Short Circuit: A Roundup of Recent Federal Court Decisions

It wasn't about what was fair, it wasn't about what was honest, it was about winning.

Please enjoy the latest edition of Short Circuit, a weekly feature from the Institute for Justice.

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• Production company hires union labor after Boston officials allegedly threaten to withhold permits for music festivals. District court: Can't try the officials for extortion because they didn't obtain any personal benefit; the alleged benefits went to the union. First Circuit: The indictment should not have been dismissed.
• Bank charges account holders up to $90 for overdrafts. An illegal "usurious" interest charge? The First Circuit says no; overdraft fees are not considered interest under the relevant statute or its implementing regulations. Dissent: When a bank covers an overdraft and the account holder doesn't make good on the balance, then that's pretty much a loan, and the overdraft fee is interest. Plaintiff should have been allowed to do some discovery.
• Exeter, N.H. police search apartment, find child porn on laptop owned by one of the residents; he's convicted of knowing possession. But wait! He has two roommates, the laptop was kept in a common room and not password protected, and there's no evidence that he used the laptop around the time the pornography was downloaded. And he took no steps to hide the laptop or destroy the files despite having approximately 15 minutes to do so. Enough evidence for a conviction? First Circuit: Most certainly not.
• FBI agents suspect that child porn is being downloaded/shared on a computer in a house in Cabo Rojo, P.R. Rather than get a warrant, they show up and ask to inspect the computers in the house, claiming that one of them is "sending a signal and/or viruses to computers in Washington." The residents consent to a search, the FBI finds child pornography, and, some days later, arrests one of the residents. Was lying to secure consent for the search a Fourth Amendment violation? First Circuit: Yes, and a clearly established one at that.
• Boy meets boy, boy dates boy, boy dumps boy: The story plays out every day in New York City. But this time the angry ex allegedly set up fake profiles for his former partner on dating app Grindr. A stream of men looking for sex or drugs—some 1,100 total—show up at the former boyfriend's home and work. A hundred complaints to Grindr do nothing. Nonetheless, Grindr isn't liable, holds the Second Circuit. Federal law says web services aren't responsible for content made by users.
• LSU education professor offers advice to students, gets fired. A violation of academic freedom? The Fifth Circuit says no. "We agree with the district court here that Dr. Buchanan's use of profanity and discussion of her sex life and the sex lives of her students was not related to the subject matter or purpose of training Pre-K–Third grade teachers."
• Federal district court: Mississippi State Senate District 22 will be redrawn to properly enfranchise its African-American voters. And that decision, says the Fifth Circuit, will go forward if the state doesn't get its act together. Editor's note: Come for a discussion of a crucial "the" in the Voting Rights Act, stay for a history of cotton in the Mississippi Delta. And check out the dissent criticizing the "majority-minority panel." (The Short Circuit staff takes that to be a voting pun about how the en banc court would come out the other way. Some Twitterati, however, see a lament that judges appointed by Presidents Clinton and Obama got their way on a court with mostly Republican-appointed judges.)
• Officer allegedly lies to obtain arrest warrant. Officer: Even if I did lie, I had probable cause for a warrantless arrest of plaintiff for a different crime, so I can't be sued for false arrest. That's not how the Fourth Amendment works, says the Fifth Circuit, in a lawsuit stemming from a grade-change scandal at a Brownsville, Tex. high school. While this officer gets qualified immunity, henceforth it is clearly established that an officer arresting someone on the basis of a bad warrant cannot later point to other probable cause to get off the hook.
• Texas corrections officials refuse Buddhist inmate's request to have a Buddhist priest present at his execution, though a chaplain would be available to a Christian or Muslim. Fifth Circuit: The inmate waited too long to seek relief. He can be executed. Supreme Court: Not without a Buddhist priest in the execution chamber. (Click here for educated guessing on why the Supremes recently denied a stay in a similar case.)
• Allegation: Three innocent men spend decades in prison for 1975 murder after Cleveland police coerce 13-year-old into providing false testimony. (It seems detectives often manipulated evidence before turning it over to prosecutors. According to one officer: "It wasn't about what was fair, it wasn't about what was honest, it was about winning.") Sixth Circuit: No qualified immunity for the only officer still living, and new circuit precedent means claims against three deceased officers might be able to go forward against their estates. Moreover, the city could also be liable if it's proven there was a policy of withholding evidence that should have been turned over to the defense.
• In February 2015, the San Francisco Sheriff's Dep't adopts policy not to honor requests from ICE to be notified in advance about the release of undocumented aliens without a court order. In March 2015, ICE asks to be notified before the release of five-time deportee who'd served a 46-month drug sentence. Per the policy, the deportee is released without notice to ICE. Shortly thereafter, he steals a gun and kills a woman. Can the City and the Sheriff by held liable by the victim's parents? Ninth Circuit: These are tragic facts, but California law grants immunity to the government defendants.
• Police respond to a call, discover Thornton, Colo. man pacing in driveway, swinging baseball bat, yelling. While one officer returns to his car to obtain a non-lethal beanbag shotgun, two other officers pursue the man, draw their weapons (one a gun, one a taser), direct him to drop his bat. When he does not, they both fire. The man dies. Excessive force? Tenth Circuit (over a dissent): Could be. No qualified immunity.
• Accountant is caught insider trading. He turns over $69k in profits to the SEC, plus an additional $109k penalty, and is banned from practicing accountancy before the SEC. But that's not all. The DOJ seeks criminal penalties for the same misconduct. Double jeopardy? The Eleventh Circuit says no. The SEC penalties were civil, and the Double Jeopardy Clause only protects against repeated criminal penalties.
• Illinois state law allows family members of people who overdose to sue anyone within a given geographic area who sold or distributed the same kind of drug. Illinois Supreme Court: It violates due process for a plaintiff to recover a lot of money from a person who had no connection at all to the drug user. Dissent: Although the law "pushes the boundary of civil liability by dispensing with traditional notions of causation," we're meant to be more deferential to the legislature under the rational basis test.
• NYC officials say a state ban on exotic and rare "gravity knives" applies to common folding knives that can be opened with the flick of wrist. Second Circuit (2018): The law is not unconstitutionally vague in all its applications. SDNY (2019): But for this plaintiff, who was previously arrested for carrying a folding knife and would like to carry one again without fear of arrest, the law is indeed unconstitutionally vague. "Because the wrist flick test is a functional one, it is difficult if not impossible for a person who wishes to possess a folding knife to determine whether or not the knife is illegal." (We talked about gravity knives on the podcast some time back.)

