Friday, November 21, 2014

William and Mary and Richmond to Meet for 124th Time

Tomorrow William and Mary and Richmond will continue their gridiron rivalry.  Unlike rivalries that some believe to be contrived, the Tribe/Spider rivalry is the oldest in the South.  The teams first played in 1898, and tomorrow's game will mark the 124th time the two have met.  The two schools will thus tie the Wisconsin-Minnesota rivalry for the fourth most prolific in college football history, behind Lehigh-Lafayette (150 games), Princeton-Yale (136 games), and Harvard-Yale (131 games). Once known as the I-64 bowl, the teams now play for the Capital Cup, in recognition of the fact that both Richmond and Williamsburg have served as capitals of the Commonwealth. 

William and Mary leads the series 61-57-5.  Richmond has shut out the Tribe 23 times, and the Tribe has returned the favor 19 times. The teams have played to three zero-zero ties, and the Tribe holds the record for the most points scored in a game, 59, in 2003.  (For the source of these data, adjusted to reflect last year's result, go to this source, updated in 2012.)

The rivalry's 124th game has more than historical significance.  Both CAA teams are 7-4 and rank 21 (Richmond) and 22 (William and Mary), respectively in the Sports Network Poll of FCS teams.  One observer has speculated that the winner of tomorrow's game (and only the winner), will earn a playoff spot.  Kickoff will be at 7:30 PM, and tickets are still available!  (For detailed game notes, go here.)  Those unable to attend the game in person can watch on the NBC Sports Network.  Good luck to both teams, and Go Tribe! 

Will Georgia Reject Liberty for Tesla (and Consumers)?

Protecting Economic Liberty


The nation's automobile dealers are at it again, attempting to thwart basic economic freedoms in a manner that protects themselves, and their manufacturers, from fair competition.  The battleground this time is Georgia, where the state's automobile dealers' association has filed a petition seeking to bar Tesla from selling automobiles in the Peach State to willing purchasers from outlets owned by Tesla.  The petition claims that Tesla, which holds an automobile dealership license in Georgia, has violated the state's Automotive Franchising Law by selling automobiles to willing consumers from a single Tesla-owned retail store.  That law makes it unlawful for any automobile manufacturer to:

"own, operate, or control, directly or indirectly, more than a 45 percent interest in a dealer or dealership in this state[.]"

Just last week, Tesla filed a motion to dismiss the dealers' anti-liberty complaint. (See here, for a report about Tesla's filing).  Hopefully the Georgia courts will look north for guidance on how to rule on Tesla's motion.  Earlier this fall, the Supreme Judicial Court of Massachusetts struck a blow for economic liberty and the welfare of consumers, by rejected a similar petition by automobile dealers demanding coercive economic protection.  See Massachusetts State Automobile Dealers' Association et al. v. Tesla Motors, MA, Inc. and Tesla Motors, Inc.   As in Georgia, the plaintiffs, an association of automobile dealers and an individual dealer, claimed that Tesla's direct sales to willing consumers violated Massachusetts' own statute governing automotive franchising, General Law Chapter 93B, entitled: "Regulation of Business Practices Between Motor Vehicle Manufacturers, Distributors and Dealers."

Section 3 of chapter 93B prohibits what it calls "Unfair Methods of Competition and Unfair or Deceptive Acts of Practices."  Section 4 in turn defines various practices that violate Section 3. Section 4(c)(10) provides that it shall be a violation of Section 3 for:

"a manufacturer, distributor or franchiser representative to . . . own or operate, either directly or indirectly through any subsidiary, parent company or firm, a motor vehicle dealership located in the commonwealth of the same line [or]  make as any of the vehicles manufactured, assembled or distributed by the manufacturer or distributor.”

