Categories
Law

Supreme Court strikes down Jerusalem passport law

The Supreme Court on Monday ruled that the power to recognize foreign nations belongs to the president alone, resolving a dispute between the executive branch and Congress over the American position on the status of Jerusalem.

The decision came in connection with a passport issued to Menachem Binyamin Zivotofsky, who was born in 2002 to U.S. citizens living in the contested capital. Zivotofsky’s parents had asked the U.S. Department of State to list the place of birth on his passport as “Jerusalem, Israel.” The department declined, citing a longstanding policy of neutrality on the status of the city. Zivotofsky’s passport would list only “Jerusalem” as his place of birth, the department determined.

Zivotofsky’s parents sued, charging that a law passed in 2002 requires the Secretary of State to identify citizens born in Jerusalem who so request as being born in Israel, a position at odds with the policy of presidents dating to the Oslo Accords, which call for Jerusalem’s status to be resolved through negotiation. Though a trial judge declined to resolve the dispute, which the judge concluded presented a question committed to the legislative and executive branches of government, the D.C. Circuit Court of Appeals later sided with the executive branch, declaring the statute to be unconstitutional.

By a vote of 6 to 3, the Court agreed, holding that the Constitution gives the president the exclusive right to recognize foreign governments and nations. “The President’s exclusive recognition power encompasses the authority to acknowledge, in a formal sense, the legitimacy of other states and governments, including territorial bounds,” Justice Kennedy wrote for the majority. “Albeit limited, the exclusive recognition power is essential to the conduct of presidential duties.”

“The formal act of recognition is an executive power that Congress may not qualify,” he added.

In arriving at its determination, the majority looked to the framework for assessing exercises of executive power first articulated by the Court in 1952, when the justices invalidated a move by President Truman to seize the nation’s strike-bound steel mills during the Korean War. According to that analysis, when the president takes measures that are incompatible with a congressional mandate, the president’s power, as Kennedy explained, “must be both ‘exclusive’ and ‘conclusive’ on the issue.”

The majority traced debates over the power to recognize nations to 1793, when President Washington, without consulting Congress, authorized diplomatic relations with the revolutionary government of France. “Congress expressed no disagreement with this position, and [the French ambassador’s] reception marked the Nation’s first act of recognition—one made by the president alone,” wrote Kennedy.

According to the Court, Congress also honored a decision by President Monroe not to recognize Argentina and Chile initially as those republics cast off colonization by Spain, as well as a determination by President Jackson to recognize Texas when it ceded from Mexico and President Lincoln’s decision to recognize Liberia and Haiti.

Similarly, as the majority noted, Congress acceded to President McKinley’s opposition to recognizing Cuba when it separated from Spain in 1898 and to President Carter’s recognition of the People’s Republic of China instead of Taiwan as the government of China.

Though the recognition power belongs exclusively to the president, Congress has other ways to disagree with the executive branch in the conduct of foreign relations, the majority noted. As Kennedy observed, the Constitution authorizes the legislature to decline to confirm an ambassador, to put in place an embargo or to declare war.

“From the face of [the statute], from the legislative history, and from its reception, it is clear that Congress wanted to express its displeasure with the president’s policy by, among other things, commanding the executive to contradict his own, earlier stated position on Jerusalem,” Kennedy wrote. “This Congress may not do.”

For their part, the Court’s dissenters rejected the majority’s view of the separation of powers at issue. “I agree that the Constitution empowers the president to extend recognition on behalf of the United States, but I find it a much harder question whether it makes that power exclusive,” wrote Justice Scalia, who took the unusual step of reading his dissent from the bench.

Chief Justice Roberts, writing separately, called the ruling unprecedented. “Today’s decision is a first: Never before has this Court accepted a president’s direct defiance of an Act of Congress in the field of foreign affairs,” he wrote.

U.S. and Palestinian officials welcomed the ruling, while the Israeli government declined to comment. “This is an important decision which accords with international resolutions and the resolutions of the U.N. Security Council and General Assembly,” a spokesman for Palestinian President Mahmoud Abbas told Reuters.

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Law

Why the Supreme Court will uphold same-sex marriage (Part 2)

A friend whose prognostications about politics I respect and who happens to be married to someone of the same sex, told me recently that he predicts that the Supreme Court, in a decision expected before the end of this month, will refrain from enshrining same-sex marriage in law but command states to recognize such marriages from other states.

