Diversity of One

by Victoria Bassetti

*Victoria Bassetti is leading ACS' analysis of US Attorneys.

On September 21, when Louis V. Franklin, Sr., raised his hand to take the oath as U.S. Attorney for the Middle District of Alabama, he could not have known that Donald J. Trump, the man who had appointed him, would launch an attack the next day on black football players who take the knee.

What Franklin surely knew, however, was that he is the only African-American President Trump has selected thus far to be a U.S. Attorney or indeed to hold any senior position at the Department of Justice.

President Trump has nominated 46 people to be U.S. Attorneys to date. Of them, three are women; two are Asian American; and one is Native American. And one, Franklin, is the only African American.

Law enforcement officials and prosecutors are concerned about the lack of diversity in the Trump class of US Attorneys.

“I can probably tell you that the vast majority of people they are going to be serving or prosecuting are going to be black or brown people. So, it’s troubling,” said William Jorden, president of the National Black Prosecutors Association. “How can you say you represent the people. You can’t represent the people if you don’t look like the people.”

“This coincides with the troubling regularity of divisive rhetoric and with the violence [of Charlottesville]. It all has to go in one large melting pot of concern,” said Jorden.

“It’s important to have confidence in the system, especially at this point in time. A diverse corps enhances the credibility of the system,” said Ron Weich, dean of the University of Baltimore School of Law. “There is a crisis of faith in the criminal justice system, and we need law enforcement officials who represent the full range of community members,” he said.

Overall, two percent of Trump’s nominees are black. Seventeen percent of President Barrack Obama’s nominees for the top prosecutor posts were African American. There are 93 US Attorneys in the United States, serving in each of the judicial districts.

The 59-year-old Franklin has spent almost his entire legal career at the U.S. Attorney’s office for the Middle District of Alabama. He started with the office as an Assistant U.S. Attorney in 1990 and eventually rose to be its Criminal Chief. He was briefly in private practice from 1996 to 1998. The Senate confirmed him as U.S. Attorney on September 14 by voice vote.

The Middle District of Alabama covers the southeastern corner of the state and includes the state’s capital, Montgomery.

In 2006, as head of the office’s criminal division, Franklin led the headline making prosecution of Alabama’s then-Governor Don Siegelman on corruption charges. Siegelman, the last Democrat to hold statewide office in Alabama, was convicted on bribery and obstruction of justice charges. The jury found that Siegelman had sold a seat on a state regulatory board in exchange for a $500,000 donation to a campaign he was associated with.

The Siegelman case was quickly embroiled in controversy, with charges that the prosecution was politically motivated, that it had been strongly influenced or even driven by then White House Senior Advisor Karl Rove, and that it had little legal justification. More than 50 state attorneys general from both parties pushed for a congressional investigation of the matter shortly after Siegelman’s conviction. "I haven't seen a case with this many red flags on it that pointed towards a real injustice being done," Grant Woods, the former Republican attorney general of Arizona told a CBS reporter at the time. The House Judiciary Committee opened an investigation into the prosecution.

Franklin himself came under fire from observers for offering multiple and conflicting explanations for the decision to investigate and then prosecute Siegelman. An investigation by the Department of Justice’s Office of Professional Responsibility concluded that the investigation was not politically motivated.

The 93 U.S. Attorneys President Trump appoints will be at the forefront of his Administration’s efforts to set law enforcement priorities. 

Department of Justice watchers worried that the lack of African Americans in prominent positions would also affect the process by which future policy decision would be made. Historically, the Attorney General has an Advisory Committee composed of U.S. Attorneys that provide him or her feedback. In the early days of the Obama Administration, when the Department was headed by Eric Holder, that committee was chaired by Loretta Lynch, then the U.S. Attorney for the Eastern District of New York and an African American. There was always “an array of views and perspectives in that room,” said Weich who was the Assistant Attorney General for Legislative Affairs under Holder.

“I was in many meetings with U.S. Attorneys at DOJ, and I was always struck by the diversity of viewpoints and experience in the room. That was so valuable,” Weich said. “African American U.S. Attorneys were strong advocates for the Department’s positions on sentencing reform and hate crime legislation.”

