Should abstract justice displace contract law?

The Texas Supreme Court is currently considering one of the most important contract cases in recent years. In Plains v. Torch (our shortened name, for the sake of convenience), two oil companies dispute the rightful owner of a 43 million dollar award that one of the parties (Plains) obtained from the federal government. Both parties argue vigorously about the meaning of the contract, but both agree that the contract should decide the winner of the dispute. Yet the lower court sent this case to a jury so that jurors could consider an equitable “money-had-and-received” claim, and distribute 43 million dollars guided not by the words of the contract, but by vague philosophical notions of “good conscience” and “abstract justice.”

Pacific Legal Foundation filed an amicus brief today asking the Texas Supreme Court to decide this contract claim by looking at the contract itself. A contrary interpretation that uses abstract justice to decide contract cases would demolish the expectation interests of the parties and is not a tenable rule for law or commerce. The freedom of contract is the right of any person to form a mutually beneficial agreement with anyone else. And that right should not be limited by a single quote from a single philosopher–or even twenty quotes from twenty philosophers.

On punishing plumbers

In the midst of a struggling economy, California has decided to crack down on the nefarious handymen that you hire to fix your stuff. Thanks to a new California law, honest people trying to scrape by doing repair or construction work now face greater barriers to feeding their families.

California has long required costly licenses for construction contractors. For decades, the “Joint Enforcement Strike Force” (a group that sounds more like a legion of stormtroopers than a gaggle of nosy bureaucrats) has been “protecting” consumers from choosing who they want to hire. But the large contractors who might have to compete against unlicensed scallywags have asked the California government to do more. The state responded with a law that will make the most hardened Craigslist repair guy tremble.

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Is the denial of preferential treatment discrimination?

female engineer

One group in the State of Washington thinks so. White female contractors are threatening to sue that state’s department of transportation if they aren’t given preferential treatment based on their race and gender.

The commotion stems from Washington’s implementation of the infamous federal Disadvantaged Business Enterprise (DBE) program. That program was created by Congress to remedy intentional discrimination against minority- and women-owned firms on federally funded public transportation construction and engineering contracts. And therein lies the problem:  Washington admits that it does not have evidence of discrimination against white women-owned firms.

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Congressional leaders and more than a dozen states support PLF’s Obamacare case

A coalition of congressional leaders and states have filed friend of the court briefs in support of our case challenging the constitutionality of Obamacare under the Constitution’s Origination Clause. In July, a three-judge panel of the D.C. Circuit Court of Appeals rejected our lawsuit, holding that the Individual Mandate may be a tax, but it isn’t a “bill for raising revenue,” because its “primary purpose” is to force people to buy health insurance, rather than to raise money for the government. We’ve asked the entire D.C. Circuit to rehear the case, pointing out that this vague “primary purpose” test has no foundation in the precedent, and would allow Congress essentially to ignore the Origination Clause at will.

Senators John Cornyn and Ted Cruz have filed a brief, co-signed by Georgetown law professor Randy Barnett, which points out that the “primary purpose” test is incompatible with what people understood the Constitution to mean when it was written and ratified. Under the original public meaning, the term “bill for raising revenue” was understood to mean any law that’s passed solely under Congress’s taxing power—and according to the NFIB v. Sebelius decision from two years ago, Obamacare is just such a law. It wasn’t an exercise of any Congressional power other than the power to tax—and therefore, it should have started in the House, as the Constitution’s authors and ratifiers expected. You can read that brief here, and read more about it at The Volokh Conspiracy here.

In another brief, House Majority Leader Kevin McCarthy, House Majority Whip Steve Scalise, and the Judicial Education Project, argue that “if anything is a bill for raising revenue, the ACA is.” As they point out, that 2,000+ page bill is chock full of taxes; everything from a surtax on investment income to an excise tax on indoor tanning salons, to a fee on pharmaceutical importers. All of these put money into the general fund, to be spent however Congress chooses, and are therefore taxes, not fees or penalties or anything else. Thus they should have originated in the House. Worse, the panel decision—by holding the ACA exempt from the Origination Clause because its “primary purpose” is to control behavior—“turns the Constitution on its head,” because it “would make the Clause entirely inapplicable to the very taxes most threatening to individual liberty.” You can read that brief here.

A third brief, filed by the states of Alabama, Alaska, Arizona, Colorado, Florida, Georgia, Idaho, Kansas, Nebraska, South Carolina, South Dakota, Texas, and West Virginia, argues not only that any law passed solely under Congress’s taxing power must be a “bill for raising revenue,” but that the Senate’s power to “amend” House-created bills cannot include the power to completely gut them and substitute entirely different language. Such a procedure would make the Origination Clause “a mere paper tiger.” Yet that is just what happened in this case. You can read that brief here.

Finally, 43 members of the House of Representatives have filed another brief, pointing out that the panel’s decision conflicts with precedent regarding the Origination Clause, and that the tax imposed by Obamacare is not just “incidental” to a law enacted for “other purposes”—on the contrary, the Individual Mandate is just what the founders were concerned about when they wrote the Origination Clause: the abuse of Senatorial power to violate individual liberty free of the democratic accountability that disciplines the House of Representatives. Dividing the power to tax between the Senate and the House, these amici point out, is just as important as dividing other powers between the three branches of the federal government, or dividing power between the federal government and the states. You can read that brief here.

We’re grateful for the support of our amici, and we hope that the D.C. Circuit will choose to reconsider this case and apply the Constitution’s carefully designed restrictions on the power to tax.

