Tuesday, December 03, 2002

The interstices of common-law torts and the Federal Boat Safety Act

In SPRIETSMA, DECEASED v. MERCURY MARINE, A DIVISION OF BRUNSWICK CORP., (No. 01-706. Argued October 15, 2002--Decided December 3, 2002), the Supreme Court of Illinois rejected the lower court's rationale for dismissing the complaint, but affirmed the judgement on implied pre-emption grounds. Justice Stevens delivered the opinion of the Court, phrasing the legal question as follows: "The question presented is whether a state common-law tort action seeking damages from the manufacturer of an outboard motor is pre-empted either by the enactment of the Federal Boat Safety Act of 1971, 46 U. S. C. §§4301-4311 (FBSA, 1971 Act, or Act), or by the decision of the Coast Guard in 1990 not to promulgate a regulation requiring propeller guards on motorboats."

First the facts, as exactly described in the decision. Petitioner's wife was killed in a boating accident when she was struck by the propeller of an outboard motor manufactured by respondent, Mercury Marine, a division of Brunswick Corporation. In petitioner's subsequent common-law tort action in Illinois state court, he claimed that Brunswick's motor was unreasonably dangerous because, among other things, it was not protected by a propeller guard. The trial court dismissed the complaint, and the intermediate court affirmed, finding the action expressly pre-empted by the Federal Boat Safety Act of 1971 (FBSA or Act).

Now the holdings. Since the lower court justified its holding on the basis of an express pre-emption in the FBSA, Justice Stevens begins his explanation by reviewing the FBSA. Holding that the FBSA does not pre-empt state common-law claims such as petitioner's, Stevens refers to Section 10 of the FBSA Act, which sets forth the purported express pre-emption clause, to explain this holding. According to §40's saving clause, compliance with the Act or standards, regulations, or orders prescribed under the Act does not relieve a person from liability at common law or under state law. The reasoning gets interesting here, as the Court tries to show how the lack of an "express" pre-emption by the FBSA on common-law tort-claims. I quote:

"Section 10's express pre-emption clause--which applies to "a [state or local] law or regulation"--is most naturally read as not encompassing common-law claims for two reasons. First, the article "a" implies a discreteness that is not present in common law. Second, because "a word is known by the company it keeps," Gustafson v. Alloyd Co., 513 U. S. 561, 575, the terms "law" and "regulation" used together indicate that Congress only pre-empted positive enactments. The Act's saving clause buttresses this conclusion. It assumes that there are some significant number of common-law liability cases to save, and §10's language permits a narrow reading excluding common-law actions. See Geier v. American Honda Motor Co., 529 U. S. 861, 868. And the contrast between its general reference to "liability at common law" and §10's more specific and detailed description of what is pre-empted--including an exception for state regulations addressing "uniquely hazardous conditions"--indicates that §10 was drafted to pre-empt performance standards and equipment requirements imposed by statute or regulation. This interpretation does not produce anomalous results. It would have been perfectly rational for Congress not to pre-empt common-law claims, which necessarily perform an important remedial role in compensating accident victims."

The Court also explains why the Coast Guard's 1990 decision not to regulate propeller guards fails to pre-empt petitioner's claims. That decision left applicable propeller guard law exactly the same as it had been before the subcommittee began its investigation. In the words of the court, "A Coast Guard decision not to regulate a particular aspect of boating safety is fully consistent with an intent to preserve state regulatory authority pending adoption of specific federal standards".

The Court then shows why the FBSA's statutory scheme implicitly pre-empt petitioner's claims. As Ray v. Atlantic Richfield Co., 435 U. S. 151, and United States v. Locke, 529 U. S. 89, distinguished, the Act does not require the Coast Guard to set forth comprehensive regulations covering every aspect of recreational boat safety and design; nor must the Coast Guard certify the acceptability of every recreational boat subject to its jurisdiction. Stevens writes: "Even if the FBSA could be interpreted as expressly occupying the field of safety regulation of recreational boats with respect to state positive laws and regulations, it does not convey a clear and manifest intent to completely occupy the field so as to foreclose state common-law remedies. This Court's conclusion that the Act's express pre-emption clause does not cover common-law claims suggests the opposite intent."

Monday, December 02, 2002

More on "No Child Left Behind"

No Child Left Behind (NCLB) has been described by the Maple River Education Coalition as "a massive grab federal power over education". (See the very different description proffered by the US Department of Education.) Technically, there is reason to believe that the US Constitution (via the 10th amendment) prohibits the federal government from involved in education. The NCLB disregards this by holding that each state must set a single level of achievement for all students in that state-- measured by federally-mandated tests, of course. All resources, time, attention and accountability are directed towards meeting the requirements of that one level of "proficiency " for all. One might be tempted to imagine young children as sheep instead of potential citizens and creative, individual members of society.

