Official Publication of the San Antonio Bar Association
November–December 2023
Retiring Fourth Court Justice Patricia O’Connell Alvarez
On the Importance of an Independent Judiciary
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contents ON THE COVER 8 Silencing an Independent and Impartial Judiciary: Can This Possibly Occur in Texas? By Justice Patricia O’Connell Alvarez
FEATURES 16 Famous American Justices: Justice Sandra Day O’Connor By Harry Munsinger
22 Demystifying Cryptocurrency: A Guide For Lawyers, Part I By Daniel Wood
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DEPARTMENTS
BAR BUSINESS
25 Fourth Court Update
5 2023 San Antonio Bar Foundation Gala Benefit and Awards
By Justice Liza A. Rodriguez
By Sofia Garcia
26 Federal Court Update By Soledad Valenciano, Melanie Fry, and Jeffrie Lewis
November–December 2023 | San Antonio Lawyer® 3
®
Official Publication of the San Antonio Bar Association San Antonio Lawyer ® is published bimonthly. Copyright ©2023 San Antonio Bar Association. All rights reserved. Republication of San Antonio Lawyer content, in whole or in part, is prohibited without the express written permission of the San Antonio Bar Association. Please contact Editor in Chief Sara Murray regarding republication permission. Views expressed in San Antonio Lawyer are those of the authors and do not necessarily reflect the views of the San Antonio Bar Association. Publication of an advertisement does not imply endorsement of any product or service. San Antonio Lawyer, the San Antonio Bar Association, and the Publisher reserve the right to edit all materials and assume no responsibility for accuracy, errors, or omissions. San Antonio Lawyer and the Publisher do not knowingly accept false or misleading advertisements or editorials, and do not assume any responsibility should such advertising or editorials appear. Contributions to San Antonio Lawyer are welcome, but the right is reserved to select materials to be published. Please send all correspondence to info@sabar.org.
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OFFICERS / DIRECTORS President Steve Chiscano President-Elect Patricia “Patty” Rouse Vargas Treasurer Nick Guinn Secretary Jaime Vasquez Immediate Past President Donna McElroy
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Directors (2023-2025) Kacy Cigarroa Melissa Morales Fletcher Elizabeth “Liz” Provencio Krishna Reddy Directors (2022-2024) Emma Cano Charla Davies Charles "Charlie" Deacon Jorge Herrera Executive Director June Moynihan
STATE BAR / SA BAR FOUNDATION State Bar of Texas Directors Tom Crosley Lawrence Morales, II
San Antonio Bar Foundation Chair Donna McElroy
LOCAL BAR ASSOCIATIONS Association of Corporate Counsel South/Central TX Bexar County Women’s Bar Association Christian Legal Society Defense Counsel of San Antonio Federal Bar Association—San Antonio Mexican-American Bar Association—San Antonio San Antonio Black Lawyers Association San Antonio Criminal Defense Lawyers Association San Antonio Trial Lawyers Association San Antonio Young Lawyers Association TEX-ABOTA, American Board of Trial Advocates—San Antonio William S. Sessions Inn of Court
ReflexiÓnes Adapting to Growth and Change with Engagement By Steve Chiscano San Antonio Bar Association President
I
look forward to working with the SA Bar Board of Directors and other volunteer leaders of the SA Bar and local affinity bars in making meaningful and transformational change in our Bexar County legal community. San Antonio is a unique ecosystem of compassionate, caring, and dedicated lawyers making a difference in people’s lives every day. I am looking forward to advancing new and innovative ideas to build upon the great work SABA has done over the last 125 years.
New Space This past summer, the San Antonio Bar Association opened our first SABA Member Center to serve our membership with in-person meeting and event space, a private work area, and amenities such as print services, Wi-Fi, coffee, and more. We encourage all members to take advantage of this new benefit and to share ideas for new benefits that would be useful to their practices. Every SABA benefit, project, or event you enjoy started as a member suggestion.
San Antonio is the 3rd Fastest Growing U.S. City1 San Antonio is projected to surpass 3 million residents in the next 10 years. Businesses with interstate and global footprints are launching San Antonio offices to be available for the projected accompanying economic prosperity. There are nearly 110,000 attorneys in Texas. Despite a current population of over 2 million residents, San Antonio’s attorney population is just shy of 6,500 lawyers. The SA Bar enjoys a reputation for being one of the most collegial bars in Texas and a welcoming city in which to practice law. The SA Bar strives to maintain the friendly ambiance of our legal community as our legal community grows and welcomes lateral and new lawyers starting their careers in San Antonio. Want to be part of the welcome committee? We encourage you to attend SA Bar events to expand your network and welcome new members. Join the Membership Committee to plan socials, or join a Courts Committee if you are interested in organizing a CLE event.
Steve Chiscano photo by Al Rendon
Staying Engaged and Sharing Experience & Resources As we welcome new members, the pending “silver tsunami” of attorneys expected to retire from the practice of law is at an all-time high and is an alert for our bar association to build ways for these dynamic and knowledgeable mentors to continue to participate and share their expertise with the incoming generation of practitioners. Please share ideas for innovative programs! Law firms, no matter what size, experience the growing pains of any other business and many of us are juggling to keep up with using the best management, staffing, IT, banking, and benefits tools. The SA Bar is currently fine-tuning a more comprehensive vendor directory to help members more quickly find solutions to their problems.
Let Us Know Your Concerns & Ideas The purpose of the SA Bar is to help lawyers in their practices and serve as the voice of the local attorney community. If you have a concern, idea or questions, we invite you to share them with the bar. You can contact me or any board member directly through the SABA Board Portal on our website, sabar.org. We look forward to the next year and visiting with you!
Send the SABA Board an email
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November–December 2023 | San Antonio Lawyer® 5
2023 San Antonio Bar Foundation Gala Benefit and Awards
by Sofia Garcia Sold out and attended by over 600 friends, the 2023 San Antonio Bar Foundation Gala Benefit & Awards was held on September 23. The San Antonio Young Lawyers Association (SAYLA), the San Antonio Bar Foundation (SABF), and the San Antonio Bar Association (SABA) presented awards to members to recognize their outstanding work for the legal community and career achievements. Generous members and friends of the Bar helped raise over $105,000 in support of civic education, scholarship, and pro bono services. In the words of Steve Chiscano, ¡Órale!
Solero Flamenco performing for Gala attendees
SABA President, Steve Chiscano, and Foundation Chair, Donna McElroy, serving as the emcees of the evening
A member of SABA posing for a photo
SABA Past President Lawrence Morales, II, Chief Justice Rebeca Martinez, and TYLA Past President Michael Ritter
Members of Solero Flamenco playing their drums and guitar
Whitney Thomas, Danica McKinney, Deborah Stanton Burke, the Hon. Linda Lewis
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Award Recipients
Sara Dysart accepting the 2023 SABA Joe Frazier Brown Award of Excellence, Lifetime Achievement Award from SABA President Steve Chiscano and Foundation Chair Donna McElroy
Eduardo Juarez accepting the 2023 Peacemaker Award and William “Bill” Crow accepting the 2023 Carolyn Thurmond Outstanding Lawyer in Community Service Award from SABA President Steve Chiscano and Foundation Chair Donna McElroy
Scan the QR code to view the 2023 SABF photo gallery.
The San Antonio Young Lawyers Association presented the Outstanding Young Lawyer Award to Collanne Bramblett West, the Liberty Bell Award to Anabel Martinez, and the Outstanding Mentor Award to Justice Beth Watkins.
Collanne Bramblett West accepting the Outstanding Young Lawyer Award from SAYLA President Herbert Hill and President-Elect Josue Galvan
SAVE THE DATE: September 21, 2024
Anabel Martinez accepting the Liberty Bell Award from SAYLA President Herbert Hill and President-Elect Josue Galvan
Justice Beth Watkins accepting the Outstanding Mentor Award from SAYLA President Herbert Hill and President-Elect Josue Galvan
November–December 2023 | San Antonio Lawyer® 7
Silencing an Independent and Impartial Judiciary: Can This Possibly Occur in Texas? By Justice Patricia O’Connell Alvarez
Framing the Inquiry Judges are required to maintain their independence from the other two branches of government. This is necessary because the judiciary is charged with policing the other branches so they do not abuse their power. An independent judiciary has been the most admired facet of American government. It represents a “worldwide movement toward a realization that people’s liberty and their prosperity depend in part upon strong judicial institutions.”1 When judges fail to do their jobs, or if the other two branches of government leverage enough influence or power to undermine an independent judiciary, then the Rule of Law is threatened, and democracy disappears. Other democracies have suffered such a democratic devolution. Two examples are Hungary and Poland, whose democracies eroded when their leaders eliminated the judiciary’s role as the guardian of the separation of powers and the Rule of Law. Could it happen in Texas? Well, it’s happening around the world, so why not in Texas? How can we prevent this from even being contemplated in Texas?
Introduction There is a worldwide concern that democracies are dying, and there is a sincere belief that the United States is heading in the same direction.2 In the democracies that have already fallen, we see examples of those that fell instantly and those that failed over time. Examples of instant death by military coup d’état or by military coercion include Chile, Argentina, Guatemala, Pakistan, Ghana, Greece, Turkey and—more recently— Thailand. Examples of democratic death that occurred over time include 8 San Antonio Lawyer® | sabar.org
Venezuela, Peru, Hungary, and Poland. These deaths occurred at the hands of democratically elected leaders—that is, presidents, prime ministers, or parties who subverted the very process that brought them to power, such as Hugo Chavez in Venezuela, Alberto Fujimori in Peru, Viktor Orbán in Hungary, and the Law and Justice Party in Poland. I should also mention that Germany suffered a relatively fast democratic death at the hands of Adolf Hitler in the wake of the 1933 Reichstag fire in Germany, although it later recovered. Such leaders did not initially project themselves as autocratic. They only revealed themselves as such after they dismantled the democratic systems they led. This process is known as “democratic erosion”—“the slow but substantial decay of all three of the institutional prerequisites of [a] constitutional democracy.”3 One way a democracy erodes is when leaders or political parties first attack, and then eliminate, the judiciary’s independence. Is the threat of “democratic erosion” by eliminating the judiciary’s independence viable in Texas? What can we, as Texans, do to prevent this from ever happening? To answer these questions, my starting point is to define the judiciary’s role in a democracy.
