throttling. That isn't good for anybody. We're into making sure that consumers have their resources and the services and can enjoy the internet the way they want to.

 

Hon. Jerry Smith:  Question?

 

Questioner 12:  Thanks. My understanding of blocking and throttling is that if these companies were willing to do that, then it would help break the advertising duopoly that's currently held by Google and Facebook, who do a fair amount of their own blocking and throttling to control what consumers see first and foremost when they get online. I think Wall Street Journal reported that between Google and Facebook, something like 98 percent, or at least more than 90 percent of advertising revenue gets channeled to those companies. And it seems to me that if someone was interested in promoting a product or service, and they had an effective alternative to Google and Facebook that could be provided through blocking and throttling—for instance, giving a consumer a slight discount if they traffic one media website instead of another media website, or other creative solutions—is it possible for Google and Facebook to be challenged through intelligent and consumer-friendly blocking and throttling strategies if someone were to choose to want to do that?

 

Dane Snowden:  I have no idea, but I'm going to be very clear. We're not in the business of doing that. We don't want to be in that business, and that's not something we will do. You're right about the stranglehold they have on advertising, but it is not our goal as an industry, and I think I can speak for Kathleen and CTIA as well, to get in the business of blocking and throttling consumers.

 

Hon. Jerry Smith:  All right. Further questions? Yes.

 

Questioner 13:  Is there any plan or active ideas about liberating spectrum that's currently in the hand -- that's currently underutilized? We talked about TV earlier. Are there some other bands, or is there active approaches that would allow spectrum users to use it in a broader way? Some spectrum bands are -- have very strict regulations about how they can currently be used. Are there some active measures that are being talked about to create some more flexibility within particular bands?

 

Kathleen Ham:  Yeah. I mean, spectrum management, that's a big part of the FCC's function and NTIA that manages the federal portfolio. But yeah, I think right now -- for example, I'll pick on the satellite industry. The satellite industry doesn't always make good use of its spectrum. Maybe it needs to rethink that, and maybe there's some efficiencies that can be brought there.

 

      A lot of federal spectrum -- I mean, when T-Mobile went through the AWS, Advanced Wireless Service auction back in 2007, I think it was, and we bought a bunch of spectrum that was occupied by the federal government, and we spent two years clearing that, I was sort of shocked at what the federal government was doing with some of that spectrum just in terms of the types of technology. They were using a lot of analog technology, for example, that is a real spectrum hog as opposed to digital. And so some of that -- I think the challenge with the government spectrum use is it takes funding oftentimes to transition them to better technology, more efficient use. And we had -- in that auction, we had some money set aside for the federal government to do that, and it was a win/win in the sense that they were able to transition to, oftentimes, to some much better technology, much more spectral efficient technology. With the broadcasters, likewise, they're being repacked and as they've gone to digital, they need to use less spectrum. So technology definitely helps to solve some of those problems.

 

      But it's very valuable stuff, spectrum, that people are sitting on, and they don't often easily want to give it up. And this is where the FCC comes into play and tries to, I think, give them a little bit of a nudge. Congress, several years ago, gave -- adopted incentive auction authority for the FCC which is what enabled them to do the 600-megahertz repack with the broadcasters, which was they get some payment for giving up their spectrum. And a lot of these folks are people that got the spectrum for free, but paying them to get off of it is, I think, a benefit because it frees that spectrum up for newer and better uses, frankly, things that consumers are demanding.

 

Jaime Susskind:  I mean, you would have heard Chairman Pai at least allude to some of the active proceedings we have ongoing at the Commission both to free up both mid-band and high-band millimeter wave spectrum. I think he mentioned that yesterday the Commission launched the first auction of millimeter wave spectrum which is thought could be used for future 5G uses. So the administration at the agency is definitely thinking about this. It's a very high priority, I would say, for them.

 

      As far as the government users, I know we coordinate with NTIA closely. There was an interesting bill—doesn't mean I'm passing out whether it's good or bad—that came out yesterday—Senators Lee, and I think it was Senator Markey—that would require federal agencies to basically put a value on their spectrum holdings. It's a concept that's been around for a while. We sort of fought about it when I was a Senate staffer. It's very interesting, so it might be something worth looking into a little more.

 

Dane Snowden:  I would also add that as we've mentioned, we're nearing a crisis in the Wi-Fi unlicensed spectrum bands, and I think it's very simple. More spectrum equals more Wi-Fi, and that's what consumers want. And so we look at the 5.9 band, unlicensed band, which is a key area that we need to make sure that we can grow that and use that for our use in our industry.

 

Hon. Jerry Smith:  So this is just an historical relic, but you probably never noticed how many ABC stations are channel 7. Does anyone know why that is? It's because in the early days of television, it was -- there was a big gap on the spectrum between channel 6 and 7, and it was generally thought that the federal government was going to grab channels 2 through 6 for their own use, so ABC thought it was super smart, and it went out and claimed all the channel 7s, thinking that would be the lowest channel. And then, of course, the Feds changed their mind and released channels 2 through 6. I'm sure that some of you here on the panel know more about that than I do, and you can correct me if it's wrong. And the Feds also reserved UHF channel 37, which nobody ever used. It was supposed to be for national security, and it was totally wasted for decades. So these things go on, and on, and on, and they never get fixed.

 

      Any other questions from anyone? So I'll invite -- Oh, yes, I'm sorry. Go ahead. Right over here.

 

Questioner 14:  For a long time, rural places have lagged with the different technologies we've talked about. I'm interested in what each of the panelists think the future looks like for rural places, especially as rural America gets less populated and even more rural than it is now.

 

Kathleen Ham:  I'm really glad you asked that question because that's one of the reasons why we wanted that 600-megahertz spectrum. As I said, it makes it more affordable to build out in rural areas. We also are very excited -- again, I'm putting out another plug in for my merger, but that spectrum, the combination of Sprint and T-Mobile is going to enable us in a lot of those rural areas with their 2.5 spectrum to have deeper capacity, which may mean we would be an alternative for rural broadband in those areas. So that's something we're very excited about. We put some really good data into the FCC record on that, and so -- because I agree with you. In rural America, there's a lack of choice, and wireless is a really good alternative, I think, in rural America.

 

Dane Snowden:  And for us, we are, as I mentioned earlier, looking at redoing our networks and expanding our networks and moving from the 1-gig world that we're in now to hopefully to get to a 10-gig world, a 10G world. So I would also say that it's important to think through what's going on right now with all the infrastructure dollars that are being put out there, and there's a lot of talk about how to use those monies, etc. Our goal is to make sure that we use them where there is no service, not where there is some, but where there is no service, and that will help solve some of that issue as well.

 

Nuala O'Connor:  I'm so glad you asked the question because it raises issues of inequality and particularly as a mom, I look at how much my kids are reliant and how many of their assignments come with a requirement that they get online for a certain website or whatever, as we don't have equality in access and provision of services in a number of parts of this country. We always look at the rest of the world and say we're doing so well, but we've got some real issues of access right here at home. We've really got to think about whether we're going to end up with a two-tiered system of kind of access to the internet.

 

Jaime Susskind:  I actually feel very optimistic about where we're headed. Chairman Pai has said before that the agency's number one priority right now is closing the digital divide, and I believe that the members of the Commission all genuinely believe in achieving that goal. So probably half this room will get upset about the idea of universal service subsidies, so we don't have to fight about it, but I think that's one piece of the puzzle, and it actually has proven to be helpful in unserved areas. We recently concluded an auction that will give about a billion and a half dollars to further deploy in unserved areas, so I think that that is a good step in the right direction.

 

      Another piece of the puzzle, which my boss feels strongly about, and I've said here today, is just streamlining our regulations, removing the red tape and letting the innovators do what they do best. And I think we are seeing results. As I said in my remarks, 5G doesn't have to just be in California.  It doesn't just have to be in New York City. We've seen small cells going up in places like Sioux Falls and suburbs of Indianapolis, so he feels strongly that that, too, will help folks in not just urban America.

 

Kathleen Ham:  Again, from my standpoint, it's very expensive to cover those areas. And you can do it with government subsidies, but you can also do it with private investment if you have the scale to do it. And that's what our deal is about. So it's about doing it through private investment.

 

Hon. Jerry Smith:  We have a couple of minutes left if any of the panelists have anything that hasn't been touched on, or any kind of response that you'd like to make to anything that's been said, or anything that we've left out. If not, and if there are no further questions, then -- well, it's all right. Go ahead. We have time for just one more, I think, so that's just fine.

 

Kathleen Ham:  Going once, twice…

 

Questioner 15:   Sorry. This might be a little off from what we've been on so far, but I'm wondering from like a consumer privacy and information perspective -- I'm thinking of the issues where you have like microphone access to your phone, where people are thinking that their microphone access is off, and then suddenly an add pops up, and they're in the middle of the Himalayas, and they had no service to have any microphone access. So where do you see this issue? Is this an issue of like the apps themselves, and where do you see the accountability coming in in this area?

 

Nuala O'Connor:  Wonderful. Wonderful to end on that topic because I'm thrilled by all the excitement about privacy. And it really, as it moves inside the curtilage of our homes and into the most intimate parts of our lives, we have got to have some rules of the road for good actors, for good corporate actors, and for individuals to know what is going to be used about them. And what -- not only the data that is collected, but the decisions that are made about them, so what you see online, what you experience in the world, there's certainly a theory that the internet is to blame for the decisions we make politically in this country or in the rest of the world. I don't think we can give them, the internet actors, all the credit. There's plenty of information coming to us from television, and radio, and the like, but I think all actors in the ecosystem have to behave in service of their customers and in service of the democracy. And so those are the issues we're working on. I happened to work on the Amazon Echo when I was at Amazon, and I'm happy to tell you offline all of the secrets of how it works. I'm kidding.

 

Hon. Jerry Smith:  Thanks to the panel and to everyone for your participation and attention.

 

       

11:45 a.m. - 2:00 p.m.
Revisiting the Community Reinvestment Act

2018 National Lawyers Convention

Topics: Financial Services • Financial Services & E-Commerce
The Mayflower Hotel - Chinese Room
1127 Connecticut Avenue, NW
Washington, DC 20036

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It is difficult to find anyone today who is satisfied with how CRA currently works. Its clear and terse statutory purpose is to assess a bank’s record of meeting the credit needs of its entire community.  Subsequent regulation and enforcement practices have expanded Community Reinvestment Act requirements and layered on significant compliance obligations, beyond a view of lending, while narrowing its focus to segments of the community, particularly low- and moderate-income neighborhoods. The geographic assumption of the statute appear increasingly out of step with the expansion of banking through the Internet, mobile banking, and ACH and the apparent lessening importance of brick- and mortar- branch offices as sources of deposits. What is the relevance of the CRA today, and what reforms are appropriate? Or should it be repealed altogether?

  • Mr. Bert Ely, Principal, Ely & Company, Inc 
  • Mr. Deepak Gupta, Founding Principal, Gupta Wessler PLLC 
  • Mr. Keith Noreika, Partner, Simpson Thacher
  • Mr. Jesse Van Tol, Chief Executive Officer, National Community Reinvestment Coalition
  • Moderator: Hon. Joan Larsen, United States Court of Appeals, Sixth Circuit

Speakers

Event Transcript

 

Wayne Abernathy:  Good afternoon, ladies and gentlemen. Let me welcome those of you who are here in the room, as well as those of you who are viewing this session today by life webcast, web streaming video, something that we’re trying to do to extend the reach of the presentations that will be presented today. My name is Wayne Abernathy. I’m the Executive Vice President for Financial Institutions, Policy, and Regulatory Affairs at the American Bankers’ Association, and I’m very honored to be the Chairman of the Executive Committee of the Financial Services & Ecommerce Practice Group of the Federalist Society.

 

It’s a great privilege to work the tremendous experts that are part of that practice group. But I also would extend to you please do contact me if you would like to be more involved in the activities of our practice group, the Financial Institutions & Ecommerce Practice Group. See me afterwards or send me an email. We’d love to have you more involved. The more people that are involved, the more that we can know what we are talking about and reach to things that other people are interested in those areas, as well.

 

Today, the law that we’re going to be looking at and that we’ll be examining today, the Community Reinvestment Act, it may be the shortest banking law in the entire federal statute of the banking laws. It counts as eight pages, if you include the three lines that are on page eight. Well, that’s the heart of CRA. Its guts are to be found in the regulations, and that’s what we’re going to look at because that’s what we’re going to have the panel discuss today because the regulators have put on the agenda reform and update of the CRA regulations. And it’s time, they say, for us to bring them up to date to where they are and, in their view, more fully fulfill the intent and purpose of CRA. And that’s what our panel is going to be discussing today.

 

Let me introduce the moderator of our panel today, the Honorable Judge Joan Larsen. A judge of the United States Court of Appeals for the Sixth Circuit, she was appointed to this position by President Donald Trump and confirmed by the United States Senate in 2017. Prior to her appointment to the federal courts, Judge Larson was a justice on the Michigan Supreme Court. Judge Larsen will introduce the members of our panel. Please join me in welcoming Judge Larsen.

 

Hon. Joan Larsen:  Hi. I’m delighted to be here today. My name is Joan Larson, as you just heard, and I am a judge on the Sixth Circuit. I don’t even think it’s a coincidence. It’s an interesting, I guess I’ll say coincidence, that I am here to speak to the Financial Institutions Practice Group. I have a bank. That might be what I know about banking law. So I’m very interested to learn from our distinguished panel today.

 

I will briefly introduce our speakers, but I won’t dwell long on their biographies. They’re all available to you in the program and on the app. I will give everyone six to eight minutes to make their opening remarks because we want to leave plenty of time for discussion between our speakers and then, ultimately, to open the floor to you to ask the questions that you might have. Also, just a public service announcement to please remember to turn off your cellphones or other devices. We’re being live streamed, so you don’t want to be that guy. Okay.

 

Our first speaker today is Keith Noreika. Keith is a partner at Simpson Thatcher’s Washington, D.C. office and a member of its Financial Institutions Practice Group. As the practice group name implies, his practice focuses on banking regulation and litigation, and he was previously the Acting Comptroller of the Currency. I am confident that he knows a great deal about the banking system in the United States.

 

Next, we have Deepak Gupta. Deepak is the founding principal of Gupta Wessler PLLC. He is a renowned appellate advocate who argues frequently in the U.S. Supreme Court as well as federal courts around the country. Before founding his firm, Deepak was senior counsel for litigation and enforcement strategy at the CFPB.

 

Next, we will hear from Bert Ely. Bert is a principal at Ely & Company and a well-recognized expert on financial institutions. He has a well of expertise in the banking industry, having specialized in deposit insurance and banking structures for more than 35 years. He consults widely and has helped draft numerous pieces of federal banking regulation.

 

And last, we will hear from Jesse Van Tol, CEO of the National Community Reinvestment Coalition. Jesse has spent a decade at NCRC and has played a key role in many of the organization’s successful community reinvestment campaigns. He’s also been instrumental in NCRC’s efforts at housing finance reform. Gentlemen, we are delighted to have all of you here today, and we will start by hearing from Keith Noreika.

 

Keith Noreika:  Thank you, Your Honor. It’s a pleasure to be here today. I was tasked by my panel members with giving a little bit of a background of the CRA to bring everyone on the level in sort of where we are today, how it’s enforced, how it’s assessed, and what the current issues are. So just to take a brief, quick trip through time. [The] Community Reinvestment Act was enacted in 1977. It was meant to address an issue of so-called redlining, if there were, that banks would stay out of certain areas or wouldn’t lend within certain areas of their community. It was one of a number of laws passed in the late ‘60s and during the 1970s, such as the Fair Housing Act, the Equal Credit Opportunity Act, and the Home Mortgage Disclosure Act of 1975.

 

At the time of the CRA’s passage, the law’s purpose, generally, was understood to require federal banking regulators to assess depository institutions’ lending performance in their communities with an emphasis on learning how such institutions were serving their local community’s credit needs consistent with the institution’s continued safe and sound operations. The CRA’s purpose talks about Congress finding that regulated financial institutions have a continuing affirmative obligation to help meet the credit needs of local communities and encourages regulated institutions to help meet the credit needs of local communities in which their chartered, consistent with safe and sound operation.

 

Because of that broad language of the so-called obligation of the statute, many initially assumed that CRA obligations were merely hortatory to depository institutions. That Congress expressed the belief to the extent CRA caused institutions to make additional loans or other banking services available to their local communities. Institutions would be able to do so profitably, and it was not intended to alter the economics of banking, much less to convert depository institutions into public utilities.

 

When CRA was initially enacted, Congress did not mention race or gender as criteria on which depository institutions should be evaluated. It was only in 1992 that Congress added two sections to the CRA that permitted the consideration of race and gender of CRA beneficiaries and limited circumstances when assessing a firm’s CRA performance. It wasn’t until 1999 in the Gramm-Leach-Bliley Act that Congress extended the reach of the CRA by requiring that in order for a bank holding company to become a financial holding company, and thus able to engage in a broader range of financial activities, all of the company’s subsidiary depository institutions had to score to satisfactory or higher.

 

Over time, the bank regulators have come to view CRA as imposing a substantive obligation on depository institutions, and now they routinely enforce it through their approval process for various type of regulatory applications. In this process, commenters have the ability to comment on certain transactions that need regulatory approval, and they look at how a bank’s performance is scored in its so-called community. Communities are measured by reference to metropolitan statistical areas and other geographies as defined by the Office of Management and Budget with regard to census tracks and the like. Obviously, these measures of community are delineated for purposes other than the CRA, and that has the potential, these days, to have perverse effects on the working of the CRA.

 

For instance, banks may want to stay away from certain geographies where they know, if they do it there, they may have more lending obligations and make it harder for them to engage in certain transactions.

 

CRA evaluations are done, as Wayne said, now under a set of rules issued by the federal regulators, and there are three tests that regulators look at: a lending test, an investment test, and a service test. Each is separately scored on a score of outstanding, satisfactory, needs to improve, or substantial non-compliance. The institution’s also given an overall CRA rating on the same scale that reflects a weighted average of these three tests. The lending test is the most highly weighted of the tests and looks at a bank’s lending to its community, especially low and moderate income individuals within the certain geographies that are defined as its community for purposes of the Community Reinvestment Act.

 

The investment test measures an institution’s investment, or money donated to community development, in its assessment area, and the service test measures the institution’s distribution system for delivering retail banking services in its assessment area. The evaluation process, I think as an understatement, exercises considerable judgmental discretion of regulators in making the evaluation, and there are no clear metrics or benchmarks for meeting a CRA requirement, even what activities would constitute credit for purposes of meeting the CRA. CRA performance is also often judged relative to competitor banks operating in a particular assessment area, and a relative assessment among institutions can cause competition for CRA creditable activities, which can drive those activities from being profitable to not profitable.

 

The federal banking agencies have also engaged in a process of so-called downgrading institutions for purposes of consumer compliance violations. One of the reforms I put in place when I was the acting comptroller was to limit those downgrades so that the consumer compliance violations have to have a so-called logically nexus with the firm’s CRA creditable activities for which they’re claiming credit under the various tests, usually the lending test.

 

CRA reports are public. After an examination, a federal banking regulator must prepare a written report assigning a CRA rating to the depository institution and explaining the reason for that rating. Depending on the size, those institutions may only be rated every three years, so there can be a lag in activity.

 

It’s enforced, as I said, through the application process. Those are getting a new charter, getting deposit insurance, opening a new branch or moving a branch, or a big one is mergers and acquisitions. The only penalty is a potential failure to get regulatory approval. It can’t be enforced through a court action. At least, courts have said that. And under the current CRA regulations, federal banking regulators are supposed to take into account views expressed by interested parties, including community and local activist groups, when deciding whether or not to grant an application.

 

The latest thing, and then I’ll pass it along, is the OCC has issued advance notice of proposed rulemaking in August 28th of this year. Comments are due next week, so if anyone’s so inclined after this panel, you can go run and prepare one. But the advanced notice of proposed rulemaking seeks to address some of the perceived weaknesses in the CRA evaluation process, making it clearer with clearer metrics of how to evaluate banks so they can be judged across one another and there can be more safety and security for banks in knowing what activities they take to meet their obligations.

 

Again, that’s just an advanced notice of proposed rulemaking. It hasn’t yet been joined by the other agencies enforcing the CRA. Those would be the Federal Reserve Board and the FDIC. Although, I assume when they get to the notice of proposed rulemaking, they’ll have some kind of more of an agreement between agencies. I’ll stop there.

 

Hon. Joan Larsen:  All right. Thank you. Next, we’ll hear from Deepak Gupta.

 

Deepak Gupta:  Thank you, Judge Larsen, and thanks to the Federalist Society for having me here. The last time, if you permit me a small personal note, the last time I spoke at this convention was a week after the 2016 presidential election, and it was sort of the last room I wanted to be in. A friend called me and told me I should just call in sick. Why would you want to be around those people? But I realized I wanted to be here, and it’s not just the spirit of opened debate, that you really do want to hear from all sides of an issue. It’s also that you’re a group of people that care about the rule of law at a moment where it’s really facing unprecedented threats.

 

So I’m even more pleased to be here now, this week, after hearing about the formation of the checks and balances group aimed at rallying around our shared constitutional values, and I hope many of you will join it and speak out. I want to talk about the Community Reinvestment Act from the perspective of what I think are our shared constitutional values. Now, I’m a consumer protection lawyer. I worked in the last administration on consumer protection, and I think, in an interesting way, the debate about this kind of sleepy law -- a lot of people have not heard about this law.

 

It doesn’t get litigated into courts, but it intersects in important ways with a big debate that our society is having about predatory lending, high-cost loans, payday loans. And I think there are some shared values that I hope can guide everyone’s thinking about this debate because I think the real policy momentum—I want to just get this out—comes in part from an attempt by banks to get credit and, therefore, to incentivize so-called simple loans or other high cost loans. These are very high interest rates loans that actually compete with pay day loans that are being offered by banks or through arrangements with chartered banks.

 

So the first principle I want to get out there is let’s ask about democracy and democratic legitimacy. If we’re really talking about changing the CRA, and I think there is consensus that the statute is pretty outdated. It’s as old as I am, and there have been a lot of changes in technology and banking since that time. But if we’re talking about changing it, as opposed to interpreting it, should we really be doing this through unelected bureaucrats, or should we be doing it through the democratic process? Just to give you some context, when you’re talking about high-cost loans, I am worried that federal regulators will say, through the CRA process, that these loans are good for consumers and they should count – banks should get credit for extending some of these high cost products.

 

But whenever you put the question of usury caps for high-interest rate loans up on the ballot, when there are ballot initiatives about them, they pass by overwhelming margins. I’ll give you a few examples. In Montana in 2010, the electorate approved a 36 percent interest cap with 71 percent of the vote. In South Dakota in 2016, the same kind of cap passed with 76 percent of the vote. And then in the most recent election, last week, Colorado passed a ballot initiative with 77 percent of the vote. These are all 36 percent interest rate caps. There are 15 such ballot initiatives. They don’t lose. So if you’re asking are these loans good for consumers, I think you ought to pay attention in a democracy to what the electorate says at the ballot box and also what consumer groups and community groups say about these loans in the affected communities. They don’t think these are great loans.

 

So I mentioned South Dakota is one of the states that passed that ballot initiative. Just to give you one example of what’s happening on the ground, there is a small, Utah chartered bank called Op Loans. It’s selling loans right now with a 199 percent APR. That is usury territory by any definition. Those are loans that compete with payday loans, and they’re selling these loans in South Dakota. That’s plainly illegal under the cap that was just passed by ballot initiative, but this bank says the loans are being originated by an FDIC-member bank. So you can see this effort to use the shield of federal regulation to shield conduct that would otherwise be illegal under state law.

 

And I’m quite concerned that through this CRA process, but also through a number of other regulatory processes that are going on across the banking regulatory agencies, that the regulators will bless practices that are clearly not acceptable to the public when tested democratically but will do so through this bureaucratic process that, unfortunately, is not very visible. You don’t see a lot of people hotly debating the Community Reinvestment Act or other regulatory reforms. They’re kind of happening under the radar. So that’s the first test I want to submit, that we should ask about democratic legitimacy.

 

Second, and closely related, federalism. Is there a role for states’ rights or local control here? If you have these caps being passed on the ground, responding to local conditions, and you have a history here of states passing these kinds of usury caps, isn’t there some role for the states? And then, finally, the role of tradition. Restrictions on the rate of interest are probably the oldest and most ubiquitous form of economic regulation. They go back to every ancient civilization. They’re part of the Bible, and we had them in the United States from the founding of the Republic up until the 1980s, where, through a series of Supreme Court decisions and some deregulation, we effectively got rid of interest rate caps.

 

I think that tradition should count for something. I think it’s important to recognize that that deregulatory move happened after the CRA was passed. And so I think you’re probably going to hear a broad consensus from the panelists that the assumptions on which the CRA rests are outdated, and I actually agree with that. But I think one way in which they’re outdated is that the Community Reinvestment Act was passed at a time when policy makers regarded the extension of credit as an unalloyed good. The problem was redlining. You had banks that through geographic arrangements were not reaching minority and poor communities, and the problem that Congress principally wanted to address was to insure that banks wouldn’t do that, that they wouldn’t exclude people from the extension of credit.

 

But the story has completely flipped, and in the past decade or more, what we’ve really been worried about is the extension of high-cost products that trap people in a cycle of debt. It was that kind of extravagant lending that contributed to the financial crisis. So that is an assumption that is outdated, and I think we should have a debate about that. But it’s my submission that we should have a debate about that that takes into account concerns of democratic legitimacy, concerns about federalism and concerns about the long tradition. If so many societies throughout history have organized themselves with usury prohibition, have thought that this kind of high-cost lending is problematic, that probably should count for something. I think that’s one thing that conservatives understand. One reason to value tradition is we’re not the experts on everything. Other people have thought about a problem, and they may have gotten it right.

 

And then, finally, let me just end with a point of, I think, consensus. There is a real thrust to modernize the CRA because it rests on considerations of geography. It used to be that every bank had geographic footprints, and that was the right way to assess them. That just doesn’t make sense right now for a lot of reasons. You have Goldman. Goldman is a state chartered bank. Their headquarters is in New York City. They have lending centers in Salt Lake and in Dallas, and they’re lending from all over the country. How do you assess them based on a geographic footprint? It doesn’t make sense.

 

So I think there’s probably consensus among everyone that it’s the actual interactions that financial institutions have with people that ought to count rather than simply geographic footprint. But I will say—and this is my final thing I’ll say—in preparation for this, I talked to a friend of mine who his job takes him to community banks all around the American south. And he did point out that he hears over and over again that these storefront banks really matter, and their interactions with particular minority communities really matter. I do think there is a real need among the poor and underserved communities for basic banking services, for no-fee checking, for credit cards that allow you to travel, simple, simple banking services.

 

And if the CRA is used as a mechanism to no longer give credit for that kind of basic banking, I think what you’ll see is a greater push. And this is already being proposed, for postal banking, to have basic banking services at post offices. I query whether those of you represent financial institutions whether that’s actually something you want to encourage downstream. Thanks.

 

Hon. Joan Larsen:  All right. Thank you. Next, we’ll hear from Bert Ely.

 

Bert Ely:  Thank you, Judge. The Community Reinvestment Act, or CRA, now 41 years old, was enacted on a basis of premises which were questionable at the time, if not outright false. More importantly, the financial services world has changed dramatically over the last four decades. Many of those changes further undermine whatever premises might have existed in 1977 to justify the CRA. The time has come to reassess those premises on which the CRA is based and to reconsider its continued existence. Key to that reassessment is understanding how much of the financial services world has changed over the last 41 years. Back in 1977, SNLs were the primary source of mortgage credit.

 

The largest portion of retail financial services were delivered through bank and SNL branches, with the balance delivered through credit unions, finance companies, mortgage banks, and capital finance companies. Third, branching prohibitions and restrictions in many states greatly restricted bank entry into new markets, which protected existing institutions, thereby limiting customer choice and disruptive entrance. Regulation Q interest rate limitations caused periodic credit crunches, particularly for home mortgages. Electronic banking and the delivery of banking services over the internet were unheard of. Redlining complaints were prominent in states with highly restrictive bank branching, such as Illinois and Texas.

 

And finally, numerous laws already had been enacted to bar lending discrimination, including the Fair Housing Act, Consumer Protection Credit Act, Equal Credit Opportunity Act, and Home Mortgage Disclosure Act. Today, many of the constraints on the delivery of financial services have declined substantially or have disappeared, in part because of increased competition. Branching restrictions have been wiped away, as well as Regulation Q. The electronic delivery of financial services has exploded, with innovation continuing at a rapid pace. At the same time, enforcement of fair lending laws has continued unabated. Smart bankers, of course, have always realized that it’s dumb to discriminate because that means passing up on profitable business opportunities.

 

Here’s the question we should be pondering today. If the CRA had not been enacted in 1977, how different might be the financial history of the last 42 years? To the extent that CRA incentivized banks or compelled them to unwisely extend more credit, or to loosen their credit criteria, was the 2008 financial crisis more severe than it otherwise would have been. Many have argued that CRA-driven lending preceded the financial crisis and exacerbated the effects of the crisis, in part because home ownership was overstressed. For many folks of modest means, owning a home, in fact, is often not a wise investment. Obviously, we can only speculate about alternative outcomes, but it is a useful speculation whenever changes in the CRA are debated.

 

A more fundamental question: if the CRA had never been enacted, would enacting such a law even be considered today? I doubt it, but that is a debate worth having. Put another way, what are the pros and cons of continuing the CRA in any form? How might the financial services world change if the CRA suddenly disappeared, other than leaving lots of CRA examiners and bank compliance people they deal with looking for new jobs? Those questions have become more pressing as financial technology increasingly lessens the role of bank branches in the production and delivery of financial services and, specifically, of credit products, such as home mortgages.

 

Let me suggest that we might actually see greater diversity in the types of firms providing financial services if banks were empowered to break away from the one-size-must-fit-all business model imposed on them by the CRA. No doubt we would see more minority controlled banks serving minority communities as large banks no longer felt compelled to serve arbitrarily designated assessment areas solely in an attempt to earn an outstanding CRA rating. While a CRA repeal is not actively being considered this time, the recently enacted tax law, the Tax Credits and Job Act of 2017 has introduced a CRA-like provision that may force a fundamental reconsideration of the CRA, specifically as it relates to bank lending. The new law added a new section of the Internal Revenue Code called Opportunity Zones.

 

According to the statute, a qualified opportunity zone means a population census track that is a low income community that is designated as a qualified opportunity zone. These census tracks are essentially the ones that CRA is focused on. Favorable capital gains rules have been established for investments in opportunity zones. These investment opportunities in turn will generate lending opportunities for banks in those zones. There are limits on the number of opportunity zones that can be created and the types of qualifying investments that can be made in those zones. I suspect, though, that banks will seek to include opportunity zones in their CRA investment area because of the additional lending opportunities those zones supposedly will create.

 

However, opportunity zones when interacting with banks’ CRA obligations may create unintended and perverse consequences, notably, wasteful and uneconomic investments in opportunity zones that eventually generate loan losses for banks while actually damaging a zone when an investment later goes bust, leaving behind empty structures and unemployed workers. I might add there’ve been several interesting articles in the New York Times in just the last couple days about opportunity zones. Time will tell if this interaction between the CRA and the Internal Revenue Code is a success or, as more likely to be the case, backfires.

 

I will close my remarks with some comments about redlining. A key premise justifying the CRA, even today, is the concept of redlining, that certain neighborhoods have been designated as high risk and, therefore, bankers should not lend in those areas. Redlining dates to the 1930s when the federally chartered Home Owners’ Loan Corporation, or HOLC, was created to refinance home mortgages and, when necessary, to foreclose on defaulted mortgages and sell the foreclosed houses. To assist in this undertaking, HOLC examiners created color coded what were known as residential security maps for major cities, with four colors used to designate neighborhoods: green for the best, blue for still desirable neighborhoods, yellow for definitely declining neighborhoods, and red for so-called hazardous neighborhoods where property values were most likely to decline. Presumably, the term redlining stems from the use of that color.

 

After reviewing a map of the Cleveland, Ohio metropolitan area the HOLC created, I strongly question the extent to which racial considerations overtly played a role in how HOLC classified neighborhoods as to the degree of riskiness in making home mortgages. I grew up in Cleveland, spending my first 24 years there, including attending college and later working on public accounting assignments that took me all over the metropolitan area. Consequently, I knew Cleveland’s geography quite well. Many of the areas colored red on the Cleveland map were in fact areas were property values were weakest for non-racial reasons. Many of the areas, in fact, were 100 percent white. Those areas were colored red, in my opinion, for one or more of the following reasons: the houses were old, small and of wooden construction, and/or they were adjacent to industrial areas.

 

At that time, Cleveland had lots of heavy industry that generated lots of pollution. The city of Cleveland also did not have very good schools, another negative in value of residential properties. No doubt many of the red zones in Cleveland and in other cities the HOLC mapped were largely, in not entirely, minority communities, including immigrant communities, but I question the continued use of the term redlining in the context of its apparent initial use 80 years ago. If nothing else, many once red neighborhoods in cities across the country are now solid green due to gentrification, while other once red neighborhoods are improving in quality as more and more folks of all ethnic background value urban living. I certainly have seen that process in Alexander, Virginia, where I have lived for the last 37 years.

 

In closing, the discussion of housing patterns in credit availability, as those conditions exist today, should reflect today’s realities and especially the manner in which credit is now provided and not the United States of 40 or 80 years ago. The CRA, should it continue to be law, should reflect current day realities. Thank you.

 

Hon. Joan Larsen:  All right. Thank you very much, and now we will hear from Jesse Van Tol.

 

Jesse Van Tol:  Okay. Jess Van Tol, Chief Executive Officer of the National Community Reinvestment Coalition. NCRC was founded in 1990 to save CRA. It was an instrumental part of the mid-1990s reforms to CRA and an integral part of the conversation in the late 1990s around Gramm-Leach-Bliley. It’s the first time, Keith, I’ve ever heard Gramm-Leach-Bliley as having strengthened the CRA. I think it would be news to Senator Gramm that that was the case. There were some elements of it that weakened the CRA as well, but we played a critical role in that and are very actively engaged in this discussion over CRA today.

 

I’m going to sort of largely talk about the state of play of the ideas being proposed right now. I wanted to take a moment to comment on some of Bert’s remarks because I think sort of going back to the roots of CRA are instructive for today’s conversation. Right now, nobody is looking at getting rid of CRA. The debate and the conversation is how do we change CRA, how do we provide more clarity, how do we make it better. But certainly I think some of the fundamental questions are important to discuss. So the first one is sort of the rationale, the reason behind the CRA.

 

We often boil it down to a single word, which is redlining, and redlining was a practice in which banks would draw redlines around neighborhoods and not lend there. It was codified in government practice and policy with the Home Owners’ Loan Corporation which neighborhoods were graded. I actually have an answer to some of Bert’s questions. We did a study, and we found that 75 percent of the neighborhoods redlined under that Home Owners’ Loan Corporation practice, 75 percent of them are, today, still economically distressed. So a lack of capital investment in communities over time is a self-fulfilling prophecy. Those neighborhoods struggle to do better over time.

 

We also have an answer to the counter-factual. CRA has been difficult to measure because it involves proving a counter-factual. What would have happened if it didn’t exist? Fortunately, we also have the answer to this question. The Philadelphia Fed did a study of census tracks in the Philadelphia metro area that became -- lost their CRA designation essentially because of the census. They went from being lower to moderate income to not being that way, to no longer being included in the Philly MSA for CRA purposes. And what they found, what they documented was that 10 to 20 percent drop in lending in those communities over the next three to five years, 10 to 20 percent drop. That, by the way, I think is a very conservative estimate, and the reason is that the banks in those communities had built up an infrastructure to do lending.

 

They had opened branches in those communities. They had fulfilled their CRA obligations, and those things don’t just go away when a track suddenly becomes not CRA eligible anymore. In fact, if anything, the increased economic activity in that community should be evidence of more lending. And it really only measures the geographic basis for CRA. Banks still get credit in those census tracks outside of Philadelphia for lending to low and moderate income people. So the fact that you see a 10 to 20 percent drop, I think, is significant. If you extrapolated that across the entire country, it would be $50 to $100 billion in home and small business lending that doesn’t happen over the next five years. That is a significant impact. Again, I think it is a very conservative impact of CRA, and that’s just really the lending test part of CRA.

 

On investments, the largest banks in the country, the top 20 banks, do about $35 billion a year in community development investments, and some of these investments are quite profitable. Someone said, I believe it was Keith, that maybe banks compete for certain types of investments. It drives up the price, makes them less profitable. That happens in the LIHTC, low income house tax credit area, occasionally. But more than one bank has reported that that area of their business has been the most profitable line of business for their company in certain years. Some of that would continue to occur without CRA. I think much of it would go away in many communities outside of New York and some of the higher cost communities.

 

So I want to come back to this redlining notion, though. Redlining is a word we use to describe a broader phenomenon, which is a lack of capital and credit access in many communities, including poor white communities. I would dispute the notion that race was not a part of CRA. Race was a part of the conversation, certainly, when CRA was passed. Discrimination against people of color, many of these laws come out of the Civil Rights Movement. They are a suite of laws. They are related to each other. They interact with each other, but you can find discrimination against poor white people as well. Many of the conversations by realtors at the time, even up to and including mentions within the FHA underwriting guidelines, rank neighborhoods by ethnicity. It was really clear that ethnicity went into the grading of communities and their sort of relative desirability, and that includes the ethnicity of white people.

 

So there’s a list that separated northern Italians from southern Italians, southern Italians being less desirable and part of those hazardous communities that the Home Owners’ Loan Corporation divided. The Irish were considered to be less desirable. Ethnicity was absolutely a part of redlining, and it didn’t include just people of color. It included poor white people as well. And poor white people have always been a part of this notion. So CRA was established on a class basis. I would put to you that today, when we look at that original problem often sort of captured as redlining, but when we look at the problem of capital and credit access, it continues to exist today.

 

The average credit score for Fanny, Freddy, FHA is higher than it’s really historically ever been, in the 700s. Many people cannot get loans, and I think the evidence is that the impact of CRA, a 10 to 20 percent loss of lending in communities justifies its continued existence. I want to say, Deepak talked about shared values. People often forget that CRA, and in particular HUMDA, which is really a companion law to CRA, was in part about transparency. It was about disclosing what institutions are doing to serve their community. Letting the public know about that. I want to make a point that, when we think about market theory and when we think about competition producing optimal outcomes for each side of the transaction, the assumption was also that there would be perfect information.

 

And I would put to you that our system of capitalism, over time, has produced a scenario in which the people extending capital and credit have a lot more information than the people receiving it. There is a power imbalance in that transaction in which one party has not nearly as much information as the other party. That is, I believe, a root of the kinds of abuses that we see in credit markets. Your average person might get a mortgage three or four times in their lifetime, maybe only once, but the average mortgage lender is going to make that transaction thousands, if not millions, of times. So HUMDA, CRA is in part a transparency law.

 

The debate today around CRA is really about three things. It’s what counts, where it counts, and then how we’re going to sort of enforce and grade and get input around those factors. One major idea, sort of a push by the OCC, is making CRA a more metric driven approach, to bring a lot of clarity to sort of both what counts, but also sort of where it counts. There’s an interplay there, and I think the idea that’s received the most attention is Comptroller Otting’s idea around establishing sort of one metric to determine whether or not a bank is meeting its CRA obligation. And the one metric is a counting up of all of the activities that count for CRA: loans to low and moderate income people.

 

They have some ideas about maybe broadening what counts. The industry has certainly pushed for that. Let’s broaden what counts in the buckets. So you add that all up, and you divide it by some measure of a bank’s capacity, some measure of what their obligation should be. And that’s maybe assets or deposits or Tier 1 capital, different ideas for what that is. If it’s above a certain ratio, you get a passing grade. That’s purest form of a one metric idea, and this is something that the comptroller has mentioned, has brought up as a central idea in the reform process. And then sort of below that, and sort of the state of play currently, maybe you can’t have one metric. There’s a challenge to sort of having one metric. The statute speaks of communities and measuring banks in communities. And, in fact, Marty Gruenberg, the former FDIC chair, gave a speech recently in which he said, “In fact, you can’t have one metric. It’s illegal.”

 

Because in 1994, Riegle-Neal added the MSA as the standard for the assessment area upon which banks would be measured. So now the notion is sort of a metric driven approach. Maybe it’s not one metric. Maybe we’ll measure banks sort of in MSA but establish some metrics, establish some quantitative aspects of measuring bank performance. And this, too, has challenges. I’ll point out that that idea was originally proposed by the Clinton administration in the mid-1990s. It was withdrawn as part of the update to the regulation because banks and conservatives said it was credit allocation.

 

They said it would distort markets. They said if you did that, either you set the number too high and banks can’t meet it, and it distorts what loans they make. Or you set it too low, in which case it’s meaningless. But getting exactly the right metric or exactly the right number is inherently difficult to do, which is why the regime was designed around performance context, around relative to peers, around what’s happening in the market. And the core of CRA -- and then I’ll end because I guess that timer was for me. The core of CRA, the intent of the law was always about the convenience and needs of the community. And one community is very different from another community in terms of what’s going on.

 

It inherently was designed to make sure that banking institutions, in the places that they are chartered, where they are taking deposits—that’s the capital of community—that they are putting them back to work in those communities. And as they do that, they are assessing what is happening in the community. They are assessing what the convenience and needs are. They are assessing what the community needs, not just in a quantitative metric driven way, but in fact qualitatively what’s different in Rochester, New York versus Memphis, Tennessee. What’s different in this community, and being responsive to that, being responsive to those needs.

 

And that is really the entire legislative history and core intention of CRA is to make sure that institutions based in a community are responsive to those needs. So I disagree also with Deepak a little bit. I think you can’t make it not geographically based. I think you can make it a blended system in which, depending on business model, a banking institution is really responsive geographically to the needs, but also to the needs of people and individuals.

 

Hon. Joan Larsen:  Okay. Thank you. After warning everyone to silence their cellphones, it turns out I’m that guy, so I do apologize. If experience is any measure, I am guessing that the panelists have a few remarks that they’d like to make in response to things they’ve heard others say. So I’d like to give each of you just a few minutes if you have anything that you want to say in response and part of the conversation. Then I will either ask some questions or see whether we have some coming from the audience. So, Keith, do you have anything that you want to say?

 

Keith Noreika:  Sure. Thank you. This has been a very informative discussion. I think at the end of the day, when we start to look back at the original purposes of the law, we’ve come a long way, and there are obviously vested interests that crop up in the regulations and monitoring and enforcement of CRA that’s come over the last 40 years or so. To me, having been a regulator, I thought the purposes were salutary, but the execution of it left a lot to be desired, both at the regulatory level. Just trying to make judgements, it was not clear.

 

I thought there needed to be a little bit more clarity, both for the sake of administering an agency as well as who were the potential beneficiaries and fairness to the regulated industry as well. I think that’s a laudable goal of the current -- my successor at the OCC is to sort of move to more transparent means by which you can judge whether or not you’ve met the CRA. And, frankly, maybe there should be some safe-harbors or the like so we don’t get into protracted fights. At the time of economically beneficial transactions, you can know whether or not you’ve met it. It can be enforced, potentially, more in a supervisory manner and less as a sort of roving specter of viability over economically beneficial transactions.

 

Deepak Gupta:  I’ll make two points that sort of pick up on the themes that I was talking about and how I think they touch on what people have said. The first is, on the question I was stressing, democratic legitimacy, because we have these federal banking regulators -- It’s not just the OCC. I think it would have to be a coordinated effort by all of the prudential regulators to do something here. These are big questions. I think the discussion today shows you that there are competing values here, and we are talking about a law that was, I think, intended to be a Civil Rights law. Despite what we’ve heard, it was intended, in part, to address the credit needs of minority communities. And yet, there have been changes over the last 40 years that may necessitate an overhaul.

 

What I heard from Bert was the argument that maybe Congress wouldn’t have enacted this law today. And I think in our system if you don’t like a law, if you think that it shouldn’t have been enacted or that it needs to be changed, we don’t do that through unelected processes. We do that through the political branches. I am afraid that we have here a situation where the changes that are being sought are changes that everyone knows could not be accomplished through the politically branches, not simply because you need expert regulators to do this, but because they would be extremely unpopular. So if that’s the case, that really raises fundamental questions about the democratic legitimacy of what the administrative state is trying to do in this scenario.

 

And then the second thing I would say, and I don’t want to be misunderstood. When I said that I think there are some outdated assumptions in the statute and that geography is no longer the be all, end all, I do think that’s true, and I think the example of online lenders shows that most clearly. There were no online lenders in 1977. With so many other things about the internet, it’s challenging, when you have a legal framework that was devised based on geography, to figure out how the internet should be treated. I do think there needs to be some updating for that. But I want to be absolutely clear. This is a law that recognized, in 1977, something that is still true today, which is that in many communities, if there is no access to some kind of storefront banking with basic services like checking accounts or extensions of credit, that is going to be a very bad thing for those communities.

 

And we know that what will happen in those communities is that if there aren’t ordinary banking services, people will turn to check cashing joints and payday lenders that will trap them in a cycle of debt. That is more true now than it was in 1977. That’s a reason, even more so, to have standards like the Community Reinvestment Act. I’ll just make a pitch again to ask yourself, when you hear this debate, if you ask yourself about core conservative principles, democratic legitimacy of the administrative state, federalism and local control, and the value of tradition, how do the things you’re hearing stack up? I don’t think that what the OCC and other agencies are planning to do stack up very well against those metrics.

 

Keith Noreika:  Could I just say two things in response to that very quickly?

 

Hon. Joan Larsen:  Sure.

 

Keith Noreika:  First, democratic legitimacy I don’t know gets you very far here because all the obligations are put in place by undemocratically elected regulators. So if those regulators just repeal what they did, we go back to a world where none of this exists. You can’t hide behind democratic legitimacy to keep something that’s undemocratic in the first place. The second thing is, on the payday lender front, I sympathize with you, but certainly the things I’ve seen from inside the OCC was, by driving these people out of the banking system, you’re sending them -- 199 percent interest rate is a lot better than, say, 1,000 percent interest rate.

 

There’s still the 26 percent of the people who didn’t vote for that law who need some kind of cash somewhere and are going to get it. I don’t think that really has much to do with CRA, at least in my view, unless it has something to do with creditable activities. You have to always worry about the perverse impacts of sort of what you’re arguing for. That’s just my -- I don’t mean to interrupt Bert or Jesse.

 

Hon. Joan Larsen:  No, that’s good. I was going to not that I wasn’t quite sure whether I had just heard Deepak Gupta advocate the contraction of the Commerce Clause and the overruling of Humphrey’s Executor, but maybe.

 

Deepak Gupta:  If I said that, I went way to far.

 

Hon. Joan Larsen:  All right.

 

Jesse Van Tol:  Lawyer jokes.

 

Hon. Joan Larsen:  All right. Bert?

 

Bert Ely:  Again, I just want to come back to a point that I made before and others have touched on. That is technology has really, irreversibly changed the production and delivery of financial services. And the question is does the CRA reflect that? Because what the technology’s done is, in many ways, reduced the importance of, or the significance of, geography. It hasn’t eliminated it completely. A key question that has to be asked, particularly in terms of defining what are called assessment areas, is that still a valid way to look at the manner in which financial services, particularly credit products, are being delivered. I think that that’s just not being acknowledged enough that in effect geography, even though it’s not unimportant, it’s nowhere near as important as it was in 1977.

 

But I think the other thing that has to be asked that I touched on just very briefly, and that is how has the CRA distorted the delivery of financial services? Let me give one example that I’ve heard on a number of occasions. That is that what the CRA does is it incentivizes the large banks, particularly those who want to be doing acquisitions, to go out and be so aggressive in lending in favored communities that it actually has led to an erosion, a disappearance of banks that were initially set up to serve those areas, in effect, banks set up to serve various minority communities. I think that that’s a complaint that I’ve heard, and it’s one that I think has to be acknowledged as, shall we say, an unintended but still undesirable consequence of the CRA.

 

Jesse Van Tol:  So let me try to sort of handle a number of things at once here. Undoubtedly, the banking system has changed, and sort of our remedy for addressing that when it comes to assessment areas, when it comes to other things, is an acknowledgment that, today, banks, not just FinTech, not just internet banks, but banks are increasingly driven by technology. They’re taking deposits from places where they don’t have branches. Notably, the original statute actually doesn’t really define deposit-taking facilities. I’ve argued that this should be considered a deposit-taking facility, and on that basis, you could establish an assessment area wherever an institution is taking deposits, including through the internet. You could cover FinTech-type companies that are taking deposits in that manner.

 

But we have also argued for establishing assessment areas not just on the basis of deposit taking, but also considering business activity, lending essentially. And there is some precedence for this even in the current framework. It might require to do this fully a change to the law, but essentially, you could set up a regime in which you are examining institutions, banks or otherwise, where they’re doing concentrations of leading. Even when you look at FinTech companies like, say, Square, you can find within the lending that they do, you can find within the activities that they do geographic concentrations of where they’re doing business, and that could be a basis for establishing an assessment area, an area in which they need to go deeper and try to solve some of the problems that CRA originally envisioned.

 

I’ll remind people that while the problems that CRA was set up to address, you know, redlining, credit access, things that I believe continue to happen today, the rationale for applying the CRA obligation to banks was that they received deposit insurance and other forms of government subsidies. You think about access to the fed window, etc. Other forms of subsidy, so there was a quid pro quo. There was a rationale for applying a public policy obligation to them. I would argue, today, we know that the entire mortgage system in the country is backed by the federal government. The financial crisis taught us that. And if you want to disagree, $30 trillion in loans, investments, and guarantees were made at the height of the crisis, not just to banks. The federal government stepped in to make sure that the system didn’t go under, and thank god they did. There was a very good reason to do that. It saved the economy. It saved probably millions of jobs. It would have been much worse.

 

But the point is there’s inherently a government subsidy standing behind the financial system, and we have, throughout our history, examples of when the financial system gets out of control and takes too many risks, it results in calamity. So there is a reason a government infrastructure has been built up around that system. But that building up of that infrastructure is a form of subsidy. The rationale exists to expand CRA to apply it to more institutions, to mortgage companies, to credit unions, something that we have supported. And, I think if you were to ask the question “if the law were passed today, would people want to do it?” I would say, if anything, people would go further today in passing a CRA-like law if they really understood what it did and what it meant.

 

To Deepak’s point, be careful what you wish for. The affordable housing crisis around the country, the rental affordability crisis, homeownership at a 50 year low is leading to a resurgence of ideas like rent control, to a resurgence of let’s regulate the banks and the financial system. That when you poll people, overwhelmingly, they are supportive of more regulation for financial services companies. I won’t sit here and tell you that I think, yes, yes, yes, more regulation is good.

 

We take a very nuanced view on that, but I would say, if you were to have the debate today and you were to look at what’s happening in low income communities, you look at what’s happening in working class white communities, people are struggling to get ahead. Inherent to our system of building wealth is access to credit, is being able to buy a home or start a small business. And I think, if anything, if people understood sort of this law and the nature of it, you would have a conversation that said let’s go even further in making that a requirement.

 

Hon. Joan Larsen:  Okay. Well, on that provocative note, are there questions that people would like to ask this panel? There’s a microphone right behind you. If you can go to the microphone, I think it helps pick up.

 

Bert Ely:  If I could just make one quick follow-on comment, in order to have that debate, what we should do is repeal the CRA, and then that will trigger the debate.

 

Hon. Joan Larsen:  It sure would.

 

Jesse Van Tol:  How about we have the debate and then figure it out?

 

Deepak Gupta:  You have to go to Congress for that. That’s the problem, right?

 

Questioner 1:  I’d appreciate your opinion on whether the three following factors might justify a rollback of CRA and its regulations. The first would be Professor Todd Zywicki, down at George Mason, has determined that the sub-prime mortgages actually didn’t default at a higher level than other mortgages during the financial crisis. So would that fact make you think that there is a market there that could be filled by financial institutions without the CRA holding the club over there head?

 

Second would be with regard to interest rate caps. If you do not allow interest rates to match risk, Mr. Gupta, is that going to limit the opportunity for low income people to obtain financing for their businesses and their personal consumer loans?

 

And then the third would be, if I can remember it here -- I’ll be like that guy yesterday that forgot what he was going to say at the end. Let’s see. I’ll just leave it at those two. There are probably some other lurking variables out there that you might address, but that’s what I’d be interested in knowing.

 

Hon. Joan Larsen:  Thank you. Who wants to take those?

 

Deepak Gupta:  I’ll just quickly react, especially since one of them is directed to me. So on the first point, I think the scholarly consensus is not Todd Zywicki’s view. The scholarly consensus is -- there’s overwhelming consensus about this, including the Financial Crisis Inquiry Commission conclusions, that sub-prime mortgage lending was not the only contributing factor to the financial crisis but was overwhelmingly a part of it. And the default rates were higher, and the securitization of sub-prime mortgages contributed to cascading effects that nearly brought the economy -- did bring the economy to the brink of crisis. So we can have a dispute about facts that’s not very interesting.

 

On the second question, I think you’re right, and I think Keith said this, too. You do have to be worried about the law of unintended consequences, and it is true that if you restrict credit too tightly, particularly when it comes to banks, that people will seek out -- because people want the credit, and they’re desperate for credit sometimes. I think this is where folks like me maybe are a little bit more paternalistic than folks like people in this room. I think sometimes people don’t necessarily have all the facts and know what might be best for them. That’s how they end up trapped in cycles of debt and things like payday lending. So you do have to worry about that. And I think even with the simple loans that I mentioned, so this is this product -- U.S. Bank has a product like this. I think it’s around 70 percent APR.

 

I think there’s a legitimate debate about whether products in that neighborhood are going to meet the needs of credit and prevent people from going to payday loans. I do think there needs to be a debate about that. What I’ve been suggesting is that these are big questions that involve competing value choices. They are not just questions that ought to be done under sort of the cover of darkness. We ought to have a public debate about that, so I think maybe Bert is right. If you don’t like the CRA, the way you do that in our system is you go to Congress, and let’s decide as a society what we want to replace it with.

 

I think Jesse is right that if you had that debate, that if people understood the stakes of the debate, and we know this from the ballot initiatives, they would overwhelmingly favor tighter restrictions, particularly when it comes to predatory lending. Which is what I really think this is ultimately about. There’s kind of a crypto debate that is ultimately about using the prudential regulators to bless and incentivize predatory lending that’s otherwise illegal and increasingly illegal at the state level.

 

Bert Ely:  I just want to make two quick caps. First of all, rate caps are loved by loan sharks. The lower you put those caps, the more you incentivize illegal or undercover black market type of lending, and I don’t think that that is very desirable socially. It’s better to have those who are operating within the legal system providing credit, even if it’s seen as very costly, rather than trying to squeeze them out of existence. The other thing that is very misleading are these interest rates, like 70 percent APR. Particularly in small dollar lending, there’s a lot of fixed cost. It costs probably as much to make a $500 personal loan as it does a $5,000 loan, so the lender has to get a recovery of those costs in addition to paying for the cost of the funds they’re lending. And I think that that’s certainly one of the most distorting aspects of this debate is to throw around these percentages without putting them in the context of what the lenders’ costs to operate are.

 

Jesse Van Tol:  On rate caps, I think it’s a complicated issue in so far as there’s kind of a moral question than more of a legal one. I think the question is, if you sort of just do a comparison, isn’t 100 percent better than 500 percent? Everybody would say yeah, yeah, 100 percent is better, but there is sort of a larger question around, just because there is a demand for a product, if it’s inherently abusive, if it doesn’t produce ultimately a real benefit to the consumer, and if it could be done at a lower price and still manage for risk, shouldn't that be the product that we sort of allow within the context of the federal banking system? And there are companies, there are credit unions, there are banks that do these types of loans at below 36 percent. The evidence would suggest that some institutions have figured it out, have figured out how to cover for risk and are able to do those loans.

 

I think the real question is how are they pricing it not for risk, but for their profit appetite? And I think that maybe in different situations people are seeking to make more of a profit or less of a profit. So will you have enough liquidity if people can’t make enough of a profit to sort of satisfy the needs of their investors, their shareholders, etc.? That, to me, is the debate. It’s not really about risk. There are institutions that are doing it below 36 percent and covering their risk.

 

On sub-prime, yeah, I think the body of evidence is sub-prime, sort of the first wave of the foreclosure crisis, did default at really significant rates. Sub-prime is sort of one of those words that has a lot of different definitions. It’s a little unclear. You start to talk about alt-A and other types of products that sort of layered risk, had a bunch of risky features, but just connecting to something that was kind of alluded to earlier, there was this myth, this story out there that some how CRA motivated sub-prime lending. The CRA motivated risky loans that caused the financial crisis.

 

Everybody, from the CEO of Bank of America to the Federal Reserve, has said that’s not true. The Federal Reserve did a study and found that 94 percent of those sub-prime loans that were risky were made, not motivated by CRA at all. If they were made by traditional banks, they were made outside of their CRA assessment areas, so they got no CRA credit for them. So the body of evidence is that CRA really had nothing to do with sort of the foreclosure crisis and the resulting financial crisis. I do think that some people discovered that there was money to be made at those types of products, that low and moderate income people actually were a good credit risk. And you saw, unfortunately, innovation within the private sector, the advent of certain types of mortgage backed securities, the advent of synthetic CDOs, the advent of dangerous, really risky, really financial alchemy that created liquidity on steroids for the types of loans that nobody could verify whether the person could pay it back or not.

 

So you saw a loosening of credit standards. It has nothing to do with CRA, has nothing to do with creating home ownership for low and moderate income people, really has nothing to do with a public purpose at all. It had everything to do with unbridled greed and people wanting to make a significant return. And, by the way, you don’t have to believe me, the advocate on that. You can go to Lou Ranieri, you can go to industry, you can go to Republicans, Sheila Bair. You can go to anyone of these people and they would tell you exactly the same thing.

 

Keith Noreika:  Is she a Republican?

 

Jesse Van Tol:  She is a Republican, yeah. Yeah she is, lifelong.

 

Hon. Joan Larsen:  Do we have another question here? Yeah. No, please come on up. And if you can say your name and affiliation, I didn’t ask before.

 

Keith Noreika:  We just see a bright light up here.

 

John Juke Harris (sp):  Fair enough.

 

Keith Noreika:  Is it you, God?

 

John Juke Harris:  I’m John Juke Harris. I’m with the Chicago Federalist Society. This question may be a little broader than the scope of this panel, but I think everyone here is well qualified to answer it. For someone who’s not as familiar with bank regulatory laws and what not, I kind of wanted to ask a more broader question about what does Dodd-Frank exactly do? I think it imposes a lot of transparency --

 

Jesse Van Tol:  Do you have a few hours?

 

John Juke Harris:  I’m sure that’s a loaded question, and if that’s too broad, I have a more specific one. Which is I believe it was earlier this year, in an age where bipartisanship seems to be rare, there was a widely bipartisan law passed that I think scaled back the reach of Dodd-Frank in terms of, I think, if banks had less than $250 billion in assets, if I’m not mistaken, which was mainly community and small banks, the Dodd-Frank was widely scaled back. I think they even passed with the bipartisan super majority in the Senate. Again, in these days and age, it seems rare. But I wanted to ask a little more specifically about Dodd-Frank in general. And in that law in particular, do you think that was a good product of bipartisanship, and is there more room for bipartisanship like that with regards to Dodd-Frank?

 

Hon. Joan Larsen:  So that’s taking a little bit far afield from our topic, but if someone -- in the spirit of every time I said I was going to moderate on the Community Reinvestment Act, many people said to me, “Oh, yes. That’s the thing that caused the financial crisis,” in response to that. So if there is a five minute take you want to give, if you have a bullet point on Dodd-Frank, you are welcome to give it, but I recognize that’s not the thing you came here to discuss.

 

Keith Noreika:  Sure. I can give a little bit of an overview. We regulate the banking industry in general for safety and soundness reasons. We have insured deposits to prevent runs. We have other restrictions that are prudential restrictions. I think those were viewed as somewhat deficient through the financial crisis. Dodd-Frank was enacted. There are debates on whether or not it was the right medicine for the disease, but, be that as it may, it sort of pumped up what was the already existing regulatory sphere in a number of different ways, including the regulation of banks that was created on a tiered asset schedule. So you had up to $10 billion banks to 10 to 50, and above 50 were treated as the largest institutions.

 

I think what we saw through the last law that just went through was that $50 billion mark was really a competitive barrier to entry. So you had the $3 trillion banks at the top. You had the $50 billion banks. That’s about a 40 to 50 times difference that were bearing the same regulatory costs. So it was a practical matter that was a barrier to entry. Frankly, that’s really, to me, one of the lessons we see a lot of, even as we talk about the CRA. There are a lot of laws enacted for, presumably, good purposes that quickly become used by industry as a means by which to protect their competitive advantage. So the thing about what they just did with increasing the 50 to 250 I think was a modest step in the right direction of allowing some more competition in the banking industry, allowing banks to build up scale without a punitive sort of cliff effect.

 

To me, again, even as a person who’s practiced in this area for 25 years, having become the regulator, and this is not something that really is republican or democrat. You think back to the Carter era. He was one of the biggest deregulators of certain industries, and you can see why, as you’re sitting there, that certain things, as soon as they’re put in place for safety and soundness or to protect a certain community, quickly become used as a means by which to prevent competition with potential competitors. Go ahead.

 

Deepak Gupta:  I was just going to say I can actually agree with a lot of what Keith said. Having been at the Consumer Financial Protection Bureau, one of the things you realize is financial regulation is hard. And one of the things you really are worried about is the law of unintended consequences. It is very difficult with fast moving industry to set these rules and not have them boomerang around on you. And just I think to connect the discussion about Dodd-Frank with our topic today, the Community Reinvestment Act, I think some of the dynamics that I’ve been trying to highlight I think are what gave rise to the Dodd-Frank Act. There really was a concern in Congress that the prudential regulators -- they have to look out for the entire banking system and the profitability, the safety and soundness of the banking system. So consumer protection concerns took a backseat.

 

And some of these dynamics I’ve been talking about, like the idea of rent-a-bank, that you have competition among banks for their charters, and that ends up having federal regulation protect against state level regulation of predatory lending. It was that kind of thing that led Congress, in part, to pass the Dodd-Frank Act and to create a Consumer Financial Protection Bureau where you consolidated consumer protection functions in one agency that had that as its highest mission. Unfortunately, the CRA wasn’t really touched by this process, so the CRA is still in the hands of prudential regulators. The fear I have about this whole modernization process is that, once again, concerns for bank profitability will take priority over some of the consumer protection concerns that really should be front and center.

 

Hon. Joan Larsen:  Bert?

 

Bert Ely:  I think one of the things, to again somewhat repeat what has been said is, Dodd-Frank was passed in the aftermath of a very severe crisis. It’s typical of legislations passed in crisis situations. There’s an overreaction, and so what we’ve had with the recent legislation is an attempt to try and eliminate some of the worst of the excesses of Dodd-Frank and to try and strict a better balance. Whether we have or not won’t be known for several years or after the next crisis. I thought we had another question.

 

Jesse Van Tol:  Actually, before, if I could. I think the organizing principle, executed more successfully in some places than in others around Dodd-Frank, was assuring, as financial companies engage in transactions, that there is a mutuality of interest inherent in those transactions. I think Alan Greenspan said -- he was invited to testify. He said his thinking about the free market had been challenged, that there had been a rational exuberance, that he never believed that companies would do things—I’m paraphrasing here—as stupid as they did because the market would correct for it. They would be punished. He said his thinking had been challenged around that space.

 

And so while it seems maybe sort of a no-brainer, should we have to pass a law that says that, when you make a mortgage loan, the person you’re making the loan to has the ability to repay, that you need to verify that? Should we be able to do that? What happened was many of the people making mortgage loans didn’t have any type of share in the ultimate risk of what was happening with that loan. So when I say mutuality of interest, part of this is making sure that when you have companies engaging in a space they don’t just get to pass along all of the risk to someone else; that there is legal risk, that there is capital risk built into the system. I think many of the rules that we pass, the Qualified Mortgage Rule, the Qualified Residential Mortgage Rule, the Fiduciary Duty Rule, which has been rolled back -- the fact that investment advisors don’t have a fiduciary duty to their client, which is to say that they can make investment advice to a client that might be more in their interest than in the interest of the client is sort of appalling.

 

And that was sort of what the Fiduciary Duty Rule was all about. It was rolled back by the administration. So this principle of risk sharing, of ensuring a mutuality of interest, we may disagree about the mechanisms to do that. I hope we can agree that that’s inherently a good goal, however. And again, I would say you don’t have to take my word for it. There are people in this space for a long time who -- Alan Greenspan who said that his thinking was challenged by what happened in the financial crisis, that you did see things happen that sort of bely a notion, some fundamental market theories that you would expect in terms of how this all plays out.

 

And when you have that ability to pass the risk along the line to someone else and not have to pay the consequence for it, I would argue you do have to put in place many of the core provisions of Dodd-Frank, some of which, by the way, just promote transparency around what’s happening in markets, more data. One of the industry’s biggest complaints has been around the database that CFPB collects around consumer complaints. It’s data. I’m sorry, but I think it’s somewhat hypocritical to argue against it.

 

Keith Noreika:  Sort of like the CRA. We should have a clear metric, right?

 

Hon. Joan Larsen:  There you go.

 

Jesse Van Tol:  I didn’t say clear metric at all. By the way, let me just say, we’re not opposed to metrics. We’re not opposed to metrics within CRA. In fact, while there aren’t clear metrics, there are a series of metrics that banking examiners use, metrics that people assume are the case. We’re not opposed to metrics. We just don’t believe in you have one metric, and we think that the system for coming up with metrics has to, on the NSA level, it has to involve the community and it can’t be set in stone.

 

Keith Noreika:  Should there be a safe harbor?

 

Jesse Van Tol:  A safe harbor for what?

 

Keith Noreika:  To have credits. If you’re outstanding or satisfactory, the regulators can’t hold up your transaction for a CRA protest.

 

Jesse Van Tol:  So Keith’s talking about a merger or an acquisition. I think an interesting thing about that is people have -- so in a merger review, you have to do a CRA review. You have to look at their record of serving the community. By the way, 98 percent of banks get a passing grade on CRA, and so I will tell you that when an outstanding bank applies to merge, that application goes faster than when a satisfactory one does. And of course, at various periods of time, there’s been a limitation on banks acquiring another bank if they have a failing grade that needs to improve or a substantial non-compliance. So I would argue that, while there’s not a safe harbor, there is, today, a system in which banks with an outstanding record have a much easier time getting their merger through than banks that do not.

 

But CRA is not the only applicable law. In fact, much of what advocates have used recently can be found within the Bank Holding Company Act, the public interest and antitrust provisions built into not just banking law, but all of corporate law. And those, I think, are really the more meaningful questions. When we look at whether or not a transaction will produce a public benefit as it is legally required to, and you look at the record -- Daniel Tarullo, Federal Reserve Board Governor, said that there has been very little evidence in research that consolidation within the banking industry has produced a public benefit in the form of lower pricing, benefits to consumers. If anything, you do see, overall, an anti-competitive effect of consolidation within the banking industry.

 

These are the forward, prospective looking aspects of the law that consumer advocates have questioned. They have said, when you apply to merge, you ought to show that your merger is going to produce benefits for the public writ large, and specifically for those communities among us that have been least well served.

 

So, no, I don’t think that there should be a safe harbor. Should an institution with an outstanding record have an easier time of it? Yes, and they do. I think if you look at the average number of days of an institution with an outstanding acquiring another institution that it’s less than one with a satisfactory. And by the way, if you look at how banks prepare for a merger, in every other aspect of how they prepare for a merger, the due diligence is significant. It lasts months and months, and they spend a lot of time doing it. Not so with CRA. Make it clear what they need to do in advance and they will do it.

 

Hon. Joan Larsen:  Okay. We’ve had someone who wants to ask a question waiting patiently, so please introduce yourself.

 

Dan McLachlan:  All right. Dan McLachlan from National Review. It seems to me that, conceptually at least, that CRA is a bundling statute. It really is saying that, essentially, if you want to do, in a simplified way, if you want to do upmarket lending, you have to do down-market lending. I guess the two conceptual questions I have about that are, one, is that too much of a spur to gigantism in the industry? And secondly, why do we think that down-market lending markets should be served, or have to be served, by banks that are also in an upmarket lending business?

 

Bert Ely:  I think that’s an excellent question, and I think where this has come up is in terms of banks that have been chartered to serve minority communities. One time in this country we had a lot of banks, in Cleveland, where I grew up and other places, that would focus on serving neighborhoods, ethnic communities. We used to have a lot of small SNLs that would do that, as well as credit unions. And I think one of the things that’s happened, and I think it’s unfortunate, is a loss of a lot of these small independent institutions, in part because they couldn’t deal with the subsidized competition coming from large banks that were trying to meet their CRA obligations. I think that’s been one of the unintended but unfortunate consequences of the CRA.

 

Hon. Joan Larsen:  Any response over there? No.

 

Jesse Van Tol:  I would just say CRA is a law that essential says that you can’t just lend to the well healed, and there’s a whole history around that. And that is the nature of the law, that it says that you can’t just pick and choose to lend to wealthier people. You can’t just pick and choose to lend to just white people. There’s other aspects of the law, and I think that those measures are appropriate. Look, there is some aspect of CRA and the suite of Civil Rights laws that we have which is a corrective not just ensuring that there’s not ongoing discrimination in credit markets, but also a corrective to our history. So the history is important.

 

The history is not just relevant in terms of what happened then, but it’s relevant in terms of what happens today. So when you start life with relatively little accumulated wealth -- and African Americans in this country have seven cents on the dollar for accumulated wealth. White people have a lot more accumulated wealth. When you start with relatively low accumulated wealth, you’re more likely to default on credit obligations, so your credit score is more likely to be lower. Well, when you have a history in which certain communities were denied access to credit, were denied access to the means to build wealth, you have an ongoing impact. 75 percent of redline neighborhoods today are still economically distressed. It was an outgoing impact, so it is a corrective for both things, for making sure institutions don’t discriminated today in who they choose to lend to, and, two, for a history of discrimination.

 

Hon. Joan Larsen:  All right. We have another question.

 

Questioner 2:  As I understand it, originally the CRA was just focused on preventing discrimination, and then, in the 1990s, it kind of mutated a little bit into looking at outcomes and looking at how many loans were actually made to certain economic groups, as opposed to focusing on instances were loans were denied to people because of their ethnicity or other factors. And I’d like to get your view on whether this change is really a good one or to what extent you think that could have contributed to the problems we had ten years ago, when people who should have gotten loans got loans, in part because banks were pushed to making loans to meet those quotas. And to the extent that CRA is now being looked at again, if any changes would be in order to make sure that it really sticks to its original goal of avoiding discrimination, as opposed to pushing loans to be made to people who then later may not be able to handle them.

 

Deepak Gupta:  I think that’s an excellent question, and I think it gets at something I’ve been trying to say which is I think, at the time that the law was passed, Congress and policy makers really were not worried as much about the dangers of extensions of credit. At the time, the concern was simply just the classic redlining model. So I think the way that consumer credit worked, back in 1977, it made sense simply to think about ensuring that people served minority communities and underserved communities. But I think now, as part of the conversation -- and I mean, I’m not one of those people who thinks that this had the unintended effect of contributing to the crisis, but I do think that, now, part of the conversation should be and has to be, "Are we incentivizing the extension of credit to minority and poor communities where that extension of credit is going to harm them?"

 

I don’t think it makes sense, in the wake of the crisis and given the debate we’re having about predatory lending, to not make that part of the CRA calculus. And I think it’s something that regulators are having to deal with anyway. There’s a debate now about what the tolerances should be. The Consumer Financial Protection Bureau had a payday lending regulation that would have had these small-dollar lenders ask questions about the ability of borrowers to repay. Who knows what the fate of that rule will be. I think it’s being rolled back, but there’s a broader conversation anyway that’s going on, and that has to go on, about what the guideposts are going to be. And I think it would be very strange to modernize the CRA and not have that conversation as part of CRA modernization because, otherwise, you’re just acting on the same assumption from the ‘70s that we know is no longer true.

 

Bert Ely:  I’d like to point out, though, that even before the CRA was enacted, there were several laws that had been enacted to bar lending discrimination explicitly: the Fair Housing Act, the Consumer Protection Credit Act, Equal Credit Opportunity Act, and HUMDA. So laws were on the books, which is why I would question as to whether CRA was really intended to deal with lending discrimination for the first time.

 

Jesse Van Tol:  I’m going to agree with Bert here. The law was always [Laughter] -- yeah. I know. Thank you. Thank you. The language of the law is that it imposes a continuing and affirmative obligation on deposit taking institutions to serve the credit needs of the communities in which they’re based, consistent with safe and sound operations, written right into the law a prohibition against pushing institutions to make loans that somehow affected their bottom line. And so really, that word affirmative really meant not that you are prohibited from doing bad things, but that you must do good things, that you must serve certain segments of the communities that are underserved. So no, the basis just sort of -- on the question, no, it was not established fundamentally as a prohibition against discrimination, even though that was part of the rationale.

 

I said it was a suite of laws because there were a number of laws passed addressing different aspects of that problem. You really can’t think of it’s just CRA or it’s just HUMDA or it’s just ECOA. These things were passed as part of a broad concept. CRA specifically is this affirmative obligation -- and I want to correct another thing. It’s not quotas, though it might become quotas. CRA does not say you must make a certain number of loans to low and moderate income people. What it sets up is an examination procedure to examine how well you’re doing at that, and it compares Bank A to, say, the rest of the market in that place. And if Bank A is making a lot less loans to low and moderate income people in a particular place than Banks B, C, D, and F, Bank A might get a lower grade. It fundamentally is not quotas. The metric driven system being proposed by the OCC right now would establish quotas, and that’s why I pointed out at the beginning that, interestingly enough, we’re in an interesting time.

 

Historically, that idea has been one attacked by conservatives. The Clinton administration proposed a metric driven approach to assessment areas by MSA, and it was withdrawn because of outright opposition by the banking industry and opposition by conservative economists. So it’s just interesting that we’re now in a place where I’m telling you the proposal would establish quotas. You ought to be concerned about credit allocation. You ought to be concerned about how you establish the right number, and I think there are other ways less detrimental to establishing to what counts and what doesn’t.

 

Hon. Joan Larsen:  Keith, do you want to respond?

 

Keith Noreika:  Well, look, I think your question actually puts a finger on sort of some of the reason we’re up here. We have a law that was enacted, maybe, just expressing views of Congress in a suite of laws. This particular law was meant to address an issue of geography at a time when there were banks located in communities and banks may not be lending to part of that community. It has morphed over time, even with the aiding and abetting of Congress at times, into something else with regulators, clearly, establishing a regulatory framework that there’s little resemblance to what the original law and its obligations were. And now, we’re here, and what do we do now? I think you have to kind of go back to basics. Well, what does this law do? How does it operate? In many ways, is it a tax on valuable economic transactions? If it’s a tax, then maybe we should just make it explicit tax through a series of clearer metrics and quotas.

 

I don’t know the answers to these questions, but I think that’s what we’re grappling at the moment in asking those questions. So maybe you take something that was sort of dark and murky and had perverse affects like the ones that Bert was talking about, and other potentially, and you make it explicit. If people don’t like that, then you can follow it up through some further change through the democratic process. One of my big worries we haven’t really talked about is the phenomenon of disintermediation. So basically, if this is a tax, it’s one of the taxes on the banking industry that’s basically pushing stuff out of the banking industry. And it’s not just payday lenders and the like.

 

There are other ways to make commercial loans and get capital to good borrowers that don’t have to go through this very clunky and costly regulated industry. Over time, that will decrease the safety and soundness of the industry.

 

Bert Ely:  This is where shadow banking essentially comes from, and the roots of the last crisis were in shadow banking. And arguably, the roots of the next crisis will be in shadow banking.

 

Hon. Joan Larsen:  Okay. Do we have another question?

 

Rob Chatfield:  Rob Chatfield from Free to Choose Network. I did bank M&A in the early 2000s, and, Jesse, there may not be quotas, but there’s de facto quotas when you’re doing M&A. If you didn’t hit a mark that somebody wanted to, there was no timeline with regards to when your acquisition was going to be approved on. That said, you touched on something earlier though, Jesse, which I think the panel’s danced around, which is you have non-profit credit unions which, essentially, their charter is to go ahead and serve these underserved communities, if you will. And yet they’re not subject to CRA, and I’m actually okay with that because that’s what their charter is supposed to be. But why would you want to expand upon this and say, “Oh, if it’s not really working with the banking, we’re going to go ahead and expand this over to these ones over here”?

 

Jesse Van Tol:  I guess I would start by sort of talking about whether or not it’s working in banking. I think the evidence is, in fact, as I suggested earlier in terms of the impact, that it is working, that it’s having an effect. Frankly, I don’t think we would be sitting here having this conversation if it weren’t. By the way, again, you don’t just have to trust my word for it. I think if you talked to bank CEOs, if you talked to the banks, they would say it’s a really important law, and the banking industry has largely come to a consensus. We don’t want to do away with it. We find value in it. I think it does motivate institutions to do some things that they otherwise wouldn’t. I think it addresses some market failures, and I think there may not be total agreement on that.

 

But I think that there is actually some agreement on that. I don’t know that you have to apply CRA to credit unions. I agree with you their mission and purposes is to serve people of modest means. That’s why they were established. But I don’t believe that they’re doing all of them, as an industry, a very good job of fulfilling that purpose. So I think if you look at the data, the evidence would suggest that many of the largest ones are not serving low and moderate income people and people of color as they should be, and that is the reason we support applying the CRA to credit unions.

 

Bert Ely:  I think a lot of banks would agree with that to, to level the playing field between the credit unions and the banks. Again, I’m of the theory that we ought to have a fundamental rethink of CRA, but it ought to be evenly applied across all deposit taking institutions because credit unions, as a practical matter, you really can’t differentiate from banks today, with one exception. That is they don’t pay income taxes.

 

Hon. Joan Larsen:  Well, as we’re drawing to a close here, it sounds to me like there’s broad consensus that we need to do something about the CRA. So if each of you had a wish list, and you can get one item, you only get to pick one thing -- so you get one item on your wish list. Let’s Deepak’s off the table by giving him what he wants by saying Congress is going to -- well, give Bert['s], too. Congress will repeal the act, and now you get to put one thing in the new law. What do you want? What’s the most important thing we need to do?

 

Keith Noreika:  Don’t start with me. I have to go first all the time.

 

Hon. Joan Larsen:  Okay. Fair enough. Bert?

 

Bert Ely:  Why me? No, again, I think you have to, in this day and again, where technology is, I think you have to question the need for CRA or anything like it. I think the key thing is to have an efficient financial services sector where all the players are playing on the same field, and that includes the credit unions. And then, let the market work it out. Because again, as I said before, I think one of the problems to the CRA is it has actually lessened diversity among financial services providers because of the one-size-must-fit-all rules it has. I think that we’ve got too much homogeneity in the delivery of financial services, and I think CRA contributes to it. So I’ll continue to say we ought to appeal the law and then rethink what it is, if anything, that’s needed.

 

Deepak Gupta:  I’ll take the question as assuming that we will replace the law with something like the CRA and it’ll have a scoring system. So the question to me is what should that look like to respond to all of the changes that have happened over the past 40 years? And as I’ve been saying, I think the biggest change is a recognition that consumer credit can cut both ways. It gets people their cars, their houses, their educations. It’s an incredible force for good in our society. But it can also wreck families. It can also kick people out of their homes. It can also destroy communities, so it’s a very powerful force. The law, when it was passed, did not recognize the degree to which the extension of credit could cut both ways, could both serve minority communities and underserved communities and also wreck those communities.

 

So what I would want is a scoring system that takes that into account and that assess not just extension of credit to low income and minority communities, but also the effects on the community of that extension of credit. So if you have banks that are really doing the right thing and are providing good alternatives for people that need small-dollar loans to keep up with their bills and get ahead, then those banks ought to get credit for that. If, on the other hand, they’re using their banking charters to shield and to give immunity to what are, in effect, the modern-day equivalent of loan sharking happening through financial institutions, that ought to count against them. And that’s very simple, and I think there would be broad public support for that kind of approach. And it could all be done within something like the existing CRA framework.

 

Keith Noreika:  I was going to go last.

 

Hon. Joan Larsen:  You can be last. All right. Jesse?

 

Jesse Van Tol:  All right. Well, if I could have one thing, it might be to go back and tell the people who wanted to repeal it that maybe AML BSA would be a higher priority in terms of lessening the load on community based institutions. But in designing a law, obviously, what we want is affirmative obligation across industries that is measurable—but I would point out that quantitative factors are data, too, that can be measured—that has some level of transparency and accountability, and that is responsive to local needs that is based and grounded in serving the community.

 

Keith Noreika:  For me, I kind of go back and forth as well on the standardized versus individualized type of obligation. To me, as I think about it and the history of this -- and I actually did a short piece on this in 2000, which we pulled out for my thing, and remarkably little had changed since then. But one thing that always occurred to me is, when they put up the last rules in the early ‘90s, there was something for a strategic plan where a bank could sort of tailor-make its own CRA initiatives. But to me, the lost opportunity there of the regulators is they wouldn’t then guarantee that if you met your plan, you were going to achieve a certain rating under the CRA or get a certain number of safe harbors.

 

So I can understand, having been a regulator, there’s some difficulty with that in having to measure the strategic plan, but I still think, even as we sit here today and discuss these issues, it’s a little bit of a lost opportunity. The goal, if you go back again to first principles, is to make sure the bank is focused on its community, that it's lending to its community. Why don’t we let it design its own plan? And if it meets the sort of acceptability criteria, we let them go off and do it. They basically are able to achieve their own purposes. We check on whether they’re cheating or not on their own plan, and then that’s it. We move on and we hope that that encourages economically beneficial transactions because I do somewhat worry the more we commoditize this, the more we focus on lending in certain geographies that become designated as certain areas -- you see the effect on it, as Jesse said, but I’m not sure that’s a good thing because everyone’s competing for loans there.

 

They get de-designated. They move somewhere else. It needs to be a little bit more, again, about getting banks involved in their communities. Banks will have different conceptions of what communities are based on the nature of the bank that they are.

 

Bert Ely:  Keith, I think, makes a very important point, and that is what the definition of community is. It’s easy to think of community in a geographic sense because it’s physical. You can define boundaries and so forth. But in fact, society, particularly a large society like this country has, has lots of overlapping communities and lots of different communities of interest. Unfortunately, in my opinion, the CRA doesn’t recognize that.

 

Jesse Van Tol:  Well, since Bert jumped in, I will say one thing.

 

Keith Noreika:  So much for my last word.

 

Jesse Van Tol:  I’m going to agree with Keith, here, to an extent. I think the problem, Bert, with your comment is that community is actually statutorily defined. I think there’s no issue here, and by the way, has a clear intent and history within the law. You try to redefine community I think you have real problems. But I will say on the Strategic Plan, I agree. I’ve often said, look, there’s a metric-based system right now. It’s called the Strategic Plan. People don’t use it because it’s viewed to be sort of a hassle to get it approved and also, I think, the factor you talked about. There’s not a guarantee if you hit the number. What community groups would want would be a guarantee that if you don’t hit the number, then you don’t pass.

 

And the bankers I talk to want it both ways. They want both performance contexts. Okay. If the economy goes bad, or something happens that’s a reason and it’s a really good reason why we could hit the number, then we could still pass. So they want it to only cut that way, and I think, to be fair, it has to cut both ways. That if you hit the number, you’re guaranteed to pass. If you don’t hit the number, you’re guaranteed to fail. So if you want to have clarity -- and you can’t say it’s clarity, but we can move the goalpost if it’s advantageous to us. But we won’t move the goalpost if it’s disadvantageous to us. That’s not a position of integrity. I think there’s a lot of hypocrisies within that.

 

And if we could agree on that, by the way, I think community organizations would say, okay. We have some concerns about how you set the numbers and how you get the plan approved, but as long as it cuts both ways and we can live by that, we’d be okay with that aspect.

 

Bert Ely:  Jesse, "hit the number" sounds like quotas.

 

Jesse Van Tol:  It is quotas. I made that point earlier. Look. This was originally proposed by the Clinton administration, and it was withdrawn because of opposition from conservatives and from banks. It’s now what’s on the table. It’s interesting that we’re debating it now under the Trump administration, under a Republican. Again, we’re not opposed to metrics and quotas. We have some issues with how you get there.

 

Bert Ely:  Quotas don’t have a good history.

 

Hon. Joan Larsen:  All right. Well, I think we have just about exhausted our time. I thank all of our panelists, and please welcome them and thank them -- join me in thanking them. All right. Thank you very much.

 

 

 

 

 

       

 

11:45 a.m. - 2:00 p.m.
Discrimination Against Minorities

2018 National Lawyers Convention

Topics: Civil Rights
The Mayflower Hotel - State Room
1127 Connecticut Avenue, NW
Washington, DC 20036

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In 2014, Students for Fair Admissions (SFFA) sued Harvard University, alleging that Harvard was violating Title VI of the Civil Rights Act by, among other things, discriminating against Asian Americans in the admissions process. In its recent motion for summary judgment, SFFA presented statistical evidence that Harvard discriminates both in subjective scoring and selection for admission to limit the number of Asian Americans that attend the college. Harvard’s filing denies all of these claims, stating that the statistical model put forth by SFFA is deeply flawed. They argue that the model ignores essential factors, such as personal essays and teacher recommendations, and omits large sections of the applicant pool, such as recruited athletes and legacy applicants. Harvard explains in their rebuttal that once all relevant information is included, there is no evidence of discrimination. The trial began on October 15th in Boston’s Federal District Court. Harvard officials, as well as past and present students, have testified in support of Harvard. This panel will examine the implications of the case, which many believe is destined for the Supreme Court. The resulting decision will set the precedent for college admission processes nationwide and could transform the nation’s higher education landscape. 

  • Prof. Andrew Koppelman, John Paul Stevens Professor of Law, Northwestern University School of Law
  • Dr. Althea Nagai, Research Fellow, Center for Equal Opportunity 
  • Mr. Patrick Strawbridge, Partner, Consovoy McCarthy Park PLLC 
  • Prof. John Yoo, Professor of Law, University of California, Berkeley
  • Moderator: Hon. James C. Ho, United States Court of Appeals, Fifth Circuit 

Speakers

Event Transcript

Gail Heriot:  Welcome everyone. Welcome, including to our livestream audience. Welcome. My name is Gail Heriot, and I am chair -- [Applause] That's not that great a name. I am chair of the Civil Rights Practice Group, and I'm up here for two reasons. One is to tell you that you too can be a member of the Civil Rights Practice Group. If you'd like to be, just speak to me or speak to Dean Reuter or shoot us an email, whatever you'd like. And my second task up here is to introduce our moderator, the Honorable James Ho. I take particular pleasure in this introduction because I have actually known Judge Ho since before he went to law school.

 

      Now, you might notice there's a bit of an age gap between the two of us. So I had been practicing law. I had been a member of the law -- the bar for 15 years at that point. But since then, Judge Ho has gone to the University of Chicago Law School, clerked for Judge Jerry Smith, was a Special Assistant to the Assistant Attorney General for Civil Rights, was an Attorney Advisor in the Office of Legal Counsel, worked for the Senate Judiciary Committee under Senator Cornyn, clerked for Judge Clarence Thomas, was Solicitor General of Texas, and was the Co-chair of the Litigation and Constitutional Law Practice at Gibson, Dunn & Crutcher before being confirmed by a vote of 53-43—that's pretty good these days. [Applause] That's a landslide—to the United States Court of Appeals for the Fifth Circuit. And I have one thing to say to you, Judge Ho, and that is "You sure know how to make a girl feel old." So take it away.

 

Hon. James C. Ho:  Thank you, Gail. That was very, very generous and kind. My name is Jim Ho, and I am profoundly honored to moderate today's very interesting panel. And I want to apologize at the outset if my voice is a little weaker than is normal for me. The good news is my introduction will, therefore, have to be relatively short.

 

      28 years ago, a high school student, a senior who had emigrated from Taiwan to the United States, started to apply for college. His admissions advisor told him that his grades, SAT scores, the rest of his application were all quite strong, and in theory strong enough to get him into his top choice of schools but for one thing: his race. Three decades later, The Federalist Society has invited that former high school senior to moderate this panel. I am delighted to do so because it means that I finally get to ask this amazing panel of experts about the advice I got way back in 1990. And I have basic questions that I hope our panelists will answer for us. First of all, is it true? The title of today's panel, rather provocative: "Discrimination Against Minorities." Is it true that some of our nation's colleges and universities are engaged in discrimination against minorities? And second, if it is true, is it justified? Is it legal under current judicial precedents, and is it legal under the plain text and original understanding of our Constitution and various statutes?

 

      Our first speaker today will be Patrick Strawbridge. He's a Partner at the law firm of Consovoy McCarthy Park, one of the law firms who's playing a leading role in the current case against Harvard University. He'll give us an update -- up-to-date, very recent news. The trial just finished, as I understand it. And so he'll give us a great update on the Harvard litigation – the complaint, the discovery hopefully, and the recent trial proceedings just over these past few weeks.

 

      Next, we will hear from Dr. Nagai. Althea Nagai, a Research Fellow at the Center for Equal Opportunity, who will talk about various, statistical studies that she has done, analyzing these various educational admissions policies and their effects on minorities part, who will talk about various, statistical studies that she has done, analyzing these various educational admissions policies and their effects on minorities particularly the Asian American community.

 

      We will then have two distinguished law professors, who will take -- I predict will be opposite stands on the merits of these suits. We'll see how good I am at predicting. We have with us Professor Andrew Koppelman, the John Paul Stevens Professor of Law at the Northwestern University School of Law. And Prof. John Yoo, Professor of Law at the University of California at Berkeley. He is here under my protest, and so I am a very loyal Stanford Law.

 

      I'm going to invite each speaker to begin with some opening statements, and then I'll invite some dialogue between the panelists. I expect we'll have an interesting clash of ideas. I certainly hope we will. And then we will certainly try to leave ample time for members of the audience to ask questions. And, again, to ask questions. We'll be policing that particular Federalist Society policy with the full letter of the law. We'll begin with Mr. Strawbridge.

 

Patrick Strawbridge:  Well, thank you, Judge. And I just want to take the opportunity to thank The Federalist Society. Panels like this are one of the reasons why a lot of us joined The Federalist Society and [we] look forward to this. And it's a real honor to be invited on behalf of the firm to present a little bit on this case, which you may not have heard about, but it has gotten a little bit of press coverage, especially over the last year or so.

 

      I'm going to do my best to set the table, kind of describe briefly as I can the background of the case, how we got to where we are, and in particular, culminating in what was a three-week bench trial that was held in the District of Massachusetts last month in October. And then [I'll] talk a little bit where the case is likely to head next, and then that'll frame some of the discussions I imagine we're going to have for the next couple of hours.

 

      So these cases were filed almost four years ago—it's like four years ago next week, I think—on behalf of Students for Fair Admissions. There was a case that was filed against Harvard, and there was a case that was filed against the University of North Carolina at the same time. Students for Fair Admissions is an association, a non-profit, 501(c)(3) organization that is opposed to the use of race in college admissions. It currently has more than 20,000 members, many of whom have contributed financially or in other ways.

 

      And using an association like Students for Fair Admissions is a long, established way to pursue civil rights litigation in particular. By suing for an association, you are able to avoid some of the difficulties that come from how some of these affirmative action cases have been litigated in the past, which is on behalf of an individual applicant, who then has to demonstrate some kind of damages or entitlement to relief. An association that seeks injunctive relief, which is what these claims seek, they just simply seek to limit or end the use of race in the college admissions process, allows you to bring the litigation on behalf of the organization. We do have members -- the Harvard complaint mentions one particular Asian American member. We have a number of other members who you can rely upon for standing. They all applied to Harvard and were rejected under the Grutter and Gratz cases. Those individual members would have standing if they can demonstrate that they were denied a fair opportunity to compete in the admissions process, in part because the admissions process itself uses race. And so does the individual injury that some of our members have. But because we only seek injunctive relief, the members are not actually necessary to pursue the claims. The organization can asset the claims on behalf of them.

 

      So Students for Fair Admissions filed its lawsuit in November of 2014. The complaint against Harvard included six counts. All of these counts are under Title VI of the Civil Rights Act, which prohibits -- I can read you the text since I know the text is of some passing interest to the people in this room. "No person in the United States shall on the ground of race, color, or national origin be excluded from participation in, be denied the benefits of, or be subjected to discrimination under any program or activity receiving federal financial assistance." And so for everyone who's wondering why a private school is subject to this lawsuit, the answer is Harvard takes tens of millions of dollars in federal money in a variety of different ways: research grants, an enigma of certain educational programs, and that is what subjects them to the requirements of Title VI.

 

      So the six individual counts. The first one, which is obviously been the focus of this case, will probably be the subject of a lot of our discussion today, alleges that Harvard is intentionally discriminating against Asian American applicants and has been for a number of years. I'll just run through the counts, and then I'll circle back and talk a little bit about what the evidence on these counts -- how that has developed.

 

      The second count is basically an allegation of racial balancing, apart from an individual discrimination against Asian American applicants, just generally Harvard is engaged in what's known as "impermissible racial balancing," attempting to achieve a certain level of racial representation through its admissions process.

 

      The third is a claim that is using race for more than a plus factor, which is the language from Grutter, is the current governing standard for when race can be used in the admissions process.

 

      The fourth count basically asserted that Harvard was not simply using race to fill the last few seats in the class as a tie breaker, which is what was taken from the Bakke decision and it was just a determination, which, frankly, is not contested in this litigation. But that is not how Harvard was using race.

 

      There was also a count that was based on the fact that Harvard has race-neutral alternatives available to it that could achieve the educational benefits of diversity without actually using race as part of the admissions decision-making process. That is a claim I think that was front and center in the Fisher litigation and the future of that claim or the future of what the standard is for race-neutral alternatives count I think was left a little unsettled by the Fisher II decision but was still something that was an active part of the applicable constitutional test.

     

      And then the sixth claim is that in any event, Grutter should be overruled if Harvard's not liable under these other counts.

 

      The complaint makes for good reading. It is very lengthy. The complaint was filed in 2014. Harvard elected not to move to dismiss the complaint, and I think a motion to dismiss would have been futile, but it still interesting that they did not at least attempt a motion to dismiss. They answered the complaint, and one does wonder being on the other side of the V, I can only speculate here, but one does wonder whether they realized what they were buying with their answer in terms of the level of discovery that we were going to seek in this case because, although no one has ever told me this, I think they may have assumed this was going to be like the Fisher case, maybe a 36(b) deposition, maybe some limited discovery. Instead, Students for Fair Admissions came in and we wanted to see the files, we wanted to see the records, and that is where the case really began to heat up.

 

      I'll talk a little bit about the scope of discovery and then talk about the evidence that was developed through that discovery. We ended up -- there was a stay in this case that kind of slowed it down for about a year and a half. There was partial discovery while Fisher 2 was being granted and considered by the Supreme Court. But, ultimately, Students for Fair Admissions obtained six years of individualized level applicant data. Names were redacted and certain identifying information was redacted, but we had access to Harvard's admissions database covering a six-year period. And that included everything about extracurricular activities, their academic accomplishments in high school, Harvard's internal ratings for the applicants as they went through the process, and of course, the disposition of their application.

 

      We received tens of thousands of pages of documents, including some very interesting internal reports that Harvard's admissions office had been involved in, if not actually assisted in preparing. We took more than 20 depositions of Harvard admissions employees, Harvard administrators, and/or third parties. And, ultimately, both sides obtained experts, the primary expert battle in this case was between a couple of economists. SSFA retained an economist from Duke, Peter Arcidiacono, who has written a lot on the use of race in college admissions, and Harvard retained David Card, an economist at Berkley, who is also somewhat renowned in the field. And they, I think Dr. Nagai will talk a little bit about the statistical evidence as we get into it.

