Unconstitutionally Blocked: Southern District of N.Y. Rules President’s Twitter Practice Violates First Amendment

Written by Steven L. Foss

 

Background

On May 23, 2018, a federal district judge ruled that President Donald J. Trump’s blocking of Twitter users critical of him violates the First Amendment. Judge Naomi Reice Buchwald of the Southern District of New York, in a 75-page order on cross–motions for summary judgment, determined that the President’s Twitter handle @realDonaldTrump and the “interactive space” it generates constitutes a public forum under First Amendment jurisprudence. Consequently, when the President blocks someone from viewing and interacting with his profile, he commits unconstitutional viewpoint discrimination.

Knight Institute v. Trump

The controversy began when seven individuals who criticized President Trump on Twitter were blocked from the President’s @realDonaldTrump account. The Knight First Amendment Institute at Columbia University filed suit on behalf of the blocked individuals, claiming that the President used the blocking function to suppress political dissent in violation of their First Amendment rights. Judge Buchwald rejected the argument that the President’s personal First Amendment right of association outweighed the plaintiffs’ own First Amendment rights. And, while recognizing that there is generally no “right to be heard” by the government, Judge Buchwald distinguished that principle from the plaintiffs’ claims. She discussed the difference between Twitter’s blocking feature and its “muting” feature, whereby users can choose not to see the activity of a particular user. Unlike blocking, when user A is muted by user B, user A can still view, reply to, and retweet user B’s tweets, even though user B will not see these replies. Blocking users that the President does not wish to interact with is not functionally equivalent to muting them because the blocked users cannot reply to the President’s tweets and engage other users in dialogue concerning those tweets. The court noted that muting users that the President does not wish to engage with would serve the President’s own interests equally well while not infringing on the rights of individuals to speak to — but not necessarily be heard by — the government in a public forum.

Forum Analysis and Viewpoint Discrimination

In analyzing First Amendment claims, a preliminary question asks what type of forum the speech takes place in or is excluded from. The court in Knight Institute v. Trump determined that the President’s Twitter handle @realDonaldTrump and the “interactive space” created around it by virtue of Twitter’s features is a designated public forum for free speech purposes. Judge Buchwald rejected the argument that because the President once used the account as a private citizen, the handle is not a public forum. Rather, because the President chose to use the account in a manner similar to a traditional public forum, the handle must adhere to traditional First Amendment protections of subject matter and viewpoint neutrality.

In traditional and designated public fora, government regulations of speech must be “narrowly drawn to achieve a compelling state interest” in order to pass constitutional muster. While some subject matter and speaker restrictions can be constitutional under certain circumstances, viewpoint restrictions are generally considered to be forbidden. In the Knight Institute case, Judge Buchwald held that the blocking of users critical of President Trump was “indisputably” unconstitutional viewpoint discrimination, and went beyond merely choosing not to amplify the voices of those he disagrees with.

Declaratory or Injunctive Relief?

A more vexing problem for the court and those concerned with separation of powers was the type of remedy available to the plaintiffs. Citing multiple U.S. Supreme Court cases, Judge Buchwald rejected the government’s argument that a court “categorically lack[s]” authority to order the President to unblock Twitter users. However, the court did not grant the plaintiffs both declaratory and injunctive relief, as they had requested. It declared the President’s blocking unconstitutional and left open the possibility that if the President refused to unblock the plaintiffs, an action for injunctive relief could be brought to compel the President or his staff to unblock them. The Court held unblocking to be a purely “ministerial” action, involving little or no discretion (given the court’s ruling that blocking is unconstitutional, and the President’s general duty to comply with the law). Requiring such a ministerial action would be a “minimal” intrusion on the President’s inherent authority as chief executive. The court opined that even if it lacked the power to issue an injunction against the President, it could enjoin his social media director and co–defendant Dan Scavino, who also has access to the account.

Going Forward

In the wake of Knight Institute, it seems that government officials or entities operating social media accounts for official purposes must not restrict users from interaction based on viewpoint. There are similar lawsuits pending in other district courts, and they may take notice of Judge Buchwald’s ruling. They could also be critical of the expansion of First Amendment protections into cyberspace, heeding Justice Samuel Alito’s concurrence in Packingham v. North Carolina where he cautioned against Justice Kennedy’s broad language in striking down a law forbidding sex offenders from accessing vast swathes of the Internet. A federal district court in Kentucky denied a preliminary injunction preventing Governor Matt Bevin from blocking critics on social media, holding that the plaintiffs there were unlikely to succeed because they are simply not being heard by the government. The case is ongoing.