What Is the Role of the Judiciary in a Democracy? In a democracy, the role of the judiciary is to enforce laws and protect the Rule of Law through its power of judicial review, all the while remaining autonomous and independent.4 To fully capture what a judge’s role means in a democracy, I will attempt to give concrete definitions of these terms: “democracy,” “the Rule of Law,” “judicial review,” and “judicial independence.”
What Is the Meaning of “Democracy”? The word “democracy” comes from two Greek words: “demos,” meaning “people”; and “kratein,” meaning “to rule.”5 Interestingly, the term means different things to different people. Minimally, it means free and fair elections involving two or more political parties. To some, including Abraham Lincoln, “democracy” meant a “government of the people, by the people, and for the people.”6 To others, “democracy” means freedom and liberty.7 And, to still others, “democracy” is equated to economic values of prosperity, equality, and security.8 For our purposes here, the best definition is the one asserted by legal scholars. They define the term “democracy” as a system that: (1) has a strong administration of the Rule of Law; (2) has a free and fair election process involving two or more legitimate political parties; and (3) possesses a system of judicial review by an autonomous and independent judiciary to effectuate checks and balances.9
What is the Meaning of “the Rule of Law”? For the past few years, we have read or heard something nearly daily referencing the Rule of Law. We read reports about the former President’s disdain for and assault on the Rule of Law.10 We also read disturbing questions about the conditions of, nature of, and threats to the Rule of Law by worldwide leaders.11 We have likewise heard American politicians referring to “the Rule of Law” as a fundamental basis for their concerns about the state of our democracy. They have either claimed that the Rule of Law is broken, that the Rule of Law no longer exists, or that the Rule of Law must be saved.12 There has been a surge of books by respected scholars warning of threats to democracy and the Rule of Law.13 Major newspaper editorials likewise urge government agencies “to restore respect for the Rule of Law, [because] no one, not even a former President, can be above it.”14 So, what is the Rule of Law? Is it a country’s constitution? Or is it a country’s body of law? Does it imply an ideal or a principle? Better yet, is it a moral compass for how the law should be applied? Is it all in one? Or is it only a series of procedures that a country must follow? The answer lies in what the Rule of Law is not. The Rule of Law is not a law or a set of rules enacted by a state (i.e., the constitution, statutes, jurisprudence, etc.). The Rule of Law is not the “rule of men.” The “rule of men” refers to “the sheer will (desire) of someone or some group of people with power,” who rule arbitrarily to serve their own interests and desires.15 The “rule of men” is a “situation where a state is dominated by a person or a group of people (e.g., “aristocrats,” “whites,” “men,” a political party), who use the power of the state to reinforce their continued dominance.”16 The “rule of men” is synonymous with anarchy and tyranny.17 By contrast, the Rule of Law “depends on certain aspects of official conduct and the life of the community being ruled in a way that distinguishes the rule of law from its two antitheses: anarchy and government by arbitrary use of power.”18 When a tyrant, a despot, or an authoritarian leader or regime ignores a provision of a legally binding treaty or a country’s constitution, or snubs some other law, there is no meaningful Rule of Law.19 Based on what the Rule of Law is not, we can deduce that the general purpose of the Rule of Law is to: (1) protect against anarchy and war against all; (2) allow people to plan their affairs with reasonable confidence; and (3) guarantee against at least some types of official arbitrariness.20 To effectuate this purpose, the Rule of Law must be clear, stable, with authority over officials and citizens alike (not a rule of a few men, but a rule of government), with its enforcement part of an impartial and independent judiciary.21
What is the Meaning of “Judicial Review”? For I agree, that “there is no liberty, if the power of judging be not separated from the legislative and executive powers.”22 Judicial review is the implicit constitutional power of courts to hold both the executive and legislative branches of government accountable by reviewing their actions for compliance with the Constitution and existing laws.23 The power of judicial review comes from the principle of separation of powers adopted to protect the governed from overreaching governmental branches.24 In most democratic countries, judicial review is the most distinctive feature of all democratic constitutional systems.25 “That is why, all over the world, in all democratic States, independently of being subjected to a legal system based on the common law or on the civil law principles, the courts—special constitutional courts, supreme courts, or ordinary courts—have the power to decide and declare the unconstitutionality of legislation when a particular statute violates the text of the Constitution or its constitutional principles.”26 Simultaneously, courts have the power to protect and guarantee the constitutional and fundamental rights of citizens.27 Judicial review, like the Rule of Law, includes the element of judicial independence.28
What Does “Judicial Independence” Mean? “Judicial independence” does not mean that a judge may do whatever he or she pleases and rule without limits. Judges should not be independent of, for example, the Rule of Law or binding precedent, and they certainly should not legislate from the bench.29 Judges who do that violate the democratic doctrine of separation of powers. Instead, “judicial independence” means that individual judges can render controversial decisions within their judicial power without the fear of reprisal.30 “Judicial independence” is the principle that a “judicial officer, in exercising the authority vested in him, shall be free to act upon his own convictions, without apprehension of personal consequences to himself.”31 We want judges who are independent from improper decisional motivators—anything that would cause a judge to be partial or otherwise unjust.32 “Judges must be free, and must be perceived as being free, to render their decisions based on the law and facts of each case.”33 “Judicial independence” also means that for the court system to do its work, the other two branches of government should not interfere.34 In this context, judicial independence incorporates the idea of separation of powers to imply “that resources exist to ensure that justice can be dispensed fairly and efficiently; and that within reasonable limits and with appropriate accountability, the judiciary has the discretion to manage its own affairs.”35 The main reason for establishing institutional independence of the judiciary is to avoid improper influence on the courts from the other branches of government. Judicial independence is the cornerstone of a legal system.36 “[A]n independent judiciary with the authority to finally interpret a written constitution . . . is one of the crown jewels of our system of government today.”37 It is the “realization that people’s liberty and their prosperity depend in part upon strong judicial institutions.”38 The United States Constitution protects judicial independence not to benefit judges but to promote the Rule of Law. In turn, judges are expected to administer the law fairly, without regard to public reaction.39 If the independent role of the judiciary is abrogated in any way, there can be no Rule of Law.40
Role of the Judiciary Revisited Having defined “democracy,” “the Rule of Law,” “judicial review,” and “judicial independence,” I now define the judiciary’s role in a democracy: The role of the judiciary is to protect the Rule of Law November–December 2023 | San Antonio Lawyer® 9
through judicial review by ascertaining that (1) laws remain the supreme legal authority (as opposed to “rules of men”) and are impartially and independently enforced; and (2) the branches of government do not overstep their constitutional or legal boundaries. Keeping in mind this definition of the role of the judiciary, how do democracies erode, decay, and then die?