The National Assessment for Educational Progress or NAEP, is a biennial national sampling assessment conducted in 4th, 8th and 12th grades which will now be, for the first time, required by federal law. Strictly speaking, if the state is taking federal education money (which usually falls under Title 1), all of its public schools must participate in state assessments. No state or school is exempt. As I mentioned before, this includes Alabama.

A newletter I recieved from the Maple River Coalition warned as follows:

Schools are facing a oncoming nightmare. It will be costly. It will focus almost exclusively on low performers. Do you wonder where your education dollars are going? Massive amounts of state and federal money have been poured into Goals 2000 and School-to-Work restructuring and other federally conceived programs. Requirements of NCLB will multiply this drain on education resources.

How this narrowly-channeled focus on low performers will measure the actual educational reform on state schools is a mystery to me. We shouldn't be surprised to find that some students will do learn alot without necessarily "performing well" on standardized tests. The jury is still out on whether or not performance anxiety is a rite of passage that might prove beneficial to students. In the meantime, however, companies like The Lightspan Network are marketing cheat-sheets to assist states in passing the NCLB test. So everybody gets tested-- the children, the teachers (in their ability to prepare the students for the tests), the schools (in their ability to meet quotas), and the states (in their ability to meet the fed's demands). Yet all the testing in the world cannot hide the fact that what everyone will be learning to pass these tests is not how to think or deliberate, but how to memorize, regurgitate, cut corners, and hate school. President Bush has, indeed, "transformed the federal role in education", but this transformation is an inefficient and dastardly one, adding weight without substance. Should we feign shock if the results never show up as more than bureaucratic obesity?
No Child Left Behind: An example of idealization at the expense of education.

The new federal law known as "No Child Left Behind" might be an example of how good intentions lead to bad policy consequences. The goal is to make sure that no disadvantaged child suffers from lower educational opportunity, as measured by standards. However, The National Center for Policy Analysis points out that this act might be too ambitious for its own good, which is directly related to the purported good of the children it aims to assist. Apparently, the act is "composed of a dizzying set of new requirements: annual testing of students in reading and math from grades three through eight, transfer options for children in schools that fail for two years running, and private tutoring after three years -- paid for with federal money earmarked for poor schools." Sounds good. So what is the problem?

For starters, the benefits of the No Child Left Behind Act will be concentrated in geographical regions and areas that already possess the financial capacity to engage in school reform. Just as no child should be left behind, no standardized test should be assumed as a free lunch-- anyone who has taken the SAT or GRE knows that test administration costs a fair bit of money. One might even argue that standardized tests impose prohibitive costs on poor students applying to college, as even the ability to apply presupposes the financial wherewithal to pay for the tests. Poor and rural school districts, already strapped for funds, will bear the costs of this Act disproportionately. According to an April report from the General Accounting Office, 35 states failed to meet the testing and assessment requirements of the 1994 Comprehensive Education Reform Act -- which is a milder version of the Bush plan.

I will take this personally, as education reform in Alabama has progressed so slowly as to be called "snail-like". The arguments for silent seething are at an impasse. Teachers unions here have waged their wars on private education at the expense of disadvataged students. I must thank Diana Jean Schemo, whose article "Poor Rural Schools Must Struggle to Meet New Federal Rules" for the New York Times, reveals the extent to which my home-state has been hurt by the Bush administration's emphasis on reform instead of school choice. In Alabama, teachers at poor and remote schools must often teach from textbooks first published in 1961. You can imagine how well such instruction prepares them for "the real world". It only increases their competitiveness to the extent that archaic, fossilized knowledge is useful (which, I hope most will admit, cannot be the case). In order to earn the equivalent of an academic diploma which will allow them to attend a university, Alabama students must master a foreign language -- although there are no foreign-language teachers at some schools. Spending money on tests when you can't even afford teachers is a disgrace. But, then again, politicians in Alabama seem fairly comfortable with disgrace. What surprises me is that our school-friendly President should be.

Wednesday, November 27, 2002

Russia's tax revolution: A model or mistake?

