31 July 2009

A Long Recession

The second quarter of 2009 was the fourth consecutive quarter that that inflation adjusted gross domestic product, as measured by the U.S. Government's Bureau of Economic Analysis, has declined by 1.0%.

This is the first time that this has happened since the government started keeping quarterly records in 1947. Annual records go back to 1930. On an annual basis, there was negative economic growth in the years 1930-1933, 1938, and 1945-1947.

The decline in GDP so far in 2009 exceeds the annual decline in GDP for every year on record except 1930, 1932 and 1946. Of course, some of this year's decline could be offset with growth in the third or fourth quarter.

In absolute terms, even before accounting for population growth, the United States gross domestic product was lower in the second quarter of 2000 than it was in the third quarter of 2007, and in every quarter since then.

Nacchio Sentence Reversed By 10th Circuit

Joseph Nacchio, the former CEO of Qwest Communications International, Inc. (“Qwest”), was convicted of nineteen counts of insider trading in federal district court. . . . this court . . . affirmed Mr. Nacchio’s conviction. . . . The district court sentenced Mr. Nacchio to seventy-two months’ imprisonment on each count, to run concurrently, and two years of supervised release on each count, also to run concurrently. The district court additionally assessed a $19 million fine and ordered him to forfeit approximately $52 million.

From the 10th Circuit Opinion released today.

The court found the trial court overstated the gain Nacchio made from his insider trading deals, which in turn impacts the length of his sentence, and improperly failed to deduct his direct costs in connection with the deals in calculating the asset forfeiture amount that he must surrender.

The parties do not dispute that: Mr. Nacchio’s gross proceeds from the relevant stock sales were $52,007,545.47; the cost of exercising the options was $7,315,000.00; the brokerage commissions and fees paid were $60,081.09; and the taxes paid were $16,078,147.81.

Prior to sentencing, the parties presented arguments to the district court regarding the appropriate amount that should be considered “gain” for purposes of increasing Mr. Nacchio’s offense level under § 2F1.2(b)(1). The government argued to the district court that Mr. Nacchio’s “gain resulting from the offense” pursuant to § 2F1.2(b)(1) was at least $44.6 million, i.e., the net profit Mr. Nacchio received from his stock sales during the April-May 2001 time period. That figure would equate to a 17-level increase to Mr. Nacchio’s base offense level and a Guidelines range sentence of 70-87 months. . . .

Mr. Nacchio [Ed. arguing that not all of the gains had a causal link to his trades with expert testimony] argued for calculation of gain at $1.8 million, which would translate to a 12-level increase under § 2F1.1(b)(1)(M) and a Guidelines range of 41-51 months.

The district court rejected both of these arguments and instead calculated Mr. Nacchio’s gain to be approximately $28 million.

The trial court had focused on Nacchio's net profits from the trade. But, the 10th Circuit held that Nacchio was focusing on the right objective in his gain calculation, without necessarily endorsing his expert witness's way of getting there. The court held that "if the impact of unrelated twists and turns of the market is ignored in the sentencing calculus then an insider trading defendant is likely to suffer a sentence that is detached from his or her individual criminal conduct and circumstances."

On the issue of forfeiture:

Mr. Nacchio appeals the district court’s order that he forfeit approximately $52 million. He argues that the district court erred in requiring him to forfeit his gross proceeds rather than his net profit. According to Mr. Nacchio, under the terms of the forfeiture statute he should be required to forfeit no more than approximately $44.6 million, which comprises his gross proceeds from the unlawful trades less brokerage commissions and fees and the cost of exercising the options.

His fine was not struck down, although he is not barred from raising an excessive fine issue before the trial court, and arguing that it is excessive in another appeal. The 10th Circuit implied in a footnote that this would be a weak argument.

Nacchio will be resentenced by the trial court as a result. It must consider the federal sentencing guideline sentences, properly calculated, at that time, although it is not required to follow the Guidelines precisely so long at the trial court has what amounts to a reasonable justification for the deviation.

Bottom line: Nacchio gets to keep about $7.4 million that was going to be subject to forfeiture and will probably get a couple of years trimmed from his current prison sentence of six years. A good day's work for his lawyers.

Nacchio is unlikely to be released in the meantime, as his convictions stand and he has not served a sentence longer than the one he is arguing for on appeal.

California Courts Close

"Every district court is considered always open[.]"

-- Federal Rule of Civil Procedure 77(a) (in part).

In California, however, which is struggling under the weight of a massive budget crisis, that produced deep cuts in a recent budget resolution, this isn't quite the case.

The Judicial Council on Wednesday ordered all California courthouses closed once a month starting Sept. 16, despite ongoing complaints from labor groups, sheriffs and some judges that the closures are unnecessary and potentially dangerous. . . .

The third-Wednesday-each-month closures will save an estimated $85.3 million and are a key part of the judicial branch's overall plan to cut spending, raise fees and siphon savings to close a $393 million deficit. The Legislature authorized the closures as part of the $26 billion budget revision signed by Gov. Arnold Schwarzenegger on Tuesday.

From Law.com.

The judicial branch cuts comprise 0.15% of the total budget deal signed for this fiscal year. The closures account for a little less than a quarter of the total judicial branch savings.

Spleen Not Useless

One of your body's less essential internal organs is your spleen. You can live without one, but it does have a purpose.

[It] serves as a holding tank for ready-to-go immune agents called monocytes. . . the spleen is their main dispatcher. . . . It recycles iron from old red blood cells, houses fresh blood cells, synthesizes antibodies and acts as a chamber in which pathogens are killed. . . .

In 1977, scientists reported that servicemen who had undergone spleen removal during World War II had higher rates of death due to diseases in general — and from heart disease and pneumonia specifically — during the 28 years following the war, compared with similar men who kept their spleens. . . .

Spleen removal can . . . cause diminished response to some vaccines and increased susceptibility to infections.

Spleen malfunction may be one factor in autoimmune diseases.

Building Bridges With Booze

Who has what "might be the city’s best margarita"?

Sushi Den!

Patrick Doyle's review is at 5280 magazine's blog.

Sushi Den, in Denver's Platt Park neighborhood in the tony, off the beaten path Old South Pearl commercial district, is widely considered the best Sushi restaurant in Denver and flies its fish fresh in from Japan every day.

Sushi Den's addition of the margarita to its official drink list (it was an off menu choice until now), isn't the only way that ethanol is being used to bridge ethnic divides these days. In what will be recorded by historians as a signature Obama move, the President was busy this week healing any harm he might have done with his comments to race relations in Cambridge by bringing the parties to a high profile police run involving a famous African-American professor at Harvard to his place for beer.

It is time to get the CIA hard at work determined the favorite drinks of Kim Jong Un, the twenty-six year old youngest son and likely successor to North Korea's current supreme leader who is at grave risk of dying from pancreatic cancer in the near future. Perhaps they can ask Kenji Fujimoto, a former Japanese sushi chef for the North Korean leader and author of the memoir "I was Kim Jong Il's Cook."

Zombie Porn Hunters

[I]n 2005 when Attorney General Alberto Gonzales set up an Obscenity Prosecution Task Force, which ultimately focused on prosecuting fetish, bestiality and so-called fringe porn.

Six months into the Obama Administration, the task force is still in business and is still headed by a former U.S. Attorney for Utah under President Ronald Reagan, Brent Ward.

From Politico.

The task force was accused of venue shopping for conservative juries by arranging FBI stings that ordered allegedly obscene materials in conservative rural jurisdictions and then securing adult porn obsenity indictments in those places. A key finding that juries must make in adult porn cases to reach a guilty verdict is the determination that the material is obsene in light of "community standards." (A subject addressed at length in this recent article.)

Adult porn prosecutions had virtually vanished prior to the creation of the task force by the Bush Admininistration in 2005, in the wake of changing community standards and appellate court rulings that provided strong free speech defenses to prosecutions. Adult obsenity cases also took a back seat in prosecution priority because they are victimless crimes involving consenting adults. The federal government even regulates the adult porn industry's record keeping requirements in order to simplify child pornography prosecutions, where there are far fewer legal defenses because child sexual abuse is a serious crime and is considered inherently involuntary. But, in the wake of the task force, which has led programs for state and local prosecutors on prosecuting adult obsenity case, as well as conducting its own prosecutions, the trend has reversed.

Convictions have even been secured for a comic book depicting child porn in a clearly drawn rather than photograph derived way, and for obscene, unillustrated written pornography.

The link above relates a sting set up by the Task Force where materials were ordered from a New Jersey company in Montana and an indictment was issued last August (under the George W. Bush Administration). This May, the Obama Administration quietly assenting to a judge's ruling change the venue in the case to New Jersey, where a conviction is likely to be much harder to secure due to the differences in the jury pool.