The Department of Justice disagrees with the Knight Institute decision and is reviewing its options, including appeal. We shall have to wait and see. In the meantime, given politicians’ increasing online presence and the growing recognition that public fora extend beyond traditional physical spaces like sidewalks and parks, public officials should exercise caution when deciding how to deal with dissent on social media.


Sources

Hargis v. Bevin, 2018 U.S. Dist. LEXIS 54428 (E.D. Ky. Mar. 30, 2018).

Issie Lapowsky & Louise Matsakis, Trump Can’t Block Critics on Twitter. What This Means For You, Wired (May 23, 2018, 6:29 P.M.).

John Herman & Charlie Savage, Trump’s Blocking of Twitter Users Is Unconstitutional, Judge Says, N.Y. Times, May 23, 2018.

Knight First Amendment Inst. at Columbia Univ. v. Trump, 2018 U.S. Dist. LEXIS 87432 (S.D.N.Y. May 23, 2018).

Packingham v. North Carolina, 137 S. Ct. 1730 (2017).

Press Release, Knight First Amendment Institute at Columbia University, Federal Court Rules that President Trump’s Blocking of Twitter Critics Violates First Amendment (May 23, 2018).

 

Photo courtesy of The Economist.

Gambling with Gamers: The Global Controversy Surrounding the Growth of Virtual Loot Boxes and Their Ties to Gambling

written by Nathan Jerauld

 

Background

In recent years, video game companies discovered a new way to generate profits: loot boxes. “Loot boxes” are randomized rewards that video game players receive in exchange for in-game points, which are earned by playing the game or by paying real-world cash. The rewards offered in loot boxes could be purely cosmetic, or could offer players powerful perks that improve their chances of winning games.

Globally, countries differ on whether loot boxes constitute gambling, and should be regulated accordingly. Earlier this year, the Netherlands outlawed loot boxes because of its association with gambling. Conversely, the United Kingdom concluded it was not gambling. Last month, however, Belgium became the second country to make loot boxes illegal, and required game publishers to remove loot boxes purchasable with cash. Despite the recent turn in Belgium, the CEO of Electronic Arts (EA), a major video game producer, stated early this month that they remain committed to including loot boxes with future game releases.

Ties to Gambling

Loot boxes bare some similarity to gambling, a practice illegal for minors in the United States. According to Black’s Law Dictionary, gambling is “[t]he act of risking something of value, especially money, for a chance to win a prize.” With regards to risking something of value, players must spend in-game currency, which requires them to invest time into gameplay, or use cash to purchase it.

Additionally, loot boxes do not guarantee good prizes. While players receive rewards for every loot box purchase, the most beneficial prizes are rare. In order to obtain the best prizes, players generally need to purchase numerous loot boxes. The hope of obtaining better loot drives players to spend more time or money to get more chances. Players report spending hundreds and thousands of dollars trying to get additional perks. In one notable case, a player spent over $13,000 USD as a minor in pursuit of in-game rewards.

Domestically, lawmakers have concerns about the relationship between loot boxes and gambling. To date, five states (California, Washington, Hawaii, Indiana, and Minnesota) have bills seeking to regulate the use of loot boxes in games marketed to minors. The Minnesota bill, for example, would prohibit the sale of video games with loot boxes to minors, and require publishers to include a clear warning to players that the game “contains a gambling-like mechanism that may promote the development of a gaming disorder . . . and may expose the user to significant financial risk.”

Despite growing concern about loot boxes and gambling, there are notable differences between the two. According to EA, loot boxes always provide the player some type of reward, and they also prohibit players from “cashing out” points for actual currency; the same cannot be said for gambling. Similarly, the Entertainment Software Association, a group representing video game publishers, compared loot boxes to popular, and legal, trading card games that require players to purchase card packs without knowing their contents.

The Way Forward

Video game publishers are unlikely to discontinue the use of loot boxes. Publishers earn about $30 billion dollars from loot box sales globally. In 2017, major video game publishers EA and Activision Blizzard earned over half of their revenues from digital sales, which include the purchase of loot boxes. In the next four years, global earnings from loot boxes are projected to increase to $50 billion dollars globally.

