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Sunday, June 28, 2015

Obergefell And The Supreme Court's Warning To Finance, Business Communities

The Supreme Court rulings in two cases involving statutory interpretation of the Affordable Care Act and constitutional interpretation of the Equal Protection Clause's treatment of states' recognition of same sex marriage show contradictory reasoning. By so doing, the high court has raised troubling questions about a new era of legal uncertainty about how any plain language document, from laws to regulations to contracts, can and will be interpreted and enforced.

In an era where the legal establishment is increasingly openly hostile to and contemptuous of asset holders and business owners in general, what does this mean for the average homeowner, the average small business owner and even the regular investor?

Last week's momentous Supreme Court rulings hit many people in the finance and business communities hard in the gut, for reasons having nothing to do with partisan politics or one’s personal beliefs regarding same-sex marriage. The rulings sparked feelings, probably very hard to express, define or articulate, all owing to a sense that something is about to go very, very wrong.

That's because the decisions – King v. Burwell,[1] the ruling reaffirming the Affordable Care Act (the "ACA") released Thursday, and Obergefell v. Hodges,[2] the ruling extending same-sex marriage recognition nationally released Friday -- reaffirm the growing unpredictability of legal interpretations from the nation's highest court. That means that when the law becomes uncertain, when its enforcement becomes dependent on hope instead of the law, the power of the law diminishes and the power of its enforcers grows in inverse and perverse proportion.

The message is implied, and it is chilling.  It is, must be, that laws, and certainly the contracts that govern relations among honest people in commerce, are far more open to reinterpretation that they once would have been.

Whereas not too long ago contracts and statutes would have been interpreted, and enforced, according to the "four corners" of the document (that is, what's contained on the paper and nothing more), rulings from the Supreme Court invite a new level of sophistry from people determined to argue that words are to be accorded meanings that are something different, if not something completely opposite, from those intended by their writers.

Consider Chief Justice John Roberts’ majority opinion in King, where he criticizes the quality of the statutory drafting of the ACA.  He wrote, in relevant part:

“The Affordable Care Act contains more than a few examples of inartful drafting. (To cite just one, the Act creates three separate Section 1563s. See 124 Stat. 270, 911, 912.) Several features of the Act’s passage contributed to that unfortunate reality. Congress wrote key parts of the Act behind closed doors, rather than through “the traditional legislative process.” Cannan, A Legislative History of the Affordable Care Act: How Legislative Procedure Shapes Legislative History, 105 L. Lib. J. 131, 163 (2013). And Congress passed much of the Act using a complicated budgetary procedure known as “reconciliation,” which limited opportunities for debate and amendment, and bypassed the Senate’s normal 60-vote filibuster requirement. Id., at 159–167. As a result, the Act does not reflect the type of care and deliberation that one might expect of such significant legislation. Cf. Frankfurter, Some Reflections on the Reading of Statutes, 47 Colum. L. Rev. 527, 545 (1947) (describing a cartoon “in which a senator tells his colleagues ‘I admit this new bill is too complicated to understand. We’ll just have to pass it to find out what it means.’”).
King v. Burwell, pp. 14-15 (emphasis added in bold).

As our legal jurisprudence respects and relies on the precedential value of prior court opinions, you can just imagine the fear of the potential for abuse of the precedent this ruling, and this specific passage, carries for the future. Indeed, for Roberts further wrote:

“In this instance, the context and structure of the Act compel us to depart from what would otherwise be the most natural reading of the pertinent statutory phrase.
King v. Burwell, p. 20 (emphasis added in bold).

But then consider that the same Justice Roberts, evaluating Obergefell at the same time as King, reached the opposite conclusion. Consider from his dissent:

“Today, however, the Court takes the extraordinary step of ordering every State to license and recognize same-sex marriage. Many people will rejoice at this decision, and I begrudge none their celebration. But for those who believe in a government of laws, not of men, the majority’s approach is deeply disheartening.”
Obergefell v. Hodges, p. 2 (Roberts, C.J., dissenting)

Roberts continued:

