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September 10, 2018

Originalism is at war with America

By Alan Brownstein

[Cross-posted from The Hill]

President Trump is nominating federal judges, and Supreme Court Justices such as Judge Brett Kavanaugh, who claim to be committed to “originalism.” This approach to constitutional law requires that the Constitution be interpreted to mean today what the text was intended or understood to mean at the time it was written. But originalism conflicts sharply with American reality and American ideals.  

Years ago, Frank Sinatra sang a song about what America meant to him. The last line was “But especially the people, that’s America to me.” If that’s what America is, then originalism is unamerican.  Because there is no place for the over 300 million Americans today in originalist interpretations of constitutional law. We just don’t count.

Who does count? Only the people who were here in the 1780’s and 90’s or when specific constitutional amendments were adopted. The vast new diversity of the American people today has nothing to offer to our political foundations. 

Both originalists and non-originalists look to American history to interpret the Constitution. But to originalists, most of that history stops 230 years ago. The American constitutional story largely begins and ends on the first page. To non-originalists, American constitutional law, like America itself, is a story that never ends.

The key issue separating originalists and non-originalists is what to do with all of the rest of American history after the Constitution was ratified. When courts interpret the Constitution, just how much weight should be assigned to the collective experience of the American people over the last 230 years. The originalist answer is none or as little as possible. What matters most is what judges decide constitutional language meant over two centuries ago.

Put bluntly, this originalist commitment to a constitution frozen in time and divorced from the changes America has undergone over the centuries repudiates the core values of the American experience.

Think about what is distinctive and special about America. European governments were chained to centuries of history and tradition. That was the old world. America is the new world. We are the pragmatists, the experimenters. We try things out and continue what works and discard what doesn’t. We do that with everything including law. But that’s not the America of originalists. From their perspective, constitutional law is fixed and immutable. It cannot evolve. Judges cannot learn from American experience.

Non-originalists believe that the American people have worked with constitutional law for over two centuries. We learned a lot. We struggled to create constitutional doctrine that reflects who we actually are as a people, not some ideologically manipulated picture of who a few judges think we once were.

Unlike originalists, non-originalists recognize that the Constitution must take account of the changed understanding in our society of the status and rights of women. Accordingly, privacy and autonomy rights including the right to access to medical contraceptives must be protected and gender discriminatory laws must be subjected to rigorous scrutiny.

Unlike originalists, non-originalists understand how much our society has learned over time about the LGBT community. Because they are no longer in hiding in response to persecution, we can now see our gay and lesbian family members, friends, neighbors, co-congregants, and colleagues as people with the same needs and rights as the rest of us. At the constitutional level, this means that laws criminalizing sodomy or prohibiting same-sex couples from marrying must be struck down.

Unlike originalists, non-originalists have learned that democracy needs constitutional protection against political threats the framers may have under-estimated or ignored. Courts cannot close their eyes to elections being manipulated through burdens on voting and gerrymandered districts. The Constitution must be interpreted to protect voting as a fundamental right and to insist, at a minimum, that election districts must be of equal size and reflect the principle of one person, one vote.

Put simply, non-originalists believe that constitutional case law is a process grounded in the on-going experience of the American people. Older decisions can be challenged because of their real world consequences. Non-originalist judges may make mistakes. When that happens, eventually the wrongfully decided cases are overruled. Constitutional law does not become permanent unless it works, unless it resonates with the beliefs of the American people overtime.

Originalists believe that history has an iron grip on constitutional meaning. The great constitutional questions of the day turn on lawyers debating what people understood centuries ago, not on the needs of Americans today and the values we have forged over centuries of struggle.

Alan Brownstein is a professor of law emeritus at the University of California, Davis School of Law. He has written numerous articles for academic journals and opinion pieces for other media on a range of constitutional law subjects. He is a member of the American Law Institute and serves on the Legal Committee of the Northern California American Civil Liberties Union. He received his B.A. degree from Antioch College and earned his J.D. (magna cum laude) from Harvard Law School, where he served as a Case Editor of the Harvard Law Review.

 

 

September 10, 2018

California court finds public trust doctrine applies to state groundwater resources

[Cross-posted from Legal Planet]

The California Court of Appeal for the Third Appellate District has issued an important decision declaring that California’s powerful public trust doctrine applies to at least some of the state’s overtaxed groundwater resources.  The court’s opinion also rejects the argument that California’s Sustainable Groundwater Management Act (SGMA) displaces the public trust doctrine’s applicability to groundwater resources.

The Court of Appeal’s opinion in Environmental Law Foundation v. State Water Resources Control Board decides two key issues of first impression for California water law: first, whether the public trust doctrine applies to California’s groundwater resources; and, second, if it does, if application of that doctrine has been displaced and superseded by the California Legislature’s 2014 enactment of SGMA.  A unanimous appellate panel answered the first question in the affirmative, the second in the negative.

The facts of the Environmental Law Foundation are straightforward and undisputed: the Scott River is a tributary of the Klamath River and itself a navigable waterway located in the northwestern corner of California.  The Scott River has historically been used by the public for recreational navigation and serves as essential habitat for migrating salmon listed under the Endangered Species Act.

Critically, there are groundwater aquifers adjacent to the Scott River in Siskiyou County that are hydrologically connected to the surface flows of the Scott River.  Local farmers and ranchers in recent years have drilled numerous groundwater wells and pumped ever-increasing amounts of groundwater from those aquifers.  As a direct result, the surface flows of the Scott River have been reduced, at times dramatically.  Indeed, in the summer and early fall months, the Scott River has in some years been completely dewatered due to the nearby groundwater pumping.  The adverse effects on both the Scott River’s salmon fishery and recreational use of the river have been devastating.

Environmental groups and the Pacific Coast Federation of Fishermen’s Associations, relying on California’s venerable public trust doctrine, initially responded to this environmental crisis by petitioning Siskiyou County and the State Water Resources Control Board to take administrative action to limit groundwater pumping in the Scott River watershed.  Both the Board and the County declined to do so.

Plaintiffs responded by filing suit, arguing that groundwater resources that are interconnected with the surface water flows of the Scott River are subject to and protected by the state’s public trust doctrine.  Siskiyou County disputed that claim, arguing that the public trust doctrine is wholly inapplicable to groundwater and that the country has no duty to limit groundwater pumping, even in the face of the resulting environmental damage to the Scott River ecosystem. (The Board, by contrast, eventually reconsidered its position, ultimately adopting plaintiffs’ view that groundwater resources interconnected with surface water flows are indeed subject to the public trust doctrine.)

The trial court concluded that the public trust doctrine does apply to the groundwater resources of the Scott River region.  While the litigation was pending there, however, the California Legislature enacted SGMA, which for the first time creates a statewide system of groundwater management in California, administered at the regional level.  Siskiyou County seized upon that legislation to argue that even if the public trust doctrine would otherwise apply to the County’s groundwater resources, the doctrine was automatically displaced and made inapplicable to groundwater as a result of SGMA’s allegedly “comprehensive” statutory scheme.  The trial court rejected this backstop argument as well, and the County appealed.

