Category: Administrative Law

Schmayek’s Shutdown

MirowskiCoverIf you asked Ted Cruz or Jim DeMint who was the guiding spirit of their government shutdown, they’d probably mention Friedrich von Hayek. The Nobel Prize winning economist warned the world that “socialism” would put citizens on a “road to serfdom.” For the Tea Party, PPACA is a horror, perhaps even a new form of slavery, a threat to liberty even darker than the feudal past Hayek evoked.

But there is another figure just as important to current neoliberal thought as Hayek. Carl Schmitt provided jurisprudential theories of “the emergency” and “the exception” that highlighted the best opportunities for rapid redistribution of wealth upwards. In Never Let a Serious Crisis Go to Waste, Philip Mirowski explains how neoliberal thought, far from advocating a shrinking of the state, in fact sparks a redirection and intensification of its energies. As he puts it, “A primary function of the neoliberal project is to redefine the shape and the function of the state, not to destroy it” (56). Moreover, the “strong state was necessary to neutralize what [Hayek] considered to be the pathologies of democracy” (84). Even a temporary dictatorship can work in a pinch.

The shutdown is a brilliant strategy to meld Hayekian substance and Schmittian procedure. As Aaron Bady has observed,

A shutdown is a state of exception when the government gets to do things it normally can’t do, like close the Environmental Protection Agency, de-fund WIC, close the national parks, send a lot of government employees home [in what is in many ways a lock-out], and all sorts of other stuff. A shutdown is a moment in which a choice gets made about which laws to obey and which laws to ignore, when the government gets to decide that some people are essential and some people aren’t.

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Homeownership, Flood Insurance, and Stupid Land Uses: The Kolbe Decision

First, thanks to Concurring Opinions for inviting me back.  It’s been years.  What took you so long? 

I plan to spend some of my month’s effort here discussing coastal land use and disasters and the law.  In light of Superstorm Sandy and likely future megastorms, and given climate change and sea level rise, I can’t help noting that, whatever is going on with managing CO2 levels at a global scale, one class of disasters results from what I have come to call in conversation (and now in writing) Stupid-A** Land Use Decisions (SALUD).   We build houses in harm’s way.  I’ve written about the folly of allowing homes on the parts of barrier islands that are most likely to flood or wash away, noting in passing the folly of building homes on scenic hillsides subject to rock- and mudslides.  In the news lately, there’s much about the costs of rescuing homes built in forests that are just waiting to catch fire.  At some point, we have to disincent SALUD, or at least insist that the full cost of risk and rescue and rebuilding be reflected in the market cost of building in Stupid-A** places, and let that expense disincent.  It’s very hard to do.  As my own dear New Jersey Governor Chris Christie said after Superstorm Sandy, we will rebuild!

 Which brings me to the case I’m discussing today.  It came down last Friday. The case is Kolbe v. BAC Home Loans Servicing, LP (1st Cir. No. 11-2030, Sept. 27, 2013) (en banc), 2013 WL 5394192.  It is a First Circuit en banc decision, on a 3-3 vote, failing to reverse the District of Massachusetts, which granted a motion to dismiss a putative class action seeking an interpretation of a form mortgage contract provision concerning flood insurance.  Warning, I’m not an expert in all of the doctrinal areas involved, so please forgive if I miss something, but boy, is it interesting. 

The provision in dispute is Covenant 4, a three-sentence paragraph required by the Department of Housing and Urban Development (HUD) to be included in all single family dwelling mortgage contracts insured by the Federal Housing Administration (FHA).  Covenant 4 was established by a regulation promulgated in 1989 after notice and comment rulemaking.  It allows a lender to require that the homeowner purchase insurance for “any hazards . . . in the amounts and for periods that the Lender requires.”  Covenant 4 also requires the borrower to insure against loss from floods to the extent required by the Secretary of HUD.  HUD requires flood insurance whenever a property is located in a “special flood hazard area,” the most risky category under the National Flood Insurance Program (NFIP) classification scheme.  HUD requires flood insurance at least equal to the outstanding balance of the mortgage, that is, the lender’s stake in the property, but there is a cap of $250,000.  Thus, as to hazard (but not flood), the lender clearly has authority under Covenant 4 to require further hazard insurance.  But it is, arguably, unclear whether Covenant 4 empowers the lender to require a homeowner to purchase additional flood insurance.  Perhaps the provision of Covenant 4 referring to requirements by HUD insulates the homeowner from lender requirements as to purchasing flood insurance.  Perhaps Covenant 4’s authorization for lenders to require additional hazard insurance includes flood insurance, because floods are a type of hazard.  That’s the interpretation question. Read More

