Litigating for Liberty

The Institute for Justice's Chip Mellor on campaign-finance reform, eminent-domain abuse, and licensing laws gone wild

If you've seen a case of state-on-citizen injustice become a mainstream outrage from coast to coast, chances are Chip Mellor had something to do with it. Mellor founded the Institute for Justice, arguably the most effective public interest law firm dedicated to property rights and choice, in 1991.

Since then IJ has "litigated for liberty" on behalf of small entrepreneurs and property owners against rapacious City Halls. In its most famous case, it defended homeowner Susette Kelo at the U.S. Supreme Court against the city of New London, Connecticut, which seized her house using eminent domain to clear the way for a big real estate project that never really got off the ground. Although the Supreme Court ruled against IJ's client, Kelo v. New London was a tremendous political success, triggering a backlash that has rolled back eminent domain abuse in more than 40 states. Which was exactly the point.

"All of our cases," the 58-year-old Mellor says, "are viewed and deliberately designed as platforms to educate the general public about the importance of what may seem to be unique or even arcane issues and why those issues affect many, many people beyond the particular case."

Born in Knoxville, Tennessee, and raised all over the upper Midwest, Mellor was an anti-Nixon, anti-war activist at Ohio State from 1969 to 1973; discovered the works of the economist Milton Friedman, the anti-communist writer Whittaker Chambers, and the novelist Ayn Rand; and earned his law degree from the University of Denver with ambitions to "change the world." That led him to the Mountain States Legal Foundation, one of the first non-lefty public interest law firms, where the self-described hippie worked for James Watt, the soon-to-be-despised future secretary of the interior, whom Mellor describes as a "fascinating man."

In the 1980s, Mellor moved on to the Reagan administration, where he was a deputy general counsel in the Department of Energy. After that he served for five years as director of the Pacific Research Institute, where he helped "develop a strategic long-term…libertarian litigation strategy," one that would come to full fruition with the founding of the Institute for Justice.

IJ has helped everyone from New York jitney drivers to D.C. hair braiders to New Orleans florists defeat unreasonable, frequently ridiculous legal restrictions that prevented them from earning a living in their chosen trade. In recent years the law firm has branched out to defend free speech against campaign finance laws and school vouchers against teachers unions, earning high praise along the way from the likes of Mellor's hero Milton Friedman. "The Institute for Justice," Friedman once said, "has become a major pillar of our free society."

Editor-in-Chief Nick Gillespie spoke with Mellor in IJ's Arlington, Virginia, offices in September 2007.

reason: Let's talk about the First Amendment and particularly your political speech cases. IJ has traditionally focused on economic liberty issues—the ridiculous licensing of hair braiders and florists, for example. Wading into speech issues is a relatively new initiative.

Chip Mellor: Yes. We're challenging the stranglehold campaign finance laws pose for vibrant political free speech. We won a case recently in the Washington state Supreme Court in which the state had passed a 9.5 cent per gallon tax increase and some folks organized an initiative to repeal that. Amongst those supporting the initiative were two talk radio hosts. They opposed it and used time on the air to rail against the injustice and insanity of this kind of tax.

The election commission there slapped them with a cease-and-desist order on the grounds that the time they had spent on the radio advocating against the tax constituted an in-kind contribution to the anti-tax campaign.

reason: And we can guess that had they been talking about how great the tax increase was, they wouldn't have been fined for political speech.

Mellor: Right. A twist on this is that the law firm doing the enforcement activity had direct ties to the city and would benefit from the gas tax increase because of the work it did.

These campaign finance laws get very complicated and very technical very quickly, so many people don't understand them very easily. Something like in-kind contributions might not sound that bad. But the practical reality is that here the limit is $5,000 per campaign or per cycle for in-kind contributions. That's about five minutes on talk radio.

reason: What happened?

Mellor: We won. That part of the law was invalidated. They were able to keep talking up to a point, but there was a period of time when they had to do that at risk. They were brave enough to do it, but other folks might not be, so it has this chilling effect that even when you fight back, you're in this limbo not knowing what the ultimate outcome is going to be.

reason: What are some of the other problematic campaign finance laws?

