Tuesday, May 31, 2011

Judge Cacheris reconsidering critique of Citizens United?

On May 31, 2011 Judge Cacheris entered an additional briefing order requiring the parties in U.S. v. Danilczyk to submit additional materials on the effects of the decisions in FEC v. Beaumont, 539 U.S. 146 (2003), and Agostini v. Felton, 521 U.S. 203 (1997), and if these decisions should alter Judge Cacheris' extension of Citizens United from May 26, 2011 as discussed here.

Professor Hasen has the breaking coverage at the Election Law Blog of this additional briefing order, and a copy of the order here.

Procedural items of note:

Judge Cacheris issued this Order sua sponte (without either party requesting it).  This indicates Judge Cacheris was concerned about some element of his ruling.  He also ordered briefs within 24 hours and a hearing within four days.  Motions for reconsideration will normally be heard quickly, but this is lightning fast.

So what is the purpose of this procedure?

Prof. Hasen indicates as follows:

"The reference to Agostini means he could decide that Citizens United implicitly overruled Beaumont. (I think that argument is dead wrong, for reasons explained in great detail in Part I of this brief filed in the San Diego case.)"

Quite frankly I have not briefed this particular issue, yet I stand by my prediction, of this morning, before Judge Cacheris issued this briefing order that:

"As indicated, I do not think an appeal is likely, although I do believe this is grounds for reconsideration so Judge Cacheris can write an additional paragraph about how FEC v. Beaumont although not specifically overturned, was functionally overturned in Citizens United."

I believe Judge Cacheris already has an amended opinion in draft form, and needs to see if there is anything to add from the parties before issuing the opinion.  Some folks may not give him credit for it, but I think Judge Cacheris wants to make sure his opinion is thorough, even if it is controversial.

Why the real fallout of Judge Cacheris’ expansion of the Citizen’s United case will be minimal

UPDATE: Judge Cacheris reconsiders his previous ruling, coverage here.

On May 29, 2011 I explained the nature of Judge Cacheris’ decision in U.S. v. Danielczyk, Case No. 1:11cr85, and how the portion reported in the media is only a small portion of a 52 page substantial opinion. 

Some commentary from learned observers prompts me to explain why in my estimation this opinion will have little effect on the electoral landscape.

Is the opinion subject to being overturned?

For the opinion to be overturned it must be appealed.  Only in certain specific and uncommon circumstances can a decision be appealed before a case has been resolved.  U.S. v. Danielczyk does not have a final decision, and can not be currently appealed.  There is a trial set for July 6, 2011.  No appeal will be happening at least until after trial, sentencing, and post trial motions.

Moreover, many criminal cases do not reach an appeal stage.  The case is a criminal matter with an indictment that has at least five counts that survived the Defendants’ motions to dismiss.  If there is any reasonable possibility of both actual guilt of the Defendants, and success on any count by the prosecution, the parties will probably reach a deal.  If there is a plea bargain the case will not be appealed, and the ruling will stand.
Professor Rick Hasen who runs the Election Law Blog believes the case will be overturned on appeal, or at least be reconsidered.  In this post, Prof Hasen points out that Judge Cacheris failed to address an earlier Supreme Court case, FEC v. Beaumont, that supports the Constitutionality of the ban on corporate giving.   

It would be odd that Judge Cacheris failed to mention this case, except, as suggested by Prof. Hasen, the federal government did not mention it in their brief.  As indicated, I do not think an appeal is likely, although I do believe this is grounds for reconsideration so Judge Cacheris can write an additional paragraph about how FEC v. Beaumont although not specifically overturned, was functionally overturned in Citizens United.

So if no appeal occurs do we have a corporate fundraising free-for-all?

In my last post I suggested, through a series of rhetorical questions, that a corporate fundraising free-for-all is unlikely for practical reasons.  In reality, as long as this decision is not appealed, a corporate fundraising free-for-all remains legally perilous for candidates and corporations alike.

In Roll Call on May 28, 2011 in an article entitled Campaign Finance Experts See Few Implications for Virginia Ruling, the author states the following:

“The interpretations of Thursday's U.S. District Court decision by Judge James C. Cacheris vary. Campaign finance lawyers believe the decision applies to only a small section of the country, would allow federal candidates to raise donations only from Virginia companies and even those contributions would be subject to donation limits.”
This is mostly accurate.  To understand how this works the reader needs to understand the jurisdictional effect of federal precedent.  In simpler terms, “if a court says something, who geographically is affected?”  For Supreme Court cases, the opinions affect the entire country.  For Federal appeals court cases, (Circuit Courts) the cases affect all of the states and territories within the Circuit. For example the Fourth Circuit encompasses the following states, MD, WV, VA, NC, and SC, and all of those states would be affected by a Fourth Circuit ruling.  For these reasons it is possible to have conflicting rulings in different parts of the country.

