When can a Louisiana company sue a Colorado company for violations of federal law, in a federal court in Louisiana? This is the question posed by Luv'n Care, Ltd. v. Insta-Mix, Inc. decided today in the 5th Circuit Court of Appeal.
The facts are not very unusual, and I've litigated similar issues many times. The Colorado Company, Insta-Mix, makes baby bottles in Colorado Springs, Colorado, where it delivers them to Wal-Mart trucks. The Wal-Mart trucks take the bottles to Wal-Marts all over the country. The court found that Insta-Mix knew that some of those bottles were going to end up in Louisiana (in fact it was a little under 5% of them), despite Insta-Mix's claim to the contrary, based on invoices showing an Louisiana destination which it received (it claimed it didn't care where they were going and so didn't look). Since everyone knows that Wal-Mart does business all over the country, the "I had no idea where my product was going" defense is pretty hard to make. A Louisiana company, Luv'n Care, claims that those bottle designs violate its copyrights and trademarks pursuant to federal law.
No one disputes this case belongs in federal court. It isn't widely known, but well established rule is that U.S. District Courts have no greater jurisdiction over out of state parties, as a general rule, than the state courts in the state where they sit. No one disputed that the only contact that Insta-Mix had with Louisiana was selling bottles to Wal-Mart when it knew that some of them were likely to end up in Louisiana. Under what is called the "stream of commerce" theory of jurisdiction adopted in the 5th Circuit Court of Appeals, as long as the suit has something to do with the bottles, this is good enough. The 4th Circuit Court of Appeals has a different rule called "stream of commerce plus" which requires some connection stronger than a mere knowledge that your products are likely to end up in a state. So, the Colorado company lost.
This case is attracting wider attention because 5th Circuit Judge DeMoss in a concurring opinion, noted the circuit split, said that the 5th Circuit rule is a bad one (on federalism grounds), and urged the losing Colorado company to take their case to the U.S. Supreme Court. Judge DeMoss also appropriately notes that the U.S. Supreme Court sewed the seeds of the current circuit split in 1987 when it decided Asahi Metal Industry Co. v . Superior Court, 480 U.S. 102, without a majority opinion (agreeing unanimously, but only, on a result), and that some courts had followed Justice O'Connor's reasoning, "stream of commerce plus" (to which four Justices agreed), while others followed Justice Brennan's reasoning "stream of commerce" (to which four Justices agreed), and perhaps some Courts even followed Justice Steven's own unique reasoning (neither of the above).
One interesting question is whether the Colorado company should follow the judge's advice and seek U.S. Supreme Court review. It probably isn't in their economic interest to do so.
They could still end up having the case transferred to Colorado, because the law makes a distinction between personal jurisdiction (which court is allowed to hear this case involving these parties) and venue (which court of those that are allowed to hear this case will actually get to do so). Since the trial court found that the Louisiana federal court didn't have jurisdiction over the Colorado defendant (a decision which was reversed) it didn't reach the issue of venue. It is entirely possible that the trial court will still find that the case needs to go to Colorado on venue grounds. Colorado is the only proper venue in this case for a copyright suit, standing alone, under 28 USC 1400. A trademark suit may be brought outside of Colorado in this case only if Louisiana is "a judicial district in which a substantial part of the events or omissions giving rise to the claim occurred, or a substantial part of property that is the subject of the action is situated.", 28 USC Section 1391(b)(2), which is a close question itself. The statute itself also doesn't address what to do in cases where two kinds of claims are present in the same lawsuit and are subject to conflicting venue provisions. And the Louisiana federal trial court can also send the case to Colorado for "the convenience of parties and witnesses, in the interest of justice," 28 USC Section 1404(a), thus avoiding the mixed type of case issue it would have to consider otherwise, and could probably be reversed on appeal only if that decision was an "abuse of discretion." Thus, not appealing does not necessarily mean losing the ultimate issue. Just because a court has the power to hear your case doesn't mean that it actually must hear your case, when another court is available.
Also, having the case tried in Louisiana rather than Colorado would probably not be the end of the world for the Colorado company. It would be more expensive for them to have to bring witnesses to Louisiana for an ultimate trial and perhaps a jury there might be less favorable, but the odds that this case will be resolved in motion practice or by settlement long before the case reaches a jury is high, and since the case involves purely federal law, local counsel wouldn't necessarily have to do that much work to cooperate with the Colorado company's Colorado lawyer.
Thus, an appeal to the U.S. Supreme Court would be a very expensive proposition but would be unlikely to help the company bringing the appeal very much, even though it would be very useful to all companies in the United States, in thousands of cases each year, to have the issue resolved. This is still a very early stage of the lawsuit, and for the Colorado company, even if they win, they still have to fight this battle in Colorado. Litigants, especially Defendants with uncertain liabilities hanging out there which there is a good chance could be eliminated if the case goes forward, rarely appreciated delay. Indeed, the fact that it is often not in the interest of litigants to take cases like this all the way to the U.S. Supreme Court, even when they could, is one of the reasons that a circuit split on the issue has persisted so long. What is in the interest of the system as a whole, is not always in the interests of those participating in that system.
25 January 2006
Fear Of Gays Expensive For Defense Department
The U.S. military has a don't ask, don't tell policy. If you admit you are gay, you are discharged. About 10,000 gays have been discharged from the military under that policy and 350 of them have been medical professionals. All have been trained by the military at public expense. This has deprived our military of valuable active duty military personnel at a time of urgent need, and has cost our nation a great deal of money. Allowing gays in the military openly, and providing domestic partner benefits, would be far cheaper and would improve the effectiveness of the U.S. military.
Alito Nomination Nose Count
Fifty-one Republicans and one Democrat Ben Nelson of Nebraska support Alito. . . . Four Republicans, 23 Democrats and independent Sen. Jim Jeffords of Vermont were still publicly undecided Wednesday or refused to say how they would vote on Alito's nomination.
For the math challenged, that means 20 Democratic Senators have said that they will vote against Alito.
From here.
At this point, any stance other than "I will filibuster Alito", is an assent to his confirmation. Republicans need to secure support from eight of the twenty-eight Senators who have not announced their positions to prevent that from being possible. I don't think that this will happen. Democrats can stop Alito, a nomination that they overwhelmingly oppose, if they have the political will to do so. It is unclear if they actually do. We will have a much better idea a week from now.
No Strings Attached
One of George W. Bush's signature campaign issues was the need for "faith based initiatives." He argued that social services from religious organizations necessarily includes religious strings, so the government needs to relax the First Amendment to muddy the waters between church and state for government funded social service programs provided by churches. The Pope doesn't agree.
In Pope Benedict's first Encylical (an authoritative statement on church doctrine), entitled "God is Love", which also made clear that the church has no desire to govern states or set public policy (and should instead build strong consciences in individuals), he wrote that:
Obviously, the Pope is not the only voice who speaks for Christianity, and he certainly doesn't speak for all faiths. But, he does speak for about half of the religiously affiliated people in the United States, and his reasoning in this Encylical would be uncontroversial among a large share of Christian groups that are not Catholic as well.