How Do Democracies Erode, Decay, and Die? A democracy dies when its leaders are not bound by their country’s Rule of Law or when they ignore the separation of powers to satisfy their own personal interests.41 A leader who wants to shed democracy has many paths available. All paths begin with one step: winning the loyalty of key players and key institutions. In How Democracies Die, Levitsky & Ziblatt masterfully explain these phenomena by using a soccer game example: [I]magine a soccer game. To consolidate power, would-be authoritarians must capture the referees, sideline at least some of the other side’s star players, and rewrite the rules of the game to lock in their advantage, in effect tilting the playing field against their opponents.42 In democracies, the referees are embodied in the judicial system, law enforcement bodies, and intelligence, tax, and regulatory agencies. Each has the authority to investigate and punish wrongdoing by public officials and private citizens. When these referees remain independent, they can uncover abuse or cheating from one team or a player. But suppose a referee’s loyalty is controlled by a player or his or her team. In that case, the referee becomes an enabler of that player or team by “shielding the [player or the team] from investigation and criminal prosecution that could lead to [that player or team’s] removal.”43
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Keeping in mind the element of loyalty, another important leadership feature associated with the erosion of democracy is that the leader, when elected, is not only charismatic but also a populist.44 “Populists tend to deny the legitimacy of established parties, attacking them as undemocratic and even unpatriotic.”45 “They tell voters that the existing system is not really a democracy but instead has been hijacked, corrupted, or rigged by the elite.”46 “[O]n a populist’s understanding, it is not possible to challenge or doubt the decision of a popular leader, who has direct knowledge of the people’s will.”47 Populists begin the process of eroding democracy by “capturing the referees, buying off or enfeebling opponents, and rewriting the rules of the game.”48 In this way, “elected leaders can establish a decisive—and permanent—advantage over their opponents.”49 “Because these measures are carried out piecemeal and with the appearance of legality, the drift into authoritarianism doesn’t always set off alarm bells . . . . Citizens are often slow to realize that their democracy is being dismantled—even as it happens before their eyes.”50 Unlike a totalitarian or fascist leader, once the charismatic populist leader is in power, he slowly begins eroding democracy by taking small incremental steps—each within legal or constitutional limits— that, in the aggregate, assault democratic institutions and ultimately kill democracy.51 These steps include measures such as: (1) using constitutional provisions or amendments to alter basic governance arrangements; (2) eliminating judicial review and checks and balances; (3) centralizing and politicizing the executive power; (4) contracting, distorting, or eliminating the public sphere; or (5) eliminating/ suppressing political partisan competition.52 These five measures, separately or in the aggregate, directly attack democracy by weakening the administration of the Rule of Law. Each
“subvert[s] democracy—packing and ‘weaponizing’ the courts and other neutral agencies, buying off the media and the private sector (or bullying them into silence), and rewriting the rules of politics to tilt the playing field against opponents.”53
Measures Used by Hungary and Poland to Compromise the Independence of their Judiciaries and the Rule of Law In the last decade, the independent role of Hungarian and Polish judges became illusory. Wanting to destroy checks on the executive, populist leaders in these countries began by implementing constitutional amendments and backing laws that threatened the judiciary’s independence. They complemented these steps by unpacking existing courts and packing them with party loyalists, shrinking constitutional courts’ jurisdiction and social standing, enacting judicial “reforms,” or publicly questioning or criticizing the judiciary’s democratic commitment. All these measures were meant to silence the judiciary and eliminate the checks on the executive branch. In both countries, these efforts were initially masked as necessary steps to enhance the democratic accountability and efficiency of the judiciary.54 In Hungary, the populist Fidesz Party (Hungarian Civic Alliance Party), headed by Viktor Orbán, won a constitutional two-thirds majority through a coalition with the Christian Democratic People’s Party (KDNP) in 2010.55 When Orbán came to power, he began “dismantling the existing checks and balances” enforced by the judiciary.56 First, Orbán replaced the 1989 Constitution (renamed the “Fundamental Law”).57 The Fundamental Law included “reforms which gradually strengthened the parliamentary sovereignty and weakened its constraints and counterweights.”58 For example, the Fundamental Law contained “a set of cardinal laws [or amendments] introducing structural changes in the judiciary and targeting its independence.”59 The existing Constitutional Court had no choice but to strike the transitional provisions as unconstitutional.60 Furious about this move, Orbán’s government fought back. It adopted an additional amendment, which not only introduced most of the provisions invalidated by the existing Constitutional Court, but also retaliated against that court.61 First, the legislators stripped the Constitutional Court of its jurisdiction and authority to review constitutional amendments, making its legal precedent retroactively void. Next, the Orbán government split the role of the National Judicial Council in appointing judges and gave that role to the newly created the National Office for the Judiciary (NOJ). Since its inception, the NOJ had been criticized for the lack of transparency in its appointments and for the absolute power its two members enjoy. The procedural tactics used to curtail the independence of the Constitutional Court opened the floodgates to effectuate further changes. With the help of the NOJ, Orbán and the Fidesz Party began packing all levels of the court system with Fidesz Party loyalists. Through constitutional amendments, which were complemented by media attacks on the judiciary, Fidesz changed the number of Constitutional Court justices, their term length, and their selection mode. They increased the number of Constitutional Court
justices from eleven to fifteen, prolonged their term from nine to twelve years, and modified the nomination of justices from consensual to governing majority rule. They also changed the retirement age for nonconstitutional judges from seventy to sixty-two. As a result, over 274 judges were forced to retire and were replaced by Fidesz Party loyalists. By 2013, Orbán and his government had packed the Hungarian judicial system with judges expected to be loyal to the Fidesz Party. Since then, the number of law annulments has significantly decreased. “The 2010-11 changes to the Hungarian Constitution [or Fundamental Law] provide two examples of ways by which constitutional changes can undermine democracy.”62 First, the “government’s ability to achieve these changes depended upon quiet and careful manipulation of parliamentary rules, changes that could easily be viewed as technocratic and neutral so far as the maintenance of democracy is concerned.”63 To the public, the changes were viewed as a way to eradicate the vestiges of communism, which the judiciary allegedly supported. Second, the effect of constitutional changes was not immediately obvious.64 It took years for the autocratic effects to surface because they were originally promoted as democratic. Poland followed a similar process to dismantle its judiciary and replace it with friendly party members. When, in 2015, the PiS Party won a majority in parliament, Poland’s democratic erosion began. The PiS proceeded to “launch[] a frontal assault on [the Constitutional] Tribunal as the only thing standing in the way of [President Andrzej Duda’s] plans to radically remodel Poland according to his nationalistic and conservative ideology.”65 Before the October 2015 elections, the party in control, the Civic Platform Party, or PO Party, appointed new judges for five seats on the Constitutional Tribunal. After taking office, the new PiS President, Jaroslaw Kaczynski, refused to administer the oath to these judges and began to annul their appointments by amending the law governing the Constitutional Tribunal. By December 2015, the new parliament had named five new judges to replace those designated by the PO Party. PiS President Kaczynski’s government did not stop there. It continued to impose its will in a majoritarian fashion, taking on Poland’s
November–December 2023 | San Antonio Lawyer® 11
high court, the Supreme Court, and other institutions in a campaign meant to dismantle existing checks and balances. For example, the PiS Parliament adopted additional amendments to box-in judges in the Constitutional Tribunal by increasing the number of judges who would have to hear each case and requiring more of them to agree to issue a ruling.66 Even more controversial was a provision stripping the Tribunal of control over its own case docket. When the newly appointed judges of the Tribunal held those changes unconstitutional, PiS officials refused to publish the Tribunal’s opinion.67 Another example occurred in 2017, when the PiS members of the National Assembly (the lower house of the Polish Parliament), determined to undermine the independence of the judiciary, passed a bill that put the nation’s Supreme Court, a separate body from the Tribunal, under the control of the ruling party.68 The bill, among other things, ousted the sitting Supreme Court judges with the aim of reforming the judicial system and ensuring any vestiges of communism were purged. The ruling party did not stop there. In 2018, the PiS legislative majority enacted legislation that reduced the mandatory retirement age of its Supreme Court justices from 70 to 65, which triggered the removal of about 27 of the 73 justices. In addition, the court was expanded to include 120 justices through government appointments, in effect giving the ruling party the power to reshape two-thirds of the Supreme Court.69 What is as troubling is that, in late 2019, the National Assembly approved a “muzzle” law, which empowered the Disciplinary Chamber to charge judges who questioned the ruling party’s platform.70 In fact, laws were enacted to require the judiciary to disclose their memberships
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in associations of judges with the purpose of “chill[ing] discourse between judges regarding reforms, and to dissuade judges from joining judicial associations that have been critical of PiS legislation.”71 At the same time, PiS waged an ideological public-relations battle against the judiciary by accusing them of communist ties and painting them as impediments to democracy. The goal was to continue to justify using executive and legislative power unfettered by judicial review. As a result, judges began to be publicly and officially prosecuted for “allegedly political activities, such as chairing a meeting where judicial independence is discussed . . . [or] for referring questions to the European Court of Justice, an action referred to as ‘judicial excess’” by the prosecutors.”72
Consequences of the Hungarian and Polish Judicial Reforms As a result of the measures implemented in Hungary and Poland, their judicial systems were stripped of independence and autonomy, their authority disappeared, and their Rule of Law became a rule for the few and privileged party members. Once the leaders of these countries succeeded in replacing their judiciary, they could play the game they wanted, a game played according to their own rules and without the intervention of independent referees to impede them from pursuing their personal goals. They were free of institutional checks. The result was that both countries, especially Hungary, were transformed from a democracy to an autocracy.
Can Democratic Erosion Happen in Texas? If democratic erosion happened in Germany in the 1930s, and in Hungary and Poland in the 2010s, then it can happen anywhere else in the world, including Texas. In Texas, the powers of its three branches of government are set forth in its Constitution.73 No person, or collection of persons, of one of these branches may exercise any power properly attached to either of the others except in instances expressly permitted in the Constitution.74 The express separationof-powers provision reflects a belief on the part of those who drafted and adopted the Texas Constitution “that one of the greatest threats to liberty is the accumulation of excessive power in a single branch of government.”75 Despite this language, the Texas Constitution does not specifically provide any provision that delineates the independence of the judiciary. Consequently, legislators have been free to interfere with the judicial system. For example, in the past two legislative sessions (the 87th and 88th Legislatures), Texas legislators attempted, and in the 88th Legislature succeeded, in creating legislation to alter the composition of the Texas appellate courts. The Senate Judicial Committee of the 87th Legislature contemplated gerrymandering the fourteen courts of appeal by redistricting them into seven courts.76 Why was the Committee contemplating such a step? As you recall, in November 2018, a “blue wave” swept judicial elections in Texas. The wave did not affect the state-wide courts, which remained Republican. However, the wave did affect local elections in large metropolitan areas. Almost “50% of appellate incumbent judges were defeated.”77 Forty-five of the eighty judgeships were on the 2018 ballot, with contested elections occurring in thirty-two of the forty-five seats.78 As a result, Democrat judges became a majority in seven of the fourteen courts of appeal when, before the election, they only held seats on three courts.79 With the exception of two proposed districts, the Committee’s proposed redistricting would facilitate Republican districts. Although the Committee’s chair later withdrew the committee bill, a danger exists that it might be revived in a future legislative session. If this occurs, will any such redistricting have as a hidden agenda an attempt to dilute the power of the existing fourteen courts? Is such a strategy geared to 12 San Antonio Lawyer® | sabar.org
ultimately “pack” the judiciary with members of the legislative branch’s majority party? Will it be an attempt to eliminate or suppress partisan competition? Given what happened in Hungary and Poland, shouldn’t we be asking these questions? In this last legislative session, the 88th Legislature, the controlling legislative party was more successful than in the previous session. It successfully passed legislation that limited the fourteen appellate courts’ power of judicial review and independence by creating the statewide Fifteenth Court of Appeals.80 This newly created court will have exclusive jurisdiction to review broad classes of cases involving the State of Texas. This would effectively strip the Austin Court of Appeals, a mostly democratic court, of its independent power to review important State matters, including cases involving the constitutionality or validity of a state statute or a rule to which the attorney general is a party. During this same session, legislators eliminated district courts’ and the fourteen courts of appeals’ power of judicial review over specific business cases by creating a state-wide business court and granting appellate jurisdiction to the newly created Fifteenth Court of Appeals.81 What is the significance of such enacted legislation? Well, as explained above, in the last few decades, Texans have elected state-wide courts from only one political party. Does it follow that the creation of new state-wide courts is a step toward eliminating the judicial power and independence of the local district courts and appellate courts? What about packing the Fifteen Court of Appeals and the business court with members of the majority party? Shouldn’t we be asking ourselves, do these steps mirror what occurred in Hungary and Poland? Is it the beginning of a slow democratic erosion? Revisiting the soccer example, will the effect of the laws enacted during the last legislative session be to eliminate referees (the fourteen courts of appeals and the district courts) from the game (cases involving the State of Texas and specific business cases) and introduce new referees (the Fifteenth Court of Appeals and the business court) chosen by the more powerful team (the majority party)? Will the new referees be independent? Will the rules of the game change to benefit only the few? Or will the new referees follow the existing rules without regard for who the players are? How about the audience—will they perceive the new referees as independent? Does this matter? All the questions I raise (and you may have more) are troubling, considering the recent changes in the Texas judiciary’s composition, power, and independence. Troubling because we know what happened in Hungary and Poland—their democracies died when their judiciary’s independence was finally destroyed. Troubling because of the threat of gerrymandering our court system with the purpose of diluting the votes of our citizens. What can we, as Texans, do to prevent the same from happening in our State? What should we as judges—without regard to party affiliation— do to continue our role as protectors of the Rule of Law and our democracy?
