tv Key Capitol Hill Hearings CSPAN January 23, 2015 9:00pm-11:01pm EST
er snowier place in washington, i was at martin luther king day celebration, early 2014. and a minister stood up and said something that you all know, but he said it better than anybody i've ever heard say it. he said your life expectancy is connected to your zip code. we all know that if you grow up in our state, my state if you grow up in the east side of clooef land, am la cha versus if you grow up in shaker heights or scarsd ale, new york, you have a better chance in life or a worse chance in life in terms of everything, quality health care, education, social support necessary to succeed. it's something that most of us know and most of us don't think about and most of us fail to talk about it very much. 50 years ago, the poverty rate was 26%. today it's around 15%.
it's still far foo high. we know they work. tell e we know they've made huge differences in people's lives. they've taken people from extreme poverty and brought them up. they've taken people only the edge and brought them out of poverty. they are some of the best partnerships in many ways, that people have ever known. despite this some of the people in this town so many people in this town that dress well, that get good titles that have good salaries, good benefits,
including hemtcare paid by the taxpayers of the united states, so many people want to cut and undermine and emasculate these programs that clearly work. they want to do that, in large part, because of their view of government. that government can never work. that government should never be on the side of people in the mid lt class or government should never be on the side of people that aspire to the middle class of low income workers. this fight has been going on for a long time. ralph waldo emmerson spoke about the innovators and the con verve xxs. he said hisz ri is an on going battle between the innovatorst and the conservators. fundamentally fundamentally, the conservators want to preserve usually, their privilege and protect their wealth. the innovators i would call in 2015 progressives people that believe in providing opportunity
for everybody not dependent on your zip code, believe in moving forward and have better life expectancy and better lifestyles. we know how hard this fight is. i scape across a letter that i'm going to share with you. it's dated december 24th, 1936. to me, it ill strats the difficulty of selling the public getting the public to buy into the most important things that the public later figures out. this is a letter that a woman in my office, her father found it and his father's -- her 90-year-old father found this in his father's paper somewhere. in eastern pae pa. it's a letter from the pennsylvania gas and electric company, december 1936.
the company is required to dedukt 1 pnt of your wage beginning and it goes on. these doe ductions are designed to provide for your retirement at age 65. so you're this worker and you get this letter. you've probably never heard of social security. it had passed congress. i'm sure it got attention in the philadelphia inquirer and whatever. but you probably don't know anything about this. he looks around and says noble in my family has ever lived to
65. why is this going to work? so when you think about anything that we, as progressives and i mean we, you and i and all of us that care about this anything we do is always difficult. it's always easier to be the innovators, to be the conservators conservators, hold on, don't change. it eetsz always easier to be the conservators to fight progress to fight what progressives need to do for this country. 1965, people aren't sure. the same opponents of the affordable care act, they called it the john burj society. same people, same group, same strain of sort of misintloeps of people -- that's unfair, of
people that sometimes had -- okay. you get it. but in 1967565, think about this. when this law passed in 1965, president johnson dispatched vice president humphrey to begin to call may rs and governors in montgomery and charles ton and charleston south carolina, and atlanta and charlotte and jackson and tupelow and all over the country all over the south and said this was 1965. three months -- a few months after selma. the same year as voting rights passed, the year after civil rights passed. called these mayors, called these governors and said if you want medicare, you're going to integrate your hospitals. imagine how controversial that was in 1965. so when social security passed it was difficult to itch leaptment of it was difficult to
get the country to buy in. that's why it's so important. for a moment, refleblgt on what we've done. look at what you eve done with the affordable care act. you know what it's meant e meant. these tables noe what it's meant to ohio. 700,0 0 people have shurnls? ohio, many, many of them children that didn't have it five years ago. a hundred thousand kids under 26 are on their parents' plan. that's just one medium-sized to large state. a million seniors in ohio have gotten free, without co-pay, without deductibles, free screening for osteoporosis and diabetes and other kind of physicals and all. we know that. that's while your work in this made such a difference. that's why your -- let me tell you a story. every thursday, i have coffee in my office for anyone in ohio that's in town that i don't always get a chance to talk to one-on-one because of committee hearings and floor sessions. and i was, one morning, my staff is always there one morning, a
woman and her husband and her two teenaged kids come to see me. they were from ohio's most conservative corner, soit west ohio. and she was lobbying on the issue of home schooling, which tells you she was politically, fairly conservative. she says to me, we're talking a while and she says see my son over there, thank you for the affordable care act. >> i said sure. she said see my son over there, he's 15. he was diagnosed with diabetes when he was 8 or 9, if i recall. and then she said, you know, i tried to get insurance for our family. and she said i counted the number of times i was turned down. i was turned down 34 times for insurance because of son's ill nlsz because he had a pre-existing condition. and then she smiled and said you know what, two weeks ago, i signed up for health care and i have health insurance because of the aforpdble care act.
[ applause ] and, again, that's why what this does is so important. 700,000 people in my state. maybe they all don't have a story quite as good as that womans. but a whole lot of people do. when you think about what it means in your life -- another story real quick. i was in youngstown one day. the woman before the affordable affordablecare act passed. she was actually on health care and she said i have two jobs. she said i don't have insurance. i'm not making much money. both jobs are just slightly over the minimum wage. she said i'm 63 and i need to stay alive a year and a half longer so i can get medicare. not stay alive so i can see my grand kids. but to stay alive -- margaret meade said that knowledge and
wisdom are passed from grandparent to grandchild. and you know how important -- that's one of the really important things of medicare. it allows a lot more grand kids to have the joy of their grandchildren and to have the impact on their grandchildren that make for a better world. we know what chip has done. if we want to tackle inequality and health care we need to extend the children's health insurance fund. 130,0 0 children in ohio have access to health care because of c.h.i.p.
it means that a mother has the opportunity to take her child with an ear ache into a doctor instead of waiting until it's much worse and much more ebs e expensive and cause the child hearing loss. it means vaccines and shots it means dental coverage it means belter treatment when children get sick: and it means something we don't talk about enough. it means better attendance at school and a more alert child who can learn better at school. c.h.i.i.p. means all of that. it's not just the number of children that are insured. it's the flejsblety of states, quality of care children receive. i know the secretary of hss was here today or yesterday? today. i know she addressed those and she is terrific. she comes from west virginia. she probably talked a little bit about her upbringing and is doing a terrific job.