Many commentators were puzzled that the topic was chosen when he "could easily have delved into a more problematic issue." But, Benedict was not throwing a softball here. Threats to Catholicism to the right see Christianity as a religion focused on hate. Threats to Catholicism on the left bemoan a church that sometimes seems indifferent to social justice. Benedict is trying to pave a middle path of consensus.
As a non-Catholic, I don't use the same reasoning that Bendict does, but I come to the same conclusion. Charity is a moral obligation and should not come with strings attached.
In Pope Benedict's first Encylical (an authoritative statement on church doctrine), entitled "God is Love", which also made clear that the church has no desire to govern states or set public policy (and should instead build strong consciences in individuals), he wrote that:
Love is free; it is not practiced as a way of achieving other ends. . . Those who practice charity in the church's name will never seek to impose the church's faith upon others. They realize that a pure and generous love is the best witness to the God in whom we believe and by whom we are driven to love.
Obviously, the Pope is not the only voice who speaks for Christianity, and he certainly doesn't speak for all faiths. But, he does speak for about half of the religiously affiliated people in the United States, and his reasoning in this Encylical would be uncontroversial among a large share of Christian groups that are not Catholic as well.
Many commentators were puzzled that the topic was chosen when he "could easily have delved into a more problematic issue." But, Benedict was not throwing a softball here. Threats to Catholicism to the right see Christianity as a religion focused on hate. Threats to Catholicism on the left bemoan a church that sometimes seems indifferent to social justice. Benedict is trying to pave a middle path of consensus.
As a non-Catholic, I don't use the same reasoning that Bendict does, but I come to the same conclusion. Charity is a moral obligation and should not come with strings attached.
24 January 2006
Army Breaking
An internal Army report shows that the U.S. Army's heavy duties are on the verge of "`breaking' the force in the form of a catastrophic decline."
As I've noted before, it has 47% of its troops serving abroad at any one time, compared to 28% of Marines, 22% of the Air Force, and 13% of the Navy. The President's capacity to call up the national guard is almost exhausted, and they are starting to call upon the Individual Ready Reserves, which were the least mobilized reserve component of the military, with little success. There are efforts to use the resources of the Navy (also here) and the Air Force to carry out traditional Army tasks, but this has limits. Also, the Air Force and Navy are each actively reducing the number of active duty military personnnel that the maintain. Almost no one has taken up offers to allow laid of sailors to transfer to the Army on favorable terms. Republicans and Democrats agree that a draft is politically impossible. Army recruitment efforts, particularly for support troops and in African-American communities, are struggling. Army forces in Iraq are finding themselves spread more and more thinly as the Coalition of the Willing evaporates.
Most of the Army soldiers abroad are in tense situations. They are fighting wars or putting down insurgencies in Iraq, Afghanistan, Kosovo, or in other war on terror postings like Guantanamo Bay and Saudi Arabia. They are spending longer tours in combat zones than the Marines do. They are not allowed to leave service, under stop loss orders, in many cases, even though their planned term of service has expired. Deployments in South Korea and Germany may be less perilous, but those posts are being reduced in size and South Korea does face more than negligable military threats. No country in the world is more mobilized for war than North Korea.
A 500,000 person Army does not have the capacity to put 500,000 on a foreign battlefield. The Navy can only manage to keep about a third of its warships deployed at any given time and the Army, at its best, isn't designed to handle much more intense operations itself. Something has to give, and it isn't clear what it will be, but the Army's difficulties in finding personnel to carry out its mandates is increasingly becoming a driving force behind Iraq War policy.
As I've noted before, it has 47% of its troops serving abroad at any one time, compared to 28% of Marines, 22% of the Air Force, and 13% of the Navy. The President's capacity to call up the national guard is almost exhausted, and they are starting to call upon the Individual Ready Reserves, which were the least mobilized reserve component of the military, with little success. There are efforts to use the resources of the Navy (also here) and the Air Force to carry out traditional Army tasks, but this has limits. Also, the Air Force and Navy are each actively reducing the number of active duty military personnnel that the maintain. Almost no one has taken up offers to allow laid of sailors to transfer to the Army on favorable terms. Republicans and Democrats agree that a draft is politically impossible. Army recruitment efforts, particularly for support troops and in African-American communities, are struggling. Army forces in Iraq are finding themselves spread more and more thinly as the Coalition of the Willing evaporates.
Most of the Army soldiers abroad are in tense situations. They are fighting wars or putting down insurgencies in Iraq, Afghanistan, Kosovo, or in other war on terror postings like Guantanamo Bay and Saudi Arabia. They are spending longer tours in combat zones than the Marines do. They are not allowed to leave service, under stop loss orders, in many cases, even though their planned term of service has expired. Deployments in South Korea and Germany may be less perilous, but those posts are being reduced in size and South Korea does face more than negligable military threats. No country in the world is more mobilized for war than North Korea.
A 500,000 person Army does not have the capacity to put 500,000 on a foreign battlefield. The Navy can only manage to keep about a third of its warships deployed at any given time and the Army, at its best, isn't designed to handle much more intense operations itself. Something has to give, and it isn't clear what it will be, but the Army's difficulties in finding personnel to carry out its mandates is increasingly becoming a driving force behind Iraq War policy.
Rule of Law
Alberto Gonzales is in charge of the Justice Department. One of the ideas he seems to have trouble with is that idea that government lawyers are bound by and should follow the law in conducting their business. Another case in point comes from a recent sentencing decision:
The Justice Department decision to ignore the U.S. Supreme Court's ruling in Booker which repealed the United States Sentencing Guidelines, is visible in court opinions all across the nation. It is a matter of policy being implemented by the Bush Administration. It is just as obnoxious coming from the Justice Department as it is coming from Roy Moore's protege in the Alabama Supreme Court, or from Roy Moore, who was removed from the Alabama Supreme Court for misconduct for defying court orders. It is one thing to try to interpret a confusing legal decision, it is another to ignore binding precedent.
Since when did the Republican Party become the party of anarchy? Politicans can whine about judges, but judges and lawyers, especially lawyers for the government charged with upholding the law, have an obligation to implement the law even if they don't like how the U.S. Supreme Court has ruled.
After Booker, no one can reasonably dispute the fact that sentencing courts have discretion to impose a sentence lesser than the low end of the Guideline range, so long as that sentence is reasonable in light of the Section 3553(a) factors. Nonetheless, the Department of Justice ("DOJ") continues to do so. At every sentencing hearing before this Court, the prosecution recommends a Guideline-range sentence, making no effort to explain that recommendation in light of the Section 3553(a) factors. After any below-Guideline sentence, the prosecutor routinely objects, and the only explanation offered is that the sentence falls short of the Guideline range. Obviously (though not openly), the government continues to maintain its policy that the only reasonable sentence is one that falls within or exceeds the Guideline range — a position that obviously contradicts the Supreme Court's pronouncements in Booker. And DOJ has maintained this posture even though the Eleventh Circuit has explicitly rejected its argument that a sentence in the Guideline range is, per se, a reasonable sentence.
By continuing to insist that this Court rigidly adhere to the Guidelines, prosecutors are violating their obligation as officers of the Court and failing to provide this Court with any meaningful assistance in crafting a reasonable, just sentence.