The case also sheds interesting light on another not widely known fact. There are many types of prosecutions that courts have held that the federal government has the power to make (such as prosecutions of cases under federal law for crimes where there have been acquittals in state trials, prosecutions for mere intentional failure to file a tax return without other tax charges, and prosecutions for check fraud under $75,000), that internal Justice Department policies direct its attorneys not to bring. One of those policies involves the kind of case brought by the Task Force in the Montana case:

[A]n internal Department of Justice policy. . . . dating to 1979 or earlier and included in the U.S. Attorney’s Manual, says postal obscenity cases “should not ordinarily” be filed in the district where an undercover agent had materials sent unless the defendant had some other contacts with that district.

Violations of these policies are not directly subject to judicial review, but failures to follow these policies might prompt new statutory or judicial rulings against the practices that could limit Justice Department bargaining power and legal rights in future cases. One reason the Justice Department may have dropped its appeal to the 9th Circuit in the Montana case, in addition to a change in administration policy, may have been to avoid the chance that a binding appellate court precedent limiting Justice Department power would be created.

Some of these Justice Department policies, which in principal can be changed at the whim of the Attorney General, amount to part of the unwritten constitution of the United States (a concept attributed in the English context to Walter Bagehot, which has increasing relevance in U.S. law and politics).

There are other political considerations in these cases as well:

Obscenity cases are politically sensitive for the Obama Justice Department because the deputy attorney general, David Ogden, was criticized by Republicans during his confirmation for his past legal work for Playboy and other purveyors of sexually explicit material. . . . The U.S. Attorney who brought the [Montana obsensity] case last year, William Mercer, had close ties to the Bush administration and in an unusual arrangement served as the No. 3 official at the Justice Department. In addition, complaints from [Obsensity Task Force leader] Ward about alleged resistance to bringing obscenity cases reportedly played a role in the firings of at least two of the U.S. Attorneys whose dismissals by Bush in 2006 sparked controversy and investigations.

Adding a new political dimension to the saga, the case filed against Goldman last week was assigned to Judge Joseph Greenaway Jr. of Newark, a Clinton appointee. In June, Obama nominated Greenaway to the U.S. Court of Appeals for the 3rd Circuit. The Senate has not yet acted on the nomination.

The reasons that U.S. Attorney appointments should be political, the counterarguments, and the federalism concerns implicated by these prosecutions are explored in another recent piece of legal scholarship.

30 July 2009

Long Term Unemployment At Record High

Unemployment sucks. Unemployment for more than six months (the duration of unemployment benefits) can be economically catastrophic. The percentage of the labor force that has been unemployed that long, 2.8%, is at the highest point it has been in more than 40 years.

The commentator I have linked to believes based upon past trends that "even if the current recession officially ended this month, the number of long term unemployed would probably continue to rise through the end of 2010."

The Great Depression was worse, but this recession is once again shaping up to be the worst economic pratfall since then.

The Denver Post's latest unemployment headline which reports that Latinos and men have been particularly hard hit with unemployment in this recession is correct, although the statistics used to support it which compare the current unemployment rates of different groups, don't prove that claim. The Post's statistics prove that they are currently having a harder time than the average person, but don't prove that this recession caused that to happen. To do that you would need to look at before and after unemployment rates.

In a not entirely unrelated bit of financial crisis news, the "cash for clunkers" program was suspended after four days because it was too popular and burned through its budgeted limit (just under a billion dollars). The program was designed to help troubled auto dealers and manufacturers while helping the environment and energy independence too. It encouraged owners of inefficient old cars off the street encouraging to trade them in for newer, more fuel efficient and less polluting new vehicles while turning the clunkers into scrap metal, with four figure government subsidies.

From an economic stimulus perspective, quicker is better than shorter. But, any program that runs out of money in just four days was clearly based on unsound expectations when it was passed.

Also importantly for auto makers, the plan shows that a fairly modest adjustment in prices has the potential to clear a lot of backlogged motor vehicle inventory, which could make it possible for automakers to get production of cars they have a reasonable chance of selling moving. Vehicle sales are down an average of 500,000 vehicles a month from "normal" levels overall in the U.S. About 250,000 vehicles were sold under this program in just four days. A boost in sales that was a fraction as intense as this one would return the industry to levels that would end the need for the huge layoffs of autoworkers that we've seen in recent months. Even if this didn't make automakers more profitable, this would be a very good thing, so long as they didn't lose money by lowering prices and increasing sales.

Before G.M. and Chrysler went bankrupt, each was first basically breaking even on every sale made, and then losing money on every car it sold. A big part of that was attributable to large legacy costs, like retired employee health benefits and interest on bonds, that remained fixed expenses even if production fell.

Now that these legacy costs have been shed to a great extent, and unprofitable products are being removed from the market, the possibility that we could see an American automaker make money selling cars doesn't seem beyond reach.

Then again, we've reached a point where even much better run Toyota, which has much better market share for many of its vehicles than its American competitors, and has a mix of vehicles better suited to the desires of current consumers, is losing money in North America due to declining sales. Then again, Toyota is just losing money now, and is doing so despite the fact that it hasn't gone bankrupt, so it is still paying all of its debts in full.

A Response To Hazard On Comparative Private Law

Geoffrey C. Hazard Jr. as a retired professor of civil procedure who is one of the most famous authorities in the field. I used his textbook in law school. This month, he gave a podcast interview with him about comparative civil procedure.

An Incomplete Truth

The key points that he makes about the differences between how American courts handle lawsuits between private parties and those in almost every other country in the world have a real world basis. His main points are set out below, because they are worth considering, but in each case I have added my own caveats and context as a counterpoint to the assertions that he makes about American civil justice.

In general, Hazard's observations have validity in the narrow class of big lawsuit against big businesses for a type of lawsuits known as "torts" but do not accurately capture the flavor of other important types of lawsuits between private parties in the U.S. such as collection cases (the numerically dominant type of civil dispute and normally brought by businesses), real property cases, and business to business big dollar contract disputes (frequently the biggest dollar case in the court system).

His failure to make these distinctions is typical of the American "tort reform" movement, which generally seeks to weak legal protections for those who are harmed by business misconduct.

Misdiagnosis Leads To Bad Solutions

These lapses are important. One reason to do comparative law is to suggest policy reforms for your own system. But, if one misapprehends what is wrong wiith it, you are likely to come up with the wrong solution to it.

Reforms that work need to recognize the high hidden costs of procedures designed to protect jury authority in cases where juries are rarely used and don't perform a vital role, like commercial cases. The benefits of arbitration as a widely applicable solution are greatly overstated.

In major tort cases against big businesses, which are the unstated focus of Professor Hazard's analysis, many of the concerns raised are overstated, and the easiest way to deal with the genuine concerns may be to broaden liability in a way that reduces the scope of relevant facts in a case, moving the American system closer to a "no fault" regime with liability based upon causing an injury without regard to fault, and to devote more public resources to case management by hiring more judges and magistrates in these cases.

Professor Hazard is also correct in his assessment that personal injury litigation is a seccond rate substitute for universal health insurance, which is available in every country which is an economic peer of the United States. This too, is a "no fault" compensation regime. Routinely awarding attorneys' fees in personal injury cases (and thus, reversing the "American rule" on the subject) in some manner or other, would also greatly reduce the economic and political need to award non-economic damages in these cases.

An Issue By Issue Analysis


POINT: The U.S. is one of the only countries in the world to use juries on a widespread basis to resolve legal disputes between private parties (quite a few countries use juries or lay judges in criminal cases).

Many cases don't go to trial, but even in cases that settle, the settlement is impacted by the prospect of a jury trial.

Juries have become more representative of the general adult population then they were several decades ago when juries tended to be middle or upper middle class, better educated than average, predominantly male, and overwhelmingly white. These less educated and more diverse juries are more populist and less predictable.

COUNTERPOINT: While juries are available as a matter of right in almost all lawsuits between private parties in the U.S., they are predominantly used in a narrow subset of cases, called "tort cases." The point he makes is basically a "tort reform" argument.

Limited jurisdiction cases (in Colorado, these consist primarily of debt-collection cases involving less than $15,000 owed, residential landlord-tenant evictions and collections, small disputes (under $7,500) between non-lawyers, and temporary restraining order cases that frequently involve domestic violence), almost never involve jury trials and the prospect that a case could go to a jury trial is rarely relevant. The key issues are usually disputes entrusted to the judge like interpretations of law and contract language, rather than disputes entrusted to the jury.

Even in large dollar, general jurisdiction court cases, jury trials are overwhelmingly confined to personal injury, civil rights and employment law suits where non-economic damages and/or punitive damages are available, or where fraud is an important claim. Juries are sought primarily when resolution of discretionary issues of non-economic harm or witness credibility are involved. Jury trials are rare in disputed arising under contracts and in real estate disputes between private parties. Juries are rarely requested by either party in these cases (although a jury trial can often be requested if a request is made at the outset of a case), and all or most of the issues in a case are often resolved based upon legal arguments, documents and pre-trial deposition testimony presented to a judge prior to trial.