she also -- one of her first exposures to public policy was jay rock feller, senator rock feller who retired at the end of the year. i made a floor speech about jay who was one of my dearest friends in the senate. and i actually sit in the spot on the senate floor now where he sat. and he really -- nobody did more on c.h.i.p. than he did. and he had asked me and senator widen to sort of take up that mantle and it will be hard to do. he was out listening to people about it and i would -- one of the things that jay did that not nearly enough politicians did do is he used to go meet with -- i know he did this with children's act viss, too. he would go meet with veterans,
no media no staff and sit with ten veterans for two or three hours. imagine this guy was a multigazilionaire and had every privilege in life and he would sit there and devote so much of his career to children and to veterans and would sit for a couple of hours. pope francis in one of my favorite quotes from any religious leader said he exhorted his parish priests a couple of months ago. he said go out and smell like the flock and how important it is for all of us to really listen to people who have problems. listen to their needs. listen to their concerns. that's what jay did with children and with veterans. that's what's so important. again, it's not just the right thing to do to fund c.h.i.p. and, at adequate levels, it's also the smart public policy thing to do. it does matter in schools. it does matter in these children growing up.
the young adults who have contributed to society. it's always been a bipartisan effort. we need to continue to make sure it's a bipartisan effort. i know that probably many of you in this room consider yourselves democrats, some of you consider yourselves republicans. regardless of where you are and what you think about who's elected to office in this country that's so important that you work to make this bipartisan to help us so we can do this right. let me close with a story from john lewis, a congressman from georgia. how many of you have seen selma? the movie so far? okay. john lewis was beaten up in a civil rights movement more than any other single personal that's believed. john was in that movie a number of times. john was born in 1940.
and then e let the record reflected to congress in the 1980s. he was the youngest person to speak at the 1963 march in washington. a number of people in history tells us other civil rights leaders told us to tone down his speech. he was speaking at a graduation i believe, at emery last spring. and he told this story about his childhood. he said i saw those signs that said white men, colored men white women, colored women. i'd come home and ask my father and my grand parents why is that? they would say john, that's the way it is. don't get in the way. don't get in trouble. in 1957, he wrote, i metro sa parks.
those two individuals inspired me to get in the way to make trouble. so i encourage you, he told these graduates, to find a way to get in the way. find a way to get in trouble. make good, necessary trouble. and that's the calling of all of you to make good, necessary trouble in your communities and sometimes, challenging people's conscience and sometimes challenging the power of some people and sometimes challenging and pushing and talking to your elected officials. whatever you need to do, continue to do that. and some day in this country our zip codes, our life expectancy won't be so connected to our zip codes and you all continue to make a huge difference for our country. i thank you very much. [ applause ]
we submit that strict skrooutny applies by the court below for several reasons. first of all this was obviously a content-based restriction. it turns on the content of the speech. does it solicit a campaign contribution? my friend relies on this court's decision in mcconnell to justify applying the closely-drawn skrooutny standard that has sometimes been applied to campaign contribution limitations. that standard does not apply for several reasons. >> mr. pincus, whatever the standing, suppose the florida rule was simply no face-to-face solicitations. that's it. would you concede that that would be a valid regulation? or would that fall under the first amendment as well? >> well, my client didn't engage in any face-to-face solicitation.
>> i want to understand review of the scope of the first amendment in relation to this selection -- election of judges. >> i think a state could adopt a prophylactic rule prohiblting face-to-face solicitation. certainly one-on-one, and, promise some states have done in larger groups. there might be some 57ly cases of that rule that were -- that made that rule invalid, as applied. for example, a face-to-face solicitation of one's relatives that have nothing to do with the judicial system. but i think the first amendment would certainly allow the adopg of that sort of rule. >> the first amendment would not allow that for the candidate for political office. >> exactly. >> so you are making -- you are recognizing that there's a difference between judicial office, the first amendment allows the state to do things with respect to the election of judges that it wouldn't allow
them to do with respect to members of legislature? >> well, i guess i would amend to say that the first amendment might allow a ban on some solicitations on a coercion theory. let me step back. there are three governments that have advanced -- >> i just ask you, you gave me an answer and now are you telling me that that answer was considered? that is a ban on face-to-face solicitation by candidates for judicial office good or not? i think that the government could support from a judicial context, one of them doesn't exist in the legislative context. the interest in preventing a
bias or preserving impartiality. one, the interest in protecting the coercion of a person solicited applies somewhat differently than it does in the judicial context. so i don't want to say that there's no ban on solicitation that would be permissible. >> but if you have the statute, then you have all sorts of gradations. what about a personal, one-on-one letter? how is that different? then, if we say well the one-on-one letter that's lchl like a personal solicitation. we can ban that.
>> there are three interests. one, the interest in preventing quid pro quo corruption. one, this interest in preventing bias and, third, the interest in protecting persons solicited against coercion. >> it's at least a tra dirgs. i'm not sure if it's in any ethical rules, but let's assume it was. that judges do not respond in
op-ed pieces to criticisms of their decisions. john marshal did that but he did it anonymously. would that stand? >> i think there is such an interest. and i think it's executed principally through the acts of judges as judges and maybe is best analyzed under the government employee free-speech rubric. so it doesn't necessarily have to reach a compelling interest in order for it to justify some
restrictions on the judge's speech. >> no, florida law didn't let them do that. what i'm trying to find out is if you think you can have different rules for judicial e lerksings, then you can have political elections. i mean,we're told by the in re fl judges that filed the brief that they had a horrendous problem with corruption. and they wanted to get a handle on it so they made this small step.
>> to answer your question, yes there can be different rules. two of the interests that i mention ed mentioned so i do think in your hypothetical hypothetical, could florida prohisht in-person one-on-one solicitations to a group of some size of states have done? yes, i think they could do that. and i don't think that could be done for legislative or executive branch candidates. >> the state's view is we want our judiciary to be above the political frame. so we have this kind of restriction on putting themselves forward as a solicitor. >> well, a couple of answers, your honor.