The Court of Appeal’s decision today resoundingly affirms the trial court on both issues.  On the threshold public trust claim, the justices rely heavily on the California Supreme Court’s landmark public trust decision, National Audubon Society v. Superior Court.  In National Audubon, the Supreme Court held that the public trust doctrine, a foundational principle of California natural resources law, fully applies to the state’s complex water rights system.  Specifically, National Audubon found that the City of Los Angeles’ diversion of water from the non-navigable, freshwater streams flowing into Mono Lake, which were reducing the lake level and causing environmental damage to the lake ecosystem, could be limited by state water regulators under the public trust doctrine.

The court in the Environmental Law Foundation concluded that the rationale and holding of National Audubon are fully applicable to the facts of the Scott River case.  Rejecting the County’s argument that extractions of groundwater should be treated differently from the diversions of surface water that were found in National Audubon to be causing environmental damage to Mono Lake, the Court of Appeal declares:

“The County’s squabble over the distinction between diversion and extraction is…irrelevant.  The analysis begins and ends with whether the challenged activity harms a navigable waterway and thereby violates the public trust.”

Accordingly, the Environmental Law Foundation court concludes that the public trust doctrine fully applies to extractions of groundwater that adversely affect navigable waterways such as the Scott River.

Turning to the County’s SGMA-based defense, the Court of Appeal had little difficulty concluding that by enacting that statute the Legislature did not intend to occupy the entire field of groundwater management and thereby abolish the public trust doctrine’s application to the groundwater resources at issue.  (The County had argued that SGMA’s enactment not only relieves the County of any public trust-related duties, but also precludes the State Water Resources Control Board from acting to protect public trust resources from environmental damage resulting from excessive groundwater extractions.)  The Court of Appeal concludes:

“[W]e can evince no legislative intent to eviscerate the public trust in navigable waters in the text or scope of SGMA…We conclude that the enactment of SGMA does not, as the County maintains, occupy the field, replace or fulfill public trust duties, or scuttle decades of decisions upholding, defending, and expanding the public trust doctrine.”

Environmental Law Foundation v. State Water Resources Control Board represents an important judicial ruling concerning the public trust doctrine’s application to California’s water resources–perhaps the most important since the California Supreme Court decided the iconic National Audubon decision 35 years ago.  Additionally, Environmental Law Foundation is the first California appellate decision expressly applying the public trust doctrine to (at least some of) the state’s groundwater resources.  It’s also the first appellate decision interpreting SGMA, although that decision limits the application of the statute and harmonizes it with longstanding California public trust doctrine.

Perhaps most importantly, the Environmental Law Foundation opinion represents yet another ringing judicial affirmation of the public trust doctrine’s continuing, vital and foundational role in California natural resources law and policy.  The California judiciary has in recent years consistently given a robust interpretation to and application of the public trust doctrine.  Environmental Law Foundation is but the latest manifestation of that most welcome and trend.

(Full disclosure notice: the author of this post serves as counsel of record for the prevailing plaintiffs in the Environmental Law Foundation v. State Water Resources Control Board case.)

September 6, 2018

Happy 11th Birthday, Legal Ruralism

 

I nearly forgot--again this year--to commemorate the birthday of my Legal Ruralism Blog (subtitle:  a little legal realism about the rural).  Last year's milestone birthday slipped right by me.  The day of the inaugural post was actually September 3, 2007, so I'm a few days late.  Never mind:  HAPPY 11th BIRTHDAY, LEGAL RURALISM!   The last time I wrote a post about the blog's birthday was on the one year anniversary (roughly), and it featured a photo of Sarah Palin, who had become the face of rural America as John McCain's running mate.  Remember all that Main Street v. Wall Street rhetoric from Election 2008?  And all that rural bashing that Palin's presence on the national stage elicited?  Actually, sounds rather similar to where we are a decade on, thanks to different political actors.  

 

In the last year, I've noticed that Legal Ruralism was cited in a Vera Institute Report on rural jails and that it was cited in a couple of law review articles (e.g., Savannah Law Review and Georgia State Law Review) by scholars other than me.  Admittedly, I have cited the blog fairly frequently in my own academic writing because often I put on the blog a "half-baked" idea about a possible rural trend, and those posts later prove useful when I wind up writing an academic article about what has, in fact, proved to be a trend.   

 

Maybe Legal Ruralism is beginning to prove the adage, "if you build it, they will come."  Certainly, it has helped several national journalists find me over the past few years, as the media became more interested in rural America in the wake of Trump's election. 

 

Here's the first post, from September, 2007, the first semester I taught my Law and Rural Livelihoods course, which launched simultaneously with the blog:

Three articles in the Sunday New York Times pick up on rural themes and phenomena that we discussed in our first class: lack of anonymity, lack of economic opportunity, and urban use (and abuse) of the rural. 

The first story, about a small-town newspaper in western Nebraska, describes a situation similar to the one I described regarding my own home town: complete listings of calls to law enforcement authorities, reported verbatim in the local newspaper. The Nebraska editor is quoted as saying that these reports rival the obituaries in popularity among readers. A look at the reported items indicate that residents of this Nebraska town not only report petty thefts and minor happenings unrelated to law (e.g., squirrel down the chimney), which might go unreported in  urban places, but that they also officiously report their neighbors’ activities. One caller told police that a 9-year-old boy was being endangered by mowing his lawn when the child’s mother was “perfectly capable of doing it herself.” In light of limited law enforcement resources in rural areas, what are we to make of such uses of those resources? Do stories such as this effectively refute the familiar images of rural folk as self-sufficient, close-knit and looking out for one another in helpful ways? 

The other two articles reflect the lack of opportunity associated with rural areas and discuss two different communities’ debates about how to respond to it. One reports on the 5,000-member Yurok tribe in northern California. Situated along the once salmon-rich Klamath River, the tribe is deciding how to spend $92.6 million in logging proceeds – a figure six times the tribe’s annual budget. Some favor a lump sum distribution to members, while others support investment in programs to address high unemployment, flagging fishing, and the drug and alcohol problems with which the tribe has struggled. Meanwhile, development is afoot: a new gas station and 99 slot machines. 

The third article similarly considers the economic struggles of rural folk. Once a thriving paper mill town in northern New Hampshire, Berlin (population 10,000) is trying both to revive its economy -- and to diversify it, “not to put all our eggs in one basket” as the mayor reports. Construction of a federal prison will begin this fall, and the town is developing a 7,500 acre A.T.V. park which it hopes will generate $700,000 in revenue each year.  

While developments in both Klamath, California and Berlin, New Hampshire, are generating hope among residents, the extent to which those residents have considered the downsides to such developments are unclear.

Interestingly, the Klamath River and the Hoopa Tribe who depend on it were in the New York Times again this week.  Christopher Chavis regularly posts about New Hampshire and elsewhere in New England, as he did here a few days ago.  And as for rural self-sufficiency, that was a major theme of this post from a few days ago.  So, I guess the more things change, the more they stay the same.  That's certainly true of the "urban use of rural" label, one of the "tags" I put on that very first post eleven years ago.  At this point, more than a decade on, I've used that label more than 100 times, a sad commentary on the ongoing relationship between rural and urban in the United States.  