 

      We also had an expert on race-neutral alternatives. SSFA retained, Rick Kahlenberg, and if anyone's familiar with Rick Kahlenberg's work, he has for 20 or 30 years been probably the foremost writer and thinker on socioeconomic preferences, in general, but alternatives use of race in the admissions process. And Rick Kahlenberg is a progressive ThinkTank representative. He's been a senior fellow at the Century Foundation, and I think was a very compelling witness precisely because he does not necessarily share the goals with respect to the use of race in college admissions that members of the organization do or other folks do in this area. But he firmly believes and presented testimony that there are ways to achieve a comparable level of racial diversity without actually using race in the admissions process. And we'll talk a little bit about those options as well.

 

      Fact discovery closed at the end of 2017. Expert discovery went for basically another eight months on top of that. We then arrived at a decision point in the case, which was that the parties had always assumed and there was baked into the schedule a summary judgment proceeding. We showed up for a conference to discuss how summary judgment was going to proceed, and Harvard—represented very ably by WilmerHale, Seth Waxman and Bill Lee, the former managing partner of the firm, a number of other very talented and excellent lawyers—showed up to that hearing and proposed that we not file summary judgment, that we go directly to trial. Which was a little unusual and, frankly, I think was an attempt to see if they could use their resource advantage. And I think this was an interesting decision point in this case because our firm, Consovoy McCarthy Park, was a start-up firm. We work very hard, but we do not have the resources of WilmerHale, and it was, I think, a recognition by that, an attempt to basically say, "Why don’t we skip summary judgment and go straight to trial."

 

      Well, the good news was that caused us to rethink our strategy, although we were ultimately successful in filing summary judgment and getting the court's permission, which we had to request, to file a summary judgment motion, it did cause us to think, well, maybe we should look and see if anyone would be willing to help us. And so a very small trial firm by the name of Bartlit Beck volunteered to help us, and that was a huge boost to us as we headed into the trial. And I'm going to talk a little bit about it in a minute, but that was a very interesting decision point in the case. If they had not been so aggressive in pushing us to trial, it may not have actually come out that way. But, thankfully, Bartlit Beck was there.

 

      Both sides filed summary judgment. That all came out in June. It was the first time most of the evidence in the case reached the public light. There was an awful lot of press coverage, most of it surprisingly favorable. For this first time, I eagerly awaited the publication of the New York Times to see if -- [Laugher]. It's very unsettling to wake up and realize the New York Times is writing favorable stories about our case. But it was no less welcome.

 

      The summary judgement was comprehensive to say the least. Our statement and material fact featured 900 paragraphs. It was 195 pages long. There was a lot to say, and we certainly said it all. Harvard vociferously opposed summary judgment, and I think as the court had largely telegraphed to the parties back and the first hearing, to no surprise shortly before the scheduled trial in October, the court denied summary judgment. [It] said there are a lot of fact issues here that I need to dig into.

 

      And so we went to trial. Trial started on October 15th in Boston. We were in front of Judge Allison Burroughs, who was a long-time Assistant U.S. Attorney in Boston, had been on the bench for five or six years, [and] was appointed by President Obama in his second term. Judge Burroughs -- I'll say this. Judge Burroughs has been an exceedingly fair judge, and I think has issued some written decisions. There were disputes over standing and discovery issues early on, and I think -- we very much feel like the court has given us more than a fair shake and given us the chance to develop a record that we can take up. And she was very diligent at the trial—this was a bench trial; there was no jury. And so we sat there in her courtroom in Boston for three weeks. Basically, there were more than a dozen live witnesses, not counting the expert witness. Each side put on two expert witnesses. There were some amici who came in, and current people who claimed that they're the beneficiary of the use of race that Harvard provides. And they were allowed a day in court to testify about what they view is the advantage of going through the process.

 

      As I mentioned, Bill Lee, Seth Waxman, Felicia Ellsworth, a number of very talented lawyers on the Wilmer side—no surprise in a Boston courtroom that they would be flexing their muscle. But I have to put in just a very brief plug for the trial team, in addition to myself, Mike Connolly and Will Consovoy for our firm. We had the dynamic Adam Mortara—if anyone has ever had the pleasure of meeting Adam, dynamic is a good way to describe him—as well as John Hughes from Bartlit Beck. Their partners, Scott McBride and Katherine Hacker, as well as associates Meg Fasulo and Krista Perry. And they were phenomenal lawyers. If you ever have the opportunity to hire that team or Bartlit Beck, I strongly endorse it, unless, of course, we're also in the mix for the work in which case you have no choice but to hire both of us. But they did a fantastic job. Obviously, we're playing in Harvard's home court with WilmerHale, and they did a phenomenal job presenting this case, presenting the case in a manner that, I think, could speak to the district judge and certainly gives us the best opportunity to win that case. It was just a phenomenal lesson as a lawyer to sit there and work alongside those lawyers and see how they presented the case, and we're very happy with it.

 

      The trial had a little bit of everything, including some surprise testimony in the middle of trial that necessitated some emergency, in-trial discovery and allowed us to recall some witness to have them correct testimony on behalf of Harvard that they had given that turned out not to have been accurate in the middle of trial. I'll talk a little bit about that. But that's always fun when you get that in the middle of trial. Closing arguments were on November 2nd. There's going to be an exchange of proposed findings of fact and conclusions of law over the next couple of months and a second closing argument once all the legal briefing is done in February. I would anticipate a decision sometime probably this summer, realistically, given the size of the record in this case. That's where I'll go.

 

      I will very briefly just try to talk about the evidence that is most interesting. I'm sure we will circle back to it and revisit it at various points in time. With respect to discrimination, there's really three key pieces of evidence on the intentional discrimination claim. The first of which is a series of reports which were conducted by Harvard's Office of Institutional Research. This is their internal statistics group. They prepare reports when Harvard is up for accreditation. They prepare reports for Harvard's reporting to the federal government. They provide reports to the governing board of Harvard about any issue that needs statistical analysis.

 

      When some attention had come to light in the popular press about potential discrimination against Asian Americans in higher education in late 2012, discovery turned out that they had embarked on a quest to determine whether in fact the admissions process disadvantages, or in some drafts, was biased against Asian Americans. And they produced some very interesting findings that, frankly, I think were strong evidence that, yes, not only did Asian Americans appear to be suffering disproportionately from various factors that were used in the admissions process, but specifically this question of the fact that Harvard has these ratings that they assign to applicants.

 

      One of them is academic, which is based on some assessment—some objective, some subjective—as to the academic accomplishments of the student. They have an extracurricular rating, which is clubs and leadership positions and activities that you do outside of the classroom. They have an athletic rating, which is largely used to identify recruited athletes. It has a somewhat less significant role with respect to your athletic accomplishments, but there's a way to signal some involvement in high school athletics. And then they have what they call the "personal qualities rating," and the personal qualities rating is, according to the testimony in the case, used to measure whether someone is particularly effervescent or would be a good roommate or has courage or has good character. A very rigorous standard, which could be applied neutrally. And there was a tremendous amount of guidance, which is to say there was no guidance on how to provide this rating.

 

      And the OIR reports demonstrated what became a key issue in the fact, which is that Asian Americans were certainly overrepresented in terms of high performance in the academic category. And Asian Americans in the pool, relative to the rest of the pool, also did better on extracurricular activities than everybody else. Athletic was a bit of a wash. As I said, the athletic rating is simply just not as important in the admission decisions that Harvard makes once you're not one of the 200 or so recruited athletes that Harvard is recruiting for their sports teams.

 

      And then you have this personal rating. And these OIR reports demonstrated that especially -- compared to everybody, but particularly compared to white applicants, Asian Americans were routinely and significantly marked lower on the personal rating. And this was in stark contrast to much smaller differences that were seen with respect to the personal ratings that were assigned or based upon the evaluations from teachers and guidance counselors and alumni interviewers at the Harvard process. It was the personal rating assigned by the admissions office that showed a significant, negative effect for begin Asian American versus any other racial group.

 

      It turns out that the statistics also revealed that African Americans and Hispanics were generally rated as having higher personal qualities than whites or Asians in a way that actually mirrors what one would expect for the use of racial preferences by Harvard. And that becomes a key part of the case.

 

      The second part of the case, besides -- well, I'll just say one more thing about the OIR. The evidence was that OIR essentially produced this information, gave it to the admissions office, and the admissions office said, "Thank you very much," tucked it away in a drawer and never told anyone ever about it again. There was no follow up to see what was happening here, why was the personal ratings so low, are we, in fact, biased against Asian Americans? The reports were basically stuck in a desk drawer. Not even most of the admissions office was ever alerted to those findings.

 

      The statistical evidence complied by the experts I think basically confirmed that this personal rating did tend to disadvantage Asian Americans. To some extent, Harvard does not even contest that. They agree that comparted to white, Asian Americans do worse on this personal qualities rating. They just simply offered up a number of explanations as to why that may be so. And, frankly, there was evidence presented at trial by Harvard -- this still surprises me, although I guess the statistics said what they said so there needed to be some explanation. There was statistical evidence presented by Harvard at trial that the Asian applicants are just not as multi-dimensional as the white applicants.

 

      And one of the keys to this argument that they were not as multi-dimensional was basically based on the personal rating. They get lower personal ratings, so they must not be as well-balanced as the other applicants. And I think that there's a lot of grounds upon which to dispute that. But that is one of the key things in the case. The reason why that is a key dispute in the case is because when you do a statistical analysis to determine the effect of race, everybody agrees that if a variable is directly affected by race, not just associated with race, but race is going into a reading in this case, then you have to take that rating out of your statistical analysis to determine what effect race is having. And both experts basically agreed that if you take the personal rating -- if you exclude the personal rating as a control in these 200 variable models that both experts constructed, both experts, including Harvard's expert, agrees that there is a statistically significant discriminatory effect in the admissions process against Asian Americans. So proving that the personal rating is affected by race and that it has to be excluded from the statistical model is the key statistical dispute in the case.

     

      There was also a number of emails and application files that suggested that there was, in fact, evidence that stereotyping—I'm not going to get into any of the details. I've probably spoken too long as it is. But I just want to run through a little bit more of the key evidence. But there was certainly phrases like "standard strong" that appeared to disproportionately pop up on Asian-American -- notations on Asian-American applicant's files that sort of confirmed this view that Asian Americans may be lumped into a category that made them less attractive to Harvard as part of its admissions process.

 

      There was evidence of racial balancing. I'm just going to briefly touch upon the other claims in the case. Harvard would generate reports that their admissions office would use when they were in their meetings. They do a two-or-three week meeting process to admit -- to whittle down and decide who's getting admitted and who's not getting admitted. They do it once for the early action process and once for the regular action process. There's evidence that the admission's office received on a regular and sometimes every day or every other day reports that included a breakdown by the racial composition and specifically compared it to the prior racial year's composition.

 

      And this coincides with what the complaint acknowledge, and what I think is really not controversial, which is that across the Ivy League there is a shocking—maybe not shocking—there is a remarkable stability in the Asian-American representation at the Ivy League schools that basically runs between 18 and 20 percent over the last 10 years; never higher, never less. And the natural comparator to that, as I'm sure others are going to talk about, is in California, for example, where racial preferences are not permitted, Asian Americans make up about 40 percent of the elite college campuses. So it didn't seem like that was pure chance, especially if this was truly a holistic process, making individual judgments that it would remarkably come out to this level of racial stability, particularly for the Asian-American numbers. It seems like more of a coincidence and that's certainly evidence to support racial balancing.

 

      There's the Grutter sort of more than a plus factor. I'll say on that is both experts actually don’t disagree that with respect to African Americans and Hispanics, there are sizable racial preferences being employed. Harvard's own expert witness conceded that if you are Hispanic, it amounts to all other things being equal, a 200 percent increase in your chance of admission. And if you're African American, it's a 300 percent increase in your chance of admission. Whether or not those are significantly high percentages that they overrule what the standard under Grutter is will have to be decided by both the district court in the first instance, and ultimately the later court. But I don't think there's any question that there are significant racial preferences that are being used here.

 

      And then I'll briefly talk about the race-neutral alternatives evidence. There was evidence presented and really not disputed by Harvard, that Harvard if it got rid of certain other admissions practices, and that would include if they got rid of legacy preferences; if they stopped giving preferences to donors and people who appear on the Dean's List, which is a special list to track people of high interest to Harvard for reasons other than the normal application factors; if they got rid of preferences for the children of faculty and staff; and if they increased socioeconomic preferences -- and the benchmark for what was presented at trial was if you gave a preference for low socioeconomic status, that was roughly half the size of the preference that was given to recruited athletes.

 

      You could generate a class, a hypothetical admitted class—and again these statistics are not really disputed—that would feature an overall representation of Hispanic and African-American students that would be the equivalent of what they have now. It would be slightly more Hispanic students—there'd be 19 percent—and slightly less from 14 percent to 10 percent, but still at 10 percent African-American class, which was what the size of the admitted African-American class was at Harvard at the beginning of the Obama administration. So not that long ago, that was a sufficient level of racial diversity, at least through Harvard's process at the time. And then you would, also not surprisingly, see a class that decreased with the percentage of white. It was 3 percent white, and it would be 31 percent Asian American under those circumstances as opposed to the 19, 20, 22 percent that we have today.

 

      I'll be happy to jump in and explain. That is basically a very brief summary of what is a lot of evidence developed in this case. But it is going to be a fun one to watch as it moves through Judge Burroughs's court and then ultimately the First Circuit, and perhaps down to 1 First Street.

 

Hon. James C. Ho:  Thank you. Dr. Nagai?

 

Dr. Althea Nagai:  Okay. I'm going to pick up where he left off. I'm going to talk about two reports, basically, that we've done at the Center for Equal Opportunity. They can be found at www.ceousa.org.

 

      The first one is a comparative study of three universities. We did this in May: Caltech, MIT, and Harvard. And it's in the context of whether or not these schools ask, "Are there too many Asian Americans?" And we look at it over time because my idea was, look, the only way you can really see if they're discriminating is first of all, do we have a ceiling appear? And the reason for this is there's been incredible growth in the Asian-American population, and there's been explosion in the growth in Asian Americans attending college. Okay. So you had this -- it curved from about 1980 -- and in '60 to '80 it's small and then you have this exponential growth.

 

      Now, what we see Harvard, MIT, and Caltech is until about the 1990s you see the three schools parallel back exponential growth. Caltech, MIT percentage of Asians making up the undergraduate class increases. And in the early 1990s something very interesting happens at Harvard. It goes from about 21 percent, and then all of the sudden, it drops to about 17 percent. And it kind of stays like that for the next few decades. All the while, the percentage of Asian Americans attending college, taking the SATs, just keeps growing and growing.

 

      MIT increases and then it just sort drops a little bit, and at some point, MIT said, "We’ve stopped using alumni preference in their admission process but did admit to using race. Caltech is the only one in our case study that used neither alumni preference nor did they use race. Caltech in 2015, according to the federal statistics, had an undergraduate population of roughly 43 percent Asian American. This parallels the percentage of Asian Americans at the UC elite public universities, something in the low 40s. Harvard, on the other hand, kind of stayed the same. It didn't really budge, and then I guess the last year it kind of went up to 22 after you guys filed the lawsuit.

 

      But I don't know if Harvard's counting Asians in the same way for public admissions versus what they have to report to the feds. I've noticed some discrepancy, and I think it was Stuart Taylor that pointed out their different rules of counting. So my statistics are basically for enrollment figures. I take them off the U.S. government statistical database.

 

      Keeping that in mind, now Caltech goes up, undergrads -- general Asian-American population goes up, MIT goes up and just kind of goes down, trickles down. And Harvard goes up until 1990 and then just goes down to 17 and just stays there. Okay. Because they filed their lawsuit, we found out what they were doing, and I want to thank you guys for that SFFA v. Harvard lawsuit because the summary judgment, the material facts up there, it is an unbelievable wealth of statistical data. And I don't care what Harvard says about that OIR report, those reports coming out of their Office of Institutional Research are a goldmine. Basically, it was an absolute -- it was what we would've done had we had access to that data, but only better because they have tons of information. They have information on athletics data, legacy, race, everything.

 

      And these are not working papers. This was not a guy practicing logistic regression, blah, blah, blah. He did a whole bunch of runs. He made over 20, maybe close to 50 charts in different formats. There were PowerPoint presentations. Okay, he had a typo here, typo there, which I guess plaintiff attorneys -- I guess Harvard pointed out that, "Oh yeah, he had typos." And they didn't come to a conclusion, which is usually not the role of the statistician. There was no disagreement as to how they modeled what they did. And they had some incredible data.

 

      What I want to focus on is their statistician's decision to try to look at what the entering class would be like if they used only academics. And he compared whites and Asians. If they used only academics, Asians would be 43 percent, just like Caltech. Gee, what do you know? Oh, and by the way, Caltech is not just a math nerdy school. They have a medium verbal score of 750, so you know, don't stereotype there.

 

      So if they used only academics, Asian Americans would be 43 percent, whites would be 38. When they introduced the variable of legacy and D-1 athlete – recruited athlete – white went up to 48 percent, Asian Americans dropped to 31. So right there you had a 12 percent drop. When they introduced the extracurricular and those notorious "personal ratings," Asian Americans dropped even more to 26 percent. Whites at that point went up to 51 percent.

 

      The problem was they still had very few Blacks and Hispanics, so they introduced race as a factor. So what happens is when you introduce all these other factors instead of race, it doesn't significantly increase the number of African Americans or Hispanics. When you introduce all these factors, plus race, then Blacks increase from 1-2 percent – they go up to 11 percent; Hispanics go up to about 10 percent. That's his model. The model for each of these groups is off by 1 percent of the actual enrollment figures.

 

      To put it in perspective, if we had presidential candidates that had statewide models like this, they would not have skipped Wisconsin. This is a really -- you would die for percentages like this. This is a good model.

 

      Then what they did, the statistician decided, oh, let's see what it would look like if we took out all the athletes who got in and all the legacies because those are factors beyond the control of the candidates, and he said, okay, you have to control for them, so why don't we just eliminate that. When he looked at just whites and Asians on all these other factors besides -- instead of legacy and athletes, he found Asians doing better statistically than whites on all the academic factors, slightly better on extracurriculars. They kind of evened out on recommendations.

 

      But on the personal ratings done by the admissions officer, which by the way, the admission officer I don't believe ever interviewed any of the candidates. They just came up with this personal assessment that you're trustworthy, or you have good character, whatever. They don’t have to see you. They just look at your portfolio. And based on that, there was a statistically significant difference in favor of the white candidate. And this is not legacy; this is everyone who's not a legacy, not a donor, and not an athlete. So here we're talking strictly Asian and White comparison.

 

      And statistically, this is exactly what the expert witness for the plaintiff also did. So, again, they were doing duplicate things, somewhat different variables, combining them in somewhat different ways, but coming to the same result. Basically, no matter how you cut it, no matter what variables you use -- you can introduce income; they used first generation going to college; they introduced gender as a variable; they cut it in different ways. OIR consistently found that being Asian was a negative—not a plus—factor in admission. And this was all statistically significant.

 

      Okay. One of the problems of this is Harvard -- the personal decision, I have to add this as a second comment, is Harvard is also the main site where they do a lot of implicit bias research. So there's this social science -- they're nationally known for their implicit bias research in psychology. And it never occurred to anybody, "Gee, maybe when this was all done in 2013, maybe they might want to have their notorious workshops and all the things they subject all the employees to, but I don't think they ever did any of that. I don't think they talk anything about unconscious bias against any candidates, despite the fact they have all of this information that's just crying for that kind of intervention. But the intervention's only I guess for student and faculty and not for the admissions committee. On that, thank you and thank you for all the work you guys did.

 

Hon. James C. Ho:  Thank you, Dr. Nagai. Professor Koppelman?

 

Prof. Andrew Koppelman:  Okay. I'm very grateful to The Federalist Society for having me here. The affirmative action controversy is tediously familiar. It's a ubiquitous part of American life. I am a beneficiary of affirmative action myself because I am the token liberal on this panel.

 

      Now, for many years American conservatives have proposed to interpret all Civil Rights laws, including Title VI of the Civil Rights Act of 1964 to prohibit it. Now, it's a common place of semantics that the exact same action can have different meanings in different contexts. So the suit, Students for Fair Admission      v. Harvard presents itself as a blow against racial tribalism. What I'm going to do here is worry that in context, this could make tribalism worse.

 

      So I'm going to begin by wishing a plague on both your houses – the opponents of affirmative action and also its defenders. And, of course, being here, you guys have pride of place. I'm going to start with the opponents.

 

      So Chief Justice Roberts writes an often quoted sentence that, "The way to stop discrimination on the basis of race is to stop discriminating on the basis of race." So his claim is that the essence of racism is classification. And the familiar liberal objection to this is that this implies that Black Americans can be without jobs, have their children in all-Black, poorly funded schools, have no opportunities for decent housing, [and] have very little political power without any violation of anti-discrimination law. And to this one might add mass incarceration with its devastating effects on families and communities. And if you're conservative and you're concerned about intermediate associations and all the values of local communities, you ought to care about that. But on this account, if the problem is classification and if that's the whole problem, then for Black people to think that these disadvantages stamp them with a badge of inferiority is solely because they choose to put that construction upon it.

 

      So I'd start by saying effects matter. Today a large class of Americans remain disadvantaged because their ancestors were slaves. And because Asian is clear and so aggregate racial effects matter. Neil Patrick said that when he that it's possible to achieve a comparable level of racial diversity without using race. The implication is that racial diversity matters. And it matters which goals are permissible to pursue.

 

      So one of the narratives at the beginning of this, I have to say, fabulously well-written complaint that was filed in this case is the story of how Harvard figured out how to lower the number of Jews in the entering class in the early 20th century without an explicit quota. And that was not okay. But, evidentially, take using non-racial means for the purpose of increasing the number of Black members of the entering class is okay. I think that that's an important difference.

 

      Now, you can say all of that. And you can say that the numbers matter without defending affirmative action because it doesn't remedy any of the pathologies I just described. It benefits the most privileged minority applicants. It did help create a large Black middle class, which is a great accomplishment. But it doesn't address the most damaging consequences of slavery and segregation. It is racial justice on the cheap.

 

      It creates the illusion of equality. And the importance of illusion is particularly transparent in Justice O'Connor's opinion in Grutter v. Bolinger. I'll just read what she wrote. "In order to cultivate a set of leaders with legitimacy in the eyes of the citizenry, it is necessary that the path to leadership be visibly open to talented and qualified individuals of every race and ethnicity." So this means that the entering class in places like Harvard is to be selected on the same principles as models in a United Colors of Benetton advertisement.

 

      This obsession with appearances drives the demand for obfuscation as for example when the court says, "You can use race as a plus factor but not use quotas, even though these are functional and mathematical equivalents. And it also stokes racial resentment. So for every Black student who was admitted to one of these schools, you generate 100 white ones who know to a moral certainty they're the ones who would've gotten in.

 

      So I think speaking as a member of the left, I don't think that the left should settle for this. It should demand a lot more. I would cheerfully jettison affirmative action in favors of measures that would actually improve the condition of the worse off people in American society, Black and white. I thought that that was what defined us as left. Maybe Congress could do it in a grand bargain that clarifies the Civil Rights Act while at the same time taking more concrete measures against racial subordination, but I have no illusions that that'll happen. The proposal that's on the table here is a proposal to abolish affirmative action and replace it with nothing at all.

 

      Now, you don't need to love affirmative action—I hope that my lack of love is now clear—to worry about this lawsuit. I'm not going to try to adjudicate the merits of the lawsuit, the expert statisticians are in deep disagreement. I will say, so in response to Judge Ho's question, "Is it true?" some pretty damaging evidence has been offered here. I'm not going to adjudicate that. I'll just say it's a pretty damaging story. On the question of is it legal? No. If Harvard has a ceiling on Asian Americans, if it is discriminating against Asian-Americans, that's nasty. Stop that. Discrimination against an ethnic minority is exactly what the law aims to prohibit. On the other hand, it's confused to say that Asians have any special stake in eliminating affirmative action for African Americans. Even if you were to have a quote for African Americans, if you had a rigid, numerical quota, 10 percent of the entering class for Asian Americans, that doesn't say anything at all about what you do with the remaining slots. They're unrelated questions.

 

      Now, I think that there has been confusion here, which I think this is where some of the mischiefs is in9 Justice Powell's opinion in Bakke, which talked not at all about history, not at all about the history of racial injustice, which is what everyone had in their minds, and said, well, all right, you admit some flue players, and you admit some people from Montana, and oh, yeah, maybe you'll admit some African Americans, too. And so it opens the door for ceilings. It opens the door for jiggering the numbers throughout the class. I think it would've been better to just say that given the terrible history of mistreatment of African Americans, it's okay for the university to respond specifically to that. Diversity is just the wrong frame to think about how to respond to that past injustice. A person who I think was the strongest on the Court in suggesting a backward-looking approach to affirmative action was Justice Stevens. He's no longer on the Court.

     

      Now, this litigation is generally understood to aim to beat a path to the Supreme Court and to persuade the Court to discard the decades-old understanding of Title VI that came out of Bakke in favor of an absolute ban on any consideration of race. And the consequence if you did that, assuming that Harvard is not going to take the alternative means, they're not going to get rid of donor preferences. They're not going to get rid of preferences for children of alumni. Neither one of those preferences violates any law. At many universities, it's going to produce a significant reduction in the number of Black students. So this may be the opening wedge for more lawsuits to come. It is reported that the Trump administration is preparing to redirect resources of the Justice Department's Civil Rights Division toward investigating and suing universities over affirmative action admission policies that are deemed to discriminate against white applicants.

     

      So what's it going to mean? I'm just going to ask you ask a cultural matter. You're members of American culture as much I am. For a Republican Justice Department to start investigating colleges for telltale signs that there are too many African Americans, it fits, I think, quite neatly into a really dangerous narrative that I think is a matter of division within the Republican Party. So one recent poll tells us that only 27 percent of Republicans think that Black people experience a lot of discrimination today, whereas 43 percent think that there's a lot of discrimination against white people.

 

      So this litigation promotes a narrative, whatever the intentions are of the litigators—I'm not saying anything about them—in which incompetent and undeserving Black people are taking desirable spots from deserving whites. So this frightens me. Chief Justice Roberts worries about racial tribalism, and he writes, also in Parents Involved, "Government action dividing us by race is inherently suspect because such classifications promote 'notions of racial inferiority and lead to a political of racial hostility,' 'reinforce the belief, held by too many for too much of our history, that individuals should be judged by the color of their skin,' and 'endorse race-based reasoning and the conception of a Nation divided into racial blocs, thus contributing to an escalation of racial hostility and conflict.'”

 

      Now, I note again there's not a word about subordination. Racism divides groups that are in other respects imagined to be on an equal footing. The problem is Chief Justice Roberts understands it is thinking about ourselves in tribal terms. But stipulate that that's right and look at what this litigation does, again, to the extent that its target is all racial classification. To the extent that you're trying to get rid -- if Harvard has a quota on Asian Americans and you're trying to get rid of that, I am all for you. But to the extent that it is understood by left and right to being an effect to enlist Asian Americans to form a block with whites to resist the claims of Blacks, it promotes the politics of racial hostility. Thank you.

 

Hon. James C. Ho:  Thank you, Professor. Professor Yoo?

 

Prof. John Yoo:  I want to thank the Civil Rights Practice Group for inviting me to leave smoke enclosed California and fly here. Usually the smoke is because of marijuana but now it's because our forests are on fire. And I was barely able to fly out of San Francisco airport yesterday and had to reroute to Philadelphia where being a native of Philadelphia, I picked up lunch. Any other Philadelphians here, you're welcome to join. I got a whole rack of soft pretzels up here.

 

      So I'm trying to figure out why I was asked to be on this panel. [Laughter] So it could be so that we could have 60 percent Asians on the panel, but we don't believe in quotas for Asians. But I will note, if Harvard didn't use race in its applications, this is probably the proportion of Asians in the freshman class. [Laughter] It could've been just because of the ricochet Law Talk, and since Richard Epstein's here, I have to be here too. You should know a variety of hosts tried out to be Richard's co-host on Law Talk. I was the only one who could interrupt him and stop him from speaking for 45 out of the 60 minutes of the podcast [Laughter]. I got him back. Let the record show I got him down to 44 minutes. [Laughter]

 

      And then I thought, I must have been invited to so I could make fun of Jim Ho. [Laughter] So let me engage in this favorite sport of mine. Just two quick comments. So I had the pleasure of working with Jim in the Office of Legal Counsel, and I was a little older than him. And so he came into my office one day and said, "I want to seek career advice. I have a very important question to ask you." So he came into my office—I used to love screwing around with Jim—so he came into my office and so I said, "Jim, don't tell me. You have an illegitimate child."

 

      That was the first and last time I have ever seen Jim speechless. [Laughter] Then [I say], "Well, what is it really, Jim? What do you want to talk to me about?" He goes, "I have an offer to go work for Senator Cornyn as his chief counsel. Do you think I should take the job? I'm really torn about it. I love working in the Justice Department. Should I go over there?" I said, "Jim, you're Asian so you're supposed to be smart, but you have no personality. If you don't take that job, you are so stupid I'm going to fire you from OLC and then you'll have to take the job anyway." I will not say which result ended in him moving over to the Senate, but he made the right career choice.

 

      And then, lastly, I figured out this is why I'm on the panel as opposed to all these other University of Chicago graduates. All of them who hate Harvard. I'm the only one who actually went to Harvard on the panel. [Laughter] I'm sure the president of Harvard asked for there to be representation, for someone to defend the university. Unfortunately, I don't think I'm going to be able to help out there.

 

      So actually, I think the reason I'm on this panel, seriously, is because I wrote an LA Times piece when news of this lawsuit came out. I’m not going to read it to you, although I've been reading it, and it's a great piece. [Laughter] And I'm currently trying to find a co-author to write the book, sequel, for me – the book version, which I have decided to entitle, "Why Are Asians so Dumb?" We are really good at taking tests. There's no one better taking tests than Asians, clearly. But we do not know squat about politics. And the reason why is because Asians continuously, by huge majorities, vote for the Democratic Party. It's not really a partisan thing, but it happens to be the Democratic Party, which nominates justices and judges to the Supreme Court who have never voted to strike down an affirmative action policy. And let me give you the numbers.

 

      In the 2012 election -- first of all, Asians used to be one of the most loyal minority groups to the Republican Party. In 1996 Asians voted for Bob Dole. Nobody voted for Bob Dole. [Laughter] But we voted for Bob Dole. Realizing the error of our ways, Asians have voted reliably for the Democratic Party ever since. Just take some recent numbers: in 2012 -- and I'm living up to Professor Koppelman's worry about tribalism here, I'm sorry. In 2012, Asians voted for Barack Obama by 76 percent. In 2016, that went down. Asians voted for Hillary Clinton by 66 percent. Still in both cases, the only demographic group that voted more for the Democratic candidate were African Americans. So in both cases Asians are voting for the Democratic nominee more than Hispanics, more than single mothers, all the cartoons that the White House made up back in those days about people who need to vote Democrat, Asians voted more than all them.

 

      And then after news of Patrick's lawsuit came out, after all the facts about Harvard's affirmative action policies, after the news of the mayor of New York City deciding to try to reduce the number of Asians who are getting into the magnet schools in New York City on a race-neutral test—Stuyvesant and Bronx High, you might have heard of some of these schools -- I actually have a special love for Stuyvesant because my wife went to Stuyvesant. My wife was not particularly wealthy. Had she not gone to Stuyvesant, I never would've met her. On the other hand, she couldn't have been that smart and still gone to Stuyvesant because she married me.

 

      Anyway, after all the news of these policies come out, in the midterm elections, Asians voted for Democratic congressional candidates by 77 percent. And this makes no sense. This is why I think Asians are dumb at politics. Asians, you would think, based on all the other demographic qualities they have, would vote Republican, vote conservative. So Asians are the -- and also, I should note. It's weird to put Asians all in one group because we represent so many different countries, most of whom hate each other back in the old country. So it's strange to have Indians and Pakistanis in the same racial group and Koreans and Japanese in the same racial group -- well, actually, most everybody hates the Japanese back in Asia. [Laughter] But it's very strange to lump us all into one demographic group. But if you take them as a collective, they are the most economically successful, or wealthiest if you want to call it that, of the different racial groups; the most highly educated; the most likely to run a small business; the most religious; the lowest divorce rates. So you would think if there were a party that Asians would support would be the Republican Party.

 

      And then to add on to that, the party which consistently nominates judges and justices who oppose affirmative action for the most part. I'd say 95 to 98 percent of the judges Republicans have appointed have opposed affirmative action. And if Asians consistently tell pollsters that is the one issue they care about more than anything else, is getting a fair shake in higher education emissions. But you would think Republican deregulation policies, and low tax cuts, and so on and so forth, you would think Asians would vote Republican.

 

      So for me the interesting thing about all of this is why don't they, given all the evidence that Patrick has laid out. I don't think it's even hard to reach the conclusion that Harvard is discriminating against Asians on the basis of race. I'm a university professor, unfortunately. I've been one since before Prop 209 passed in California, which Dr. Nagai mentioned. It was a case at Berkley before Prop 209 passed, Asians were roughly about 18 to 20 percent of the population of undergraduate body every year. Prop 209 went away, and it's now 40 percent. And that's with a lot of cheating, don't get me wrong. Berkley also uses a holistic admission process. I think it had a lot to do with what Professor Koppelman said. There's a lot of self-illusionary behavior going on with our admissions officers, who have a lot of nice rhetoric, but I think everyone involved in higher education knows what going on. And that is there's a lot of racial balancing in admissions, even if they won't admit it.

 

      And I don't think it's a hard question that I think the Supreme Court has gone down the wrong path here. Whether you're conservative or liberal, the idea that diversity used to be a means to some end. Now it's an end. It used to be a mean. Now diversity has become -- and I think that is the biggest change I've seen on this issue over the last 30 years at the Supreme Court. Any why is diversity an end, in and of itself? What human good does it produce? According to Justice O'Connor on the Supreme Court I guess racial diversity produces ideological—this is the logic of the case—ideological diversity, which produces a better education. I don't know if that's true at Berkley because none of my students seem very ideologically diverse except for the teacher. I think we do a pretty good job in class arguing -- I do a good job arguing with all those liberals all the time.

 

      But I still find it extremely offensive and stereotypical to say, oh if we have racial diversity, we will have ideological diversity because to me that assumes that particular races share particular ideologies, which I just think cannot be true. And I think it's quite insulting, actually, to all of us, not just racial minorities.

 

      So putting all of the easy stuff aside, to me the hard question is why do Asians consistently vote Democratic? So I started to do some research. There's this well-known book I highly recommend to all of you by Norman Podhoretz called, Why are Jews so Liberal? A lot of the same demographics I read out about Asians were true of Jews, and Jews also, historically, and to this day vote Democratic by large numbers. Although, I'll note they voted, I think -- almost the majority voted for Nixon. So after that they learned their lesson, and so they've never gone back to the Republican Party, I suppose. But Podhoretz famously said, Jews—how did he put it—Jews live like Episcopalians by vote like Puerto Ricans. So I wonder what he would say about Asians. He'd probably say something -- Podhoretz would probably say, "Asians live like Episcopalians or they live like Mormons, but the vote like Puerto Ricans," I suppose.

 

      [Inaudible 01:24:50] actually had a better line like that. The LA Times took it out of the piece, I'm afraid, not surprisingly.

 

      So what explains this? So Podhoretz's argument about Jews was that Jews are liberal because they fear Christians. There've been such a long history of Jewish-Christian conflict, particularly with Evangelicals -- I don't know if any of this is true. But that was Podhoretz's explanation. I think it's particularly not true now. But when he wrote his book in the late '90s, early 2000s, that was his view. The interesting thing to me is that cannot possibly be true about Asians. Asians are actually highly religious. And actually a large number of Asians are members of Evangelical Christian churches. Let me tell you, I had to go to a bunch of these boring, religious ceremonies when I was a kid. I still don’t understand what was going on.

 

      So I don't understand why are Asians so heavily supporting a party which puts into place judges and justices—and let's be clear, it's only the Supreme Court that can change our national policy on affirmative action—that consistency support a policy that harms their most dear interests. So I've three explanations, none of which I know are true or not because I'm a professor. I'm not going to do research on this.

 

      One, it could be urbanization. So I think Asians do tend to be more urban, perhaps, than other immigrant groups at first. And I have to say when was the last time you saw a conservative win a mayorship in a major city? I think conservatives, Republicans, whatever you're going to call them, have given up competing for political office in major cities, so liberals control all the levers of power in any major city. So if you're an immigrant from another country, particularly one where you left an authoritarian government or socialist government, you don’t want to get in trouble with the authorities, you're going to play ball with the liberals who run the city. Maybe that's it. So maybe Asians over time will become more balanced as they leave the cities.

 

      Two, it could be universities. I think this is a strange phenomenon I've noticed being a professor. Asians really respect higher education, as I said before. They tell pollsters -- Asian families tell pollsters, "College university admissions is the most important thing to them." Well, where is the ideology of racial diversity most deeply entrenched in our society? It is in the universities. And so if Asians are sending their best and brightest to these schools with fancy names, where they are taught that there are too many of them and that racial balancing is okay, and there're all kinds of fancy theories about why different racial proportions should be held in society, well that's what they're going to learn at the universities.

 

      The third one, and this is the only thing I can think of that would explain the strange, to me, increase in Asian support of the Democratic Party when that party would never appoint any judge who opposes affirmative action, after the facts of this lawsuit came out, after the facts of what New York City's going to do with the magnet schools is Donald Trump and immigration. I think it's got to be the case, I suppose, that Asians like other minority groups are reacting to the symbolism of the President's immigration statements and some of the statements of people in the Congress, even though I don't think those policies would have a big impact on them. I don't think it's because of the numbers or who's coming in, from what countries -- in fact, it's quite clear that immigration policies since 1965 has been very favorable to Asians. But I think it's just because of the symbolism. Some of the things Professor Koppelman was referring to. There's this sort of symbolism involved with that. And that seems to me to be driving Asian Americans away from the conservative wing of our polities, even those that is the wing who has the policies that would most benefit them as a group.

 

      So let me close by just saying what's the remedy? That's the thing I think is interesting in all of this affirmative action talk. Suppose Patrick wins, and the Supreme Court overrules Grutter. What are universities going to do? Are they going to go -- do you think that they're really going to adopt a race-neutral process? Does anyone really think that? You're going to have enormous amounts of money spent by universities to try to figure out something that still produces the right results. They'll just come up with something else other than the personality score.

 

      The personality score, by the way, is so ridiculous. It's just sort of -- I mean, there's a billion and a half people in China. None of them have personalities? It's just one of the most ridiculous things I've ever heard of, that Asians -- that any racial group would have different scores on a personality factor. It seems kind of stupid and silly. [Laughter] But the problem I think for all of us as lawyers to think about is if universities are still intent, which I'm certain they are, to produce a certain racial balance, not because of outside pressure. The bureaucrats inside universities just believe this is a good thing to achieve. They will come up with some other measure.

 

      How are courts—because generally, we tend to be suspicious of judicial activism—how are we going to ask for -- how are courts going to effectively monitor whatever universities come up with next to try to determine whether there is racial animus behind it? I think that's going to be extremely difficult. So I have no answer there. But I would love to hear -- one thing is—I'll just throw this out—is it's just going to take lots of lawsuits every time they come up with something new. And maybe the burden of proof should shift to force universities to explain themselves. At least that's what happened here. And just watching Harvard trying to explain its own policies and how it worked showed how ridiculous they were.

     

      So thank you very much and I look forward to the questions and comments.

 

Hon. James C. Ho:  We're going to leave plenty of time for questions from the audience, but let me exercise at least a little bit of moderator prerogative. First, I want to invite everybody, if anybody wants to offer any sort of response to anything that's been said on the panel.

 

Patrick Strawbridge:  Yeah, I'll respond to a couple things, including something that Professor Koppelman said and something that Professor Yoo said. And that is just there's been a lot of discussion about the fact—and this has actually been very prevalent, I think, in some of the opposition to the lawsuit—is that nobody wants to own what Harvard is doing here. And so Will Consovoy, my partner and who really gets credit for the complaint, the driving force behind this lawsuit, he goes to these college campuses, and the first thing that happens when you get on these panels—and The Federalist Society is always very good about having a dissenting view on it—is everyone says, "I want to be clear. If what is happening in your complaint is fine, no one defends that." But then we get these generalized expressions of concern about it begin a wedging issue and it increasing racial tribalism. Well, the only people who are actually arguing that the lawsuit is having that affect, I think, are not -- they appear to be the press and the concerns on the left. And so I don't think that has to be the case and nor do I believe that this is an example of the lawsuit seeking to replace it with nothing.

 

      As I mentioned, there are other -- Berkley still has a holistic review process. There are a number of tried and true examples of universities, both in this country and states that have banned the use of race in the admissions process, as well as in other countries, including very elite universities Cambridge and Oxford, of getting rid of legacy preferences, of getting rid of other types of preferences, of actually increasing socioeconomic preferences. Which I think everybody would agree that to the extent that African Americans in particular and other groups in this country, unfortunately, still face a legacy of economic challenges that arise from slavery and unlawful discrimination. The goal should be to help the people who are experiencing that legacy, not those who are fortunate enough to have been born into the middle-class advantages that other racial groups have enjoyed.

 

      So replacing it with a socioeconomic preference I don't view as replacing it with nothing. And I think it's much more in line with the professed goals of everybody. And certainly, one interesting fact that came out in the course of evidence, both from the OIR internal reports as well as from the statistical reports offered by the plaintiff's expert was that Harvard's admissions office gives a small tip for socioeconomic status right now. It is not on the level of the tips they give for racial groups. But they do give some bump for people from a low socioeconomic status.

 

      But what was very interesting is if you are African American and you in the Harvard applicant pool, you don’t receive any additional bump beyond the bump you get for being African American, on average, across the pool. This is not about specific individual applicants. You don’t get any [additional] statistically significant bump by being low income if you're African American. And what that essentially means is I think what everybody says, is that Harvard's use of race is very effective for getting the sons of doctors, and lawyers, and corporate achievers into Harvard. But it's not doing much for actually reflecting a desire to lift up the people who are experiencing the legacies that Professor Koppelman's worried about. So I don't think that a socioeconomic status process is nothing. And I don't think that it's -- I think it is something that is an actual alternative.

 

Hon. James C. Ho:  If I may before I turn to you, I wanted to ask a follow-up because you mentioned that there are certain alternatives that might be available. There's one alternative that you didn't mention, which is not taking federal funding. Is that --?

 

Patrick Strawbridge:  At the Hillsdale [inaudible 1:35:26] right?

 

Hon. James C. Ho:  Exactly. Is that a plausible thing for schools or is that just a crazy idea that is not on the table?

 

Patrick Strawbridge:  I believe it was stipulated at trial, actually, that Harvard's rich. [Laughter]

 

Hon. James C. Ho:  I think it's on their website

 

Prof. John Yoo:  But they always want more. They're not rich enough. Don't forget to give to your class reunion.

 

Patrick Strawbridge:  There are colleges that have elected to decline federal funding so that they can do -- I mean, certainly that would get you out of whatever constraints Title VI imposes on you. And so that would be optional.

 

Prof. John Yoo:  Can I just mention on that, that would be practical for most universities. So University of California Berkley, allegedly a public institution, receives more money from the federal government than the State of California now. So I don't think any of the major research universities could survive if they cut off all federal funds.

 

Prof. Andrew Koppelman:  Let me just say if you're concerned about social class and non-race based ways of responding to social class, then I think you've got to pull the camera back and stop looking at Harvard. There's just not that many slots at Harvard anyway. The big shift that's happened with higher education is the shift of financial aid money from need-based to merit-based financial aid. And that's the big effect that keeps people trapped in the lower quartile of socioeconomic groups. And if you have class-based affirmative action at Harvard, that is another form of justice on the cheap. What you really want to do is make it possible for people who can't afford to go to their state university and they're at the right educational level for their state university to be able to go to that state university. But that's going to require a significant redistribution of resources in a way that's got nothing to do with race.

 

Prof. John Yoo:  I totally agree with Professor Koppelman on this point that racial -- if you really want some kind of racial justice or opportune society, then numbers at college are so far too small to actually do anything about it. The real place you would do it would be K-12 education. But here, again, this goes back to my "which parties are supporting which policies?" I find it incredible, actually, that the efforts to introduce innovations and competition in K-12 education are all so systematically -- I just don’t understand why it's so systematically opposed by one political party that claims to be the most interested in racial justice, when the benefits of things like carter schools and vouchers and so on flow pretty predominantly to poor inner-city kids.

 

      If you really wanted to do something about these outcomes, which I completely support, I would say by higher education it's too late bur where we have large numbers of people trapped in inner cities who already have no chance of getting not because of resources. We have increased for primary, secondary education by incredible amounts just by the way we dysfunctionally organize those bureaucracies. So I would think that's where we could, maybe, reach a compromise of some kind, in terms of forward policy as to "Let's get rid of the way we run our primary and secondary. Anything, I think, would be better. But at least try to see if charter schools' scholarships and all this stuff work – vouchers work.

 

Hon. James C. Ho: Dr. Nagai?

 

Dr. Althea Nagai:  My main comment has to be the change in the composition of the racial groups, so my main comment has to be the change in the composition of the racial group insofar as immigration, I think, is effected the kind of applicants. I have been asked this question about Harvard applicants who are Black. And I had seen somewhere that among those that attended Harvard, a large percentage of Black enrollees were immigrants. And the children of immigrants. So this, as few as 30 percent were of American Black decent -- who could trace descendants back from slavery. So this changes the dialogue. Again, we're kind of being reduced as something as simplistic as just skin color, and we're not talking about heritage and history that's being passed down. So the whole diversity issue becomes even more distorted because of immigration.

 

      As a side point, the census has been tracking immigration and they noticed that Nigerian immigrants, for example, have the largest percentage of college graduates of African immigrants. They have a huge percentage of those with graduate degrees. Their children are going to go to Princeton. Their children are going to go to Harvard. But their experience is going to be similar to the experience of the immigrant professor whose children are also going to be at Harvard, much more so than the lower, middle-class Black kid who's in D.C. and has to try to work their way out of the neighborhood. I think that's another consideration. It does work into the immigration debate.

 

Hon. James C. Ho:  Shall we open it up to some questions? Sir? 

 

Questioner 1:  Yes. Does this mic work?

 

Hon. James C. Ho:  We can hear you.

 

Questioner 1:  Thank you for the panel, and good to see you again, Professor Yoo. You're --

 

Prof. John Yoo:  Good to see you, too. [Laughter]

 

Questioner 1:  It's always a reunion and a pleasure to hear all your comical analysis.

 

Prof. John Yoo:  My comical analysis? [Laughter] It's always funny.

 

Questioner 1:  You're comment about—this is the first time I've heard this—but Asians living like Mormons but voting like Puerto Ricans. I experienced a silent chuckle when I [heard] that for the first time. But I agree with you. You gave, actually, some really excellent compare and contrast analysis to the remedial question. That's one thing I want to focus on. But before I jump into that question, to Ms. Althea, to your point about diversity. Di-versity—if anybody ever look[ed] at the root word, "di" is almost like divide. So I'm all for diversity, but when there's ideological differences that Professor Yoo has mentioned, there's no unity in ideology when there's too much diversity because there's a division.

 

      But going back to your point, Professor, I think the whole affirmative action talk and remedy --

 

Hon. James C. Ho:  Do you have a question? I don't meant to be impolite, but we have other people.

 

Questioner 1:  Sure. Could you speak on the point about -- the liberal professors, there's no surprise that they outweigh the conservative professors on campus. So if you want to broaden the question, could you speak on those points you see, if there are cause and effect to the issues at hand that you presented? Thank you.

 

Prof. John Yoo:  Well, I thought with a) with Grutter the idea that maybe it's true that you want ideological diversity in colleges, universities. That produces better educational outcomes, although in the Supreme Court case, there was no evidence produced to this effect. The Court just said it. Or at least, I think what they actually did is they deferred to the views of university presidents, who I would really not trust on this issue. But usually they ask for money when they are -- another one of the things I really don't trust them. But that was what the Court did was to equate ideological diversity with racial diversity. Why not just see if universities are producing ideological diversity in the first place? Which I would say they are not.

 

      If you look at -- John McGinnis did this nice study about campaign contributions by -- I think he did one on law professors, and I think Jim Lindgren then tried to do one on professors. And so I think he found something like 91 or 92 percent of all university and college professors give to the Democratic Party. Now, that's just the ones who give, but that's some sign of the heavy unbalance in the college university systems.

 

      So if the Supreme Court really cared about ideological diversity, then perhaps they should hear more cases by conservative professors claiming discrimination in hiring and promotion. Again, this is a judicial capability problem because I'm sure there're many people here—I hope so—particularly younger members of The Federalist Society who have considered or thought about an academic career but are too discouraged by the reputation of universities for ideological discrimination. I think it's true. I don't know if it's intentional or unintentional.

 

      I will say I had this interesting debate with a professor of the English department of Berkley, which I think is one of the great English departments. And I was giving him a hard time because I said, "I don’t think there are any conservatives in your department." He said, "Of course there are no conservatives." "How can that be?" He said, "You can't be a good academic and be conservative." I was like, "What are you talking about? This is one of the finest English departments." He said, "Because to be conservative means you always defend the existing order, and good academics challenge the way things are." And I was like, "Have you actually looked at who’s defending the status quo these days? And who's actually challenging it?"

 

      But anyway, I think if the Court were serious at all -- but I don't think there is really any serious Supreme Court law about ideological discrimination in university hiring.

 

Prof. Andrew Koppelman:  I'll just agree that it's a serious problem. That's why you should go to law schools that have faculty members like John McGinnis and Jim Lindgren and Steve Calabresi, who said the Pledge of Allegiance last night.

 

Prof. John Yoo:  Very good.

 

Prof. Andrew Koppelman:  Those are the schools you should go to. All Northwestern faculty.

 

Prof. John Yoo:  It's true.

 

Curt Levey:  Curt Levey. John, your remark reminded me of what people sometimes say to me, which is "You're Jewish. How can you be conservative?" So similar views that we should all adhere to the same values.

 

      But in any case, this is mostly for Patrick. Is there some tension, or maybe I'm getting this wrong, some tension between their claim -- the admission by Harvard that they do get preferences to Blacks and Hispanics and their claim that they are not discriminating against Asian Americans? By definition, if you're giving preferences to Blacks and Hispanics, aren't you discriminating against the other groups, including whites and Asian Americans? Or is their argument just, "We're not discriminating any more against Asians than we are against whites."

 

      And my second question -- well, my second question, I guess, would be for all of you. Why this resistance to socioeconomic preferences? Given that states like California and Texas, when it was under the Hopwood decision, did achieve racial diversities and socioeconomic presences. And, again, one would argue a deeper type of diversity given that it wasn't just affluent minorities. Why the resistance? I know that people say in their official positions, "Well, we can't achieve the same diversity." But at least over a beer with some of these people after a debate, it seems like—at least to me—it's more of a philosophical objection, just that treating white poor people the same as Black poor people is to deny the plight of the discrimination suffered by African Americans.

 

      But in any case, I'd like to hear your views on why there is so much resistance.

 

Patrick Strawbridge:  Let me address the first point, and I can briefly comment on the second point and let the other panelists do that. With respect to the first question, "Is there some tension?" college admissions is a zero-sum game. That's especially true at an elite university such as Harvard. That's just math that's there.

 

      Now, under the existing Supreme Court framework, since you are actually allowed to discriminate to some extent on the basis of race, or at least in favor of certain racial groups, there is a bit of intellectual thought as to how do you distinguish between what's unlawful discrimination and what's lawful discrimination. And the one way we have conceived of that, and I think it's as logical a way as any, although I'm happy to be corrected, is one can look at what the effect of racial preferences is versus whites and Asian Americans. And one can, then, just actually say, well, let's just look at what's happening with whites and Asian Americans because if Asian Americans are being treated different as whites and everyone agrees that they're not getting, as a group, on average, any kind of racial preference, then a negative, statistical effect just between whites and Asians would be suggestive of actual intentional discrimination against Asian Americans.

 

      And that's what a lot of the statistical fight that we're having with respect to the personal score is. The baseline in that case is white applicants. You do a logistical regression. You basically compare apples to apples and you say, "Are Asian-Americans applicants with the same qualifications, with the same criteria, being treated differently than whites?" And the answer, like I said, is if you don't control for personal score, the answer is—by both experts; it's undisputed—is yes, there's a significant discriminatory effect against Asian Americans.

 

      So the larger point is there. Asian Americans, I think, are disadvantaged by racial preferences in a zero-sum game. But you can look at that as a broader question than just how are they being treated against similarly situated white applicants.

 

      The larger question, "What's the hesitancy?" I'll posit, too, based on arguments that have come up. One is the goal here is to achieve racial diversity. That is the end. And so nothing's more efficient to achieving racial diversity than using race. So that's one of the objections that is flat out raised at some point. It's like, well, if our goal here is to get to racial diversity, why are we going to take the long way around, and what the Constitution or Title VI might say is beside the point, I suppose.

 

      The second objection to it is somewhat financial, I suppose. There's some concern that that's going to require a lot of money and this is much easier. Whether that's, again, a satisfactory, constitutional, or statutory answer is what's to be adjudicated.

 

Prof. Andrew Koppelman:  I think I go back to the main forum of class-based affirmative action that matters is subsidizing education. Not cutting the budgets of state universities in order to force them to raise their tuition. Not having people graduate from college with a hundred thousand dollars of debt. And just let the admissions offices make their decisions on academic merit. I was very smart. I graduated college in 1979. I think that today, and with lots of Pell Grants—I'm a Pell-Grant kid—I think that today I would have to yield my spot at the University of Chicago to somebody dumber and richer.

 

Hon. James C. Ho:  Sir?

 

Questioner 2:  Good afternoon. My mother is 85 years old, and in 1955, she applied to law school at the University of Texas, and she received a letter stating that she, as a Black woman, would not be admitted but that Texas would give her a voucher to attend an all-Black school in Mississippi. Now, when I was at Stanford, proponents of affirmative action argued that without affirmative action, there would be a return to a de jure segregation discriminatory system. But from what I'm hearing from the panelists, that's wouldn't be the case. That there are alternatives to outright discrimination and affirmative action. How can you package your message better to defeat that argument that if you eliminated affirmative action or if it were declared unconstitutional that there would be a return to 1955?

 

Hon. James C. Ho:  Why are you all looking at me?

 

Patrick Strawbridge:  I will say this. One thing that's important to remember, look, most of the people in this room move in somewhat elite American society. Most of us, obviously lawyers, academics. This issue is not viewed the same way by the general population as it is by elite society. And when I say that, it is not viewed the same way by minority populations in this country. There was a post-Fisher II poll that showed large majorities of Americans across ethnic and racial groups oppose the use of race in college.

 

      So certainly, there needs to be, I think, a better job of making that difference. I think that the work that's been done on race-neutral alternatives, which is based on the actual experience in all of the states that have eliminated the use of race as a factor in college admission, are valuable ways to get the word out that this is not a return to a natural segregate university and -- I mean, come on. Does anybody in this room believe for a second that if a university were told it could not legally use race in the admissions process, it would abandon any attempt to achieve racial diversity on campus? I just don’t think that's a stable position. It has not been the experience in the other states.

 

Prof. John Yoo:  I think part of what you said -- first of all, congratulations for your mother for overcoming that kind of discrimination and also having to have you as a child.

 

[Laughter]

 

Prof. John Yoo:  Clearly, she was able to live a long and happy life despite your obstacle. But I think part of it is -- I've been very moved by the arguments that Shelby Steel makes, that a lot of people who could come up with alternate policies, they feel a profound sense of guilt for the treatment of African Americans in the country's history and for conduct that's the kind you described happened to your mother. And I think it ties is with what Professor Koppelman said about affirmative action is a cheap, easy way to assuage your guilt, for university professors or elite society. They say, "Look, we're doing something about it." But you're not really doing something about the more serious problem, which I think is K-12 education.

 

      And so I think if you were going to try to figure out a policy that is not just about a zero-sum fighting between racial groups over limited seats at Harvard, you would want to -- and I think President George W. Bush tried this in his first term. You would want to lay out a series of policies to create more opportunity in society. And to me that more focuses on socioeconomic class, and also maybe just an outright rejection—and this is where I think George W. Bush didn't go—I think following Martin Luther King's rhetoric – rejecting the use of race in all its forms, and focusing right, as he said, "on the content of you character, not the color of your skin." But pairing that with something that creates more economic opportunity for the people who are trapped in our inner cities.

 

Questioner 2:  Thank you.

 

Hon. James C. Ho:  Sir?

 

Questioner 3:  Thank you. It's a very good panel. Thank you very much. I have a two-part question. Professor Yoo, you kind of anticipated some of the points I'm about to make. But first, if this Harvard case goes to the Supreme Court, and they strike down Grutter, would it necessarily strike down the personal assessment factor in the current way they're rating students? Though we know that this is a proxy for race, it's only a statistical relationship. They can simply claim it's a coincidence.

 

      A second question has something to do with something you just mentioned, Mr. Strawbridge, that universities at this point are going to continue to practice some affirmative action whatever the Supreme Court says. And I think as long as diversity is our national religion, and I guess I'm at risk of being the skunk at the picnic, I really don’t think racial and ethnic diversity is our strength. What do you think we could do as a society to discredit or destroy this idea?

 

Patrick Strawbridge:  You're certainly correct that striking down Grutter says nothing about how colleges have to select their applicants and whether or not they can use a holistic admissions process. As Professor Yoo pointed out, Berkley still use a holistic admissions process. And there may be outright cheating. There may be an attempt to use race of the sly without being so explicit about it. and that would require more careful policing, but there would be real value, I would think, just in a society that values what law is and how we apply laws to have at least a statement that this is not allowed and to make it more difficult to do it. If that has to be litigated or policed by the federal government, so be it. That's true under a lot of regimes today. But I don't think it's a reason not to pursue these cases, and certainly not a reason to accept some level of discrimination against groups, including Asian Americans in this particular case. So I think that that's -- the two points are unrelated to me with respect to that.

 

Prof. John Yoo:  I feel like on the holistic, I would expect more universities after Grutter, if [were] Grutter struck down, would switch to a holistic system. The one thing about being on the inside and having watched my colleagues struggle mightily to figure out ways to get around Prop 209 with not too much success, but the one thing about holistics is that it's expensive to run a system like that. So I assume most of us went to law school. Several of us may have went several times. But in law school, we don’t have the huge admissions staffs that colleges do. Law schools don’t want to pay for the 30 admissions officers that Harvard University probably has. The dirty secret is that most of the seats in law school are determined primarily by GPA and LSAT scores. But at Berkley, we have a holistic system for half our spaces. So you could go to Northwestern and learn empirics, or if you just did that on the LSAT, you could apply to Berkley.

 

      But the holistic system is going to cost colleges and universities a lot of money to implement in the way you might think would happen after Grutter. And so I'm like, "Great! Make them pay more money to live up to their ideals."

 

      Secondly, I would just point out about the holistic system is that it's going to be very difficult, again, I think for courts to monitor whether the truly are engaging in a -- let's consider socioeconomic barriers that someone had to overcome. Or are they secretly just cheating? One effect I think after Patrick's lawsuit is that the Harvard admissions office will ban all emails or written memos of all kinds, and they'll do everything in person talking to each other. They're never going to write anything down again. And I'm sure after this lawsuit, no college and university admissions office is ever going to write anything down in email. They might use whatever app that is where it disappears after 30 seconds, along with the inappropriate pictures they're probably sending each other. But they're never going to write anything down.

 

      So I don't see how a court wants all the universities go to holistic. They could use a system which, as a conservative, I just instinctively don’t like, which is prima facie differences based on statistical disparities. Which is kind of what's going on here. When it's employed in other contexts, I've really not thought that should be the way to get into court. It's just so -- "Oh, there's deferential racial hiring in this industry or that industry; therefore, you readily get into court and demand the other side prove they don’t have racial animus. But that might be the way the law goes if every university just said, "We're not going to tell you what we're doing, but we're just going to look at the whole person now.

 

Questioner 3:  I guess that still speaks to the idea that diversity is an end in and of itself. Again, which I think is a corruption. It's a very bad thing in my view. So how do we destroy this idea? You may not have an answer, but that, to me, seems to be the ultimate question. They're going to continue to do it so long as society seems to value this idea.

 

Prof. John Yoo:  So you know, it's interesting. If you talk to people in the sciences—Berkley is a very strong science university—they wouldn't say the purpose of education is diversity itself. I agree. Somehow diversity went from being a means -- the idea of diversity helps achieve some other human good to becoming the end in and of itself. And I don't understand what the end in and of itself actually is. You know, why is diversity for its own sake good? But I don't see how to diffuse it. Being at a university you might have a different opinion. I think this has become so hard wired and to professors and the way they think that it's not going to go away. In fact, over time it's been getting stronger and stronger, which is different than saying we should have different subjects taught. That's a different kind of diversity. But just the idea of diversity itself, I think, has become so firmly planted, I think more than any other institution in our society. It's become so firmly planted in academia, I don’t see how it gets uprooted, actually.

 

Prof. Andrew Koppelman:  I blame Lewis Powell. It was clear that there's a strong imperative to remedy the history of racial injustice when Bakke is decided. It's only a few years after the Civil Rights Act got passed. And Powell says you can do this, but you must use the word diversity, over and over again, and that's your free pass. And they do it, and of course it takes on a life of its own, and of course it makes not a lick of sense.

 

Prof. John Yoo:  This is interesting, just to pursue this, because I agree. He could've said what affirmative action is is a remedy for past wrongs, which I think a lot of people would agree with --

 

Prof. Andrew Koppelman:  Stevens said that. No one listened to him.

 

Prof. John Yoo:  The problem is that, the only thing that's good about this that gives me hope is I agree, this was created by the Supreme Court. So maybe the first step is for the Supreme Court to confess its error and at least start the process by getting rid of its elevation of diversity as the real reason for these policies.

 

Dr. Althea Nagai:  Okay, I want to say from the statistician's perspective, one of the ways of holding institutions accountable is to have their admissions data made public. You could strip it of private info. But the Center for Equal Opportunity, we've spent years trying to FOIA flagship universities to see, "What exactly are they doing?" And it takes forever. There're lots of roadblocks. Some are more accommodating than others. And especially when you talk about state universities, you're talking about taxpayer money. You're talking about does a university have a 10 percent plan of what does it look like. It does not involve a lot of work on the part of a university to make the data stripped of identifiers to make is public because they all have this data available. They report it routinely to the U.S. News and World Report and to the federal government.

 

      So this is how you hold them accountable. You need groups to basically monitor them to make sure they're doing what they say they're doing.   

 

Ken Masugi:  Hi, my name's Ken Masugi. I'd like to ask my wife a question, rather to have her --

 

Hon. James C. Ho:  It's a unique opportunity.

 

Ken Masugi:  -- elaborate -- yes. Indeed. --

 

Prof. John Yoo:  Are you guys really married or is this some kind of inside joke? [Laughter] You guys really are married?

 

Dr. Althea Nagai:  Yes, that's my husband.

 

Ken Masugi:  -- I wasn't referring to Mr. Koppelman. --

 

Prof. John Yoo:  You're not a lawyer. You don't realize how inappropriate this is.

 

[Laughter]

 

Ken Masugi:  You had a very interesting observation about Harvard trying to diversify by hitting, say, people in Nevada or Montana, but how that had a racial ethnic component in it. And I just wanted to add my own teaching experience here at Michigan State at James Madison College. Now, at the time, James Madison College—about 1,500 undergrads within the huge Michigan State system, plus the undergraduate admissions. Virtually open admissions. And I observed that among the smarter students in my classes were African American students. And they all uniformly came out of Detroit or Milwaukee from an inner-city Catholic school.

 

      And I asked around, and it turned out, subsequently—this is 25 years ago—subsequently I'd ask my graduate students, who were African American, about their own background. And each and every single one of them went to a Catholic school, an inner-city Catholic school. And these are the sorts of institutions—Catholic and other religious schools and other private sorts of schools—that are being crushed by the administrative state. And the administrative state is a bipartisan creation. It's not just a liberal, democratic creation. And so I think there are modest forms of affirmative action because James Madison College, under then-Dean Bill Allen, wanted to get more of these students in, not because they were African American, but simply because they added quality to the student body. And so there're dual motives here that can lead I think to some good results. So Dr. Nagai?

 

Dr. Althea Nagai:  This came up in conversation, and it was in response to I think what came out in the lawsuit when you were examine -- I think the admission officer—Fitzsimmons is his name? He was on the stand.

 

Patrick Strawbridge:  "Sparse country". Is that what you're talking about?

 

Dr. Althea Nagai:  Yes! "Sparse country".

 

Patrick Strawbridge:  I'll just briefly touch on it.

 

Dr. Althea Nagai:  Oh, yes. Oh that made me mad.

 

Patrick Strawbridge:  So Harvard, like a lot of universities, buys standardized test results from high school students and uses that for recruiting. And they basically have groups who they target their recruiting for. They send out letters. They try to get them to apply to Harvard. And one of the things that came out in the process was that they have a variety of breakdowns. And they want high achieving groups by ethnicity, so they target high scorers. And, obviously, the SAT bands change depending on what group they're targeting because they're basically trying to target the top performers. And, of course, the legacy of standardized testing and other educational disparities in our country is that different racial groups do differently on some standardized tests.

 

      So what was interesting about it was that in what they call "sparse country", which is basically outside of the coasts and the heavy metropolitan areas where, presumably, Harvard does not get as much applications, or at least there's not the same level of high-performing students. Harvard asked for test results, and the effect of it is that their floor in "sparse country", which only applies to white students or people who don’t say their race is lower than the floor that they apply for Asian American nationwide. And what that means is that if you're in "sparse country", which to be clear, includes such undeveloped waste lands as Las Vegas, Nevada and Phoenix, Arizona --

 

Prof. John Yoo:  They are.

 

Patrick Strawbridge:  But other -- if you are in one of these states, you might get a recruiting -- and if you score 1320 or --

 

Dr. Althea Nagai:  1310 for whites.

 

Patrick Strawbridge:  Well, the floor was 1310. It goes up to 1370. If you score between 1310 and 1370 and you're white, Harvard will recruit you with a letter. If you're Asian in the same school achieving the same score, you will not get a letter from Harvard.

 

Dr. Althea Nagai:  Yeah. 1370. The cutoff --

 

Patrick Strawbridge:  It's an interesting other aspect on the ways in which Harvard seeks to cheap its class.

 

Dr. Althea Nagai:  Yeah. Now, the irony was when you -- I believe when Fitzsimmons was on the stand. This was reported in, I believe, the Chronicles, that someone asked. . . I think "Lawyers, how do you explain the disparity?" And he said, "Well, you'd achieve diversity just basically because the white student would be multi-generational American, while the Asian American will most likely be in the country only two or three years," or something implying that the applicant would be immigrant.

 

Patrick Strawbridge:   Yes. What Dean Fitzsimmons, whose been the Dean of Harvard College of Admissions for going on 30 years, now, approximately -- what he testified in response to that question what that when they seek students from "sparse country", they're looking for a certain type of student who may not have Harvard on their radar. And he specifically made a reference to the notion that they're looking for students who grew up in "sparse country", not someone who arrived a year or two ago.

 

      Now, there is a way to look at that statement as trading upon the stereotypes that I think underlie a lot of what the evidence against Harvard shows. Whether you want to call it implicit bias or unconscious bias, what we're really talking about and what the law has recognized as a form of invidious discrimination is stereotyping. And I think you see that in the personal score part of the case. I think you see it in the response to justify the "sparse country" differences. This is racial stereotyping. It's long been actionable under Title VII and under Title VI. That's really what this case is about is racial stereotyping.

 

Dr. Althea Nagai:  The irony is, though, that a lot of Asian Americans who live in "sparse country" and, in fact, the descendants of the interned. Their grandparents were interned; a lot of them emigrated from Hawaii where I'm from to live in Las Vegas. They're Filipino; they've been Americans for multi-generations, and yet, they've been stereotyped.

 

      So in the context of that, I think that they would have that higher cutoff because they're Asian American in spite of the past history. And that was kind of annoying.

 

Hon. James C. Ho:  Well, I have thoroughly enjoyed being the moderator for this panel. I hope you all enjoyed this. Please thank our panelists as well.

 

 

2:15 p.m. - 2:45 p.m.
Address by Alex Azar

2018 National Lawyers Convention

Topics: Federalism • Healthcare • Federalism & Separation of Powers
The Mayflower Hotel - Grand Ballroom
1127 Connecticut Avenue, NW
Washington, DC 20036

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On November 16, 2018, Secretary Alex Azar offered an address on the unintended consequences of health care regulation in the United States.

  • Hon. Alex Azar, Secretary, United States Department of Health & Human Services
  • Introduction: Mr. Dean Reuter, General Counsel | Vice President & Director, Practice Groups, The Federalist Society

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Event Transcript

Dean Reuter:  Good afternoon, everyone. Good afternoon, and welcome to our afternoon address. I’m Dean Reuter, Vice President, and General Counsel, and Director of Practice Groups at the Federalist Society.

 

I’m very pleased to introduce our guest today. I will break from the authorized introduction to say that he came to us from the White House, this afternoon, where he was going to attend an awards ceremony that was running long. So, rather than spend time at the White House, he came to be with you. So special thanks, Alex Azar.

 

Alex Azar was sworn in as President Trump’s Secretary of Health and Human Services in January 2018. His current tenure, at HHS, is a second tour of duty for him at the department. After serving as General Counsel and then Deputy Secretary in the 2000s.

 

He spent his entire career working in senior health-care leadership roles in both the public and private sectors. And it’s very much a pleasure to introduce to you the 24th U.S. Secretary of Health and Human Services, Alex Azar.

 

Hon. Alex Azar:  Well, Dean, thank you very much, and good afternoon, everybody. Thanks so much for welcoming me here today. It feels a little bit strange to be giving an actual speech to this crowd given that I know so many familiar faces here. A little awkward to be just speaking instead of having a discussion. But I’ve got so many fond memories of my work with The Federalist Society over the last, almost, 30 years at this point.

 

      My involvement began as a student at that well-known cozy home for conservatives known as Yale Law School. For me, as a law student, The Federalist Society was not just an opportunity to connect with like-minded, intellectual students, it was also just a way to make sure that I had somebody who would eat lunch with me.

 

[Laughter]

 

      The Federalist Society serves as a support group for those who care about our founding principles and care about applying them in the courts and throughout our government. As you may know, I’m a devoted protégé of Justice Scalia. That was the ceremony that I was to be at, but that ended up starting a little late, was the wonderful awarding of the Presidential Medal of Freedom to my mentor and Justice Antonin Scalia.

 

[Applause]

 

      I know that, like myself, everyone in this room misses him greatly. One of the signal lessons that Justice Scalia taught the legal world was that it can take a certain level of stubbornness to stay faithful to our Constitution and our laws.

 

      Some of his most notable opinions, in fact, on topics, such as freedom of speech and the Fourth Amendment, produced policy outcomes that he did not like, but he adhered to what the Constitution and the law said. It’s the easy choice to assume the law says what you want it to say. It’s much harder to engage in the work of debating what it really says and means.

 

      The Federalist Society has done invaluable work by building the intellectual and organizational foundation for this kind of textualist thinking to occur, for leaders, like Justice Scalia, to emerge like all the other leaders in this room.

 

Now, today, I have sort of left the law behind, largely. I’ve got a very fine General Counsel in Bob Charrow, who is here, to sift through the trickier legal questions that we face. And I’ll get to be the client. And the client that I am, the department that I run, the U.S. Department of Health and Human Services is largely known as a creation of the New Deal and the Great Society. Certainly, its scale would be mind-boggling to our founders.

 

The department employs 80,000 people with a $1.3 trillion budget and more than 300 programs. We are twice the size of the Defense Department. We are one fourth of the U.S. Government. Standing alone, we would be the sixth-largest government on earth. That’s right, the U.S., China, Japan, Germany—much to my chagrin—France, and then HHS.

 

[Laughter]

 

Don’t worry, we’ll grow our budget. We’re going to beat France. Don’t worry.

 

[Laughter]

 

      But just because we have got a massive, complicated system, doesn’t mean there can’t be simple principles for reforming it. One of our great presidents, who everybody in this room has such great affection for, President Ronald Reagan applied common-sense solutions to the supposedly intractable challenges of his time, like an overly-complicated tax code and a bloated, broken welfare system.

 

      He had a pithy description of how problems are usually handled here in Washington. “Government’s view of the economy could be summed up in a few short phrases,” he said. “If it moves, tax it. If it keeps moving, regulate it. And if it stops moving, subsidize it.”

 

[Laughter]

 

      Now, for too long, that has been more or less the federal government’s approach to healthcare. We saw it most recently with the Affordable Care Act, which imposed a new tax, or regulation, or sometimes both on just about every moving part in our healthcare system. There was even a tax on not buying the right kind of insurance until President Trump and Congress repealed it.

 

      Last year, 6 million Americans paid over $3 billion in taxes for the privilege of not buying health insurance that they did not want and could not afford. The Trump administration’s first instincts are the opposite of the big government nightmare that President Reagan described. “If something in our healthcare system isn’t working, we’ll see if there’s a regulation in the way. If prices are high, we’ll see if there’s a tax involved. If prices keep rising, we’ll see if there’s a subsidy driving them.”

 

      This thinking has been ingrained in me for a long time. In fact, one of the other maxims that I keep in mind, came from one of my favorite professors I had at Yale, Professor Robert Ellickson.

 

      I found it useful to choose law school classes more by the professors who were most engaging than by the actual subject matter. Which is how I ended up in Bob Ellickson’s land-use controls class. Yes, I took land-use controls in law school.

 

The great lesson that he had for us was this: he would say, “When you take metro north from Connecticut into Manhattan and you see land with burnt-out buildings or land that’s not being put to its highest and best use, even if just as a parking lot, ask yourself the following question: how is the government involved here?”

 

[Laughter]

       

      And, while it’s sort of amusing, that really is a guiding principle for me in thinking about economics and regulation. When things don’t work the way they should, when we ask why the rest of our economy is fully digitized while healthcare isn’t, when we wonder why healthcare lacks the dynamism and consumerism of the rest of the economy, I look for culprits. And so very often, the culprit is government action. Sometimes, from decades or even a century ago.

 

      In some cases, government action may be needed to fix what government action broke. Sometimes, the necessary government action may be strong medicine because markets have become so distorted, or so diminished, and special interests have become so vested in the status quo. And sometimes, our solutions, because of political realities, may be subject to the law of the second best. To use law and economics speak.

 

      Always, however, our actions will be aimed at building markets and competition, restoring price signals and incentives, and empowering consumers rather than having government decide what is best for the individual.

 

      Now, this can be a bit of a contrarian approach to healthcare just as The Federalist Society’s approach is to the legal world. No other country on the planet has a written constitution, federalist system, and respect for individual rights in the way that we do. And no country has a free-market healthcare system respectful of patient choice and open to innovation, like the one that we have.

 

      That doesn’t mean our health system is perfect or even fully competitive. Far from it. Just as with our constitutional system, maintaining the freedom we have in healthcare requires constant vigilance about the unintended consequences of programs and rules that we have and an openness to reforming them.

 

      This is true for each of the four priorities that I’ve laid down for HHS. Reforming the individual market for insurance that Obamacare undermined. Bring down the high price of prescription drugs. Fighting the opioid crisis. And moving to a healthcare system that pays for health and outcomes rather than procedures and sickness. With each of these challenges, part of the problem we face is the unintended consequence of sweeping, centralized government action.

 

      Obamacare usurped the power states traditionally had to run their own insurance markets, imposing new regulations and new open-ended entitlements rather than doing the hard work of building a fiscally sustainable, state-run, consumer-driven system.

 

      In prescription drug pricing, government action has helped create a broken system that works for all of the special interests involved, but not the patient. We’ve got a system where everyone makes their money as a share of a drug’s list price. This means, literally, the higher price you charge, the more appealing your drug is within the channel and the market. Meanwhile, many patients pay their drug cost as a share of these ever-increasing prices.

 

      The opioid crisis had at its root, in part, a hubristic idea about how we can treat pain, which was reinforced by short-sided government payment policies. We seized on quick pharmacological fixes and produced deadly unintended consequences.

 

      Finally, for the last half-century, government regulation has dominated the way we pay for healthcare services. So it’s little wonder that we keep paying more and more for them.

 

      Regulation is one of the most significant sources of unintended consequences. An issue this administration takes very seriously. It’s an issue that some people in this room, I know, actually enjoy talking about. When we talk about the administrative state, we typically think of rules from the FCC, the NLRB, and all of the early 20th century progressives' alphabet soup of agencies.

 

      HHS is attentive to the cost that we impose on market actors with these kinds of rules. In the last year, by OMB's accounting, we cut more economically significant and burdensome regulations than any other cabinet department. That represents $12.5 billion in savings in present-value terms, earning us not just the number one spot, but actually making up half of the entire U.S. government’s regulatory savings.

 

      President Trump set a goal of removing two regulations for every one new regulation imposed. At HHS in 2018, we took five deregulatory actions for every new regulation imposed. For physicians alone, we estimate that our reforms will save 53-million hours of paperwork every year.

 

      But perhaps the most significant federal rules that go through notice-and-comment every year aren’t quite traditional regulations. They’re payment rules issued by our senators for Medicare and Medicaid services. Each year, physicians, hospitals, and other healthcare facilities are told by the federal government—I’m afraid to say, by me—how much they’re going to get paid by Medicare and what they need to do to get paid.

 

      Now, they don’t have to take Medicare. A slice of doctors, often very high-quality doctors, do not. But the size of Medicare is such that, for many, it is a mandatory system, and a system that effectively micro-manages so many of their decisions. We tell them exactly what we’ll pay for and how they need to fill out a form to get paid for it.

 

      Imagine the standard legal process of billable hours. I know, PTSD for all of you.

 

[Laughter]

           

      I don’t have that anymore.

 

[Laughter]

 

      Except, imagine the federal government running that process, and the time you spend to comply takes time not away from a legal client, but from a patient who needs your attention and care. In other words, nowhere does the administrative state loom larger than in the place you’d want it least: your doctor’s office.

 

      So what if instead of sticking with the status quo, we radically simplified these burdens. What if we said, “We’ll pay you a certain amount for each patient you take care of if you keep them healthy? If you produce good outcomes, you can keep the savings."

 

      It’s sort of like being on retainer rather than billing for every hour. Of course, some patients are riskier than others, just like some legal clients are riskier than others. Thankfully, in healthcare, we actually have quite a good system for risk adjustment, which I’m not sure exists for picking up clients.

 

      Most importantly, the more risk that healthcare providers are willing to take on, the less we will micro-manage the work that they do. Let me give you a plain-English example of how this would work. I have a relative who was recently in a rehabilitation hospital. When I was there—it’s hard to be a patient as a health secretary. It’s also very hard to be a caregiver as a health secretary, when that’s known—the nurses kept coming to me saying, “You’ve really got to do something about the staffing ratios that Medicare mandates. The ratio of doctors and nurses on the floor at the hospital.”

 

      So I called our CMS administrator, and I said, “Do we have anything to do with regulating the ratio of doctors and nurses on the floor of a rehab hospital?” She said, “Well, yes, of course, we do. [Laughter] We tell them exactly what has to be done.” And we came back together, here, in Washington, and we said, “There’s a different vision.”

 

      The vision should be, if my relative walks when he leaves the hospital, the hospital should get this amount of money. And, if my relative is in a wheelchair when he leaves that hospital, they ought to get less money. And, other than doing things ethically, we really ought not care how they get from here to there. So, the more risk providers are willing to take as a burden and the more they’re willing to share, then the less we should be micro-managing how they practice medicine.

 

      And this how we’re going to accomplish what those of you who work in healthcare, or follow healthcare policy, know as the shift from volume to value where insurers pay -- the current system of volume where insurers and the government pay for procedures and sickness rather than paying for health and outcomes.

 

      There’s a well-known economic axiom, one I think even lawyers understand, that when you pay for something, you get more of it. When we pay for healthcare procedures, guess what happens?  We get more of them. The federal government simply can’t afford such a system.

 

      Margaret Thatcher had a famous quip that the problem with socialism is eventually you run out of other people’s money. The problem with Medicare today is that we already are running out of other people’s money, and those other people happen to be our children and our children’s children.

 

      The Medicare Hospital Insurance Trust Fund will be out of money just eight years from now necessitating large tax increases or benefit cuts. If you think the federal government spends a lot on healthcare now, consider that, over the next 30 years, the share of our economy spent on Medicare and Medicaid is projected to double.

 

      Reforming the system in the way that I’ve described, towards value, will go a long way toward putting us on a sounder fiscal footing. But as I’ve laid it out, it’s worth remembering how it will also be a huge rollback on the role that government plays in American life.

 

      I want to, now, discuss another area of healthcare where government rules are firmly entangled in how we propose to reform it. Prescription drug pricing. Earlier this year, the president laid out a vision for bringing down the prices Americans pay for prescription drugs using four strategies: more competition, better negotiation, incentives for lower list prices, and lower out-of-pocket cost.

 

      Each of these first and foremost is going to rely on market forces. This includes areas of competition you are probably familiar with, like rapid approval of generic alternatives to expensive brands of drugs.

 

      The Food and Drug Administration has approved a record number of generic drugs the last two years under President Trump. Generic approvals from January 2017 through July of 2018 saved American patients $26 billion in drug spending. According to new numbers from the FDA, we are actually paying substantially less for generic drugs than some other wealthy countries do.

 

      But we could still use more competition and market forces. Today, we prevent Medicare Part D Drug Plans—these are the drug plans that cover spending when the senior walks into a pharmacy for a drug they’ll take themselves—and private Medicare Advantage Plans—these are the private plans that run for one-third of our beneficiaries, their Medicare benefit package—from using all of the tools that private, commercial insurance plans already use to negotiate lower drug prices. We’ve already taken steps to allow these programs to use these same tools, and we’re going to continue this effort.

 

      In bringing down drug prices more broadly, we’re going to rely on market forces, including providing transparency around prices and empowering patients as consumers. But there’re also places where, right now, Medicare pays for drugs with a price-setting system, and there’s no practical alternative that I’ve been able to, yet, find.

 

      For some of the most expensive drugs that Medicare covers—these are the infusion drugs that a physician administers in their office; it’s a separate payment system with a single-payer government system—we currently pay a set price, and yet we set that price at a sky-high level, list price plus six percent effectively. That’s almost double what other wealthy countries pay for the exact same drugs.

 

      So President Trump has put forth a model that will reset the prices we pay for many of these drugs bringing it much closer to what other wealthy countries pay. This is actually a market-based price. It’s not determined by some expert’s idea about what the drugs are worth but rather, using in part, the discounts that manufacturers, themselves, voluntarily agree to sell their drugs to other countries for. 

 

      While such a price-setting system is still not ideal, we can at least make sure that we’re paying a fair price and no longer subsidizing other countries with our investment in research and development.

 

      The reforms I’ve described today in healthcare payments and prescription drug pricing are going to deliver better outcomes for American patients by unleashing market forces and curtailing the footprint of government. This is not to put it mildly, the traditional vision for health reform. Nor is it one that large, incumbent-market actors are always going to be happy with.

 

      But, luckily, we’ve got a president who is willing on healthcare, and much else, to do as Justice Scalia often coached me: to stand against the wind. I don’t think this is because he’s surrounded himself with so many FedSoc members. Though I’m sure that doesn’t hurt.

 

      The president’s willing to deliver change because he understands the need for fundamental reforms to the programs our federal government runs. He knows our system isn’t delivering the results for the forgotten men and women of America, and he’s willing to fix it.

 

      It’s actually an irony of history that we who call ourselves conservatives are willing to shake up a system that is not working, while those who call themselves progressives often stand in defense of the status quo. Systemic reform means asking hard questions. Just as textualists ask not what we want the law to say, but what it really says. We have to ask ourselves not what our government programs are trying to do, but what they are really accomplishing.

 

      Asking these questions and executing on what we learn is the way to reform the important programs that we run. Bring real competition and freedom back to healthcare and deliver the good government that Americans deserve.

 

      Thank you very much. It’s a pleasure to be with you today.

 

Dean Reuter:  Well, thank you, Secretary Azar. There’s another saying about Congress that I like to recite, and that’s one that, “Congress spends money like a drunken sailor." But, of course, that’s unfair to sailors because they stop spending when they run out of money.

 

[Laughter]

 

      But thank you so much for being here. I mentioned at the outset that Secretary Azar skipped out on a White House event to be here, but let’s just make that our little secret in this room. So with that, Secretary Azar, thank you so much for being with us.

 

      If you could remain in your seats while the Secretary leaves. Thank you so much.

3:00 p.m. - 4:30 p.m.
National Security Law & Doing Business Abroad

2018 National Lawyers Convention

Topics: International Law & Trade • International & National Security Law
The Mayflower Hotel - State Room
1127 Connecticut Avenue, NW
Washington, DC 20036

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U.S. businesses operating in the global economy, and non-U.S. businesses operating or looking to invest in the United States, must account for an increasingly prominent national security and personal security law architecture applicable to international trade and investment. Businesses in the United States are both the world’s largest foreign direct investors, and the largest single national beneficiary of foreign direct investment from other countries. But as markets and investment opportunities have become increasingly global, protection of national security interests has become an important consideration for many governments. While the term "national security" naturally conjures up images of military and intelligence matters, the link between trade, investment, and national security has become more prominent for policymakers. Although national security reviews of foreign investment, such as the process conducted by the Committee on Foreign Investment in the United States (CFIUS), perhaps receive the most public and media attention, there are a host of other security-related concerns that must be navigated by companies operating in the global environment: requests to assist the home state government with intelligence and criminal investigations; ensuring that products and services sold outside of the U.S. are done in compliance with applicable U.S. and foreign trade sanctions and import/export licensing regimes; and maintaining data privacy/security and robust cybersecurity protections. Our panel of seasoned general counsels and national security experts will explore the intersection of private sector commerce and national security.

  • Mr. William J. Haynes II, Former General Counsel of the Department of Defense
  • Mr. Timothy J. Keeler, Partner, Mayer Brown
  • Prof. Randal S. Milch, Co-Chair, NYU Center for Cybersecurity; Distinguished Fellow, Center on Law and Security; Professor of Practice, New York University School of Law
  • Mr. Donald J. Rosenberg, Executive Vice President, General Counsel and Corporate Secretary, Qualcomm Inc.
  • Moderator: Mr. Eric J. Kadel, Jr., Partner, Sullivan & Cromwell LLP

Speakers

Event Transcript

Matthew Heiman:  Thank you all. If you could take your seats. Good afternoon. My name is Matthew Heiman. I chair the Federalist Society’s International & National Security Law Practice Group, and we are the group that’s organized this afternoon’s panel. So I want to thank you all for being in attendance, and I also want to thank folks watching us on the livestream for paying attention to what I think will be a very interesting panel.

 

      Before I hand it over to our moderator, I just want to let people know, if you’re interested in the work of the International & National Security Law Practice Group, I can tell you a little bit about it. We do panels like this. We have regular teleforum. We have a symposium or two every year, and we cover the gamut of topics that you would expect given our title. So whether it’s trade, electronic surveillance, law of war, anything in the international or national security law realm, we have experts on our executive committee that really dedicate a lot of time thinking about program in these areas.

 

      So if you’re interested in today’s topic or any of the things I just mentioned, I would love to hear from you. I’m around today, but I’m also on the Federalist Society’s website. So if you want to track me down, if you want to get involved, just send me a note and let me know. We’d love to have more folks engaged.

 

      And so with that, I’m going to turn it over to our moderator who will introduce the panel. Today’s moderator is Eric Kadel. He’s a partner at the Sullivan & Cromwell Law Firm. Eric has a wide ranging practice that covers everything from OFAC to anti-corruption to trade sanctions, a lot of the topics that the panelists will be discussing today. So the moderator has deep expertise and our panelists have deep expertise, so I really thank them for attending. So with that, Eric, the floor is yours.

 

Eric J. Kadel, Jr.:  Thank you very much, Matthew. Can everyone hear okay? The mics -- I guess they’re working. Thanks for coming today. What our -- the formal title of our panel today is National Security Law and doing business abroad, and I’d say that it’s a little bit misleading. As we sort of thought through what we really wanted to talk about today and convey to you, that title became a little bit too narrow. What we’re really talking about, I think it’s fair to say, is the intersection between corporations doing business and seeking to obtain profit and grow their companies in the sort of ordinary way that you think about corporations as profit maximizing entities.

 

      Think about business opportunities within the context of the overlay of national security responsibilities, and you might think, “Well, that seems like an easy choice.” But as you’ll see, in the context of the panel’s discussion today, it really isn’t always that easy. There are a lot of tricky questions that can come up, in particular, for businesses that are doing business across borders. So we think we’ve got a great program for you today, and we really hope you enjoy it.

 

      Just a note on process. What we’re going to do is we’re going to go through our discussion and cover a few different topics through the course of our discussion. At the end, we’ll save somewhere in the neighborhood of 15 minutes or so for questions. If you do have a question that comes up, please write it down or remember it, and then you’ll see there’s two microphones in the middle of the room there. Please queue up behind those microphones, and we’ll take questions in the order of people’s presence in the line. I’ll alternate between the two microphones, so don’t worry about being stuck behind the wrong one.

 

      With that, let me introduce our panelists just very briefly. Obviously, their bios are on the website, and please do take a look at that if you want any more information. But first, two down to the right is Tim Keeler. He’s an attorney with Mayor Brown in the government and international trade group. Prior to joining Mayor Brown, Professor Keeler—and he’s an adjunct professor at the Georgetown University School of Law—he was in a variety of senior positions in the U.S. Government, including Chief of Staff in the Office of U.S. Trade Representative from 2006 to 2009 and then at the Treasury Department earlier in his career.

 

      At the far end of our panel there, we have Don Rosenberg. He’s the Executive Vice President, General Counsel, and Corporate Secretary of Qualcomm, Inc. Mr. Rosenberg reports directly to the CEO, Steve Mollenkopf, and is a member of the company’s executive committee. In his role as the chief legal officer, he’s responsible for overseeing Qualcomm’s worldwide legal affairs, including litigation, intellectual property, and corporate matters. Qualcomm’s government affairs, international audit, and compliance organizations also report to Don. Prior to joining Qualcomm, Don served as the Senior Vice President, General Counsel, and Corporate Secretary of Apple, and before that Senior Vice President and General Counsel at IBM. Don has also served as an adjunct professor. You’ll see this is a theme. He was at New York’s Pace University School of Law, and he taught courses in intellectual property and antitrust law.

 

      Third, we have Randy Milch. He is between Don and Tim, and he’s the co-chair of the NYU Center for Cybersecurity and a professor of practice at NYU School of Law. Before that and most recently before that, he was the Executive Vice President and Strategic Policy Advisor to Verizon’s chairman and CEO and served as the company’s general counsel from 2008 to 2014. At Verizon, Randy chaired the Verizon Executive Security Council, which was responsible for information security across all Verizon entities, and he was responsible for national security matters at Verizon beginning in 2006.

 

      Finally, next to me here, Jim Haynes. He has served in a variety of roles in the government. He was the General Counsel of the Department of the Army and later General Counsel of the Department of Defense and Director of the Defense Legal Services Agency from 2001 to 2008. He’s also been in private practice as a partner in the national law firm of Jenner & Block, and he’s been in house in the biotechnology, energy, and national defense industries with a number of major companies, including Chevron, General Dynamics, CSRA, Inc., and Siga Technologies, S-I-G-A. A graduate of Davison College and Harvard Law School, Jim is an honorary doctor of law from Stetson University and has numerous awards for his public and private service.

      As far as I can tell, Jim’s the only one of us up here not currently or that has been a professor of law. I am an adjunct at GW Law. So with that, let’s just launch into what we’re here for. And just to set the stage, what we’re going to talk about first is an area of law called National Security Review of Foreign Investment, or you might colloquially have heard this referred to as the CFIUS process. In the United States, the CFIUS process is a means by which foreign investors who come in and obtain control, or as Tim will explain a little bit, in certain sectors, if they just have a minority investment, may need to go to an interagency grouped chaired by the Treasury Department and obtain a review of that investment for national security reasons.

 

      And there’s a wide range of options that CFIUS has in evaluating a transaction, including, potentially, referral to the president. I’ll start with this first question to Tim. So Tim, very recently the Foreign Investment Risk Review Modernization Act, or FIRMA, was overwhelmingly passed by Congress on a bipartisan basis following extensive negotiations with the administration. And President Trump signed it into law in August. FIRMA substantially reforms the CFIUS process as we know it, and FIRMA was described by a number of legislators, including Senator Cornyn, who was the principle sponsor of the reform initiative, as designed to address both gaps in the pre-FIRMA CFIUS process and to address serious concerns that China and other foreign countries may be seeking to obtain leading edge American Technology, both established and emerging, and to leap-frog the United States' advantage in technology.

 

      Can you tell us a little bit about what happened in FIRMA? What was it all about? How did FIRMA end up becoming both FIRMA and the Export Control Reform Act? And how did it change the CFIUS process that we know?

 

Timothy J. Keeler:  Sure. Again, thanks, Eric. Thanks to the Federalist Society. Thanks to my panelists for being up here. So as Eric started to lay out, a lot of what’s driving changes in national security law and policy are really this big shift going on both in the presidential level and in the national security bureaucracy about its view of China and what to do about China as a potential adversary that is different than what the Soviet Union was. And CFIUS is -- in some ways, this bill that passed is Congress’ imprint on it, so I’ll talk about CFIUS. I’ll talk a little about export control, and then I’ll talk a little bit about some of the sort of new and emerging national securities and technology issues that are arising.

 

      So CFIUS applies to the acquisition of "control" of, as CFIUS defines it, of U.S. businesses by foreign persons. That’s what called a cover transaction under CFIUS, and that is this recent enactment of the statute changing. That was the general rule, and they were technically voluntary filings by parties. I say technically because if you’re a Chinese investor and you wanted to put in a billion dollars buying a U.S. company and it had any sensitivity at all, which these days pretty much means any company the Chinese really want to invest in has a risk of being considered sensitive by the U.S. government, you would want to get a letter from CFIUS saying that they are okay with this transaction. If you don’t, then it’s possible the President of the United States could force a divestiture, meaning you have to essentially do a sale, a fire sale, or they could impose terms to -- change material terms of the deal to take care of national security considerations.

 

      So while it was technically voluntary, and still in many transactions it is still technically voluntary, there’s a huge incentive for parties to want to file before they actually cut the check. I used air quotes for the word “control” because CFIUS keeps it deliberately ambiguous. It’s different than market definitions of control. You might think of control as 51 percent. That’s not what CFIUS views it as. CFIUS’s only bright line has been, thus far, less than 10 percent and passive is not control, so anything above 10 percent and anything non-passive, one board seat, could be considered control. And as I’ll get into, they’ve even gone farther than that in the new statute.

 

      There’s been significant scrutiny of China in the past ten years. This pre-dates Donald Trump. In the Obama administration, there was heavy scrutiny, in fact, blocking of post-transactions where Chinese companies would gain control of U.S. semiconductor companies. And then, since the Trump administration has come in, Chinese investment has dropped dramatically into the U.S. Chinese CFIUS filings have also dropped dramatically. There’s been, I think, a lot of -- made up for it by other foreign investors from pretty much everywhere else in the world, but Chinese investors have definitely been spooked by the Trump administration in the past almost two years.