Mellor: One perverse aspect of McCain-Feingold and Buckley v. Valeo, the predecessor case, is that both allow legislators wide latitude to pass laws limiting political speech for the purpose of avoiding the appearance of corruption. That standard—the appearance of corruption—is obviously so vague and so much in the eyes of the beholder or the politician that it allows virtually unfettered discretion and potential for abuse. You see that playing out in McCain-Feingold with the restrictions on advertising 30 or 60 days before an election. Unions and corporations are not allowed to express advocacy for or against a candidate 60 days before a general election and 30 days before a primary. What that basically means is you can't take out paid advertising and make your position known.

reason: It has the explicit intention of limiting the amount of information that would be available to voters.

Mellor: Yes. On the express assumption that this is somehow corrupting the political process and this is somehow beleaguering voters with information that might make them make a bad choice.

reason: If the AFL-CIO or Bechtel can just throw an unlimited amount of money saying that George Bush is a bastard or John Kerry is the greatest thing since sliced bread or whatever, why shouldn't that be regulated?

Mellor: The whole notion of democracy is the ability to persuade others to adopt the views that you have in voting for the candidate or the issue that you prefer. That's true of the AFL-CIO or John Doe on the street. Reaching large numbers of people often requires the enlistment of media or of an extensive advertising campaign. It just goes hand in glove with making your views known. In the early days it was pamphlets; today it's TV.

Two things will always happen. One is that money will always find its way into elections. The problem isn't too much money in politics; it's too much power in government. I think that's absolutely correct. As long as government has the favors to dispense and the power to dispense, people will find ways to get the money to it. It's a fool's errand to try to just limit the money.

Second, as long as America is a democracy, you're always going to have people trying to make their views known. And that's as it should be. So the attempts to limit this and to impose these increasingly complicated obstacles are doomed to failure and at the same time are going to increasingly create incentives for cynicism, for all sorts of intermediaries. You have to hire lawyers, accountants. You have to do all these sorts of things, and it will serve the interests of the entrenched political establishment because it will be the most able to adapt to them. It will paralyze outsiders and insurgents because it will be harder for them to organize and penetrate these increasingly complicated and arcane rules.

One good example of that is a case we have in Colorado. In Parker North, which is not too far from Denver, a neighborhood found out that it was going to be annexed. Parker North was suddenly going to become part of Parker. That carried with it increased taxes and other obligations that the residents of Parker North were not interested in, so several folks got together and just started talking among themselves in their backyards and said let's fight this, let's organize against it. So they began posting yard signs and organizing a bake sale and that sort of thing to increase interest among the residents in their community to vote against the annexation. Partway through the campaign they were served with a cease-and-desist order saying they'd violated the campaign laws of Colorado because they had spent more than $200 simply to influence the outcome of an election and they failed to account for every penny of that, from bake sales, on yard signs.

These are feisty folks. They didn't give up, but others might, and it's still in trial.

reason: Will they win?

Mellor: I think we'll ultimately win, but the fact that we're in trial, that it's not a slam-dunk victory for us, should tell you something.

reason: How do you feel about mandatory disclosure laws?

Mellor: Mandatory disclosure laws are often viewed as a painless way of accommodating some degree of regulation of campaign financing such that people at least know who is backing whom. I think that oftentimes people overlook problems created through disclosure, and we ought to consider those problems and determine if those costs are worth bearing. Any time you have to disclose, you're in essence putting your vote on record. You may feel perfectly comfortable saying, "I back Ron Paul," but other folks may be in a position where coming out visibly for a candidate or an issue could compromise them in their community, in their workplace, in their church or synagogue, or some place like that, and they may be very reluctant to have their name appear not just in some obscure filing in a city hall file cabinet but on the Internet.

reason: What was the first case that IJ took on?

Mellor: The first case was in 1991 and involved a wonderful entrepreneur here in Washington, D.C., named Taalib-Din Uqdah and his wife, Pamela Farrell. They were entrepreneurs seeking to braid hair but had the misfortune of doing so without a license to practice cosmetology.