 

A dear colleague from another institution recently pointed out that someone forgot to tell me that blogging is so yesterday's medium.  Maybe so, but students like doing it in my three seminar courses (I also have a Feminist Legal Theory Blog and a Working Class Whites and the Law Blog) because it's a great way to exchange ideas, to have an extended conversation, to sharpen written communication skills.  I think I'll stick with it for a while--at least another 11 years.  

September 4, 2018

McClatchy feature on policing in rural California echoes my theorizing of law's relation to rurality

Most Wanted Poster

Trinity County, California, Courthouse, July 2018

Photos by Lisa R. Pruitt 

The headline is "Calling 911 in rural California?  Danger might be close, but the law can be hours away," and four Sacramento Bee journalists contributed to this major feature, which has been in the works since December, 2017.

 

I was gratified to see the story--which documents the reality (and consequences) of lack of effective law enforcement and high per capita violent crime rates in California's nonmetro counties.  To be clear, the news is bad, but I was gratified in that the story confirms work I have been doing for more than a decade now (some of it documented in this blog since September, 2007, 11 years ago this month).  That work has been theorizing the difference that rurality makes to law's operation and people's attitudes about law.  In other words, what is the legal relevance of rurality and, thus, why should legal scholars attend to rural difference?  why should "rural" be a category of analysis in the implicitly urbanormative field of law?

Siskiyou County Sheriff's Office, Yreka, California, July 2018

photos by Lisa R. Pruitt (c) 2018

 

Just a few years ago, I published a chapter on this issue in a volume of legal geography essays.  Mine was titled, "The Rural Lawscape: Space Tames Law Tames Space."  My argument was that rural spatiality is in tension with law.  That is, the distance between homes and the distances that legal actors must traverse in order to exert law's authority--to make law meaningful--practically disables law.  Technology can help (that is, time can trump space), but it's costly and cannot always be a substitute for the presence of human law enforcement.  Further, rural residents' sense that they must be self sufficient is reinforced by this lived reality.  As academics express it, society, spatiality and law and all mutually constituting or co-constitutive.  If people know that legal actors such as law enforcement are effectively not present, then they know they must take care of themselves.  In a sense, the lack of efficacy of law promotes a sort of frontier justice or informal order.   

 

Now, the empirical work of these Bee journalists confirms my theorizing with hard data about the number of sheriffs deputies per 100 square miles in California counties--including those all across the state, not just in the northern third on which Sac Bee usually focuses.  These journalists also look at  violent crime rates, confirming that  many of the highest crime counties are "rural" according to the metric used by the reporters:  Alpine (with a population of just 1,175, the state's least populous county, in the eastern Sierra) and Lassen (in the northern Sierra) lead the pack.  Third is metropolitan San Joaquin County, home to Stockton.  

Plumas (again, northern Sierra) is next, followed by the state's most urban county, San Francisco, then nonmetro InyoShastaLake and Modoc.  Of course with populations as low as those of many of these nonmetro counties, the violent crime count doesn't have to be very high to rise to the top of the per capita heap.  Indeed, it would be interesting to see data on deputy sheriff per 1000 residents vs deputy sheriff per 100 square miles.  How different would the map and rankings look then?  And which is the more salient metric, given the significance that material distance plays in rural lives? 

 

The Bee story begins with information about a 2011 double murder in the Trinity County community of Kettenpom, nearer to Mendocino County than to Weaverville, the Trinity County seat.  In that case, Trinity County law enforcement asked the neighbors of a couple who called 911 to check in on that couple because sheriffs deputies coming from Weaverville were several hours away.  The incident ended badly, with the responding neighbors severely wounded and the assailant, who had killed the couple who initially called 911 by the time the responding neighbors arrived, also dead after a car chase.  The responding neighbors, Norma and Jim Gund, are suing the Trinity County Sheriff (in a case now going to the Supreme Court of California), and in the related story by journalist Ryan Sabalow observe, "Over here, we have to take care of ourselves."  Any trust they had in the sheriff's office has disappeared, the story reports.  (The separate story about this law suit is well worth a read, especially for legal eagles who will be interested in the arguments of the respective parties, including the assertion that the Gunds were effectively "posse comitatus," which happens to be the name of a far-right survivalist group).

Another quote from this McClatchy feature similarly speaks powerfully to informal order.  The man quoted is one whom Modoc County Sheriff's deputies knew was growing marijuana illegally.  Yet when they stopped him in a remote locale, they made an effort to calm his anger rather than confront him with the marijuana infraction.  The story reports that the deputies planned to return later with reinforcements rather than risk the consequences of his ire when they stopped him in a vulnerable location.  The man who was stopped, identified as Roberts, told the reporter who was on a "ride along" with the deputies:

We have freedom with responsibility out here.  We can do a lot of stuff. These guys [sheriffs deputies] referee.  

Read more here: https://www.sacbee.com/news/state/california/article215453050.html#storylink=cpy

Wow, law enforcement as referees for what residents want to do?  This is sounding like the wild west, indeed.  (As it happens, I am in the midst of reading about the wild west in Wallace Stegner's Pulitzer Prize winning Angle of Repose, which features vignettes where vigilante justice takes over, much to the dismay of eastern transplants to places like Leadville, Colorado in the 19th century).  

Bieber, California (Lassen County), July, 2018 

Lack of tax revenue undermines rural counties' 

ability to finance public services

 

These somewhat harrowing vignettes from Trinity and Modoc County aside, what I consider to be the story's lede contrasts rural with urban:

As urban areas such as San Francisco, Los Angeles, Sacramento and Fresno grapple with discussions about use of force and the over-policing of minority communities, the state’s rural counties face a growing and no-less-serious law enforcement crisis: a severe shortage of staff that puts the public — and deputies — in danger. 

A McClatchy investigation found that large stretches of rural California — where county sheriffs are the predominant law enforcement agencies and towns often run only a few blocks — do not have enough sworn deputies to provide adequate public safety for the communities they serve.

Elsewhere the story provides this illustration, again contrasting rural and urban:

Del Norte Courthouse, Crescent City, July 2018  

While the Sacramento County Sheriff’s Department employs nearly 160 deputies for every 100 square miles it covers, the tiny sheriff’s departments in Madera, Mariposa and Mendocino counties employ about four deputies for the same amount of turf. In Del Norte and Alpine, the counties make do with two deputies per 100 square miles.

Those figures include non-patrol personnel and those who work in county jails. 

Also, consider the role that the phenomena of distance and personnel shortage played in this tragic story out of Tehama County last fall.  Perhaps these Rancho Tehama events gave the Bee journalists the idea for this story.

Tehama County Sheriff's Office, Red Bluff, California, July 2018

The McClatchy story features a color-coded map that shows the number of law enforcement officers per 100 square miles (again, what would it look like if deputies per 1000 residents?).  It reminds me of maps I have helped to produce here showing lawyers per capita in California counties.  Guess what? As with law enforcement officials, nonmetro counties have shortages of lawyers.