 

      CFIUS is also concerned with state control of foreign investments as a general proposition. You may recall over ten years ago there was a lot of public outcry about potential takeover of Unocal, an oil company, by CNOOC, and also Dubai Ports World attempted takeover of some ports in the United States. So more recent concerns are any U.S. businesses in the tech space, anything -- companies that hold data, especially personal data, companies that have physical locations that might be near sensitive military assets.

 

      A great example is CFIUS actually blocked the acquisition of, I think, it’s the Hotel del Coronado in San Diego. If you’ve ever been there, you can see there’s Marine jets flying right in that area that you can see from the hotel, and they blocked that purchase. So really, you can’t -- ten years ago, I might have said, “Hey, if you’re buying a hotdog stand, it’s not that sensitive.” But if the hotdog stand is on a military base, in fact, it can be.

 

Eric J. Kadel, Jr.:  It depends where it is. Exactly.

 

Timothy J. Keeler:  So one thing the Chinese started doing was shifting away from acquisitions and started to do licensing deals and licensing deals of technology that wouldn’t meet certain export control thresholds. And this really made a lot of the defense agencies nervous because they weren’t having to ask -- the parties were not having to ask permission from either CFIUS or from export control authorities before they got their hands on this technology. You might be able to build it back up on the other side.

 

      And they had sufficient concern that, in fact, I think they started talking to Senator Cornyn and that’s why he moved to expand CFIUS jurisdiction, both to cover small investments in the U.S. that weren’t passive, less than 10 percent non-controlling, and also expand CFIUS jurisdiction to cover, essentially, outbound movements of technology. That’s what the bill would initially do. A lot of business -- U.S. businesses were very concerned with the breadth of that. The final version moved that outbound piece to a new export control process.

 

      So for the most part, the bill has been enacted but not fully implemented. It expands CFIUS jurisdiction to, as I mentioned, small, non-passive investments. For example, you could have just 5 percent plus one board seat, and CFIUS would -- could have, if it’s in a sensitive sector, jurisdiction to block that or investigate it, at least. It creates a new short form declaration to sort of make one thing potentially easier for some businesses where they don’t have to do a full filing, but they can get CFIUS’s blessing and the safe harbor that might go along with that.

 

      It mandates that certain parties that have -- where governments have substantial interest in them are mandated to file when they’re investing in the U.S. Also, it granted authority to CFIUS to mandate -- make other transactions mandatory, which they had started to do with a pilot program that actually just went into effect this past weekend. On the export control side, what Congress decided to do was create a new category of export controls called emerging and foundational technologies. They didn’t really define it, but I think the general gist of it is they wanted to create a process where the Executive Branch could move more quickly to control uncontrolled technologies. And through the normal course of action, it might take too long to do, so either unilaterally or through multilateral export controls.

 

      I think, as we go forward, it’s going to be very important to watch not only how the administration implements the new CFIUS rules, and we can talk more later about the pilot program they rolled out, but also when they start to implement these new export controls, how far do they go, what do they do. And I think it’ll also be interesting to see how the administration handles, from a broader perspective, some new and emerging issues in the national security and technology space that might arise in, say, government contracting. For instance, Amazon seems to have a pole position for DOD’s new cloud-based classified web service.

 

      At the same time, they’re providing very similar services in China. And even if one assumes a lot of the IP’s protected, does that -- having those two customers with very similar programs, does that raise vulnerabilities just by dent of being a customer on both sides of the Pacific that we may not have been concerned about in the past? It certainly -- I think we’re going to see a lot more of cases and instances where those types of new issues really raise concerns.

 

Eric J. Kadel, Jr.:  Great. Great. Thanks very much, Tim. And, Don, if I could turn to you next, and I’m sorry if this is bringing back some bad memories from earlier this year, or maybe it’s good memories, but in any event, memories. Tim’s laid out for us the sort of jurisdictional framework of what CFIUS is, what CFIUS does and the process, but you’ve got some real, real world experience with CFIUS process. National security law played a profoundly important role in how Qualcomm does business at home this year, or, I guess, last year.

 

      CFIUS took the extraordinary step of actually blocking a hostile takeover of Qualcomm by Broadcom and calling the proposed transaction “a risk to the national security of the United States.” Can you tell us a little bit about what elevated this business conflict to the statues of a national security threat?

 

Donald J. Rosenberg:  Sure. First, I just want to thank the Federalist Society. They have been extraordinarily supportive of, in particular, property rights, which we at Qualcomm believe very strongly in. And that includes intangible property rights, and that has been going on for years, actually, not just recently. That is the Federalist Society’s support, so I just wanted to throw in a word there of thanks. Yeah. So the business conflict, and it was this year. I was actually thinking about that. It seems like --

 

Eric J. Kadel, Jr.:  It seems like a long time.

 

Donald J. Rosenberg:  -- three years ago, but it was just this year. And it actually is a good memory, not a bad. I’ve got enough bad memories from this year and the last couple of years that this is actually one of the good ones, although extremely interesting. And it was a tough one. So it goes back -- let me give you some context. The business conflict, as I recalled it, was the classic hostile takeover, which you don’t see much of these days. And it was Broadcom’s attempt, and Broadcom’s Chairman Hock Tan, to acquire Qualcomm.

 

      It was a surprise letter I received in the middle of the night with no prior notification, other than about a year before, Broadcom had approached Qualcomm to see if we were interested in discussing some form of merger or some other form of get together. But that had been dropped for quite a while with no further discussions and certainly no further interest on our part. So we received the letter. It announced the intention to launch this hostile. It had an offer in it for a price that was above our market price at the time, but not anywhere near, in our view, what the company was worth.

 

      There were quite a few other reasons why the company was ultimately not very interested in that deal, but there was, I think, an assumption, since it was a hostile takeover and since Broadcom had just recently, days before having sent that letter, met with the President in the White House and declared that they were going to redomicile. Some people think they were a Chinese company. They were a Singapore company, and they said they were going to redomicile to the United States. So the assumption on the part of those who were focused on the possibilities of CFIUS was that, well, that shouldn’t be a problem now. They’re going to be a U.S. domiciliary, so not an issue.

 

      I, on the other hand, started to think about a number of questions relating to their hostile takeover, and one of them was I had had some inkling of an understanding that Broadcom had recently been trying to acquire a smaller company called Brocade. And the history of that was that it was examined by committee, the CFIUS committee for, I think, about a year. And I understood very little, but my information was that the committee was going to object to that acquisition, presumably on grounds that CFIUS would be concerned about. And it was only as a result of that White House meeting and some promises that Hock Tan of Broadcom made, including the redomiciling, that the President, in his prerogative, basically said they were going to approve that acquisition.

 

      But I had a sense that the CFIUS committee, which Tim can describe, is made up of multiple agencies in the United States chaired by the Treasury Department. The CFIUS committee, I think, was left with a somewhat of a bad taste in its mouth in terms of the Brocade deal, so that was an inkling to me that I might have some interest there. I also did some research on CFIUS. I had not focused on it as much as I’ve since focused on it, and it occurred to me that there might be a view that, with a hostile takeover -- normally what happens is the companies are merging, or there’s an acquisition that’s ultimately agreed to. And the two companies basically notify the committee so that it can get the approval that Tim was talking about before. But this was a hostile, and we were clearly not going to go in jointly.

 

      And it appeared to me that Broadcom had no intention of raising the issues because they thought they had satisfied the requirements by saying they’re going to redomicile. But after looking into it, I decided that there is a chance that we could be viewed as a covered transaction here. And even if this deal was to go through, whether we accepted it or whether they successfully completed the hostile, it was important to our company and to the shareholders to know whether there was going to be a CFIUS issue here. So we engaged with the committee on, I guess, an informal basis to ask some questions and to raise some concerns. And we found that, indeed, the CFIUS committee was, in fact, interested in this; although, it was a kind of sui generis problem for them.

 

      And it was one of the issues that actually lasted right through the very end of the process, which was -- well, Tim mentioned control, and there’s a different control definition here. But a lot of people were saying, “Well, let’s see. Suppose, now” -- I’m sorry. Broadcom had put up a slate of directors, so going forward, they wanted to have their slate accepted when we decided we weren’t going to accept their hostile takeover. And they wanted to be victorious at our proxy meeting and get their slate of directors in. Presumably, that slate of directors would be more willing to do the hostile. In fact, Broadcom had selected each one of these directors, as well as paid each one of them $100,000 a piece. But still, the notion was, well, these directors will have fiduciary obligations. They can’t just simply vote the way Broadcom wants them to vote.

     

      And my answer to that was I suppose that’s possible, but they were hand selected. They were each paid $100,000, and they have been inundated with everything we’ve been inundated with in terms of the benefits that Broadcom said would be reaped as a result of this transaction. But the CFIUS committee was wondering will they actually have control if they were to win the proxy contest. Because, remember, they would just be new directors; they wouldn’t be -- it wouldn’t be CFIUS. They wouldn’t work for CFIUS. So that was one of the -- that was one of the hurdles we had to get over.

 

      And, of course, when I say “we,” I just was, and my team, was trying to educate them. They were asking a lot of good questions, and we were giving them all the right answers, I think. So I’ve tried to cull this down because it was a three or four month story. As anyone who’s been through a hostile knows, the process that ensued after that hostile was revealed to us was, to put it mildly, all consuming. You have to deal with shareholders, particularly institutionals and index funds. You have to be concerned about ISS and Glass Lewis because what you’re trying to do is preserve your company as you think it ought to be preserved versus giving it away to the hostile.

 

      So we were faced with, in a short term, a very difficult and taxing question. And, of course, the main thing that our shareholders were interested in, at least in the short term, was the fact that market cap would increase, presumably, dramatically if the hostile was accepted. They even at one point raised their price when we rejected their first bid, and so raised it even higher, which, of course, attracted even more interest on the part of our shareholders. We were, of course, interested not just in short term, but in the long term, and Hock Tan had made it very clear -- and he had a history of acquiring other companies and selling to private equity interests and basically getting some short term return. He had made it clear that he was going to reduce, fairly dramatically, our investment in research and development.

 

      Now, Qualcomm spends over 20 percent of its revenue every year on research and development. For those of you who are aware of what companies generally spend, that’s an enormous percentage of revenue. Companies like Apple spend something in the range of three to four percent of their revenue per year on research and development. And our research and development is closer to pure than a lot of other companies. 70 percent of our employees are still engineers, and we started as a research company and a company that really wanted to develop system-wide mobile communications technology. We’re known now for the chips we sell. We started with modems, the connectivity chips, and now we sell a complete application process there, along with integrated connectivity technology. And, of course, our second business is licensing.

 

      The R&D that we spend is part of what we think of a virtuous cycle. We invest in inventing technology. We protect it with patents. We then license those patents, having contributed our technology to the standards bodies, which control the mobile communications industry. And we agree, when we contribute that technology, to license our patents on what are called fair, reasonable, and non-discriminatory terms. That research and development is basically funded by the royalties that we collect from that virtuous cycle I just described. So it was clear that if the research and development was going to be dramatically limited, we were going to have to dramatically -- or Broadcom would have to dramatically decrease its investment in research and development going forward.

 

      So cutting a lot of pieces out of here, eventually the committee, CFIUS, issued what was an interim order, along with what’s called a "Ralls" (sp) letter to us. And I want to -- I brought them with me because I just want to give you some sense of this. So the Ralls letter talks about “having sought review of this Broadcom solicitation of proxies, the Department of the Treasury broadened the scope that it originally thought it was going to look at to review the proposed hostile takeover of Qualcomm, the entire hostile takeover.” They said -- they concluded that “It could very well pose a risk to the national security of the United States.” Now, what they do when they examine one of these proposals is they go through a process of looking at each party and determining what impact, if any, from a national security perspective in particular, the transaction might have on the United States.

 

      They said that "CFIUS had identified potential national security concerns that warrant a full investigation of the transaction, and the articulation of the potential national security concerns, in significant part, is classified." They then talked about how Qualcomm is a leader in the technology and standard setting. They talked about the risks that would be posed to the United States’ national security if Qualcomm’s ability to invest in technological leadership was in any way limited. There was a lot of focus on 5G. Those of you who were in one of the last sessions with Ajit Pai, he talked a lot about 5G and its implementation.

 

      We, Qualcomm, are at the forefront of inventing what will be the technology of 5G. We’ve been doing it for close to a decade now. 5G is a continuation of 4G, which was a continuation of 3G. There are new and great things associated with it, but there’s a lot of investment that goes into reaching that. It was clear that the committee was very concerned about what was coming in the form of 5G and whether the U.S. was going to maintain leadership in the standard setting process in mobile communications. As opposed to, and they said specifically “the weakening of Qualcomm’s position would leave an opening for China to expand its influence on the 5G standard setting process. A shift to Chinese dominance in 5G would have substantial negative national security consequences for the United States.”

 

Eric J. Kadel, Jr.:  And that was actually in the Ralls letter that the committee provided?

 

Donald J. Rosenberg:  Yup. And I’m taking this opportunity because I’m kind of doing a little bit of a sales pitch for the importance of Qualcomm and the importance of Qualcomm’s investment in technology. They then focused on Broadcom, and in particular, Hock Tan’s statements -- numerous statements to the press, and they all related to, one way or the other, the reduction of research and development investment and the need for short term improvement of the stock price. I’ll read one more paragraph from this letter, which I think is important.

 

      “U.S. national security also benefits from Qualcomm’s capabilities as a supplier of products. For example, the Department of Defense national security programs rely on continued access to Qualcomm products. Qualcomm holds a facilities security clearance and performs on a range of contracts for United States government customers with national security responsibilities. Qualcomm currently holds active sole source classified prime contracts with DOD. Additionally, Qualcomm currently holds unclassified prime contracts with DOD. Qualcomm’s partnership with the United States government encompasses efforts to address cybersecurity in the next generation of wireless, 5G, and the Internet of Things. Limitation or cessation of supply of Qualcomm products or services to the U.S. government could have a detrimental impact on national security.”

 

      So having made it clear, and the order is as clear, if not more clear, that accompanied the Ralls letter, that Qualcomm was not only important to national security but was a trusted partner to the U.S. government. And they reference both classified and non-classified activities. They decided that they would have to, at least, try to slow down the process, and in an extraordinary step -- extraordinary for those of us who spend time in corporate governance and thinking about proxy battles, they issued this order which accompanied the Ralls letter. And we were ordered that we could not accept Broadcom’s proposed merger, at least in the interim while the review was going on, and that Broadcom shall provide CFIUS with five days business notice before taking any action toward redomiciliation in the United States while this order in affect.

 

      And just as a side note, I’ll tell you -- so I was laser focused on everything going on and everything they were doing. And one of the things I did was -- the steps they had to take, I determined, to redomicile involved both court action in Singapore and then ultimate action with the SEC hear in the United States. So one of the things I wanted to do was follow what was going on in Singapore, so we retained a Singapore law firm  just to watch the dockets. It was clear to me that after, I think, it was like two months since the declaration had been made that they were going to redomicile, they had not taken one step to redomicile. Now, that didn’t say they weren’t going to, but it was a helpful fact for us to take a look at.

 

      And it also helped in terms of -- what I said to the committee is “If in fact their slate is voted in in our March meeting, and they still haven’t successfully redomiciled, now you’ve got a situation where you do have a foreign entity, if you accept the notion that they then gain control—and control, as Tim said, is a looser standard than we’re all use to—then now you’ve got a foreign entity, not a U.S. entity that is acquiring Qualcomm.” So that was, I think, of great interest to the CFIUS crowd as well. Now, Broadcom made a very belated attempt to speed up their redomiciling, but it was too late because, among other things, the CFIUS committee concluded that they had violated this interim order. And all of this, actually, took place within a week, or about a week.

 

      Less than a week after this order was issued, we ultimately got our final order from the President, signed by the President, prohibiting, permanently, the merger of the two companies. Now, there’s a lot more to it, obviously, and there’s questions you should have in your mind of what specifically was it that they were concerned about vis-à-vis us, vis-à-vis Broadcom. That I won’t get into, but that’s pretty much -- that’s how a business conflict became a very interesting matter of national security and a CFIUS issue.

 

Eric J. Kadel, Jr.:  Yeah. Thanks very much, Don, and that was really an interesting explanation of the process that we all saw unfold in the news. I know that you have something you want to say about sort of the other direction of the coin, but if you don’t mind, right now I’d like to sort of switch gears, change direction away from the national security concerns associated with foreign investment or outbound investment and tact towards a different angle to the national security questions that we’re addressing today. I’m going to address these to -- these questions to Randy.

 

      Randy, in many cases, U.S. corporations may be called upon to assist governments in criminal investigations or intelligence operations. And this can take various forms, including requests to provide information in the corporation’s possession or in connection with data protection or the response to data breaches, cybersecurity incidents. Can you tell us a little bit about how these issues can present themselves to corporations and how corporations might respond?

 

Prof. Randal S. Milch:  Sure. Thank you very much. It’s a pleasure to be here. The landscape surrounding dealing with government requests for information or assistance, and assistance is its own separate interesting issue, has changed very markedly in the last decade. And some of these things are obvious when you think about them, but hopefully you guys don’t spend that much time thinking about them. The reason that it’s changed is a few fold. It used to be that the government requests for information from companies was concentrated in a few areas.

 

      The government used to go ask for banking records, financial records. The government used to go to communications companies to get communications records, and the communications companies had landlines. And they eventually had wireless thanks to Qualcomm and Don, and those were the centerpieces of government activity as a general matter. I think if you looked overwhelmingly at where the requests came, that’s what you would find. Obviously, we’ve had something called the internet for quite a while, but the internet has become a far more pervasive aspect of everyone’s life over the last decade.

 

      And wireless and landline are now predominately, I would believe, convenient access points to the internet as opposed to the end-to-end communications network that people are looking at. And the internet, of course, has transformed transactional life. It’s transformed our communications life. It’s transformed our social life on the nation as a whole. Not my social life, but other people’s social lives. The result of this is a few very important things. It means that the ones and zeros that the government is looking for are now much more widely dispersed than they used to be. Right?

 

      So the ones and zeros can end up to be in a lot of different places when the government is interested in an intelligence investigation or a criminal law investigation or something that’s a little bit of both. And we’re looking now at social networks. We’re looking now at any company that basically has transactions over a platform and maintains data about the activities of someone who might be of interest in an investigation. And it’s no surprise to any of you that this is getting more and more pervasive when you have warrants now for information that might have been passively collected by your Alexa in-home "spy." I don’t know what else to call that machine that sits in your house and monitors what you say and at times, seemingly blurts out words from the devil without bidding, which is why I unplugged my Alexa.

 

      This transformed landscape, the landscape that has much more data, much more widely dispersed, much more intimate data, raises a few issues for an in-house counsel, I would think, and for all of us to think about because we are very much at a stage where the limits of government action and the intersection with private industry, where we have to remember that in the United States, unlike almost everywhere else in the world, 80 to 90 percent of all the data, all the infrastructure, everything the government’s interested in are in private hands.

 

      This makes the United States somewhat unique as in comparison to the rest of the world. So there are a few items that this raises that I would set out for your consideration. First and foremost, I think from the standpoint of a company who may find itself with data that could be of interest, number one, you’ve got to figure out are you a company with data that might be of interest? Because many companies don’t do that, and many companies are startled when they get the first request from the government for data. And the general counsel, who may be a perfectly good startup guy or may be someone who came along with a merger or an acquisition or may be someone who does IP work, or whatever it is, he may be a little shocked at getting that -- when the warrant or the subpoena or what we call a D order shows up on the door and you have to figure out what to do.

 

      So number one, it’s worthwhile if you are in the information business—among the very many things that it’s worthwhile to do if you’re in the information business, including not having so much damn information so you don’t get hacked. But we’ll put that side for a second—is am I likely to be of interest to the government? If you think you are likely to be of interest to the government, or potential interest to the government, because you have data that could be of interest in an investigation, you have to take the next step. The next step is what is my posture going to be when I get a request? We have all seen that there are companies that have decided that public opposition to government requests is good for marketing.

 

      We have seen companies who didn’t think about this but all of a sudden find that their employees are up in arms when it comes clear that there’s a request for data, and they have respond belatedly to employee pressure. We’ve seen companies who have seemingly taken steps to make it impossible for themselves to respond to government requests by the way they’ve implemented certain technology. So it’s important to have a theory about this, is my view, and it’s important for that theory to be a theory that the board supports because you will quickly find yourself, or could quickly find yourself, with a lot of unwanted publicity about this particular question, which is something that is going to get a lot of people upset. And you’re not going to make a good decision when everyone’s upset about this. You’re just not going to make -- you’re going to make a very reactive decision, and that’s not the way that you should do that.

 

      I think the significant increase in -- part of this is the significant increase in interest across the board of privacy, data subject privacy, the people who are supplying all that data that might be of interest to the government, and what kind of promises companies might make to their customers about the privacy of their data. I would think that any company that is coming up with a reasonably accurate privacy policy would have to say that the privacy of the data is subject to getting processed by the government. But this all comes together in a question of what your posture is going to be.

 

Eric J. Kadel, Jr.:  How might they handle -- so sometimes, the government will come with formal process. It’s a search warrant or something else, but sometimes they’re will be a request to sort of collaborate as I --

 

Prof. Randal S. Milch:  Well, I was going to get to that. Let me finish up with --

 

Eric J. Kadel, Jr.:  Yeah, yeah. Sorry.

 

Prof. Randal S. Milch:  -- formal process. I do have that as my last point. I would urge folks to get a lawyer that’s up to date on this because the law is in flux in this area. It’s not -- we just had a Supreme Court case that came out, the Carpenter case, which made a very interesting exception to what had been pretty well accepted 40 years’ worth of law in the third party doctrine. Now, there’s an exception for anything more than -- and a very carefully cabined exception for anything more than seven days of location data from a cell site. Go figure.

 

      But these devices have pushed the courts in a lot of ways because of the huge amount of data that are encompassed in them and the huge amount of data that’s available and the concern that data analysis would permit the government too easily to get far too much information about an individual. And it’s a long standing theory of how we deal with the government looking for information that there should be friction. The government shouldn’t have it too easy, and this is something that the left and the right agree on. They come back to the center on this and from very different approaches. But the notion that there should be friction and it shouldn’t be too easy is a long standing concern if you go back and you read the cases.

 

      So you need someone who is up to date on this because the law is constantly changing. Again, this comes back to your posture. Are you going to publicly refuse? Are you going to get into a fight like Apple did with the FBI over the phone -- over the county owned phone in the San Bernardino -- in the wake of the San Bernardino terrorist attacks. So this is something that comes up to things. Let me turn to this notion, if I could, if I still have time --

 

Eric J. Kadel, Jr.:  Yeah.

 

Prof. Randal S. Milch:  -- about this question of assistance. So assistance comes up in a couple of different ways. I’m putting aside for a moment being a government contractor. So if you have a contract to the government, obviously, if you’ve done your work, you’ve set out the meets and bounds of what your obligations are to the government, and they have expectations for you. Not that that wouldn’t make you an interesting potential "partner," quote/unquote, for extra contractual or other assistance. It might because they know you and you have -- your people have friends who are in the government, particularly if you do classified work. You’re going to have -- there’re going to be some very close relationships, and those are the -- one root in which these requests come in is from your government contract handlers.

 

      Somehow, your name gets passed around, and people you don’t normally deal with all of a sudden are at your door to ask you for assistance. Assistance, by the way, comes in the warrant arena as well. Title III has an assistance provision. The FISA Act, FISA has an assistance provision that tells any company, basically, that it has to provide suitable assistance in carrying out a FISA warrant. So you could be asked for assistance even if you’ve put in place protective measures -- measures to protect the privacy of your customers’ data. You could be asked for assistance to undo those measures, and that indeed was the crux of the Apple FBI question.

 

      It wasn’t about encryption, per se, but it was about the additional safety requirements that Apple had put in place to slow down and prevent brute force attacks on the data that’s in the phone. So let me turn to this question of assistance because I think, again, it is a naughty corporate decision, assistance. I’m going to be careful to state this in appropriate fashion. The first thing you should remember about assistance from the government is that if it is secret or covert and you believe that, you’re an idiot. There is no such thing as a secret, and particularly if it is secret, that makes it all the more likely that it’s going to be disclosed.

 

      So you can’t operate on a theory that any assistance to the government in the course of an investigation, in the course of some covert activity, in the course of some assistance in a covert activity -- God forbid that you actually agree to do something covert. I think you probably should be disbarred and kicked out of the company if you actually agreed to put your people in harm’s way that way. But there could be -- there are lots of assistance aspects that you might think are very safe. No one will ever know. Not a problem, right? And then you have a Snowden or you have -- and for some reason, the government allows someone to leave with reams of data. And your name’s all over those, and it’s a bad hair day all around.

 

      So number one, it’s not going to stay -- if they tell you it’s secret, it’s not going to stay secret. So anything you agree to do has to be something that you’re willing to see on the front page of the New York Times, which is the old rule about everything you do, right? If you don’t want your mother to know about it or you don’t want it to be on the front page of the New York Times, don’t do it. And the -- so the question really comes to, you know, in the case of something that might be classified, how are you going to brief your board? How are you going to brief your boss, if your boss doesn’t have the suitable clearances?

 

      Getting a clearance is a pain in the butt, and these days it takes forever. Now, you can demand that, if they’re going to ask you to do something, “I want a clearance for this person for this day.” And low and behold, people have that power to do that, but it’s significant. And getting a board, are you going to have a special board committee? Many companies that have lots of classified contracts sometimes have board committees that are cleared so that there could be board oversight of these activities. All in all, I think that, from my own view, is that when these requests come in, which they do, they have to be very carefully considered.

 

      After all, in the best of circumstances, this is an important thing to do. The government is doing something important and necessary. That’s in the best of circumstances. Without having any other data, which you are probably not going to have because there’s a real data asymmetry when you’re dealing with these issues, you’re being told this is the most important thing in the world and lives depend on it, etc., etc. You know, you’re going to have to take this seriously because they could be telling the truth on that. They could also be lying on that, or not lying. They could be exaggerating. I think that’s probably a better way of saying it. I wouldn’t say that anyone’s lying; they’re exaggerating. So you have to figure out a method. If this happens, you have to figure out a method.

 

      And again, this is one of those things. I don’t think this is a very likely scenario for the run of the mill company. I do think it’s a potential scenario in an interconnected world. You never know where the potential nexus of a bit of information or a bit of transaction might cross Company X’s portals in a way that they could be of assistance but not in a way that really gels into one of the standard forms of process that the government could give to provide you with appropriate protections from lawsuit, appropriate protections that the request has been vetted, and appropriate protections that it’s been vetted by someone neutral like a judge.

 

      Those are all important protections for a company that agrees to do or respond to the government, right? The neutrality of the judge signing off on a warrant or an order is an important set of protections for a company. If it falls outside any of the standard ways that things can happen, that’s a much more significant set of risks that you are potentially undertaking for your company.

 

Eric J. Kadel, Jr.:  Great. Yeah. Go ahead.

 

William J. Haynes II:  Can I ask you a follow up?

 

Prof. Randal S. Milch:  Sure.

 

Eric J. Kadel, Jr.:  Just go into the mic.

 

William J. Haynes II:  Sorry. Randy, you talked about commands from the government, and you talked about requests from the government. What about when the government comes in and just sort of lays something on the table and walks away?

 

Prof. Randal S. Milch:  Yeah. That happens at times. That certainly happens in the cybersecurity realm. That happens in other instances when they think you might be unknowingly dealing with someone you shouldn’t be dealing with. It’s like any other information, Bill. You’ve got to take it -- you’re going to immediately give it a little bit higher priority in the sense that you can’t imagine why they would be coming at the door if it wasn’t a serious matter. I don’t know about Don, but I certainly got those phone calls. I got those phone calls from generals in the Pentagon at times, you know, reaming me out for putting out RFPs that had, God forbid, included Huawei and ZTE. And how could I possibly do that?

 

      But I think that you have to take it seriously and you have to deal with that set of information like any other. Of course, you’re in a little bit of an awkward position if you are a government contractor because that tends to -- that potentially can influence the way you respond to things that are a little bit out of the ordinary from the government. You’re going to have sales people, and you’re going to have revenue targets, and you’re going to have all those other things. And people are going to say “How can you jeopardize that?” That’s when you have to be a general counsel and sort of say "No," or “This is why we’re going to worry about it.”

 

William J. Haynes II:  Or ask for a commander.

 

Prof. Randal S. Milch:  Right. Oh, absolutely. If there’s a way to ask for -- you’re nuts if you don’t demand process if there’s a way to get process. You certainly, if there’s a potential for process and you can work with the government if you have the right people in-house or you find the right people outside, to very creatively insure that appropriate process is done and modifying -- they’re even willing to modify existing forms of process if the matter is significant enough or get you something called a 2511 letter, which basically says no process is necessary. But you get the same protections, if it’s important enough. If that is a potential route, you’ve got to be sure you do that because, otherwise, you’re putting your company at even higher risk because there’s the absence of something you could have gotten.

 

Eric J. Kadel, Jr.:  Great. Thanks very much. Don, I know this is horribly unfair, but if there’s any way to do it, I’d like to ask you to just spend maybe five minutes, maybe ten just talking a little bit about the other side of the coin, I’ll call it, which is when Qualcomm’s going out and doing business abroad and dealing with other jurisdictions, are there situations where Qualcomm can be asked to essentially force or be forced to transfer technology? And if there is, is there anything that the U.S. can do about it or should be doing about it?

 

Donald J. Rosenberg:  So we have -- we’ve never been asked to transfer technology. We wouldn’t if we were. We, of course, as I said before, we license the right to use our patents. We support our products with some level of technology, whether it’s software or even physical people onsite to help them. And we haven’t—I don’t know if this is where you want me to go—but we haven’t been the subject of taking of our trade secrets to the best we know. Occasionally, of course, but not a systemic government taking of our property.

 

      The way governments, foreign governments have actually taken our property -- so I shouldn’t say they haven’t, but they have by employing different means, sometimes under the color of law. So most significantly, we’ve had issues in Korea, in China, in Taiwan where the governments have basically said we’re going to use our antitrust laws, or our competition laws, to regulate what you can transfer or how much you can transfer it for. For example, we spent 15 months in China being investigated by the NDRC, which was one of the agencies that enforced the anti-monopoly laws there.

 

      Now, the NDRC was an agency that existed -- it pre-dated the anti-monopoly laws and it was the China price regulator. That’s literally what its job was and is because China, unlike the United States, is a regulated country. So the NDRC was in the business of regulating prices. When the AML came out, the anti-monopoly law, came out, they had a provision in that law very specifically that said, unlike, again, the U.S. -- that said they could regulate excessive pricing. And excessive pricing wasn’t defined, so presumably the enforcement agency was going to define excessive pricing in any given case.

 

      And the NDRC, in its role as a price regulator and now an enforcer of the AML, chose to use that provision to claim that we were charging excessive prices for the royalties that we charged for use of our patents, standard essential patents and non-standard essential patents. And that was the start of a 15 month exchange, which ultimately resulted in a fine of close to a billion dollars for us and a recasting of our licensing program in China, for China, but in a way that we ultimately found was acceptable to us. And we were successful in actually turning back several of the concepts or misapprehensions they had about our program. For us, it turned out to ultimately be a good deal because we ended up with a better relationship in China with what was called a rectification plan, which basically was us abiding by the new regime that we had agreed to.

 

      And we modified, as I said, our licensing program to some extent in China, for China. And the result of that was -- one of the problems we had had before that, and this is kind of not government taking but company taking. One of the problems we had before that is there are enormous numbers of device makers in China, what we call OEMs. You wouldn’t believe how many there are, and we wouldn’t know about them unless somehow somebody told us about them or they came knocking on our door. So we had a lot of companies who weren’t paying for the intellectual property they were using.

 

      Of course, it’s patents, and as we all know, there’s no way of stopping the use of patents. We publish everything associated with it, and if they want to infringe the patent, they can infringe them. We just have to find them and then take some legal action in a place where there’s a rule of law that you can apply. So we didn’t know about a lot of the OEMs, the device makers in China. After we finished the resolution with the NDRC, we’ve subsequently signed up an additional 150 licensees in China, admittedly under the new terms, which were something different from our old. But all in all, it was a net positive for us.

 

      The same thing has happened to us -- we have a case in Korea, KFTC. They followed China. They fined us close to a billion dollars. That one didn’t end well, so we’re appealing that in the court of appeals. We think there’s a lot of problems with that, not just substantive procedural, and that’s a wonderful case of lack of due process. If we had time, I would tell you about the process of the hearings in the KFTC. And in Taiwan, they followed suit as well, and it was literally almost a “me too” process. In fact, in Taiwan there was newspaper articles about legislatures asking “When are we going to get our billion dollars?”

 

      So it was taking under color of law I guess is what I would say. But there’s no question that when you deal with different cultures, they do come at things differently than the way we do, and part of it is just understanding their perspective. Now, I had no doubt that there was a large degree of industrial policy being implemented and protectionist activities. But if you’re a business that’s a global business and you look at the market in China, which is enormous, you have to try to find some ways to compromise. But we never did and never will give access, purposely, to our proprietary information.

 

Eric J. Kadel, Jr.:  Great. Well, thanks. Thanks very much, and I know that there’s a lot more you could say about that. But you’re right. We’re getting a little bit short on time. So this is going to be the last question for the panel. I’m going to pose it to Jim here, but if you’re ready for questions, please do start to queue up behind the microphones as Jim addresses this last question. We’d be happy to take any questions you have for us. So Jim, what I wanted to do to sort of sum everything up here is taking advantage of the fact that you’ve been in the government, you’ve been in the corporation, you’ve been in the private firms, you’ve got a wide range of experiences, and you’ve seen a lot of these issues unfold in your practice and your career.

 

      What I think a theme that we’re hearing here is there, obviously, are very serious national security issues that can be presented in the context of investment, doing business, and, potentially, that could be in tension with what the corporation would most want to do to maximize profit. How do you think the corporations really can balance that tension, or do you even think there really is a tension there? And to the extent that you do, how might the government view the balance of sort of national security policy and industrial policy and making sure that our corporations really have the best ground to compete on?

 

William J. Haynes II:  Well, thanks, Eric. I’ve been absorbing this as much as possible. Great panel to be on. I wonder if there’s not a correlation between the fact that I’m not as smart as these guys and I’ve never been a professor. So maybe what I’ll say is I’m old fashioned, and I don’t really see much tension between the corporate responsibility to maximize shareholder value and being a good corporate citizen, if being a good corporate citizen is helping our country. There are rules that govern that. There are all sorts of obligations that govern that. There’s, perhaps, less discretion then there used to be, and I’ll get to that maybe at the end of my time because I think there’s some practical observations I’d make. But I’d say, generally, there’s not -- there shouldn’t be a tension, as long as you’re careful.

 

      I would look at it a little bit differently. We’ve talked about some of the very granular obligations, some very important new -- and CFIUS, for example, some great anecdotes from Don and so forth. But drawing back a little bit, looking at things from the corporate perspective, and particularly from a general counsel perspective, you have to look at things like sort of the fiduciary obligations of the board and the management and members of the company. There’re also the statutory framework sort of rules of the road, if you will, statutes and regulations that we’ve talked about in part here, certainly contractual obligations, and then even sort of corporate powers, ultra vires doctrine.

 

      I thought I might just sort of touch on each of those briefly as important context for decisions that a general counsel or anybody at the leadership has. The fiduciary obligations are pretty basics, the duties of care, essential to make careful, informed decisions, and a duty of loyalty to act on behalf of the corporation and the stockholders by not putting any personal interests in front of those. And I would think analyzing, operating in the interest of national security in that context is not hard to do if you follow the rules. It’s pretty generic, but it’s important to remember. And that’s where I think Randy’s comments about inquiries or questions or mandates from various levels of our enormous government, not to mention other countries’ government, makes it important to go, as he said, go find an expert. But there is that basic groundwork.

 

      There are also statutory obligations. We talked a lot about CFIUS and the recent amendments to that. There are some old statutes that certainly apply in the national security context. The Defense Production Act, which is very broad, and has all sorts of powers that are available to the leadership of the country in all different contexts, including national emergencies, some of which have been unending. There are national emergencies that were declared decades ago that still apply for purposes of the Defense Production Act. Also, the Defense Base Act, if you’re doing any work for the government overseas. Those are very deep subjects, and, perhaps, a topic for another conversation.

 

      You’ve got contractual obligations. If you’re a new company, you’ve got the formative documents of the company. You’ve got spin off -- you know, you’re spun off and you’ve got licensing constraints. You’ve got financing arrangements with affirmative and negative covenants that might be implicated by certain actions that you need to be careful about. You’ve got joint venture agreements, licenses—Don has talked about those a lot—and certainly contracts with U.S. government, if you have them. And finally, sort of at the broad level, the ultra vires doctrine, which essentially is you’ve got to be -- if you’re going to act on behalf of the company, you’ve got to have power to do it and not step outside of that without certain steps being taken.

 

      So I thought that was useful, or important, to make sure it’s laid out that a general counsel has to view these things in a context. And I shouldn’t neglect the disclosure obligations, particularly for public companies. Material contracts that reach certain thresholds have to be disclosed unless there’re exceptions. And then for the basic securities quarterly and annual filings trends that should be illustrated -- elevated to the awareness of the shareholder base that may be implicated by doing business with the government. Practically points, if I may?

 

Eric J. Kadel, Jr.:  Yeah. Please.

 

William J. Haynes II:  In the old days, somebody might have walked in to see the CEO and say, “Look. I need you to do something.” And patriotism being the way it is they’d go do it. Nowadays, the CEO is likely to come to the general counsel, I would think. The scarier, and perhaps more common context, though, is, in my experience, is that they don’t -- whoever’s coming in is not going to the CEO. They’re going to some organism buried way deep in the company. They may be overseas, and we sort of train our business people to be sort of like military officers. When in command, take command. Go out and make decisions and ask questions later.

 

      Those kinds of things can come and bite you. So the old ways really just don’t apply. You want to be asked. And my advice the first time you get that is no matter how much you think you know, find somebody outside who’s really on top of it. There are all sort of prudential reasons for that, including CYA, which is a term that we use in the corporate world from time to time. But you’re obligation is to your client, to make sure that somebody else who is a true expert in these things is really on top of the latest state of events. And there are all sorts of things besides the jots and tittles of a particular regulation that go into these kinds of decisions.

 

      The CFIUS process has, even though it’s been substantially enhanced, it’s long been a potentially enormous issue that has way more than legal aspects to it. The Dubai Ports case is a good example I remember from my time in government, where Dubai Ports was wanting to come in and take over the Port of Baltimore, and it probably was resolvable. But it was just the absolute wrong time for that to go anywhere, and it rapidly became something way beyond what CFIUS required. And there are plenty of other examples of that. Perhaps Don could elaborate on lots of aspects of his own experience recently. So find an expert. Everything’s more regulated these days.

 

      Randy talked about the government coming in and asking for assistance. There’s also when you want to go out and ask the government for assistance. There are different -- whole different things that are implicated there. Just an example of non-legal issues. If you’re going to be dealing with a bureaucracy, which is not withstanding our Constitution that says that sort of those essential decisions have to be made by officers of the United States which have to be confirmed by the Senate.

 

      We’ve seen this issue arising with the new attorney general. A lot of decisions, way more than any that are visible, get made very low in the bureaucracy. So understanding how things really work, in addition to the way things should work, is so important. You can have an immediate success by sort of plowing through because you’re right, or you can have a long term success if you work it properly. I think probably I’m running out of time, so I’ll turn it over to you.

 

Eric J. Kadel, Jr.:  Great. Thank you. Thank you very much. So I see it looks like we have one question already. Your question?

 

Myles Lynch:  First of all, thank you for coming.

 

Eric J. Kadel, Jr.:  If you could just announce your name and your affiliation, that’d be great.

 

Myles Lynch:  My name is Myles Lynch. I’m a 2L at University of Pennsylvania Law School.

 

Eric J. Kadel, Jr.:  I wanted to rephrase that last -- or reframe that last question. You answered that, Mr. Haynes, from a corporate perspective, how to just balance those, but how do you balance, from a public policy perspective, the interests of the nation in policy on innovation versus the national security concerns of other companies -- or other countries investing in U.S. companies? So my understanding is that there’s not enough U.S. VC money to fund all the startups and companies that are looking for funding, and how do you stop countries like China from just controlling too many things in the United States?

 

William J. Haynes II:  I’ll start answering the question --

 

Eric J. Kadel, Jr.:  Yeah. Go ahead. --

 

William J. Haynes II:  -- but I actually think Tim’s probably --

 

Eric J. Kadel, Jr.: -- then we can go over to Tim. Yeah.

 

William J. Haynes II:  -- the expert on that. I think the short answer, from my standpoint, and here I’ll turn to the expert because I practice what I preach. But I don’t think there’s a prohibition on investment. It’s just that it needs to be elevated and evaluated, and there are all sorts of mitigation tools that are available to the government so that the government can make a decision. It’s just the context of getting the issue up and elevated and making sure that there’s a deliberate process to follow. Is that fair?

 

Timothy J. Keeler:  Yeah. You sort of raised the big picture policy questions for CFIUS policy makers in Congress and the president, whenever there’s amendments to CFIUS at all, it starts with throat clearing language, or an executive order of throat clearing language, about the importance of welcoming foreign investment as a general proposition in the United States and how it enhances U.S. economic strength, and therefore enhances U.S. economic and national security but generally expanding concerns about particular types of investments. And I think there’s not a prohibition on Chinese investment in the United States right now.

 

      There have been very small numbers, a very, very small number of Chinese deals that have been approved by CFIUS during the Trump administration. But I think Chinese investors probably accurately read that the Trump administration was going to be giving an enormous amount of scrutiny to Chinese investments, and that itself deterred investment. I’ve not seen anybody try to assert that that massive drop off in Chinese investment into the U.S. has materially harmed the economy because the economy’s just done very well in that same time period.

 

      And foreign investment in the U.S. overall has not dropped. It’s just the composition has changed. So all for all these issues when you’ve got a conflict between, essentially, national security and economic goals, you have to make choices. And given the nature of the U.S.-China relationship and how it is different from the U.S.-Soviet Union relationship, where China is an economic competitor in a way that the Soviet Union never was, this is going to be part of that -- I mean, battlefield’s too strong a term, but, you know, very figuratively speaking, this is part of that battlefield. It’s one part of sort of a broader trend in U.S. policymaking that I suspect is not going to change regardless -- even if Donald Trump gets beaten next go around. I don’t see any change in this trend.

 

Eric J. Kadel, Jr.:  Thanks very much. Can we go to mic two?

 

John Baker:  John Baker, visiting professor at Georgetown Law. In a way, this follows on that question. And Mr. Haynes was saying there’s no conflict between corporate view and national security, and on the other hand, the description of very different market -- so called market economies in China and elsewhere. Would any of you want to comment on the notion about the theory of free trade? That is, even though there may not be a conflict, many of the corporations are simply criticizing what’s going on in the government in this administration as protectionist.

 

      And in part, the response from the government is, “This is national security.” To what extent do you think that, internally within corporations, they’re being to get a view, as I think Mr. Rosenberg’s has, that it’s much more complicated than the theory suggests, that you’re dealing with different not only economies, but legal regimes that force companies in one country to do one thing that are not permitted, or are permitted, in another country? Thank you.

 

Donald J. Rosenberg:  I’ll start on the last part of that. Probably about ten years ago, I made a speech in which I warned about global corporations doing business worldwide having to now be concerned about competition agencies in many more places than when I first started to practice. It used to be you’d think about the DOJ and the FTC and Europe and not much else. Now, there are 130 competition agencies around the world, and I remember using the term “lowest common denominator.” Because if you’re a company doing business all over the world, you have to -- you basically can’t do different things based on where you are, essentially. I mean, some variations but not very much.

 

      So you’ve got to basically adjust your practices to make sure you’re abiding by the most restrictive provisions, which is a daunting task for companies. Nevertheless, as I said earlier, we’re in a global -- the idea that there shouldn’t be trade or trade should be restricted or we should do something about getting away from a so-called global economy is a dream. We’re in a global economy, and we’ve got to deal with that. So I think -- what I would like, actually, and again, I’m focused on competition laws, is a bigger focus on due process when we engage with other countries.

 

      There’s a lot of lip service paid to due process, and I explained this to anybody who would ask me in the government when I was going through the last several years’ worth of deal with several of the countries I talked about. Take Korea for example. We have a trade agreement with Korea, a bilateral trade agreement called KORUS. And in that trade agreement, there’s recent terminology, which predated our issues in Korea, which we basically participated in lobbying for, which says that they will provide due process rights to foreign companies to a similar extent they provide them to their own companies.

 

      But we even had specific language in there that talked about, such as, access to the full record if you’re being accused of something, ability to cross examine witnesses. We had none of that when we went through our Korean fair trade episode. But as I have explained now several times, you’ve got to be careful. It goes back to the cultural point I made before. They agreed to that language, and then their response to me was, “No, you’ve got the record. You’ve got the full record. That’s what you get. Well, no, you couldn’t cross examine witnesses. It’s just the way we do it, which is not on the same day. You can’t have any information in advance. The questions have to be pre-arranged and submitted to the --”

 

      So what I’ve said to anyone, as I said, who’ve asked me, and several have in the DOJ. Thank goodness for Makan Delrahim now who’s really pushing that concept. And actually, Roger Alfred just four days ago made a speech at the College of Europe’s Global Competition Law Center in Brussels talking about due process. And what I said was it’s not just the words. You’ve got to make sure that you get the concepts down. And so there’s got to be some kind of leveling of the playing ground.

 

Eric J. Kadel, Jr.:  Yeah. So we’re getting close to the end. I see two questions pending. Why don’t we just have both of you ask your questions, and then we’ll be able to answer them together. Or, hopefully, they’re close enough. Go ahead, please.

 

J.B. Tarter:  Good afternoon. J.B. Tarter with the Defense Intelligence Agency. My question’s my own, not representing any government agency. So the assumption that’s been provided here is that working with government is a risk to corporations, either on contract or providing assistance. And for a while, as Mr. Haynes said, the answer was “Patriotism should help us.” But you see corporations publicly saying “We will not work with the U.S. government.” Apple’s brought that up.

 

      Other corporations like Google have said, “We will sell our data broadly, but not to the intel community.” So the question on the business side is what can the U.S. government do to be a positive partner, whereas working with or for the U.S. government is actual a positive for the bottom line in the corporation and not a risk? How can the government make itself a better partner?

 

Donald J. Rosenberg:  I just have to say this is one time I want to say we are not a Silicon Valley company. We live in San Diego near del Coronado and we work with the government.

 

William J. Haynes II:  But you were at Apple.

 

Eric J. Kadel, Jr.:  Let’s just get the second question and then we can answer. Go ahead.

 

Yvonna Bingocheya (sp):  Hi. I’m Yvonna Bingocheya. I’m a third year student at Columbia Law School. My question is related. So you mentioned the Carpenter standard, but it is my understanding that, despite that ruling, there is a lot of information that the government can subpoena from corporations that have third party data, like IP addresses and to and from addresses, that are considered business records and that the standard is not even probably cause but something approaching probably cause. Do you think that standard’s too low, so I guess in the reverse, or do you think Carpenter was correctly ruled and the government doesn’t need warrants for a lot of this data to be disclosed?

 

Eric J. Kadel, Jr.:  Do you want to take a shot at starting?

 

Prof. Randal S. Milch:  So I can start with the second one, and I have some opinions on the first one. But very quickly on the second one, so obviously a subpoena is a standard that’s lower than probable cause. A D order is something that approaches probable cause. So there are plenty of companies that have data. It’s their data. It’s available by subpoena if it’s not otherwise covered by a court case or otherwise. Do I think that that’s too low? I think that as a general rule most of us are far less interesting to the government than we wish we were, and I think that there is plenty of -- we go through fits and starts in this, right? The legal regime always has to catch up with technology.

 

      It’s never ahead of it, and the history is that there’s a series of court cases that enrage the -- enrage legislatures one way or the other, and then Congress comes up with a law. And it’s happened repeatedly. It’s happened periodically since 1968. It’s in the modern era that technology -- that the law has tried to keep up with technology one way or the other. I guess, fundamentally, my opinion is meaningless about whether Carpenter was rightly decided or wrongly decided. It’s certainly going to make life interesting for my former colleagues back at Verizon and the other companies trying to figure out why six days is okay and seven days is not. It’s not very much of a theory, but seven days was the answer because that was the amount that was taken. And they wanted to reverse.

 

      So I think that’s just the way that is. On your other question about how can the government be a good -- someone that is good for marketing to market with, I think it depends entirely on your customer base. I don’t think that the DIB, the Defense Industrial Base, has any probably being the DIB, and I don’t think that they want to be good partners to the government. And I think that it’s -- you know, I think that if you do not have a consumer base for your customer -- you don’t have a wide consumer base as your customers, you don’t have much to worry about in this light. It’s very difficult to be pressured one way or the other.

 

      On the other hand, if you’re a consumer company with a lot of data, you’re going to have to worry about this problem. I think that Jim’s notion about what to do about patriotism is probably the hardest question here. I’ve been on panels with colleagues, when I was a general counsel, colleagues from Apple and Microsoft and others, and we have very, very markedly different approaches to thinking about whether you’re a U.S. company or not. You know, fundamentally, there’s a danger of thinking about yourself as a global company. Obviously, you’re a global company because you want to reap global benefits. You want to -- you go where the market is. You want to get that money in the door, right?

 

      And you have to face the issues of law everywhere you go because you’re going to be, as a good corporate citizen, you’re going to follow the law wherever you are. You’re not going to flout the law wherever you are. But history hasn’t looked too kindly, in the longer term, on the global U.S. companies who found themselves in the run up to World War II being big apologists for the big markets they had in Germany. And I think that they should be embarrassed about that, and at a certain point, when push comes to shove, you do have to decide whether you’re an American company or not. You do have to decide that I’m going to take certain risks, or I’m going to approach things in a certain way because I have duties that go to the heart of being able to be a company somewhere.

 

      There’s no God-given right to be a company. You’re a company because the surround, there’s a rule of law, there’s corporation statutes, there’s all the other things that make you allowed to be a company. And at a certain point, you’ve got to figure out where you’re a company of, and that may alter your approach in these areas I discussed where the board has to make a decision, where you’re approach to your technology is significant. And, you know, that’s just -- now, listen. Most companies don’t have to face this problem. This is not a problem for most companies.

 

      This is a problem for companies that get -- and it gets put into the spotlight when something bad happens and there’s a request for information or one of these big deals happen and there’s a CFIUS problem. For 99 percent of the companies in the country, this is an esoteric problem that other people have to deal with and you don’t have to deal with.

 

Eric J. Kadel, Jr.:  So Randy, that’s a great answer, but maybe more importantly, it’s the final answer. I’d like to say thank you to Tim, to Randy, to Don, to Jim, and most important, to all of you for coming out. I hope you enjoyed yourselves.

 

Donald J. Rosenberg:  And to Eric. He did a terrific job preparing.

 

Eric J. Kadel, Jr.:  Thank you. I hope you all will come back next year and take Matthew up on his invitation to join our group if you’re interested in these issues, generally.

 

 

 

 

 

       

3:00 p.m. - 4:30 p.m.
Say What You Will?: Government Compelled Speech

2018 National Lawyers Convention

Topics: First Amendment • Free Speech & Election Law
The Mayflower Hotel - District Room
1127 Connecticut Avenue, NW
Washington, DC 20036

Event Video

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Description

When can the government require you to speak, or to host speech on your property, or to pay for speech you dislike? Three of the Court’s 2018 cases – the Masterpiece Cakeshop wedding cake/same-sex wedding case, the Janus union dues case, and the National Institute of Family and Life Advocates pregnancy crisis center case -- all involved this question. So do many other matters that are in the news: For instance, the controversy over whether people can be required to use particular pronouns to refer to others is in large measure a controversy about compelled speech. But the law in this area is surprisingly complicated, ambiguous, and unsettled. This panel will consider what the law is, and what the law ought to be.

  • Prof. Mark L. Rienzi, Professor of Law, Columbus School of Law, The Catholic University of America
  • Prof. Amanda Shanor, Assistant Professor, Legal Studies & Business Ethics, The University of Pennsylvania Wharton School
  • Prof. Eugene Volokh, Gary T. Schwartz Distinguished Professor of Law, University of California Los Angeles School of Law
  • Moderator: Hon. Sandra Segal Ikuta, United States Court of Appeals, Ninth Circuit 

Speakers

Event Transcript

Erik Jaffe:  Hello? All right, we're going to get started. Hello? Hi. I'm Erik Jaffe. I'm the Chairman of the Free Speech & Election Law Practice Group, the sponsor of this panel. I just wanted to thank you all for coming and to invite any of you who are interested -- hopefully, everyone in this room is interested in free speech and election law issues -- to participate in the practice group, to get in contact with me or with Dean -- I said I'd mention Dean at least two more times, so Dean -- and join the practice group, maybe if you want to be in leadership or do some writing or anything like that. And without further ado, I would just like to introduce Judge Sandra Ikuta from the Ninth Circuit who will then take over, and moderate, and introduce the other panelists. Thank you.

 

Hon. Sandra Ikuta: Thank you very much. This -- can you hear me? Okay. I'm delighted to be back here at The Federalist Society National Lawyers Convention. And congratulations on finding this room. It was an intelligence test.

 

[Laughter]

 

      I'm here today to talk about the First Amendment and compelled speech with three preeminent First Amendment scholars. Because an extended biography for each panelist is available in your materials, I think, actually, in your app, I'll just make a very brief introduction.

 

      First, Professor Eugene Volokh, who I think probably doesn't need an introduction, is a Professor of Law at the University of California at Los Angeles. He's an extremely influential writer on First Amendment topics, as well as garnering fame for the well-named Volokh Conspiracy blog.

 

      Professor Mark Rienzi, at the end, is a Professor of Law at the Columbus School of Law at the Catholic University of America. He's also the President of the Becket Fund for Religious Liberty and has broad experience litigating First Amendment religious exercise and free speech cases.

 

      Professor Amanda Shanor is an Assistant Professor of Legal Studies and Business Ethics at the University of Pennsylvania Wharton School. Professor Shanor recently authored "The New Lochner," a provocative and very well-received article about the impact of the First Amendment on the administrative state. As an attorney in the ACLU's national legal department, Professor Shanor represented the gay couple in Masterpiece Cakeshop.

 

      Please join me in welcoming our panelists. Before turning this over to the panelists, I'd like to have a few words about our topic today, government compelled speech. In 1943, the Supreme Court said, "If there's any fixed star in our constitutional constellation, it's that no official, high or petty, can prescribe what shall be orthodox in politics, nationalism, religion, or other matters of opinion, or force citizens to confess by word or act their faith therein. If there are any circumstances which permit an exception, they do not now occur to us."

 

      So these stirring words are from the Court's landmark decision in West Virginia State Board of Education v. Barnette. In that case, the Court held that the First Amendment protects students from being compelled to pledge allegiance to the flag of the United States. And yet, every fall, I tell idealistic new graduate students from law school that they must raise their right hand and repeat after me: "I will support and defend the Constitution of the United States against all enemies, foreign and domestic, and that I will bear true faith and allegiance to the same." Now, at least one of my law clerks was shocked that she had to make that pledge. I don't know if this is a condition of the job as my law clerk, but AO Form 78a says, "Appointment is not complete until the oath of office is administered."

 

      I mention this because it's sometimes difficult to see how the Court's compelled speech jurisprudence applies in the real world. For instance, the Supreme Court has held that the government cannot require recipients of federal funds to adopt a policy explicitly opposing prostitution and sex trafficking. According to the Court, it's a basic First Amendment principle that freedom of speech prohibits the government from telling people what they must say. And yet, the University of California, like many other public and private universities, requires all applicants for a faculty position, as a condition of appointment, to submit an EDI statement that describes the candidate's past, present, and future planned contributions to equity, diversity, and inclusion.

 

      So the Supreme Court has also suggested there are limits on what messages the government can compel private individuals to post on their property. We just had that case last term. And yet, the federal government in most states compelled private employers to post multiple notices for the benefit of employees, including the employee's right to unionize and the right to be a whistleblower – information some employers might prefer not to disclose. And don't get me started on the regulations that require calorie information about my McDonald's Chicken McNuggets.

 

[Laughter]

 

      So despite some great libertarian statements from the Supreme Court, it's clear that the government is constantly telling us what to say. The question is how far can the government go? The question was clearly on the Supreme Court's mind this term when it decided three important cases addressing these issues. That was Masterpiece Cakeshop, National Institute of Family and Life Advocates v. Becerra, and Janus v. American Federation of State, County, and Municipal Employees. The trail lines from these cases show at least some skepticism about the government's power to compel unwilling speakers to convey government-approved speech. So I'm as curious as you are about what these cases portend for the future.

 

      And without further ado, I will let the panelists get started, starting with Professor Volokh.

 

Prof. Eugene Volokh:  Thank you. And thank you very much for that excellent introduction, which I think highlights that this is an area that's pretty complicated. Often, you see the Court saying -- Riley v. National Federation for the Blind is a classic example, but Barnette itself also suggested the same -- that the rules for speech compulsions are as demanding as the rules for speech restrictions. And that's often said, and sometimes followed, and sometimes not. And then the question is, how do we try to rationalize this whole thing, how do we try to restate it in order for it to make sense? So what I'm going to try to do is I'm going to try to summarize what I think is the law of compelled speech, flag some unresolved questions that are really important, and also flag some things that we may think are resolved, but, I think, are not.

 

      One thing I should mention, especially in light of the excellent examples given in the introduction, is I'm going to set aside for now the other tremendously important area, or I should say, the tremendously important portion of this that has to do with the government acting in special capacities like employer. Obviously, even sitting aside various oaths and such, if you go to work for the government at UCLA Law School, you better teach classes. And you say, "Well, I don't want to be compelled to teach classes." Well, not going to work, right?

 

      Likewise, Barnette itself, I think one weakness in the opinion is it didn't do much to explain how the Pledge of Allegiance was different from all the other kinds of speech compulsions that are routine in schools. If you are called on, you have to answer, and if not, you might be marked down. You have to write answers on the exam. Often, you have to write the answers the teacher expects. I think there are possible distinctions, but I think they are complicated. I'm going to bracket this for now. All of the things, or almost all of the things I'll be talking about are government acting as sovereign, so it doesn't get any extra oomph for its control over the property, and yet, even so, it turns out to be very complicated.

 

      So the first thing I want to say is there actually are two compelled speech doctrines. And that's not just me. You see that both in the cases, but also, you see it pretty expressly discussed in Rumsfeld v. FAIR, just many people miss that. One doctrine has to do with compulsions that actually act as speech restrictions. As we'll get to in a moment, some speech compulsions not just are treated the same as speech restrictions, they are, in fact, speech restrictions. Those, it's pretty easy to say they should be treated as speech restrictions, although then, of course, the question is how exactly? But then there's what I call stand-alone or pure speech compulsions, like in Barnette or in Wooley, the license plate case where it's not restricting anybody's speech by requiring them to pledge allegiance, it is purely compelling it. And then one question is how you deal with that. Again, you might say, "Well, it's the same as speech restrictions." Turns out, just looking at the cases, it's not. And then the question is what is it?

 

      So let me just quickly run through the compulsions that are restrictions. One classic although rarely used or rarely seen example is you might think of a content-triggered compulsion, not just you must say something, but you must say something if you've said or published something else. Classic example, Miami Herald v. Tornillo, the right of reply law statute. The Supreme Court struck down a Florida statute that required newspapers to publish replies from candidates for office that were being -- or office holders -- that were being criticized in the newspaper's pages.

 

      And one of the rationales the Court gave is it's essentially a content-based tax. If you were to say any time you criticize or allow the criticism of a candidate, you have to pay even $10, clearly unconstitutional content-based tax. Well, if you were to say you have to hand over, for free, portions of your precious column inches of the newspaper for the reply, that, too, is a content-based tax. I mention this in part because Miami Herald is a prominent case, and in part because if you want an example that is most uncontroversially a speech compulsion that is a speech restriction, there is little doubt that that's so, and the Court has treated it that way.

 

      Now, here's another possibility, and this what I call interference with a coherent speech product. You might say, "Well, what is a coherent speech product?" That turns out to be one of the problems. But it is clear that the Court recognizes sometimes speech compulsions being restrictions when they, by requiring you to add something to some speech, they basically make it impossible for you to convey the speech you want, which is this, without the addition. And the famous line from the Court is, "All speech inherently involves choices of what to say and what to leave unsaid."

 

      So here's a -- one example is Miami Herald, which had an alternate holding. It said even apart from the content-based tax, if you require that a newspaper include some speech, you're interfering with the newspaper's ability to publish a newspaper that doesn't include that. That's most clear if you think about a magazine. Imagine the National Review were required to publish left-wing publications -- or, excuse me, articles -- and The Nation was required to publish right-wing articles. It would be a very different magazine. You wouldn't have magazines of opinion the same way that you have now.

 

      Classic example of that is Hurley v. Gay, Lesbian, & Bisexual Group of Boston case which involved a parade. And there, there was a requirement that it was interpreted by state courts as saying that, essentially, a parade could not exclude a pro-gay rights group. And the Court said, "Look, the parade is all about the floats that are chosen to be in it, and this is both the floats that are included and the floats that are excluded." And Wacko Hurley, I think was his name, the parade organizer, the guy who was apparently in charge of the parade, is entitled to choose which floats are included and which are not.

 

      Another example is McIntyre where there's a ban on anonymous leaflets. There's a whole separate doctrine dealing with anonymity, but even setting that aside, the Court said, "Look, by requiring the inclusion of a name on a leaflet, you're interfering with the ability of the author to choose what to include, such as to choose not to include her name." And Riley was an example of where the government required people to -- fundraisers to include in their fundraising pitches information about how much of the money actually ends up in charitable hands. That, too, the Court said was an interference with free speech, and I think it's because the pitch was seen as this coherent speech product.

 

      And most recently in NIFLA, the Court's rationale was, "Look, if you require pregnancy crisis centers to put up signs talking about the availability of abortion, that affects their ability to present to their clients the speech that they want by requiring them to include other speech. So you might say, "Okay, fine. Why not just say you can't be compelled to say anything, or you can't be compelled to display anything. Remember, NIFLA, for example, involved display and not speech; likewise in some measure, Hurley.

 

      Well, let's look at three other cases. PruneYard, the Court unanimously held that a shopping center could be required to allow leafleters on its property. And part of the rationale, if you look at the case and later cases justifying PruneYard, was that, "Look, it doesn't interfere with the shopping center's owner's own free speech." Now, you might imagine that every shopping center is creating a coherent speech product, kind of the overall look and feel of the center. And of course, there may be signs, there may be Christmas decorations, and various other things. But the Court's view is that people just don't view that as a coherent speech product.

 

      It was even more clear in Turner Broadcasting where a cable system was required to include various channels it didn't want to include. The Court said no speech compulsion. There, it was 5-4, in part because nobody perceives a cable system, like Spectrum or Time Warner Cable as being a coherent speech product. Now maybe—the Court didn't deal with it—but maybe a cable channel might be seen as a coherent speech product, but a cable system was not.

 

      And most recently in Rumsfeld v. FAIR, the Court upheld a requirement that universities allow military recruiters. Many universities were excluding them because the military, at the time, was discriminating based on sexual orientation. I guess that makes -- what is the current status? But any case, certainly, at the time, it was under "Don't ask, don't tell." And the Court upheld that. Now, note the statute was written as a condition on funding, but the Court said we don't even have to deal with the unconstitutional conditions doctrine because even if this were just a mandate, a flat requirement, it would be constitutional. So we're going to talk about Rumsfeld the same way the Court talked about Rumsfeld—or FAIR is usually the way it's referred to—as a government is sovereign case because the Court said it's okay to require universities to allow these recruiters on, at least if they have other recruiting. Well, in the process of doing that, it said it doesn't interfere with the university's own speech. Again, it viewed this as not a coherent speech product.

 

      As you might gather, there ends up being some controversy about what is and what is not a coherent speech product. What if a book store were required to stock certain books, or not discriminate based on race, let's say, in the authorship of the books, or sex, or some such? I'm inclined to say that would be a coherent speech product, but as you might gather, one would need to navigate, or need to figure out whether you're closer to these three cases or to the other cases.

 

      Now, this brings up the question of pure speech compulsion. Now, you might say, "Well, PruneYard and the other cases, well, they're not -- don't involve pure speech compulsion because nobody's being required to speak as such," although we'll see that's actually a bit more complicated. But the Court has said that not only compelling people to say things, but compelling people to display things, as in Wooley v. Maynard, display a slogan on a car license plate, is a speech compulsion. And compelling the funding of speech in Janus, the Court said is a speech compulsion, even when the government is acting as employer. Okay, that sounds good, but compelling the hosting of speech on your property—PruneYard, Turner, FAIR—that doesn't seem to be a speech compulsion.

 

      Now, I can tell you I think this is the line, in a sense, that the cases draw, but one interesting question is why? Why is compelling you to pay your money to a union—not an unconstitutional speech compulsion—but compelling you to hand over your property to military recruiters or to other leafleters, that is -- excuse me, the compelling to pay your money is a speech compulsion; compelling you to turn over your property is not a speech compulsion. If anything, you might think it's the opposite that in a sense, you have more connection, more affiliation with your property than just with the money in your paycheck. In any event, the Court has never really fully explained this, and I think that's an interesting and complicated conceptual question.

 

      Now, there is actually a possible way of reconciling all these cases, which I'll get to in a moment, but there's one other question. In PruneYard, the Court stressed that one reason maybe it was okay to compel shopping centers to allow leafleters on their property is because the shopping center had to allow all speakers equally. So it was, in a sense, a content-neutral speech compulsion. It isn't just not triggered by the speech of the shopping center. It's not affected by the speech of the proposed visitor. But then along comes FAIR. Universities only had to allow military recruiters. It wasn't that the university had to allow all recruiters if it allowed some, it only had to allow military recruiters. That's pretty clearly a content-based compulsion, I would think.

 

      What's the current status? We don't know. And that turns out to be important because some states do have content-based compulsion, so some states say you don't have to allow, as a shopping center owner, everybody on your property, but you do have to allow people who are gathering signatures for initiatives in referenda; viewpoint neutral, but clearly content-based. Is that constitutional? Turns out, we don't know. There's actually a dispute between the Cal Supreme Court and the D.C. Circuit as to whether states can say property owners have to allow unions but not other speakers access to their property. That, too, not clear because the Court seems to say one thing in PruneYard and another thing in FAIR.

 

      Now, see, here's a possible rule, and I claim this rule actually connects or restates well the cases. The problem is it's not at all clear that it makes any sense. And it restates the cases both as to funding and as to property access. You might say compulsions of turning over either your money or your property are okay if they benefit all speakers neutrally -- there's actually a funding case on that called Board of Regence v. Southworth, which involved student dues funding that ended up going to a wide range of student groups -- or if it benefits just government speakers. That could explain FAIR v. Rumsfeld. It could also explain why the Court said it's impermissible to require people to pay money that ends up going to unions, but permissible for the government to require people to pay money that goes to the government in taxes for speech, among other things.

 

      Among other things, in a union labor management negotiation, it's not just under the old pre-Janus regime, it wasn't just the union that was funded by compelled funds, it was management, too. Management is the government employer. It's obviously funded by compelled tax money. So that rule captures well what the results are in the cases, but again, it's hard for me to see why it is that compulsions that benefit the government speakers would somehow be better than compulsions that benefit union speakers, let's say, or that benefit other speakers. Very hard to know.

 

      So here's another thing that's uncertain: compulsions to state facts. Riley says compelling statements of fact like, "80 percent of the money I raise is going to go me and my colleagues and not to the charity," just as bad as compelling statements of opinion. But in FAIR, one of the things that the law required universities to do is send around emails announcing where the recruiters are, not just allow them on the property, but actually to talk about them the same way they talk about other recruiters. The Court says, "Well, that's a far cry from the compelled speech in Barnette and Wooley." Why? Well, maybe because it's a compelled statement of fact and not of opinion, but what about Riley? Very hard to tell.

 

      This turns out to be really important because there are lots of compulsions that state facts. Some of them might be facts about here are the legal rules that are available for employees, but sometimes they're just pure facts. Like, for example, what about compelled reporting of crimes one witnesses to the government? There's no such general law, but many states have such laws, and many states have laws requiring reporting particular kinds of crimes. Interesting of the Second Circuit in the highly unusual case struck down one of those laws on compelled speech grounds. Other courts have upheld them.

 

      What about compelled reporting of financial information, such as tax information or information to taxing authorities, whether income tax, sales tax, or whatever else? What about compelled reporting of information to the census? Or how about the Maynards? They had to show up at the DMV, presumably, and convey all sorts of information. And again, you could say, "Well, but that's different from a 'live free or die.' That's facts." Okay, but then what do you do about the Riley line that facts are treated the same as opinions?

 

      So let me finish up with a few things. So one thing is it looks like there is a doctrine that compulsions incidental to conduct requirements are permissible on this notion that when the government is regulating conduct, it can incidentally regulate speech; extremely troublesome notion, very ill defined. I do think there's a way of rationalizing it. I wrote an article all about it a couple of years ago in Cornell, but what it looks like in this context is when people engage in non-speech conduct, they may be required to provide information either describing the conduct and its consequences or alternatives. That's the rationale the Court gave in Planned Parenthood v. Casey as to why informed consent is to be required -- can be required for abortions, although it's an interesting question how reconcilable that is with NIFLA, although I think it could be, or if it's the sort normally provided by the people with regard to similar conduct.

 

      So you might say for an ordinary anti-discrimination law case is if a restaurant has to provide service to people without regard to race, it includes the speech component of the service. Like you can't say, "Okay, we'll pay you the food, but we won't tell you what the menu is." We won't show you any menus because that's compelled speech. So that might explain the situation in FAIR, but again, note this is weirdly bumpy, almost gerrymandered doctrine. Does it make much sense? Maybe. I think this may make more sense than the one I just talked about before. But at least, you need something like that to reconcile the cases.

 

      Let me close with two items. One is compelled commercial speech. What can you be required to post in your ads? It looks like the rule is government may compel commercial advertisers to include government-mandated purely factual and uncontroversial information about their goods and services. Well, what about controversial information? What about not purely factual? It looks, in the face of NIFLA, that they can't require that, but there is a good deal of controversy about how much -- about where those lines are drawn, among other things, what constitutes uncontroversial information?

 

      The last question is one that is on many people's minds, was at the time of Masterpiece Cakeshop, and continues to be because, of course, the Court never resolved it there. What do you do about compulsions to create speech, like compulsions to take photographs, or compulsions to sing wedding songs, or compulsions to make calligraphy invitations? Even if the compulsion is articulated as a non-discrimination rule, it stills compels the creation of speech. Are they like compulsions to display speech as in Wooley, or are they not? And then, of course, one of the key questions in which I differ from many of my conservative friends in Masterpiece Cakeshop is what constitutes speech? If you've got a speech compulsion, what about the cake? Is that speech? What about photography? I think, and given the Judge's background in journalism and her husband's background in photography, she might, without admitting it, agree that photography is speech. What about florists? Say it with flowers? Is it?

 

[Laughter]

 

       So those are some of the many questions that remain unresolved.

 

Hon. Sandra Ikuta:  Well, as you can imagine, appellate judges love to hear that there's a discernable rule that makes no sense.

 

[Laughter]

 

      And so we hope that Professor Rienzi will make some sense over compelled speech and religious objections.

 

Prof. Mark Rienzi:  Great. Thank you, Judge. I'm going to try to give you a good rule. First, I'm honored to be here. Thank you all for coming. Thank you for having me here. It's great to be here with this panel. Let me give my normal disclaimer which is I have a whole lot of employers, I have a whole lot of clients, and I'm not here to give their views, I'm here to give mine.

 

      Americans disagree on all sorts of big and important questions. We disagree about religion, sex, marriage, life, death, war, peace. That's okay. That's the natural consequence of free people who are allowed to think for themselves. If the government could dictate an orthodoxy on those questions, if the quote from Barnette were not right, if the government could tell us the answers, it would be easy because we wouldn't disagree. We'd have a little less friction because we'd all think the same thing. But we don't, and I suspect most of us don't want to live in that world.

 

      The reason we don't live in that world is that the First Amendment protects the right of people to come up with their own answers to those deeply important questions, even though our answers on deeply important questions might cause our neighbors distress, might be bothersome, or hurtful. The First Amendment protects the rights of minorities to come up with their own views, and it protects us all from the government, whichever side, left or right, deciding that it knows the one and only right answer to some deep question about morality, or sex, or life, or death.

 

      What I'd like to do today is talk about just two cases. Eugene did a great job giving the broad overview of all the complexity. My effort here is really just to focus on the two big cases at the Court last term that I think set up some pretty clear rules, NIFLA and Masterpiece, because I think they both run afoul of the same big and important principle, which is that the government can't pretend to decide the one and only right answer to big questions and then force everybody else to either embrace that answer or help mouth or say that answer to others. That's a big, dangerous thing for the government to do. The fact that they tried it in NIFLA and Masterpiece is a bad thing. The fact that those cases came out the way they came out is a very good thing.

 

      If you look at both NIFLA and Masterpiece, there are two similarities that I want to point out before I walk through some details. One is that I think each one really is about a forced embrace of the government or the majority's proposed orthodoxy on a particular issue, whether it's the proposed orthodoxy on people really ought to be offered alternatives to abortions, or people really ought to be willing to sell or participate in some way in celebrating a same-sex wedding. In both cases, what I think those cases really are about is the message, and I think it's the message that got people regulated. It's the message that got people upset, and I think that where -- that's what the governments actions are all about, where the actions really are all about either stepping on a message the government doesn't like, or forcing people to clap their hands, or salute the flag, or otherwise support a message that they don't like. That's when the First Amendment has its most important work to do. And I think it did it well in NIFLA and Masterpiece.

 

      Secondly, I think if you look at both cases, you'll also find that the harm at issue, while in some cases arguably real harm, is not the kind of harm that we would normally accept in any other First Amendment context as allowing the government to tell people what they can or should say. In other words, the harm, I think, at most, that can be dragged out of those cases is the harm that is essentially the natural consequence of living with people who have different beliefs than we do.

 

      And so all of us as members of a free society have to deal with the fact that we may have beliefs, we may have parts of our identity, we might have religious beliefs that our neighbors may think are evil, awful, and wrong. And it may be very hurtful to hear somebody say that or hear somebody say that they don't want to celebrate or be part of something with us. But I'll submit that I think that's the natural consequence of living in a free country, living in a pluralistic place, is that unless someone's going to make us all think the same things, sometimes we'll have disagreements. Sometimes they'll be about really important things, and most of the time we shouldn't want the government to come in and crush our opponent. We really ought to just live and let live.

 

      Let me start with NIFLA. The NIFLA case really grows out of something that had been going on since 2007 or 2008, which is an organized push by pro-choice groups nationwide to try to control or undermine the speech of their opponents, namely crisis pregnancy centers. The point of those restrictions, to my mind—and I think the evidence ends up showing it by the time we're done with NIFLA and some of the other cases that wrapped up around the same time—the point of those restrictions was always to control or undermine somebody's unpopular speech.

 

      The claim was made that pro-life pregnancy centers are dangerous. They're misleading women. They're convincing women to not seek medical attention in ways that ends up harming them. Those claims were made over and over in all the places for the laws. But if you look at the ones -- and NIFLA wasn't one that actually got to discovery and trial because it was resolved at preliminary junction stage -- but if you look at the cases that actually got litigated where you had to come forward with evidence to prove the claims of harm, the truth is there was no harm there. And I'll get to that in a second.

 

      If you need any convincing about the fact that the pregnancy center speech regulations were about controlling or undermining your opponent's speech, let me just tell you about the very first of these proposals. It was a state statute in Maryland, and here's what the state statute in Maryland required anybody to say before they wanted to have a conversation in which they are providing information about alternatives to abortion. So the law only applied to people who wanted to provide alternatives to abortion. If you're pro-choice, if you're an abortion clinic, you didn't have to engage in this speech. But you had to start your conversation with the following disclaimer: "I am not legally required to tell you the truth."

 

      Now, on one hand, like here's what you can say for that. It's true. You're actually not usually legally required to tell the truth. But I think it's very clear that anything along those lines is obviously designed to undermine the speaker in the listener's mind. That's the reason you would have somebody start by saying, "Hey, I'm not obligated to give you the facts. I can just make stuff up." Try saying that in your next job interview or your next blind date.

 

[Laughter]

 

      It's a great starter. It's true. I suspect they won't last long.

 

      The Maryland law actually failed, but the pro-choice group succeeded in a handful of fairly liberal municipalities -- Baltimore, Montgomery County, Maryland, New York, Austin, San Francisco. And then a few years later, a few states passed these laws. And there's a variety of different types of the pregnancy center laws. Some of them require what California required for at least some of the speakers, which is a sign saying, "Call this number and the state can provide you with free access to abortion." Some of them required statements that, "We're not doctors, and the government thinks you ought to go see somebody who has doctors." Some of them required statements about, "We don't provide abortion." So a range of different things, but they all have one thing in common, which is they're all targeted solely at the pro-lifers.

     

      Leading up to NIFLA, those cases were almost entirely losses for the pro-choice side, and then NIFLA, of course, was a loss for the pro-choice side. And I want to give two reasons why it was a loss, and then just tell you a couple things from some of the lower court cases. One reason NIFLA lost is -- so NIFLA, California were saying, "You've got to put it on your wall that California will provide people with free services, including abortion, and here's the phone number to call." The problem with that requirement is that it's really hard to get past the idea that California could do that itself.

 

      This is the State of California. They've got one of the biggest GDPs in the world. They don't lack for a mouthpiece when they need one. The idea that California needs pregnancy centers to tell people that California offers free stuff is just a pretty weak argument. It's a pretty dumb idea. California can actually tell people whatever it darn well pleases. It can advertise it on every billboard and radio station in town, and they just don't need to make the pregnancy centers say, "Here's where you go for your abortion." So I think it was obviously gratuitous. And I think that's also true of the other kinds of regulations. If the state thinks there's something important to say about crisis pregnancy centers, they can say it. No one stops the government from saying it. But it's a little bit odd to say that the pregnancy centers need to say it by themselves.

 

      At times, these governments have argued that it's commercial speech. And we don't really have time for that argument, so I'll just take 20 seconds on it, which is to say if pregnancy centers that provide help and advice for free, often in the basement of churches, if that's commercial speech, then everything is commercial speech. And that may be an appealing idea if you're California or one of these governments that's really looking hard to find a way to regulate somebody's speech, but it's a really terrible idea for the First Amendment. It's a really bad idea. People get all sorts of free information and advice from all sorts of places. The idea that the government gets some extra power to regulate it is a real dangerous idea.

 

      The second reason these cases lost is that there's just no evidence of a real problem that needs regulating. And let me give you two objective ways that you can tell there's no evidence of a real problem that needs regulating. So the State of California argued that one of the problems, one of the things we worry about is people fakely pretending to be medical clinics when they're not really medical clinics. And so we need to make them put a sign up that says, "We're not medical." They only say you need to do this if you want to talk about pregnancy. If you want to talk about drugs, or AIDS, or any other important issue, they don't make you put up such a sign. It's only about pregnancy options that they want it.

 

      And it's already against the law to falsely pretend to be a medical clinic when you're not. If California had any evidence of even one of these places pretending to do that, Javier Becerra, the Attorney General, would've been delighted to prosecute them. The fact that he didn't, the fact that they needed to go past a different law to get the pro-life groups, is actually the best evidence you have that, oh, they really weren't violating the existing laws.

 

      It's a little bit like the abortion clinic buffer zone case, McCullen v. Coakely, that the Supreme Court heard a few years ago. There, the claim was, "Well, we need to have a buffer zone and keep even the peaceful, consensual speakers back because there's a lot of door blocking going on, and there's a lot of violence going on, and there's a lot of problems at the abortion clinics that we can't police." And the Supreme Court, all nine Justices, left, right, and center, said, "Well, no. You actually have laws against that stuff. And if somebody's blocking the door, you should go prosecute the person who blocks the door. And if somebody's harassing people, you should go prosecute the person who harasses people. And if someone engages in violence, you should go prosecute them. But you certainly can't use that as a club to attack peaceful, consensual speech," which is what was going on there, and why Massachusetts lost that case nine-nothing.

 

      I said the NIFLA case didn't go to discovery, but a couple of the cases from Maryland did. And I just want to read you two very quick quotes. So the Baltimore case took seven years of litigation. I was involved in it. The Fourth Circuit Court of Appeals sent it back down to make sure Baltimore had a long period of time to get as much evidence as it could. By the end of that case, the Fourth Circuit panel, which included one of the judges who sent the case back down for more evidence, said that "the city could not identify a single example of a woman who entered the center under the misimpression that she could obtain an abortion there." And then this is from the district court opinion quoting the city's own heath commissioner, "The city does not know of any instance when a person has visited a pregnancy center in Baltimore who was harmed or delayed in seeking medical care."

 

      And the Fourth Circuit said that after seven years of litigation and a 1,300-page record, just no evidence. There actually wasn't a problem there. In Centro Tepeyac, which was the Maryland case heard by Chief Judge Deborah Chasanow, a Clinton appointee. Chief Judge Chasanow eventually concluded that the county had no evidence that the centers were causing pregnant women to be misinformed in any way which affected their health. She pointed out that the county's Chief Health Officer testified that she had never received one complaint in the eight years she had been the county's Chief of Public Health. So the fact of the matter is these were fake claims from the beginning. The government had no good reason, and what was really going on was an effort to enlist the government to silence your opponent and to make your opponent violate his or her deeply held beliefs. Those cases lost mostly across the country before NIFLA, and then they lost at the Supreme Court.

 

      Masterpiece. Masterpiece, of course, wasn't decided on speech grounds. It ended up being decided on religious liberty grounds. Some people will tell you Masterpiece was a really narrow decision. I don't think that's quite right. I actually think using the religious liberty ground actually makes it broader than it would have been on speech. I actually think the cake really was expressive. I think people actually believe that weddings are really, really important. That's why both sides fight like heck over them. People actually believe the wedding cake is really important. That's why people spend a fortune on it. That's why it's worth fighting about. People actually think the wedding cake is a really big, important symbol at the wedding. I think all that's actually obvious if you take it out of this context. I don't think it's really terribly debatable.

 

      I think if somebody were refusing to make big celebration cake for the Trump inauguration, people would not have a difficult time figuring out that, "Oh, maybe they feel like they're expressing a celebration about something they don't want to celebrate." So I don't think the speech question was actually quite as hard as everybody made it out. I do think the Justices felt like, "Well, I don't know where to draw the line after cakes." I think that was clear in the oral argument that they were searching for that line, and I don't dispute that there could be some difficult line-drawing there. I just don't think the cakes were on the difficult side of the spectrum.

 

      But again, the Court didn't decide it on speech grounds. They decided it on religious liberty grounds. And that makes Masterpiece a broader decision. If it was just a speech decision, in all follow-on cases, you would sit around and say, "Okay, but is it expressive like a cake, or is it not as expressive as a cake?"  And I think in a lot of these cases, the religious liberty ground is, in some ways, the stronger ground. It's certainly the broader ground. In other words, you could imagine a situation where someone says, "Look, I can't participate in X," whether X is a same-sex wedding, or building the turrets on a tank, like the Thomas case, or something else. Someone says, "I can't participate in that. I can't help that." Well, sometimes, their help will be speechy, but sometimes it won't. And deciding Masterpiece on religious exercise grounds actually makes it more broadly applicable.

 

      The other reason some people suggest that Masterpiece is narrow is they say, "Well, Masterpiece was actually based on the fact that there was this obvious discrimination going on from the government. The government actually said some mean things about the religious guy. They said that his religious claim was just a cover for discrimination. They compared it to racism and other atrocities, and therefore this is narrow and idiosyncratic." I don't think that argument is going to hold up too well over time, and I think that's an argument that you might make if you don't litigate many of these cases.

 

      But I actually don't think the Colorado Civil Rights Commission was too far afield from what a lot of governments sound like when they impose these types of requirements. And just to give you one example, a case in Philadelphia right now which I'm working on, Fulton v. City of Philadelphia, where the City of Philadelphia is trying to shut down Catholic charities from doing foster care in the city. So this is a ministry that Catholic has been doing for far longer than the City of Philadelphia has been doing it. And what the city said is, "Look, you can't keep doing that unless you will do home studies. You'll do the evaluations, and you will approve same-sex couples to be foster parents."

 

      And the Catholic Church, this probably is not much of a surprise, says, "Look, we actually can't do those home studies and say that would be a good place to raise kids. We also don't do it for unmarried, heterosexual couples." The Catholic Church just has some beliefs about sex and marriage, and they're not trying to forbid other people from fostering or adopting, they just say, "Look, if that were to come into my door, I would honestly say to somebody, 'Look, we really probably shouldn't be the ones to go into your house, and study your family life, and give people opinions on that. You probably would rather have somebody else do that.' " Philadelphia said no, said, "Unless you say you will do those certifications and give your stamp of approval, you have to get out of the foster care business entirely."

 

      Here is what the government agents from the city said to Catholic Charities. They called them into the government office, and they said, "Look, you're going to do these certifications or we're going to shut you down." And they said that when Catholic said, "Look we're not trying to discriminate against anybody, we just want to stand aside. These are our religious beliefs." They said, "Well, it's not 100 years ago anymore, and you really ought to be following the teachings of Pope Francis rather than of your local archbishop." And by following the teaching of Pope Francis, the government administrator thought, clearly meant her understanding of what she thinks Pope Francis thinks. The mayor tweeted that he didn't care about the people in the archdiocese, that they were mean and unchristian. The city council said, "We need to have an investigation to root out discrimination under the guise of religious liberty." And then, sure enough, the commission went ahead and only looked at religious agencies but didn't look at secular agencies.

 

      At the end of all that, they just shut them down. They said, "No more foster kids for you. No more foster kids for any parents who've been approved by you," so that Philadelphia right now has several hundred children who they need foster homes for. Catholic, at last check, has about 35 homes that they are pre-approved parents who would take those children. Philadelphia won't put them there because those parents worked with Catholic.

 

      The most outrageous piece of that is that no gay couple has ever even asked the Catholic Church in Philadelphia to do that kind of review. And it's outrageous because it means that there actually was nobody really harmed. It's also heartening, and the reason it's heartening is that it shows that in the real world, people can actually live and let live, and disagree. In other words, I actually think it's a great thing that the conflict didn't -- it's not like the Catholic Church is luring people in, saying, "Come on in here. Okay, great. Now, I'm going to deny you, and you can't be a foster parent." They just don't want to be the ones to do the certification at all. And it shouldn't be all that surprising that gay couples don't walk in to Catholic Charities and say, "Hey, Catholic Church, Catholic Church, can you come in and evaluate my family life and my relationship?" They know they have a disagreement. There's 30 other agencies in Philadelphia that do this. There's no evidence of a single couple in Philadelphia who can’t foster or adopt.

 

      Why does all that matter, and what does it have to do with Masterpiece? Well, I think it suggests that the Masterpiece scenario is actually not quite all that idiosyncratic. It's actually something that will recur. In all of these cases, in Masterpiece and in Fulton, the harm that we're talking about is, I think, plausibly real. In Philadelphia, it hasn't happened yet, no one's even asked, but it's plausibly real in that it can certainly be really hurtful if somebody says that I think your identity, your marriage, your religion, is deeply wrong and evil in some way. I think that's tough stuff. That's hard. And I don't think we should act like it's not. I think it is.

 

      But it's also not the kind of thing that we, in other contexts, allow to give the government a club to control people's speech. And to just put it differently, I don't think there's any doubt that if the guy who wouldn't bake the cake had directly said, "Hey, I think same-sex marriage is really evil and wrong," from a First Amendment point of view, he's got a right to do that. And so the idea that we protect people from this implicit harm of the guy won't bake the cake, but we allow the direct -- we allow Westborough Baptist Church to stand on the road with their very, very hurtful, mean signs, "God hates fags," and "Priests rape boys," and all the other stuff that Westborough likes to say, we let them stand there. Why? Well, because in a free country, we have to let people say things that we disagree with.

 

      And so I think if we're honest about dealing with the fact that we live in a place where people are allowed to have different opinions and allowed to live their lives differently, then we should be opposed to the idea that the government's going to tell us that there's one and only one government acceptable view about sex, or marriage, or life, or death. Ultimately, I think the First Amendment's the antidote to all that. In other words, I think the First Amendment really is how we can all live together, even if we have deep disagreements about important stuff. The First Amendment doesn't protect us from having to deal with a no, that we've got neighbors who think terribly different things than we do, and who may have beliefs that we think are wrong, and who may think our beliefs, or our religious practices, or anything else are wrong. That's part of living in a free country. But the First Amendment does and should protect us from the government saying it can come up with the one orthodox and correct answer, and then punish people who can't live by it. So I'll stop there.

 

Hon. Sandra Ikuta:  So we'll next turn to Professor Shanor for her thoughts on compelled speech as a deregulatory agent, and possibly some different views on Masterpiece Cakeshop.

 

Prof. Amanda Shanor:  Indeed. Can you all hear me? Terrific. Welcome, everyone. Thank you all so much for having me. It's such a pleasure to be on this esteemed panel with fabulous people, a very hard act to follow. As Judge Ikuta said, my name is Amanda Shanor.  In my short introductory remarks, I thought I'd address three big points. The first, I want to outline a little First Amendment history to provide a slightly broader frame in which to understand these debates, and the Court's most recent big cases, and the regulation compulsions of speech and association, in particular, in economic life.

 

      But to give you one top-line takeaway, really big and important things have been happening in the First Amendment, and in particular, in the First Amendment and its interaction with regulation of economic life in the past few decades, and in particular, with regard to compelled First Amendment claims specifically. And as I'll explain, this marks a notable shift in U.S. constitutional law, and I think it's impossible for us to understand and really consider what the importance of the most recent cases [is] without understanding that history.

 

      So that's first, a little bit of history. Second, I thought I'd do a slightly deeper dive into the three big First Amendment cases that the Court heard last term, Masterpiece, NIFLA, and Janus, and how they relate to those broader trends. And finally, I thought I'd say a few words about why I think those cases, or at least Masterpiece and NIFLA came out so narrowly—so I do think that Masterpiece in particular came out really narrowly—and raise some questions about the future, all in roughly 12 minutes.

 

      Okay. So first, some history with a disclaimer. I should emphasize that at the outset, I'm giving you a 30,000-foot view so that we don't miss the forest for the trees, but that necessitates glossing over some, I think, really important nuances, many of which Eugene focused on in his presentation, in particular, the distinction between compulsions of fact and opinion.

 

      So I'll say some history. Despite the First Amendment's current prominence, it's actually quite young in many ways. And within it, the protection of compulsions of speech association and expressive activities in commercial life, in particular, are far younger. The Founding generation, you'll recall, passed the Sedition Act of 1798, which made seditious libel a federal crime. As Akhil Amar has explained, "Supreme Court Justices writing circa two centuries ago cheerfully enforced a Sedition Act that made mere criticism of certain incumbence a federal offense."

 

      The Supreme Court, in fact, did not address a single free speech claim until the early 1900s, and those cases all involved what we might sort of like understand as core political speech. In the early 1940s, just after the Supreme Court's turn away from Lochner, the Court rejected outright the notion that the Constitution protects speech in commercial life at all. It was just a regulation of a business practice, and that's what governments can do. It wasn't until the 1970s, which is, I think, after many of you, at least a few of you were born in this room, that the Court extended constitutional protection to speech and activities in commercial life at all under the First Amendment. And when it did, it adopted different rules for the protection of that type of speech, giving strict protection to speech and association that are, for example, political under the principles of Wooley and Barnette, or intimate, like your choice of friends or partners, but less or even no protection to speech, expressive activities, and associations in many parts of economic life.

 

      Why it did that, I think, is really interesting and important. The Court pointed out that as long as we live in a predominantly free enterprise society, the economic decisions that people make -- people must have information to be able to make informed decision in economic life, and also to make informed decisions about how they want to tell their politicians that economic life should or shouldn't be regulated. And so the Court protected commercial speech as being an important source of information for the public to be able to make both economic decisions and political decisions about how to regulate the economy, which is another way of saying commercial speech, or speech in the commercial sphere, has been for a long time, from the Supreme Court, oriented towards protecting it as a value to the public as opposed to as a value for the commercial speaker.

 

      So but again, in broad brushstrokes, the Court has treated these two spheres differently, sort of like acting as if we can act -- there's some sort of range of politics that's separate from economics. So for example, as Justice O'Conner explained in a case called Jaycees, these spheres received, quote, "radically different constitutional protections, saying the Constitution does not guarantee a right to choose employees, customers, suppliers, or those with whom one engages in simple commercial transactions without restraint from the state." The original extension of any constitutional scrutiny to regulations of speech in the economic sphere was originally stringently opposed by conservatives, in particular, Justice Rehnquist, as a dangerous form of judicial activism. And it wasn't until, really, the 1990s that that began to change when Justices, in particular, Justice Thomas, began to see the First Amendment as a robust protector of economic liberty, so focused on economic liberty as opposed to what we might understand as speech per se.

 

      Since that time, again, since really only the 1990s, these cases have been rapidly proliferating, and claimants becoming more successful, in some cases ever since the last three decades, in particular, have seen a marked increase in First Amendment challenges to economic regulation, everything from cigarette warning labels, to the nutrition labels for McDonald's food, to credit card swipe fee laws, to the FDA's drug regulatory power, to anti-discrimination laws like that at stake in Masterpiece. And as we'll discuss, arguably each of the Court's three important decisions last term could be understood, at least, in the main in that thread. What's fascinating to me as an academic is that these sorts of challenges didn't exist a few decades ago, but as Floyd Abrams, a prominent First Amendment Supreme Court advocate said in a debate a couple years ago, "More so than perhaps at any other moment in history, the basic purposes of the First Amendment are now in play."

 

      So again, the important points I want to convey are that the First Amendment protection for any form of expression or association in economic life is actually really strikingly young but is now one of the most hotly contested areas of constitutional litigation today. This leads me to my second set of points about the Court's last term of cases. Hopefully, you can all now see how these larger trends are important to the three cases on the Court's First Amendment docket last term, Janus, Masterpiece, and NIFLA, each of which could be understood as a compelled speech or association challenge to a law that we might view as form of economic regulation. So in Janus, a law regulating the management of public employees; in Masterpiece, a law regulating sales by businesses open to the public; and in NIFLA, a law at least purporting to regulate the medical profession.

 

      So I want to just look at each of these and think about a few -- how it connects to these broader trends. So I'd like to start with Janus because I think, in some ways, it's the most straightforward, if in my view, the most wrongly decided. Janus involved a public employer, and in the context of public employers and public employees, employee unions 40 years ago in a case called Abood, you all may remember, the Court sought to balance the different -- including different speech and association interests that are at stake in a public workplace. So of course, not only the folks who don't want to join a union have associational interest to not join, but also the people who join a union, who want to join a union, and then employers have employer interests, government employers have employer interests in managing their workplaces however they see fit.

 

      The Court in Abood struck a type of balance and essentially divided the world between political and economic, and said the government can compel payments to unions for, essentially, economic functions, so things that the government delegates to the union to manage its workplace. But it can't compel an employee to pay money to a union for a union's political speech. So you can't be compelled to pay for a union's political speech, but insofar as a government employer is saying, "We want a union to do things like run grievances, and you all have to pay into this," then we can make employees pay into that as a form of economic governance.

 

      In Janus, the Court essentially rejected those long-held distinctions and held that basically everything a union does is political, and so no payments can be compelled to a union. On the one hand, I think, of the three opinions, Janus strikes me as clearly the most inconsistent with prior precedent. It also ignores, and I think this goes to, I think, what I understand Eugene's dispute with Janus to be, which is that it also ignores that there might be a difference between a government acting as a sovereign versus a government acting as an employer, as a manager of its workplace.

