Supreme Court Grants Immunity to Ashcroft for Abusing Material Witness Warrants to Detain American Citizens

LinkIn its first day back from Memorial Day weekend, the Supreme Court today held that using material witness warrants as a pretext for detaining alleged terrorism suspects, with no probable cause to arrest for criminal wrongdoing, does not violate the Fourth Amendment in Ashcroft v. al-Kidd.

Eight justices unanimously held that former Attorney General Ashcroft was entitled to qualified immunity from suit, because there was no clearly established constitutional law prohibiting the pretextual use of material witness warrants to preventively detain terrorism suspects. However, Justice Scalia’s majority opinion went much further, holding that the government’s subjective intent in obtaining a material witness warrant is irrelevant under the Fourth Amendment. In other words, so long as the government’s material witness warrant is validly obtained, it does not matter whether the government actually intends to use a detainee as a witness in a prosecution, even if the warrant was a pretext to arrest a suspected terrorist.

The case arose in the aftermath of the September 11, 2001 terrorist attacks. Attorney General Ashcroft “authorized federal prosecutors and law enforcement officials to use the material-witness statute to detain individuals with suspected ties to terrorist organizations . . . with no intention of calling most of these individuals as witnesses.”

Abdullah al-Kidd, a native-born American citizen who was a college football star at the University of Idaho, was targeted for surveillance and ultimately detained in 2003, while boarding a flight to Saudi Arabia to pursue a doctoral degree in religious studies. Al-Kidd allegedly had information “crucial” to the prosecution of Sami Omar al-Hussayen, but was never called as a witness during his detention or supervised release, which lasted fourteen months and ended in al-Hussayen’s acquittal on all charges. As explained by Justice Ginsburg,
Ostensibly held only to secure his testimony, al-Kidd was confined in three different detention centers during his 16 days’ incarceration, kept in high-security cells lit 24 hours a day, strip-searched and subjected to body-cavity inspections on more than one occasion, and handcuffed and shackled about his wrists, legs, and waist.
While there was no probable cause to arrest al-Kidd for criminal wrongdoing (and not even the suspicion of wrongdoing), the Obama Administration defended Ashcroft, with Acting Solicitor General Neal Katyal claiming in oral argument that al-Kidd’s “lawsuit seeks personal money damages against a former attorney general of the United States for doing his job."

Under Harlow v. Fitzgerald, qualified immunity protects government officials from suits for money damages, unless a plaintiff can show that (1) the official violated a statutory or constitutional right, and (2) that the right in question was clearly established at the time of the alleged violation. The Ninth Circuit held that Ashcroft was not shielded from suit for abusing the material witness statute as a pretext for arresting terrorism suspects absent probable cause of wrongdoing. Had the majority limited its opinion to the second prong – that there was no clearly established constitutional rule forbidding the pretextual use of material witness warrants – the Court would have produced a single, unanimous opinion. However, Justice Scalia took the unnecessary step of assuming the validity of the material witness warrant in order to announce a new constitutional rule. Under the majority’s new formulation, so long as a magistrate signs a material witness warrant under objectively reasonable circumstances – that is, if it “may become impracticable to secure the presence of the [witness] by subpoena” – the Attorney General can never be held accountable for harsh, pretextual detentions of American citizens.

Each of the concurring opinions noted that the validity of al-Kidd’s material witness warrant was unclear at best. The federal government omitted and misrepresented crucial information to secure the warrant. For example, the government submitted an affidavit claiming that al-Kidd had purchased “one-way flight to Saudi Arabia, with a first-class ticket costing approximately $5,000,” when he had actually purchased a round-trip coach ticket costing $1,700. Furthermore, “the Magistrate Judge was not told that al-Kidd’s parents, wife, and children were all citizens and residents of the United States,” and that al-Kidd had been cooperative with FBI agents in several earlier interviews. As Justice Ginsburg concluded in her concurring opinion, “there is strong cause to question the Court’s opening assumption – a valid material-witness warrant – and equally strong reason to conclude that a merits determination was neither necessary nor proper.”

Justice Kennedy’s concurring opinion explained that the majority opinion did not uphold the validity of al-Kidd’s material witness warrant, leaving this question to lower courts on remand. Thus, as both Justice Ginsburg and Justice Sotomayor express in their concurrences, the majority opinion, decided on the assumption of a valid warrant, clearly overreached. Chief Justice Roberts, along with other conservatives on the Court, have often stated their preference for “limited” opinions that only decide the case at hand. Here, the majority decided a hypothetical; once the Court decided that there was no clearly established constitutional right, Attorney General Ashcroft was entitled to qualified immunity and nothing further was needed to resolve his appeal.

Nevertheless, the Court crafted a new rule, holding that an American citizen can be detained as a “material witness,” even if the federal government has no intention of ever calling that individual to testify. Brutally harsh “preventive” detention, which in Justice Ginsburg’s view presented “a grim reminder of the need to install safeguards against disrespect for human dignity,” has been given new protection by the conservative wing of the Supreme Court. While al-Kidd has settled some of his claims against lower-level officials and his suit against Attorney General Ashcroft is not entirely foreclosed (since it is still possible that the lower courts will find that the underlying warrant was not validly obtained), an effort to hold high-level government officials accountable for the ongoing, post-9/11 assault on civil liberties was dealt a strong blow by the Court.

Hosting this week's #CRECHAT on Twitter!

I guess it is time for me to dust off my chat hosting skills -- I can't believe it has been about 13 years since I have done it -- for a good cause!  #CRECHAT on Twitter is a great group of commercial real estate professionals that meets weekly at 1:00 PM (Central time) on Fridays for an hour to discuss issues of the day in the business.  This is the brainchild of my friend Jason Sandquist in Minneapolis, whom I have gotten to know through social media.  I think he is a great and smart guy and really appreciate the effort he has put into #CRECHAT.

This week's topic is "Overcoming Obstacles in Commercial Real Estate Transactions."  Simply put: what are some of the biggest problems out there that you have encountered, and how did you solve the problem for your client or for yourself to make the deal happen?  Was it a person, a thing, a legal problem, a business issue, money or something else? And what steps did you take to make the deal happen?  Or was it a deal that simply "needed killing?" 

I'm looking forward to seeing all of you -- virtually, of course - on Friday!  You can follow using the hashtag #CRECHAT on Twitter, or just go to this website that Jason has graciously set up.

PS: we usually "introduce" ourselves to the group at the beginning of the chat, but I plan to make a twist on the usual introduction with a surprise technological bent.  I think you will enjoy it.

LA Times: Supreme Court "justices should not have the last word about their own compliance with judicial ethics"

The LA Times this week examined the issue of ethics at the Supreme Court.

The Code of Conduct for United States Judges was established by the U.S. Judicial Conference and covers all federal lower court judges. Among other things, the code says that "a judge should avoid impropriety and the appearance of impropriety in all activities." Supreme Court justices insist that they too are guided by the code, but when it comes to ensuring public confidence, voluntary compliance is no substitute for mandatory adherence.
Earlier this year, Rep. Chris Murphy of Connecticut introduced a bill that would place the nine justices of the Supreme Court under the same Code of Conduct that applies to every other federal judge.

Read the full editorial here.

Alliance for Justice and others have called for reform of the ethics guidelines for Supreme Court justices. Click here to learn more.

Liu Withdraws Nomination

Goodwin Liu, one of the most remarkable, highly qualified, and well-respected judicial nominees in recent memory, has withdrawn his nomination to the Ninth Circuit Court of Appeals.

Click here to read Liu's letter to President Obama.

Supreme Court Upholds Arizona's Anti-Immigrant "Legal Arizona Workers Act"

Today the Supreme Court’s conservative majority upheld Arizona’s anti-immigrant Legal Arizona Workers Act in Chamber of Commerce v. Whiting. The Court held that the federal Immigration Reform and Control Act (IRCA) of 1986 did not preempt the state from revoking business licenses or mandating that employers’ check their employees’ immigration status using the federal E-Verify database.


In an effort to crack down on illegal immigration, Arizona passed a law in 2007 that punishes employers that hire undocumented workers by revoking their business license – referred to as the “business death penalty.” The law also requires employers to use the federal E-Verify system – an online employment verification database. The Chamber of Commerce and immigrant rights’ organizations teamed up as unlikely allies to oppose the Arizona law, arguing that it is expressly and impliedly preempted by federal law. The IRCA expressly preempts “any State or local law imposing civil or criminal sanctions (other than through licensing and similar laws) upon those who employ, or recruit” undocumented workers.