The article seems to suggest that the ruling of a District Court Judge will be binding on the entire District.  This is simply not the case.  The rulings of District Court Judges are binding only on the facts, circumstances, and parties of the exact case before the Court.  The other Judges in the Eastern District of Virginia re not even bound by Judge Cacheris’ ruling outside of the actual case of U.S. v. Danielczyk.  Any federal candidate or federal corporation engaging in direct solicitation or contribution, even in the Eastern District of Virginia, is doing so at the highly likely peril of prosecution, assignment to a Judge other than Judge Cacheris, and criminal sanctions.  Not even Judge Cacheris is technically bound by his previous decision, and could decide in a contrary manner for the next similar Defendants in his courtroom.

So if the decision is not appealed, does it matter at all?

Yes.  Any ruling declaring a law unconstitutional will be used by future litigants in an attempt to invalidate the law in other courtrooms.  Eventually this issue will make it to one or more Circuit Courts, and perhaps back to the Supreme Court.  This is just a very early skirmish in a very long litigation battle.  Corporations are far from being able to donate directly to federal candidates. 

For those interested in seeing how an alternative campaign finance system works with no limits, but full disclosure, look into Virginia’s state level campaign finance regulatory scheme.

Some basic sources can be found here:

Sunday, May 29, 2011

Virginia Federal Court paves the way for direct corporate contributions to federal candidates, and it does not matter

UPDATED: see below

On May 26, 2011 Judge James Cacheris sitting in the U.S. District Court for the Eastern District of Virginia ruled that the Supreme Court case of  Citizens United v. FEC, 130 U.S. 876 (2010), by extension makes unconstitutional  a criminal law banning direct contributions from corporations to federal candidates  under the First Amendment.

The case is U.S. v. Danielczyk, Case No. 1:11cr85, and the 52 page opinion can be found here.

How the Court ruled on the issue of corporate First Amendment rights

The determination of the Court on this widely reported issue is summarized n page 46 of the opinion as follows:

“Citizens United held that there is no distinction between an individual and a corporation with respect to political speech. Thus, if an individual can make direct contributions within FECA’s limits, a corporation cannot be banned from doing the same thing. So because individuals can directly contribute to federal election campaigns within FECA’s limits, and because § 441b(a) does not allow corporations to do the same, § 441b(a) is unconstitutional and Count Four must be dismissed.”
In short, corporations and individuals enjoy equal political speech under the Constitution, and any law that applies to Corporations in a more stringent manner than individuals, and regulates political speech is inherently unconstitutional.

It is important to note that the Court only addressed this issue on pages 42-46 of the opinion.  In other words only about 4.75 pages of a 52 pages decision were devoted to this one issue.

What did the other 47 pages of the opinion say?

In short, the rest of federal criminal campaign contribution regulations remain intact and robust.  Five of six of the challenged counts of the indictment were upheld, and set to go to trial.  Most importantly the laws banning individuals from contributing money only to be reimbursed by another party (in this instance a corporation) were reinforced.  It is still illegal for a corporation to order hundreds of employees to make contributions and still be reimbursed by their employer.

Why the 4.75 pages don’t really matter

Corporations may now make direct contributions to federal candidates, but they are subject to the same rules as individuals.  They have the same campaign limits, and the same campaign disclosure requirements.  As a federal candidate, how much positive affect on a candidate will an additional $2,500 from a corporation have on a candidate?  How much access will that candidate give to a single corporate donor that makes up ~$2,500 of a $1,000,000+ campaign budget?  How much scrutiny is a candidate willing to endure for such a small portion of a total campaign budget?  How much scrutiny are corporations willing to endure for favoring candidates for office?  The answers to these questions explain why Judge Cacheris’ ruling not only vindicates Supreme Court caselaw and the Constitution, but also poses very little threat to our Constitutional republic. 