 

      But on the other hand, I'm not that concerned about Janus in some ways because I doubt it'll be applied elsewhere. I can't imagine that we're going to see the Court, for instance, hold that a government can't compel you to pay taxes just because everything the government does is obviously in some sense political, and you, say, don't want to pay your taxes because you don't want to support Obamacare or building a wall with Mexico. I also can't imagine that the courts are going read Janus to mean that every government employment issue can be made into a federal constitutional case. So while wrong, and I think unprincipled, I suspect that Janus will be pretty cabined.

 

      So this leads me to Masterpiece. I want to say a little bit about Masterpiece, which I had the honor of litigating with a group of terrific lawyers before the Supreme Court. I think you all may reasonably think, as -- actually, I just worked on the case at the Supreme Court level, and when I came into the case, I thought it was really about gays, and cakes, and maybe whether or not cakes are art. As I got more into it, it became really apparent to me that the case put at stake much broader issues.

 

      And let me explain about that. For centuries, public accommodations laws have protected the rights of persons to obtains goods and services on equal terms in American economic life. They have protected the equal opportunity to participate in what the Supreme Court has called "the basic transactions and endeavors that constitute ordinary civic life in a free society." Over many decades, both Congress and the Supreme Court have considered and rejected arguments by commercial entities claiming constitutional exemptions from laws forbidding discrimination in the provision of public accommodations, including restaurants or bakeries.

 

      Let me give you some examples. So in Heart of Atlanta Motel, the Court rejected a Fifth Amendment—so like a free -- an economic liberty claim brought under the Fifth Amendment—brought by a motel that didn't want to serve Black customers. And the Court rejected that argument, saying that you don't have that right against a public accommodations law. In Newman v. Piggy Park, the Court rejected a free exercise of religion clause claim against a barbecue joint that didn't want to serve Black customers on religious grounds. That may seem—maybe it doesn't seem now, with the rise of White Nationalism—but that may seem less believable today, but at the time, the owner of the store very much believed that the Bible required separation of the races and so felt religiously compelled not to allow Black people at his barbeque restaurant. The Court rejected that argument as quote, unquote, "frivolous."

 

      Then in Hishon v. King & Spalding -- I like this one -- King & Spalding, a large and still prominent law firm, brought a freedom of association claim to say that they didn't have to make women partners because they had a right to associate only with male partners, not with female partners. And the Court rejected that as well. And then in a case called Runyon, the Court rejected a claim that private schools had a right just to accept white students and not Black students in the face of an anti-discrimination law.

 

      In every one of these prior cases, the Court has rejected such claims where the frame is involving the freedom of contract, association, or religion. Instead, it's held that discriminatory conduct by business entities, quote, "has never been accorded affirmative constitutional protections." As an academic, I think it's fascinating that over time, the underlying constitutional claims, so whether is the Fifth Amendment, or the First Amendment, or what have you, has changed, but sort of the gravamen of the underlying claim, like what's really happening in real life that people care about is in many ways the same. And I want to say, I want to emphasize, too, that's not me trying to say that what's happening in Masterpiece or any of the religious exemption cases is the same thing as racism, or equally bad or worse. But instead that in all of these claims, what's happening is the question of whether or not a business open to the public has a constitutional right to refuse to interact in economic commerce with someone on religious, or moral, or expressive political grounds.

 

      And I'll say what's interesting about the case is when we went into Masterpiece, we were sure we were going to lose. Commentators were generally agreed that despite this long history of cases that made the legal question really clear -- like if you were a lawyer, it should be really clear to you that Colorado and the gay couple should have won. But we'll assume when the case was accepted, that the Court accepted it to change course, and change prior case law, and cut out, most likely, a free speech exemption to public accommodations laws. But to the surprise of many, it did not. The Court instead decided the case on, I think, the narrowest grounds it could have under the established principle that a government violates free exercise principles when it enforces a facially neutral law in a biased way that targets religious belief.

 

      But that is also to say that the Court declined to grant the bakery a free speech right or free exercise right to discriminate its principal arguments either generally or narrowly, and it thus preserved the decision of the Supreme Court for over 50 years to deny claims to do something like this in commercial life. And it left all public accommodations laws, including Colorado's, on the books. So it didn't strike down Colorado's law, which means the very next day, if Masterpiece was asked to serve a gay couple, he would be compelled by the law to do so.

 

      But the majority, I think, went further than that to affirm a longstanding principle that I hope, I think, is aimed to meet the main concerns that I understand Mark has, which is that while all people have a fundamental right to express their disagreement with gay marriage, with gay people, with any number of things, the most important moral, political, and social issues that we face today in the public sphere, that doesn't mean that businesses open to the public have a constitutional right to deny those same people service. So the Court said, "While religious and philosophical objections to gay marriage are protected, it is a general rule that such objections do not allow business owners or other actors in the economy and in society to deny protected persons equal access to goods and services under neutral and generally applicable accommodations law."

 

      Because what's really important is that following Masterpiece, just as before, the First Amendment continues to permit, and indeed, encourages those who, for example, disagree with gay marriage, or anything else, to speak out. It protects robust, even vitriolic debates where we very much disagree in ways that are really hard, tough stuff, as Mark says, over the status of not only gay people, but Black people, immigrants, and others in the public square on TV, on the internet, in our faith communities, and by our elected leaders. But what it does not do is allow businesses open to everyone to claim a right to say, "No Blacks, no Christians, no gays, no Jews allowed here."

 

      In light of decades of case law, that answer was really clear, I think, but it's not at all how most of us thought -- that most court watchers thought the case would come out. And it's not at all what I think ADF or Masterpiece was originally hoping. And we can talk more about whether or not that's narrow or not, but I think the fact that it was a religion case is narrower in many ways because you can make a speech argument in almost any context. I'm from Atlanta, and I think you could easily make an argument that selling a sandwich to a Black person in the '60s had incredibly important social meaning. You could make that about almost anything. Because you can see speech and expression almost anywhere, I think a speech claim would have been much broader than a religion claim.

 

      This leads to NIFLA, the crisis pregnancy center case. I'll leave most of this to our discussion, but briefly, NIFLA involved a California law that required disclosures by certain pregnancy-related service centers. The important thing about NIFLA, I think, is what didn't happen in NIFLA. The challenge was raised in a way that might have more broadly implicated the regulation of the professions like doctors and lawyers, or even expression in commercial life more broadly. But NIFLA, too, was decided on very narrow grounds. The Court declined the invitation to reject the basic idea that the First Amendment treats the political and economic spheres differently, and it indeed reaffirmed Zauderer, the case that Eugene pointed to, that originally held that commercial speech compulsions receive something closer to rational basis review.

 

      So that's very different than Wooley and Barnette. Rational basis review as opposed to strict scrutiny is a very different -- there's an asymmetry in how the Court has historically treated compulsions in commercial versus political life. And in NIFLA, the Court explicitly emphasized the presumptive constitutional permissibility not only of the types of factual disclosures governed by Zauderer, but also a broad category of what the Court called health and safety warnings. And it ruled in NIFLA, essentially, by treating the regulation of crisis pregnancy centers as not about commercial life, but instead as about political advocacy or religious advocacy, given the uniquely morally, philosophically, and politically fraught status of abortion in our society – meaning it has effectively split the conservative coalition that was supporting the case, ruling narrowly with regard to law in favor of faith-based groups but rejecting, and even in some ways, I think, stymieing the broader arc of the libertarian demands made in this and other related litigation.

 

      Which brings me to the question of why the Court decided Masterpiece and NIFLA in the incredibly narrow ways that it did, and what we might take from that about the future. On that front, one thing seems really clear to me, and I agree with Mark, I think both cases, and Masterpiece in particular, raise really difficult limiting principle questions, ones the Court perhaps didn't anticipate when it granted cert. So I was at an argument in Masterpiece, and when I got there, midway through the argument, Justice Kennedy leaned really far back in his chair -- and I don't know if you've been to the Court. Those chairs can lean really far where you think they're going to fall over. He leaned really far back, and he put his hand on his head like, "Oy vey, why have we taken this case?"

 

[Laughter]

 

      And I think that that really goes to something key that Mark also pointed out about Masterpiece, but also about NIFLA. So in Masterpiece, for example, if this bakery prevailed, could another refuse to sell a cake to an inter-racial or an inter-faith couple on religious grounds? To a divorced person remarrying? What about a florist, or a caterer, or an architect? Could a business run by a person of faith, say an Orthodox Jew or Muslim, refuse to hire women on similar grounds?

 

      And the speech claim was—and this is where I disagree with Mark—I think the speech claim was far broader. The speech claim wasn't limited to Mr. Phillips's religious reasons for refusing service. It presented at Court a problem of what any business expresses about a customer when it agrees to sell something to them. In Masterpiece, the Court thus faced the problem if it gave this bakery a right to decline service, why would it not, or should it not, give the same right to another equally faithful person, even someone that looks less appealing, like the barbeque owner who didn't want to serve Black people? Or another person equal[ly] expressing by refusing to abide by an anti-discrimination law their deeply held views of another person and their status or behavior in our society? And that, I think, ultimately just ended up being more than the Court felt like it could deal with.

 

      Similarly, in NIFLA, the Court appeared unwilling to say that all speech compulsions in economic life should receive even presumptively stringent scrutiny. So what of the securities disclosures, or prescription drug or nutrition labels about chicken nuggets, or other things? The Court's narrow decision suggests to me that it just wasn't ready to go down the path litigating every commercial disclosure as a federal constitutional question.

 

      And finally, in my now-dwindling time of your attention, I want to outline just two important thematic questions. The first is to ask whether or not we've been asking too much of the First Amendment of late. Is the First Amendment really the proper vehicle to try to limit the administrative state as it's really become in many ways now? And I think these cases show us that there may be a limiting principle to the First Amendment's ability or the Court's interest in having the First Amendment do so. Are cases like Masterpiece really about speech, or are they being litigated that way because of the arc of our free exercise jurisprudence? So in particular, was Masterpiece litigated as a speech case because of Smith's holding that rational basis review applies to neutrally generally applicable laws that incidentally aren't in religion?

 

      Second, what do our theories of constitutional legitimacy say about any of this? The First Amendment and compelled commercial speech claims in economic life, in particular, are having something of a living constitutionalism moment. If you're a principled originalist, this may seem concerning to you. Many of these cases, I think, place libertarian originalists in something of a difficult position because the sort of deregulatory outcome potentially produced by some of these claims may be attractive, but the method of reaching them is contrary to the methodology from which originalism derives its normative force.

 

      So I also noted a couple times, I think, that some of these cases pit sort of like faith-based conservatives and libertarian conservatives not necessarily on the same page, and I think as we'll see, some of the abortion litigation may go in that direction. So for instance, there's a bunch of state laws in states like Texas that require ultrasounds before a woman can have an abortion. Why should that type of case not be treated the same as the type of regulation at NIFLA? And I think you might have a different view of that case if you come from a faith direction as opposed to a libertarian direction.

 

      So that's all I've got to say for now, but I'm thrilled to be on this panel and look forward to the discussion.

 

Hon. Sandra Ikuta:  In the remaining time, before opening it up for questions, we're going to give each of the panelists an opportunity to comment on the other panelists, but you might want to start thinking about your questions and getting ready to ask them. So I'll start with Eugene.

 

Prof. Eugene Volokh:   Sure. So I wanted to ask maybe three questions from my fellow panelists. One for Mark -- if somebody comes to me, knowing that I'm a lawyer, maybe doesn't even say, "Oh, can I hire you as a lawyer?" but asks me some questions about like, "What do you do about the debts?" Of course, I'll say, "I have no idea." But let's say I say, "Oh, no, I'll tell you. You can do this. You can do that." But I don't mention bankruptcy because I'm morally opposed to bankruptcy. I take it that the Bar could say, and malpractice law could say, that if somebody comes to me asking for advice about a particular issue, that I could be required to tell them all that's in their interests, even if I don't fully approve of it. So do you agree, and do you think the NIFLA situation is different in various ways?

 

      I wanted to ask Amanda two related questions. One is a simple one, just in factually simple. Imagine that you have somebody who is a freelance writer, and he satisfies all the requirements for public accommodations the way that painters, photographers, and others do. He just -- he says, "Hey, folks, come and hire me." And the Scientologists come to him and say, "We would like you to write a press release for our new celebrity Scientology promotion center." And he says, "You know, I draw the line at Scientology. I'll do it for the Catholics, even though I'm not Catholic. I'll do it for Jews, even though I'm not Jewish. But Scientologists, I just don't." And they say, "Ooh, discrimination based on religion in a place of public accommodation." Is that an impermissible speech compulsion, or could he be ordered to do that or else lose hundreds of thousands of dollars?

 

      And the third question, also Amanda, for you -- so you say -- I think you tired to distinguish speech in commercial life from other kinds. That's the label that I saw. On the one hand, it seems you're labeling NIFLA—which involved, as best I can tell, nothing at all commercial, no money changing hands, no commercial motivations—as a commercial case, even though it doesn't seem to me commercial. But second, in your history, I take it you're treating the union speech and the employer speech cases which basically arose within a decade and were decided by the Court more or less within a decade of when the Court first authorized or first used this free speech clause to strike things down, that was in 1931, late 1930s.

 

      Union speech was protected, not fully, to be sure. It took awhile to have more protection, but certainly the Court said of that in the early 1940s in Virginia Electric and then later Thomas v. Collins, the Court said, of course, employer speech invites unionization as well. So I think for your history and for your analysis to work, you have to declare the union and employer speech cases not to be commercial life cases, but to declare NIFLA to be a commercial life case. And this makes me wonder if the commercial life or speech about commercial matters distinction you're drawing is one that actually works.

 

Hon. Sandra Ikuta:  Mark, we'll go to you next.

 

Prof. Mark Rienzi:  Sure, I'll go first. So generally speaking, I'd say the government can regulate the practice of law. It's regulated the practice of law for centuries as practice of the profession. I think if a lawyer has a religious objection to taking a particular case or giving a certain piece of advice, I think they're entitled to that objection. In other words, generally speaking, I don't think the Bar could make me represent Planned Parenthood. I wouldn't do it.

 

      So I think, if you compare it to the medical context, for something like abortion, from about five minutes after we had Roe v. Wade, we've had a relatively broad national consensus both in federal law, and within a decade after that, in most states of saying there are certain things that the government just can't make doctors do. And one of them is participate in, and often it's refer for, an abortion. So I think for anyone who's a regulated professional has a deeply held belief that I can't do X, I can't recommend X, I think they've got a strong claim. And I think that's actually been well-recognized in the law where it really happens, which is the medical context.

 

      I'm not aware of any actual cases that look like your lawyer case. But I do think it's clear that in regulating the practice of law, if I'm in front of the judge, I have an obligation to advise her of precedent, even contrary precedent. And I think the bottom line is that regulation of the practice of law, that's probably okay. I think in terms of making you take a case or making you provide a service, I think it's a little bit different. And so I would suspect that if those cases happened, the lawyers would, and should, win. I don't think they'd really happen. They do happen in the medical context, and there I think, also, the medical practitioners do, and should, win.

 

Hon. Sandra Ikuta:  Amanda?

 

Prof. Amanda Shanor:  Well, maybe I'll go backwards then and talk about NIFLA. So I don't think that NIFLA is a commercial case, or at least my point was that the Court -- it was litigated as if it might raise that question. That was one of the most important questions, I think, that was raised in NIFLA, but instead, the Court didn't take bait on that and treated it really as not about the regulation of doctors. So I don't think that it was actually decided in a way that fits within that frame. And instead it said, "This is not a Zauderer case, and Zauderer stays good law, and we're not going to touch that."

 

      With regard to the unions, so I disagree with -- so one thing is, I think, that part of this has to do with my glossing over many of the differences between some of these cases. With regard to unions what happened in Abood in the '70's around the same time as Virginia Board was a decision to bifurcate this idea of the political speech of unions versus a particular type of thing that's happening, which is a weird quirk of federal labor law. So federal labor laws coming from the '30s essentially allowed government employers to deputize unions to do management stuff that government employers normally do. And instead of having employees pay that to the employer and then have the employer pay to the union, they didn't want to have that kind of conflict of interest, and so they instead said the employees have to pay directly to the union.

 

      This created a potential compelled speech problem which is like, essentially, I think, a function of the weird structure of federal labor law. And so I still do think that what Abood was about was about reemphasizing the distinction from Virginia Board and a bunch of other cases that treated commercial life and employment life as part of that in a way that's different for First Amendment purposes, treats political speech differently than stuff that's essentially going to managing employees.

 

      So then I think the more important question, the more interesting question to me -- freelance writers or photographers. I think that as a point of fact, somebody like that is not going to be covered by any public accommodations law in the country, to my knowledge. So if you --

 

Prof. Eugene Volokh:  Why not? If the photographer is, why wouldn't the freelance writer be if he also holds out a shingle?

 

Prof. Amanda Shanor:  So it depends on -- maybe I misunderstood your hypothetical, but if you're just like a freelance writer who writes stuff, and you write stuff that you want, you can take whatever you want to take. And you're not normally covered by these sorts of laws. If, instead, you put out a shingle, and you're a photographer -- I don't know writers who do this, but I'll stipulate that maybe there are -- but you can think of this as the difference between a person who does commercial -- or does not commercial photography. I do photography and I like to take pictures of dogs. And I don't take pictures of cats because I do not like cats. I only take pictures of dogs. Okay. Fine. True. As opposed to the CVS photo guy who -- the CVS photo guy can't just be like, "I don't take pictures of cats, dogs, or Black people." That's a different thing.

 

      And so my point is that most public accommodations laws make this type of distinction. So for instance—this is a distinction we argue in our brief—between a famous artist like, I don't know, Picasso or something, deciding what he wants to do in his art and Picasso opening an art store and saying, "I will only sell art to white people." So which is to say I don't think -- I think that this is not a real question that happens in real life. And I think if we look at the Masterpiece Cakeshop case -- we can think of hypotheticals, but if you think about the Masterpiece Cakeshop case, he had a shop that's open to everybody, like just a regular store like Georgetown Cupcakes. If, instead, he just said, "I only make cupcakes for my faith community," no, he could not be compelled to make cupcakes for Jewish people. He couldn't. I don't think he could.

 

      So I do think that there is a residuum of protection about what your selected thing is, but in part that that's been, I think, pretty well traced within the public accommodations laws so that most of the things that we're most concerned about, a lot of these hypotheticals, would never come up under any of the laws. We did a big review of all of these different laws and a few places have weird ones, but in the main, they don't include these types of activities.

 

Hon. Sandra Ikuta:  So if you have questions, you might want to go up to the microphone. And in the meantime, I'll see if there's further comment.

 

Prof. Mark Rienzi:  Yeah, I just had a couple of quick points. Regarding the history, I think it's fine to look at Heart of Atlanta Motel, and Piggy Park, and those cases, but to me, the public accommodation case that was left out but that I think is actually the most similar is Hurley. In Hurley, there was an effort to use a public accommodations law to force the St. Patrick's Day parade in Boston to include a gay group that they didn't want to include. And the Court treated that as actually a relatively easy case. It was eight or nine votes, I forget which one, but they said, "Look, public accommodations laws, generally fine, but public accommodations laws, where they're going to be used in this situation where they're forcing expression in some way, that's different and not okay."

 

      And I would just suggest that I think cases like Masterpiece Cakes where you're forcing someone -- it's not somebody who's saying, "I wish to never serve gay people, or Black people, or Jews, or whatever group." It's somebody who's saying, "There is a particular celebration that I can't help you celebrate. Otherwise, I'll sell you anything you want, any day you want. I just can't sell you something to participate in that very expressive, very solemn, often religious, celebration." I think that's just really different from a lot of the rest of the cases that we've seen. And it doesn't surprise me that the Supreme Court ended up treating it differently.

 

      In terms of whether there's some big see change going on in the First Amendment because these cases didn't exist before, one possibility is like really, really smart plaintiffs' constitutional lawyers, and I love theories that go that way --

 

[Laughter]

 

      -- but the other possibility is that the governments are doing something different here, and that that's really what's different. So if you look to take a purely commercial case, like the Expressions Hair Design case, which was about the credit card swipe fee, you could look at that and say, "Wow, that's really different, the Supreme Court applying speech principles there to protect a vendor from being forced by the state not to tell the customer something about how the fees work out, and that they're paying more for using a credit card." Or you could say, "Oh my goodness, the government, in the pocket of the credit card companies, the government passed a rule making it illegal to tell your customer something about how they're being charged? That's really weird."

 

      And so maybe it shouldn't be that big a surprise that the Court ends up asserting the First Amendment, and I think you can look at it in the same way thinking about the marriage cases now. One way to look at it is to say, "Oh, I guess they didn't think about the free speech angle in the cases in the '60s when people went to the racist baker and asked the racist baker to make the cake for the inter-racial wedding." I suppose that's one possible explanation for the absence of such cases, but I'll suggest that I think the better explanation is that nobody actually thought to try to use public accommodations laws to make the racist baker bake the cake for the wedding because people didn't really want the racist cake maker baking the cake for their wedding. That nobody had thought about, "Let me take the government and wield it as a club to crush my opponent into oblivion."

 

      And I think the truth is, that's actually the difference. In other words, I think if it were really going on, what you'd see if you looked back in the cases, is a bunch of racist cake baker cases from the '60s where the racist cake baker kept losing because there weren't enough smart trial lawyers to think about compelled speech. But I don't think you actually see that. I think you see an absence of the cases, and I think it suggests that the governments are doing something different here, and that's why I think it's like Hurley. It's a particular use of public accommodations law to let one side win, not just win a political fight over what the rule should be, but use the power of government to force people to bend a knee, or force people to get with the program and say the thing the government wants. And I think that's the thing the First Amendment's supposed to protect against most.

 

Prof. Amanda Shanor:  Okay, I think --

 

Hon. Sandra Ikuta:  So --

 

Prof. Amanda Shanor:  Can I respond?

 

Prof. Eugene Volokh:  Yes, please.

 

Hon. Sandra Ikuta:  Very quickly so we have time for the --

 

Prof. Amanda Shanor:  So many things I want to respond to. Okay, so first, Hurley. I think if you think about my presentation, maybe you listened, maybe you didn't, if you think about the distinction between political activities and economic activities, a bakery looks really different from a public protest. And that's the distinction that happened in Hurley is that it was an attempt by a state to apply a public accommodations law in a super weird way, not to actual public accommodations, but to a public protest. And in that way, I agree with Hurley. It was inappropriate to apply a public accommodations law, and therefore unconstitutional, as opposed to applying it to a super ordinary conduct of a business open to everybody.

 

      And this is one thing I'll say about Masterpiece Cakeshop. One, I'll disagree about the facts of the case. I think it's actually really important that Masterpiece Cakeshop, Phillips -- the government found that Phillips had declined service to half a dozen other gay couples, including a lesbian couple who didn't want to buy a wedding cake but wanted to buy some cupcakes for their weddings, so the facts really were that he didn't want to sell baked goods for gay weddings. I think that's fair.

 

      And then -- and also that when the gay couple came in, two things. They came in on the advice of their wedding planner person, their event planner. They had no idea what Phillips's predispositions were. Having met them, I'll tell you, they sure as heck wouldn't have gone to that bakery to be rejected if they had possibly known that that was going to happen to them. But in fact, they did, and when they were -- they met him at the door, he said he actually just doesn't do gay weddings, so as to say, he says no. I think that's different from the argument you're making that is basically like, "I shouldn't have to make something for a particular event." Let me explain why.

 

Hon. Sandra Ikuta:  As we say on the bench, please wrap it up.

 

Prof. Amanda Shanor:  Okay, quickly.

 

[Laughter]

 

      Sorry. Okay, so is it he doesn't make Halloween cakes either? But in this case, it wasn't that he wouldn't make Halloween cakes, it was he wouldn't make the exact same cake for you and you but would for you and you. And that, I think, is fundamentally different.

 

Hon. Sandra Ikuta:  Okay, we are going to take a couple of questions. Please state your name and affiliation and frame your question in the form of a question. Go ahead.

 

Dave Watson:  Dave Watson. I'm in-house with Reynolds Consumer Products. California has Prop 65 which requires you to label your products with things that the State of California says are dangerous to consumers, many of which are not actually dangerous to consumers. And some of the other consumer goods companies with much larger litigation budgets than mine are challenging this on the grounds it's inappropriate for the state to require you to put false information on your packaging. And I'd be curious to your thoughts.

 

Prof. Mark Rienzi:  I'll just give a quick thought, which is to say I think it's very different from NIFLA. In NIFLA, California was regulating people because they talked about pregnancy and in order to make them talk about abortion. And I think this is a place where Amanda and I agree with how the Court analyzed it. That's just very different from most other run-of-the-mine speech compulsions. If what California is saying is, "If you want to sell a widget that has this chemical in it, you must then say X," it is at least better than the culture war use of government in that they're not regulating the company because it speaks or because it talks about a sensitive issue. They're being regulated because they sell widgets.

 

      That said, I don't -- that's not an area where I litigate, so I don't know enough to tell you how I would think about the rest of the case other than that really does seem to me to be really closer to commercial. And if there is going to be a dividing line between commercial speech and what I would call sort of pure political stuff, which is what I think the Supreme Court was dealing with, that seems pretty clearly on the commercial side of it to me.

 

Prof. Amanda Shanor:  I agree with Mark, and actually, that was a big question in NIFLA. And I think NIFLA just reaffirmed that that type of case is fundamentally different, will still be judged from the parameters of Zauderer, as well as NIFLA created like another -- a freestanding exception for health and safety warnings, and I think Prop 65 probably falls, or may arguably fall, at least in many cases, within that boundary. Which, again, NIFLA came out in a way that supported faith-based communities, but not necessarily libertarian aims.

 

Hon. Sandra Ikuta:  Okay. Next question?

 

Questioner 2:  The academic left very much wants to propound the thesis that the use of the First Amendment to protect economic liberty is a sort of Lochner-ization of the First Amendment. We've seen this in a number of academic pieces. Mark, you propounded a different thesis there right there at the end that maybe what the state is doing is different, not what the First Amendment lawyers are doing is different. If your thesis is right, I think over time, what we would see is the First Amendment cases that make it to the Supreme Court would be cases involving things done by administrative agencies. And I'm just wondering, over time, is that the trend that we've seen? Are the cases that are making it to the Supreme Court First Amendment cases based on conduct by administrative agencies as opposed to, say, older cases where it was conduct as a result of statutes?

 

Prof. Mark Rienzi:  It is as if you stole my computer and read my draft papers, but yeah.

 

[Laughter]

 

      So yeah, I do think if you look at like religious exercise -- I've only looked at in in the religion area, but they overlap quite a bit -- if you look in the religion area over the past, say, 100 years, and since Reynolds, 130 years since Reynolds, what you see is that the early cases are almost all statutory. The later cases, you get more and more to its administrative agencies that are imposing the burdens. In the religion context, what I think happens is that if you're in the administrative world, why do administrative agencies bump into religious groups and everybody else all the time? It's because agencies are big, they're all-encompassing, they've got lots of tools in the toolbox, they're doing everything these days.

 

      All of those reasons mean that when the agencies bump into religious conduct, and probably when they have speech compulsions, there're going to be pretty good arguments that the government should lose because the big agency that's got all the tools in the toolkit and can try to require nuns to give out contraceptives, to go back to the culture war fight that never dies. Well, the same government that can do that, gosh, they also have a lot of other ways they get people contraceptives, so it's not a particularly hard argument to say, and therefore, the government should lose rather than being able to compel people to violate their deeply held beliefs. So I do think you're getting more of them from agencies. I think there are a lot of ways in which agencies are more likely to be people who should lose because they've got a lot of tools in the toolkit.

 

      The one other thing I'd say about Lochner is I do think a lot of the rights we're talking about, the abortion right, for example, it seems to me there's a pretty strong case that Roe v. Wade is pretty darn Lochner-ish, too. And so that we're seeing an expansion of the law to expand rights and then if it -- I don't quite think of it as an expansion of the law. I actually think these are principles that go back to Barnette. So I guess I wouldn't have copped to the idea that on the First Amendment, we're seeing an expansion.

 

Hon. Sandra Ikuta:  Okay. Next question?

 

Justin Pearson:  My name is Justin Pearson. I'm a lawyer at the Institute for Justice, and I litigate commercial speech challenges as well as other types of constitutional challenges. And so my question is related to Zauderer. As you probably know, there has been disagreement at the circuit level over whether Zauderer's use is restricted to compelled corrections of inherently misleading speech, or whether it can be used in all compelled commercial speech cases, even when the underlying speech was not misleading. That issue was not resolved by NIFLA, and so I was wondering what the panel thought was the correct approach.

 

Prof. Amanda Shanor:  So I think the circuits are in agreement that Zauderer extends not to just corrections of misleading or inherently misleading speech, right?

 

Justin Pearson:  No, there are circuits that have expressly ruled otherwise, including the one where I live, in the Eleventh Circuit.

 

Prof. Amanda Shanor:  Which case are you thinking about?

 

Justin Pearson:  There are a couple, and my favorite is a case called Mason v. Florida Bar, which dealt with a compelled disclaimer in attorney advertising, and it was struck down under Central Hudson. And there are other circuits, as well.

 

Hon. Sandra Ikuta:  Were they after NIFLA or before NIFLA?

 

Prof. Amanda Shanor:  They were before NIFLA.

 

Justin Pearson:  Oh, they were before NIFLA. It was in the last 10 to twenty years, but well after Zauderer.

 

Prof. Eugene Volokh:  Yeah, it's an interesting question. I do think that NIFLA does not purport to change that rule except insofar as it suggests that Zauderer actually has a pretty aggressive non-controversiality requirement. That's what I think. If it adds anything, it's that.

 

Prof. Amanda Shanor:  Maybe. I don't know. Abortion is super controversial, so if it has to be less controversial than abortion, there's like a wide range. Yeah.

 

[Laughter]

 

Prof. Eugene Volokh:  Right. Right, right, right. Yeah. It's all where you draw the bar, it's true, it's true.

 

Justin Pearson:  It's true. My commercial speech cases are not as controversial.

 

[Laughter]

 

Hon. Sandra Ikuta:  Okay. Last question? I'm sorry, we're out of time. One last.

 

Kai Allbrook:  I'm Kai Allbrook (sp) from the State of Washington. This last election, a pamphlet was handed out that said. "John Doe is for better government and lower taxes. Vote for John Doe." Our public disclosure commission said that pamphlet could not be distributed because it did not disclose the party affiliation of John Doe. It did not state by whom the pamphlet was paid for. Now, I'm not asking about the requirement that whoever paid for it has to file a report for a campaign expenditure, but how do you square that with the compelled speech holding that was mentioned earlier that you have the right to hand out anonymous pamphlets? How do you distinguish speech in the context of an election as opposed to other pamphlets?

 

Prof. Eugene Volokh:  You know, you should be asking that of the Supreme Court because they caused this problem. In McIntyre v. Ohio Elections Commission, they say you can't require everybody to sign their pamphlets, even ones that are focused on election there. It's a ballot measure. On the other hand, in Citizens United, the Court reaffirmed the proposition that you can require broadcast ads to identify who it is who paid for them. So is the distinction candidates versus ballot measures? Is it broadcast versus print? Is it really expensive things from things where it's merely just a modest amount of reproduction costs? I wish I knew the answer. I'm not sure anyone does. Do you guys know the answer? I mean, I…

 

[Laughter]

 

Prof. Mark Rienzi:  Elections are really important, and therefore, that's where we have the most important reason to have the government tell us what we should say.

 

[Laughter]

 

      I don't really mean that.

 

Hon. Sandra Ikuta:  Well, I'm sorry to say that I haven't obtained a discernable rule yet, despite this distinguished panel, but I think we at least know what all the hard questions are. So please join me in thanking the panel.

 

Prof. Eugene Volokh:  Thank you so much.

 

3:00 p.m. - 4:30 p.m.
Evolution of the District Courts

2018 National Lawyers Convention

Topics: Federal Courts
The Mayflower Hotel - Grand Ballroom
1127 Connecticut Avenue, NW
Washington, DC 20036

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Over the past several decades, the workload of federal district courts has changed significantly. On the civil side, perhaps as litigants seek to avoid the expense of elaborate discovery and prolonged motions practice and trials, more and more cases are resolved through alternative dispute resolution. On the criminal side, more and more cases are resolved through plea bargaining. The result is fewer and fewer trials. Our panel will discuss these phenomena, and their implications. What are the causes of these evolutions? Is there a lasting impacts on judges themselves? Are lawyers now required to hone different skills? Is there a lasting effect on the administration of justice, and civil society more generally?

  • Hon. Thomas Hardiman, United States Court of Appeals, Third Circuit
  • Hon. Michael B. Mukasey, Of Counsel, Debevoise & Plimpton, LLP
  • Hon. William E. Smith, Chief Judge, United States District Court, District of Rhode Island
  • Hon. Amul Thapar, United States Court of Appeals, Sixth Circuit
  • Moderator: Hon. Carlos T. Bea, United States Court of Appeals, Ninth Circuit

Speakers

Event Transcript

 

Dean Reuter:  Good afternoon once again, everyone. Our microphone seems to be drooping here. I guess we’ve worn it out. I don’t know. Well, thank you all again for being here. It’s certainly a pleasure to have everyone.

 

A few years ago, at our luncheon on Saturday before we began the Rosenkranz debate series, we had a panel of federal appellate court judges talking about life on the bench. Internally, we call that panel “bunch of judges”—just the in-house short hand for it. And this is very similar to that panel, as judges and former judges—or judges and a former judge—but with a particular focus on how life is changing at the district court level.

 

So we’ve got district court judges; former district court judges; and, of course, a very good friend of The Federalist Society to moderate from the Ninth Circuit, Judge Carlos Bea. He’s a longtime friend of The Federalist Society. I count him as a personal friend: him, and his wife, Louise. And we’re so very pleased to have him back with us again this year. So with that, please welcome Judge Bea.

 

Hon. Carlos Bea:  Thank you very much, Dean. We have a distinguished panel here today. And the first thing I’ll do is I’d like to introduce -- the name of this session is the “Evolution of the District Courts.”

 

And we have with us on my immediate left Tom Hardiman, who was born in Waltham, Massachusetts, in 1965. And he received his B.A. with honors from the University of Notre Dame and his J.D. with honors from Georgetown University Law Center in 1990. During law school he served as a Notes and Comment Editor on the Georgetown Law Journal. Following graduation, he joined the Washington, D.C., firm of Skadden Arps as an associate in the litigation group. In 1992 he moved to Pittsburgh and joined the firm of Cindrich & Titus, later known as Titus & McConomy LLP, as an associate. In 1996, he was elected partner at the age of 30. In 1999, Judge Hardiman joined Reed Smith as a partner in the litigation department until he took the bench on November 1, 2003.

 

To his left, Michael Mukasey, Of Counsel to [Debevoise & Plimpton], recently served as Attorney General of the United States, the nation’s chief law enforcement officer. As Attorney General from November 2007 to January 2009, he oversaw the U.S. Department of Justice and advised on critical issues of domestic and international law. Judge Mukasey joined Debevoise as a partner in the litigation practice in New York in February 2009, focusing his practice primarily on internal investigations, independent board reviews and corporate governance.

 

From 1988 to 2006, Judge Mukasey served as a district judge in the United States District Court for the Southern District of New York, becoming Chief Judge in 2000.

 

To his left, William Smith. William Edwards Smith is the Chief United States District Judge of the United States District Court for the District of Rhode Island. Prior to his appointment to the bench in 2002, Judge Smith was a partner at Edwards & Angell practicing labor and employment law.

 

And last, but not least, on my left, Amul Thapar is a United States Circuit Judge for the Sixth Circuit, who has the privilege of being the first South Asian Article III judge. President George W. Bush nominated him to the district court in May of 2007, and President Donald J. Trump nominated him to the Sixth Circuit on March 21, 2017. 

 

Before becoming a judge, Judge Thapar served as the United States Attorney for the Eastern District of Kentucky. While United States Attorney, Judge Thapar was appointed to the Attorney General's Advisory Committee (“AGAC”) and chaired the AGAC's Controlled Substances and Asset Forfeiture subcommittee. He also served on the Terrorism and National Security subcommittee, the Violent Crime subcommittee, and Child Exploitation working group.

 

What we’re going to talk about today is the dearth—and perhaps death—of civil trials and criminal trials in the U.S. district court. To give you an idea of a little background on this, the proportion of civil cases concluded at trial in federal courts has steadily declined from about 25 percent in the 1930s -- that’s 25 percent of the cases that were filed went to trial. When I started practice in the early 60s, it was about 20 percent -- 18 or 20 percent. It’s now below 2 percent. State courts are faring even worse, with only 1 percent of state civil cases being concluded at trial.

 

There has been a similar decrease in the absolute number of civil trials. The number of civil trials has decreased by more than 20 percent during a period in which civil filings have increased fivefold.

 

Why is this? The Federal Rules of Civil Procedure, issued in 1938, seemed to shift the focus of pretrial procedures from pleading to discovery, and to perform the function of investigation of facts that used to be done by the examination and cross-examination of witnesses at trial. The result is the facts are known now long before trial, but at great cost due to the complicated and excessive discovery techniques employed.

 

District courts have become, in what one of my old colleagues from the superior court told me, she said, “We’re not a trial court anymore in San Francisco. We’re a long-motion court.” [District courts] determine motions for summary judgment and class-action certifications for resolution by multidistrict-litigation panels. Or cases are referred to alternate dispute resolution, arbitration, or mediation.

 

Yale professor John Langbein put it: “Pretrial procedure has become non-trial procedure by making trial obsolete.” Or discovery is used as a tool to make litigation so expensive as to foment settlement.

 

A certain amount of backlash has resulted in raising pleading requirements in the Iqbal and Twombly cases and the strict Rule 9 enforcement in claim-of-fraud cases.

 

The format today will not be the normal recitation by each one of these distinguished gentlemen, but will be a discussion of several topics. And they’ll be able to chime in with their own views as we go along.

 

One of the things we’re going to start with is Judge Smith has prepared a PowerPoint presentation to show you just what has been happening as far as the trials are concerned. Judge Smith.

 

Hon. William Smith: All right. Well, it’s not so much a presentation. It’s just a couple of slides. So you can rest easy.

 

So these slides, which I hope you all can see, will just put a little bit finer point on some of the statistics that Judge Bea just recited to you, and give it to you in a little more visual format. So this slide shows the really inexorable decline in civil trials from 1962 to the present. And you see a peak there at about 1968. We were trying approximately 12 percent of civil filings. And now, in the federal courts, we are under 1 percent.

 

Now, this data is -- I'm quite confident it’s very accurate, but it all comes from the Administrative Office of the Courts’ data collection. And there are some quirks about that. And I won’t go into any of the details.

 

But you can see this inexorable decline in both jury and bench trials. So we’re under 1 percent now.

 

Let’s go to the next slide. [It] shows more of the story, and really an interesting story. So there are three lines. The bottom line is the trial line that you just saw on the first slide, the declining trials. The two other lines -- the orange line represents the percentage of matters that were resolved without any court action whatsoever. So in 1962 about 55 percent of cases filed in the federal district courts were resolved with no involvement of a judge.

 

The blue line represents cases that were resolved with the involvement of a judge, including trials. And in 1962 that was about 35 percent -- a little less that 35 percent. As you move along in time -- and I put two call-out boxes there for two seminal events. One was the summary-judgment trilogy, the Celotex trilogy, of the Supreme Court in 1986. And the other was the Civil Justice Reform Act, which is the law that required all district courts to have a mandatory -- have an ADR, alternative-dispute-resolution program.

 

And these events -- you can see the lines crossing virtually at the point where the Supreme Court decided the summary-judgment trilogy, and then proceeding along. What’s so interesting about this, I think, is—as you get to the next slide—is if you think about how many cases involve district court judges -- it’s now at around 82 percent involve judges in some way: motions to dismiss, motions for summary judgment, settlement conferences, or trials. We know that under 1 percent of that is trials.

 

And then, if we go to the next slide, we look at the caseloads of district court judges. They’ve almost doubled since 1971 from 311 pending cases per authorized judgeship to 628 cases per authorized judgeship. Now, that doesn’t mean that every district judge has 628 cases. Obviously, we have senior judges. And there’s a lot of variation between and among districts. But as the numbers have gone up in terms of filings, the involvement of judges has gone up. And if you go back -- I'll go back to the last slide and just point one thing out. If you look right here and you think about -- in 1962, judges only got involved in about 35 percent of the cases filed. And 12 percent—almost half, a little under half—of that involvement was trials.

 

This slide shows you the time to disposition of cases that actually do go to trial. And it’s gone from 1997 – 18 months, up to about 25 months now, which could represent, and we’ll talk about this, perhaps the increasing complexity of cases that do go to trial, perhaps the difficulty of discovery.

 

And then turning to the criminal side, you can see here the number of cases going to trial on the criminal side has gone down from around 15 percent in 1962, to just over about 2.5 percent in 2017. And there are a couple of call-out boxes there just to give a couple of frames of reference: the Sentencing Reform Act, which was passed in 1984; and the Federal Sentencing Guidelines, which came into effect in 1987. And you can see how much the number of criminal trials declined after those two events.

 

And finally, these last two sides are the flip side of that—that is, the number of cases disposed by plea agreement, which in the 1960s was around 83 percent and is now around 97 percent. And finally, the amount of time it takes for criminal cases to be disposed of in the district courts, which in 1971 was about 3 months and has now gone to about 7.5 months. So there you have it.

 

Hon. Carlos Bea: Now I would like to ask the panelists, from left to right, what their impression is, why this is happening. Tom?

 

Hon. Thomas Hardiman: Well, I think statistics that are that dramatic -- obviously it’s a multitude of factors. But I think the principal culprits are litigation has become too expensive and too slow. I’ve always believed that justice delayed is justice denied. And I think that judges are not always as proactive as they need to be in moving their docket.

 

      Sometimes it’s judges that have an outlandishly large portfolio of cases based upon where they’re located in the country. So there are great geographic disparities around the country depending upon what federal district court one works in.

 

      But in terms of things that we can change, I think discovery is a big problem. And perhaps we could do some audience participation here. How many in the room have tried a case? Raise your hand. Great. For those of you that raised your hand -- for those who raised their hand, how many think that discovery is your favorite part of litigation? [Laughter] Okay! There’s a gentleman in the back! Okay. Thank you. Okay.

 

      Well, I know I hated discovery as a lawyer. I hated this -- I wanted to get into the arena and try my case. I wanted to get a result for my client. Preferably a good one. But even if it was a negative result, you wanted closure for your clients. Your client could get on with his or her or its life. So I think we need to try to be creative and find ways to make discovery less burdensome, less expensive, and move the case expeditiously.

 

Hon. Michael Mukasey:  Couple things. First of all, I find it somewhat interesting that -- and it’s the first time I’ve seen this -- that the greater the involvement of district judges in cases, the slower it is that they get resolved. Given the requirement under Rule 26 that you have a conference early on, you would think that the effect would be precisely the opposite. And part of that, I think, is that lawyers and judges are really no threat to try cases. It’s simply become part of the ritual that you go through.

 

      To the extent that law firm economics has contributed, particularly to the decline of civil cases, I would call your attention to that statistic about the peak of civil trials being in 1968. I don’t know. I don’t think there’s anybody in this room who actually remembers 1968 other than me. But in 1968, the New York law firm of Cravath, Swaine, & Moore raised starting salaries unilaterally to—brace yourselves—$15,000 a year. That was a 50 percent increase. And, in fact, there was a newscaster named Eric Sevareid who ended his newscast the day they did that with just that item, and did in in just that portentous way: $15,000 a year for first-year students. Obviously, that changed the economics for private litigants substantially. And it’s gone upwards since then.

 

Hon. William Smith:  Well, a couple of thoughts. One is that I think in some ways we’re the victims of our own success. When we began seriously to pursue alternative dispute resolution programs in our courts, we took it—most courts took it—very seriously. [They] devoted a lot of resources to it and actually became very successful at it. And I know this is true in my court. And I think it is true in many courts around the country.

 

      And lawyers respond to that in some ways developing the way that they -- the economic model of how they practice law starts to respond to the fact that we provide such effective mediation services. So there’s a lot of cases that are filed by a lot of lawyers who know they’re going to get a magistrate judge who works for free, who will invest an enormous amount of time in helping them get a case settled that they never intend to take to trial. And they’re able to develop that into a very lucrative economic model of practice. So I think that’s one thing.

 

      And, you know, trials are very expensive, and they’re very chancy. And I think most lawyers would much prefer to work the case out -- on both sides, plaintiff’s and defendant’s side. So I think that’s one factor.

 

      And the second is the trilogy that in 1986 really got lawyers and courts focused on summary judgment as a tool for resolving cases and really encouraged it. And so it has become almost standard in every case. Judge Hardiman and I were talking out in the hall beforehand, and we have to work hard to persuade lawyers, even in cases where there are clearly factual disputes, not to file summary judgment motions.

 

      We had a judge in my court who’s passed away a number of years ago; but he had a saying that he would tell lawyers: “Why do you want a summary judgment, when you can get a real judgment?” And that’s the line I’ve stolen from him to tell lawyers. And very often they’ll run off and settle the case before they get to trial.

 

      So I think those are the two main phenomena that I think have driven the numbers down.

 

      And the third one I think is very important, too, is the Rules of Civil Procedure and the Chief Justice have encouraged judges to be very proactive in managing cases. And so we are encouraged as District Court judges to reach out and touch the case frequently. And, of course, that leads to more discussion about “What are you doing to resolve this case?” So I’d say those three factors.

 

Hon. Carlos Bea: Judge Thapar?

 

Hon. Amul Thapar: So I might have a -- I agree with everything they’ve said. I might have a little different take.

 

      So I look at the stats and the studies and I see trials going [down], time to resolution going [up], and happiness of lawyers going down. So that to me seems consistent. No one went to law school to be a discovery lawyer. You never tell people, “I went to law school to be a discovery lawyer.” You say, “I went to be a trial lawyer” or “a corporate lawyer.” And the problem everyone’s identified is litigation is too slow. Part of that is on the lawyers. And part of that’s on the judges.

 

      So to me what has to change -- let me throw out an example. Does anyone know—in here—, other than the AUSAs and criminal defense attorney -- so the civil attorneys. Does anyone know how long between indictment and trial you have to go in a criminal case? I can’t hear anyone. So I’ll just say it.

 

Audience Member: [inaudible]

 

Hon. Amul Thapar: What is it?

 

Audience Member:  [inaudible]

 

Hon. Amul Thapar: Thirty days? No. Close. Seventy days. Right? And someone’s liberty’s at stake. And you’re talking about 70 days between indictment and trial without a finding by the judge that there’s an exception.

 

      So what we tried in Pikeville, which is a remote docket of Kentucky, is—now, seventy days in a criminal trial—we tried in a civil trial one year. Complaint to trial, guaranteed one year. You’re going to go to trial. I gave lawyers three months for discovery. You would not believe the screams at first. I said, “Here’s the deal. I’m available day or night. I’m available 24/7. Any disagreement you have I will resolve immediately. Let’s not aim for perfect discovery. Let’s aim for imperfect discovery and happy lawyers, happy clients.”

 

      What people want is their day in trial. If you go back and look at—and Justice Thomas talks about this in some of his opinions—what the Founders talked about with trials, they -- Here's what John Adams said: “Representative government and trial by jury are the heart and lungs of liberty.” Elbridge Gerry said: “The jury is adapted to investigation of truth beyond any other system the world can produce. A tribunal without juries would be a Star Chamber in civil cases.”

 

      People want a jury trial. And why don’t we give it to them? For a number of reasons. Discovery takes way too long. People are trying for perfect discovery rather than quick discovery. Again, criminal cases, someone’s liberty’s at stake, 70 days. Civil trials, 25 months. There’s something wrong with that.

 

      And the profession is getting unhappier. If lawyers, young lawyers -- I met a young lawyer the other day who’s here who said she showed up at Will Consovoy’s firm and was cross-examining a witness in the Harvard trial. I mean, how many young lawyers would die to have that opportunity? So something is wrong when we’re dragging these things out.

 

      So to me the resolution is: shorter discovery, quicker trials. We had a lot more trials [and] we had a lot less discovery fights when you only have three months to get it done.

 

The other commitment judges need to make -- It's interesting to me. Judges get involved and litigation drags out. The reason is judges are pushing. We were trained to push people to settle. Well, what message, in my mind, does that give to the clients coming to court? “Here’s a judge who doesn’t want to do his or her job and try the case.”

 

So the reality is we should leave dispute resolution to the parties. As judges, we need to try cases. But the other thing we need to do is resolve motions. So the commitment I made when I said “Okay, I’m going to put you through this to get us to trial” is 30 days from the minute a motion is ripe, I would have to resolve it. Set deadlines in orders for myself to live up to. And I think judges need to start doing that. Because if we’re resolving motions quickly you’re not going to have the frivolous summary judgment motions because they know you’re going to rule on it.

 

What happens when I look at -- the final point I’ll make. Judges who are too involved, they’re dragging out cases because they’re interested in ADR and they’re not resolving motions. You file a motion, it sits for nine months because they’re hoping you’ll resolve it. If they have a deadline to resolve it, frivolous motions won’t get filed because you’ll get a ruling quick. And we’ll get more trials.

 

Hon. Carlos Bea:  Michael, you had some experience with setting one-year limits to trials. Do you want to talk about that?

 

Hon. Michael Mukasey:  Yeah. One key point that Judge Thapar just made when he was talking about the way discovery goes on, he says, “I’m available 24 hours a day.” It’s interesting. He didn’t say, “You can go to a magistrate.” He said, “I’m available 24 hours a day.” And when the parties and the lawyers are convinced that they’re going to have to         bring their little disputes before the judge who is going to have to try the case, I will tell you that the coefficient of nonsense goes way down.

 

      If you send it to a magistrate judge to conduct discovery, well, magistrates don’t get to do very much other than write discovery opinions. Nobody reads the discovery opinions, but if that’s your job, that’s what you do. And so it goes to a magistrate, you don’t see it for six months or a year. If the judge remains involved in actually deciding motions rather than massaging people into settlements, it goes a lot faster.

 

      And you can -- I mean, the fact is that a jury trial is a lot quicker than a bench trial. People say, “Well, I’m going to do you a favor, Judge, and waive a jury.” No, no, no, no, no. That’s not a favor. You bring a jury in. You pick ‘em in half a day, if that. They go out and decide the case. If you’re a judge you have to write findings and conclusions, which then go to the court of appeals. And we know what happens there.

 

Hon. Carlos Bea:  We retry the case gratis.

 

Hon. Michael Mukasey:  Right. [Laughter]

 

Hon. Thomas Hardiman: Well, I’ll second what my colleagues said. When I was a district judge, I did not use magistrate judges for discovery because I wanted to know exactly what was going on in my cases from start to finish. And in our district, the Western District of Pennsylvania, the new tradition seems to be to use magistrate judges to get consents. And if you have good magistrate judges and if the district court is willing to do it, the lawyers, I think, are happy to consent and go with the magistrate judge.

 

      Because I felt that if you bring the magistrate judge then you’re just doing everything twice. And I agree with Judge Thapar that I don’t think in three-and-a-half years I wrote an opinion on a single discovery motion. Because, like him, my approach was “If you have a problem, call me.” And we’d resolve it on the phone. And if we couldn’t resolve it on the phone, I’d bring them into chambers and we’d sit there off the record and work it out. And if we couldn’t work it out, then we’d bring in a court reporter and we’d make a record so that when it went up on appeal everyone knew what happened.

 

      But I think all that requires proactive district judges. So I think the enemy here is the district judge who sits back in the ivory tower and allows the case to unfold upon him or her without taking an active role.

 

      One little potential area of dissent from what I heard is: I hear my trial-lawyer-Rambo friends paint ADR as the enemy of the jury trial, and the statistics you just saw are because of ADR, and it’s terrible and it should be done away with. And, of course, my communitarian friends think that. And I’ve heard some judges say this. Some federal district judges say, “Any time I have to put on the robe and go on the bench and put a jury in the box—that’s a failure.”

 

      I think both of those are extreme positions that are wrong. I think ADR should be used as an important tool. And I do think court intervention is required in some way, shape, or form. Because if you leave the parties to their own devices, it usually gets acrimonious quickly, and they can’t get to yes. So I think they need help getting to yes. And the court can serve a good function there as a facilitator.

 

      But I think what ADR should be about is the judge identifying early on which cases can and should settle. So you’re moving the settlement paradigm from the courthouse steps the day before the jury is in the box and move it as close to the Rule 16 conference as you can. And once you do that, and you settle cases earlier and smarter, you’ve freed up your schedule to try cases quicker and more fairly.

 

Hon. William Smith:  Could I just challenge a little bit, maybe as a devil’s advocate to some of the points that Judge Thapar has put out? So, first of all, and I agree with what Judge Hardiman just said about ADR, but it’s important to remember that Congress is the body that told us to create these alternative dispute resolution programs and to encourage alternative dispute resolution. And the Supreme Court is who told us to get serious about summary judgment as a way of resolving cases. And we have to take seriously what the Court told us.

 

      Now, has it gone overboard, summary judgment? Yeah, I think it has gone overboard. The other thing to keep in mind is that we’re not equipped as district court -- I love hearing these appellate court judges tell the district courts what they have to do. Because the truth is we don’t have enough judges to try all the cases. If we went back to a system where we were no longer doing pleas and sentencings the way we are, and we had to try 15 or 20 percent of the criminal cases that come before us, it would shut us down. There would never be a civil trial.

 

      There are districts on the borders that never try civil cases. Ever. To get a civil case tried in some of those districts you have to import judges from other parts of the country. 

 

      And then I would suggest to you that it might not be true that parties really want juries to decide their cases. If that was true, they wouldn’t be building in so many mandatory arbitration provisions into so many contracts that require parties to go to arbitration. A lot of people, particularly on the defense side, don’t want jury trials. And they don’t want their litigation conducted in a public forum. They want it private. And they have lots of reasons for that. And a lot of good reasons for that.

 

      And then, the final point I would make is that sometimes juries aren’t very good arbiters of truth. They’re terrific in criminal cases. They’re terrific in simpler civil cases. But juries in patent cases, for example, or extremely complex cases, are really a roll of the dice. And so parties are really, really concerned about taking highly complex matters to juries. And I imagine there are a lot of lawyers in this audience that feel that way when they’re advising their clients.

 

Hon. Michael Mukasey:  Yeah. I just think the growth of multinational corporations and their involvement in litigation in this country has resulted in a greater reluctance to go to trial than existed before, largely because of the mistrust of the whole jury process.

 

      But I have to -- I disagree somewhat with the notion that juries can’t try complex civil cases. I had excellent experience with juries trying complex civil cases. They try to -- the Trade Center Insurance cases, which involved layers of insurance and determining what various writers meant -- and they were spot on.

 

      I think when they take it seriously and when they’re instructed properly and lawyers are kept under control, they can do a terrific job in both civil cases and criminal cases.

 

Hon. Carlos Bea:  Judge Thapar?

 

Hon. Amul Thapar:  Yeah, so I’ll respond to a number of the points.

 

      So I don’t disagree that ADR isn't a good process. What I’d say is I have a problem with judges forcing it on the parties. Having it be an available option for the parties is one thing. Forcing it on them is another, mainly because it reflects very poorly on us in my opinion. So, of course, it’s out there. Of course, it’s available. The reason . . .

 

I totally agree with General Mukasey that juries can try complex cases. You know how they try them? When lawyers do a good job. That’s how they do a good job. Lawyers take a complex case and make it simple. The best lawyers in the world, that’s what they do. They take a very complex case and they make it easy for a lay person to understand.

 

So juries can do it. We should give them the opportunity to do it. Too often, even judges don’t trust juries with doing it. And so they want to resolve it themselves. Or they want to push parties to resolve. And my problem is really the battering ram.

 

The other thing is I totally agree with Judge Smith that district courts are very busy. I say it to my court-of-appeals colleagues all the time, that they need to go try cases. My whole district, in the Eastern District of Kentucky, when Texas was flooded with border cases, every judge in the Eastern District of Kentucky volunteered and went down there. We dominated that district court because the judges in Kentucky were willing to go out and do those things. And I think district judges and court-of-appeals judges have an obligation, when district courts are overwhelmed, to pitch in. All you lawyers travel all over the country doing things. Yet we get wedded to our comfortable chambers and don’t even want to walk into the courtroom and try cases.

 

So while I’m happy to criticize district judges, I’m also trying a case in two weeks. So I’m not here saying, “I’m not doing it.” I’m calling district judges saying, “Look, if you’re overwhelmed, give me a call. I’ll come try it.” So I think it’s important that we remember -- we often blame lawyers and parties for the lack of trials without looking at ourselves a lot of times.

 

And so I think that ADR is an option. We should encourage it, but not batter parties with it. And we can let a magistrate judge or someone else encourage it so that the district judge is always available to try the case whenever parties want and never give the parties a feeling of “If you don’t try this, I’m going to give you an unfair trial.”

 

Hon. Carlos Bea:  Talking about trials, have any of you had any experience with the sort of quickie trials that they’re doing in Las Vegas, in New York state trials, where the trial could take -- Perhaps in Vegas, one day in trial, four or five jurors, sometimes an arbitration has been made and not accepted by one of the parties. In New York state, and not federal courts, they have quickie trials with an opening statement of ten minutes a side, a case presentation for one hour, modified rules of evidence that allow reports rather than live testimony, and the parties prepare trial notebooks for the jurors. Have any of you had any experience with any of that?

 

Hon. Michael Mukasey: Those are not binding. Those are advisory, right?

 

Hon. Carlos Bea:  No, they’re binding.

 

Hon. Michael Mukasey:  They’re binding? Interesting.

 

Hon. Carlos Bea:  I mean, they’re agreed upon before by the parties. But that becomes a binding judgment.

 

Hon. Michael Mukasey:  Because my experience with juries is it takes them a good day or day-and-a-half, at least, simply to become acculturated to what they’re doing there. I mean, they’re taken from their daily lives. They’re plunked down in the middle of a system they don’t understand. And then to have a case put before them and decide it in a day? Good luck with that. I’m skeptical.

 

Hon. Amul Thapar:  Our district and Ohio did the summary jury trials is what we called them. And they did it, but it wasn’t binding. Because I agree with the General; it was a method of alternative dispute resolution that actually had a really high success rate.

 

Hon. Michael Mukasey:  It actually has an even higher success rate when you can monitor the deliberations --

 

Hon. Amul Thapar:  Right.

 

Hon. Michael Mukasey:  -- since it’s advisory. And you listen to what the jurors are saying about your case. That has a sobering effect on many lawyers. [Laughter]

 

Hon. Amul Thapar:  Same with questions, by the way, during trial. I allow the jurors to ask questions during civil trials. Because I had a lot more trials once I went from complaint -- with a year from complaint to trial. And I always, throughout my career, allowed juries to ask questions. And that -- it was amazing how about halfway through trial the lightbulb went off. And the parties, on their own, would settle.

 

Hon. Michael Mukasey:  Yeah, I had the experience of having a juror, the second week of trial, pass a note that said, “What is this case about?” [Laughter] Settlement followed soon after.

 

Hon. William Smith:  That was the point I was making earlier.

 

Hon. Thomas Hardiman:  Do you let them ask questions, Will?

 

Hon. William Smith:  Yes.

 

Hon. Thomas Hardiman:  You do?

 

Hon. William Smith:  Well, I have done it in the past. But it gets a little out of control.

 

Hon. Thomas Hardiman:  Yeah, I never did. I was sort of a holdout. I didn’t want my jurors having tablets and pens in their hands.

 

Hon. Amul Thapar:  I loved it. And they pass up -- at the end of every witness they write on the notepad, pass it up—they were so engaged, so involved—they’d pass it up. I’d go over the questions with the lawyers. Then I’d ask them on the jury’s behalf. So they never knew which juror was doing it. And we could get the ones that would violate the rules of evidence out or rephrase them.

 

      But it was amazing. The lawyers would ask all their questions, and then a juror would ask a question and the lawyers would both go, “How did I not think of that?”

 

Hon. William Smith:  In my experience, the lawyers objected to all the questions that would have developed any relevant evidence. [Laughter] The only ones they wanted were frivolous.

 

      But could we come back? One of the -- sort of the trends of this dialogue that we’re having is that -- I think is sort of counterfactual, which is that we need to do something about this as a problem. That there need to be more trials. We have to solve this problem. And I would suggest that if you look hard at those statistics, you’re not going to be able to do anything about this problem.

 

      I mean, the decline, from the 1960s to the present is effectively a straight—if you plotted it—it’s a straight line. And unless we’re going to completely change the way we have structured our courts, this is where we are. I don’t think we’re ever going back to a day when we’re going to be trying 12 percent to 15 percent of our civil cases and 15 percent of our criminal cases. It’s not going to happen. And we’re not built for it. And so I’m not sure we should be discussing this as if it is a problem that needs to be solved as much as it is a new reality that we need to deal with.

 

      Now, should there be more trials? Yes. I would like more trials. I think lawyers would be happier if there were more trials. And I think judges would be happier if there were more trials, too. And that could create an institutional problem for us if we don’t have more trials. Because we rely so heavily on senior judges that if being a trial judge is no longer any fun, and all the money is being made in private mediation, when you turn 65, you’re going to leave and go out and be a mediator, or be a partner in a law firm, or do something different. Because you became a judge to be a trial judge.

 

      And we can’t make it without senior judges. Senior judges are critical to the way we function.

 

Hon. Carlos Bea:  Let me ask you an impertinent question. Why do we need more trials? Shouldn’t it be better if people don’t go to trial? Isn’t it an abject failure when people have to go to trial?

 

Hon. Thomas Hardiman:  Yeah, no. I strongly dissent from the notion that it’s an abject failure because not everything can be resolved amicably. And a trial is a beautiful alternative to what Aaron Burr did to Alexander Hamilton. [Laughter] And I think any time you can duke it out in the hallowed halls of the federal and state courts, you have a victory.

 

      And one of the most beautiful things happened to me during my practice. It was a tiny little case. I was defending a guy who was an excavator with a seventh-grade education. He was a great man. And he was sued under the federal labor laws in federal district court for $22,000. And a really wise senior judge with a remarkable amount of trial experience gave my client his day in court. And if he had been one of those judges that Judge Thapar was rightly criticizing, he would take a blunderbuss and force me to settle the case. It would have been terrible.

 

      This judge gave my client a trial. He heard all the evidence. And at the end of the evidence, after two days, he said, “Now look, I can do all these findings of fact and conclusions of law. And these lawyers can make all kinds of money. But why don’t I just tell you sort of what I’m seeing here?” And he basically told my client he was a great guy, but he violated the federal labor laws, and the union damages were ridiculous, and he really should pay them about $7,500. We walked out into the hallway, pulled out a checkbook. He wrote the union guy a check for $7,500. They shook hands; and they went home.

 

      That was a beautiful exercise in American civic justice. And if we didn’t have a judge with the wisdom to give the -- and, you know, these were repeat players. Right? The union was upset with my client. My client felt like he was being beaten up by the union. And there is a tremendous catharsis that can and often does occur in a trial.

 

      So I’m all for trials. And I’m for more trials. And I think we can take that number from 0.9 percent up to 5 percent. But if I were able to do something unilaterally, I would probably institute a new federal rule that said, “All cases worth less than $500,000 will be tried without any discovery. [Applause]

 

Hon. Amul Thapar:  Can I say “Amen” and be done? The one thing I want to add is we say we can’t, but -- and you’re right, we’re not going to get back to 15 percent. But I think, if you look at the studies, lawyers are less happy. So what -- Judge Sutton was in charge of the rules committee. He championed changing the rules to make courts more accessible. One of the things that Judge Sutton and I talked about is we encouraged people for so long to go to alternative dispute resolution that they thought we didn’t want them. And I think it’s important that courts have a very open door to people coming in and litigating cases.

 

      Over my whatever, nine, nine-and-a-half-year time on the district court, I had 150 to 200 cases I tried. Very few were appealed. That speaks to Tom’s point. People want a jury trial.

 

      There is some wisdom in our Founders, right? This is The Federalist Society. We do believe in what the Founders thought. The anti-federalists crusaded on a jury trial. The promise in Federalist 83 from Alexander Hamilton was that there were going to be jury trials. It’s important we remember the wisdom. They were pretty wise, right? The Constitution still exists. And some of us still like interpreting it the way it was meant to be.

 

      And so that is an important right. And I think lawyers need to remember to force judges to remember that. There are a lot of new, great, originalist judges. These arguments are out there to be made. And Justice Thomas sometimes writes about this. And I think it’s important that we remember the wisdom and we offer to the public the opportunity to try cases. Because a lot of them leave, happy or sad, if you give them a trial within a year.

 

      So I’m with Tom. Under 500,000? Let’s do that. Let’s put that in the books. You know how much happier lawyers will be? You know how much happier clients will be? How many clients do any of you have that say, “Thank God, we had a year-and-a-half of discovery”? [Laughter]

 

Hon. Thomas Hardiman:  And how many clients win, and the judgment they earned was less than the fees they paid their lawyer? That’s a pyrrhic victory.

 

Hon. William Smith:  Well, I would just -- I can’t really disagree with a lot of what you’re saying. But I don’t see the problem as the judges. Most of the judges I know want to try more cases. They don’t want to do discovery either. They don’t want to -- as a trial judge, I love being a trial judge. And one of the things I like about being a trial judge is trials.

 

      So it’s very frustrating not to have trials. And I think it’s going to result in more judges retiring as soon as they’re eligible. So I’m not sure it’s a judge problem. I think it’s a lawyer problem as much as it is anything else.

 

Hon. Amul Thapar:  Can I ask a question? Because I think it’s as much a judge problem as a lawyer problem. How many of you have had a case that you wanted to go to trial, where the judge battered you until you settled? Yeah, I think that --

 

Hon. William Smith:  There ain't many.

 

Hon. Amul Thapar:  No. That’s a decent amount. Look, it should never happen, is my point.

 

Hon. William Smith:  I agree.

 

Hon. Amul Thapar:  And there are enough out there that wanted to go to trial

 

Hon. Michael Mukasey:  It’s corrosive of the judge’s function to be as, put it, “battering people” into settlement. But it is also destructive, I think, of lawyers’ skills to have that many cases, or that proportion of cases, settle. How can a lawyer possibly advise a client on what the risks are of going forward if that lawyer has never tried a case? And yet, there are people becoming partners in substantial firms, in the litigation department, of all things, who have never tried a case.

 

      I had the experience when I was in practice—this was before I went on the bench—of having somebody come into my office and sit down and try to make the case for making one of our associates a partner. And I said, “But he’s got no stand-up experience.” And the response was, “Oh, he’s not a trial lawyer. He’s a litigator.” [Laugher.]

 

Hon. William Smith:  Well, and on that point, in my experience, the fastest way to force—you talk about battering lawyers to settle—the fastest way to get lawyers to settle is to set a firm trial date. That’s when they settle. Because they’re afraid of going to trial, or their clients are afraid of going to trial.

 

Hon. Michael Mukasey:  And the result of a lot of this is that in -- the cases that do go to trial are in substantial part the ones where a plaintiff, for example, has nothing to lose. You get a pro se prisoner who manages to survive summary judgment. He gets a free trip to a much better prison than the one he was in. He gets to see his friends and relatives. And he may get some money.

 

Hon. Carlos Bea:  Now that you brought up people who had nothing to lose, I think it’s a perfect segue to the criminal law. Can we talk about what the effect of, for instance, lengthy sentences and plea bargaining has been, and any other subject which has caused a drop in criminal trials?

 

Hon. Michael Mukasey:  Well, I think it’s pretty obvious what caused the drop-off in criminal trials was the institution of the guidelines. Which is interesting, because when they first went into effect—I was sitting at that time—everybody predicted that nobody would plead because they were so draconian, that everybody would go to trial. Whereas quite the opposite happened. They appeared -- one view is that, well, they gave the criminal classes what their lives always missed, which was structure and predictability. Here’s what you get if you go to trial; here’s what you get if you plead.

 

      There’s a lot more to it than that. Part of this is driven by mandatory minimums. And the only way you can get out from under those is to provide substantial assistance to a prosecutor. So prosecutors make charging decisions. Those charging decisions substantially control the outcome. And as a result, lawyers increasingly try their cases in the assistant U.S. attorney’s office rather than in the courtroom.

 

Hon. Carlos Bea:  What has been the effect of Booker, which made the sentencing guidelines advisory? Will, you’re up.

 

Hon. William Smith:  Right. Well, if you look at the statistics, the decline has been consistent and very steep from about 1992 to the present. But with Booker, which happened in 2005, and then there was some follow-on caselaw development that didn’t really settle down until about 2007 or 2008. The decline slowed down, definitely, with Booker. And it’s really settled in at around 2.5 percent of criminal cases go to trial.

 

And we do try criminal cases. I tried one last week. I’m trying one next week. And I’m trying one the week after that. And those cases are going to go to trial. They’re not going to end in pleas.

 

There are a number of reasons why people go to trial. Sometimes they’re innocent. That’s a reason. Sometimes . . .

 

Hon. Michael Mukasey:  How often is that?

 

Hon. William Smith:  Haha. Well, the one at -- my trial last week resulted in an acquittal. So . . .

 

Hon. Michael Mukasey:  That’s different from innocent.

 

Hon. William Smith:  Yeah, well. True. [Laughter] That’s what the prosecutor said.

 

Hon. Michael Mukasey:  The verdict is “not guilty.”

 

Hon. Amul Thapar:  That’s a good Attorney General right there. [Laugher.]

 

Hon. William Smith:  So, some cases go trial because deportation is on the table. And it’s not about whether the defendant is looking at two years or four years. The defendant’s looking at being deported. And this is the only chance to stay in the country, is to throw the dice. So we get some of those.

 

      But still, I think, the effect is that Booker has not had a dramatic effect in terms of increasing the number of criminal trials. It may have slowed the decline. But the effects that the General talked about are still absolutely true today, even after Booker. That is, the power of the U.S. attorneys to leverage with mandatory minimums and otherwise is just so great.

 

Hon. Carlos Bea:  Judge Thapar, you were going to talk about the presence of a lot of frivolous appeals on sentencings since Booker.

 

Hon. Amul Thapar:  Yeah. I mean, one thing that happens is -- this is one are where I’m a big fan, in most instances, of the hard work district judges do at sentencing. They pay a lot of attention to the guidelines and 3553(a) factors. And one thing we found, though not uniformly, is that there’s a category of sentences where you’re sentenced within the advisory guidelines, where it’s very hard for a court of appeals, looking at a cold record, to revisit what a district judge does. And, a lot of times, a lot of those appeals flood the courts.

 

      Whereas, there are some meritorious appeals. Judge Kethledge had to reverse a district court twice for giving a child-porn person one day. And so there are appeals outside the heartland, where I think courts of appeals have a significant role in paying attention—both going up and going down—and making sure that people are fairly sentenced.

 

But what tends to happen a lot is, in this day and age, as Judge Smith pointed out, where there’s a lot of plea agreements, the only thing they reserve appealing is their sentence. District judges are very careful and thoughtful, in my experience, in going through the factors and making sure the sentence is fair and just and within the heartland. And then it’s very difficult for courts of appeals to do anything. I don’t know if Tom’s had a different experience.

 

Hon. Thomas Hardiman:  Well, I see it exactly as you do, Amul. Booker’s effect primarily has been on the prolixity of sentencing hearings now. And that sometimes is triggered by the overzealous circuit court review of what the trial judge did. And there’s an interesting dialogue on our court about those who were and those who weren’t. Those circuit judges who were trial judges and those who weren’t, and what degree of scrutiny is given to the sentence. And as for Will’s point --

 

Hon. Michael Mukasey:  Those are the two worst kinds of circuit judges, by the way. [Laughter] Those who were and those who weren't.

 

Hon. Thomas Hardiman:  What’s the alternative? For what Will said, I agree Booker’s had no impact on trials. A great percentage of the criminal trials I presided over were mandatory minimum cases where the defendant had little to lose. Might-as-well-take-a-shot kinds of cases.

 

Hon. Amul Thapar:  And the innocent defendants, right General?

 

Hon. Michael Mukasey:  Yes. Right. Both of them. [Laughter] It’s interesting if you think about how all of this started. Time was that the only rule for sentencing is that there was a maximum that was prescribed in the criminal law, and a judge could sentence to anything from zero to the maximum. And that was accepted as one of those oddities of life.

 

      But a district judge, as a matter of fact, in the court on which I used to sit, named Marvin Frankel, wrote a thin book, it’s less than 200 pages, called The Crime of Sentencing. He did that in the 1970s. And he recounted stories about disparities in sentencing, and about arbitrariness in sentencing, including stuff that he heard at the lunch table, I guess, at the courthouse, where one judge said, “You know, I was going to give this guy five years. But he came in an delivered this tirade to me about how unfair his trial had been, so I gave the SOB another five years, tacked it on.” And of course the scandal was the guy never knew it. The defendant never knew it.

 

      There was that kind of scandal. And then, of course, there was the untruthfulness, essentially, of the sentencing, where somebody would come in and get 10 years or 15 years. And there’d be a headline, “Mr. X or Ms. X got 15 years in jail.” And then it would go to the Parole Commission, and they would let him or her out within a relatively short period of time. There were judges who felt that, you know, “Parole Commissions don’t have anything to tell me about what’s a fair sentence and what isn’t.”

 

      And so, to bring in uniformity and what was called “truth in sentencing,” the guidelines were put into effect. No more parole, and supposedly uniform sentences. I say “supposedly” because I think that promise has been breached more often than kept. The bringing of charges is what controls the length of the sentence. And sometimes it’s not really a scandal for people to get different sentences in different parts of the country for the same act. Because the rip that’s made in the social fabric in one place may not be the same as the rip that’s made in another.

 

Hon. Carlos Bea:  Is there any variance in the sentences that are being handed out by younger judges and older judges? The ones that were around before the sentencing guidelines, when it came in? What about that?

 

Hon. William Smith:  I don’t know that there’s been enough time to really study that. But there definitely are variances that exist. Geographically, for example. And the Sentencing Commission reviews and produces data on this that is really, really detailed and really terrific.

 

      So that’s a bit of a concern. I know in our region of the country, up in the Northeast, we vary from the guidelines probably more than any other part of the country. In the South and the West, they do so less. And there’s a lot of in-between. And it can be sliced and diced down to the district. And there’s great controversy over whether it can be and should be looked at even by judge. And that’s an issue that has been kicking around a little bit.

 

      I do think that we are going to have a generation of judges—maybe soon a majority of judges—who came onto the bench after Booker. Booker was 2005. So we’ve had thirteen years of appointments now with judges who didn’t know what it was like to sentence people under a mandatory-guideline system.

 

      All of us -- well, I think you came on around that time --

 

Hon. Amul Thapar:  Right. I’m after.

 

Hon. William Smith:  Yeah, after Booker. But Tom and I were—and General Mukasey, definitely—sentenced people during the mandatory-guideline era. And I will tell you that it was -- in my view, it was miserable business. And I am so thankful every day that I have my discretion now to not impose sentences on -- mandatory sentences under the guidelines.

 

      It’s really brought home to me when I visit prisoners, when I go to prisons—and I’ve gone to many of them—I visit the people that I’ve sentenced. And it’s a moving experience to have 10 or 15 people stand up and ask you, “What the hell am I supposed to do with my life when I get out of prison after the 20- or 25-year sentence that you gave me?” And it really doesn’t make them feel much better when you say, “Well, that was before Booker, and if it was after Booker, you know, I just let you know that would have only been a 3-year sentence, not a 20-year sentence.” It really doesn’t make them feel much better.

 

      So now we’ll have a whole generation of judges who’ve had discretion right from the beginning. Now, how will they be? I mean, one of the things I do for the Federal Judicial Center is mentor new judges. I’ve mentored classes of judges appointed by President Obama, and I’ve mentored classes appointed by President Trump. I mentored a class in January. And there is a difference, for sure, in coming onto the job, on how they view sentencing issues as they’re taking the bench. I think how you feel about it when you take the bench is often a little different than how you feel about it after you’ve done it 5 or 10 years. So that -- judges will evolve.

 

Hon. Carlos Bea:  How do these mandatory minimums affect plea bargaining in your idea?

 

Hon. William Smith:  Wow. I mean, they give all the leverage, as opposed to just most of it, to the prosecutor.

 

Hon. Thomas Hardiman:  I just had two quick addenda to what Judge Smith just said. I think one salutary change brought about by Booker is that cases decided before Booker had some really sort of errant and bizarre guidelines interpretations that I could conclude only that the district judge was doing everything he or she could to get out from under a mandatory guideline. So I feel like the work of the district courts now is a lot straighter and cogent regarding the interpretations of guideline enhancements or reductions.

 

      And then the other thing I’ll mention is in addition to the geographic disparities mentioned by Judge Smith, there are these disparities within certain categories of cases. And I think three notable ones, about which a fair amount has been written, are: Fast-track jurisdictions. Not every [one] of the 94 districts adopted fast track. A few did. And th[ere] can be great disparities, wild disparities in child pornography sentencing because the guideline ranges tend to be quite high in that area. And also career-offender disparity.

 

      So, in addition, I agree that regional disparities exist—and I think sometimes for good reasons, as General Mukasey identified. But there are also these disparities based on certain categories of cases.

 

Hon. Carlos Bea:  Okay. Well, if there’s no further comments, I think we’ll open up the floor to questions. Please state your name. And please state a question.

 

Steve Calabresi:  I’m Steve Calabresi, co-founder of The Federalist Society. And I found this discussion extremely interesting. I had three questions.

 

      One is, I was fortunate enough to be working for Attorney General Meese when the sentencing guidelines were approved as law. And some of us at the time felt that there should also be charge guidelines issued to the U.S. Attorneys to try to guide their discretion in charging defendants. I don’t know if that could be effectively done; but I wonder what any of you might think about that.

 

      Second, an issue that comes up all the time now with district court nominations is if the ABA criticizes the district court nominees for having insufficient trial experience. It’s obvious why judicial nominees to the district courts have insufficient trial experience—there aren’t that many trials going on. I don’t know who should tell this to the ABA, that this is happening -- [Laughter] -- or what the ABA should be looking for instead of trial experience in terms of ranking district court nominees. But it -- clearly something should happen.

 

      And then my third and biggest question is, there’s been a huge increase in the caseload over the period of time that Judge Smith identified. I know that since 1991, the caseload in the federal district courts and the federal courts of appeals has at least doubled. And there have been no new Article III judgeships created since 1991. And, obviously, if you double the caseload, or triple the caseload, and you leave the number of judges the same, the judges simply aren’t going to have time to try cases. And so alternatives to trial are going to emerge. I have previously written an op-ed arguing that there should be perhaps a doubling of the number of district court judges.

 

And at the court of appeals level, I think there’s a real similar problem, which is that when I clerked on the courts of appeals, only about 20 percent of the cases were decided by unpublished memorandum opinions. Currently, about 90 percent of the cases on the federal courts of appeals are decided by memorandum opinions.

 

No, given the politics surrounding the creation of judgeships, the only way a judgeship bill could pass, if one even wanted it to pass, is for it to phase in, perhaps over a 10-year period of time, with additional judgeships being created every two years. There’s obviously a cost in having more judges. It creates more complexity and more difficulty in interacting. But it might, at the same time, allow for the trial of more cases.

 

I’d be curious to hear your answers to any of those questions.

 

Hon. Carlos Bea:  I’d like to exercise my authority as moderator to answer your second question about the ABA criticisms. My standard response to the ABA, when I get a letter from them, is “I have nothing to do with you.” [Laughter] Does anybody want to talk about charge guidelines and --

 

Hon. Michael Mukasey:  I think it’s a terrific idea. And particularly given the presence of the sentencing guidelines. It is one thing to have sentencing in the hands of somewhat older, more stable people who don’t have any experience. But to have those decisions in the hands of kids who’ve never made a mistake in their lives, or so they think, is worse yet.

 

      So I’m all in favor of it.

 

Hon. William Smith:  I’d be in favor of charge guidelines as long as there was discretion associated with them. One of the most frustrating times for me as a judge was during the Ashcroft era, when the so-called “Ashcroft Memorandum” went out, which required prosecutors to charge to the highest possible sentence. And that resulted in a lot of what we call “851” allegations being made, which could double -- and ultimately double mandatory minimums and lead to life sentences for drug offenses. And that really tied the hands of prosecutors in a way that was very frustrating to judges and frustrating to defense attorneys and frustrating to the prosecutors, too.

 

      So I would not be in favor of that kind of thing.

 

Hon. Thomas Hardiman:  I'll just speak to your third point, Steve. Increasing case load, sure; increase judges or reduce federal jurisdiction. I think that's largely just the ever increasing fed of everything is what's caused those numbers to dramatically increase.

 

Steve Calabresi:  That's an excellent point.

 

Hon. William E. Smith:  Amen. Can I say that again?

 

Hon. Michael B. Mukasey:  The point about increasing --

 

Hon. Carlos T. Bea:  There is a silver lining from the Ninth Circuit. Our case load has actually decreased about 15 percent in the last three or four years. And I was talking to a judge who will not be named from the Seventh Circuit, and he told me that they're getting new judges and fewer cases to the point where they're going to be dark in January.

 

Hon. Thomas Hardiman:  And one addendum, too, is I got to put in a plug for technology since I do a lot with the federal courts and technology. Judge Aldisert in his 90s mentioned that when he came on in the '60s, the Third Circuit judges were deciding 60 cases per year per active judge. And the same year he told me that, we were doing 420 decisions per year per judge. And we weren't anywhere like seven times smarter than our forbearers, but rather the technology has just given us remarkable power to work more efficiently than they were in the typewriter era. And the shepherd of shepherds here. Do you remember Shepherds?

 

Hon. William E. Smith:  Shepherds books.

 

Hon. Thomas Hardiman:  Shepherdizing -- I said to a clerk once, "Why don’t you Shepherdize that case," just to see the reaction. I got nothing. He wanted to talk about the categorical approach in the Shepherd documents. I was like, "No, no. That's a totally different thing."

 

Steve Calabresi:   Just out of curiosity --

 

Hon. William E. Smith: Can I come back to this ABA point that Steve mentioned? I think that this is a really important point. There's a mythology about finding people who can be district court judges, that there has to be this great body of trial court experience for one to be a good trial court judge. And it's a total myth, in my view. I think it's a total myth. I was a labor lawyer. I didn't try cases to juries. I did the trial by ambush that you all want to go back to. That's what I did. I tried lots of cases, but we never had discovery as labor lawyers. We just tried arbitrations. And you can learn the rules of evidence and you can learn how to handle a trial perfectly well in a lot of ways. And it just isn't that -- trial lawyers have for generations wanted to create this myth around what they do, that it's just -- it's a combination of art and science and you just have to be infiltrated in it for years, and years, and years before you could ever possibly understand how to do this business. And it's just not true.

 

      There're a lot of people who can be great trial judges. Maybe they wouldn't be great trial lawyers, but they would be great trial judges with proper training. And, frankly, I think we ought to worry more about making sure we have smart judges who can learn to do these basic things that we do. A lot of what we do is not rocket science, and you can learn it. But if you're going to handle a really, really complicated patent case and you don’t know anything about math or science—unfortunately, I fall into that category—that's a bigger hurdle than running a simple dryer.

 

Hon. Carlos T. Bea:  Let's go to the back of the room.

 

Trey Mayfield:  Trey Mayfield. I'm a litigator here in the D.C. area. Thank you all for your comments. A number of you made, in the civil discussion section, the point that judges need to be more hands on. And I think, at least from my vantage point, as a 20-year litigator, I do see that. But it see it processed hands on; I don’t see substantive hands on from the federal J udiciary. I had the privilege of clerking in the district court 20 years ago, and I remember my reaction was that 80 percent of these cases shouldn't be here. The answer is just so obvious, and we have something in the civil rules that's supposed to address that. And it's called Rule 11. And yet, I don’t see, and I don't think any of my colleagues see, judges really applying Rule 11 in a meaningful set. They use it for egregious lawyer conduct. But no one says anymore, there's just some cases just too stupid to be in court. And I want your comments on that.

 

Hon. Amul Thapar:  I think that's a valid point. I would say that I never saw so -- it's a product of two things, right? And it's circular, is that judges may not grant them, because we don’t want to grant them against lawyers—maybe I'm surmising. I never saw emotion under Rule 11. So it takes two to tango, and I think the motions have to be filed.

 

      Having said that, I recognize that lawyers are wary of filing it because they're worried judges will come down hard on them. But I actually agree with your previous sentiment that if we could get rid of the frivolous cases, we really could focus more on getting the other cases to trial. And so maybe that is a tact to take.

 

Hon. Carlos T. Bea:  Anybody else? Okay, next question.

 

Mike Daugherty:  I'm Mike Daugherty, and I'm not a lawyer, so perhaps this might sound naïve. But my question is about accountability of judges. I'm from Georgia. We got knocked out from the federal -- we moved up in jurisdiction from the Northern District to the Western District of Pennsylvania, and we've had -- our tolling ignored, even though we were in the wrong jurisdiction. We've had -- then a recusal, then everything's rubber stamped at the magistrate court. We've not had discovery in three years. I have a similar case in the state court in Allegheny County, where it's a defamation case where I'm a defendant, and we've had no discovery for over four years because the plaintiff said he's under investigation by the FBI, and so he needed to plead the fifth. And the judge let that go.

 

      Anyway, I could just list a nightmare, but that's not the point. The point is one year in the crosshairs, anything that could happen? Anything that can be done? My lawyers are eggshell walkers in Pittsburg because they just don’t want to tick off the judiciary.

 

Hon. Thomas Hardiman:  I have an easy answer for your problem. I'm in the Third Circuit and that might come to my court, so I have nothing to say about that.

 

Mike Daugherty:  Wow, and I liked you until right now. [Laughter]

 

Hon. Michael B. Mukasey:  I'm sorry. Can you phrase your question as a question?

 

Mike Daugherty:  Didn't I say that? I didn't ask a question. I just said what can one do with judges with this type of -- what can one do when you're in the crosshairs or is there nothing? It's really about accountability in the big picture.

 

Hon. William E. Smith:  Right. And the answer to your question is every court has a disciplinary body, which is the circuit conference. And if you feel a judge has handled things in an inappropriate way, you can file a complaint with the circuit court. And it would be assigned to a panel of judges and a staff attorney who would examine it. And that's the process that we would follow.

 

Mike Daugherty:  I was trying to get to more macro-level than me specifically. But I had to give some example, but thank you.

 

Hon. Carlos T. Bea:  In the back.

 

John Curry:  Yes, I'm John Curry. I'm a trial judge in Chicago, Illinois in the state court system. And one product of the increase of the cost of litigation is, at least in our jurisdiction, an increase in the occurrence of pro se litigation. I'm curious as to whether this is also a factor in federal jurisdiction. It's a serious one for us at the state court that we have developed programs to deal with it. So, a) Is it a problem in the federal judiciary? b) What are your strategies for dealing with it? And c) What is the success rate or your opinion as to the worth of those strategies? Thank you.

 

Hon. Thomas Hardiman:  It's a big issue. I don't know that I'd identify it as a problem. But I can tell you that in 2007 when I joined the Third Circuit, 42 percent of our cases were pro se, and that number has now gone to about 60 pro se. And a large percentage of those pro se cases are pro se prisoner cases. And the Chief Justice wrote an opinion, I don't know, five or eight years ago that was really interesting where he feared that the proliferation of pro se prisoner cases might put the judiciary in a needle-in-a-haystack situation, where some of the really meritorious prisoner cases run the risk of being overlooked by the deluge of unmeritorious cases.

 

      So you've identified a very real issue. It's something we're cognizant of. As far as solution, we take whatever is filed. So we're not going to have any impact on what cases we get. You file a case in our court; it's timely. We exercise jurisdiction. So I'm not sure what the answer is except that it certainly has increased in our circuit and it's something that we're well aware of.

 

Hon. Michael B. Mukasey: Some courts have it—my old court had—a pro se office, comprised of lawyers who would sit down with pro se plaintiffs and try to translate their complaints into something coherent, analyze them, and then present them to, usually, the Chief Judge to sign off on – either summary dismissals or putting the case into the docket of district judge if it has some merit. And that kind of screening device, I think, could be very useful.

 

Hon. William E. Smith:  I agree. And I just think that it takes -- the unfortunate thing is it's a manpower issue. It take bodies and for that you need a budget. And that's the best we have to throw at it is our resources.

 

Hon. Carlos T. Bea:  What we do in the Ninth Circuit, we have—at least 50 percent of our cases are pro se on the appeals—we first have them screened by our staff attorneys. And they prepare a short resume of the important issues in the case. And then we have a panel of three judges that meet either in San Francisco or in Pasadena or in different places on television. And we discuss each one of these cases and attempt to come to a conclusion that day. We usually do about 150 cases a day.

 

Hon. Carlos T. Bea:  Next question.

 

Devon Watkins:  Hi, my name is Devon Watkins. So it seems to me, just considering civil cases, it seems to me that the old way of doing things was that when the parties come with a factual dispute that they can't agree, that this would almost always go to trial. But more often today, you see the judges look at discovery and go "In my opinion, no reasonable jury can conclude that the facts be anything but this. . ." And so you never actually get to a trial because it can get done by summary judgment. Do you think that in some ways undermines the right to a jury trial to have judges be making those calls?

 

Hon. Amul Thapar:  Do you mean during summary judgment when motions are filed?

 

Devon Watkins:  Yes. During summary judgement they say, "In my opinion, no reasonable jury can conclude any facts but such and such," even though the parties disagree as to what the facts are.

 

Hon. Amul Thapar:  So I wouldn't be comfortable opining because I think it's an argument someone could make. I could tell you, and you probably are aware by asking the question, there are law reviews written on this, both by a professor from the University of Illinois, who takes the position you're, at least, indicating, and Brian Fitzpatrick, who's also a very thoughtful scholar from Vanderbilt, who says summary judgment's perfectly permissible. But I think it's an interesting argument, and I just haven't done the research—historical research—to figure out if that's there. But I think, again, got a lot of new judges who are willing to look at originalist research, and if it's in the interest of your client to make it, you might want to.

 

Hon. Carlos T. Bea:  In the back of the room.

 

John Barone:  Thank you. My name is John Barone. I'm a retired supreme court justice, New York State, which meant I sit in what everybody else would call the "Superior Court" in Bronx County. I have two questions to ask, one related to the civil trial. As a Bronx judge, you did -- as a supreme court justice, you did a fair amount of summary jury trials. Just to clear up some certain things, the effect was the same as binding arbitration. It was very little chance for appeal. It was done by preparing trial books for the jury. Each side has a limited time to present its case, usually an hour or an hour and a half. Cases were presented before lunch. The jury usually, but not always, was not compelled to come to a verdict that day. They sometimes came back the next day. And it was all fee driven. It was all accident cases, generally, where policies were 25 to 50 or 50 to 100,000 dollar insurance policies where it wasn't economic for the plaintiff to proceed to a full jury trial.

 

      Some insurance companies consented to that. Others did not. And the City of New York did not. --

 

Hon. Carlos T. Bea:  Can we get to the question, please?

 

John Beroni:  Yeah, I'm getting to it right now. I got another one, though, you know? The question is when you were talking about the federalist system, what kind of -- is there an availability, or do you think a likelihood, or an advisability to have some sort of summary jury system in the federal courts?

 

      And my second question deals with—and I'll be quick. My experience has been with the sentencing guidelines that you must consider—and I hope you can answer the question—you must consider the pressures on a civil or white collar defendant in the -- because the prosecution has tremendous weapons they can essentially give a "Get out of Jail Free" card to every witness except the person they want to get. They can threaten prosecution of family members, and they can bankrupt the defendant. And so there is a possibility—I'd wish you'd comment on that—there is a possibility of an innocent person taking a year in jail with maybe six months house arrest as opposed to spending a million dollars on defense, running the risk of being convicted, and getting, let's say, a 10-year sentence under the -- I know these were pre-Booker cases that I was aware of. But even under the post-Booker cases of getting a much longer sentence in the federal courts. And it is a temptation, I believe—and you can tell me what you think about it—it is a temptation for an innocent person to take a guilty plea.

 

Hon. Carlos T. Bea:  Does anybody have a comment?

 

Hon. Thomas Hardiman:  I mean, summary jury trials, sure. I view it as a form of ADR, and if it's a form of ADR that both parties like, then fine. Great. But I still think the better solution – increasing the trials – is to get to trial quickly without discovery and have a trial that's not a species of ADR. And, again, I'm very much in favor of ADR. But if you're going to try the case, I'd rather have it be a trial.

 

Hon. Carlos T. Bea:  Last question from you, sir?

 

John Barone:  Oh, sorry, I had that second question about the likelihood of compelling guilty pleas from innocent, particularly white collar criminals.

 

Hon. Michael B. Mukasey:  Yeah, look. The risk of an innocent person coming in and pleading guilty, as was pointed out to me just a minute ago by Judge Hardiman, is an inherent risk in any system. And we place defendants under oath at the time they enter pleas, such that they have to swear that they did what they say they did. Now, other than that, it's difficult to figure out how to create a perfect system.

 

John Barone:  I agree. Thank you.

 

Questioner:  I'll just keep it really short. The Constitution limits federal jurisdiction to cases on controversies. But overwhelmingly, when a case arises on appeal, it goes as a matter of law, and the facts are taken for granted from the lower courts. As the Supreme Court almost never takes a case to reverse error. It's mostly [if] it's causing a circuit mess of some kind. So if the fact gets lost in the lower courts and the case rises only as a matter of law, and the Supreme Court says that it's not taking a case to get rid of an error made by the lower court, to what extent does that attitude effect the way lawyers look at the case at the beginning? Or the way trial judges approach a case?

 

Hon. Michael B. Mukasey:  I think part of what you're saying is that, in some respects at least, the trial court is the court of last resort, i.e. facts. And I think that burden rests on every district judge. I will also tell you that it is a maddening complaint by district judges that contrary to what you just said, there if often fact finding in the court of appeals, and they get a case back and don’t recognize the opinion as being the case that they tried.

 

Hon. Thomas Hardiman:  That's why we distinguish between those who were and those who weren't.

 

Hon. Michael B. Mukasey:  Right. [Laugher]

 

Hon. Carlos T. Bea:  And with that --

 

Hon. William E. Smith:  Amen.

 

Hon. Carlos T. Bea:  -- I'd like you to thank this swell panel for me.

5:00 p.m. - 5:45 p.m.
18th Annual Barbara K. Olson Memorial Lecture

2018 National Lawyers Convention

Topics: Constitution • Federalism • Separation of Powers • State Courts • State Governments • Federalism & Separation of Powers
The Mayflower Hotel - Grand Ballroom
1127 Connecticut Avenue, NW
Washington, DC 20036

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On September 11, 2001, at the age of 45 and at the height of her professional and personal life, Barbara K. Olson was murdered in the terrorist attacks against the United States as a passenger on the hijacked American Airlines flight that was flown into the Pentagon. The Federalist Society believes that it is most fitting to dedicate an annual lecture on limited government and the spirit of freedom to the memory of Barbara Olson. She had a deep commitment to the rule of law and understood well the relationship between respecting limits on government power and the preservation of freedom. And, significantly, Barbara Olson was an individual who never took freedom for granted in her own life, even in her final terrifying moments-her inspiring and energetic human spirit is a testament to what one can achieve in a world that places a premium on human freedom. Solicitor General Theodore B. Olson delivered the first lecture in November 2001. The lecture series continued in following years with other notable individuals.

On November 16, 2018, Judge Jeffrey Sutton offered the annual Barbara K. Olson Memorial Lecture. Sutton reflected on the roles of state constitutions, state courts, and state governments in the formation of American constitutional law.

  • Hon. Jeffrey Sutton, United States Court of Appeals, Sixth Circuit
  • Introduction: Mr. Eugene B. Meyer, President, The Federalist Society

For more on Barbara Olson and the Barbara K. Olson Memorial Lecture Series, follow this link.