That would represent a middle ground—short of finding a constitutional right to marry someone of the same sex—which, in my friend’s view, would allow the Court to continue same-sex marriage on a course toward inevitability nationwide without having to get too far in front of states.

There’s precedent for incrementalism. Two years ago the Court ruled that gay couples married in states that have legalized same-sex marriage are eligible for Social Security and other federal benefits that opposite-sex couples receive. Yet the Court stopped short of declaring a fundamental right to marry.

Still, there are reasons to think the Court may act more sweepingly this time. One is that same-sex marriage itself has become the law in more states. Since the decision in 2013, nine states have legalized same-sex marriage, bringing the total nationwide to 37. Also, 60% of Americans think same-sex marriage should be recognized by law as valid, according to the latest Gallup poll, up from 53% two years ago.

Then there’s the appeal currently before the Court. The parties agree that if the couples who are challenging the bans on same-sex marriage in four states persuade the Court to declare a constitutional right to marry, the question whether states must recognize same-sex marriages performed in other states becomes moot.

So the court could rule as my friend suggests on the first question while ordering states to acknowledge same-sex marriages performed elsewhere, as they do valid heterosexual marriages from other states. But that, as Chief Justice Roberts observed at oral argument, presents an inconsistency that may be difficult for the Court to overlook. Consider the following exchange:

Chief Justice Roberts: I think your… argument is pretty much the exact opposite of the argument of the petitioners in the prior case. The argument that was presented against them is, you can’t do this, we’ve never done this before, recognized same-sex marriage. And now you’re saying, well, they can’t not recognize same-sex marriages because they’ve never not recognized marriages before that were lawfully performed in other states.

Douglas Hallward-Driemeier (on behalf of the petitioners): Well, what—

Chief Justice Roberts: “You’ve got to decide one or the other if you win… You can’t say that [the states] are not treating the marriage as a marriage when they don’t have to do that in the first place.”

In other words, if the couples challenging the law assert that the argument by states in opposition to same-sex marriage that they have never defined marriage to include a couple of the same sex is not a reason to deny same-sex marriage now, the couples cannot then argue that states must recognize same-sex marriages from other states because they’ve long recognized heterosexual marriages from other states.

By extension, the states cannot argue that they cannot be compelled to redefine marriage and then maintain they cannot depart from their longstanding practice of recognizing opposite-sex marriages entered into elsewhere. Either tradition matters or it doesn’t, according to the chief justice’s observation.

That reality may present an obstacle to a justice who may be tempted to decide the appeal as my friend suggests. This assumes, of course, that there already are four votes in favor of striking down state laws that ban same-sex marriage. The inconsistency that Chief Justice Roberts noted may matter most to the chief justice himself or to Justice Kennedy, who together represent the likeliest fifth or sixth votes for a majority.

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Law

Supreme Court limits ability of struggling homeowners to cancel mortgage debts

The Supreme Court dealt financially ailing Americans a setback on Monday in a decision that narrows their ability to erase mortgage debts in bankruptcy.

The Court ruled unanimously that David Caulkett and Edelmiro Toledo-Cardona, who each had two mortgage liens on their respective houses, cannot void a mortgage held by Bank of America that is subordinate to the other mortgage, even though both borrowers owe more on their first mortgage than the property is worth.

Both debtors filed for Chapter 7 bankruptcy, which allows a trustee appointed by the court to sell off the debtor’s assets and discharge any remaining debts, in 2013.

At the debtors’ urging, the bankruptcy court, acting pursuant to a provision of the law that allows debtors to strip away rights to repayment held by creditors who would receive nothing if the house were sold, voided Bank of America’s liens. That rendered the bank unable to foreclose on the loans even if the houses’ values later rose. The 11th Circuit Court of Appeals affirmed the rulings.

The Court disagreed. A secured claim, as defined by the bankruptcy code, means “a claim supported by a security interest in property, regardless whether the value of that property would be sufficient to cover the claim,” wrote Justice Thomas, who added that the debtors had not asked the Court to overrule a decision from 1992 on which the Court based its ruling but instead “request that we limit that decision to partially—as opposed to wholly—underwater liens,” a characterization that Justices Kennedy, Breyer and Sotomayor did not endorse despite joining the ruling.

The decision means that Americans who find themselves in financial distress may remain liable for second mortgages notwithstanding bankruptcy. To cite one example, 23% of Florida’s roughly 1.3 million homes that are worth less than the debt they secure have more than one mortgage, according to the Times.

