Overlawyered: Chronicling The High Cost Of Our Legal System

For LabMD, the consolation of a big win in court

Readers who watched the Cato forum last November on prosecutorial fallibility and accountability, or my coverage at Overlawyered, may recall the story of how a Federal Trade Commission enforcement action devastated a thriving company, LabMD, following a push from a spurned vendor. Company founder and president Mike Daugherty, who took part on the Cato panel, wrote a book about the episode entitled The Devil Inside the Beltway: The Shocking Exposé of the U.S. Government’s Surveillance and Overreach into Cybersecurity, Medicine and Small Business.

Last month two separate federal appeals courts issued rulings offering, when combined, some consolation for Daugherty and his now-shuttered company. True, a panel of the D.C. Circuit Court of Appeals, finding qualified immunity, disallowed the company’s claims that FTC staffers had violated its constitutional rights by acting in conscious retaliation for its criticism of the agency. On the other hand, an Eleventh Circuit panel sided with the company and (quoting TechFreedom) “decisively rejected the FTC’s use of broad, vague consent decrees, ruling that the Commission may only bar specific practices, and cannot require a company ‘to overhaul and replace its data-security program to meet an indeterminable standard of reasonableness.’” [More on the ruling here and here]

As usual, John Kenneth Ross’s coverage at the Institute for Justice’s Short Circuit newsletter is worth reading, both descriptions appearing in the same roundup since they were decided in such quick succession:

Allegation: Days after LabMD, a cancer-screening lab, publicly criticized the FTC’s yearslong investigation into a 2008 data breach at the lab, FTC staff recommend prosecuting the lab. Two staffers falsely represent to their superiors that sensitive patient data spread across the internet. (It hadn’t.) The FTC prosecutes; the lab lays off all workers and ceases operations. District court: Could be the staffers were unconstitutionally retaliating for the criticism. D.C. Circuit: Reversed. Qualified immunity. (Click here for some long-form journalism on the case.)…

Contrary to company policy, a billing manager at LabMD—a cancer-screening lab—installs music-sharing application on her work computer; a file containing patient data gets included in the music-sharing folder. In 2008 a cybersecurity firm finds it and tells LabMD the file has spread across the internet. (Which is false.) When LabMD declines to hire the cybersecurity firm, the firm reports the breach to the FTC, which prosecutes the case before its own FTC judge. LabMD does not settle; the expense of fighting forces the company to shutter. The FTC orders LabMD to adopt “reasonably designed” cybersecurity measures. Eleventh Circuit: The FTC’s vague order is unenforceable because it doesn’t tell LabMD how to improve its cybersecurity.

Our friend Berin Szóka of TechFreedom sums it up: “The court could hardly have been more clear: the FTC has been acting unlawfully for well over a decade.” He continues by calling this “a true David and Goliath story”:

Well over sixty companies, many of them America’s biggest corporations, have simply rolled over when the FTC threatened to sue them [over data security practices]. … Only Mike Daugherty, the entrepreneur who started and ran LabMD, had the temerity to see this case through all the way to a federal court. …After losing his business and a decade of his life, Daugherty is a hero to anyone who’s ever gotten the short end of the regulatory stick.

[cross-posted from Cato at Liberty]

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Free speech, Brett Kavanaugh, and the Supreme Court

Yesterday was a two-podcast day for me. The first was a discussion at FIRE on prospects for free speech at the Supreme Court after Anthony Kennedy’s retirement and the nomination of Brett Kavanaugh. Other panelists were First Amendment experts Robert Corn-Revere and Paul Sherman and the moderator was FIRE’s Nico Perrino.

At the Cato Daily Podcast, Caleb Brown interviewed me about what we know from nominee Brett Kavanaugh’s career as a judge, which has been spent on the influential but atypical D.C. Circuit Court of Appeals. That means we know a lot about his views on some subjects (regulatory and administrative law, separation of powers, national security law) but much less about his approach toward issues that loom larger as a share of the docket in other circuits, such as disputes involving schools, land use, police abuse and prisoner cases, torts, and so forth.

Related to both podcasts, Ken at Popehat assesses Kavanaugh’s record on the First Amendment and finds it quite speech-protective, while Jonathan Adler has more.