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Event Transcript

Mr. Eugene Meyer:  Good afternoon. That was a more powerful microphone than last night. Welcome to the 18th Annual Barbara Olson Memorial Lecture. I am Eugene Meyer, President of The Federalist Society. And this Memorial Lecture started, as many of you know, shortly after 9/11. Ted Olson’s inaugural lecture reminded us of what it means to be an American and how our legal system is a critical part of our identity as Americans. Perhaps we could stand to be reminded of that again today.

 

Both Ted and Barbara -- and Ted, unfortunately, can’t be here today. He was scheduled to be here and the weather messed up his transportation and he’s out of town and remaining out of town, unfortunately.

 

But both Ted and Barbara understood this connection. We want the lecture series to remind lawyers of it so they foster legal principles that advance individual freedom, personal responsibility, and the rule of law.

 

Our other lecturers have included a distinguished cast: Justice Scalia; Chief Justice Roberts; Vice President Cheney; Judges Ken Starr, Robert Bork, Ray Randolph, Edith Jones, Doug Ginsburg, Dennis Jacobs; and then-Judge, now-Justice Neil Gorsuch; former Attorney General Michael Mukasey; former White House Counsel Don McGahn; and Peter Thiel; John Allison; and Senators Tom Cotton and Ben Sasse.

 

This brings us to today’s lecture. It’s my honor to introduce for this year’s Barbara Olson Lecture, the Honorable Jeff Sutton, who is a Judge for the United States Court of Appeals for the Sixth Circuit. Prior to this, he was a partner with the law firm of Jones, Day, Reavis & Pogue in Columbus since 1996. And before that he was an associate with the firm, where he specialized in commercial litigation, constitutional litigation, and appellate practice.

 

Since ’93, Judge Sutton has been an adjunct professor of law at Ohio State—at The Ohio State University College of Law, as all of our football fans understand—teaching seminars on the United States Constitution and state constitutional law. Since 2012, Judge Sutton has taught a class on state constitutional law at Harvard Law School. From ’95 to ’98 he was the state solicitor for the State of Ohio—I would add, at a time when there weren’t quite so many state solicitors. But he oversaw all the appellate litigation on behalf of the attorney general and participated in complex litigation on her behalf at the trial level.

 

Judge Sutton had clerked before for Justice Lewis Powell and Justice Scalia. He’s argued 12 cases in the United States Supreme Court, received his B.A. from Williams College and his J.D. from the Ohio State University College of Law. He teaches a class at Harvard Law School—pardon me; I mentioned that already—but on state constitutional law, and has co-authored a casebook. And more recently, and more importantly for us and for this lecture, he recently wrote 51 Imperfect Solutions, which I suspect he will talk about a bit.

 

It is a real honor to have Judge Sutton deliver the 2018 Barbara Olson Lecture. Judge?

 

Hon. Jeffrey Sutton:  Wow. Thank you, Gene. When you write a book, you learn who your friends are.

 

      I’m deeply honored to give this year’s Barbara Olson Lecture. I knew Barbara and I know Ted and I’m proud to call them both friends. Barbara believed in the power of ideas and spent her all-too-brief time on this earth promoting them. Count me as a fellow traveler.

 

      The theme of this year’s Convention is Good Government Through Agency Accountability and Regulatory Transparency. Let me start with some judicial transparency. If anyone thought that I would have the good taste to refrain from talking about state constitutions or promoting the ideas in 51 Imperfect Solutions, I have some bad news. I do not have that kind of restraint. The phrase "assumption of the risk" comes to mind. The good news is that my topic, federalism, is no stranger to the theme of the Conference, separation of powers.

 

      There is one other reason I cannot resist talking about the book. Many of the ideas in it grew out of a national convention 21 years ago. In 1997, the Society put together a panel on City of Boerne and the Future of Federalism. As is the Society’s custom, its most radical and impressive custom, the panel had intellectual diversity.

 

In a minor breach of separation of powers, I moderated the discussion and participated as a panelist in it. On my side of the debate was someone I did not know: Bill Pryor, then the Attorney General of Alabama. The two of us were picked to carry the states’ side of the debate on a theory that we would agree with each other because he was the Alabama AG and I was the Ohio SG. That’s not how it worked out.

 

As I neared the end of my presentation, I made a passing comment about the reality that state courts can do all kinds of innovative things under the banner of federalism, including invalidating state school systems, states’ funding systems, under their own constitutions.

 

Bill did not like that idea one bit. He had suffered through the defense of one such lawsuit in Alabama. And he proceeded to grill me about the utter failings of these lawsuits. “Who is this guy?” I thought. We were supposed to be on the same side of the debate. I’d given him a wonderful introduction. [Laugher] No matter. He let me have it.

 

Not one to dodge an argument, I defended my point and the virtues—even if unpredictable virtues—of federalism. Back and forth we went, each completely convinced the other was wrong, the other two panelists just watching us. I probably called him a fair-weather federalist, and he probably called me a judicial activist. Fighting words.

 

Learned Hand once said that “The spirit of liberty is the spirit which is not too sure that it is right.”  Bill and I did not win any Learned Hand awards that day. [Laugher] But we did win each other’s friendship and respect. A quintessential Federalist Society story. One of us a son of the north; one of us a son of the south. One a Protestant; one a Catholic. And, most improbably of all, one of us an Ohio State fan, and one an annoying Alabama fan. [Laugher.] Easily the best line in the talk.

 

What mattered was a shared interest in getting the big questions right, even if it meant arguing about them from time to time. Bill still second-guesses me now and then. Just this past week, as if on cue, he sent me an email questioning one of my decisions. What are friends for? [Laugher]

 

Bill and I ended up doing a lot of work together. He hired me to handle three merits cases in the U.S. Supreme Court and to write several amicus briefs there. Greg Katsas also worked with us in many of those cases. Not a bad team.

 

Together, our work at the U.S. Supreme Court, I would like to think, increased the profile of state AG and state SG offices. Before long, Bill created an SG position for Alabama, the second occupant of which was Kevin Newsom. The Ohio office continues to have a good reputation. And Texas played a leadership role as well. In the 1990s, the late and much-beloved Greg Coleman got the Texas SG position off the ground, and it too has flourished with help from the likes of Ted Cruz, Jim Ho, Kyle Duncan, and Andy Oldham among others.

 

Just recently, New Hampshire became the 40th state to create a state SG position. All of this has been good for American law, and The Federalist Society had a lot to do with it. By insisting on intellectual diversity in its programs, the Society incubates good ideas and makes good ideas better. And by devoting so much programming to separation of powers—it’s really, frankly, quite exhausting—the Society never lets us lose sight of the most essential, but most neglected, question in American constitutional law: who decides?

 

So enough about me and The Federalist Society. Let’s talk about me and my book. [Laugher.] It’s really quite outrageous. It’ll be over soon.

 

My position is that we have lost track of how to identify and develop judicially enforceable rights, and in the process lost track of our constitutional roots. Let me offer a few reasons why we need to take state constitutions and the courts that interpret them more seriously.

 

One is historical. The individual rights we prize the most—free exercise, free speech, due process, right to counsel—all originated in the state constitutions. The greatest era of constitution writing in this country, indeed in world history, was between 1776 and before the fabled summer of 1787 in Philadelphia. Whether it’s the individual rights provisions in the original U.S. Constitution, or the Bill of Rights, they were authored by the framers of the state constitutions, not the other way around.

 

The foundational idea was that the state courts would be the first responders in addressing new infringements on liberty, and the state constitutions would be the principle shields in saving individuals from new threats to their freedom. In truth, the 1787 Philadelphia Convention involved more cutting and pasting than original drafting. The only truly patentable idea that came out of the Convention was, in Justice Kennedy’s words, “splitting the atom of sovereignty,” a division of vertical power that gave birth to American federalism and that gave birth to dual roles for state and federal courts in protecting constitutional liberties.

 

A second point is this: anyone who cares about judicially enforceable rights should prefer two shots, rather than just one, to invalidate a state or local law or to protect against a state or local criminal prosecution. There are 51 constitutions in this country and 51 high courts to interpret them. The key individual rights protections appear in virtually every state constitution as well as the federal constitution. Only a lawyer half-interested in obtaining relief for his client would pay attention to just one of those shots. And only a law school that wanted its graduates to be half-equipped to solve their clients’ problems would neglect teaching the second shot, the state shot.

 

Given the frequency with which lawyers put all of their efforts in just one place, the U.S. Constitution, it’s fair to revisit that age-old, existential question: are American basketball players smarter than American lawyers? [Laugher.] The answer is easy. And it’s an indictment of our shared profession. No American basketball player ever took just one shot after a two-shot foul.

 

My third point is that a renewed interest in state constitutions would be healthy for federal constitutional law and for the U.S. Supreme Court. Year-by-year, the U.S. Supreme Court exercises more control over our lives. If we federal judges share some of the blame for this development, it’s worth remembering that we Americans need to look in the mirror as well. Our country adores judicially enforceable rights. And I doubt any country in world history has embraced them with more gusto than we have.

 

For what it is worth, I am a skeptic of our modern obsession with judicially enforceable rights. They are overrated in at least two ways. They overrun the compromises often needed to make democracy work. And they rarely settle disputes in a way that creates lasting tolerance of minority perspectives.

 

Let me make the point this way. If I had to pick between the 1964 Civil Rights Act or Brown vs. Board of Education, and I could only have one, I would always take the ’64 Civil Rights Act. What would you rather have? A country in which five to nine members of a life-tenured court protect our rights? Or a country in which we create a legal and social norm in which the majority looks after the interests of the minority?

 

While I may be an optimist, I am not delusional. A legal culture that embraces judicially enforceable rights is not going away any time soon. So I must deal with the world as it is, not as I wish it could be. In our current world, the incentives to seek winner-take-all victories in Washington, D.C., remain high and will stay high. Who doesn’t want to sideline a policy opponent with a constitutional victory at the U.S. Supreme Court?

 

There is just one small problem with this situation. Unless you’ve been hiding under a rock for the last few decades, you may have noticed that it is getting harder to fill these seats on the U.S. Supreme Court. Indeed, on all of the federal courts. The intensity of the resulting confirmation fights runs the risk of politicizing the U.S. Supreme Court to a degree and a level that cannot be undone.

 

I have no grand solutions here. But I have a strong conviction that increased reliance on state constitutions and state courts will improve matters. Most Americans would embrace this essential insight of federalism. In dealing with new policy challenges, it can be helpful to use the 50 states as laboratories of policymaking experimentation. Why try a novel social experiment on 325 million people and 51 jurisdictions at once?

 

The Brandeis metaphor, of course, refers to state legislatures as these laboratories. All I am saying is that we should apply the same insight in developing constitutional rights. We should start thinking more often of the state high courts as laboratories for constitutional experimentation.

 

So that is my opening argument. I have reserved most of my time for rebuttal. [Laugher.] I have a sense from my audience, having given so many talks to FedSoc student and lawyer chapters around the country about the topic for the last year -- Bismarck, North Dakota, for what it’s worth, in the summer, was my favorite destination. [Laughter.] I wasn’t expecting it to be that much bigger an applause.

 

But my talk to the Birmingham chapter was the most unusual and had to be a first in FedSoc history. Halfway to Birmingham, I ran into plane delays and soon realized I would not be able to get to the city in time for a noon event. Rather than cancel the event, my preference, the chapter insisted that I give the speech with my iPhone in one of the remote carrells in the Admiral’s Club in the Charlotte, North Carolina, airport. Somehow the folks in Birmingham found a way to put a cell phone up next to a microphone to project my talk. It worked. Or so I’ve been told. Best I could tell from my carrell in Charlotte, everyone had left.

 

But I do know this. Two poor souls in the carrell next to me listened to the whole speech. Afterwards—I’m very proud of this—they said they liked it. [Laughter.] So membership in The Federalist Society grew by two that day.

 

 

As I can attest, and as my presence here today confirms, The Federalist Society brings together a lot of perspectives about constitutional law and about the role of the courts in enforcing it. That big tent is well represented by the range and talent of prior Barbara Olson lecturers, a wonderful testament to Barbara.

 

So let me work through what might be the reactions of these past lecturers to what I am saying and the questions they assuredly would have for me. What would originalists like Justice Scalia, for example, say about this? Or libertarians like John Allison? Or restraintists like Judge Bork? You get the idea.

 

Let me start with Justice Scalia—always a good place to start and always a voice whispering in my ear. So would reinvigorated state constitutions be good for originalism? You bet. It not only would be good for originalism, it is indispensable to it. How can anyone call himself an originalist and not take state constitutions seriously? They are the source of our federal rights and the source code for interpreting them.

 

Just read Justice Scalia’s second opinion in Heller if you doubt me. One of the key explanations for the decision was the state court interpretations of the state right-to-bear-arm guarantees and the state courts’ nearly uniform interpretations that they were individual rights, not militia limited rights.

 

All of this might explain why Justice Scalia, in his last majority opinion for the Court, Kansas v. Carr, embraced what I am saying. In his words, I am quoting, “The state courts may experiment all they want with their own constitutions, and often do in the wake of this Court’s decisions.” As support for that claim, he cited an article making the very points I am making today. I don’t want to lie—it was my article. [Laughter.] I know. Something about that doesn’t seem right. I really did not want to tell you. But then I felt -- my conscience kicked in. Let’s move on.

 

Past speakers like John Allison and Peter Thiel might ask whether libertarians would benefit from vigorous state constitutionalism. That too is easy. For the libertarian, state constitutionalism is the ship you have long waited for the prevailing winds to bring in. Two shots are always better than one. Most libertarians, indeed, would probably prefer three or even four ways to limit government. For now, however, don’t get greedy. It’s always better to have two shots, rather than just one, to halt enforcement of an overarching, overreaching state or local law. The point turns on math, not law.

 

Let me illustrate the point with the Patel opinion by Don Willett, then a Justice on the Texas Supreme Court, now a judge on the Fifth Circuit. At issue in Patel was a set of burdensome licensing requirements that Texas imposed on wannabe commercial hair threaders. The plaintiffs filed the challenge under the Texas Constitution’s due-course-of-law provision, presumably on the theory that they wouldn’t have gotten anywhere under the U.S. Constitution. In a history-filled concurrence that all libertarians and all natural-law advocates should relish, Judge Willett examined the Texas Constitution’s protection of property and due process rights and their under-protection in the past. His thoughtful reasoning, with the memorable line “don’t thread on me” . . . [Laughter.] Those opportunities don’t come very often in a judicial career. His opinion laid out a roadmap for other state courts to follow in honoring their own state liberty and property protections. The wee Willetts must have been proud of their father that day.

 

[Applause.] Good. I could use the pause.

 

What about the risk that if we place more emphasis on state constitutions, we will dilute respect for federal constitutional rights or diminish the role of the federal courts in protecting them. Perhaps Chief Justice Roberts and other federal judges might ask that question. A short answer is that this is the nature of federalism. We do not think any less of Congress when a state legislature takes a different path from the national legislature under its own lawmaking prerogative. It’s the same thing when a state court charts a different path under its constitution.

 

Madison was right in Federalist 51—surely, by the way, the most aptly numbered of the Federalist Papers. [Laughter.] It’s pretty good. That was a promotional point. I wasn’t sure you were getting it. That’s why I had to mention it.

 

In Madison’s words, “Ambition must be made to counteract ambition.” That dictum not only means that state power sometimes limits federal power, but it also means that state courts are free to disagree with U.S. Supreme Court decisions when exercising their sovereign duty to construe their state constitutions independently.

 

The greatest problem in the judiciary is not when judges show, in Madison’s words, that they are not angels. It’s much worse when judges come to think of themselves as angels and act on that impulse in overreaching and underreaching ways. That is the story of Dred Scott. And that is the story of Buck v. Bell.

 

The eugenics chapter in American history illustrates this peril and shows one way to avoid it. Most everyone knows about the U.S. Supreme Court’s ignominious rejection of Carrie Buck’s 14th Amendment claim and the jarring words that Justice Holmes used to justify it—“three generations of imbeciles is enough.”

 

What few people know is that the state courts before 1927, by and large, got the issue right. In five of the six state court decisions before Buck v. Bell, the state courts granted relief. Sometimes under the federal Constitution; often under their own constitutions. After 1927, however, a dozen or so more states enacted eugenics laws, and yet the state court activity and the state court innovation stopped. A constitutional tradition in which we assume that federal judges are beyond reproach is not worth preserving.

 

If Jim Crow is exhibit A that the state courts and state constitutions sometimes fall down on the job, the eugenics movement is exhibit A that the federal courts and federal Constitution sometimes fall down on the job. We should remember both stories. Not just one.

 

Reinvigorated state constitutionalism not only may fill liberty gaps left by misbegotten U.S. Supreme Court decisions, it also may relieve pressure on the U.S. Supreme Court to be treated as the only rights-protector in the country. That has not been good for the Court or, for that matter, fair to it. Anyone worried about the growth in the U.S. Supreme Court’s role in American government, as I am, should embrace a partnership with the state high courts in rights interpretation. It might allow for more regional differences of opinion, and perhaps more tolerance of them. Or it might supply useful information for the Court before it decides whether to nationalize a right.

 

One last point on this score. It is remarkable how little we know about or appreciate the day-to-day role of the state courts in preserving the rule of law. In the last year for which we have numbers, 84 million cases were filed in the state courts, 360,000 in the federal courts. If we care about justice and freedom in this country, we should be paying far more attention to the role of state courts in establishing it.

 

Let me echo this keen insight from the historian Leonard Levy: “A society reveals itself in its law, and nowhere better than in the reports of the decisions of the state courts. The reports are, however, the wasteland of American legal history. The work of state judges is undeservedly unstudied. So long as that condition exists, there can be no history of American law, and without it, no adequate history of this nation’s civilization.”

 

He made that observation in 1957. Matters have only gotten worse.

 

Next, I can imagine Justice Gorsuch and Judge Ginsburg wondering what a renewed interest in state constitutions would do for those who care about administrative law. Here, too, is another useful story.

 

As it turns out, many state courts have taken these state separation-of-powers issues quite seriously, often more so than the federal courts. Many state courts—almost half of them—have not hesitated to enforce the non-delegation doctrine with respect to state laws. One objection to enforcing the non-delegation doctrine at the federal level has been the concern that the line-drawing is too difficult—a risk that the state experiences either can confirm or expose as mistaken.

 

What of Chevron-type theories of state deference at the state level. The states are all over the map, but a growing number of state courts have rejected deference to administrative agencies, often as incompatible with state separation of powers. Two of those state court decisions came in the last eight months: one from the Mississippi Supreme Court, and one from the Wisconsin Supreme Court, in a thoughtful decision by Justice Dan Kelly. Each of the decisions refused to follow the federal Chevron model. And each of them invoked Justice Gorsuch’s—I guess I’ll call it landmark—Tenth Circuit opinion in Gutierrez. It’s really sad to be a Justice on the Supreme Court and your landmark decisions are on the Court of Appeals. [Laugher.] But he has time to correct that. So dialogue between the state and federal courts, as these cases show, runs in both directions.

 

Next, I can imagine my federal court predecessors at the lectern—Judges Jacobs, Jones, Mukasey, Randolph, and Starr—and last year’s speaker, Don McGahn, all wondering about the selection process for state-court judges and the reality that 90% of them are elected. Well, let me just clear some brush. They don’t have lists at the state court level. They’ve chosen some other approaches. But there’s time. But the harder point is “How can one trust majoritarian elected judges,” they might say, “to perform a counter-majoritarian job?”

 

Well, I have a lot of first-hand experience in this area. And I can tell you not to worry. As state Solicitor of Ohio, I defended many state laws in front of the Justices of the Ohio Supreme Court, who are elected to six-year terms. As I tell my students at Ohio State and Harvard, I could teach a semester-long course on state constitutional law based exclusively on cases I lost at the Ohio Supreme Court under the Ohio Constitution. These were not inconsequential cases: school funding, vouchers, tort reform, criminal procedure. Elected judges, I found out, are just as apt to be allies as foes when it comes to constitutional cases.

 

Judicial elections, moreover, have not gotten in the way of many excellent lawyers joining the state bench. Indeed, many of them are now former state-court judges because the current administration has appointed so many of them to the federal court. Good for them, I say. Go where the talent is. In the long-term, that development is going to lead to more first-rate lawyers serving on state courts and perhaps, especially, lead more former state SGs and deputy state SGs to serve on state courts. I cautiously predict that we are entering a golden age of state court judges.

 

Buried in the judicial-selection question, by the way, is an assumption, an elitist assumption, I fear, that state court judges are not up to snuff with federal judges. It may be true that more federal judges went to Ivy League law schools and more state court judges went to state law schools like my alma mater—The Ohio State University. Come to think of it, that may be why I like state court judges and state constitutions so much. [Laughter.] Well, distraction.

 

But if it’s fair to compare credentials, it’s equally fair to compare performance. Ask yourself which set of judges—our state judges, or our federal judges—have been more faithful to the language of their respective constitutions over time. I don’t know the answer; but I have my suspicions. I suspect that the state reporters convey a greater respect for the language and original public meaning of their constitutions than the U.S. Reports do for the U.S. Constitution.

 

Keep in mind the possibility that electoral accountability, and perhaps attendance at state law schools, God forbid, may make judges better. Or at least better when it comes to respecting text and fixed meaning.

 

Imagine if a judge from another country wanted to learn how we interpret statutes and constitutions. And imagine if all we gave him were the transcripts of federal court confirmation hearings before the Senate Judiciary Committee to answer that question. Based on these transcripts, our visitor would assume that the overwhelming norm for American federal judges is textualism and originalism. It is their job to interpret the law, not make it. I’m not going to ask that visitor from another country to look at the U.S. Reports. You might draw a different conclusion.

 

Now what about what judges say when they’re running for office in state, elected offices? Same thing. You listen to those campaign speeches. You are going to see they adopt the language of originalism and textualism because that has become the acceptable norm in American political discourse when describing the appropriate role of judges, whether state or federal. In the words of Chief Justice Roberts, judges are to be the "servants of the law, not the other way around." All of this gives me hope about how state judges would use the power I want them to exercise, and hope about what state citizens would do in judicial elections if judges overreached.

 

Next, what of the perspective of those who care about judicial restraint? A view captured by one of the first Olson lecturers, Judge Robert Bork. Isn’t there a risk that, with a renewed interest in state constitutions, we will unleash a wave of judicial activism?

 

Before taking on that question, let me say a word about Judge Bork. Most people in this room over age 50 have had some personal experience with him. Mine was personal, but not face-to-face. My first year of law school was 1987, the year he was nominated to the Court. In my third year of law school, my father in law gave me The Tempting of America as a Christmas gift. The book changed my view of law and interpretation.

 

When I had the good fortune of picking an active Justice to work with during my year with Justice Powell, I chose Justice Scalia, a decision heavily influenced by what I had learned from Judge Bork, and a decision that changed my life. I owe Judge Bork a great debt. We all do.

 

So let’s think seriously about what Judge Bork would say about my argument. He likely would point out that the last federal appellate judge to take up the cause of state constitutionalism was Justice Brennan. And he would add that history has not treated Justice Brennan as one of the great apostles of judicial restraint. Judge Bork has a point. And I can already hear another mentor of mine, Frank Easterbrook, wondering about it.

 

Justice Brennan, it is true, wrote a landmark article in 1977 that promoted many of the themes I am promoting today. I have two responses: one that defends the Brennan piece, and one that qualifies it.

 

The first is that federalism is a two-way street. No one would take the position that it is a bad idea to have judicially enforceable limits on congressional power because some states might misuse that power. If the people of a state want judicial activists, or restraintists, or institutionalists, they are free to have them. And if they have buyer’s remorse, they can do something about it. They can amend their state constitutions, which usually require just a 51% vote. Or they can replace the judges, most of whom face electoral accountability or age limits. Those options do not exist with the U.S. Constitution or the composition of the U.S. Supreme Court.

 

To offer a friendly amendment to Chief Justice Marshall’s too frequently invoked comment about the U.S. Constitution, we must never forget that we have life tenure, and that it is a constitution, an essentially unamendable constitution we are expounding.

 

Let’s remember as well that rights innovation at the state level does not inherently favor some rights over others, say, blue rights over red rights. It is emphatically neutral. Consider the aftermath of Kelo, the takings-clause case, which Judge Bork, a believer in restraint, but also an originalist, might have thought failed to account for the original public meaning of the clause. In the first year after the decision, two state supreme courts—one from Ohio, one from Oklahoma—rejected the decision in construing their own constitutions’ takings clauses. Just as quickly, many state legislatures placed new limits on the eminent-domain power. State-law developments not only can fill gaps left by U.S. Supreme Court decisions, they also can establish data points for reassessing them.

 

But I do disagree with Justice Brennan in one important respect: this is not a ratchet. State courts may disagree with the U.S. Supreme Court in construing similar state guarantees in both directions, not just one. They may interpret their guarantees to provide more protection, or less protection. Otherwise, my approach would not lead to a true free market of constitutional interpretation.

 

In thinking about this, don’t make the mistake of assuming that state courts may not go below the “federal floor.” Metaphors can slay. And that metaphor has done a lot of damage to American constitutional law. There is no floor when it comes to the state courts’ interpretation of their constitutions, save for the unusual situation in which the interpretation violates a separate federal guarantee.

 

I can illustrate the point with a well-reasoned concurrence written by Justice Tom Lee on the Utah Supreme Court. In an exclusionary-rule case arising under the Utah Constitution, Justice Lee looked at the history of Utah’s protection against unreasonable searches and seizures and came to the conclusion that the provision did not come with an exclusionary rule. The state courts are free to interpret their state constitutional guarantees to go above the federal floor or, as Justice Lee pointed out, go below the floor with respect to state law.

 

Here is my last question. Isn’t it important to have uniform rights in this country? So that when Americans move for one reason or another, they can be assured that the protections they had in one state they can bring with them to the new state? Yes, I would say in some instances. But no in others. Here, I will use the perspectives of Senator Sasse of Nebraska; Senator Cotton of Arkansas; Vice President Cheney, in his capacity as a Congressman from Wyoming; and Ted Olson, a Californian, to aid my argument, not to second-guess it.

 

To paraphrase Senator Sasse, there is a difference between life in Nebraska and life in Vermont. One group of people is proud of cattle; the other, ice cream. [Laughter.] How proud they must be. Even sibling states have profound differences. Think Vermont and New Hampshire. Or if you question whether there is really any difference between Michigan and Ohio, just go to next Saturday’s football game.

 

[Laughter]

 

Audience Member:  Go Blue!

 

Hon. Jeffrey Sutton:  No. Not fair.

 

More to the point, no one can deny the remarkable range of cultural, faith, urban-rural differences in this vast country. I want to start with the presumption that we will respect these differences, not the presumption that we will eliminate them. Is it possible that we 21st century Americans have become incorrigible busybodies?

 

Rather than pick on another state, let me pick on my own, Ohio. Too often I see Ohioans wanting to tell the people of another state, say Wyoming, how to run their lives. And then my Ohio friends become resentful when the people of Wyoming want to return the favor. Would it not make a little more sense for we Ohioans to take care of things in our own backyard, our local communities, cities, states, whether legislatively or through state-court decisions? Then, having fixed a problem, why not have the courage of our convictions and let other states adopt our solution if they see fit?

 

So I have no problem if state courts construe provisions -- prohibitions on, say, unreasonable searches and seizures or other guarantees to have more or less protection that the federal guarantee. Yes, we should have uniform protections when the U.S. Constitution requires it. But otherwise, let’s remember that this is a very big country and we would do well to mediate more of these difficult disputes locally, rather than racing to Washington to enlist Congress or the Court to impose a one-size-fits-all interpretation for all 325 million of us.

 

So I’ve put a lot on the table. Much as I’ve tried to account for all of your perspectives, I know nagging doubts remain. This is a Federalist Society meeting, after all. And I would be very disappointed in you if that were not the case. But if we cannot agree on all things, I should hope we can agree on one thing. What a wonderful idea, once a year, to remember Barbara Olson, "a quintessential American," in Ted’s words, and to remember how she died, and how she lived, and to continue generating and debating new ideas in her honor. Thank you.

 

Mr. Eugene Meyer:  I am confident both Ted and Barbara would be proud. Thank you so much. We have a reception across the hall for those who’ve registered for that. And we have a book signing in the promenade, which Judge Sutton was far too modest to mention. And with that we are adjourned.                                                                                    

5:45 p.m. - 7:30 p.m.
Barbara K. Olson Memorial Reception

2018 National Lawyers Convention

The Mayflower Hotel - East & State Rooms
1127 Connecticut Avenue, NW
Washington, DC 20036

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This is a ticketed event. To be admitted to this reception, you must purchase either an All-Inclusive ticket or a single Barbara K. Olson Memorial Lecture & Reception ticket.

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9:00 a.m. - 10:45 a.m.
Showcase Panel III: The States & Administrative Law

2018 National Lawyers Convention

Topics: Administrative Law & Regulation
The Mayflower Hotel - Grand Ballroom
1127 Connecticut Avenue, NW
Washington, DC 20036

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We live in a system where regulators make the rules, investigate alleged violations of the rules, and then adjudicate those violations before Administrative Law Judges. If the matter ever gets to court, courts generally defer to the agency on questions of law “and fact.” As a result, agencies know that their regulations are unlikely to face challenge and, if they are challenged, will likely be upheld. In this system, critics argue, the predictable result is more and more irrational regulations and enforcement actions. Arizona has first-of-its-kind legislation to “reverse” Chevron and to instruct courts to give no deference to agency decisions on questions of law. On a related note, Arizona also passed the Right to Earn a Living Act, creating a cause of action to challenge occupational licensing decisions under a heightened standard of review. Some contend that the result of this new law has been significant in that regulators are reviewing and improving rules, or repealing them outright, rather than face litigation. Could these measures serve as a model other states and the federal government in reducing the size and scope of, and otherwise improving the Administrative State?

  • Prof. Nestor Davidson, Albert A. Walsh Chair in Real Estate, Land Use, and Property Law; Faculty Director, Urban Law Center, Fordham University School of Law
  • Prof. Chris Green, Associate Professor of Law and H.L.A. Hart Scholar in Law and Philosophy, University of Mississippi School of Law 
  • Prof. Miriam Seifter, Professor of Law, University of Wisconsin Law School 
  • Hon. Jeffrey Sutton, United States Court of Appeals, Sixth Circuit
  • Moderator: Hon. Michael Scudder, United States Court of Appeals, Seventh Circuit

Speakers

Event Transcript

Dean Reuter:  Good morning. Good morning and welcome back to this, the third day, the best day of The Federalist Society’s National Lawyers Convention. I am still Dean Reuter, still Vice President, General Counsel, and Director of Practice Groups at The Federalist Society. But now I am also in charge of cleaning up the rooms after we finish here. [Laughter] So if you would please be careful with all your personal belongings, that would be helpful to me personally.

 

      What a great second day I think we had, and a great night last night. I thought Jeff Sutton—Judge Jeff Sutton—was terrific as he delivered the Olson Lecture. So good, in fact, that we’ve invited him back to be on this morning’s panel. In addition to having heard his lecture last night, I have read his book. And I recommend it highly. It embraces a view of law and the practice of law that is, I’d say, near revolutionary, but so obvious I wonder that nobody had come up with it before. So obviously correct that to not adopt his views, I think, might rise to the level of legal malpractice.

 

Hon. Jeffrey Sutton:  I’ve got you right where I want you. [Laughter]

 

Dean Reuter:  Yeah. So you might want to buy a copy for yourself, but also for all your partners and associates to keep your firm out of trouble. So congratulations, Judge, and welcome back this morning.

 

      Our first panel this morning is titled “The States and Administrative Law.” And we’ve assembled for you this morning what I consider to be a truly first-class group of panelists. And I do really mean first class. I’m very proud of this panel.

 

      But that term, “first class,” gets overused sometimes. And that, of course, reminds me of a little story, which takes me back over twenty years. And this story -- it also happened in an airport, which might be of interest to you for that additional reason, since many of you travelled by plane to get here.

 

      So, twenty years ago or so, I was working for the federal government, and my children, who are now grown, were at the time very little. And I was a single parent with custody of my kids. So I tried to keep my travel to a minimum. But one time I had back-to-back trips. And I went to the extraordinary measure of trying to come home just for an overnight.

 

      But coming back on that first leg of the trip I had severe delays, landing well after midnight at Dulles airport. I was supposed to have arrived in time for dinner, tuck my kids into bed, and see them. But instead, I was merely able to just peek in on them. I climbed into bed and set my alarm for an early morning flight out. My kids never saw me, although I did see them, before I headed back to Dulles at daybreak the next day.

 

      That morning I was in the check-in line—still dark outside—waiting, at the check-in line. And I was on one of the budget airlines, which I would charitably describe as a younger airline. It no longer exists. It died before it reached puberty for . . . [Laughter] . . . for reasons that might become apparent here in a minute. But I got to the front of the line, and I saw an impossibly young man behind the counter to greet me. He looked like he should have been catching the bus to his middle school at that hour of the day. And I was wearing a suit. I had a well-worn trench coat; and a somewhat battered, wheeled suitcase; a well-used briefcase—I looked just like the stereotypical business traveler. And so I was a little surprised when the young man, way too happy at that hour of the morning, asked me, “Is this your first time flying?” [Laughter]

 

      Now, having landed at that very airport just a few hours before—after midnight, in fact, that morning—I was able to reply, somewhat snarkily, “This isn’t my first time travelling today.” [Laughter] And, of course, that remark went right over his head.

 

      Anyhow, I was worn out by this time, and I thought I’d use my own money to try to get some extra leg room. So I said, “Do you have anything in the economy-plus section?” “No, sir,” he replied, without further elaboration. So now I was willing to plunk down my own money, some real money, to upgrade to first class. “Do you have anything available in first class?” I asked, hopefully. And then, without pausing, almost as if he had anticipated my question, he said, “Sir, all our seats are first-class.” [Laughter] “Of course they are,” I said. And by that time I was totally defeated.

 

      But out panel is truly first-class. [Laughter & Some Applause]

 

      And I’m very pleased to introduce our moderator -- if you want to applaud, you can. But . . .

 

      Judge Michael Scudder of the Seventh Circuit, I believe, is making his first appearance at our Convention as a moderator, today. And we’re very pleased to have him here. Incidentally, if you haven’t noticed, we have over—I did the math on this—we have over 20 percent of the active federal appellate bench involved in the Convention this year, so . . . They’re doing everything, including cleaning up rooms afterward.

 

      Judge Scudder attended St. Joseph’s College and then Northwestern University Law School, a very fine institution. He clerked for Judge Niemeyer on the Fourth Circuit and then Justice Kennedy. He was at Jones Day Cleveland, which some people might know as the home office of that law firm, and then as an AUSA in the Southern District of New York. He’s also served in the White House Counsel’s Office and the National Security Council. He’s been serving on the Seventh Circuit since earlier this year. And I’m very pleased to have him with us this morning. So, please, do join me in welcoming Judge Michael Scudder.

 

Hon. Michael Scudder:  Thank you, Dean. Good morning, everyone. It’s wonderful to be here. I want to start by just introducing our panelists and diving right in to what, I think, will be a very vibrant and illuminating discussion covering a range of pretty timely topics from a variety of perspectives.

 

      So to my left is my good friend, Jeff Sutton. Dean was right on the money, I think, in commending everyone that was not able to attend Judge Sutton’s Olson Lecture, yesterday evening, featuring his book, Fifty-One Imperfect Solutions: States and the Making of American Constitutional Law. I think Jeff is going to elaborate on some of the points, and then maybe expand upon a couple of aspects of the points he made yesterday. And just briefly, I think as most people here know, Judge Sutton serves on the U.S. Court of Appeals for the Sixth Circuit. He, too, is a former Jones Day lawyer, and is actually the reason I joined Jones Day after clerking for Justice Kennedy. And, of course, Judge Sutton served as the State Solicitor of Ohio, was a law clerk to Justice Lewis Powell and Justice Antonin Scalia, as well as Judge Meskill on the Second Circuit.

 

      To Jeff’s left is Chris Green. Chris is a law professor at the University of Mississippi, where he also teaches as a scholar in law and philosophy. Chris graduated from Princeton, Yale Law School, has a Ph.D. from Notre Dame in philosophy, clerked for Judge Barksdale on the Fifth Circuit, teaches in the area of constitutional law, including state constitutional law. So, Chris, welcome.

 

      To Chris’s left is Miriam Seifter from the University of Wisconsin Law School. Miriam is a graduate of Yale University, Harvard Law School, clerked for Chief Judge Garland of the D.C. Circuit and for Justice Ginsburg at the Supreme Court, worked in private practice a bit at Munger Tolles in Northern California, and is here this morning to focus on an aspect of state administrative law that we’ll find pretty fascinating—looking at agency independence at the state level and what it says and doesn’t say, more broadly, for the development of administrative law at the state and federal level.

 

      And to Miriam’s left is Nestor Davidson from Fordham Law School. Nestor teaches in the area of property, land use, real estate; has a casebook that came out last year, on property law; practiced at Latham & Watkins after graduating from Harvard College, Columbia Law School; clerked for Judge Tatel on the D.C. Circuit and then Justice Souter at the Supreme Court.

 

      So welcome, one and all. And why don’t we start with Judge Sutton here and invite him to offer his perspective this morning on the topic that brings us together: the states and administrative law.

 

Hon. Jeffrey Sutton:  All right. Thanks, Mike. It’s great to be here. [Applause.] I think we’re going to try to present in the eight-minute, ten-minute range and then start a discussion among ourselves and then with you, eventually. I’m getting -- feeling a little ashamed about all this book marketing. You might call it schilling. So let me -- a little full disclosure before you buy the book.

 

      So I’m very happily married to a seventh-grade English teacher. And when I was about six months away from the book finally coming out, she said, “You know, maybe, Jeff, I’ll just read it once and see if I have any suggestions.” So a couple days later, a chapter and a half in, she said, “I don’t love you that much.” [Laughter]

 

      But she did read the book eventually. Why? When it was getting very close—a couple weeks, final page proofs, she’s a seventh-grade English teacher—she became embarrassed about the possibility that it would have some grammatical mistakes. So she read the whole thing, cover-to-cover, because she did not want the world to know that she was married to a dunce. [Laughter] It is a little heavy sledding sometimes.

 

      So I’m going to give some broader structural points—I hope that’ll set this up—and a couple thoughts of my own. One thing that’s very different about what we’re talking about today—when it’s state structure, state separation of powers—is the difference between that and state individual rights. So when you have state individual rights, like their Bill of Rights with free speech, free exercise, and so forth, you have this two-shots phenomenon, where if you don’t like what a state or local government has done, you can sue under the First Amendment’s Free Speech Clause and you can sue under the counterpart of that state’s constitution. So that would be the individual rights world, where almost always you have two shots.

 

      Now when we go to structure, different story. The U.S. Constitution does not speak to the structure of the states and their state constitutions. The republican-form-of-government guarantee in the U.S. Constitution has been deemed judicially unenforceable to date. So that really -- you don’t have this overlay where you can get a state separation-of-powers problem and say, “Aha, does the federal Constitution speak to that? Is there a second shot?” Not really. You have to be pretty imaginative and very persuasive advocate to get someone to think about it that way.

 

      That said, you still have the dialogue issue, where what’s going on at the State level is highly influential to the federal level. And that goes back to the point that the state constitutions were really the ones that came up with our original separation-of-powers doctrines, concepts, language, from 1776 up to 1787. And they really became the blueprint for what was done in 1787.

 

      The other thing you’re going to find, and this might be a first in Federalist Society National Conventions -- you're actually getting an assignment today. It’s unenforceable; but you are getting an assignment. I really would love it if everybody would take 15 minutes—I mean, we’re already taking an hour and forty-five minutes from your life you’re never getting back, so let’s make it two hours—spend 15 minutes and just read your own state constitution. No more than 15 minutes. You will be so struck by the differences in length; language; and, often, specificity about structure.

 

      So one reason for that is that, at the U.S. level, there’s only been one Constitutional Convention. That’s it. 1787. Then 27 amendments after that, we know how difficult that Constitution is to amend. At the state level, there’s been over 300 conventions. The norm at the state level is lots of amendments, and that’s in part because they’re so easy to amend: 51 percent vote, quite often. So you have a lot more specificity, whether it’s structure or rights. You’ll really be quite shocked in that 15-minute overview.

 

      So one feature -- this is something Miriam’s going to talk about with a little more specificity. But one feature you’ll see separation-of-powers wise is a big difference between the unitary executive at the federal level and what I’ll call the plural executive at the state level, where we have separate elections for state AGs, state secretaries of state, auditors, and the like. That creates all kinds of fascinating separation-of-powers problems within the state. So, having worked at a state AG’s office, the one we saw all the time was: who’s in charge of the litigating position of the state? A separately elected AG? A separately elected governor?

 

      It turns out -- usually, if you look at the case law, the case law’s going to say usually the state AGs win that battle, at least as a matter of case law. I can tell you, from experience, in state AGs offices that’s really not what goes on. And I can illustrate it with a story. It may be legendary; it happened before my time. But it has a ring of truth to it.

 

      The governor, I think, was from a separate party than the AG at the time. So they had an inherent reason to disagree. It was a politically controversial topic. And so the AG and the governor are going back and forth about what the litigation position’s going to be and exactly what the state is going to do on this particular issue. Finally, the governor had enough -- well, no, no, actually, it goes the other way around. Finally, the AG has had enough, or so he says. And he says to the governor, “Okay, fine. We will do it your way. I will send a lawyer over in 15 minutes.”

 

      So the AG, clever man, looks around the office; finds the greenest, youngest, goofiest-looking guy in the office; gives him a yellow pad and a pen; and sends him over to the governor’s office. Knock, and in comes this young guy who doesn’t know anything. And the governor, within five seconds, realizes, “Oh, this is not going to work.” He says, “Why don’t you wait outside?”; calls the AG back; and says, “You win.”

 

      So control over counsel can actually be a lot more important than anything separation of powers says.

 

      My last couple points I want to make is drill down a little more specifically on non-delegation and the Chevron-deference issues. So my big gripe when it comes to state courts and state constitutions is that they too often lockstep, reflexively follow what the U.S. Supreme Court is doing with similar guarantees, similar issues. That is very much a problem in the rights arena, in my view. It is not that kind of a problem in the structure arena. It turns out the state courts are really quite independent when it comes to construing their own structural issues and the structural guarantees in their state constitutions. I don’t know if that’s because those issues have less political resonance, whether it’s because the state guarantees are so much more specific in terms of structure, I don’t know. But there really is quite a difference.

 

      And you really see this in the gap between what’s going on with the non-delegation doctrine, which, at the federal level, is actually a delegation doctrine. That’s the better way to put it; on the federal level there really is no non-delegation doctrine. Whereas at the state level there really is a judicially enforceable non-delegation doctrine. Judge Ginsburg, Jim Rossi, [and] Steve Menashi have laid out that it’s really about half the states that quite seriously enforce that doctrine. And to me that’s fascinating first for the states—it’s really important to the lawyers; it’s very important to what’s going on in that particular state. But it’s also quite fascinating for what that body of law means to the extent the federal side—the U.S. Supreme Court, the federal courts—reconsider, think a little bit more about the non-delegation doctrine on their side. Those state experiences sometimes can be quite relevant from an originalist perspective.

     

      Now, sometimes they’re really not that relevant because the language of the state constitutions is so different. I think their experience though is most relevant when it comes to dealing with I think what has been the biggest practical problem with the non-delegation doctrine at the federal level, this concern about line drawing. And this was really -- it seemed to be one of the things motivating Justice Scalia, who we all know cared deeply about structure, but was not someone willing to enforce the non-delegation doctrine. And it seemed, for him, he was really quite concerned about the role of the courts in being able to manage that line. And what I think is fascinating—I think someone needs to really look at—is how the states are doing. Because if state courts can do it, it’s really fair to wonder whether the federal courts can do it. So it becomes a question.

 

      On the Chevron side, really quickly, here the states are all over the map when it comes to deference to administrative agencies. It’s really quite fascinating the number of state courts that are now taking quite seriously no deference. And not just for statutory reasons, but for constitutional separation-of-powers reasons under the state constitution. The Mississippi, Wisconsin Supreme Courts, this wonderful opinion by Dan Kelly for the Wisconsin Supreme Court -- actually, the Wisconsin Supreme Court’s really a great illustration of the debate within the state courts because Justice Kelly’s opinion is one that focuses on the constitution and says no administrative deference as a matter of state constitutional requirements, whereas other justices on the court took a constitutional-avoidance approach to the issue. So it’s not clear exactly where that one’s going.

 

      Now, in Mississippi, it’s a pure constitutional-separation-of-powers issue. And what’s really fun about this is you really do have a dialogue between the states and the U.S. Supreme Court, or, in the case of Justice Gorsuch, the Tenth Circuit, when it comes to how exactly to manage this Chevron line. But again, practical point. One of the great concerns at the federal level of getting rid of Chevron is this anxiety of “Oh my God, how would this work in Washington with all these agencies without deference?” Being from Ohio, “I don’t frankly care” would be my first answer. But my second point would be: What happened at the state level? What happened when the agencies didn’t get deference? Did that really shut the agency down when it came to doing its job and administering this or that statute? So that experience, too, not just doctrinally, but as a matter of practical, on-the-ground experience, what really happens there is worth examining.

 

      So, I’ll go on. Let Chris go.

 

Hon. Michael Scudder:  We’ll go to Professor Green now. He’s going to share the results of pretty extensive survey work that he’s done looking at decisions at the state level and their application—or lack thereof—of some doctrines that many in the room will know well that exist in federal administrative law, and what the experience has been at the state level as far as enhancing accountability and transparency vis-à-vis agency action. So, Chris, in your hands.

 

Prof. Chris Green:  Well, thanks. Thanks for the opportunity to be here. And I should say thanks especially for the opportunity to present something in such preliminary form. So last summer at the Southeast Association of Law Schools meeting, I was on a panel with Judge Sutton. And one of his former -- a law professor who had worked for the Judge as an associate said or joked, “We shouldn’t get paid by the hour, we should get paid by the 50-State Survey.” So I’ve got three surveys; but none of them are full 50-State Surveys. So I worry that I really -- that I shouldn’t get paid.

 

      One of the most frustrating things I encounter just looking at state Con Law issues is the 35-State Surveys. Here’s a whole bunch of states on one side of the issue. Here’s a bunch of states on the other. Well, what about the others?! And that maybe says something more about my presence on the Asperger’s spectrum than -- I can’t even until I get a 50-State Survey. But . . .

 

      So what am I talking about? So I'm, also, I think the only presenter at the conference with a handout, which I thought surely somebody else will have a handout, but probably just be me. Maybe somebody later today.

 

      So these are three areas where judges are saying to state administrators, "Hey, you haven't explained yourself enough." The three contexts in which that can happen -- And they can draw an adverse inference from the failure to -- they might or might not draw an adverse inference from the failure to explain a result.

 

      Okay, so why might we want to have a doctrine like that? Because the experts might not know what they don’t know. So the experts might think they know things that they don’t actually know. So Socrates was said to be the wisest man because he knew he nothing. Hayek focused on what the government doesn't know about what prices ought to be. I don't remember the character of that. . . in Magnum Force, "A man's got to know his limitations." And women and agencies and artificial agencies. It's hard to know your own limitations.

 

      So part of the idea is you got experts. They know stuff. Okay, no question about that. One way to test whether the experts really know stuff is to have the experts try to explain it to a generalist audience. As a normative matter, you might think, "Well, no. The generalists just can't understand it; the failure of the generalists to understand some area might just be like, well, it's like the failure of my seven-year-old to understand the sense-reference distinction, or something. Although, my seven-year-old can -- my three-year-old doesn't get it. My seven-year-old does. . .

 

      So normatively, I really don't know. I'm just trying to get a description. So the three areas are hard-look review where a court says, "Hey, you haven't explained yourself enough." The replacement of Chevron by Skidmore. So if you take away Chevron deference, you say, well, we're not going to just defer to you because the statute's ambiguous. One way to think about what happens when we cast Chevron overboard is you return to Skidmore. So Skidmore, of course, in 1944, says, even though an agency doesn't have authority, it might be able to persuade us. Anybody might be able to persuade us.   So Mike Rappaport's "We shouldn't even have Skidmore deference because, after all, private entities don’t get --." Well, maybe private entities should. So I come into court, I develop an expertise, I have consistency over time, all those factors giving me—or a lawyer, or the ALI, anybody—the power to persuade if lacking power to control. Well, you should defer to them in the sense of agreeing with them because they offer persuasive reasons. So Overton Park, State Farm say, "Hey, you got to give a reason for your regulation." Skidmore says, "You got to give a reason for your interpretation of the law.

           

      A third area is I think considerably less well-known. It was abandoned by the U.S. Supreme Court in 1931 in a case called O'Gorman & Young v. . . some insurance company, I think. So this was one of the -- so in 1931 you had O'Gorman; 1934 you had Nebbia; 1937 you had West Coast Hotel. So this is part of the surprisingly long story about the collapse of economic liberty under pre-New Deal, or in the 1930s under the 14th Amendment. So in 1931 we had a case where a state came in and said, "We're going to have some restrictions." And the litigants came in and said, "They haven't explained why we need these restrictions. You're telling insurers they can't. . . you had to have an in-state agent." It was -- on its face, it looked like rent seeking legislation. So I got my little deadweight loss diagram there. It looked like that. It looked like you're just trying to restrict supply to redistribute wealth to the sellers, harming society but benefiting particular insurers.

 

      And the four conservatives on the Court said, "In order to justify the denial of the right to make private contracts, some special circumstances sufficient to indicate the necessity therefore must be shown by the party relying upon the denial." They're in litigation, okay? So you're arguing to an agent saying, "This regulation doesn't make any sense." The administrator says, "Well, it's up to you to show that it's unconstitutional. It's not up to me to show that it's justified. I have to have a reason for regulation?" So in 1931, the Supreme Court says, "Yeah, we're not going to draw any adverse inference from the failure of an administrative agency or a litigant to justify that regulation."

 

      It seems to me, looking at just the early, early state constitutional law that state courts exercising judicial review have a duty not to leave evidence on the table; not to fail to make proper inferences from things like that. So I cited in the handout a bunch of early cases. I call this the "duty to clarify." So the duty not to strike down statutes unless it's clear that a statute violates a state constitution. But you also have a duty to clarify, and that means not leaving evidence on the table.

 

      So these are three places where a court can tell an agency, "You haven't explained yourself." There's a bunch of other people who might tell an agency, "Hey, you haven't sufficiently explained yourself." So I think this is going to become an article -- ten ways to make state administrative administrators explain themselves. And I'll just rattle some of these off.

 

      What's a non-delegation doctrine? It says, "Hey, agency? You can't just adopt this. You've got to persuade the legislature." The legislature – a bunch of non-expert generalists, so you could have to persuade a legislature. You could have to persuade a state OIRA, which is what Miriam has looked at in great detail. You might have to persuade other agencies. "Hey, we've got a stake here," so that be another way that state OIRA would be involved.

 

      You might have to persuade the agency itself. So if you have a separation of prosecution and adjudication within the agency—New Jersey and Georgia, I'm told by people at this conference, have that sort of doctrine—you might have to persuade the agency at a later time. So the agency adopts a rule, but it might be easy to reverse it. So Fox v. FCC issues at the state level would be important, and there's a number of other doctrines that allow future agencies to reverse decisions. So unless the agency makes a persuasive case to its future self, it's not going to last.

 

      Finally, you might have the public. So a transparency requirement says, "Hey, if you're going to do something, you've got to tell the world, and give them a chance to overrule it." Talk to their legislature. That's less effective. You might have juries. You might bring in 12 members of the public and say, "Well, you know, we think we should be at quantity one instead of quantity zero on this thing. We think we should ban cigarettes. What do you people think?" That would be, as Philip Hamburger says, quite a limit on agencies.

 

      So, anyway, am I out of my eight minutes? Maybe close to it. But there is exciting stuff going on in all of these areas. William Funk in '91 I think is, as far as I found, the only one to assess the ground of hard-look review in the states. He thinks—it's in '90, '91—he said, "It looks like a lot of states don’t have hard-look review." I couldn't find that many. Wisconsin was actually one of them, but not too many. It was a little unclear in Florida. But lots and lots of states had something like hard-look review, at least in name. Funk suggested that it was just boilerplate on of them. But if you want the sights and want -- if you have a regulation and no one else can help you, maybe you can cite one of these cases.

 

      Chevron – there's been four states that have cast it off this year in four different ways. So Mississippi cast it off quite summarily, and suddenly, and unanimously in our King case; a few weeks before [in] the extremely expensive and widely discussed at great length opinion in Wisconsin. Arizona got rid of it by statute, and then Florida got rid of it by constitutional amendment.

 

      Beyond those, you have a lot of states that the way the apply Chevron, or the way they apply deference, really has a much more Skidmore flavor to it. So some people call that "Chev-more," a blend of Chevron and Skidmore. Justice Breyer's approach in the Mead Corp. line suggests that the trigger for Chevron deference is giving a persuasive reason. Okay, that's essentially like having Skidmore instead of Chevron. So there's lots of cases citing that.

 

      Finally, in O'Gorman you find a bunch of states that actually do draw an adverse inference, including Florida. They say, "O'Gorman, that's not the rule here. If an agency doesn't give an explanation for why they're doing it, then we're going to draw an adverse inference." That was 1984. It feels like a long, long time ago, but this was a long time after 1931. So there is quite a lot of ferment. I hope to have 50-State Surveys of all these 10 areas, so 500 rules of law nailed down at some point. But watch, not this space, but Google my name at some point in 15 years and see if I ever do get these 10 surveys done. So thank you.

 

Hon. Michael Scudder:  Thank you, Chris. So Professor Seifter has an article that I mentioned coming out in the Michigan Law Review early next year, is it, Miriam?

 

Prof. Miriam Seifter:  That's right.

 

Hon. Michael Scudder:  And exploring a very fascinating topic, and, perhaps, for the first time that it's ever really been looked at. And that is agency independence at the state level. We know well, considerations of agency independence at the federal level and lots of debate, lots of case law, and lots of ink spilled on just how much independence is required of the President for an agency to be independent – broader structural questions about whether that's even constitutional or not. But Professor Seifter is looking at this at the state level and her forthcoming article, I think, pays particular focus to considerations of independence between a governor and state agencies. So with that, we'll ask for an overview and listen attentively.

 

Prof. Miriam Seifter:  Thank you so much. [Applause]. Thank you. So I'm very happy to be here. I'm pleased to be on a "first-class" panel. I didn't realize that was going to be the case. And I'm thrilled to be on a panel that's focused on the states. I could not agree more with my co-panelists that states are really worth studying.

 

      States are, of course, deeply important in their own right because it's state government, after all, through which most of us experience regulation. And state approaches to common problems can also provide an instructive comparative lens, reminding us that there is more than one way to do things.

 

      So as Judge Scudder said, I'm going to talk today about what agency independence looks like in the states. And by agency independence I mean the relationship between executive entities and the Chief Executive, so, of course the President at the federal level and the governor at the state level.

 

      My focus won't be on the normative question from yesterday's terrific panel on agency independence, which was how much agency independence is too much because I think in the states we actually need to take one step prior to that and just try to unearth a descriptive picture of what is happening.

 

      So what are the legal contours of agency independence in the states? This is more than just an academic question. Take a recent conflict in Arizona. Was there anything unlawful or incongruous about a proposition that just passed giving the governor more authority over the State's Clean Elections Commission, which has identified itself as an independent body? Or, for that matter, was it constitutionally required for the governor to have that sort of authority over the Commission? Or take North Carolina. Was it permissible for the state legislature there to divest the governor of substantial power over certain executive commissions? Or in a number of states, as Judge Sutton alluded to, what if the governor and the state attorney general disagree?

 

      So the question I've been looking at is, "What is the going legal framework for analyzing these questions?" I've studied state constitutions, state legislation, and state judicial decisions doing the beloved 50-State Surveys, and I've looked specifically at issues like the selection of an officer, the removal of an officer, and then the ability of the governor to direct the officer once they are in office. For the full story, you can check out my forthcoming article that Judge Scudder mentioned, but it's barely 10 am. You don’t want to read that. So I'm here to give you the Cliff-Notes version.

 

      My thesis, basically, is that states' approach and agency independence [is] very different from the way the federal realm has approached it. States employ a version of agency independence that is different for different agencies, unclear legally, and unstable over time. So to flesh this out, let me draw out four big picture differences. And I'll draw upon differences regarding state constitutions, state courts, state legislatures, and state norms.

 

      The first difference is in state constitutional law. Perhaps this is the most obvious difference. It's the one that Judge Sutton mentioned. Almost every state constitution creates what we can call a "plural" executive branch in which multiple officers are, first of all, created separately from the governor, and then many of them are also elected separately. So this obvious difference might seem to lead to an obvious conclusion that states are, therefore, home to a more robust independence all around. But that conclusion is actually not obvious, and, in fact, most state courts have not so held. And the reason for this is that most state constitutions also have clauses that empower their governors, often to a degree that's not present in the federal Constitution. So many constitutions say that the governor has the "supreme executive power." a number of state constitutions have gubernatorial supervision clauses, or particularly robust take care clauses, all of which seemed to support an argument for gubernatorial control.

 

      Now, the positive law picture gets even more complex once you fold in state legislation. One of the things that I found really interesting in my study was that the vast majority of officials within the plural executive branch nationwide, the state constitution leaves either all or some of their powers to state legislatures. So a typical formulation is something like, "There shall be a state treasurer with duties to be prescribed by the legislature." And many state legislatures have, at various times, particularly during times of executive branch reorganization, decided to give the governor power over various executive officials, including those that might superficially seem to be independent. So in many states, the question of independence presents an interpretive challenge.

 

      Now, that leads me to the second part of our descriptive journey here. What have state courts done in confronting this challenge, and how is it different from what federal courts do? So to paraphrase everybody's favorite administrative law case, United States v. Mead—that was an administrative law joke—the states have generally tailored independence to variety. Now, there are a few state courts that don’t fit this description. So there are a few state courts that have held that the governor's supreme executive authority means that the governor has to control all agencies. And on the flip side there's at least one state court that has indicated that the plural executive structure creates a sort of categorical, constitutional independence across the board.

 

      But most state courts have proceeded with what I call a non-binary, non-categorical approach. Non-binary because they don’t divide the world into independent agencies and not independent agencies the way we sometimes teach at the federal level. And non-categorical because most states don’t even use the term "independent agency." It's not a "thing," as my students would say. And they don’t use any similar, synonymous terms to invoke this idea that there's a trans-substantive category of this thing called an independent agency. Most state courts also don’t assume from the presence of one factor, like, let's say, tenure protection, that an agency must fit some set, pre-determined mold of independence. Instead, most state courts resolve questions of independence in a clause-based and context-sensitive way.

 

      So, for example, it's not unusual for a state court facing an intra-executive dispute to say, "Okay, this is an officer or agency that the governor either doesn't appoint because they're separately selected, or whom the governor can remove at will. But that doesn't preclude us from concluding that the governor can nonetheless direct or veto this agency or official over certain decisions if that's the best reading of the statute.

 

      Now, it's kind of worth noting here that this state approach resonates with what I think is a rising critique regarding federal jurisprudence on agency independence and on the separation of powers more broadly. Scholars of varied perspectives have argued that federal courts do too much abstracting on these issues. John Manning, for example, has argued that there's no freestanding separation of powers doctrine, and so courts should engage in what he calls "ordinary interpretation of the most relevant clauses at issue."

 

      Similarly, on this specific topic of independent agencies, Kirti Datla and Ricky Revesz have asserted an idea that courts shouldn’t embrace abstractions about agency independence either. They should just follow the terms of whatever the statute says. So the states present this real-life judicial system in which to see this alternative approach in action.

 

      Okay, the third difference I want to talk about has to do with legislatures. State legislatures, and for that matter, state initiatives and state referenda, have played a more active role in tinkering with agency independence over time. I think this is different from the federal realm where we often think of, at least, the highest levels of agency structure as part of the rules of the game. Those features that stay put even when political fortunes change. So even if Congress, for example, is upset with the decision by, say, the FCC, we don’t imagine that Congress's next move will be to change the FCC from an independent agency to an executive agency. Or at least that would be a big deal.

 

      But state legislatures do that pretty regularly, as I document in the article. Now, one implication that is worth noting here is this sort of legislative volatility raises the possibility that it will really undermine independence in a deep way. How independent can you be if your independence itself is up for grabs depending on what you decide?

 

      Okay, the fourth and final difference I want to point out has to do with norms. The state sphere may reflect weaker norms about what independence means. Now, I think partly this flows from the legislative volatility I described and from the lack of a categorical, judicial approach to independence. In other words, maybe agency independence in the states is just too much of a moving and evolving target for a strong norm to emerge. Partly, it may also be because state legal communities tend to lack some of the norm producing institutions that the federal government has. Most law schools, to Judge Sutton's and my disappointment, don’t teach classes in state constitutional law. And also, not all state executive branches or state bars have entities analogous to, say, the Office of Legal Counsel, who really devote their time to developing a keen and lasting understanding of executive power.

 

      So unlike at the federal level where scholars have recently been documenting how unwritten rules regarding independence actually explain a lot of the behavior that you see from both presidents and agency officials. In many states, the issue seems to be more up for grabs.

 

      So let me close with just a few implications of these findings. The first—and this echoes something that Judge Sutton said—is that state courts deserve credit, I think, in this area. They're dealing with really challenging materials. They are not lockstepping with federal law the way they're sometimes criticized for in other areas. And these cases are really a rich resource for anyone who's interested in studying executive power.

 

      A second implication has to do with what I think of as the twin effects of precision on one side of the coin and uncertainty on the other. So state legislature's practices of creating different independence for different agencies and then changing it over time, and state judicial practice of hewing to those choices, have this democratic appeal. Maybe the people are getting basically, exactly the independence they want in each different context. But the flip side of that narrow, clause-based, context-specific approach, may be that the law is less certain and less predictable and harder to anticipate for any given actor.

 

      Now, this raises a question about practical effects. In particular, does the uncertainty and instability, for some officers, mean that they have less operational independence. And, really, this is a question rather than a statement, but even if the law makes them nominally independent, will they feel less independent because of the role in frequently revising their independence?

 

      And then, finally, whatever the answer is to these other questions, I'll come back to the value of teaching state administrative law and state constitutional law in law schools. It can add so much to our understanding and to our discourse. And at all events, I'm happy to be on a panel highlighting state law, so thanks for having me today.

 

Hon. Michael Scudder:  Thank you, Miriam. Nestor Davidson has done some work and published it in the Yale Law Journal, if memory serves, on administrative law at the local level – at the municipal level, at the county level, at the village level, and is going to offer some perspectives today on what we can learn from administrative law at that level.

 

Prof. Nestor Davidson:  Thank you so much. And thank you all for showing up at 9:00 in the morning on a Saturday to think about state, and I will now add, local administrative law. We literally have people in the rafters. This is pretty stunning. So thank you. I also think it's a particularly timely moment to be thinking about the sub-federal level. Given the nature of the hydraulics of policymaking in this country, at a moment when we are at a fairly deregulatory -- having a very deregulatory moment at the federal level, and some gridlock on areas where the federal government has been traditionally very active, a lot of the energy for regulating is moving to the state, and I think local level, as well. And so I think it's appropriate, as governance is devolving in many areas, to be paying very close attention to the mechanics and the law that is governing that evolutionary, regulatory environment.

 

      So my brief this morning, as Judge Scudder mentioned, is a pretty simple one. I want to argue that it's important to pay attention not just to the critical questions at the state level about agency independence, about deference, but to add the local as well. And Miriam has unpacked some of the horizontal questions that are so critical, and let me try and unpack some of the vertical questions within the states that I think are also fairly critical.

 

      So to begin, I think it's important to remember that much of what we think of as within the realm of how states operate, states operate through local governments. And whether we think that local governments are an arm of the state or a local polity or some hybrid version of that, many, many areas in are federal system that we delegate or that have begun as matters of state, confidence, and importance, are really exercised through local governments. And it's terrific to be focusing, as Judge Sutton has done, on individual rights at the state level, but the individual structure, I think, is equally important.

 

      So much of what local governments do, and this is not just in the delivery of services, which is obviously a critical aspect of what cities and counties and suburbs and small towns do. But also as regulators and local governments are increasingly acting as regulators. They do through administrative bodies. And on the regulatory front, local governments are increasingly involved in regulating everything from workplace conditions to public health, to the environment, to technology – many, many areas that I think maybe a generation ago we would've thought of as largely federal areas of concern that states have always been involved in to some extent are really increasingly playing out at the local level. And that's true not just for large cities but also for smaller, local governments.

 

      And if you look at how local governments are structured, and not just in New York, or D.C., or Los Angeles, or Chicago, but Oak Park, and Tuscaloosa, and Barrow, Alaska—and I spent a lot of time looking at the structure of lots and lots of local communities—you will find a little, mini version of the alphabet soup we have in terms of agencies at the federal level. You find a really remarkable array, even in relatively small communities. And when I was working on this article, I would go around the country giving versions of a talk about the article, and wherever I was, I would Google the night before that particular local government and you could always find 10, 12, 15 agencies, even in the smallest community. It became a little bit of a parlor game. But you'll find health departments, zoning boards, school boards, police commissions – an entire panoply. I like to call this -- it's not so much the administrative state, but it's kind of an administrative city state. It may not be the FCC, it may not be the EPA, but it's actually a very important layer of governance.

 

      And if you think about where governance happens today in the United States, 1 in 38 people in the country live in New York City where I live. New York City has more people than Idaho, Montana, Wyoming, North Dakota, South Dakota, and Nebraska combined. More than 80 percent of the people in the country live in urban areas, and in many important respects, cities, suburbs, counties are the most important regulatory layer for that.

 

      So let me just say a few words about structure. Structure is obviously critical to doctrine. And it's important to pay attention to structure, and as interesting as things get on the state level—and they get very interesting—I think they get even more interesting when you turn the lens on the microscope and begin to look a little bit lower in the federalist stack. So, for example, many local governments have little or actually no separation of powers whatsoever. In many local governments, you have a legislative body that also happens to have an executive as part of it, or you may have no recognizable, at least, elected chief executive at all. We tend to think of a model of the mayor because that's our popular culture, and certainly, again, I live in New York. We have a very strong mayor, relatively speaking.

 

      But in more than half of all local governments, the person who we would think of as the chief executive of the executive branch is just an appointed civil servant – a city manager. And they just perform functional duties. Important, critical, but there's no electoral responsibility, so forget what we know about the unitary executive at the federal level. Imagine a system where courts are reviewing action by a government that has no executive, or at least no elected executive. And what does that mean for how we think about separation of powers? What does that mean for how we think about deference?

 

      Similarly—and I think this is really important—local governments and local government agencies, in particular, often have a dual structure of accountability. So local agencies are accountable in the way we traditionally think of federal agencies towards both the executive and legislature in their local government of general jurisdiction. And as hard as it is for 51 jurisdictions to draw generalities, there are over 90,000 local governments in the United States, so I'm radically oversimplifying here.

 

      But many, many agencies are accountable both to their local government of general jurisdiction and also to the state. And in many instances, they may have power delegated directly from the state to an agency. And so we get into these very interesting, almost triangular relationships between agencies, whose brief -- whose jurisdiction is at a particular locality, who may have a close or a distant relationship -- [I'm] talking about independence from the general local government, but may have an even closer relationship with the state itself. And, again, as we think about a jurisprudence of accountability and transparency, which is really what we're taking about this morning, that dual reporting structure and how much power the state delegates to a local government is really critical.

 

      So, briefly, how might we think about what's different, taking a step back, about the context and the structure and what does this actually mean? I think it's important to recognize there're reasons why courts -- and here, again, to be clear these are mostly -- the jurisprudence that's developed around state administrative law—and certainly around local administrative law—is largely a body of state law. It's state courts reviewing state actors, which is not to say the federal courts don’t have something to do with that, but they're largely not at the center of this conversation.

 

      So how do state courts approach this? I think there are reasons why at the local level—and whatever we think about state structure, the local level—we tend to see less deference. We tend to see a more intrusive, local jurisprudence to the extent that courts segregate at all. And they generally don’t, but I think you see concerns in the jurisprudence about capacity at the local level, about expertise at the local level, about informality. In roughly half the states, there's no equivalent at the local level to a state Administrative Procedure Act. Having practiced in land use, when I began as a young lawyer and dutifully looked for what procedure governed when we were trying to get some zoning change, I was often very surprised to realize that nobody had any idea what the procedure was. And you would go into a board and kind of make it up as you would go along. And that's not unusual and courts do some work in imposing a formality, but really not all that much at the local level.

 

      And then I think some courts are concerned about parochialism and scale and the tendency of some local governments to really not internalize the external effects of what their regulatory choices are. In this article, I also lay out some arguments for why we might actually give more deference, or courts might actually give more deference at the local level. This hasn't really shown up in the jurisprudence, but I think it's important to have out there.

 

      I do think subsidiarity is a really important principle. I think recognizing that in many regulatory areas, land use being a good example, the level of government—to cite the cliché—that is closest to the people who are being regulated should be able to regulate, and that's not necessarily only a question of power, but that's also a question of deference. So I think scale can be a reason for giving more deference to the output of local agencies.

 

      I also think there's a different kind of expertise you get at the local level. So if you think about the kinds of areas where local governments may regulate best, it is kind of tool -- local governments can be a kind of tool that aggregate a particular kind of local knowledge. And if you think about how a state, in the generic sense, sees, local governments have an ability to see in a more precise and very localized way. And that's a reason for, perhaps, giving a little more deference. And I think the fact that the public is much more involved. So if you think about zoning boards, and school boards, and police commissions, and a lot of local administration, whether it's in the quasi-lawmaking context or in the more discretionary application of delegated authority, a lot of local administration is marbled throughout with public involvement in a way that's unusual at the federal level. And I do think that kind of inherent involvement of the public, which has lots and lots of downsides, may have some upsides in terms of legitimacy and a ground for deference.

 

      So let me just close with one, brief, doctrinal example, and then I look forward to the Q&A. And we, I think, can talk about what a localist Chevron, or a localist Skidmore, or a localist "Chevmore" might look like. But let me pivot to something that Judge Sutton mentioned, which is non-delegation doctrine. And it is true that non-delegation doctrine has more teeth at the state level. It has a lot of teeth at the local level, and this is really the doctrine that got me interested in thinking about the interplay between courts and local administration. And it's fascinating to see that state courts demand, at the local level—again, recognizing how hard it is to generalize across 90,000 local governments—but in the main, for all the many cases I've read in this area, state courts really do demand a much more precise specification of the authority that has been delegated to an administrative body.

 

      In the article, I give one example of a case out of Maine where a zoning board was given the authority to review land use decisions—something called conditional use permits—and the standard was that they had to evaluate whether or not the change in zoning would "conserve natural beauty." And for those of us who look at the state of delegation at the federal level, that's not much more -- I mean that's actually more precise than regulate the air waves in the public interest, right? That would likely be upheld at the federal level, but the court in this particular case said that was not nearly specific enough, and struck down the exercise of that delegated authority. And that's a very typical example.

 

      You often get state courts saying, if a legislature, if a city council, or county council, or another local legislative body is going to give discretionary authority to a zoning board, or a school commission, or the like, it has to be very precise in the metes and bounds of that delegations. And we can debate the merits of that, but I think it's interesting to note that the lower you go down in our federalist structure, the more courts may be actually requiring some precision in this kind of accountability conversation.

 

      So I'll just close by saying I think it's important, if we think about the states, to disaggregate between states and local governments. I think there are many areas where the doctrine is very similar and appropriately so, and I think that's true of federal, state, and local. Bu there are many areas where, as Miriam mentioned, if you look very specifically at a given agency and the given statutes that govern it, and, again, structure of a particular local government you're going to come to different answers than you would certainly at the federal level. And so I think it's very important to pay attention to those given contexts, and I don't think state courts often do that enough. And I think we could have a more intentional jurisprudence as we think about the kind of plurality of structures, and that holds important, comparative lessons as well. Thank you.

 

Hon. Michael Scudder:  So I want to open it up to the room. I'm sure there's some questions from the podium, but I invite anyone with questions. There's microphones on the side aisles or raise your hand and speak loudly, and we can get some dialogue going in the room here this morning.

 

Prof. Nestor Davidson:  Good to know you're not all leaving. You're actually going for the microphones.

 

Hon. Michael Scudder:  Let me put a question out there.

 

Hon. Jeffrey Sutton:  I have to say just one thing. I've already decided what I'm doing in my retirement years. I want to be the first person in American legal history to do the 90,000-city survey.

 

Prof. Nestor Davidson:  I've tried. It's not easy.

 

Hon. Jeffrey Sutton:  That is going to be so awesome! It's definitely going to be a book, right? I mean, that's not an article. That's a book.

 

Prof. Chris Green:  I have two bad jokes I wanted to tell. So if you have a non-delegation doctrine at the city level, a city can't just have a dictator.

 

Prof. Nestor Davidson:  Right.

 

Prof. Chris Green:  So you can't have Cincinnatus for Cincinnati.

 

Prof. Nestor Davidson:  There you go.

 

Prof. Chris Green:  So has it been taken? So I'm looking for a crazy idea about hard-look review that'll expand the range of -- get something from off the wall to on the table to expand the Overton Park Overton window. So, anyway, you won't ask me back.

 

Hon. Michael Scudder:  Okay. We got our queue. I see Steve Calabresi.

 

Steve Calabresi:  Steve Calabresi. I'm the Chairman of The Federalist Society Board of Directors. And I wanted to begin by commending this panel for a fascinating discussion about state and local administrative law. I also have to apologize. I have laryngitis, so I can't be heard very clearly. But my question was particularly directed to Judges Sutton and Scudder, but I'd be interested in what the other three panelists think of it as well. And it goes to something that I learned from Judge Ralph Winter when I clerked for him in 1983. And he said that when he was young and in law school, there used to be a saying, "Don't make a federal case out of this." And Judge Winter said in 1983 that that saying should be amended to mean, "Don’t utterly trivialize this." In other words, a lot of things that are very trivial are finding their way into federal court that may properly belong in state court.

 

      My question for the two federal judges and for the other panelists is if you have a filing before your appeal before you that raises some important federal constitutional question, say, on a controversial issue like abortion or affirmative action, would it be appropriate to ask the plaintiffs to amend their complaint to add any state constitutional law claim that they could have so that the court would have the option of deciding the issue on state constitutional grounds rather than federal constitutional grounds? The federal interest in that is if a federal court of appeals decides a case on state constitutional grounds, its ruling can be overruled by the state supreme court. Its ruling applies to only one state, not to the three states in the Seventh Circuit for the four states in the Sixth Circuit. And it might be compatible with the discussion in Younger v. Harris about the important of our federalism and of emphasizing the role of the state courts. Any thoughts?

 

Hon. Jeffrey Sutton:  Well, I love that question, Steve, and I've thought a lot of about it. And I'm so disappointed I haven't come up with a way to say yes because I so badly want that to be the answer. What you're really saying, and what I think makes a lot of sense is an exhaustion requirement. And a way to think about this doctrinally is most federal constitutional claims run through the Due Process Clause, right? That's incorporation, "the Liberty Clause." And so you say to yourself, "Why wouldn't you ask yourself if there's any way in which the state could fix this problem short of there being a federal constitutional problem?" And it is, after all, a due process clause, so it implicates -- suggests process; that process could include avoidance: interpret the state statute to avoid the problem. It could involve a state regulation. And, of course, it could involve the state constitution, which would take the problem off the table.

 

      But I don't think there is an exhaustion requirement. I don't think there should be one. And I think our federal rights are our federal rights. And if someone's violating them, and if you want to go to federal court and just take one shot—you know, I'm not a very good basketball player, but take just one shot—you're, frankly, allowed to do that.

 

      Now, I will say at the state level—Oregon's a really good example of this. They do have this exact exhaustion requirement under the state constitution and federal, but they're allowed to do that as a state court. The only other thing I would say, which is implicated by your question, is when you do have two claims – state and federal – in the federal level, it's often a very good idea, I think, for the federal court to certify the state constitutional claim to the state supreme court. In fact, for a litigant, it can be a really quick way to get something to the state supreme court. You try certification at the federal district court level, boom, you're right there to the state supreme court. Unfortunately, this is something I've been working on with state court judges. I basically think the certification process is broken. I blame state court judges in part because it take a little too much time, and I blame federal judges because we're too impatient. But we've got to fix that system because it would be quite respectful and very federalism driven.

 

Hon. Michael Scudder:  Yeah, Nestor, go ahead.

 

Prof. Nestor Davidson:  I just want to add one footnote to this discussion, which is we do have one area of constitutional law where we have this kind of exhaustion --

 

Hon. Jeffrey Sutton:  For now.

 

Prof. Nestor Davidson:  For now, and the Supreme Court's going to look at it. And it's been very fraught, which is in the takings context, which is to say that before you can bring a federal constitutional takings claim, you have to decide whether the state has or has not given you just compensation. And in order to do that, you have to go through state process. And the Supreme Court's going to likely decide this year whether or not that exhaustion requirement will survive. But it has been quite controversial, and it's created a lot of tension, precisely for the reason Judge Sutton pointed out, which is that a lot of people believe that it denies the ability to get into federal court on the core question of a federal right. It does, as a practical matter, require you to litigate questions of federal takings law in state court and then be precluded if you then try to go back to federal court. So I think that there're complications here that we should pay attention to and the Takings Clause is an area where we actually do have a body of law on that.

 

Prof. Chris Green:  There is something to be said for having the same rule for all the rights. You could have Williamson County for everything, but that would be different.

 

Hon. Michael Scudder:  Okay, we'll shift over to this side.

 

Stephen Casey:  Stephen Casey, Austin, Texas Lawyer's Chapter. Within the last 10 years, there's been an increased ground swell of people moving to Texas and anecdotally to being documented from high-tax, high-regulatory states, like New York and California. It'd be interesting to get the panel's perspective, do you think it's going to lead to a feedback in those states from they're moving to a lessening of the regulatory burden and lessening of the administrative state, or do you think that it's going to boost Texas a little bit and turn it a little more "purple," I would guess, than blue?

                                      

Prof. Chris Green:  Well, most people from Mississippi, it tends not to -- I mean it takes our best people and it makes Texas better and makes Mississippi a little weaker.

 

Hon. Michael Scudder:  Do you guys -- go ahead.

 

Prof. Nestor Davidson:  I would just say one thing about that, which is that people are moving to Texas, of course. But in many ways, they're moving to Austin, and they're moving to Dallas, and they're moving to Houston, and they're moving to San Antonio, and I think one dynamic that we already see is that we have a greater level of friction and I think it's really developed over the last 10 years. It's always been there, but it's increasing with mobility between the policy preferences at the state level in a place like Texas and the increasingly divergent policy preferences in a place like Austin. And those conflicts are playing out largely as a question of home rule, immunity at the local level. But I think as cities -- because, really, Texas has four of the -- if you look at the top ten fastest growing cities in the country, four of them are in Texas right now. And I think it's really the urban areas in Texas that are drawing population. And that is increasing the political power, relatively speaking, within the state. The state may not be purple, but there are some really deep blue pockets within Texas.

 

      In the mid-terms, there was a story that could be told about, even the area around Fort Worth which has traditionally been a relatively conservative urban area is now trending more democratic. And I think a lot of other factors are driving that mobility. But I do think it's a stark reality and I do think you can tell a similar story in Georgia, in North Carolina, in Florida, and other places. I think it's going to increase tensions between the cities in a place like Texas, the Texas triangle, and the State.

 

Hon. Michael Scudder:  Over here, then. Sir?

 

Questioner 3:  Thanks so much. Each of the panelists have talked about the very distinct differences of state administrative law from federal administrative law. Judge Sutton urged us all to read the local state constitution, Professor Green remarked upon the tyranny of the 50-state survey, Professor Seifter said, "No state administrative law in law school," and Professor Davidson said there are distinct, local doctrinal differences in non-delegation. So why I'd like to do is have the panel act as our ad hoc marketing firm, and I'd like a marketing suggestion from each of the panelists about how local lawyers can highlight in an educational way the distinct local and state differences to the bench and bar. What suggestions about highlighting the differences would each of you give us?

 

Prof. Miriam Seifter:  May I recommend my forthcoming article? [Laughter]

 

Prof. Nestor Davidson:  I would second that.

 

Prof. Chris Green:  Judge Sutton's book, really, is far better marketing than I've ever seen. It's great.

 

Hon. Jeffrey Sutton:  Well, I mean -- we should read each other's stuff and --

 

Prof. Chris Green:  I should write my stuff. . .

 

Hon. Jeffrey Sutton:  I would like to do the bias more to what they've written, and I really would read what they've written. Knowledge is power in this area. It blows me away the number of disputes locally, city versus state, going on where people are not paying attention to the things we so obsess about at the federal level.

 

      Now, of course, that makes sense. At the federal level, the stakes are so high you can afford to hire 100 lawyers to figure this out. You cannot normally do that at the state and local level. But there are just so many opportunities here to help a client, I guess is the way I would put it. And you read these things and you're just so shocked. No one's paying attention to this. And I think the last point that Nestor made that we have red, blue statewide, and then within states -- that's the Ohio story. The cities in this last election became bluer, and the suburbs, particularly the counties, rural areas – way redder. And that is going to lead to a lot of conflict.

 

Prof. Miriam Seifter:  Yeah. So more serious than my previous answer, I would say there're actually a number of ways to start to build this familiarity. So one of them we've already mentioned is teaching classes in this. It's very doable. My law school, in particular, was very open to this. So if you're a law professor, you can go to your law school and suggest it. If you're a law student, you can go to your law school and suggest it.

 

      Another is the state bar. So does your state bar have a practice group or a focus group on matter of local government? Most of them do. What about state constitutional law? Not all of them do. And then another is thinking about ways to invest in state and local government to have them create long-standing offices that are building up this knowledge base and are available to educate people, to talk to people. So those are all other ways than reading all these books. But really, actually, the literature is great in this area and probably under-read to get this information out there.

 

Hon. Michael Scudder:  Go ahead.

 

Richard Samp:  Richard Samp with the Washington Legal Foundation. I guess my question is for Professor Seifter. It's a separation-of-powers issue. Basically, what should federal courts be doing when they have to decide state law separation-of-powers issues? I'm think of the case in the Supreme Court right now about gerrymandering in Virginia, where the state legislature say, "We have ultimate litigating authority over issues having to do with how we get redistricted." The attorney general says no. In the Florida recount situation, the Florida Supreme Court says, "We are the ultimate arbitrator of election results, and the state legislature says "No. Pay no attention to the state courts. We decide these questions." Are there any neutral principles that federal courts can apply when deciding these state issues? Or do they just have to read the state constitution and do their best guess?

 

Prof. Miriam Seifter:  This is a really hard and important question. And in my article, actually, I talk about this as one of the costs of the lack of clarity at the state level. For all its benefits, it does have this feature where federal courts, and in particular the Supreme Court, actually, sometimes deny certiorari because this is a vehicle problem. We're not really sure if we're even talking to the right state entity.

     

      How to solve it in a neutral way, I mean I think probably the classis answer would be that you would look to the final decisions of the state supreme court if there are decisions on a relevant question. But, often, there aren't. So I'm not sure that there's a ready solution to this. I mean, other than certification or denying certiorari until the state can sort its own house out.

 

Hon. Michael Scudder:  Sir?

 

Brian Bishop:  Brian Bishop. I come from Rhode Island, where, for the first fourscore years, we didn't have a constitution and operated under the [Royal] Charter. But one thing that I observe about our system, which I think -- I'm wondering for the folks that research state and municipal undertakings, my observation in Rhode Island, and I think it's not actually -- it fits with the wider 50 states, is local government is actually far more parliamentary in nature. So while you look very specifically at the delegations, and it's not that they don’t exist, that there aren't an alphabet soup of agencies, but the local municipal legislatures and even state legislatures seem much less cherry -- and that's simply coming in and settling a thing or making, literally, an individualized zoning decision at the level of a state legislative statue. And I'm not actually sure that that's unhealthy, at least in a small state, with, very much, access to the legislature. That has been a far more responsive avenue for myself than the purported responsiveness of agencies. And I'm wondering if you've looked at that in your undertakings.

 

Prof. Nestor Davidson:  Yeah, so it's a great point. And one of the arguments that people make in favor of local empowerment is local legislatures can be much more nimble. We don’t have a tradition of bicameralism, for example. Again, I mentioned in many local governments, there is no presentment equivalent, right? And so local governments can move much more quickly. There is also a tradition, talking about norms of non-partisanship. And, actually, in some states it's explicit. Local charters, some municipal charters, explicitly say that local officer holders cannot identify themselves by their partisan affiliation. So it's a very different norm. And you do, then, have the ability in small and even medium size -- doesn't work so much in a place like New York with eight and a half million people and budgets that are larger than many states. But in a lot of smaller, local governments, and even medium sized, you do get individualized attention. And kind of an accountability feedback loop that's very immediate. And I would say that courts have been a little bit cherry of that as well.

 

      And there is a body of law, at least in the land-use context and it's bled into a few other areas. But it's clear it's in the land-use context, where courts have looked at legislative bodies. A city council clearly delineated as a legislative body when they are making an individualized determination. For example, amending a zoning code in order to change the rules for one individual owner. Courts will sometimes treat those legislative bodies as quasi-administrative. And it has generated a really interesting body of law, largely around proceduralizing. So you could have due process rights before a city council if you think about the Londoner/Bi-Metallic condition. That actually doesn't apply in a lot of local governments. You actually get a fairly vigorous procedural rights as a matter of due process at the state level before legislative body. And I don't know that that's a bad idea, I think that's actually not a bad idea at all.

 

Prof. Chris Green:  And arguably, constitutionally compelled because you can't just take -- can't have bills of attainder. You can't have local bills of attainder. So Londoner/Bi-Metallic is important.

 

Prof. Nestor Davidson:  Which, by the way, were local government cases.

 

Prof. Chris Green:  Yeah.

 

Hon. Michael Scudder:  Okay. Let's jump back here.

 

Alden Abbott:  Thank you, Judge. Alden Abbott, long-time member. I think it's fair to say that regulatory takings doctrine is severely limited under federal constitution laws. Some total destruction of value, that sort of thing. To what extent are state constitutional provisions in state litigation pointing to a broader ability to recover, under state constitutional takings clauses? In short, is there more of an opportunity, perhaps, to find regulatory takings under certain state constitution? Is there a trend anyone could identify? Thank you.

 

Prof. Nestor Davidson:  Judge Sutton?

 

Hon. Jeffrey Sutton:  I mean, I think -- so I'll tell you the part of the story I know for sure, and the part of the story I'm going to guess at. The part of the story I know for sure if the post-Kilo story that the state supreme courts within a year of Kilo, several were rejecting it under their state constitution, and therefore providing remedies for the plaintiffs in those cases. This are not regulatory takings. We're talking imminent domain. But just to complete that story, it's a controversial decision, and it's really not just a state constitutional law story; it's a state legislative story. The states really responded very quickly there.

 

      So now I'm going to get to the part that I don't know, but I have my suspicions about that in that stream, you're going to have a lot of state courts now that would be much more sensitive to that kind of argument than I think they would've been before Kilo. I mean, what's really fascinating about how this works between state and fed is when you get a very controversial U.S. Supreme Court decision that allegedly under-enforces -- it makes the papers, suddenly, the state supreme courts are all over this. And instead of lockstepping, they're really looking at it independently. And so I think this is an area where state courts are aware of it. They are starting to think independently about it. Whether they're getting very good briefing is another matter. That part I just don’t know. And how much they're doing, I don't know either.

 

Prof. Chris Green:  Buck v. Bell was sort of the opposite. So when the U.S. Supreme Court -- "Well, if the feds said it's okay," then that shuts down. But sometimes you get [with] Kilo the opposite effect. There's lots of cases in Mississippi, certainly.

 

Prof. Nestor Davidson:  And I would just add specifically on regulatory takings, you also have a dynamic at the state level which you really don’t have at the federal level, which are state statutory regimes that give property rights recognition. So in Florida, actually, there was a constitutional -- an initiative on the books in Colorado in the midterms that failed, but would've had a very similar, essentially, a compensation requirement for any regulation that lowers the value of property. So very, very different doctrinal answer to the question of incidental effects of regulation on property rights. But several states have those property rights statutes, and they operate, and they are constrained on regulation, and they are compensatory regimes. And so that's an important distinction at the state level. Well, and that's not so much constitutional as it is statutory.

 

Hon. Jeffrey Sutton:  Well, you know, the other thing as I think about it and listen to my co-panelists, it's dangerous to pigeonhole these things. If you read Judge Willet's opinion, then Justice Willet's opinion in Patel, the way that it's written, it looks an awful lot like a regulatory takings decision. I mean, it's a due process decision under the Texas Constitution. But if you read it, it really is very similar. So I wouldn't think of it purely as taking. That's really the way he was framing the issue.

 

Hon. Michael Scudder:  Sir?

 

Kai Allbrook (sp):  I'm Kai Allbrook from the state of Washington. Our West Coast states have policies on climate change that are very much opposed to those of the current federal government. As a result, you see denials by regulatory agencies of permits necessary to create and export infrastructure for carbon and hydrocarbon coal from the West Coast. And I'd be interested to see how you would analyze state regulatory agencies frustrating federal policy and, in fact, interfering with interstate commerce because of an ideological opposition to coal being burned in China as opposed to remaining in the ground in Wyoming.

 

Hon. Jeffrey Sutton:  Well, I'll give one quick idea on this. I don't have a great sense, specifically for the West Coast constitutions, but I will say this. This is a very important point about state constitutions and a very big difference between state and federal constitutions. The federal Constitution when it comes to rights is negative, biblical – "Thou shalt not, thou shalt not," and so forth. State constitutions have lots of positive rights. Emily Zackin wrote a great book about this, Looking for Rights in all Wrong Places, and making the point that there were education rights, labor rights, and environmental rights, and so I think it's about a third, at least, of the state constitutions that have this. So now you have this interesting dynamic where the state legislature, perhaps with state agencies, has an obligation -- actually, an affirmative obligation to protect water/air resources. But, of course, we know there is a supremacy clause, so that's where it gets a little complicated.

 

Prof. Miriam Seifter:  And I would just add to that in addition to the affirmative constitutional rights, another difference at the state level is that under most state constitutions, state legislatures have plenary power. So the state constitution limits them. It doesn't enumerate their rights the way we have at the federal level. So I think the answer to your question would have to proceed on two lines. One: is it legal under state law? And if the state legislature has said something about this or if they've delegated power to an agency, often that's going to be constitutional at the state level because unless the constitution says no, a state legislature can presumably do it. But then, of course, there's the federal level. So is it actually preempted under the Supremacy Clause? And then you just have to do a close reading of what the federal law is and what the state law is.

 

Prof. Nestor Davidson:  And I would just add I think one of the hardest questions in all of this when you're thinking about the federal-state relationship, and, frankly, it plays out as well on the state-local relationship, do we really have neutral principles that apply across policy disagreements? So we get these swings where in one administration, states are asserting policy preferences about immigration, about other areas, and we look to how do we adjudicate those. And then the politics change, and you get a set of different states opposing the federal government. And it is very, very hard, I think, to come up with general, neutral principles in the kind of Wexlerian sense to adjudicate that distribution of power. But I think it's the right thing to try to do whatever your individual policy preferences might be.

 

Hon. Michael Scudder:  I think we've got a little over five minutes left, so we'll try to get the next couple of questions, and I may offer a parting thought of my own. Go ahead.

 

Mark Middleman:  I'm Mark Middleman from St. Louis. And this is particularly addressed to Professor Davidson. A great part of our jurisprudence in Missouri on local law is that there is no sovereign power in local communities. Sovereignty is restricted to the state government, but as Professor Seifter suggested, it's plenary. We have what are called "home rule charters," but they're not really total home rule because there's some limitation on what a locality can do through its own city council or whatever its local legislative body. Do you find this in other states that there is a difference in the administrative powers of localities precisely because they don’t have complete sovereignty?

 

Prof. Nestor Davidson:  Yeah, it's a great question. And I have found, again, in the world of our fantasy 90,000 local-government surveys that home rule is one of those areas of state jurisprudence in state constitutional law that varies, not only across 50 jurisdictions, and the District of Columbia has its own unique particular version of home rule, but within states. And so you have a range that varies in really broad terms between what we call a Dillion's Rule state where the only power that a local government has is that which is explicitly legislatively delegated from the state, from that exercise of plenary power, versus home rule, which in its strongest form in state constitutional law actually changes that paradigm about where sovereignty rests.

 

      And so you have states—and a not significant number of states—where as a matter of black-letter, structural constitutional law, the state constitution actually says that, at least with respect to local matters—and courts have no idea what that actually means—but with respect to local matters, a local government, a city, a county, a suburb is sovereign. And so it's a choice within the state. If you think about the federalist system, sovereignty resides at a state level. Within a state, a state constitution can make a choice to sub-delegate to locate that sovereignty at the local level. And in many states—I can't give you a number because the jurisprudence is all over the place—but in a critical mass of states, as a matter of formal state constitutional law, a great deal of that sovereignty that we think of at the state actually resides at the local level.

 

      Now as that has been litigated, and it gets litigated all the time, state courts are reluctant to recognize that. And I have begun to noodle on an article that I'm thinking of as home rule originalism because you have a lot of these state constitutional conventions that have adopted home rule not only were in the 1910s and the Progressive Era, but actually through the '60s and into the '70s. And so the Founders or Framers debates are really accessible. And you have some home rule constitutional amendments—and New York, frankly, is a good example—where the intent, the Founders' intent, was to be fairly strong on the delegation to local democracies, to have a conception that people should be governing themselves at the local level. And state courts haven't respected that at all. So the black-letter law of localism in the New York, which is the state I know best, the formal structure that we get in the state constitution and the functional structure that appears in the jurisprudence are radically different. And so I think there's an incredibly interesting variety. And we haven't quite figured out what that all means.

 

Prof. Chris Green:  Bob Alex – from time to time, he would say, "Do you want to be James Madison? Do you want to be a Founder?" Well, go get involved in your local homeowner's association because that's where you can establish a new politiea and you will be the "Founder."

 

Hon. Michael Scudder:  One last question.

 

Sam McVey:  Sam McVey. I'm a retired Utah state court judge. One of the reasons for giving judicial deference to and review of agency adjudication proceedings is that these agencies are supposedly endowed with a lot of expertise and so forth, and the judges are apparently too technically challenged to figure some of these things out. To quote my former boss, though, a judge -- paraphrase the former boss: a judge knows what he or she knows and a judge knows what he or she doesn't know. So if a judge doesn't know, can't the judge just proceed under Rule 53 of the Federal Rules of Civil Procedure and its state equivalents? Get a special master to help them on these technical issues and forget the agency bias that occurs when you render agency deference.

 

Prof. Chris Green:  If they do know what they don’t know, that's great. I mean, the judges sometimes have the same problem. Not these.

 

Hon. Jeffrey Sutton:  Ouch. This is what happens now that you're a new federal judge. They're not usually explicit about it. They laugh at your jokes in your face, and when you're not there, they tell you that you're wrong and full of yourself.

 

Hon. Michael Scudder:  So thanks everyone. Let me offer a bit of a suggestion, perhaps, to Dean and Steve. First, I think on behalf of all of us up here, thanks for covering the topic, and everyone's engagement. I can tell you from just talking to my colleagues on the panel and reading a bit of their work, one of the questions that was coming to mind constantly as I read this was there's embedded in a lot of the discussion a bit of a normative preference to govern at the local level as much as possible, at the state and local level for all the reasons that are obvious: closer to the people, etc., etc. And then as you read some of Miriam and Nestor's work—at least I did—I really realized how much the state, local, municipal, administrative apparatus has grown, and just how expansive it really is, and how many different aspects of our lives it touches. And what also comes to mind is I read very little about it from day to day. The local newspaper has tended to focus on national coverage so much. The local newspaper is not at the end of the driveway anymore. It fell by the wayside.