According to an editorial ("The Putin Curve") for The Wall Street Journal, Russia has recently undergone a tax revolution. The Russian reforms began in 2001, when a 13 percent flat tax on individual income replaced a convoluted system with a marginal rate of 30 percent. Then the tax on corporate profits was cut nearly one-third to 24 percent, corporate tax loopholes were closed, and social security levies were simplified and payroll tax rates reduced. Tax revenues immediately began rising as citizens decided it was easier to pay taxes than to avoid them -- a classic Laffer Curve effect of an enlarged tax base and a surge in tax revenues.

Russia's economy grew 9 percent in 2000 and 5 percent in 2001 and is expected to expand by more than 4 percent this year. Meanwhile, as other stock exchanges shudder under the threat of self-fulfilling doom prophecies, the Moscow stock exchange is galloping. The tax reforms have provided a solid basis for economic growth and investment. As important, they have signaled to Russian individuals and businesses that the government is serious about creating incentives to productive work and risk-taking. Worthy of remark is the political effectiveness of Putin's economic team in expediting these reforms, which were only predicted to start in 2004 or 2005.

Another tax going on the Russian scrap heap is the "road user" tax. At about 1 percent of corporate revenues (not profits), the tax was highly regressive, a disincentive to investment that pushed a lot of business into the black market. "The Russian example shows that this is precisely the right time for tax reforms to spur economic growth in the United States," concludes the Journal. The National Center for Policy Analysis concurs, as it has been agitating for tax reform to stimulate economic growth quite consistently.

I'm not sure whether the current economic success in Russia is best attributed to tax policy reform. Though tax reform certainly increased investor confidence by providing a modicum of transparency and increased Russia's competitive opportunities for foreign investment, the Russian tax "miracle" has been a long time in the making. Russian tax policy certainly played a significant role in the failure of the Washington approach, as man-handled by Clinton, Summers, and Sachs, to facilitate Russia's economic transition to a mixed market economy. By 1995, tax policy in Russia had undergone so many modifications and changes that neither tax-payers nor tax inspectors could make sense of it. As a result, Vladimir A. Samoylenko cautioned that "the rights of tax bodies in interpreting the provisions of the tax laws became so broad that any revision by the tax inspectorate resulted in the arrest of a tax-payers' account and unconditional recovery of taxes in arrears, as assessed by the opinion of a taxinspector, together with fines and penalties". Confusing tax policy combined with the pro-investment strategies of Yeltsin and the Washington consensus to create an environment ripe for corruption, as many tax officials began interpreting and manipulating tax codes in ways favorable to certain oligarchs. Even in 1998, Russia's tax policies continued to be cited as main impediments to economic reform.

Surely, however, Putin's cool, calculated, pro-Western foreign policy should also be credited with stimulating Russia's economy, especially to the extent that American investors have been eyeing his relationship with the Bush administration to see how smooth US-Russian relations might be in the aftermath of last year's terrorist attacks and last month's NATO accession summit in Prague. What Nikolai Sokov calls Putin's "pro-Western pragmatism" has strengthened Putin's hand vis-a-vis Europe, where his political style and manner is greatly appreciated-- which only serves to solidify his popular base and political legitimacy at home. So far, I think that this, more than anything, has contributed to keeping the disgruntled Russian hawks in the military and intel communities from posing a destabilizing threat to Putin's detached diplomatic intimacy and intricacies. Economists are overlooking the role of Putin's pragmatic foreign policy in creating the conditions for economic prosperity.

For more interesting commentary on the Russian tax reform, see articles and essays by the Hoover Institution's Alvin Rabushka. Also worth noting are the scholars and talks given at a summer 2002 conference "Taxation in Russia and the CIS" hosted by the Adam Smith Institute. The best easy, breezy break-down is one by Deroy Murdock for Citizens for a Sound Economy.

Sunday, October 20, 2002


At the Mises Institute 20th Anniversary conference this past weekend, Thomas DiLorenzo discussed the different approaches classical liberals hold to antitrust legislation. Author of numerous works on the Sherman Antitrust Act, DiLorenzo's "kudzu antitrust theory" stands in sharp opposition to the antitrust arguments given by the Chicago school, which DiLorenzo summarizes as "you can keep antitrust as long as you have smart people running the country" (an approach also taken by the American Enterprise Institute in Washington DC). DiLorenzo's distaste for antitrust legislation as a market cure for monopoly is apparent in his position on the Microsoft case.

DiLorenzo argues that antitrust legislation has "always been a protectionist racket", as the businesses targeted at the time were very successful. Rather than compete on the market, businesses discover that it is in their interest to compete for government favors, or to wage that ethically-ambiguous war of monopoly-slandering. Since special interest groups use antitrust legislation as a tool to accomplish either similar or distantly-related goals, DiLorenzo holds that you cannot reform such legislation. While he agrees with the Chicago school that the Sherman Antitrust Act was horrible, he disagrees with them about the extent to which carefully crafted antitrust legislation might avoid the pitfalls of Sherman.