>> well, there are some states that prohibt. >> i think that's just unworkable. >> i think that's a question of how effective it is. but i do think that underlies what's really going on here. that any incremental benefit that is served by a prohibition on solicitation given if reality that the judge knows and, especially, given the fact that a judge can write a thank you note. soo you're suggesting that there could be a mass mailing but the judge is prevented from 2340eing? >> that is the rule is some states. >>. i'm asking whether or not that is consistent with your theory? >> well, i don't -- i think the court could conclude, as the 8th circuit did in minnesota, in a state like that,where the judge
doesn't know, there's even less of a reason to prohiblt solicitations because the judges are going to know who's responded. can i go back to judicial dignity coercion. it's very, very rare that either by letter or by personal call that i ask a lawyer to do something, whether it's serve on a committee, help organize something, do whatever it is that i'm asking that that lawyer will say no. isn't it inherent in the lawyer-judge context that people are going to say yes?
>> well, i don't think so, your honor. in this case, there was no response. i'm talking about this prohibition is dealing with an issue that does happen in the vast majority of cases. >> here's the contrast, your honor, if i may. i guess the question is what's the difference between that letter and the following letter that's signed by the members of the committee, which is totally permissible under florida law. dear joe, as an attorney frequently appearing before the county court we're sure you're concerned with the quality of the judiciary. judge jones personally asked us to serve on his campaign committee. and we're writing to ask you to contribute to his re-election. as you know, florida law per mits judge jones to thank contributors. i think once those things are permissible, who makes the solicitation really doesn't make that much of an incremental difference. >> well, that's what you think.
i can actually see how receiving a signed letter from the judge saying give and/or a telephone call or a personal meeting has an incrementally graeter impact than a letter. i get even today i get a whole lot of campaign committee letters. and i just throw them out. if a candidate calls me or reaches out to me i tell them i can't talk to them and i can't give. okay. but i have a reason. and an excuse. a lawyer doesn't have that reason or excuse. >> and i think that's why at least one line is permissible is a line between written communications and oral communications in a small group.
it's clearly greater there and the question in the first amendment context where we're talking about core critical speech, where the court recognized both in the charitable contribution cases as well as in mcconnell, is the intertwining of messages where you're severing that. there has to be a really good reason. and, in the written communication context at least we submit, as the 6th circuit and the 11th circuit and as the ninth circuit have founded, there isn't enough there. >> is there anything in the florida rules, i couldn't find it, that could prohibit giving a list of people to contact? >> there is a rule that says
what candidate can do. i don't know if the bar would interpret the giving of a list to circumvent that rule. >> your problem is a way to decide. it's a sort of joke but it's so true in the experience of the court of appeals that i have. the district court judges that i know that any lawyer by a lawyer, the annals is yes. that's until they get out the door. i don't know whey e what they say when they get out the door. but that is such a common experience that when the judge says can you please, yes. that's the answer. you have to learn to interpret when they really want to do no. that's really almost universal. and i think that's why they're writing the rule the way they do.
it says i asked for your support in early contribution made payable to me day of the campaign will help, sincerely, sign my name. the answer to that question is yes. and if it's the campaign manager, perhaps it's no. that's such instinct and intuitive, i don't know that i'm asking it because i want it raised to the surface and i want to see what's there to say. i think, a couple of things, your honor. i think, first of all, i think you have to compare that letter to the text that i read.
it seems to me -- >> that's if you're looking for something. but when somebody else writes the letter somebody else makes the request it's so instinctive that my instinct is it's not the same thing. >> but they're making the request on behalf of the judge. that's the critical factor. >> it doesn't just go to a lawyer, either. the limitation is not solicitation of lawyers, is it? it's anybody, which really makes me think that it has more to do with judicial dignity than the corruption stuff we've been talking about. you can't solicit anybody. >> absolutely, your honor. and i think that's one of the proofs -- >> isn't the proof of the pudding in what justice pryor is saying in the statistics, one of the briefs mention that those
candidates who can fund raise personally do appreciably better in collecting money than the candidates who have to go through a committee? so what would be the difference other than the fact that there is some form of personal coerce coercion in the presence of the judge asking for the money. >> i don't think so, your honor. assuming that the statistics are right, it seems to me in a system where we vote for a perng, a american e message from a person that combines what they stand for with request to a contribution makes that request for effective. not because it's coercive, but because it's tie today what the person stands for. and those parts of the message are effective when they come from the person themselves.
i think you'd find the same statistics that they do much better when they put the arm on you personally rather than having someone else contact you. i can't imagine it being anything different. >> well, that's the point sbt it? i think it's only the point if that arises from coercion. and as i just said, i'm not sure that that's right. i think we don't know. we also don't know whether those statistics involve states that permit one-on-one, in-person solicitation. obviously, it's quite different in the sending of a letter. in those states and there are ten of them obviously, that is fully equivalent to the solicitation process in the legislative or executive race. so i think we don't quite know. but i think it would be drawing the wrong conclusion to say the only possible explanation is coercion. i think there are other more likely explanations.