Tesla obviously manufactures automobiles, and it distributes such vehicles in Massachusetts via Tesla Motors of Massachusetts, a wholly-owned subsidiary.  Nonetheless, the Supreme Judicial Court concluded that the legislature did not mean to protect the state's dealers from competition by unrelated manufacturers.  Instead, the court said: "93B is aimed primarily at protecting motor vehicle dealers from injury caused by the unfair business practices of manufacturers and distributors with which they are associated, generally in a franchise relationship."  In other words, if a manufacturer, say Ford, relies on independent dealers to distribute its vehicles, it may not then open its own dealerships that compete with such dealers.  On the other hand, a manufacturer such as Tesla that only engages in self-distribution is perfectly free to do so, even if the resulting sales reduce the profits of established manufacturers and their dealers.  As the court put things later in the opinion:

Chapter 93B "was intended and understood only to prohibit manufacturer-owned dealerships when, unlike Tesla, the manufacturer already had an affiliated dealer or dealers in Massachusetts."

While the court couched its ultimate holding as resting upon the plaintiff's lack of standing, the opinion's rationale also suggests that Tesla's self-distribution does not violate the statute in the first place.  If so, then a party that did have standing to challenge a purported violation would nonetheless lose any challenge to Tesla's practice on the merits.

Of course, the ruling by the Supreme Judicial Court is not binding on Georgia courts interpreting their own statutes.  Moreover, the operative language of the Georgia statute is somewhat different from that of the Massachusetts statute.  Still, both statutes govern the franchising relationship between manufacturers and existing independent dealers.  Moreover, both statutes ban numerous practices that manufacturers might employ to the detriment of such independent dealers.  Read as a whole, then, neither statute seems designed to govern manufacturers that, like Tesla, have no independent dealers whatsoever.  Perhaps the Georgia courts will recognize this apparent function of the statute and reiterate the Massachusetts approach.  Failure to do so would place red-state Georgia in the embarrassing position of rejecting a form of economic liberty recognized in blue-state Massachusetts, an a potentially ironic twist given credible rankings finding that Massachusetts otherwise lags far behind Georgia when it comes to protecting basic economic freedoms.

Even if courts in both states embrace a pro-liberty position, the respective state legislatures are still perfectly free to amend their statutes so as to abridge basic economic liberty by banning self-distribution by firms like Tesla.  Indeed, less than a year ago, and as reported here, a member of the Massachusetts legislature introduced a bill intended to "clarify" Chapter 93B. The bill included the following language that would have banned Tesla's strategy of self-distribution.

"The blanket prohibition on manufacturer ownership applies notwithstanding whether a manufacturer has used independently owned or operated dealerships to distribute its vehicles."

Hopefully both legislatures will resist any temptation to alter their statutes in this way.  As previously explained on this blog, free societies respect the rights of entrepreneurs to distribute products as they see fit, so long as the method chosen does not impose inefficient harms on third parties.    Like some other manufacturers, Tesla has chosen to rely upon complete vertical integration, a practice that can reduce the transaction costs that sometimes result from reliance upon independent dealers. While such dealers can provide valuable services, some consumers choose to forgo such services and purchase directly from the manufacturer.  Proponents of legislation imposing blanket bans on such vertical integration by automobile manufacturers have offered no plausible account of how integration by modestly-sized firms such as Tesla can produce economic harm. (See here, discussing and refuting arguments in favor of such a ban.)  Thus, some commentators have properly concluded that statutes banning Tesla's self-distribution "reduce competition in [the state's] automobile market for the benefit of its auto dealers and to the detriment of its consumers."  As a result, they conclude, such statutes amount to "protectionism for auto dealers, pure and simple." Such protectionism, of course, also raises barriers to entry for firms such as Telsa, who apparently believe that self-distribution is less costly than reliance upon independent dealers.  A state anxious to maximize the liberty and welfare of its citizens will reject such coercive protectionism.

Saturday, September 13, 2014

Tribe Home Opener Tonight!

Just Hours Away! 

The Tribe opens its home football schedule tonight against the Norfolk State Spartans.    The unranked Spartans are 0-2, having lost to nationally-ranked Maine in a defensive struggle, 10-6 and Liberty, 17-0.  Ranked 16th in the Sports Network Poll and 19th in the Coaches Pollthe Tribe is 1-1, having lost to Virginia Tech on opening day and defeated Hampton, 42-14, last week.  William and Mary leads the series with the Spartans 4-0.  (For the Tribe's all-time record against other 2014 opponents, go here.) 

Good luck to both teams, and GO TRIBE! 