The Justice Department decision to ignore the U.S. Supreme Court's ruling in Booker which repealed the United States Sentencing Guidelines, is visible in court opinions all across the nation. It is a matter of policy being implemented by the Bush Administration. It is just as obnoxious coming from the Justice Department as it is coming from Roy Moore's protege in the Alabama Supreme Court, or from Roy Moore, who was removed from the Alabama Supreme Court for misconduct for defying court orders. It is one thing to try to interpret a confusing legal decision, it is another to ignore binding precedent.
Since when did the Republican Party become the party of anarchy? Politicans can whine about judges, but judges and lawyers, especially lawyers for the government charged with upholding the law, have an obligation to implement the law even if they don't like how the U.S. Supreme Court has ruled.
Alito Nomination News
Judge Alito's nomination was approved by the Senate Judiciary Committee by a 10-8 party line vote (per How Appealing). One Democratic Senator has said that he will vote for Alito. There are 55 Republicans in the Senate. In order to win on floor vote, six of those Republicans need to oppose Alito, and all remaining Senators must oppose Alito. This seems very unlikely.
Alternately, Democrats could filibuster the nomination (something Republicans have done before themselves in recent history on a judicial nomination), and no more than three of the remaining Senators (the 43 other Democrats and independent Jim Jeffords) could oppose cloture. If Democrats lose the cloture vote, Justice Alito is confirmed and nothing really unusual will have happened.
If Democrats win the cloture vote, then the Republicans have a stark choice whose outcome is uncertain. If the Republicans fail to marshall a majority of Senators to abolish the filibuster for judicial nominees entirely, the Alito nomination, George W. Bush's second nominee for this post will be defeated (actually, his third, if you count Justice Roberts whose nomination was withdrawn so he could be nominated for Rehnquist's post) and he will likely feel compelled to appoint a candidate both more moderate than Alito and more conservative, or at least experienced, that Harriet Miers, who withdrew her nomination, and there will be no constitutional crisis.
But, Republicans could still confirm Judge Alito if they abolished the filibuster for judicial nominations, and their loyalty to their base, which is far greater than that of Democratic Senators, makes this a close question. If Republicans vote to abolish the filibuster (I doubt that any non-Republicans would join them in this vote, and I doubt a court would intervene if the Republicans did so, since the Senate is the judge of its own rules), it would have immense long term consequences for both parties.
The Republicans would, in my opinion, pay a higher political price for their decision in the long term than the Democrats, both at the polls for showing a lack of fair play, and when they are in the minority some day and don't have a filibuster for judicial appointments, and also can't count on a filibuster in high stakes legislative fights as they established the precedent for eliminating it in any situation. In contrast, the Democrats have little to lose. The need to abolish the filibuster to confirm Judge Alito's nomination would also tarnish newly confirmed Justice Alito in the eyes of the public, even if he is confirmed as a result, and would also further undermine the legitimacy of the U.S. Supreme Court in the eyes of the public (already suffering from the blow to its credibility arising from the Bush v. Gore case).
The Alito nomination is the most important nomination for the Democrats to oppose in decades, at least, and no nominations more important to oppose are likely to arise for decades to come. This is because he is a hard core conservative who will move the Supreme Court decisively to the right. The Democrats are idiots if they don't try to filibuster this nomination. Even if desertions on their own side prevent them from prevailing on a cloture vote, members of their base, like me, will not hate them forever if they at least try and a few traitor Democrats foil their attempt. Alas, I don't have a high opinion of the intelligence of the Democratic party leadership in the Senate on issue like this one.
Alternately, Democrats could filibuster the nomination (something Republicans have done before themselves in recent history on a judicial nomination), and no more than three of the remaining Senators (the 43 other Democrats and independent Jim Jeffords) could oppose cloture. If Democrats lose the cloture vote, Justice Alito is confirmed and nothing really unusual will have happened.
If Democrats win the cloture vote, then the Republicans have a stark choice whose outcome is uncertain. If the Republicans fail to marshall a majority of Senators to abolish the filibuster for judicial nominees entirely, the Alito nomination, George W. Bush's second nominee for this post will be defeated (actually, his third, if you count Justice Roberts whose nomination was withdrawn so he could be nominated for Rehnquist's post) and he will likely feel compelled to appoint a candidate both more moderate than Alito and more conservative, or at least experienced, that Harriet Miers, who withdrew her nomination, and there will be no constitutional crisis.
But, Republicans could still confirm Judge Alito if they abolished the filibuster for judicial nominations, and their loyalty to their base, which is far greater than that of Democratic Senators, makes this a close question. If Republicans vote to abolish the filibuster (I doubt that any non-Republicans would join them in this vote, and I doubt a court would intervene if the Republicans did so, since the Senate is the judge of its own rules), it would have immense long term consequences for both parties.
The Republicans would, in my opinion, pay a higher political price for their decision in the long term than the Democrats, both at the polls for showing a lack of fair play, and when they are in the minority some day and don't have a filibuster for judicial appointments, and also can't count on a filibuster in high stakes legislative fights as they established the precedent for eliminating it in any situation. In contrast, the Democrats have little to lose. The need to abolish the filibuster to confirm Judge Alito's nomination would also tarnish newly confirmed Justice Alito in the eyes of the public, even if he is confirmed as a result, and would also further undermine the legitimacy of the U.S. Supreme Court in the eyes of the public (already suffering from the blow to its credibility arising from the Bush v. Gore case).
The Alito nomination is the most important nomination for the Democrats to oppose in decades, at least, and no nominations more important to oppose are likely to arise for decades to come. This is because he is a hard core conservative who will move the Supreme Court decisively to the right. The Democrats are idiots if they don't try to filibuster this nomination. Even if desertions on their own side prevent them from prevailing on a cloture vote, members of their base, like me, will not hate them forever if they at least try and a few traitor Democrats foil their attempt. Alas, I don't have a high opinion of the intelligence of the Democratic party leadership in the Senate on issue like this one.
Plea Bargaining In Federal Court
Eddie Denton, Jr. is shown above.
Plea bargaining places an undue burden on the exercise of constitutional rights as currently practiced. Want an example?
"Denton was offered a plea agreement with an anticipated sentence of 18 to 36 months, but he rejected it and went to trial." Consequently, Denton's decision to put the government to its proof functionally increased his sentence from 18 to 36 months to life imprisonment.
Denton was the only one to go to trial:
The Clique members --- Percy Bruce Jr., Damarius Simmons, Jamall Sallis Jr. and Willie Outlaw Jr. --- pleaded guilty to various charges and testified against Denton.
Bruce was sentenced to 11 years in prison. Simmons is serving a 30-year sentence and Sallis was sentenced to 10 years and six months. Outlaw is serving 15 years and three months.
The crime for which he was convicted was conspiracy to distribute 50 grams or more of crack, 500 grams of more of cocaine, and some marijuana, within 1000 feet of two playgrounds. He was also observed possessing, but not brandishing or firing a handgun, in and around Waterloo, Iowa. The judge believed that he lied on the stand to the jury, but didn't specify when. It is also notable that the rejection of the plea ageement came within two years of suffering a serious brain injury and that Mr. Denton is currently 70 years old. His arguments ranges from a claim that he was a secret undercover police informant (he was drummed out of the police force based on bribery accusation in 1990), that he wasn't aware of the full extent of the drug dealing operation of which he was a part, and that he was a minor player in the overall scheme.