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Secret Adjudications: the No Fly List, the Right to International Air Travel, and Procedural Justice?

Airplane_silhouette_SLatif v. Holder concerns the procedures owed individuals denied the right to travel internationally due to their inclusion in the Terrorist Screening database. Thirteen individuals sued the FBI, which maintains the No Fly list and the Terrorist Screening database. Four plaintiffs are veterans of the armed forces; others just have Muslim sounding names. All of the plaintiffs are U.S. citizens or lawful residents. The plaintiffs’ stories are varied but follow a similar trajectory. One plaintiff, a U.S. Army veteran, was not allowed to return to the U.S. from Colombia after visiting his wife’s relatives. Because he could not fly to the U.S., he missed a medical exam required for his new job. The employer rescinded his offer. Another plaintiff, a U.S. Air Force veteran, was in Ireland visiting his wife. He spent four months trying desperately to return to Boston. Denied the right to travel internationally, the thirteen plaintiffs lost jobs, business opportunities, and disability benefits. Important family events were missed. The plaintiffs could not travel to perform religious duties like the hajj. Some plaintiffs were allegedly told that they could regain their right to fly if they served as informants or told “what they knew,” but that option was unhelpful because they had nothing to offer federal officials. Plaintiffs outside the U.S. were allowed to return to their homes on a one-time pass. When back in the U.S., they turned to the TSA’s redress process (calling it “process” seems bizarre). The process involves filling out a form that describes their inability to travel and sending it via DHS to the Terrorist Screening Center. The Terrorist Screening Center says that it reviews the information to determine if the person’s name is an exact match of someone included in the terrorist database or No Fly list. All of the plaintiffs filed redress claims; all received DHS determination letters that neither confirmed nor denied their inclusion on the list. The letters basically told the plaintiffs nothing–they essentially said, we reviewed your claim, and we cannot tell you our determination. 

The plaintiffs sued the federal government on procedural due process and APA grounds. They argued that the DHS, FBI, and TSA deprived them of their right to procedural due process by failing to give them post deprivation notice or a meaningful chance to contest their inclusion in the terrorist database or No Fly list, which they have to presume as a factual matter based on their inability to travel though some of the plaintiffs were told informally that they appeared on the No Fly list. The standard Mathews v. Eldridge analysis determines the nature of the due process hearings owed individuals whose life, liberty, or property is threatened by agency action. Under Mathews, courts weigh the value of the person’s threatened interest, the risk of erroneous deprivation and the probable benefit of additional or substitute procedures, and the government’s asserted interests, including national security concerns and the cost of additional safeguards.

