(This is another post in our series, Looking Back at the U.S. Supreme Court’s 2013 Term.) This blog post is the third of three on labor and employment law cases by the United States Supreme Court in the last Term. This post focuses on two employee benefit law/ERISA cases: Fifth Third Bancorp v. Dudenhoeffer and Burwell v. Hobby Lobby Stores, Inc. First, a disclosure: Along with six other law professors, I co-wrote an Amicus Curiae brief in support of the Dudenhoeffer plaintiffs.
Dudenhoeffer involves so-called ERISA stock-drop litigation, which has been rampant in the federal courts for a couple of decades now. The basic formula of these cases is that, as part of the employer-sponsored retirement plan (whether an employee stock ownership plan (ESOP) or a participant-directed 401(k) plan), the employer offers its own stock as either the entire pension plan investment or part of the pension plan investment. When the company goes south and its stock price falls, plan fiduciaries find themselves in a difficult position as far as whether to sell the stock or to hold on to it. This is especially so when the plan fiduciary has conflicting duties as an officer of the company and as a fiduciary of the plan. As a corporate officer, not only is the person supposed to act in the best interests of shareholders to maximize the value of the company, but securities law forbids them to trade stock based on non-public material information. As a fiduciary to the ESOP or 401(k) plan, ERISA gives that same person an obligation to act in the best interest and with the same care as a prudent fiduciary would when making decisions about that employee benefit plan. And in case you are wondering, ERISA Section 408(c)(3) gives employers the ability to assign the same person both officer and plan fiduciary roles or set up so-called “dual-role fiduciaries.” Continue reading “US Supreme Court Review: Two Employee Benefit Cases (Dudenhoeffer and Hobby Lobby)”
The majority opinion in the Supreme Court’s decision in the Hobby Lobby case is founded on the Religious Freedom Restoration Act (RFRA) and the restrictions it places on the Secretary of Health and Human Services (HHS) when she regulates and enforces the Affordable Care Act (ACA). While the issues raised by Justice Ruth Bader Ginsburg’s dissenting opinion as to the battle of interests protected by the Constitution are significant, an important practical legal issue that was not addressed in the Hobby Lobby case is the power of HHS to interpret the meaning of the ACA. Considering the majority’s reliance on two terms that go undefined by the Court — “sincere religious belief” and “closely held corporation” [see page 29 of the slip opinion and footnote 28] — and the fact that none of the other Hobby Lobby opinions address the meaning of these terms, it is essential that these terms be defined as they fit into the ACA context.
The Court’s failure to address how HHS might interpret the meaning of these terms is reasonable considering that HHS has not acted to interpret the meaning of a “sincere religious belief” or a “closely held corporation” in the context of the ACA. In fact, the majority states explicitly that courts will be able to separate those with “sincere religious beliefs” from those who do not. However, despite the majority’s reference to the ability, and impliedly the power, of courts to interpret the terms “sincere religious beliefs” and “closely held corporations,” terms such as these have been regularly interpreted by federal agencies as they apply to the statutes these agencies enforce. Continue reading “Chevron and the Hobby Lobby Decision”
Part one of this blog post concluded that Fantex’s IPO represents an unintended consequence of the 2012 JOBS Act. The costs imposed on startups attempting to go public are significant, and the burden of complying with mandatory disclosure laws can deter even the most-attractive startups from commencing an IPO. The JOBS Act is intended to decrease the burden on startups attempting to raise necessary capital by reducing the financial disclosure requirements normally imposed on public companies.
One way the Act reduces disclosure is through the status of “emerging growth company.” Most notably, an emerging growth company is defined as an entity with less than $1 billion in annual revenue. By falling within this broad definition, a startup may take advantage of reduced disclosure requirements for up to five years.
Based on this $1 billion threshold, the definition of emerging growth company is broad enough to encompass companies either experiencing an accelerated growth rate or with high-growth potential. Unfortunately, Fantex also falls within this broad definition of emerging growth company, as noted in its prospectus. Therefore, the real question is whether the definition is too broad so that companies with little, or no, demonstrated growth are being granted the same access to the investing public as companies that are actually growing. Continue reading “Protecting the Public from (Certain) Emerging Growth Companies”
Part 1 of 3: Legitimate or Emotional Investment?