Arguing that the Arizona statute falls within the licensing exception (italicized above), the majority rejected the Chamber’s argument that the definition of “licensing” should come from the context of the statute. Citing the dictionary definition of “license,” the majority concluded that Arizona’s sanctions of stripping businesses of the licenses they need to do business in Arizona was not preempted by the federal statute. The decision also upheld the Arizona provision mandating the use of E-Verify, stating that “the requirement is entirely consistent with the federal law” because “the consequences of not using E-Verify under the Arizona law are the same as the consequences of not using the system under federal law.”


In an ironic twist following the Court’s recent pro-corporate decision in AT&T Mobility v. Concepcion, the majority cited the supposedly difficult burden that a party must meet to prove that federal law preempts state law, stating: “Our precedents establish that a high threshold must be met if a state law is to be pre-empted for conflicting with the purposes of a federal Act. That threshold is not met here.” In AT&T Mobility, the majority tossed aside a California law (and more than 20 other similar laws from other states) designed to protect consumers from being cheated by corporations on the grounds that a 1922 federal statute preempted it. When evaluating a state law that threatened the rights and job opportunities of legal immigrants, however, the Court’s conservative majority was suddenly reluctant in Chamber of Commerce v. Whiting to find federal preemption.


Justice Breyer responded in a compelling dissent that “neither dictionary definitions nor the use of the word ‘license’ in an unrelated statute can demonstrate what scope Congress intended the word ‘licensing’ to have as it used that word in this federal statute.” Breyer stated that Congress set equivalent penalties for hiring undocumented immigrants and for discriminating against prospective employees. He argued that the purpose of this balance was to discourage employers from violating immigration laws while also discouraging them from making unlawful assumptions about the immigration status of applicants based on racial or linguistic factors. Arizona’s law upsets this careful federal balance, Breyer added, noting that it “will impose additional burdens upon lawful employers and consequently lead those employers to erect ever stronger safeguards against the hiring of unauthorized aliens—without counterbalancing protection against unlawful discrimination.” Breyer summed up his view that that federal law preempted Arizona’s statute in the following passage.


Why would Congress, after deliberately limiting ordinary penalties to the range of a few thousand dollars per illegal worker, want to permit far more drastic state penalties that would directly and mandatorily destroy entire businesses? Why would Congress, after carefully balancing sanctions to avoid encouraging discrimination, want to allow States to destroy that balance? Why would Congress, after creating detailed procedural protections for employers, want to allow States to undermine them? Why would Congress want to write into an express pre-emption provision—a provision designed to prevent States from undercutting federal statutory objectives—an exception that could so easily destabilize its efforts? The answer to these questions is that Congress would not have wanted to do any of these things. And that fact indicates that the majority’s reading of the licensing exception—a reading that would allow what Congress sought to forbid—is wrong.

Justice Sotomayor also filed a dissent in which she argued that federal law should preempt Arizona’s statute. Sotomayor stated that IRCA’s denial of work-eligibility status information to the states is inconsistent with an intent to allow states to enforce an immigration law like Arizona’s. She stated that, “[h]aving constructed a federal mechanism for determining whether someone has knowingly employed an unauthorized alien, and having withheld from the States the information necessary to make that determination, Congress could not plausibly have intended for the saving clause to operate in the way the majority reads it to do.” Sotomayor added that Congress expressly intended to create a uniform system of federal immigration enforcement when it enacted the IRCA – indeed, the statute was designed to supplant a patchwork of conflicting state laws in existence at the time – so Arizona’s state-specific immigration provision should be preempted for thwarting this congressional intent.


Reading the saving clause as the majority does subjects employers to a patchwork of enforcement schemes similar to the one that Congress sought to displace when it enacted IRCA. Having carefully constructed a uniform federal scheme for determining whether a person has employed an unauthorized alien, Congress could not plausibly have meant to create such a gaping hole in that scheme through the undefined parenthetical phrase “licensing and similar laws.”

Justice Sotomayor also found that Congress expressly rejected the idea of mandating E-Verify when it set it up as a voluntary system.


In 2003, when Congress elected to expand E-Verify to all 50 states but declined to require its use, it cited to a congressionally mandated report concluding that the annual cost of the pilot program was $6 million, the annual cost of a nationwide voluntary system would be $11 million, and the annual cost of a nationwide mandatory program would be $11.7 billion.

Justice Breyer noted that E-Verify is inherently unreliable, with an 18% of requests returning false “unemployable” reports. In one fiscal year, 46,921 workers were initially rejected but later confirmed as work authorized.


The Supreme Court could soon hear a case involving a separate anti-immigrant Arizona statute that threatens the rights of Arizona residents. The Ninth Circuit in United States v. Arizona recently blocked enforcement of a law requiring police officers to stop certain individuals whom the police suspect to be illegal immigrants.


The Supreme Court’s decision to uphold the Legal Arizona Workers Act lays bare the Court’s willingness to selectively use the preemption doctrine to support its activist conservative agenda.

Supreme Court Ruling Encourages Further Erosion of Government Transparency

The Supreme Court held yesterday in General Dynamics Corp. v. United States that the federal government can invoke the state-secrets privilege to prevent a government contractor from raising a defense to the government’s breach of contract claim.

The federal government terminated a contract to build a type of stealth aircraft with two defense contractors due to extensive scheduling delays, exposing the contractors to severe contractual penalties. To avoid a default judgment and raise a defense, the contractors were required to file a claim in the Court of Federal Claims. They argued that the breach resulted from the government’s failure to provide “superior knowledge” necessary to successfully fulfill their contractual obligations. Although the trial court found that the contractors made an initial showing that their defense was valid, the government invoked the state secrets privilege, claiming that allowing the contractors to proceed with their defense would expose government secrets to the public.

The Court of Federal Claims ruled in favor of the government without addressing the contractors’ defense, finding that allowing the contractors’ defense to proceed would risk exposure of government secrets. The contractors argued that the government should not be able to win a default judgment against a private party by invoking the state secrets privilege to deprive the party of its defense.

The Supreme Court, in a unanimous opinion authored by Justice Scalia, held that the public policy problems with allowing courts to adjudicate claims because of the risk of exposing government secrets also apply to defenses. “It is claims and defenses together that establish the justification, or lack of justification, for judicial relief; and when public policy precludes judicial intervention for the one it should preclude judicial intervention for the other as well.” As a result, the Court prevented both the contractors and the government from recovering damages and held that the lower court must “leave the parties where they are” at the time the lawsuit is filed to avoid injustice based on incomplete evidence.

Alliance for Justice highlighted this case because the state secrets privilege has been used extensively by the government to force dismissal of cases brought by victims of torture inflicted during the Bush administration, thereby undermining accountability for illegal conduct.

By siding with the government in this case, the Supreme Court extended a privilege that needs to be narrowed, not expanded.

Split Supreme Court Upholds Ruling to Reduce Cruel and Unusual Punishment in California Prisons

California prisons currently hold twice as many inmates as the prisons were designed to house. As a result of overcrowding, the prisons are incapable of providing basic health care. Prisoners suffering from mental illnesses and those suffering from physical ailments brought separate class action lawsuits to address this problem, which were consolidated in the U.S. Supreme Court in Brown v. Plata. The district courts ruled in both cases that California’s inadequate health care facilities violated the Eight Amendment’s prohibition against cruel and unusual punishment and appointed supervisors to oversee a process to remedy the conditions.

Twelve years after one decision and three years after the other, both court-appointed supervisors determined that no progress had been made in remedying the dangerous and unhealthy conditions. The plaintiffs then moved their respective district courts to convene a three-judge court in accordance with the Prison Litigation Reform Act to reduce the prison population. The three-judge court consolidated the two cases and ruled that California must reduce its prison population to 137.5% of design capacity within two years to bring health conditions up to constitutionally acceptable standards.

Today the Supreme Court upheld the order of the three-judge district court. The Court detailed how the overcrowding has caused mentally and physically ill prisoners to suffer to the point that it violates the Constitution and threatens the safety of prison guards and staff. In his majority opinion, Justice Kennedy wrote that overcrowding “has overtaken the limited resources of prison staff; imposed demands well beyond the capacity of medical and mental health facilities; and created unsanitary and unsafe conditions that make progress in the provision of care difficult or impossible to achieve.”