 

      So one of the questions that I'd encourage the Society to consider asking is, "Are we really able to realize the transparency and accountability that is kind of embedded in this normative preference we have to govern at the local level?" Or put differently, "Are we realizing the federalism benefits that I think are kind of embedded in a lot of the discussion? Are we able to, or how are we better able to, perhaps?" So with that, thank you.

 

11:00 a.m. - 12:30 p.m.
Climate Change Nuisance Suits

2018 National Lawyers Convention

Topics: Environmental & Energy Law • Environmental Law & Property Rights
The Mayflower Hotel - East Room
1127 Connecticut Avenue, NW
Washington, DC 20036

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Should climate change responsibility be evaluated in the courts or by the elected policymaking branches? Several municipalities in multiple states have filed lawsuits against energy companies claiming those entities are liable for billions in damages for climate change based on theories of public nuisance and other tort theories. On June 25, 2018, Judge William Alsup of the U.S. District Court for the Northern District of California issued the first major ruling in one of these cases, dismissing one such lawsuit brought by the cities of Oakland and San Francisco against BP, Chevron, ConocoPhillips, ExxonMobil, and Royal Dutch Shell. On July 19, 2018, New York City similar action was dismissed by a second federal district judge. These rulings are likely to have an impact on similar pending lawsuits and to set precedents regarding whether and how the courts can be accessed to bring climate change-associated liability claims.

But in Juliana v. United States, Oregon federal district court judge Ann Aiken has allowed a similar case, filed against the federal government and asserting (inter alia) substantive-due-process and public trust claims, to proceed. On July 30, 2018, and again on November 2, 2018, the United States Supreme Court denied the United States Department of Justice’s applications for a stay of the case without prejudice, noting in the first instance that the request was premature and in the second instance that adequate relief could be available in the Ninth Circuit without needing to obtain relief in the Supreme Court. The Supreme Court noted that “[t]he breadth of respondents’ claims is striking,” and that “the justiciability of those claims presents substantial grounds for a difference of opinion.” Meanwhile, a petition for mandamus remains pending before the Court, and further appellate orders in the case seem likely to be entered soon.

What is the proper scope and meaning of public nuisance and the public trust doctrine? What is the proper role of the courts in resolving issues of climate change causation, traceability, and impact? Should courts allocate costs, if any, when so many individuals and entities are engaged in actions alleged to harm the climate; and, if so, how? This panel will discuss ongoing climate-change-related public nuisance and public trust litigation and examine the major issues raised by the cases.

  • Mr. David Bookbinder, Chief Counsel, Niskanen Center  
  • Mr. Eric Grant, Deputy Assistant Attorney General, Environment and Natural Resources Division, United States Department of Justice
  • Prof. James Huffman, Emeritus Dean and Professor of Law, Lewis & Clark Law School
  • Mr. Mark W. Smith, Founder, Smith Valliere PLLC
  • Moderator: Hon. John K. Bush, United States Court of Appeals, Sixth Circuit

Speakers

Event Transcript

Andrew Varcoe:  Good morning, everyone. It’s great to see so many people here, and a special welcome to everyone who’s watching online.  My Name’s Andy Varcoe. I’m with Boyden Gray & Associates here in D.C. I’m the Chairman of the Executive Committee of the Federal Society’s Environmental Law & Property Rights Practice Group. If you’re interested in contributing to the work of our group, please let me know or talk to a Federalist Society Staff member.

 

We have a fantastic panel this morning, on a very timely and important set of legal and policy issues that are percolating, even as we speak, through the U.S. Court system, including the U.S. Supreme Court. Guiding our discussion of these issues today is our distinguished moderator, the Honorable John K. Bush of the U.S. Court of Appeals for the Sixth Circuit, whose chambers are in Louisville.

 

Judge Bush is an Honors graduate of the Harvard Law School and of Vanderbilt University. Earlier in his career, he clerked for the Eighth Circuit and practiced law here in D.C. with Gibson Dunn & Crutcher for several years. More recently, before his appointment to the bench last year, he practiced law in Louisville with Bingham Greenebaum Doll, LLP, where he was co-chair of the firm’s litigation department. Judge Bush will introduce the members of our panel, and please give him a very warm welcome.

 

Hon. John K. Bush:  Thank you, Andy. For this distinguished panel discussion today on climate change, I wore my green tie. [Laughter]. Seriously, though, there are very important issues at stake in this litigation, the type of litigation that we’re going to be talking about today. The recent lawsuits against companies in the fossil fuel industry and against the federal agencies seek to address what plaintiffs believe are devastating environmental consequences from fossil fuels’ contribution to climate change. The private defendants face claims, based on liability theories of public nuisance and public trust, for many billions, if not trillions of dollars in damages. The government defendants defend against claims seeking a wide-ranging injunctive and declaratory relief that could transform the way they regulate and govern a substantial amount of the nation’s economy.

 

­­I’m not an expert on any of this, and so I’m here just simply to listen today, and we have an outstanding group of panelists. I will be introducing those. They’ll each speak and then afterwards, of course, we’ll have time for your questions.

 

Our first speaker is David Bookbinder, who is the Chief Counsel of the Niskanen Center. After practicing law at Paul Wyse, he entered the public interest sphere. Mr. Bookbinder has served as Sierra Club’s chief climate counsel, initiating and managing Massachusetts v. EPA. He’s also represented the environmental community in litigation over California’s greenhouse gas vehicle standards and brought in re Deseret Power, which effectively imposed a moratorium on new coal-fired power plants.

 

Mr. Bookbinder led Sierra Club’s work on judicial nominations, an area of an Executive Branch action that last year was near and dear to my heart. He was involved in litigation over the constitutionality of re: [Self-Appointments 14:21] for Federal Judges and was counsel in in re Cheney. Mr. Bookbinder has helped lead efforts on both global warming legislation and greenhouse gas regulation under the Clean Air Act, and has testified before House and Senate committees on these issues. He may have been the only person ever to be invited by both Senator Barbara Boxer and Senator James Inhofe to testify. He has advised states as to greenhouse regulatory authority, as well.

 

A summa cum laude graduate of Princeton and University of Chicago Law School graduate, he’s also taught courses on environmental law and litigation at Georgetown and William and Mary. Please join me in welcoming David Bookbinder.

 

David Bookbinder:  Thank you. Thank you all for coming. I want to thank the Federalist Society for having a panel on an issue that obviously is of great importance to the legal community and to the nation as a whole. I’m going to start by talking about the nuisance cases. I am counsel in one of the nuisance cases. It’s the one pending in court in Colorado. It’s the County of Boulder v. Suncor. That one, we just finished the briefing as to whether or not it’s going to be in federal court or in state court. We filed it in state court. Defendants removed. We just finished the removal remand briefing, and eventually, we’ll find out where we’re going to be litigating.

 

The first thing I want to talk about on the nuisance cases is they are not what everyone appears to think they are. They are not climate policy cases. I do climate policy. I spend most of my time in Washington working on federal legislation on carbon tax issues, keeping an eye on the regulatory programs.

 

Earlier this week, I was talking to the Industrial Energy Consumers of America, who are all the large power users, about things like, “What would a border tax adjustment look like in a federal carbon tax bill?” That’s climate policy. That’s national and federal climate policy. These nuisance cases are not climate policy cases. These cases are local governments faced with very, very large bills for climate adaptation. Whether it’s sea level rise on the coastal cities or—and the coastal states, since now we have an entire state, the State of Rhode Island, bringing such a case—what we have is enormous amounts of expenses that are staring these local governments in the face.

 

The question is, how are they going to pay for it, and they have two choices. The two choices are, they either tax their residents or they seek to shift some of the responsibility to the fossil fuel companies. The theory in those cases is, “You made these products. At some point you became aware of the impacts these products would have when they were used. You did not reveal that information. You concealed it, and in some cases, at worst, you might have affirmatively misrepresented these things.”

 

Now, in fact, all the fossil fuel -- all the oil companies, for instance, have said, “Yes, our products create climate change. We know that.” Their business plan is to make more and more of these products, making these injuries worse and worse.

 

And let me just flip for a second to the other sorts of injuries. We brought the first case that was in the interior United States, not a coastal city or a coastal state, and it’s interesting. The counties we were representing, San Miguel County, Boulder County and the City of Boulder, are facing lots of expenses for things that are absolutely traditional government functions. Road maintenance. Most of the roads in counties in Colorado are dirt roads, and when you have an increased freeze-thaw cycle—in other words, you have more times when temperature, during the winter, is below freezing, then it rises above freezing, and then goes below, et cetera, et cetera—that wreaks havoc with dirt roads. It’s just astonishing. That leads to increased road maintenance costs. Very simple, traditional. You can’t get a more traditional government function than keeping the roads in shape.

 

Wildfire prevention, wildfire response, all these things are local government responsibilities. They have to figure out how they’re going to pay for these things. And so they’ve come up with a theory of, “Well, why don’t we see if the people who made these products, knowing that this was going to happen and not saying anything about it, should be held responsible for some of the claims?”

 

Earlier this week there was an astonishing development in these cases that has not gotten a lot of play, which is, until this week, every single one of the cases was brought by a governmental entity, whether a city, a county or a state. I think it was Wednesday, possibly Thursday. The first private plaintiffs sued. And what’s more, the private plaintiffs that sued were the West Coast Fisherman’s Associations. If you can imagine -- I don't think you can imagine a more conservative group than the fishing industry. If you’ve ever dealt with them, they are hard-core anti-environmental. They are extremely conservative, and the fishing industry has now said, “The fossil fuel industry is ruining our business, and we want to be compensated for it.” This is a watershed moment in these cases.

 

The consequences of this I don't think can be underestimated. I am aware of several other industries, private industries, that are contemplating such claims. The fact that this one was the first filed is very interesting. It gives political cover to a lot of industries that were a little nervous being the first ones out of the box. And I think that will be the next set of developments in the nuisance cases, will be more and more of these private parties bringing them.

 

Just let me add one more thing, because I suspect -- we’re only supposed to go for five minutes, and I probably am hitting that limit. The fishermen brought a public nuisance claim, a couple of other claims. They brought a public nuisance claim because their catch, it’s the Dungeness crab, and a subset of that industry that is the basis of the claims that it’s ruining the crabbing off the west coast. Those crabs are in public waters. They’re in state and federal waters. It’s a public nuisance claim.

 

The next set of plaintiffs who will bring private nuisance claims will take a step that I don’t think a lot of people are prepared to deal with. Because there’s been a lot of talk out there. Not involving the plaintiffs in these cases, but a lot of other people and pundits saying “Well, well, well. Eventually, at some point, if they succeed in these cases, then the oil companies will come to the table and get a carbon tax, and Congress will immunize them against this liability.” Whether or not that’s true, that’s an interesting idea. That goes right out the window if you’re dealing with private nuisance claims. The Supreme Court and many state supreme courts have said, “A private nuisance claim is a form of property, and the legislature cannot eliminate it unless it pays just compensation.

 

So we’re now on the cusp of a situation where the claims that are going to be filed in the future by private industry and private actors are not anything that can be eliminated in a political settlement. So with that, I will resume my seat here and turn it over to the next speaker.

 

Hon. John K. Bush:  Our next panelist is Eric Grant, who is Deputy Assistant Attorney General in the Environmental and Natural Resources Division of the United States Department of Justice. Mr. Grant earned both his undergraduate and law degrees from the University of California, Berkeley. He served as a law clerk to retired-Chief Justice Warren Burger and Associate Justice, Clarence Thomas. Over the course of his 28-year legal career, Mr. Grant has argued cases in the United States Supreme Court, the California Supreme Court, and numerous other federal and state appellate courts. He has published on constitutional law and taught as an adjunct professor at UC Davis School of Law.

 

Following two decades of private practice in Sacramento, where he focused on environmental law and other complex civil litigation, Mr. Grant last year joined the Environmental and Natural Resources Division of Department of Justice. As Deputy Assistant Attorney General, he’s in charge of appellate and Indian-related litigation. Please join me in welcoming Mr. Eric Grant.

 

Eric Grant:  Trying to get a timer here, so we stick to five minutes. Thank you, Judge Bush, for that kind introduction. My thanks also to the Federalist Society and to the Environmental Law & Property Rights Practice Group, in particular, for inviting me to be part of this panel.

 

I’m on the leadership team of the Justice Department’s Environment Division, newly headed by Jeffrey Clark, whom many of you know. I need to say that my remarks do not constitute the official views of the department, which speaks principally through its court filings. I will discuss some of those filings, and I hope you will get a good sense of the department’s views about climate change nuisance suits.

 

At Judge William Alsup’s invitation, we expressed those views in our amicus brief in the nuisance lawsuit brought by the cities of Oakland and San Francisco in the Northern District of California. That brief is available as part of the convention’s CLE materials, and I commend you to read the entire thing.

 

That brief made three points. First, the federal common law of nuisance affords no remedy to plaintiffs seeking relief from alleged global climate change. Such relief would require judicial creation of a novel remedy with no statutory basis. Such a remedy would implicate critical policy judgments best made in the first instance by Congress.

 

Second, any federal common law claim that might exist is displaced. Although the cities cast their allegations in terms of the production of fossil fuels, their claim of injury is legally and factually tenable only to the extent it’s predicated on emissions of greenhouse gases from the combustion of fossil fuels. The Supreme Court’s decision in American Electric Power Company v. Connecticut teaches that Congress has addressed greenhouse gas emissions in the Clean Air Act, granting authority to address such emissions as a matter of federal law, not to the courts, but to the Executive Branch. The authority of Congress and the Executive Branch over foreign relations, including the power to negotiate with other nations to address climate change on a global scale, is another important reason why these nuisance claims are unsuited to adjudication under federal common law.

 

Third, these nuisance claims are unsuited to such adjudication, because they violate constitutional separation of powers principles, and because they’re nonjusticiable. Virtually every individual company and government across the globe emits greenhouse gases. If two cities in California may properly allege injuries from climate change in federal court, then so may every person on the planet. Federal courts are poorly equipped to handle this multitude of cases and the associated complex scientific and economic judgments and technical judgments that are part of them.

 

Nor should courts be the institutions designated to resolve the serious policy questions that arise in these cases. Instead, balancing the nation’s energy needs and economic interests against the risks posed by alleged global climate change should be left to the political branches of the federal government in the first instance. We’re pleased that in rejecting the city’s nuisance claims, Judge Alsup expressly cited our amicus brief.

 

Not to be outdone by Oakland and San Francisco, the City of New York has brought its own climate nuisance suit in federal district court. That suit raises a slightly different issue, whether plaintiffs may combat alleged global climate change through state law claims, but the outcome was the same. Like Judge Alsup, Judge John Keenan of the Southern District of New York ruled that they may not. “To litigate such an action for injuries from foreign greenhouse gas emissions in federal court would severely infringe upon the foreign policy decisions that are squarely within the purview of the political branches of the U.S. government.”

 

More generally, global warming and solutions thereto much be addressed by the other two branches of government, and they are not for the judiciary to ameliorate. We heartily agree. That brings me to the supreme exemplar of the climate change nuisance suit, at least insofar as it’s a nuisance to Justice Department lawyers. [Laughter]. That is Juliana v. United States as it is known in the trial court. In this lawsuit, District Judge Ann Aiken has already recognized a Fifth Amendment substantive due process right “to a climate system capable of sustaining human life.”

 

In a ruling that the plaintiffs satisfied the redressability prong of Article III standing, the judge has determined that she is empowered to redress plaintiff’s alleged injuries by ordering defendants—and seriously, I’m quoting here—ordering defendants “to cease their permitting, authorizing, and subsidizing of fossil fuels, and instead move to swiftly phase out CO2 emissions, as well as take such other action necessary to ensure that atmospheric CO2 is no more concentrated than 350 parts per million by 2100.” She can do that.

 

To put an end to this lawsuit and forestall the scheduled ten-week trial—that the plaintiffs bill is “the trial of the century”—the department has filed no fewer than four mandamus petitions in the Ninth Circuit. One mandamus petition in the Supreme Court, and two stay applications in the Supreme Court. In that effort, I feel like the title character in the Biblical parable of the persistent widow. Jim Huffman has more on Juliana and similar cases in foreign courts, and so I’ll yield to him.

 

Hon. John K. Bush:  Our next speaker is Professor Jim Huffman, who is Emeritus Dean and Professor of Law at Lewis & Clark Law School. Professor Huffman joined the law school faculty in 1973, was appointed acting dean in 1993, and dean in 1994. He returned to full-time teaching in 2006. Born in Fort Benton, Montana, Jim is a graduate of Montana State University, the Fletcher School of Law and Diplomacy at Tufts University, and the University of Chicago Law School. He has literally seen the world as a visiting professor at universities in New Zealand, Guatemala—and Oregon, if that counts as a foreign country.

 

He was also a fellow at the Humane Studies Institute and a distinguished Bradley Scholar at the Heritage Foundation. He serves on boards of the National Crime Victim Law institute, the Foundation for Research on Economics and the Environment, the Classroom Law Project, and the Rocky Mountain Mineral Law Foundation.

 

An author of more than 100 articles and chapters on a wide array of legal topics, Jim is a member of The Federalist Society and former chair of the executive committee of The Federalist Society’s Environmental & Property Rights Practice Group. Please join me in welcoming Professor Jim Huffman.

 

Prof. James Huffman:  Thank you very much, Judge. It’s a pleasure to be here. I’m sure I don’t need to say that my views are not those of my colleagues at Lewis & Clark Law School. [Laughter]. Or of most of my colleagues in the legal academy. As was suggested by Eric, over the last few years, decade or so, there’s been a literal barrage of lawsuits filed in this country and across the world, making various claims about rights that people have to be free from the effects of climate change and, therefore, for courts to mandate that governments undertake various policies. Those claims are rooted in a variety of theories, ranging from basic human rights documents of international treaties, etc.; constitutional claims, both at the federal and state level; and common law public trust doctrine claims.

 

I can’t address all that, but I do want to focus on a couple, and first, before turning to Juliana and related cases, mention one international case. That Dutch case, if you’re not aware of, I think you might find interesting. It’s called, Urgenda v. the Kingdom of the Netherlands. It was a lawsuit rooted in human rights theories and a lot of international agreements that the Dutch government has entered into on the basis of which the claimants in that case argued that they had a right to be free from the effects of climate change and, therefore, for the court to order the Dutch government to take greater measures than they had.

 

Well, the Dutch government had already taken pretty serious measures. They had put into place regulations to reduce carbon emissions that were projected to achieve at least a 17 percent reduction from 1990 and later, on reassessment, projected to reduce carbon emissions by 20 percent.

 

Well, the trial court in the Netherlands ruled that that wasn’t good enough, and that the government had to figure out how to reduce it by 25 percent, based upon various scientific estimates from 350.org and other such places. That case has, within the last three or four weeks, been upheld by an appellate court in the Netherlands, and there’s been similar successful litigation in Pakistan and Colombia on similar theories.

 

In the United States, the Juliana case is part of a quite sophisticated strategy pushed by something called, Our Children’s Trust. Their objective was to file cases either in courts or administrative agencies in every state in the Union and the federal government, with the theory being—and it’s not a bad theory, given the realities of our lives—that somewhere they’re going to find a judge who takes the bait. And sure enough, right there in my home state of Oregon, they found the judge.

 

Just a few words about the Juliana case, beyond what Eric said. It’s really rooted -- they have two fundamentally different theories. One is the due process argument that Eric mentioned, and let me just quote a couple of things from the judge. Eric’s already given you a taste. Here’s a little more. She said on both of these claims, both the public trust claim and the due process claim, quote, “To rule otherwise would be to say that the Constitution affords no protection against a government’s knowing decision to poison the air its citizens breathe or the water its citizens drink.”

 

She really felt that she had no choice but to find these claims to have some viability. On the due process claim, her basic argument was or her justification for ruling that there is such a due process right was to cite the abortion cases and the same-sex marriage cases as precedent for the position that she takes on due process. She said, again to quote, “Exercising my reasoned judgment, I have no doubt that the rights to a climate system capable of sustaining life is fundamental to a free and ordered society.” Well, it doesn’t take a lot of imagination to think of a whole lot of other things that are necessary to a free and ordered society.

 

I want to focus mostly on the public trust doctrine, because it seems to be a doctrine of which there is very little understanding and a lot of confusion. It is the foundation of a theory that was originally promulgated by Mary Wood, who’s on the faculty of University of Oregon Law School, which she labels, the atmospheric trust theory.

 

The public trust doctrine actually never existed under that terminology in English law, but it existed in principle and was adopted in this country from the beginning of the state governments. It is a question of state law, although there’s a lot of arguments that it’s also a question of federal law. The rules were basically applied to very narrow public uses of navigable waterways. Fishing and commercial navigation. There were a few cases that also referenced bathing, but that was it.

 

That was it, right up until the middle of the 20th century, or a little past the middle of the 20th century. Now, there was some variation from state to state, as you would expect, and as it should be, because it is a question of state law. But that was the focus. It was on navigable waters and those very limited but important public uses.

 

In 1969, Professor Joe Saxsome of you remember Joe—wrote an article about the public trust doctrine, suggesting that it might be a good foundation on which environmental efforts could get courts to take more action to promote environmental objectives. It was a well-written and well-argued article, as all of Sax’s were. In 1980, he wrote another article, the title of which was something like, “Removing the Historic Shackles of the Public Trust Doctrine,” which others might think of just overcoming precedent.

 

Sax argued that if we could just remove these constraints of what the doctrine has been throughout the history of American common law in the States, it could become a very effective doctrine. Mary Wood really took him up on that and said, “Let’s call this thing an atmospheric trust doctrine. On that basis, we can order governments to take all kinds of measures that they have chosen in many cases, not to take, through the political branches of the government.”

 

The power of the public trust doctrine and why I think the environmentalists have long tried to rely on it, is it insulates government from any takings claim, because by definition, a public trust right predates everything. It’s a right that existed in the nature of popular sovereignty, and therefore takings claims are off the table. That’s a powerful incentive to get courts to try to rely on it.

 

The last point I want to make, and this is a point that Eric has made, as well, is what’s really important in these cases. I think, on the merits, it’s beyond my imagination, although many things have happened beyond my imagination, that ultimately if this gets to the United States Supreme Court, they would uphold the kind of theories that Judge Aiken has articulated in her preliminary opinion in federal district court.

 

What’s more significant to me is the separation of powers implications of these kinds of cases. Because it’s putting the courts in the position, asking the courts to be in the position of mandating action by the executive and legislative branches of government. Which those branches of government are, on a regular basis, considering and choosing to take, or not take. It seems to me, under the separation of powers doctrine in this country, that’s just got to be unacceptable.

 

My colleagues’ suits support these theories. [They] argue that, well, this is a common law doctrine and common law judges, as we were taught in law school. The common law is judge-made law, not legislative-made law. But that’s an oversimplification of what common law judges do, in my judgment. There’s a certain amount of adaptation that the law has to take, but it’s not an authorization to make law.

 

That’s really what Judge Aiken ultimately says in her opinion in Juliana case. She quotes John Marshall, who we’re going to hear more about later today, and the widely and frequently-quoted language from Marbury v. Madison, that it is “…emphatically the province and duty of the judicial department to say what the law is.”

 

Well, I never understood that to mean, to say what you want the law to be, or to make the law. I always understood that to be a simple reaffirmation of the concept of judicial review. Ultimately, we can understand Judge Aiken’s position in this quotation from the end of her opinion. She cites another federal circuit court judge, Alfred Goodwin, who wrote, when he was an Oregon state supreme court judge, an opinion of somewhat similar vein on the access to coastal areas in the state of Oregon. She says, “Federal courts too often have been cautious and overly deferential in the arena of environmental law, and the world has suffered for it.” Well, I think we’ll suffer a lot more for the kinds of decisions that Judge Aiken is proposing that the courts ought to make. Thank you.

 

Hon. John K. Bush:  Our final speaker is Mark Smith, who is founding partner of Smith Valliere PLLC in New York City. Mr. Smith is an NYU School of Law graduate, who clerked for Judge Brook Bartlett of the United States District Court for the Western District of Missouri. He practiced at Skadden, Arps and also was a partner at Kasowitz, Benson, Torres & Friedman LLP before founding Smith Valliere in 2007. Mr. Smith has tried jury and bench trials in state and federal court, and has litigated complex cases involving billions of dollars.

 

As co-counsel in a federal jury trial, he represented a client who won a multi-million dollar judgment in a significant civil rights case reported by the New York Times as the largest of its kind in New York history. He was also involved in an important no-fault insurance trial involving $23 million. He’s represented Texas legislators as amicus in the U.S. Supreme Court and represented African American women seeking to start a hair-braiding company in a highly publicized constitutional challenge to New York state economic regulations.

 

Particularly relevant here, Mr. Smith represented New Yorkers in a constitutional challenge to New York’s participation in the cap and trade process called the Regional Greenhouse Gas Initiative. Please join me in welcoming Mr. Mark Smith.

 

Mark Smith:  Thank you, Judge. For those of you who are concerned with the worldwide environmental dangers of carbon dioxide, I welcome all of you to hold your breath throughout my remarks this morning. My response to these climate change lawsuits really goes back to around 450 A.D. in the middle ages. In the dark ages, in Europe. During the Dark Ages, the Middle Ages, many bad things occurred, we know from our history books, in the natural world. The Black Plague, falling trees, avalanches, earthquakes, animal attacks and all sorts of superstitions about witchcraft and the devil running amongst European populations. A scary time in that period of world history.

 

Many of these unfortunate natural events were really unexplainable to humans at the time, because they lacked the benefits of modern science. But humans, by their nature, are uncomfortable with things that they cannot explain. They want to know there’s a cause and effect. And when [good] people are hurt, they want to know why [good] people who do good things are hurt by bad people who do bad things.

 

In the medieval times there was a solution for instances of animal attacks and natural disasters and the humans that sought explanations. And that was the actual trial of animals and inanimate objects. During this period of medieval history there were hundreds and hundreds of trials involving pigs, bulls, cows, eels, mice, leeches, rats, locusts, and the list goes on and on and on.

 

But in addition to the animals being tried, there were also trials involving inanimate objects who were put on trial for being guilty or not guilty for causing the problem in the failure of the crops, or not. Those inanimate objects that were tried in medieval Europe included rocks, trees andmic dropglaciers. Just like we’re talking about today.

 

Now, by virtue of the word, trials, I mean literally, trials. There were prosecutors. There were defense counsel. There were witnesses. There were judges. There were extensions of time to allow the animals to respond and show up, in response to notices. There were jails designed for the inanimate objects and the animals, who were put in there, pending trial. There were convictions, there were sentences, and, yes, there were even pardons of the animals and the inanimate objects, including again, rocks, trees and the glaciers.

 

Now, I first heard about the history of animal and inanimate object trials from a law school classmate, Paul Berman, who wrote an excellent law review article in the New York Law Review, back in law school. This is before he went to clerk for Ruth Bader Ginsburg on the Supreme Court, and this is before she was notorious. I remember thinking, at the time of Paul’s article, “Wow, I’m glad that moving into my career at Skadden, Arps. I don’t have to worry about the courts getting involved with superstitions and mysticism ever again in my life under the color of law.” How wrong was I? Because now we have lawsuits involving climate change, putting on trial CO2, carbon dioxide, which last I checked is what we all exhale, among other things. A natural phenomenon, no different than the natural phenomena that were tried in medieval times.

 

Now, I’m not going to get into the merits and debate about the science of climate change beyond saying this. Thursday in New York City, the meteorologist and the weather forecast said, “We might have a light dusting of snow.” Thursday afternoon, we had six and a half inches of snow in Central Park, and Bill de Blasio, who’s signed on, by the way, to all these climate change lawsuits, could not be more angry at the weathermen. He excoriated them for getting the forecast wrong, eight hours before the snowstorm. Well, needless to say, for a profession that cannot predict the weather eight hours in advance, I’m not inclined to repeal the industrial revolution based on their models.

 

So what are these climate change lawsuits today really about? Well, they’re not about the law. And they should not be treated as law, and they should not be treated and analyzed in a way litigations are usually analyzed. These are propaganda devices. Polemic devices designed to effectuate and change the political narrative of, not just political leaders and not just the covers of newspapers that breathlessly report, “These children crusaders are changing the world and saving the globe from climate change and CO2.”

 

No, this is about weaponizing the courts for a political gain. That’s what this is all about, and it should not be treated as law. The left, of course -- and America is known for this, and they have a lot of success. We have nationwide rights to abortion because of the courts. We have gay marriage in America because of the courts. We have free public schooling education for the children of illegal immigrants because of the courts. The list goes on and on. I don’t need to recount them here to you, because you’re familiar with them.

 

So these lawsuits about climate change simply provide the excuse to talk about a left-wing agenda item, and it has worked. In fact, the fact that this morning we are talking about the agenda item of climate change and suing capitalism and suing businesses for being productiveand mind you, the fossil fuel companies, the oil companies, make the fuel. They don’t burn the fuel they make. Those are burned by the cities and the towns and the plaintiffs that are suing them. The CO2, mind you, is not from fossil fuels; it’s from the burning of fossil fuels, burned by the very same Bill de Blasio and liberals that fly around on their private jets, burning the fossil fuels which are actually the cause of the problem.

 

Now this panel today, and I will close with this, should not be taking place at a legal conference at The Federalist Society. A discussion of these lawsuits should really be taking place at a conference of marketing and public relations professionals, because that’s what they really are. And by putting the inanimate object, CO2, or carbon dioxide, a natural part of our climate and a natural part of the human existence, on trial in a courtroom is essentially, and at best, a feel-good attempt to advance a political agenda where there are political leaders.

 

The fact that they exist and are being taken seriously really makes me wonder. How far have we, as a society, advanced since the middle ages when we used to put rocks, animals and, yes, glaciers on trial for things we did not understand about the human and the natural condition of our planet? Thank you.

 

Hon. John K. Bush:  Can you hear me from here? Now that things have livened up a bit [Laughter], I’ll start the questioning now. Mark, your remarks sort of reminded me of, maybe, this issue. I wanted to direct it to Eric, first.

 

In the Juliana case, as well as in cases brought against the oil industry defendants by the cities of Oakland and New York, it appears to be taken as a given that fossil fuel consumption is the direct cause of many serious, bad, environmental effects. In the oil industry cases, the decision not to dispute the facts is understandable, because those cases involve motions to dismiss.

 

But in Juliana, that’s a summary judgment motion. Can you comment on the federal defendant’s decision, apparently, not to even attempt to challenge the alleged facts linking fossil fuel consumption to various climate events?

 

Eric Grant:  Certainly. Two aspects of that. One, the answer, in that case, was filed in a previous administration, and reflects the views of that administration. Two, and more importantly, our very simple argument is, we win as a matter of law. No matter the truth of the allegations of the plaintiff’s complaint, there is no substantive due process right to a stable climate system. There is no public trust doctrine that allows a court to order federal officials and agencies to reorder the national economy.

 

We think that’s pretty simple. It’s pretty clean. It’s a matter of law. We deserve summary judgment, and as we’ve asked the Ninth Circuit four times and the Supreme Court twice, this lawsuit should be dismissed.

 

Hon. John K. Bush:  Does anyone else have any comments on that question? Go ahead.

 

David Bookbinder:  Two things. The science is not really at issue, certainly, as Mr. Grant pointed out, in the nuisance cases. It’s not because it’s at the motion to dismiss stage, it’s because Ted Boutrous, who won a great victory yesterday for freedom of the press, got up in a courtroom in San Francisco and for two hours through dozens of PowerPoint slides, put up the [IPCC AR5], the Intergovernmental Panel of Climate Change [Fifth Assessment] Report, and said, “We agree with this statement. We agree with this statement. We agree with this statement. We endorse this statement,” for two hours. Stood there and talked about how they endorsed it. If you don’t think that’s dispositive, you should read the climate reports from the defendants. Their climate status reports, their annual reports, their securities filings, all the defendants have completely admitted, “Yes, we make products that are altering the climate.”

 

Now, it’s interesting that the federal government -- Yes, the answer in Juliana was filed, I think, in December of 2016. Two years later, the Justice Department has not seen fit to submit an amended answer in that case. I think that’s also very interesting, that they’ve not chosen to dispute any of the facts, even on the eve of trial. In fact, they asked the judge to not have any of the plaintiffs’ climate experts testify, because they’ve conceded all the scientific issues in that case.

 

I think it’s very interesting. The science stuff is not actually going to be as much of an issue in either set of cases. Although, eventually, in the nuisance cases, there will be the big issue, the very, very interesting issue, of attribution of particular climate injuries in particular locations, to climate change. And that’s going to be a very fascinating question, if we get to trial.

 

Hon. John K. Bush:  Jim or Mark, do you have any thoughts?

 

James Huffman:  I would just second what Eric said. It seems to me, the science stuff is really not at issue in the Juliana case. What’s at issue is whether or not these rights exist as a matter of law, and whether or not it’s the role of the courts to be effectively acting on whatever the science stuff says. It’s not within the judicial competence. It’s not within the judiciary’s constitutional role. Those are the issues to me. It’s not whether the science is right or wrong.

 

Mark Smith:  I guess I would just add, in the Scopes Monkey Trial, evolution lost. So courts don’t always nail science correctly. Whether or not this judge will nail science correctly, or whether or not the other enlightened members of "deep state" in Washington have got it right, I can’t speak to that right here and right now. Everything, both positions taken in these cases should be taken, I would say, with a healthy dose of skepticism based on the history of some of this.

 

Hon. John K. Bush:  I’ll be happy to continue on with my questions, but I think probably some people in the audience may have more burning issues they’d like to raise, so we’ll go ahead and open it up to some questions.

 

Questioner 1:  Thank you. I’m not sure the extent of the defendant class, Mr. Bookbinder and Mr. Grant, in these cases. I’m wondering if you included all the foreign oil companies that really don’t do business here. I don't know if AMEX—I guess AMEX does. We’ve got Petrogas. We’ve got Gazprom. Chinese oil companies, [Sinopec], something like that. I wonder if you joined them as defendants, because from what I understand, that’s where the massive amounts of carbon increase are coming from is China and other developing areas. The United States has actually done a pretty good job of reducing emissions.

 

Also, whether you’ve included Oakland and San Francisco themselves, for cutting down massive amounts of carbon dioxide and carbon forest when they developed their cities. Whether anybody’s brought up a Rule 19, “a necessary and indispensable party.” That’s about joining all these other defendants. I’m just mostly interested in the Rule 19 issues. Yep.

 

David Bookbinder:  It’s interesting. The various groups of lawyers who are doing the nuisance cases have very different theories about what set of defendants they want to be suing. It ranges. One group of lawyers, who’ve brought the most of these cases, have named an endless string of oil and gas companies and coal companies, and John Does 1 through 100. The second group of cases is brought by a lawyer who’s New York, Oakland, San Francisco, King County in Washington State, has sued repeatedly the set of defendants of five oil companies.

 

No, there’s been no Rule 19 issue there, as to adding necessary parties. In Colorado we’ve simply sued two oil companies, and we seek only several liability. We’re seeking only to establish the liability of the particular defendants that we’ve sued, and for their share of the problem, not going for joint and several liability as in the other cases. That’s the short answer, and there’s been no discussion -- I don't think any motions filed in any of the cases about Rule 19.

 

They all either went straight to -- the first issue is, of course, whether they’re in state or federal court. The defendants in the cases with the most, the long laundry list of fossil fuel companies, the Ninth Circuit is addressing the question, “Do these belong in state court, or do these belong in federal court?” Which is a fascinating issue. Two judges in the same courthouse in San Francisco. Judge Alsup said, “These are federal, and I’m keeping them.” Judge Chhabria said, “These are clearly state, and I’m sending them back to state court.” That’s where we stand on those issues.

 

Eric Grant:  Justice Department’s defending the United States, the president, several presidential offices and more than half the cabinet level agencies, so we think there are enough defendants in these cases. [Laughter]. We think that in pleading, potential additional defendants takes away from the simplicity of our argument that as a matter of law, these claims simply don’t exist.

 

Hon. John K. Bush:  Sure. Go ahead.

 

Chris Hollinger:  Hi. Can you hear me okay? Sorry. Chris Hollinger from Virginia Beach. Also a question for Mr. Bookbinder. Your statements just a second ago were getting into this question for me. Could you explain a little bit, maybe, about how the nuisance lawsuits intend to try to—I don't know if the word is allocate or apportion—responsibility? You mentioned that in Colorado, you’re only suing two oil companies. How do you figure out those two oil companies’ share of the global problem of climate change that’s caused by the actions of every human being on earth and every company that you can possibly name?

 

David Bookbinder:  Yes. The theory on them is simply the percentage of fossil fuels that they’re responsible for producing and marketing. If we look at the injury created by the use of all fossil fuels since the point when those defendants became aware of the problem, and then apportion it, almost certainly along the lines of their share of what they produced and marketed, we think we can narrow it down to a pretty easy set of numbers for the court to handle. Especially after we go through the discovery process.

 

Off-camera voice:  Get him. In the front.

 

Off-camera voice:   Oh. Okay.

 

Brooks Harlow:  Thank you. Brooks Harlow. I practice here in the D.C. area. Thank you all for accepting my reprints of my CO2 article from the Energy [Law] Journal. I see the science as a huge issue, and I addressed a very narrow slice of that. The first issue that you’ve got is that earth’s climate is unquestionably changing. Anybody who denies that, I write them off, okay? It changes all the time. We’ve gone from, literally, snowball earth, where the entire earth is covered with ice, to totally ice-free earth over five billion years.

 

In the last 200 years, more recent memory, we’ve had a continual increase in the global temperature since we came out of the little ice age. There were quite a lot of historically known variations in climate for the last 2,000 to 3,000 years, where we had historical records. The problem that I see initially is, nobody understands why the earth’s climate changes the way it does. So we don’t have a baseline.

 

The second issue I see, and this is the subject of my article, is that the concerns about significant climate change. Everybody knows that the CO2 we’ve been putting in, it may raise the temperature half a degree or so, which probably isn’t enough to cause any problems that are raised in these suits. The concern is that you then get a feedback. It’s a positive feedback and it’s significant, so a little bit of increase creates a big increase. That’s based on models --

 

Hon. John K. Bush:  Have you got a question for the panelists?

 

Brooks Harlow:  Yeah. The question is, how do you see getting around the problem of, a) a lack of baseline and b) how do you get into court with models and proving things on models that have never been tested in real life?

 

David Bookbinder:  I assume that’s a question for me. We don’t foresee any problem with the first step of that, which is that we’ve got anthropogenic climate change – human-created climate change, created and caused largely by the use of fossil fuels. We don’t think that’s a problem. The defendants have already conceded it. Every government on the planet, including this government, has said, “Yes, that’s what’s going on.”

 

The more interesting problem, as I think you pointed out, is how do we show, for instance, that the freeze-thaw cycles in San Miguel County, the increase in number of the cycles, is attributable to climate change? The answer is, we are confident that we have the scientific testimony, and we are looking forward to going in front of a trier of fact on this.

 

It’s interesting. Climate has already been tried in the courts. In 2007 the auto industry sued for the states that adopted California’s tailpipe CO2 standards. We took it to trial in Vermont, and the auto industry dragged out their climate scientists, saying, “No such thing. Not happening.”   On cross examination, we sliced and diced, and they led them out in body bags.

 

The Judge’s decision is available. It’s a case called, Green Mountain v. Crombie in a case brought by the auto industry in a courthouse that they chose. So, yes, we’ve already gone through this once on the general climate issue. On this specific attribution, at the level we’re looking at, that’s going to be a really, really interesting exercise. There’ll be experts on both sides, and we’re confident we can prove it.

 

Mark Smith:  I’d like to add on, as a practicing litigator that’s spent 20 years litigating, literally, billions of dollars in cases in all sorts of contexts, the problem, I think, that your question  raises is that, in these cases—and this is mission-critical to understand—there really is no other side. And what I mean by that, if I can draw an analogy as to how government collective bargaining agreements get negotiated, and then draw the analogy. When you have government workers negotiating pay raises with government workers on the other side of the table, like elected mayors and politicians, there’s no other side to the debate. There’s no, “I want to pay you a dollar and you want a million dollars, and we meet in the middle.” When you have either government negotiating with government or government litigating against government, there’s no other side.

 

So in these cases you have lawsuits brought by public interest lawyers that want to change the world. [They] can’t do it through the democratic process and use the courts to do it. Working alongside with plaintiffs’ lawyers that just want the money is understandable, right? They sue government agencies run by "deep state" government regulators that went to work for the EPA —except for Eric—because they wanted to change the world. That’s why they took the job at EPA in the first place, right? This is their dream job.

 

And then they sue these people, who want to change the world through their regulations. Then you have a government judge, most of whom are scientifically illiterate, looking at this case. Next thing you know, you have a courtroom full of everyone on the exact same side saying, “We want to regulate. We want more government. We want higher taxes. We want more lawsuits. We want more lawyers.”

 

And guess what happens when you create that sausage? Out comes the result of, “There’s a problem here. We need more lawsuits, more damages, more —” etc. etc. So the reality is, when I see these contrived lawsuits, essentially government suing government in front of government, I kind of have a feel of what’s going on here. Again, it’s why FDR said, “You can’t let government employees negotiate government contracts with government employees. They will always give themselves raises.” This is a version of that.

 

David Bookbinder:  I’d like to respond to one point. There are no government versus government cases anywhere in either of these two sets of litigation. The nuisance cases are, until this week, just government against the fossil fuel industry. Now, it’s government and private industry against the fossil fuel industry, and in the Juliana case, it’s individuals against the federal government. There are no government versus government cases in any of these.

 

Mark Smith:  Right, but the point is, even in the cases when we have governments suing private actors, those cases are all using government decisions made years ago. Either by EPA officials about the carbon dioxide as a pollutant under the Clean Air Act, or whatnot, or other decisions made, for example in San Francisco by a judge. So these now become established scientific fact that all this stuff is true. So when the government sues a private actor, they just say, “Well, we already know. The EPA decided this. These European scientists over in Geneva decided this. This is established fact.”

 

Then they come into court against the private actors, so it’s really an unfair fight. Even if it’s not technically government versus a government in a particular case, the reality is, the government is using all of that government apparatus and all of that government conclusions and findings to beat the private litigant over the head, as this is established by our better people at the EPA than we are.

 

Hon. John K. Bush:  David, I will give you one short response. [Laughter]. Then we have to move on.

 

David Bookbinder:  As I said, the defendants have, up and down and in and out, repeatedly conceded the science on this issue. That, we think, is closed. The second thing is in the nuisance case, for instance in my nuisance case, we’re not seeking any injunctive relief. We’re specifically saying, “We’re not asking you to reduce your amount of production fuels at all. We’re simply saying we want you to pay for the damage that those fuels cause.”

 

Hon. John K. Bush:   I think you’re next.

 

Devin Watkins:  Hi. My name’s Devin Watkins from the Competitive Enterprise Institute. My question is to Bookbinder. As far as I’m aware, the Clean Air Act preempts local and state jurisdictions from regulating the emissions of carbon dioxide and other such emissions. As the burning of these fossil fuels, and so the emission of them is, I believe, a core part of your causation analysis, why isn’t that preempted under the Clean Air Act? And the others can respond, as well.

 

David Bookbinder:  The answer is the Clean Air Act only preempts state and local governments from regulating mobile sources. Basically vehicle tailpipes, because they want to have a limited number of standards for national industry. States are completely free to regulate carbon dioxide from stationary sources, which is why we heard about the regional greenhouse gas initiative, where nine states regulate the emissions from all the fossil fuel power plants in their states. That’s why Oregon and California have a low carbon fuel standard, which mandates the amount of CO2 that can be emitted when you burn the fuels. That’s why many states have renewable -- 37 states have renewable portfolio standards mandating the amount of CO2 that can be generated by power produced in that state. That’s why three states have laws saying you can’t sell electricity in our state that’s been produced by -- if you exceed a certain amount of CO2 in generating it. The answer is states are totally free to regulate carbon dioxide from any and all sources, except tailpipe sources. That’s why you don’t have separate state standards for vehicles.

 

Hon. John K. Bush:  Any response?

 

Eric Grant:  In a properly implemented federal system, state and local governments are preempted from regulating conduct outside their borders, and I think, in these cases, conduct outside the borders of the United States. That’s one fundamental problem that we’ve identified with these nuisance lawsuits. That the judges in 50 states and 93 federal districts are purporting to, essentially, regulate conduct that’s taken place all over the world for decades.

 

Mr. Bookbinder said that these are not climate policy cases, but the cities of Oakland and San Francisco, just by themselves, have asked for $1.3 billion in their nuisance lawsuit. If you start adding those up for every municipality on the West Coast -- and I guess now we’re starting to get municipalities in the interior of the country, as well. That’s crushing, punishing liability for an industry that Judge Alsup, I think properly, recognized is, in part, responsible for us having a modern economy.

 

Mark Smith:  I should add the Competitive Enterprise Institute did an excellent job on this. They pointed out, when they analyzed the municipal bond offerings by the cities that were suing over the destruction of their land and property and values – the oil companies; when the Competitive Enterprise Institute looked at the bond offerings that they were floating, it turns out, apparently, that the amount of damages that were anticipated to be suffered by these cities were not as robust. In other words, they were telling bondholders, apparently, that maybe the damages to their cities are one thing and the damages that they were claiming in court may be a little bit bigger. Again, that’s the research done by the Competitive Enterprise Institute. You may want to check that out if you want to see whether or not they’re squaring their circles in the various legal proceedings.

 

Hon. John K. Bush:  Do you have one? Right there.

 

Questioner 2:  Good morning. My question is also for Mr. Bookbinder. I know you’re not surprised to hear that.

 

David Bookbinder:  That’s what you get when it’s three against one. [Laughter].

 

Questioner 2:  That’s right. You expected this. You drew a distinction early on between nuisance and climate policy. I think litigation between private actors, it makes sense, maybe, to characterize it as nuisance. I’m more curious about your thoughts on the Juliana case. First of all, if or when Judge Aiken decides that the plaintiffs are entitled to relief, presumably she enters an injunction and maybe retains jurisdiction as policing the government’s efforts to comply. At that point, is she not, as a practical matter, dictating policy to the policymaking branches?

 

Secondly, what are your thoughts on these substantive due process theory, there? Do you think there’s a right to any specific kind of climate and if so, how do we define that? Is it a right? Recognizing that there were multiple ice ages and thawing periods, and there was life during cold air and warm air periods. Is it a right to the climate that existed throughout history until we started burning fossil fuels? Is it a right to the climate that existed in the 19th century? Is there any not-arbitrary way to define such a right?

 

David Bookbinder: That’s an excellent question. Whew, I’m just -- rather than leaning towards that mic. It's just giving me a bit of a neck ache. Those are terrific questions. And let me start by saying -- well, I’m going to address the remedy issue first. Or, actually, no. Let’s do the substantive claim.

 

I wrote an amicus brief on behalf of the plaintiffs in Juliana in the Ninth Circuit, on, simply, the issue of the public-trust doctrine. We did not take a position on the substantive due process claim, which is a huge uphill climb. No kidding. The chances of them ultimately succeeding on that claim, in the Supreme Court, I think are very, very small, which I don’t think comes as a surprise to anybody in this room.

 

I think the remedy question is really, really interesting, as well. Because what, exactly do you want the judge to do, when the defendants are, as Eric points out, virtually every government agency? Virtually every action they’ve taken in any way dealing with fossil fuels for the last -- Eric, what? Thirty years? Forty years? Some very long period of time.

 

What the plaintiffs have said throughout the court papers—and again, Eric, if I say something wrong, please correct me—is, “Hey, we’re not going to propose a remedy. We want the judge to find that there’s this constitutional right, find that the defendants have violated it. And then, let the defendants come up with a plan for how they’re going to regulate, using their existing regulatory authority, to remedy that violation. Eric, am I correct? Please. You’re the expert.

 

Eric Grant:  Well, the bait and switch in these cases is that to have Article III standing, the plaintiffs have to have redressability. So at the outset they have to be able to show that the judge has the authority to order a remedy that will remediate their alleged injuries. At the outset they say that, and then later when United States goes to the higher courts, they like to say, “Oh, we don’t have any proposed remedial plans. That’ll just happen at some later stage.”

 

David Bookbinder:  Yeah. I think it’s fraught with all sorts of big constitutional issues here. I think the separation of powers question is an extremely real question. The judge very confidently said, “I am pretty sure I can deal with this.” If it gets to the point where the trial goes forward and she gavels down and says, “Yes, I find that there’s this right, and the government’s violated it,” and then, “What am I supposed to do about it?” I think then it might occur to her that she’s got herself a whole new and interesting set of problems, because what can she order federal agencies to do?

 

And more importantly, more interestingly, in the context of finding a constitutional violation and trying to remedy a constitutional violation, can she cut back on agency discretion? I don't know the answer to that. If I were involved in the case, I’d be doing a lot more thinking about it. I think there’re some really, very difficult questions ahead for Judge Aiken, if she ever gets to the point of trying to figure out what a remedy is.

 

Hon. John K. Bush:  Let’s go to the back. Someone from the back. Oh, do you -- I’m sorry, go ahead, Jim.

 

James Huffman:  I just want to add to this. Maybe it’s more of a point you’d hear from an academic. It seems to me there’s a more fundamental problem implicit in the request that’s been made of the judge. And that is that it’s really asking for the court to recognize an affirmative right, as opposed to a negative right. This issue actually was discussed briefly in the prior session. It was pointed out that some state constitutions have what were described as affirmative rights, meaning that individuals have a right for the government to provide something that they aren’t providing.

 

Now, my understanding, after 47 years of teaching constitutional law at the federal level, at least, in constitutional theory, we’ve always drawn a very strong distinction and clear distinction between negative and affirmative rights for this reason. Negative rights are rights which, in theory at least, can be enforced. You can tell the government to stop doing something it’s doing, and if the government’s willing, it’ll stop. Or the court with make it stop, somehow.

 

Affirmative rights are a whole different can of worms. If you look at a lot of foreign constitutions, they’re everywhere in foreign constitutions. Rights to education. Rights to health care. Rights to a decent level of housing, whatever. Those are rights that really are unenforceable. Even by the by the legislative executive branches, because they’re dependent upon resources being available.

 

As soon as you say one thing is a right and something else isn’t, you’re mandating the way those resources are expended. That is clearly a legislative function. It is not a judicial function. To me, that is at the root of these problems. If you look at the state constitutions that have affirmative protections for environmental rights, very, very few courts have found a way to make those enforceable. To say, “This is a right that we can actually enforce.”

 

Hon. John K. Bush:  How about the one on the left, in the very back? That’s fine. We can go across. [Laughter]. My left is --

 

David Bookbinder:  Your left, my left.

 

Questioner 3:  Good afternoon. Thanks for the panel. The question is this. Since we accept all the premises you have, Mr. Bookbinder, then why wouldn’t your plaintiffs be interested in going after comparatively, India and China in some foreign tort claim against those countries?  Because, if you look at the graph and what's happened since Paris, the U.S. is cutting back in as much ways as it can. India and China seem to be going forward in producing more, and they comparatively would be the worst actors. They would seek remedy in their courts, if you assume Bernoulli’s law, and this is all affecting everybody equally across the globe.

 

David Bookbinder:  I can’t speak for the other lawyers involved in these cases but, again, trying to go to China and suing the Chinese government in Chinese court for climate injuries? That would be, I think, a complete waste of time and not get your clients the economic relief they’re seeking. My clients got to fix the roads. My clients have to deliver water. My clients have to prevent wildfires, and then combat wildfires when they happen. And spending time chasing down foreign governments in foreign courts is not a very profitable way of doing that.

 

It’s interesting. There is an issue that came up earlier in these cases. The Norwegian oil company, Statoil, was originally named in some of these cases. It’s owned by the state of Norway. And the state of Norway, it’s a sovereign entity and has the right to remove to federal court, so they dismissed Statoil out of these cases. So the idea -- even if you can sue foreign governments in an American court, they have a right to remove to federal court, and the plaintiffs believe that these are state court claims and want them heard in state court.

 

Hon. John K. Bush:   Let’s go to the other side. Yeah, the guy in the back.

 

Questioner 4:  Thank you. Mr. Smith said at one point that these aren’t real lawsuits, that they don’t deserve to be thought of as real lawsuits. They’re really public relations campaigns, or part of a public relations campaign and propaganda. I guess I wonder, insofar as that’s true, isn’t this exactly the right thing for that side of the debate to be doing? A public relations campaign to try and get a law passed, I guess, ultimately, by building a public support for their point of view?

 

As a corollary to that I also want to ask, is it giving away the game for the other side, if their response is largely focused on procedural technicalities or remedies and standing redressability, and not the broader substantive case at the heart of the debate?

 

Mark Smith:  Yeah, I think it’s great strategy for the climate change plaintiff’s bar and the people on that side to be doing what they’re doing. I think they’re playing it exactly right. And I think we’re living proof in this room that they’re winning, in one sense. This is the Environmental Law & Property Rights panel of this year’s conference. Rather than talking about, let’s say, advancing and enforcing the takings clause to advance property rights in America, we’re talking about these lawsuits. This is the change in the narrative and the dialogue and the issues being discussed across the country that’s taking place.

 

Rather than talking about "how do we strengthen private property rights," we’re talking about an agenda of environmentalism that’s really, in my view, anti-industrial revolution. So, yes, I think they’re doing exactly what they should be doing. Especially since they’re nominally out of power in Washington, although one wonders how many people at the EPA voted for Donald Trump.

 

Hon. John K. Bush:  Why don’t we go a little bit further in? Maybe the guy in the middle here, who’s got the beard -- Oh, well, you’ve got two beards, so maybe they both get to answer a question, so -- [laughter].

 

Questioner 5:  My beard's longer, so I’ll ask the question. Since IPCC 5 came out -- I think there was a discussion of pre-IPCC 5 litigation with the trucking industry. Is anyone on the panel aware of many instances of depositions or cross-examinations on the issue of the magnitude of climate sensitivity?

 

I had an occasion where the Department of Justice, for some reason, the previous administration, decided to select as an expert a lead author of one of the IPCC chapters. I got to ask him a lot of questions about this, and it was pretty revealing testimony. Why not depose more people and do more cross-examinations on climate sensitivity? The answers seem pretty revealing to me.

 

David Bookbinder:  If and when that testimony is necessary for the cases, then that will happen. You don’t generally start deposing people when you’re dealing with removal and remand and motions to dismiss. That will happen when we get into discovery and experts.

 

Hon. John K. Bush:  Let’s go to the next --

 

Mark Smith:  A simple appellate lawyer. I win, no matter what the facts are. [Laughter].

 

Hon. John K. Bush:  Let’s go to the next bearded questioner.

 

Tony Francois: Thank you, Eric. Tony Francois with Pacific Legal Foundation. I got another couple of questions for Mr. Bookbinder, but these are more like tactical litigation questions.

 

David Bookbinder:  Fire away.

 

Tony Francois:  In your description of your clients’ claims, you talked a little bit about the defendants’ knowledge of the effects of their products, which sounds a little bit like products liability, as well. So I wonder if you could talk about what you think the differences are between a products liability claim and the nuisance claims.

 

Then, the other question I’ve got, if anybody on the panel has information about: are you aware of anybody trying to intervene in these nuisance cases? Arguing that they think they are better off on that basis because of the benefits of industrialization, and that they should be heard, at least, in fashioning a remedy? That would take a different view what the remedy should be from the plaintiffs in those cases.

 

David Bookbinder:  Let me start with the second part. I’m unaware of anyone attempting to intervene in any of the nuisance cases as a defendant. There were two or three trade associations, I believe—and Eric will correct me if I’m wrong—the National Association of Manufacturers and the American Petroleum Institute did intervene as defendants in the Juliana case. When the judge denied the motion to dismiss and said, “We’re going to discovery,” they ran away and dropped out of the case.

 

The first question is the differences between product liability and nuisance? I’m not really an expert on product liability, so what I would tell you, I would not be comfortable discussing product liability law. We brought these as nuisance claims and just did not bring product liability claims.

 

Mark Smith:  But I do understand what you’re asking. You’re essentially saying, “How is this different than, let’s say, the DES litigations that we saw, back in the day, involving that drug?” There they, of course, essentially whacked up liability by market share allocation. Of course, that was a very unique product. They knew the number of it, believed women that took the DES pills. They knew the damages. They knew the market share. They had all that data. That’s a much different situation than we have here, where every single person in this room is literally contributing to climate change by exhaling.

 

Not to mention the California forest fires and the foreign contributions and water vapor. Buddy Menton, over here, of the Manhattan Contrarian blog—which is excellent—will give you a list of another 50,000 contributors to global warming, if you buy into that CO2 causes all this. That’s why, I think, products liability can’t work, because you can’t be that specific with the causes.

 

Hon. John K. Bush:  Why don’t we go over to this side? Maybe here in the front. Over here. Yeah, at the very -- or either one. Okay.

 

Questioner 6:  I’ll try a question for Mr. Grant, to make things a little different. Probably everybody in this room knows about the so-called endangerment finding that the EPA adopted in 2009 at the beginning of the Obama administration for reasons -- again, many people know. I’ve submitted on behalf of clients that petitioned to the EPA to revoke that, but we consider it laughable and invalidated science.

 

But my question to you is, first of all, do you find the endangerment finding constraining you in either these litigations or other environmental litigations that you are defending on behalf of EPA? And what, if any, plans are there to actually inject some real science into this endeavor from the side of EPA or Justice?

 

Eric Grant:  As to the first, the endangerment finding is there, adopted pursuant to the Administrative Procedure Act, and it will remain until it’s changed, pursuant to that same act. We, all the time, deal with duly-enacted rules and regulations that exist and will continue to exist until they’re repealed. Now, whether and when it will be repealed, I don't know. Our clients at EPA have a lot on their plate. If you have a petition pending, I’m sure they’re considering it, and I hope that I won’t have to defend an unreasonable delay claim in that regard.

 

Hon. John K. Bush:   You want to -- ?

 

Questioner 7:  I’m going to return to the pattern and it’s a narrow question, David. I feel like I know you, in the front row, so I’d like to be friendly. You had mentioned that the preemptions questions here would be focused on mobile sources? That those would be the sources where preemption might preempt essentially state-level claims or remedies. Yet you describe litigation where you’re suing oil and gas companies. I wouldn’t say, entirely, and one could argue about natural gas of late, but clearly, the majority, I think, of oil and gas is going to mobile sources.

 

Not to mention that it’s a bit circular, that the communities want this to fix their roads so the mobile sources can run. That does go a little to the question of whether this is -- I don’t mean this demeaningly, but it’s a public relations or public question being answered, as opposed to the question of really great damages that would actually help the communities involved.

 

David Bookbinder:  I think your question is, “Because the Clean Air [Act] preempts separate state tailpipe standards, how does that play into a damage claim based on fossil fuels, which are largely used in vehicles?”

 

The answer is that when Congress preempted states from setting tailpipe standards, it was because they don’t want vehicle manufacturers to have to make 50 different kinds of Chevy Impalas, or 30 different kinds of Chevy Impalas. They want one kind of Chevy Impala, but states are free to decide what kind of fuels go into those cars. As a matter of fact, as I said, California and Oregon both have a low carbon fuel standard, and the oil industry has sued over them, but has made no claim that the state has no authority to adopt these standards.

 

There was one claim saying this particular issue in a Clean Air Act amendment did preempt part of one of the regulations, and the Ninth Circuit shot that down twice. So the answer is, it’s the industrial policy. We don’t want manufacturers to have to make 30 different kinds of Chevy Impalas. But Congress has said states are completely free to regulate the contents of fuels, including how much carbon dioxide they put in the air when burnt.

 

Hon. John K. Bush:   We have time for one more question. Sir, since you’re on the front, I think -- Andy, you will get the last question. Thank you.

 

Andrew Varcoe:  I think it’s only appropriate to ask David a question. [Laughter]

 

David Bookbinder: You guys owe me lunch. [Laughter]

 

Andrew Varcoe:  Two questions. Fresh off your remand and removal briefing. First, could you say a little bit about how—I assume it’s Colorado law—how Colorado law can govern emissions from outside Colorado, or for that matter, outside the United States? And then, relatedly, can you win without imposing liability under Colorado law for non-Colorado emissions?

 

David Bookbinder:  Oh. Yeah. The conduct isn’t what we’re getting at. The conduct isn’t the burning; that’s just a piece of the causal chain. The conduct is the production and marketing, and not disclosing what you knew about the product. The fact that it’s burned elsewhere is just a piece of a causal chain. It’s not part of the conduct that we think is going to be adjudicated in these cases. We don’t need to impose liability on some guy driving a car in Bangladesh. Again, we’re just seeking it from the people who didn’t disclose what they knew about the bad effects of what they were selling.

 

Hon. John K. Bush:   Does anyone else have any final thoughts?

 

James Huffman:  I would just offer people a reference if you want a good catalog of all of this stuff, the Sabin Center for Climate Change at Columbia has what I think is a pretty comprehensive listing of all the nuisance, public trust, all the climate change cases.

 

Hon. John K. Bush:   Well, this has been a fascinating discussion. Please join me in thanking this panel.

 

 

 

11:00 a.m. - 12:30 p.m.
Technology, Social Media and Professional Ethics

2018 National Lawyers Convention

Topics: Professional Responsibility & Legal Education
The Mayflower Hotel - State Room
1127 Connecticut Avenue, NW
Washington, DC 20036

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To what extent can the legal community engage in social media: a critical means to connect and network in the 21st century? To what degree are judges held to higher standards when posting, liking, and retweeting what may be controversial content? In this day and age, when much of America gets its news from social media, the legal community can ill afford to disengage. Justice Don Willett of the Texas Supreme Court, who has been dubbed “the most famous judge on Twitter,” due to his commentary on sports, family, politics, and cultural issues, said he errs on the side of self-censorship: “Usually what goes through my mind before I hit the tweet button is, did I misspell or mis-grammatize anything, but also, is this worth polluting the interwebs with for posterity?”

The possibility of endangering a citizen’s view of their lawyer or an unbiased judiciary seems clear. Critics of the practice argue that a judge should have a more controlled demeanor than is conducive to frequent, polarizing online posting. On the other hand, David Lat, founder of the popular Above the Law blog, has the view that we should be more concerned about what judges and lawyers are writing in their opinions and briefs than online on personal accounts. This panel aims to discuss the tenuous ground on which advocates and judges must tread in the coming years.

  • Prof. Josh Blackman, Associate Professor of Law, South Texas College of Law 
  • Mr. John Browning, Shareholder, Passman & Jones 
  • Hon. Stephen Dillard, Chief Judge, Georgia Court of Appeals 
  • Mr. David Lat, Founder, Above The Law 
  • Moderator: Hon. Don Willett, United States Court of Appeals, Fifth Circuit 

Speakers

Event Transcript

Hon. Barry Anderson:  Good morning, and welcome to the Professional Responsibility & Legal Education Panel on Technology, Social Media, and Professional Ethics.

 

My name is Barry Anderson. I’m an Associate Justice on the Minnesota Supreme Court. I’m filling in for Jack Park who normally handles the introduction of our moderator. I’m going to do that here in just a minute.

 

I first want to thank all of you for attending here today, those of you who’ll be watching the video, and I want to thank our panel for participating. I do have one note that I want to share with you. Those of you who were with us last year and many previous years know that an important member of our committee was Professor Ronald Rotunda. Professor Rotunda passed away this past year—a tremendous loss to all of us.

 

I do want to mention in conjunction with Professor Rotunda’s service that we’re likely to do a teleforum about his career and life. I also want to mention to those of you who can get to the John Marshall presentation this afternoon, you should do so. I certainly recommend Richard Brookhiser’s book on Marshall, but I also want to pass along to you that Professor Rotunda has a book—it’s a little more academic, a little more case oriented—about John Marshall entitled John Marshall and the Cases that United the States of America. That book was published just shortly before he died, and I also recommend it to you.

 

      My principal duties today are to introduce your moderator and then get out of the way, so I will proceed to that task now.

 

Our moderator today will be Judge Don Willett of the Fifth Circuit Court of Appeals. I know him previously as a member of the Texas Supreme Court where he served for over a decade, 12 years in fact.

 

Judge Willett has a distinguished résumé: he served as legal counsel for a Texas attorney general, a Texas governor, a U.S. attorney general, and the president of the United States. His biography notes that he was raised by a widow mom in a double-wide trailer in a town of 32 people. This, incidentally, puts him ahead of the Chief Justice of the Minnesota Supreme Court who always points out that she grew up in a town of 292 people. So that’s about what, less than 10 percent, something like that?

 

But he has a distinguished career as an author and speaks frequently throughout the country. I do want to note his academic career. He earned a triple major from Baylor University and then went to Duke University and liked it so much he wouldn’t leave. He earned three degrees there:  a juris doctor, an MA in political science, and an LLM in judicial studies. He has clerked for Judge Jerre Williams on U.S. Court of Appeals for the Fifth Circuit and practiced law before entering public service. Distinguished career in public service, and I am delighted to introduce to you Judge Don Willett.

 

Hon. Don Willett:  Thank you. Your Honor, thanks for the gracious introduction. Thank you everybody. I’m thrilled to moderate this impeccably dressed panel on technology, social media, and professional ethics.

 

      I read an article last week that opened this way: “If you want to become a miserable partisan who spends more time being angry at people you’ve never met than enjoying the company of friends, neighbors, and loved ones, then Twitter is the place for you.” [Laughter]

 

      Today’s all-star panel will discuss the legal community as an online community. We inhabit a wired world. Twitter processes a billion tweets every 48 hours, half of those from this panel. [Laughter] There are more than two billion people on Facebook; there are 800 million users on Instagram and Snapchat. So for lawyers in 2018, technology’s impossible to ignore; it’s ubiquitous. And more and more Americans get their news from, and view the world through, social media. But lawyering and judging in the digital age is rife with ethical minefields.

 

      So what are the rules of engagement for the legal community when it comes to social media? And our panelists today will discuss the promise and the perils of technology and social media for lawyers and courts and judges. Each speaker will, if all goes according to plan, speak for about eight minutes, roughly, and then we’ll have some spirited, lively, cross-panel debate. And then we’ll wrap up with some speeches from the audience. [Laughter] Sorry! We’ll wrap up with some very tweet-length questions from the audience in one of our two microphones.

 

      So batting leadoff, to my immediate left, is John Browning a.k.a. @therealjohnbrow. You can see all of our Twitter handles are at the bottom of our name cards. John is my sometimes co‑presenter and coauthor in his non -- so by day, he’s a litigation partner in Dallas handling virtually every type of matter and virtually every type of court. But in his non-billable time, he moonlights as perhaps the nation’s—strike the perhaps—the nation’s leading published authority on social media and the law.

 

He’s written countless books and articles on the topic with more forthcoming, including some stuff with me, I hope. He’s probably the nation’s most sought-after speaker on lawyers’ use of technology and social media. He’s written more than 25 law review articles, many of them award winning. He’s probably the most quoted authority in America on this topic by major national press, both print and TV, and at legal symposia all over the country.

 

So bottom line, John is the singular authority on this stuff but, strangely, he doesn’t tweet much himself. @therealjohnbrow has tweeted only 31 times, the last time on the day I was nominated, a year ago, a date which will live in infamy. [Laughter] In fact, someone tweeted last week, “John Browning needs to be on Twitter. He’s hilarious.”

 

So John is a former varsity tennis player and a teaching pro. And my favorite all-time fact about John is that he won the gold medal in men’s singles at the 2000 Clydesdale World Games in Mexico City. It’s an international competition for athletes 200 pounds and over.

 

[Shows slide] Whoop, wrong one.

 

[Another slide shown] Wrong one. [Laughter]

 

[Another slide shown] There we go! Look on the right, there’s John and his doubles partner. [Laughter] And he did this one week after undergoing emergency appendectomy surgery. That’s incredible.

 

So John’s going to focus on how today’s practice environment makes it essential for lawyers to maintain tech competency, including being fluent in social media.

 

Next will be, as we go down the table, David Lat a.k.a. @DavidLat. David is editor-at-large and founding editor of Above the Law, but he first gained notoriety as the mysterious ghost blogger at Underneath Their Robes, an irreverent and, I’ve got to say, must-read blog about federal judges. David was leading a double life. So by day he was a hard-nosed AUSA, and he was a blog world sensation by night. He’s also served time as a big law associate in Manhattan and a law clerk to the legendary Judge O’Scannlain on the Ninth Circuit.

 

David grew up down the street from President Richard Nixon, who would give him candy. Right?

 

David Lat:  That’s right.

 

Hon. Don Willett:  That’s right!

 

Graduate of Harvard College and Yale Law School and a few years ago published his first novel, the much-buzzed about Supreme Ambitions. Last year, David and his husband Zach welcomed into the world . . . you saw it earlier . . . [slide of Judge Dillard and a bulldog] That’s not David! [Laughter]

 

[Picture of David and a little boy shown] Yeah, there we go! David! He welcomed into the world Judge Dillard! [Laughter] Into the world, Harlan. This is Harlan, everyone! Yes, named after the justices—plural? Or the great dissenter?

 

David Lat:  It’s a matter of dispute, but I’ll explain later.

 

Hon. Don Willett:  He doesn’t look like a great dissenter to me. Looks like he’s a rhino --

 

David Lat:  -- He’s just warming up.

 

Hon. Don Willett:  So welcomed into the world Harlan.

 

Unknown speaker:  The kid’s a rhino, huh?

 

Hon. Don Willett:  So at—the kid is a rhino. So at that time . . .

 

[CROSSTALK then laughter]

 

David Lat:  He’s an elephant next year.

 

Hon. Don Willett:  This is going to be a lively panel.

 

      So when Harlan came along, David stepped away as managing editor of Above the Law, moved into a more flexible role of editor-at-large, and he wants to make it clear that this means he no longer has responsibility for any Above the Law stories except the ones that he authors personally. And he dissents, respectfully but fervently, for many of the stories that now appear on Above the Law.

 

      So after John’s words of caution, David will outline the benefits of social media and speak about the evolution of online media generally.

 

      Next, Chief Judge Stephen Dillard a.k.a. @JudgeDillard. Stephen has served on the Georgia Court of Appeals for eight years and the last year or so as chief judge. He’s a proud member of the so-called Manion Mafia, having clerked for Judge [Daniel] Manion on the [Seventh] Circuit, and he was an appellate specialist in private practice for many years before assuming the bench.

 

      Chief Judge Dillard and I met—this will shock many of you—on Twitter. And he has since become a dear, dear friend, and he speaks and writes frequently and eloquently across the country on a range of topics, including the judicial use of social media. And it’s true that more and more judges are becoming more adept, more prolific, using social media in their personal and professional lives to stay connected and to stay elected. And as his 15,000 followers can tell you, Chief Judge Dillard is living proof that a judge can engage online with surpassing civility and good humor with a healthy dose of civic education to boot. And I think every day his online activity underscores rather than undermines public confidence in the judiciary and public understanding of the judiciary.

 

So as he puts it, judges are public servants. They are accountable to the people, and they need to be accessible to the people. Chief Judge Dillard is president of the Alumni Association at Samford University. He’s wearing a Samford University Bulldog bow tie—not a Georgia Bulldog bow tie.

 

He was recently named alumnus of the year, and he can frequently be seen prowling the sidelines—where is it? [Looking at slide]

 

That’s not David! [Another slide shown] There he is! Prowling the sidelines at Samford Bulldog football games.

 

So Chief Judge Dillard’s going to focus his remarks along the lines of a really exceptional article he published recently in Judicature, the scholarly journal for judges, about the benefits of judges engaging with citizens that they serve on the social media platforms that people use every day and educating folks about the important role the judiciary plays in their lives.

 

And then finally, batting cleanup is Professor Josh M. Blackman of the South Texas
College of Law Houston, who borrowed one of my bow ties today—he doesn’t own one --

 

Prof. Josh Blackman:  -- He made it for me.

 

Hon. Don Willett:  He’s got an official FedSoc bow tie.

 

      I met Josh about a decade ago when he was a law student, and today he is a highly caffeinated scholar whose office looks like NASA mission control. Let me show you the picture.

 

[Picture shown] Look at that! That’s his home office! He’s got seven screens, count them.

 

Josh writes about everything. He speaks everywhere. And he tweets about, well, he tweets all the time about every topic under the sun. He ranks among the most prolific law professors on planet Earth.

 

So Josh is barely 30 years old, but he hosts one of the top legal blogs in America. He’s authored more than four dozen law review articles, a couple of critically acclaimed books. He publishes commentary in most every major national legal publication. He’s a five-tool professor. He blogs. He tweets. He teaches. He writes. He speaks. And Josh is going to bat cleanup and be something of a gap filler today.

 

So depending on how the conversation unfolds, he may cover—he’s going to wing it—he may cover how courts can use social media more effectively. He may cover how profs and scholars can use it more effectively, or he may cover how the press covers the courts through social media.

 

So with that introduction, I’ll turn it over to John Browning. Take it away.

 

John Browning:  All right. Well I am wearing a bow tie for the very first time at Judge Willett’s behest, so this is not a regular part of my wardrobe, but --

 

Hon. Don Willett:  -- If you can’t see it --

 

John Browning:  -- I’m thinking it’s actually going to be a regular part of it.

 

Hon. Don Willett:  Can you all see it on the screen? Star Wars bow tie.

 

John Browning: To go with these Star Wars cuff links because I fly my geek flag pretty proudly. [Laughter]

 

      So I guess I’m supposed to be the sayer of doom and gloom and caution our audience about that, but let me begin by acknowledging, as Judge Willett pointed out, that we are practicing in a very different environment now for lawyers. Not just the fact that the ubiquitousness of social media with 293,000 status updates posted every 60 seconds and 6,000 tweets every second—many of which may originate from somewhere else in D.C. as well as this panel—but we have got a very different practice environment than many of us who are a little more gray-haired like myself started practicing it. But the other reason, besides the fact that social media is so all pervasive, is that we are now being held to a higher standard as lawyers.

 

      In 2012, the ABA passed a change to Model Rule of Professional Conduct 1.1 on what constitutes competent representation. And now 33 states have adopted that change. Texas is about to become state number 34, and it imposes a requirement on lawyers to not just keep up with the latest developments in one’s area of practice, but also to be conversant in the benefits and risks of relevant technology. Now what does that mean?

 

      Well, it depends on your practice, but it certainly means if you’re handling litigation involving e-discovery, you should be either conversant in the use of e-discovery software, hire an outside vendor who is going to do that in a competent manner, have someone on your staff to do it, or not take the engagement. The big Wells Fargo data breach occurred, in part, because of a lawyer handling a fairly routine defamation case who didn’t understand how to use the e-discovery software.

 

      This is just one example of many I could give you of a lack of tech competence that has led to this. So it’s not just the fact that social media is inescapable, but it’s also the fact that we are practicing in very different times where we are under expectations of maintaining appropriate cybersecurity measures. The ABA just released a formal ethics opinion on that effect and numerous jurisdictions have addressed this as well. We are under higher expectations in terms of protecting our clients’ confidences through the use of technology, such as using encryption with email and also using social media in a responsible and ethical manner.

 

      So let me see if we can actually advance the slides. I’m wondering if I’m just not pointing it at the right thing here—maybe up at the ceiling. Ah, here we go. [Slide shown]

 

      All right, so you don’t need to be a member of the Geek Squad, but you also can’t be the proverbial caveman lawyer from the old Saturday Night Live sketch confounded by the strange box of noise and light that most of us refer to as the computer.

 

      [Next slide] Just to give you a little bit of a taste of kind of a rogue’s gallery of incidents of maybe not living up to professional standards, you probably—after winning a courtroom victory like this criminal defense lawyer in Wisconsin—you probably don’t want to take that victory selfie in the courtroom before the judge even leaves and then post it on Facebook because guess what? The guy in the black robes with the gavel will not be clicking “like” okay? [Laughter] He will, however, issue a show-cause order for you to come back and explain yourself.

 

      [Next slide] Probably the best way to react to a major seizure of drugs and weapons if you’re a young assistant prosecutor is not to pose for a selfie with one of the sheriff’s deputies involved in the seizure with some of the weapons that were seized and caption it “You should take the plea.” [Laughter]   Your bosses may not find that consistent with proper evidence room protocol. Go figure. [Laughter]

 

      [Next slide] And this is actually a lawyer from Chicago who was in a federal courtroom and— he’s actually a securities litigator, he wasn’t there on one of his own cases—but he was blogging about a big securities fraud trial. And he happened to be tweeting from the courtroom, including tweeting—I think there were about nine tweets total—of some of the evidence, some of the exhibits, that hadn’t even been admitted yet. There was a very helpful FBI agent in the courtroom, who very helpfully pointed out the big sign of Federal Rule of Criminal Procedure 53 saying no broadcasting, photography, or recording allowed. And he very helpfully escorted that lawyer to the judge for a show-cause hearing and a $5,000 fine, 40 hours of community service, and one mandatory CLE seminar on social media and legal ethics.

 

Is he here, by the way? [Laughter] I’m not sure if he’s ever satisfied it, but that’s what was the sentence from the court, who was not very amused at that.

 

      [Next slide] Okay, now we all know it’s important that we adequately communicate with our clients, right? And this gentleman, Curtis Jackson [III] a.k.a. 50 Cent or, as some of you folks may know him, “Fiddy.” [Laughter]

 

Fiddy had—well, you know, that’s how I roll. [Laughter] So 50 Cent had a multimillion-dollar judgment entered against him, and he did what many people do when multimillion-dollar judgments are entered against them: they file for bankruptcy protection. But somewhere along the line, the fundamental underlying principle behind bankruptcy law was not fully communicated between 50 Cent’s lawyers and him: the idea that you cannot pay your creditors because you do not have the money to pay your creditors. [Laughter]

 

And so 50 Cent was posting on Instagram, very prolifically, photos like this, and I believe the correct hip-hop vernacular—and correct me if I’m wrong, Judge Willett—but I believe it’s “fat stacks of cash, yo” [Laughter]—was posting all of these which led to the folks on the other side, the creditors’ lawyers, questioning whether or not his bankruptcy petition was valid or not, and that led to another show-cause hearing. Although one of the photos I could not save, because it was deleted too quickly, was 50 Cent in the federal courthouse itself holding up "fat stacks of cash, yo." And that did not amuse the federal judge very much either. I think he learned a lesson about that.

 

[Next slide] This is -- again, sometimes lawyers forget the fact that these social media platforms are very public. I published an article earlier this year called “Taking the Heat for a Tweet,” which pointed out while you may have a first amendment right to air your views, there are going to be consequences.

 

This lawyer from the Austin, Texas, area was not happy with a cabinet member’s decision to revise certain Obama-administration-era guidelines on handling campus sexual assault investigations. And so he tweeted that he would be okay if that particular individual were sexually assaulted. Wishing sexual violence on anyone is really not a good career move to say the least. He wound up parting ways with his law firm almost immediately thereafter.

 

So [a] very difficult sort of thing when you venture [Next slide] as this individual, who was a senior in-house counsel with CBS. She posted on Facebook shortly after the tragic Las Vegas mass shootings that she actually had no sympathy for the victims because it was a country music concert, and country music fans were just a bunch of, as she put it, “republican gun toters.” CBS fired her immediately and issued a statement indicating that her comments on Facebook were not consistent with their values.

 

[Next slide] And then there was a prosecutor from Orlando. This was actually not his first questionable Facebook post. He actually posted this before he posted about the Orlando nightclub shootings, and that was the one that actually got him fired. And, again, he was doing this and made no distinction between his work as an individual or his views as an individual and his status as a prosecutor.

 

And every time I talk to audiences of lawyers, I hear lawyers say, “Well, John, I’m a boring transactional lawyer. I’m a boring tax lawyer.” That’s actually redundant. [Laughter] “I’m a boring appellate lawyer, so I don’t need to worry about this stuff. That’s the litigators who get in that kind of trouble.”

 

No, it’s not. Boring appellate lawyers do too. [Next slide] This was a staff attorney for the Kansas Court of Appeals, and she took great delight in the fact that a former attorney general from that state was actually in the midst of a disciplinary hearing before the Kansas Supreme Court. She didn’t agree with him politically, and so she live-tweeted his disciplinary proceeding, and a number of the things that she tweeted were not very appropriate, and she wound up being—those came to light, and she was fired from her job. And perhaps in the most ironic twist—and it’s actually kind of funny that her Twitter profile picture was her going “shh” because she should have taken her own advice—she actually wound up on the receiving end of a disciplinary proceeding herself. So what goes around comes around.

 

[Next slide] And, of course, we have to have some mention of the fact that there are a growing number of judges who are active on social media, including the gentleman to my right.

 

Now there are dos and don’ts if you are a judge on social media. Don’t be like the former Ohio supreme court justice who responded to the #MeToo Movement while he was running for governor of Ohio by going on Facebook and boasting about your sexual conquests in great detail. Not a good idea. And by the way, he placed a distant fourth in his democratic primary.

 

But do be like one of the gold standards like Judge Dillard or Judge Willett and post things that obviously don’t involve commentary on cases or parties but, in this case, a humorous tweet: Don’t consult a Dove wrapper for oral argument advice: “Ignore the clock.”

 

With that, I think that kind of gives you an overview of some of the danger areas, and we’ll talk more about that as the panel progresses.

 

Hon. Don Willett:  John, thanks so much. David, take it away.

 

David Lat:  Thank you. Can everyone hear me, including at the back? Okay, great.

 

      John is a tough act to follow. Judge Willett, thank you so much for putting together this panel. I have to confess, because of your years of great tweeting as the Tweeter Laureate of Texas and as a member of the Texas Supreme Court, you’ll always be, in some ways, Justice Willett to me, and perhaps you’ll be Justice Willett again.

 

      I must also thank Judge Willett for forcing me, a 40-something-year-old man, to learn how to tie a bow tie. I have spent several hours on YouTube this week and about a half hour on YouTube this morning, and I still needed a tune up from Chief Judge Dillard, but I think I now have a reasonable facsimile of a bow tie.

 

      So it’s great to see such a large crowd here for our Saturday morning panel. I know my co‑panelists are a great draw, but I also know that we had you at ethics credit. [Laughter] And I have to say it is an honor to be on this stage at The Federalist Society National Lawyers Convention. As a right-of-center legal nerd, this has definitely been a bucket list item, and so it is really a thrill to be here.

 

      As Judge Willett mentioned, before I started Above the Law, I had a blog called Underneath Their Robes, which was irreverent, occasionally snarky about members of the federal judiciary while I was working as a federal prosecutor, and you can read about the whole saga online. But in many ways, I’m like the former felon who now goes to schools and says, “Here’s what you should not do.” [Laughter] So there’s that. But me and my story all worked out in the end. I found new gainful employment in a different industry, but others may not be so fortunate.

 

      And I have to say, I have been writing about this conference dating back to Underneath Their Robes. I wrote a post about the 2005 Convention, which you can still find online called “Robing Room Report: Federalist Fiesta Edition” where I gave out awards for things like the funniest panelist—that was John Yoo—prom queen and king, and, of course, I had to recognize the wife of my former boss, she’s right here, Mrs. Maura Nolan O’Scannlain, as best-dressed judicial spouse. [Laughter and applause]

 

      So as a blogger, I’ve actually been involved in the social media world really dating back to 2004, and actually Chief Judge Dillard, too, was a former blogger. Blogging is really one of the earliest forms of social media, and services like Facebook and Twitter were initially called microblogs. Now given the lengthy screeds that people post on both services, the micro is probably no longer applicable, but you can still get the sense of the DNA of Facebook and Twitter and LinkedIn or other services in the traditional blogs, which are still, of course, very much alive and well.

 

      So why am I here on this panel? After John put the fear of God in you by offering you a lot of cautionary tales and, of course, you can read about my own online as I mentioned, I’m here to really tell you that technology and social media are your friends. Or at the very least, they can be used in ways that advance your career rather than destroy it.

 

      So I’m going to make three quick points, and we want to leave a lot of time for questions because social media, of course, is all about social interaction, and so it wouldn’t be very fitting for us to sit here and lecture you for 90 minutes.

 

      So point number one: social media is really nothing to be afraid of. Lawyers can sometimes be Luddites or technophobes. A lot of us went to law school because we were not STEM people, but we’re still interested in gainful employment. I’m a former English major myself, and so for many lawyers, social media and technology in general can be exotic and even scary. And cautionary tales like the ones that John shared might reinforce this view.

 

      But at the end of the day, social media and technology are just like any other tools available to lawyers. They can be used wisely or unwisely; they can be used ethically or unethically. They are really just what you make of them. So this is why the American Bar Association’s duty of technology competence, which John mentioned, adopted by 33 states—I had 32 in my notes, but John just updated me—is actually, as a technical matter, in a comment to the existing rule of technology competence, rather than a new rule itself. What the ABA is basically saying is your existing duty of rendering competent representation to your clients includes a duty to keep abreast of relevant developments in the law and its practice, including the benefits and risks associated with new technology.

 

      So in many ways, you can think of this as—to make this more interesting to the FedSoc crowd—something analogous to constitutional law. Where here at The Federalist Society we do not believe in a living, breathing StairMastering constitution, so the rules stay the same, but their application to different forms of technology will, of course, constantly arise.

 

      So for example, we have the Fourth Amendment, and the rules and principles of that Amendment are fixed, but how it applies to GPS, how it applies to cell phone searches, that, of course, will evolve and change as the technology also evolves and changes.

 

      So in the final analysis, the responsible use of social media is really just about exercising good judgment. I think the examples that John pointed out in many ways could have been avoided by just a modicum of common sense or not exercising bad judgment. And so if you are a lawyer and you are exercising judgment and providing advice to your clients for a living, after exercising judgment in this form, you shouldn’t be afraid of exercising it on social media as well.

 

      So point number two: social media—everybody’s doing it. Now, of course, when you said this to your mom as a kid and wanted to get permission to do something and she said, “Well, if everyone jumped off a bridge, would you?”

 

Well, if you’re a lawyer or law firm, yes! [Laughter] This is a profession very much focused on, obsessed with, precedent. It’s a profession where peer pressure exerts a very strong pull. This is why, when one major law firm raises salaries, pretty much everyone else falls in line as we breathlessly report on Above the Law. And so, I think it will be, perhaps, persuasive to those of you who are more resistant to social media to learn about how many of your peers are actually actively involved and engaged with it.

 

So a survey by the ABA last year found that 81 percent of lawyers use social media for professional purposes. 77 percent of these lawyers reported that their law firms had some kind of social media presence.

 

What do lawyers use social media for? The top purposes are career development and networking, so pretty much more than 90 percent of lawyers have LinkedIn profiles. Second, client development; third, education and general awareness; and fourth, case investigation.

 

And social media does bring benefits to lawyers. Of the lawyers using social media, 27 percent reported that they had actually obtained clients from their use of social media. Now, of course, this will vary depending on your practice. If you have a very consumer-focused practice, you will get more work out of social media. If you are at an Am Law 100 firm representing large companies, you probably aren’t going to be landing that billion-dollar securities class action defense from Facebook.

 

But on the other hand, I will note that I’ve seen—perhaps just because of my connections to the vast right-wing conspiracy—I’ve seen a fair number of general counsel of publicly traded large companies on Facebook. They might be posting about their pets or their kids, but if you interact with them on Facebook, in a way, you’re keeping yourself top of mind. And even the ways of retaining outside counsel are getting more professionalized and also more bureaucratic. Sometimes, whether you get an engagement is just whether the GC or deputy or associate GC happens to remember you, and if you are engaging with them on social media, even on a platform not explicitly professional like Facebook, that can often be an advantage.

 

So here’s my third and final point, which is if you’re not using social media or if you’re at least not cognizant of it or don’t understand its nuances, you could actually be violating your ethical duties. As noted by John, there is this widely adopted comment to the ABA model rule of competence that makes this clear, and you can find a whole host of specific examples where lawyers’ aversion to technology or to social media actually got them into trouble.

 

So for example in a 2010 case, Johnson v. McCullough, the Missouri Supreme Court held that lawyers actually have an affirmative duty to research perspective jurors online. Now, this is actually one of the emerging issues in social media for lawyers, the extent to which you can turn to social media in the voir dire process, so you should check the rules of your own jurisdiction. Your mileage may vary.

 

But I think the principle of this Missouri case is pretty straightforward. Sometimes in order to serve your client well, to litigate and investigate a case properly, you will have to go on and use social media whether you are a technophobe or not. We’ve all, of course, heard of cases whether some personal injury plaintiff who claims some terrible, life-altering injury is then busted on Facebook because they are water skiing. There are certainly cases like that.

 

Use of social media is very widespread in the family law context where Facebook and other platforms are used to establish relationships, licit or illicit. And of course, social media is also very relevant in the criminal law context. There are a lot of prosecutors here, and many of you are probably using social media to research your cases and sometimes, of course, law enforcement will use social media for sting operations, so it’s very relevant.

 

And it’s also relevant to defense counsel, which it could be relevant in terms of mounting a defense for your client. So for example, in the case of Kennedy v. Adams, a Ninth Circuit case, but bear with me. [Laughter] The court held that a failure to investigate the social media recantation of an allegation by an alleged victim of a sexual abuse constituted inadequate assistance of counsel.

 

Now, this case actually ended up being the subject of some en banc activity and my former boss sought to have it reheard en banc, but for a totally separate issue related to the standards for habeas review, the core holding of that case, or the holding of the case related to social media, and the duty of lawyers to use it as an investigative tool, really is not altered by the rest of the aspects of that case.

 

So Judge Willett also said that I would talk briefly about the evolution of online media, which I expect we’ll talk about a lot in the Q&A as well. And I guess I would just have three quick observations on that.

 

One, as we all know, and as Judge Willett demonstrated by mentioning some statistics, the world of online media has just grown so rapidly in the past decade or so. Certainly, it has exploded since the time that I first started blogging back in 2004. So it’s grown in terms of usage; everyone uses social media practically. My mother—I will not reveal her age; she would kill me—is very active on Facebook, for instance. There are just many wonderful uses of social media, and it is not just lawyers but your clients too who are using social media.

 

The second thing I would say is social media and online media have grown as businesses as well. Facebook, Twitter are multibillion-dollar companies. Facebook is one of the largest companies in the world. And even small operations like Above the Law are now, of course, gaining economic traction. Above the Law, I should mention, is owned by a company called Breaking Media. Breaking Media publishes about a half dozen different websites focused on different industries. In terms of Above the Law, we have seven-figure revenues; we have about a dozen people who work full time on it, health insurance, everything.

 

So online media, whether you’re Facebook or whether you’re us, is now a viable way of making a living. Back when I first entered this business, you could probably number in the dozens the number of people in the country who were actually making a living as bloggers or as social media folks. And now, of course, even law firms will hire people who handle their social media essentially. It is something that is quite imperative for both lawyers and law firms.

 

And the third and final point I would mention, which Judge Willett alluded to at the start, and this is perhaps a more depressing aspect of it. So I’ve talked about how social media has grown in size, and it’s grown as a business. I would say also it has grown in vitriol. I think the polarization that we’ve seen on social media, I’ve noticed it just as an active user of Facebook, Twitter. The types of confrontations and arguments, name-calling that you’ll see, they’re all very unfortunate. And I think for those of us who’ve been using social media with great enthusiasm and joy for many years, recent developments have tainted that a little bit. You can locate blame for this on a lot of fronts and on both sides certainly, but I think it is an unfortunate development that we do have to grapple with.

 

So the final piece of advice I would offer is just social media is a wonderful thing, but it is also possible to have too much of a good thing. Don’t be afraid to occasionally log off. I just returned to Twitter after a multiweek hiatus, and I think sometimes stepping away from the computer and stepping away from social media can actually be very salutary for your mental health.

 

So with that, I thank you for your attention, and I look forward to interacting with you online and off.

 

Hon. Don Willett:  David, thank you so much. Chief Judge Dillard.

 

Hon. Stephen Dillard:  All right, well, it’s appropriate that I’m here with David. We go way back, and like David, this is a bucket list item for me to be speaking on a Federalist Society panel. I like to tell people; I like to brag; I’ve been involved with the Federalist Society since 1993. That doesn’t make me one of the original gangsters, but it certainly means I like to say that I’m like after the apostles. I’m like that first generation after the apostles in terms of FedSoc lineage.

 

      So I’ll also say something funny. Somebody came up to me and said—gosh, the one thing people like to tell me, and I don’t want to take it as an insult—they’re like, “Gosh, we really miss Judge Willett on Twitter. Man, he was . . .” and he is. He was an amazing presence. And they said, “But you’re doing a nice job of filling his shoes.” [Laughter] And I said, “Well, maybe one shoe, but not both.” I mean, I don’t think we can ever replace Judge Willett. He will always, to me, be the judicial Twitter king, so we hope to have you back soon.0

 

      All of that said, so what I want to talk about today is social media as a means of how we communicate as a society and whether or not judges ought to be involved in that. Now judges ostensibly at least, are supposed to be experts in language and in communication, yet when we look at state bars and their reactions to social media and some of the judges that I’ve talked to at these seminars when I’ve spoken throughout the country, there is a lot of—and I think David pointed this out—there is a lot of resistance to change. There is a lot of resistance to technology.

 

      I have a former colleague of mine, who has since retired, who had a computer in his office and he never used it. He was a great judge, but it does seem odd to me that there is this resistance by the legal profession to engage in modern forms of technology and communication. And if you doubt that, David did a very nice job of explaining that social media platforms and technology and how—I just turned 49—in my lifetime, how we communicate with one another has dramatically changed. And if you are not on a social—if you don’t understand as a judge, social media, or how it works, or how any aspect of—I’m not sure how you do your job effectively. David once again did a nice job of explaining many of the different ways that technology and social media come up in cases.

 

And if you doubt that—now I have two teenage daughters. My middle child Lindley has taught me a lot about how teenagers communicate. They really don’t use text messaging much. They really don’t use Facebook a whole lot. They really think Twitter is for old people as well. And my daughter uses, and her friends use, Snapchat as text messaging, but they take photos, selfies, and put a message. And if you’ve never seen this happen in real time, it is remarkable how fast they’re communicating and taking photos. I’ve never seen anything like it.

 

They also use Instagram and have running commentaries on Instagram throughout the day. And it’s like some sort of the old AOL chat rooms, I’m not real sure.

 

But what it shows you is that—and it may very well be—that in five years from now that Twitter is gone by the wayside or is not as prominent or Facebook, but there are going to be new platforms. This form of digital communication is not going away and judges, in my mind, we have to understand this in order to effectively represent the people.

 

And we are public servants. I say this repeatedly. Judge Willett pointed out my article. Judges are public servants; we have to be connected to the people we serve. We have to be accessible; we have to be transparent. And I think voters are increasingly expecting that the people that serve them will communicate with them in ways that they actually use, right? Gone are the days when judges, I think, could just go to the Rotary club and give a speech. I think those things are still effective, and I think—I can’t remember who said it, but was it—who said the iPhone to iPhone? Who made that remark yesterday?

 

David Lat:  Senator Lee, I think?

 

Hon. Stephen Dillard:  Yeah, Senator Lee made that remark. And he’s right. Nothing replaces talking to somebody in person. But you have to understand that a lot of people are talking iPhone to iPhone. People talk about their pocket friends, right? On their phone. And so you need to understand that you’re not going to be effectively communicat[ing] in society if you are not involved in social media. And once again, I think voters expect that.

 

Social media platforms, especially for people -- I’m going to sever off here state-elected judges and federal judges for a moment. In terms of your ability to -- Down-ballot races – social media is really one of the only ways that you’re going to be able to get your message out. And so I think it’s important for people -- And Judge Willett, once again, the leader in all of this. I think he said it’s political malpractice if you are a state-elected official to not use it, and that applies to judges as well.