Tuesday, September 2, 2014

A "Win Win" for American Workers

Wants to Make Work Pay

Ditto, But Has a Better Plan 

Speaking in Wisconsin on Labor Day, President Obama reiterated his call for a higher national minimum wage. The President claimed that such coercive wage fixing will help ensure that "hard work pays off --- with higher wages, and higher incomes."  The President did not mention a recent report by the Congressional Budget Office predicting, consistent with economic science, that the President's proposal to mandate a minimum wage of $10.10 per hour would throw 500,000 Americans, and perhaps more, out of work.  Nor did the President mention other scientific evidence rebutting his previous claims that raising the minimum wage will stimulate the economy and increase employment.

President Obama is right to be concerned about the economic plight of America's working poor. Fortunately a resident of Wisconsin has offered an alternative plan that would improve the living standards of millions of Americans without the various negative consequences of higher minimum wages.  In particular, Congressman Paul Ryan has proposed expanding the earned income tax credit ("EITC") for workers without children, thus significantly raising the effective wage that such individuals receive.

As currently structured, the EITC provides an annual tax credit of $5,500 to an individual with two children who works full time at minimum wage.  When combined with the current federal minimum wage of $7.25 per hour and the refundable child tax credit of $1,000 per child, the EITC pushes the effective wage for such individuals to just under $11.00 per hour.  (See this tax calculator to generate these data.)  Individual workers without children fare far worse under the current tax code, however.  Such individuals are of course not eligible for the child tax credit.  Moreover, the EITC provides such individuals only $503 per year, less than one tenth what individuals with two children receive.

Congressman Ryan's proposal would double the $503 credit for such employees, lower the eligibility age from 25 to 21 and raise the income cap that limits participation in the program. The Ryan proposal would be superior to increases in the minimum wage in several ways. First, the proposal would not throw any Americans out of work.  Second, raising the EITC would confer its benefits only on individuals who need assistance.  By contrast, raising the minimum wage would confer benefits on all minimum wage employees, including, say, teenagers and college students in high income households.  Indeed, most individuals who work for minimum wage are not in or near poverty, with the result that higher minimum wages redistribute income from businesses and consumers (some poor) to individuals in the middle and upper classes.  Third, the burden of an increased EITC would fall on the community as a whole, and not merely upon those employers (and their consumers) that happen to occupy low wage industries.  Fourth, the cost of increasing the EITC would be transparent, unlike the cost of the minimum wage and other labor regulations.   Fifth, the EITC would preserve a level playing field between employers competing with one another in the marketplace. By contrast, mandating a higher minimum wage would disproportionately burden small, labor-intensive firms vis a vis those with capital-intensive production processes, thus protecting large incumbent firms and distorting firms' choices of production technology.  (See pp. 293-95 of this article for additional detail regarding how minimum wages and other labor regulation can disadvantage firms with labor-intensive production processes.)   It is thus no surprise that leading economists, such as Christina Romer, have endorsed the EITC as superior to the minimum wage as a means of ensuring that hard work pays off.  Nor is it surprising that various newspapers, including the Washington Post and Baltimore Sun, have endorsed Congressman Ryan's plan.  (See here and here).  Indeed, President Obama has himself advocated such an increase in the EITC, albeit in addition to a job-killing minimum wage.

It should be noted that, even if Congressman Ryan's plan becomes law, the effective wage of a childless American earning the minimum wage will still be less than $10.00 per hour.  Perhaps there is room for a compromise of sorts between the President and Congressman Ryan.  That is, President Obama could back off his demand that Congress increase the minimum wage, and Congressman Ryan could propose a more generous increase in the EITC. Such a plan would be a "win win" for millions of American workers.

Monday, September 1, 2014

Even Binding on the GAO 

Various media outlets are reporting that the Obama Administration violated federal law when it swapped five Taliban prisoners for Army sergeant Bowe Bergdahl, whom the Taliban had held captive for five years.  (See here and here, for instance.) These stories uniformly cite a report by the non-partisan General Accounting Office, an arm of Congress, prepared at the request of the several U.S. Senators. This report asserts that the swap violated two different statutes. First, the report concludes that the swap violated the National Defense Authorization Act for 2014, which provides that the President must notify Congress 30 days in advance before releasing any prisoner from Guantanamo Bay. Second, the report concludes that the expenditure of money necessary to effectuate the transfer violated the "Antideficiency Act," which prohibits the expenditure of funds that exceeds Congressional authorization.