It is unclear if state efforts to regulate loot boxes will succeed. Traditionally, gambling is a state-level issue that falls within its police power. Yet, state bills addressing loot boxes are moving slowly, and hitting political snags. Hawaii’s bill originally attempted to impose regulations similar to Minnesota’s bill, but now would only require publication of the odds for winning loot. California’s bill has been effectively withdrawn. Indiana’s bill, introduced in January, calls for the State Attorney General to study the issue further; as of May, it is still in committee.

Adjusting U.S. policy on loot boxes could produce unintended consequences for other amusement industries. Currently, loot boxes are not regulated domestically. While the production, shipment, and use of video games with loot boxes would likely fall under interstate commerce, loot boxes seem more akin to unrestricted activities than restricted ones. Various activities marketed toward minors involve monetary risk, but do not fall under social conceptions of gambling. Consider popular trading card games like Magic: The Gathering, or other amusements like claw games, and carnival games that involve risking money for prizes. Although these activities have similarities to gambling, they are legal. If the government elects to regulate loot boxes, it is hard to see why it should not elect to regulate access to claw games, capsule vending machines, and Ring Toss.

Market factors will likely discourage predatory uses of loot boxes in the future. Boycotts have already been successful. Last year, EA made in-game payments and loot boxes an integral part of a major game, Star Wars Battlefront II. Players responded with highly negative criticism, and EA failed to meet its sales expectations for the game. Because of the response, EA altered the structure of the game. If players hold publishers accountable for loot box misuse, and refuse to pay, the industry will respond accordingly. Additionally, for younger players, increased awareness of the issue will help parents supervise their children’s use of loot boxes, and mitigate concerns of overspending.


Sources

Actions for Senate Bill 333, Ind. Gen. Assembly, https://iga.in.gov/legislative/2018/bills/senate/333#document-58bc9bc4. (last visited on May 18, 2018).

Call to Regulate Video Game Loot Boxes over Gambling Concerns, BBC (Nov. 24, 2017).

Dave Thier, EA: ‘Star Wars Battlefront 2’ Misses Sales Expectations, Forbes (Jan. 30, 2018, 5:27 PM).

Ellen McGrody, For Many Players, Lootboxes Are a Crisis That’s Already Here, Vice Waypoint (Jan. 30, 2018).

Ethan Gach, Meet the 19-Year-Old Who Spent over $17,000 on Microtransactions, Kotaku (Nov. 30, 2017).

Gambling, Black’s Law Dictionary (10th ed, 2014).

Gamers’ Anger Halts Star Wars Battlefront II’s Payments, BBC (Nov. 17, 2017).

HF 4460, 90th Leg., (Minn. 2018).

Jason M. Bailey, A Video Game Loot Box Offers Coveted Rewards, but Is It Gambling?, N.Y. Times, Apr. 24, 2018.

Matt Perez, Despite ‘Battlefront 2’ Flub, Electronic Arts Posts Record Annual Revenues of $5 Billion, Forbes (May 8, 2018, 7:20 PM).

Mike Wright, Video Gamers Will Be Spending $50 billion on ‘Gambling-Like’ Loot Box Features by 2022, According to Analysts, Telegraph, Apr. 17, 2018.

Nelson Rose & Rebecca Bolin, Game on for Internet Gambling: With Federal Approval, States Line up to Place Their Bets, 45 Conn. L. Rev. 653, 657 (2012).

Press Release, Entm’t Software Ass’n, Entertainment Software Association Commends California Assembly Member Bill Quirk (Apr. 17, 2018).

Rob Thubron, Over Half of Activision Blizzard’s $7.16 Billion Yearly Revenue Came from Microtransactions, Techspot (Feb. 12, 2018, 6:12 AM).

Tom Shea, EA Adamant Loot Boxes Aren’t Gambling, Gameindustry.biz (May 9, 2018).

Video Game Loot Boxes Declared Illegal Under Belgium Gambling Laws, BBC, Apr. 26, 2018.

A Brief Analysis of the Supreme Court’s Recent Decision on Sports Gambling

Written by Jacob Honan 

 

The United States has an undeniable attraction to betting on sports. Recent studies indicate that sports gamblers spend an astounding $105 billion annually through both legal and illegal means. On May 13, 2018, the United States Supreme Court issued their decision in Murphy v. NCAA, giving many gambling fans across the nation reason to celebrate. The primary takeaway from the Court’s 6–3 ruling is that all states are free to decide whether their citizens may gamble on professional sports, overturning prior law. As a result, some states have already implemented measures to make sports gambling widespread and accessible, while owners of professional sports teams are looking forward to seeing their revenue dramatically increase. The rationale for this decision—based on the right of states to be free from commandeering by the federal government—will likely shape other areas of constitutional law for years to come.

