Streetwise Professor

June 27, 2010

They Fight the Law. Will the Law Win?

Filed under: Economics,Energy,Politics — The Professor @ 2:16 pm

Myriad commentators have criticized the Obama administration’s repeated flouting of the law.  Professor Bainbridge has a list of some of the greatest hits the law has taken at Obama’s hands.  So does Victor Davis Hanson.  I wouldn’t go as far as Thomas Sowell in seeing in all this the first steps to the gas chambers or the Gulag, but it’s bad enough.

The $20 billion BP compensation fund is the most expensive, and most egregious, of these transgressions.  Taking time off from his day job telling American corporations what they can pay their executives (another extra-legal monstrosity), Kenneth Feinberg assures us that “fairness” is his guidepost:

State laws will have to be made as consistent as possible to ensure that some victims of the Gulf of Mexico oil spill are not treated unfairly, says Kenneth Feinberg, the lawyer chosen by the White House and BP to administer a $20bn claims fund.

Determining which claims are eligible and which are not will be a “challenging” task, says Mr Feinberg, a renowned mediator who will soon take over the day-to-day running of the claims process from BP.

“How do we deal with a restaurant in Boston that can’t get shrimp for its favourite dish or the strip joint in New Orleans where business is off because the fishermen aren’t coming in?” Mr Feinberg asked.

“I think the best way to look at it is the way Congress looked at 9/11 cases. Would your claim be applicable under state and, in this case, maritime law? If the state would recognise it, then I will recognise it. If not, I should not,” he said.

So I see.  There are state laws and maritime law that govern liability and damages in such matters.  I’m going out on a limb here, but given that, I’m guessing that there are like courts and stuff with established procedures, rules, and precedents that are capable of applying such laws.  Indeed, not just capable, but Constitutionally charged with the responsibility of applying them.

Not only does the BP fund trample separation of powers, it also rides roughshod over federalism.  Feinberg will, like some imperial vizier, decide which state laws apply and which do not:

Overcoming differences in state laws will be another challenge, and Mr Feinberg’s team is now going through state laws to check for inconsistencies.

Although their initial inspection showed that the laws were “sufficiently similar”, the lawyer is also looking at creative ways to deal with any problems.

For example, if the law is the same in 41 states but not in the other nine, he might choose to apply the law of the majority across the board.

“I am very worried about unfair treatment. I can’t conduct and administer a fund where one person in one state would get their claim and another person in a different state would not,” he said.

I see.  It’s all about fairness.  Let me wipe this tear from my eye.

No, it’s not all about fairness, actually.  In this federal system, there is a demarcation between state law and federal law.  Each state has its own laws, duly passed by its legislature, its own courts for interpreting these laws and making judgments under it, and its own executive, for enforcing them.  Citizens of those states have access to the courts under established principles of standing and jurisdiction.  Individuals have made choices where to live based in part on those laws.  They have entered into contracts under those laws.  That’s the way it works, and the way it has worked for centuries.

Where does Ken Feinberg, and the Obama administration, get the power to turn this system completely on its head?  Under what Constitutional theory does an unaccountable “official” (I use the quotes because the “position” he holds does not appear to have any legal sanction whatsoever) get the power to disregard some state laws to award claims that presumably have a legal basis in these same state laws?  Since when does a majority of state laws trump the laws of the remainder?  I mean, this is an absolutely bizarre legal doctrine.

This does not exhaust the deep problems with the BP fund.  Obama and individual Congressmen have made it plain that BP funds will be used to compensate those who suffered losses from events for which no court likely would hold BP liable.  Specifically, BP will pay oil workers for income lost due to the administration’s own drilling moratorium.

A competent court has already found the existing version of the moratorium to be legally deficient.  It is remarkable indeed to expect BP to pay for costs arising from a government policy that has no legal basis.

Moreover, to craft a moratorium that passes legal muster, the administration (Interior Department) would almost certainly have to argue that deepwater drilling is so inherently risky that it cannot be countenanced.  At most, the BP spill demonstrated the risks of drilling, risks that must exist independently of BP if all drilling is to be stopped: if the administration is correct that the irremediable and indefensible risks of drilling demand termination of the activity forthwith, those risks are inherent in the activity and would exist and have existed regardless of whether the BP well had exploded or not.  That is, if the administration’s argument justifying the moratorium is correct, it would be correct regardless of whether the BP spill had occurred or not.  How can you make BP pay for people not making money for not performing an activity they shouldn’t be performing in the first place?