If a house is worth less than the amount a borrower owes on the first mortgage—a situation known as the home’s being underwater—the second mortgage is worth nothing in a foreclosure.

The debtors’ contention—that a wholly underwater mortgage can be voided but a partially underwater mortgage cannot—would lead to an “odd” result, according to Justice Thomas. Under their approach, he explained, “if a court valued the collateral at one dollar more than the amount of a senior lien, the debtor could not strip down a junior lien under [the relevant precedent], but if it valued the property at one dollar less, the debtor could strip off the entire junior lien.”

“Given the constantly shifting value of real property, this reading could lead to arbitrary results,” Thomas added.

Last year more than 700,000 individuals and couples filed for Chapter 7 bankruptcy. Lenders cheered the ruling, which they say will help to make second mortgages affordable.

Others termed the decision an erosion of rights for vulnerable consumers. “Since 1992, the financial industry has chipped away at [bankruptcy law] to give protections to property regardless of the value of the claim,” David Dayen wrote last March about the appeal in The New Republic. “Now they want to chip away some more.”

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Law

Facebook posts cannot be threats without intent, Supreme Court rules

The Supreme Court on Monday narrowed the circumstances in which someone who posts threats on Facebook or social media can be criminally liable for their actions.

In an 8 to 1 ruling, the court overturned the conviction of Anthony Elonis, a Pennsylvania man who was found guilty in 2011 of threatening his estranged wife, former co-workers and others in series of posts on his Facebook page.

The musings, which contained violent language and images, earned Elonis, writing under the pseudonym “Tone Dougie,” a sentence of 44 months in prison for violating a federal law that bars “transmitting in interstate commerce” a threat to injure another person or group of people.

On appeal, Elonis contended that to be criminal—and otherwise beyond the protection of the First Amendment—the threats required a subjective intent that Elonis claimed he lacked. According to Elonis, the trial court erred when it instructed a jury that a statement constitutes a criminal threat when a “reasonable person” would interpret the statement as “a serious expression” of an intent to inflict injury.

The Court agreed, noting that to be criminal, conduct must derive from a defendant’s mental state; that negligence alone is insufficient to support liability. “Federal criminal liability generally does not turn solely on the results of an act without considering the defendant’s mental state,” Chief Justice Roberts wrote for the majority. “That understanding ‘took deep and early root in American soil’ and Congress left it intact here… ‘wrongdoing must be conscious to be criminal.’” (citation omitted)

Though the court did not discuss the implications for free speech raised by the appeal, the American Civil Liberties Union and other groups had charged that the instruction insisted on by the trial court would discourage speech protected by the First Amendment.

For its part, the government contended that requiring a subjective intent as Elonis urged would undermine the goal of protecting people from fear of violence regardless whether the person who threatens them intends his words to be harmless.

The Court limited its opinion to Elonis’ intent. “Having liability turn on whether a ‘reasonable person’ regards the communication as a threat—regardless of what the defendant thinks—‘reduces culpability on the all-important element of the crime to negligence,” wrote Roberts. “We ‘have long been reluctant to infer that a negligence standard was intended in criminal statutes… Under these principles, ‘what [Elonis] thinks’ does matter.” (citations omitted)

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Law

Senate has few options in Patriot Act extension, NSA phone records collection matters little in preventing terrorist attacks

The Senate is expected to convene Sunday to decide whether to permit the lapse of a surveillance program that authorizes the government to collect en masse  information about Americans’ telephone calls.

Amid news coverage of the debate, I reread relevant portions of reports by several panels within the executive branch that have assessed the effectiveness of the program, which, according to the panels, has never been instrumental in any investigation of terrorism.

At issue is Section 215 of the USA Patriot Act, which authorizes the National Security Agency to harvest telephone numbers and other details of calls made or received in the US. By its terms, Section 215 will sunset on June 1. A federal appeals court in New York ruled recently that the collection of so-called metadata in bulk as the government currently gathers it is illegal.

Though collection of telephone records by the government predates the September 11 attacks, the Patriot Act broadened the types of records the government can gather. As the appeals court found, the government has collected telephone metadata in bulk for at least the past nine years.