Background

 In 1992, Congress enacted the Professional and Amateur Sports Protection Act (“PASPA”), which forbid 46 states from authorizing any form of gambling on sports. This law was intended to protect the integrity of the professional leagues, as legislators feared that allowing such betting would “change the nature of sporting events from wholesome entertainment for all ages to devices for gambling.” Four states (most notably Nevada) were exempted from this regulation, and could allow sports gambling to varying degrees.

Controversy arose in 2012, when New Jersey Governor Chris Christie enacted a law that authorized gambling on professional sports within the state. The statute was in clear violation of PASPA and was prohibited from taking effect. The four major professional sports leagues (MLB, NFL, NHL, and NBA) and the NCAA sued New Jersey, arguing that this state law was invalid because it conflicted with PASPA. New Jersey was defeated in every lower court, but the Supreme Court granted certiorari and reviewed the case.

Murphy v. NCAA 

Surprisingly, the Court overturned every prior decision and ruled in favor of New Jersey, but the decision did not give any explicit endorsement of gambling. The majority of the Court, led by Justice Samuel Alito, relied on the anti-commandeering doctrine from the Tenth Amendment to the Constitution in making its decision. In essence, the anti-commandeering doctrine prohibits the federal government from “commandeering” state governments to implement certain laws. The Court held that PASPA violated the anti-commandeering doctrine because it prohibited states from allowing their citizens to bet on professional sports. While illustrating that PASPA imposes an unconstitutional infringement on state rights, Justice Alito stated that “[a] more direct affront to state sovereignty is not easy to imagine.”

The major sports leagues that sued the state of New Jersey argued that PASPA did not qualify as commandeering because the statute merely prohibited a state from legalizing sports wagering, and did not command any affirmative behavior. The Court rejected this claim, holding that the clear purpose of PASPA was to control activities within the states, which is a violation of the purpose of the Tenth Amendment. The Court also found no evidence that sports wagering qualifies as interstate commerce, which can generally be regulated by the federal government.

Finally, the court did not give explicit approval or disapproval to betting on professional sports, as its decision was based on constitutional concerns, not practical ones. Furthermore, the opinion allows for Congress to choose to ban or allow sports gambling altogether. However, Congress also has the option bypass the issue and let the individual states decide for themselves.

What Does the Court’s Decision Mean Going Forward?

Hypothetically, if Congress does decide to institute a nation-wide ban on betting on professional sports, it is plausible that the Supreme Court would uphold such a law. Experts have speculated that the Court would apply the strict scrutiny standard of review to this issue. A law subject to strict scrutiny will only be upheld if it is necessary to achieve a compelling government interest. If a suit challenging such a law is brought in the future, the government will likely defend a ban on sports gambling by using the same rhetoric as the enactors of PASPA—that ensuring the integrity of professional sports by prohibiting gambling qualifies as a compelling government interest. A challenger to this law would claim that there is no correlation between professional sports gambling and corruption within the leagues, and so a prohibition of gambling would not further the government’s interest. It remains to be seen whether Congress will prohibit sports wagering, but interesting lawsuits would undoubtedly result if they choose to do so.

In addition, the Court’s rationale in Murphy v. NCAA will likely impact claims brought against other laws that involve commandeering of states. For example, this decision appears to give significant ammunition to challengers of federal marijuana regulations, as they now have a credible argument that bans on the substance qualify as commandeering of state sovereignty. In addition, some cities have refused to follow recently-enacted federal immigration laws, and can use this ruling to claim that these laws pose a Tenth Amendment violation. Thus, the impact of this case could travel far beyond the casino, and will likely be relied upon in other areas of constitutional law for years to come.

Sources

Marc Edelman, Explaining the Supreme Court’s Recent Sports Betting Decision, Forbes (May 16, 2018).

Charles Star, Here’s What That Supreme Court Decision About Sports Betting Actually Does, Deadspin (May 15, 2018).

Sean Gregory, The Risks and Rewards of the Supreme Court’s Sports Gambling Decision, Time (May 18, 2018).