The lack of African Americans “is concerning because not only is the U.S. Attorney the lead law enforcement offices for the district” but because of their role in advising Attorney General said Barbara McQuade, who was the U.S. Attorney for the Eastern District of Michigan for seven years in the Obama Administration. Under Attorney General Holder, the U.S. Attorneys met as a group eight times a year and in addition served on several DOJ working groups including one on racial diversity. “It’s useful to have diverse perspectives at the table for the administration of justice,” McQuade said.

In the eight months since Jeff Sessions became Attorney General, he has reversed course on many Obama-era prosecutorial objectives. In May, he directed local DOJ offices, led by the U.S. Attorneys, to bring the most serious charges and seek the most severe penalties possible in criminal cases with an emphasis on mandatory minimum sentences. The directive reversed an Obama-era initiative that urged prosecutors to avoid bringing charges that could trigger mandatory minimum sentences against non-violent drug offenders.

Sessions also announced a renewed use of civil asset forfeiture at the Department this summer. “We will continue to encourage civil-asset forfeiture whenever appropriate in order to hit organized crime in the wallet,” he said. Civil asset forfeiture is a technique used by law enforcement to seize property involved in criminal activity. In many cases, the property can be taken before a criminal conviction has been secured. Sessions revived a program put to rest by Attorney General Eric Holder that allowed state and local governments to seize assets under the auspices of federal law. Federal agencies later shared the bounty back with them. That program was viewed as enabling abuse of civil asset forfeiture laws.

A Washington Post analysis of the program found that more than $2.5 billion in assets had been taken under the program in a thirteen-year period from late 2001 to 2014. It found that “local and state police routinely pulled over drivers for minor traffic infractions, pressed them to agree to warrantless searches and seized large amounts of cash without evidence of wrongdoing.”

The absence of African Americans at the Department could “retard the growth and development of what National Black Prosecutors Association have been pushing for – more inclusion of black and brown people in the prosecutorial ranks,” said Jorden.

The reason for the lack of African-American nominees is unclear. Traditionally, responsibility for selecting U.S. Attorneys is diffuse. Nominees are selected on a state-by-state basis with Senators, especially those of the President’s party, playing a dominant role in suggesting the nominees to the White House and Department of Justice. “I’m not sure if it’s fair to lay [responsibility for the lack of diversity] at the President and Session’s door. No one’s looking at the whole field,” said McQuade. She noted that there is a tendency for Senators to pick people they know. “There is an old boy’s network. If that’s what’s going on, instead of a merit selection process, that could account for the difference,” between the diversity of Obama and Trump’s picks.

One reason for the lack of African-American appointees could be because African Americans are reluctant to work for an Administration that is seen as “hustling backwards,” Jorden said. “Some people may not want to serve.” He also added that qualified African-American candidates might be overlooked because they are not viewed as law enforcement leaders. “Either way, I know it’s troubling.”

Jorden said, however that there were many qualified African-American prosecutors who would be interested in being U.S. Attorneys. “All they have to do is reach out and ask.”

One Senate staffer who worked on the nominations process at the beginning of the Obama Administration, who asked not to be named, said that he recalled clear input from the White House pushing Senators to actively seek minority and women candidates for the post.

Overall, African-Americans are underrepresented in prosecutors’ offices. A 2014 survey of 2,400 elected prosecutors nationwide found that 95% of them were white and 79% were men.

The Attempt to Make the Muslim Ban Permanent

by Ryan J. Suto, J.D., Government Relations Manager, Arab American Institute

On September 24, the Trump White House released a new Presidential Proclamation effective October 18, which essentially makes permanent the temporary Muslim/refugee Ban the president signed earlier this year. The Proclamation, like Trump’s previous Muslim Ban actions, relies on the fundamental assumption that foreigners, and specifically Muslims and Arabs, pose a heightened threat. Arguing “...foreign nationals who may commit, aid, or support acts of terrorism, or otherwise pose a safety threat…” the Administration holds tightly to creating xenophobic fears, despite no existing evidence to show that foreign nationals commit crimes at greater rates than citizens.