>> i take it it follows from what you're saying that the federal cannon that applies to us is unconstitutional, at least as respects to written communications. so we're not allowed to put our name on fund raising materials. i take it that you're saying that, too, that's got to go as well, is that right? >> no, i don't think so, your honor. i think that the leeway that the federal government and the states have to regulate the judges and other employees, because of inconsistency with their duties, this court has said is much broader than it is. and does not have to satisfy the compelling interest test as this particular restriction does. so i don't think it at all follows. >> i'm sorry, i really didn't get that. why is the restriction on us constitutional? >> you are federal employees. you're government employees. and so the court has said in
pickering and in other cases, that the government whoever the responsible rule-making thorty is, has much more authority to regulate the speech activities. >> florida could regulate the already-elected judge when he's running for re-election. >> well -- >> he could say we have a rule, judges don't solicit. period. but charities themselves, so we have a judge. he's a state employee. i take it from your answer in applying pickering to government employee, that the sitting judge can be restricted. >> no, i don't think so, your honor. i think this is speech in a different category. anymore than the government can say we're going to use pickering to select the solicitation speech of a congressman or state legislator. i think it is the context and the fact that the state has chosen to view its judges, via election. >> i would think it's just the opposite.
right? that in the case for federal judges. like you say, this's really not much of an interest. who cares whether i solicit funds on behalf of my olds law school. it doesn't have anything to do with what rulings i'm going to issue, who i'm going to favor, who i'm not going to favor. in this case, the state can really come in and say, you know the things that we're objecting to the solicitations that we're preventing are exactly the ones that are going to go to whether this judge can be an impartial judge rendering fair verdicts. >> i think that's wrong on two counts, your honor. i think there is, again where the judge can know who contributed and can write a thank you note the idea that prohiblt pro prohibiting the judge to asking contributes in any way to the protection of that interest seems inconceivable. if the question is is there bias, what florida has basically made a basic determination that a thousand dollar campaign
contribution limit is going to protect our interests against bias. and so the question then is are any of these other activities going to create such an appearance? and where the state has said, a thank you note which seems. >> now let's say, the state says look, we've been trying to do this because we've been trying to narrow the law in order to accommodate first amendment interests. but if you're going to tlouf that back in our face, we'll apply it to the campaign chair, too. we'll apply it to thank you notes, too. those will also be infamous. >> i think if the state wanted to adopt a system of public financing for judicial candidatings, that it might then be constitutional for the state to ban solicitations. >> oh well, i'm not going to
answer that sequel because we can think about something else. >> i think the answer to that question is no because the contribution are still permissible. the line that the court drew in mcconnell, in terms of solicitation limitations, was it's quite permissible to ban candidates from soliciting contributions that cannot lawfully be made to their committees when there are other avenues, when they can still solicit contributions for their committees. yes, we're going to have an election, but no one can solicit any money because the court has said to get the message out. >> but the whole effort on florida's part is to make the selection of judges not like the political context. if they choose i elected judges,
they can do itle the same way. >> well, respectfully, your honor, i don't think so. i think there are two distinctions. one-on-one florida says thank you notes are okay, it can't ban solicitations. it might have a better case to justify its state interest if it didn't do that. and i do think the coercion rationale would permit limitations that don't apply. if i may i'd like to reserve the balance of my time. >> thank you, counsel. >> mr. richard? >> mr. chief justice, may it please the court. there's nothing in florida law or the cannons that prohibits a candidate from giving names to the committee for the purpose of the committees soliciting from those individuals. what the florida cannon is designed to do is something that this court has recognized
previously in mcconnell which is to cut the drekt link that creates the kwid proquo relationship by keeping the judge from communicating or the judicial candidate from communicating directly with the person that he or she desires. >> oh, so this is a thank you note? >> thaekt, your honor. i think that -- >> once you say thank you note, what you said is just not true. >> if what we focus on which is what my colleague and opposing counsel focused on, is the intimidation issue, i agree with you. either the intimidation erlt or the curry favor x i agree there. it is inherent in the squid pro quo that results in the public
loss of confidence in the judicial system. >> but there's not always sectional appearance. what if a judge calls a clas classmate. believe it or not, i'm a judge. i'm running for election. can you give me some run. money. >> the direct solicitation nobody would say there's any real risk of corruption because he's calling up his old friends, let's say they're not lawyers. >> what we deal with here in response to your question is similar in kind to how many people are being addressed. this court has said that in circumstances like this the court has no scalpel to use its words, as to where to draw the line. the question is what's judicially manageable. and so the question then becomes, mr. e where there's going to be a line drawn is it reasonable for the state -- we're just going to prohiblt. we're not going to try to micromanage.
>> there's a difference in micromanaging and e. this could be conclusive to litigants or lawyers appearing before the court. >> it could be, your honor. but then the question is what the appearance to the public is. and then the second kwae isquestion is, how does this weigh against the im im imp imposition of candidate's rights. one of the reasons that it upheld it and applied a lesser standard of review is because it said that the imposition on the communicative value of the contributions was marginal. in this case, it's even more marginal. >> be careful with that liable. there's a number of justices on the court that sent it from that. and citizens united has brought that into question.
so i'm assuming that's not the argument. what's the better response? >> no, i understand. i understand. perhaps, your honor it was not the best way to lead into it. >> well, you only need five votes. and there were five votes. [ laughter ] >> don't be too sbim dated. >> i'm trying to get yur vote, as well. i haven't reached that point yet. and i understand it's a high mountain to climb. but the point here that i'm trying to make is this is an extremely minimal imposition of the candidates' freedom of expression if there's any imposition at all. >> could florida apply this cannon to candidates for political office? >> are you saying could it? >> yes. if florida says we think it's such a good idea for the judges and want to make it across the board, no candidate for political office can make a direct appeal for money. >> i think it would be far more
difficult to convince the court that that would be constitutional and here's the reason. it's because of what justice kennedy has recognized as what he coined the good responsiveness and the bad responsiveness. in democratic society, in a republican form of government candidates in the other two branchs are expected to commit themselves in advance to certain positions and are expected to comply with that once they're elected in order to do what they're supporters expected them to do when they supported them with financial contributions and otherwise. when we're talking about judges there's no good responsiveness. judges are expected to be impartial. >> really. judges aren't going to be tough on crime? >> that's a different issue. >> that's good responsiveness i
thought. >> i think that's responseive to an issue but not responsive to an individual. that's the difference. it's a big difference. >> is it really the prospect of appearance of impartiality with you have radio ad with the judge and says this is my philosophy, please send me a contribution. is anything going to think that judge will be partial to one side or the other? >> i think that two things the answer to your question is i can't presuppose who will think is partial. >> we'll back for a second. i think judges should keep their pre preconceptions under control and decide the individual case.
what is your distinction between what i took as an important argument on the other side. maybe you've said it already, but i want to hear it again. florida lets judges write thank you notes for direct contributions. >> that's right. >> what's the difference between that and this rule. >> the money is being solicited doesn't know if the judge will
ever find out. he can find out. the person doesn't know if the judge will find out if he's going to receive a thank you note or not. >> is it unlawful under florida law to put in a campaign letter. >> for what? >> if i will tell the judge be. >> what's the second? >> my second argument? >> i want to know what the differences are which is the main point that was argued that once you say they can write a thank you note and indeed as you've added in the initial letter you can say and i will tell the judge. once florida permits those things, what is it that florida's adds to that.