Not very closely related: you’ve probably heard the theory that Trump made the choice he did because Kavanaugh doesn’t think Presidents should be investigated or charged with criminal offenses. Here’s Ben Wittes, who’s anything but a Trump fan, on the problems with that theory. [Lawfare]

More: And now a video of the FIRE panel:

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“Illinois 13-year-old charged with eavesdropping felony for recording meeting with principal”

“For years, [Illinois] cops used the state’s eavesdropping laws to arrest citizens who attempted to record them. This practice finally stopped when three consecutive courts — including a federal appeals court — ruled the law was unconstitutional when applied to target citizens recording public servants.” But the law is “still being used by government officials to punish people they don’t like. Illinois Policy reports a 13-year-old student is facing felony charges for recording a meeting between him and two school administrators.” [Tim Cushing, TechDirt; Austin Berg, Illinois Policy, related]

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July 11 roundup

  • “Expensive new licensing requirements and the bureaucratic headache of implementing” new regulations are expected to reduce further the number of agencies offering international adoption to U.S. families [Liz Wolfe, Reason] And don’t forget to mark your calendar and, if you can attend in person, register for next week’s July 19 Cato conference on adoption policy, at which international adoption will be one focus;
  • Report confirms again what I wrote nearly a year ago: many persons are being held in jail longer under Maryland’s ill-thought-out venture in restricting cash bail [Lynh Bui, Washington Post, my WSJ piece last September, more]
  • Online data protection episode is just latest instance of how California initiative process can put disturbing leverage in private hands [Cathy Gellis, TechDirt]
  • “The cans now read ‘NON-TRADEMARK INFRINGEMENT ALMA MATER IPA’ with no other Pitt-related images.” [Grant Burgman, Pitt News on campus beer trademark controversy]
  • “Pregnancy discrimination? Don’t rely on government for additional protection” [Vanessa Brown Calder, Cato]
  • If you’re looking to dodge voir dire scrutiny: “How To Get On a Jury” [Mark Bennett, Reason]

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A “web of concealment and highly questionable ethical practices”

A “web of concealment and highly questionable ethical practices by experienced attorneys who should have known better”: a court has unsealed a scathing report on the conduct in the State Street case of a leading class action firm, Labaton Sucharow, and Garrett Bradley of the Thornton Law Firm in Boston. The court took particular notice of Labaton’s connections through a Houston middleman (to whom it had agreed to pay an undisclosed $4.1 million fee) to the Arkansas Teacher Retirement System, which served as institutional plaintiff [Daniel Fisher/Forbes, Amanda Bronstad/NLJ] Earlier here and here.

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Banking and finance roundup

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Judge Brett Kavanaugh picked for Supreme Court

Brett Kavanaugh is a stellar pick, whose name would have been at or near the top of any list of outstanding Republican nominees for the high court. As a longtime judge on the D.C. Circuit he has authored nearly 300 opinions, many in big cases hinging on constitutional issues such as the allocation of powers. Like Chief Justice John Roberts, whom in many ways he resembles, he has unusually close ties already with his eight new colleagues: his decisions on the appeals court have fared exceptionally well on review by the higher court and are often cited as authority there, and he acts as a “feeder judge” sending clerks to Justices across the Court’s ideological spectrum. His qualities of temperament and character are widely respected on all sides, and he is known for advancing diversity among the influential ranks of Supreme Court clerks by recruiting law graduates from many backgrounds.

Yale lawprof Akhil Amar is out with “A Liberal’s Case for Brett Kavanaugh” in the NYT. He writes:

The nomination of Judge Brett Kavanaugh to be the next Supreme Court justice is President Trump’s finest hour, his classiest move. Last week the president promised to select “someone with impeccable credentials, great intellect, unbiased judgment, and deep reverence for the laws and Constitution of the United States.” In picking Judge Kavanaugh, he has done just that.

In 2016, I strongly supported Hillary Clinton for president as well as President Barack Obama’s nominee for the Supreme Court, Judge Merrick Garland. But today, with the exception of the current justices and Judge Garland, it is hard to name anyone with judicial credentials as strong as those of Judge Kavanaugh.