Whereas the temporary travel ban, EO 13780, included Iran, Libya, Somalia, Sudan, Syria and Yemen, the Sept. 24 proclamation removed Sudan and added Chad, North Korea, and Venezuela. It also added nuance by providing a rationale to the Administration’s additions to the banned countries list, something we hadn’t seen with previous iterations.

While flawed at best, the Administration will undoubtedly point to their nuanced process, the various exceptions to the travel restrictions, the allowance for case-by-case waivers, and the addition of non-Muslim majority countries as reasons why the new ban is rational, objective, and constitutional. However, each of these defenses are lacking.

First, the establishment of the process by which the list of countries was created is important for distancing the Administration’s policy from their campaign conclusion that Muslims must be banned from entering the US. This Proclamation argues national security is a compelling state interest and that a travel ban is necessary because technological deficiencies prohibit the US from ensuring the identity of travelers which threatens national security. However, nowhere in the Proclamation does the Administration show that the claimed technological deficiencies, even if they do exist, actually lead to national security threats. At no point does the Proclamation note an instance or statistic to show that the lack of such technologies lead to increased terrorism threats.

Next, the Administration will point to the various exceptions to the travel restrictions and the allowance for case-by-case waivers to show the ban is not a blanket policy, but is narrowly-tailored to target individuals who pose heightened risks. Such provisions are insufficient to protect innocent foreign nationals because the Administration is nonetheless creating a presumption of danger: any individuals from these countries are presumed terrorists unless shown otherwise. Importantly, this presumption existed in the original Muslim Ban while specifically excluding non-Muslims. Further, the exceptions and case-by-case waivers are the same as they were under the temporary Muslim Ban, which nonetheless saw CBP agents harass and detain those who clearly fell under those exceptions, including US citizens who happen to be Arab or Muslim. The Administration’s thinly-veiled attempt to put a neutral face on a discriminatory policy nonetheless had the discriminatory impact it desired.

Last, Trump will claim that the addition of Venezuela and North Korea prove that the policy does not target Muslims. These additions are cosmetic and designed to hide the ban’s original intent. In North Korea travel to the US is already illegal, and most North Koreans seeking refuge in the US do so on South Korean passports. As for Venezuela, the ban involves a limited set of government officials and their families. This means that Muslim travelers remain the focus of the policy and the group most impacted.

Importantly, under the Proclamation there is no stated venue for individuals to challenge their treatment, and the Administration can, at will, expand the ban to broader classes of individuals or more countries. Allowing the Trump Administration to ban travel from these eight countries under this Proclamation opens the door for the ability to ban entire ethnic or religious groups without individual redress.

Regardless of how the Court handles the existing dispute over the first Muslim Ban, the permanent version via proclamation explicitly aims to limit the presence of the Arab and Muslim populations in the US through targeted immigration control. Such policies and intentions are evocative of the shameful Chinese Exclusion Act of 1882, and subsequent discriminatory US immigration policies, which banned the immigration of Chinese laborers to the US because they “endanger[ ] the good order of certain localities”. Contemporary US Senator George Frisbie Hoar of Massachusetts called the Chinese Exclusion Act “nothing less than the legalization of racial discrimination.” He was correct then, and the same is correctly said of the most recent  Muslim Ban Proclamation. Congress must now act again to end these bigoted, xenophobic policies emanating from the White House. Our country deserves nothing less.

Loyalty

by William Yeomans, Lecturer in Law, Columbia Law School

*William Yeomans served 24 years in the Civil Rights Division of the Department of Justice. He is currently the Ronald Goldfarb Fellow at the Alliance for Justice and Lecturer in Law at Columbia Law School.

Interior Secretary Ryan Zinke last week stated in a speech to oil industry executives that among Interior Department employees he “got 30 percent of the crew that’s not loyal to the flag.” He elaborated that they were not loyal to President Trump or to him. Zinke’s comments convey an attitude toward government service that is grounded in ignorance of the role of career government servants.

First, Zinke, as did Trump in dealing with former FBI Director James Comey, equated “loyalty” to the president with loyalty to “the flag,” presumably meaning the country. He suggested that patriotism in federal employment requires loyalty to the president. In reality, of course, every federal employee takes an oath to uphold the Constitution and does not swear fealty to the occupant of the Oval Office or his appointees. Federal employees serve their country by defending the Constitution and enforcing duly enacted law.