The Court described how overcrowding denies prisoners minimal mental health care:
Because of a shortage of treatment beds, suicidal inmates may be held for prolonged periods in telephone-booth sized cages without toilets. A psychiatric expert reported observing an inmate who had been held in such a cage for nearly 24 hours, standing in a pool of his own urine, unresponsive and nearly catatonic. Prison officials explained that they had “no place to put him.”
Noting that, in one prison, “up to 50 sick inmates may be held together in a 12- by 20-foot cage for up to five hours awaiting treatment,” and, according to the district court’s extensive fact-finding, one inmate needlessly dies in a California prison every week due to deficiencies in health care, the Court concluded that prisoners with physical illnesses receive “severely deficient” treatment.

The Court also rebutted concerns that the panel’s order would threaten public safety. The opinion quoted the former warden of San Quentin and acting secretary of the California prison system stating that the current system “make[s] people worse, and that we are not meeting public safety by the way we treat people.” The Court also relied on the head of Pennsylvania’s correctional system, an expert witness in the case, who stated that measures to reduce prison population may “actually improve on public safety because they address the problems that brought people to jail.” Other expert witnesses “produced statistical evidence that prison populations had been lowered without adversely affecting public safety” in several different jurisdictions, the Court stated.

The majority concluded that the order to reduce California’s prison population would uphold constitutional protections while protecting public safety. “A prison that deprives prisoners of basic sustenance, including adequate medical care, is incompatible with the concept of human dignity and has no place in civilized society,” Justice Kennedy wrote for the Court. Chief Justice Roberts and Justices Scalia, Thomas and Alito dissented.

Commercial real estate and social media in 11 words

I have been reading a lot online about so-called social media expertise and all these folks who purport that they can make me a better and more successful lawyer because of their skill at marketing via blogging, Twitter, Facebook and the like.

This isn't to say there aren't a few people out there whom I think have legitimate knowledge and even expertise when it comes to social media.  But I think that, more often than not, the real experts are not so much the ones who advertise themselves as authorities and try to sell you services (again, there are exceptions), but rather the folks out there in the real world who are just doing it.

I do not consider myself a social media expert, guru, ninja, black belt, maven, or anything like that. But I have been at it a long time; longer than most, now that I've thought about it thanks to a recent Twitter exchange.

My blog turned four years old last month without any fanfare.  But my time in social media goes back beyond that.  In the real-time format, my experience with social media goes back to about 1995, when I was on AOL as a young lawyer and hosting regular chats about the OJ Simpson murder trial.  (And yes, I predicted the "not guilty" verdict. Everyone thought I was crazy.)  And I started participating in bulletin boards and online discussion groups back in about 1988 on Prodigy, CompuServ and other boards.  Yes, I feel old.

So, without further ado, here's what I think are the eleven most important words when it comes to social media  for real estate professionals (and, for that matter, just about everyone) based on my years of social media experience:

  • Be yourself. Even though it is the Internet and people (usually) can't see or hear you in real time, people can spot a phony at 100 characters.  Don't pretend to be who you are not or put on some persona.  This isn't Second Life, after all. Don't approach social media as solely a money-making enterprise, because people will figure it out.  Look at it as a way to connect with the world initially without spending your life savings traveling the world.
  • Be genuine. This is a corollary to being yourself.  Again, a BS artist is usually spotted a mile away.  Social media is not about selling things, at least not for me, because I tune out the blatant salesmen pronto.  And don't sugar coat things.  Tell it like it is, as Howard Cosell used to say, although I do like to say things in a nice way whenever possible because that's just genuinely who I am.  And people appreciate honesty, even when it hurts a little; e.g., "Dave, you're really fat, you know."
  • Be generous.  Take an extra minute to help a friend or an acquaintance. You never know when the person needing the help will be you.  Respond to requests for (non-confidential) information, to talk to people or meet them for coffee, lunch, or whatever. 
  • Share.  Give credit to others.  If you have an insight about something, or know or think something the rest of the world ought to know, and it is not confidential or anything, such as a piece of news, your reasoned opinion, or anything, say it.  When I hear about things from different points of view it makes me a better person, which brings me to the educational words. (Also, retweet the good stuff!)
  • Learn.  Guess what?  Social media is not all about you.  It is about you and all the people you interact with and all the people they interact with, and so on ad infinitum.  And you don't know it all.  Take time to learn from others.  You will not regret it, because their collective experiences will blow you away.
  • Teach.  Like sharing and being generous, you need to give back.  We all know a lot about something.  Tell us so we can learn from each other.  But try not to do it in a preachy way.  I remember being in chat rooms many years ago with a certain now-prominent celebrity who thought that s/he was the smartest person in the room, knew more than the rest of us about the law and was going to teach us dummies a lesson.  A lesson was learned, all right.
  • Have fun.  I saved what I think is the best one for last.  Don't treat social media like a job, even if happens to be your job.  By being yourself, being genuine, being generous, sharing, learning and teaching, you should or at least ought to be having a good time at it.  Revel in the collaboration at the keyboard and at all you have taught and learned and experienced.  And then step away from the computer once in a while!  After all, life is too short not to have fun.
I know I am not a high-priced social media consultant, and I am not looking to be one.  But I wanted to share my decades of the social media world with all of you and tell you what has worked for me.  Has social media made me rich and famous? No.  Has it made me smarter, a better lawyer and allowed me to connect with a ton of great people?  Yes, and I'd do it all over again!

Violating a Principle on Judicial Nominations

When Senator Lamar Alexander said, "I will not vote to deny a vote to a Democratic president's judicial nominee just because the nominee may have views more liberal than mine," it was taken as a statement of principle, and a reflection of the belief that the Senate should hold a final yes-or-no vote on every one of a president's judicial nominees.

But after Senator Alexander -- and every Republican except Sen. Lisa Murkowski of Alaska -- voted against a motion to break a filibuster and hold a yes-or-no vote on Liu's nomination, it's clear that Alexander's statement of principle leaves some room for interpretation. (Senator Orrin Hatch of Utah voted "present" in the roll call, which he has painted as a principled stand. Nonetheless, a vote to end a filibuster requires 60 "yes" votes to break, so a "no" vote is functionally the same as no vote at all.)

The New York Times puts forth the idea that Alexander's vote wasn't about Liu being "more liberal" than the senator from Tennessee:
But other Republicans were more forthcoming about the real reason for the blockade: Mr. Liu dared to criticize Justice Samuel Alito Jr. as harshly conservative before he was confirmed to the Supreme Court. The filibuster apparently was payback, and the Republican eagerness for revenge has broken faith and a clear understanding on the Senate floor. That will make it harder to fill benches during this administration and many more to come.
Click here to read the Times editorial, and click here to learn more about Goodwin Liu.

Senator Alexander wasn't alone, of course. Other Republican senators have pledged to not filibuster judicial nominees, yet they stood together and Thursday and did exactly that. The result is that a federal judgeship, classified as a "judicial emergency" remains vacant, the caseload on the Ninth Circuit remains dangerously high, and a qualified, intelligent nominee was rejected by the Senate on the flimsiest of excuses.

AFJ Condemns Republican Hypocrisy and Cynicism in the Filibuster of Ninth Circuit Nominee Goodwin Liu

PRESS RELEASE

Alliance for Justice President Nan Aron issued the following statement on the Republican filibuster of Ninth Circuit Court of Appeals nominee Goodwin Liu:

Today is an extremely sad day for American justice as all but one Republican Senator chose to block a final vote on Goodwin Liu, one of the most remarkable, highly qualified, and well-respected judicial nominees in recent memory. The vote to sustain the filibuster relied almost exclusively on dishonest and distorted attacks on Professor Liu’s record and character. Not only have the American people been denied a great judge, and Asian Americans in Western states denied representation on the federal bench, but the judiciary itself has once again been subjected to the kind of destructive obstructionist tactics that have precipitated a national crisis in the courts.

We find it disheartening that consistency and truth have been sacrificed in the name of crass political posturing. We also reject the transparently false idea that somehow the Liu nomination falls within the concept of “extraordinary circumstances,” as spelled out in the “Gang of 14” agreement of 2005.