During the NFL season, millions of fans are emotionally invested in their favorite teams and players. But since Fantex, Inc. filed a preliminary prospectus with the SEC on October 17, the notion of financially investing in professional athletes has generated considerable buzz. After letting the dust settle, a careful reading of the company’s prospectus reveals numerous red-flags regarding this IPO – most notably to potential investors.
At first glance, Fantex’s strategy to raise capital appears pretty straightforward. The company will raise $10 million by selling ten-dollar shares to the general public. Fantex also entered into a “brand contract” with Houston Texan’s running back Arian Foster. Under the terms of this contract, Fantex will make a one-time, $10 million payment to Foster in exchange for 20% of his future earnings. The company expects to enter into similar brand contracts in the future with not only athletes, but also entertainers and other high-profile individuals. If Fantex’s efforts are successful, it will issue dividends to investors. Therefore, the more shares that are purchased, the more dividends investors can expect to receive – right?
As with most IPOs, nothing is ever quite so clear. The details in the prospectus reveal that Fantex lacks any clear business model. More importantly, there is no clear plan for generating a return for investors. Based on the prospectus, it is safe to conclude that any reasonable investor would not purchase shares under this IPO. However, this offering is perfect for those investors who do not actually intend to make any profit. Continue reading “Adding Context to the Fantex Public Offering”
Earlier this summer, in Southern Union Co. v. United States (No. 11-94), the Supreme Court seemed to reverse course yet again in its on-and-off revolution in the area of jury-trial rights at sentencing. The revolution began with Apprendi v. New Jersey (2000), which held that a jury, and not a judge, must find the facts that increase a statutory maximum prison term. The revolution seemed over two years later, when the Court decided in Harris v. United States that no jury was required for mandatory minimum sentences. But, another two years after that, in Blakely v. Washington, the revolution was back on, with the Court extending Apprendi rights to sentencing guidelines. Blakelywas especially notable for its hard-nosed formalism: Apprendi was said to have created a bright-line rule firmly grounded in the framers’ reverence for the jury; we are not in the business, declared Justice Scalia for the Blakely majority, of carving out exceptions to such clear rules in the interest of efficiency or other contemporary policy concerns.
Then came Oregon v. Ice in 2009, which seemed to signal that the Court had again grown weary of the revolution. Continue reading “Ice Gets Iced”
Earlier this year I observed the 125th anniversary of the Interstate Commerce Act, among the most important statutes that Congress has ever enacted. I allowed that a future issue of the Marquette Law Review would publish essays by a number of leading scholars concerning the Act and its legacy. With the summer issue of the Marquette Law Review now out, that future is now.
The remembrance is titled “125 Years Since the Interstate Commerce Act: A Symposium in the Form of a Final Convocation.” As I explain in my Foreword (“The Last Assembly of Interstate Commerce Act Lawyers”), the essays, collectively available at the link at the beginning of this paragraph, are by an impressive collection of scholars:
- James W. Ely, Jr., the emeritus Milton R. Underwood Professor of Law and emeritus Professor of History at Vanderbilt University, recalls “The Troubled Beginning of the Interstate Commerce Act”;
- Randal C. Picker, the Paul and Theo Leffmann Professor of Commercial Law at the University of Chicago Law School, writes of the interplay between the Act and the antitrust law enacted only three years later, in “The Interstate Commerce Act and the Sherman Act: Playing Railroad Tycoon”;
- Thomas W. Merrill, who is Columbia University’s Charles Evans Hughes Professor of Law, discusses the unusual phenomenon of administered contracts in the Act’s regulatory scheme, suggesting that the form of regulation was more impressive than the fact (in “The Interstate Commerce Act, Administered Contracts, and the Illusion of Comprehensive Regulation”);
- Paul Stephen Dempsey, Tomlinson Professor of Global Governance in Air & Space Law and Director of the Institute of Air & Space Law at McGill University, focuses on the ICC as an agency, taking us broadly from its creation to its demise, in “The Rise and Fall of the Interstate Commerce Commission: The Tortuous Path from Regulation to Deregulation of America’s Infrastructure”;
- Richard D. Cudahy, Senior Judge of the U.S. Court of Appeals for the Seventh Circuit (whose scholarly and judicial career was recently celebrated by the Yale Journal on Regulation, but no link is available), points us to the future, sketching the possible relevance of the Interstate Commerce Act’s paradigm for modern debates over regulation (“The Interstate Commerce Act as a Model of Regulation”); and
- James B. Speta, Professor of Law at Northwestern University (and my fellow editor of this symposium), concludes the project with a critical assessment of the Act’s pertinence in an area—namely, telecommunications—with almost as much importance to the twenty-first century as the railroads (which the Act was passed to control) possessed in the nineteenth: “Supervising Discrimination: Reflections of the Interstate Commerce Act in the Broadband Debate.”