Zinke’s comment reflects a commonly held misunderstanding of career government service and why it is important in our constitutional scheme. Historically, government service was corrupted by non-meritocratic favoritism and political cronyism in hiring and promotion. Indeed, federal jobs too often were distributed as part of a grand spoils system. Our current civil service structure is an attempt to bolster the integrity and quality of employment decisions by basing them on a structured evaluation of the ability of a candidate to do the job.

Governments have learned repeatedly that creation of a merit-based, non-political bureaucracy is fundamental to building and preserving the legitimacy of government. Government functions best when staffed by a core of permanent and expert professionals. The challenge has long been how to prevent an entrenched bureaucratic class from becoming too powerful and how to ensure democratic responsiveness. The federal government’s response has been the creation of a complex set of relationships between political and career appointees and between the executive and legislative branches of government.

In our system, career government employees are supposed to be hired without inquiry into their political affiliation and they serve through both Democratic and Republican administrations. They contribute 1) substantive expertise based on years of immersion in a subject, 2) experience that can help shape effective policies and save incoming appointees both embarrassment and the need to reinvent the wheel, 3) an understanding of institutional culture and norms that helps political appointees get things done, 4) knowledge of and relationships with relevant players in Congress, NGO’s and others with an interest in the work of the agency, and 5) continuity through transitions in the White House. They owe allegiance to the Constitution and to the missions of their agencies, as defined by Congress and previous executive experience.

The average service of a political appointee is less than two years. They are selected because of a combination of their political connections and ability to do their jobs. Many bring 1) strong resumes, 2) political connections within their agencies and with Congress, 3) fresh perspectives, 4) energy, and 5) a desire to pursue the president’s agenda. They, too, swear to defend the Constitution, but they also understand that their jobs depend on pleasing the president.

Political appointees appropriately have the authority to make final decisions. Those decisions, however, are made best when they follow a process that incorporates the experience and expertise of career employees. As a practical matter, there simply are not enough political employees to handle the duties of government. More importantly, however, good decision-making rests on a foundation of facts, expertise, and experience to which career employees contribute enormously. While political and career employees may disagree, both are served best by an inclusive process that allows for reasoned discussion. 

Too often, political leaders, like Zinke, assume their positions burdened with deep distrust of career employees. They view them as an enemy that must be subdued or circumvented if the president’s agenda is to be served. Rather than engage and attempt to lead through an inclusive process, they shortsightedly seek to rule by fiat. Often they do so in ways that are ill-informed and, as a result, inconsistent with the established mission of the agency and longstanding interpretations of statutes and the Constitution. Principled career employees, who are bound by their oaths to uphold the Constitution, have a duty to push back. Ideally for all, they should have this opportunity before a final decision is made.

Weak political leaders who cannot tolerate disagreement have been tempted to reject merit-based hiring in favor of hiring people who share their political views. Such efforts to politicize the bureaucracy are unlawful and counterproductive, as George W. Bush’s Department of Justice learned. It undermined enforcement of civil rights law by filling the ranks of career attorneys with attorneys chosen for their right-wing politics and punishing successful attorneys perceived as too liberal. Its unlawful conduct destroyed morale within the Civil Rights Division, damaged its credibility with courts and advocates, and inflicted substantial damage on the Department of Justice.

We need a government that acts on the basis of facts, expertise, and experience. Shutting out the career bureaucracy from the process or distorting hiring practices to turn the bureaucracy into a reflection of the prevailing politics of the day will cripple government’s effectiveness. It will also pose a threat to our democratic institutions. A principled, informed bureaucracy that is loyal to the Constitution is an essential safeguard against a lawless president.

The Dilemma of the Black Athlete as Activist

by Gregg Ivers, Professor of Government, American University

In early September 1957, Central High School in Little Rock became the focus of world-wide attention when Arkansas Governor Orval Faubus decided to deploy the National Guard to prevent the nine African American students who had applied and been chosen to integrate the school from entering the building. For a three week period, the Central High grounds resembled the set of a science fiction film of the era – upright American soldiers with bayonet-tipped rifles protecting innocent children from an alien force in their midst. Finally, on September 25th, the Little Rock Nine, now with the support of a federalized Arkansas National Guard and the 101st Airborne Division – activated and sent to Little Rock by President Dwight D. Eisenhower – were escorted into Central High to begin a school year that they and everyone else in Little Rock would never forget.