The GAO report is incomplete to say the least.  Federal law includes more than just statutes duly enacted by Congress.  The paramount Federal law is the U.S. Constitution, which declares itself the supreme law of the land.  Article II of the Constitution vests the Executive power in the President and also provides that the President is "Commander-in-Chief of the Army and Navy of the United States." As previously explained on this blog, this provision grants the President power over what Joseph Story called "the direction of war" once Congress has initiated such hostilities.  Congress has authorized hostilities against individuals and organizations that planned and perpetrated the 9-11 attacks, included those, like the Taliban, who aided and/or harbored the perpetrators.  (See here, elaborating on the September 18, 2001 "Authorization to Use Military Force"). Having authorized the use of military force against our enemies, Congress cannot interfere with the President's exercise of the powers as Commander-in-Chief, any more than Congress can interfere with the President's authority to nominate a judge once it has created the judgeship by statute.

There is a strong argument that the detention and release of prisoners falls squarely within what Story called "the direction of war."  The conduct of military operations often results in the capture and subsequent detention, sometimes for the duration of the conflict, of those who surrender.  Direction of battlefield operations requires continuous decision making about whether to detain such prisoners, how and whether to collect intelligence from such prisoners, and which prisoners to release and when.  Such decisions are bound up with other tactical decisions, such as whether to conduct raids to capture additional prisoners, whether to enter temporary truces during which wounded prisoners are exchanged, and whether to release prisoners for the purpose of planting false intelligence with the enemy. The detention and treatment of prisoners can have strategic implications as well; an enemy might decline to surrender unless it receives adequate assurances that its captured soldiers will be released in a timely fashion.  Finally, successful negotiations with adversaries, again pursuant to the President's Article II powers, often depends upon preventing leaks so as to ensure the utmost secrecy.   Requiring the President always to notify Congress 30 days before releasing one or more such prisoners could in some cases unconstitutionally infringe on Article II of the Constitution.

If in fact the detention and release of prisoners falls within the President's authority to "direct war" and negotiate with adversaries, then President Obama was free to ignore, as unconstitutional, legislative constraints on the exercise of that power. In the same way, for instance, President George W. Bush was free to ignore legislation that purported to require the military to obtain a judicial warrant before gathering military intelligence from phone conversations between Americans and suspected members of Al Qaeda located in other countries. Presidents, like courts, are duty-bound to decline to enforce legislation they believe to be unconstitutional, regardless of whether courts have agreed or will agree with the President. (See here). Indeed, when he signed the National Defense Authorization Act for 2014, President Obama issued a signing statement contending that the notification requirement could in some cases infringe upon the President's Article II authority by depriving the President of the "flexibility, among other things, to act swiftly in conducting negotiations with foreign countries regarding the circumstances of detainee transfers."  As previously explained on this blog, such statements are an entirely legitimate means by which the President may publicly contest legislation he or she believes to be unconstitutional.

The GAO report did not examine whether the statutory provisions it invoked infringed upon Article II of the Constitution.   Instead, the report reiterated the GAO's apparent practice of declining to opine on the constitutionality of duly enacted statutes.  The GAO also asserted that statutes passed by Congress and signed by the President are "entitled to a heavy presumption of in favor of constitutionality."

GAO's failure to consider the constitutional dimensions of the question was unfortunate and weakens the persuasiveness of the report's conclusion that the Administration "broke the law," given that unconstitutional statutes are not "law" in the first place. Moreover, the report's invocation of a presumption of constitutionality is misplaced. Such a presumption might make sense in the judicial context, when judges evaluate the constitutionality of legislation passed by Congress and defended in court by the President.  Where, however, Congress and a sitting President disagree about the constitutionality of legislation that purports to constrain the President, the application of such a presumption is unwarranted.  As Justice Scalia once explained, in such cases there is simply  no rationale for according the constitutional views of one branch of government greater deference than those of the other. See Morrison v. Olson, 487 U.S. 687, 704-705  (Scalia, J. dissenting).  As James Madison explained in Federalist 49: "The several departments being perfectly co-ordinate by the terms of their common commission, neither of them, it is evident, can pretend to an exclusive or superior right of settling the boundaries between their respective powers." (quoted in id.)  Thus, "[a]s one of the interested and coordinate parties to the underlying constitutional dispute, Congress, no more than the President, is entitled to the benefit of the doubt."  Morrison, 487 U.S. at 705 (Scalia, J. dissenting).    By ignoring James Madison and Justice Scalia and invoking this misplaced "heavy presumption," the GAO avoided the sort of analysis that may have clarified and helped resolve the constitutional dispute between Congress and the President.