UPDATE:  Above are the practical reasons why the decision will have minimal effect.  The legal reasons the decision will have minimal effect can be found here

Thursday, May 26, 2011

Option II for the Commonwealth: Unexpected Orders in the Fourth Circuit challenges to the individual mandate still bad, but not as awful as originally thought

On Monday May 23, 2011 the Fourth Circuit issued two identical orders in Commonwealth v. Sebelius and Liberty U. v. Geithner requiring additional briefing on the issue of the Anti Injunction Act [AIA].   On May 24, I explained why this is not the worst news for the Commonwealth of Virginia.  Below is an alternate explanation as to why the Anti-Injunction Act [AIA] does not apply, and Monday’s orders are of less concern for the Commonwealth of Virginia’s case.

The Commonwealth of Virginia is also likely exempted from the AIA under the specific language of the AIA.  The AIA only enjoins lawsuits against the collection of a tax by a person under 26 U.S.C. § 7421.  A person is defined under 26 U.S.C. § 7701(1)(a) as follows:

"The term “person” shall be construed to mean and include an individual, a trust, estate, partnership, association, company or corporation."

In a 1934 case analyzing a different taxation statute it was determined that the Commonwealth of Pennsylvania was a person under a statute that said “the word 'person' is to be construed as meaning and including a partnership, association, company, or corporation, as well as a natural person.”  Pennsylvania, ex. rel. Schnader v. Fix, 9 F. Supp. 272, 276 (M. D. Pa. 1934).  On appeal, the Third Circuit in an indirect way stated the AIA applied to Pennsylvania as “the state had adequate remedy at law, viz., paying the contested taxes and bringing suit for the recovery of the same because allegedly illegally assessed . . .”  79 F.2d 520 (3d Cir. 1935).

The facts of that case are different than in Commonwealth v. Sebelius as Pennsylvania was trying to enjoin the enforcement of a federal tax on the state sale of alcohol, and Pennsylvania was actively engaging in the sale of alcohol.  In 2011 Virginia is not making the decision to forego the purchase of health insurance, the activity the Fourth Circuit is implying might be considered a taxable act. 

Ultimately, A state (or in this instance Commonwealth) is not a legal person under the AIA.  This issue does not appear to have been addressed in South Carolina v. Regan (keeping in mind that was 27 years ago).  As South Carolina v. Regan is the seminal case on this issue I doubt the definitions argument has ever been litigated. 

Click here. for my previous posts regarding the individual mandate.

Tuesday, May 24, 2011

Unexpected Orders in the Fourth Circuit challenges to the individual mandate still bad, but not as awful as originally thought

On Monday May 23, 2011 the Fourth Circuit issued two identical orders in Commonwealth v. Sebelius and Liberty U. v. Geithner requiring additional briefing on the issue of the Anti Injunction Act [AIA].  As indicated here, my opinion is that this reflects a strong preference among the Fourth Circuit panel of judges deciding these cases to declare that the penalty under the individual mandate is a tax.

In all of our (commentators') haste to analyze the unexpected demands of the Fourth Circuit in Commonwealth v. Sebelius and Liberty U. v. Geithner, there was a dearth of analysis as to the different effect the AIA might have on the Liberty U. Plaintiffs as opposed to the Commonwealth of Virginia.  Upon further reflection, Monday’s orders still reflect an unexpected setback, but not as much for the Commonwealth of Virginia.  The reason for the lack of effect on the great Commonwealth can be found in a 1984 Supreme Court decision regarding the ever interesting subject of the taxation of interest on state issued bonds.  (seriously, do not read the whole decision unless you are having trouble sleeping).   

Does the AIA apply to the states?

In the matter of South Carolina v. Regan, the Supreme Court addressed an instance in which the federal government sought to bar a state from pursing a remedy due to the AIA. 465 U.S. 367 (1984).  In Regan the Supreme Court stated “the Anti-Injunction Act's purpose and the circumstances of its enactment indicate that Congress did not intend the Act to apply to actions brought by aggrieved parties for whom it has not provided an alternative remedy.”  465 U.S. at 378.  Further the AIA “was intended to apply only when Congress has provided an alternative avenue for an aggrieved party to litigate its claims on its own behalf.”  465 U.S. at 381.

Virginia has no alternative avenue to litigate these claims.  The short version of the holding on the issue relevant to Virginia in Commonwealth v. Sebelius is as follows: If Virginia could never itself pay the tax and then seek a refund as suggested under 26 U.S.C. § 7422, then the AIA does not apply and Virginia may proceed with this lawsuit.  Perhaps in an oversimplification of the holding one could say “the AIA does not apply to the states.”