 

Another interesting theme/revelation in the story is that no deputy actively patrols in some counties, e.g., Mendocino, for some parts of the night, though deputies are on call from their homes.  When I wrote something similar on Legal Ruralism about my home town in Arkansas a few years ago (see herehere and here), students in my Law and Rural Livelihoods class were shocked to imagine a place with no law enforcement on duty 24-7, yet it is happening here in California, too.

 

A third interesting theme:  population churn in rural areas, partly driven by low cost of living, has had an impact on how rural communities are policed:

Tex Dowdy, the sheriff-elect of Modoc County, said an influx of transient residents drawn to the low cost of living has made identifying suspects harder for Modoc’s deputies. 

The story quotes Dowdy: 

It isn’t the same place where we used to live.  You used to recognize the bad guy walking around the street because he was in the paper every week.

Alturas, California (Modoc County) July 2018

Note the lack of anonymity theme, about which I have written a great deal in the last decade, including here and here.  The sheriff basically confirmed what I have argued:  in rural counties, the "usual suspects" is as powerful a type of profiling as racial profiling, if not more so (and, of course, the two can overlap).

 

A fourth interesting theme--one also  articulated in my academic writing--is that some people seek our rurality for the privacy and effective seclusion from law that it provides.  (Think Ted Kaczynski, the Unabomber, in rural Montana).  These folks are unlikely to call on law enforcement even when they need it.  Regarding this proposition, the story quotes Humboldt County Sheriff William Honsal in relation to this phenomenon:

Things go on in the hills all around us that go unreported.  We know that. Daily. It happens. It’s something that we’ve just gotten used to. There are shootings that occur in the middle of the night. ... We know that there’s kidnappings, we know there are people getting brutalized out in the hills, we know there are people getting robbed.

Honsal's quote reminded me of this feature by Reveal last fall, which I blogged about here, regarding wage theft and sexual abuse of "trimmigrants" in places like Humboldt and Trinity County.  Of course, immigration status can also make people reluctant to report a crime, a particular concern in places like the San Joaquin Valley.  The Chief Justice of California has, for that reason, criticized ICE for any presence in California courthouses.

 

A fifth theme relates to budgets, cuts to which have undermined a prior practice of deputizing people who lived in the remote reaches of a given county:

Until recent years, many rural departments had regional substations and hired “resident deputies” who lived in the remote areas they served. Those resident deputies knew their territories and most of the locals by name, making it harder for crime to go unnoticed, said multiple sheriffs. Resident deputies also allowed for quicker response times. 

Those in need “just come and knock on your door,” said Modoc’s Poindexter. “You just grab your gun belt and go out the door and try to fix it.”

July 2018, Bieber, California (far northern Lassen County), a sheriff station

at the local school, which is closer to Alturas, in Modoc County, than to Susanville,

the Lassen County seat.

Indeed, in my recent drive up California 299 from Burney (Shasta County) to Alturas (Modoc County), I saw a sign indicating such a remote outpost of the Lassen County Sheriff's office in Bieber, which is near the Modoc County line and also not far from Shasta County.   Yet it is technically in Lassen County, and how interesting that the Lassen Sheriff's substation should be at the school, of all places. (More photos from that journey are here and here with more to come in future posts on access to justice in rural California).  A few years ago, I also photographed a Siskiyou County Sheriff's substation in Dunsmuir.  Though it is at the southern edge of the county, it is hardly remote given its locale on I-5.

 

Siskiyou County Sheriff's

Substation, Dunsmuir July 2016

Another aspect of the economic situation is the inability of counties to tax public lands, both federal and state.  The story explains:  

The state compensates counties for protected lands, too, but that funding has been controversial and even less predictable. Since the 2015-2016 budget cycle, the state has given rural counties $644,000 for payments in total each year to be divided among them, said state Sen. Mike McGuire, whose coastal district spans seven counties from Marin to the Oregon border.

I have written previously here and here of the constraints that lack of tax revenue on federal lands place on local governments in rural areas, especially in the West, which has a much greater percentage of public lands than the rest of the country.  The impact of shrinking federal dollars on law enforcement in Southern Oregon has attracted media attention in recent years.  As for that state contribution, less than $700K/year spread among seven counties is pretty pitiful,  even in the context of a paltry rural budget. 

 

Sierra County Courthouse,

Downieville, California, July 2017

A sixth theme of the story is that the state practice of re-alignment (re: prisons and local jails) has not served nonmetro counties well.  The Bee story includes a few interesting quotes to illustrate the conundrum re-alignment has created for county law enforcement. 

 

A seventh theme is the lack of mental health support.

Rural counties have 0.9 psychiatrists for every 10,000 residents, about half the statewide average, according to California Medical Board data. Mariposa has been experimenting with “tele-doc” video technology to connect jail inmates with mental-health professionals in other counties.

Read more here: https://www.sacbee.com/news/state/california/article215453050.html#storylink=cpy

Of course, telemedicine is being used to provide mental health and other services in rural counties generally, and not only to incarcerated populations.

 

An eighth theme regards reliance on other law enforcement agencies, including not just California Highway Patrol, but also both federal and state game and fish officers.  The photos show a sign at the California Highway Patrol office in Weaverville (Trinity County), which sits next to the DMV office.  I assume that the sign encouraging reports of vehicle theft responds to the reality that rural residents report crimes at lower rates than their urban counterparts, even when the perpetrator is a stranger.  The other photo I took in Weverville this summer is of a USDA vehicle, reprsenting the sort of law enforcement proxy that game and fish commissioners sometimes represent in rural areas. 

USDA Forest Service vehicle, Weaverville, California, July 2018 

Back to the budget/economics note, I'll close with this stunning data point:  rookie deputies in Modoc County earn $13/hour!  I assume baristas in Los Angeles are paid better than that, especially if you take into account tips.

 

Cross-posted to Legal Ruralism.  

August 21, 2018

Episode 26: "Roe"

Ep. 26 of "What Trump Can Teach Us About Con Law" looks as Roe v. Wade as it relates to President Trump, his Supreme Court nominee Brett Kavanaugh, and the Constitution. This episode also examines the unusual trajectory of Roe plaintiff Norma McCorvey's life in the decades following the 1973 Supreme Court decision.

 

August 6, 2018

Lawyers defending immigrant children in detention are relying on a court case from the '80s

By Kevin R. Johnson

[Cross-posted from The Conversation]

The Trump administration’s immigration policies have brought an old court case back to life in defense of immigrant children at the border, often referred to as “the Flores settlement.”

The case, which was filed in 1985 and settled in 1997, set the rules that the government must follow when it keeps migrant children in its custody. The latest court order based on the settlement took place on July 30, in which a judge barred immigration authorities from giving children psychotropic drugs without consent of parents or legal guardians.

The Trump administration has requested to amend the settlement to allow it to indefinitely detain migrant children. So far, the courts have denied these requests, and will continue to monitor the detention of migrant children.

So what was the Flores case about?

Case took years

In the 1980s, the Reagan administration aggressively used detention of Central Americans as a device to deter migration from Central America, where violent civil wars had caused tens of thousands to flee. As a result, the government held in custody Central Americans arrested at the U.S.-Mexico border, including many who sought asylum in the U.S. because they feared persecution if returned home. Immigrant rights groups filed a series of lawsuits challenging various aspects of the detention policies, including denying access of migrants to counsel, taking steps to encourage them to “consent” to deportation, and detaining them in isolated locations far from families and attorneys.