The Little Rock crisis did not escape the attention of former Brooklyn Dodger Jackie Robinson. Just over nine years before, Robinson entered, almost overnight, into the lives of white America when he became the first African American to penetrate one of the most sacrosanct citadels of white supremacy – professional baseball. On April 15th, 1947, when Robinson jogged to first base on Opening Day at Ebbets Field, he did more than just break the color barrier in what was then America’s most popular sport. He destroyed it.

Largely forgotten in the retelling of the Jackie Robinson story is that of the 26,623 fans that attended Robinson’s first game, about 5,000 short of a sell-out, an estimated 14,000 were black. In one day, more black fans attended a Brooklyn Dodgers game than in the franchise’s entire existence. That year, the Dodgers set an attendance record at home, as their fans embraced their new hero. They also became the sport’s leading draw on the road. This was hardly a coincidence.

By the end of his first season, only the most hard-core segregationists failed to embrace Robinson’s remarkable combination of determination, courage, intelligence and athleticism. He was named Rookie of the Year, the first year the award was given out, and was feted with gifts in an end of the year ceremony at Ebbets Field. As Jules Tygiel wrote in Baseball’s Great Experiment, “For blacks, Robinson became a symbol of pride and dignity; to whites, he represented a type of black man far removed from the prevailing stereotypes, whom they could not help but respect.”

But then something happened along the way that changed the public’s perception of Robinson as a grateful black man just happy to have the opportunity to play baseball with whites – the real Jackie Robinson emerged. The Jackie Robinson that baseball fans and sportswriters thought they knew was not the man that Branch Rickey selected to break the color barrier. Robinson never accepted Jim Crow, whether in his occasional run-ins with white authorities while growing up in Pasadena and attending college at UCLA over the restrictions placed on blacks. Most famously, in 1944, Robinson was court-martialed at Fort Hood, Texas, when he refused to sit in the back of a military bus. He was later acquitted.

After his second year with the Dodgers, Robinson began fighting back, in accord with the terms that Rickey had established when he signed with the Dodgers in 1945. On the field, he challenged umpires, confronted opponents who played dirty against him and began to make public statements about the difficulties that blacks faced in baseball and in American society. Had he been white, Robinson would have been lauded as a gamer and a competitor.

Instead, the press began to turn on him, suggesting that he wasn’t grateful for the opportunities he had been “given.” Outside of Brooklyn, Robinson’s popularity steadily diminished. White America embraced black players like Willie Mays, Hank Aaron and Larry Doby, none of whom ever, at that point, publicly discussed race. By the time he retired in 1956, Robinson was perhaps the most unpopular man in baseball.

After almost six weeks of unprecedented drama at Central High, Robinson had seen enough. Having become the NAACP’s most prominent fund-raiser and public spokesman shortly after his retirement in 1956, Robinson worked with Arkansas NAACP officer Daisy Bates to arrange a phone call to the students. On October 17th – 59 years ago – Robinson spoke to seven of the Little Rock Nine and a few of their parents. A transcript of this conversation, which I recently read in his papers held at the Library of Congress, make clear Robinson’s stature among African Americans. One of the black students, Terrence Roberts, told Robinson, “I would like to say that what we are doing is only following the example you gave us, which is a very fine one, and we are trying to follow in your footsteps.

By the early 1960s, shortly after he was inducted into the Hall of Fame, Robinson turned his back on the game he revolutionized, claiming there was no place for him in baseball anymore. He had long become a fixture in the civil rights movement, raising money, participating in the March on Washington and supporting desegregation and voting rights efforts in the Deep South. His papers contain some of the many letters Robinson would write every living president of his post-baseball lifetime, imploring them in frank terms to take action on the various civil rights causes.

Robinson was, in many ways, a broken man when he died in 1972, remembered as the man who integrated white professional baseball, not as a civil rights activist who used baseball to pursue racial justice.