Most of these essays are short, and each is an engaging assessment of an act whose legacy can be felt today, not only in the general fact of the administrative state whose creation began with the Interstate Commerce Act but also in specific debates (as Prof. Speta demonstrates) about regulation today. We invite you to read the essays.
First of all, I have to admit that my prediction was wrong. I predicted that Paul Ryan would not be the Republican nominee for Vice President in 2012. My reasoning was simple: I didn’t believe that Mitt Romney would risk being overshadowed by his running mate on questions of economic policy. However, Mitt Romney did indeed choose Paul Ryan as his running mate late last Friday, thus demonstrating that he is comfortable running for President on a fiscal blueprint that is known as “The Ryan Plan” rather than “The Romney Plan.”
The selection of Paul Ryan immediately transforms the presidential race, turning it from an up or down referendum on President Obama’s performance into a choice between two starkly different views of economic policy. The Republican Party, which proudly labels itself a “brand,” will now embark on an effort to sell a plan that includes tax cuts for the wealthiest Americans, reductions in monies spent on programs that benefit low income Americans, and the acceptance of unrestrained budget deficits because defense spending is left untouched. The sales pitch is that this combination will lead to a faster economic recovery. The question is whether anyone will buy what they are selling. Continue reading “Of Paul Ryan and Buggy Whips”
On August 1, 2012, Illinois Governor Pat Quinn signed into law a bill that prohibits employers from requesting or requiring employees or prospective employees from providing “any password or other related account information” to gain access to the individual’s social networking account. Ill. Public Act 097-0875. By enacting the legislation, Illinois joins Maryland as states that prohibit employers from obtaining social media account password information. The law amends the Illinois Right to Privacy in the Workplace Act, 820 ILCS 55, and is effective January 1, 2013.
Illinois’ new social media legislation confirms that employers maintain the right to create lawful workplace policies that regulate the use of computer equipment, e-mail, and internet use. Moreover, the law also allows employers to monitor employee use of the employer’s electronic equipment and e-mail. Employers also may still obtain publicly available information concerning employees or prospective employees under the new law.
As part of the Right to Privacy in the Workplace Act, the law is subject to investigation and enforcement by the Illinois Department of Labor. Potential damages under the law include reasonable attorney’s fees if the violation is found to be willful and knowing.
This legislation comes in response to public criticism of reported incidences of employers seeking social media account password information for purposes of evaluating position applicants. Illinois employers who currently engage in such practices should be aware that any hiring policy or practice that requires applicants or employees to reveal such information will be a violation of Illinois law after the end of the calendar year.
Cross-posted to General Counselor.
I first want to take a moment to thank the Marquette Law School Blog editorial faculty for inviting me to be the alumni blogger this month. I have enjoyed the content the MULS blog has offered since its inception, and I am honored to now be a part of it.
I primarily practice in management-side, labor and employment law in Wisconsin, but I have a special interest in how social media interacts with these practice areas. My posts will focus on various ways that social media collides with the law in this respect and others.
As a side note, I not only observe social media but I am a user, too. You can follow me on Twitter @jesse_dill. I typically Tweet about developments dealing with labor and employment law, Milwaukee, and the occasional grumblings about how my favorite teams are not meeting my perfectly reasonable (read: exceedingly high) expectations.