What Can We Do to Prevent Democratic Erosion? To prevent the Texas judiciary from losing independence—and being silenced—I recommend four steps. First, Texans should pressure Texas legislators to guarantee judicial independence. Presently, no such guarantee exists. The Texas Constitution and the Texas Bill of Rights are silent in that respect. There is no Texas law that makes such a guarantee. Texans must insist that our legislators provide
such a guarantee either through our constitution or by statute. Second, to maintain independence, Texas judges must act as an independent judiciary. Texas judges must embody the courage to make independent decisions without fear of public, economic, or political pressure. Texas judges must uphold the Rule of Law without any fear of repercussion from political parties or the public. Third, in maintaining judicial independence, Texas judges must acknowledge that such independence is balanced with judicial accountability.82 As judges, we are accountable for making decisions that are “an application of the law, properly identified, and using legal reasoning where appropriate, to the true facts of a case” and without fallacies.83 Legislating from the bench is not an option; following the law is a duty. It is through transparent rulings and opinions that the judiciary honors its accountability to the electorate. Fourth, Texans must make every effort to educate the public, especially school children, on the importance of judicial independence and the Rule of Law in our democracy. This step is invaluable to maintaining an engaged and civic-minded electorate that can hold politicians and the judiciary accountable when they threaten to erode judicial independence and the democratic process.
Conclusion “Democratic erosion” can happen in Texas. As the safe-keepers of democracy and the Rule of Law, it is up to Texas judges to guard against such an occurrence. But, as we saw with Hungary and Poland, democratic erosion can creep into the judicial system without any warning. We simply cannot allow this to happen. Texans must not only be attentive to any sign of such erosion, but must also take affirmative steps (including those I suggest in this article) to guard our democracy and our Rule of Law. Patricia O’Connell Alvarez is a Justice on the Fourth Court of Appeals. She holds an LLM in Judicial Philosophy from Duke University School of Law, where she focused on judicial independence. Her article is derived from her Master of Law thesis.
continued on page 28
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FAMOUS AMERICAN JUSTICES
JUSTICE
Sandra Day O’Connor
By Henry Inman - Virginia Memory, Public Domain, https://commons.wikimedia.org/w/index. php?curid=9538002
By Harry Munsinger All photos: Public Domain
S
andra Day O’Connor was born Sandra Day on March 26, 1930, in El Paso, Texas.1 Sandra spent her early childhood on her parents’ Arizona ranch, where she loved to ride horses. The ranch, however, was far away from formal schools, so her parents sent Sandra to El Paso to live with her grandmother so that she could attend school.2 At the time, no one would have guessed that she would become the first woman to serve on the Supreme Court of the United States. Sandra’s grandmother taught her that it was important to work hard and strive for success, and that she could succeed regardless of gender. Sandra enrolled in the Radford School for Girls, skipped two grades, graduated from high school at age 15, and enrolled at Stanford University at age 16.3 After graduating with a degree in economics, she applied to Stanford Law School; she was accepted as one of four women in a class of 150 students. During law school, she met her future husband, John O’Connor, when the two were paired to cite check a law review article. After law school, Sandra married John and applied to law firms in Los Angeles and San Francisco but received no response. A partner at Gibson, Dunn, and Crutcher—a top Los Angeles law firm—told her that even though she had a good resume, the firm would never hire a woman because clients would not stand for it. The partner offered Sandra a job as a legal secretary, but Sandra declined. Instead, she took an unpaid position with the San Mateo County District Attorney’s office to obtain experience.4 16 San Antonio Lawyer® | sabar.org
She left her position when John was drafted into the Army, and the couple moved to Frankfurt, Germany. There, she worked for the Army as a civilian attorney.5 Three years later, the couple returned to the United States. John joined a law firm in Phoenix, and the couple began a family. Sandra did not work when her children were young but volunteered for various political organizations. She returned to work in 1965 as an assistant attorney general for Arizona.6 In 1969, she was appointed to the Arizona Senate.7 Three years later, she became the first female leader of a state Senate in the United States.
Judge O’Connor In 1974, Sandra became an elected judge in Phoenix, and in 1979, Arizona Governor Babbitt appointed her to the Arizona Court of Appeals, to keep her from running against him. That summer, she met Chief Justice Warren Burger, and they discussed law and politics late into the evening. Burger decided Judge O’Connor was a good choice to serve as the first woman justice for the Supreme Court of the United States. To further that effort, Burger appointed O’Connor to important judicial committees so that she could become better known within the legal community. In 1981, President Reagan nominated her to the Supreme Court8 to replace retiring Justice Potter Stewart. Senators Barry Goldwater and Strom Thurmond escorted O’Connor through the hearings. The Senate confirmed her nomination to the Supreme Court unanimously.
Justice O’Connor On September 25, 1981, Chief Justice Burger walked Justice O’Connor down the Supreme Court steps as photographers snapped pictures of the historic event. Accompanied by President Reagan, Justice O’Connor met the other Justices in their private chambers. When she was escorted to the Court’s grand chamber, Justice O’Connor sat in the chair originally used by Chief Justice John Marshall. She took the oath of office, donned her black robe, and took her seat on the far right of the other eight Justices. In her first meeting with other Justices to review cases, she took notes about the cases selected for review. Shortly after she joined the Court, Chief Justice Burger sent her a memo about the dynamics of a lone female among a group of males in a work environment. The memo recommended a passive role to accommodate the male Justices and make the group more productive. She ignored the recommendation and became an active member of the Court. Justice Lewis Powell helped O’Connor organize her office by assigning her one of his best legal secretaries. She was grateful for his help, and they became good friends. Powell, a Virginia gentleman who appreciated good breeding, was impressed by O’Connor’s intellect and upper-class manners. Justice O’Connor retained Justice Stewart’s law clerks because it was too late in the term to select her own. She listened to her law clerks’ advice because they were fresh from top-tier law schools and had learned from the country’s
brightest constitutional law professors. She quickly learned the latest thinking about the United States Constitution. Justice O’Connor’s law clerks were concerned about how she would perform during questioning of attorneys in oral argument, because East Coast lawyers and Ivy League graduates looked down on her as having an inferior legal education. As the junior Justice, O’Connor voted last during the Court’s weekly conferences. On the first case before the Justices with O’Connor on the Court, she cast the deciding vote and felt a keen sense of power. Justice O’Connor was often the swing vote at judicial conferences because she was a moderate, which gave her significant power on the Court. For example, she cast the deciding vote in Plyler v. Doe, which held that undocumented aliens have a right to free public education in America.9 The pressure on O’Connor was enormous because she was the first woman on the Supreme Court. To avoid errors, she personally checked every citation her clerks proposed before accepting an authority as support for an opinion she authored.
Engle v. Isaac Shortly after joining the Court, Justice O’Connor authored an opinion limiting the right of criminal defendants to file habeas corpus petitions in federal court. Prisoners file writs of habeas corpus to force the government to show why the prisoners are incarcerated.10 The writ had become a favorite tactic of prisoners on Death Row to have their cases moved from state to federal court, where they believed their civil rights would more likely be protected. Writing for a five-to-four majority, O’Connor limited the right of a prisoner to use a writ of habeas corpus to move a case to federal court without exhausting state remedies.
attend the all-female school—a four-to-four tie. O’Connor held the deciding vote. She followed Justice Brennan’s advice by ruling it was not necessary to decide the issue for all single-sex schools in America, considering the Mississippi University for Women was the only single-sex college in that state. By narrowing the grounds for the decision, she was able to get five Justices to allow men to enter the university without upsetting singlesex education in the entire country.
views and maintain a majority once it formed. Justice O’Connor worked hard to remain friends with Brennan, asking her husband John to send him Irish jokes, and she gave a party in her chambers to celebrate Brennan’s thirty years on the Court. Although friendly, they did not trust each other when it came to writing opinions because both Brennan and O’Connor tried to write constitutional law into footnotes, hoping the other Justices would not object.