There, at least, doesn't appear to be any evidence to suggest that Denton's involvement was more serious than that of his co-conspirators. Indeed, given the respective plea bargain offers made, it appears likely that prosecutors felt that Denton was the least culpable member of the drug gang. The other members who pleaded guilty received far harsher sentences than what Denton was offered.
The mandatory minimum sentence was 10 years, which in Denton's case would likely have been a life sentence, or close to it, in any case. But, the purpose of this sentence was not really to put Denton away until he was no longer a threat to society. It was to strengthen the hand of prosecutors in future plea negotiations.
The full appellate court opinion in Denton's case is found here. The federal appellate court affirmed the life sentence (recommended by the U.S. Sentencing Guidelines, which are no longer binding but often considered presumptively reasonable by appellate courts).
Winning The War Of Ideas
Liberals don't always perform at the ballot box as well as I'd like, but we should take heart in the fact, noted by ColoradoLib, that large majorities of the American public support key parts of a broad liberal agenda. We, and not the Christian Right, are the silent majority in America today. It is time to speak up.
Hedging In Family Finances
Hedging is one of the most difficult and little discussed parts of personal financial planning.
What do I mean by hedging? I mean carrying assets and debt, and especially carrying long term financial assets and long term financial debts, at the same time.
Most people have a mortgage, and a mortgage is a type of hedging. You have both an asset, a house, and a liability, a mortgage, rather than, for example, renting a house and keeping the money that would have been home equity in some form of investment. There are lots of reasons people choose to do this, and they aren't all bad, despite the minority of people out there who abhore debt of any kind. A mortgage insulates you from rising rents (although less so if it is an adjustable rate mortgage). A mortgage receives far more favorable tax treatment than rent. And, home ownership with a mortgage allows you to benefit from rising housing prices on a leveraged basis (albeit, accompanied by the risk of a loss if housing prices fall). But, most people understand the pros and cons of this most common type of mixed asset hedging pretty well, without thinking of it in those terms.
The harder point is the balance between financial investments and long term debts. While the amount of analysis easily available on how to invest a portfolio of financial assets is vast and often not very expensive to obtain, and analysis of more narrow financial transactions, like whether or not you should refinance your mortgage, can often be reduced to financial calculators, the financial asset hedging issues is multifaceted.
Conventional wisdom among financial planners is that you should have an "emergency fund" in some fairly liquid and safe form (perhaps a savings account), equal to about six months of earnings, give or take. This is good advice. Shit happens. You could lose a job and need money to tide you over until you can find new employment. You could have a car accident or home theft or illness and have to pay deductibles on insurance policies. You can have car or home maintenance that needs to be attended to, or have to post bond after being arrested. The list is endless, but most of the usual little earthquakes in our lives can be avoided simply by being one or two paychecks ahead in life. Beyond that, the driving force behind the emergency fund is unemployment, although an emergency fund also ends up often overlapping with the cash supply that you keep in your checking account so that you don't bounce checks over the usual paycheck and bill payment cycle each month, and the cash you would like to set aside for short and medium term major purchases (like furniture, a new car, appliances and the like) so that you don't have to pay more future finance charges than you'd like in order to make that purchase.
Thus, even if you can afford to pay an extra 25% on your mortgage, which will save you a great deal of interest payments in the long term (as your mortgage company no doubt informs you with regular sales pitches for biweekly mortgage payments), you shouldn't until you have a full emergency fund, because if you come up short on your mortgage payment, you could go into default on your mortgage, which is costly, even if you can eventually set things right without losing your home.
On the other hand, other kinds of debt may be more tempting to pay off immediately, even if it means reducing emergency funds. My mortgage is at a fixed rate of 5.25% and I can take a tax deduction for the interest that I do pay, so I'm not in a rush to pay it off, and the tax deductible interest due on my student loans is at an even lower rate. Keeping money in an interest bearing savings account or certificate of deposit or bonds, while not paying low after tax interest rate loans, is a equivalent to paying a modest price in order to have a large line of low interest rate credit open to you. The equation is further muddied because some debts like student loans have both unusually benefits (e.g., certain kinds of discharged upon the borrower's death and are fairly easy to defer payments upon in times of hardship, but are very difficult to eliminate in bankruptcy).
But, the incentive to pay off credit card debt promptly, which involves a higher interest rate and doesn't involve tax deductible interest, is much greater. Beyond paying the minimum balance you have to make that decision you have to compare two very unlike parts of your financial life - the interest you will pay if you carry a balance versus the negative financial consequences of not being to pay bills at all for a month or two more if you are unemployed for a substantial length of time, an event whose probability is often hard to determine and whose magnitude is also often imponderable. The calculus is even more difficult when you are dealing with adjustable rate loans, where you must guess what the future cost of not paying that debt will be based on your necessarily imperfect predictions regarding future interest rates.
Tax considerations and investment returns drive other types of hedging. Retirement savings, educational savings and health care savings accounts typically come with tax benefits that often are equivalent to tax free income, and with penalties and other limitations on early withdrawals for improper purposes. Overfund them, and you might not have enough of an emergency fund (and in the case of a health care savings account, the idea is to replace some of your emergency fund). Underfund them and you miss out on tax benefits, and you may have a hard time sending your kids to college or retiring in comfort. Also, most retirement savings and educational savings are typically invested in some combination of stocks and bonds, which typically have higher returns than real estate appreciation (or the after tax interest cost savings of paying mortgage debt) and savings accounts, as well as being tax free income. But, stocks and bonds carry much higher risk in the short to medium term than paying off debt or putting money in a savings account, and educational savings can often come at the high cost of reduced eligibility for financial aid later. Retirement accounts and college savings are also forms of "dire emergency funds" available when you have tapped out your regular emergency funds and face the loss of a home or an inability to put food on the table or pay for a catastrophic medical bill due to sustained unemployment or some other unexpected situation.
Even without the tax benefits of tax favored accounts, you may feel that you can earn more money in the stock market (which is often taxed at a favorable 15% capital gains and qualified dividends tax rate) than you can by paying off debt (particularly student loan debt, business debt and mortgage debt, all of which is tax deductible), particularly coming out of the historically low interest rate environment we have just left (not that the stock market has been doing all that well by comparison). Also, these can serve as reserves for major purchases and serious emergencies that can be accessed without the downsides of withdrawing "dire emergency funds", while earning higher rates of returns during the bulk of the time when ordinary cash reserves are sufficient to cover the fluxations of daily financial life.
Finally, there is the issue of "personal considerations". For example, even if it makes economic sense to pool family financial assets to pay family debts, one spouse or another may, for example, like to keep inherited assets separate, rather than using them to pay off joint family debts like a mortgage, an incentive created by our divorce laws, which make it impossible for a spouse to prevent the other spouse from obtaining a divorce at any time. Similarly, even if paying off a higher interest debt might be more sensible in dollars and cents terms than investing the funds in even a tax favored college savings plan which invests in the stock market, many people are committed symbolically to saving for their children's future, and laws like the bankruptcy code encourage that attitude.