A report on the telephone records program published in January 2014 by the Privacy and Civil Liberties Review Board, an independent bipartisan agency established by law in 2007, concluded that Section 215 “has shown minimal value in safeguarding the nation from terrorism.” According to the board:

“Based on the information provided to the Board, including classified briefings and documentation, we have not identified a single instance involving a threat to the United States in which the program made a concrete difference in the outcome of a counterterrorism investigation. Moreover, we are aware of no instance in which the program directly contributed to the discovery of a previously unknown terrorist plot or the disruption of a terrorist attack. And we believe that in only one instance over the past seven years has the program arguably contributed to the identification of an unknown terrorism suspect. Even in that case, the suspect was not involved in planning a terrorist attack and there is reason to believe that the FBI may have discovered him without the contribution of the NSA program.”

A report published roughly a month earlier by The President’s Review Group on Intelligence and Communications Technologies arrived at a similar conclusion. According to that panel:

“Our review suggests that the information contributed to terrorist investigations by the use of section 215 telephony meta-data was not essential to preventing attacks and could readily have been obtained in a timely manner using conventional section 215 orders. Moreover, there is reason for caution about the view that the program is efficacious in alleviating concern about possible terrorist connections, given the fact that meta-data captured by the program covers only a portion of the records of only a few telephone service providers.”

The Department of Justice’s Office of Inspector General, which reviewed the FBI’s use of Section 215 for surveillance generally over a two-year period starting in 2007, also found the provision to be of limited value in tracking terrorists. “The agents we interviewed did not identify any major case developments that resulted form the records obtained in response to Section 215 orders, but told us the authority is valuable when it is the only means to obtain certain information,” the Inspector General wrote in a report released May 22.

Based on the findings of these panels, it seems reasonable to conclude that no terrorism investigations have turned on bulk collection of telephone metadata by the government.

As a practical matter, the imminent sunset of Section 215 leaves the Senate with two choices: pass a measure that narrows the government’s authority to collect telephone call metadata or do nothing and allow Section 215 to expire. Of course, allowing Section 215 to lapse would not preclude Congress from legislating a replacement.

President Obama has called on senators to pass legislation that the House approved on May 13. That bill would authorize the NSA to access call records from telephone companies, which would be obligated to collect and store the data, after obtaining judicial approval.

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Law

Why the Supreme Court will uphold same-sex marriage

A recent piece by Jill Lepore in The New Yorker sheds a fascinating light on legal arguments in support of same-sex marriage, the constitutionality of which the Supreme Court is expected to decide by late June.

Lepore traces the development of theories that underpin the Court’s rulings on matters ranging from contraception and abortion rights to marriage. As she elucidates, the battles for reproductive and gay rights turned on the Court’s finding guarantees of privacy and equal protection of the law enshrined variously in the Fourth, Fifth, Ninth and Fourteenth Amendments, the latter of which denies states the ability to discriminate.

Still, as Lepore explains, equal protection has provided the way forward for marriage equality notwithstanding the court’s precedents that find protection for both contraception and choice in constitutional guarantees of privacy.

“When the fight for equal rights for women narrowed to a fight for reproductive rights, defended on the ground of privacy, it weakened,” Lepore writes. “But when the fight for gay rights became a fight for same-sex marriage, asserted on the ground of equality, it got stronger and stronger.”

Reading that conclusion sent me to an exchange during oral argument in April between Justice Alito and Mary Bonauto, a lawyer for the Gay & Lesbian Advocates and Defenders who argued the case for the petitioners in the same-sex marriage appeal.

Amid the back-and-forth, Justice Alito asked Bonauto whether, if the Court were to overturn state bans on same-sex marriage, the justices might later have a basis for denying a marriage license to a group consisting of two men and two women.

Bonauto answered yes, that the state might reasonably question whether such an arrangement constitutes marriage, which, she noted, is between two people. A foursome also might raise concerns about consent and coercion, she added.

“Let’s say they’re all consenting adults, highly educated,” Alito pressed, referring by reference to an observation by Justice Roberts that marriage between two people of the same sex did not exist in the U.S. until two decades ago. “They’re all lawyers. What would be the logic of denying them the same right?”

Again, Bonauto replied that marriage is between two consenting adults who pledge their commitment to each other. “I assume there’d be lots of family disruption issues, setting aside issues of coercion and consent and so on that just don’t apply here, when we’re talking about two consenting adults who want to make that mutual commitment for as long as they shall be,” said Bonauto. “So that’s my answer on that.”

That may be true but what Bonauto didn’t say during the exchange, and what Lepore underscores indirectly, is that one reason for denying a marriage license to four people is that numbers, by themselves, do not raise a question of equal protection of the law. Distinctions between people based on race or sex do.