Thus, there is no reasonable theory of causation that can attribute the lost income of oilworkers to BP.  Given the lack of any colorable case that BP’s actions caused this lost income, there is no way that any court would find BP liable for this loss.  The loss arises from the administration’s decision.  And if you believe the administration’s justification for the moratorium, you must also believe that there should be no oilworkers in the Gulf anyways.  Why provide compensation for the inability to undertake a wasteful activity?  (Should the makers of locks pay for the lost income of burglars?)

Shredding federalism, separation of powers, and due process—not bad for a day’s work.

As appalling as this is, it should not be a surprise.  It is the natural product of the progressive (and Progressive) legal mindset.  Dating back to the dawn of the Progressive movement in the US, adherents to progressivism have viewed the separation of powers, federalism and the resulting patchwork of 50 sets of state laws, and due process as atavistic impediments to the achievement of rational and beneficial public policies.  (For a distilled essence of this view, read any one of Tooltime Tom Friedman’s China For a Day wet dreams.)  Progressives don’t blanch at the destruction of certain Constitutional principles dating from the birth of the Republic, and legal principles pre-dating that.  They revel in it.  They believe it is a good thing.

And if you don’t share their belief, you should oppose Obama’s actions, regardless of what you think of BP.  There are ways of making sure that BP pays for the damages it has caused without trashing the rule of law; why do you think the country has so many trial lawyers?  But if you are a Progressive, this trashing is a feature, not a bug.  Progressives have been fighting the law for a long time.  Let’s all hope that the law wins.

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13 Comments »

  1. […] This post was mentioned on Twitter by . said: […]

    Pingback by Tweets that mention http://streetwiseprofessor.com/?p=3942utm_sourcepingback -- Topsy.com — June 27, 2010 @ 1:27 am

  2. Very interesting article, thanks for it. But I can’t understand why BP would agree to this: “BP will pay oil workers for income lost due to the administration’s own drilling moratorium.”

    Sounds like a total submission to Obama. But why? Because he could say BP is not willing to pay for its mistakes and that would made the company look even worse?

    Comment by deith — June 27, 2010 @ 4:08 pm

  3. […] Streetwise Professor » They Fight the Law. Will the Law Win? […]

    Pingback by Scott Tom - Online Poker | Tournaments — June 27, 2010 @ 6:55 pm

  4. I really find this shilling for the BP bandits hard to understand. I mean sure guys like Robert Amsterdam or Joe Barton are paid upfront. I too would be more than happy to shamelessly glorify BP’s integrity, competence and entrepreneurial spirit should they leave me a million or two in the bank account. Since that is none too likely to come to pass, plus it’s not even an American company. So might as well wring them dry instead of the taxpayers who the oiligarchy (in cahoots with bought political forces) want to screw over.

    Comment by Sublime Oblivion — June 27, 2010 @ 9:24 pm

  5. You just don’t get it, do you, S/O? Just because I don’t think it’s appropriate to go all Russian on BP doesn’t mean that I am shilling for the company. The point of the post is about the process. There are laws and procedures in place that are adequate to ensure that BP will pay. And pay a lot. Why not let that process work, instead of using extralegal and extraconstitutional means?

    Your comment doesn’t surprise me, though, as to you the rule of law, etc., are just neoliberal, bourgeois conceits that you despise. Thanks for the endorsement: I know I’m on the right track.

    The ProfessorComment by The Professor — June 27, 2010 @ 9:48 pm

  6. Deith–I don’t understand either. Instead of shooting off his mouth, Barton should have used his time in the hearing trying to elicit information on just exactly was said/threatened/promised to get BP to agree to this. It is extraordinary, as any lawyer would have told them such a claim would get laughed out of court. Being so extraordinary, there must have been some extraordinary arm twisting to get the company to agree.

    The ProfessorComment by The Professor — June 27, 2010 @ 9:50 pm

  7. Does this rule of law thing include BP buying up the Louisiana police to prevent reporters from accessing sites affected by the spillage? What about the rule of lawing judge who voted against the offshore drilling moratorium yet simultaneously held stocks in the affected companies?