 

      So judges are our public servants, and I think the time is coming when the people we serve are not going to be content with us to sit up in our ivory towers in our robes, our black robe philosopher. Judges are different, but they are not special. Let me say that again. Judges are different. We’re not special. Here’s what I mean by that: judges are different because we should never be politically partisan. We should not do anything where anybody that we serve ever has a doubt about whether they’re going to get a fair shake if they come before us.

 

      But just because we wear black robes doesn’t mean that gives us a free pass to remain cloistered, like monks, away from society. When I was coming up and I would meet a judge at an event, spending a few minutes with them was really amazing, just to be able to get that advice. And so social media has been transformative in allowing law students and citizens to have access to the people that serve them.

 

And as I repeatedly say, we can’t lose sight of the fact that judges are public servants, and they need to be accountable to the people. So I think now’s the time for judges to embrace social media platforms. I think federal judges should as well, but state judges, especially, are directly accountable to the people. We have to stand for election, and so I think it’s important to embrace the technology that the people that we serve, and not only embrace it, but to understand it.

 

      Let me give you a couple reasons why I decided to embrace social media platforms as a judge.

 

 Number one, I use it to educate the public about the Court of Appeals of Georgia. Now you can say, “Steve, really? Who’s interested in the state intermediate appellate court in Georgia?”

 

      Well, okay, there are some nerds, though—they’re my people—and they are interested.
So I did some things. I wrote an article for Mercer Law Review, which is a more traditional means of communicating about the inner workings and culture of the Court of Appeals, but I repeatedly promote it online. Now how many people that aren’t lawyers have read it? I’m not sure, but it’s out there and that’s important. Transparency doesn’t mean that people will always use the information that you’re giving them, but I think for a free society, it’s important to be transparent. I promote the livestreaming of our court’s oral arguments --

 

[Applause by Prof. Josh Blackman]

 

Prof. Josh Blackman:  Thank you.

 

Hon. Stephen Dillard: Thank you. [Indicates Prof. Blackman] He watches. [Laughter]

 

      I confess and I give a lot of credit to the Supreme Court of Georgia which was livestreaming long before it was cool. When I came on to the court, the first thing I said was, “Why aren’t we livestreaming?” We’re in Atlanta. Georgia is a massive state; our lawyers in Bainbridge shouldn’t have to drive all the way up to Atlanta to watch oral argument. I shouldn’t as a lawyer, when I was in Macon, have to drive all the way up to Atlanta. The people of Georgia -- we are statewide officials in Georgia, which means we’re not in districts, we are statewide. And that means, I think, that the people of Georgia, if they want to, ought to have the right to watch our oral arguments online.

 

      So I will tell you there was a lot of resistance by some of my older colleagues to that. It took me five years—I got on in 2010—it took me over five years, and I think it was the fall of 2016, we started livestreaming and we have archives. And I commend you to our website. It’s gaappeals.us. I hate that domain, but that’s it. So go to it, watch those oral arguments, and I think that’s an important part of transparency.

 

      There’s other things that you can do as a judge to educate the public about what we do, and this is going to dovetail into professionalism. But one of the things I use my account for is to promote professionalism in appellate practice. I’ve had Q&As. I give oral argument tips. I retweet. John Roberts has given out some really fascinating and interesting advice about how he used to prepare for oral arguments. We have legal writing tips.

 

There is an entire culture on Twitter, a hashtag called #appellatetwitter. And the whole purpose of #appellatetwitter is really about professionalism and networking and appellate lawyers getting together, and it’s really remarkable to see this community develop. They’ll go and have an argument in town, and someone they’ve never met in real life that they met on Twitter who they now respect because of their interactions, they’ll get together, they’ll have lunch. I’ve seen people ask questions and say, “Hey, I’ve never filed in this court before, how do I do this?” Or “What would you recommend?”

 

      We talk about the vitriol on Twitter. What we don’t talk about are some of the really, kind of the oasis of sanity in some aspects of Twitter where real relationships are being developed, professional is being promoted. I don’t think that demeans my role as a judge to participate in that community and talk generally and advocate for professionalism in appellate practice and in general.

 

      One of the most rewarding and remarkable things about being on Twitter that I never would've known -- could’ve expected is that it is a vehicle that I’m able to use to mentor law students and young lawyers. That has been very satisfying. People can ask me questions, ask for oral argument tips, legal writing tips, clerkship advice. I frequently have people who will send me messages, what we call direct messages, on Twitter, and they’ll say, “Judge Dillard, I noticed that you went back and clerked after five years in practice.” I had somebody—this is recent—said, “I’m thinking about doing that. Would you mind talking to me?” Sure. Gave them my cell number. I’m in my car a lot commuting back and forth from Macon to Atlanta.

 

And I do that because my view—I remember how important and meaningful it was when judges, just in those small moments at the Rotary club or the bar events, would take a few minutes to talk to me and give me advice. Now I can do that in a remarkable way on a much broader scale. I can respond to someone’s direct message in a few seconds and say, “Call this person” or “Look at this website” or “Check this out.” That has been so rewarding, and as much as I love being a judge and writing opinions, I think the greatest legacy I will ever have as a judge is investing in people and mentoring. I think lawyers ought to do it and public officials ought to do it, and I think Twitter is an amazing platform to be able to do that—not just the lawyers in Georgia, law students in Georgia, but people all over the United States, and even abroad. I’ve had people that are interested in coming and studying law in America, and I point them in the right direction. I have no idea how to do all that, but I try to point those folks.

 

Both David and Don pointed this out: we live in divided times. There’s a lot of vitriol and I, for those of you who follow me on Twitter, I try to promote civility. I try to promote -- I think it’s important to promote that and civics. Those to me are kind of first principles of American life. I don’t think that should be something that’s controversial. I think having the position I have gives me a platform, being nonpartisan and embracing being nonpartisan, to be able to say to those who follow me, as I like to say every Friday on my sign-off for the week, be good to each other. That may sound trite but it’s not. We need to be good to each other. We need to learn to be able to discuss important issues in a way that is civil and to have meaningful dialogue and to not separate from each other into these echo chambers. So I try to do what I can to do that.

 

I’m about to wrap up here, but I’ll just say this. It’s also good politics, right? In life, as my momma used to say, “Doing the right thing is good politics.” And I think being on there and having people who follow me, especially from the State of Georgia, and who get a better sense of who I am is -- I mean, for better or for worse, you know some things about me if you follow me on Twitter. You know I love the Samford Bulldogs, my alma mater. You know I love Radiohead and alternative music. You know I love my church and I’m dedicated. You know I love my family, and you know that I love my job.

 

If somebody were to describe me in terms of my professional capacity at the end of my career, I hope they would say, “Judge Dillard was a joyful public servant.” And that’s what I hope comes across on my Twitter feed, and I think that is something that’s important for the public to see: judges that love their job, that are committed to the rule of law, and are committed to serving others. I don’t think that demeans the office.

 

I’ll leave with this: are there pitfalls? Sure. I actually don’t think that’s a bad thing. If there are judges that are exercising poor judgment online, they are probably exercising poor judgment in real life. And the fact that it might be exposed on social media, while it may have short-term damage to the profession or to the courts, long term there have been people in Georgia that have done that and been removed from the bench. And I think transparency reveals what it reveals, and that’s not necessarily a bad thing.

 

So anyway, I think judges should be on Twitter, whether they’re state or federal. Maybe we can get into that in the discussion, but thank you for having me here today.

 

Hon. Don Willett:  All right. Thank you, Your Honor. Professor Blackman, you’re batting cleanup.

 

Prof. Josh Blackman:  Thank you so much.

 

      So first off, we are all wearing bow ties at Judge Willett’s request, and second, I do not drink coffee, so there’s no caffeine in me.

 

      It’s a pleasure to be here. I started law school in 2006. That year I attended my very first Federalist Society convention. That was also the year Twitter was invented. Three years later, I came to this very hotel, and I was the first live tweeter for the Federalist
Society Convention. Peter Redpath gave me a free ticket to the dinner if I tweet about the convention. It wasn’t even a thing yet.

 

      And now here we are about eight or nine years later, and we have this massive social media presence; it's being streamed online. Dozens of you have tweeted about this exact panel; I’ve been tweeting from the stage; we are in a very different world.

 

      I want to talk about four areas today. Social media in the courts, social media in judges, social media for legal reporters, and social media in law schools.

 

I want to start with the courts, which is a very important aspect. And I have five principles that courts should consider. First, websites for courts should be accessible. They should look like they were created in the year 2018, not in 1996 on a dial-up modem. Far too many court websites are awful. You can’t navigate; they have old information; they have no photographs of the judges. Keep up with the times.

 

      Second, make opinions freely and easily available. [Applause] Please clap for that. [More applause] There is ongoing litigation about whether PACER, which is the federal system, can charge you a nickel a page—like you're going to [inaudible 01:04:59]—five cents a page for a PDF. I think it’s illegal, but I’ll put that aside. It’s awful policy. So if you are in a state court, make your opinions available on a single-page download. I don’t have to jump through a hoop, don’t have to sign up for an account. And if you’re in federal court, guess what? You can post opinions for free on your home page. Some courts have noteworthy decisions. Just link to a PDF.

 

      The third principle—and Judge Dillard stole my thunder—livestream your arguments. I understand there are arguments pros and cons, but enough courts have tried this, it doesn’t change the dynamics. I don’t know if we’ll crack the Supreme Court, but the lower courts can change their policies. And I said livestream, not record it and put the video on a month later. That doesn’t count. People want to see information right away. There’s so much disinformation -- I’ll get to reporters in a minute. There’s so much disinformation that you can help fix by putting your own arguments live. True, people will tweet; they’ll overreact, fine. But the upshots are far greater.

 

      Fourth, consider preparing summaries of opinions. The Ninth Circuit does this. They create basically a syllabus, like the Supreme Court, where they have a short overview of a decision. That is helpful. If there’s a long, complicated decision, give us something. Give the press something to jump on quickly, so they don’t mischaracterize it.

 

      And last, this is probably for judges who have their own dockets, please make your opinions available that you can copy and paste. It’s something called OCR, optical character recognition. You know what this is, right? If you simply print your opinion out, sign it on paper and scan it, it’s useless for us, right? We can’t copy and paste from it, we can’t do a Control+F or search. Make your opinions readable that you can search them. It makes my life easier. In other words, I can’t blog about your opinion if I can’t do a Control+F and search for the word I’m looking for, so please OCR.

 

      Next, social media and judges. So I have a few basic principles, right? You can have an account like Judge Dillard, which is open to the public, but a lot of judges have private accounts. And this creates, I think, certain issues. Recently, this is from a court in Florida, I think, yesterday or the day before, said that judges do not need to disclose if they’re Facebook friends with, perhaps, a member of the jury or someone in a case. I’m not sure about that. But judges who do have social media accounts—I recognize you are human beings; you have children; you have parents; you want to exchange information—be very, very careful. Do not friend on Facebook your litigants or any possible people on the jury. I think you should disclose it anyway.

 

      Much better is make your account public. Let the people see what you’re doing. There was an article on BuzzFeed about a month ago, a number of federal judges, some in this building perhaps, have Facebook accounts. They have Twitter accounts and reporters find them. It’s not hard. If you follow certain people and you like certain things, you can track it down. So my recommendation: judges should make their accounts public.

 

      Now, I would love if you do what Judge Dillard does and actually tweet in a meaningful way. Now, I’d asked Judge Willett if he would tweet from the podium today, he gave me a “That’s a no” from Simon Cowell meme. [Laughter] So he said no, but I would hope that more judges engage in the manner that Judge Dillard does and Justice Willett did. It’s valuable. If I just tweet, I’m no one. But when a judge does, wow, that’s a big deal! So it’s a very important aspect.

 

      I’ll mention briefly, apparently now Twitter is good for federal courts, right? Courts just cite tweets as if they’re any evidence, so to the extent that you’ve any interest in government, your tweets can and will be used against you. I think one of the more dispiriting aspects of recent confirmation processes is focusing on tweets of judges that are entirely innocuous. It’s disgusting, but they will use it against you, so be very, very careful, right? Don’t put something on Twitter. If you delete it, it doesn’t matter. It’s still there. It’s preserved for eternity.

 

      The next aspect of my talk is social media and legal reporting. The way reporters cover the courts has changed drastically in the past two decades or so. It used to be that you’d have the Supreme Court decision in the morning, and the reporters would write a story for the next-day daily paper. No more. They have to get stories out within minutes of the decision. They basically write their stories in advance and just plug in the holding. It’s remarkable.

 

      It used to be that they could ask an expert for an opinion when the reporters came out. No-no. It’s right away. So you need speed, which is why putting the opinions online in a searchable format is key. Whoever tweets about it first sets the agenda. And far too often people tweeting are wrong, and they change the agenda and I have to try and fix it. It’s a full-time job, but I try very hard.

 

      So put your opinions online quickly. If you’re a court saying, "We’re going to announce opinions at ten o’clock on a certain day," that’s very good. Let the media know.

 

      But one of the consequences of the decline in legal reporting is you have fewer reporters who cover courts. It used to be you’d have one reporter whose full-time job was the courts. No more. So now you may have the political reporter who comes over and does courts every now and then or maybe the person who does the school boards does courts; they don’t know nearly as much, and I think that’s unfortunate. And a lot of legal reporting today suffers for that exact reason, which is why tweeters like myself can help bridge that gap. Reporters call upon us, say "What the hell is going on," and we can give them instant impact as long as we have the PDF of the opinion. I don’t trust a story that doesn’t have a link to an opinion. I just don’t trust it because I can’t verify it for myself.

 

      One other innovation: screenshots. If there’s an opinion and there’s a key passage, put in a screenshot right in the tweet. People are more likely to retweet if it has a picture in it—we like pictures—and you can jump to it right away.

 

      One last comment. Judges have different policies when reporters contact chambers. Some may say "no comment;" they "decline to comment." I think a good general policy is don’t even say anything, just ignore it. Even a "no comment" is kind of a comment, so I would just ignore it altogether.

 

      The last part of my talk is the one nearest and dearest to my heart, which is law schools. I’ve been teaching now for seven years; I speak at about 40 to 50 law schools a year, so I get a lot of experience, and I can’t tell you how much social media’s transformed that experience. It’s remarkable. I’m walking up and down the halls of the Mayflower, people say, “Hey, Josh, I know you from Twitter.” It’s stunning. People know this. They get to know you. They think they know you – maybe they don’t, I don’t know; I don’t drink coffee. But they think they know you well enough. [Laughter]

 

      But a couple of principles for law professors. First, livestream your lectures. Let me give you a couple reasons why. First, you benefit your students immeasurably. They can’t possibly write down everything you say; they shouldn’t. If my students know my lectures are online, they’re not doing this thing where they’re typing frantically. They can go back and check later. In fact, my students watch last year’s lecture before class, so they know what I’m going to say. That’s powerful.

 

      But this is not just for your own students. I have students around the globe who watch my lectures. Thousands of them. I don’t know who they are. But you know what? “You got me through property.” “You got me through Con Law,” when I meet them on the road. It’s frankly stunning. So put your lectures on YouTube.

 

Professors say, “Well, I may say something inappropriate.” Get over it. Your kids are recording you anyway. If you say something inappropriate, they will have a recording of it. And let me make a point that’s not too subtle: you have backup if you’re on recording. They can’t quote you out of context if you’ve your own recording.

 

      I’ve been protested. I have been heckled. Do you want to know something? I have the complete video from beginning to end. They cannot take me out of context. I’ve had students accuse me of saying things that I never said. Say, “Show me the tape,” and it goes away real quick. So it’s for your own preservation that you’re always being recorded, and I value that very highly.

 

      Also, you can use Twitter to engage students. Judge Dillard mentors them; I can just answer questions. If the student puts a question on Twitter, I’ll answer it. And that’s a direct communication line that may not otherwise exist.

 

      One other issue to think about in social media is discipline issues. Law students often get very active, very feisty, they like to fight. But sometimes they do it on social media, and they actually taunt each other in class. And discussions that begin in class spill over into class Facebook pages. I tend to stay away from it, but I think at some point, schools will try to discipline that and police that. I think there’s some First Amendment issues at state schools and other issues that go beyond the scope. But it’s one thing to keep in mind.

 

      Another related issue is tenure and professors saying stupid things on Twitter. Is a professor’s Twitter account part of his academic freedom? You’ve had professors make virulent comments about the right or the left on Twitter. Can you discipline them for that? Does it promote the academic discourse? My general sentiment is yes, it’s part of the academic discourse; we use lots of different mediums to communicate.

 

      My last point, to reiterate something that John mentioned, is that Twitter’s pretty awful, right? And David as well. There’s a lot of hatred, racism, sexism, every -ism you can imagine. I encourage you strongly, and I mean this sincerely, do not feel the need to reply. The most powerful thing ever to do on Twitter is saying, "You know what, I don’t need to reply to this person." And that’s the most effective response ever.

 

      I’ve had people message me saying, “Why don’t you reply to me?”

 

      I’m like, “I don’t want to.” And it kills them! [Laughter] So if people stop replying or instead of replying, send them an email. I had a professor say awful things to me on Twitter. I sent him an email; we diffused it in three seconds. You’re not going to diffuse an argument on Twitter. Disengage, right? Use it to push information, but don’t get into fights that you are not going to win.

 

      Thank you all so much.

 

Hon. Don Willett:  Big thanks to our panelists. That was a high-octane presentation from everybody. High octane and well dressed.

 

      We have a hard stop because we’ve got the debate at 12:30. So we’re going to stop about 12:25, so we got about -- there’s some early birds going to get a table. [Laughter]

 

We got about 16 minutes for -- unless you all want to do some cross-panel discussion, we can just turn it over to the crowd, but as people are coming to the microphone, I want to give a hearty, passionate, spirited, amen to cameras. And my former court, the Texas Supreme Court, has been webcasting live for about a decade. Zero problems. Overwhelmingly positive response. If you’re lying awake at night, insomnia creeps in, just log on and pick a case. Any case! They’re all archived there for posterity.

 

      And people talk about the fear of grandstanding or peacocking or showboating. There’s no showboating in Texas! [Laughter] People say they notice a certain swagger but, in Texas, we just call that walking. [Laughter]

 

      Okay, you’re first. Go right ahead.

 

Questioner 1:  I’d love to be first; I can’t make it work. So, I’ll just ask loudly. Both to Judge Dillard and Willett, a conundrum for me lately is how can citizens vote for state court judges if the judiciary is a black box?

 

We don’t know these people. We don’t know what they do, and unless you live at the courthouse, you will not know what they do and how to vote. But you are giving me some hope that there may be ways for judges to make themselves more visible to the electorate.

 

I’m wondering what your thoughts are on there as what is it allowable so that we don’t have to be monks. I mean, I’m not a judge, but I’ve been asked to be a judge, and I’ve turned it down because I’m much too vocal. So if there’s a way to channel that, then maybe I’ll reconsider. Thank you.

 

Hon. Stephen Dillard:  I’ll try to answer that. You bring up a great point. On the one hand, what do we hear every election cycle? We don’t know enough about the down-ballot races. We don’t know enough about the judges. Who are these judges? And yet these same media types and reporters that say that, then are like, “Judges on social media? What’s that about?”

 

      So I think the answer to it is, is that—exactly what I said—is that you use social media platforms to engage the people you serve. And you can do that in a way that’s meaningful and that doesn’t violate the canons simply by being out there.

 

      Look, at the end of the day, is the average citizen going to know about my parental rights jurisprudence? Probably not. But what they can get a sense of from my Twitter feed without me getting into specific cases is, I hope, at least, that this is a judge who is fair. This is a judge who’s impartial. This is a judge who cares about his job, who is professional, and who loves doing what he does for the State of Georgia. And I think that is a more than sufficient basis for somebody who is not trained in law to cast a vote.

 

Questioner 2:  It seems to me that the federal judicial branches are sort of lagging behind the trend of state social media judges on social media. Judge Willett has obviously gone radio silent, and probably there’s people from the administrative office gave him the training. There was also a somewhat famous blog by a Judge Richard Kopf of the District of Nebraska. He had a blog called Hercules and the Empire. He just stopped doing that for reasons that are not entirely clear. So can anyone speak specifically --

 

Hon. Stephen Dillard:   They’re pretty clear. [Laughter] We know why he stopped. I don’t want to jump in again, but let me just say this: his blog was a good example of the right way to use it and the wrong way. The right way that he used it was some of the kind of reflective commentary regarding Shon Hopwood and his sentencing. I thought that was amazing to have a sitting federal judge reflect and say maybe I didn’t use the best judgment in sentencing not only this young man, but other people. I thought that was remarkable.

 

      His other comments—which I’m not going to get into the specifics; if you want to know those, you can google them—I think are an example of maybe the admonition from David. Maybe sometimes it’s good to step away if you’re getting too caught up in things.

 

      Once again, whether you’re a federal or a state judge, whether you’re elected or appointed, you still have to follow the canons and you still have to act responsibly, whether you’re online or in person.

 

David Lat:  I would add, in terms of what Judge Kopf has done well, please check out his review of my book Supreme Ambitions. [Laughter]

 

      But I would add, just to echo what Chief Judge Dillard said, it’s absolutely true. The rules that apply to judges ethically are the same regardless of the medium. So for example, you’re not supposed to comment on a pending case. There was an interesting case out of the Ninth Circuit called Sierra Pacific where there was a trial judge who had a Twitter account. And he followed the U.S. attorney but he didn’t follow the other party, and he retweeted a news article about a case that was pending before him. And you might think, “Oh, isn’t that innocuous, he’s just retweeting a news article.” But it turned out that the article was erroneous. The headline was erroneous. The headline said the defendant admitted liability when the actual settlement resolving the litigation provided for no admission of liability.

 

So this was actually used as a grounds for appeal before the Ninth Circuit saying that the judge actually exhibited some bias by following one party but not the other, and by retweeting this headline that was more favorable to the position of the U.S. attorney rather than the defendant.

 

      So I think that it is wonderful for judges to be on social media, and I think it’s a great engine for civic education, but the same rules apply. And there are interesting case studies of how judges can make mistakes.

 

John Browning:  And I can add that as a faculty member of the Federal Judicial Center, I teach federal judges. They’re very interested in doing things the right way when it comes to social media. There’s already been at least one advisory opinion by the commission that oversees the federal judiciary. There may very well be some more guidance, but I can tell you it’s an issue that’s very much on their radar. And as both Judge Dillard and David explained about examples like Judge Kopf, I’ve written and blogged and maybe even posted on Facebook about Judge Kopf, and yes, there’s some wonderful things about his previous blogging, about insights into judicial decision-making, and then there are some things that are just -- I’d put them under the category as he described it, “dirty old man.”

 

There are some dos and don’ts inherent in both of those. If you’re interested in learning more, you can check out my law review article “The Judge as Digital Citizen” in the Faulkner Law Review. Judge Bill Pryor and I served on a panel about the role of the judge in the 21st century.

 

Questioner 2:  I just want to free the Tweeter Laureate. [Laughter]

 

Hon. Don Willett:  Go right ahead.

 

Dan McLaughlin:  Dan McLaughlin @baseballcrank.

 

David Lat:  Oh, I follow you.

 

Hon. Don Willett: Great Twitter account.

 

Davit Lat:  Oh you don’t follow me though. [Laughter] I don’t take it personally.

 

Dan McLaughlin:  But you remembered it.

 

Everyone has their own opinions about the President’s tweeting and obviously that’s a broad subject, but just to stick to a very narrow question, has the mere fact of having a President of the United States who tweets in what is very identifiably his own voice, changed the public expectation surrounding even judges and other public servants to be more accessible and more out there on Twitter?

 

John Browning:  Let me start off with this. I think the answer is yes, and we’re seeing that more and more. But it’s also leading to some other legal questions that we haven’t had to confront before, such as with respect to a government official or entity blocking an individual from following them on Twitter. Is that a limited public forum?

 

      There are courts around the country that have confronted this. Obviously, the President has been on the receiving end of some legal action as well. But there have been other governmental officials around the country, and the decisions right now are a hodgepodge. So I don’t think we have any clear guidance as of yet. I think it helps. Some legal scholars may disagree. I know I’ve got some support in thinking that the President’s Twitter account that was his personal account that predated his taking office could very well be considered his personal account and not an official forum or media outlet. But there are some legal scholars who disagree.

 

      I think we’re still waiting for that issue to resolve itself, but it is very much -- it’s raising issues like that. It’s leading to a lot of discourse, and we’ll see what happens.

 

David Lat:  If I could kind of have a mashup of John’s comment about this limited public forum issue, which is quite interesting, and Josh’s comment about not responding to trolls, my favorite feature on Twitter is actually the mute button because you will no longer see the tweets of people you mute, people that are abusive, people that are uncivil. But if you block them, then they know they got to you. They get notified that you block them. If you mute them, they have no idea. They could be tweeting up a nasty storm at you and you are oblivious. And for me actually, I’m actually fine with that. So check out the mute function if you are on Twitter.

 

Prof. Josh Blackman:  And one better, there’s a mute thread. Last night I tweeted at the dinner of the standing ovation we gave for Judge Kavanaugh. Maggie Haberman of the New York Times retweeted me. I got 50,000 angry messages after that. Howard Dean tweeted. I didn’t even know he was still around. [Laughter] Howard Dean retweeted me. God help me.

 

      So I said mute thread. Poof, gone. My timeline cleans up immediately. You can’t mute 50,000 people; you can mute the thread.

 

Hon. Don Willett:  Yes, sir.

 

John Farrey:  I feel like I should be taller. John Farrey from Boston. I use LinkedIn a lot and I use—and if you don’t know it, I can’t explain it—If This, Then That (IFTTT) to increase the number of postings where automatically it’ll go in, find business postings or articles I want to repost, some from reputable sources like the Journal, some from nonreputable like the New York Times. [Laughter]

 

      What, from a risk point of view, pulling from sources like that, do I have a risk situation where it may pull an article that may follow up and cause me problems later on? And I’m posting probably 12 to 20 of these a day.

 

David Lat:   Are you adding commentary when you --

 

John Farrey:   No.

 

David Lat:  Okay.

 

John Farrey:  No. I do separately on certain ones. But a lot of them are just a reposting automatically – seeing an article that I have preprogrammed in might be of interest and then reposting that.

 

Hon. Stephen Dillard: Are you a judge or a lawyer?

 

John Farrey:  I’m a lawyer.

 

Hon. Stephen Dillard:  Okay, all right. Well I’d have a different response if you were a judge.

 

John Browning:  Judges can get into ethical hot water for “liking” something and for retweeting or posting something even without any kind of commentary. It’s happened. But as a lawyer in private practice, if you’re just posting something and not adding commentary of your own, I don’t think there’s as high a risk factor.

 

David Lat:  I would add that you probably -- and you’re probably just organically aware of this. There are issues of essentially not a true conflict with your clients’ interests, but a sort of positional risk. If you tend to be a lawyer who represents a lot of plaintiffs, and you are retweeting some articles that are very prodefendant, maybe there might be some issue there.

 

But I do generally subscribe to the whole thing that people used to have as a standard disclaimer, but I think it’s just now so standard and accepted that nobody really needs to add it. RTs are not endorsements. People retweet things all the time. If I retweet something, it does not mean that I agree with every word in that. And that can’t even be the case because my Twitter feed is actually fairly sort of middle of the road. I will retweet opposing viewpoints just because I think they’re interesting and, obviously, I can’t agree with both of them because they disagree with each other.

 

So I think as a lawyer, it’s less risky. If you’re a judge, then you have a sort of tricky issue like what I mentioned about that Sierra Pacific case where even a retweet of an article if it’s erroneous or if it favors one party or the other could be cited by a party as a basis for recusal.

 

John Browning:  And just very quickly, for those of you in the audience who are members of the D.C. Bar, you may want to check out a November 2016 D.C. Legal Ethics Committee opinion on how social media conduct can create what are called positional conflicts, where you’re advocating a position and you’re acting contrary to something that’s a position of the client or the firm.

 

Hon. Don Willett:  We’ve got two minutes. Two more questions. I may regret this. I’m going to go to Ilya in the back and then back to the front, Mike, for the final question. Ilya, don’t make me [crossing fingers, laughter] . . .

 

Ilya:  I actually don’t have a social media question, I have a fashion question. As a sometimes, but not always, bow tie --

 

Hon. Don Willett:  I see Ilya’s time has expired. [Laughter] Go ahead. Go ahead. Actually, this is Ilya’s tie that I’m wearing today. I had a gold version. It has the Constitution on it --

 

Ilya:  We made a Pareto optimal exchange yesterday. We preferred the other’s coloring of the Constitution bow tie, but that relates to my question. What is the prominence of your current bow tie and, as a sometimes but not always bow tie wearer, what are your advice on when to wear a bow tie and when to go standard?

 

Prof. Josh Blackman:  Mute. [Laughter]

 

Hon. Don Willett:  Mute the question.

 

John Browning:  I’m going to say as a novice bow-tie wearer, choosing to accessorize the Star Wars cuff links with the Star Wars tie or the other way around, I’m liking this. I’m thinking this may be a good look.

 

David Lat:  I respectfully dissent. I think you have to -- my problem is—I noticed this in the mirror today—I am a short person. I have a round face. This bow tie is not good. I need something that accentuates my length, so I’m going back to the regular ties after this.

 

Hon. Don Willett:  All right. That’s all we have time --

 

Hon. Stephen Dillard:  Bow ties are cool.

 

Hon. Don Willett:  Bow ties are cool.

 

Prof. Josh Blackman:  Ilya, delete your account. [Laughter]

 

Mike:  Hi, my question is for Professor Blackman. You mentioned that you promote the use of recordings, not only as a pedagogical tool, but also as a shield against false or baseless accusations or misrepresentations, as well as for other uses potentially. However, many students, faculty members, and administrators are students or members of a university in a jurisdiction where one-party consent is not the law or where the university has a policy explicitly forbidding the use of recordings in a classroom or elsewhere. What advice would you give to students, faculty members, and administrators in such jurisdictions or universities?

 

Prof. Josh Blackman:  Yeah, you have to follow wiretap laws. You can get consent from your students. One way I kind of work around it is I have a lapel mike and you really can’t even hear the students at all, so it’s just my voice so it troubles me less. But university policy should -- because otherwise, I consider information free and open and the world should have access to it. Every time I give a lecture, someone else can benefit from it, so I think there are lots of things to gain.

 

There’s a slight risk of chilling speech, which I’m not ignorant of. Students may not want to speak up if it comes out at their confirmation hearing 20 years later. If I want to go to Harvard, they’d never let me record anything. It’s not allowed because they all want to be Supreme Court justices. But I think there a lot of benefits and schools should maybe reconsider those policies. Thank you, sir.

 

Mike:  Thank you.

 

Hon. Don Willett:  All right. Let’s go eat! Everybody thank our wonderful panel.

 

 

       

12:30 p.m. - 2:30 p.m.
Eleventh Annual Rosenkranz Debate & Luncheon

2018 National Lawyers Convention

Topics: Constitution • Federal Courts
The Mayflower Hotel - Grand Ballroom
1127 Connecticut Avenue, NW
Washington, DC 20036

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RESOLVED: District courts do not have the authority to enter universal injunctions.

  • Prof. John Harrison, James Madison Distinguished Professor of Law, University of Virginia School of Law
  • Mr. Neal Katyal, Partner, Hogan Lovells US LLP
  • Moderator: Hon. Beth A. Williams, Assistant Attorney General, Office of Legal Policy, United States Department of Justice
  • Introduction: Mr. Eugene B. Meyer, President, The Federalist Society

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Eugene B. Meyer:  Good afternoon, everyone. Please finish with your desserts. I want to welcome you all to our Eleventh Annual Rosenkranz Debate. I want to express our gratitude to the Rosenkranz Foundation for supporting this event for the last decade. We love having this Saturday centerpiece for our convention: an intellectually sharp, one-on-one debate between two highly prominent legal theorists. It’s been quite a distinguished career, which had a wonderful start in 2008 with a discussion between Judges Richard Posner and Mike McConnell; then Judges Guido Calabresi and Frank Easterbrook; 2010, Professors Richard Epstein and William Eskridge; in 2011, Paul Clement and Larry Tribe debated healthcare. In 2012, we had Judge Kozinski and Hadley Arkes.

 

In 2013, Randy Barnett and Judge Wilkinson. In 2014, former Attorney General Mukasey debated Nadine Strossen. In 2015, Robbie George and John McGinnis debated the constitution that was made for moral and religious people and was deemed suited for the governed and no other. In 2016, we had Professors Eugene Volokh and Deborah Rhode, and last year, Randy Barnett and Akhil Reed Amar debated. To moderate this year’s debate and introduce our speakers, I want to call on Assistant Attorney General for the Office of Legal Policy, Beth Williams, who’s long been involved with the Federalist Society. Beth?

 

Hon. Beth A. Williams:  Thank you. All right. Well, thank you so much, Gene, for that introduction and thank you all for the warm welcome. I also want to thank Gene, Leonard, Dean, and the team at The Federalist Society for putting on a characteristically fantastic conference these past few days. And thank you, of course, to Professor Nick Rosenkranz for starting and continuing the wonderful tradition of this debate, which follows in the best tradition of The Federalist Society of exploring opposing views on timely and important legal topics. I’m honored to be here today to moderate today’s Rosenkranz debate, which will take on a very timely and important topic: whether lower courts have the authority to enter universal injunctions.

 

Before I introduce our debaters, I’ll take a few minutes to set the stage. Universal injunctions are injunctions that grant relief to parties outside the case and outside of the class-action framework. One question that recurs has been what do we call them? Many have called them nationwide injunctions. But that name is not really appropriate because it’s not the geographic scope that defines them. Their defining characteristic is who gets the relief afforded. Is it just the parties to the case? Or are parties beyond the case granted relief by the court? So we’ve thrown around various names for them: limitless injunctions, non-party injunctions. Justice Gorsuch recently at oral argument suggested they could be called cosmic injunctions. And, of course, at the Department of Justice we call them “every other Friday” injunctions. [Laughter]

 

But regardless of what they’re called, the entry of universal injunctions is a relatively recent phenomenon. Universal injunctions did not exist before even 60 years ago. Before 1963, no court in this country had issued such an injunction. And they were very rare until President Regan took office. Even after that, by Department of Justice estimates, courts issued an average of only 1.5 universal injunctions per year against the Regan, Clinton, and George W. Bush administrations, and 2.5 per year against the Obama administration. In President Trump’s first year in office, however, judges issued a whopping 20 universal injunctions, an eightfold increase over the last administration. This matches the entire eight-year total of such injunctions issued against President Obama during his two terms. We are now at 27.

 

Whatever you might think about the merits of universal injunctions, the sharp increase in their frequency is remarkable. In full disclosure, the Justice Department’s position on this is not a secret. Over the years, the Department, including under President Obama, has taken a consistent position on them. And my office, the Office of Legal Policy, has had the opportunity to delve deeply into the issue. In fact, earlier this fall, Attorney General Sessions issued litigation guidelines for Department of Justice attorneys involved in litigation that challenges a federal government program, regulation, order or law. I know this is making news. Not everyone agrees with the Department of Justice. Some question whether the judiciary can really be an effective check on presidential power and unconstitutional statutes if lower courts do not have the power to strike down unlawful actions immediately and universally. Many people on both sides of the aisle believe that lower courts must have this power in order to best preserve liberty.

 

I’m happy to be in the moderator’s chair for what I know will be a robust and terrific debate between two great legal minds, Professor John Harrison and Mr. Neal Katyal, on the question of whether district courts have the authority to enter universal injunctions.

 

Let me introduce them. Professor John Harrison is the James Madison Distinguished Professor of Law at the University of Virginia School of Law. He joined the faculty in 1993 as an associate professor of law after a distinguished career with the Department of Justice. His teaching subjects include constitutional history, federal courts, remedies, corporations, civil procedure, legislation, and property. In 2008, he was on leave from the law school to serve as Counselor on International Law in the Office of the Legal Advisor at the US Department of State.

 

A 1977 graduate of the University of Virginia, Professor Harrison earned his law degree in 1980 at Yale, where he served as editor of the Yale Law Journal and editor and articles editor of the Yale Studies in World Public Order. He was an associate at Patton, Boggs, & Blow in Washington, D.C., and a clerk for Judge Robert Bork on the US Court of Appeals for the District of Columbia Circuit. He worked with the Department of Justice from 1983 to ’93, serving in numerous capacities, including Deputy Assistant Attorney General in the Office of Legal Counsel from 1990 to 1993.

 

Neal Katyal, on my left, is a former Acting Solicitor General of the United States and is now a partner at Hogan Lovells US, LLP, focusing on appellate and complex litigation. He has extensive experience in matters of patent, constitutional, technology, securities, criminal, employment, and tribal law. In December 2017, American Lawyer Magazine named him the Litigator of the Year. He has already argued more Supreme Court cases, 37, than any other minority attorney in US history, recently breaking the record held by Justice Thurgood Marshall. Prior to joining Hogan Lovells, Neal served as Acting Solicitor General of the United States. In 2011, he received the highest award given to a civilian by the US Department of Justice, the Edmund Randolph Award.

 

Earlier in his career, he served in the Deputy Attorney General’s Office at the Justice Department as National Security Advisor and a special assistant to the Deputy Attorney General during 1998 to ’99. Neal has also served as a law professor for over two decades at Georgetown University Law Center and has been a visiting professor at both Harvard and Yale law schools. After graduating from Yale Law School, Neal clerked for the Honorable Guido Calabresi of the U.S. Court of Appeals for the Second Circuit, as well as for the Honorable Justice Stephen G. Breyer of the United States Supreme Court. I will also mention one last fun fact. Neal has played himself arguing a Supreme Court case against the Solicitor General in an episode of House of Cards on Netflix, which is fantastic, which means you can find him not only in the Supreme Court Reports but also on IMDB.com.

 

Both John and Neal have given careful and sustained consideration to the question at hand. John particularly through the lens of his academic work on the structural requirements in the constitution, among other topics. And Neal most notably through his role as Counsel of Record for the respondents in Trump v. Hawaii, which presented the issue of the proper scope of relief at every level, including at the Supreme Court. I know they will both have a lot to say on this. The structure of this debate is that each will give an opening statement of about 12 minutes, followed by a second round of seven minutes each. Then, we’ll move into some back and forth discussion. Professor Harrison, please start us off.

 

Prof. John C. Harrison:  Thank you. I’m afraid I’m not to be found on Netflix, so this is a Federalist Society exclusive [Laughter]. I have three-and-a-half things to say. And I will admit one of them is basically something I said at the very first Federalist Society event I participated in in 1986. And Grant Gilmore said of Christopher Columbus Langdell, Dean of the Harvard Law School, that he had one idea, and he clung to it with a tenacity of genius. I will at least claim tenacity on this. The first thing I will say is that it is intrinsic in the idea of a case, or a case or controversy—but case is the broader concept, so I’ll use that one—under Article III, that it is -- that the case is about the relation between parties and, hence, the remedial authority of the court extends only to vindicating the rights of the plaintiff.

 

That’s as far as it goes. That’s one of those principles that is so basic that you are more likely to find traces, or manifestations, of it than straight-forward statements of it. So I’ll mention a couple of traces or manifestations of it. One, the description of what a case is by John Marshall in Osborn v. Bank of the United States. “That power,” he said, referring to the judicial power, “is capable of acting only when the subject is submitted to it by a party who asserts his rights in the form prescribed by law.” That’s what a case is. It’s about the relationship between parties, and remedies go to parties.

 

Another manifestation of that is today’s Supreme Court standing doctrine. There’s a lot to criticize in the standing doctrine, but one of its fundamentals, I think, is well founded. The reason private parties have to rely on private injury, and can’t rely simply on the fact that some law is not being complied with, is because the right to demand compliance with the law just by itself belongs to another party. It belongs to the public. And parties can assert only their own rights, not those of others.

 

Another manifestation of this, and I think this is especially interesting, because this is a place where you might find a manifestation of what you might think of as the counter principle -- I’m going to find it in the Declaratory Judgment Act. And frequently, the Declaratory Judgement Act is sort of thought of as the source of the ability just to say, for example, that a statute is unconstitutional. The Declaratory Judgment Act, though, says that the courts may in a declaratory judgement, in a case of actual controversy, declare the rights and other legal relations of any interested party. Legal relations, including rights, connect parties to one another.

 

That relational idea of law—that relational idea in particular of litigation—was behind the Declaratory Judgment Act. It was well known to people at the time that act was being adopted, like, for example, Judge Cardozo in Palsgraf, who asked not “Was there negligence?” but “Had the Long Island Railroad created an unreasonable risk to Mrs. Palsgraf?” Law and litigation are inherently relational. At least, that’s the way I see it. I’m a law professor. I like nice, clean concepts.

 

History is a little messier than nice, clean concepts. And probably the most important reason to think that maybe the powers of the federal courts, the concept of the case, goes beyond just acting as to the party is equity practice back before the framing of the Constitution, and ever since, in which equity courts sometimes gave, and continue to give, relief to parties who are not exactly before the court. And when I say “not exactly,” I want to stress that the primary manifestation of this in the old days in equity was what was called the Bill of Peace, in which one party, or a number of parties, could sue a wrongdoer who was doing something that effected a great many people and obtain relief that would benefit all the people involved.

 

 The important thing to understand about Bills of Peace is that they were understood as representative actions. That is to say the reason one party, or a limited number of parties, could seek relief on behalf of others was because they stood in for those others. So the concept of the case does include representation. It does include some form of indirect litigation, but there has to be representation.

 

And today, of course, the manifestation of that principle is the class action. Congress and the Supreme Court and the federal rules have prescribed the means by which one party can represent another. Those requirements are sometimes reasonably demanding, as they ought to be. To say that one party can say, “I am here for someone else,” is a major step when you understand the idea that lawsuits are relational. And so the limitations of the class action are there appropriately.

 

That’s point number one. Cases are about relations between parties. Remedies go to parties.

 

Point two, this is the one that I said in 1986 and just can’t get away from. It is often said that the reason it’s okay to have universal or even -- what’s the next step up beyond universal? I guess it’s cosmic. Cosmic, man [Laughter]. The justification before the trans-universal injunction is sometimes the idea that courts can, as it’s said, invalidate or strike down statutory rules or actions of the executive.

 

That is a mistake. Courts decide cases. What I’m about to say is the logic of Marbury v. Madison. Courts decide cases between parties and give relief to parties. In order to decide cases, courts must identify the legal rules that apply. Because of the American legal hierarchy, they have to consider the possibility that lower level rules are invalid because they conflict with a higher level rule. It could be a statute conflicting with the Constitution. It could be a regulation conflicting with a statute. That inquiry takes place before the court applies the law—as it has identified the law—to the parties and before it then gives any appropriate remedy. That is to say this inquiry into the law is prior to what the court actually does, which acts on the rights and relations of the parties, not on the law in the abstract.

 

And that is true—it’s especially important to see this—that is true even when the argument that is presented to the court is that some legal rule, some act of the executive is, as we say, facially invalid, is wholly invalid, is invalid in all of its applications. I’m glad to be able to talk about this at the Rosenkranz Debate because Nick Rosenkranz has done fundamental scholarship on just this point: elaborating the situations in which sub-constitutional law is invalid at the level of a rule, which is frequently what the Constitution does. It makes whole rules invalid.

 

But even when that’s happening, what is still going on is the court is identifying the law, at the step identified in Marbury, prior to that of applying the law to the particular case, prior to the law of actually doing anything. And so striking down the law is a serious misnomer.

 

There are a number of ways in which it’s possible to get confused on this point. One that’s in great practical importance is courts do not change law. They identify law, and then they change the relations of parties.

 

The Supreme Court of the United States, in particular, functionally speaking, can do something that’s a lot like changing the law because the Supreme Court sets precedents that govern the entire American judicial system. When the Supreme Court says that some law is unconstitutional at the level of a rule, it has done something a great deal like invalidating the law, but it has done something like invalidating the law.

 

One of the things that law professors often debate, talking about the role of the courts, is how important are what’s called the law-declaring function—the sort of thing I just described—and the case-deciding function. My position—and by no means everyone holds this, but I certainly do so quite strongly—is that the law-declaring function is based entirely on the case-deciding function. And I will assert the same thing about the function of checking the other branches of government. Yes, the courts do that, but they do it by deciding cases and only by deciding cases.

 

So my advice to the courts, when they talk about their role in checking the other branches and striking down statutes and so forth, is the first thing to know if you’re going to be in the business of power is don’t believe your own propaganda. [Laughter]. Rather, the appropriate way to understand what goes on in a constitutional case is, for example, United States v. Eichman, a case about the flag-burning statute. The Supreme Court concluded that that statute—following Rosenkranz logic; they didn’t know that yet, but that’s what they were doing—that that statute was wholly invalid. And then, to apply it to that case, they said, “And therefore, Eichman can’t be convicted.” The actual case deciding part was about Eichman.

 

And the same thing would have been true—and this is the transition to point three—the same thing would have been true, if instead of the case being United States v. Eichman, a criminal prosecution, it had been Eichman v. the Attorney General, Eichman against the enforcing officer. Suppose that Eichman, the person who protests a lot, says, “I plan to protest next week, but there’s the flag burning statute. I want an injunction against the enforcement against me of the flag burning statute.” The appropriate relief, given the facial invalidity of the statute, would have been an injunction as to prosecution against Eichman. That’s the nice and simple situation.

 

There are also more complicated situations, and they are genuinely interesting. And the Texas and Hawaii cases are examples of more complicated situations. They present a combination of two issues that can arise in equity. The first is what’s sometimes called “indivisible relief.” And indivisible relief arises when there’s something a defendant is doing that is wrongful as to more than one potential plaintiff and where giving relief to one plaintiff necessarily means giving that relief to everybody else. For example, say one neighbor is making an excessive amount of noise and it constitutes a nuisance. Well, say the neighbor on the south side—the sort of person who says, “Hey, you kids, get off my lawn”—sues and gets an injunction against the noise. That will have an effect on the neighbor on the north side—this is indivisible relief—even though the neighbor on the northside may really like the music and think, “This is saving me having to buy a sound system.”

 

That’s indivisible relief. Equity courts do it. It happens. My half point is that may be what’s happening when the D.C. Circuit, as they say, vacates entire regulations under the APA, the Hobbs Act -- I’m just going to identify that, pass on from that, and continue with this, with the other complicating factor. One, indivisible relief.

 

Two, overbroad injunctions. That is to say injunctions that are designed to get more than the conduct by the defendant that is unlawful, or more than the conduct by the defendant that harms the plaintiff on the grounds that sorting out the various thing the defendant is doing is too difficult. And the appropriate way to get relief for the plaintiff is to draw the overbroad injunction. That was, for example, what Texas asked for in the DACA case. Texas said DACA is wholly unlawful and beneficiaries of DACA come to Texas and inflict costs on Texas. Hawaii said something quite similar in the Hawaii case.

 

Now, not everybody who was a beneficiary of DACA was, in fact, going to go to Texas. Some people are so benighted that they never make it to Texas [Laughter]. Similarly, not everyone who was kept out by the immigration orders were going to go to Hawaii. The argument order was: “Can’t tell them apart. Give the overbroad relief. And the effect will be indivisible relief.”

 

That’s how the two come together. When a court decides whether to grant overbroad relief, one of the things it considers is the extent of the burden on the defendant and whether it’s justified. Because overbroad relief tells the defendant you can’t do something, that these are not unlawful or, at least, not harmful to the plaintiff.

 

The thing I want to add to that analysis, and courts have to do this when they’re asked for this kind of relief, is to suggest they should also weigh against overbroad relief the interest of potential plaintiffs who have decided, or may have decided, not to sue. That’s very much on display in the Texas DACA case, where a number of states of the Union said, “This program is lawful and it benefits us. We think it is a good thing.” Situations like that that combine indivisible relief—where there are other potential plaintiffs—and the overbroad injunction are situations where there’s a very important interest—the interest in the potential plaintiff who doesn’t want to sue, like the neighbor who likes the noise—that equity courts should undertake to protect.

 

And that’s a situation in some of these cases—and I think the DACA case from Texas is an example—in which although geography isn’t what this is mainly about -- it’s about universality. It’s about cosmicness. Maybe a geographical limitation would be one way to limit the overbroad injunction in the interest of the potential plaintiffs who did not want to sue.

 

My larger point—and I wish I could say I’m announcing a new maximum of equity; I don’t think it’s really that good—is that that interest of those other potential plaintiffs who don’t want to sue, who may think this isn’t a harm at all, is a very serious interest that the court should take into account in creating what they understand to be overbroad injunctions.

 

A thing about that -- I’ll just close by saying, here Neal and I are working on a Saturday, and there’s a lot to be said, of course, for just taking Saturday off. One of the great things about the interest in not being a plaintiff is that it’s an interest that can be exercised by doing nothing, by just taking the day off. That doesn’t make it an unimportant interest. On the contrary, it’s a very important interest, and to take it into account, give less indivisible relief than otherwise might be given, seems to me to be good equity.

 

Hon. Beth A. Williams:  Thank you. Okay. Thank you, Mr. Katyal.

 

Neal K. Katyal:  First of all, it is just great to be here with all of you. The Federalist Society is, I think, the only organization whose invitation I accept every single year. And I do so for one reason, which it’s unparalleled commitment to public debate. Hopefully, what you see today is going to be part of that. Literally, I’ve come every year for over a decade now. Well, actually, I missed last year because I had an oral argument. But you probably didn’t notice because Gene appointed an Acting in my place. That temporary person is going to be here for at least a year. It’s also great because this bears the name of my dear friend Nick Rosenkranz and colleague at Georgetown, so it’s a particular privilege.

 

I am here to defend the stalwart liberal, Jeffrey Sessions, who believed in nationwide injunctions until he didn’t. He was for it until he was against it. And the argument is based on the text and structure and history of Article III, as well as policy arguments. And what I’m going to do is defend what he did, which is, look, nationwide or cosmic injunctions aren’t always appropriate, by no means. They should be rare. But in rare circumstances, they are permissible.

 

They should be rare, but one question is, if you don’t have them, what is the alternative? A litigant could only seek relief in the district court. What happens when that case goes to the circuit court? Will the circuit court announce a rule that only binds the party, not anyone else, so then everyone else has to bring a case? What happens when the case gets to the Supreme Court? And the fundamental thesis here is that, if courts lose this rare tool that they use, they’ll lose a significant ability to counter things that -- actions by the other branches that incur on our individual rights and are inconsistent with limited government. Sometimes, nationwide injunctions are the only way to police those things.

 

I think the story here starts actually with Hammer v. Dagenhart in 1918, a 100 years ago, in which a group of corporations challenged the child labor statute, and the district judge held the law unconstitutional and issued an injunction. But that injunction did not apply just to the parties. It applied to everyone around. That, I think, is the first example that we’ve been able to find -- I think Samuel Bray in his article was able to identify.

 

And I think that that way of thinking does follow from older practice. I think the Supreme Court in the Grupo Mexicano case said when you’re thinking about the contours of the Article III power, you look to what courts in equity did. And courts in equity, as Professor Harrison has just said, did provide relief in bills of peace. And the most important point about bills of peace is that they were not limited just to the parties before them. They extended more broadly.

 

Now, Professor Harrison said, “Yes, but those are representation cases. The litigant was always asserting his own rights." And he quoted Chief Justice Marshall’s opinion in Osborn about litigants asserting their own rights. Absolutely. I’m not defending the proposition that a litigant can come in without a claim and say, “Well, some other dude has a claim in some other jurisdiction and, therefore, I have standing to sue and a cause of action on the merits.” Of course not. I’m defending the proposition in cases like Hawaii, which is that the litigant comes in and says, “My rights are being violated, and there should be an injunction to prevent that deprivation of my rights. By the way, others are facing the exact same problem.” And for unique reasons in the particular case—like for immigration, it’s because of Article I’s commitment to uniformity, but there’s other rationales for other cases—for those unique cases, a nationwide injunction is appropriate.

 

Now, it is the case, as Assistant Attorney General Williams said, that these are pretty rare things, historically. I do think that is perhaps the best argument of the other side, which is this practice really starts in 1918. Then 1963, it takes off a little bit more. But I think that there’s a couple of points on the other side of that.

 

Number one is I think this organization knows better than anyone that there’s a lot of federal laws out there now that didn’t exist for a long period of time because of the expansive commerce power that the government has been asserting since the 1930s. So it’s not surprising that you would have more nationwide injunctions in a period in which the federal government is acting to do more nationwide. So as the commerce power expands, so too, I think, does the need for some sort of check and balance against that. Those of you who believe in limited government, who are concerned in particular about agency overreach, I think have the most to lose if Professor Harrison’s notion is adopted.

 

Indeed, many of the injunctions since 1963, nationwide injunctions, including that one in 1963, was imposed not because of constitutional stuff, but because of administrative law. So the text of the APA, I think, actually answers this question. It says that a court, quote, “must hold unlawful and set aside,” end quote, agency action that is unlawful. Set aside the agency action. Not just set it aside to that one party, but set it aside more generally. That’s Section 706. And the D.C. Circuit has said, quote, “when a reviewing court determines that agency regulations are unlawful, the ordinary result is that the rules are vacated, not just that their application to the individual petitioners is prescribed.” And to me, that’s really the heart of this debate—and it certainly was in our litigation of the Hawaii case—the idea that the agency here, the president and the agency, were stepping beyond their bounds and those rules needed to be vacated. And it didn’t make sense to just do it with the respect to the parties at hand.

 

Professor Harrison referred to standing doctrine. But I think standing doctrine very well accommodates for a long, long period of time the idea that these nationwide injunctions are permissible. Because after all, federal judges do issue nation -- or issue injunctions to prevent future injuries that are similar to those of the plaintiffs. Think about Hutto v. Finney, in which the Court upheld an injunction that prohibited solitary confinement rules, even though it extended far beyond what the individual litigants were seeking, because they need a prophylactic protect against something broader. And in cases like NLRB v. Express Publishing Company, the federal courts enjoined defendants from engaging in conduct that could be anticipated to cause harm in the future. You all know that capable-of-repetition-yet-evading-review doctrine in which the individual litigant is not suffering harm, but nonetheless, the court says, “I can extend relief beyond this individual plaintiff.” Next-friend standing, another example.

 

Finally, something that Professor Harrison himself mentioned, the class-action system. Because in the class action system, which is the bane of my existence these days, you have all sorts of litigants, or all sorts of folks who are absent class members, and are really functionally in a very similar position to non-parties, who are benefiting from the relief that is being sought. Now, it’s the case that sometimes the class action mechanism can do the work of a nationwide injunction. And for that reason, to the extent we have any sort of Professor Harrison balancing thing—and I think we’re in agreement that there should be weighing by the court as to whether a nationwide injunction is really necessary—if the class action system’s able to do it, then absolutely it strike me that that’s the appropriate thing. But sometimes a class action system isn’t going to work the right way.

 

Think about, for example, something that is very fast moving. Think about version one of the travel ban, which on Friday night, the thing is announced. You have chaos at the airports, not just in this country, but worldwide. It would have made no sense, it seems to me, for someone to come in, win their case, and then to say “Well, you’ve only won it for you, individual person. Every other person has to sue now.” That’s the most enormous waste of resources imaginable, and I think would fall disproportionately and benefit only certain people and not others. Indeed, we had an example of this in which the judge in Massachusetts enjoined it only for people coming to Logan Airport. The chaos that resulted as a result of that, as individuals abroad started to switch their flights to Logan Airport and the like -- it just doesn’t strike me as a smart way to run a system.

 

That’s particularly so, again, in those rare cases when you do have a constitutional command, and sometimes a statutory command, for uniformity, as you did in the travel ban case. Obviously, Article I requiring a uniform rule of naturalization, as well as the 1986 Immigration Law, which also cause for -- it says, quote, “the immigration laws of the United States should be enforced vigorously and uniformly.”

 

Other times, you have circumstances in which the harm that the plaintiff is seeking to remedy spills out beyond the jurisdiction of the individual court, the individual district court. There it seems to me non-controversial that you should have an injunction that extends beyond the geographic contours of the particular district court.

 

I think maybe I’ll stop there and just actually raise one thing that Professor Harrison didn’t mention, but I do think is a pretty important counter-argument to everything I’ve said, which is percolation. And the argument goes like this: if you have a nationwide injunction, that freezes the litigation landscape. So the federal government can’t come in and really get that litigated in another circuit or something like that. The rules about collateral estoppel and stuff the Supreme Court has said, really, the federal government should have the opportunity to litigate in other circuits. I do think that that is a problem and one reason why I think nationwide injunctions should be rare. By the way, I agree with Assistant Attorney General Williams that they’ve gone up to 20 or 27 in the Trump administration. I think that says a lot more about the President than it does about the courts.

 

But I do think that that is a problem, this idea of percolation. I do think that, oftentimes, there are ways to still get those cases to percolate, the travel ban being a good example, in which litigation did ensue in multiple circuits despite the nationwide-injunction nature of this. But here’s where I’ll close. When I ran the Solicitor General’s office and we faced nationwide injunctions, we had a pretty easy remedy for that, which was to go to the Supreme Court and get that injunction vacated. And they did so on motions, and they certainly have done so in this administration as well. That strikes me as a tried-and-true path to creating the type of percolation that I think all of us want to see in appropriate cases. Sometimes, it won’t be appropriate and the injunction will remain in place.

 

But to me, that’s the better solution. Given all of your jubilation about where the Court is right now, the Supreme Court, it seems to me, actually, conservatives have more to lose if Professor Harrison’s view is adopted. Because you actually do have the ability to get percolation and get these nationwide injunctions lifted, perhaps at a higher frequency rate than might a democratic president, at least so the argument would go. We’ll have to see, but at least that’s something that I think we should put on the table.

 

Hon. Beth A. Williams:  Okay. Thank you. Professor Harrison, you now have four and a half minutes for rebuttal.

 

Prof. John C. Harrison:  Okay. I used up some of my time. I have three half points and one real point. The first half point is just to stress there are situations in which relief is indivisible, and under those circumstances, the other potential plaintiffs are just going to have to get the benefit whether they think of it as a benefit or not. But striking down a statute, for example, or a regulation, not an example of inherently indivisible relief, or at least not statutes.

 

Second point, just a point of clarification, we talked about this a couple of times. Geography is secondary. The nationwide or not nature of the injunctions is not really the issue. A plaintiff may move around, and the defendant may affect the plaintiff all over the place, so geographically broad injunctions may be just fine.

 

The point about the APA, and in particular the D.C. Circuit’s practice of, as they say, vacating orders, vacating regulations rests on a particular reading of the APA and a couple of other statues like the Hobbs Act. One of my projects, when I’m not taking a day off, is going to be to try to track that down and decide whether I think that’s right or not, as a matter of reading the statutes. If it is right, I think it’s an example of a situation in which Congress has provided a form of relief that is indivisible. If the order is vacated, it’s vacated as to everybody by way of giving relief to this particular party. Again, indivisible relief is going to happen.

 

Now the large point. I didn’t talk about percolation. I didn’t talk about forum shopping. I didn’t talk about functional considerations. Because when it comes to these fundamental questions about the structure of government, I don’t care about percolation or forum shopping or any of these others functional considerations.

 

And not everybody is going to be with me on that. And not everybody in this room is going to be with me on that. Because my claim is a fairly radical one, but I will stand by it, which is it is a condition on the legal legitimacy of what the courts do that they operate within the confines of a structure of government that does not have a council of revision, does not have a European-style Kelsenian court, does not have institutions that can operate directly on the content of the law, hasn’t said common-law style courts that decide cases before them. And they have pluses and minuses when it comes to checking the government. And I urge that the minuses be accepted along with the pluses.

 

The methodological point about that, about how to understand laws and how to understand the Constitution, I think, is to what extent should provision like Article III itself and the whole structure of the way the courts work be understood in light of a purpose attributed to them, say, the purpose of reigning in the executive? And the purpose may require adaptation to change over time, like the expansion in the state. And to what extent should they be understood as being rule-like? I will say my fundamental commitment on this issue and issues like this is it is always necessary to ask first whether an enactment is a rule. That is to say, something that is to be interpreted formalistically and simply by applying it without asking whether it is fully implementing its purpose. If it is a rule, then you live with its limitations. And it seems to me that these basic features of the system, and in particular the role of the courts as elaborated in Marbury, is a rule.

 

Hon. Beth A. Williams:  Thank you. Now, Mr. Katyal, seven minutes.

 

Neal K. Katyal:  Okay. Great. I don’t think I’ll take the seven minutes, but I will say a couple of things. Number one, I’m glad Professor Harrison admits this is a radical approach. It is. And the idea that we would reign the courts in from this really important tool that I think is, particularly in an age of expansive government, is, I think, a very dangerous proposition. I actually think that, as we think about the originalist conception of the document, we have to think about how would the founders have reacted to an expansive Congress and an expansive executive that strayed far beyond what they initially envisioned. And would it be that they would have really said, “Oh, but courts, you have to stay in your lane, exactly where you are”?

 

I actually think that nationwide injunctions do follow from the lane in which courts operated like bills of peace. They did expand beyond the relief given to the individual parties and expanded more broadly. And since 1918, as I said, we’ve had federal courts doing this.

 

Now, Professor Harrison says, “Well, but sometimes relief is indivisible, and in those circumstances, a nationwide injunction would be appropriate, but not in others.” But I don’t think federal courts have limited them for 100 years. And I think it would be a very dangerous proposition to do so for limited-government reasons. That is why federal courts don’t do what Professor Harrison is doing, not just in the nationwide injunction area, but in all sorts of other areas of standing law, like the prophylactic rules they set, like capable of repetition yet evading review and the like.

 

So if you adopt this view, you’re really adopting a set of views about federal courts that is deeply, deeply stunted, and one that I think is very much in tension with the goal of most people in this room and our Founders, which was limited government. The final thing I’ll say is about the APA. I happen to be a plain text kind of guy when it comes to statutory interpretation. The text is as plain as day that this is what federal courts are empowered to do—set aside agency action more broadly, invalidate it as a whole—when an individual litigant comes before them. So that relief extends more broadly.

 

Now, Professor Harrison is right to say this is authorized by Congress, so maybe that makes it different. But the big debate over nationwide injunctions happens to be largely around APA cases. So at least for -- I don’t know the exact numbers but of that list of 27, many of those are APA cases. So don’t think of the overall number count when you think about whether this is legitimate or not.

 

The last thing I’d say is the fact that Congress provided it here in the APA context doesn’t mean that they have to do so elsewhere, some sort of exlusio unius principle or something like that. It very well may be an example of the power that federal courts have historically had in this realm. Thanks. It’s been a pleasure debating with you.

 

Hon. Beth A. Williams:  Great. So now we’ll have some more general give and take, and then we’ll open it up to questions. One question I had for you, Professor Harrison, is is Mr. Katyal right that the better originalist argument is for courts to have this power? That the Founders would have wanted a greater check on government action and not to have -- that it should lean against government action rather than allowing it to go forward?

 

Prof. John C. Harrison:  The word originalist is, of course, a dangerous one, and one reason --

 

Neal K. Katyal:  You’re telling me.

 

Prof. John C. Harrison:  And one reason it’s dangerous is because it frequently leads to the kind of inquiry that I think Neal’s in favor of and that I’m against, which is, “What are the purposes? And how would people who had these purposes have wanted the structure to adapt to changing situations?”

 

First, I think it is extremely difficult to answer questions like that. And one reason I’m not that kind of originalist, to the extent I’m an originalist, is because I think it is extremely difficult to answer questions of the form “Okay. Had they known all these things that had happened in the succeeding 200 years, how would those particular people have thought about this?” Well, they wouldn’t be those particular people anymore if they knew the next 200 years of history.

 

I do think that the rule structure that they gave us operates the way I described it. And it does have a place for things like bills of peace. But that those have to be representative actions, and, again, that’s implemented through class actions. And yes, if the Federal Convention reconvened in 2019, what would they do? I don’t know. I do know I think it would be an excellent idea to have a new Federal Convention now, but it would be run by us and not by the people from the 18th century.

 

Hon. Beth A. Williams:  So Mr. Katyal, why aren’t class actions sufficient? Rule 23 is there for a reason. It provides protection. It provides a lot of requirements, as you know, to certify a class. Aren’t those protections there for a reason? And aren’t you subverting them if you’re not using the class action in only unique cases?

 

Neal K. Katyal:  First, let me just say a word about method. I think Professor Harrison’s right to say it’s difficult to understand and answer the question “what would the founders have thought about X in today’s age?” But I think, as my colleague Randy Barnett has pointed out -- oh, Randy’s right there. It’s also hard to ask the questions that we’re dealing with on a sub-constitutional level. Is founding practice about bills of equity the same as what nationwide injunctions are? You have these deep translation questions not just in constitutional law, but all throughout the law. I’m not sure, necessarily, that they’re any more difficult in one than the other.

 

Now, with respect to class actions, look, I think these are nationwide injunctions when imposed in the rare circumstances, like the travel ban, are effectively representation actions. So they follow directly from the tradition of the bills of peace. Oftentimes, they can be used, and should be used. Indeed, when a court is thinking about is this the rare circumstance in which a nationwide injunction is appropriate, I think you’re absolutely right. They have to ask as one of their very first questions, “Why isn’t this a class action?”

 

But in a case like the travel ban, the reason would be twofold. Number one, fast-moving, emergency situation in which it would be impractical and very hard to actually certify a class within the time period necessary in order to give relief to the parties. Literally, plane tickets are bought, and people are at the airport. And you have a constitutional command that says that immigration law has to be done uniformly. In a circumstance like that, it’s actually, to me, in tension with the Constitution and the original understanding of it to allow a court to do something and slice and dice up what immigration law would look like.

 

Hon. Beth A. Williams:  So Professor Harrison, is Mr. Katyal right? He’s raised several times the APA and the set aside language. Do you think that’s a correct reading of the APA, that Congress intended for set aside to extend beyond the parties and that that should, by extension, apply beyond the APA?

 

Prof. John C. Harrison:  Two things. First, as I said, I’m not sure. And one of the reasons I’m not sure—and people have written this about this a little bit in this connection—is the APA and the remedial structure that it created was, at the time it was adopted, largely aimed at adjudications. Rulemaking was substantially less common then than it is now. And exactly how the different provisions of the APA and similar statutes operate, with respect to rules, I think is a question that has to be answered. Some of those words certainly sound -- like set aside—that’s something a court does with the award of an arbitrator, for example. That sounds like it’s adjudicatory. And that’s sort of the body of questions that I would want to look at that I just don’t know the answers to.

 

The other thing I will say about the APA is that if it means that, then it is a congressionally mandated form of indivisible relief, which operates on an entire administrative decision. Essentially, what the court is doing is ordering the agency to rescind the entire act that it undertook. Indivisible relief is not intrinsically unconstitutional. If Congress decides they want it, they can have it. The thing I will say is that, where relief is necessarily divisible, then it goes beyond the authority of the courts to grant it to somebody who’s not a plaintiff.

 

Hon. Beth A. Williams:  So Mr. Katyal, how do you respond to concerns that universal injunctions are a one-way ratchet? So for the government, the ACLU brings ten cases in forums that it likes, and the government has to win in every single case in order to prevail. But the ACLU has to only win in one case, for example.

 

Neal K. Katyal:  Great. Before doing that, just on the text of the APA. Literally, this is the plain text that they, quote, “hold unlawful and set aside agency action.” Action. It doesn’t say courts are empowered to set aside agency adjudications. And, obviously, the whole structure of the APA is agencies do two things. They make rules and they adjudicate cases. Obviously, both are encompassed within the term “agency action,” just on the plain text.

 

Look. The one-way ratchet is, I think, a problem. It’s the kind of doppelganger of the percolation problem, and it does impose extra burdens on the federal government, as I certainly know well. At the same time, I think that’s actually the burden a federal government should have.

 

Again, not in every case. I think these should be done really rarely, but when you have a federal government that is so powerful, that is so capable of taking away people’s rights, I think they should at least temporarily have to run the table. They can always go to the Supreme Court or to the Court of Appeals first to try and get the injunction lifted. But ultimately, it strikes me as that’s the right way to do it. And again, these emergency cases are ones where there’s a constitutional command for uniformity or something like that.

 

Hon. Beth A. Williams:  So what about this argument that you can always go to the Supreme Court? Is that sufficient to say, well, the government can just ask for relief from a nationwide injunction if they go to the Supreme Court?

 

Prof. John C. Harrison:  Again, that’s a functional consideration. So in commenting on it, this is gravy. I’m going beyond what I primarily want to say. But the answer is not necessarily. That is one remedy, but the Supreme Court has a lot going on. It’s certainly not unheard of for them to have more than one emergency situation before it. And to say, “Oh, yeah. Any time there’s a real problem with a fire in this town, we just dynamite all the buildings right around where the fire is.” Yes, there are solutions, but that’s a costly and, frequently, as a functional matter, a costly and, I think, often an unnecessary solution. That kind of burden shouldn’t be put on a single institution that has a lot going on.

 

Neal K. Katyal:  So the proposition, though, is not any time there’s a fire. It’s any time that there’s a rare fire. [Laughter].

 

Hon. Beth A. Williams:  All right. We know have 15 minutes, so we’ll open it up to questions. I saw Professor Calabresi up first, so go ahead.

 

Prof. Steve Calabresi:  Thank you. My question is primarily for Professor Harrison, but also for Professor Katyal. And I wanted to talk a little bit about the history of injunctive relief. And to do that, I wanted to mention something about English courts as well as the American history of injunctive relief.

 

In England, from the 12th century until 1492, there were three common law courts: the Court of King’s Bench, the Court of Common Pleas, and the Court of Exchequer. Of those courts, only the Court of King’s Bench could issue writs of mandamus. When Henry the VII became king in 1492, he created three equity courts: the Court of Star Chamber; the Court of High Commission, which heard ecclesiastical cases; and the Court of Chancery, which heard ordinary equitable cases.

 

In 1641, the Court of Star Chamber was abolished because it had been abusive. The Court of High Commission was also abolished. The only equity court surviving when the Framers wrote the Constitution in 1787 was the Court of Chancery, and that was the only court you could get an injunction from. To get a writ of mandamus in England, you had to go to the Court of King’s Bench.

 

In 1837 or so, the US Supreme Court decided Kendall v. Stokes et al. And in that case, Congress had by statute prescribed that a certain number of mail carriers be paid by Amos Kendall, who was the Postmaster General to Andrew Jackson, a sum of money which they claimed they were due. Kendall refused to pay the money. Stokes, on behalf of the people, went to the court and sought a writ of mandamus from the lower court. The court issued the writ of mandamus.

 

And then in the Supreme Court, the issue was, “Do all the federal courts in the country have the power to issue writs of mandamus and injunctions? Or is this a special power, which could only be exercised by the Court of King’s Bench in England, which could only be exercised by a federal court of chancery?” And the Court found that all the courts in the country were courts of equity, and all the courts in the country could issue injunctions and writs of mandamus.

 

That takes us up to the Lochner period. And after Lochner, progressives became very concerned about court injunctions because they were often used to break strikes. So the progressives established what was called a three-judge district court, and only three-judge district courts could adopt injunctions. And this was to prevent the abuse of injunctions, which progressives thought the Lochner-era judges were engaging in.

 

In 1975, the post-Watergate Congress repealed that act because they wanted single-district judges to enjoin civil-rights violations, and they wanted to make it easier to get injunctions. So today, three-judge district courts only remain for voting rights cases. If you have a single judge able to issue an injunction, not only can that apply nationwide, but it also means that a single district judge in California can stop the governor and the state legislature of California from doing something that they want to do. Shouldn’t we go back to the system of having three-judge courts to issue injunctions, the system that we had from the Lochner era up until the Democrats repealed it for civil-rights reasons in the 1970s?

 

Equity is good, and a court of chancery is good, and writs of mandamus and injunctions have their place. But the broad history of both English and American law is that, mostly, that power has been limited in some way or another. And the nationwide injunctions being issued right now are not limitations of that kind.

 

Prof. John C. Harrison:  When I started thinking about this, one of the things I thought about was whether to suggest something like that. Because there’s legislation that has been introduced in Congress specifically about this problem. And one of the questions is a reform like that returning to the days of the three-judge district court, and the reason I didn’t say anything about that is because I genuinely don’t know what I think about that as an administrative reform. There is something to be said for it, this kind of relief. And again, I think the important part is not the nationwide character. It’s the as to all potential plaintiffs character. That’s the real issue here. There is something to be said for that, but the country’s experience with three-judge district courts has not altogether been happy, in part because whenever there’s a rule about having three judge district courts, those rules have to be administered.

 

And those rules further complicate the litigation. Back when there was three-judge district courts, there would be long preliminary debates about whether this really should go to the three-judge district court. Sometimes part of the case went to one judge, and the other part went to a three-judge court. And that’s another reason that Congress got rid of that system. So without giving the matter substantially more thought, I wouldn’t say anything other than that’s an option that should be on the agenda, but we have to bear in mind there’s a body of experience that shows that it has pluses and minuses.

 

Neal Katyal:  Just to add to that, there’s a real practical problem. I’ve litigated in three-judge courts, for example, in voting rights cases in which that still exists. I’m not sure the law still exists anymore, but the three-judge courts, the problem with that is when you have a three-judge court, it goes directly to the Supreme Court. There’s actually two levels there, not three. And for those of you who are concerned about nationwide injunctions, it actually might be better than the current system because, right now, it’s district court. Then it immediately goes to the circuit court within seconds, basically.

 

The district courts ask to stay their injunctions if they deny. Then the Solicitor General just authorizes an appeal pretty much on a rocket docket, and within a few hours, that appeal arrives at that circuit court. So better, it seems to me, to have actually four lower court judges, which is the current system deciding this, a district court judge and then three court of appeals judges, than to only have three.

 

Prof. Steve Calabresi:  One could-have three judge district courts with an appeal going to the court of appeals and then to the Supreme Court. All of this would require new legislation.

 

Neal Katyal:  Exactly.

 

Hon. Beth A. Williams:  Great. Is that Professor Barnett?

 

Prof. Randy Barnett:  Yes. Believe it or not, Steve Calabresi asked the exact same question I was going to ask [Laughter].

 

Neal Katyal:  I have never heard Randy so quiet.

 

Hon. Beth A. Williams:  I think you were next.

 

Questioner 3:  I think maybe it goes to that side before it comes back to me, or it’s up to you to decide.

 

Hon. Beth A. Williams:  Sure. Go ahead.

 

Questioner 3:  Maybe the issue of who should go should go to a three-judge district court, perhaps, but until we convene --

 

Prof. John C. Harrison:  See how long it takes with three people?

 

Questioner 3:  Until we convene such a court, I will go ahead and ask my question, which is primarily for John Harrison, but Neal Katyal is certainly welcome to comment as well. And that is, if I understand your argument correctly, and if I don’t, certainly tell me why I don’t, it’s actually find to have, or was fine to have, a wide range of nationwide injunctions or universal injunctions during the period when you could have the bills of peace. But now, that’s been displaced by class actions, and class actions are the only mechanisms. So that, I think, raises an issue or two. One, is it really the case that class actions have displaced bills of peace, or maybe they’ve given an alternative mechanism by which you can get nationwide injunctions, but also get a number of other things which are unique to class actions?

 

And the other is that if it is the case as you suggest that the bills of peace injunctions were permissible because they were representational, but being representational doesn’t require any actual agreement by these other parties that the party before the court will represent their interest and so forth, then it seems like a pretty thin notion of what’s representational. That would also, again, allow a pretty wide range of universal injunction cases, probably, I think in nearly all the situations where Neal Katyal would want them to exist – that is cases where there is a broad range in policy with many potential plaintiffs who are similarly situated. So if that is the case, it seems like maybe your argument ultimately leads in a direction that’s much closer to your opponent’s than may seem at first sight.

 

Prof. John C. Harrison:  Here’s what I think about bills of peace, based on my current knowledge of that, and there’s always more to know about historical things like this. That they were understood as being genuinely representational, that the courts would conduct at least some inquiry into the commonality of interest of the plaintiffs who were not present. So it seems to me—first point—is that requirement that there be genuine representation is meaningful, and it was understood to be meaningful then. It should be understood to be meaningful now, insofar as this is part of Article III. And the other thing I want to say is, yes, I do think class actions have other functions, but I do think they have, in effect, displaced anything other than the class action that would operate on the justification that it is representative. What Congress and the Court have done is say, yes, it’s possible to have a representative action, and this is what it looks like. It is a class action.

 

So they have occupied all of that space, and they’ve occupied other space, too, but they’ve occupied all of the space with the class action. One of the good things about having the class action, I think, is, I’ll admit, the concept of a representative action as we can discern it in history, as I say, I think it’s meaningful. It is a somewhat amorphous idea, just how representative does it have to be? Just how much of the interest of the absent plaintiffs have to be consulted? One good thing -- and you know I believe in rules. One good thing about the class action mechanism is that it takes that relatively amorphous concept and makes it significantly more specific and requires particular inquiries into what are the circumstances under which one party can genuinely be said to represent another.

 

Neal Katyal:  I guess I’d say two things. Number one is that Professor Harrison says that that he thinks under the bills of peace there was a true inquiry into the representational nature. I’m not sure of that. I’ve read a little bit about this. I understand there was an inquiry into whether others are similarly situated in the bills of peace, but that seems to me very similar to what happens in these nationwide injunctions, too. In those rare circumstances in which they should be imposed, it seems to me one of the questions is is that necessary? Is there some group of people at airports around the world or something that can’t effectively get relief in one place or another.

 

And the second thing I’d say is I do think your question really does underscore one of the tensions in this argument. Oh, we can just use class actions. We don’t need nationwide injunctions. Class actions have many of the same problems. I know Professor Harrison isn’t as focused on that, but others are. Percolation, asymmetric effects to the government -- if I win a class action injunction in district court, I only need to win one in any particular jurisdiction. And then nationwide, the government’s hands are tied, and there won’t be percolation in other circuits, absent a lifting of the injunction by the United States Supreme Court on emergency relief. So it seems to me that class action has the same kind of policy problems that do nationwide injunctions.

 

Hon. Beth A. Williams:  Over here.

 

Questioner 4:  Two short questions. First, if Professor Katyal’s right about the meaning of the APA, doesn’t that make universal injunctions mandatory in every single case, challenging agency rules or agency actions? And then, doesn’t that in turn undercut your claim that universal injunctions should be rare? Second, why can’t courts presume that agency rules are severable, as applied to every discrete litigant and every discrete circumstance? Normally, courts presume that statutes are severable in that way, unless it’s an abortion case [Laughter]. Why should the same presumption carry over to agency rules? And your argument seems to presume agency rules should be regarded as non-severable, but I think that presumption needs to be justified and not simply assumed.

 

Neal Katyal:  So I don’t think they can be severable just because of the text of the APA. Sometimes, you have a severability clause or something like that. Here, you really do have 706 saying, quote, "The reviewing court shall . . . hold unlawful and set aside agency action . . . found to be–" in excess of jurisdiction or contravening a constitutional right or whatever. That’s a very good point. I do think that if you can prove up to a court that the agency action is unlawful, then it would follow from the text of the statute that it has to be set aside.

 

Prof. John C. Harrison:  Let me add one thing about that. Whatever you think about severability in some other possible context, some APA challenges, like, for example, a failure to go through notice and comment, are the kind of thing that operate at the level of the rule.

 

Hon. Beth A. Williams:  Now we’re on this side.

 

Questioner 5:  So my question is for Mr. Katyal, and basically it is, "Is your version of percolation really percolation?" It seems to me that you have exactly the same problem that you’ve identified in many other circumstances where agencies, including such things as the IRS, may get an opinion they don’t like in one particular circuit or district court, and they will exceed to it in just that place. But they also have to make a decision: do we exceed to it in just that place or nationwide? And that becomes, therefore, an administrative decision. So your version of this puts the court in charge of deciding whether it’s going to be nationwide and takes it away from the administration, number one. And number two, I always thought that the whole policy argument about percolation was to give the Supreme Court a more developed view of what was going on.

 

Is it really percolation to leave it up to one court to decide and give only one judge -- or perhaps another version that you suggested is the district court and the circuit court for that particular area to have it developed only to that degree and not allow the Supreme Court to have the same issue developed more thoroughly and have a more thoroughly developed record before it? So at least in those two aspects, is your version of percolation really percolation?

 

Neal Katyal:  I might have used too much shorthand and might not have been clear enough as to what I’m saying. First of all, I think percolation is a big problem with nationwide injunctions. Second, I think that the Supreme Court avenue I’m talking about is a way to let 1,000 flowers bloom. So the way it works is say, I don’t know, the Ninth Circuit enjoins something that the President is doing -- or the district court of the Ninth Circuit, and then it goes to the Ninth Circuit. They say, yeah, that’s absolutely fine over a dissent, but then the Solicitor General has the option of going right to the Supreme Court and saying, “Please dissolve this injunction.” If they dissolve the injunction, it’s not like it’s just now the Ninth Circuit is the only ballgame. It now means that action will go into effect everywhere else because the government believes what they’re doing is lawful. So they will seek to enforce it in all the other circuits.

 

Litigation, the ten ACLU lawsuits will then be brought in all of those other circuits, and then you will have percolation through that mechanism. And so you’ll have, effectively, a blank slate for the courts of appeals on which to rule and to tee up a case, then, for the United States Supreme Court. Look, I don’t think this is ideal in almost any circumstance, but there are those rare circumstances when it is effectively the second best option. Because otherwise, you are dealing with the immediate deprivation of rights from people who otherwise can’t sue, who can’t get their rights protected through the class action mechanism. And it may contravene a constitutional command like uniformity.

 

Hon. Beth A. Williams:  I think we have time for one more question.

 

Questioner 6:  First question is should it be -- I’m not like Mr. Calabresi. I’m not that knowledgeable, but I think there’s a reasonable concern about having a district court judge from really anywhere constrain the President of the United States. One of my things is do you think it would be prudent that an appeal has to be found in, one, at the Supreme Court level before the Executive of the United States is constrained, number one? And number two, shouldn’t we be considering this as not only negative injunctions but also affirmative injunctions? Imagine if a district judge has an affirmative injunction that applies to everybody across the board. And how does this impact the equation? I think it’s reasonable to consider that. If you could, I’d appreciate it.

 

Neal Katyal:  Any such notion of an affirmative injunction just seems to me ridiculous on its own terms. That’s not a problem with nationwide injunctions. That’s a problem with the injunction itself. And any court that deigned to impose such a thing, as you’re suggesting, it would be the easiest thing in the world for any Solicitor General to get that lifted by the court of appeals. So that strikes me as a non-problem.

 

      Now, look, you could say the Supreme Court is the only one that can effectively carry out its relief whence there’s unconstitutional or unlawful action being taken. There’s a couple of problems with that. One, it would contravene the text of the APA, but, number two, I think it would really contravene our constitutional structure. Presidents can do all sorts of indelible, dangerous, anti-constitutional, unconstitutional things, and it takes a while to get a case up to the Supreme Court. So that strikes me, again, from the principle of so many of you in this room, a principle rooted in limited government, a very dangerous thing to just say you’ve got to get all the way up to the Supreme Court before your relief has any purchase.

 

Prof. John C. Harrison:  I largely agree with that. Everything I said about running three-judge district courts like this, I guess, multiplied at least by three, or maybe cubed, if it’s the Supreme Court of the United States where there are nine of them -- and they’re known to have strong views about issues. And the actual, original jurisdiction of the Supreme Court is, by design, quite narrow. There’s a reason we have this entire federal judicial system. So considering that as sort of a policy suggestion, I have doubts about three-judge district courts. And I think one point on which we disagree, the less the Supreme Court of the United States is called on in these situations, I think as a policy matter, the better for the country.

 

Hon. Beth A. Williams:  Okay. Well, thank you so much. I know Mr. Katyal has a hard stop at 2:15, so we’re going to end a little early. But thank you so much to both of you for being here, for giving your thoughts. This is a really live issue in the courts, so it’ll be interesting to watch it over this term and over the next couple of months. Thank you.

2:45 p.m. - 4:30 p.m.
Showcase Panel IV: Does Agency Regulatory Power Extend Beyond its Formal Power, and Should It?

2018 National Lawyers Convention

Topics: Administrative Law & Regulation
The Mayflower Hotel - State Room
1127 Connecticut Avenue, NW
Washington, DC 20036

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The Federalist Society’s Regulatory Transparency Project working group on agency enforcement and coercion released a report on July 5, 2017, which detailed numerous instances of potential coercive behavior by agencies. Additionally, the Administrative Conference of the United States (ACUS) sponsored a study in 2017 of agency guidance—advisories, interpretive letters, enforcement manuals, fact sheets, FAQs, etc. The ACUS study drew on interviews with 135 individuals across agencies, industries, and NGOs, finding that regulated parties often (though not always) have no practical choice but to follow informal agency guidance even when it is not mandatory. The ACUS report concluded that certain structural features of modern regulation—while not dismissing the concern of intentional or deliberate abuse—impose a strong incentive on regulated parties to figure out what an agency wants, even beyond the limits of its legal authority, and to do just that, regardless of the format in which agency wants are expressed. Can agency coercion be reduced or eliminated without reducing needed discretion in the agency?

  • Hon. C. Boyden Gray, Founding Partner, Boyden Gray & Associates
  • Prof. Kristin Hickman, Distinguished McKnight University Professor and Harlan Albert Rogers Professor in Law, University of Minnesota Law School
  • Prof. Sally Katzen, Professor of Practice and Distinguished Scholar in Residence; Co-Director of the Legislative and Regulatory Process Clinic, New York University School of Law
  • Prof. Nicholas Parrillo, Professor of Law, Yale Law School
  • Moderator: Hon. David Stras, United States Court of Appeals, Eighth Circuit 

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Event Transcript

Hon. David Stras:  Wow, I barely had to say anything. Thank you for being quiet at the appropriate time. Welcome. This is the Showcase Panel IV, and the title of our panel is "Does Agency Regulatory Power Extend Beyond its Formal Power, and Should It?" I am your moderator, Judge David Stras, United States Court of Appeals for the Eighth Circuit. And we’ve got, I think, a wonderful panel set up for today. And we're going to talk, I think, a lot about informal agency guidance, coercion by agencies, et cetera.

 

      I'll let the experts do most of the talking, but the way we've set up this panel, like many of the panels at the convention, is we've set up a six- to eight-minute, probably an eight-minute opening presentation by each one of the panelists to sort of get their opening argument out there. Then I'm going to lead a short, guided discussion and ask some questions, maybe the panelists might ask questions of each other in the course of answering my questions. And then eventually, we're going to open it up to the floor for questions from all of you, which is always, if not unpredictable, one of the most interesting parts of the entire discussion.

 

      So with that said, and again, we're going to start from my right and go to my left, our first speaker today the Honorable Boyden Gray who's the founding partner of Boyden Gray & Associates. He's well known to many of you, I'm sure. He worked in the White House for 12 years, first as Counsel to the Vice President during the Reagan administration, and then as White House Counsel to President George H. W. Bush. He's worked on a variety of projects, and I'm going to talk about at least one of them that's relevant to what we're doing today. He worked on the original Executive Order 12291, requiring a cost-benefit analysis and White House review of regulations. During the presidency of George W. Bush, Mr. Gray was U.S. Ambassador to the European Union and the U.S. Special Envoy to Europe. He has also served as the Chair of the Administrative Law & Regulatory Practice Section of the American Bar Association. Without further ado, I will turn it over to Boyden Gray.

 

Hon. Boyden Gray:  Well, Judge, thank you very much. I suppose it's appropriate that I'm on the right, at least from your perspective, and Sally is on the left. Sally rewrote the order I wrote, which is still the order, I think, so she can talk about it, too. Maybe she will. And we were once partners, actually. So there is -- it's nice that she's on the other side.

 

      It is true I was Special Envoy for Eurasian Energy. My last night in Brussels as the Ambassador, I was invited by the Head of the European Defense Force, which, by the way, doesn't really exist --

 

[Laughter] 

 

      -- kerfuffled with -- between Mack Rawlin (sp) and Trump over that last week. I was asked to go to dinner, and even though he doesn't command much of a force, he does command, or did command, a nice house, and a chef, and a staff. And I couldn't go because I was packing up, but to entice me, he sent me the guest list. And I was identified as the Honorable C. Boyden Gray, U.S. Special Convoy. [Laughter] And so I felt that I'd had a wonderful three years in Brussels making my point, which wasn't about convoys or about NATO.

 

      Do agencies project -- assert more power than is formally right, and should they? They should not. Do they? Yes, they do. I think that the reason they do has been probably discussed already at this conference and at many other conferences. It's the interplay between the delegation issue and Chevron deference. But they do take advantage of, have taken advantage of that interplay to exploit so-called ambiguities to expand their power. And that, in turn, is used with all the other regulatory authority that they have amassed over the last two or three decades, with respect to an industry or a particular company, to basically scare people, spook people out of seeking judicial review.

 

      Now, this wasn't the way things were when I first came here, more years than I'm going to admit. Judicial review of agency action was considered routine and expected, and not considered a cause of hostilities. But today, it's considered bad, and the terminology is no longer judicial review. The terminology is, "Oh, you're suing the agency." Well, not really. I mean, it's part of the APA, the Administrative Procedure Act. It's normal. But they do it, and my favorite example is the combination of DOT, and EPA, and California Air Sources Board spooking the automobile companies out of making any challenge to any rule, any guidance, any action taken by the EPA for the entire Obama presidency. Now, that's quite a feat to prohibit judicial review of any action that hadn't yet even been contemplated by those agencies.

 

      Now, is this a hopeless situation? Well, the courts -- we can get into that, but until the Chevron thing is kind of cleaned up, the courts are kind of mixed up in this in a way that has got to be unscrambled. I want to focus for just three or four minutes on Congress, which is where this problem begins. And Sally might want to say, "Well, gee whiz, only the experts in the agencies can really handle these difficult situations, " to which I would answer, "No, I've sat through enough," and so has she sat through enough in the careers that we've had—which are about the same length of time—to know that Congress is perfectly capable, both through oversight and through the original legislation, to be precise and to pin the agencies down or keep them in their place. But they just haven't done it. And I don't -- I mean, there are lots of reasons why.

 

      I ask people when I speak about this, and you can raise your hands, how many people have actually been engaged in a real fight in a subcommittee over whether an amendment is an amendment to the third degree? I don't see any hands. Well, back in the old days, that was often the biggest fight. And sometimes the most entertaining action in Washington was not a Supreme Court argument, but a subcommittee markup session where food was thrown, and all kinds of people were called in to answer a question was an amendment to the third degree really an amendment to the third degree, and therefore, invalid or not? And everybody knew every word in the statute. It would have been impossible for anyone like Pelosi to say, "We have to pass this legislation in order to find out what's in it." You couldn't get out of a markup without knowing every single word by heart, and that used to be the way it worked.

 

      Now, why has it changed? They go home on Thursday morning, they come back Tuesday afternoon, so it's like a two-day workweek. And you can only do so much in a two-day workweek, especially when you have to raise all the money they feel they have to raise. So that is part of it. I don't know. There are other reasons for it. We can get into that in the Q&A. I don't have time to go into it now, but Congress has really been running away from its oversight role and its legislative role. And it has, in fact, encouraged agencies to expand, encouraged big business, which benefits what Jamie Dimon calls Dodd-Frank -- Jamie Dimon calls Dodd-Frank his "moat." And by that, he doesn't mean his M-O-T-E in his eye, he means the water around his castle to protect him from competition.

 

      Now, Congress is capable of fixing these things, as I say. Hensarling got some legislation through last year which lifted the regulatory burden that Dodd-Frank had placed on big banks, lifted it off of community banks, which had nothing to do with the crisis to begin with and couldn't afford to keep up with all the stupid regulations. And they now started re-lending to small businesses, and that is part of the reason for the recovery. So Congress can correct things. It doesn't have to be the courts alone, and it doesn't have to be beating regulators over the head. Congress can fix it. Congress is perfectly capable of fixing it, but I think, in addition to trying to live up to their own obligations, they're going to have to go back to a five-day workweek.

 

      I'd say one more thing. It may be that they actually purposefully leave statutes vague in order to encourage lobbying through the congressional offices to the agencies as a way of generating more campaign contributions. One sort of hint about this is the fact that after all these years, we still haven't been able to have the independent agencies covered by the executive order that I initially initiated, and Sally polished up. This is sort of ridiculous, in a way, that these agencies which now really do have a big hunk of the economy, are still so-called independent, and there's no legal reason in the world why they should be. It's just pure politics, and part of the politics may be the money. And so always follow the money, they said somewhere, and I think that's what one should do now. But Congress has got to go back to work, and I think a few swift kicks in the butt by the courts might also be helpful.

 

Hon. David Stras:  Thank you, Boyden, for your comments. Our second speaker is Professor Nick Parrillo, Professor of Law at Yale. His principal field is administrative law, and recently he was commissioned by the Administrative Conference of the United States to study how the federal government's use of guidance documents, which the public often has a strong incentive to follow, even if they're not binding law, could be appropriately managed. My understanding is that his primary focus will be talking about the study and telling us about it. The study resulted in a best practices on agency guidance, and eventually, some testimony before Congress. He's also one of 40 public members of the Administrative Conference of the United States.

 

Prof. Nicholas Parrillo:  Thank you, Judge. And thanks very much to The Federalist Society for the opportunity to be here. As the Judge said, I'm going to talk about this study I conducted for the Administrative Conference on the role of guidance documents in federal regulation. My working definition of guidance documents was a conventional one. That is, polices are interpretations announced by an agency that are officially non-binding, and for that reason, can be issued without notice-and-comment rulemaking. For the study, I interviewed 135 individuals across agencies, industry, and NGOs covering several different regulatory areas.

 

      Now, I should start by saying that very often, regulated firms want guidance because it provides predictability in how the agency will make individual decisions. But also, sometimes, firms express concern that guidance practically operates like a binding regulation. My study aims to look into this concern in a way that is close to the concrete specifics of particular regulatory schemes. And what I find is that firms can face strong incentives to follow guidance, but it depends on the nature of the regulatory statute and on the structure of the agency and the industry.

 

      In particular, I find four structural factors that, when present, incentivize firms to follow guidance. So the first structural factor is preapproval requirements. That is, the statute says the firm has to win the agency's affirmative assent in order for the firm to do its business; for example, FDA premarket approval. Firms need the agency's assent, and fast, and the best way to get that assent is to follow the agency's guidance.

 

      The second structural factor is if the firm has repeat interactions with the agency, and the regulatory scheme is so complicated that the firm will inevitably fail to comply with some requirements some of the time, under those circumstances, the firm wants to build a reputation in the eyes of the agency for being the kind of company that's trying to comply. That way, when the company inevitably fails to comply on some matter or other, the agency will interpret that non-compliance as a mistake, not as intentional. The firm can build up that kind of reputation if it generally follows agency guidance.

 

      The third structural factor is if the consequences of agency enforcement are so severe that firms do all they can to avoid enforcement even being initiated against them in the first place. That can be the case, for example, in markets where the market takes the initiation of enforcement as a signal that the firm cannot be trusted by its counterparties, or in situations where the credibly threatened sanctions against the firm, in the event that it is found liable in an enforcement proceeding, are so draconian that firms view settlement as the only option should enforcement get started.

 

      And finally, the fourth structural factor is compliance infrastructure. And by that, I mean that the firm has hired large numbers of compliance officers to be its primary interface with the agency, as has become the trend in certain industries. It appears that compliance officers, as a matter of their professional culture, are likely to put an especially high value on cooperation with the agency compared with the culture of, say, in-house counsel. A firm that interfaces with the agency more through compliance officers may, therefore, follow guidance more.

 

      Okay, so those are four structural factors that push firms to follow guidance. And an agency official who issues guidance does not call these structural factors into being. And typically, that official has no control over these structural factors. But the official may anticipate that the factors, when present, will cause firms to comply with any guidance that he or she, the official, issues. The four factors that I described are common, but they are far from universal. You can find regulatory areas in which the four factors are weak or absent, and in those areas, interviewees report relatively weak incentives to follow guidance. Examples of those would be FTC consumer protection regulation, CFPB regulation of non-bank institutions, or OSHA regulation beyond the largest employers.

