The May 25 Launch of the GDPR Might Mean New Legal Headaches for American Technology Companies

The issue that United States v. Microsoft was going to address was a narrow one: did Microsoft have to obtain personal data stored by its Irish subsidiary in order to comply with a search warrant issued by a United States court. With the CLOUD Act’s passage, the issue on appeal was mooted by Congress’ explicit requirement that U.S. companies preserve and disclose personal data held overseas. But Microsoft raised an additional issue in the litigation leading up to the Supreme Court granting certiorari in the case which still remains unresolved after the CLOUD Act’s passage: If the Government’s interpretation of the warrant requirement was true, it could lead to companies having to violate the laws of the foreign country to satisfy a U.S. warrant. Ireland argued in its amicus brief in Microsoft that the proper way to seek the information was through the use of the US – Ireland Mutual Legal Assistance Treaty.  Given that Ireland’s Data Protection Act however did not explicitly prevent the disclosure of personal data to U.S. authorities, Microsoft’s conflict of laws question remained merely hypothetical. However, with the implementation of the General Data Protection Regulation (GDPR) this week on May 25, that issue may now arise, and it could have serious consequences for companies that face conflicting legal obligations.

The CLOUD Act requires communication service providers to preserve and disclose data held overseas when served with a valid warrant or other appropriate court order, and only allows a service provider to quash or modify the order if (1) the customer or subscriber is not a U.S. person that is not in the U.S. at the time, and (2) the required disclosure would violate the laws of a foreign government that has entered into an executive agreement with the United States.

We will have to wait and see what those executive agreements look like. While Mutual Legal Assistance Treaties could have been used in Microsoft, the process for obtaining data through this process often takes months (or even years) to complete. What we do know is that without an executive agreement, there almost certainly will be a problem when the GDPR enters into force. Article 48 of the GDPR requires that judgments of non-EU courts requiring the transfer of data to the non-EU countries will only be recognized when a relevant international agreement is in force.

The fact that the data sought may be that of a person in the United States makes no difference to the GDPR; its territorial scope is quite broad. Once a company stores personal data in a data center located in the EU, it is arguably subject to the GDPR and Article 48, even if the data sought pertains to a U.S. person.

This leaves companies with establishments or operations in both the U.S. and the EU in a bind, at least until executive agreements are in place between the U.S. and the EU or its member states. If a company in the U.S. receives a court order to disclose personal data stored in the EU after the GDPR goes into effect, it will have to choose between violating EU law by disclosing it in the absence of an international agreement or potentially finding itself in contempt of a U.S. court without a means to quash the subpoena due to the conflict of law issues.

Any executive agreement would theoretically need to incorporate the protections of the GDPR. Some of the groundwork for that was laid through the signing of the U.S. – EU Umbrella Agreement, which sets conditions for, but does not authorize, data transfers between law enforcement agencies in the U.S. and EU. But those are not, by themselves, sufficient grounds for challenging the court order when the disclosure is for a U.S. person. The CLOUD Act only allows a communications service provider to challenge the order when the data pertains to a non-U.S. person not currently in the United States. If a U.S. Attorney obtains an order for the data of a U.S. person that does not conform to the conditions of the executive agreement, the company still cannot challenge it, even though it would not meet the requirements of Article 48. Given the new penalty structure of the GDPR that authorizes fines of up to four percent of global revenue, many companies in the U.S. may find it cheaper to not upset EU Data Protection Authorities than to risk contempt of court in the United States.

State Politicians Eroding Norm of Obeying Court Orders

It is a sign of the times that we find ourselves asking if political leaders will comply with adverse court orders, but it has become a real and pressing concern. Not only President Donald Trump, but also a wide range of state-level politicians have signaled that they may ignore court orders to which they object. The issue has become such a matter of widespread concern that it was the focus of a recent NYU Law Review Online Symposium.