Most recently, the judge partially granted plaintiffs’ summary judgment motion, ordering further briefing set for September 9. In the August ruling, plaintiffs were victorious in important respects. The judge found that plaintiffs had a constitutionally important interest at stake: the right to fly internationally. As the judge explained, plaintiffs had been totally banned from flying internationally, which effectively meant that they could not travel in or out of the U.S. They were not merely inconvenienced. None could take a train or car to their desired destinations. Some had great difficulty returning to the U.S. by other means, including boat, because the No Fly list is shared with 22 foreign countries and U.S. Customs and Border Patrol. Having the same name as someone flagged as a terrorist (or the same name of a misspelling or mistranslation) can mean not being able to travel internationally. Period. The court also held that the federal government interfered with another constitutionally important interest — what the Court has called “stigma plus,” harm to reputation plus interference with travel. She might also have said property given the jobs and benefits lost amounted to the plus deprivation. That takes care of the first Mathews factor. Now for the second. The court assessed the risk of erroneous deprivation under the current DHS Redress process. On that point, the court noted that it’s hard to imagine how the plaintiffs had any chance to ensure that DHS got it right because they never got notice if they were on the list or why if they indeed were included. Plaintiffs had no chance to explain their side of the story or to correct misinformation held by the government–what misinformation or inaccuracy was unknown to them. In the recent “trust us” theme all too familiar these days, defendants argued that the risk of error is minute because the database is updated daily, officials regularly review and audit the list, and nomination to the list must be reviewed by TSC personnel. To that, the court recognized, the DOJ’s own Inspector General had criticized the No Fly list in 2007 and in 2012 as riddled with errors. Defendants also contended that plaintiffs could seek judicial review as proof that the risk of erroneous deprivation was small. The court pushed off making a determination on the risk of erroneous deprivation and valued of added procedures because it could not evaluate the defendants’ claim that plaintiffs could theoretically seek judicial review of determinations on which they have no notice. Defendants apparently conceded that there were no known appellate decisions providing meaningful judicial review. The court required the defendants to provide more briefing on the reality of that possibility, which I must say seems difficult if not impossible for plaintiffs to pursue. Because the court could not weigh the second factor, she could not balance the first two considerations against the government’s interest.

I will have more to say about the decision tomorrow. The process provided seems Kafka-esque. It’s hard to imagine what the defendants will file that the public can possibly learn. The briefing will surely be submitted for in camera review. Details of the process may be deemed classified. If so, defendants may invoke the state secrets doctrine to stop the court’s ever meaningfully addressing the rest of the summary judgment motion. It would not be the first time that the federal government invoked the state secrets doctrine to cover up embarrassing details of mismanagement. Since its beginnings, the state secrets doctrine has done just that. The parties were supposed to provide the court a status update today. More soon.

NLRB History

Anyone teaching administrative law will probably be reviewing several cases involving the National Labor Relations Board. In an era of declining unionism, the agency can seem like a bit of a relic. On the other hand, the rising tide of worker actions at fast food and retail giants suggests its basic premise—workplace democracy—may be needed now more than ever. Unfortunately, two presidential moves particularly eroded the agency’s ability to adjudicate disputes neutrally:

Congress presumed that all of the NLRB members should represent neither labor nor management, but rather the public. But in 1953, President Dwight Eisenhower, the first Republican president to make NLRB appointments, broke the non-partisan pattern and appointed three Republican lawyers with management backgrounds and two non-partisans. That created what later administrations understood as a “tradition” of three appointments from the president’s party and two from other backgrounds (eventually defined as from the opposing party). . . . Meanwhile, the National Association of Manufacturers, a big business group, pursued a policy of undermining the Wagner Act by promoting appointees who did not fully support the law’s goals, a strategy that Ronald Reagan escalated dramatically in 1981 by appointing prominent opponents of unionization to the NLRB, including the office of chairman.

Reagan signaled a new Republican strategy on labor. . . . As Cleveland State University law school professor Joan Flynn noted in a 2000 article in the Ohio State Law Journal, NLRB votes became more sharply divided along lines of class and ideology after Reagan named blatantly anti-union appointees to the board.

Given this history, and hardening GOP stances, it’s no wonder that the “A.F.L.-C.I.O. has set up a dozen committees — of historians, young workers, Web experts, pollsters — to propose ways to reinvent labor.”

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The FTC and the New Common Law of Privacy

I recently posted a draft of my new article, The FTC and the New Common Law of Privacy (with Professor Woodrow Hartzog).