The only thing extraordinary about the circumstances surrounding this vote is the amount of hypocrisy and cynicism emanating from Republican Senators, who should stop pretending this filibuster has anything to do with principle, and admit they blocked a vote on Goodwin Liu because they didn’t want a person of his caliber on the bench.

The notion that Goodwin Liu lies so far outside the judicial mainstream that the Senate should not even be permitted to have a final vote on his nomination is belied by his record but also by the numerous bipartisan endorsements he received, including those of very prominent conservatives.

Although we are deeply disappointed by today’s vote, we believe it is more important than ever that the President and the Senate address the continuing crisis in the federal courts, significantly accelerate the pace of nominations and confirmations, and end the political games that are damaging justice in our nation.

Join us at #CRECHAT tomorrow!

Thanks to the efforts of Jason Sandquist, some of us in the commercial real estate industry who also participate on Twitter are planning a series of weekly chats on the industry at 2 PM Eastern time, starting tomorrow.

You can also follow a feed of the chat here.  I was thinking about playing hooky tomorrow with the nice weather and all, but I do not want to miss the first effort!  (Perhaps the iPad or a laptop in the clubhouse is a good compromise.)

I hope you join us.

President Obama Nominates Morgan Christen to Ninth Circuit

This evening President Obama nominated Alaska Supreme Court Justice Morgan Christen to the United States Court of Appeals for the Ninth Circuit. If confirmed, Justice Christen would become the first female federal circuit court judge from Alaska.

For the most up-to-date and comprehensive information on judicial nominations, visit the Alliance for Justice’s Judicial Selection Project webpage.

Panel Discusses U.S. Detention Policy

- Joshua Friedlander

Yesterday, the Constitution Project, a non-profit think tank focused on building bipartisan consensus on pressing constitutional questions, hosted an panel discussion on the detention of terrorism suspects. From the government’s misuse of the Material Witness Statute to holding Guantanamo Bay detainees on limited evidence, the United States’ detention policies have spurred political, constitutional, and judicial debates.

This term’s Supreme Court case Ashcroft v. al-Kidd directly challenges the status quo of U.S. detention policy. Central to Mr. al-Kidd’s case is the Material Witness Statute, which allows the government to detain someone with material evidence to another case. The lower courts have ruled in favor of al-Kidd, however the Supreme Court will make the final judgment. In the wake of 9/11, the use of Material Witness warrants to detain terrorist suspects increased substantially. However, out of the 70 Material Witnesses detained, only half had been called to testify. According to Lee Gelernt, Deputy Director of the American Civil Liberties Union’s Immigration Rights Project and Mr. al-Kidd’s counsel, the Material Witness Statute is being used as a preventative detention tool.

In order to detain people the government lacked sufficient evidence to arrest, the Material Witness Statue has served as a preventative detention tool – allowing law enforcement to detain and investigate persons who they otherwise could not. Mr. al-Kidd, an American citizen, was detained while attempting to leave the country for Saudi Arabia on an academic scholarship. According to the government, al-Kidd was a terrorist suspect because of his association with an Idaho-based Muslim charity whose leader had also been detained by the FBI. However, concerns surrounding the affidavit the FBI used to detain al-Kidd reveal false statements about the plaintiff. Nonetheless, he was held in extremely restrictive conditions, subject to strip searches, shackling and 24-hour exposure to sunlight for over two weeks. He was released after 16 days and was never called as a witness.

The Supreme Court of the United States is now determining whether the Material Witness Statute can be employed to preventatively detain suspects. According to Gelernt, preventative detention is extremely dangerous given the implications it has for innocent people like al-Kidd. The Obama Administration has actively urged the Court to validate the manner in which the statute has been applied.

Click here to learn more about this case.

Commercial real estate and test cricket

That is my current analogy of how the market is performing right now. Why? After looking at this and other similar deals.

In test cricket you play it safe for the long haul. The game is five days long with, typically, two full turns of batting and fielding. (Yes, I am over-simplifying cricket. It isn't the easiest game to understand for us Americans, after all.) So batters tend to try to hit balls that will get them one and two runs, with anything more being gravy. That is what buying a building at a 6-cap is: safe and long-haul.

There are shorter forms of cricket that have become increasingly popular, such as one day games or even three hour formats, known as 20/20 cricket. Here the emphasis is on taking risk and hitting for fours (you score four by hitting the ball to the boundary of the field) and sixes (for hitting beyond the boundary). These deals are still in the works, because they are riskier and harder to underwrite and many institutional investors are, well, okay with singles right now.

The problem is: until the riskier development ideals start getting done again, you have a construction market that is, in a word, moribund. When those workers are back on the job the economy will, in my opinion, improve. Without it? More of the same. There is a lot of space that is vacant, but that is sometimes a function of location and lack of demand at those locations. For instance, are you going to build in the exurbs or in the heart of the city? Fortunately, people are hearing whispers of deals quietly being inked and negotiated, and perhaps next week's ICSC conference in Las Vegas and this week's ULI meeting in Phoenix will give us a little more intelligence on those types of deals.

Who is Goodwin Liu?

Goodwin Liu is President Obama's nominee for a seat on the Ninth Circuit. Originally nominated in February 2010, Liu has seen his nomination held up for more than a year by delays in the Senate.

The Center for American Progress has produced a video of Goodwin Liu in his own words:



For more on Goodwin Liu, click here.

The Need for the Arbitration Fairness Act

Last month's Supreme Court decision in AT&T Mobility v. Concepcion was a major victory for big corporations facing class-action suits. More than that, it was a staggering blow to consumer, employment, and civil rights. Because of the Corporate Court's decision, corporations now feel free to force individuals into contracts where the individual relinquishes his or her right to pursue justice in the courts.

An editorial in the L.A. Times argues that Congress has an obligation to step in and protect consumers, employees, and anyone who hopes to hold corporations accountable for their misdeeds.
Underlying this legal debate about the interplay of state and federal law is a real-world concern: that consumers not be exploited by vastly more powerful merchants. Class actions allow injured consumers in California and other states who might not bring an action on their own to combine their claims and receive greater damages. (Opponents of class actions say the principal beneficiaries of such lawsuits are lawyers.)

With its narrow reading of the federal arbitration act, the court has put such remedies out of reach for many consumers. Fortunately, Congress can overrule the decision by amending the act to allow states to declare some arbitration agreements unconscionable.
Senators Al Franken (D-MN) and Richard Blumenthal (D-CT), along with Congressman Hank Johnson (D-GA) have introduced the Arbitration Fairness Act, which would eliminate forced arbitration clauses in employment, consumer, and civil rights cases, restoring one of an individual's most powerful tools when squaring off against a corporation in the courtroom.

Click here for the rest of the L.A. Times editorial.

Senate Confirms Carney to Second Circuit

The Senate has confirmed Susan Carney to the United States Court of Appeals for the Second Circuit on a vote of 71-28. Judge Carney was nominated on May 20, 2010, and was renominated at the beginning of the 112th Congress. She is the third circuit judge confirmed this year, and the nineteenth circuit judge confirmed during the Obama presidency. She is the first circuit judge confirmed this year who received any Republican opposition in committee.

There are currently 109 vacancies in the federal judiciary, 20 of which are on circuit courts. Thirty-five vacancies are considered to be judicial emergencies by the Administrative Office of the U.S. Courts, eight of which are circuit court seats.

For the most up-to-date and comprehensive information on judicial nominations, visit the Alliance for Justice’s Judicial Selection Project webpage.

Tell Your Senators: Goodwin Liu Deserves a Vote!

** UPDATE: THIS ALERT IS NO LONGER ACTIVE ** 

An acclaimed scholar, teacher, and lawyer, Goodwin Liu is widely considered one of the brightest legal minds of his generation. Yet his nomination to the Ninth Circuit Court of Appeals has been stalled for over a year by obstruction in the U.S. Senate.

Act now to support Goodwin Liu's nomination to the Ninth Circuit. Tell your senators to confirm Goodwin Liu TODAY!

Supported by leaders from across the political spectrum, Goodwin Liu possesses the intellect, integrity, experience, and temperament to serve as an excellent circuit court judge. Not even his harshest critics can claim that Liu isn't superbly qualified, but some Republicans may still try to prevent him from even receiving a vote in the Senate.

Goodwin Liu has waited too long for a vote. We need you to join us in a national effort to support Liu's confirmation TODAY.