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Comments

[Rossami]

Re: the First Circuit dissent - No, an overdraft fee is a fee. It's right there in the name. It's a one-time payment of a fixed amount.

At least the majority got it right. And now that I think about it, I'm feeling a lot less outrage than I usually do after reading the Short Circuit. An encouraging week!

[Chem_Geek]

"What's in a name? That which we call a rose
By any other word would smell as sweet."

It's interest, not a fee. Didn't a "penalty" get transformed into a "tax" not so long ago?

[a ab abc abcd abcde abcdef ahf]

If there's a fixed fee, that is a fee, intended to discourage overdrafts.

If a checking account is linked to a savings account, the savings account loses some interest, and that's the end of it.

If a checking account is linked to a credit card, the credit card may accrue some interest, but all banks I have dealt with made that linkage voluntary, and that's the way it should be: let the customer decide whether to borrow or bounce.

[James Pollock]

"If there's a fixed fee, that is a fee, intended to discourage overdrafts."

But, as noted, when the bank pays out your overdrafted check instead of sending it back marked "insufficient funds", they're lending you money. They're lending you money at a fixed rate. If they loan you $100 for a year at 10%, you have a 10% rate. If they honor your $100 check even though you haven't got any money in your account, and charge you a $50 "fee", your cost for that loan is 50% (except the bank expects it to be covered by the end of the month, not the end of the year, or they'll hit you with another $50 "fee". Wait a year, and that comes out to 600%.

(Plus, of course, they'll intentionally process your checks in such a way as to generate multiple overdrafts, if they can. If 3 people present checks for $100, $10, and $1, and you've got $15 in your account, they'll process the $100 check first, charge you the fee to wipe out your remaining $15, and then process the other checks which are ALSO NSF now, giving them three overdrafts even though you had enough money to cover 2 of the 3 checks. (If you look, you'll find that they disclose this fact to you in the extremely fine print.)

It's a neat little scam.

[Chem_Geek]

Ding! Ding! Ding! Thank you very much folks, no more calls please, we have a winner!

[Krayt]

If it quacks like a finance charge, it's a finance charge. Voluntary has nothing to do with it as all loans are voluntary.

I recall one state claiming with a straight face, "It isn't an income tax. It's just a tax proportiinal to income."

[Chem_Geek]

Oh and BTW, since Short Circuit is designed to be a rabble-rousing outrage machine, obviously their QC (quality control, not Queen's counsel) is slipping.

[TwelveInchPianist]

"No, an overdraft fee is a fee..."

Coming soon to a payday loan shop near you: Interest free two-week $100 loan! $50 application fee.

[FlyerJack]

To anyone interested in that issue, it's worth actually reading the opinion. "Interest" is a defined term in the pertinent regulation and includes certain "fees."

