DOJ Jumps the Shark

By Clark Neily of Cato.

"Imagine you were operating a shark-diving charter boat in Florida and came across a long fishing line that you believed to be the work of poachers. You haul in the line, release a number of fish, and take the rig back to the marina after notifying state officials.

If it turns out you were mistaken and had actually stumbled onto a bona fide research project, would it be fair to charge you with “stealing” the line you hauled in and left on the dock? The US Department of Justice thought so and pursued felony charges against the two boat operators, John Moore and Tanner Mansell, for theft of property within the “special maritime jurisdiction” of the United States.

A jury reluctantly convicted Moore and Mansell after deliberating for longer than the entire trial took, sending out seven (!) notes to the judge, and nearly deadlocking. The Eleventh Circuit reluctantly affirmed, with Judge Barbara Lagoa—herself a former federal prosecutor—castigating the Assistant United States Attorney by name in her concurrence for “taking a page out of Inspector Javert’s playbook.” She noted that Moore and Mansell “never sought to derive any benefit from their conduct” and have been branded as lifelong felons “for having violated a statute that no reasonable person would understand to prohibit the conduct they engaged in.”

Yesterday, Cato filed an amicus brief urging the court to grant en banc review and reverse the convictions. The brief explains that for centuries, the greatest protection against unjust convictions and punishments was the institution of jury independence, including so-called “jury nullification.” But because modern judges have effectively nullified the power to nullify, it is all the more important that other defendant-protecting doctrines—such as the rule of lenity—be applied robustly. 

Because the jury instructions in this case reflected a broad conception of the word “steal” rather than a narrow one, Moore and Mansell are entitled to a new trial with a properly instructed jury."

All the President’s Legal Defeats

Biden’s agencies keep violating the law and losing in court: the list

WSJ editorial. 

"President Biden considers himself a law-abiding fellow. But when it comes to living within the law as established by Congress, his Administration is the most lawless in long memory. His regulators keep rewriting laws as they see fit, and the result is that they keep losing in court in humiliating fashion. 

As a public service, and to illustrate the breadth of the law-breaking, we’re providing a summary of the legal defeats across five of the most lawless agencies. Clip and save in case Donald Trump or Kamala Harris retain anyone running these agencies.

***

Federal Communications Commission

• Net neutrality rule. The FCC tried to classify broadband providers as common carriers under Title II of the Communications Act of 1934. The Sixth Circuit Court of Appealsblocked it in August, citing the Supreme Court’s major questions doctrine, which holds that regulators need express direction from Congress on consequential rules.

• National Association of Broadcasters v. FCC. In 2022 the D.C. Circuitvacated part of a 2021 FCC rule requiring broadcasters to verify the sponsors of programs by checking two federal sources

Department of Education

• Student loans. The Supreme Court ruled 6-3 in 2023 (Biden v. Nebraska) that Mr. Biden’s plan to forgive $400 billion in student loans usurped Congress’s power of the purse. Mr. Biden then boasted that the Court couldn’t stop him and came up with the SAVE plan, which caps payments at 5% of discretionary income and forgives balances after 10-20 years. The Eighth Circuit recently put that plan on hold with a nationwide injunction.

• Title IX. Six federal judges this year have blocked a new Title IX nondiscrimination rule from going into effect in 26 states. “The new rule contravenes the plain text of Title IX by redefining ‘sex’ to include gender identity, violates government employees’ First Amendment rights, and is the result of arbitrary and capricious rulemaking,” wrote Judge Danny Reeves.

***

Environmental Protection Agency

• Clean Power Plan. In 2022 the Supreme Court vacated an Obama-era rule regulating greenhouse gas emissions. “EPA ‘claim[ed] to discover in a long-extant statute an unheralded power’ representing a ‘transformative expansion in [its] regulatory authority’” in violation of the major questions doctrine, wrote Chief Justice John Roberts for a 6-3 majority in West Virginia v. EPA. The Biden Administration has issued a new rule that also uses indirect means to shut down coal plants and is being challenged in court.

• Waters of the U.S. In 2023 the Supreme Court ruled 5-4 in Sackett v. EPA that dry land on the Sacketts’ property doesn’t constitute “waters of the United States” under the Clean Water Act merely because it has a tangential connection to a navigable body of water.

• Good Neighbor Plan. In June the Supreme Court issued a stay on the EPA’s “good neighbor” rule that would have restricted ozone emissions in certain states because of their alleged downwind effect on other states. The EPA’s plan “likely runs afoul” of “long-settled standards,” Justice Neil Gorsuch wrote for a 5-4 majority.

***

Federal Trade Commission

• Noncompete ban. In August a federal judge struck down FTC Chair Lina Khan’s 2024 rule banning employee noncompete agreements. Judge Ada Brown concluded the FTC lacked legal authority under the FTC Act and that the rule was “unreasonably overbroad without a reasonable explanation.”