Even though it would be simpler for people to have only long term financial debts, or only long term financial investments, and even though sophisticated economists often deceptively talk about people saving or incurring debt, when most people do both, most rational actors in our complex tax and investment and risk environment almost always hedge to some extent. But, as this discussion illustrates, the variables are uncertain, the analysis is involved, the risks take patience and perspective to describe adequately, the literature on the subject in the personal financial planning area is sparce, and if you don't feel just a little uncomfortable about it, you are either an analytical wiz or haven't really taken enough time to digest the way that having a mix of financial investments and debts at the same time impacts your personal ability to grow your wealth and to manage your family's economic risks.
What do I mean by hedging? I mean carrying assets and debt, and especially carrying long term financial assets and long term financial debts, at the same time.
Most people have a mortgage, and a mortgage is a type of hedging. You have both an asset, a house, and a liability, a mortgage, rather than, for example, renting a house and keeping the money that would have been home equity in some form of investment. There are lots of reasons people choose to do this, and they aren't all bad, despite the minority of people out there who abhore debt of any kind. A mortgage insulates you from rising rents (although less so if it is an adjustable rate mortgage). A mortgage receives far more favorable tax treatment than rent. And, home ownership with a mortgage allows you to benefit from rising housing prices on a leveraged basis (albeit, accompanied by the risk of a loss if housing prices fall). But, most people understand the pros and cons of this most common type of mixed asset hedging pretty well, without thinking of it in those terms.
The harder point is the balance between financial investments and long term debts. While the amount of analysis easily available on how to invest a portfolio of financial assets is vast and often not very expensive to obtain, and analysis of more narrow financial transactions, like whether or not you should refinance your mortgage, can often be reduced to financial calculators, the financial asset hedging issues is multifaceted.
Conventional wisdom among financial planners is that you should have an "emergency fund" in some fairly liquid and safe form (perhaps a savings account), equal to about six months of earnings, give or take. This is good advice. Shit happens. You could lose a job and need money to tide you over until you can find new employment. You could have a car accident or home theft or illness and have to pay deductibles on insurance policies. You can have car or home maintenance that needs to be attended to, or have to post bond after being arrested. The list is endless, but most of the usual little earthquakes in our lives can be avoided simply by being one or two paychecks ahead in life. Beyond that, the driving force behind the emergency fund is unemployment, although an emergency fund also ends up often overlapping with the cash supply that you keep in your checking account so that you don't bounce checks over the usual paycheck and bill payment cycle each month, and the cash you would like to set aside for short and medium term major purchases (like furniture, a new car, appliances and the like) so that you don't have to pay more future finance charges than you'd like in order to make that purchase.
Thus, even if you can afford to pay an extra 25% on your mortgage, which will save you a great deal of interest payments in the long term (as your mortgage company no doubt informs you with regular sales pitches for biweekly mortgage payments), you shouldn't until you have a full emergency fund, because if you come up short on your mortgage payment, you could go into default on your mortgage, which is costly, even if you can eventually set things right without losing your home.
On the other hand, other kinds of debt may be more tempting to pay off immediately, even if it means reducing emergency funds. My mortgage is at a fixed rate of 5.25% and I can take a tax deduction for the interest that I do pay, so I'm not in a rush to pay it off, and the tax deductible interest due on my student loans is at an even lower rate. Keeping money in an interest bearing savings account or certificate of deposit or bonds, while not paying low after tax interest rate loans, is a equivalent to paying a modest price in order to have a large line of low interest rate credit open to you. The equation is further muddied because some debts like student loans have both unusually benefits (e.g., certain kinds of discharged upon the borrower's death and are fairly easy to defer payments upon in times of hardship, but are very difficult to eliminate in bankruptcy).
But, the incentive to pay off credit card debt promptly, which involves a higher interest rate and doesn't involve tax deductible interest, is much greater. Beyond paying the minimum balance you have to make that decision you have to compare two very unlike parts of your financial life - the interest you will pay if you carry a balance versus the negative financial consequences of not being to pay bills at all for a month or two more if you are unemployed for a substantial length of time, an event whose probability is often hard to determine and whose magnitude is also often imponderable. The calculus is even more difficult when you are dealing with adjustable rate loans, where you must guess what the future cost of not paying that debt will be based on your necessarily imperfect predictions regarding future interest rates.
Tax considerations and investment returns drive other types of hedging. Retirement savings, educational savings and health care savings accounts typically come with tax benefits that often are equivalent to tax free income, and with penalties and other limitations on early withdrawals for improper purposes. Overfund them, and you might not have enough of an emergency fund (and in the case of a health care savings account, the idea is to replace some of your emergency fund). Underfund them and you miss out on tax benefits, and you may have a hard time sending your kids to college or retiring in comfort. Also, most retirement savings and educational savings are typically invested in some combination of stocks and bonds, which typically have higher returns than real estate appreciation (or the after tax interest cost savings of paying mortgage debt) and savings accounts, as well as being tax free income. But, stocks and bonds carry much higher risk in the short to medium term than paying off debt or putting money in a savings account, and educational savings can often come at the high cost of reduced eligibility for financial aid later. Retirement accounts and college savings are also forms of "dire emergency funds" available when you have tapped out your regular emergency funds and face the loss of a home or an inability to put food on the table or pay for a catastrophic medical bill due to sustained unemployment or some other unexpected situation.
Even without the tax benefits of tax favored accounts, you may feel that you can earn more money in the stock market (which is often taxed at a favorable 15% capital gains and qualified dividends tax rate) than you can by paying off debt (particularly student loan debt, business debt and mortgage debt, all of which is tax deductible), particularly coming out of the historically low interest rate environment we have just left (not that the stock market has been doing all that well by comparison). Also, these can serve as reserves for major purchases and serious emergencies that can be accessed without the downsides of withdrawing "dire emergency funds", while earning higher rates of returns during the bulk of the time when ordinary cash reserves are sufficient to cover the fluxations of daily financial life.
Finally, there is the issue of "personal considerations". For example, even if it makes economic sense to pool family financial assets to pay family debts, one spouse or another may, for example, like to keep inherited assets separate, rather than using them to pay off joint family debts like a mortgage, an incentive created by our divorce laws, which make it impossible for a spouse to prevent the other spouse from obtaining a divorce at any time. Similarly, even if paying off a higher interest debt might be more sensible in dollars and cents terms than investing the funds in even a tax favored college savings plan which invests in the stock market, many people are committed symbolically to saving for their children's future, and laws like the bankruptcy code encourage that attitude.
Even though it would be simpler for people to have only long term financial debts, or only long term financial investments, and even though sophisticated economists often deceptively talk about people saving or incurring debt, when most people do both, most rational actors in our complex tax and investment and risk environment almost always hedge to some extent. But, as this discussion illustrates, the variables are uncertain, the analysis is involved, the risks take patience and perspective to describe adequately, the literature on the subject in the personal financial planning area is sparce, and if you don't feel just a little uncomfortable about it, you are either an analytical wiz or haven't really taken enough time to digest the way that having a mix of financial investments and debts at the same time impacts your personal ability to grow your wealth and to manage your family's economic risks.