Jonathan H. Adler on Kavanaugh’s extensive record striking down federal agency action (at least 75 times, according to the White House handout), including several major cases in which his rulings were upheld by the high court on appeal:

Judge Kavanaugh takes administrative law very seriously, and he makes agencies do their homework. As much as any other judge on the D.C. Circuit, he makes sure that agencies act within the scope of the authority they have been delegated by Congress, that they follow the procedures required by the APA, and that they adequately justify their decisions. This has often led to decisions invalidating agency action — both in challenges brought by supporters and opponents of regulation — but Judge Kavanaugh is not an anti-regulatory zealot. Where agencies play by the rules, he has upheld their actions against legal challenge, even where the actions in question may seem unreasonable or unfair.

Plus: Christopher Scalia Twitter thread on why the “theory that Trump picked him because he’d protect the president from indictment” is “nonsense”; Tony Mauro; Ken at Popehat on Kavanaugh’s (good) free-speech record. And Andrew Grossman on the Cato Daily Podcast praises Kavanaugh’s record on the D.C. Circuit, especially his willingness to hold federal agencies to the law rather than allow variance in the name of ambiguity or deference.

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Awaiting a Supreme Court nominee

The White House has indicated that President Trump will announce a nominee for the Supreme Court vacancy Monday evening. Jonathan Adler breaks it all down at Volokh Conspiracy as does David Lat in a series of posts (sample: feeder judge Brett Kavanaugh “sends clerks to almost all the justices, on both sides of the aisle.”) Other resources while we wait:

  • Factually rich cheat sheet with links to writings and opinions of judges thought to be on the list [TIFIS]
  • The New Civil Liberties Alliance has evaluated the likely picks on the basis of their posture toward the powers of the administrative state. Chris Walker at the Yale Journal on Regulation examines related issues of their views on administrative law. And the Institute for Free Speech on records on free expression;
  • Judge Raymond Kethledge’s concurrence in the Cathedral Buffet case, with observations about government scrutiny of religious beliefs and the First Amendment’s Free Exercise Clause, is getting some attention. I wrote it up at the time here and at Cato at Liberty;
  • Hmm. “[Amy Coney] Barrett defended the Supreme Court’s current approach in cases dealing with economic regulation, in which the scales are tipped in favor of lawmakers via the highly permissive standard of judicial review known as the rational-basis test.” [Damon Root, Reason]
  • Ilya Shapiro has some kind things to say about another Sixth Circuit judge on many shortlists, Amul Thapar. What got my attention as a confirmed legal formalist is that Judge Thapar threw a case out of court for being one cent short of federal jurisdiction. As I argued way back in The Litigation Explosion, bright-line rules are generally a good thing and jurisdiction, especially, should not be subject to rules of close-enough. This recent Michigan Law Review piece by Judge Thapar and Benjamin Beaton, reviewing a new book by Judge Richard Posner has more on the virtues of formalism and is eminently worth reading;
  • Highlights of Kevin Cope’s ideological scoring of the judges for the Washington Post’s Monkey Cage: likely picks other than Thapar are clustered closely together, all less conservative than Justice Alito’s Third Circuit record when he was picked; Thapar gets a more moderate rating but his tenure as an appeals judge has been very brief. Note also that Merrick Garland, much promoted as centrist two years back, scores well to the left of the pre-appointment records of Ruth Ginsburg and Sonia Sotomayor.
  • You can listen to me briefly discussing the possibilities on the Hartford-area Ray Dunaway show here.

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Obergefell overturned?

My opinion piece in Monday’s Wall Street Journal offers eight reasons why, no matter who is the next justice, the Supreme Court will not overturn Obergefell v. Hodges, its 2015 same-sex marriage decision.

2. In deciding whether to respect stare decisis and follow a precedent deemed wrongly decided, justices apply standards that can appear wobbly and uncertain. But whatever else is on their minds, they always claim to take seriously the practical dangers of upending a decision on which many people have relied.

Few legal strokes would be as disruptive, yet fully avoidable, as trying to unscramble the Obergefell omelet. Large numbers of marriages would be legally nullified in a moment, imperiling everyday rights of inheritance, custody, pensions, tax status and much more. These effects would hit on day one because an earlier generation of social conservatives managed to write bans on same-sex marriage and equivalents into many state constitutions. Those bans would prevent elected officials from finding legal half-measures to avert massive dislocation for innocent persons.

The piece is paywalled, but Jonathan Adler has a write-up briefly summarizing some of its other points. I’ve discussed Pavan v. Smith here and Masterpiece Cakeshop here.

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