• Welsh Carson antitrust case. In May federal Judge Kenneth Hoyt dismissed an FTC lawsuit against Welsh Carson. The private equity firm had a minority stake in an anesthesiology company, and the judge ruled that even if the anesthesiology firm violated antitrust law, holding a minority stake couldn’t make Welsh Carson liable.

• Administrative law judges. In 2023 the Supreme Court ruled 9-0 in Axon Enterprise v. FTC and SEC v. Cochran that companies can take constitutional challenges to federal court rather than having to first go through administrative agency tribunals that invariably rule for the agencies.

• Meta acquisition. In January 2023, federal Judge Edward Davila ruled that the FTC did not meet standards of proof in its antitrust case against Meta’s acquisition of virtual reality app Within Unlimited.

• Microsoft purchase of Activision Blizzard. In 2023 federal Judge Jacqueline Scott Corley dismissed the FTC’s attempt to block a Microsoft-Activision merger. “The FTC has not shown it is likely to succeed on its assertion the combined firm will probably pull Call of Duty from Sony PlayStation, or that its ownership of Activision content will substantially lessen competition in the video game library subscription and cloud gaming markets,” the judge wrote.

***

Securities and Exchange Commission

• Proxy advisory rule. In June the Fifth Circuit ruled that the SEC’s rescission of a 2020 proxy advisory rule was arbitrary and capricious. SEC Chairman Gary Gensler had sought to preserve the duopoly of Glass Lewis and Institutional Shareholder Services.

• Private fund disclosure rule. In June the Fifth Circuit blocked the SEC’s rule that would have micromanaged contracts between private funds and their investors, saying the agency lacked statutory authority.

• Debt Box. In March a federal judge in Utah imposed sanctions on the SEC “for bad faith conduct” in its crypto case against Debt Box. In May the SEC was ordered to pay $1.8 million in fees and the case was dismissed.

• Stock buyback rule. In December 2023, the Fifth Circuit vacated the SEC’s rule that required extensive public disclosures when a company decides to buy back its own shares: “The SEC acted arbitrarily and capriciously, in violation of the APA, when it failed to respond to petitioners’ comments and failed to conduct a proper cost-benefit analysis.”

• Grayscale. In 2023 the D.C. Circuit ruled against the SEC’s denial of Grayscale’s bitcoin fund. “The denial of Grayscale’s proposal was arbitrary and capricious because the Commission failed to explain its different treatment of similar products,” Judge Neomi Rao wrote for the court.

• Ripple. In 2023 federal judge Analisa Torres rejected a significant part of the SEC’s case against Ripple’s sale of a digital token. Judge Torres ruled that about half of Ripple’s token sales did not constitute an illegal securities sale.

***

This is an extraordinary record of lawlessness, and note the variety of judges who have ruled in these cases. They illustrate the degree to which the progressive administrative state simply disregards the law as its avatars seek to impose their will on Americans without the consent of the governed.

It’s also worth noting that both FTC Chair Khan and SEC Chair Gensler were Sen. Elizabeth Warren’s hand-picked choices whom President Biden accepted when he subcontracted his Presidency to the left. They bull-rush their policies via regulation and dare the judiciary to stop them. Americans are fortunate the Founders created an independent judiciary to block this will to undemocratic power."

The Court says prosecutors must prove criminal intent to gain a conviction

See When All Nine Justices Agree. WSJ editorial.

"The Supreme Court set off political fireworks this year with divided opinions on gun rights, abortion, religious liberty and more. So it’s worth highlighting the Court’s unanimous June decision that reinforces a core tenet of the U.S. legal system (Ruan v. U.S.)

Two doctors were charged with violating the Controlled Substances Act for allegedly dispensing opioids illegally. The law makes it a federal crime “for any person knowingly or intentionally . . . to manufacture, distribute, or dispense” a controlled substance, except as authorized.

Prosecutors accused Xiulu Ruan of running a pill mill in Alabama that issued nearly 300,000 prescriptions for controlled substances including opioids and benzodiazepines in four years, and Shakeel Kahn of writing prescriptions in exchange for payments. The government argued that the doctors dispensed drugs outside what a “reasonable” doctor would consider proper medical practice.

The doctors argued in defense that they had dispensed the drugs as they believed they were authorized to do under the law. Yet the government claimed that a requirement of scienter—that is, the intent or knowledge of wrongdoing—would make it too hard to convict errant doctors. Lower courts dispensed with this requirement in their jury instructions. 

Both doctors were convicted and sentenced to more than two decades in prison. In their appeal, they argued that the government should have been required to prove mens rea—that is, a guilty mind. The Supreme Court ruled unanimously for the doctors.