Colorado Second In Foreclosures
Only Florida has a higher foreclosure rate than Colorado. Lackluster housing appreciation has made it hard to sell a house at a profit when hard times strike, and the state economy is not exactly humming either.
The End of An Era
Yesterday was the last day that the Denver Post included stock quotations in its print edition. From now on, they are available only via the internet or by phone. It was obvious that it would happen someday. But, it is worth marking the fact that the change took place today.
Navy Catches Somali Pirates
A U.S. Navy Destroyer has captured a pirate ship 52 miles off the shore of Somalia. It is nice to know that with all the money we spend on the Navy it does occasionally do something worthwhile. This may be the first pirate apprehension in decades, although I don't have any data at my fingertips (yet).
Pirates were chased away but not boarded or fired upon, by a U.S. Navy amphibious assault ship on February 17, 2005 near Kuwait. Pirates were fired upon, but not captured by the U.S. Navy on April 23, 2002. Most attacks in recent times have been outside of U.S. Navy jurisdiction as they have occurred in the territorial waters of foreign states. Some recent background on the issue is here and here.
The last time anything resembling a piracy incident has killed a member of the U.S. military was on July 4, 1930 when "bandits" fired upon the U.S.S. Guam on the Yangtze River in China, and the last official death at the hands of pirates was on June 17, 1870 when the U.S.S. Mohican battled with Mexican pirate steamer Forward in the Teacapan River in Mexico.
An incident on April 24, 2004 in the Persian Gulf also killed Naval personnel, but is probably better classified as terrorism or part of the Iraqi insurgency than piracy.
Pirates were chased away but not boarded or fired upon, by a U.S. Navy amphibious assault ship on February 17, 2005 near Kuwait. Pirates were fired upon, but not captured by the U.S. Navy on April 23, 2002. Most attacks in recent times have been outside of U.S. Navy jurisdiction as they have occurred in the territorial waters of foreign states. Some recent background on the issue is here and here.
The last time anything resembling a piracy incident has killed a member of the U.S. military was on July 4, 1930 when "bandits" fired upon the U.S.S. Guam on the Yangtze River in China, and the last official death at the hands of pirates was on June 17, 1870 when the U.S.S. Mohican battled with Mexican pirate steamer Forward in the Teacapan River in Mexico.
An incident on April 24, 2004 in the Persian Gulf also killed Naval personnel, but is probably better classified as terrorism or part of the Iraqi insurgency than piracy.
Murder By Torture, No Big Deal.
What is the punishment for murder by torture in the United States? If you are in the U.S. military it isn't much. There was a reprimand and in addition:
He probably won't get a promotion. He likely won't be encouraged to come back when his term is up. But, he doesn't even receive an unfavorable discharge.
If service like this is honorable, then the entire concept has been severely debased. The message that military jury has sent to the world is that the U.S. does not take this kind of case very seriously. Drunk driving is sometimes punished more severely in civilian courts.
Chief Warrant Officer Lewis Welshofer Jr. also was ordered to forfeit $6,000 salary and was restricted to his place of work, worship and barracks for 60 days. The sentence now goes to the commanding general, Maj. Gen. Robert W. Mixon, who can order a lighter sentence or set the whole verdict aside, defense attorney Frank Spinner said.
He probably won't get a promotion. He likely won't be encouraged to come back when his term is up. But, he doesn't even receive an unfavorable discharge.
If service like this is honorable, then the entire concept has been severely debased. The message that military jury has sent to the world is that the U.S. does not take this kind of case very seriously. Drunk driving is sometimes punished more severely in civilian courts.
23 January 2006
Canadian Election Results
As shown above, Canadian ballots are very simple. Each voter chooses a single candidate for his "riding" (equivalent to a U.S. Congressional District). Each party has one candidate selected by party officials rather than in a political primary. Nothing else appears on the ballot. The candidate with the most votes in the riding wins that riding. Paper ballots are used.
In a nutshell:
Results thus far. % is popular vote. 155 seats needed for majority:
Conservatives - 124 seats (36.4%)
Liberals - 103 seats (30.1%)
Bloc - 51 Seats (10.5%)
NDP - 29 seats (17.4%)
Others - 1 seat (5.6%)
Total: 308 (of 308)
63,094 of 66,171 polls reporting
By Jurisdiction (older data):
Yukon: 1 Liberal
Northwest Territories: 1 Liberal
Nunavut: 1 Conservative (by just 3 votes with 31 polling places not yet in)
British Columbia: 16 Conservative, 7 Liberal, 12 NDP
Alberta: 28 Conservative
Saskatchewan: 13 Conservative; 1 Liberal
Manitoba: 7 Conservative; 3 Liberal; 4 NDP
Ontario: 38 Conservative; 56 Liberal; 12 NDP
Quebec: 50 Bloc; 10 Conservative; 14 Liberal
New Brunswick: 3 Conservative; 6 Liberal; 1 NDP
Price Edward's Island: 4 Liberal
Nova Scotia: 3 Conservative; 6 Liberal; 2 NDP
Newfoundland and Labrador: 3 Conservative; 4 Liberal
The Conservatives in Canada vaguely resemble moderate Republicans. The Liberals vaguely resemble Northern Democrats. The NDP is to the left of the Liberals (the sort of people who might vote Green Party if they lived in the U.S.) [Ed. A commentator advises me that the Minnesota DFL might be a better comparison as farmers and labor are important parts of the NDP base]. The Bloc Quebecois is the Quebec Nationalist Party, which is politically well to the Left, but focused on Quebec autonomy (its seats comprise about two-thirds of the seats in Quebec, which is French speaking). There is one independent.
The commentators at Daily Kos (linked above) assure me that despite the fact that left leaning parties far outnumber the Conservatives, that the Conservatives, as the biggest seat winner in Parliament, will be permitted to try to form a government (i.e. choose the Prime Minister and cabinet) and that barring truly obnoxious behavior, will be backed, at least, by the Bloc Quebecois initially. But, such minority governments are fragile and rarely last more than two years. When and if the Conservative minority government falls by failing to receive a vote of confidence after the defeat of key legislation in the House of Commons (typically a money bill), new elections will be called.
Thus, the Canadians have handed the Conservatives a pyrrhic victory, while issuing a stern reprimand to the ruling Liberals. Barring extraordinary success on the part of the Conservatives against overwhelming odds, they may be out of power again in short order.
Genetic Engineers Take Note
We are learning what our genes do, and we are learning to change our own genes during life. When we learn that a gene causes something bad, we are tempted to eliminate it, and when we learn that a gene causes something good, we are tempted to want everyone to have that gene. But, you can't win.
Case in point: There is a gene mutation found in one percent of whites, which confers HIV resistence. But, the very same gene mutation confers West Nile Virus succeptibility. HIV is a more reliable killer, but it also acts more slowly and there are many ways one can avoid exposure to it. West Nile kills about one in twenty people who are infected with it and get sick (probably closer to one in a hundred people who are infected, without regard to whether they get sick), but kills in days instead of years, and is much harder to guard against because it is mosquito borne.