City of Akron v. Akron Center for Reproductive Health, Inc.12
Wallace v. Jaffree13
Her next important case involved stateimposed limits on abortion. The issue involved the City of Akron’s restrictions discouraging women from having abortions. The City required women to sign a consent form, listen to a lecture that a fetus is “human life from the moment of conception,” and wait twenty-four hours before receiving an abortion. O’Connor was willing to allow states to pass restrictions on abortion, so long as the restrictions did not place an “undue burden” on a woman’s access to an abortion. Six justices voted to strike down Akron’s restrictions on abortion, while O’Connor, White, and Rehnquist voted to sustain the restrictions. Although she failed to convince a majority to support her position, Justice O’Connor and Justice Brennan usually succeeded in obtaining a majority. O’Connor was direct, and Brennan was subtle, but both were adept at convincing other Justices to support their
Planned Parenthood of Southeastern Pennsylvania v. Casey O’Connor had another opportunity to consider the issue of abortion in Planned Parenthood of Southeastern Pennsylvania v. Casey. For the first time, a case raised the issue of abortion before a Supreme Court
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Mississippi University for Women v. Hogan11 In March 1982, O’Connor heard her first sex discrimination case. Joe Hogan—a 26-year-old male—wanted to become a nurse. He applied to Mississippi University for Women and was rejected because he was a male. He won admission to the university in state court, but the women’s college appealed to the United States Supreme Court. When Mississippi University for Women v. Hogan was considered in chambers, Chief Justice Burger, and Justices Rehnquist, Powell, and Blackmun voted to allow the university to remain all female. Justices Brennan, White, Marshall, and Stevens voted to allow men to
The decision prohibiting prayer in school, Engel v. Vitale, was one of the Warren Court’s more unpopular decisions. To get around Engel’s prohibition, the Alabama legislature introduced a “moment of silence” at the beginning of class. Justice O’Connor joined the majority in declaring that a moment of silence in public schools violates the Establishment Clause of the United States Constitution, reasoning that the true purpose of the moment of silence was to reintroduce prayer in schools in contravention of the Engel decision.
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with a conservative majority. At that point (1992), many legal scholars believed the Court might overturn Roe v. Wade.14 The underlying state law required a woman who wanted an abortion to wait twenty-four hours after receiving a lecture on the development of the fetus, and to notify her husband, if she was married, before having an abortion. At the first conference after oral argument, five Justices wanted to overturn Roe v. Wade. However, Justices Kennedy, Souter, and O’Connor secretly drafted a narrow opinion that preserved the right to an abortion with restrictions, and it attracted five votes at the next conference. The following year, another female Justice joined Justice O’Connor on the Supreme Court, after the Senate confirmed the nomination of Ruth Bader Ginsburg. In 1996, Justice O’Connor began thinking about retiring because she would soon turn sixty-six years old and felt she had been on the Court long enough. However, Bill Clinton was President, and she did not want him to appoint a liberal Justice to replace her. Moreover, legal scholars referred to the Supreme Court as the O’Connor Court because she was often the swing vote in a five-to-four majority. Justice Kennedy was the other potential swing vote, but he was more reluctant to cast the deciding
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vote. In contrast, Justice O’Connor was a moderate Justice and joined neither camp consistently. She tried to follow the facts and the law and believed the Court ought not to make law but follow precedent. She was careful to protect the rights of women and children before the Court. A good example was Davis v. Monroe County Board of Education,15 where the Court determined a school could be liable for student-on-student sexual harassment under Title IX of the Civil Rights Act.
Bush v. Gore16 Perhaps the most important case to come before the Supreme Court during Justice O’Connor’s tenure was Bush v. Gore, a decision that would decide who would become President of the United States. The presidential election of 2000 between Al Gore and George Bush was essentially a tie because neither candidate won a clear majority in the electoral college. The issue arose when Florida voted for Bush by so few votes as to trigger an automatic recount under state law. The problems in Florida flowed from old voting machines, older voters, and confusing ballots, all producing chaos during the counting process. The voting machines could not count paper ballots with hanging or dimpled chads, requiring hand-counting of those ballots. The Republican secretary of state was prepared to certify that Bush had won the election, but the Florida Supreme Court, dominated by Democratic judges, ruled that the state authorities had to hold a recount over the entire state, which would favor Gore. The Bush legal team appealed the state decision to the United States Supreme Court and asked for an injunction to stop the state-wide recount. When the Justices met on December 9, 2000, all five Republican Justices voted to issue a stay and stop the statewide Florida recount without debate. Based on that vote, Bush won the presidency. However, the five Republican Justices needed a legal reason to justify their decision. They scheduled oral argument for two days later. The Court’s conference following oral argument was heated. Justice O’Connor finally suggested that the Court use the Equal Protection Clause of the Fourteenth Amendment to reason that the State of Florida, by using different standards in the various voting districts of the state, had violated Bush’s right to equal treatment under the law, and that the violation justified stopping the statewide recount. O’Connor wrote the Court’s five-to-four majority opinion, holding that the ruling was “limited to the present circumstances” and was a onetime solution to a difficult political problem.
Gratz v. Bollinger17 The next important case involved affirmative action in school admissions. Under the doctrine of affirmative action, universities, businesses, and law schools could consider race as a factor to increase the admission of African American students. The doctrine triggered resentment among white and Asian students denied admission in favor of lowerscoring African American students. The University of Michigan used a 150-point scale to rank students and gave extra points to African American, Native American, and Hispanic students based on their race or ethnicity. In Gratz v. Bollinger, two white Michigan residents sued the University of Michigan and alleged that the university’s admission policy was racially discriminatory and violated their equal protection rights. The Court, in a six-to-three decision, ruled that the university’s admission system violated the Equal Protection Clause of the United States Constitution and Title VI of the Civil Rights Act of 1964. Chief Justice Rehnquist authored the opinion, reasoning that giving extra points to minority students had the effect of making race the main factor in the decision to admit a student and was, therefore, unconstitutional. Justice O’Connor voted with the conservative majority in rejecting the university’s undergraduate admission policy, but as for the university’s law school admission policy, she voted with the liberal wing of the Court to uphold a flexible affirmative action plan in which the school could consider race in admissions, as long as race was not the deciding factor. Her reasoning was that law schools provided national leaders, and national leaders should reflect the country as a whole. She believed that a “critical mass” of minority law or business students was necessary for the welfare of all students on campus. Justice O’Connor also suggested a twenty-five-year limit on law school affirmative action plans, although businesses and law schools largely ignored the suggested time limit.
Eyeing Retirement In August 2004, O’Connor decided she needed to leave the Court to take care of her husband John who had Alzheimer’s Disease. When the new Supreme Court term began in October 2004, Chief Justice Rehnquist was not feeling well and announced he was going to the hospital for thyroid surgery. During the operation, his surgeons discovered Rehnquist had developed thyroid cancer, and his future on the Court was questionable. After the second inauguration of George W. Bush in January 2005, O’Connor and Rehnquist
discussed who should resign first, because they did not want two vacancies on the court in the same year. When Rehnquist returned to the Court, he announced that he intended to stay for another year, so O’Connor decided to retire immediately. President Bush nominated John Roberts to replace O’Connor, and she planned to resign once Roberts was confirmed. However, at the end of August, Chief Justice Rehnquist was rushed to the hospital suffering from a recurrence of aggressive thyroid cancer that proved terminal. Before Rehnquist died, he suggested President Bush nominate John
Roberts as the new Chief Justice, and Bush agreed. O’Connor told President Bush she would continue to serve on the Court until the Senate confirmed her replacement.
Ayotte v. Planned Parenthood of Northern New England18 Before Justice O’Connor left the Court, another abortion case appeared on the docket. In Ayotte v. Planned Parenthood of Northern New England, the issue was whether minors must notify their parents before getting an abortion. Justice O’Connor wrote an opinion
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The first four women Supreme Court Justices: Sandra Day O’Connor, Sonia Sotomayor, Ruth Bader Ginsburg, and Elena Kagan, October 1, 2010. O’Connor was retired when the photograph was taken.
for a unanimous Court, sending the decision back to the lower court for a narrowly tailored remedy that required parental notification while meeting the needs of the state, minors, and parents.
Retirement On January 31, 2006, Sandra Day O’Connor retired from the Supreme Court after decades of service. She and John took a boat trip off the coast of Turkey, but it was a disaster because John was developing latestage Alzheimer’s Disease, and O’Connor was concerned he might jump overboard and
drown. She realized she could no longer take care of John and asked her children to find John a suitable assisted-living facility. Because John hated to fish, the family persuaded him to enter the Huger Mercy Living Center in Phoenix by telling him they were taking him to a hotel while Sandra went fishing. John passed away in 2009. By March 2013, Sandra began to show signs of failing health and became forgetful and irritable. By late Spring 2013, she was diagnosed with dementia and fell into denial for a while before acknowledging she remembered less. In 2017, she moved to an assisted living facility in Phoenix, Arizona. Harry Munsinger is the author of Texas Divorce Guide, The History of Marriage and Divorce, History of Inheritance Law, History of Medical Miracles, and Portraits of Leadership. He has served on the San Antonio Bar Association’s publications committee for many years. During that time, he has been a frequent contributor to the San Antonio Lawyer magazine. Although now retired from law practice, Harry continues to contribute to this magazine!