>> it's never been applied by this court. the answer is to say it adds nothing. i got that answer. you have any answer that says it does add something? if so, what? >> i believe that florida could prohibit the fact but it doesn't change the fact by not prohibiting it it does not undermine the fact that telling judges they cannot face-to-face or by telephone call solicit it.
>> if you write a thank you note you are not going around holding your hat out asking people for money. you're not relying on the judicial dignity of the office that's held or sought. that has nothing to do with florida? >> i'm not relying on that. it's possible that if the action rose to the point where it undermine the public's confidence it might be sustained. i agree with you that if all we're talking about is the dignity of a judge who is going around with a hat, i think that probably would not be sufficient for this court to uphold it.
>> they didn't want to accept contributions. call it the public shouldn't perceive judges as being political offices so we shouldn't say, it's the same thing as an election to the legislature. the whole idea is to put the judiciary in separate category. i thought that was florida ease idea. >> i think that's true. i think it's the culture of this nation. i think that goes to justice kennedy's distinction between the good and bad responseiveresponsiveness. >> i think you've answer justice briar a little too quickly.
>> >> thank you. i agree with you. >> number two, you had started, i think, in answering question of the quid pro quo difference between a thank you and the initial ask. >> yes, of course the one area where this court has consistently recognized that the state can validly regulate contributions and solicitations is in its effort to break the direct quid pro quo. direct communication between the judge requesting the money and the judge opposed to even in the other two branchs the court has recognized that. the judge requesting the money
directly from the person who would be contributing and when one envisions what does not exist in florida and most states at the current time which is a judge being able to pick up the telephone or visit any lawyer who ever appears before him or that matter any non-lawyer before him or her and asks for a contribution and compare that to a third person saying kr a contributor, my friend joe smith is running for judge and i would appreciate for you to give me money, i think it would be difficult to say it is not a significant difference. the public recognizes that. the effect. >> we have before us involving a particular person. she did something and she was disciplined for it. don't we have to compare what
she did and some of the thing that's regarded by the florida law as been unethical and what she could have done and see whether the difference has any significant relationship to any interest that this rule is supposed to serve. was there a greater danger of quid pro quo corruption. difference of what she did and what she could have done? i understand your answer is following, a letter could have been sent by a committee and the letter could have said that petition ner gave us your name and asked us to solicit a contribution from you. that's what we're doing. the letter could say and we'll let the judge know if you gave a contribution and the candidate know and she can write you a thank you note. she will write you a thank you note if you contribute it or you
speak for the florida bar. you said it will be okay to put that in the letter. if that's not, at least you can put in the letter and under florida law the candidate can see the list of people who contributed. why was there any greater damage what she did as poseopposed to what you admit she could have done in. >> she is personal and publicly requesting a quid from people who will appear before her. it's florida's concern of the public reaction's to that, which i would suggest is fair concern. >> it's not just confidence. to ask, for a judge to ask for a quid puts pressure on people to
give it. that's a different evil than they're simply knowing what happens. i'll have plenty of people pointing out it isn't necessarily a good argument. >> you said it so eloquently. i believe there's a significant difference between a judge requesting a contribution or later saying thank you for the contribution. what if the letter said the judge will know about this later. that murky's the water a bit.
there's no evidence it's been -- >> there's something the other side has said about your position, and i'd like your answer to it. that is what you are advocating will help the people who are already in the judiciary. people who have lots of money so they don't need contributions from others people who will be heard. >> i disagree with that. i find it curious that a petitioner would suggest if we take restrictions off incumbent judges who are free to call lawyers before them that they
wouldn't give the incumbent an enormous advantage over non-in non-incumbent judges. we're dealing in an area where there is no evidence. >> up to this point you've been saying whether it's a significant difference it can make whether someone solicits in person or not. now you're telling us it doesn't make much difference at all. >> it seems to me social security self-evident prohibiting form of raising funds is to the great advantage of the incumbent because the only way in most judicial races they will be challenged is if you have somebody who can get their own distinct message out. >> i have two. excuse me if i didn't clearly
express myself. when you tell an incumbent judge that they judge can solicit money that's going to give an incumbent judge who has far more intimidation power and as to weighing which will give more or less advantage, it's difficult to answer that question. i don't know it makes any difference. we have no evidence in this record or in the literature or in the case law to suggest is factor under any circumstances. if you look at the difference in
the impact upon this petitioner's free speech, between sending a letter to one person or personally con fronting one person and on the other hand sending it to five or 10 or 50 people, it doesn't move the free speech needle in this case. there's very little impact on that candidate's free speech no matter how many people the candidate is talking to. the candidate can still say anything he or she wants to about qualifications, issue case, about anything he or she wants to. this court said so in white and florida can and doesn't attempt to put any restriction on it. the only thing it says is do you can't give me money.
when you get money it enables you to broadcast your message more widely. that only rises to constitutional level when restriction is to great you can't broadcast your message reasonably. the committee can raise money and we have no evidence again. >> when did we say that? i don't know the case law says that. they do not prevent we're going to sit in judgment about whether they prevent the candidate from -- what case are you referring to? >> the discussion in buckley when it said that the restriction on campaign con tri
>> you be able to speak a reasonable amount. that was the first amendment. >> i think you be able to speak as much as you -- >> as much as we think is reasonable, we the judges? >> i think that's more broadly stated that you have said in the past. >> broadly stated as you stated. >> i think it's as much as you desire to speak until you have entered the level you have interfered with standard of review that the court applies. >> you've been saying it's a little bit we prohibit so don't worry about it.
