Michigan Court Inexplicably Tosses Suit, Endorses Forcible Enlistment of Day-Care Workers into the State Government

When lawyers and other commentators say that a court did not properly explain its decision, it’s typically for hyperbolic effect. But, in a bizarre move, a court in the failed great state of Michigan has dismissed an economic liberty case brought by our friends at the Mackinac Center Legal Foundation for reasons the court quite literally did not explain. The court simply denied the plaintiffs’ complaint and that was that.

Home-based day care owners Sherry Loar, Michelle Berry, and Paulette Silverson have all been taxed by the Michigan Department of Human Services because, according to the state, they are somehow employees of the state and (further!) must pay union dues. because this baseless assertion comes directly from the state DHS, an executive department, among the significant constitutional objections to the case presents separation of power problems. (Ok, I haven’t studied the Michigan Constitution, but I assume they separate their powers there.) Enough ridiculous laws are passed by state legislatures — more than 40,000 last year alone – we don’t need state executive agencies getting into the act.

Yet, the Michigan Court of Appeals has nothing at all to say about the case.

Inexplicable — and unpardonable.

CP: Cato's blog

What Is "Unreasonable" Compensation? And Who Gets to Decide?

As could be expected, the effects of the financial crisis — and people’s reaction thereto — are starting to make their way to the least political branch of government, the judiciary. The Supreme Court this term will be hearing several cases that could have serious repercussions on our economic recovery, one of which led us to file an amicus brief. Here’s the situation:

The Investment Company Act of 1940 places on investment advisers a fiduciary duty with respect to the compensation they receive for the services they provide their clients. In the case of Jones v. Harris Associates, shareholders in various mutual funds contend that their adviser fees were excessive and violated the ICA. The Seventh Circuit, the federal appellate court based in Chicago, affirmed the judgment of the district court that the fees were not excessive but also expressly disapproved of the methodology for evaluating such claims used by the Second Circuit (based in New York). Judge Frank Easterbrook’s opinion explains that the ICA creates a fiduciary duty but does not act as a rate regulator, and that judicial price-setting does not accompany fiduciary duties. Judge Richard Posner, writing for five judges, dissented from the denial of an en banc rehearing. The Supreme Court agreed to review the case to settle the circuit split.

Our brief supports the investment adviser and makes three arguments:

1. All persons have a fundamental human right to whatever compensation their contracting partners freely and honestly choose to pay them.
   
2. Courts have no power to second-guess the reasonableness of any salary or compensation agreement honestly and freely signed by both contracting parties.
   
3. The ICA’s fiduciary duty requires only fair dealing, not any particular outcome.

Thanks to Cato adjunct scholar Tim Sandefur for spearheading this effort, and to Cato intern Matthew Aichele for helping with much of the attendant busywork.

[Cross-posted at Cato's blog.]

"Sweet" Victory in Oregon

As a follow-up to Jason Kuznicki’s post from January, I am pleased to report that yesterday Oregon Governor Ted Kulongoski signed HB 2817—a bill that eliminates the cartelization of the moving business in the Beaver state.

The old law required the Oregon Department of Transportation to notify existing moving companies of businesses that wanted to enter into their market. What’s more, those companies were given a veto over the would-be market entrants thereby locking out all competition to maintain artificially high prices—all with the government’s help.

The owner of a new moving company, Adam Sweet, enlisted the help of Pacific Legal Foundation lawyer and Cato adjunct scholar Tim Sandefur to litigate against the old law. That lawsuit, once it cleared challenges for dismissal, prompted several pieces of legislation that culminated into the bill that the governor signed yesterday.

Congratulations to Mr. Sweet, Tim, and PLF for their well-fought victory for economic liberty for the entrepreneurs and consumers of Oregon!

More details from PLF here.

[Cross-posted at Cato's blog.]