ENDNOTES Sandra Day O’Connor, History.com, https://history. com/topics/us-government/sandra-day-o’connor#. 2 Marjorie Williams, How Sandra Day O’Connor became the most powerful woman in 1980s America, The Wash. Post, Mar. 29, 2016, available at https:// www.washingtonpost.com/news/arts-and-entertainment/wp/2016/03/29/how-sandra-day-oconnor-became-the-most-powerful-woman-in-1980samerica/. 3 Sandra Day O’Connor, History.com, https://www. history.com/topics/us-government/sandra-dayo’connor#. 4 Id. 5 Williams, supra note 2. 6 Id. 7 Sandra Day O’Connor, History.com, https://history. com/topics/us-government/sandra-day-o’connor#. 8 Id. 9 Plyler v. Doe, 457 U.S. 202 (1982). 10 Engle v. Isaac, 456 U.S. 107 (1982). 11 Miss. Univ. for Women v. Hogan, 458 U.S. 718 (1982). 12 City of Akron v. Akron Ctr. for Reprod. Health, 462 U.S. 416 (1982). 13 Wallace v. Jaffree, 472 U.S. 38 (1984). 14 Planned Parenthood of Se. Pa. v. Casey, 505 U.S. 833 (1992). 15 Davis v. Monroe Cty. Bd. of Educ., 526 U.S. 629 (1999). 16 Bush v. Gore, 531 U.S. 98 (2000). 17 Gratz v. Bollinger, 539 U.S. 24 (2003). 18 Ayotte v. Planned Parenthood of No. New Eng., 546 U.S. 320 (2006). 1
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Demystifying Cryptocurrency: A GUIDE FOR LAWYERS, PART I By Daniel Wood
Introduction
In this era of accelerating technological progress, the legal landscape evolves constantly, sometimes leading to confusion and challenges but also presenting new opportunities. One of the emerging frontiers driving changes to a broad array of laws is cryptocurrency and blockchain, a digital revolution that has transformed the way we perceive and experience financial services. Cryptocurrency is, quite literally, the first truly new form of money since paper banknotes, and its potential as digitized value is only a small part of the expected impact of this technology on our lives. This dynamic and complex technology is not just for crypto-bros, speculators, and money launderers. Blockchain technology can drive fundamental shifts in multiple sectors. Like the advent of the internet, it will likely reach its fingers into numerous areas of our lives, sometimes without our realizing it. For lawyers who may not have extensive technology expertise, understanding this complex area may seem daunting but is of growing importance. This three-part series aims to provide an approachable introduction to cryptocurrency and blockchain, breaking down fundamental concepts, legal developments, and practical implications. No prior technological expertise is needed. After all, one does not need to understand mechanical engineering to drive a car. In this first installment, we will walk through the basic concepts of cryptocurrency and the blockchain, with a focus on the use of cryptocurrency as a new form of monetary value. Later in the series we will delve into other evolutions and use cases for this technology as well as some legal and regulatory considerations. The aim of the series is to give attorneys from all practice areas a sufficient grounding to understand how cryptocurrency and blockchain might affect them and their clients, and to better contextualize new developments.
Key Takeaways
• Cryptocurrency is a digital token that relies on cryptographic techniques for security and operability, and can substitute for money. • A blockchain is the underlying technology of most cryptocurrencies, serving as both a network and a public ledger to record cryptocurrency transactions. • Blockchain-based cryptocurrency offers decentralization (also sometimes called disintermediation) that enables peer-to-peer transactions without the need for trusted intermediaries like banks or payment networks. • There are both pros and cons associated with cryptocurrency.
What is Money?
Before we consider how cryptocurrency is revolutionizing money, it may be helpful to pause and contemplate what money actually is. We all use it every day. It’s the lifeblood of modern societies. But many of us would struggle to give a proper definition off the tops of our heads. Going a step further, have you ever thought about why we use money and where it came from? At its most fundamental level, money is a portable and transferrable representation of labor. Early on in the development of human society, social groups typically used a barter system: a fisherman trades some of his fish to a farmer for some of his vegetables so that both people can benefit from having both fish and vegetables. (This may not be an anthropologically accurate scenario, but just go with it.) A barter transaction revolves around the relative value of the goods involved, and core components of that value are the effort, skills, and time that go into the goods being traded. The parties literally trade the products of their labor. Unfortunately, barter economies are incredibly inefficient and November–December 2023 | San Antonio Lawyer® 21
unwieldy. (Just consider how much fun it would be to carry a barrel of fish to a shopping mall to trade for some new shoes, a pair of sunglasses, and an iPhone.) So along came money. To solve the problems inherent in a barter system, our clever forebears came up with the idea of using smaller, more portable objects that would represent a universally agreed-upon amount of human effort. As an overly simplified and completely made-up example, if it takes an hour of human labor to catch five fish and an hour of human labor to harvest a pound of carrots, then either we can trade five fish for a pound of carrots, or we can agree that a small object (maybe a small circular slice of a precious metal, as just one example) represents one hour of human labor. This idea unlocks the ability to use these small objects as intermediary trade goods—a medium through which we ultimately exchange the goods and services that are the products of our labors. Hence, we often use the term “medium of exchange” to define, in part, money and monetary value. Generally, anything considered a currency—i.e. money—serves three basic roles in the society that uses it. Specifically, currency is: (1) a medium of exchange for transactions of goods and services; (2) a standardized numerical unit that can measure the value of things (a “unit of account”); and (3) an asset that retains purchasing power so it can be used in the future (a “store of value”). These days, the three roles are typically assigned and enforced by a government. For example, a reason the U.S. dollar functions in all three roles is because federal law requires that it must be accepted for all public debts and payments, and the federal government carefully controls its creation and administration. But at its heart, the dollar, like all currency, is a way to represent human labor. One of the key points is that any object—seashells, coconuts, tulip bulbs, coins, bits of paper—can be a currency so long as we universally agree that it fills these three roles. When a society makes such an agreement, the otherwise valueless thing becomes valuable as a currency. In the case of a government-issued currency like the U.S. dollar, we agree it has value because the government has mandated that it must be acceptable as a medium of exchange, and therefore naturally becomes both a unit of account and store of value.1 A currency that is money only because of government mandate is often called “fiat currency,” as it is literally currency by government fiat. But ultimately, if a thing fulfills those three roles, regardless of whether it does so as a matter of law or by virtue of communal agreement, it serves the purposes of a currency. Put another way, it is certainly possible that a digital token that only exists on a peer-to-peer network, absent any involvement by a government, can be money.
The Cryptocurrency Revolution
Though not the first attempt at a virtual currency, Bitcoin was the first cryptocurrency released into the world. Virtual currency is a term generally used to refer to any form of electronic currency. Cryptocurrency, on the other hand, is a specific subset of virtual currency built on, and governed by, cryptographic functionality. The roots of cryptocurrency development go back to the early 1980s. In 1983, a computer scientist at University of California at Santa Barbara, David Chaum, published a paper called “Blind Signatures for Untraceable Payments” that theorized a method of digitizing payments based on cryptographic protocols. In 1989, Chaum implemented his ideas, founding a company called Digicash, which facilitated virtual payments by “eCash.” Although Digicash went bankrupt in 1998, its technology was an important precursor to Bitcoin. In and around 1991, other computer scientists were also playing with the idea of distributing data in “blocks” that are secured cryptographically in a chain. These two developments can be seen as the core components of cryptocurrency. In 2008, one or more persons operating under the pseudonym 22 San Antonio Lawyer® | sabar.org
Satoshi Nakamoto, published a white paper on the internet titled “Bitcoin: A Peer-to-Peer Electronic Cash System.”2 The whitepaper set out in detail the ideas underlying Bitcoin. Then in January 2009, Satoshi Nakamoto released the software that implemented the Bitcoin system described in the whitepaper. It was uploaded to a free, opensource repository called Source Forge. This means that anyone is able to download the software, look at the code themselves, and run it. Or, as we’ll see later, a person could take that publicly available software and write their own alternate version. It would be like someone downloading a copy of Hamlet, changing the main character’s name to Simba, making all the characters African animals, and altering a few plot points to suit their own story ideas. That was, of course, a completely random analogy that is not intended to resemble any real-world creative work. The point is that this is a core concept of cryptocurrency: it was originally created as an open source, free, democratized system that people could adopt, adapt, and use freely. And they did. People immediately began downloading the Bitcoin software, creating new Bitcoins, and trading them as part of a network that ran on its own automated rules.
Bitcoin Basics
You can think of Bitcoin—and nearly all subsequent cryptocurrencies based on the Bitcoin software protocols—as having two core components: (1) a peer-to-peer, internet-based network built on a publicly viewable ledger of every transaction on the network (the “blockchain”) and (2) a digital token that is unique, cannot be copied or counterfeited, and can be sent back and forth between participants (a “bitcoin,” but also sometimes generically referred to as a “coin” or “token”). It may help to think of Bitcoin as somewhat similar to U.S. mail: the two components are the postal service, which is a network of post offices and mail carriers, and the individual pieces of mail, packets that are sorted and transferred by the postal service between and among people who use the postal service. However, the similarities are only skin deep. The Blockchain. The Bitcoin blockchain is built on a peer-to-peer network (sometimes abbreviated as “P2P”). As an aside, technically the blockchain and the network are separate things, but in practice, many people conflate the two and use the term “blockchain” to also mean the network of computers connected to the blockchain. Generally, a peerto-peer network is decentralized—meaning there is no central authority running or administering the network—and each participant (or “peer”) has equal status and capability with respect to sharing and accessing resources on the network. This contrasts with traditional client-server networks, which resemble a hub-and-spoke model, where one central site or server is controlled by an administrator, while multiple clients must connect to the hub to access information or other network resources. Think of the client-server network model like a typical office IT system: each employee is granted login credentials from the central IT administrator and logs in with a workstation to the network owned and operated by the employer; files and other computing resources are stored centrally and under the control of the employer’s IT department. With a peer-topeer network, there is no central repository of files—they are distributed across all members of the network—and no one person controlling the network. Any person can download a copy of the software and install it to become a peer on the network. The blockchain itself is a ledger that records every transaction that takes place on the network. Because Bitcoin is a peer-to-peer network, each person running the Bitcoin software has access to the blockchain. That means, any person can see every single transfer of Bitcoin that has ever happened. The general term for this type of blockchain-based ledger that is shared across all members of the network is “distributed
ledger.” Distributed ledgers are an important part of why cryptocurrency Bitcoin wallet, a pair of cryptographic keys is generated—a private key technology is revolutionizing industries that have nothing to do with and a public key. In actuality, each key is (you guessed it) a unique string currency or payments. of alphanumeric characters. The public key is mathematically derived As the name implies, a distributed ledger records transaction entries, from the private key, and is itself used to generate a Bitcoin address. In but it can also store additional data linked to each transaction. Such overly simplified terms, the public key is similar to an email address, data can be encrypted by the network protocols so that members of the and the private key is similar to the user’s password needed to access network cannot see the details of the data being stored on the blockchain the email account. Anyone can send a Bitcoin to a public key Bitcoin without the proper cryptographic keys. As a result, the blockchain can address without the input or permission of the owner of that public act as a secure repository for information that cannot be tampered with key in the same way anyone can send email to your email address. But and which can be easily transferred among peers on the network. For to send a Bitcoin out of a wallet requires the private key of that wallet, example, healthcare companies have been experimenting for years with much like sending an email from your email account requires your blockchain solutions that enable patients to easily access, add to, and account password. transmit their medical records. The main takeaways regarding the blockchain are: • The blockchain is a distributed ledger that records every single transaction that takes place on the network. • The network is composed of every computer running the Bitcoin software, and each computer performs certain tasks to ensure the system operates automatically based on its protocols. • As a ledger, the blockchain is accessible to every network participant. The Token. Conceptually, a Bitcoin is digital token created through a process called “mining” (sometimes, especially with other cryptocurrencies, also called “minting”), where computers on the peer-to-peer network solve complex mathematical problems in order to At Frost, relationships – not transactions – are how we can best validate and record transactions on the blockchain. In technical terms, an help our customers build, manage, protect and distribute the individual Bitcoin is essentially a unique assets they’ve worked hard to acquire over a lifetime. We are string of alphanumeric characters. Each here to help design the plans and strategies so your clients Bitcoin is associated with a Bitcoin address. The Bitcoin address is yet can leave the legacy they’ve dreamed of. From probate or another unique string of alphanumeric trust administration to special needs trusts, real estate, mineral characters representing the imaginary location of the Bitcoin. and investment management – and everything in between – we As a parallel, when you buy a car, you provide a suite of versatile services to meet your clients’ needs. must register it with the state where you live and the car becomes associated with an address, namely the street address of your home. If you sell your car, the Visit us at frostbank.com or call (210) 220-5016 new owner must re-register the vehicle, at which point it becomes associated in the records of the DMV with a new address. This is, in a way, how the government records and tracks vehicle ownership. At a very high level, Bitcoin operates similarly. Each time a Bitcoin Investment management services and trust services are offered through Frost Wealth Advisors of Frost Bank. Investment is transferred, the blockchain makes a and insurance products are not FDIC insured, are not bank guaranteed, and may lose value. Brokerage services offered record that associates the new address through Frost Brokerage Services, Inc., Member FINRA/SIPC, and investment advisory services offered through Frost with that Bitcoin. Investment Services, LLC, a registered investment adviser. Both companies are subsidiaries of Frost Bank. Additionally,insurance products are offered through Frost Insurance. Deposit and loan products are offered through To hold, send, or receive Bitcoins, Frost Bank, Member FDIC. a person must create a “wallet” on the Bitcoin network. When a user creates a
We don’t just build a plan. We build relationships.