However, in saying this, DiLorenzo still does not explain the different methodological approaches containing the divisions within classical liberal thought on antitrust legislation. To his credit, he notes that Misean methodological individualism provides the basis for public choice theory in economics, as the Misean focus on incentives also influenced the UCLA-Washington property rights school approach.

"No oppression is so heavy or lasting as that which is inflicted by the perversion and exorbitance of legal authority." Joseph Addison

"The greatest dangers to liberty lurk in insidious encroachment by men of zeal -- well-meaning but without understanding." Louis D. Brandeis


The legal community fails to demonstrate the requisite concern for the current Justice Department's use of the 1996 Antiterrorism and Effective Death Penalty Act which, among other things, makes terrorism a crime punishable by death. Initially passed by the Clinton administration as a response to the Oklahoma bombing, the "reform" in habeus corpus provisions is dramatic. Both capital and non-capital cases are affected by provisions that create one-year deadlines for filing habeas petitions, limit successive petitions, and generally restrict the review of state prisoner petitions if the claim was adjudicated on the merits in the state courts. A "certificate of appealability" also is required before a habeas petition by a state or federal prisoner can be appealed to a federal court of appeals.

Other provisions include the creation of an Alien Terrorist Removal Court composed of five sitting U.S. district judges designated by the Chief Justice; an expanded definition of an aggravated felony under which aliens may be deported, and a streamlined deportation process for criminal aliens after they serve their sentences; the creation of a five-member Commission on the Advancement of Federal Law Enforcement to study criminal law enforcement, the chair of which will be appointed by the Chief Justice; the authorization of appropriations for the Judiciary of $41 million from the Crime Trust Fund from fiscal year 1997 to FY 2000 to help meet the increased demands for judicial branch activities resulting from enactment of the bill; a set compensation for court-appointed attorneys in capital cases at a rate of not more than $125 per hour for in-court and out-of-court time, in addition to an authorization to the the Judicial Conference to increase the rate of compensation in the future under a "CPI escalator" mechanism; the capping of fees and expenses paid for investigative and expert services in capital cases at $7,500, but providing for a waiver mechanism whereby such expenses can exceed that cap if the excess payment is certified by the court as necessary to provide fair compensation for services of an unusual character or duration and if the amount of the excess payment is approved by the chief judge of the circuit.

In 2001, the Supreme Court rejected an appeal that would remove two groups from this Act, giving reason to believe that the constitutionality of this Act is not in question. The federal appelate courts have been a little more forthcoming in their rulings on cases involving the Antiterrorism Act. A unanimous panel of the 2nd U.S. Circuit Court of Appeals ruled that habeas petitions dismissed pursuant to the U.S. Supreme Court's ruling in Stone v. Powell, 428 U.S. 465 (1976), constitute a denial on the merits. Tom Perrotta comments that, although "the act does not explicitly define a "second" or "successive" petition, the 2nd Circuit has ruled that a petition will be classified as successive if a prior petition has been decided on the merits (Corrao v. United States, 152 F.3d 188, 1998)". For a more particular analysis of the act's provisions and stipulations, the best work I've encountered so far is a lengthy break-down by Charles Doyle.

Saturday, October 19, 2002


A former real estate developer filed a lawsuit against the state of Alabama yesterday for allowing the governor's beach-house to fall into disrepair. The plaintiff believes the state should forfeit this property. However, an attorney for Governor Don Siegelmann claimed that the house was damaged by storms and should remain state property. While the governor's beach-house should, of course, be at the top of policy priorities, I fail to see what keeps this from being a frivolous lawsuit. If the developer wants to file suit against the state for negligence (in care of state property), then Alabama schools and parks might be a much surer shot.

Friday, October 18, 2002


The debate over whether the USC will use the 11th Amendment to back a states' rights position in this term's Nevada Department of Human Resources v. Hibbs continues. While, technically, the case comes to the Court in the guise of an employment law dispute-- a challenge by the state of Nevada to the Family Medical Leave Act, which is the federal law guaranteeing an employee 12 weeks of unpaid leave to care for a newborn, an adopted child, or a close relative with a serious health problem-- skeptics believe it is just another infamous states' rights case which prime Justice O'Connor to once again play the swing vote. Justice O'Connor could go one of two ways, either deciding in favor of her personal distaste for gender discrimination or in favor of her private federalist.