Amy Howe, Opinion Analysis: Justices strike down federal sports gambling law, SCOTUSBlog.com (May 14, 2018).

Michael McCann, Why New Jersey Won Its Supreme Court Battle to Legalize Sports Betting, Sports Illustrated (May 14, 2018).

Yancey Roy, What the Supreme Court’s Decision on sports betting actually means, Newsday (May 18, 2018).

Photos Courtesy of WKBW Buffalo & USA Today.

May 2018: Edward Bibko (L’94)

Edward Bibko was born and raised in Phoenix, New York, a tiny village with just over 2,000 people. He had his sights set on getting out but didn’t know yet what the world had to offer. He never imagined that he would become European general counsel at a global investment banking firm in London, England.

Edward Bibko                                     Acting General Counsel for EMEA and Asia

It all began with his brother’s pursuit of engineering. “I thought, ‘I could do that!’” he said. But after some time studying engineering, Edward decided he wasn’t too intrigued by the science. So, he changed majors and graduated from the University of Vermont in 1989 with a degree in Finance.

Following graduation, he began working for IBM as a financial analyst. IBM offered Edward an exciting opportunity and a great start in his professional career, so he spent over a year there. But again, Edward decided he really didn’t like numbers in general. Having eliminated two professions, he thought about law. He didn’t really know what lawyers did, apart from what he’d seen on TV shows of lawyers. Nevertheless, Edward was ready to find out for himself what it was really like and how he could make his own impact. So, in 1991, Edward set off to begin law school at Syracuse University College of Law.

He was invited to become a member of Syracuse Law Review Volume 43 and was thereafter elected by his peers as the Managing Editor of Volume 44.

“[Law school has] so many amazing, intelligent people, and to have the support of your peers and to be elected to [Managing Editor] was a tremendous confidence boost,” he said. “I think that inspired me to set my sights a bit higher.”

Edward was a commuting student, and busy with Law Review work, but he took advantage of the opportunities available to him. He recalls participating in the ‘Lawyers in the Classroom’ program, where he’d visit inner-city high schools and talk about the law, trying to make it interesting for 15 to 18-year-olds by teaching cases with “wild fact patterns.” He also spent all of his first summer and part of his second summer at the New York State Attorney General’s Office, where he got to be a hands-on participant in a variety of cases.

Likely the most impactful experience of his law school career, however, was the consequence of reading an ad that led to a trip to Cambridge, England.

“In between my second and third years of law school, a good friend and I were just waiting for a class to start and leafing through one of the legal magazines,” he said. “There was an ad on the back of it that said, ‘Study in England . . . because everyone should have at least one great time in law school.’ Convinced, we went to Cambridge, and that’s actually where I met my wife, who is from Chicago, at the Spread Eagle Pub. It was a tremendous time, really studying European law and also the history of law. So, when I came back, there were two consequences from that: I ended up marrying my now wife, [and] it made me think maybe I wanted to do something international.”

The trip to England was the start to an exciting career ahead for Edward, but he didn’t head to London just yet. He first began his legal career, upon graduation in 1994, in New York City, where he worked as a litigator at the firm of a Syracuse alumnus. While there, the prospect of one day living in England remained prevalent, so Edward kept his options open.

“I found some used books and studied for the British Bar,” he said, “and I took that in 1997 while I was in New York. Then, when my wife said she couldn’t quite get used to New York, we moved to Chicago.”

Upon the move to Chicago, Edward found an attorney position with Sam Zell, former owner of the Chicago Cubs professional baseball team. Zell had “his own law firm with 45 lawyers” that focused solely on his legal needs, and Edward was one of them. After a couple of years, however, a new opportunity arose.

“[Zell] decided to wind up [his law firm] because he saw the ‘dot com’ bust coming,” Edward said. “So, that’s when I moved over to Kirkland and Ellis. I said to them, ‘I’ll join you, if you consider moving me to London at some point.’”

And so, the move to London became another step closer and became more real as the international legal work piled up. Through Kirkland, Edward worked with many Japanese clients, hosting conference calls at 2 a.m. to make up for the time difference and working with a wide variety of legal principles. Then, another opportunity sprung up.

“A former Kirkland [attorney], who had moved earlier to Baker & McKenzie was partner,” he said, “and she hired me [to Baker]. That was the bridge between the two.”

At Baker, Edward quickly rose from senior associate to partner, and eventually became the head of Baker’s Capital Markets Group with Europe, the Middle East, and Africa (“EMEA”). The best part? He and his wife had finally struck a deal and moved to London.