Lepore cites a decision in 2003 by the Supreme Judicial Court of Massachusetts that established the commonwealth as the first to guarantee same-sex marriage as a constitutional right. In that case, Chief Justice Margaret Marshall tied the right to marry to equal protection. As Lepore writes, describing Marshall’s opinion:

“Marshall also cited Loving v. Virginia, the 1967 Supreme Court Case that struck down a ban on interracial marriage, drawing an analogy between racial discrimination (if a black person can marry a black person but cannot marry a white person, that is discrimination by race) and sex discrimination (if a man can marry a woman but cannot marry a man, that is discrimination by sex).”

Of course, both are inconsistent with what Marshall described in her decision as “equality under law.” The observation by Lepore fills in what seemed to be missing the first time I read the exchange between Justice Alito and Bonauto.

Missing to me, that is, not from the argument. Later in the session, Donald Verrilli, Jr., the solicitor general, underscored the significance of equal protection as a legal theory that supports same-sex marriage. As it happens, the solicitor general advanced only that theory, reasoning that it alone provides a basis for the Court to uphold same-sex marriage. As Verrilli explained:

“We think… this issue really sounds in equal protection, as we understand it, because the question is equal participation in a state-conferred status and institution. And that’s why we think of it in equal protection terms… what these gay and lesbian couples are doing is laying claim to the promise of the Fourteenth Amendment now.”

The argument seems insurmountable based on the history that Lepore delineates. It also seems likely to be the basis upon which a majority of justices will decide the appeal.

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Law

Making sense of trade deals

Over this Memorial Day weekend, I’ve tried to learn a bit about the recent debate over trade, including legislation that would authorize President Obama and his successor to negotiate trade agreements without the prospect of the deals being dismantled by Congress.

The issue arises most recently in connection with the so-called Trans-Pacific Partnership (TPP), a regional free-trade pact being negotiated among 12 countries: the U.S., Australia, Brunei, Japan, Canada, Chile, Malaysia, Mexico, New Zealand, Peru, Singapore, Vietnam and, possibly, South Korea and Taiwan. (Note that the U.S. currently has trade agreements with Australia, Chile, Peru and Singapore.)

One hears a great deal of wrangling over trade. Do the pacts strengthen the U.S. economy and add jobs, as supporters say, or send jobs overseas and threaten the environment, as opponents charge? I knew little about the subject so I set out to learn more.

What the Senate passed on Saturday

The Senate approved a measure on Saturday that would grant the president trade-promotion authority (TPA)—sometimes referred to as fast track—by a vote of 62 to 37. The bill now goes to the House of Representatives, which is expected to debate the measure as early as next month.

TPA outlines a series of procedures for moving trade legislation through Congress. Such legislation, which Congress first passed in 1974, limits legislative debate on trade deals the president negotiates. Because Congress cannot amend such deals, both the House and Senates must vote either up or down on trade pacts, which means the deals can pass with a simple majority (as opposed to the two-thirds majority needed to bring up legislation for a vote in the Senate).

In essence, TPA is a compact between the executive and legislative branches that reconciles powers the Constitution grants to both Congress and the president with respect to trade. Article 1, Section 8 of the Constitution gives Congress the power to “regulate commerce with foreign nations… ” and to “lay and collect taxes, duties, imposts, and excises… ” Though the Constitution gives the president no explicit authority over trade, Article II authorizes the president to negotiate treaties and international agreements.

TPA empowers the president to enter into trade agreements with foreign nations, provided, among other stipulations, that at least 90 days prior to entering into an agreement, the president notifies Congress of his intention to do so and publishes the text of the agreement at least 60 days prior to the U.S. entering into the deal. That way Congress can examine the treaty and consider implementing legislation subject to the limitations on debate and amendments.

The latest grant of trade promotion authority would tie to a series of trade deals that, besides the TPP, include Trans-Atlantic Trade and Investment Partnership, a pact that is being negotiated between the U.S. and the European Union; the Trade in Services Agreement, a trade pact being negotiated by the U.S. and 22 other countries, including the EU; and the Environmental Goods Agreement, a trade agreement the U.S. and 13 countries that among them represent roughly 86 percent of global trade in solar panels, wind turbines or advanced batteries.