Hair braiding is a means of both artistic and cultural expression as well as personal preference for the way that hair is styled, particularly in African-American and Caribbean communities. It is widely practiced and very popular. It's often practiced in the home and passed on from mother to daughter in sort of an informal apprenticeship, because it is a very elaborate means of styling hair. But Taalib-Din had opened a salon. It was in a home, but one where they'd converted the first floor to a salon. He employed about a dozen people.

He actually received a knock on the door from the D.C. cosmetology police informing him that he was practicing cosmetology without a license, and he had to cease and desist immediately or face a fine—I believe it was $1,000 a day—and possibly even imprisonment for the crime of braiding hair and employing people. And when he went down to get a license, of course, he found that it was much harder than one would expect because it required that you actually attend cosmetology school for a couple of years, that you have thousands of hours of training learning skills that have nothing to do with African hair braiding. Adding insult to injury, it required you to demonstrate your proficiency by showing that you could, on a practical exam, style women's hair in finger waves and pin curls, which were the hair styles popular with white women in 1938, when the law was passed.

reason: What happened in the case?

Mellor: We lost at the U.S. District Court and were moving it up through the appeal process when we were successful through both media and other efforts in getting it deregulated in the D.C. City Council.

reason: How did the media respond?

Mellor: All of our cases are deliberately designed as platforms to educate the general public about the importance of what may seem to be unique or even arcane issues and why those issues affect many, many people beyond the particular case, both in terms of the situation and also in terms of the constitutional principle involved. Here we had a wonderful media response from everybody. They picked up on several things: 1) the inherent injustice involved; 2) the compelling story that the clients had to tell; and 3) the way in which the law was really rigged against what could otherwise be a totally legitimate and productive activity.

The principle of law there is applicable whether it's hair braiding or cab driving or casket retailing or flower selling or any number of entry-level occupations that are subject to arbitrary regulations.

reason: Could you talk a little bit about that type of case?

Mellor: In economic liberty cases, the standard of the law today is so abominable that the government virtually gets a free pass to regulate any activity it wants in almost any fashion. The legal standard is literally that any reasonably conceivable set of facts will suffice to justify an economic regulation, even if those facts weren't present or considered by the legislature when the law was enacted.

For instance, look at the 2003 case we had in Louisiana involving flower retailing. There anyone who arranges flowers—which means, by law, putting two flowers together—and then sells those flowers for any amount of money has to be a licensed florist or work for a licensed florist.

reason: Who does the licensing? Is it a state board?

Mellor: Yes, it is. Of course, it's comprised of florists. These restrictions were all made out of Public Choice 101 usually.

reason: Meaning that a cartel or a politically savvy group of people get together to limit marketplace entry.

Mellor: Right.

reason: When did the Louisiana law go into place?

Mellor: In the 1940s. There was a proliferation of these licensing laws in the Progressive Era and an explosion of them after the New Deal. They've just continued to increase as the number of occupations has grown and enterprising people have created more niches.

In Louisiana, once they set this law in place, it was regulated by the floristry board that was comprised of florists. Surprisingly, or perhaps not so surprisingly, the passage rate on the practical exam—where you arrange flowers and show your proficiency—was about 35 percent a year. It was utterly subjective. They'd just say things like, "It doesn't have the proper sense of balance. It doesn't have the proper perspective. It's not artistic enough."

There was no appeal from it, no standard of review. You were basically stuck. Many more people passed the bar exam in Louisiana than passed the floristry exam.

The state was arguing that you could create a corsage in such a way that someone could prick their finger on the pin, and that this was a public health and safety rationale sufficient to uphold that law. That's literally what they were arguing.

In Oklahoma we had a case where individuals were seeking to sell caskets without having to be fully licensed funeral practitioners. Bear in mind that the fully licensed funeral directors have to go to school for two years, have to embalm bodies, have to do all sorts of things that have nothing to do with selling what amounts to a box.

And you can only go to a funeral director for a casket. Markups of 100 to 600 percent are routinely imposed on casket buyers in the funeral home context.