To be sure, as some symposium participants argue, there are strong norms against defying court orders. Professor Tara Leigh Grove argues that we are unlikely to see this administration openly contravene a court order, due to the still-powerful norm created in the civil rights era. Similarly, Keith Whittington argues that Republican leaders will realize that defying courts is not in their long term political interest.

That appears to be true for now, but directly violating a court order is not the only way to get around one. As Johanna Kalb and Alicia Bannon chronicle, President Trump has responded to adverse rulings by mocking and delegitimizing the judiciary. If the President’s supporters believe that the courts are the enemy, there is less political cost to disobeying them. Further, the president has used his pardon power to strip the judiciary of its enforcement and investigative abilities, as he did with Sheriff Joe Arpaio’s contempt conviction, and Scooter Libby’s perjury conviction.

In many ways, states have served as the laboratories of defiance of judicial decisions. In North Carolina, the legislature shrunk the size of the state’s Court of Appeals to deny the governor appointments, and eliminated a public finance system for judicial elections. Next, as described in a recent ACS webinar, they plan to redraw the state’s judicial districts into a racial and partisan gerrymander – an extraordinary assault on due process. Elsewhere, in Florida, the governor asserts he can install three new supreme court judges in the very final hours of his administration. In Kansas, Governor Brownback signed a law to take funding from the judiciary if it strikes down the state’s school funding scheme. And in Pennsylvania, legislators responded to a ruling by their state supreme court striking down a gerrymander with threats of impeachment.

In addition to these frontal assaults on courts, powerful interests have taken advantage of the elections used by most states to select their judges. Judicial elections have become contentious, ideologically-charged affairs (regardless of whether they are nominally "nonpartisan") which too often force judges to become members of political coalitions. In some cases, powerful conservative interests have decided to skip the middle man, and instead of lobbying legislators or governors to intimidate judges or remove them from office, they have attempted to do so directly by massive campaign spending. A recent study by the Center for Media and Democracy found that ten of the largest groups with a combined annual budget of more than $220 million have spent millions over the past decade to mount a relentless attack on safeguards designed to insulate judges from politics, including merit selection, campaign finance laws, and judicial codes of conduct that limit what judges can say about legal issues likely to come before their courts.

The trend shows time and again that judicial independence is under significant attack, which predates the current administration but has intensified under it. For the foreseeable future, the binding authority of court orders will likely endure. But partisans have learned that if they don’t like the rules of the game, they can change the referee. Lawyers and law students must rise in defenses of fair and impartial courts.

A Slow-Motion Saturday Night Massacre Guest Post

The Justice Department is unique among Cabinet agencies. Unlike the Department of Education and Department of Energy, it must be independent from the White House. The reason is simple: The Attorney General, not the president, is the nation’s highest law enforcement officer with authority to investigate public corruption, money laundering and other issues.

Trump is a threat to the independence of the top law enforcement and domestic intelligence agency.

We are watching a slow-motion Saturday Night Massacre. Why terminate investigators when you can engage in the “most sustained smear campaign against honest government officials since Senator Joe McCarthy’s attacks of the 1950s?”

With bold public instructions to investigate Trump’s investigators, the president crossed a red line. Congress can and should act as a check on this abuse of presidential power. At this defining moment, every Member of Congress must take a stand and answer these questions:

  • Do you object to the President directing a Justice Department investigation of unsubstantiated allegations regarding how the FBI conducted its inquiry into Russian interference with the 2016 election?
  • Are you committed to holding the President accountable to the laws that apply to other Americans?
  • Should a commitment to protecting human assets that serve our nation’s counterintelligence and law enforcement operations be a prerequisite for chairing congressional committees with law enforcement or counterintelligence jurisdiction? Will you support replacing any chair who fails to meet that commitment?
  • Do you support legislation to protect the Justice Department and FBI investigators who are examining Russian interference into the 2016 presidential campaign?

Journalists cannot allow lawmakers to duck these important questions. The rule of law depends on it. No one is above the law.