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To verify the authenticity of a transaction, the recipient uses the sender’s public key to verify the digital signature of the transfer. Interestingly, because all transactions are submitted to a public, peer-to-peer network, the verification process also involves numerous other users on the network. Multiple users confirm whether the signature matches the transaction data and the public key of the sender. Because the public key is generated from a wallet’s private key, the mathematical verification of the public key and the other transaction data (such as the Bitcoin address) prove that the sender has the private key corresponding to that public key, and thus the network automatically confirms that the transaction is valid. The results are then permanently recorded in the blockchain. This process happens very quickly. Because of the immense distributed computing power involved, blockchain transactions are processed in moments. Also, there is no central authority that controls, oversees, or approves transactions to slow things down. And because the network simply uses the internet to connect its peers, blockchain transfers cross international borders without any friction whatsoever, limited only by the reach of the internet itself. You don’t have to understand, or even remember, most of the explanation above because there are numerous businesses that understand and handle all the Bitcoin mechanics, presenting customers with simplified and easy-to-understand interfaces that are much like logging into an online banking account to check your balance or initiate an electronic transfer of funds. But it is useful to understand the following basic concepts about Bitcoins: • On the blockchain, a Bitcoin is just a unique string of characters. Each Bitcoin is associated with an address (another unique string of characters), which is how “ownership” is recorded on the blockchain. • Because each individual Bitcoin is a unique string of characters generated by the network using an algorithm, Bitcoins cannot be counterfeited. • The peer-to-peer network collectively performs mathematical calculations to verify the validity of a transaction. It is, therefore, nearly impossible to fake a transaction or fraudulently transfer Bitcoin from a wallet whose private key you do not have. • Bitcoins can be transferred from one wallet to another anywhere in the world in moments.
Pros and Cons of Cryptocurrency
Cryptocurrency, as a form of money, presents both benefits and risks as compared to other forms of currency and value transfers that existed in our financial system before Bitcoin appeared. Following are a few to keep in mind. Fast and cheap. The point of an autonomous system like the Bitcoin network is that it removes the need for a trusted intermediary to keep a hand on the wheel. To put it another way, there is no middleman. Clearance and settlement of Bitcoin transfers are automated and inherently secure (because of the self-verifying nature of blockchain transactions), as well as cheap (no intermediary means no one collecting fees). As an experiment, in July 2016 a Canadian bank used a blockchain (not Bitcoin, but similar in concept) to send $1,000 to a German bank in eight seconds. In April 2017 BBVA used that same blockchain to send fifty transfers from Spain to Mexico in “mere seconds” at a cost 81% less than the correspondent bank network. Central banking systems have been racing to catch up to remain competitive (See, e.g., FedNow). Systemically irreversible. Bitcoin functions like cash. If you hand a ten-dollar bill to a person, there is no way to reverse that transaction. You would have to force the other person to return it to you. By contrast, electronic payment systems like the credit card networks and the automated clearinghouse system used by banks have mechanisms 24 San Antonio Lawyer® | sabar.org
to reverse transfers either before funds have settled or, in some cases, afterward. Transferring a Bitcoin is like physically handing cash to a person. The only way to get the Bitcoin back is to force the person to give it back to you. But because Bitcoin transactions are purely electronic, many people naturally equate them to electronic transfers by banks and, therefore, assume there are similar protections in place. It is important to understand that there are fewer protections relative to cryptocurrency generally, and unless a transaction is performed through a third-party like a licensed cryptocurrency exchange, there is no way to recover spent Bitcoins. Pseudonymous. You may have heard that Bitcoin is anonymous. In truth, it is actually pseudonymous, and this pseudonymous nature is based on the public key/Bitcoin address functionality of wallets. While the blockchain records every Bitcoin transaction that has ever happened and ever will happen, it only records the Bitcoin addresses associated with each transaction. Without additional information, a Bitcoin address is a meaningless string of alphanumeric characters. There are clever ways to analyze blockchain activity to deduce useful information, but determining who sent or received a particular Bitcoin is extremely difficult. This can be a benefit to those who value the privacy of their financial transactions but can also increase the risks of criminal activity and be a barrier to law enforcement or regulation. Many cryptocurrency exchanges require customers to provide identifying information when establishing accounts. As such, it may be possible to find out who owns a particular Bitcoin wallet or who conducted a particular transaction, but only if that wallet is managed through a third-party business like an exchange, in which case the user’s identifying information must be retrieved from the company operating the exchange rather than from the blockchain. There is no aspect of the blockchain itself that collects a user’s personal information.
Conclusion
Cryptocurrency is a complex and hyper-technical subject. Attorneys who do not practice in financial services or similar areas that have been directly affected by the advent of blockchain technology may be tempted to ignore this rapidly evolving field. But as with all new technologies, there are terrific business opportunities as well as practical and useful applications that are worth exploring. It is not necessary to have a theoretical mathematics degree to understand how cryptocurrency and blockchain might drive changes in different industries. A basic grasp of the key concepts is useful for attorneys of all practices. Daniel Wood is Counsel with Pillsbury Winthrop Shaw Pittman, LLP, as part of the Fintech, Payments & Blockchain team, advising on matters related to financial services regulation. Prior to joining Pillsbury, he was an Assistant General Counsel for the Texas Department of Banking, where among other things he primarily drafted the agency’s policy memo on cryptocurrency. ENDNOTES E.g., 31 U.S.C. §5103; 12 U.S.C. §411 (“The said notes shall be obligations of the United States and shall be receivable by all national and member banks and Federal Reserve banks and for all taxes, customs, and other public dues. They shall be redeemed in lawful money on demand at the Treasury Department of the United States, in the city of Washington, District of Columbia, or at any Federal Reserve bank.”). 2 https://bitcoin.org/bitcoin.pdf. As an additional interesting point, the identity of Satoshi Nakamoto has never been conclusively determined. The pseudonym was active in the Bitcoin online community for a while but eventually ceased all activity and handed over active development of the Bitcoin software to Gavin Andresen and the Bitcoin Foundation. 1
Fourth Court Update
Operation Lone Star and Equal Protection Habeas Claims By Justice Liza A. Rodriguez
A
s explained in a previous column, the Fourth Court has faced a tsunami of filings relating to Operation Lone Star (OLS), launched by Governor Abbott in March 2021 to “devote additional law enforcement resources toward deterring illegal border crossings.” Under OLS, “the primary felony arrest” is for “smuggling of persons,” but the “primary misdemeanor arrest” is for criminal trespass. Due to OLS, thousands of noncitizens have been arrested for criminal trespass in several counties within the Fourth Court’s jurisdiction, and many of those people have brought pretrial applications for writ of habeas corpus, alleging violations of their state and federal equal protection rights. See U.S. Const. amend. XIV; Tex. Const. art. I, § 3(a). Recently, in Ex parte Aparicio, No. 0422-00623-CR, 2023 WL 4095939, at *1 (Tex. App.—San Antonio June 21, 2023, pet. granted)(en banc)(“Aparicio”), the Fourth Court addressed whether such a pretrial habeas claim was cognizable. In Aparicio, a noncitizen brought a pretrial selective prosecution claim, arguing that his state and federal equal protection rights had been violated by the decision to prosecute him for criminal trespass, but not to prosecute similarly situated women for the same offense. At the habeas hearing, the evidence showed that Aparicio was in a mixed group of men and women at the time of his arrest. While he and the other men in the group were arrested and transported to a detention facility, the women were not arrested and were released to federal authorities. At the time of the hearing, 470 men (but no women) had been arrested in Maverick County for misdemeanor offenses relating to OLS; and in the five counties participating in OLS at the time, 4,076 men (but no women) had been arrested for misdemeanor offenses. Further, at the hearing, a DPS captain testified that, under OLS policy, officers were instructed to arrest “the majority” of single adult males, but that the guidance to officers did not include arresting similarly situated women for criminal trespass. With regard to the human trafficking felony offense, though, both men and women were arrested and prosecuted. Other DPS troopers,