The court said that Oklahoma had a legitimate interest in protecting the funeral home industry from competition. That opinion should chill everyone who believes in free enterprise, because it says dispensing favors is the national pastime of state legislatures. Economic protectionism is a sufficient ground alone to justify this kind of practice.

reason: But in other areas of commercial activity that have long been regulated, things seem to be going in the other direction. You can buy mail-order dentures now. You have 1-800-CONTACTS. Before you would go to an eye doctor, you would get a prescription, and then often you would go to a captive optician to buy your contact lenses, your glasses, etc. That seems much more open now. In certain areas where things were tightly regulated, it seems to be loosening up.

Mellor: Obviously, the Internet has had a profoundly beneficial effect on commerce and on the choices available to consumers. At the same time, though, people who are active in their communities providing goods or services in those communities as entrepreneurs are increasingly subject to licensing and permitting requirements that range from annoying to impenetrable. That's the real burden, and that's what we're trying to stop. These burdens fall most heavily on folks who are really the aspiring entrepreneurs at the entry level, trying to break in for the first time or move up the next notch.

reason: So it's the flower arranger seeking to go out on her own in New Orleans.

Mellor: Or the cab driver, the jitney driver. Virtually every city in the country has some degree of entry control and monopolization with the cab market. At the same time, cabs have provided a wonderful means of entry-level opportunity for entrepreneurs, often immigrants. They provide flexibility. They provide an opportunity to work as hard as you want and earn as much money as you can or as little as you want.

It's one thing to say that under the police power of the government they can require safe vehicles and insured vehicles and competent drivers. But they start creating monopolies, limiting the number of cabs that can enter a market, regulating rates. We've worked in Denver, Indianapolis, Cincinnati, Minneapolis, and New York to open up transit markets. We've had success, but we have a lot yet to do.

reason: Give an example of a success.

Mellor: Maybe you've been to Queens or Brooklyn and seen the commuter vans that operate there. These are wonderful community-based transportation options for folks who prefer them over public buses, which are usually woefully inadequate; cabs, which are nonexistent; or private cars, which are either unaffordable or inconvenient. In the mid-'90s, when we took on the case, there were about 60,000 people a day using these otherwise illegal vans to get from point A to point B because the vans ran on a fixed route.

reason: You would show up at a particular place and get in and pay a certain amount of money.

Mellor: One buck. They were called dollar vans. They've since changed a little bit, but at the time it was a dollar and you got on and went as far as you wanted with that dollar. They were efficient and safe, yet they were illegal, because the city council had passed a law at the behest of the transit workers unions and the public bus companies that limited the number of vans.

We fought against that with a lawsuit and the media. The Giuliani administration was actually supportive of our efforts, and we got the arbitrary procedures ruled unconstitutional. The vans are allowed to operate and have flourished since.

reason: Talk a little bit about the wine case.

Mellor: It's a little different in that it was under a different provision of the Constitution, not the 14th Amendment but the Commerce Clause. It involved a woman who unfortunately just passed away, Juanita Swedenburg, and Swedenburg Winery out here in Middleburg, Virginia. She, like so many winemakers around the country, was subjected to a law that made it illegal to ship her wine to individual purchasers in other states. These were protectionist laws that were set up in various states to favor in-state wineries.

reason: Obviously, you could ship your wine to wholesalers.

Mellor: Yes. The wholesalers were really the 800-pound gorillas in this whole thing. They were the middlemen who were profiting—and still are profiting in some states—by the constraints imposed through these protectionist laws. They were very powerful and influential lobbies.

We took Juanita's case to the Supreme Court and won. That has freed up wine shipment and the ability to get wine around the country. Because of the way states have authority to regulate wine or alcohol under the 21st Amendment, there are still some barriers that can be set up, but this removed a big one.

reason: Eminent domain has been a huge issue for you. How did it present itself as an area that demanded IJ's attention?

Mellor: It's a property rights issue. Eminent domain abuse had been of concern to us since our earliest days, but we really didn't take it on until the mid-'90s, when we came across this situation in Atlantic City, New Jersey. Donald Trump, who owned a casino, had obtained the authority of eminent domain to condemn and tear down the home of an elderly widow right across from his casino in order to build a limousine parking lot to provide what Trump called a proper sense of arrival for his clients. We won that case in court and got tremendous media attention in the process, and that resulted in a deluge of inquiries and approaches to us from folks around the country who were suffering from similar plights.