Supreme Court Deals Blow to Employees Hoping to Hold Employers Accountable

A Kafkaesque beginning usually portends a bad ending, and today’s opinion in Epic Systems Corp. v. Lewis is no exception: “Should employees and employers be allowed to agree that any disputes between them will be resolved through one-on-one arbitration?”

In a 5-4 decision, Justice Gorsuch’s majority opinion ruled that employees’ rights to participate in concerted activities under the National Labor Relations Act (NLRA) does not include the right to participation in class and collective actions. The Federal Arbitration Act (FAA) beat the NLRA.

Unfortunately, the Supreme Court’s views about arbitration (and interpretation of the word “agreement”) in consumer and employment contexts are no longer the relative surprise they were in 2011. The Supreme Court has not changed, in this sense, but the world around it has: as just two examples, the #metoo movement and empirical studies of the infirmities with pay secrecy show that silencing and silo-ing employees creates various kinds of inequality and other problems.

We, as employee-side lawyers, will have to take these and other examples and push forward until there is a legislative fix at the federal level, or even if there won’t be a legislative fix.

First, just as localities and states have been enacting legislation on pay secrecy and use of past salary in setting compensation (reforms that are linked to the idea that hiding information hurts employees, not employers), we need to look to our local governments on this issue as well, not only from the specific (and maybe limited) prism of how to counter arbitration, but how to help workers.

Second, to the extent that there is growing understanding that there are negative consequences to silencing women (and men) who are victims of sexual assault—people who also “agree” (as in, don’t really agree) to silence—we have to keep reminding everyone who will listen that forced, confidential arbitration does the same thing. Bad employers don’t get the reputational hit of misconduct. Good employers don’t get the benefit. And all employees suffer this way.

Third, we’ve said this before (e.g., discussions of mass consumer action) and we will say it again and again:  employee-side lawyers will not stop pushing to help employees who are underpaid and otherwise harmed. We will do class action cases where we can—and there are still many contexts in which we can—and we will do individual cases, and we will do arbitration.

Fourth, we will look for new ideas, new allies, and new thinkers, including students and educators. Law schools are now asking employers about arbitration agreements. Perhaps colleges and business schools should be next.

We have no desire to spin: the opinion is bad, a blow, an embarrassment that reflects the palpable inequality of our time. But it’s not a surprise. And we will keep litigating.

Building on Brown v. Board of Education

Brown v. Board of Education is back in the news. That’s not a reference to two of Trump’s judicial nominees who recently refused to comment on whether the US Supreme Court correctly decided the school desegregation case.

There is another outrageous development.

Decades after the landmark decision, hundreds of thousands of New Jersey children are attending schools doubly segregated by race and poverty. The Garden State is among the most racially divided in the country. Four out of five black and Latino students in the state are taught in segregated classrooms.

Why does this matter?

Third-graders who attend integrated schools achieve higher proficiency rates on standardized tests than children in segregated schools. And New Jersey’s segregated schools raises serious legal questions, potentially violating provisions of the state Constitution that ensure students receive a, "thorough and efficient" education and equal protection of the law.

Fortunately, civil rights advocates – including ACS board member Elise Boddie - are standing up for New Jersey’s students. A coalition of community, business, and faith leaders today announced a lawsuit aiming to diversify New Jersey’s public schools.

New Jersey courts have long led the way in civil rights, with landmark decisions that promote residential integration and that ensure fair funding for poor urban schools. And the state’s Constitution is the first to prohibit racial segregation in public schools.

This case is an opportunity to systemically address the scourge of segregation in all public schools. New Jersey has an opportunity to show leadership for the rest of the nation. We hope it chooses to do so: our children depend on it.

American Racism

In the last few weeks, five Trump nominees to the federal bench refused to say at their confirmation hearings whether they thought Brown v. Board of Education was correctly decided. Of course, judicial nomination hearings have become thoroughly cynical affairs where most nominees refuse to comment on anything important. Nevertheless, all nine current Supreme Court Justices said they agreed with Brown, and the authors of an important book on judicial nominations said only a few years ago that no nominee could be confirmed without signaling assent to the decision that ended formal segregation. Yet, here we are with multiple nominees refusing to do exactly that. There was some media outcry, but not very much, and that absence reveals a lot about the state of race relations in America. We can’t even publicly agree that Brown was correctly decided?