Real property foreclosures and mechanic's lien foreclosures in Colorado rarely even give rise to a right to a jury trial.

Jury involvement in civil justice enhances the democratic basis of the American legal system, insulating judges from political criticism in cases where the state has little to gain from making private parties unhappy. Also, juries are more predictable than critics suggest. In studies of juries where researchers secretly polled judges regarding the correct resolution of a case when the case was sent to a jury, judges usually ended up agreeing with the jury's verdict on the merits.

Non-Economic and Punitive Damage Availability

POINT: The U.S. allows the award of both compensatory non-economic damages (e.g. "pain and suffering") and punitive damages to a much greater extent than most legal systems. Most foreign legal system rarely, if ever, make damage awards for items like pain and suffering or as a punishment.

COUNTERPOINT: Non-economic damages (such as "pain and suffering) and punitive damages are generally not available in contract disputes or quasi-contract (unjust enrichment/restitution) claims, other than civil rights employment cases which are arguably a form of contract dispute. This is again a "tort reform" issue not broadly applicable to all kinds of lawsuits between private parties.

Punitive damages (also called exemplary damages) generally require a showing of intentional misconduct, reckless conduct, fraud, or in some jurisdictions gross negligence well in excess of that necessary to create liability. The U.S. Constitution requires these awards to have some relationship (expressed as a ratio of punitive damages to compensatory damages including non-economic damages) to compensatory damages, at least when the compensatory damages are non-trivial.

Punitive damages are brought almost exclusive in personal injury cases involving unusual levels of fault (e.g. civil claims for battery, drunk driving related automobile accident cases, or covered up environmental contamination incidents) and civil fraud cases (including consumer fraud). Punitive damages are sought in only a minority of tort cases, which themselves constitute a minority of general jurisdiction lawsuits between private parties, and are awarded in an even smaller minority of cases.

It is true that awards for non-economic and punitive damages are not required to closely track awards for economic damages. But, jury awards for non-economic and punitive damages are, in practice, usually closely related to the size of the award in the case for economic damages and the severity of the injuries suffered in most cases where non-economic and/or punitive damages are awarded. While these damages can't be predicted with certainty, a general idea of what kind of award is likely can usually be predicted with moderate reliability.

Contingent Fees

POINT: Lawyers in the U.S. can take cases on contingent fees; while lawyers in other countries do not. When a case is brought on a contingency fee, the case is likely to involve large damage claims and have a high probability of liability because lawyers do not have a good chance of making a sufficient fee in cases that are too small or unlikely to prevail on the merits.

COUNTERPOINTS: This too is a "tort reform" argument, and not an entirely accurate one.

Contingent fees are not restricted to high dollar cases, although they are generally restricted to cases likely to prevail on the merits. For example, collection cases brought concerning debts owed to businesses, frequently involve attorneys' who are compensated thorough contingent fees. Employment and personal injury cases are also often brought on a contingent fee basis; they are numerically much less common, but still not unusual. Collection cases are typically brought in limited jurisdiction courts and often involve just a few thousand dollars.

Professor Hazard suggested that few cases involving less than $300,000 of likely damages are brought by skilled lawyers retained on a contingent basis. In reality, the floor is closer to $30,000-$75,000 in tort cases or complex commercial or consumer rights cases, depending on the complexity of the case and the local economic situation. This is one reason why cases with individually small damage amounts are aggregated into class actions. The large dollar thresholds that Professor Hazard suggests are more typical of cases where liability is less clear or a vigorous defense is highly likely, like medical malpractice cases, or securities fraud cases.

Contingent fees are very rare, in contrast, in business to business isolated contract disputes. These case are usually handled on a billable hour basis.

The Economic Purpose of Non-Economic and Punitive Damages

POINT: The U.S. has a weaker social safety net than many countries. While personal injury victims in most countries are guaranteed medical care at public expense without regard to fault, and are entitled to a social safety net, in the U.S. many people can receive this compensation only through litigation to secure a damage award from someone who is "at fault" for the injury.

COUNTERPOINT: The U.S. does have a weak social safety net and this drives a great deal of personal injury litigation. Tort law is a poor substitute for universal health insurance, which is a sort of generalized "no fault" compensation regime. But, there is more to the economic purpose of non-economic and punitive damages in tort cases than this motivation.

Attorneys' fees are generally a component of damages in personal injury cases in foreign jurisdictions, but are generally not a component of damages in U.S. personal injury cases. The need to make a victim of someone else's careless behavior whole when some of their economic damages will go towards paying the attorney who brought the case partially explains why non-economic damages and/or punitive damages are functional in the system as whole.

In contrast, in contractual disputes and real estate disputes, where non-economic and punitive damage awards are very rare, contractual and/or statutory rights to attorneys' fees for a prevailing party are very common.

Litigation v. Regulation

POINT: Potent private litigation options in the U.S. are related to a regulatory environment that is more relaxed and less effective than in many other countries.

COUNTERPOINT: Private litigation has advantages over more direct regulation.

Damages in private litigation are frequently more proportionate to the actual harm than in a regulatory environment where harm and punishments are often see a disconnect, usually with too little harm in serious harm cases (like failure to follow workplace safety standards causing death), often too high in cases involving trivial harm (like the FCC fines for a Superbowl half-time show "wardrobe malfunction"). Unlike regulatory fines, these damages also compensate those harmed by the misconduct, rather than simply enriching the public purse.

Similarly, private litigation benefits from 20-20 hindsight, by only punishing conduct that really did pose a risk to the public, rather than punishing conduct that is in violation of the letter of some rule but unlikely to actually result in injury to someone.

These elements of the private litigation regime give businesses an incentive to focus on mitigating the most material risks using information that might not be available to even vigorous regulators. Moreover, to the extent that third parties with good information can foresee the risk, insurance underwriting can serve purposes similar to those of regulation.


POINT: The U.S. state court system is predominantly organized in an operational sense for issues like assignment of judges and jurors at a county level (a local government subdivision of a state), rather than a state or national law. Different jurisdictions have different tendencies, causing great disparities in the functional law from place to place. People bringing lawsuits exploit this fact to venue shop.

COUNTERPOINT: This is not only a concern primarily in tort cases (like personal injury and fraud cases), it is also a concern only in the narrow subclass of cases of most concern to the "tort reform" movement. Venue shopping by more powerful defendants is more common through contractual choice of law clauses in contract cases involving a dominant party (particularly consumer cases which often designate the drafting party's place of business as the venue).

There are strong legal limitations on the ability to choice a plaintiff friendly venue in legal disputes between individual plaintiffs and small numbers of defendants arising out of a contract or isolated incident causing harm. Contracts often specify a particular venue. Court rules generally limit venue to the place where a defendant arises or the suit arose.

People bringing suits have the ability to choose a particularly friendly venue (a practice called venue shopping) like mass tort cases (like securities fraud, consumer fraud, and products liability cases) where harm occurred over a wide areas, in defamation cases (i.e. libel and slander) where a word is published in a widely distributed medium, and in patent infringement cases involving widely distributed products. Bankruptcy cases are also often brought in jurisdictions with little genuine economic relationship to the bankrupt party.

Statutory reforms address many of these concerns either by limiting venue choice or by transferring such cases to federal court. Cases brought by domestic parties against exclusively foreign parties can be removed to federal court. So can suits arising under federal law or subject to special legislation. For example, almost all securities fraud cases involving publicly held companies and multi-jurisdictional class action cases are restricted to federal court. Patent law and bankruptcy cases are also largely restricted to federal court.

Federal courts often (as in the case of Colorado) preside over and operate at the level of an entire state (like Colorado) and where they do not, they typically involve a more demographically and ideologically balanced region that includes an entire metropolitan area or economically meaningful division of a state. Moreover, federal courts are bound by appellate courts with jurisdiction over a multiple state region, as well as the U.S. Supreme Court which primarily interprets the law that comes up in federal rather than state cases outside the criminal law sphere.

The elite nature of the federal court bar, its larger share of big civil cases, the broader demographic makeup of federal court juries, and the broader scope of federal appellate courts makes federal court litigation more predictable than state court litigation for national and international businesses. The federal judiciary is also, on average, currently more conservative than the typical state judiciary.


POINT: There is little difference between a U.S. and foreign forum in cases where a contractual arbitration clause covers the entire dispute. Arbitration clause can cure many of the faults of the American civil litigation system.

COUNTERPOINT: Pre-dispute arbitration clauses aren't available in cases involving people who haven't entered into contracts with each other (with rare exceptions, like fee disputes between Realtors who consent to arbitration as part of their professional association membership). But, a large share of cases where non-economic damages or punitive damages are available are disputes between private parties with no contractual relationship.

Thus, arbitration usually applies to the kind of contract disputes where the elements that make American civil justice unique are less prominent; moreover some of the most popular arbitration systems in the U.S. adopt by reference the rules of civil procedure that would have applied in a public court.

