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OpenMarket: April 2014

  • CEI, Former State Department Officials Defend Freedom of Contract in Supreme Court Case against Argentina

    April 17, 2014 4:11 PM

    [caption id="attachment_74355" align="alignright" width="300"]Argentina President Cristina Kirchner Argentina President Cristina Kirchner[/caption]

    Can a country seeking to welsh on its debts invoke sovereign immunity to evade not just court orders to pay those debts, but also post-judgment discovery aimed at collecting on those judgments? Can it do so to prevent not just discovery directed at it, but also at third-party banks? Most importantly, perhaps, can it do so even though it contractually waived sovereign immunity? The answer is yes, according to Argentina, which is seeking to stiff many of its bondholders. Thankfully, the U.S. Court of Appeals for the Second Circuit disagreed with this attack on property and contract rights in a 2012 decision.

    But amazingly enough, the Obama administration has taken Argentina’s side at the Supreme Court. It is joined by the government of France, which has experienced downgrades in its credit rating due to stubbornly-high government spending under Socialist Francois Hollande that consumes well over half of France’s economy. The willingness of the Obama administration to take Argentina’s extreme position is disturbing given that the Second Circuit’s ruling was unanimous.

    CEI and several former State Department officials have filed an amicus brief asking the Supreme Court to uphold the appeals court’s ruling, and reaffirm the availability of the post-judgment discovery needed to protect property and contractual rights. The former State Department officials include counsel of record John Norton Moore, former Counselor on International Law to the Department of State; Robert F. Turner, former Deputy Assistant Secretary of State for Legislative Affairs; Abraham D. Sofaer, a former federal judge and former Legal Adviser to the Department of State; Professor Malvina Halberstam, former Counselor on International Law to the State Department; and Davis R. Robinson, former Legal Adviser to the State Department. John Norton Moore, who teaches international law and national-security law at the University of Virginia, was extensively involved in drafting the Foreign Sovereign Immunities Act (FSIA) involved in the case. Judge Sofaer was appointed by President Carter to the federal bench in 1979.

  • CEI Podcast for April 17, 2014: Brexit Strategy

    April 17, 2014 10:34 AM

    Iain Murray, CEI's Vice President for Strategy, along with Freedom Association Director Rory Broomfield, won second place Institute for Economic Affairs' Brexit Competition. The goal of the competition is to devise a strategy for Britain's exit from the European Union.

  • CEI Testifies against National Labor Relations Board Rule to Allow Ambush Elections

    April 16, 2014 7:10 AM

    NLRB Ambush Election HearingOn three separate panels, I testified last week against the flaws inherent in the National Labor Relations Board’s (NLRB) latest proposed rule.

    The NLRB benignly purports to re-examine “Representation Case Procedures.” The rulemaking is commonly known as the ambush elections rule, as a result of a key component that could require elections in as few as ten days.


    On the first panel, I addressed the election date at the heart of the proposal. Approvingly quoting a letter from eighteen United States Senators who commented against the proposed rule, I noted that, “then-Senator John F. Kennedy stated that it was essential to allow ‘at least a 30-day interval between the request for an election and the hold of an election’ in order to ‘safeguard against rushing employees into an election where they are unfamiliar with the issues.’”

    The crux of then-Senator Kennedy’s statement is a focus on safeguarding employees and on ensuring that effectively educating employees remains the Board’s focus.


    Pointing out that the median times for elections are on the order of 40 days and that the proposal could call for elections in as few as ten days, I asked, “Would your students benefit from a 75-percent reduction in study time?”

    I pointed out that workers, who already have a job and many of whom have families and hobbies, are challenged with essentially learning a crash course in labor law and labor economics—two arcane and intricate areas normally pursued by highly trained specialists with advanced degrees.

    An absolute minimum of 30 days and really a routine minimum of sixty days are appropriate to learn such material.

  • First Ever Constitutional Ruling against Dodd-Frank Voids Destructive "Conflict Minerals" Section

    April 14, 2014 5:31 PM

    Today’s ruling of the D.C. Circuit Court of Appeals that Dodd-Frank’s "conflict minerals" disclosure mandate violates the First Amendment is the first time ever a court has ruled that a provision of Dodd-Frank violates the Constitution. Regulations issued under Dodd-Frank have been struck down for reasons such as inadequate cost-benefit analysis and other procedural violations, but this is first time a provision has been found to be unconstitutional.

    And it couldn't happen to a more misguided and destructive provision of the law! As my Competitive Enterprise Institute colleague Hans Bader and I have written in blog posts, articles, and regulatory comments, the conflict disclosure mandate creates a compliance nightmare, hurts American miners and manufacturers, and does the greatest harm to those it was intended to help -- the struggling worker in and nearby the Democratic Republic of Congo.

