Worse Than Reckless?
Peter Robinson ·
Jun 16, 2010 at 1:36pm
The President has accused BP of "recklessness," used all the threats of coercion and retribution implied in the powers of his office to cow BP into devoting billions--billions--of its shareholders dollars to paying the costs the President wants it to pay, and has done all this, manifestly, before he, BP, or anyone else knows quite what happened on the Deepwater Horizon. (As the President himself put it last night, he is establishing a national commission "to understand the causes of this disaster.")
May I just ask where all this fits into the Constitution of the United States?
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Re: Worse Than Reckless?
There are multiple layers to Peter's question has to do with the culpability of BP. Here there are two ways to answer this. First, as a matter of basic tort liability, BP has no across the board defense. It has defenses that may go to certain class of plaintiffs, e.g. remote suppliers of services consumed by people who suffer physical injuries. And it can fight damages. But no inquiry is needed to find that if they set off the explosion that caused the leak they are responsible. There is the question of the cap, which turns on recklessness or failure to comply with federal statutes. The evidence is very strong to date that even if the former is not proved, the latter seems likely. Other CEOs distanced themselves from BP just yesterday and rightly so.
The next question is if the liabilities are uncertain what remedies against BP now, before this all is settled. Here the conventional question is to ask whether the payment of dividends impairs the ability to meet debts as they accrue. If so, then one can treat the distribution as a fraudulent conveyance....
Re: Worse Than Reckless?
On the evidence we are not quite there yet, but it looks as though someone will try to keep assets in the corporation to guard against that eventuality. Market pressures and political ones will work both ways on the dividend, to say the least. Next there is the question of what can the President do to force BP to turn stuff over. Two parts here. On presidential authority the case depends on the web of statutes and the powers of the various agencies, about which I know very little. But regulation usually does not deal with payments in advance on tort liability. On the due process issues, the President will lose. There are no judgments here, and no company can be required under threat to turn over assets to the president for him to distribute as he sees fit, without allowing BP a chance to raise whatever defenses it sees fit. So the company can rebuff the President, but if it does so, there are other threats against the company that could be implemented. This is a political matter. The legal position at the moment seems clearly against the President.
Re: Worse Than Reckless?
Okay, I know less than Richard about such statutes, but I think common sense can take us part of the way. If there was a statute that authorized the executive to force BP to slash its dividend or set up a $20 billion escrow or pick up the tab for a drilling moratorium, surely the President would have cited that law. Absent such authorization, it seems to me that Obama's bullying is presidential fiat, which is why I suggested over in the other thread that Obama's only justification for his bullying must be an expansive reading of the generic "executive power" in Article II.
I agree completely on the due process point. But what are the "other threats" that could be deployed? The DOJ criminal investigation?
May '10
Re: Worse Than Reckless?
Adam Freedman
Absent such authorization, it seems to me that Obama's bullying is presidential fiat, which is why I suggested over in the other thread that Obama's only justification for his bullying must be an expansive reading of the generic "executive power" in Article II. · Jun 16 at 2:10pm
What makes you think he cares what the Constitution says about his powers? He's the President, and he is annoyed by all this limited government, separation of powers, due process, checks-and-balances stuff. Anyways remember, as he always reminds us, this is not about him.
May '10
Re: Worse Than Reckless?
He's busy, you know, trying to clean up somebody else's mess, just like he always has to, so instead of sitting on the sidelines rooting for failure, saying he doesn't have the authority to mop that way, why don't you grab a mop?
May '10
Re: Worse Than Reckless?
Professor Epstein: I enjoyed your column in today's Wall Street Journal. Based on that column and your personal experience with President Obama, I'd like to get your reaction to Michael Barone's frequent characterization of several administration actions as "gangster government." I believe his point is that the administration is bullying people and institutions (e.g., GM's secured creditors, BP) to do things or make concessions that the government has no authority to compel on its own. Certainly we have a long history of Presidents who enjoyed throwing their weight around (Jackson, both Roosevelts, Kennedy in his denunciation of U.S. Steel), but the Obama administration seems to have provoked a particularly strong reaction; for example, I don't consider Michael Barone to be one prone to histrionics or hyperbole. Do you see something different about the Obama administration that justifies a label like "gangster government," or is it best described as a rhetorical flourish?
Re: Worse Than Reckless?
Peter, I fear we've gone from a bully pulpit to a thugocracy. The rule of law means whatever the President wants it to mean. I'm not sure about the reason behind the absence of protest, though I hope that it is due to the possiblity that people realize he isn't listening to them in any event, and so are waiting to voice their displeasure at the ballot box.
Oh, and you are right that Benjamin Carter has an excellent point concerning BP being made to fund Obama's moratorium. And the fact that Ben is my son has NOTHING to do with my endorsement. No sireee.
Jun '10
Re: Worse Than Reckless?
"May I just ask where all this fits into the Constitution of the United States?"
I saw it there just the other day. I believe it was right in between the section 321-a, article 3, "The President shall have the right to suspend bankruptsy laws when he wishes to support any constituency." and 321-c of the same article, "The President and Congress may force any citizen to purchase insurance, and, by extension, any other product or service, He or They deem to be beneficial to the social good of the prolitariat." It's right there in the living constitution. What's so difficult? Didn't you get your urban public education?
Re: Worse Than Reckless?
One more point, Peter. I think that your questions were designed to have built-in obsolescence. The not quite announced deal with Ken Feinberg over the $20 billion fund is an effort to split the difference. The US does not get to call the shots, but neither does BP. There seems to be no assurance that the dollars in the pool will be all that BP has to contribute, which is the correct result as far as it goes. The criteria for claims are not yet settled. Feinberg is a past master at running programs of this sort, but he has never looked at anything as complicated as this. And the next step will be to ask what the other players will be forced to chip into the pool. Halliburton and Transoceanic are not bystanders. The issue will only grow with time. If forced to bet, I still think that BP and its compatriots are in for even worse news.
Re: Worse Than Reckless?
I think the compensation set up would be questionable, Peter, as a matter of presidential power, were it not for BP's voluntary consent. Unless he were acting according to some pre-existing authority from Congress, President Obama would not have the authority to simply order BP to hand over $20 billion to the U.S. to hand out to claimaints. But if BP wants to cook itself, that's its own prerogative.
Even then, I don't see how President Obama and BP can agree that claimants must go to the new BP fund first, rather than going directly to court, if that is their wish. If I were a BP shareholder, I would want to know why the management believes that it would have been worse off to go to trial, have a jury render a verdict, and pay the damages -- that is going to happen anyway, I suspect, on top of the $20 billion, which itself may not be BP's last payment under political pressure.
Re: Worse Than Reckless?
Matthew: I'm glad you enjoyed my column. I am not privy, thankfully, to any of the inside information about Obama, or indeed any other administration. Barone, whom I know from law school, is, and I respect his judgments. It is of course worth noting that Obama's choice of Rahm Emanuel to head the White House Staff is consistent with that characterization. The BP incident is harder to read because the company had, and has, some very great exposures, so that this effort to slow matters down may well have made sense from its point of view no matter what the President said or demanded. The editorial in the WSJ about the abuse of experts on the question of whether to impose a general moratorium is very disturbing. Thuggish tactics in support of an indefensible substantive position. Transitions are always danger points, and to induce these in stable environments for no reason is foolish behavior. What is clear to me, as an academic, is that Obama and his crew do not have, or at least act on, a systematic world view on how to handle and minimize risk. That mix of analytical shortcomings and political toughness is a deadly combination.
Edited on Jun 17, 2010 at 8:49am