Brown signs bill that purports to overturn Schuette

Ten days ago, Governor Brown signed AB 2646 into law.  The stated purpose of the statute is return the law to where it was before the Supreme Court issued its opinion in Schuette v. BAMN — the case that upheld the Michigan voters ability to amend their constitution to prohibit racial preferences. The statute basically creates a cause of action for a Hunter/Seattle violation: if some government body passes a law that burdens an individual’s right to engage in the political process, this newly enacted statute would allow them to bring a cause of action challenging the law.

The problem with this whole statute is that the law already provides for that remedy.  The statute doesn’t do a thing!  The Supreme Court’s decision in Schuette did not overturn the Hunter/Seattle doctrine. All the Schuette decision does is say that when the voters of a state choose to ban racial preferences, the Hunter/Seattle doctrine does not prohibit them from doing so. As PLF made clear in its amicus brief in the case, the Equal Protection Clause is not violated by a constitutional amendment that requires the state to treat everybody equally.   Continue reading

Uber, Lyft, VRBO, and the value of economic liberty

I was recently interviewed on the Power and Market Report about Uber, Lyft, VRBO and other innovations which are providing consumers with excellent new services.  Naturally the old regime is not pleased, and has taken to lobbying state legislatures to step in and ban the competition.  I discuss PLF’s efforts to fight anti-competitive laws which have no public benefit, and that are instead designed to protect interest groups from competition.  You can listen to the interview here.

George Will discusses the most important economic liberty case in recent years

The Supreme Court will hear arguments tomorrow in N.C. Bd. of Dental Examiners v. FTC, which asks whether states can immunize people from prosecution under the antitrust laws when they use government power to crush economic opportunity and free competition. In his column this weekend, George Will explains how this case touches on important broader themes of liberty and responsible government.

The case began when North Carolina dentists, deputized by the state to regulate the practice of dentistry, tried to block competition by people performing “teeth whitening”—a commonplace, safe procedure you can do at home with an over-the-counter kit. They used their official powers to threaten teeth whiteners with prosecution for practicing dentistry without a license. When the Federal Trade Commission said that this violated the antitrust laws, they claimed immunity from those laws because they were working for the state. And it’s true: the only entity that can really create monopolies—the government—is typically immune from federal antimonopoly laws. But in this case, the courts said no: the officials weren’t being sufficiently supervised to ensure that they acted in the public interest, instead of preventing their own competition—so they were not immune.

We filed a brief, joined by our friends at Cato, arguing that the Court should rein in these antitrust immunity doctrines. It makes no sense that private parties face prosecution for so-called anticompetitive acts (which are often innocent, and benefit consumers—the antitrust laws are so irrational), while government can do the same, or much worse, with impunity.

As Will notes, today’s antitrust immunity doctrines help perpetuate an attitude that the founders expressly rejected, in which “commercial interests collaborated with governments that protected them against competition.” This, Will writes, is a “residue[] of the mercantilist mentality, which was a residue of the feudal guild system, which was crony capitalism before there was capitalism.” The founders hoped that what they called the “compound republic” of federal and state powers balancing each other would prevent such abuses. Sadly, in this area, courts have simply shrugged at the problem.

We hope that the Supreme Court will reverse that trend and hold that, at least in this area, government cannot restrict economic liberty with impunity. Whatever one thinks of antitrust law (and we aren’t fans), there’s no justification for allowing the government to deprive people of economic liberty in ways that would be considered criminal if private parties did it. A win for the FTC in this case would at least put a small tool in the hands of entrepreneurs to defend their right to earn a living.

You can read the rest of Will’s column here, and my Regulation magazine article, which he quotes, here.

EPA & enviros decide that suit against poultry farmer is for the birds

As we reported last month, the EPA has abandoned its case against a West Virginia poultry farmer for alleged violations of the Clean Water Act. Last week, environmental groups followed suit, ending the case.

The case began when the poultry farmer, Lois Alt, received a compliance order accusing her of violating the Clean Water Act because of runoff from her chicken coops, and threatening her with $75,000 a day in fines if she didn’t comply with EPA’s orders. Relying on PLF’s Supreme Court victory in Sackett, Alt sued, arguing that the compliance order is illegal because there is an express exemption for “agricultural” stormwater runoff. Once challenged, EPA backed down and tried to end the suit by withdrawing the compliance order. But, knowing that EPA could issue a new compliance order at any time, Alt continued and, last year, the trial court ruled in Alt’s favor, holding that the agricultural stormwater exemption applies to poultry farms.

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President’s weekly report — October 10, 2014

Obamacare — The Affordable Care Act, Taxes, and the Origination Clause

In Sissel v. U.S. Department of Health & Human Services, we filed a petition for rehearing en banc in the DC Circuit Court of Appeals on Monday.  On Oct. 9, the court ordered the Federal Government to respond to the petition within 15 days.  We are asking the court to revisit our argument that when the Constitution says that revenue-raising taxes must originate in the House of Representatives, it means just what it says and there is no exception if Congress happens to have another purpose in mind.  In other words, just because the law is supposed to improve health care, that doesn’t mean that the billions of dollars in taxes associated with the statute are immune from the prescription of the Origination Clause.  See our blog for an extended discussion of where this critical Obamacare case is heading.

Property Rights — No more illegal taxation Continue reading

EPA seeks to regulate coal-fired power plants out of business

As most Americans know, the Environmental Protection Agency (EPA) has a strong penchant for regulation of businesses and industries.  Consider its unlawful attempt to impose both state and federal regulations on existing coal-fired power plants—a strategy surely aimed at putting these lawful business out of business.

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