What does this mean for the Commonwealth of Virginia?

The negative consequences indicated here will not befall the Commonwealth.  Instead the Fourth Circuit will likely throw out Virginia’s claims on standing grounds as indicated in oral argument (I explained this here).

What does this mean for the Liberty U. Plaintiffs?

The Fourth Circuit is seriously considering the individual mandate a tax and dismissing the Liberty U. case pursuant to the AIA.

What does this mean for substantive rulings on the individual mandate?

If the Fourth Circuit finds against the Commonwealth on standing and against the Liberty U. Plaintiffs under the AIA, then the Fourth Circuit will have avoided ruling on the substance of the individual mandate in the PPACA.  The Supreme Court can then still deny certiorari for the Fourth Circuit cases without affecting the Constitutionality of the individual mandate.  The only hope in this situation is that the Commonwealth can convince the Supreme Court that the issue of standing for states is just as important as the Constitutionality of the PPACA, and argue both standing and the Constitutionality of the individual mandate in the Supreme Court.

The second reason the Commonwealth of Virginia should be less concerned about the additional briefing orders can be found here.

Click here. for my previous posts regarding the individual mandate.

Monday, May 23, 2011

Virginia healthcare challenges suffer further unexpected setbacks

UPDATE:  This setback has different effects on the Commonwealth of Virginia and the Liberty U. Plaintiffs.  See details here and here.

Unexpectedly on Monday afternoon the Fourth Circuit Panel that heard oral argument in Commonwealth v. Sebelius and Liberty U. v. Geithner ordered the parties to provide supplemental briefing on a narrow set of issues barely addressed at any stage thus far.

The ordering of supplemental briefs after oral argument is quite unusual by itself, moreover the subject matter of the additional briefs should be cause for concern by opponents of the individual mandate.

The Orders require that the parties must submit supplemental briefs by May 31, 2011 on three subjects.

1. When applicable, does the Anti-Injunction Act, 26 U.S.C. § 7421(a), deprive a federal court of subject-matter jurisdiction? See J.L. Enochs v. Williams Packing & Navigation Co., 370 U.S. 1, 5-8 (1962). If so, does it divest federal courts of jurisdiction in this case? See Bob Jones University v. Simon, 416 U.S. 725, 736-48 (1974).

2. Can a court determine that a challenged exaction qualifies as a “tax” for purposes of the Anti-Injunction Act without reaching the question of whether the exaction qualifies as a “tax” for purposes of Art. I, § 8, cl. 1? Compare Bailey v. George, 259 U.S. 16 (1922), with Bailey v. Drexel Furniture Co., 259 U.S. 20 (1922).

3. Assuming the Anti-Injunction Act does apply in this case, does a plaintiff have the ability to challenge the exaction provided by § 5000A in a refund suit or otherwise? See 26 U.S.C. § 7422(a); 28 U.S.C. §§ 1331, 1340, 1346.

What is the anti-injunction act all about?

In order to avoid prolific anticipatory (before tax enforcement) litigation seeking to prevent the government from enforcing a particular tax, there is a federal statute prohibiting lawsuits seeking injunctions against collection of federal taxes.  There are exceptions to this act.  In many instances when a tax has been erroneously collected the remedy for the taxpayer is a lawsuit under 26 U.S.C. § 7422 after presentation and denial of a claim for refund.

Where does this leave us on the schedule?

The Fourth Circuit will not be deciding either case until at least after May 31, 2011.  Moreover the Fourth Circuit will likely want to take some time to consider the arguments in the briefs.  In terms of timing, this is a setback for the Virginia cases, and may just put them directly on par, in terms of timing, with the Florida case going before the 11th Circuit in early May.

What does this mean for the substantive outcome of the cases?

This is a setback.  It means the Fourth Circuit is seriously considering declaring the penalty under the individual mandate a tax, and barring both cases on procedural grounds.  If this were to occur, the Supreme Court could deny certiorari for the Virginia cases, without resulting in a substantive effect on the Constitutionality of the individual mandate.  The Virginia Plaintiffs would then be left until after actual imposition of the tax penalty before a remedy could be had that challenges the Constitutionality of the individual mandate.  This would set these cases back for years.

Order in Commonwealth v. Sebelius can be found here.

Order in Liberty U. v. Geithner can be found here.

Click here. for my previous posts regarding the individual mandate.