Liu's nomination also has historic significance: if confirmed, he would become only the second active Asian American appellate judge in the country, and the only active Asian American judge on the West Coast's Ninth Circuit. The Senate will decide Thursday if Liu will even receive a yes-or-no vote; the time to act is now!
    
Tell your senators to move forward with Goodwin Liu's nomination, and to vote to confirm him to the Ninth Circuit.

Supreme Court Overturns Decision Holding Corporation Accountable for Deceptive Retirement Benefit Practices

Today the Supreme Court overturned a district court order in CIGNA Corp. v. Amara that compelled CIGNA to provide retirement benefits as they were described in a deceptive summary rather than the less generous benefits described in the plan itself. The Second Circuit upheld the district court’s order.

In order to avoid a backlash among its employees, CIGNA buried in fine print a change to its retirement plan that reduced benefits. CIGNA accurately detailed the change in the complete description of the plan but implied in a shorter summary that employees were more likely to read that no change had been made. Affected employees filed a class action suit to recover retirement benefits as described in the summary.

CIGNA argued on appeal that beneficiaries should be required to prove that they personally relied, to their detriment, on the summary description of the plan. The employees argued that the federal statute that governs retirement plans, ERISA, does not include a reliance requirement and that the employees should benefit from a presumption that they relied on the summary.

The Supreme Court held that the section of ERISA under which the district court ordered an employee-friendly change to the retirement plan does not empower courts to grant such relief, which the Court held to be equitable rather than legal. Discussing the terms of the retirement plan, the Court stated that “we have found nothing suggesting that the provision authorizes a court to alter those terms…where that change, akin to the reform of a contract, seems less like the simple enforcement of a contract as written and more like an equitable remedy.” As a result, the court overturned the district court’s decision.

However, the Supreme Court described in detail why a different ERISA provision might empower the lower court to order the same remedy and remanded the case with a strong suggestion that the employees seek relief under that provision. The district court did not determine whether the separate provision of the statute allowed a correction of the retirement plan. That provision “allows a participant, beneficiary, or fiduciary ‘to obtain other appropriate equitable relief’ to redress violations of (here relevant) parts of ERISA.”

Justice Scalia, joined by Justice Thomas in concurrence, argued that the Court should have stopped once it determined the district court’s remedy could not be sustained under the section of ERISA it had relied on. Justice Scalia then went on to suggest that the plaintiffs may not be able to establish the elements required under the alternative equitable remedies suggested by the Court, noting the district court did not use this alternative provision because it found it “particularly complicated” and “knotty.”

Although the Supreme Court provided a potential road map for employees to seek justice for CIGNA’s deceptive corporate practices, this holding overturned relief already granted and forced the employee plaintiffs back to starting gate in the district court.

Supreme Court Denies Cert Mohamed v. Jeppesen in a Blow to Torture Accountability

The Supreme Court today denied certiorari in Mohamed v. Jeppesen Dataplan, a Ninth Circuit Court of Appeals decision that kicked out of court a lawsuit claiming that the victim had been tortured. The Ninth Circuit en banc panel voted 6-5 to dismiss the case, upholding an assertion of the state secrets privilege, first raised by the Bush Administration and now by the Obama Administration, that the need to protect state secrets trumps the ability of former prisoners to sue over alleged torture.

The ruling is another blow to accountability for torture that took place under the Bush Administration. According to the New York Times,
“The lawsuit was brought in 2007 against a Boeing subsidiary, Jeppesen Dataplan,
that the plaintiffs said had arranged the rendition flights that took them to
Morocco, Egypt and Afghanistan to be tortured. One of the men, Binyam Mohamed,
had his bones broken in Morocco, where security agents also cut his skin with a
scalpel and poured a stinging liquid into his wounds.”
The 9th Circuit opinion, which will remain in effect now that the Supreme Court has denied cert, “reluctantly” concluded that state secrets trump the “fundamental principles of our liberty, including justice, transparency, and accountability” in this case. Notably, the 9th Circuit’s decision held that the claims could not proceed “even assuming plaintiffs could establish their case solely through nonprivileged evidence.”

Alliance for Justice joined a letter signed by 20 other groups calling on the Department of Justice to implement a policy, as it promised, to ensure that there is transparency and accountability in cases like this where credible assertions of government wrongdoing have been raised. The Attorney General announced a policy in 2009 whereby DOJ would make referrals to the inspectors general of the CIA, DOJ, Defense Department, or other appropriate agency, when a civil complaint dismissed on state secrets grounds raised credible allegations of wrongdoing. When the judicial system fails to provide accountability and transparency by allowing cases to be dismissed on state secrets grounds, requiring an inspector general to investigate the allegations would provide some modicum of accountability.

Supreme Court Undermines Whistleblowers’ Ability to Uncover Corporate Fraud

The Supreme Court held today in a 5-3 decision in Schindler Elevator v. United States ex rel. Kirk that a federal agency’s response to a Freedom of Information Act (FOIA) request is a “report” under the False Claims Act (FCA). Therefore, a private party that uncovers corporate fraud against the federal government as a result of a FOIA request may not obtain a court award for doing so.

Daniel Kirk, an employee of Schindler Elevator Corporation and a Vietnam veteran, suspected that his employer was violating a federal statute requiring companies with large federal contracts to establish affirmative action programs that benefit Vietnam-era veterans. Those suspicions were confirmed after he examined documents his wife received in response to a FOIA request.

Under the FCA, private individuals who uncover fraud against the federal government can sue on behalf of the United States and be awarded a portion of any recovery the government receives from the lawsuit. However, the statute prevents courts from hearing a case if the lawsuit is based upon one of several types of public disclosures, including information in a government “report.” The purpose of limiting recovery is to prevent “parasitic” lawsuits in which a party without personal knowledge of a company’s fraud sues and then profits by merely learning about the fraud from a public source. Kirk filed and initially prevailed in his lawsuit against Schindler Elevator, winning an award from the trial court that was affirmed by the Second Circuit.

The Supreme Court’s conservative majority overturned that award, holding that the “broad ordinary meaning of ‘report’” as the word is defined in dictionaries is consistent with the “generally broad scope” of public disclosure methods that prevent private parties from recovering an award. The Court described the information that must accompany a response to a FOIA request and stated that the information falls within those various dictionary definitions of “report” as “‘something that gives information,’ a ‘notification,’ and an ‘official or formal statement of facts.’”

Writing in dissent, Justice Ginsburg picked apart the majority’s arguments by quoting the Second Circuit’s opinion below. The dissent argued that the Court took “report” out of context by giving it a dictionary meaning when all of the other terms in the list of public sources describe “the synthesis of information in an investigatory context.” The Second Circuit stated that the other sources, such as “hearing” and “audit,” apply to information that the government intended to gather for some purpose, not the “mechanistic production of documents in response to a FOIA request made by a member of the public.” Until Mr. Kirk’s suspicions were confirmed by documents he obtained from the government, there was no government “report” or “investigation” that would have exposed Schindler Elevator’s fraud.

Ginsburg added that the Court’s ruling “weakens the force of the FCA as a weapon of fraud [against] Government contractors” who have cheated the government. She stated that it also “severely limits whistleblowers’ ability to substantiate their allegations” before suing and she suggested that Congress should remedy the majority’s holding.

The Supreme Court’s ruling undermines whistleblowers who play a critical role in uncovering fraudulent corporate activity against the government and taxpayers.

Summarizing a real estate deal in four letters: RTFD

This is a follow up to my post on why you should call me (or your real estate lawyer) first. Let's be honest, though: it isn't always going to happen.  Why? Time, money, hubris, you name it.  I get that.  I don't like it but I get it.

What really irks me, though, is a corollary to at least two of the five points I made last week; namely, this classic: "Oh, I just signed the document without reading it." And it happens more than I care to admit.

I can hear someone say, well, what about the boilerplate residential loan documents that are uniform and the same for every single deal?  Okay, I understand. But did you confirm the deal terms were correct? What about the HUD-1? Did the Truth-in-Lending Statement change? (That is a no-no these days.) Did you sign a document saying that you are going to own and occupy the house when in fact you are not?

What am I getting at? Read The Friggin' Document.  Maybe it will all make sense and you can at least be informed about what you are doing.  Maybe you will catch a mistake. And maybe, just maybe, you will realize that there are some terms in these documents that you don't understand completely.  At least then you might come to your senses and call someone who can help you. If not, then you'll be calling someone later, most likely after it is too late (or very expensive) to fix the problem.

