A Broadening of Diversity Jurisdiction

Students of civil procedure—which should mean just about everybody interested in using the formal processes of the law to vindicate rights—will be interested in a decision today by the United States Supreme Court. The opinion concerned the provision in the statutory grant of diversity jurisdiction that deems a corporation “to be a citizen of any State by which it has been incorporated and of the State where it has its principal place of business.” 28 U. S. C. §1332(c)(1) (emphasis added). There has been a longstanding imprecision—a lack of unanimity—within the lower federal courts as to whether a corporation’s “principal place of business” is its “nerve center,” “locus of operations,” “center of corporate activities,” “muscle center” (none of these latter four terms being statutory), or some otherwise determined place. In Hertz Corp. v. Friend, the Court resolved the matter.

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Judge Posner’s Argument Concerning “A Failure of Capitalism”

88px-Richard_posner_harvardzSurely there are more pressing things to do at this hour than scan my Google Reader headlines (well, actually, I’ve become a Feedly user, but the Feedly feed comes from Reader, mostly).

Nonetheless,  I couldn’t pass up today’s essay by Seventh Circuit Judge Richard A. Posner, on Foreign Policy’s website.   Titled “The Real Danger of Debt,” the article is described as having been “adapted from” Judge Posner’s book, “A Failure of Capitalism: The Crisis of ‘o8 and the Descent into Depression.”  In the article, Posner describes the “deeply wounded economy” of the United States, explaining that, essentially, “private savings are being borrowed by the government, combined with the government’s foreign borrowing, and then transferred to households to enable them to maintain their accustomed level of consumption. People are saving more, but government borrowing overwhelms their saving, with the result that aggregate saving — public plus private — is negative.”

He goes on to outline, in his usual clear, bracing style, the steps by which this state of affairs could lead to rising interest rates, instability in the value of the dollar, the loss of the dollar’s status as the chief  international reserve currency, increased savings rates, and decreased economic growth:

As real interest rates rise as a consequence of a growing public debt and declining demand for the U.S. dollar as an international reserve currency, U.S. savings rates will rise and, by reducing consumption expenditures, slow economic activity. Economic growth may also fall as more and more resources are poured into keeping alive elderly people, most of whom are not highly productive members of society from an economic standpoint. The United States may find itself in the same kind of downward economic spiral that developing countries often find themselves in.

This ominous prediction of where current trends may lead us is dramatic in itself  (although, sadly, much less dramatic than it would have seemed in 2007).  But rather than the worrisome warnings about a second economic depression, the passages that struck me most are the ones characterizing the current political situation in the United States.  

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Seventh Circuit Weighs in on Bankruptcy Fraud

seventh-circuit51In the wake of a surge in bankruptcies, can a boom in bankruptcy fraud prosecutions be far behind?  If so, district court judges will benefit from the Seventh Circuit’s opinion today in United States v. Peel (No. 07-3933), which addressed a number of unsettled legal questions.

The facts in Peel were unusually lurid for a bankruptcy case.  Back in the 1970’s, Peel had an affair with his wife’s sixteen-year-old sister.  Although the affair ended after a few months, Peel kept several nude pictures of the sister.  Some time later, Peel was divorced from his wife, and bankruptcy followed.  Peel’s largest financial obligation was to his ex-wife: $230,000 plus an additional $2500 per month for the rest of his life, pursuant to the terms of the divorce settlement.  The ex-wife filed a claim in the bankruptcy proceedings in order to ensure that these obligations were not discharged.  Peel then attempted to pressure her into dropping the claim by threatening to release the nude pictures of her sister.  The ex-wife complained to police, and Peel was eventually convicted of bankruptcy fraud, obstruction of justice, and possession of child pornography.

Judge Posner, writing for the court, addressed several issues relating to Peel’s convictions and sentence. 

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