Also, there has been considerable hostility to pre-dispute arbitration requirements in contracts with consumers. As a result, in the past month, the two largest providers of this kind of arbitration have left the market, and legislation that would greatly curtail the use of arbitration where it is most widely preferred by big businesses is being consider by Congress. No one doubts the usefulness of arbitration to resolve small stakes disputes that are likely to recur between economic equals. But, an arbitrator's freedom to ignore the law and facts if desired makes it a poor forum for "bet the farm" cases or cases where there is a fear that one party could unduly influence the arbitrator.

Arbitrators tend to be more educated than jurors, and arbitrations proceed more quickly on average than public court cases.

But, the expense of arbitration is often not that different from the expense of a public court case; it is just more concentrated. Some of the cost savings of arbitration in the process are offset by a much higher cost to pay for the services of the arbitrator.

Hazard's suggestion that arbitration is more predictable than the outcome of a public court case is doubtful. A trial court decision can be appealed if the decision is based upon a procedural or substantive law error, and this is often done in large general jurisdiction court cases. In contrast, arbitration decisions generally cannot be appealed, even if the arbitrator's decision clearly misinterpreted the law or was based upon a finding of facts contradicted by the evidence received. This unpredictability is one of the main reasons that arbitration clauses are rare in high stakes business to business contracts.

From a big business perspective, the main reasons to have arbitration clauses are to (1) remove the availability of remedies like punitive damages and procedural options like class action cases, and (2) to reduce the duration of the process compared to public court dispute resolution in cases where certainty of outcome is less important because the stakes in each individual case are small for the business.

Overall Duration and Cost

POINT: Civil litigation in the U.S. can be longer and more expensive than in other countries, with the wide availability of broad pre-trial discovery (such as depositions of witnesses under oath and mandatory document production) accounting for a large share of that cost and time delay.

Large businesses abroad and in the U.S. fear the U.S. system of civil justice relative to other countries. People aligned with people who bring suits against large businesses tend to prefer the unique features of the U.S. system.

COUNTERPOINT 1: First, again, he overstates the scope of the problem which is particular to one subset of the general jurisdiction civil case docket. Discovery time and expense can be high, but this varies by type of case. It is not a major problem in all cases. The cases Hazard's concerns reflect the deepest worries about are exceptional. Discovery in personal injury cases involving isolated incidents, or relatively straight forward contractual disputes involving a small number of parties, is often relatively modest.

On the other hand "business tort" and "mass tort" cases like those alleging anti-trust violations, product liability claims, securities fraud cases, and consumer fraud cases, do often involve massive amounts of discovery, both through depositions and document disclosures. Still, one has to recognize that this is a small subset of all lawsuits between private parties handled by our court system.

COUNTERPOINT 2: A key concern that he neglects to mention is one of the most important reason that American trial lawyers and defense lawyers devote so much time to pre-trial preparation through discovery, and are so settlement prone, both of which are attempts to reduce "surprise" at trial. This is finality.

-- Finality In U.S. Jury Trials --

The grounds upon which a U.S. jury verdict can be overturned on appeal are very narrow. In this respect, the U.S. system is more like arbitration, and less like the civil law system.

In the U.S., an appeal of a jury verdict can raise only questions of law resolved by the judge (primarily questions of trial procedure and jury instructions), and the argument that the factual record provides no basis upon which any reasonable jury could have come to its conclusions.

Applications of facts in particular cases to broad legal standards (e.g., does conduct entirely captured on a good quality videotape among to "negligence" in a particular case) are treated as factual questions, even if they are, in theory, legal issues. Resolutions of these applications of facts to broad legal standards don't have precedential effect in te U.S. courts, and juries are generally completely unaware of how prior, very factually similar cases have been resolved.

Furthermore, since jury's typically decide only who wins and how much to award in damages (often a single number that does not distinguish between economic and non-economic damages), a jury verdict can be upheld even if the actual factual reason for the jury's verdict was not supported by the evidence at trial. For example, a verdict can be upheld because a jury could have disbelieved a key wiitness, even if the jury actually believed that witness.

In contrast, a judge must generally state both his findings of fact and conclusions of law in writing in detail when rendering a verdict, which makes it easier, in practice, for an appellate court to reverse a trial judge's ruling for a lack of factual basis.

Also, the trial upon which a judge or jury rules in the U.S. is very compact and rarely considers factual or legal arguments raised prior to trial if they are not renewed in the context of the trial.

-- The Hidden Costs Of Finality --

In practice, this means that there is a very high premium in American trial practice on going to great lengths to be prepared for anything that could happen at trial in a big case, even if it is unlikely to come up, has already been discussed extensively prior to a trial, or shouldn't be subject to reasonable dispute. Moreover, an American trial lawyer also has to present his entire case to make available all possible arguments on appeal and to make sure that everything that matters to the trier of fact is covered since there is little give and take between the trier of fact (i.e. the judge or jury) and the lawyers to determine how much the judge or jury understands and agrees upon.

-- The Civilian Approach To Finality And Its Implications For Lawyers --

In contrast, in civil law countries, it is generally possible to raise both mistaken findings of fact and mistaken findings of law on appeal, and to present new evidence concerning mistaken findings of fact during the course of the appeal. Also, civil law litigation frequently involves multiple single issue hearings with feedback provided along the way to guide lawyers in determining what factual and legal issues are truely disputed and require more development.

A French lawyer can afford to take the chance that the other side will challenge the credibility of a minor but important witness and omit evidence such as documentary foundations that would go establish the credibility of that lawyer, because if the point is raised and proves decisive, it can be relitigated on appeal. Avoiding the cost of extra preparation 19 times out of 20, if less expensive if one time out of 20, where the weak preparation makes a difference, the issue can be relitigated on appeal.

The availability of an appeal on an issue of fact that can be addressed with new evidence also more generally makes surprising the other side at trial a much less attractive strategy in litigation for lawyers.

In the U.S. if you can raise a point that sways a jury one way (e.g. that a key witness lied about an affair in his testimony), even if you know that there are counterarguments (there are three witnesses who are more inconvenient to call to the stand who could corroborate the material point made by the key witness), because you know that the other side won't have the evidence at hand necessary to counter that point effectively, it makes strategic sense to keep that ace in the hole until the last moment. An unprepared opposing counsel will probably never get a chance to present the evidence necessary to make the counterargument annd could lose as a result in a way that an appeal couldn't address. So, U.S. trial lawyers devote a great deal of time to predicting what opposing counsel will do at trial.

The amount of effort needed to secure an extra little bit of certainty regarding a case's outcome is very high. It is many times more expensive to be ready for 99% of things that could come up, than it is to be ready for 95% of things that could come up. So, the amount in controversy, rather than the amount of preparation necessary to be reasonably ready to make all of the points likely to come up, drives the cost of litigation in big stakes cases in the U.S., but that relationship is much less strong abroad.

In contrast, if you win through trial by surprise in Germany, you simply set your client up for an appeal, in which your cards have been already shown, that is likely to result in your client ultimately losing the case after incurring considerable additional expense in connection with the appeal. Moreover, in Germany, you can only win through trial by surprise, if your issue is raised in one of the last hearings in the case, and your client will likely have to pay the other side's attorney fees in connection with the appeal if the case is reversed on appeal.

Preserving a record for appeal much less important in France or Germany. Generally, a verbatim record of what was said at the trial level will not be kept at all. Instead, the judge will take notes and those notes will be used by the judge to prepare detailed findings to support the judge's verdict.

In general, the only facts it makes sense not to disclose in a civil law system, are those facts that will never come out until the trial and the deadline for an appeal of its conclusions is reached.

-- Reconsidering Finality And Jury Trial Availability In The U.S. --

Americans have the finality rule, in part, out of fear that there would be excessive appeals if findings of fact could be appealled (something that isn't born out by civil law practice). It is also a function of the impossiblity of respecting a jury's authority, a democratic political value, after a panel is irrevocably disbanded while also reviewing findings of fact against the record.

This consideration also prevents judges from resolving factual issues upon which there is any genuine dispute prior to trial, even when the issue isn't actually very close. The rules of civil procedure, designed with jury trials in mind, don't even make exceptions for cases where the judge will decide the case at trial without a jury.

Allowing judges in American court cases involving private parties to rule on factual issues at any point in a case where a jury trial has not been requested and sufficient evidence is available (predominantly commercial cases), could greatly reduce the duration and cost of litigation, by resolving factually clear cases sooner and reducing the need to prepare for trial without judicial feedback. This rule adjustment could be even more powerful if the right to a jury trial in state court (where it is not a constitutional right in civil cases) were abolished in the cases not involving non-economic damages or fraud where it is more frequently invoked.

Allowing appeals on issues of fact, as well as law would even more radically reduce the cost of litigation, by dramatically reducing the incentives to hide key facts until trial, and by reducing the importance of pre-trial discovery and preparation.

The importance of a jury trial in personal injury, civil rights and civil rights employment cases may outweigh its high hidden costs. But, in commercial cases, jury trials may have outlived their usefulness.