One suit was filed by the American Civil Liberties Union in 1985 on behalf of Jenny Lisette Flores, a 15-year-old from El Salvador. She had fled violence in her home country to live with an aunt who was in the U.S. But Flores was detained by federal authorities at the U.S. border for being undocumented.

The American Civil Liberties Union charged that holding Flores indefinitely violated the U.S. Constitution and the immigration laws. The Flores case made its way to the U.S. Supreme Court.

In its 1993 ruling in the case, the court held that a regulation allowing the government to release a migrant child to a close family member or legal guardian in the United States was legal.

But the primary legacy of the case was the subsequent settlement, to which both the Clinton administration and the plaintiffs agreed in 1997.

The Flores settlement established standards for the treatment of unaccompanied minors who were in the custody of federal authorities for violating the immigration laws. It requires the federal government to place children with a close relative or family friend “without unnecessary delay,” rather than detaining them; and to keep immigrant children who are in custody in the “least restrictive conditions” possible. Generally speaking, this has meant migrant children can only be kept in federal immigrant detention for 20 days.

The Flores settlement created a framework agreed to by the U.S. government that addressed how migrant children were to be treated if they were detained. It is a landmark settlement in no small part because Central Americans continue to flee violence in their homelands and the U.S. government has responded with mass detention of immigrant children. Although the Flores settlement was agreeable to the Clinton administration, the Trump administration wants to detain families, including children, for periods longer than permitted by the Flores settlement.

July 30, 2018

States Should Conform to -- and Improve -- the New Federal Tax Provisions Meant to Counter Base Erosion

By Darien Shanske

[Cross-posted from Medium]

The United States used to tax multinational corporations (MNCs) on the basis of their worldwide income, except that most foreign source income would only be taxed when actually repatriated to the United States. This structure naturally created considerable incentive to strip income out of the United States and then not to repatriate it.

Now, thanks to the TCJA, the United States is ostensibly only going to tax MNCs on their US source income. This shift to a so-called territorial system means, of course, that MNCs will continue to have incentive to shift income abroad in order to avoid US tax. The TCJA has two separate provisions meant to counter this: GILTI and BEAT. One question for the states is whether they should conform to these provisions. I think the answer is yes. I also think it is clear that states should improve these provisions when they adopt them.

There is a preliminary question as to whether states can — as a matter of federal constitutional law — conform to these provisions. I think the answer is again yes, but the details of the state law will matter a great deal.

Not everyone agrees. For instance, the STAR Partnership, argues here that:

“Under the prior federal tax system, States generally did not include foreign income in their own tax bases, for both policy reasons and Constitutional limitations. States should continue to respect these policy and Constitutional rationales and avoid taxation of foreign income by excluding these provisions from their business tax bases.”

In short, according to a group of top state and local tax lawyers and policy wonks — who are quite explicitly representing the “business community” — states should not and cannot conform to the federal provisions meant to prevent base erosion. It is true that states do not tax foreign source income (in general) and that it is a tricky policy and constitutional question whether they can and/or should, but is it true that this is what states would be doing if they tax the repatriation or conform to GILTI or BEAT?

Consider some well-known and curious facts about the income of MNCs. First, there are some jurisdictions that are just unbelievably profitable for corporations. As Torslov, Wier and Zucman put it: “Foreign corporations . . . have extremely high profitability ratios in tax havens, e.g., 800% in Ireland. . . . By contrast, and strikingly, in almost all non-haven countries foreign firms are less profitable than local firms. Thus, there is a clear trace in global macro data of shifting from high- to low-tax affiliates, in such a way that profitability is systematically over-stated in tax havens and under-stated elsewhere.”

Many of those some super-profitable jurisdictions also house profits worth many multiples of their GDP, which would seem to be a real head scratcher. For example, the profits of US controlled subsidiaries in the Cayman Islands represented over 1000% of that island’s GDP in 2014. It is of course not possible for firms to earn profit in a jurisdiction many times the size of the jurisdiction’s economy.

We know why this money is taking a Caribbean vacation and we also know which legal structures got it there — see here for example.

In short, there was already a great deal of base erosion, and the two new provisions of federal law we are discussing are meant to counter it. (Indeed, there is a good argument that these provisions are roughly consistent with the anti-base erosion principles championed by the OECD.)

If a state were to conform to these base protection provisions or tax the repatriation, then a state is not — counter to the STAR Partnership — trying to tax “foreign” income, but trying to protect domestic income from being stripped out of their tax base.

This fact has an important legal implication. Again, it is true that the legal questions would be trickier for states looking explicitly to tax foreign income. Matters are different if a state is trying to tax domestic income and is simply trying to craft rules that lead to a better reflection of domestic income. As to designing their own tax systems to tax domestic income, states have a lot of leeway.

So, states can conform to these federal backup taxes and they should, but it is important to note that they should and could also improve these taxes. For more on how states should tax the repatriation, see here and kudos to NJ for doing so.

Here are a couple of examples of possible improvements to the backup provisions that are drawn in particular from Rebecca Kysar and Dan Shaviro. GILTI stands for “global intangible low taxed income” and the intuition behind the provision, consistent with the evidence above, is that certain low-tax jurisdictions are suspiciously profitable. Therefore, GILTI income is income that is earned beyond the normal expected return on an investment. There are numerous complexities involved in GILTI, many of which are not resolved, but for our purposes we can note that GILTI assumes a normal rate of return of 10%, which is rather high. A straightforward fix that a states could adopt would be conform to GILTI but use some lower rate tied to actual normal returns — perhaps a long-term corporate bond rate +2%. That would make the rate 6% at the moment.

As for the BEAT, the “Base Anti-Erosion Tax,” this is a minimum tax much like the Alternative Minimum Tax (AMT) for individuals. The idea is that a primary way of shifting income abroad is for MNCs to take large deductions for payments to related foreign corporations — say a US corporation paying a foreign affiliate in a low-tax jurisdiction for the use of intellectual property. The BEAT requires an MNC to add such payments back into the tax base; that broader base is then subject to a 10% rate. If the resulting tax liability is greater than the regular liability, then the taxpayer pays the minimum. As with GILTI, the BEAT has many design flaws. For instance, the BEAT only kicks in for relatively large corporations ($500 mn plus in gross receipts); it would make a lot of sense for states to adopt the BEAT, but at a lower threshold.

The TCJA emerged from such a flawed process that even its most reasonable ideas, like GILTI and the BEAT, are deeply flawed. (Again, don’t take my word on it, ask Kevin Brady.) And the states will be negatively impacted if the TCJA encourages MNCs to strip out even more income because the GILTI and the BEAT are ineffective. So, at a minimum, states should conform to these provisions and ideally they should improve them, but it should be remembered that improvements need not be through tinkering with the mechanics of these provisions.