Today, however, Robinson is universally revered, admired as much for his courage as for the excitement he brought to the game. In 1997, Major League Baseball announced that Robinson’s number, 42, would be retired throughout the sport, an honor no other player has ever received.  Recent books and documentaries delve much deeper into Robinson’s civil rights activism the courageous civil rights advocate and praise him for his example and his willingness to use his celebrity to advance racial fairness.

African American Athletes who followed in Robinson’s wake, such as Muhammad Ali, experienced as similar demise in their popularity when they began to speak out on civil rights matters. Claiming conscientious objector status after he was drafted to serve in Vietnam, Ali was banished from boxing for almost four years and widely condemned by sportswriters and a public who loved the young, playful Cassius Clay. Yet, upon his death in 2016, Ali somehow was only remembered as a courageous, principled humanitarian whose position was borne out by a Supreme Court decision exonerating his position.

Twenty years from now, Colin Kaepernick may or may not be remembered for the protest he started when he refused to stand for the national anthem during an NFL pre-season game last year. But people will remember how Kaepernick’s protest slowly took on a life of its own, spreading to other sports and down the chain to colleges, high schools and youth programs. Obviously, Kaepernick’s message has resonated with minority athletes. A growing number of white athletes have supported their non-white teammates, having a better view of a black athlete’s life than many of those who have criticized Kaepernick’s position as selfish. This includes, not surprisingly, the current president, who believes that the First Amendment protects the rights of white Christian supremacists, unrepentant Confederate sympathizers and neo-Nazis, but not those who speak out against them in peaceful fashion.

Jackie Robinson was not just the first African American to integrate white professional baseball. He was the first athlete, regardless of race, to use his status and celebrity to engage the political world and speak out against racism in sports and society. For the black athlete, speaking out has been both a burden and a necessity – something they’re expected to do because they’re black, and yet something they need to do because they’re black. White America has no problem accepting the black athlete and hasn’t for some time, as long as they put the ball in the hoop, the end zone or in the stands. Extending that respect to black athletes as men is the next step.

Professor Ivers is currently working on a book, "Swingin' at Jim Crow: How Jazz Became a Civil Rights Movement". 

Forced arbitration is bad for consumers

*This piece originally appeared on the EPI blog.

by Heidi Shierholz, Senior Economist and Director of Policy, Economic Policy Institute

Many financial institutions use forced arbitration clauses in their contracts to block consumers with disputes from banding together in court, instead requiring consumers to argue their cases separately in private arbitration proceedings. Embattled banking giant, Wells Fargo, made headlines by embracing the practice to avoid offering class-wide relief for its practices related to the fraudulent account scandal and another scandal involving alleged unfair overdraft practices.

New data helps illuminate why these banks—and Wells Fargo in particular—prefer forced arbitration to class action lawsuits. We already knew that consumers obtain relief regarding their claims in just 9 percent of disputes, while arbitrators grant companies relief in 93 percent of their claims. But not only do companies win the overwhelming majority of claims when consumers are forced into arbitration—they win big.

Some crucial background helps illustrate the stakes. In July 2017, the Consumer Financial Protection Bureau (CFPB) issued a final rule to restore consumers’ ability to join together in class action lawsuits against financial institutions. Based on five years of careful study, the final rule stems from a congressional directive instructing the agency to study forced arbitration and restrict or ban the practice if it harms consumers.

In recent weeks, members of Congress have introduced legislation to repeal the CFPB rule and take away consumers’ newly restored right to band together in court. Opponents of the rule have suggested that the bureau’s own findings show consumers on average receive greater relief in arbitration ($5,389) than class action lawsuits ($32). As we have previously shown, this is enormously misleading. While the average consumer who wins a claim in arbitration recovers $5,389, this is not even close to a typical consumer outcome. Because consumers win so rarely, the average consumer ends up paying financial institutions in arbitration—a whopping $7,725.

A recent report released by the nonprofit Level Playing Field hones in on Wells Fargo’s use of arbitration in consumer claims. Compiling publicly reported data from the American Arbitration Association (AAA) and JAMS (initially named Judicial Arbitration and Mediation Services, Inc.), the report found that just 250 consumers arbitrated claims with Wells Fargo between 2009 and the first half of 2017.1 This number is surprisingly small, since this period spans the prime years of the bank’s fraudulent account scandal.