>> i'm not saying it's no big deal. i don't think we can ever say that when dealing with free speech. the state has not only standard -- >> where does it come from? if that defines the rule of the judge you're saying that it is you do look to the degree to which you are interfering with the free speech of some degree some. when is it not relevant.
>> in almost the major first amendment cases has asked that question. >> 800 years ago judges were not elected. i appreciate the challenge you're under. you're backing and filling. the fundamental choice was made by the state when they said we're going to have judges elected. you're trying to patch the problem there. you have situation where the people in the state said we're going to have judges elected. you're under a great burden trying to figure out how to fix that. >> it is great burden? >> why is it a great burden? does it change because you're elected the judge? you're changing the fundamental
role of the judge? >> i don't mean it's great burden to make that point. we have election of judges which many people think is a burdensome system for electing judges for a lot of reasons. the fact is we have that. we're faced with as we said in in the brief with the reality that florida is trying to weigh to fundamental constitutional interests and find a reasonable compromise. one is the interest in free speech. the other one is the undeniable entrance. it's essential to a stable democracy
democracy. >> somebody looked into the contributions in election for county court judge in florida. what percentage of the contributions would be found to have come from practicing lawyers within the county. studies have shown not only in the county court but in more judicial elections that the large percentage of the contributions come from practicing orders. i think that's where judges naturally seek contributions. >> thank you. that could be because lawyers expect judges to respond by favoring their cases or could be the lawyers care more.
>> it doesn't show any construction. it shows lawyers want good judges and care more about it than the average citizen does. it's vieding the potential that it's found inhernts in the quid pro quo relationship. it's reasonable to urge the court respectfully that the same rules that apply or at least the minimum degree of which the court is applied these rules to
the other two branchs needs to be applied to the judicial branch. there's no basis. it would be totally inappropriate to carve out a write the judges have and the court has not according with the other two branchs. >> you have four minutes left. thank you. >> it's important. one to one or in person over the phone. not the kind of written communications that are at issue in the case. that's because it's very difficult to say that a written communication fits either of their two interests. >> suppose i'm a judge and i say dear joe you've been in my
courtroom many times. i know you'll be here some more times in the future. i hope i always will be fair. you know i'm running for judge. i'd like a contribution of 1,000 there are seened judge smith. they is say i'm writing on -- i'm one of people who judge smith personally selected to solicit funds for his campaign and say the rest. i think it's important to make another point. maybe if rational basis applied here. >> it's rational basis. i think until citizens united in one opinion which wasn't the
separate coercion and quid pro quo. >> respect all elected officials. i think if you accept my colleagues argument that preventing the appearance is sufficient to ban solicitation there's no reason why florida couldn't say such a great idea. we're going to apply it. i think you'll, the focus really ends up being on coercion. get into office to maintain a position to promgs you maintain. that's not the focus of a
judicial election. my colleague refers to it because he wants to use the court's analysis which i think is applicable any way. i don't think it's impossible to say quid proquo corruption is the basis. >> thank you. case is submitted. speakers include potential 2016 candidates. scott walker and chris christie. former governor mike huckabee,
really i would say give you a sense of whether the sky is falling or whether this has just been a phenomenon of interest. as john talked about inversions or transactions where a larger u.s. company ends up or in combination which you would call a migration combination or a combination version however you want to describe it. john gave some of the reasons why these trangs p transactions
occur. i put them into four categories. one is with respect to future growth. one is putting leverage in u.s. operations. i think 163 j and its limitations or generosity. the final is access to historic offshore cash. mcdermott transaction that received some infa my back then. these slides have boxes for every kind of step. i was talking to michael grads
before we started. he said he was totally confused by the boks. it's kind of like tax practictioners deed boxes. economist need formulas. these are the boxes on the mcdermott transaction. i really don't have time to dwell on it. not only did you skds in having a foreign parent, you seeing your foreign affiliates and that was something that both congress and the service had real objections to the law changed and important ways to make that transaction a very difficult one to do for the last 20 plus
years. one of the themes you'll see is if you look state wise there are disproportionate number of texas companies. i'm not sure what to make of it. that was kind of the poster child for change in the 367a regulations that was adopted in 1994 and later reduced to regulations. there's a lot of details around it. the basic take away from a policy point of view is that if
u.s. shareholders end up owning more than 50% of the stock by voter value of the foreign company after the inversion transaction then it's taxable to the shareholders. it's an interesting application of 367a. i think as one of the drafters back in the '70s, we were focused not on transactions. nobody had challenged the ability of that regulation and it's a theme that reappears more than once a year about a government using its authority in an expansive way in this area.
obviously approved by the shareholders in the public context. there's no change. the inability to access offshore. by doing this transaction in and of itself and it's important to keep that in mind. once the stock market went down so that the shareholder gain was less of an issue, you saw a number of transangsts. you look at the list of companies here and besides the
predominance of texas you can see industry bias here. one is insurance/reinsurance companies. u.s. national insurance company and like has happened in other industries where sub part f interferes in your real business in major way it tends to increase the incenturyincentives. i think the other thing about the insurance industry is your
assets tend to not be worth more than book value. selling them is not painful transaction. the second is the oil drilling and services business whether it's transocean, global santa fe. similar sub part f applies broadly in some services businesses. that was a particular incentive in my mind for those companies to engage in these transactions.
most of them happen after the late 90s when oil prices went down. therefore the value of drilling rigs went down. the value of oil services companies went down and so the games that were triggered by moving assets out from under be u.s. after self-inversion seen to be more manageable for many companies. this set of transactions gave rise to interest. senator brassley made a proposal that became section 7874. it ended up having an effective date of 2003. it's why you saw a lot of
transactions happen in 2002. a foreign company requires the assets or stock of a doe messiahic corporation or partnership. the group after the transaction does not have a substantial in the country where the foreign parent is incorporated. as i say the provision was enacted in 2004 seem to be an abuse provision that had limited application.
i will tell you that for international who deal with cross border we probably spend half of our time dealing with the section because there's an amazing number of circumstances where it can apply. we think we fail under 7884 given the way the provisions work. that's something the service is aware of and is sympathetic to. it shows you thebred of what's happened.