As President Obama describes it, TPA is essential to America’s pivot toward Asia, where China also is influencing the rules of trade. As the president explained in his latest State of the Union address:

“Today, our businesses export more than ever, and exporters tend to pay their workers higher wages.  But as we speak, China wants to write the rules for the world’s fastest-growing region.  That would put our workers and our businesses at a disadvantage.  Why would we let that happen?  We should write those rules.  We should level the playing field.  That’s why I’m asking both parties to give me trade promotion authority to protect American workers, with strong new trade deals from Asia to Europe that aren’t just free, but are also fair.”

Support for trade promotion authority scrambles party lines. Only two Republicans in the Senate—Senator Rand Paul, the Kentucky Republican and White House hopeful; and Senator Richard Shelby of Alabama—joined 35 of the chamber’s 44 Democrats and two Independents to oppose the measure. Shelby said in a statement that he fears “that Alabama could lose a significant number of jobs if President Obama agrees to an unfair agreement.” Meanwhile, Majority Leader Mitch McConnell of Kentucky predicted that TPA would create “new opportunities for bigger paychecks, better jobs and a stronger economy.”

Opponents, who include senators from manufacturing states, say the negotiating objectives contained in the bill are insufficient. “Trade Promotion Authority will green light a deal that will not advance wage growth in Pennsylvania or our manufacturing sector,” Senator Bob Casey (D-Pa.) said in a statement.

Senator Debbie Stabenow, a Democrat from Michigan who opposed the bill, contends that manufacturers in her state see the competitiveness of their exports weakened by countries that manipulate their currencies. Senator Elizabeth Warren, the Massachusetts Democrat who leads the party’s populist wing, charged that big banks will use trade deals “to water down financial regulations.”

That’s because, as Paul Krugman opined recently in the Times, the TPP “could force the United States to change policies or face big fines, and financial regulation is one policy that might be in the line of fire.” Krugman points to the example of Canada’s foreign minister recently telling bankers in the U.S. that the so-called Volcker Rule, which bars banks from certain forms of risky trading, may violate the North American Free Trade Agreement.

Trade promotion authority has the support of manufacturers, Hollywood studios, pharmaceutical companies, farmers and the software industry, among others. Organized labor opposes it. “Fast track trade deals mean fewer jobs, lower wages, and a declining middle class,” Rich Trumka, president of the AFL-CIO, wrote to Congress in March.

The Trans-Pacific Partnership

The economic impact of the TPP, which was proposed by President George W. Bush and later taken up by President Obama, may depend on several factors, including the extent of trade liberalization achieved in the agreement and, of course, the trade and investment that develops among members, according to a report last March by the Congressional Research Service (CRS).

Taken together, countries that are party to the agreement represent about 40 percent of the global economy and the largest U.S. trading partners, accounting for 41 percent of total U.S. goods traded in 2014 and 24 percent of total U.S. services trade a year earlier, according to CRS. The treaty has 29 chapters that cover such industries and issues as financial services, labor, plant and food safety, telecommunications, intellectual property and the environment.

Estimates of the TPP’s potential impact on the U.S. economy suggest that the effect might be modest. According to David Rosnick, an economist with the Center for Economic and Policy Research, a progressive think tank, the gains to the U.S. economy from the TPP will be “meaninglessly tiny” while workers whose wages fall in the middle of the wage spectrum “are likely to lose” as a result of the deal.

An analysis by Peter Petri and Michael Plummer for the Peterson Institute for International Economics that was published in June 2012 predicts that the U.S. will gain $78 billion annually—a bump in income of 0.19 percent—from the TPP. A study in 2012 by the National Bureau of Economic Research projects a gain of 0.22 percent of GDP provided that the signatories remove non-tariff barriers.

Though the gains don’t seem that significant compared with the size of the U.S. economy (gross domestic product stands at nearly $17 trillion), there are other objectives at stake. “For the United States, the TPP’s overriding purpose is not to contain China but to create a counterweight to its rise,” Robert Samuelson wrote recently in The Washington Post.

For its part, the Obama administration says the TPP aims to set standards for trade, not to put China on the defensive. “TPP is open architecture, and TPP is really meant to be about setting high standards for trade — standards that aspire to be equivalent to the United States’,” Commerce Secretary Penny Pritzker told the Times last spring.