Hopefully GAO will discard its practice of disregarding the Constitution when opining on the legality of executive branch actions.

Monday, August 18, 2014

On The Lawless Indictment of Rick Perry

Will Beat the Rap

Commentators on both sides of the political spectrum are condemning the recent indictment of Texas Governor Rick Perry, and indictment claiming that Perry violated two different criminal statutes.  For instance, Harvard Professor Alan Dershowitz decried the indictment as unwarranted criminalization of political differences.  Moreover, writing at ThinkProgress, Ian Millhiser thoughtfully suggests that the prosecution of Perry unduly interferes with the Governor's constitutionally-conferred veto power and thus "raises serious separation of powers concerns," even if Governor Perry's actions otherwise violate Texas law.  While the legislature could constitutionally ban the Governor from threatening to use a veto as part of a scheme to solicit a bribe, Millhiser writes, there is no allegation that Perry did anything of the sort.  By contrast, he says, a law that purported to criminalize Perry's actual conduct likely "cuts too deep into the governor's veto power," contrary to the Texas Constitution that confers this power.  On the other side of the spectrum, Senator Ted Cruz has echoed Millhiser's separation of powers argument.  According to Senator Cruz:  "The Texas Constitution gives the governor the power to veto legislation, and a criminal indictment predicated on the exercise of his constitutional authority is, on its face, highly suspect."    

Dershowitz, Millhiser and Senator Cruz are right to question the indictment on the grounds they invoke.  There is, however, a more mundane reason that this prosecution should end.   Simply put, the Governor's conduct did not violate either statute that the indictment invokes.  Thus, continued pursuit of this prosecution contradicts a fundamental attribute of the Rule of Law, namely, that the State may only exercise coercion against its citizens, including political officials, pursuant to intelligible rules announced in advance. Bending Texas law after the fact so as to render innocent conduct "criminal" violates this core principle of a free society.

The indictment alleges that Governor Perry threatened to veto an appropriation to support the Texas Public Integrity unit overseen by Travis County District Attorney Rosemary Lehmberg, who had been convicted of driving while intoxicated, unless Ms. Lehmberg resigned her position.  When Lehmberg declined to resign, Governor Perry carried out the veto threat.  (For a summary of the allegations, go here.)

The indictment claims that Governor Perry's actions violated two different criminal statutes.

The statute invoked by the first count of the indictment penalizes any public official who:

"misuses government property, services, personnel, or any other thing of value belonging to the government that has come into the the public servant's custody or possession by virtue of the public servant's office or employment."

See Texas Penal Code -- Section 39.02

The statute invoked by the second count of the indictment penalizes any official who:

"influences or attempts to influence a public servant in a specific exercise of his official power or a specific performance of his official duty or influences or attempts to influence a public servant to violate the public servant's known legal duty[.]" 

The actual and threatened veto did not violate the ordinary meaning of either statute.   Take the first count first.  The funds that the legislature attempted to appropriate were no doubt valuable. However, Governor Perry did not "possess" or have "custody" of such funds and thus could not have misused them within the ordinary meaning of the statute.   Moreover, the power to veto a bill is obviously not "property, services, [or] personnel." Thus, Governor Perry's actions can only violate this statute if the veto power is a "thing of value belonging to the government . . .[in Governor Perry's] custody or possession[.]" This interpretation seems strained to say the least.  The veto power is not a "thing."  Nor does it "come into an individual's possession or custody" any more than it can depart from such possession or custody.  Instead, the veto power is constitutionally-conferred legal authority that a governor may exercise at his or her discretion.