But we can take this data a step further by looking at Wells Fargo’s overall gains and losses in arbitration. As one might suspect based on the CFPB data, Wells Fargo indeed won more money in arbitration between 2009 and the first half of 2017 than it paid out to consumers, despite creating 3.5 million fraudulent accounts during that same period.

What is even more troubling is that forced arbitration seems to be significantly more lucrative for Wells Fargo than for other financial institutions. In arbitration with Wells Fargo, the average consumer is ordered to pay the bank nearly $11,000. We calculated a mean of $10,826 awarded to the bank across all claims in the Level Playing Field report.

No wonder Wells Fargo prefers forced arbitration to class action lawsuits, which return at least $440 million, after deducting all attorneys’ fees and court costs, to 6.8 million consumers in an average year. Banning consumer class actions lets financial institutions keep hundreds of millions of dollars that would otherwise go back to harmed consumers—and Wells Fargo seems to have harmed huge numbers of consumers.

Opponents of the CFPB’s arbitration rule argue that allowing consumers to join together in court will increase consumer costs and decrease available credit. Most recently, the Office of the Comptroller of the Currency (OCC) claimed that restoring consumers’ right to join together in court could cause interest rates on credit cards to rise as much as 25 percent.

However, examining the OCC’s study, it appears the agency merely duplicated the conclusion reached by the CFPB and based its 25 percent estimate solely on results it admits are “statistically insignificant at the 95 percent (and 90 percent) confidence level.” In its 2015 study, the CFPB considered this same data and accurately assessed that there was no “statistically significant evidence of an increase in prices among those companies that dropped their arbitration clauses.”

Perhaps more importantly, claims that the arbitration rule will increase consumer and credit costs are also contradicted by real-life experience. Consumers saw no increase in prices after Bank of America, JPMorgan Chase, Capital One, and HSBC dropped their arbitration clauses as a result of court-approved settlements, and mortgage rates did not increase after Congress banned forced arbitration in the mortgage market. Of course, many would argue that banks like Wells Fargo shouldbear any increase in cost associated with making consumers whole for egregious misconduct.

Once again, the numbers are clear: class actions return hundreds of millions in relief to consumers, while forced arbitration pays off big for lawbreakers like Wells Fargo.

Endnotes

1.To my knowledge, AAA and JAMS are the only firms that routinely provide arbitration services to Wells Fargo. In arbitration agreements, Wells Fargo typically designates AAA as the arbitration firm to arbitrate any consumer dispute.

 

Supreme Court Should Reject Corporate Impunity for Financing Terrorism

by John M. Eubanks, Member, Motley Rice LLC, Petitioners’ Counsel in Jesner v. Arab Bank

Imagine a situation where an international bank with a presence in Manhattan holds accounts for known terrorists and serves as the end-payor to beneficiaries of a fund created for the explicit purpose of supporting an armed uprising typified by suicide bombings and indiscriminate killing of civilians carried out by known terrorist organizations with whom the bank’s accountholders are directly affiliated. Then, picture this international bank being immune from lawsuits filed by the victims of these suicide bombings and indiscriminate killings solely on the basis of its corporate form. This is precisely the issue with which the Supreme Court will grapple in Jesner v. Arab Bank, to be argued before the Court on October 11, 2017.

Jesner addresses the same question that was raised in Kiobel v. Royal Dutch Petroleum Co. during the October Term 2011. That question is whether the Alien Tort Statute (ATS),  creates a categorical bar to corporate liability for violations of the law of nations, or customary international law. The U.S. Court of Appeals for the Second Circuit – from which this appeal came – is the only federal court of appeals to determine that corporations are immune from the reach of the ATS, finding itself in conflict with the U.S. Courts of Appeals for the Seventh, Ninth, Eleventh, and District of Columbia Circuits. While the Supreme Court had the opportunity to decide this issue in Kiobel, the Court instead answered a distinct question of whether claims under the ATS are subject to the presumption against extraterritoriality – that is, laws do not cover conduct that takes part outside the territorial confines of the United States absent explicit language to that effect. The Supreme Court carved out a test for overcoming this presumption under the ATS – “where the claims touch and concern the territory of the United States, they must do so with sufficient force to displace the presumption against extraterritorial application.”