Movement in the Judicial Selection Process

The judicial selection process has seen new movement over the last two weeks.

On May 3, cloture was invoked on John McConnell, a long-blocked nominee to the District Court of Rhode Island, despite unprecedented opposition from the U.S. Chamber of Commerce. McConnell was confirmed on a party-line vote the next day. The McConnell vote helped pave the way for confirmation of Edward Chen this week as the first Asian-American district court judge in San Francisco. In addition, the White House has submitted eleven new nominees, a considerable increase from the two-per-week average prior to May.

These developments help clear the way for the Senate to consider the nominations of Susan Carney to the Second Circuit, Goodwin Liu to the Ninth Circuit, and Caitlin Halligan to the D.C. Circuit. Stay tuned for more news and opportunities to get involved in the coming weeks.

Professor Schwartz Calls for Ethics Reform

Washington College of Law Professor Herman Schwartz today authored an op-ed in Politico, calling for the application of mandatory ethical rules to justices on the Supreme Court. Comparing the justices’ lifetime tenure and immense power to the closest thing America has to “absolute monarchs,” Schwartz notes that in return, we expect them to act ethically.
Today, Supreme Court justices are subject to virtually no ethical standards — except those they impose on themselves. That is not good enough.

The official Code of Conduct for United States Judges is not applicable to justices. It should be. Though legally unenforceable, it establishes specific standards of conduct that no justice is likely to ignore as casually as some seem to do now.
The issue of Supreme Court recusal has been gaining more and more attention lately as challenges to the health care law make their way through the courts.

In today's column, Schwartz goes on to detail a number of examples of justices engaging in conduct that would likely violate the Code of Conduct, if it applied to them, such as Justice Alito headlining a fundraising event for the conservative American Spectator, and Justices Thomas and Scalia attending a political strategy meeting organized by the Koch brothers:
We don’t know why Scalia and Thomas were at these partisan meetings and what they did. And there is no established procedure for finding out. Supreme Court justices answer to no one for what they do.

When their conduct is questioned, they respond either in self-righteous indignation (as Scalia has) or charge their questioners with being “bent on undermining the court” (as Thomas has) or just dismiss the matter as “not important” (as Alito did).

There is no justification for such arrogance. The justices are public servants and should be just as responsive to valid questions about the propriety of their conduct as the lowest GS-1.

What seems beyond dispute is that all three justices engaged in conduct inconsistent with the Code of Conduct for United States Judges, which requires that a judge “not personally participate in fundraising activities; or use or permit the use of the prestige of judicial office for that purpose, … make speeches for a political organization or attend or purchase a ticket for a dinner or other event sponsored by … an entity whose principal purpose is to advocate for or against political candidates.”

For reasons unknown, however, neither this code nor any other applies to Supreme Court justices. According to court spokeswoman Kathy Arberg, “justices look to the code for guidance.” Some justices apparently don’t look often.
Schwartz also went on to call for a process of oversight for recusal decisions at the Supreme Court, where none exists now. Currently, each justice is allowed to decide for him or herself whether or not to recuse. Schwartz explains that this runs afoul of a longstanding principle: "it is axiomatic that no one should be a judge in his or her own case." To remedy this problem, he suggests there be a randomly selected panel of Supreme Court justices, including retired justices, to decide recusal requests.

Schwartz ended by calling on Congress to remedy this problem by passing legislation that would make the Code of Conduct applicable to the Supreme Court, and revising the recusal process.
No one expects Supreme Court justices to live apart from society. But when they allow themselves to be “featured” at political fundraisers and strategy sessions or don’t withdraw from cases where they seem to have a conflict of interest, they truly “undermine the court.”

Congress should move quickly on this matter — it is time for the justices to live by the same rules as all other federal judges.
To learn more about judicial ethics reform, click here.

Senate Confirms Urbanski to District Court

Yesterday, the Senate confirmed Michael Francis Urbanski to the United States District Court for the Western District of Virginia on a vote of 94-0. Judge Urbanski is the 23rd Obama nominee to be confirmed during the 112th Congress.

There are currently 110 vacancies in the federal judiciary, 34 of which are considered to be “judicial emergencies” by the administrative office of the U.S. Courts. Forty-nine nominees are pending in the Senate, 14 of which are awaiting final confirmation votes.

For the most up-to-date and comprehensive information on judicial nominations, visit the Alliance for Justice’s Judicial Selection Project webpage.

New York Times: "A Devastating Blow to Consumer Rights"

Today's New York Times editorial summarizes the blatantly pro-business decision in the Supreme Court case of AT&T Mobility v. Concepcion, and takes a hard stand against the blatant corporate bias on the Roberts Court.

Calling it "a devastating blow to consumer rights," the editorial rightly described the Corporate Court's decision "a dramatic example of judicial activism."
In his dissent, Justice Stephen Breyer highlights the damage to consumers: “What rational lawyer would have signed on to represent the Concepcions in litigation for the possibility of fees stemming from a $30.22 claim?” And he made clear that many rational couples would not press their own case for that amount if it meant “filling out many forms that require technical legal knowledge or waiting at great length while a call is placed on hold.”
We have already seen fallout from this decision, as corporations have moved to have class-action cases dismissed and forced into one-on-one arbitration. Citizens are being told that they gave up their right to have fair access to our courts when they purchased a product, or signed terms of service for some software, and the courts are now bound to agree.

The Times editorial concludes:
Unless Congress fixes the problem, the Supreme Court’s decision will bar many Americans from enforcing their rights in court and, in many cases like this one, bar them from enforcing rights at all.
Click here to read the full editorial.

Recusal on the High Court Gets Attention As Health Care Law Works Its Way Through the Courts

Politico yesterday ran an article describing the efforts on both the left and the right to force the recusal of certain justices from the upcoming challenge to the Affordable Care Act, which could be heard in the Supreme Court as early as next October. Conservatives have argued that Justice Kagan should recuse herself because she was Solicitor General while the case was active within the Department of Justice, while progressives have argued that Justice Thomas should recuse due to fact that his wife earned over $700,000 lobbying against the passage of the law. Neither Justice has recused from the case and neither is likely to do so.

Legal ethicist Stephen Gillers predicted that whichever way the case comes out, the losing party is likely to attack the integrity of the decision on the basis that Justices Kagan or Thomas (depending on which side prevails) should have recused from the case.

Regardless of whether one agrees with these arguments, under the current system the only arbiter of the facts and legal issues raised by recusal motions is the accused justice, who may deny a motion without issuing a written explanation. Continuing to allow each individual justice to have the final and only say as to whether they might appear biased risks the continued erosion of public confidence in the integrity of the Court as an institution, and heightens fears that the Supreme Court has become inappropriately politicized.

That is one reason why Alliance for Justice is calling for reforms to the Court’s recusal process that would create more transparency and accountability around a justice’s decisions not to recuse from a case. The current procedure governing recusals should be modified to provide for some method of review of an individual justices’ decision not to recuse. Such a process would help ensure the recusal statute's "appearance of bias" standard is applied, thereby strengthening the ethics of the Court.

To learn more about ethics on the Supreme Court, and the reforms called for by Alliance for Justice, click here.

Constitutional Scholar Chemerinsky Slams Corporate Court’s AT&T Mobility v. Concepcion Decision

Erwin Chemerinsky, constitutional scholar and dean of the law school at UC Irvine, slammed the Supreme Court’s decision in AT&T Mobility v. Concepcion and its recent history of pro-corporate bias in a Los Angeles Times op-ed. Chemerinsky called AT&T Mobility “part of a disturbing trend of the five most conservative justices closing the courthouse doors to injured individuals.” Chemerinsky offered the following critique of the decision:
The high court's decision is particularly troubling because it is based on the Federal Arbitration Act, which states that contracts providing for arbitration are to be enforced except where state law deems them to be unenforceable. The California courts consistently have found that the arbitration clauses that preclude class-action remedies are unenforceable. The Supreme Court ignored this and explicitly said that it was important to protect defendants, such as corporations, from the in terrorem (“in fear”) effects of class action that pressure them into settlements. The court's conservative majority could not have been clearer that it was favoring businesses over consumers.
Chemerinsky placed the case in the context, calling AT&T Mobility “the third decision in the last three years in which the high court has found that arbitration agreements should be broadly read to prevent injured individuals from going to court.” He noted that all three were 5-4 decisions in which the Court’s conservative majority voted to shut the courtroom doors on everyday Americans.