it will be taxed as a u.s. company. it's an extraordinary reach of tax policy. i don't know of any other country that has a rule that comes close to it. i think many would say and mike williams will talk about this in the uk context that it was an alternative to a managed and controlled test. our treasury department has not been in favor of establishing as base for foreign companies as if they were u.s. companies. it made it easier with not only would you have to put a non-u.s. company on top but you have to meet the requirements for that company to be managed elsewhere.
there was a bit of a pause. these lists are not comprehensive comprehensive. i should have said that with the list. they are ones i remember or some of my partners have returned. the luster hopefully didn't miss many. there were a few combination my grags transactions. the cooper transaction of 2012 and there were some self-inversions that met the substantial business activities test.
that moved to the uk once because of their sea operations. once the uk rules became more user friendly for parent companies. the interesting thing from my perspective is what didn't happen back then. i was involved in 2006. u.s. company that had been one of the top ten companies under hia. doing a deal with a foreign company about 30% of the its market cap. could have done a combination inversion in that deal. we sat down to suggest that because they had thought about
that company decided it was better to do it as a u.s. company. one feature of that transaction was that the foreign company did not have significant u.s. operations. they're going to have substantial leverage in the u.s. obviously you can't continue that when the u.s. company buys a foreign company. there's a negative synergy that happens by reason of the situation.
the treasury reacted to that with regulations. most importantly the 2012 regulations that established a 25% test for the various types of activities. that happened a few months afterthe transaction to the uk. major u.s. multinational. under the 2009 and 2006 regs met the test. under those regulars it's been one transaction that clearly met the test.
that's liberty global virgin media. that was a combination transaction but they were both u.s. companies. both of them are cable companies. virgin media was almost entirely a uk kpabl company. burger king, the burger king tim horton's transaction would meet the 25% test. obviously because it's real combination transaction of a foreign company and u.s. company. it didn't necessarily have to meet that test in order to qualify. the 2012 regs have largely shut down self-inversions. in particular the requirement that you get 25% of your gross income from transactions with third parties in your country of
incorporation. that's a very, very difficult test. how many multi-nationals do you know that get 25% of their gross income from third party transactions in any country in the world maybe even including united states. certainly in any non-u.s. companies. a very aggressive use of regulatory authority to try to limit taxpayers flexibility under the statute. started pecking up late in '12 and became much more robust in '13 and '14. it's not surprising that a certain percentage of those transactions were inversion transactions for reasons that
john talked about and for reasons like not if the foreign company had substantial u.s. operations not wanting to reverse the tax planning that they have with respect to their u.s. operations in terms of leverage for example. the you'll notice if you look at the variation transactions there's a clear pattern toward the health care industry. obviously, health care is one where ip is the most important asset. ip is pretty mobile. there's a lot of flexibility in that industry to take advantage of the foreign parent organization. a lot of companies are smaller and so in my view based on the transactions we were involved in it was definitely more about
future planning than existing planning. the model is not lost on other companies and ceos boards who want to see their companies thrive. that drove a fair number oftransactions. the other thing to comment on is the number of spin offs that have occurred from various companies. tyko like maybe five different companies. they origin nayally split into three. over time ingersoll rand has spun off their security business
as well. the final thing to talk about is the deals that weren't done. you can infer as much as i can from the reasons why they weren't done. some of these clearly were affected by the treasury regulatory activities in september of 2014. some of them clearly weren't. the situation where fitz was out bid bp you put yourself in play when you do one of these transactions. these are real transak transactions. they have real economic impacts. a lot can happen once you put the transaction into the public domain domain. this is a slide that shows how it works.
the foreign parent tends to acquire the foreign target and the u.s. target. you tend to have a new target with the foreign parent that is then owned by the shareholders of both companies. let's just spend a moment on the treasury guidance. i think others will talk about more that came out in september as a response to the set of transactions that we just saw. there's really three important things that the treasury guidance did to stay away from the technical and just deal with it from high level. one is modifying the 7874 rules to make it harder in some cases, to count the stock that's issued to the foreign company shareholders. that's done two ways. one if the foreign company has a lot of cash, you reduce the
number of shares that's going to share holder. the second is to treat shares that have been bought back or distributions that have been made by u.s. company over the prior three years as amounts that have to be added back to the shares that the u.s. company takes. the latter one is a very broad provision, very complicated provision. the notice only states it in a couple of sentences. it's real issues to whether people have notice about how the provision works from the notice. you can have situations, for example, where say the u.s. company has a spin off two years ago and then acquired for cash. if you add backs the shares effectively deemed in spin off, it doesn't have any shares in the transaction but you have to
koupts count the shares from the spin off. again, that's the situation treasury aware of and is thinking about whether something shouldn't be done about that. it shows you the reach of how this provision has come to sprawl over all of cross border. the second is to treat any use of existing foreign cash and earnings for the benefit of foreign parent through loans or other types of transactions as a 956 event. an extraordinary reach of authority. there's nothing in 956 that says buying shares of a foreign company or lending money to a foreign person has anything to do with 956. they decided if it's a foreign parent then it should have something to do with 956 and pick it up. the final thing is some limitations on your ability to restructure your legacy. cfc operations in combination with a foreign company and to
try to dcfc, if you will some of your cfcs. all these things limit if assuming their valid limits the benefits of inversions to large companies. they don't benefit if you go back to the slides to some of the smaller companies here. my sense is that by the end of the winter once we get into the spring you'll see more deals hits hitting the radar screen. they will be more of the kind of indoe health solutions transaction of smaller companies that want to become like activas. that's it. [ applause ]
>> good morning. i think we will find that the uk experience and the u.s. experience is really rather different. i suspect we will also conclude that in the sense the uk experience is more similar to that than the rest of the world and the u.s. experience is doubly different. in very broad summary before it get on with the slides, you can lever leave the uk. we have less defenses against companies leaving the uk. equally we focus on whether
you've left or not. perhaps consequence of people being more free to leave is a need to see whether they have or not. if i then go onto the structure of the presentation. again, i think it's significant i will need to focus on residents not so much on corporation. the uk tax system is founded on proposition on the individual side. we tax residents, not citizens. you can argue in the u.s. and the uk on the corporate tax size. you also want to tax corporations. i think it's not surprising that who's side you want to tax