Frankly, we had not realized just how widespread this phenomenon was until then. It was a terrible under-the-radar-screen tyranny that was sweeping the country. Once we became aware of it, though, we formed a strategic plan to escalate it to national attention and ultimately to the Supreme Court, which we did in the course of the next seven years.

We percolated several cases through the court system, all of which were wonderfully suited to bringing this issue to the U.S. Supreme Court. One of them involved Susette Kelo and several of her neighbors in New London, Connecticut, whose homes were being taken to provide what amounted to amenities for the new Pfizer plant being constructed there. High-end condos or a hotel or an office complex, a variety of things that would purportedly increase the tax revenue for the city and give a more amenable neighborhood for what Pfizer wanted there.

reason: For eminent domain to happen, you have to condemn a property.

Mellor: Yes. As the Supreme Court has done in tragically far too many instances, the words in the Constitution were interpreted or twisted to mean something entirely different from what they were intended to mean. The Constitution says "nor shall private property be taken for public use without just compensation," and those words "public use" were twisted in a 1954 case to mean public purpose.

reason: That was in the context of urban renewal?

Mellor: That's right. They razed a slum in Washington, D.C., to put in public housing and other developments. They said clearing the slum was a public purpose, and that was sufficient to do it.

reason: The difference between purpose and use here is that public use had traditionally meant a school, a hospital, possibly a publicly funded hospital, a library.

Mellor: It's what common sense and historical practice would lead you to believe it was. Something owned and used by the public.

reason: Why wouldn't a housing project fit into that context?

Mellor: Number one, that was never envisioned by the founding fathers. Number two, it's not the typical public property ownership where you've got it available to the public in an open and even way.

reason: So even though it's publicly owned and operated, it's not like you can go into anybody's apartment.

Mellor: Right.

Once this practice was blessed by the Supreme Court, it ushered in an entirely new practice in urban redevelopment which had a horrible legacy for cities across America and the people who live in them. Entire neighborhoods were razed. People, especially in minority neighborhoods, were displaced, and horrible new public housing projects were created.

The practice went from slums to blighted areas to not-so-blighted areas and ultimately to perfectly fine neighborhoods. A "public purpose" was deemed to be anything that increases a city's tax base and creates more jobs by tearing down whatever was in one spot and replacing it with something deemed more appropriate—usually at the behest of, or certainly for the benefit of, private developers.

reason: How many of the original affected homeowners in New London sold out at the first opportunity? Originally they were given market value.

Mellor: Some did sell out, many of them under protest. What happens—and this is a very standard operating procedure under eminent domain—is you're basically approached by an agent for the developer and informed that they're there to make you an offer, which usually comes as a surprise to most people because they don't have their houses for sale. They're told that we're here to make you an offer, we think it's a fair offer, in fact we think it's a generous offer. However, if you don't agree, we're going to have to go to the city, and they're going to condemn your property and, you know, we just can't guarantee you'll get this much money. You may get less.

reason: What did Kelo and her co-defendants do?

Mellor: They said no. Susette Kelo said that she was not going to move, that she had bought that home with hard-earned money and had restored it lovingly. She was living there with her husband, and this is where they wanted to stay. It wasn't a matter of money. This was their home.

We knew we had an uphill fight in the Supreme Court. Sandra Day O'Connor had written one of the worst opinions on the issue back in 1986, and William Rehnquist had joined her, so that made it tough to figure out how we were going to get five votes. Nevertheless, we were there and we were going to make the best case. By this time, we had also developed a national campaign of public awareness in the media, and that was working pretty well.

When we got into court, the good news for us came when O'Connor leaned forward during the argument of the opposing side, the city council side, and said, "Stop a minute, counsel. Let me see if I understand. Do you mean to say that it's your position that the City of New London could take a Motel 6 and give it to Ritz Carlton?" And he said what he had to say. He said yes, that's my position, and she had a look of utter disbelief on her face. She sat back, and we knew at that moment we'd reached her.