While at Baker, Edward worked on many initial public offerings, with most of the deals done by listing foreign companies on the London Stock Exchange.

“The biggest work flow or work task is to prepare a prospectus for investors that describes everything about the company and the securities,” he said. “In order to kick off that process, you typically would go off to that company and spend a few days with them to see what they do so that you can write about it[.]”

These trips to visit the companies led to a multitude of ‘movie moment’ adventures, from driving across the Saudi desert, to working from an island in the Maldives, to encountering traveling camels in Uzbekistan. He said this made for an exciting career, as each “deal was like a little master class in that company’s business.” One of his more interesting adventures took him to Russia.

“I worked for the Russian Diamond Mining Company, and so I went by private plane to just south of the Arctic Circle to an uninhabited region of Russia to this diamond mine,” he said. “I went and dug up diamonds for a couple of days and lined up at the equipment cage with all the other minors.”

After 17 very successful years with Baker, one of Baker’s clients – Jeffries – came knocking. As a young, evolving global investment bank, Jeffries has grown to become one of the top 10 investment firms – joining the ranks of Goldman Sachs, Citi, J.P. Morgan, and the like – according to Edward (and a December 2017 Business Insider article).

He chose to transition from his capital markets position with Baker into Jeffries’ in-house counsel role after wanting a change. “I was excited about the opportunity,” he said, “but I had also sort of been in-house early in my career, and I knew it was a fantastic dynamic[.] There’s a relationship where you are part of a team[.]”

Edward has been serving as Head of the IB Legal at Jeffries since his 2017 move and recently received a new title in just the last few months: Acting General Counsel for EMEA and Asia. He said he loves this new role, and he looks forward to all that comes next.

As to advice for students planning out moves to one day follow in his footsteps, Edward laughs and simply remarks, “Don’t sweat it.”

“If my career stands for anything,” he said, “it’s that you can make every mistake possible and you’ll still end up where you’re meant to be. I was, I suppose, a disaster in terms of planning. I didn’t know what lawyers did when I went in to law school. I didn’t really focus on any one area of law in particular in law school. I had only vague notions of what I was supposed to be doing. I didn’t do a summer associate program. I didn’t do the paralegal route. Essentially, I had done everything wrong, but you just find your way.”

“Relax, and know it’s a long career ahead of you. If anything, we’re in a world where flexibility is probably the most important thing these days. And so, I think that my advice would be…at the end of the day, don’t sweat it. If you just apply yourself and continue on, you’ll find where you’re supposed to be.”


This story was written by outgoing Legal Pulse Editor Samantha Pallini and incoming Alumni Editor Kristina Cervi. It is the ninth installment of Syracuse Law Review’s monthly feature, “Alum of the Month.” Stay tuned for next month’s feature on another noteworthy Syracuse Law Review alumnus!

Congratulations, Class of 2018

It is with great pride and excitement that we introduce you to Syracuse Law Review‘s graduating Class of 2018!


On May 11, 2018, our 3L’s crossed the stage and officially completed their legal education. We are incredibly grateful for their hard work and for the knowledge and tools they have passed on to the Class of 2019.


We will miss them in the office next year, but we cannot wait to see where they go next! Read on to meet the graduates and learn where you might find them this fall.

Maryland’s Effort to Control Skyrocketing Drug Prices Hits a Constitutional Snag

Written by Chris Baiamonte

 

Background

Dutch pharmaceutical giant Mylan un-serendipitously made headlines in 2016 when it raised the price of the life-saving injection device, EpiPen, to over $600.00 per unit, up from only around $50.00 per unit a few years prior. Unfortunately, this was merely one egregious example of the increasingly common phenomenon of skyrocketing drug prices. Long patent protections and inelastic demand allow pharmaceutical companies to routinely raise prices on essential medications by hundreds or thousands of percent. Examples of drugs costing hundreds per pill or tens of thousands for a course of treatment abound. The rarer the ailment, the less likely competitor generics are to enter the market and the more leverage the manufacturer has in raising prices.

A part of these eye-popping prices is a natural consequence of the ever-increasing difficulty of developing new drugs. Pharmaceutical companies spend billions of dollars developing thousands of compounds, in the hopes that a handful will lead to viable medications, of which one or two might pass the long and rigorous FDA approval process to reach the market. Nonetheless, these costs are all-but impossible for the average patient to keep up with, so most of the cost gets passed on to insurance providers, the largest of which is the U.S. taxpayer.