From the beginning of our country’s history until today racial inequality has been our most difficult question of public policy. Our founding economy was based to a substantial degree on slave labor, racial apartheid defined many parts of our country for over a century until the late 1960’s, and today the economic disparities between whites and blacks are staggering. In 2014, the median adjusted income for black households was $43,300, while for whites it was $71,300. In 2013, the median net worth of white households was approximately 13 times that of black households ($144,200 for whites compared with $11,200 for blacks). In 2010, black males were six times as likely as white males to be put in jail. The data showing white/black inequality in 2018 America is dramatic and undeniable.

Whites and blacks view these issues quite differently. 88% of blacks think that we have much more work to do before reaching racial equality while only 53% of whites feel that way. 43% of blacks do not believe we will ever reach racial equality while only 11% of whites think the goal is unattainable. These differences are stark and make societal conversations about race extremely difficult.

As a country, we have simply not taken responsibility for our racist past. The depressing numbers above are not the result of chance or randomness. They are the direct result of generations of formal and legalized race discrimination. In addition to slavery and segregation, formal governmental economic policies have caused the gross inequality we still see today. For example, from just after the depression until the 1960’s, the federal government backed billions of dollars in home loans which helped spawn the wealthy suburbs surrounding many cities. But as a recent NPR report summarized:

The term "redlining" ... comes from the development by the New Deal, by the federal government of maps of every metropolitan area in the country. And those maps were color-coded … to indicate where it was safe to insure mortgages. And anywhere where African-Americans lived, anywhere where African-Americans lived nearby were colored red to indicate to appraisers that these neighborhoods were too risky to insure mortgages.

This official, government sponsored racially discriminatory housing policy led to increased property values in white neighborhoods, better public schools in those neighborhoods leading to even more housing appreciation, and then wealth handed down from white generation to white generation. Few of those economic benefits accrued to African-Americans, who for the most part were prevented by these policies from buying homes in these neighborhoods. Approximately 98% of federally backed mortgages between 1934-1968 went to white applicants.

We haven’t come close to making up for this racially discriminatory governmental policy. The average white person lives in a neighborhood that is 75% white and only 8% African-American. One recent study concluded that “racial residential segregation and racialized concentrated poverty persist today.” The Trump Administration’s fair housing policies, to the extent they exist, are likely to make matters worse, not better.

We will not be able to devise effective solutions to the problems of race in America until we recognize two key facts. First, our country is still divided by race in serious and harmful ways. African-Americans have far less wealth than whites, live in much poorer neighborhoods than whites, and attend schools with far less funding than schools which are predominantly white. The fact that there may be less overt racism than fifty years ago doesn’t change that sorry data one iota.

The data leads to the second point. The only way to improve the plight of African-Americans in this country is to enact formal policies to help wipe out centuries of caste-based discrimination. The main impediment to enacting such policies is the belief that now that formal discrimination has been eradicated, official governmental policies should be “color-blind.” Chief Justice Roberts summed up this sentiment when he said, in a case, that prevented parents, educators, and the public at large from voluntarily adopting limited racial balancing in public schools, that the “way to stop discrimination on the basis of race is to stop discriminating on the basis of race.”

Justice Roberts is wrong. The effects of centuries of racism cannot be alleviated by color-blind policies. Moreover, in the long run, policies that equalize conditions of opportunity between the races benefit all of us. Making those policies effective is challenging, and there may be backlash, but there is no other way. In a country where people may attain the office of federal judge while refusing to affirmatively embrace the most important civil rights decision in history, it should be obvious how much more work needs to be done. Slavery and segregation were our country’s original sins. We can’t move past those sins without directly addressing the legacy of those sins. We have a long way to go.