The White House terms the Trans-Pacific Partnership “the most progressive trade agreement in history.” According to the Obama administration, the deal would reduce or eliminate tariffs for American goods and make foreign state-owned companies compete fairly with U.S. businesses. The deal also would ensure, among other things, the rights of workers to form unions and bargain collectively, protect wildlife and the environment, and remove tariffs and other impediments to an open Internet and the sale of high-tech products, the administration says.

Some disagree. According to Public Citizen, a nonprofit group that champions citizen interests before Congress, the TPP would, among other ills, offshore U.S. jobs and expose Americans to unsafe food and products. Public Citizen, the AFL-CIO, the American Association of Retired Persons and Doctors Without Borders all have charged that patent protections in the TPP will hike the cost of medicines by delaying cheaper versions from entering the market. For its part, the Obama administration says the pact will expand access to generic versions of patented drugs.

According to the Electronic Frontier Foundation, the TPP also would enshrine laws that restrict fair use of copyrighted material, diminish competition in businesses ranging printer cartridge refills to mobile phones, and subject journalists to criminal penalties for revealing or accessing information via a computer system that is allegedly confidential.

Robert Reich, who served as labor secretary under President Bill Clinton, wrote recently that despite the administration’s push to counter the influence of China, the TPP “will also allow American corporations to outsource even more jobs abroad.”

According to Reich, corporations “want more international protection when it comes to their intellectual property and other assets… But they want less protection of consumers, workers, small investors, and the environment, because these interfere with their profits. So they’ve been seeking trade rules that allow them to override these protections.”

As for public opinion, 58 percent of Americans view trade as a opportunity for U.S. economic growth through more exports, while 33 percent view trade as a threat to the economy from imports, according to a poll last February by Gallup. Sixty-one percent of Democrats trade mainly as an opportunity for the U.S., compared with 51 percent of Republicans. According to Gallup, Americans’ support for free trade may correlate with their confidence in the economy.

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New York City

Memorial Day

Soldiers' and Sailors' Monument, Riverside Park, New York City (Photo by Beesquared)
Soldiers’ and Sailors’ Monument, Riverside Park, New York City
Categories
Law

Victim of Ponzi scheme must be customer of firm to compel arbitration

An investor who wants to force a financial firm to arbitrate a dispute must first establish that she is a customer of the firm, a federal court in Brooklyn has ruled.

Sagepoint Financial, an investment firm based in Phoenix, cannot be compelled to arbitrate a claim filed by Marcia Small, who allegedly lost $870,000 after investing with Robert Henry Van Zandt, Sr., a financial adviser from the Bronx who in November pleaded guilty to a Ponzi scheme that stole $4.8 million from 29 investors.

Small invested with Van Zandt in 2008, when Van Zandt was registered with GunnAllen Financial, a Tampa-based brokerage firm that shuttered in 2010.

In December, Small filed papers with the Financial Industry Regulatory Authority (FINRA) against brokerage firms that Van Zandt was associated with during the decade that his scheme unfolded. Among them was American General Services, Inc. (AGSI), which Sagepoint acquired in 2006, roughly two years after Van Zandt ended his registration with AGSI.

Small charged that Sagepoint, as successor to AGSI, bears responsibility for AGSI’s failure to supervise Van Zandt with regard to investments he sold, for misreporting the reasons that Van Zandt left the firm, and for the company’s alleged failure to report Van Zandt’s activities properly to regulators. Those obligations, according to Small, required Sagepoint to arbitrate Small’s claim in a forum provided by FINRA.

The court disagreed, pointing to the absence of either a relationship between Sagepoint and Small that would constitute Small’s being a customer of Sagepoint or an agreement between the parties to arbitrate disputes.

“Here, any customer relationship between [Small] and Van Zandt based on investment activity in 2008 arose almost four years after Van Zandt ended his affiliation with AGSI,” U.S. District Judge Dora Irizarry wrote in a ruling published May 15. “Further, [Small’s] claims in the arbitration, whether based on AGSI’s alleged supervisory failures or on Van Zandt’s own misconduct, do not allege any time during which [Small’s] investment activity with Van Zandt coincided with Van Zandt’s affiliation with AGSI.”

“Absent any such temporal nexus, [Small’s] investment relationship with Van Zandt does not provide a basis to compel arbitration against AGSI, or against [Sagepoint] as AGSI’s alleged successor,” Irizarry added.

The ruling illustrates at least one limit on investors’ ability to compel arbitration, which is a contractually agreed-upon procedure to resolve disputes. When one party resists arbitration as part of a push to move a dispute into court, a judge will, as in Small’s case, decide whether the arbitration should proceed.