Chemerinsky concluded by describing the long-term effects of the Court’s decisions.
The notion that an injured person has a right to his or her day in court is deeply ingrained in American culture. But the proliferation of arbitration agreements, and the Supreme Court's aggressive enforcement of them, means that it is increasingly a myth that an injured person can sue.
Click here more information on AT&T Mobility v. Concepcion and AFJ’s special report on the case.

Corporations Rush to Kill Consumer Rights Following AT&T v. Concepcion Decision

Only three weeks have passed since the Supreme Court’s decision in AT&T Mobility v. Concepcion gave corporations a license to steal from the public.

As American Lawyer (subscription required) reports, that has proven to be plenty of time for corporations to rush to court and use the decision as a basis for throwing out lawsuits by consumers who claim that the corporations cheated them out of money.

In AT&T Mobility, the Supreme Court handed corporations a sweeping legal victory by allowing them to write clauses into the fine print of contracts that force consumers to give up their right to enter into class arbitration or litigation.

Arbitrating or suing as a class is essential to holding corporations accountable for wrongdoing because few people will arbitrate or sue as individuals if the corporation has wrongfully taken from them a relatively small amount of money. As a result, contract clauses that forbid class actions virtually guarantee that a corporation that steals a small amount of money from many people will escape justice.

In one example of AT&T Mobility’s effects, U.S. Bancorp moved in a San Francisco federal court to compel plaintiff consumers to arbitrate a dispute about overdraft fees. Plaintiffs claimed in their lawsuit that U.S. Bancorp wrongfully collected fees after automatically deducting automobile loan payments from checking accounts with insufficient funds. The AT&T Mobility ruling could prevent the plaintiffs’ class action suit from going forward, which would ensure that almost none of them would spend time and resources on individual arbitration.

The new power that the Corporate Court has granted to corporations may also extend to homeowners facing foreclosure. As ProPublica has reported, banks are increasingly writing language into the fine print of contracts that force homeowners to waive their rights to sue or fight foreclosure. The report identified eight banks and other mortgage servicers that target individuals facing foreclosure and include waivers of rights. As borrower attorneys noted in the article, “if a homeowner signs away their right to sue, they might be forfeiting the best leverage they have to get a lasting solution” to their financial difficulties. AT&T Mobility will encourage more banks and mortgage companies to take advantage of people struggling to keep their homes by using fine print to strip them of their legal rights.

The first three weeks under the Corporate Court’s AT&T Mobility regime demonstrate that the repercussions for everyday Americans are likely to be devastating for years to come if Congress fails to undo the decision and restore the balance of power between individuals and corporations.

Click here more information on AT&T Mobility v. Concepcion and AFJ’s special report on the case.

Will BigLaw finally catch up to the rest of us?

I read with great interest Maura O'Connor's recent blog post on re-engineering real estate law.  It was a good post for what it is, except that I had to say to myself: "Isn't it about time the large law firms caught up with the rest of us?"

(Full disclosure: I was, some ten+ years ago, an associate at the Chicago office of Seyfarth Shaw, the firm where Ms. O'Connor is now a partner.  [She came on board after I left, as Seyfarth did not at the time have a real estate practice in its California offices.] I had a wonderful experience there and many of my former colleagues are friends to this day.  I harbor absolutely no animosity toward BigLaw and work routinely with  them on deals.  And I respect the work they do.  I just no longer wish to bill 2000+ hours a year.)

As Maura points out correctly, BigLaw is slow to change its business model out of institutionalism, profit incentive, hourly billing rate pressure, per partner profits and other factors.  For someone like me, who does not have the pressure of having to ask partners or administrators to modify my billing rates or quote a flat fee deal, it is an entirely different animal.

And as Jay Shepherd rightly points out, you either know how to price a deal or you don't.  I think I do, although in some cases if I say so myself I am a pretty good deal, inasmuch as I see people charging double my billing rate for the same work.

What I find annoying is when that work is done poorly at those rates, regardless of the firm's size.  I have been reviewing documents and other work product the last few weeks that would have gotten me scolded if not fired a few years ago.  In addition to the usual egregious typos (I know, but lawyers are trained to loathe them), there were internal inconsistencies, wrong choices of law, provisions that were not checked against the business deal, terms left in from previous deals that did not belong here (yes, Virginia, we all re-use the same forms over and over again), documents that had to be corrected two or three times -- you name it.

I think part of the problem is that the senior associates and partners do not have the time anymore to mentor and work with the younger folks to improve their drafting and lawyering skills.  It is an art.  I am not perfect by any means at all, but I had some great mentors who took the time -- even non-billable time -- to make me a better attorney, and for that I am grateful.  These days?  There is so much pressure to make hours these days that it is hard to make the time to both mentor the young and have a life.

All the buzz words aside, here is what it really comes down to in my humble opinion, and it isn't rocket science:

1.  Clients want results.  And they will pay for results.

2.  Clients want you there.  So yes, you answer the phone or an email when least expected.

3.  Paying up to $750/hour for routine legal services is, in my opinion, insane. Period. When you are betting the company or doing the deals in the spotlight (been there, done that, by the way), it makes a LOT of sense. But for some items, as Maura correctly points out, there needs to be a different approach.  Maybe getting BigLaw to come down to my pricing level is one way.  Hiring people like me is another, as you do not sacrifice quality, or get my skill for the price of a junior associate.

4.  Know how to price a deal when asked.  A good real estate lawyer can usually give a good and fair number.

5.  Work hard when called for.  Be thorough.  Turn the product around.  Keep the client happy.

So, dear BigLaw -- welcome to our world.  We small firm folks have been "using modern business process driven methods, smart forms, predictable pricing and agile lawyering" for years now.  Nice to see you catching up to us!

AFJ Condemns Effort to Steer Oil Cases to Friendly Courts

PRESS RELEASE

Alliance for Justice Condemns Cynical Effort by Big Oil to Steer Oil Drilling Cases to Friendly Courts

Washington, D.C., May 11, 2011–Alliance for Justice today condemned Section 202 of H.R. 1229, legislation that would mandate that civil litigation related to oil drilling in the Gulf of Mexico be steered exclusively to courts in the Fifth Circuit, many of whose judges have notorious connections to the oil and gas industry. The section’s only purpose is to ensure that cases originating in Florida and Alabama, and that otherwise would be heard in the Eleventh Circuit, are brought to courts considered most responsive to the interests of Big Oil. Offshore drilling cases from Louisiana, Texas, and Mississippi would already be assigned to the Fifth Circuit and wouldn’t be affected by the legislation.

Alliance for Justice President Nan Aron in denouncing the bill said, “This cynical and transparent attempt to manipulate the judicial process and shepherd offshore drilling cases into the welcoming arms of the Fifth Circuit is a violation of fundamental principles of American justice. The people of Florida and Alabama have a right to have their cases heard within their own jurisdiction and not be exported to other courts where powerful parties seek advantages with many judges who have spent their careers marinating in the world of oil interests. Anyone who doubts the motivation behind this appalling ploy need only read our report, Judicial Gusher: The Fifth Circuit’s Ties to Oil, which detailed the extensive energy investments and professional ties of most Fifth Circuit judges. This is a circuit, after all, where last year so many judges had to recuse themselves from a case due to conflicts of interest that an en banc circuit court of appeals panel couldn’t get a quorum.”

Aron called for Section 202 to be stripped from H.R. 1229, saying, “It’s no mystery why the oil lobby is asking friendly legislators to help them rig the judicial process, but Congress should resist efforts to meddle with the courts in this way. We strongly support efforts by Congressman Ted Deutch and others to amend the bill and preserve the rights of the people of Florida and Alabama and safeguard the independence of the federal courts.”

A copy of AFJ’s report on the relationship between the Fifth Circuit Court of Appeals and the oil and gas industry is available here.

Stephen Higginson Nominated to the Fifth Circuit Court of Appeals

President Obama has nominated Steve Higginson to the United States Court of Appeals for the Fifth Circuit. Mr. Higginson, a former editor-in-chief of the Yale Law Review, is currently an Assistant United States attorney in Louisiana.

With Mr. Higginson’s nomination, there are now 10 nominees pending for the 21 vacancies in our federal appellate courts.