One of the great ironies about information privacy law is that the primary regulation of privacy in the United States has barely been studied in a scholarly way. Since the late 1990s, the Federal Trade Commission (FTC) has been enforcing companies’ privacy policies through its authority to police unfair and deceptive trade practices. Despite more than fifteen years of FTC enforcement, there is no meaningful body of judicial decisions to show for it. The cases have nearly all resulted in settlement agreements. Nevertheless, companies look to these agreements to guide their privacy practices. Thus, in practice, FTC privacy jurisprudence has become the broadest and most influential regulating force on information privacy in the United States – more so than nearly any privacy statute and any common law tort.

In this article, we contend that the FTC’s privacy jurisprudence is the functional equivalent to a body of common law, and we examine it as such. The article explores the following issues:

  • Why did the FTC, and not contract law, come to dominate the enforcement of privacy policies?
  • Why, despite more than 15 years of FTC enforcement, have there been hardly any resulting judicial decisions?
  • Why has FTC enforcement had such a profound effect on company behavior given the very small penalties?
  • Can FTC jurisprudence evolve into a comprehensive regulatory regime for privacy?

 

 

The claims we make in this article include:

  • The common view of FTC jurisprudence as thin — as merely enforcing privacy promises — is misguided. The FTC’s privacy jurisprudence is actually quite thick, and it has come to serve as the functional equivalent to a body of common law.
  • The foundations exist in FTC jurisprudence to develop a robust privacy regulatory regime, one that focuses on consumer expectations of privacy, that extends far beyond privacy policies, and that involves substantive rules that exist independently from a company’s privacy representations.

 

You can download the article draft here on SSRN.

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Predictive Policing and Technological Due Process

Police departments have been increasingly crunching data to identify criminal hot spots and to allocate policing resources to address them. Predictive policing has been around for a while without raising too many alarms. Given the daily proof that we live in a surveillance state, such policing seems downright quaint. Putting more police on the beat to address likely crime is smart. In such cases, software is not making predictive adjudications about particular individuals. Might someday governmental systems assign us risk ratings, predicting whether we are likely to commit crime? We certainly live in a scoring society. The private sector is madly scoring us. Individuals are denied the ability to open up bank accounts; they are identified as strong potential hires (or not); they are deemed “waste” not worthy of special advertising deals; and so on. Private actors don’t owe us any process, at least as far as the Constitution is concerned. On the other hand, if governmental systems make decisions about our property (perhaps licenses denied due to a poor scoring risk), liberty (watch list designations leading to liberty intrusions), and life (who knows with drones in the picture), due process concerns would be implicated.

What about systems aimed at predicting high-crime locations, not particular people? Do those systems raise the sorts of concerns I’ve discussed as Technological Due Process? A recent NPR story asked whether algorithmic predictions about high-risk locations can form the basis of a stop and frisk. If someone is in a hot zone, can that very fact amount to reasonable suspicion to stop someone in that zone? During the NPR segment, law professor Andrew Guthrie Ferguson talked about the possibility that the computer’s prediction about the location may inform an officer’s thinking. An officer might credit the computer’s prediction and view everyone in a particular zone a different way. Concerns about automation bias are real. Humans defer to systems: surely a computer’s judgment is more trustworthy given its neutrality and expertise? Fallible human beings, however, build the algorithms, investing them with bias, and the systems may be filled with incomplete and erroneous information. Given the reality of automated bias, police departments would be wise to train officers about automation bias, which has proven effective in other contexts. In the longer term, making pre-commitments to training would help avoid unconstitutional stops and wasted resources. The constitutional question of the reasonableness of the stop and frisk would of course be addressed on a retail level, but it would be worth providing wholesale protections to avoid wasting police time on unwarranted stops and arrests.

H/T: Thanks to guest blogger Ryan Calo for drawing my attention to the NPR story.