Writing for the majority, Justice Stephen Breyer notes that the “Government’s standard would turn a defendant’s criminal liability on the mental state of a hypothetical ‘reasonable’ doctor, rather than on the mental state of the defendant himself or herself,” adding that the regulatory language defining an authorized prescription is “ambiguous” and “open to varying constructions.”

“The Government argues that requiring it to prove that a doctor knowingly or intentionally acted not as authorized will allow bad-apple doctors to escape liability by claiming idiosyncratic views about their prescribing authority,” Justice Breyer writes; “this kind of argument, however, can be made in many cases imposing scienter requirements, and we have often rejected it.”

Justice Samuel Alito, in a concurrence joined by Justices Clarence Thomas and Amy Coney Barrett, agreed to vacate the convictions. But he wrote that under the language of the law the doctors should have been allowed to make a good-faith defense rather than require the government to prove beyond a reasonable doubt that the defendants knowingly or intentionally acted in an unauthorized manner.

By slapping down the government, the Court is sending a powerful message to prosecutors who often charge unsympathetic defendants with insufficient evidence to prove the accused knew what they were doing was wrong. The ruling could affect prosecutions of opioid distributors and retailers, but the principle applies to other crimes such as fraud.

Despite their ideological differences, the nine Justices agree that the government must prove a defendant knew he was committing a crime. This is crucial to defending against unjust prosecution, and the ruling is a victory for liberty."

The Justices Send a Message to Congress

The EPA case doesn’t preclude climate rules. It require lawmakers to enact them.

By Kimberley A. Strassel. Excerpts:

"Sweep away the opinion’s numbing technical descriptions, and the ruling is a joy to read. The six conservatives on the court, in an opinion by Chief Justice John Roberts, have officially declared the “major questions doctrine”—a concept that has appeared in a handful of past court decisions—to be a living, breathing principle. The federal bureaucracy is no longer allowed to impose programs of major “economic and political significance” on the country absent “clear congressional authorization.” Hallelujah.

That’s a bummer for the executive branch—and its army of bureaucrats—which for decades has been acting as if it were king. In this case, the Obama administration was frustrated Congress wouldn’t enact a law empowering it to regulate climate emissions. So it magicked up the authority out of the 1970 Clean Air Act. Democratic administrations in particular are growing brazen in delegating to themselves these new superpowers. The Biden team last year in litigation insisted there existed in a 77-year-old law the authority to impose an eviction moratorium. Just as it found permission in a 51-year-old law to impose a vaccine mandate on the nation’s workforce. The high court struck down both and—just in case Mr. Biden didn’t get the hint—used this week’s EPA decision to lay out stricter rules going forward.

But it’s equally a bummer for Congress, which was essentially just told by the court to get off its lazy backside and resume the people’s work. It’s easy to bash the administrative state, but bureaucrats are simply filling a vacuum created by a legislature that these days can rouse itself to little more than naming a post office. “Federal agencies must have the authority to regulate carbon!” every Democrat wailed in response to this week’s ruling. To which the obvious response is: Then give it to them! Pass a law. Do your job."

Eliminate the Bar Exam for Lawyers

The disadvantaged pay the price for an elitist legal system 

By Clifford Winston.

"The legal profession regulates itself—which explains how lawyers get away with practices that pad their own earnings and block nonlawyers from selling competing services at lower prices.

Congress may soon strengthen the antitrust enforcement powers of the Biden administration’s Justice Department. The department should use those powers to eliminate the American Bar Association’s monopoly in determining what constitutes an acceptable legal education and state licensing requirements, which restrict the supply of lawyers.

Prospective lawyers generally graduate from an ABA-accredited three-year law school before taking a state bar examination to obtain a license to practice law. However, many people who are interested in and capable of providing legal services cannot afford the high tuition and opportunity cost of not working for three years and paying to obtain a law degree.

Limits on the supply of lawyers are reflected in prices. A simple contract can run $1,500, which most people cannot afford. One study by the National Center for State Courts found that 75% of civil matters in major urban areas had at least one self-represented party, and these parties are less likely to prevail in court without proper legal help. Others who can’t afford legal assistance end up stuck in horrific circumstances that ought to be criminal matters, such as domestic violence.

Eliminating both the ABA’s monopoly control of legal education and states’ licensing requirement would allow alternative legal education programs to flourish, including vocational and online courses that could be completed in less than a year and college programs that offer a bachelor’s degree in law. Graduates of those programs could expand the availability of effective, low-cost civil legal services. Three-year law schools would be forced by the new competition to reduce tuition and the time to graduate. More J.D.s would be free to pursue a career in public-interest law if they were less encumbered by law school debt.

My new Brookings book with David Burk and Jia Yan takes an economics look at the legal profession and argues that educational requirements and state bar exams do little in practice to assure a minimum quality of legal services. Market forces have created institutions that accurately inform consumers about the quality, reputation and performance of a plethora of services.