Interestingly enough, however, these reforms, which would not necessarily systemically favor either plaintiffs or defendants, have largely escaped discussion in civil procedure reform debates.

COUNTERPOINT 3: A third key consideration is the expense associated with administering the system.

Civil law countries have far more judges per lawyer, per lawsuit, and per population, than the United States. Serious cases in civil law countries are not handled by juries, but they are decided by three judge panels. It isn't unusual for a "supreme court" which is a final court of appeal in those countries to have dozens of lawyers on it, who organize themselves by subject-matter expertise.

Judges aren't cheap. But, a greater number of judges in the system allows the system to expect closer judicial supervision of a case. Judges who are more involved in cases on the merits as they develop are in a better position to restrain excesses by lawyers. For example, most key witnesses in the U.S. are examined at great length by lawyers without the presence of a judge at great length prior to trial and rules limiting the scope of that examination with no one to enforce them are largely unworkable. In contrast, judges preside over witness questioning in civil law countries, discouraging unnecessary questioning on side issues. Both in the U.S. and abroad, lawyers are much more reasonable when a judge is present than when one is not.

Civil law countries use increased public expenditures on judges to reduce private litigant expenditures on civil litigation. The United States, which is congenitally resistant to taxes and public spending, administers its court system at a comparatively slight cost, in exchange for allowing lawyers to have much more freedom to engage in costly litigation activities prior to trial.

Close judicial supervision also speeds up the process, because the parties don't have to come to a grinding stop while waiting for guidance on some issue raised in a case, until a judge with a huge caseload can take a moment to get up to speed and rule upon an issue in their case.

The U.S. might find that the system worked better, particularly in those cases where there are important reasons for retaining a right to trial by jury in civil cases, if greater judicial resources were devote to case management -- perhaps by putting civil cases where a jury right was retained into special courts limited to those cases with greater staffing resouces, so that discovery excesses could be more directly contained, and issues that could be resolved prior to trial were resolved more often.

COUNTERPOINT 4: A fourth key consideration is that the substantive law intentionally makes tort cases expensive to litigate. Businesses have accepted high litigation costs as a political compromise to make success on the merits more likely.

In cases brought most often by businesses, enforcing contract rights, strict liability is the rule. It doesn't matter why you can't pay your bill, you are legally responsible for doing so.

In contrast, American law usually imposes liability for non-contractual harm requires proof not only that the defendant caused the injury or was related to it in some other significant way, but that negligent, reckless or intentional conduct caused this to happen.

For example, the U.S. devotes vast amounts of resources on a case by case basis to determining who was at fault in car accidents, even when it is undisputed that someone was else was hurt because their car collided with the injured person's car. European law generally focuses more on causation and less on negligence. Liability is easier to establish under the applicable legal standard in most cases.

The U.S. has toyed with the idea of "no fault" regimes in some situations. After decades of expensive litigation over fault in workplace accidents, the worker's compensation compromise, which guarantees compensation without regard to fault for any injury caused by activities in the workplace, in exchange for a ban on workplace injury lawsuit in court and a dramatic curtailment of non-economic damages and a pay as you go approach to economic damages (as opposed to a final numerical determination at trial by a jury of matters like future medical costs in American personal injury cases).

Similarly, many states, including Colorado, have experimented with "no fault" automobile insurance. In these systems, everyone must have insurance and the insurance compensates all economic damages in small automobile accidents without regard to who was at fault, in exchange for a ban on lawsuits in these small cases.

American personal injury laws and child custody laws make all manner of considerations relevant, greatly expanding the legitimate scope of pre-trial discovery regarding facts. In contrast, American contract law deems legally irrelevant all sorts of logically important issues like the discussions that took place in the negotiation of contracts that are on their face unambiguous.

The smaller the number of issues that are legally relevant, the less expensive they are to litigate.

So Much For Character And Fitness Review

When I took the bar exam in Buffalo, New York, none of my fellow test takers were arrested during the course of the exam. Those following in my footsteps this time around were not so lucky.

An ID of the suspect will not be difficult. At least when I took the exam, you had to both sign and put your finger print on your exam each test session, to insure that an imposter wasn't taking it instead. I'll bet doctors don't have to do that.

29 July 2009

Legislative Repeal of Iqbal?

Sen. Arlen Specter, D-Pa., has already introduced legislation, called the Notice Pleading Restoration Act, which would return pleading standards to what they were before both Iqbal and Twombly. "The effect of the court's actions will no doubt be to deny many plaintiffs with meritorious claims access to the federal courts," Specter said in a statement on the Senate floor last week.

From here.

Iqbal and Twombly govern the question of how detailed factual allegations in Complaints for relief must be under the Federal Rules of Civil Procedure and have been discussed previously in this space.

And, for those of you who weren't paying attention, the (D) for Arlen Specter is correct. The moderate Pennsylvania Republican switched parties earlier this year. He serves on the Senate Judiciary Committee, so his proposals are more likely to become reality than those of many legislators and commentators. The bill number in the current session of Congress is S. 1504.

Absent the fluff of headings, etc., the bill, introduced July 22, reads in its entirety:

Except as otherwise expressly provided by an Act of Congress or by an amendment to the Federal Rules of Civil Procedure which takes effect after the date of enactment of this Act, a Federal court shall not dismiss a complaint under rule 12(b)(6) or (e) of the Federal Rules of Civil Procedure, except under the standards set forth by the Supreme Court of the United States in Conley v. Gibson, 355 U.S. 41 (1957).

Bill O'Reilly Still Stupid

[O]f course America has lower life expectancy than Canada — we have 10 times as many people, so we have 10 times as many deaths.

Bill O'Reilly, as paraphrased by Paul Krugman.

Why is he a syndicated TV personality again? Oh yeah, its Fox News.

I'm glad that original source Media Matters keeps on eye on this stuff so that I don't have to; my head would explode.

Quote of the Day

Regulation is the price we pay for the failure of morality.

-- Dwight Golann, law professor at Suffolk University who attributed the line as "an adage."

Governor's Office Makes Clemency Case To WPP

Trey Rogers from Governor Bill Ritter's office gave me a call today. We talked for half an hour about this post about a Colorado Public Radio spot on the progress being made by the Colorado Juvenile Clemency Board, which I understand from Mr. Rogers has been widely circulated by Mary Ellen Johnston, the advocate for juveniles in the spot. Who knew? Most of my posts receive less attention.

It appears that the Governor's office is paying rather close attention to the issue, at any rate, presumably under the belief that this has political importance. Suffice it to say that I've never received such a lengthy, personal and vehement defense of a Governor (or any other official's) position on anything, either as a genuine paid journalist, for Colorado Confidential, or here. Whatever actions the Governor takes in these cases will not be political accidents or missteps. They will be deliberate.

I confirmed that he was on the record, so I first offer some factual points he made to me on that call, some of which were not previously reported upon in the press.

A Clarification

The Colorado abolition of LWOP bill was passed in 2006 legislative session, when Bill Ritter were merely the leading Democratic Party candidate for Governor. We have a Republican Governor, Bill Owens, then. Bill Ritter did not take a public position during the campaign on that issue. This said, he silence was not meaningless.

This debate came up as a hot issue while he was running and it is the prerogative of a candidate for Governor to take a position on issues like this one. Further, as District Attorney, he was an active supporter of the position of the District Attorney's Association at the Capitol that the legislature should never retroactively reduce a criminal sentence, essentially on the grounds that this is a Governor's privilege. If he had taken a position in support of retroactive repeal of LWOP he could have done so. If he had wanted to use his pardon power to do that across the board once elected, he could have done so.

There is no legal requirement that he make a record on a parole matter showing everything considered in his decision. There is no legal requirement that a request for clemency be received at all. There are precedents for unsolicited grants of clemency by both Governors and Presidents. Clemency is not an adversarial process. He can write it on a napkin if he wants, so long as he sends a brief follow up letter to the appropriate official in the Colorado General Assembly explaining his action to meet the minimal notice requirements of the state constitution.

Trey Rogers asserts that Governor Ritter was simply not a part of the LWOP debate. I'm not convinced that this was true in terms of messaging and behind the scenes influence. A candidate for Governor is always part of any high profile debate, even if that role is silence. But, to the extent that I implied that he was Governor when the bill abolishing LWOP was passed, I was wrong.

Also, when the Board was established in August 2007, it was spun as a way to address the issue of Juvenile LWOP sentences in the state that were not retroactively repealed. If he was not in the debate at that point, he inserted himself into the debate at that point, marking territory on the issue to discourage the legislature from passing a retroactive juvenile LWOP themselves.

The Colorado Juvenile Clemency Board Progress Report

My understanding form Trey Rogers is that the recommendations of the Colorado Juvenile Clemency Board are generally for the Governor's eyes, and the Governor's eyes only. He may take or leave their recommendations, and he will take responsibility for them. He said that there was no way anyone could know if the Board had recommend clemency or not in any cases, and that Jeanne Smith didn't say that the Board hadn't (her language, and his suggested that it had not, but wasn't absolutely definitive).