She wrote a wonderful dissent, but sadly it was a dissent. We lost 5-4, with Kennedy coming in with a very unfortunate concurrence that purported to set some limitations on eminent domain.

reason: There's a bizarre coda to all of this, right?

Mellor: Yeah. The development's not going to happen. It's utterly at the end. It's not a viable effort at all.

Susette's house, though, is going to remain standing. They moved it from where it was located to another spot in town. It will stand as a symbol for property rights for the future.

reason: After Kelo you kept litigating this issue.

Mellor: We announced a national campaign to take this to the states, because the one ray of hope in the majority opinion was that the states could do more to protect property rights if they chose. So it was our duty, our opportunity, to go to the states and get greater protection.

reason: Can you talk briefly about how that played out in Ohio?

Mellor: Sure. We had a situation outside of Cincinnati where a neighborhood was being condemned to expand a shopping center. Some wonderful clients there had homes, or in one case a business, that they cherished. We were up against an enormously powerful developer and the city, who were determined to take this property

The law in Ohio was not very good. They're allowed the condemnation of property if it was declared blighted, and to be declared blighted there was a list of subjective standards that could fit just about any neighborhood, such as diversity of ownership or cul-de-sacs. This neighborhood had, in fact, been declared blighted under those highly subjective standards.

We argued the case in the year after Kelo, and one thing that was evident during the argument was that the court was very, very sensitive to the outrage that was evident around this issue throughout the country. In the days after the Kelo decision, poll after poll after poll was showing astonishing opposition to that decision—70, 80, 90 percent against the government and in favor of property owners.

We won a unanimous decision at the Ohio Supreme Court level. This is the kind of decision lawyers live an entire career for and rarely get. Not only was it unanimous, not only was it in our favor, but this decision quoted Richard Epstein, Bernie Siegan, John Locke, spoke of natural rights—I mean, all of these wonderfully important authors and concepts woven into an unabashed defense of property rights and striking down, among other things, these utterly subjective notions of blight, recognizing them for the sham that they are.

reason: This is an example of where you lose in the U.S. Supreme Court but you generate a huge backlash.

Mellor: Without the Kelo decision, business would have continued as usual. Business as usual meant a complete drift in the direction of greater government authority with eminent domain, less protection for private property rights. Today that's profoundly different. Forty-two states have enacted laws that change the status quo that was in existence at the time of Kelo in a way that to some degree provides more protection for private property rights. Some of those are modest and minor degrees; some of them are profoundly important degrees; some of them are kind of in the middle. But all of them are better than what existed before.

reason: What are your areas of greatest concern looking into the future?

Mellor: First, I'm worried about the fact that there's a lot yet to be done on the areas that we've carved out. We've made measurable, notable, and I think significant progress in those areas since we started, but we're a long way from the rule of law we need for a free society.

I think those are going to be compounded by the challenges we face in the coming years in the realm of the war on terror and the war on drugs.

reason: How so?

Mellor: There's no question that we are on a precipice over which we could easily tumble, especially if there's another major terrorist development whereby the state, at all levels, will gain greater authority. The presumption in favor of state authority will escalate dramatically and that will bleed over into all sorts of activities that we take for granted today, whether it's financial transactions, whether it's property ownership and use matters, whether it's education, whether it's travel. The liberties that are in the fabric of everyday life could be chilled and then perhaps profoundly restricted.

reason: Do you think we're more free or less free in that kind of big-picture sense? Are we more free or less free than we were in, say, 1975?

Mellor: I think that we're more free. The proliferation of new media, the availability of new mechanisms for investment and financial transactions that have dispersed and created wealth for vast numbers of people, property ownership, access to information—all those are wonderfully exciting new developments.

But I think the potential for being less free is far greater, along the lines of what I was talking about with the war on terror and the war on drugs. That whole effort to give government the benefit of the doubt when it comes to its exercise of authority is the real problem that we face. More and more people are willing to do that in more and more areas, and as that happens, as that becomes the prevailing way of thinking, then naturally government will expand into those new initiatives.

What we really face is a Zeitgeist of assumptions. It's the accumulation of many years of repetition of collectivist thinking, and it allows people to accept as a given things that they would have questioned or been outraged about years ago.