Astute members of the profession are aware that the most advantaged members of society, such as Donald J. Trump and his 3,500-plus lawsuits, are the primary beneficiaries of the system. By eliminating ABA’s monopoly on legal education and licensing requirements, antitrust authorities could help the most disadvantaged members of society benefit from access to justice.

Mr. Winston is a senior fellow at the Brookings Institution and a coauthor of “Trouble at the Bar: An Economics Perspective on the Legal Profession and the Case for Fundamental Reform.”"

The Problem With Law Schools

See Schools for Misrule Reviewed posted by Walter Olson at Cato.

"Today was a banner day for my new book on legal academia, Schools for Misrule. It was reviewed at the Wall Street Journal by John McGinnis, professor of law at Northwestern, and at the Weekly Standard by George Leef, director of research at the North Carolina-based John Pope Center for Higher Education Policy. (One or both reviews may be behind subscriber screens.) Both reviews were highly favorable.

McGinnis:

American law schools wield more social influence than any other part of the American university. In ‘Schools for Misrule,’ Walter Olson offers a fine dissection of these strangely powerful institutions. One of his themes is that law professors serve the interests of the legal profession above all else; they seek to enlarge the scope of the law, creating more work for lawyers even as the changes themselves impose more costs on society.

Leef:

At most law schools—and emphatically at elite ones such as Obama’s Harvard—students are immersed in a bath of statist theories that rationalize ever-expanding government control over nearly every aspect of life. ... They learn that the concepts of limited government and federalism are outmoded antiques that merely defend unjust privilege. ... Schools for Misrule explains how most of the damaging ideas that lawyers, politicians, and judges are eager to fasten upon society originate in our law schools. ...

The most recent explosion of legal activism involves making the United States subject to international law. Olson notes that at a New York University Law School symposium, speakers declared that international law requires nations to guarantee all people the right to health, education, “decent” work, and freedom from “severe social exclusion.” Columbia has created a campaign called “Bring Human Rights Home,” which is intended to generate pressure to make American policies consonant with the collectivist notions of “the international community.”"

How One Greedy Lawyer (Bill Lerach) Hurt Business

This comes from a book review in the WSJ From Bully to Felon: How Bill Lerach shook down corporations, until his scam was uncovered. From the 3-2-10 issue, p. A21. Exerpts:

"In 1972, a young lawyer co-authored an article for the University of Pittsburgh Law Review. He targeted class-action securities lawsuits, calling them "procedural monstrosities." They were legal extortion, he said, in which plaintiffs simply use "allegations as a bargaining weapon to be disposed of when an appropriate premium has been extracted from the defendant.""

"In the course of 30 years at the New York-based firm of Milberg Weiss, Mr. Lerach would become the most feared tort lawyer in the country, pioneering an assembly-line model of "strike" lawsuits against corporate America.

In a typical case, he would charge that a company had misled shareholders; he would then sue for damages, claiming to represent a class of people who had lost money on the company's stock; and, finally, he would bully the company into paying over a settlement. In 2008 he became a national symbol for the corruption and greed that lay behind such lawsuits, going to federal prison for helping to orchestrate one of the longest- running legal scams in history."

"Along the way they show how the plaintiffs' bar has transformed the process of class actions into big business."

"Mr. Lerach (eventually with the help of dozens of employees) would monitor company stock prices, waiting for one to plunge. Then he would find some prior sunny statement from the chief executive, dig up an inside trade or two, locate a shareholder plaintiff, and scream investor fraud. Subpoenas would often open up new targets for yet more accusations. Mr. Lerach would then threaten to bankrupt the firm in court or go away for a hefty sum. "I'll own your f---ing house in Maui and the diamonds on our wife's fingers," he once warned a CEO."

"By 1992, Milberg commanded 25% of the country's securities class actions; 90% were settled out of court. The firm's profits in 1993 exceeded $100 million."

"Nobody knew until later that a lot of this legal gamesmanship was rigged. Mr. Lerach had no trouble identifying corporate targets; the hard part was rustling up plaintiff-shareholders to represent. In 1976 an investor named Seymour Lazar proposed a solution: He'd buy stocks and serve as a plaintiff—for a kickback of any payout. It was illegal to pay individual plaintiffs to serve in lawsuits, lest their interests conflict with those of the rest of the plaintiffs' class; Milberg Weiss got around that restriction by sending the kickback money through middlemen lawyers."

"The federal government wouldn't catch on to the scam until the late 1990s, when yet another of the firm's professional plaintiffs was caught in an unrelated crime and came clean."

"Democratic Party thrives on campaign contributions from the securities bar and in return blocks the reforms that might put an end to such legal extortion"