He specific said that he wouldn't say if they had made recommendations or not (with the exception I will note below). I understood that they would not be made public prior to a decision by the Governor on these cases.

His initial summary of the status of the applications was that there were "a handful of denials, low single digits, or recommendations that the Governor grants some clemency." More detailed numbers followed, and I'm not entirely clear if this initial estimate was clarified by, or was in addition to the further detail I repeat below.

He notes that the Board was created from scratch in August 2007, a little less than two years ago, and that it took the Board time to develop threshold criteria, board rules, create a draft application and accept applications. He also stated that applications typically require staff to gather non-public, not easy to get information like comments from the victim's family, the prosecutor and judge that are not public, that applications are typically not complete. These lengthy submissions, as supplemented by staff must then be considered by the Board.

I was told that 20 applications have been submitted. The first application was completed in June 2008. Four of the 20 applications were either incomplete or didn't meet the basic criteria established by the Board that an inmate has served a third of a sentence or ten years in prison before an application will be considered. At this time, the Board has considered 11 of the remaining 16 applications and has 5 applications that will be considered in due course, for example waiting for a future meeting.

There were 3 applications of the 11 applications considered were of individuals were have parole eligibility within the next 3 years. I was told that the Board was "not going to look seriously at those." This leaves 8 applications, of which 4 involved Life Without Parole (LWOP) and the other 4 were very long sentences. The LWOP sentences and very long sentences were the ones that the Board undertook to consider.

One of the four LWOP was rejected by the Board. This was the case described as a "hit and run" by Mary Ellen Johnston on the Colorado Public Radio spot. Trey Rogers disagreed. He asserted that the jury found that the killing was a premeditated and intentional gang initiation killing that used a motor vehicle as a weapon.

The overall point that Trey Rogers was making in bringing up these details was the delay was not unreasonable, a point that has some merit, and will discuss in a bit.

Discussion Of The Merits

Trey Rogers acknowledged that Jeanne Smith, who was interview by Colorado Public Radio, was not just a random board member. She is the chair of the Board, and was intentionally selected as the Board's spokesperson to provide to Colorado Public Radio. Trey Rogers said that she was "speaking for the Board," although in context, he meant that she was a board member who was authorized to speak when she spoke about what the Board had decided, but that she was also one member of a Board that was not unanimous on these issues (nor is Governor Ritter's staff) and when she did not speak on behalf of the Board itself by her words that her statements reflect her view of the matter.

Neither he, nor I suggested that point, because it was understood. But, certainly to the extent that she was speaking for this advisory board, she was not speaking for the Governor himself, although she was hand picked by him to lead this Board and one assumes that he was familiar with her positions on these issues when she was appointed, and that he has accurately conveyed publicly or privately to her some of his feelings about what he wants from this Board which exists solely to provide him with non-binding advice.

Trey Rogers also indicates that his comments and other information provided by the Governor and the Board to Colorado Public Radio was left on the cutting room floor or not included in the story, because that was not the way that CPR wanted to tell the story. He raised his version of the "hit and run" case that was denied.

He also mentioned his statement to CPR, coming out of the Governor's office, that it would be legitimate for the Board to reduce sentences to parole after 40 years (which is what it would have been if the legislature had made its Juvenile LWOP decision retroactive), a position seemingly at odds with the position taken by Jeanne Smith in the interview. He did not suggest, however, that the Governor actually intended to take that position.

He raised the possibility that a reduction of a sentence to possibility of parole after 40 years could put a person who turned out to be a dangerous violent offender back on the streets. I asked why the parole board couldn't consider those issues in after the person who had been convicted of the crime committed as a juvenile after 40 years and deny parole if the inmate had shown himself to be dangerous in that time period. He didn't have an answer to that question.

To suggest that a parole board in 40 years with better information couldn't be trusted would require the Governor to agree with an exceedingly distrustful, conspiracy theory view of how parole boards work, of course, which isn't what one would expect from a politically moderate sitting Governor. Common sense makes clear that parole boards don't put people convicted of first degree murder back on the streets after a history of bad behavior in prison for forty years.

The simple fact is that the real risk to the public involved in not commuting juvenile LWOP sentences to the retroactive consideration of parole after 40 years determination in any of these cases is essentially zero. And, for crimes committed by juveniles it is simply impossible to know with certainty now that the inmate will be a threat to the public in 40 years -- none of them have the track record of misconduct at this point in time to justify such certainty.

With regard to the suggestion that the media had spun the story in the wrong way, misinterpreted Jeanne Smith, incorrectly described the one case that the Board had rejected, or misconstrued the Governor's position, I stated that the media would pick up any press release that the Governor made on the issue. He didn't disagree with this assertion and didn't offer any firm statements about why the Governor hadn't done so. I guess that I'm the press release. I'm doing my best to accurately reflect the discussion, but I'm human and as a lawyer in compliance with ethical rules in Colorado, I don't tape telephone calls without the consent of everyone on the call and didn't this time. I'm human and I could convey wording that a press release wouldn't convey.

On the timing issue, I raised the upcoming 2010 election. I noted that the Governor is goinig to be under intense political pressure when he is lagging in the polls and running as a moderate to refrain from issuing pardons or clemency in 2010. Also, the traditional time to grant pardons and clemency requests, although not the exclusive one, is from Thanksgiving to Christmas, in the holiday season, give or take a few days. (In hindsight, I didn't discuss this, the second anniverary of the commission would also be a sensible time to announce a decision.) So, there is basically one narrow politically sensible window for the Governor to act, and it is coming up very soon.

Trey Rogers suggested that at this point in our discussion that I was just predicting the future. I directed him to the name of the blog.

He, of course, took umbrage at my description of the action to date as a broken promise in my original post, before there was much real information in the hopper. I noted that the CPR piece confirmed the prior supposition made in the Denver Post by Susan Greene (he claims without interviewing anyone in the administration about the facts), that the Board was just a smokescreen. But, for all the discussion of the timing, the real discussion was about the merits of Jeanne Smith's statement about how the Colorado Juvenile Clemency Board was interpreting its mandate.

This interpretation was undoubtedly more crabbed that the way that the Board was spun when it was created, which was as a way to make middle ground between a retroactive legislative amnesty to current Juvenile LWOP inmates and no relief at all for Juvenile LWOP inmates.

A special Juvenile Clemency Board wasn't created simply to consider compassionate release or extraordinary good behavior while incarcerated. It was created to provide some sort of relief from juvenile sentences that the legislature has since disavowed (in a very modest way -- 40 years is still an extremely long time for a juvenile offender when the average adult sentence for murder in Colorado just a few decades ago was under ten years), and which are substantively unjust given the facts of the underlying cases even though they were legal at the time. By disavowing this part of the Board's mandate, it has broken the implied promise to consider this issue that the Governor made when he created it.

Her statement isn't binding precedent. The Board could vote her down in another case they find more suitable. The Governor could disagree with the Board's recommendation. It is simply a relevant precedent, and the precedent is not just in the actual determination made on the facts, but in the reasoning used to justify that decision.

The real meat of the discussion, of course, was not delay. It was whether the Governor intended the Board to see reconsideration of legislative decisions that it has since changed in old cases to be beyond its mandate, and if not, why he hasn't clarified that point or revised his executive order. If the Governor really agrees with the policy stated by Jeanne Smith on Colorado Public Radio, he has broken an implied promise. If the Governor didn't intend that, then why wait for a flawed recommendation.

The even deeper subtext is whether the Governor is expanding the scope of issues upon which he is breaking with his political base in the Democratic Party. The bridges have been burnt with labor already, and no olive branches have been offered to mend them (apologies for the mixed metaphor). But, it still isn't definitely established that the Governor will break with his political base on this criminal justice issue by refusing to make even a token effort to say that inmates imprisoned for crimes committed by juveniles should have at least some chance, long in the future, to tell a parole board that they are redeemed enough to be released.

Background: the Colorado Situation

It certainly looks like he has broken the implied promise he made when he created the Board by staking it with people who have a crabbed view of justice. But, Governor Ritter can change his mind and make peace with his fellow party members by showing just a little mercy to some of the 46 juveniles serving LWOP and more juveniles serving very long sentences in Colorado.

Who are those juveniles in prison for life without possibility of parole?

• 1 of the 46 is a female.

• 57 percent committed their crimes at age 17.

• 22 percent were 16 when they committed their crimes.

• 17 percent were 15 when they committed their crimes.

• 4 percent (two of the juveniles) were 14 years old.

• 26 percent of those serving life sentences are black.

• 29 percent are white.

• Two-thirds of the convictions were for murder, and one-third were for felony murder, in which the juvenile did not personally kill anyone but played a role in a robbery or other dangerous felony in which an accomplice killed someone.