Attempted Solutions

Amid calls for regulation, Congress has been slow to react. Alternatively, state legislatures, motivated by the impact high drug prices have on state Medicaid budgets, have taken a more aggressive stance combating rising drug prices. New York, for instance, limits what state programs will pay out for drugs the state deems to be priced disproportionately high when compared to their medical benefit. In 2017, four states passed laws prohibiting third-party administers of prescription drug benefits from restricting pharmacists’ ability to inform customers about cheaper options for filling their prescription; an unfortunately common practice, known in the industry as a “gag rule.” California recently passed SB 17, a law requiring drug makers to disclose significant price increases ahead of time and make a public justification as to the need for the increase. Many other state measures of one kind or another have been enacted.

Maryland’s legislature passed one of the most ambitious solutions. HB 631 went into effect in October of 2017, over a veto from Governor Larry Hogan, who objected that the law was unconstitutional. HB 631 created a cause of action for the State Attorney General against generic drug makers who increased the price of any “essential” drug by 50 percent or more during a single year. However, an industry trade group representing the drug succeeded in having the law declared unconstitutional by a federal appellate court last week. In addition to setting back Maryland’s consumer protection efforts, the decision could be useful to other pharmaceutical industry groups in rolling back other state laws, including the one currently mounting a challenge to California SB 17.

Association for Accessible Medicines v. Frosh

After the District Court found in favor of Brian Frosh, Maryland’s Attorney General and the named defendant, plaintiff Association for Accessible Medicines (“AMA”) appealed to the Fourth Circuit Court of Appeals. On April 13th, a divided three-judge panel handed down its decision, agreeing with AMA that the law violated the dormant commerce clause’s extraterritoriality principle. The court described this principle as operating to prohibit state regulations which “’regulate[] the price of any out-of-state transaction, either by its express terms or by its inevitable effect.”’ The majority opinion found the broad scope of activities potentially affected by the Maryland law problematic. In relevant part, the law established a cause of action based on the price of the “initial sale” of any drug “made available for sale” in Maryland. As written, the law would implicate out of state transactions because, as Frosh’s counsel admitted at oral arguments, the ‘initial sale’ of nearly every drug sold in Maryland involves a manufacturer located outside the state, selling to a wholesaler, also located outside the state. For the majority, the regulation of these out of state transactions amounted to a regulation of out of state commerce, in violation of the dormant commerce clause.

The dissent decried the majority’s interpretation of the dormant commerce clause and questioned whether the extraterritoriality principle was even valid constitutional law. Its reasoning centered around the idea that the purpose of the dormant commerce clause is to check state laws which “discriminate against interstate commerce or favor[] in-state interests over out-of-state economic interests” and that this HB 631 accomplished neither. The dissent argued that absent these concerns, Maryland could regulate any “stream of commerce” that ends in Maryland.

What This Might Mean Going Forward

The significance of the decision, as well as the stark disagreement about the nature of the dormant commerce clause and the continuing vitality of the extraterritoriality principle, make the case a viable candidate for en banc review, where all the Fourth Circuit Court of Appeals judges would have a chance to weigh in, or potentially a grant of certiorari from the United States Supreme Court.

However, for the time being, the majority decision is law in the Fourth Circuit. If legislators in Maryland, North Carolina, South Carolina, Virginia, or West Virginia want to enact rules to counter the pernicious effects of runaway drug prices, they will have to proceed in a less zealous manner, or at least in a more circumspect one.


Sources

Ass’n. for Accessible Medicines v. Frosh, No. 17-2166, 2018 WL 1770978 (4th Cir. 2018)

Dana A. Elfin, Spiked Maryland Rx Pricing Law Could Kill Similar Efforts, Health Care on Bloomberg Law (April 16, 2018).

H.B. 631, 2017 Leg., 437th Sess. (Md. 2017).

Tara Parker-Pope & Rachel Rabkin Peachman, EpiPen Price Rise Sparks Concern for Allergy Sufferers, The New York Times (Aug. 22, 2016).

April Dembosky, California Governor Signs Law to Make Drug Pricing More Transparent, National Public Radio (Oct. 10, 2017).

Shefali Luthra, Federal Appeals Court Finds State’s Drug Price-Gouging Law Unconstitutional, National Public Radio (April 17, 2018).