Basic principles of statutory construction confirm that treating the veto power as "a thing of value" would stretch the meaning of the statute too far.   The canon of statutory construction ejusdem generis teaches that a general word or phrase that follows an enumeration of two or more things applies only to persons or things of the same general kind or class specifically mentioned.  See Antonin Scalia and Bryan A. Garner, Reading Law: The Interpretation of Legal Texts, 199 (2012).  Thus, a statute referring to an "automobile, automobile truck, automobile wagon, motor cycle or any other self-propelled vehicle not designed for running on rails" does not refer to airplanes.  See McBoyle v. United States, 283 U.S. 25, 26-27 (1931).

The term "any other thing of value" is "a catchall at the end of an enumeration of specifics" (Scalia and Garner, Reading Law, at 199). This enumeration consists of the terms "property," "services," and "personnel," terms that provide context and thus limit the meaning of "thing of value."  See id.  These three terms all refer to items that have a potential market value or use separate and apart from their public function, thus giving rise to a risk of abuse by public officials. Think, for instance, of a government-owned automobile ("property"), which an official might convert to personal use, or government employees ("personnel"), whom an official might order to paint her house on the weekend. None of these terms, by contrast, refers to the discretionary exercise of governmental authority, such as the veto power, which has no value separate and apart from official functions. Thus, application of ejusdem generis confirms that the power to veto legislation is not a "thing of value" within the meaning of the statute.

The canon noscitur a sociis --- related words bear on one another's meaning --- points in the same direction.  See generally Scalia and Garner, Reading Law, at 195.  A statute that refers to "tacks, staples, nails, brads, screws and fasteners" does not refer to fingernails ("nails") or reliable and customary food items ("staples"). See id. at 196 (employing this example).  In the same way, a statute referring to items ("property, personnel and services") that have value or use separate and apart from their governmental function does not refer to governmental powers that do not.  Indeed, the statute includes an explicit exception providing that, say, "frequent flyer miles," "hotel discounts" and "food coupons" that employees earn while conducting state business are not "things of value" within the meaning of the statute, but only for reasons of administrative convenience.  This exception is only necessary if such items are otherwise "things of value," thus further bolstering the contention that the statute is designed to prevent wrongful use of items that have value separate and apart from their public function.  

What about the second statute?  Here again the plain meaning of the statute does not prohibit Governor Perry's conduct. The Governor urged Ms. Lehmberg to resign.  While this demand was an attempt to influence Ms. Lehmberg to step down and thus vacate her office, the indictment nowhere alleges (aside from rote recitation of the statutory language) that Governor Perry sought to influence her "in a specific exercise of [her] official power," a "specific performance of [her] official duty," or any "known legal duty."  The statutory language simply does not prohibit Governor Perry's conduct.

Some readers may find the language of the statutes quoted above more ambiguous and perhaps susceptible to a strained interpretation that prohibits Governor Perry's conduct.  Others might urge the courts to interpret the statutes expansively, so as to ban conduct they believe to be improper.   However, it is a cardinal rule of statutory construction that criminal statutes are to be construed strictly, with ambiguities resolved against the prosecution and in favor of individuals. As Chief Justice John Marshall (pictured above) explained in United States v. Wiltberger, 18 U.S. 76, 95  (1820).

"The rule that penal laws are to be construed strictly is perhaps not much less old than construction itself.  It is founded on the tenderness of the law for the rights of individuals, and on the plain principle that the power of punishment is vested in the legislative, not in the Judicial Department.  It is the legislature, not the court, which is to define a crime and ordain its punishment."

Texas has long recognized this "rule of lenity" when interpreting criminal statutes.  As the Texas Court of Appeals explained in 1886:

"[B]efore a man can be punished, his case must be plainly and unmistakably within the statute, and if there be any fair doubt whether the statute embraces it, that doubt is to be resolved in favor of the accused."

Murray v. State, 21 Tex. App. 620, 633, 2 S.W. 757, 761 (1886).

Presumably the Texas courts will agree with Chief Justice Marshall and decisions such as Murray and decline the indictment's invitation to rewrite Texas law in a manner that expands criminal liability and offends the rule of the law.