Clemency has been rejected in one of the two-thirds of the cases where the convictions were for murder. Three more Juvenile LWOP cases are being, or are just about to be considered by the Juvenile Parole Board.

The other 43 inmates appear to be hanging back, waiting to see how cases are handled by the Board before they try to make their cases, and the Governor looks likely to refrain from granting clemency to any of them at this point, simply because they have not asked him for clemency at this point.

The felony murder cases, and the cases involving the 14 and 15 year old offenders, in particular, cry out for relief more generous than the possibility of parole after 40 years dispensation that was granted by the legislature. These are cases where the prosecutors clearly abused their discretion in bringing this cases as first degree murder cases in adult court at all. But, given the statements and lack of statements that we have seen to date, I am not optimistic at all that this kind of clemency will be forthcoming, even though that is what is just.

Pending SCOTUS Litigation -- the Merits

In 2002, the U.S. Supreme Court prohibited the execution of retarded defendants, reversing its 1989 decision to the contrary. The opinion reaffirmed prior holdings that:

[W]e have held that death is an impermissibly excessive punishment for the rape of an adult woman, Coker v. Georgia, 433 U. S. 584, 593-596 (1977), or for a defendant who neither took life, attempted to take life, nor intended to take life, Enmund v. Florida, 458 U. S. 782, 789-793 (1982).

The Colorado felony murder statute could, in theory, include offenses both within and beyond the scope of Enmund as restated in the 2002 opinion.

In 2005, the U.S. Supreme Court held that the constitution prohibited executions for against persons committed by juveniles, no matter how heinous. In 2008, the U.S. Supreme Court has also recent held that an adult may not be executed for raping a child, if no one is killed, in a broad ruling that included statute that required even more aggravated non-murder convictions.

The political balance of the U.S. Supreme Court is largely unchanged since these cases were decided, despite some changes in personnel, and the pending confirmation of Justice Sonia Sotomayor who was nominated by President Obama.

The U.S. Supreme Court is currently receiving merits briefs in two cases involving life without parole sentences imposed for non-triggerman murder offenses committed by juveniles under the 8th Amendment's prohibition on cruel and unusual punishment, "one involving a 13-year-old sex offender [he has now served 20 years in prison], the other a 17-year-old probation violator present when a felony murder occurred." The first is Sullivan v. Florida, the second is Graham v. Florida.

The questions upon which the U.S. Supreme Court granted cert. are as follows. I suspect that the phrase "freakishly rare" has never before appeared in a U.S. Supreme Court certiorari grant. The Court also didn't have to grant certiorari using the wording "non-homicide" in the Graham case if it hadn't wanted to do so. This has to be good news for the larger class of inmates impacted by these cases.

Graham v. Florida, 08-7412 (cert. granted 05/04/09)
(case below: 982 So.2d 43)

Questions presented:

Whether the Eighth Amendment's ban on cruel and unusual punishment prohibits the imprisonment of a juvenile for life without the possibility of parole as punishment for the juvenile's commission of a non-homicide?

Sullivan v. Florida, 08-7621 (cert. granted 05/04/09)
(case below: 1D07-6433)

Questions presented:

(1) Does imposition of a life-without parole sentence on a thirteen-year-old for a non-homicide violate the prohibition on cruel and unusual punishments under the Eighth and Fourteenth Amendments, where the freakishly rare imposition of such a sentence reflects a national consensus on the reduced criminal culpability of children?

(2) Given the extreme rarity of a life imprisonment without parole sentence imposed on a 13-year-old child for a non-homicide and the unavailability of substantive review in any other federal court, should this Court grant review of a recently evolved Eighth Amendment claim where the state court has refused to do so?

The Sullivan case, which is the case in which the U.S. Supreme Court is more likely to grant relief, would not necessarily impact any juvenile incarcerated in Florida. Colorado does not call for a life without possibility of parole sentence in cases other than first degree murder and first degree kidnapping (where the death of the victim could be only possible, rather than proven beyond a reasonable doubt), and has only murder and felony murder juvenile LWOP inmates right now. Colorado also has no cases where the crime was committed by an offender as young as thirteen years old.

The scope of the ruling in Sullivan could, however, to the extent that it talked about whether a very young offender can ever be culpable enough to qualify for a life without parole case without regard to the nature of the offense, impact some of the younger offenders (those who committed offenses at ages 14 and 15 who weren't eligible for the death penalty even prior to the U.S. Supreme Court's 2005 ruling).

The Graham, in contrast, could be resolved in multiple ways. If the State of Florida wins the case, it would ratify the constitutionality of juvenile life without parole sentences in felony murder cases involving bystander juveniles who are close in age to eighteen years old. It could also be used to more broadly affirm Florida law and allow life without parole sentences for any juvenile convicted of first degree murder.

On the other hand, Graham could be used to invalidate life without parole sentences for all juveniles, or for all juveniles who did not personally commit, attempt to commit or intend to commit a murder, deferring age issues to another day.

The Graham case could even be used to overrule its past precedents and hold that scuh felony murder cases do not necessary constitute homicides within the meaning of the Court's 1982 Enmund decision and are hence not eligible for either juvenile life without parole or the adult death penalty. This would require reconsideration of each of the felony murder juvenile LWOP cases in Colorado, about a third of the total and the least culpable of the cases (and hence most plausible cases in which to grant clemency).

Of course, any defendant favorable ruling in Sullivan or Graham will require the U.S. Supreme Court to consider how to determine what does constitute a constitutional sentence in such cases. Two ways that this could be done would be either by fiat (perhaps following Colorado's miserly example of parole consideration after 40 years), or with reference to the next most serious offense for which the juvenile could have been convicted in Florida.

The issue will be on center stage in the U.S. Supreme Court right around that holiday season this year and into the start off the Governor's 2010 re-election campaign.

Pending SCOTUS Litigation - the Politics in Colorado

Looming over the decision of the Governor and the Board is pending U.S. Supreme Court litigation regarding juvenile life without parole.

If the Governor grants pardons, this adds more fuel to the criminal defendants' cases in the U.S. Supreme Court that these sentences are unjust (the Colorado legislature will probably not have time to act further on the matter before these cases are decided). But, granting pardons also makes the Governor look foresightful and merciful if the U.S. Supreme Court agrees that the sentences would have been unconstitutional, but for his act of clemency. And, if he says no to anyone who applied for clemency, when the U.S. Supreme Court finds the sentence to be unconstitutional, he looks like his own judgment is "cruel and unusual" as officially determined by the U.S. Supreme Court.

But, if the U.S. Supreme Court rules in a way that would have upheld the constitutionality of the Colorado sentences, but the Governor pardoned defendants anyway, he will give his Republican opponents a fig leaf to argue that he is more lenient that the U.S. Constitution requires him to be. This will be a fairly weak argument, however, so long as there is a life with possibility of parole sentence with eligibility after any term of years, because a parole board must first approve the release based upon the inmate's post-conviction conduct in prison.

We'll see what happens next.

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This blog has been going for a little less than four years and one month. It is still eclectic when it comes to subject matter, although there are common themes.

This blog is primarily policy oriented. I prefer academic and scientific scholarship, government statistics, empirical data, history, facts and personal experience as sources. Not infrequently, I propose responses to policy issues. Sometimes, posts don't squarely address policy issues but provide important context for the larger analysis.

Within this broad outline, my posts are eclectic although not comprehensive. I prefer topics that are not the subject of saturation coverage elsewhere, particularly matters of intrinsic or practical value that are not widely known except by specialists in a field. I have a couple dozen issues that I follow particularly closely, like military procurement, the financial crisis, intellectual property and criminal justice issues. I pay special attention to issues pertinent to Colorado, but most of the time, I discuss issues of more general interest. I avoid issues which present questions of professional ethics for me (generally, conflicts of interest and confidentiality) at the time due to my day job clientele and workload.

This blog is written at a level intended for reasonably well educated people who are not necessarily specialist in the subject matter discussed. Sources are condensed with busy people in mine, not ill educated people.

I usually write posts with paragraphs that convey reader's digest versions of ideas with additional original analysis (instead of mere sentences or sentence fragments with links); sometimes with images but almost never with audio or video elements. This is not a group blog; I write it, and I don't have a copy editor. I correct errors in form, even if I notice them later, only as time permits. I always include a comment option in my posts and moderate comments with a light hand, primarily to remove spam comments unrelated to the post in question. I update my posts irregularly; sometimes in the body text and sometimes in the comments. At other times, I simply let a matter drop even when there are new developments or address it in a new post which may or may not be linked. Tags help connect related posts, but I am not entirely systematic in my tagging practices and didn't tag most of my old posts.

Usually, I favor policy positions that are best described as politically liberal, but I am a technocrat and policy wonk at heart, so my analysis takes me where it leads me given the facts. I write from a secular perspective. I have more libertarian and conservative readers and post links than the vast majority of conventional liberal political blogs, in part because my posts are not always politically orthodox. Expertise and facts trump ideology. I also tackle topics like military procurement at a much higher level of detail than most people in the liberal policy discussion; this issue is one of several that is more frequently discussed by conservatives than by liberals.