This time we were lucky. We know the tradeoffs associated with the presence and absence of this mutation, so we will recognize the choices associated with trying to genetically engineer it. But, next time, we may only see one half (or less) of the equation, and be very tempted to go forward with genetic engineering to take advantage of the known feature. It may take decades or more to discover that negative side effects that come with that decision. So, the original choice could turn out to be an uninformed one. It is easy to translate "no known side effects" into "no side effects", but they aren't the same thing.
Case in point: There is a gene mutation found in one percent of whites, which confers HIV resistence. But, the very same gene mutation confers West Nile Virus succeptibility. HIV is a more reliable killer, but it also acts more slowly and there are many ways one can avoid exposure to it. West Nile kills about one in twenty people who are infected with it and get sick (probably closer to one in a hundred people who are infected, without regard to whether they get sick), but kills in days instead of years, and is much harder to guard against because it is mosquito borne.
This time we were lucky. We know the tradeoffs associated with the presence and absence of this mutation, so we will recognize the choices associated with trying to genetically engineer it. But, next time, we may only see one half (or less) of the equation, and be very tempted to go forward with genetic engineering to take advantage of the known feature. It may take decades or more to discover that negative side effects that come with that decision. So, the original choice could turn out to be an uninformed one. It is easy to translate "no known side effects" into "no side effects", but they aren't the same thing.
Subprime Lender Busted
Up to 12,500 Coloradan's will share in a $295 million national settlement with subprime lender Ameriquest, which will also be required to reform its lending practices. It was accused of using deceptive practices to secure mortgage refinancing deals. While the settlement is only a few hundred dollars per affected consumer, I assure you that companies in real life do not pay three hundred million dollar settlements of claims that are truly groundless and frivilous, simply to make them go away and avoid the costs of litigation, nor do state attorney generals in every state sign on to such cases.
Soj Is Back
International affairs investigative blogger extraordinaire Soj is back in action with her blog Flogging the Simian, including considerable legacy content from her previous version of a blog by the same name that was shut down when someone tried to "out" her (I don't know if everything was restored or not). I don't know what happened that allowed her to return to the blogosphere, but welcome the return of her top notch insights.
The Federal Judiciary Reconsidered
Our country is currently debating the nomination of Judge Alito to serve as the next Justice of the United States Supreme Court. It is an important political fight, because Judge Alito will, if he is confirmed, undoubtedly move federal jurisprudence, particularly in the politically charged area of constitution law significantly to the right.
But, this fight obscures an equally important larger story which also needs to be part of the liberal agenda. We have already lost the battle for the federal courts. The United States Supreme Court may be closely divided, but the federal judiciary is more conservative than that of almost any state in the Union. Bush the younger, Bush the elder, and Reagan have left their mark on the federal judiciary, and Presidents Clinton and Carter were less effective in blunting that mark than they might have been.
Conservatives are fond of reminding us that Congress has broad authority to set the jurisdiction of the federal courts, but their vestigal state court bias (from the civil rights era when the federal courts were more liberal than the segregation era state courts), has not been exercised systematically. For example, subject to certain exceptions, cases involving less than a certain dollar amount used to have to be tried in state court, even if they involved exclusively federal questions. But Republican members of Congress have largely limited their consideration of the issue to proposed rifle shot removals of certain classes of cases from federal court jurisdiction (most recently purporting to remove jurisdiction of Guantanamo Detainee cases from federal court jurisdiction) with a particular outcome on the merits in particular cases desired, and have often sought to eliminate all federal review of cases (including U.S. Supreme Court review) even in cases arising under federal law.
Liberals should rethink the extent to which cases are allocated to the federal courts, but should do so on a more systemic and principled basis that retains the fundamental notion that all questions of federal law should ultimately be reviewable in the United States Supreme Court.
On the criminal side of the docket, this means rethinking which crimes should really be federal crimes. In the most recent year for which statistics are available, 2002, there were roughly 72,000 people convicted of federal crimes (table 326). One-third of those convictions were for drug dealing (or manufacturing). Only about 3% were convicted of violent crimes. About one in seven were convicted of fraud offenses, and another one in seven were convicted of immigration offenses. A wide variety of other offenses (weapons, drug possession, larcency, regulatory offenses, and misdemeanors of all stripes) made up the rest.
There is no compelling reason that intrastate drug dealing, bank robberies (which make up a large share of the violent offenses, most of the rest occur on federal land or Indian Reservations), or intrastate weapons possession cases, which together make up about 40% of the federal criminal docket, should be federal offenses. It isn't as if these things don't violate state law.
Draconian federal sentences imposed at the whim of federal prosecutors (who usually defer to the milder state courts) for drug offenses only dimly related to interstate commerce are nothing for liberals to defend. And, the debates over medical marjuania and the right to die indicate the benefits of providing states with more flexibility in this area. Why should one end up in federal court if one robs a bank, but in state court if one robs a jewelry store? And, why should issues like whether a felon should be able to possess a gun in a particular state be an issue of federal law? What makes sense in Rhode Island may not make sense in Wyoming.
Such a shift would impose a relatively modest burden on state courts, which are already responsible for criminal cases which have put 91% of the people in prison and 99% of the people on death row. But, it would bring criminal cases into the more reality based state court criminal justice system (even Alabama recognizes the need to control prison expenditures through more sensible sentencing), and would put the hot button issue of urban crime into the hands of the people who live with it, jurors drawn from urban counties and judges selected for those counties (usually from the ranks of local county bars), rather than much larger jury pools used in federal court and politically appointed, frequently hard core conservative federal judges.
Similar considerations apply to civil cases. Through historical accident, for example, civil employment cases are tried to a great extent in federal court. These cases make up about 20% of federal civil cases other than prisoner's petitions (table 325). They are tried before federal judges, who are often conservatives hostile to the very idea that employees should be able to sue their employers, and before usually much less diverse juries than would be available in state court. Also, federal court is generally more expensive to bring suit in, if for no other reason than that 98% of civil suits are brought in state court reducing the pool of lawyers familiar with federal procedures. Why shouldn't liberals favor keeping federal employment laws on the book, but reserving them to state courts, subject only to U.S. Supreme Court review, except in intestate class action cases?
Likewise, why should diversity cases which make up around 40% of the federal docket, exist at all anymore, at least in intrastate cases? As I have noted before, a large share of these cases involve situations where diversity of citizenship is little more than a legal fiction, because an interstate corporation with widespread local operations happens to have a headquarters in another state. And, there are more important uses of federal judicial resources than insuring that an out of state driver doesn't get hometowned in a case arising out of an automobile accident with a local resident (usually with the same attendant inconvenience of having to hire a local lawyer and go to out of state court proceedings, and the same entirely hometown jury and state laws, as a state court). These changes, because most civil cases are already tried in state court, would have an even smaller impact on the states.