    You say there are “there are laws and procedures in place that are adequate to ensure that BP will pay”. Exxon only ever paid (a completely risible) 500mn $ for the Exxon Valdez, compared to profits in the tens of billions per year. As things stand BP won’t even have to fork up that amount, since under the oil interests friendly policies of the Bush regime, liabilities for such events were capped at a completely insignificant 75mn $! Meanwhile, normal American have-nots who are not part of the oiligarchy are being screwed by the elitist haves with ever more savagery.

    It is becoming increasingly obvious that the BP Bandits (and private resource extraction companies in general) rarely care to play by the spirit of the law, so why should the Obama administration kowtow to them? The overall trends are ever more indisputable. Socialism for the rich, capitalism for the poor. Rule of law for the ins, the jungle for the outs. It is a rotten system which Obama must ruthlessly dismantle.

    Comment by Sublime Oblivion — June 27, 2010 @ 10:24 pm

  8. […] 28th, 2010 · No Comments Moreover, to craft a moratorium that passes legal muster, the administration (Interior Department) would […]

    Pingback by On legal liability for the BP oil spill — June 28, 2010 @ 3:13 am

  9. What about the rule of lawing judge who voted against the offshore drilling moratorium yet simultaneously held stocks in the affected companies?

    Answered here.

    Exxon only ever paid (a completely risible) 500mn $ for the Exxon Valdez, compared to profits in the tens of billions per year.

    In the West fines and compensation awards are thankfully not based on how much money somebody has.

    As things stand BP won’t even have to fork up that amount, since under the oil interests friendly policies of the Bush regime, liabilities for such events were capped at a completely insignificant 75mn $!

    BP said that it would ignore this cap about 6 weeks ago now. They’ve already spent over $2.65bn.

    Comment by Tim Newman — June 28, 2010 @ 6:14 am

  10. BP can defend itself with top lawyers. The small businesses and workers who sue them might not be able to. Unless some lawyer takes up a class action suit.

    Comment by Surya — June 28, 2010 @ 3:21 pm

  11. It’s my understanding that all of the state/local apparatus you’re concerned about is being left intact – but a plaintiff’s right to these processes are waived if they accept a settlement offered by Feinberg. A similar thing was done with the 9/11 Victim’s Fund – were you opposed to that fund’s creation as well and get all hyperbolistic about the destruction of liberty because some people allowed to elect to be compensated for their losses without having to go through years of court proceedings?

    Why is it so hard to believe that BP could consent to this fund without much of a “shakedown” by the administration? They could prefer to have this $20bln fund for a variety of reasons.

    I suppose I can see your concerns regarding separation of powers and federalism (to some extent) – but the shredding of due process? BP has in essence waived due process, something that I’m sure their $700/hr lawyers explained the reprocussions of, to which they still consented knowingly.

    Comment by gcoaster — June 28, 2010 @ 4:29 pm

  12. In the West fines and compensation awards are thankfully not based on how much money somebody has.

    Indeed – did I ever argue otherwise? They are based on privilege and civil law for the rich and connected, repression and criminal law for the poor and powerless. If prior precedent is anything to go by, the lawsuits will stretch into the decades, the plaintiffs will win little and gradually die off, and BP will pay an absolute pittance relative to its wealth.

    BP said that it would ignore this cap about 6 weeks ago now. They’ve already spent over $2.65bn.

    And they did it out of altruism? BP drilled below the permitted depth and broke numerous safety regulations in its offshore scramble. Even a government apparatus as compromised by oil money as the US would not have tolerated BP capping it at $75mn. (Of course it’s better than Nigeria but that’s not exactly a high bar). $2.65bn is small peanuts for a company that makes tens of billions in profits per year, and I do wonder about how much is going on the actual ecological cleanup (as opposed to the “political” cleanup).

    Comment by Sublime Oblivion — June 29, 2010 @ 12:42 pm

  13. And they did it out of altruism?

    Let’s remind ourselves that you said:

    “As things stand BP won’t even have to fork up that amount, since under the oil interests friendly policies of the Bush regime, liabilities for such events were capped at a completely insignificant 75mn $”

    Why they are ignoring the cap is another subject altogether, and has no bearing on the fact that your statement above is nonsense.

    Comment by Tim Newman — July 9, 2010 @ 1:07 pm

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