The states pioneered an anti-income stripping regime that I would argue is simpler and likely more effective than even an improved GILTI and BEAT: mandatory worldwide combination using the single sales factor. This approach does not require the government to identify a particularly problematic form of income or deduction, which can have unexpected and undesired consequences. Instead, all income is income, and income is apportioned according to where an MNC makes its sales. We know that it is unlikely that an MNC makes many sales to final consumers in tax haven jurisdictions. Currently, no states require mandatory worldwide combination, but many permit taxpayers to choose it. If a state is unwilling to require worldwide combination, then an appealing option would be to conform to GILTI and the BEAT, with improvements, and then permit MNCs to choose if they would not prefer the simplicity of worldwide combination.

 

July 30, 2018

Back to the Future?

By Kevin R. Johnson

[Cross-posted in Frank Essays]

As I wrote in 2009, race and class permeate U.S. immigration law and enforcement. This taint stems in large part from the critically important roles of race and class in the formation and maintenance of the American national identity.  Immigration law reinforces and maintains that identity by determining who is admitted to the United States.  A history of exclusion of poor and working people of color from the United States reveals both how we as a nation see ourselves and our aspirations for what we want to be. 

Through aggressive immigration enforcement like that seen in no other administration in modern U.S. history, President Trump has taken race and class in immigration to the next level.  Indeed, his administration has embraced a policy akin to the infamously discriminatory Chinese exclusion laws of the late 1800s. Moreover, his attacks on Mexican immigrants, Muslims, and migrants from “s---hole countries” expressly invoke race and class of migrants as the reason for their harsh treatment.

Immigrants from Latin America

Because of their perceived negative impacts on U.S. society, Mexican and other Latino immigrants, particularly those who are undocumented, are among the most disfavored immigrants of modern times.  President Trump has made no bones about his view that Mexico does not “send their best” to the United States and has labeled Mexican immigrants as a group as criminals.  Although not mentioning “Operation Wetback” by name, President Trump has endorsed the now-discredited deportation campaign of President Eisenhower that removed hundreds of thousands of persons of Mexican ancestry from the Southwestern portion of the United States in 1954.  President Trump also has disparaged Salvadorans, tying them to members of the violent gang MS-13 who are no less than “animals” warranting the harshest of treatment. 

President Trump’s raw demonization of Latinos fits into a long history of discrimination against immigrants from Mexico and, more generally, all persons of Mexican ancestry in the United States.  The demonization is not limited to “aliens” or “illegal aliens” but today affects Latinos in this country of all immigration statuses.

Anti-Mexican sentiment, often combined with class-based bias, has long been prevalent in American social life.  Persons of Mexican ancestry are often stereotyped as little more than peasants who undercut the wage scale of “American” workers because of their willingness to work for “inhuman” wages.  The debates over the ever-expanding fence along the U.S.-Mexico border that President Trump champions and border enforcement generally, the proliferation a few years ago of state and local immigration-enforcement measures such as Arizona’s infamous S.B. 1070, and the popularity of immigration enforcement, reveal both anti-Mexican and anti-immigrant sentiment, as well as legitimate concerns with lawful immigration and immigration controls.  President Trump has fully embraced and amplified these sentiments. 

The difficulty of disentangling lawful from unlawful motivations does not change the real influence that invidious motives have in both the substance and enforcement of U.S. immigration law and policy.

An often-expressed public concern is with the magnitude of the flow of immigrants from Mexico. Some contend that the United States is being inundated – “flooded” is the word frequently employed - with poor, racially and culturally different Mexican immigrants (often referred to as “illegal aliens”) and that this flood is corrupting the national identity of the United States as well as resulting in economic and other injuries to U.S. society.  Consistent with that sentiment, President Trump has tweeted that immigrants “pour into and infest out country.” 

The alleged failure of immigrants to assimilate into American society also is a related, oft-expressed concern and is presumably what motivated the President to say that we need more immigrants from Norway than El Salvador and Haiti. 

As President Trump’s comments about immigrants suggest, recent developments reveal the unmistakable influence of race and class on immigration law and its enforcement.  Consider a few contemporary examples.

Deportations

The Obama administration deported in the neighborhood of 400,000 noncitizens a year during his first term.  Removal numbers were widely publicized.  Not widely publicized was that more than 95 percent of the persons removed were from Mexico, El Salvador, and other Latin American nations.  The harsh effectiveness of the Obama removal campaign, which devastated Latino families and communities, resulted from the U.S. government’s focus on noncitizens arrested by state and local police, with whom Latinos are disparately targeted due to racial profiling and other practices.

Announcing a “zero tolerance” policy, President Trump has sought to ramp up removals of Mexicans, Salvadorans, Hondurans, Guatemalans, and Haitians, many of whom are poor and seeking asylum in the United States.  This strategy, seen clearly in the administration’s responses to the migrant “caravan” and the Central American mothers and children in 2018, likely will continue to disproportionately affect poor and working class Latinos.

Raids

At various times in U.S. history, the U.S. government has employed raids as a device for enforcement of the immigration laws.   Employers as well as immigrants have been affected.

As Congress debated comprehensive immigration reform, the Bush administration increasingly employed immigration raids in the interior of the United States in an effort to demonstrate the federal government's commitment to immigration enforcement. 

These raids have had racial and class impacts on particular subgroups of immigrant workers, namely low-skilled Latina/o immigrants.

For example, the May 2008 raid of a meatpacking plant in Postville, Iowa, constituted one of the largest raids on undocumented workers at a single site in American history.  In the raid's aftermath, the U.S. government did not simply seek to deport the undocumented, but pursued criminal prosecutions of the workers for immigration and related crimes, such as for identity fraud.  The raid involved a massive show of force that included helicopters, buses, and vans as federal agents surrounded the Agriprocessors plant in Postville, the nation's largest kosher slaughterhouse.  According to news reports, immigration authorities arrested 290 Guatemalan, 93 Mexican, 4 Ukrainian, and 2 Israeli workers. 

President Trump has employed well-publicized workplace raids at 7-11 stores and, more recently, meatpacking and landscaping companies in Ohio.  Those raids specifically targeted workplaces of working class immigrants and Latinos.  We can expect the same types of disparate impacts on Latino working class immigrants as we have seen with past immigration raids.

Detention

Immigration detention has been in the news, with vivid pictures of desperate mothers and children who fled the rampant violence of Central America catching the national imagination.  Ending “catch and release” of noncitizens apprehended in the U.S./Mexico border region, President Trump has used a variety of policies, such as family separation and family detention, in the administration’s efforts to deter Central Americans from coming to the United States to seek asylum – relief for which the law allows them to apply.  As the pictures make clear to the world, poor and working class Latinos are the most directly affected.  Given that the policies are directed at border crossers from Central America, it cannot be denied that the U.S. government is not targeting Latinos in the enforcement efforts.   

Border Enforcement

U.S. border enforcement historically has focused on Latinos, with racial profiling a well-known phenomenon in immigration enforcement.  Immigration enforcement officers often target Latinos for immigration stops.  President Trump has ramped up enforcement in the U.S./Mexico border region, with persons who “look” Latino/o the focus of those efforts.  President Trump’s rhetoric attacking Latinos cannot help but encourage immigration officers to focus on Latinos and to ultimately remove many of them from the United States.