 

      But even when these structural factors do operate, there's still a way of stopping the guidance from becoming practically binding. The officials who conduct the individual proceedings to which the guidance document pertains, the individual licensing decisions, the individual enforcement decisions, or the like, can be flexible in how they apply the guidance document. In other words, they can be open-minded toward arguments by regulated firms that the guidance document shouldn't be applied, either for general policy reasons or as applied to that particular decision. The more flexible and open-minded the officials are in these individual proceedings, the less coercive the guidance is, even if the structural factors that I described earlier are operating.

 

      But are officials flexible? Sometimes they are, but sometimes they're not. And we might assume at first glance that flexibility is the official's path of least resistance, such that inflexibility, when it happens, must be a sign of a deliberate effort on the part of officials to impose their chosen policies without notice and comment. But while there are some deliberate efforts like that, I think we should not assume that these are usually what is causing agency inflexibility, where it exists. Officials in large bureaucracies, especially government bureaucracies, run into major obstacles to being flexible, even when they subjectively want to be flexible and recognize that they should be flexible.

 

      Let me discuss one such obstacle. An official in an agency, when asked by one firm to be flexible, will often be under pressure from other outside stakeholders who want the official to be inflexible, or to use a different word, who want the official to be consistent. These stakeholder demands for consistency spring from rule of law values that officials would be remiss to ignore. If one firm gets a departure from guidance, that firm might get a competitive advantage. So the firm's competitors will want the agency to adhere to the guidance consistently to maintain a level playing field.

 

      Now, it is possible for an agency to be flexible while taking due account of these understandable demands for consistency. To do that, an agency that departs from guidance in an individual proceeding should announce the reason for its departure and make that reason applicable to all similarly situated firms going forward. By following this approach, the agency can keep an open mind to new arguments, but also keep the playing field level.

 

      There's just one problem. Formulating defensible reasons for departures and writing them up takes staff time and resources that are in short supply, so the agency may default to being rigid because rigidity is a cheap way to be fair. Now, you might respond, "Just have the agency do all its policy through notice-and-comment rulemaking." But that, too, runs up against shortfalls in resources. Or you might respond, "Okay, just have the agency not announce general policy at all." But that, of course, runs against objections from industry about how guidance is necessary for predictability in the individual proceedings that are going to occur in any event.

 

      So overall, the problem of guidance is shot through with hard trade-offs. The administrative conference has suggested managerial reforms to promote flexibility in a way that's principled and fair, but these reforms are costly, so priorities will have to be set. For example, allocating resources to providing flexibility in situations where structural factors like the ones I described earlier would otherwise impose very strong pressure to comply. That's just a sketch, happy to talk about it more in Q&A.

 

Hon. David Stras:  Thank you for your comments. Before we move on to our third speaker, I do want to acknowledge that, as with the rest of the program during the convention, this is being live streamed, so welcome to all of those who are watching us on the internet.

 

      Our next speaker, our third speaker is a former colleague of mine from the University of Minnesota, Professor Kristin Hickman. She is an authority in the fields of tax administration and administrative law. She's the co-author of an administrative law treatise and a casebook on federal administrative law. She is also a public member of the Administrative Conference of the United States. And as I said, she has the wonderful distinction of having started at the University of Minnesota one week apart from my beginning in 2004. I'll turn it over to my good friend, Kristin Hickman.

 

Prof. Kristin Hickman:  So what David neglected to say was that I started a week before him with the result that then he had to take notes at the faculty meetings for the rest of the year as the junior first year law professor.

 

[Laughter]

 

      So I have to start with a couple of disclaimers. The first is that although I was invited to speak here today in my professorial capacity, I'm also presently serving as Special Advisor to Administrator Neomi Rao at the Office of Information and Regulatory Affairs. And my thoughts today are mine and do not represent the views of OIRA or Administrator Rao. I also have to mention that a lot of my thoughts derive from an article that I'm presently working on with a co-author, Mark Thompson. So at some point, when you're co-authoring, you lose track of which thoughts are yours and which thoughts are your co-authors, and they kind of get blended together, but I do think everything that I'm going to say.

 

      I do want to start by agreeing with Boyden and probably a lot of the people in this room that at least on some level, we do have a guidance problem. Agencies too often use subregulatory guidance in problematic ways, leading to real-world consequences without offering affected parties the protections of public participation, APA procedural and process requirements, and pre-enforcement judicial review. The guidance problem contributes to perceptions that agencies are unaccountable, and unfair, and illegitimate, but I also don't think we'd want a world without guidance. The result is that the problem is complicated.

 

      The title of this panel asks whether an agency's regulatory power extends beyond its formal power. When we talk about an agency's formal regulatory powers, we mean the power to adopt legally binding regulations. And some agencies can also act with the force of law through and exercise policy making discretion through adjudications as well. These formal powers come from statutes. If Congress doesn't give an agency the power to act with the force of law, then the agency doesn't have that power. By comparison, an agency's power to issue guidance derives not only from an act of Congress, but also from the Constitution's Article II.

 

      When Congress enacts a statute and assigns an agency the responsibility of implementing and administering a statutory mandate or program, then the agency is constitutionally obligated to execute that law. The responsibility of executing the law necessarily involves interpreting the law, reaching conclusions about when the facts and circumstances exist that trigger rights and obligations, and making judgments about enforcement priorities. It is in all of our interests to encourage agencies to be forthcoming, to document and publicize their thinking with respect to these decisions, and this sort of transparency actually facilitates accountability and oversight. Moreover, regulated parties want guidance, as Nick so ably demonstrated. As I tell my students, prudent regulated parties and their attorneys seek every scrap of guidance they can get, no matter how informal, to help them understand the regulatory climate in which they operate and to make informed decisions regarding their primary behavior.

 

      So in addressing the guidance problem, how do we avoid throwing out the baby with the bathwater? Part of the guidance problem is that regulated parties want to be able to rely on guidance without being bound by it. And that position is sometimes a little bit difficult to square, at least as a matter of law. Talking about the guidance problem in the abstract is complicated by the fact that we have lots of different types of guidance out there with different degrees of authoritativeness, different degrees of thoroughness. Some guidance is so informal and equivocal with enough disclaimers that sensible people understand that it's not all that reliable, it's not especially binding in any real sense.

 

      Other guidance is authoritative. It's signed by agency leadership, and it seems more definitive. Some guidance falls in the middle. It's not authoritative, in that leadership hasn't signed it, but everybody understands that leadership has reviewed the guidance, that the guidance reflects leadership's opinions, and that agency enforcement staff, correspondingly, are going to follow that guidance faithfully. And some of that guidance, while not formally binding or even authoritative, uses unequivocal "comply or else" type language.

 

      Finally, we've got guidance that doesn't specifically dictate regulated party behavior, but nevertheless, alters the legal landscape in which the agency and regulated parties operate, such that it has indirect and meaningful consequences. There's a tendency to want to resolve the guidance problem by pushing any remotely consequential agency pronouncement into the legislative rule box with all the corresponding procedural protections. Sometimes, that may be the right answer, but given the burden of those procedures, pushing too much guidance into the legislative rule box seems most likely just to curtail the flow of agency communications that people want, which just turns informal agency decision making into a black box, and actually diminishes agency accountability.

 

      So because I assume that Congress is not going to stop adopting complex regulatory regimes and relying on agencies to implement and administer them, my own answer to the guidance problem, which somewhat echoes what Boyden had to say, is pre-enforcement judicial review, applying the Skidmore and State Farm standards to a wider range of agency guidance documents. Maybe not all of it, but certainly the more consequential stuff. Congress, through the APA, has set up the courts as an important check against agency power. Courts can evaluate agency guidance documents for consistency with statutory meaning and for evidence of reason decision making, holding agencies that act inconsistently to a higher responsibility under both standards, and invalidating the guidance if the agency can't satisfy these relatively mild thresholds. Now, maybe not every consequential guidance document is going to get to court, but the mere availability of meaningful pre-enforcement review will go a long way toward curtailing agency's worst guidance practices and facilitating perceptions of the legitimacy of agency guidance.

 

      The primary obstacle to judicial review of agency guidance, using the Skidmore and State Farm standards, is finality doctrine, which often operates to keep guidance out of court until the enforcement stage. The Supreme Court, historically, has taken a pretty pragmatic approach toward finality that tires to look at the whole picture. But in Bennett v. Spear, Justice Scalia condensed the Court's prior finality analysis into a two-part test that at least sounded narrower and more legalistic. That test asks whether the agency action in question represents the consummation of the agency's decision-making process, and whether legal consequences will flow from it. Interestingly, although Justice Scalia's language in formulating this two-part test sounded narrower and more legalistic than the Court's earlier finality jurisprudence, his application of the test wasn't actually so.

 

      Regardless, too often the Department of Justice has pushed the line, and the circuit courts have been willing to adopt a narrow understanding of the words consummation and legal consequences in that standard that essentially would limit pre-enforcement judicial review to legislative rules or guidance documents that a court thinks really should have been legislative rules and are being challenged as such. This interpretation of Bennett v. Spear is not consistent with the Bennett opinion itself, nor with the Court's broader finality jurisprudence, including the more recent Sackett and Hawkes decisions.

 

      But while not every circuit court decision has followed the more legalistic version of Bennett, nevertheless, the Bennett framing and its aftermath have lead to -- they've had the overall effect of moving the analysis toward a more legalistic and less pragmatic conception of finality, with the result that conventional wisdom in administrative law circles now holds that guidance is not final, so it's not reviewable by courts on a pre-enforcement basis. In other words, the finality doctrine pendulum has swung too far in one direction, going from judicial activism that perhaps we saw in the 1970s and the 1980s past judicial restraint and approaching judicial abdication in the context of agency guidance. We need to nudge finality doctrine back in a more pragmatic direction to allow courts to serve their proper role in ensuring agency accountability with respect to agency guidance.

 

Hon. David Stras:  Thank you, Kristin. Our last speaker, before we get into sort of a more interactive discussion, is Professor Sally Katzen, who is a Professor of Practice and a Distinguished Scholar in Residence at NYU Law School. She has extensive, like Boyden, extensive government experience, having served in the Clinton administration as the Administrator of the Office of Information and Regulatory Affairs in the Office of Management and Budget, Deputy Assistant to the President for Economic Policy, and Deputy Director of the National Economic Counsel in the White House, and then as Deputy Director for Management, OMB. She also served as the head of the Agency Review Group for the Obama/Biden transition with responsibility for the Executive Office of the President and all government-wide agencies. Her wide-ranging experience with administrative agencies and the Executive Branch will surely add to our discussion today.

 

Prof. Sally Katzen:  Well, thank you. And thank you very much for inviting me to be here today. I have always admired and commended FedSoc for including speakers with different viewpoints. And I truly appreciate you're willing to listen, in fact, to seek out, somewhat unorthodox positions. I also appreciate the structure of our panel today with Boyden and me being the bookends. We are, in many respects, bookends. As he said, we go back a very, very long way and have had parallel paths working in the same law firm, having similar government positions. He drafted 12291, I drafted 12866, for those of you who like to rattle off the executive orders for regulatory review. We've been friends for years, although we agree and disagree about a number of things while remaining respectful, and I wish that that were a more frequent trait that we would find in this city. From my lips to His ears.

 

      Okay, to the subject at hand. I wanted to start with guidance because Nick and Kristin spent so much time on that. They've pretty much covered the field. I just want to emphasize a few things. As Nick said, agencies are turning to guidance not out of ill will, or aggressivity, or a grab for power, but for a number of reasons, one of which is the formidable process that's necessary to do rulemaking. In the APA, informal rulemaking is called informal. There is nothing informal about rulemaking today. Nothing.

 

      Aside from the notice and comment and reasoning basis in the APA, there's the judicial gloss on those terms and what constitutes sufficient notice and sufficiency of the reason and basis. There are other congressional statutes that have been enacted from regulatory flexibility, unfunded mandates, small business regulatory enforcement processes -- I could go on and on. And then there are these wonderful executive orders, of which I'm very, very fond, that specify that an agency has to say not only what it wants to do, what information it's based on, and how the proposal will solve the problem, and what alternatives there might be, and the costs and benefits of those alternatives. Don't get me wrong, I don't disagree that these requirements are appropriate. I fully support those kinds of requirements.

 

      The consequence is better decision making, but it takes time. We're not talking months, we're talking years to do a significant regulatory action, so sometimes an agency might seek an alternative to notice-and-comment rulemaking. It might want to use soft power to push the boundaries, and there are tales to be told and anecdotes that are thrown around, and I'm not naïve, it happens. Agencies do, sometimes, act too aggressively. But our Ad Law casebooks show that when this happens, the courts do step in. There are constraints, language about binding effect, either on the agency or on the regulating community, and there's remarkable consistency among the lower courts in what it takes to survive judicial scrutiny.

 

      So I would caution against painting with a very broad brush, condemning guidance as illegitimate. It might make people feel good, but I think that this administration is finding that by being highly resistant to dispensing guidance, they're actually not advantaging some of those whom they would like to. As Kristin has said, guidance serves a very important function. It tells people what an agency is thinking. And better to be upfront and tell them than to have secret law. That has always been, I think, an important factor in this.

 

      Turning to Boyden --

 

[Laughter]

 

      -- he says that during the Obama administration, regulated entities were scared or spooked out of seeking judicial review. As somebody who has to try to keep up on the cases that are coming out of the courts, I almost wish that that were so. But there were an awful lot of cases that went to trial, that went to hearing in courts of appeals, and a lot of LOI. I believe the courts have been in play here. He also said that Congress could do a better job of being more specific in solving some of these. I agree. If we could solve that problem, I think we'd be going a very long way.

 

      But we have to remember when we look at this, and I think Boyden's real concern, if I may, is that the administrative state is too big. It's gotten out of hand. It's not controlled. It's nothing like what the Founders envisioned. True. But this country has gotten very big. It has grown from the Thirteen Colonies on the edge of the Atlantic Ocean, with mostly white males making decisions, coming from agrarian backgrounds, to a very big country whose economic interests lie in a global—I use the term global—economy, and who represent and include people of different races, genders, religions. It has gotten enmeshed in technologies that were unthought of. It is doing things that could not even be imagined. I remember in my youth reading comic books that were sort of sci-fi, science fiction. We are so far beyond anything in the imagination of those people. And yet, our government has not truly responded to that.

 

      This may come as a shock to those of you who keep saying, "We need a smaller government." In the 1950s and the 1960s, we had about 180 million people in this country, and roughly 1.8 million civilian employees working for the government; 180, 1.8 million working for the government. Over the next 50 years, we enacted laws. And I'm saying Congress enacted laws. These were not generated by the agencies. These are relating to auto safety, occupational health and safety, environmental protection, healthcare, just to name a few—a very few—of the areas that Congress decided were appropriate areas and which the courts sustained. We now have roughly 325 million people, not quite double, and our federal civilian workforce is about 2 million, two-tenths of a point more than we had in the '50s.

 

      In addition, in the last several decades, we have seen straight-lining or declining budgets for agencies. And the situation at many agencies is, frankly, appalling. When I got to OMB in '93, the State Department was using Wang. Only those who have very grey hair appreciate how out of date that is. Agencies do not have information technology comparable to the businesses that they are supposed to monitor in some respect. I mean, there's a lot of different issues, and that's another battle which doesn't come here. I just want to emphasize that the agencies are doing what they were told to do. That is the crucial phrase from Article II of the Constitution. Take care to faithfully to execute the law. They're trying to do that. They make mistakes, of course they do.

 

      But on the other hand, we have the courts, which is why this organization is so invested in, and appropriately so, the selection of judges. We have the courts that make a difference in this country. We have a judiciary that's dedicated to baseline norms of legal regularity. And the agencies have been kept honest, whether it's pushing back against Obama-era regulations, which some have said have gone too far, or whether it's chastising the agencies when they fail to keep faith with the law, as has happened by a number of courts with respect to Trump administration decisions to delay effective dates, to stay, to hold in abeyance, or to rescind existing regulations without following the appropriate course. The constant theme, whether it's pushing back Obama or pulling forward Trump, is the same: the law, as it should be.

 

Hon. David Stras:  Thank you, Sally. I've got a few questions that we can start with, then eventually we'll move to questions from the audience as well. I'm going to show a little bit of my own bias, and I use that term a bit loosely, but before becoming a federal judge, I was a state judge—and this will bridge a little bit of this morning's program as well—for seven and a half years. And in Minnesota, we had one flavor of administrative law, and that was a regulation, which we all are familiar with. So far, I've been a federal judge for nine, ten months now, and it seems that informal -- in addition to regulations, that informal policy guidance comes—it's kind of like Baskin Robbins—in 31 flavors.

 

      So far, I've seen guidelines, handbooks, manuals, guidance, dictionaries, letters, opinions, and policy statements, and I'm sure there's a lot more out there. And they range from the very specific, which is a handrail needs to be so many feet off the ground, to general statements of intent about what the agency is trying to do. For those out there who don't specialize in this, and I'm -- this is not my specialization, I'm a generalist -- how should courts, and how should litigants, when they encounter these sorts of things, what should they do? How should they treat them? And is this a good thing to have all of these different things out there? A lot of times I say to my clerk, "So what's this? What do I do with this thing?" And so I'm asking you. What do we do with all these different flavors?

 

Hon. Boyden Gray:  Well, if you want me to give one short answer, just to repeat what I said is that if you could get in a court a little easier, people like you would quickly jolt and knock it down. But the agencies have this way of intimidating you out of even trying to get anything they do to you reviewed because if you do ask for review, you better watch out. The next time around, they start to regulate you, even watch it in this round. So there is real intimidation. I'm just firmly -- it's happened to me, and when you have no accountability and Congress is sort of asleep at the switch, agencies will do what they can do. I mean, why not? It's a freebie. And so that would be my answer. The court thing, the suggestion for more pre-enforcement review, well, I think that's a good suggestion. We tried that to challenge the CFPB, and we filed our action in 2012, and only this year did a court of appeals render a decision. That's six years. That's rocket docket stuff.

 

[Laughter]

 

      The D.C. Circuit is not overwhelmed by cases. The reality, I think, is that even before the last three judges were added by President Obama, it had then the lowest case load of any court in the country. Now, I think it has really the lowest case load, and I've been told about certain judges on the D.C. Circuit who schlepped secretly around the country searching for cases to sit on because otherwise, they would grow tired of boredom. So there's room to do this if the agencies weren't in such a retaliatory mode. That's my view of why the caseload here in the D.C. Circuit is so low.

 

      Doug Ginsburg once asked me -- we were on a drive out in California to a conference, and he was then Chief Judge, and he said, "How come we have such a low caseload?" And I said, "Well, Judge, I think it's because the agencies are scaring people out of asking for your oversight, and you are partly responsible. Your decision in Business Roundtable v. SEC would spook any agency out of judicial review, so I'm not sure I blame the agencies, but you started it." Anyway -- no, no…

 

[Laughter]

 

Hon. David Stras:  Others?

 

Prof. Nicholas Parrillo:  I mean, I certainly agree that guidance is very much non-standardized across lots of different agencies. It comes in all sorts of different formats with all sorts of different labels. I mean, the conventional legal definition of it at the federal level it that it's some communication or statement by an agency that falls into the bin of general statements of policy or falls into the bin of interpretive rules. But those are categories that are often -- they may be applied ex-post by the agency when faced with litigation if someone challenges them for why they didn't put a certain statement through notice and comment.

 

      And also, they can certainly come up in the course of counseling within the agency, "We want to issue this or that document with whatever name. Do we have to go through notice and comment for it?" And then the agency counsel look at it and say, "Well, could we argue that this is an interpretive rule or a policy statement?" So there's that lack of standardization.

 

      And there's all kinds of variation among guidance. Perhaps one of the most important dimensions of variation is whether the guidance is addressed to specific regulated parties in response to specific questions that, say, one company asked, or whether it is written up as a more comprehensive guide, more on the initiative of the agency officials. But I should note that one of those kinds of guidance often leads to the other. You may have the agency initially saying nothing about how it's going to interpret some regulation or exercise its discretion, but then you have firms calling up the agency, showing up and asking questions, and you have front line officials giving individual answers. And then you have an agency manager saying, "Well, wait a minute. Someone in this office is giving one answer, and someone in the next office is giving a different answer. We need some consistency."

 

      And also, it's unfair that the people who show up get all this clarity. What about the people who aren't sophisticated enough to show up? Don't they deserve some clarity as well? And then you have the managers taking the initiative to write more comprehensive forms of guidance, a manual, as opposed to merely a series of letters that maybe are posted on the internet.

 

Prof. Kristin Hickman:  So not to discourage you, but the IRS alone -- my friend Don Korb, who used to be the IRS Chief Counsel, when he was done, wrote an article where he walked through all the different kinds of Treasury IRS guidance, and he identified 27. And they change periodically. They get rid of some, they start new ones. It's an impossible task, I think, to keep up with it all.

 

      Not to belabor the point, but when a case comes in front of you, the only thing I think you can do is two things: State Farm and Skidmore. Skidmore does it -- to the extent that it interprets the statute, is it consistent with statutory meaning? And under State Farm, is there evidence of reasoned decision making? That can vary depending on exactly what the particular guidance document is trying to accomplish. It can vary depending upon whether the agency's being inconsistent, as sometimes happens from administration to administration, or as agencies just change their mind and try different things. But those two doctrines give you a lot of latitude while at the same time telling you what to do.

 

Prof. Sally Katzen:  I would join Nick and Kristen on this one. I think if it helps at all, the lack of standardization reflects, to some extent, the lack of standardization among agencies. Each is created by Congress for a specific purpose. It's given a specific mandate. Sometimes, it's given specific tools. If not, it gets creative. But they have different tasks, and so you would not think that they would be uniform in any way. I always had thought of NPRM, I had finally gotten it down, notice of proposed rulemaking. And then I heard about NOIs and other -- Nopers -- and other terms that other agencies use. I guess at some point, breathe. Accept the fact that there are differences, and that we can live with them.

 

Hon. David Stras:  And sort of a follow-up question -- I think we have a range of opinions on a great many things, but one of the things where opinions, I think, range here is, I think that Kristen takes informal guidance as a given. I hear Boyden saying that informal guidance is generally a bad thing. And I hear Sally saying that we live in a big country, and maybe informal guidance helps. It helps guide behavior. And I guess my question is to sort of get you all talking on the same page, not saying the same thing, necessarily. I think that's impossible. But is it a good thing? What are the specific advantages, if you think it's a good thing, and what are the disadvantages of a world in which much of law is governed by informal guidance, it seems? We're talking about, again, pages and pages of stuff out there on a whole host of topics.

 

Prof. Sally Katzen:  Well, let me start by saying --

 

Hon. Boyden Gray:  Well, I'll --

 

Prof. Sally Katzen:  Go.

 

Hon. Boyden Gray:  I'm just a broken record on this. Guidance is not only helpful; in some cases, it's essential. And I'm not saying there shouldn't be any agency guidance. All I'm saying is that if there is a little stretch in that agency guidance -- I mean, think of the rules now that are being -- maybe this is a sore topic to raise at this point, but the rules out of education which are giving people accused of assault the right to see the evidence, and to face their accuser, and do some cross-examination. What's so radical about that? Well, that was the result of a guidance document that obviously people didn't really want to take to court when it was issued. And why was that? Well, I've already said -- for the third time, I won't say I won't repeat it again, that people are very scared of suing the federal government now because it is so powerful.

 

Prof. Kristin Hickman:  So I think the good point of guidance is transparency. It's helpful to know what the agency's thinking, and through that transparency comes accountability. The real downside of agency guidance really has to do with the fact that it's not subject to any sort of procedural requirements under the APA. And those lack of procedural requirements, the lack of public participation, means that regulated parties who may feel they need to comply with guidance, if they think it's inconsistent with the statute, if they think it is predicated on misunderstandings of how their industry works, if they think that the agency hasn't properly considered the consequences of what their interpretation of the statute would entail, they have nowhere to go. They can't appeal to the agency because there's no notice-and-comment process. Sure, maybe they can send in a letter to the agency or object, but there's no formal process that the agency has to follow. Their only avenue is court as an alternative, or just going along with something that they think is flawed and wrong.

 

      And a lot of people -- there's plenty of social psychological research that shows that if people feel like they have some sort of venue where they can air their concerns and have their concerns listened to, then even if they end up losing at the end of the day, even if the agency in this instance adopted a document or an interpretation that they think is wrong, nevertheless, that process adds legitimacy, and people have faith in what's being accomplished. When you don't have that, you don't have an avenue for checking that agency power, then that leads to a loss of faith and a perception that government isn't on our side.

 

      So the APA doesn't require procedure for guidance, for interpretive rules and policy statements. It explicitly contemplates that you're going to have guidance by having those exceptions. But it also sets up a robust process of judicial review on a pre-enforcement basis. Not you have to wait till the agency comes after you, but you're able to challenge what the agency says before you have to follow it. And I take Boyden's point that litigation takes a long time, but there's also to be said for agencies, collectively, can be trained. And if there are enough guidance documents that get castigated by courts on a pre-enforcement basis, then agencies are a little bit more careful about how they use guidance.

 

Hon. David Stras:  Shall we start taking some questions from the audience? Please feel free to -- there's two sets of microphones, one up here and one back there. All right, let's go a head and go to the first question.

 

Myles Lynch:  Hi, my name is Myles Lynch. I'm a second year student at the University of Pennsylvania Law School, and I have read both Professor Parrillo's report and the House Oversight Committee's "Shining Light on Regulatory Dark Matter" report which talks a lot about the lack of uniformity within the administrative state, and how different agencies have very widely varying procedures on how they publish guidance, how they make it know, etc.

 

      I'd like to push back on Mr. Gray and Ms. Katzen's point a little bit that there's been congressional inaction and that this avenue hasn't really been explored because the Congressional Review Act allows or requires that guidance be submitted to Congress that could be validated, invalidated. But one thing that's pointed out in the report is that only 189 out of 13,000 plus, more like 30,000 guidance documents have even been submitted. So with judicial review not being available, and even if it was available, it's not legally enforceable, so it makes it guidance, and with the congressional avenue being present and not being used, what really can be done to increase uniformity and to basically shine light on this issue?

 

Prof. Sally Katzen:  Let me start on that, actually, because it was in my capacity as an advisor during the Clinton administration that I "helped negotiate" the terms of the Congressional Review Act. And I beg strongly to differ with your reading that guidance documents were to be sent to the Congress as part of the CRA. The CRA was originally intended, and the language that was used in all of the discussions, were rulemakings. Notice-and-comment rulemakings, the same kind of concept that was going on under the Unfunded Mandates Act, which was being negotiated at the same time, and several other -- the [inaudible 1:04:40] -- some of the other statutes. It was not intended to cover guidance, either in the form of a general policy statement, or a manual, or a press release, or the chairman of a committee -- head of an agency giving a speech at lunch where he or she says, "I think we have an obligation to look into X." That was never intended to be incorporated in CRA. So I wanted to just set out a slightly different interpretation of the statute.

 

      To your question, where do we go to get uniformity, I fall back on the -- I'm not so sure uniformity is the ultimate objective. Because we have different agencies with different missions, with different mandates, with different resources, there are different styles, there are different techniques that are used. And while the Judge might be disturbed that these things come with different titles, and different names, and different things, I don't think that that is the world's greatest problem, or even this nation's greatest problem. And I think that if we're worrying about the rule of law, this might be on the third or fourth sheet of things we would list that we would want to have some sort of handle on. It's nice if everything is simple. Black-letter law is terrific . . . sometimes.

 

Hon. Boyden Gray:  Well, now, I'm going to break my own rule a fourth time. Political oversight is really important here, and let's leave aside the courts for a minute. Take Congress. I've said that they've been AWOL, and it used to be that was a regular order of process, both on the budget side and on regular legislation. And in the old days, what I'm about to describe was so common that, of course, everyone knew what you were talking about, but now I can't even remember the name of it. Somebody up here may. Sally was at OMB for enough time that she should.

 

      But one of the early examples of a congressional review that knocked something out was OMBs issuance or knocking out of a milk marketing order. Now, you all sitting in the audience will say, "Well, what in the hell is a milk marketing order?" Well, this is one of the wonders of American government where in most realms of activity, if you agree to set the price of something or the amount of production, you go to jail. Marketing orders are just the reverse. If you don't agree to price fix or limit production, you go jail. So OMB took that -- Brian Mast is laughing. He was at OMB when this took place and they knocked out a milk marketing order whereupon Congress immediately passed a rider, as they were called, for forbidding—I think to this day, it still applies—forbidding OMB to even look, or think, or dream about milk marketing orders.

 

      Another great example was the ignition interlock. There's probably no one in this room old enough to remember the ignition interlock rule, but this was designed to get people to use their seatbelts. And they had a big demonstration, and I don't want to go too long in this, but it's always struck me as very funny. They had a big demonstration down in front of the Capital, General Motors and Ford showing off their new technological prowess. The trouble is if you didn't get into the car in the right order that the software people had anticipated, you couldn't start the car. And then everybody had to get out and get back in again.

 

[Laughter]

 

      It took five or six attempts to get the car started, and they couldn't get in in the right order. And within 30 days, the ignition interlock rule was zeroed out of existence. Now, this was a common thing when they used to have to come up with a budget. Once you get into -- you get out of regular order and you don't do budgetary items, you don't go through the budgetary process, there's no opportunity to get an override like that. But they were commonplace, and it ought to be commonplace again for the Congress to have the opportunity to do this when an agency gets out of line.

 

Prof. Nicholas Parrillo:  With regard to the role of Congress with respect to guidance, there's the Congressional Review Act process that you pointed out. There are also examples, at least occasionally, of Congress imposing some kind of process controls on guidance on at least an agency-wide basis, if not a government-wide basis. So for example, in the late 90s, FDA was relying more and more on guidance to a large degree because the science was moving so quickly that it was difficult for notice-and-comment rulemaking to keep up with it. But the stakeholders said, "Look, we need some more quality control here. We need some more clear signal from the agency about which utterances out of agency officials are actually going to be citable and review decisions are not. And we also, as the industry, want to have some input into the creation of all this guidance."

 

      And so FDA, to a large degree, on its own initiative, came up with what it called its own good guidance practices which would create more of a closed universe of identified guidance documents that were actually going to be applicable in adjudicatory decisions and that also promised a kind of notice-and-comment light for those documents. In other words, the agency would take comment, but it would not respond, the idea being that writing a response would slow things down too much, make it too much like legislative rulemaking. And Congress actually -- it was to some degree because of congressional oversight pressure that the agency ended up deciding to do this. And then ultimately, Congress ratified and required that procedural regime in legislation in 1997.

 

      So it is possible for Congress, both through the oversight mechanism and through the legislative mechanism, to get more involved in this. I think it's a lot more feasible to do it and has a lower risk of unintended consequences if Congress does it on an agency by agency basis as opposed to a government-wide basis.

 

Hon Davis Stras:  All right, let's actually go to the back of the room next, and then we'll come back to the front.

 

Questioner 2:  Thank you. There was some bipartisan consensus earlier on the panel about the desirability of congressional clarity. And of course, Congress can choose to speak clearly any time it wants to. It doesn't seem to have much of a desire to quite frequently. And right now under the current status quo, any time Congress doesn't speak clearly in a statute that gives an agency enforcement authority, that is presumed to be a delegation of interpretive discretion of authority to the agency to interpret it in any reasonable manner. If we want Congress to be clear, however, should we maybe not think about tinkering or changing that default background presumption and apply something like a penalty default, say, sort of à la Judge Easterbrook's proposal on statutes domains, that if a law is indeterminate on a specific point, the law just has no meaning, and the agency cannot act in that space until such time as Congress clarifies its purpose and meaning?

 

Prof. Kristin Hickman:  So two points on that one. First, I think you want to be clear. I mean, there are varying shades of ambiguity, and you're right that we do have this assumption on some level that some kinds of ambiguity represent delegations of policymaking discretion, but no matter how -- given the nature of the English language, no matter how hard Congress tries to make statutes clear, there will inevitably be some ambiguity. And so saying that a statute's inoperative simply because clever attorneys are able to articulate two possible, competing interpretations simply can't be the way that we make the law work.

 

      At least when we're talking about guidance documents though, that presumption about ambiguity doesn't hold because when we're talking about guidance, we're in the realm of Skidmore. That's the Mead case which tells us that only when we're acting with the force in effective law are we in Chevron territory. Otherwise, we're in Skidmore land, and we're looking for things like consistency, and we're looking for thoroughness of agency consideration. But also, courts remain the primary interpreters of the statute under Skidmore, not the agency. So I think that's an important difference to keep in mind, at least when we're talking about guidance in the post-Mead era.

 

Prof. Sally Katzen:  I concur.

 

Hon. Boyden Gray:  I must say, this reminds me of a story that many of you have probably heard, but Skidmore and Mead are cousins, or first cousins, or siblings of Auer deference to an agency's interpretation of its own rules, which should have had some sort of statutory basis to begin with. And after one argument in the Supreme Court -- this is recently. This is Justice Thomas telling that story about his friendship with Scalia after Scalia had died. That argument about Auer came up during the oral argument. And after it was all over, Scalia leans over to Thomas and says, "You know, that Auer decision, Clarence, was maybe the worst decision ever rendered by the Supreme Court." And Thomas says, "Yes, Nino, I feel your pain. You wrote it."

 

[Laughter]

 

Hon. David Stras:  It's a true story. I've heard that story from Justice Thomas as well. Go ahead.

 

Devin Watkins:  Hi, my name is Devin Watkins. So it's one thing in my mind to take non-binding agency guidance and kind of skip the rulemaking process, but it seems to be another to say that it's also immune from judicial review. And so my question is to Sally. Do you think that under current law that guidance documents are immune from judicial review and not final? And should they always be subject to judicial review and challengeable as final agency actions in that way?

 

Prof. Sally Katzen:  Well, I don't like any blanket statements. Should they always be -- I mean, cases come up and vary -- no. But the answer to your first question is no, they're not immune. That's why they're all in the casebook telling you where courts throw them out. If I said they should be immune, then I must have misstated, and I apologize.

 

Prof. Kristin Hickman:   I don't know that anybody thinks they're totally immune. I think the question is timing, and that's where the finality question comes in. There is, I think it's fair to say, if you look at the finality jurisprudence, I don't think there's any question that we've gone in a direction where more courts than not are -- maybe they're not quite ready to put a blanket kibosh on pre-enforcement review of guidance, but I think they're less willing to find guidance reviewable than they were prior to Bennett v. Spear. I'm hopeful that after Sackett and Hawkes, and after my forthcoming article, whenever I manage to get it out, that courts will decide to relax a little bit and find more agency guidance documents final, and thus reviewable, on a pre-enforcement basis.

 

Hon. David Stras:  All right. Let's go back to the back of the room.

 

Questioner 4:  Thank you so much. Several members of the panel have discussed the lethargy of the federal government, both in inability to interact, the legitimacy questions, questions about outdated equipment. I served in the Navy, and we were using—in the nuclear power field—instruments that were 20 years old by current nuclear industry standards. But doesn't that suggest that the government in creating an agency -- which I think some things should be agency regulated, like nuclear reactors -- are picking one avenue to solve a problem when the market offers 359 other ways to do it?

 

      A perfect example of this at the state level is insurance regulation of LASIK and rhinoplasty. No regulations on it, insurance wouldn't cover it, and yet, the market solved the problems far faster and more responsive to the public than agency and restrictive guidance would. So are there many instances where the agency really doesn't need to exist, and where the market could solve the problem much faster with better legitimacy in the market?

 

Prof. Kristin Hickman:  Okay, I'll take that one. Perhaps. However, at least in the context of talking about subregulatory guidance, we're really talking about where Congress has already made a decision. So the correct avenue for reaching the conclusion about whether we need a particular agency, whether we need a particular regulatory program in the first instance, lies with Congress, not with the agency itself.

 

Hon. David Stras:  Anyone else? All right. Let's go to the front of the room.

 

Questioner 5:  I wanted to ask about the informal part of formal processes, which I think falls under the rubric of what you're discussing. I'm thinking particularly, and there are many examples, but in this case, I'm thinking about, for instance, prosecutorial discretion, or enforcement discretion. And I think, anecdotally, the case of Gaston Roberge in Maine who allowed the town of Old Orchard Beach to put some spoils from roadwork on his dry property and was promptly charged with filling a water of the United States. And all was fine, and he would have been a disastrous criminal and in the dock, were not a note found in the file where the agent bringing this forward said to his supervisor, "This would be a good one to squash and set an example." And I'm wondering if there's a space either through judicial review or possibly, ironically, through guidance to see that prosecutorial discretion is not used as a tool, almost, for unequal protection.

 

Prof. Nicholas Parrillo:  Well, on that point, I should say that when I interviewed enforcement officials, or former enforcement officials, they, I think, on average, were most full-throated in their support of the agency issuing relatively clear guidance documents and adhering to them quite closely in ways that some people would say risk judicial challenge for inflexibility. And they actually said to me -- these were people who had managed enforcement at the EPA and that kind of thing -- and they said in order to elicit trust from the regulated population, you need to be transparent about why this party and not that party is being selected for enforcement. And you need to provide some assurance, especially to enforcement targets who are each other's business competitors, that if they settle with EPA on these terms that the same terms are going to be offered to their competitor when their competitor walks in the door later.

 

      So I should also add that a lot of other observers who I also interviewed said, "Oh, the EPA Enforcement Office is much more inflexible about guidance than the other offices at EPA." But the people at the office say, "And yes, there's good reason for that," precisely because prosecutorial discretion or enforcement discretion is so liable to abuse. And this is one of the areas where we really need consistency. And yet, it runs up against the principles of the APA that if you want to provide consistency, you have to go through legislative rulemaking. But then, of course, as I've said before, it becomes more difficult to provide guidance on a timely basis.

 

Hon. David Stras:  Any other comments? All right, we'll go to the back of the room.

 

Dr. Jan Hamilton:  Hello. Thank you. I'm Dr. Jan Hamilton from Aspen, Colorado, with a case at the U.S. Supreme Court as well as the Federal Court of Appeals for D.C. As we have navigated the agencies and the judicial review process, we have now learned that our challenges in judicial review in that court in the D.C. Circuit will now be sent to the Tenth Circuit --

 

Prof. Sally Katzen:  -- I'm sorry. Could you stand closer to the microphone? Because with all the noise of the door open and the hall, I haven't heard the last couple of phrases.

 

Dr. Jan Hamilton:  Okay. The matter that I'm asking each of you to look into your crystal ball and help us discern the justice that we all seek is now that Judge Merrick Garland has recused himself in matters before the judicial review counsel for the Federal Circuit Court, and those are sent to the Tenth Circuit, my being from Colorado and the case working its way through the Tenth Circuit, we're questioning how justice will be done when our case now bounces back in the judicial review. Now, I served as a witness on October 30 at the Federal Judicial Codes and Disqualification Conduct over at Thurgood Marshall Judiciary Building, and so we are seeing America turn a page in history. And as the judicial review bounces away from this circuit and to a Tenth Circuit, what should we watch for? What do you foresee as our country perhaps looks at impeachment, of disqualification of sitting judges? And just give us some of your wisdom to ponder.

 

Hon. Boyden Gray:  Well, let me just -- I'm not sure I understand exactly what you're talking about. Why would the disqualification of a Chief Judge, one judge of I don't know how many who are on the D.C. Circuit now, why would one judge's disqualification bounce the case to the Tenth Circuit?

 

Dr. Jan Hamilton:  Chief Judge Merrick Garland has disqualified -- has recused himself in a complaint filed against Gregory Katsas for non-recusal, and we know this week he did recuse himself in the Mueller investigation. So that judicial review matter will not be heard in the D.C. Circuit but will now be heard in the Tenth Circuit because Judge Garland recused himself of that matter, also of any complaints against Brett Kavanaugh. Those will go to the Tenth Circuit. So that's a new development. I'd like to just see what your insights are into how that happened and what might be the result.

 

Hon. David Stras:  I appreciate the question, but it sort of strays a bit off topic. I think -- I'm not sure that it has much to do with agency. And certainly if anyone wants to address it, they're free to do it, but in terms of agency informal guidance, agency coercion, agency rulemaking, I'm not sure that that's what that question is about, so --

 

Dr. Jan Hamilton:  The agency in question is the Metropolitan Police Department in D.C. and --

 

Hon. David Stras:  Okay. Unless anyone wants to take that question, we'll move on.

 

Prof. Sally Katzen:  I threw away my crystal ball a couple years ago.

 

[Laughter]

 

Hon. David Stras:  Yeah. All right, let's go to the front. Thank you.

 

Ken Klukowski:  Thank you. And I appreciate each of your presentations so much. My name is Ken Klukowski. Building on the comments that Ambassador Gray made regarding the proper role that Congress should play in this process and perhaps institutionally has not, in terms of the legislation that underlies these actions, a question that I have, and I guess especially for Professor Katzen, given your role that you described with the CRA, what do you think of the theory that some people prominent with FedSoc have advanced that under a proper understanding of the CRA, all rules must be submitted to Congress, and without that formal submission to Congress, they have no lawful effect whatsoever? Now, obviously, the implications of that are staggering when you think of how many rules have never been formally submitted to Congress, but it sounded like an intriguing legal theory, and [I] would be interested in your response.

 

Prof. Sally Katzen:  Well, I've debated that issue with some of the proponents from time to time, and I have, as I said, my recollection of what it was we were talking about, and it was far more limited than others might expect. I also know that there's a provision in the CRA that says nothing is judicially reviewable, and so I would suggest that this is a very interesting subject for debate, and I do not foresee resolution of it in the courts in my lifetime, which is getting shorter by the minute.

 

[Laughter]

 

Hon. David Stras:  Anyone else? All right.

 

Ken Klukowski:  Thank you all so much.

 

Prof. Kristin Hickman:  How can we follow that?

 

Hon. David Stras:  Yeah, exactly. All right, to the back.

 

Ilan Wurman:  Thank you so much, all, for being on this panel. Ilan Wurman, Sandra Day O'Connor College of Law. Kristin, as you know, I use your casebook in my administrative law class. And I have to confess that on the day we get to non-legislative rules, the distinction between interpretative rules that don't have to go through notice and comment and those that do have to go to the legislative rules, the students get closest to tears as they do anywhere.

 

Prof Kristen Hickman:  [Laughter]

 

Ilan Wurman:  Now, it could be a contributing factor that the add/drop deadline usually just passed.

 

[Laughter]

 

      However, having said that, there's a reason for this. I, myself, get very close to tears when I teach this because the real problem, it seems to me, is that the doctrine itself is completely incoherent and confused as to what is, in fact, an interpretative rule that doesn't have to go through notice-and-comment rulemaking, and what's a legislative rule that does have to do through notice-and-comment rulemaking.

 

      So there are two reasons, just for the uninitiated, why this is the case. So the APA distinguishes interpretative and legislative rules, but the Mead doctrine tells us that a trigger for Chevron deference, judicial deference to agency interpretations of law, is that the rule has gone through legislative formality, your notice-and-comment rulemaking. So the Chevron doctrine basically treats these legislative rules as interpretations of statutes, so that's one problem.

 

      And then, because they're supposed to be different -- and the other is the Chenery II doctrine because the test for distinguishing interpretative and legislative rules is the American Mining Congress case, which says it's interpretative if there isn't otherwise a sufficient basis to enforce -- for enforcement. But Chenery II says there's always a sufficient basis for enforcement. The statute could be as broad as you want it to be. Chenery II says that's a sufficient basis, which also says that every legislative rule that has gone to notice and comment is actually just an interpretation of the statute after all and didn't have to go through notice and comment at all.

 

      So I guess my question is wouldn't -- isn't the problem that the doctrine has simply lost sight of how to actually distinguish between interpretative rules on the one hand and legislative rules on the other, that we have conflated two different activities, law interpretation on the one hand, and as you point out in your recent article in the GW Law Review, there's a different kind of activity, a policymaking power, an interstitial gap-filling power that agencies actually do pursuant to broad and open-ended statutes.

 

      In other words, if what's really going on is that 90 percent of the time, agencies, when they issue guidance, aren't actually interpreting law, but they're actually making law in the interstices of the broad statutes that Congress enacts, well then, 90 percent of current guidance should go through notice-and-comment rulemaking because it's actually legislated. And for that other 10 percent, when it's actually interpretative, well, we all know that courts shouldn't defer to agency interpretations of law. So wouldn't that solve the problem, I guess? Or what do you think about that, to make it a question before the Judge gives me another stare.

 

Prof. Kristin Hickman:  So there was a lot in that.

 

[Laughter]

 

Ilan Wurman:  Sorry.

 

Hon. David Stras:  Compound question.

 

Ilan Wurman:  Maybe that's why my students cry.

 

Prof. Kristin Hickman:  And I'm not going to try to tackle all of it. You and I can talk offline, Ilan. But what I will say is -- so the line between interpretive rules and legislative rules is incredibly murky. The line between what carries the force of law and what doesn't for Chevron purposes is, I would say, equally murky. I don't think it's just notice and comment versus not. What I'm suggesting is that trying to line up these different strands of doctrine like little ducks in a row so that they're all neatly consistent with one another is a fool's errand, and actually causes more problems that it solves. It might be easy to do, but I don't think it's going to get us very far in any way that makes any kind of sense.

 

      We're always going to have trouble distinguishing legislative rules from interpretive ones. We're always going to have a little bit of trouble figuring out where the margins an agency action carries the force of law for Chevron purposes. I just think the finality in deciding justiciability of a guidance document should be its own question, and I think, should be evaluated in somewhat more pragmatic terms than our present doctrine regarding legislative versus interpretive rules, or our present doctrine regarding Chevron versus Skidmore allows. And otherwise, we'll talk offline.

 

Ilan Wurman:  Thank you.

 

Hon. Boyden Gray:  If I could -- no, go ahead.

 

Hon. David Stras:  Go ahead.

 

Prof. Nicholas Parrillo:  Well, may I ask a follow-up question of Kristen on this point that was brought up by the question?

 

Hon. David Stras:  Yes, please do.

 

Prof. Nicholas Parrillo:  Could you say more about what you see as being the most promising place to draw the line between the guidance documents that ought to be subject to pre-enforcement judicial review and those that ought not? Is it something about impact on regulated party behavior? Is that -- because I take it that's the underlying functional consideration that so many of us care about. Do you think that should openly be the official legal test as well?

 

Prof. Kristin Hickman:  Well, so -- and I'll admit that I'm still working out this part of the paper a little bit, but if you look at the history of finality doctrine, before we had Bennett v. Spear that turned it into a two-part test, we had five factors from FTC v. [Standard] Oil Company of California. And some of the circuit courts, in trying to apply Bennett v. Spear, have added a gloss where they've drawn factors from Socal and sort of used them to help understand and inform the Bennett v. Spears test in a way that makes it more flexible. So part of it is that.

 

      You've got this question of is it authoritative or non-authoritative, which I think adds into it a little bit. There's also the question in terms of where -- is there a place to go within the agency that's left? That overlaps with exhaustion doctrine, but it's one of the questions from FTC v. Socal. So I think that there's a -- the courts have the questions out there that are in the jurisprudence. It's really just a matter of not viewing Bennett v. Spears so tightly that you limit judicial review on a pre-enforcement basis to legislative rules.

 

Hon. Boyden Gray:  Can I ask another question of --

 

Hon. David Stras:  -- Sure, please do.

 

Hon. Boyden Gray:  I would hear from Neomi about -- and others, [inaudible 1:34:17] -- about the huge fight going on with Treasury over interpretive versus legislative roles. And I never really got the details, and I'm dying to find out whether you can inform us of how you pulled it off because we tried to get Treasury into the fold back in 1981 and failed miserably. Of course, that may be because -- I don't know why. But anyway, how did you do it?

 

Prof. Sally Katzen:  I think part of it is that Susan Dudley and I co-authored an op-ed piece calling for that change, and yeah --

 

Hon. Boyden Gray:  Oh, okay. That answers that. Right.

 

Prof. Kristin Hickman:  And I will also say that while I can't comment on that specifically, I've written a whole bunch of law review articles on it that I would be delighted for anybody to go read. They're all on SSRN. I've been talking about treasury and APA compliance for 15 years.

 

Hon. David Stras:  One question that'll probably -- that I have, and we'll go back to the audience here in a second -- but in the report, Nick, that you produced, or maybe it's in some of your articles, you talked about a stripped-down version of notice-and-comment rulemaking for some types of guidance, which I guess would further shade the lines, make it more difficult to tell interpretive rules from legislative rules. But I'm wondering if you could address that, and then if anyone else has comments -- I found that fascinating. Of course, it could run into Sally's point that it takes years to do that, although my understanding is you want to strip it down some.

 

Prof. Nicholas Parrillo:  Sure. So as I mentioned previously, the FDA is actually required to do that stripped-down version of notice and comment for its guidance documents as a matter of FDA specific legislation. Several other agencies do it as well. The National Organic Program has a procedural rule that for an identified and large proportion of their guidance documents, they will do that. EPA does it on an ad hoc basis, making the decision document by document, but a substantial number of documents do go through that process. And then other agencies like OSHA virtually don't do it at all, so it really is a matter of the agency's own management decisions and its own kind of micropolitics whether it does this kind of thing.

 

      I think there's -- it's certainly possible for this kind of notice and comment to win some additional political legitimacy for the guidance documents. According to the people I interviewed, it tends to raise the quality of the policy that's being made just because it's better informed. You have better anticipated implementational problems that the industry can tell you about if they have fair warning.

 

      I will say a pitfall that it runs into is this, and this is something that at times has happened at the FDA. If it's a regulatory context in which there are structural factors that create pressure to follow guidance, as there absolutely are at FDA, especially for pre-market approval, then if the agency does notice and comment on a guidance document and puts out the document in draft, and it says "draft" on in it red letters, the industry quite often will just start following what's in the document because they know that this is what the people at the agency would like. And regardless of its format, whether it be legislative rule guidance or draft guidance, they're going to be inclined to do it.

 

      The result is that the agency gets whatever shift in regulated party behavior it was seeking. And at FDA at least, the people writing the guidance documents, the people obligated to process the comments coming in on draft guidance documents, are also the people who write the new draft guidance documents. They're under all kinds of pressure from the industry to produce draft guidance where there's not even a draft, and that's what they're under pressure to do. And so they kind of shoot the next wolf at the door, and they start writing up new draft guidance where there's not even a draft. And they neglect to process the comments on the existing drafts and finalize those documents, which means that at FDA, sometimes a document will remain in draft for years.

 

      And this happens at other agencies as well. At EPA, there's guidance on power plant permitting that has been in draft for 28 years. And this is a very authoritative guidance document other than the fact that it's in a draft. And really, it's a matter of -- to a large degree, at least at FDA, it's the fact that they're short staffed. They don't have enough resources to both produce the new drafts that industry wants and finalize the existing drafts, and so you end up with comments not being processed and not being listened to when they're made. So this is often a good idea, but the agency has to be resourced enough that it can actually execute the procedure in a meaningful way.

 

Prof. Sally Katzen:  I would be remiss if I did not mention that during the George W. Bush administration, the Office of Information and Regulatory Affairs produced a guidance on guidance document in which it instructed the agencies, and it's in reference to the streamlined version. If it's a significant guidance, which means it would generally meet the terms and conditions for a significant regulation, then there is a requirement under the guidance on guidance to provide notice of what the agency is thinking of, take comments, and actually respond to those comments. It's virtually indistinguishable at some levels for some types of guidance from notice-and-comment rulemaking. You might as well just go through the ropes in the first instance. But if you're at an agency, and you're thinking about this, you better check the guidance on guidance, on guidance, on guidance.

 

[Laughter]

 

Hon. David Stras:  I've got to say, that's one flavor I have not encountered yet is guidance on guidance. Let's go ahead and take -- this'll have to be our last question, and we'll have to -- the speakers, as I've been told by Dean and others, will have to vacate the room because we're going to start promptly at 4:30 for the next program.

 

Questioner 9:  That was a perfect lead-in for this though, which is we keep making these agencies out to be these opaque, nebulous blobs. And the decisions being made within them are made by individuals, yet I haven't heard any discussion on this panel, really, with regards to the role of individuals in terms of either making people more accountable within the agencies, or how do you better utilize the individuals within the agencies?

 

Prof. Sally Katzen:  Well, I personally believe that the career staff, the civil service, is an exceptionally good group, well trained, thoughtful, analytical, and they do their jobs. And they work for the current President until 11:59 a.m. on January 20th, and then they immediately will work for the new President at 12:01 p.m. on January 20th. They are led, or should be led, by competent managers who, among others, are the political appointees. I think it's unfortunate that many of the slots are still vacant and cannot be attributed to foot-dragging by the Hill, which has been very prompt in processing nominations. But there are lots of instances where the management competence or experience is not among the forefront of the qualifications for nomination. And I think that's most unfortunate.

 

Hon. David Stras:  Any responses from other panelists? All right. Well, please give a round of applause to our panelists. Very robust and lively debate. Thank you very much.

4:30 p.m. - 5:30 p.m.
John Marshall: The Man Who Made the Supreme Court

2018 National Lawyers Convention

Topics: Founding Era & History • Supreme Court
The Mayflower Hotel - State Room
1127 Connecticut Avenue, NW
Washington, DC 20036

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  • Mr. Richard Brookhiser, Senior Editor, National Review and Author, John Marshall: The Man Who Made the Supreme Court 
  • Hon. S. Kyle Duncan, United States Court of Appeals, Fifth Circuit
  • Hon. Kevin Newsom, United States Court of Appeals, Eleventh Circuit
  • Mr. David B. Rivkin, Jr., Partner, BakerHostetler
  • Moderator: Hon. William H. Pryor, Jr., United States Court of Appeals, Eleventh Circuit

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Event Transcript

 

Hon. William H. Pryor, Jr.:  Everyone, please be seated. Okay, we can be grateful that the Federalist Society has decided to close this Convention with a panel on something that does not involve administrative law. [Applause] We’re going to instead discuss the great Chief Justice John Marshall.

 

And for this occasion, the Federalist Society, has, as usual, assembled a great panel. First and foremost, Rick Brookhiser, a senior editor at National Review, who is the author of several books. I’m a fanboy. I admit it. I brought with me Alexander Hamilton, American. One of my favorite of his biographies.  Gentleman Revolutionary: Gouverneur Morris, the Rake Who Wrote the Constitution. Founding Father: Rediscovering George Washington. He’s also written a book about James Madison. But today, we’re here to discuss his newest book, the title of our panel, John Marshall: The Man Who Made the Supreme Court.

 

We are then going to have—after an overview by Mr. Brookhiser, about his book, about the life, legacy, judicial career of John Marshall—we’re going to have some responses from other members of the panel. All of us have had the privilege of reading an advanced copy of this book.

 

And we’re going to begin with my colleague Kevin Newsom, a circuit judge on the United States Court of Appeals for the Eleventh Circuit. Judge Newsom is a graduate of Samford University and Harvard Law School, after which he clerked for Judge Diarmuid O'Scannlain on the United States Court of Appeals for the Ninth Circuit, and then served as a law clerk for Justice David Souter on the Supreme Court of the United States. He engaged in the private practice of law here in our nation’s capital before moving back home to the State of Alabama, where he was hired to serve as the Solicitor General of the State of Alabama.

 

Who hired you for that job?

 

Hon. Kevin Newsom:  Oh, yeah, who was that? You ran off and left me, [inaudible 06:30].

 

Hon. William H. Pryor, Jr.:  Yeah. [Laughter] Yeah, his question was, who ran off and left me without -- a couple of months later. [Laughter]

 

      He then engaged into private practice of law in Birmingham before being appointed last year by the President to our court. We’ll then have a few remarks from Judge Kyle Duncan of the United States Court of Appeals for the Fifth Circuit. Judge Duncan was educated at Louisiana State University. I was in Baton Rouge recently. [Laughter]

 

Hon. S. Kyle Duncan:  I thought we weren’t going to talk [crosstalk 07:15]

 

Hon. William H. Pryor, Jr.:  Eight in a row. [Laughter] And the Louisiana State University, Paul M. Hebert Law Center, and he has an LLM from Columbia. He clerked for Judge John Duhé on the U.S. Court of Appeals for the Fifth Circuit, practiced law in Texas, was an Assistant Solicitor General of Texas, Appellate Chief for the Office of Attorney General of Louisiana, and General Counsel for the Becket Fund for Religious Liberty, and practiced law, as well, here in our nation’s capital before being recently appointed to the Fifth Circuit.

     

      And then we will have some remarks from David Rivkin of BakerHostetler, a partner there. David is a member of the firm’s litigation international and environmental teams and is co-leader of the firm’s national appellate practice. He’s a graduate of Georgetown University, where he also earned a master’s degree in Soviet Affairs. He earned his law degree at Columbia Law School and served in two different presidential administrations; the Reagan administration and the first Bush administration, the George H. W. Bush administration. He served as an associate White House counsel. He’s published hundreds of articles, op-eds, book reviews, and book chapters on a variety of legal topics.

 

      So we’ll begin with some remarks by Rick Brookhiser, an overview about the Great Chief Justice. Mr. Brookhiser.

 

Richard Brookhiser:  Well, thank you very much. It’s an honor to be on such a distinguished panel and before such a distinguished room. I’m sorry that the Supreme Court hasn’t been in the news in the last few months, but I’ll try and make it as interesting as possible. [Laughter]

 

      I just want to say a few things about the Great Chief Justice. I want to start by explaining a little bit about who he was, talk a little bit about how he ran the Court, and maybe talk about one of his crucial decisions.

 

      I think the most important fact about John Marshall is that he was a country boy. He lived much of his adult life in Richmond. He spent one month a year as Chief Justice in Washington. He spent months in Philadelphia, six months in Paris. But he was born and raised in Fauquier County, Virginia.

 

      The first house he lived in was a log cabin. The Marshalls didn’t get glass in their windows until the third house he lived in. And they were never poor, and they were never exactly pioneers, but they were country people. And this was a quality that stayed with him all his life.

 

      The word that people used to describe him, over and over again, is simple. He had simple tastes in how he dressed and how he looked. His wife cut his hair. He was riding circuit in Raleigh, North Carolina once. He forgot to pack a pair of pants. When he got to Raleigh, the local tailors couldn’t supply his slacks, so he heard his cases just draping his robe over his legs.

 

      He liked drinking. The Court, when he got on it, had a custom that when the judges—after a day of hearing cases—when they were deliberating over dinner, or after dinner, they could only have wine if it were raining outside. And I assume this was to cheer themselves up.

 

      But, so, Marshall would always ask one of his colleagues to look out the window and tell him what the weather was, and Brother Story might say the sun is shining, and Marshall would say, “Our jurisdiction is so vast, that by the law of chances, it must be raining somewhere.” So wine was always served to the Marshall Court.

 

      Marshall also liked simple games. He belonged to a club in Richmond called the Quoits Club, and they met every Saturday in all the warm months. Quoits was horseshoes, but played with a metal ring. And people testified that Marshall seemed to spend almost as much attention deciding whose quoit was closer to the post as he did on his great decisions.

 

      So this was a man of very simple habits. The man he loved most in the world was George Washington. He served under Washington in the Revolution. He was in three battles where Washington commanded: Brandywine, Germantown, and Monmouth. And in the midst of those, he was at Valley Forge where Washington also commanded. He felt that Washington was the rock on which the revolution had rested.

 

      After the war, he followed Washington again because Washington presides over the Constitutional Convention, signs it, endorses it, and Marshall is a delegate to the Virginia Ratifying Convention. A strong pro-Constitution delegate.

 

      And then when the first American two-party system arises, the Federalists versus the first Republican Party. Both Washington and Marshall are Federalists. And in 1798, Washington summons Marshall to Mount Vernon, tells him he has to run for Congress; the Federalist Party needs bucking up in Virginia. And Marshall doesn’t want to do it because he’s making good money as a lawyer, and he has a family. He’s buying land.

 

      And, finally, he decides he just has to get up at the crack of dawn and leave. He can’t keep saying “no” to this man he reveres so. But Washington got up earlier and put on his old uniform. [Laughter] Marshall said, “I yielded to his representation.”

 

      The man he hates is his second cousin, once removed, Thomas Jefferson—and Jefferson returns that hatred. Jefferson thinks Marshall is a sophist, that he will take anything and twist it into a predetermined-legal conclusion. He warns Joseph Story before Story joins the court “You must never give a direct answer to any question Marshall asks you. If you were to ask me if the sun is shining, I would say, I don’t know, sir. I cannot tell.” [Laughter]

 

      Marshall thinks that Jefferson is a demagogue.  He talks a great game about letting Congress take the lead, but he secretly manipulates it for the purposes of this own popularity.

 

      So in the election of 1800, Thomas Jefferson beats the second president and the last Federalist president, John Adams. John Adams has tapped Marshall to serve as his Secretary of State, promoting him from the Congress to his cabinet.

 

      So in the lame duck period of the Adams administration, Adams learns that the then chief justice, Oliver Ellsworth, is going to quit. Ellsworth’s health is bad. He has gout. So Adams decides to nominate the first man to hold the job, John Jay. A great revolutionary patriot, diplomat, a spymaster. Jay had been Chief Justice from 1789 to ’95, and then he had left to be Governor of New York. So Adams sends Jay’s name to the Senate, and the Senate confirms him. Then he gets a letter from Jay saying he’s not going to take the job.

 

      Jay explains that the federal judiciary lacks energy, weight, and dignity. He’s not going to go back. So Adams is sitting in his office, in the still uncompleted White House—it’s just an exterior shell—with his secretary of state, and he says, “Who shall I nominate now?” And Marshall says, “I don’t know.” Adams thinks a moment, and says, “I believe I will nominate you.” So this is how Marshall’s name is sent to the Senate, and he his confirmed, and so begins his 34 years as Chief Justice.

 

      Now, how does he run his court? And this becomes a partisan problem because when he joins the Court, it’s all six justices. There’re only six at the time. They’re all Federalists. But very soon—because of death and retirement, and also, Congress expands the size of the Court to seven because the country is growing—by 11 years, the partisan balance has shifted to 2 Federalists and 5 Republicans. And yet all these new Republican appointees follow Marshall’s lead.

 

      I think he used several techniques. One was his—that simplicity of his personality. He liked people, and people liked him. And there was a geniality that he managed to impart to any group that he belonged to. Another thing he does is he defers; he defers to colleagues who are more expert in certain areas of laws than he is. Land titles go to Thomas Todd. Admiralty law goes to Joseph Story. And when you defer, you get deference in return. It’s not just the right thing to do, it’s the smart thing to do.

 

      The third thing is that Marshall is always the smartest man in the room. And many of these are smart guys, and also, the lawyers who argue before the court. But they all acknowledge Marshall’s superiority. And he doesn’t have a quick intelligence; it takes him a while to get going. But when he does, there’s something implacable about it.

 

      William Wirt, who was a lawyer before the court, before he becomes attorney general, said that Marshall’s mind was like the Atlantic Ocean; everyone else’s minds were like mere ponds. So that’s the impression Marshall’s mind gave.

 

      And then the fourth factor is time. Marshall is Chief Justice for 34 years, and to Andrew Jackson’s second term, he swears in 5 presidents and 9 inaugurals. There’s also—in the middle of that tenure there’s an eleven-year period, 1812 to ’23, where there’s no personnel changes on the court. That’s also a record that’s only been tied once.

 

      So that’s the man. Those are his techniques. His most famous decision, of course, is Marbury. The supremacy decisions were, probably, the most controversial at the time he made them. But the one I just want to talk about briefly has to do with the contract laws and that’s Fletcher v. Peck. This arose because of a land deal made by the State of Georgia in 1790s. Georgia was the poorest of the 13 states. All it had, as an asset, were 35-million acres of land which are now Alabama and Mississippi.

 

      And so, the Georgia legislature sold this tract for a penny and a half an acre. Every legislature was bribed. The going rate was $1000. One man who took only $600 explained that he wasn’t greedy. All these lawmakers were replaced at the next election by a new set who passed a Repeal Act, which retracted the sale and forbade it from being brought up in a Georgia court.

     

      The Repeal Act said that any employee of the State of Georgia who referred to the sale, in any way, would be fined $1000. They also burned the original sale publicly in the state capitol. And the story goes that when they were about to set fire to it, an old man stepped from the crowd and said that the acts of corruption should be burned by fire from heaven. So he held a magnifying glass over the paper, caused it to combust.

 

      Well, now, the purchasers, of course, were not intending to live in the land they purchased. They wanted to flip it, and they did that almost immediately, selling it to other purchasers who were going to flip it in turn. But all this real estate speculation depended on the original sale being valid. So they got a legal opinion from Alexander Hamilton, who retired from government. He was a lawyer in private practice. And Hamilton said that the Repeal Act was impractical and unjust, but it was also unconstitutional because Article 1, Section 10 forbids the states from impairing the obligation of contract. And Hamilton knew that clause very well because he was probably responsible for putting it in the Constitution. We can go into that if you like.

 

      But that was Hamilton’s opinion. But how can it be brought into court? Georgia has forbidden it from coming into its own courts. The Eleventh Amendment prevents anyone outside Georgia from suing the State of Georgia. But if people in two different states are involved in a suit against each other, that can go to a federal court.

 

      So Robert Fetcher, of New Hampshire, sues John Peck of Massachusetts for $3000. Peck has sold him some of this Georgia land, but Fletcher says, “You didn’t have legitimate title to it because of the Repeal Act. I want my money back.” And their case rises up to the Supreme Court.

 

      They were both land speculators. This was certainly an arranged case they had to test the sale. In the 20th century, someone found that Fletcher’s acreage had been altered to make sure that the value was over the minimum to send the case to the Supreme Court.

 

      Marshall’s decision follows Hamilton’s reasoning. He says that to revoke a sale in this fashion is unjust, but worse, it’s unconstitutional because of Article 1, Section 10. And the most striking thing to me about his opinion is he says that this a bill of rights for the people of each state, and I think that would surprise most people. We think the Bill of Rights is the first ten amendments. But Marshall is saying, no, there was a bill of rights in the Constitution before those amendments, and its Article 1, Section 10, which prevents states from impairing the obligation of contract.

 

      And the reason I wanted to single this decision out is that when we think of the Founding Fathers who were most responsible for the economic world we live in, we think of Hamilton. Especially, after the musical. Which I like, and I think it’s pretty accurate. But Hamilton’s plans and vision needed a legal armature to support them, and that comes from decisions that the Marshall Court makes. Contract decisions. Also, famous commerce decision Gibbons v. Ogden.

 

      So that’s just my little intro to the man and what he did, and I turn it over to my fellow panelists.

 

Hon. William H. Pryor, Jr.:  So I want to begin the discussion among the panelists by asking each of them to give some of their impressions about the book. Particularly, things that, perhaps, surprised you about John Marshall. Things, perhaps, you did not know before. Things that impressed you. Things that were jarring or even striking. Kevin, do you want to start?

 

Hon. Kevin Newsom:  Yeah, I’d love to. All right, are we on here?

 

Hon. William H. Pryor, Jr.:  Yeah.

 

Hon. Kevin Newsom:  Good. So I’ll start where Rick started. I sent around an email to my co-panelists yesterday with a list of things that had really sort of startled me about the book. I think it’s just a wonderful read. When you get your hands on it, you’re not going to be able to put it down. There’s a lot of law in there, and there’s also a lot of life in there. So for people—largely, the people in this room are going to love the law, but I think you’re also going to love the life.

 

      And what I—what most struck me about the book, as Rick began, was about his emphasis on Marshall’s simplicity. Maybe, it’s because I’m a country boy. I’m from Alabama. I sort of identify with the simpleness, the plainness, the primitiveness, as Rick describes it, of—lest we sort of forget—probably the most significant judge, not just in American history, but by virtue of this country’s emphasis on world affairs, perhaps in world history, and that he viewed himself as a really ordinary guy.

 

      And this ordinariness, I think, is oftentimes, regrettably, in short supply among us judges if we are self-aware enough to recognize it. So this is coming from a guy who traipses around the country. John Malcolm has heard the speech. I gave it to the Heritage Foundation. I’ve given it to the Federalist Society Chapters in law schools, about what I view to be the three cardinal virtues of good judging: objectivity, humility, and civility. And humility and civility—and we’ll hear a lot more about objectivity, I think, because, Marshall, there’s a lot of originalism and textualism in Marshall’s opinions. So we’ll hear a lot about objectivity.

 

      But humility and civility were really two of the calling cards of his career, and to read Rick’s book, he really believed it. He wasn’t putting it on. He didn’t view himself as fancier or more important than the next guy. And not only is that in, my view, just a decent life philosophy, the way you treat other people and the way you view yourself within the cosmos, but it turns out, in Marshall’s career, to have been a very useful character trait.

 

      It enabled him, not only, to forge unprecedented consensus on the Supreme Court—this is the guy who authored unanimous decision, after unanimous decision, after unanimous decision in cases that, let’s just say, likely wouldn’t be unanimous today—but it also enabled him to navigate some really tricky political shoals within the Federalist Party. Federalists of the early 19th century, lest we forget, didn’t always love one another.

 

      The Adams’s and the Hamiltons didn’t love one another. Everybody revered George Washington for their own reasons, but Pinckney was off this way. But Marshall managed to navigate all of that, and I think just the common decency with which he treated people served him very well.

 

      I like to think I come by my simplicity a little bit more honestly than Marshall did because I am not, and never have been, and never will be, the smartest guy in the room. And secondly, I don’t have my wife cut my own hair. Who needs that? I cut my own hair. [Laughter] So for me, there’s a lot to talk about in terms of the law, and I’m sure we’ll get into it. But the thing that struck me most from page one of the book, really was Marshall’s simplicity, and the way it just infused everything that he did over the course of his career.

 

Hon. William H. Pryor, Jr.:  Kyle.

 

Hon. S. Kyle Duncan:  Thank you. Thank you, Judge. Let’s see. On?

 

Hon. William H. Pryor, Jr.:  Yeah.

 

 Hon. S. Kyle Duncan:  Great. Thank you. Thanks for inviting me to be on this panel, this great panel, and to talk about this great book. It’s a wonderful book. You should all read it. I hope it will encourage people to read, not just this book, but more books by Marshall and go back read his opinions, which are just marvelous. So that’s the first thing I’d say is that the book left me with—it reinforced the impression that I already had of Marshall from law school because I had good con. law professors in law school.

 

      And they always taught me that Marshall was a giant of the law, that we shouldn't go back and deconstruct his opinions, or what he thought, maybe some error he made in statutory interpretation, or some such thing. That he was a giant. That he laid the foundations for what we understand to be constitutional law. And that without him, we would definitely not have the Supreme Court and the legitimacy of the federal judiciary that we have today. We’d have something very different, and I think we’d have something far weaker and far less what the Founders understood they wanted when they created Article III.

 

      You just said John Jay said he didn’t want the job because the federal judiciary lacks energy, weight, and dignity. And I’d say that the thing that I drew from your book most clearly is that Marshall came into the Court where the Court—and maybe Jay was right, that it lacked energy, weight, and dignity, and he didn’t want to be bothered to take the job.

 

      But Marshall left it as an institution that had energy, weight, and dignity that could serve the role the Founders envisioned for the Court. One thing that occurred to me as I was reading this book is that Hamilton wrote in the Federalist—he was trying to ensure people that the federal judiciary would not be a danger to our freedoms, right? And one thing he said, and I love to say this to federal judges and in the presence of federal judges, that one of the reasons—one of the main reasons—that Hamilton offered is the natural feebleness of the federal judiciary. That the federal judiciary is so weak that it could not possibly be a danger to our freedoms.

 

      It occurred to me that Marshall left the Court so strong—did he sort of betray the vision of Hamilton? And I came away from your book thinking absolutely not, absolutely not. He strengthened the Court in the areas where it needed to be strengthened so that when it solved national problems, like the problem in Fletcher v. Peck that you talked about, which I did not realize before I read your book, the magnitude of that problem, that crisis caused by the corrupt Yazoo -- I didn’t realize the Yazoo land deal covered the states of Alabama and Mississippi. I’ve always thought Alabama had questionable origins. [Laughter]

 

Hon. William H. Pryor, Jr.:  Let us not forget my hometown, Mobile, was the first capital of the Louisiana Purchase. [Laughter]

 

Hon. S. Kyle Duncan:  And the Yazoo land deal happened long before Nick Saban got here. [Laughter] See this is what happens when --

 

[CROSSTALK]

 

Richard Brookhiser:  I'll leave you two gentlemen to. . .

 

Hon. William H. Pryor, Jr.:  So much better now. [Laughter]

 

Hon. S. Kyle Duncan:  But surprises. Let me just say one thing that reinforced in my mind that Marshall embodied the independent federal judge or justice that Hamilton was talking about in Federalist 78. And that came through very clearly in your book, and it’s great. So surprises. So I want to echo what Kevin said, or Judge Kevin—

 

Hon. Kevin Newsom:  That’s what my kids call me, Judge Kevin. [Laughter]

 

Hon. S. Kyle Duncan:  My kids call me Judge Daddy. [Laughter] But Marshall’s character was -- I knew something about it before I read your book, but it really came through as a surprise to me—his warmth to people. His simplicity as Kevin mentioned. He was a fun guy. I imagine you’d just -- you would want to have a beer with John Marshall, right?

 

Richard Brookhiser:  Medeira.

 

Hon. William H. Pryor, Jr.:  Medeira.

 

Hon. S. Kyle Duncan:  You want to have a Medeira with John -- I don’t think -- yeah. One thing that came through that was really -- it made an impression on me is he solicited for his wife. Evidently, his wife suffered a lot. His wife had lost several children. How many children did she lose? Did they lose?

 

Richard Brookhiser:  Two or three died, and there were miscarriages.

 

Hon. S. Kyle Duncan:  Yeah. So she suffered a lot, and he had to, in a sense, arrange his life to make sure that his wife was taken care off. Didn’t have a lot of loud noise around her. Just a lot of great solicitude and love for his wife. That made an impression on me.

 

      Another surprising thing, he wrote his own epitaph. A couple of days before he died, he wrote his epitaph on July 4th. What year did he die? 1830—

 

Richard Brookhiser:  ’35.

 

Hon. S. Kyle Duncan:  ’35. And you report his epitaph. And here’s the epitaph that he wrote. “John Marshall: Son of Thomas and Mary Marshall was born the 24th of September 1755. Intermarried with Mary Willis Ambler.” He called her Polly, right? “The 3rd of January 1783. Departed this life the blank day of 18 blank.” And I just asked Rick, to make sure, that what that doesn’t include is that he was Chief Justice of the United States. And that’s astonishing to me, and I think that speaks volumes about what kind of man that he was.

 

Hon. William H. Pryor, Jr.:  Thank you. David?

 

David B. Rivkin:  Thank you, Your Honor. Well, I also wanted to thank the Federalist Society for inviting me. One of probably the best aspects of this exercise, it’s rare for somebody like me who practices law for a living to be in the same venue of three appellate judges and not feel nervous. [Laughter]

 

      I like the book very much. I’m going to echo some of the themes. That’s the disadvantage of going last. I would’ve certainly mentioned that his treatment of Polly and the fact that he did extremely well in every sphere of life he inhabited: politics, family, law. But most of us, at least lawyers who care about constitutional law, have read his decisions. What the book has really done for me is try to bring the whole picture of him as a man, and I’m going to use a fashionable modern term, I think it was ultimately vogue. Whether you call it simplicity, whether you call it geniality, he was a man who was perfectly comfortable in his own skin and, therefore, could move on from that and be extremely successful.

 

      I guess I did not fully appreciate [inaudible 34:35]. It should not be surprising how much he personally venerated Washington.  I don’t just mean the fact that he subscribed to the Federalist philosophy, and in more time, we can talk about the difference between Washington’s Federalism or Hamilton Federalism. But it really was a very personal relationship. As some of you may know, he wrote, and labored hard at it, a biography of Washington, and many volumes. And I actually, I don’t want to say I read all of it, it would not be true, but I at least read parts of it, and it’s actually quite good.

 

      The other thing that struck me -- it’s interesting, we had some discussions with other people on the panel, but also, it’s very fashionable these days to talk about, well, judges and justices are supposed to be political eunuchs. And I think Marshall’s life decisively rebuts this proposition because he was quite political. He was in Congress, albeit for a short time. He was an activist. Participated in the ratification of the Constitution. I dare say he was not very fond of Jefferson. Let’s just say, he was a very politically active man. He had strong convictions, and yet it did not prevent him from being a great judge, a great justice, which goes to show that the right way to do that, if you stick to the proper judicial role and you rule based upon the proper sources, it doesn’t matter what your political convictions are, you can rise above it.

 

      Now, I briefly toyed with an idea that we can borrow some of his consensus-forming skills, aside from the fact that Medeira is not very fashionable these days. We talked a little bit about this earlier today. The fundamental difference is that he had an opportunity to write on a pretty blank slate, ladies and gentlemen. Meaning, of course, the Constitution was there, but most of the big constitutional issues were left to be resolved, and you could adopt an attitude where you can truly incorporate the view of your colleagues, and be differential, and work on it. Unfortunately, we’re not in that world anymore. There’s lots of constitutional precedents. It’s very difficult to imagine being that flexible. So it’s a great precedent, no pun intended. But it’s not easy to follow.

 

      The other thing—speaking about my last point about Fletcher v. Peck—the thing that struck me about the case—again, reading it from the way Richard described it versus just reading—the decision itself is held decisively. It rebuts the notion that the essence of judging is to render justice in each particular case because there’s no question that the corrupt legislation was a bad thing.

 

      But what ultimately drove Marshall, correctly so, is the notion that the long-term rules mattered far more than rendering justice in any particular case. Again, it seems like an obvious proposition, but it’s not very obvious these days.

 

      So I enjoyed it very much, and again, made me appreciate Marshall as a great justice even more once I understood a bit more about Marshall as a man.

 

Hon. William H. Pryor, Jr.:  Okay. So, Rick, what does the great Chief Justice have to teach us today about controversies of today?

 

Richard Brookhiser:  Well, I just want to pick up on something that Mr. Rivkin said, and stress it. The politics of Marshall’s time was poisonous. People wring their hands over our politics now, with a lot of reason. But we’re not back to that level yet. The benchmark is that our politicians aren’t killing each other. [Laughter]

 

      When Vice President Cheney shot that man, it was an accident, and he lived. [Laughter] When Vice President Burr shot Alexander Hamilton, it was not accident, and he died.

 

Hon. William H. Pryor, Jr.:  It was not.

 

Richard Brookhiser:  And one of Marshall’s colleagues, one of his republican nominated colleagues, Brockholst Livingston, had killed a Federalist in a duel. He shot the guy in the groin, and he bled out in five minutes, and this was not mentioned in confirmation. He just—[laughter]—on the Court. And dueling was illegal in every state. Deaths and duels were considered murders in every state. They were never prosecuted because no jury would convict because that’s what gentlemen did. It was national jury nullification. But, even so, in that atmosphere, Brockholst Livingston concurs as often as all the other Republicans on his Court.

 

Hon. William H. Pryor, Jr.: Kyle.

 

Hon. S. Kyle Duncan:  Yeah. So politics. The independent judge is not supposed to be political, and, of course, we all agree with that, and that’s correct. It’s easy to look back at Marshall, and say he was political. But rereading his life, rereading his opinions, it strikes me that he operated with cognizants of the political backdrop of his decisions. But he was able to forge a consensus about the result based on the law. And that’s a lot different -- so take Fletcher v. Peck, which again, this massive nationwide controversary caused by the corrupt Yazoo land deal. I don’t know how accurate this is, but I read another account of it: the people were talking cessation over this in the northeastern states.

 

      Marshall could’ve focused on the rawest political parts of that decision, which is the corruption in the Georgia’s legislature. That’s what ticked everybody off. That’s what resulted in the Repeal Act. But he side-steps that issue completely in his opinion. And he says it would be indecent in the extreme to talk about the corruption in our state legislatures.

 

      Now, he doesn’t deny that it’s there, but he’s not going to talk about it, and he’s certainly not going to pretend to resolve it. Instead, what does he do? He uses an innovative interpretation of the contract laws to resolve the issue on the basis of the law. And that strikes me as -- and he does that time and time again in his opinions. And there’s a real difference between that and being a political judge.

 

Hon. William H. Pryor, Jr.:  Kevin.

 

Hon. Kevin Newsom:  All right. So to tell you what I think the great Chief Justice can teach us today, I’d like, if I can, to juxtapose two quotes from Rick’s book. The first is a quotation from an unnamed, imminent federal judge recently retired who said the following: he admitted that he paid “Very little attention to legal rules, statues, or constitutional provisions” in deciding cases. “A case is just a dispute. The first thing you do is ask yourself, forget about the law, what is a sensible resolution of this dispute?”

 

      All right. So that is a view very much in vogue. And now let’s see what John Marshall can teach us. This is a quotation from Ogden v. Saunders, 1824. “The intention of the instrument—” that is the Constitution— “must prevail. This intention must be collected from its words. Its words are to be understood in that sense in which they are generally used!” 

 

Hon. William H. Pryor, Jr.:  David.

 

David B. Rivkin:  Once again the disadvantage of going last is I would’ve -- let’s just say, I echo Judge Newsom’s point. Let me just add one thing. I greatly esteem the fact that the Chief Justice Marshall found the core constitutional provisions and not just the Contract Clause. If you look at the number of other decisions, I would venture a guess that they were not as bill-of-rights centric as a lot of modern decisions are.

 

      Because I think it’s a perfectly obvious point that the entire constitutional architecture, and certainly the Contract Clause, but limitations, governmental power, overarching checks and balances have a lot to do with the protection of individual liberty. I’m not going to dwell heavily on the "parchment barrier" discussion. But one of the sad things now, particularly, in law schools, but also in some courts, is the reduction of the Constitution to the Bill of Rights, which is important, to be sure, but not the only thing.

 

Hon. William H. Pryor, Jr.: Okay. It’s time for some questions. Now, we have mics in the front, at the back. I only have one rule, it’s the usual rule: please make sure that you’re asking a question. We have panelists who were invited to give monologues. None of you were. [Laughter] So let’s have our first question from the back.

 

Questioner 1:  Do you know what response Chief Justice Marshall made to Andrew Jackson’s comment? “Chief Justice Marshall has made his decision. Let him enforce it,” regarding the Indian Removal Act?

 

Richard Brookhiser:  That comment of Jackson is only written down about 30 years later. Horace Greeley heard it from a congressman. So that’s kind of [a] weak justification for it.

 

      Jackson did write a letter, at the time, to a political ally of his saying that the decision that Marshall had given in Worcester v. Georgia "has [fallen] still born," meaning that Georgia was not going to acknowledge it; it was not going to enforce it. And Jackson, himself, had no intention of compelling them to do it, and the whole case dies. It gets caught up in the politics of nullification.

 

      Because at the same time this Cherokee decision is being decided, South Carolina has pulled the trigger on its threat to nullify the tariff. They said in 1828, "We’re going to do this," and then in 1832 they actually do do this. And Jackson is planning to ask Congress for a force bill which will allow him to collect the tariff by force. But he needs to be sure that South Carolina is isolated. And one of his fears, with the Cherokee case, is if he were to do what he was supposed to do and see that the law was enforced, he might drive Georgia to join South Carolina in this nullifying spirit. Possibly, also, Alabama and Mississippi because they also had large Indian populations east of the Mississippi.

 

      So the missionaries who were bringing the suit are persuaded by their sponsors—the Congregationalist religious board that picked them and employs them—they are persuaded in their jail cells to drop their suit. They’re told “Look, the survival of the country depends on you people. So don’t force Jackson to make a no-win choice.” So they dropped their suit. And then, Marshall and Story are invited to the White House and kind of fated, which they find very surprising. Story writes a letter to his wife saying that he shared a glass—two glass—each had a glass of wine with Andrew Jackson, and he said, “Who could’ve foreseen this?” But it was just a result of this political storm in which the whole Cherokee case occurred.

 

      And then years later, the federal government extorts a treaty from a faction of the Cherokees, and they are marched to Oklahoma. And the two ministers, who dropped their suit, accompanied them, and they died and are buried in Oklahoma.

 

Questioner 1:  Thank you.

 

Hon. William H. Pryor, Jr.:  Yeah. Next question.

 

Questioner 2:  This is for Mr. Brookhiser, but anyone else can answer if they so choose. It’s probably faux pa to bring up another book that came out this year, Without Precedent. It’s another good book, but your book makes me think of it. I just wonder is it unfair to have limited John Marshall to his legacy on the Court because he has further legacy as a statesmen, being in the XYZ Affair, and so on?

 

Richard Brookhiser:  Well, I think I covered his pre-court career as a Federalist. And he was a very sharp one, a very political one, a very nimble one. The problem with that is the Federalist Party dies. He survives his own party. By the end of the War of 1812, they’re gone. Many of them have been anti-war secessionists, so the whole party collapses. And John Marshall is the last Federalist left standing. He survives his own party by 20 years. So, in a sense, all that work, all that hard work that he did for them in the 1790s kind of washes away, and what he does that remains is what he did on the Court.

 

David B. Rivkin:  Let me just add one point. For those of you who like alternative history, it would’ve been interesting to speculate what would happen if Adams did not offer the seat on the Court to Marshall. I happen to think that he would’ve had a great political career. Briefly thought about running for presidency, but this was when he was already on the Court. So I think he would’ve done extremely well, and maybe there would’ve been a different outcome for the Federalist Party. I happen to think he was not only a great Secretary of State. For those of you—and the book describes it: he really was more than that because Adams was absent, particularly, in the last few months of his administration. So he basically ran the government while they were being confirmed by the Senate. [Laughter]

 

Hon. William H. Pryor, Jr.: Any other comments? Next question, in the back.

 

Questioner 3:  Thank you. Well, some proponents and critics of expansive federal power look to Marshall and his opinion in McCulloch v. Maryland regarding the Necessary and Proper Clause and implied powers as the first in a line of cases that resulted in the massive and massively powerful federal state that we have today? Do you think there is truth in this narrative or has Marshall been misrepresented?

 

Richard Brookhiser: Well, look, everything—you can find precedents for anything. It doesn’t necessarily mean that the precedent was intending to point in that direction or that’s the only direction it was pointing in.

 

      Gibbons v. Ogden, one of the minor players in that decision is Cornelius Vanderbilt. He works for Thomas Gibbons running his steamboat in and out of New York Harbor, and Vanderbilt will become wealthier than the federal government. He will actually have more money, himself, personally than the federal government has. So it’s a very different world in which this is all going on.

 

Hon. S. Kyle Duncan:  Can I add something to that?

 

Hon. William H. Pryor, Jr.: Mm-hmm.

 

Hon. S. Kyle Duncan:  I have often heard it, or read it, that Marshall -- the premise of that question was, well, Marshall laid the ground work for expansion of the federal government beyond what the Founders intended, and that was the original sin that led to other things that people don’t like. And often the sentences quoted from McCulloch “We must never forget,” or “We must remember that it is the Constitution we are expounding.” And that is taken to be the justification, not only for an overexpansion of federal power, but for reading the Constitution in a particular way, that it’s a living document.

 

      And I cannot say how wrong that is. Read the opinion. I’m not saying the questioner thinks that, but read the opinion. That sentence, in the opinion, is followed by paragraph, after paragraph, after paragraph of careful textural and structural analysis of the Constitution, right? What that sentence means in context is that we should read the grants of power to Congress in the Constitution way that’s consonant with the structure of the Constitution in a fair and natural way. Not that Congress can do whatever it wants. I think that’s a bad misreading of Marshall.

 

David B. Rivkin: Just ten seconds. No, I’m actually a fan of McCulloch, and I happen to think that -- and this is something that you can see in Marbury as well. You have somebody who is very intelligent in expounding the metes and bounds of executive -- well, let’s say federal power, but also comes with cabining principles. And there’s a lot of good cabining in McCulloch, which unfortunately is not something you meet in [inaudible 52:19] cases which -- and this whole issue loom large, as to what is the precise cabining, loom large in the Obamacare case.

 

      My favorite example, I love talking about Marbury. It is a very expansive view of judiciary authority. Actually, not over congressional statutes, but over Article II, cabined with a pretty good exposition of what became to be known as political question doctrine. So it is a balancing, and my good friend Judge Duncan is absolutely right – it’s cabining it in a context of overarching constitutional structure, not looking at it just as one individual clause.

 

Hon. William H. Pryor, Jr.:  Next.

 

Questioner 3:  Segueing over to Marbury v. Madison. There is a common argument that you hear among legal academics that in Marbury v. Madison, Justice Marshall was basically making it up to get to the right decision. I remember being in my first day in the federal courts class, and it was Professor Steve Vladeck, who asked us “Now, are you sure that Marbury was rightfully set?” I thought he was trolling us. Turns out, he seriously believes this. I would just like to hear the panel’s opinion on, is there something to this academic argument, or is it just one of the usual wrong academic arguments? [Laughter]

 

Hon. Kevin Newsom:  I’ve got my book open to this quote. Judge Pryor asked us at the outset for things that surprised us. Others might’ve known this. If I knew it, I’ve since forgotten it. But John Marshall, when he was a delegate to the Virginia Ratifying Convention, here’s the speech he gave. And this will let you know -- this tells me that this notion of judicial review was not, contrary to some academic perspectives, just cooked up out of whole cloth in 1803.

 

      This is what he said in 1787: “If it—the government—were to make a law and not warrant it by any of the powers enumerated, it would be considered by the judges as an infringement of the Constitution, which they are to guard. They would not consider such a law as coming under their jurisdiction. They would declare it void. To what quarter will you look for protection from an infringement of the Constitution if you will not give the power to the Judiciary? There is no other body that can afford such a protection.”

 

      If I hadn’t told you where that was from—it’s been long enough since you’ve read Marbury—you would’ve said that’s from Marbury. That was 16 years before Marbury. So I think the notion that judicial review was cooked up out of whole cloth in 1803 will not fly. Marshall told you about it in the Ratifying Convention in 1787 as if it’s a paraphrase of what he was going to say 16 years later in Marbury itself.

 

Hon. William H. Pryor, Jr.: Well, in the arguments made in Federalist 78 by Hamilton.

 

Hon. Kevin Newsom:  Yeah.

 

Hon. William H. Pryor, Jr.: The argument’s been made that Marshall’s opinion in Marbury is just really a re-statement of Hamilton’s argument. There’s a lot of Machiavellian motives that are attributed to Marshall in Marbury, one of which is that they wanted to create a precedent for judicial review. How many times did the Marshall Court ever cite Marbury for the proposition of the power of judicial review? Zero.

 

David B. Rivkin:  And as the book correctly points out. If you look at Hylton v. United States, which happened to uphold Hamilton’s tax and carriages, including some arrangement we can joke about in order to meet the jurisdictional threshold. They assume that the person before the court, owed—what is it? One hundred fifty-eight --

 

Richard Brookhiser:  One hundred twenty-five carriages.

 

David B. Rivkin:  -- carriages. And as you point out, there’s probably only one person at that time in history, and that would be George III who owned that many carriages. So the judicial review, in a sense of being able to scrutinize, and strike down, or uphold, and held on the appeal the statute, but they could reasonably strike it down, is pretty obvious to me. I wish we had more time.

 

      What’s interesting is how Marshall looked at the scope of judicial authority vis-à-vis Article II, both in terms of remedies, but also ability to exercise personal jurisdiction over Executive Branch officials. Again, cabined by political question doctrine. So let’s just say that a lot of people write about Marbury. I may not have read it or read in a wrong way.

 

Hon. William H. Pryor, Jr.:  Rick, do you have something to say about Marbury?

 

Richard Brookhiser:  I think the news of Marbury, at the time, was the run-up to the final decision, which is the long-finger wag of the Jefferson administration.

 

Hon. William H. Pryor, Jr.:  Mm-hmm.

 

Richard Brookhiser:  He’s basically saying, “Oh, you guys said we were the bad guys, and you were going to come in. You were going to be the good guys, but look at what you’ve done. You should’ve given William Marbury his commission, but you haven’t done it. I can’t give it to him because the law under which he is applying for redress, this portion of it, happens to be unconstitutional. But he had a right to it, and you did wrong."

 

      And this was picked up in the New York Post, which was Hamilton’s newspaper. The headline was something like "Administration Violates Constitution." Hamilton got the point. [Laughter]

 

David B. Rivkin:  One last point, the thing that struck me is, again, who practices law for a living, is how remarkably a short period of time it took from oral argument. That I did not know. Fourteen days?

 

Richard Brookhiser:  Yeah.

 

David B. Rivkin:  That’s a blink of an eye.

 

Hon. William H. Pryor, Jr.:  Right.

 

Questioner 3: Thank you.

 

Hon. William H. Pryor, Jr.:  In the back.

 

Questioner 4:  Relatively short question. Unless I’m mistaken, I think Chief Justice John Marshall only ever authored one descent in his 34-year career on the bench. And I was just wondering if you could mention that case, and why he descends it?

 

Richard Brookhiser:  Well, one descent in a case of constitutional import.

 

Questioner 4:  Yeah.

 

Richard Brookhiser:  There were few other smaller ones.

 

Questioner 4:  Right.

 

Richard Brookhiser:  But the big descent was Ogden v. Saunders, and it had to do with a case involving bankruptcy law, and Marshall was denying that contracts were creatures of law. He was saying that contracts are brought -- the right to contract is brought by man into society. Really precedes society.

 

      And he even goes into this very Lockean or Rousseauian fable. He tells a story about what we now call cavemen. One man has more skins than he needs to clothe himself, and some other man, they have more food than he needs to feed himself. And so, they make a deal to exchange the skins for the food. And it’s kind of an exercise in 17th or 18th century mythical anthropology to explain human rights. But he really believes that contracts are pre-social. Those are arrangements that men make with each other and have a right to make.

 

Hon. William H. Pryor, Jr.:  Last question.

 

Questioner 5:  So you had mentioned how that he got his seat on the Supreme Court because someone else had refused it. I seem to remember that John Marshall had been appointed and confirmed as the U.S. Attorney for Virginia. Sent his commission and then refused it and had to get it sent back. Do you know why he refused his commission?

 

Richard Brookhiser:  He refused several offers of federal jobs in the 1790s. That was one of them. I don’t believe he had the commission already. That was a Washington offer, and he was actually offered a seat on the Court as an associate justice, and he turned that down. I believe that was from John Adams.

 

Hon. William H. Pryor, Jr.:  I thought it was also offered Attorney General of the United States. Is that --

 

Richard Brookhiser:  Yeah. I think so. He wants to make money. And he’s very good at it. [Laughter] No. He’s got a growing a family. He’s also buying land, buying farms, and buying slaves, as Paul Finkelman recently discovered.

 

Hon. William H. Pryor, Jr.:  One other fact that, I think, is a testament to Marshall’s simplicity, and humility. When he takes the oath as Chief Justice, he wears the plain black robe that was the wig tradition of Virginia. If you go to the Supreme Court of the United States, in one of their great conference rooms with portraits of Chief Justices, you’ll notice the portrait of our first Chief Justice John Jay with the beautiful scarlet-colored robes, what were called the party-colored robes of the day. But ever since John Marshall, we’ve followed his tradition of a plain black robe. Will you please join me in giving a warm show of appreciation? [Applause]

 

      Now, Mr. Bookhiser will be available for those who want to get his book and to have him sign it. Before we break, though, I think -- woah, I’m being cut?

 

      Please thank the Federalist Society and its staff for a terrific Convention. [Applause] Our closing reception is across the hall. Please enjoy.

 

5:30 p.m. - 7:00 p.m.
Closing Reception & Book Signing

2018 National Lawyers Convention

The Mayflower Hotel - Palm Court Ballroom
1127 Connecticut Avenue, NW
Washington, DC 20036

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All registrants are welcome to attend the Closing Reception.

Book Signing:

  • John Marshall: The Man Who Made the Supreme Court by Richard Brookhiser

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