Small charged Sagepoint with seeking to avoid arbitration because the firm disliked the outcomes of other arbitrations that stemmed from Van Zandt’s conduct. However, Sagepoint’s experience in other cases had no bearing on Small’s charges, according to Irizarry.

Though Irizarry acknowledged Small’s contention that federal law has a presumption in favor of arbitration, Small and Sagepoint were battling over the existence of an obligation to arbitrate, according to the court, and not the scope of an arbitration clause.

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Law

Google wins free-speech case over ‘Innocence of Muslims,’ actor has ‘beef’ but no copyright claim, says court

An actress who lost a lawsuit to force Google’s YouTube to remove an anti-Muslim video from its site pursued the wrong claim against the wrong party.

That’s one conclusion from a decision by 9th Circuit U.S. Court of Appeals, which ruled on Monday that Cindy Lee Garcia cannot compel YouTube to take down “Innocence of Muslims” because she cannot copyright her five-minute performance in the video, which disrespects the Prophet Muhammad and sparked death threats against Garcia.

“In this case, a heartfelt plea for personal protection is juxtaposed with the limits of copyright law and fundamental principles of free speech,” U.S. Circuit Judge Margaret McKeown wrote for a majority of the court. “The appeal teaches a simple lesson—a weak copyright claim cannot justify censorship in the guise of authorship.”

The decision represents a win for free speech. Though the First Amendment does not shield copyright infringement, Garcia could not claim a copyright in her performance. According to the court, granting a copyright to an actor based solely on her performance—a work for hire—would put distributors such as YouTube in the position of having to obtain licenses from everyone who appears in a film, as opposed to obtaining the permission of the work’s author, in this case Youssef.

The alternative would render distribution of movies unworkable, the court found. As McKeown noted:

“Treating every acting performance as an independent work would not only be a logistical and financial nightmare, it would turn cast of thousands into a new mantra: copyright of thousands. That leaves Garcia with a legitimate and serious beef, though not one that can be vindicated under the rubric of copyright.”

What if Garcia had grounded her complaint in the threats to her reputation and privacy that followed Youssef’s using Garcia’s performance in a way that was different than she had authorized? Though she appeared knowingly in “Desert Warrior,” Youssef allegedly overdubbed that performance to make her appear to ask if Muhammad were a “child molester” as part of a film that he disseminated widely.

Under California law, a person’s right to privacy may be violated in varied ways, including by acts that cast someone in a false light. “Innocence of Muslims” portrayed Garcia in a light that was highly offensive to millions of people worldwide, judging by the outrage the film has provoked.

False light can be difficult to prove in California without a showing of financial damages. Moreover, even were Garcia able to prevail against Youssef for portraying her in a false light, it’s unlikely that would authorize her to order YouTube to take down the video because, as the trial court noted, the harm from the trailer’s appearance on the Internet already has occurred.

Garcia sued both Google and Youssef initially in state court, where she alleged a series of wrongs, including violation of her privacy and intentional infliction of emotional distress, that she later dropped against Google when she sued the company in federal court for copyright violation.

Note that Garcia could not sue Google for Youssef’s alleged defamation. Federal law shields online services from liability for information they host that’s created by third parties.

Thus, to the extent Garcia has a remedy, it lies in a wrong to her reputation instead of copyright. As McKeown explained:

“We are sympathetic to her plight. Nonetheless, the claim against Google is grounded in copyright law, not privacy, emotional distress, or tort law, and Garcia seeks to impose speech restrictions under copyright laws meant to foster rather than repress free expression.

Privacy laws, not copyright laws, may offer remedies tailored to Garcia’s personal and reputational harms. On that point, we offer no substantive view. Ultimately, Garcia would like to have her connection to the film forgotten and stripped from YouTube. Unfortunately for Garcia, such a ‘right to be forgotten,’ although recently affirmed by the Court of Justice for the European Union, is not recognized in the United States.”

Garcia’s claims may have a shot but it’s a long one. It’s also a reminder that you may have less dominion over your image than you think. As the ruling demonstrates, what’s workable for content creators and distributors can be at odds with the expectations we have in how our likenesses appear online.

As Matthew Schruers, a vice president of law and policy at the Computer and Communications Industry Association, which supported Google and YouTube in the case, told Wired, “Everything you and I and the rest of the world upload to YouTube, is protected the moment we hit record.”