Assuming the presumption against extraterritoriality is displaced, the question becomes – do we want corporations to be able to violate customary international law, including human rights law, with impunity? The language of the ATS does not explicitly exempt corporations. In fact, the text of the statute is only 33 words long. It specifically lays out who can sue (“an alien”), but it provides no limitation for who can be sued. Under standard statutory interpretation, the ATS – as the Supreme Court noted in 1989 – “does not distinguish among classes of defendants.” In other words, if Congress sought to limit the scope of potential defendants in a statute, it knew how to do so, and it did not do that in the ATS. In fact, the use of the word “tort” to describe the type of action immediately invokes the concept of corporate liability as corporations have been liable for tort actions since long before the United States became a country. And as the Supreme Court has held, “when Congress creates a tort action, it legislates against a legal background of ordinary tort-related … liability rules and consequently intends its legislation to incorporate those rules.” One of those rules is this long-held concept of corporate liability for torts.

While seemingly cut-and-dried from a statutory interpretation standpoint, a 2004 Supreme Court case helped create the corporate immunity split in law. In Sosa v. Alvarez-Machain, the Supreme Court held that the ATS provided jurisdiction in the federal courts for a modest number of violations of customary international law that were well-established norms on par with norms that existed when the ATS was first enacted in 1789. However, the decision also included a discussion on violations of customary international law that could only be committed by sovereigns and those that could be committed by “private actors.”  In addressing this difference, footnote 20 of the opinion stated that “[a] related consideration is whether international law extends the scope of liability for a violation of a given norm to the perpetrator being sued, if the defendant is a private actor such as a corporation or individual.”  While this footnote clearly grouped both corporations and individuals under the heading of “private actors” as opposed to sovereigns, the Second Circuit determined that this footnote required that international law must recognize claims against corporations for violations of the law of nations in order to provide ATS jurisdiction.

The application of customary international law in the criminal context against private actors began in its current form in the post-World War II Nuremberg proceedings where an international tribunal was convened to adjudicate claims against individuals within the Nazi regime for having participated in, among others, crimes against humanity and war crimes. In these criminal proceedings, the defendants were limited to natural persons rather than corporations (or “juridical entities”). The trend of permitting international criminal tribunals to have jurisdiction solely over individuals and not over corporations has continued to this day through such modern international criminal tribunals as the International Criminal Court, the International Criminal Tribunal for the Former Yugoslavia, and the International Criminal Tribunal for Rwanda. The reasons for why these criminal tribunals limit their scope to the actions of individuals are complicated, but they revolve around a singular concept – corporations cannot be incarcerated, and the various countries who establish these tribunals have differing views on corporate criminal liability and how such justice may be meted out. Furthermore, in Nuremberg, corporate entities such as IG Farben – which manufactured Zyklon B that was used to gas Jews in the infamous concentration camp “showers” – were dismantled based on their role in violations of the law of nations including the Nazis’ “Final Solution.” The dismantling of these corporate interests was akin to a corporate death penalty for these corporations not unlike many of the convictions doled out against the individuals who were tried before the tribunal.

The converse to this trend in criminal law is the fact that all civilized countries in the world permit corporate civil liability. The fact that the ATS provides jurisdiction for a civil cause of action rather than a criminal one is a determining factor. The question then becomes whether corporate liability needs to be a part of the international norm to be recognized under the ATS or whether corporate liability is part of the remedy and thus subject to ordinary tort-related rules, which would allow such liability under the ATS. The United States Solicitor General has weighed in saying that it is part of the remedy, and corporations may be subject to liability under the ATS.

So this brings us back to the initial scenario – where a corporation engages in conduct that it knows will facilitate violations of the law of nations such as terrorism, crimes against humanity, or even genocide, can that corporation be held liable under the ATS to the victims of those violations? The answer is a simple “yes” based on the statutory text and common law’s interpretation of tort liability, and it is up to the Supreme Court to make this determination.