corporations. it's more equivalent than individual residents in the same way that in orpgs of a company is more similar to citizenship for the individual. i'll talk about company residence. i'll go on the cfc rules and migration. we will tend the migrations rather than inversions. i think that goes back to the point i made of the staff we're talking about businesses being able to leave corporations being able to leave but equally have they left or not. the uk test for residence was traditionally based solely on the place of central management and control and this is probably a crucial divergence where the company was incorporated. it didn't matter where the
company was incorporated. you could have a u.s. incorporated company managed and controlled in the uk. it was it was an expanding corporation in the uk from 1988. maybe i should pause at that point and note that there isn't such a thing in the uk anyway just as i understand it there isn't incorporation in the u.s. there isn't a uk company register. we have three company registers for england but the reality is it covers the three different sorts and indeed corporate law is not substantially different across the three. then inevitably, tax treaties are needed to cope with conflicts and interactions
between theour rules for taxing companies and other residents. generally tax treaties -- this would be our strong preference it is broken by looking at the place of affective management and i have come on to what we mean by affective management. i think again that's not just the case with the uk it would, i think, be pretty similar if you looked at say france or germany. equally they are probably closer to affective management as their domestic test where you have a company that's not incorporating in france or germany that is in fact based there. worth perhaps noting along the way through but the island would have inherited our traditional way of deciding whether a company is resident because it was invented at a time when island was part of the uk starting with the uk's traditional approach that is to become realigned with the uk from this january by actually
including in these resident tests, incorporation in ireland like us. they have also gone for five year grandfathering but on the other hand they have waited quite significantly longer time to us to actually extend their test for residents to include corporation. let me go onto central management and crop control. it's a case law test that emerged, you know from the need to know whether people were resident or not even in the 19th century, people needed to know that. not surprisingly, therefore, it was tested in case law. the bleeding decision is a case called deberes. it baits perhaps not surprisingly from the 19th century. the key point isn't focus on central management and control. it means the highest level of control of the business, not some lower level. highest level will generally be
exercised by the company's board of directors. with the caveat that's provided that the director's generally control the company. yet, it's difficult to envision a circumstance where you will get control below the level of the directors, i think. that will probably be quite uncommon. on the other hand i think you could more regularly envision control by a dom nant directinant director. who was exercising control throughstuge director through shadow circumstances. in that circumstance it would be important where the shadow director is based and not where the board of directors had their meetings. the weakness is it worked better
in a time where it was harder to travel about or in a time where teleconferenceing are not possible. if you look back to the 19th century, if you wanted to have a board meeting in the particular place, if you weren't there you had to get on a ship to get there. it was a clearer and easier test. you can see why over time it became rather less satisfactory as a test. i don't think it would be realistic to contemplate having that as a sole test now. if we then go onto affective management, this is the tie breaker in most of the uk's tax treaties. you can think of a pretty straight forward example you have a corporation that is incorporated in france, say, but has its central management control in the uk. you could presumably envision a case where you have -- the directors and the main shareholders being french, they
happen to want to work in the uk but equally they are more familiar with french company law. something like that. they would rather be governed by that, you then some way of breaking the tide between the uk which will be wanting to tax based on central control and france that will be wanting to tax based on the corporation of the company in france. and then there is a quite clear and explicit test in the uk france tax treaty which makes clear that where a person other than an individual is resident in both states then it's deemed to be resident in the state in which its place of affective manthment management is situated. inevitably there are similar rules for individuals but different rules. both the uk and france taxing individuals on the basis of residence residence, there's a need to cope with situations where say someone has a house in both
countries. then the interpretation of that is left to the ucducdocd model tax convention. think the key point is you can have one place of affective management even though you can have any number of places where there's some management. it's where key management and commercial decisions that are necessary for the conduct of the entities business as a whole are in substance made. so again the substance protects against subterfuge or where it is affectively managed. in a very brief shorthand i think you can reasonably translate that as the company's headquarters where most, if not all of the senior executives are based. inevitably, the executives will
travel around but most corporations, even now have what you might call a headquarters. i think you can see that in the uk context with two of the uk banks, lloyd's banking group and rbs west. both are headed by scottish companies. both hold most of their board meetings in scottland had scotland separated from the uk following their referendum in september, in that circumstance it's clear that central management and control would have been in scotland. equally it's clear that the head officers of rbs and lloyd's banking group are based in london. that's where their senior executives habitually work from and where most of their meetings will take place. so you can see how you can get a distinction between central management and control and
affective management in circumstances where there's no contrivance, there's no sham where all the directors and other people involved generally have the capacity to do the work they are deported to do and indeed do it. what i think is quite important and worth noting is you can't -- if you've got a test of this sort keep your headquarters or in paris or frankfurt and then be effect be a uk resident simply by having board meetings in the uk. that's generally not going to work if your senior executives want to keep working somewhere else because that's where they want to live, where their families want them to stay and their headquarters stayed there, then it's going to be unlikely under the uk residence test as modified by treaties that you're going to get to the uk resident on that basis. generally in those circumstances, the other country
are disurp residence and under the tie breaker they will get res dense. hopefully hopefully. it's the same in reverse, it would be quite difficult if you wanted to keep your headquarters in london that just because you put on top of your existing uk company, and you have board meetings of that company outside the uk that that was enough. in many circumstances it wouldn't be. in terms of whether we have similar rules as paul described to prevent migrations and inversions, i haven't got a slide on that because broadly we don't. we don't have such rules. in many circumstances he would prevent us having such rules. we can't prevent a genuine
transfer of the headquarters of a uk incorporated group to another member state of the eu. that would controvene the markets. these things tend to be resip rickol. if we go back to my example of a company headquartered in turin if it stays headquarters in turin, it will be resident in italy. on the other hand, eu law prevents any step being taken to stop headquarters being moved to the uk and if it is moved to the uk, it will be resident in the uk and the same in reverse. so in a sense we lack any of the