Beware of overly-simplistic analysis.

[Voize of Reazon]

In the case at hand the fee was a recurring charge not one-time, although the total was capped and each charge was independent of the amount of the overdraft. These, plus the fact that the charges are associated with a deposit account rather than a credit account and that the bank has the option of not honoring the overdraft, seem to be behind the agency's interpretation that the court Auer-defers to.
That all sounds to me like too much reliance on magic words. In particular the majority dismisses too easily the possibility that what the bank offers is a combination of deposit and credit services, and I find a lot to agree with in the dissent.

[bernard11]

As others, it's interest.

Substance, not form, is what matters. The bank covered the check, and then wanted its money back, plus extra. That's interest.

And it doesn't matter if it is "intended to discourage overdraft," not that I believe that for a second.

[David Nieporent]

When you borrow a book from the library and return it late, they charge you a fine. Is that interest?

[Voize of Reazon]

At my library it is, they make me give them back extra pages.

[David Nieporent]

Substance, not form, is what matters.

Substance, not form, is what matters if, say, we're economists trying to model the effects of such charges. But this case is not about what these charges "really" are; this is about how they are regulated. And that depends on what the statutes and regulations say. Cocaine is not in reality a narcotic, but that doesn't mean that you can't be charged for possession of narcotics if you've got a supply in your house, because the relevant statutes do classify it as such.

[FlyerJack]

Worth noting, regarding your "late fee" comment, that "interest" is a defined term in the controlling regulation:, and can include late fees:

The term 'interest' as used in 12 U.S.C. [?] 85 includes any payment compensating a creditor or prospective creditor for an extension of credit, making available of a line of credit, or any default or breach by a borrower of a condition upon which credit was extended.
It includes, among other things, the following fees connected with credit extension or availability:
? numerical periodic rates,
? late fees,
? creditor-imposed not sufficient funds (NSF) fees charged when a borrower tenders payment on a debt with a check drawn on insufficient funds,
? overlimit fees,
? annual fees,
? cash advance fees, and
? membership fees.

Both the majority opinion and the dissent agreed that it was a close, fact-specific inquiry. The broad-brush (and "clearly did not even skim the opinion") armchair analysis in this comment section is not very useful.

[tkamenick]

Not every dollar amount charged for a loan of money has to be interest, though. If it's a flat amount, it's a fee. If it's a percentage that grows at fixed intervals, it's interest.

[tkamenick]

Well, I should've taken the good advice and read the regulation more. Based on the statutory definition, yes, it's "interest". But by the common definition of interest, no. There's a distinction between a fee and interest for a reason. Not all money charged on a loan is interest (obvious example, are your closing costs on a mortgage "interest"?)

[Beldar]

Thanks for including the link to the "educated guessing" about the different results in the Buddhist priest case. It's likely correct, but the series of 14 tweets shows quite dramatically how incredibly unfit and stupid a medium Twitter is.

Indeed, Twitter's defining characteristic is that it truncates discussion based on an arbitrary number of characters. Thoughtful people ought shun it, if only for that.

Twitter delenda est.

[James Pollock]

"Indeed, Twitter's defining characteristic is that it truncates discussion based on an arbitrary number of characters."

So does this site's comment system.

[MatthewSlyfield]

Twitter is the most aptly named of all the "social media" services. All their users are twits.

[Bored Lawyer]

Grindr isn't liable, holds the Second Circuit. Federal law says web services aren't responsible for content made by users.

Time to rethink the CDA.. Not necessariy throw it out, but limit the immunity in some way.

[James Pollock]

Maybe they could change it, so that the person who actually created the bad content was liable, instead of the company that didn't do anything wrong.

[tkamenick]

Exactly, hold the person who did something wrong liable. Holding Grindr liable is no smarter than holding the US Post Office liable for the mail people send.

[ReaderY]

Loc officials imposing conditions on permits is a not uncommon political act. In the case of things like zoning variances, it is often a legitimate one. I agree that in the case of something like a concert it violates the first amendment. But I disagree that it represents extortion or that local officials can be held criminally liable for it in the absence of any personal gain, at least in the absence of a statute intended to cover the issue. Otherwise federal officials have enormous leeway to prosecute political opponents over essentially political differences. Overly expansive readings of broadly worded criminal statutes are also dangerous to liberties, and should be avoided.

[nonzenze]

Loc officials imposing conditions on permits is a not uncommon political act.

Sure, if based on political considerations and not personal gain. "You can't build here unless you hire my daughter as an architect" isn't a political act, it's a criminal one.

[lazylemurjulian]

Amazing article! Very informative, thanks for sharing!