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Teaching Administrative Law Using Current Events

One of the best parts of teaching a course you’ve already taught is updating course materials. I’m teaching Ad. Law again in the fall, and I’m considering adding a few relatively recent events as introductory discussion problems. The goal is to get students thinking about how process and agency structure shape substantive decisions. I tried to choose topics which do not require students to grasp complicated substantive issues:
1. The TSA seeks comments on across-the-board, whole body imaging for airline passengers. Here students can consider the interplay between notice-and-comment procedure and privacy objections to the imaging. I’ll also explore whether procedures (and concerns with use of imaging) should be different if TSA employees require this enhanced screening only on a case-by-case basis.
2. The IRS has been accused of unfairly targeting conservative groups who claim tax-exempt status. The issue highlights agency structure and raises questions of accountability in a system with multiple bureaucratic decision-makers. It also illuminates the tension between law and politics in agency decision-making, especially where agencies operate under vague rules such as the “social welfare” organization exemption.
I welcome any suggestions you may have.

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Mooting Noel Canning?

No, I don’t mean running practice sessions for the oral argument.  There is a story today that Senate Democrats want to change the rules to bar filibusters of executive branch nominees.  (I’m all for cloture reform, as I’ve explained many times here.)  Part of that plan (or bluff) involves the confirmation of all of the President’s nominees for the vacancies on the NLRB.  These are the same vacancies that the President filled with recess appointments last year and were declared unconstitutional by the Third and D.C. Circuits.

Here’s my question.  Suppose the Senate does confirm these people.  Can they then confirm retroactively all of the decisions made by the recess appointees?  (Since I think the recess appointees and the nominees are the same, it would be confirming their own decisions.)  If so, then that would moot the appeal from the D.C. Circuit on which the Supreme Court granted certiorari.

Reviewing Cass Sunstein

The Boston Review recently published a review of the new Cass Sunstein book, Simpler. Sunstein has been a leading advocate of “libertarian paternalism:” a program of soft “nudges” designed to change “choice architecture” to promote better behavior. Law professor William H. Simon is unimpressed:

The biggest current liability for liberals is that many people have lost faith in the capacity of government to solve the problems they care about. Perhaps the most prominent of these problems are unemployment, economic inequality, the deterioration of the natural environment, and national security. The behaviorist toolkit [of Sunstein] is not much help here. Sunstein’s account of the future of government has nothing to say about unemployment, inequality, or national security, and its contribution to environmental protection is limited to consumer labeling of cars and appliances. . . .

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Agencies in the Cathedral?

AgenciesAreas of law dominated by government agencies haven’t taken advantage of the rich literature on property rules and liability rules, which are “workhorse concepts that permeate every corner of the economic analysis of law.” In their 1972 article Property Rules, Liability Rules, and Inalienability: One View of the Cathedral, Calabresi and Melamed observed that there are fundamentally two types of remedies: (1) property rules, such as injunctions or disgorgement, which aim to deter, and (2) liability rules, like compensatory damages, which aim to compensate. This framework has paid rich dividends in areas like torts, property, IP, contracts, and conlaw — but seems to have bypassed areas of law dominated by agencies.

Government agencies’ remedies can be classified as either property rules or liability rules. For example, if a business has a permit from the EPA but violates the permit’s conditions, the remedy could be either taking away the permit (a property rule), or requiring proportional compensation (a liability rule). Similarly, if a broker has a license from the SEC and violates securities law, the remedy could be either yanking the license (a property rule), or requiring compensation for the harmed parties (a liability rule).

I apply the property rule and liability rule framework to my favorite agency — the IRS — in a forthcoming Virginia Law Review article. When a taxpayer violates a tax-law requirement, the remedy can be either yanking the taxpayer’s favorable tax status (a property rule), or requiring compensatory additional tax (a liability rule). Counterintuitively, anecdotal evidence shows that property-rule remedies may be less effective at deterring violations, because the threat of political and media blowback may make the IRS unwilling to impose a draconian property-rule remedy. As a result, when Congress protects a requirement with the property-rule remedy of yanking a favorable tax status, politically-powerful or sympathetic taxpayers are rarely deterred from violating the requirement. The IRS doesn’t dare impose it. Surely similar problems plague enforcement by other agencies.

Anyone working in any agency-dominated area of law could consider how the property-rule/liability-rule framework fits into their area.