Social media services like Facebook, Twitter, LinkedIn, FourSquare, Instagram, and the like have quickly become the hot topic in my line of work because of their widespread use among employers and employees. Whether an employer wants to utilize a service for recruiting purposes or try to regulate its use by employees in the workplace, a host of fascinating issues arise while attempting to apply old legal theories to these new devices. Continue reading “Here’s My Invite, so Friend Me, Maybe? Changing Notions of Privacy in Social Media”
The decision in National Federation of Independent Business v. Sebelius is a victory for the supporters of the Affordable Care Act, and a fairly broad vindication for the constitutionality of the law. Here are my initial thoughts:
This is a big win for the Obama Administration. The only portion of the law struck down is the Medicaid expansion provision, on the grounds that Congress cannot threaten to take away funds previously granted to the States if the States fail to accept new conditions. This strikes me as a fairly reasonable gloss on the case of South Dakota v. Dole and, at the same time, a constitutional interpretation that still allows Congress a fair amount of flexibility to attach conditions to the receipt of new federal dollars.
I am not persuaded by Justice Robert’s argument rejecting Congress’ power under the Commerce Clause. It strikes me as primarily conclusory rather than analytical, and my initial reaction is that it should be considered dicta since Justice Roberts upholds the ACA on other grounds. Of course, I have already made clear that I am inclined to agree with Justice Ginsburg that the Court’s precedent under the Commerce Clause provides ample support for the ACA’s constitutionality, as I argued in previous posts here and here.
Nor am I convinced by Robert’s tax argument. He labors a great deal to make the case that the ACA does not impose a “tax” for purposes of the statutory Ant-Injunction Act but nonetheless imposes a “tax” under Congress’ constitutional taxing authority.
It appears to me that Roberts tried to split the baby in a statesman-like way, by giving victory to Obama but by using reasoning and language designed to placate President Obama’s critics. Am I the only person who read Justice Robert’s opinion and thought of Marbury v. Madison?
Today I particpated in another debate over the constitutionality of the Affordable Care Act’s individual mandate. At the invitation of the Milwaukee Chapters of the Federalist Society and the American Constitution Society, I debated Robert Levy of the Cato Institute over luncheon at the Milwaukee Athletic Club. My thanks to our hosts, to Mr. Levy, and to the audience. Below are my prepared remarks. My previous post on the consitutionality of the individual mandate can be viewed here.
In December 1783, George Washington gave a toast at a dinner celebrating the formal dissolution of the Revolutionary Army. He did not use his toast to offer a tribute to individual liberty. Nor did he sing the praises of limited government. Instead, his toast was a simple expression of what he hoped the future would bring to our new nation. He raised his glass and he said: “Competent powers to Congress for general purposes.”
We must never forget that our Constitution is a document that was intended to create competent powers for Congress for general purposes.
Much of what Mr. Levy cites in oppostion to the individual mandate is based upon abstract principles. However, when we interpret the Constitution, we do not begin with abstract theories of political philosophy, and then attempt to shoehorn those theories into the text.
Instead, when we interpret the Constitution, we begin by looking to the text itself.
The power to “regulate,” which is the power delegated to Congress under the Commerce Clause, is the power to prescribe the rules by which commerce is governed. The word “regulate” means “to direct” or “to command.” Therefore, the plain meaning of the word “regulate” in the text includes a grant to Congress of the power to require action. Continue reading “ObamaCare Is Still Constitutional”
Last week, Ed Fallone posted his prepared remarks at our debate on the constitutionality of the individual mandate in the health care law. Inspired by his example, I have – after a fashion – cleaned up my notes for last week’s debate. This is how I see it.
When Nancy Pelosi was asked about the potential for a constitutional challenge to the health care law, her response was “you’ve got to be kidding.” The substance of her response – “look, we used the commerce power and that permits us to do almost whatever we want” – reflected large patches of conventional wisdom.
Many lawyers (particularly those trained before the Rehnquist Court began to push back against an unlimited commerce power) and, in particular, Progressive legal academics thought that this dragon had been slain long ago. They assumed that the idea that there might be structural limits on the federal constitution had been relegated to the status of flat earth creationism and alchemy.
Continue reading “The Individual Mandate: A Rejoinder”