    As explained by Mercatus Center scholars Hester Peirce and James Broughel in their book Dodd-Frank: What It Does and Why It’s Flawed, the "conflict minerals" mandate of Section 1502 is one the law’s many “miscellaneous provisions” that offer “a clear example of how a statute invoked as the answer to the financial crisis is, in reality, an odd conglomeration of responses to issues, many of which had nothing to do with the financial crisis.” Section 1502, championed by celebrities, including Ashley Judd and Ben Affleck, requires all types of firms to disclose their products’ use of five “conflict minerals” — including gold, tin, and tungsten — that can be sourced to war-torn regions of the Congo.

  • Encouraging News about Honeybee Health

    April 14, 2014 12:51 PM

    A recently released study in Europe reports some good news about honeybee health, which should prompt public officials to reexamine a recent ban on some agricultural products. "It's the first major study of pests and diseases that affect honeybees. A lot of it seems very encouraging," honeybee researcher Tom Breeze, says in a Reuters news story.

    The study examines honeybee populations in Europe after recent disappearances of entire bee colonies during the winter—a phenomenon called colony collapse disorder—which began in 2006 and has continued to be a problem with large losses reported after the winter of 2012-2013.

    After hives suffered considerable losses in some places in Europe, the EU took a knee jerk response by banning a class of pesticides that makes food production more affordable. Ironically, the ban is supposed to ensure agricultural productivity by protecting these pollinators, but elimination of crop protection products may undermine food production, and it's not likely to solve colony collapse disorder.

    The chemicals, called neonicotinoids, are systemic products that can be applied to seeds, which eventually produce plants that systemically can fight off pests without the need for regular spraying. There are many reasons to doubt claims that neonicotinoids cause, or significantly contribute to, colony collapse disorder in any case. For more details, read Jon Entine’s superb series on the topic, as well as the many articles posted on

    This latest study adds another wrinkle to the debate, indicating that the problem is not as widespread as people think, and that other factors are in play, such as cold weather. It underscores why we need to continue to study the issue rather than push rash and unhelpful bans.

    Specifically, it examines bee mortality during the winter of 2012-2013 when many beekeepers reported missing colonies.

  • CEI’s Battered Business Bureau: The Week in Regulation

    April 14, 2014 12:25 PM

    59 new regulations, from rearview cameras to pocket gophers.

  • Wasserman on cy pres

    April 13, 2014 5:34 PM

    University of Pittsburgh Law Professor Rhonda Wasserman has a paper on cy pres forthcoming in the USC Law Review, "Cy Pres in Class Action Settlements." The paper discusses in detail two CCAF cases, In re Baby Products Antitrust Litig., and Marek v. Lane.

    Monies reserved to settle class action lawsuits often go unclaimed because absent class members cannot be identified or notified or because the paperwork required is too onerous. Rather than allow the unclaimed funds to revert to the defendant or escheat to the state, courts are experimenting with cy pres distributions – they award the funds to charities whose work ostensibly serves the interests of the class “as nearly as possible.” 

    Although laudable in theory, cy pres distributions raise a host of problems in practice. They often stray far from the “next best use,” sometimes benefitting the defendant more than the class. Class counsel often lacks a personal financial interest in maximizing direct payments to class members because its fee is just as large if the money is paid cy pres to charity. And if the judge has discretion to select the charitable recipient of the unclaimed funds, she may select her alma mater or another favored charity, thereby creating an appearance of impropriety.

  • Unconstitutionally Overbroad New Jersey Anti-Bullying Law Challenged; Reference To "Head Lice" Deemed "Bullying"

    April 11, 2014 1:01 PM

    New Jersey's anti-bullying law, which applies to the state's schools and universities, is so overly broad that a fourth-grader was punished just for noting, in response to a question, that a classmate had suffered from head lice. A civil-liberties group called the Rutherford Institute is now representing that student in a First Amendment challenge to the law, notes the Newark Star-Ledger in an article titled, "Civil liberties organization asks federal court to declare NJ's anti-bullying law unconstitutional." Another civil-liberties group, FIRE, has also concluded that the law violates the First Amendment.

    The Rutherford Institute explains:

    Attorneys for The Rutherford Institute have asked a federal court to declare a New Jersey anti-bullying law unconstitutional in light of its chilling effect on students’ free speech rights. The Institute’s latest brief, which counters a move by the New Jersey Commissioner of Education to have the lawsuit dismissed, argues that the state’s enforcement of the anti-bullying act represents a violation of students’ rights under the First and Fourteenth Amendments to the U.S. Constitution and the New Jersey state constitution. Institute attorneys filed the First Amendment lawsuit in Lim v. Board of Education of the Borough of Tenafly in December 2013 on behalf of a 4th grade boy who was punished under the act for truthfully stating that a fellow student had head lice.

    “What school officials conveniently seem to keep forgetting is that students do not shed their constitutional rights at the schoolhouse gate,” said John W. Whitehead, president of The Rutherford Institute and author of A Government of Wolves: The Emerging American Police State. . . Rutherford Institute attorneys argue that while the purpose of the law is admirable, the law’s scope is unconstitutionally broad and the language is too vague to give parents or students adequate notice about what statements will or will not be prohibited.