Many of the opinions expressed in these posts are idiosyncratic, or do not reflect conventional wisdom (at least among liberals or those in positions of power). I prefer posts that add something to the big discussion to those that merely say what people already know or believe. If I agree with the widely held conventional wisdom on an issue, I am less likely to devote lengthy posts to the issue.

Immunity, Obesity and Type Two Diabetes

Type two diabetes (which accounts for 90% of diabetes cases) is linked to obesity; 80 percent of people with type two diabetes are obese. About 43 million Americans are obese.

Historically, the only causal ways to control type two diabetes have been diet (with a focus on blood sugar level impacts) and exercise (to reduce obesity). Now, there are additional tools available and the promise that more may be developed as our understanding ripens.

Obesity Is Complex, As Are Its Consequences

Multiple lines of research have established that being fat (i.e. obesity) and a variety of health consequences associated with being fat, involve more complex mechanisms than simply eating more makes you fat, while eating less makes you less fat.

One notable genetic factor in obesity is taste bud sensitivity to certain kinds of tastes, which can predispose people to be reluctant vegetable eaters who favor rich bland foods. This taste bud impact on diet preferences, one component of appetite, in turn, tends to lead to obesity and health problems associated with it. Appetite and metabolism (including insulin levels central to diabetes) are also regulated, in part, by a little known chemical messenger in the body called SH2B1 for short. Eating breakfast can also reduce obesity by regulating appetite and metabolism. Low energy density foods also "trick" your body's appetite system. Soda, in contrast, is an important factor in childhood obesity. Diet factors have disproportionate impacts on groups of people like African American women.

The nutrients associated with orange, yellow and dark green vegetables are absorbed much better by your body if they are consumed with some fat, a factor that complicates a simple strategy of avoiding fat all together. Also, high protein diets (like Atkins and South Beach) are more successful at producing weight loss than diets focused on fat reduction (the "unfad" diet favored by Weight Watchers).

We also know that the percentage of the energy content of food that ends up being absorbed by a person's body, rather than passed through a person's digestive system as waste, is a function of the makeup of that person's symbiotic gut bacteria (which the appendix appears to exist to reboot when it is wiped out).

Modest levels of consumption of aspirin and alcohol, and quite possibly compounds found in certain kinds of alcohol like red wine, independently dramatically reduce the cardiovascular system risks (e.g. heart attacks and strokes) associated with high fat diets. It also turns out that not all fats are created equal from a health perspective.

Chinese herb Cape Jasmine has also recently been documented to have positive effects in treating type two diabetes.

About 21% of cases of type two diabetes are statistically attributable to a quite common (38% of Americans have one copy of the gene and 7% have two copies), but simple genetic risk factor found in some people.

Even getting enough sleep can reduce obesity.

Notably, some studies show that merely being overweight, as opposed to obese, isn't a health risk at all. And, I have seen studies that show that a highly disproportionate share of the health risk associated with obesity is attributable to those who are morbidly obese, as opposed to marginally obese.

Immunity's Role

Stokes and heart attacks aren't the only health consequences of obesity. Another condition closely associated with obesity is diabetes, which is essentially poor blood sugar regulation as a result of a problem with the chemical signals in generated by the body's insulin system (something centered in the body in the pancreas). The fatter you are, the more likely you are to develop type two diabetes (type one diabetes is congenital rather than diet related), and liver disease.

But, this relationship is also not quite that simple. Both obesity and type two diabetes are associated with activity in part of your body's immune system, called mast cells, which is also active in people suffering from certain kinds of allergies. T cells, another part of the immune system that normally restrains autoimmune reactions, in contrast, appear to be low in people who are obese. These studies suggest that type two diabetes associated with obesity, or perhaps obesity itself, has an autoimmune component, in which your body's immune system overreacts to a situation and starts to harm healthy parts of your body.

Reactions from pain neurons in the pancreas, a type of autoimmune response, may be key to the mechanism of both type one and type two diabetes. This response has been successfully treated in mice with a single injection of capsaicin, the active ingredient in hot chili peppers. Of course, injecting capsaicin into an internal bodily organ is not something you can do yourself at home. The active ingredient may be cheap and easy to produce, but getting it to the right destination is not.

Indeed, bringing surprisingly complex phenomena of obesity, which many physicians describe to patients as a simple function of calorie consumption mediated only by determination, metabolism itself is influenced by a person's T cell functionality.

Vitamin D, linked to sun exposure and diary consumption, which is comparable in importance to your immune system to Vitamin C, which is associated with citrus consumption, not surprisingly, given the immune system link in diabetes, is also reduces diabetes risk.

The Practical And Theoretical Consequences

The good news is that two over-the-counter allergy medications, Zaditor or cromolyn, as well as allergy injections, counter both obesity and type two diabetes associated blood sugar issues in mice. Mice lose weight on the drugs, even if eating precisely the same diet that caused them to become fat in the first place. There is also no obvious reason that this result should be different in humans.

Thus, it looks likely that medical science has not only found new diabetes and obesity drugs, which are two of the most prevalent health issues in modern America, but that the drugs are also cheap and widely available over-the-counter drugs, just like children's aspirin, which reduces cardiovascular risk.

These drugs work in a different way than most diet drugs, which operate on appetite and metabolism systems, so they may have an independent, cumulative effect on obesity and diabetes.

Cheap solutions matter a lot, because type two diabetes, is common, is expensive to treat, tends to be chronic and is easy to screen for a propensity to develop.

Diabetes is also a problem that charity care in emergency rooms, the backstop system our country has for treating trauma and acute illnesses in uninsured people, doesn't work well to handle. This makes diabetes both a pressing problem that makes universal health care urgent and a major barrier to any system of private universal health insurance that is divorced by employment or some other large risk pool. From an insurance company's point of view, diabetic and pre-diabetic applicants for health insurance are pre-existing conditions that pose classic adverse selection/moral hazard risks for them if they don't factor these risks into their rates (something required by a system of "community rating," for example). Even when actual premiums can't be influenced by these factors, health insurance companies have an incentive to design plans that indirectly discourage predictably high cost consumers to choose their plan, for example, with additional bureaucracy. Any cheap treatment for diabetes makes it much easier economically to use the private sector to provide universal health care.

The news is also good basic science. Science is dramatically rethinking what is going on at a biochemical and anatomical level when people get fat and develop diabetes. While the complexity of the issue in the body means that it has taken a fairly long time to reach our current level of understanding, this complexity has also increased the number of ways that obesity and type two diabetes can be addressed medically.

UPDATE JULY 29, 2009 at 4:52 P.M.: As a footnote, no amount of science matters when you attribute your 11 year old's diabetes to God and conclude that the solution is prayer. The girl died. The mother was convicted of a serious offense in connection with the incident and the father still faces trial on similar criminal charges. The Wisconsin family has three other children; this girl was their youngest.

28 July 2009

The Death Of Consumer Debt Collection Arbitration

Congress is considering legislation that would invalidate contracts requiring consumer debt collection arbitration before a dispute arises, called the Arbitration Fairness Act. Testimony on the issue before Congress can be found here. The association of state securities law administrators supports the legislation, which one version of would ban.

But, the two largest providers of these services have left this market.

The National Arbitration Forum, one of the leading providers of consumer debt collection arbitration, left the market entirely on July 19, in the face of an action by the Minnesota Attorney General alleging that their conduct was improper because they were owned by the very credit card companies whose disputes they were resolving and often ceased to employ arbitrators who ruled in favor of consumers. It assigned a majority of its cases to just six of its 131 panelist. A majority of cases in a Congressional investigator drawn sample resulted in default judgments in violation of the arbitration system's own rules and the company also appeared to have violated California's state arbitration outcome disclosure rules.

On July 21, the American Arbitration Association, another leading provider of arbitration services, also announced that it had left the consumer debt collection arbitration market in June "until new guidelines are established." (See also here from the source in Congressional testimony and here in a press release.) Unlike the NAF, the AAA does a great deal of employment and business to business arbitration. There is little evidence that AAA was a bad actor in these cases, but it wants to avoid the reputational taint associated with a line of business that was dominated by a bad actor.

Cell phone and credit card disputes make up a large share of these cases.

With the two largest arbitration providers out of the field, and the debt collection mechanisms of cell phone and credit card companies thrown into disarray as a result, it seems likely that much of the political opposition to the consumer debt collection elements of the Arbitration Fairness Act will become law.

Studies showing that consumers overwhelming default in these cases when brought in court anyway also suggest that the macroeconomic impact of the demise of consumer debt collection arbitration, if it happens, may be modest. Consumers overwhelmingly lose in court in these kind of cases, often by default, often in violation of the applicable laws, in any case. But, the appearance of impropriety and secrecy of private arbitration of these disputes is not present in a court setting.