For the most up-to-date and comprehensive information on judicial nominations, visit the Alliance for Justice’s Judicial Selection Project webpage.

Senate Confirms Edward Chen to District Court Seat in San Francisco

Last night, the Senate confirmed Ed Chen to the Northern District of California on a vote of 56-42. The vote represents a major victory for Senators Feinstein and Boxer, the Asian-American community, the public interest legal community, and everyday Americans who deserve highly qualified judges.

Judge Chen is the first Asian American to serve as a federal district court judge in San Francisco. He has had a distinguished career both as a federal magistrate judge and as an attorney for the American Civil Liberties Union. Originally nominated on August 6, 2009, he had been pending for longer than any other Obama nominee, so his supporters have long been pushing for—and looking forward to—this day.

For the most up-to-date and comprehensive information on judicial nominations, visit the Alliance for Justice’s Judicial Selection Project webpage.

Four good reasons to have a closing checklist

Lawyers love checklists. They love checking little boxes and ticking off each portion of a deal as it is finished, culminating (hopefully) in the closing of a transaction.

Much as I like to chuckle about this, checklists serve very important purposes.  When I started as a real estate lawyer, I thought that my prodigious memory could handle all the details and that I didn't need to spend the time working on them.  My mentors fortunately convinced me otherwise before I fell into bad habits, and they were right. (See #2 below.) I therefore have a checklist for every commercial real estate purchase or sale or loan in which I am involved, be it one page long or more than a dozen with over 100 items.  Before you ask: yes, I have checklists for other real estate transactions, too.  I use a checklist of different sorts for leases, one that no one else I know uses.  But it works for me and keeps the deal going.  I also have my own little quirks when it comes to how I prepare and edit and work with my checklists.  I will not bore you with those details except to say again: it works for me, and I encourage you do have a system that works for you.

So why should you have a closing checklist?

1.  A good, thorough checklist is the road map of a commercial real estate transaction.  By spending the time up front and at the beginning of the deal you can see what needs to be done and budget your time accordingly. It also helps you make sure the long lead-time items are taken care of first.

2.  Without a checklist, you will inevitably forget something.  I don't care how good you are or how many deals you have done.  It will happen.  Period.  Heck, even with a checklist sometimes something will fall between the cracks because someone forgot, because you didn't know about certain requirements or because someone never told you about something.  That's why you make the big bucks, so deal with it and move on. (I speak from experience here, by the way.)

3.  A good checklist delegates responsibility.  It says what the buyer, the seller, the lender, the brokers (many lawyers often forget about them, and they shouldn't!), the title company, the attorneys and any third parties need to do to get the deal done.  Depending on the circumstances, sometimes I prepare two closing checklists: one for internal use and one to circulate among all the parties.

(Here comes the one you may not have thought about.)

4. A good closing checklist not only adds value to the deal but shows just how you are doing so!  By creating the road map, you are also showing just what you are doing, how the matters assigned to you are progressing and how close (or far) you are from getting the deal done.  A client can see this document and say, "Hey, this all makes sense.  Look at all these things we might have been scrambling for or forgotten about if Dave hadn't provided the checklist! Updating the checklist periodically is also important, in my opinion, as it shows the progress of the deal.  It also serves as a reminder to people to get their parts of the deal done so we can close, and exposes those who are not doing that.

These are by no means the only reasons to have a good closing checklist.  But they are four good ones.  If you have others, speak up.

Five good reasons to call me first

Okay, time to fess up: I am in the business of making money as a real estate attorney.  Gee, imagine that!  But that does not mean I always get the call from a client or a prospective client, or get it in time.  Here are some real life (modified a little to protect confidentiality and all that) examples of clients who should have called me first before doing something:

1.  Oh, it was only a letter of intent.  I figured you could just fix it up in the contract.  Maybe yes, maybe no - and for a variety of reasons.  Does the letter of intent say it is non-binding?  And even if it does, are there provisions a court may find binding anyway, such as the duty to negotiate and work in good faith?  (Yes, it all depends.) And even if you have all of that going for you, there may be provisions in the LOI that, while non-binding, are awfully hard to negotiate against once it is in the "roadmap" of the deal.  There are few positions I like to argue against less than, "Why are you retrading us on Provision X?  It was in the LOI for a reason."  So I end up spending more of your money fighting what could be a losing battle in a negotiation than if I had been involved from the get-go.

2.  They said this document was just a standard form.  And the check's in the mail, this will only hurt a little, and honey, I swear it is only a cold sore.  Uh huh.  So that is why you signed a ten year lease with a full personal guarantee for your business even though your financing is still in the approval state?  You didn't negotiate an out from that? Oh, your lawyer would at least have pointed it out to you so you'd know the risks.  Oh, you are calling me now!  I see...well....

3.  Oh, I don't need title insurance.  The lender has a policy so that will be enough.  Nope.  The lender's title insurance policy only kicks in if your loan is impaired and you blow out on your mortgage.  It insures the lien of the mortgage and gives the owner, in a word, nothing.  The cost of a simultaneous issue title policy in connection with a refinancing is cheap.  I Often advise clients to get one, especially if a property has appreciated in value significantly.  That said, you don't necessarily need a new one if you have a policy in place but the title agency went out of business.  The insurance underwriter that issued the policy is still liable for any claims.  Each case is a little different.

4.  I signed the lease (or the purchase agreement) without calling you because the owner is an old friend.  That's great. But what if you sign a ten year lease and the owner sells the property (or worse yet, is foreclosed) during the term.  You now have a non-friend as your landlord or a lender that could perhaps terminate your lease.  Do you want to be in that position with no bargaining power?

5.  The lease amendment just changed one thing and had a page or two of boilerplate provisions.  Uh huh.  I can think of one instance where "boilerplate" in a lease amendment cost a tenant millions of dollars in extra rent many years later because the tenant's lawyer (who actually drafted the amendment in this case) did not think through an important financial issue or perhaps never read the original lease.  (PS: I was not the tenant's lawyer.)

Hopefully this convinces you to spend a modest amount of money up front for some good professional advice, be it from me or another real estate attorney.  The alternative?  Letting it go, and then risking having your matter falling into one of the above categories or another one.  Trust me, the bill you get for being proactive will be cheaper in the long run than the bill you will get for being reactive.

Supreme Court Case Threatens to Further Erode Consumer Rights

This week the Supreme Court agreed to hear CompuCredit Corporation v. Greenwood, which is an appeal of a Ninth Circuit decision voiding a clause in a contract that prohibited consumers from settling disputes in class arbitration or in court. The Court’s decision to hear the case came shortly after the release of the AT&T Mobility v. Concepcion decision, which gave companies a “get out of jail free” card to rip off consumers and then prohibit them from class arbitration. The plaintiff consumers sued CompuCredit and other credit providers after signing up for a credit card that was advertised to consumers with low or weak credit scores as helping to “rebuild your credit, “rebuild poor credit,” and “improve your credit rating.” Although the credit providers’ promotional materials stated that consumers would immediately receive $300 in available credit, the credit providers charged the consumers $257 in fees in the first year.

The consumers sued the company for its deceitful tactics under the Credit Repair Organization Act (“CROA”) and California’s Unfair Competition Law. The credit providers challenged the lawsuit and argued that the fine print of the credit card contract contained a clause requiring consumers to settle all disputes in binding arbitration and prohibiting them from suing. However, the Ninth Circuit upheld the district court’s ruling that CROA voids the arbitration clause because it “specifically prohibits provisions disallowing any waiver of a consumer’s right to sue in court for CROA violations.” The consumers alleged that the deceitful claims violated CROA and argued that the plain language of the statute states that credit card agreements must inform consumers of the following: “You have the right to sue a credit repair organization that violates the Credit Repair Organization Act.” (emphasis added)


The credit providers and the Ninth Circuit dissenters claimed that CROA only requires a disclosure of the right to sue but does not create that right. The majority described the logical absurdity of such an argument: “Under such a reading, Congress, whose purpose in enacting the statute included protecting consumers from misinformation…drafted a statute which requires credit repair organizations to misinform consumers about a fictional right.” The credit providers appealed the decision and the Supreme Court agreed to hear the case.


If the Supreme Court rules in favor of the credit providers, cheated consumers will be denied access to courtroom justice in defiance of the plain language of a law designed to prevent such an outcome.