Brad Kutner, Fourth Circuit Overturns Maryland Drug Pricing Law, Courthouse News Service (April 16, 2017).

Photo courtesy of The Washington Post.

 

When the Exception Swallows the Rule: The Chilling Effects of FOSTA

The views expressed in this article do not necessarily reflect those of the Legal Pulse Editor or the Syracuse Law Review.

 

Background

On April 11, 2017, President Donald J. Trump signed into law the bill known as FOSTA, the Fight Online Sex Trafficking Act. FOSTA received vast bipartisan support in both houses of Congress, and is intended to reduce illegal sex trafficking online.

FOSTA creates an exception to the “safe harbor” rule under Section 230 of the 1996 Communications Decency Act. Section 230 provides that: “[n]o provider or user of an interactive computer service shall be treated as the publisher or speaker of any information provided by another information content provider.” As such, Section 230 has immunized platforms and Internet service providers (ISPs) from potential liability created by hosting user-generated content. However, FOSTA creates an exception to the “safe harbor” rule by exposing ISPs to civil and criminal liability for hosting content that enables illegal sex-trafficking.

Broad Language Could Lead to Unintended Consequences

Due to its broad and sweeping language, FOSTA poses two unintended threats: (1) the chilling of online free speech; and (2) the reduced security of sex-trafficking victims and consensual adult sex workers. As to the effect of chilling online free speech, numerous platforms have responded with attempts to proactively minimize their exposure to potential liability. In response to FOSTA, Craigslist removed its “personals” section, which allowed individuals to seek encounters with others. The closure was due to Craigslist’s fear of exposure to liability for its services being misused and, relatedly, the risk posed to its other services. This recent closure demonstrates that even where such ISPs do not themselves promote ads for prostitutes, the risk of liability in light of the burden of regulating such content necessitates the closure of such platforms. Thus, only those limited ISPs that have the requisite funds and resources would be able to implement the filters and censors necessary to be in compliance. Such compliance is not feasible for all ISPs, making it necessary to close certain platforms in whole or in part if such platforms could expose the ISP to liability. This would result in reduced competition between ISPs and, thus, threaten the vibrant online marketplace of ideas.

FOSTA may also result in reduced security and safety for both consensual adult sex workers and sex-trafficking victims. For example, Backpage.com is a website that provides an “online marketplace for sex workers.” It has provided a medium for which sex workers can communicate with each other and facilitate the provision of their services. While Backpage.com recently closed after its executives were named in a federal indictment, facing charges including money laundering and facilitating prostitution, advocates of consensual sex workers are fighting against the closure of the site and potential closure of other similar sites. These advocates argue that without a platform to communicate with one another, they are placed at a greater risk of violence. Moreover, due to the closure of Backpage.com and Craigslist’s “personals” section, sex-trafficking criminals will likely turn to encrypted or dark web forums instead in an effort to further their services while evading law enforcement review. As such, law enforcement could face greater difficulty in locating victims and prosecuting such perpetrators.

Going Forward

Although intended to combat illegal sex trafficking, FOSTA’s amendment to Section 230 results in an exception that swallows the rule. The marketplace of ideas is threatened as ISPs will either regulate or eliminate platforms that pose a risk of exposure to civil and criminal liability. Moreover, the unavailability of such platforms may force online sex trafficking further into the dark web, placing consensual adult sex workers at risk and removing victims and perpetrators from the reach of law enforcement. Thus, FOSTA may result in unintended consequences far beyond its intended effect.


Sources

47 U.S.C. § 230 (c)(1).

Amanda Arnold, Here’s What’s Wrong With the So-Called Anti-Sex Trafficking Bill, The CUT (Mar. 20, 2018).

Brian Feldman, Craigslist’s Legendary Personals Section Shuts Down, NYMAG (Mar. 23, 2018).

Charlie Savage & Timothy Williams, S. Seizes Backpage.com, a Site Accused of Enabling Prostitution, New York Times (April 7, 2018).

Elizabeth Nolan Brown, The New Law That Killed Craigslist’s Personals Could End the Web As We’ve Known It, The Daily Beast (Mar. 23, 2018).

Melissa Gira Grant, 7 Sex Workers on What it Means to Lose Backpage, The CUT (April 10, 2018).

Niraj Chokshi, Craigslist Drops Personal Ads Because of Sex Trafficking Bill, New York Times (Mar. 23, 2018).

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