Legal Immigration

The immigration laws through a variety of mechanisms historically have excluded poor and working people of color and continue to do so today.  The Trump administration has sought to make it harder to immigrate lawfully to the United States.  Put differently, he wants to limit legal as well as unauthorized immigration. 

The Trump administration has tightened visa requirements and is promising to do more.   President Trump’s travel ban denies entry into the United States of nationals from a number of predominantly Muslim countries.  In addition, the President has expressed support for the Reforming American Immigration for Strong Employment (RAISE) Act, which would cut immigration by half and redirect migration away from developing nations populated by people of color, including  Mexico, India, and China, the three nations currently sending the most immigrants annually to the United States.   

Conclusion

Race and class continue to permeate U.S. Immigration law and enforcement.  This is especially true in the Trump era.  Indeed, President Trump is focusing on policies that will directly affect working class Latinos. Judging by his incendiary rhetoric attacking Latinos and poor and working people of color generally, the Trump administration seems to have targeted Latinos for immigration enforcement.  For better or worse, my 2009 article analyzing the race and class impacts of immigration enforcement is more relevant today than when I wrote it.

Kevin R. Johnson is Dean and Mabie-Apallas Professor of Public Interest Law and Chicana/o Studies at the University of California, Davis School of Law.

July 23, 2018

Maryland’s Generic Drug Pricing Law Is Constitutional: A Recent Decision Misunderstands The Structure Of The Industry

By Darien Shanske and Jane Horvath

[Cross-posted from Health Affairs]

Maryland’s price gouging law, a first-in-the-nation state law, would protect consumers from egregious price hikes of certain generic and off-patent brand drugs made by three or fewer manufacturers. Bills based on the Maryland template are moving through a number of other state legislatures. On April 13, 2018, a split three-judge panel of the US Court of Appeals for the Fourth Circuit ruled that the Maryland law, HB 631, enacted in 2017, is unconstitutional based on the court’s interpretation of case law concerning the Dormant Commerce Clause (DCC).

However, the decision is wrong for numerous reasons, many of which were very cogently explained in a lengthy dissent. The Maryland attorney general has requested an en banc review, which is when all judges in the circuit review a decision made by a single three-judge panel. With luck, the entire circuit will get it right.

We will focus here on how this decision is based on a misunderstanding of how the US drug market and supply chain operate.

The Constitutional Doctrine At Issue: Dormant Commerce Clause

The Commerce Clause of the Constitution gives the US Congress the power to regulate commerce between the states. The DCC places limits on a state’s ability to disrupt interstate commerce. The primary focus of DCC doctrine is preventing state discrimination against out-of-state businesses. A secondary concern is preventing state laws that unduly burden interstate commerce. A tertiary concern is preventing states from regulating activity occurring out-of-state—extraterritorially. (For more information about these, the DCC, and state drug cost policy, please see this white paper.)

The Maryland price gouging law (HB 631) addresses generic and off-patent brands that are on the World Health Organization list of essential medicines and manufactured by three or fewer companies. When a drug is produced by only a few manufacturers, the producers can easily launch drugs at high prices, maintain high prices, and increase prices dramatically. High prices of important essential medicines that become unaffordable leave consumers with few, if any, treatment alternatives. This deeply problematic scenario is not just imagined, as both the Government Accounting Office and the US Senate Special Committee on Aging wrote reports detailing the problem. This is the problem the Maryland law addresses.

The generic drug industry sued based on two DCC issues. The first is that the HB 631 law violates the DCC by regulating industry financial transactions outside of Maryland—that is, the charge is that Maryland is regulating extraterritorially. Second, the industry claims that the Maryland law places an “undue burden” on interstate commerce.

Note that there was no argument that the Maryland law would somehow protect the Maryland drug industry, preventing such protectionism is the core concern of the DCC. Nevertheless, the majority of the Fourth Circuit panel found that the Maryland law failed on the secondary and tertiary aspects of the DCC—undue burden and extraterritoriality, respectively. As we will now explain, the court decision seems to have not considered how the pharmaceutical market works.

The Maryland Law Does Not Impose An Undue Burden On Interstate Commerce

The majority opinion found that the Maryland law placed an undue burden on interstate commerce. In the classic cases of undue burden, a state places a heavy burden on interstate commerce of a company or industry for a trivial reason. For instance, in one case, a state required trucks to use an unusual type of mud flap when driving in the state. The Maryland law is nothing like this. First, most obviously, the law is regulating something extremely important—namely generic drug prices—when no one else is doing so, and there is clearly a consumer health and safety issue.

Second, what Maryland is asking the generic drug industry to do is nothing as burdensome as stopping their trucks at the border and making them change their mud flaps. Rather, drug prices are already a product of an enormously complicated set of financial transactions that cross geographies. These financial transactions already vary based on where the product is made and the geography into which it will be sold.

For example, drug manufacturers will negotiate discounts with specific hospitals, health systems, or health plans. Who negotiates with whom depends on the importance of the payer/purchaser in the national or regional market, the product market competition, the importance of the product to company revenue, and other factors. If the negotiation with a hospital results in an on-invoice discount, the manufacturer has to have a financial process to ensure that the wholesaler does not lose money since the wholesaler buys the product from the manufacturer and distributes it nationally or regionally to different buyers (including more local distributors that would get the product to the hospital).

So manufacturer discount negotiations at a very local level—the hospital for instance—drive multiple financial transactions in distant geographies. Manufacturer discount rebate agreements (as distinct from on-invoice discounts) with a health plan also result in financial transactions in a state other than the corporate office of the health plan. This is all part of the business model, and these are only some of the interstate financial transactions required for individual companies to compete in the market. The necessity of working directly in many markets would be particularly important for products with three or fewer competing manufacturers—these are the products subject to the Maryland law—because this is a scenario in which price competition can move market share and profits.

Thus, given the structure of the pharmaceuticals market, and particularly the market for the regulated products, the Maryland law would hardly impose a burden, much less an undue one.

The Maryland Law Does Not Regulate Extraterritorially

The Fourth Circuit also found that the Maryland law violated the extraterritoriality doctrine. This doctrine is a bit variable, but the core rule is simple: A state cannot regulate conduct in another state. Clearly, Maryland was not trying to do this but trying to secure essential drugs at a reasonable price for its citizens. It is true that in so attempting to protect its citizens, there would possibly be a small impact on current transactions wholly out of state, but if this is the test for whether a state can regulate in our interconnected economy, then states cannot regulate much of anything. And, indeed, the decision was wrong on the law of extraterritoriality for just this reason, namely that it would undermine virtually all state regulations. For more on the doctrine, see here.

But perhaps one could defend the Fourth Circuit decision by noting that an effect on interstate pricing was especially likely because of the structure of the drug industry. This analysis, though superficially appealing, has to be rejected because, once again, Maryland is not creating a new or unique effect on interstate pricing. Even in the absence of the HB 631 law, the industry responds to the various limits that different payers put on reimbursement to generic drug dispensers. For example, each and every health plan and all Medicaid programs set their own maximum allowable costs (MACs) for generics and off-patent brands. MAC is just a term for setting dispenser reimbursement limits; it is the average of the prices among the competitors. Maryland health plans and Maryland Medicaid each set their own MACs for their own set of generic products. Furthermore, these various payment limits in Maryland are different from what each health plan in Virginia and Delaware set, all of which can require manufacturers to adjust prices for any one geography through financial transactions that likely occur out of state. This is day-to-day activity in the industry, indeed, it could be very difficult to sort out any small impact of the Maryland law because it would be completely in the mix of the current interstate pricing activity in response to payer limits on pharmacy and provider drug reimbursements—limits that can change weekly or monthly at a payer’s discretion.