“The majority’s decision is an act of will, not legal judgment. The right it announces has no basis in the Constitution or this Court’s precedent. The majority expressly disclaims judicial “caution” and omits even a pretense of humility, openly relying on its desire to remake society according to its own “new insight” into the “nature of injustice.” Ante, at 11, 23. As a result, the Court invalidates the marriage laws of more than half the States and orders the transformation of a social institution that has formed the basis of human society for millennia, for the Kalahari Bushmen and the Han Chinese, the Carthaginians and the Aztecs. Just who do we think we are? “It can be tempting for judges to confuse our own preferences with the requirements of the law. But as this Court has been reminded throughout our history, the Constitution “is made for people of fundamentally differing views.” Lochner v. New York,198 U. S. 45, 76 (1905) (Holmes, J., dissenting). Accordingly, “courts are not concerned with the wisdom or policy of legislation.” Id., at 69 (Harlan, J., dissenting). The majority today neglects that restrained conception of the judicial role.”
Obergefell v. Hodges, p. 3 (Roberts, C.J., dissenting)

Justice Roberts flips the coin, taking one side in King and another in Obergefell.  But such is the nature of decisions made arbitrarily. In so doing, he conveys the alarming implication that no lesser an authority than the Supreme Court shall decide questions of our law by first choosing the outcome, and then working backwards to reach the appropriate patina of legal legitimacy. This is the type of reason which provides ammunition to future would-be abusers of the government’s often-fearsome arsenal of powers.  

In reality, last week's decisions have implications going far beyond the “headline” subject matter of their decisions. They have far more impact on future legal jurisprudence. That is because our legal system is based on and often accords high respect to precedent, meaning prior court rulings.

So when the court rules that a law will be rewritten so it may "work," the finance community should be alarmed. Not because it agrees or doesn't agree with the Affordable Care Act. Rather, because now the confidence that one is obeying the law and can enforce legal rights has been greatly upset.

Think this is an overreaction? Consider that the legal profession is dominated -- run by -- activists who increasingly believe in "economic justice." Such phrases should alarm readers. Simple concepts require no adjectives to modify them, not unless the purpose is to convey the opposite meaning, and so it is with "economic justice." The reality is a legal establishment, now firmly ensconced in the judiciary and among regulators and prosecutors, which is not merely overtly hostile to business in general and "the rich" (read: anyone with assets) in particular, but believes it is now emboldened -- no, empowered -- to go after these sectors with an impunity borne by the delusion that their end justifies any means, and the confidence that their allies will allow them to act unimpeded and their targets have neither the will nor the power to resist. 

In such an environment where hostile actors now have the Supreme Court's green light to erase the plain language of laws, certainly those in contracts will be next.

How far are we from a legal system where the likelihood of getting a contract enforced depends, for all intents and purposes, on one's industry, political contributions or "most favored nation" status. In other words, when does your legal status depend on who you are?

The new sense of the nation being a nation of men, instead of a nation of laws, explains why the public proclamations commending Friday's ruling on same-sex marriage may be more obligatory than sincere, as it is accompanied by a new uncertainty for business. 

Indeed, it is as if the capitalist class consciousness has been raised, to recognize The Dawn Of The End Of Law. And the public celebrations on social media may well be masking a silent dread that dares not be spoken, not in these politically correct times where departure from a shifting, almost undefinable political correctness may mean being targeted with boycotts, or the loss of tenure, or one's contract, or one's job.

The questions now are how the capitalist class will respond. It -- those of us with assets, even if modest amounts -- is mobile, certainly more than the average citizen who is largely tethered to his job, his home, his community, more by immobility from fear of the loss of job, insurance and familiarity than anything else. 

Will this class simply retreat from public life, determined more than ever to make profits and showing its defiance through indifference?

Will the capitalist class publicly wink at the new trends, the new legal paradigm, while privately resolving to avoid any and all encounters with the legal system, the political system and those who would make economic threats at the slightest hint of unorthodoxy?

Legal certainty and the rule of law have always set America's economy apart from the rest of the world's. The new era of unpredictability, save for the predictable animus towards business and asset-holders, simply won't help encourage capital to come here, stay here or be invested here. 

Last week's Supreme Court ruling may make this nation more equal -- that is, more equal with the rest of the world. For Americans, that means several steps backwards. This hidden message is being felt, even if many still find it hard to believe, accept or articulate. 


[1] King v. Burwell, 576 U.S. _____ (2015), available at http://www.supremecourt.gov/opinions/14pdf/14-114_qol1.pdf.
[2] Obergefell v. Hodges, 576 U.S. ______ (2015), available at http://www.supremecourt.gov/opinions/14pdf/14-556_3204.pdf.



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