    Highlighting the potential absurd applications of the law, Institute attorneys draw attention to an incident that took place in September 2011, when a 4th grade boy was punished under the act for correctly stating that a fellow student had head lice. A few days after a note was sent home to the parents of a class of 4th grade students, warning them that one of the students had head lice, several students were sitting at a group table completing an assignment together. During the discussion, one student asked a female student why she had dyed her hair. After she failed to respond to the question, one young boy, L.L., correctly replied that she had done so because she was the student who had head lice. The female student complained to the teacher who in turn instructed L.L. to apologize, and the class lesson continued uninterrupted. The teacher then reported the incident to the school’s “Anti-Bullying Specialist,” who filled out a bullying report and informed the Superintendent about the incident. As a result of the finding, the student was forced to undergo a special sensitivity assignment, and the entire class was reminded about the need to be kind to each other, which further embarrassed the fourth grader. L.L.’s parents appealed the bullying determination first with the local school board, and then with the state Board of Education, both of which affirmed the decision.

    Arguing that the statute punishes any speech deemed “hurtful,” even if factually true and non-disruptive, attorneys for The Rutherford Institute filed a First Amendment lawsuit in federal court, asking that the statute be struck down, and that students like L.L. not be penalized in accordance with the statute for exercising their constitutional rights.

  • CEI's Scores Paycheck Fairness Act

    April 10, 2014 9:28 AM

    The Competitive Enterprise Institute scored Wednesday’s vote in the U.S. Senate on the passage of S. 3772, The Paycheck Fairness Act, a bill that would fundamentally change the Equal Pay Act of 1963, which prohibits employers from paying women less than men for performing the same work in the same workplace.

    The score will be incorporated into CEI’s Congressional Labor Scorecard that can be seen in full on CEI’s labor policy website,

    CEI opposes numerous provisions of the proposed bill:

  • EEOC Loses Hypocritical Lawsuit against Employer over Background Checks

    April 9, 2014 10:07 PM

    "In this case the EEOC sued the defendants for using the same type of background check that the EEOC itself uses." So began a 3-to-0 ruling Wednesday by the Sixth Circuit Court of Appeals in EEOC v. Kaplan Higher Education Corp. (Apr. 9, 2014). CEI joined the Pacific Legal Foundation's amicus brief in support of the employer sued by the EEOC, the federal civil-rights agency. (EEOC stands for Equal Employment Opportunity Commission.) As former assistant attorney general Roger Clegg (now at the Center for Equal Opportunity) notes,

    The Obama Administration sued Kaplan for running credit checks on employee applicants – similar, by the way, to the ones the EEOC itself uses. Kaplan had learned that some of its employees had misappropriated student payments and, to provide safeguards against this behavior, it began screening its applicants for major red flags in their credit history. The EEOC sued Kaplan, arguing that it cannot use credit checks, because use of credit checks has a disparate impact on black applicants.

    Anyway, putting aside the inherent dubiousness of the whole lawsuit, there were also severe methodological problems with the Obama Administration’s evidence, which relied on “race raters” to determine, by scrutinizing driver’s license photos, the race of the applicants. So the trial judge threw out the case. Today, I’m happy to report, the court of appeals affirmed that decision – and in no uncertain terms, I might add, much I’m sure to the Obama administration’s chagrin.

    At the Washington Post, UCLA Law Professor Eugene Volokh provides these excerpts from the court's ruling:

    The EEOC’s personnel handbook recites that “[o]verdue just debts increase temptation to commit illegal or unethical acts as a means of gaining funds to meet financial obligations.” Because of that concern, the EEOC runs credit checks on applicants for 84 of the agency’s 97 positions. The defendants (collectively, “Kaplan”) have the same concern; and thus Kaplan runs credit checks on applicants for positions that provide access to students’ financial-loan information, among other positions. For that practice, the EEOC sued Kaplan. Specifically, the EEOC alleges that Kaplan’s use of credit checks causes it to screen out more African-American applicants than white applicants, creating a disparate impact in violation of Title VII of the federal Civil Rights Act. See 42 U.S.C. § 2000e-2(a)(1), (a)(2), (k). Proof of disparate impact is usually statistical proof in the form of expert testimony; and here the EEOC relied solely on statistical data compiled by Kevin Murphy, who holds a doctorate in industrial and organizational psychology. For two reasons, however, the district court excluded Murphy’s testimony on grounds that it was unreliable. First, the EEOC presented “no evidence” that Murphy’s methodology satisfied any of the factors that courts typically consider in determining reliability under Federal Rule of Evidence 702; and second, as Murphy himself admitted, his sample was not representative of Kaplan’s applicant pool as a whole. The district court therefore granted summary judgment to Kaplan. The EEOC now argues that the district court “erred” — a telling, oft-repeated, and mistaken choice of word here — when it excluded Murphy’s testimony. We reject the EEOC’s arguments and affirm.

      . . . . . . . .

    The EEOC brought this case on the basis of a homemade methodology, crafted by a witness with no particular expertise to craft it, administered by persons with no particular expertise to administer it, tested by no one, and accepted only by the witness himself. The district court did not abuse its discretion in excluding Murphy’s testimony.


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