A major reduction of the scope of the federal court docket, would reduce the influence of an already conservative judiciary on cases with only dim connections to the nation as a whole, would reduce the extent of burdensome service on federal juries often much further from jurors homes, and would focus the resources of the federal courts on addressing those cases where the federal courts are most indispensible, cases arising out of the operations of the United States government itself, and cases, such as civil rights cases and habeas corpus cases, where the United States courts can act as an honest broker between local governments and their citizens in a way that local judges, who often depend upon those very local governments for their own funding, can not.
But, this fight obscures an equally important larger story which also needs to be part of the liberal agenda. We have already lost the battle for the federal courts. The United States Supreme Court may be closely divided, but the federal judiciary is more conservative than that of almost any state in the Union. Bush the younger, Bush the elder, and Reagan have left their mark on the federal judiciary, and Presidents Clinton and Carter were less effective in blunting that mark than they might have been.
Conservatives are fond of reminding us that Congress has broad authority to set the jurisdiction of the federal courts, but their vestigal state court bias (from the civil rights era when the federal courts were more liberal than the segregation era state courts), has not been exercised systematically. For example, subject to certain exceptions, cases involving less than a certain dollar amount used to have to be tried in state court, even if they involved exclusively federal questions. But Republican members of Congress have largely limited their consideration of the issue to proposed rifle shot removals of certain classes of cases from federal court jurisdiction (most recently purporting to remove jurisdiction of Guantanamo Detainee cases from federal court jurisdiction) with a particular outcome on the merits in particular cases desired, and have often sought to eliminate all federal review of cases (including U.S. Supreme Court review) even in cases arising under federal law.
Liberals should rethink the extent to which cases are allocated to the federal courts, but should do so on a more systemic and principled basis that retains the fundamental notion that all questions of federal law should ultimately be reviewable in the United States Supreme Court.
On the criminal side of the docket, this means rethinking which crimes should really be federal crimes. In the most recent year for which statistics are available, 2002, there were roughly 72,000 people convicted of federal crimes (table 326). One-third of those convictions were for drug dealing (or manufacturing). Only about 3% were convicted of violent crimes. About one in seven were convicted of fraud offenses, and another one in seven were convicted of immigration offenses. A wide variety of other offenses (weapons, drug possession, larcency, regulatory offenses, and misdemeanors of all stripes) made up the rest.
There is no compelling reason that intrastate drug dealing, bank robberies (which make up a large share of the violent offenses, most of the rest occur on federal land or Indian Reservations), or intrastate weapons possession cases, which together make up about 40% of the federal criminal docket, should be federal offenses. It isn't as if these things don't violate state law.
Draconian federal sentences imposed at the whim of federal prosecutors (who usually defer to the milder state courts) for drug offenses only dimly related to interstate commerce are nothing for liberals to defend. And, the debates over medical marjuania and the right to die indicate the benefits of providing states with more flexibility in this area. Why should one end up in federal court if one robs a bank, but in state court if one robs a jewelry store? And, why should issues like whether a felon should be able to possess a gun in a particular state be an issue of federal law? What makes sense in Rhode Island may not make sense in Wyoming.
Such a shift would impose a relatively modest burden on state courts, which are already responsible for criminal cases which have put 91% of the people in prison and 99% of the people on death row. But, it would bring criminal cases into the more reality based state court criminal justice system (even Alabama recognizes the need to control prison expenditures through more sensible sentencing), and would put the hot button issue of urban crime into the hands of the people who live with it, jurors drawn from urban counties and judges selected for those counties (usually from the ranks of local county bars), rather than much larger jury pools used in federal court and politically appointed, frequently hard core conservative federal judges.
Similar considerations apply to civil cases. Through historical accident, for example, civil employment cases are tried to a great extent in federal court. These cases make up about 20% of federal civil cases other than prisoner's petitions (table 325). They are tried before federal judges, who are often conservatives hostile to the very idea that employees should be able to sue their employers, and before usually much less diverse juries than would be available in state court. Also, federal court is generally more expensive to bring suit in, if for no other reason than that 98% of civil suits are brought in state court reducing the pool of lawyers familiar with federal procedures. Why shouldn't liberals favor keeping federal employment laws on the book, but reserving them to state courts, subject only to U.S. Supreme Court review, except in intestate class action cases?
Likewise, why should diversity cases which make up around 40% of the federal docket, exist at all anymore, at least in intrastate cases? As I have noted before, a large share of these cases involve situations where diversity of citizenship is little more than a legal fiction, because an interstate corporation with widespread local operations happens to have a headquarters in another state. And, there are more important uses of federal judicial resources than insuring that an out of state driver doesn't get hometowned in a case arising out of an automobile accident with a local resident (usually with the same attendant inconvenience of having to hire a local lawyer and go to out of state court proceedings, and the same entirely hometown jury and state laws, as a state court). These changes, because most civil cases are already tried in state court, would have an even smaller impact on the states.
A major reduction of the scope of the federal court docket, would reduce the influence of an already conservative judiciary on cases with only dim connections to the nation as a whole, would reduce the extent of burdensome service on federal juries often much further from jurors homes, and would focus the resources of the federal courts on addressing those cases where the federal courts are most indispensible, cases arising out of the operations of the United States government itself, and cases, such as civil rights cases and habeas corpus cases, where the United States courts can act as an honest broker between local governments and their citizens in a way that local judges, who often depend upon those very local governments for their own funding, can not.
Why Being A Trial Lawyer Is Hard.
Imagine that you are the lawyer for agribusiness giant ConAgra. You are being sued in a complicated antitrust/patent suit and think that the people bringing the suit haven't presented enough evidence for any jury to rule in their favor. You bring a motion saying so before the case goes to the jury, but lose. The 10th Circuit Court of Appeal, whose ruling controls your case, has held in a case right on point that you don't have to make the motion again after the jury rules against you, asking to judge to overrule the jury verdict, to raise the issue on appeal, even though there is a fair reading of the rule that says that you do.
You appeal. The appellate court says that you were right that there wasn't enough evidence for the jury to rule in your favor, that you didn't have to repeat your motion after the jury ruled in accordance with binding precedent, and that you get a new trial in this big dollar case.
Then, the people bringing the lawsuit said that the 10th Circuit case you relied upon was wrong, and that you had to bring your motion a second time after the jury ruled. They win in the U.S. Supreme Court in a 7-2 decision written by Justice Thomas which was released today.
Next time you think that trial lawyers are going through unnecessary motions motivated by needless paranoia, remember this case. (Dissenters Stevens and Kennedy would have given the trial lawyers for ConAgra a break under a variant of the rule that courts are allowed to redress plain error.)
You appeal. The appellate court says that you were right that there wasn't enough evidence for the jury to rule in your favor, that you didn't have to repeat your motion after the jury ruled in accordance with binding precedent, and that you get a new trial in this big dollar case.
Then, the people bringing the lawsuit said that the 10th Circuit case you relied upon was wrong, and that you had to bring your motion a second time after the jury ruled. They win in the U.S. Supreme Court in a 7-2 decision written by Justice Thomas which was released today.
Next time you think that trial lawyers are going through unnecessary motions motivated by needless paranoia, remember this case. (Dissenters Stevens and Kennedy would have given the trial lawyers for ConAgra a break under a variant of the rule that courts are allowed to redress plain error.)
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