So, if the Fourth Circuit’s analysis were correct, then any industry with a complicated business model that crosses state lines could not be regulated by the states. Even more peculiar, if an industry were not so organized, all an industry would need to do is tie itself in knots to escape regulation by the states. It can’t be that the constitutional power of states to protect the health of its citizens diminishes because a firm’s business model produces interstate ripples whenever a state tries to regulate its actions.

In the analogous area of state taxation, it is well-established that a state cannot subject an interstate business to double taxation (relative to an instate business) on account of how the state organizes its own tax system. However, if an interstate firm suffers from double taxation because of permissible decisions made by two states individually, then that is just a necessary byproduct of living in a federation where subnational units have substantial taxing and regulatory power.

But perhaps it makes a difference that part of the complexity here is a result of federal law? If the argument is that a federal law relating to generic drug prices preempts state regulation of prices charged to its citizens, then that is indeed a serious argument. The generic drug industry did not raise this issue precisely because there is no such federal law. Therefore, the court’s finding must rest on the argument that when a federal regulatory regime that does not regulate the prices of drugs that are available in Maryland and other states (because there is no federal law regulating generic drug prices) but does indirectly create possible interstate price linkages (because of federal programs such as Medicaid), then the states are not allowed to regulate those drug prices as if the federal government had preempted state regulation directly. Stating the argument clearly is to reveal how little sense it makes and also, not coincidentally, why it is not the law. There is an entire body of law—preemption—that considers when a federal law preempts a state law, and there is a presumption against preemption. Federal courts are not supposed to be in the business of finding creative ways to prevent states from protecting their citizens.

The structure of the pharmaceuticals market is opaque, as is US Supreme Court case law about the Dormant Commerce Clause. However, knowledge of the market is absolutely key to assessing state laws relative to the DCC. We do not think their decision will stand the test of time once it is understood how this complex market actually functions. 

 

July 23, 2018

Wayfair as a Federalism Decision

By Darien Shanske

[Cross-posted from Medium]

Some first impressions, including pondering how this decision intersects with NCAA v. Murphy

In the end, not a single justice would stand up for the rule of Quill, which rule was that a state can only impose a use tax collection obligation on a vendor if it has a physical presence in the state. All the justices agreed that it was the wrong rule, even apparently, when first imposed in 1967. So then why was this a 5–4 decision?

The four dissenters argued that stare decisis should protect the Quill rule nevertheless because it is an old rule that Congress can change. I take the key part of the majority response to be the following:

While it can be conceded that Congress has the authority to change the physical presence rule, Congress cannot change the constitutional default rule. It is inconsistent with the Court’s proper role to ask Congress to address a false constitutional premise of this Court’s own creation. Courts have acted as the front line of review in this limited sphere; and hence it is important that their principles be accurate and logical, whether or not Congress can or will act in response. It is currently the Court, and not Congress, that is limiting the lawful prerogatives of the States.

This seems exactly right to me and I have argued as much (see here and here). And it is of course not surprising that Justice Kennedy is arguing that federalism values establish a pro-state power default and that it is untenable for a federal court to erect a barrier to state power based on a mistake.

But note that the dissent in Wayfair was written by Chief Justice Roberts, who, in another context wrote: “The dormant Commerce Clause is not a roving license for federal courts to decide what activities are appropriate for state and local government to undertake …” The issue in that case, United Haulers, was whether a public utility could force local users to use its services, and Chief Justice Roberts held for the majority that it could. Justice Alito wrote a powerful dissent in that case and was joined by Justice Kennedy. Justice Alito again joined Justice Kennedy in Wayfair. Thus, according to these two justices, a pro-state constitutional default does not protect local flow control ordinances, but does protect the ability of states to impose a use tax collection obligation. For Chief Justice Roberts, the reverse is apparently true, though in his case he would note that stare decisis was what weighed against the states in the use tax context. (The counter to this is that United Haulers also essentially overturned a precedent, a point well made by Justice Alito in his dissent.)

So Wayfair did hinge on federalism values, I believe, but in a quite complicated way that will require additional unpacking, especially in light of NCAA v. Murphy. This decision, authored by Justice Alito, and joined by Justices Roberts, Kennedy, Thomas, Kagan and Gorsuch, struck down a federal law that made it unlawful for states or their subdivisions to authorize betting on sporting events. The majority thought that this decision followed from the anti-commandeering principle, namely that Congress cannot “issue orders directly to the States.”

As was immediately noted, a broad interpretation of NCAA v. Murphy puts into question numerous federal laws that also restrict the kinds of laws that state legislatures can pass. Such laws are particularly numerous in the field of taxation, where Congress has imposed special rules relating to mobile phones, railroads, pensions etc. And yet both sides in Wayfair seem to agree that Congress could step in and regulate how states can impose a use tax collection obligation. But would not the relevant federal law be, in effect, a prohibition on state legislative power?

This question has been very ably debated by Daniel Hemel, Brian Galle, Rick Hills, Jeff Schmitt and Ilya Somin among others. It seems to me Wayfair is a pretty strong indication that the Court did not mean to undermine the ability of Congress to restrict state taxing power — within limits. Still, Murphy says what it says and so I will add one more way that the Court — and first courts — can reasonably limit Murphy.

In Murphy, Congress was weighing in on a contentious policy matter involving regulating individual conduct on which there is a limited federal interest. The majority in Murphy signals as much in its first line: “Americans have never been of one mind about gambling…” I think that Justices like Kennedy and Alito, relative hawks in other dormant Commerce Clause cases, would argue that preventing balkanization of the national marketplace is a very different matter from imposing a one-size fits all rule about sports betting. Protecting the national marketplace is a core concern of the Commerce Clause and indeed of our whole constitutional order, a point made particularly well by Brain Galle. I know that this kind of analysis is mushy and that the Court in Murphy instead focused on the issue of whether or not the federal government is regulating a private actor, but that rubric does not work to explain how and why Congress can act to limit state taxing power post Wayfair.

Focusing on the importance and centrality of the federal interest means, in effect, that the Court is applying a kind of proportionality analysis, a very common method of deciding constitutional cases, though not in our tradition (at least not explicitly). I think applying some form of the proportionality principle is the right answer not only to the question posed by Murphy, but also to the question posed by Quill/Wayfair. The Court in Wayfair does not explicitly shift to a kind of balancing test (in particular, Pike balancing), but its retention of a “substantial nexus” standard without much further guidance seems to invite the states to engage in balancing. Clearly, a remote vendor can now be asked to collect the use tax even without a physical presence, but, just as clearly, remote vendors can only be asked to do so if there is sufficient nexus. Thoughtful balancing of the legitimately opposing interests is therefore the way forward.