including the trooper who arrested Aparicio, agreed with the captain’s testimony: they had been instructed to arrest men, but not women, for criminal trespass. Instead of arresting the women, they released them to federal border patrol authorities. Despite the evidence, the trial court denied Aparicio’s requested relief. On appeal, in holding that Aparicio’s pretrial selective prosecution habeas claim was cognizable, the Fourth Court distinguished its opinion in Ex parte Dominguez Ortiz, 668 S.W.3d 126, 136-40 (Tex. App.—San Antonio 2023, no pet)(“Dominguez Ortiz”), which held that a pretrial habeas claim—based on alleged Fifth Amendment due process violations and a Sixth Amendment right to counsel claim—was not cognizable. Unlike Dominguez Ortiz, in which “important facts” had been “in dispute or undeveloped,” the record in Aparicio was fully developed and undisputed with regard to the practice of not arresting women for the offense of criminal trespass. Aparicio, 2023 WL 4095939, at *9 (quoting Dominguez Ortiz, 668 S.W.3d at 134). Further, the Fourth Court found that Aparicio’s equal protection rights would be undermined if not vindicated before trial— observing that if Aparicio’s selective prosecution claim based on equal protection had merit, any conviction resulting from a trial would be void, and he would be entitled to release because “‘a conviction is void under the Equal Protection Cause[,] if the prosecutor deliberately charged the defendant on account of his race’ or other prohibited classification like gender.” Id. at *10 (quoting Vasquez v. Hillery, 474 U.S. 254, 264 (1986)). Likening Aparicio’s selective prosecution claim to a double jeopardy claim, the Fourth Court noted that when “a selective prosecution claim is established, prosecution itself is forbidden.” Id. Additionally, allowing pretrial writs on selective prosecution claims serves “judicial efficiency by avoiding entry of void judgments” and eliminating the need to develop a full trial record. Id. Since a habeas claim is not a defense on the merits to the criminal charge, but rather an independent assertion that the prosecution has brought
the charge for constitutionally forbidden reasons, whether Aparicio was actually guilty of criminal trespass was irrelevant to his habeas claim; and because his selective prosecution claim was distinct from an as-applied challenge to a statute—which is not cognizable in a pretrial writ—the merits of Aparicio’s criminal prosecution were irrelevant to his selective prosecution claim. Id. Finally, the Fourth Court found that Aparicio’s selective prosecution claim was similar to a facial vagueness statutory challenge, which is cognizable in a pretrial habeas writ, since a defendant bringing a vagueness challenge may argue that a statute’s vagueness impermissibly resulted in selective enforcement. Id. at *11. The Fourth Court found no “principled reason to deny pretrial habeas to an applicant like Aparicio who alleged actual selective enforcement of a statute under clear, but unconstitutional guidelines.” Id. (emphasis in original). Finally, the Fourth Court held that Aparicio’s selective prosecution claim based on equal protection was the type of claim in which “protection of the applicant’s substantive rights” or “conservation of judicial resources would be better served by interlocutory review.” Id. (quoting Ex parte Ingram, 533 S.W.3d 887, 891-92 (Tex. Crim. App. 2017)). Because the Fourth Court’s district contains the counties most affected by OLS, and the strategies implemented by the Governor continue to evolve, so too will the legal issues faced by those affected. As OLS cases continue to mount, the Fourth Court will no doubt be faced with the challenge of addressing these vital issues of community concern. Justice Liza A. Rodriguez has served on the Fourth Court of Appeals since January 1, 2019. Justice Rodriguez has been licensed since 1997, is a graduate of St. Mary’s University, is a former Bexar County Assistant District Attorney and Criminal Defense and Family Law Practitioner, and served as Presiding Judge of County Court at Law #8 and Bexar County’s first DWI Court.
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Federal Court Update
Western District of Texas Court Summaries By Soledad Valenciano, Melanie Fry, and Jeffrie Lewis If you are aware of a Western District of Texas order that you believe would be of interest to the local bar and should be summarized in this column, please contact Soledad Valenciano (svalenciano@svtxlaw.com, 210-787-4654) or Melanie Fry (mfry@dykema.com, 210-554-5500) with the style and cause number of the case, and the entry date and docket number of the order.
FRCP 4(k)(2); Personal Jurisdiction; Conspiracy Rusesabagina v. GainJet Aviation, S.A., SA20-CV-01422-XR (Rodriguez, X., July 28, 2023). After surviving an assassination attempt, Paul Rusesabagina fled Rwanda. In 2020, while residing in San Antonio, he received a call from an alleged bishop, inviting him to travel to churches in Burundi to talk about the Rwandan genocide. Rusesabagina traveled to Dubai where he boarded a jet chartered by Athens-based GainJet Aviation. From there, he was allegedly kidnapped, tortured for three days, and imprisoned in Rwanda. During his imprisonment, Rusesabagina and his family filed two federal court lawsuits: one in Washington, D.C. (“DDC”) against Rwandan officials related to the kidnapping, and one in San Antonio (“SA”) against the bishop and GainJet on conspiracy-related claims. In the DDC action, the DDC court concluded certain Rwandan officials were subject to jurisdiction under FRCP 4(k)(2), stating the rule “is essentially a federal long-arm statute.” Rule 4(k) (2) allows the exercise of personal jurisdiction for claims arising under federal law over a defendant who is not subject to the jurisdiction of any single state if the exercise of jurisdiction is consistent with the United States Constitution. The DDC court found the illegal monitoring of, and fraudulent statements to, Rusesabagina in the United States were sufficient minimum contacts. The SA action proceeded with jurisdictional discovery, uncovering facts suggesting GainJet was a willing participant in the kidnapping conspiracy. However, the SA court stated that the Fifth Circuit does not recognize a “conspiracy theory” basis for personal jurisdiction. The DDC case was dismissed in exchange for Rusesabagina’s safe return to San 26 San Antonio Lawyer® | sabar.org
Antonio. Rusesabagina then moved to transfer his SA case against GainJet to the DDC court because that court was familiar with the issues and had asserted personal jurisdiction over some of alleged co-conspirators who may serve as witnesses. The SA court denied the motion to transfer, holding that the DDC court might not come to the same conclusion about personal jurisdiction under Rule 4(k) as to GainJet as it did as to the Rwandan officials because the officials’ acts involved illegal surveillance in the United States, while GainJet’s actions appeared to have occurred in Dubai. The SA court pointed to the Fifth Circuit’s ruling in Douglass v. Nippon Yusen Kabushiki Kaisha, 46 F.4th 226 (5th Cir. 2022), that Rule 4(k)(2) does not expand the constitutional basis for the exercise of personal jurisdiction. Finally, the SA court explained that as to the claims against GainJet, Rusesabagina failed to identify any witnesses, evidence, or claims related to Washington, D.C.
Motion to Dismiss Micciche v. New Horizon Mortg. Inc., SA23-CV-00495-XR (Rodriguez, X., July 5, 2023). Borrower’s heirs sued banks and trustees for claims arising from the attempted foreclosure of a mortgage lien on property owner by the borrower prior to her death but where the plaintiffs resided. The plaintiffs asserted they were entitled to notice of default and acceleration under the terms of the deed of trust and the Texas Property Code, due to their status as heirs of the borrower, and asserted claims for trespass to chattel and for conversion. The current mortgagee filed a motion to dismiss, which the court granted. Because the plaintiffs are not yet responsible for paying the indebt-
edness at issue, they are not entitled to notice under the deed of trust or the Texas Property Code. Because the plaintiffs identified no physical entry onto their property by the bank, there was no trespass; and the conversion claim failed because real property cannot be converted under Texas law and no personal property was identified as allegedly converted.
Judgment on the Pleadings; Economic Loss Rule Guthrie v. Ocwen Loan Servicing, LLC, SA21-CV-01291-JKP (Pulliam, J., July 20, 2023). The plaintiff entered into a contract to purchase property owned by a loan servicing company. When the sale fell through, he sued the company and its agents, seeking a declaration of rights and remedies under the contract and alleging breach of contract and tort claims. The agent defendants moved for judgment on the pleadings as to the tort claims, arguing that the plaintiff did not allege any independent legal duty or injury beyond those arising from the contract and, thus, that the claims were barred by the economic loss rule, which precludes recovery in tort for economic losses resulting from the failure to perform under a contract. A motion for judgment on the pleadings is evaluated under the same standard as a motion to dismiss for failure to state a claim. The court rejected the plaintiff’s argument that his claim for fraudulent inducement survived because even though the economic loss rule does not preclude such a claim, the plaintiff had not actually pled a claim for fraudulent inducement. Because the plaintiff’s complaint alleged only the contract as the source of duties owed by the agents and the rights and remedies between the parties,
dismissal was proper based on the economic loss rule; and because the plaintiff had already been given leave to amend once, the court denied the plaintiff’s motion for leave to amend a second time.
Removal and Remand; Amount In Controversy; Pre-Suit Demand Letter Sliepcevic v. Am Fam. Connect Prop. & Cas. Ins. Co., SA-23-CV-00553-XR (Rodriguez, X., July 5, 2023). The plaintiffs filed suit for breach of contract and violations of the DTPA, alleging “monetary relief of $250,000 or less, excluding interest, statutory or punitive damages and penalties, and attorney fees, and costs.” The defendant removed, alleging diversity jurisdiction. The plaintiffs moved to remand, alleging the amount-in-controversy requirement had not been satisfied. In Texas, a statement in the petition limiting damages to an amount below the amount-in-controversy of $75,000 or less is not binding. To prevent removal, a plaintiff must file a binding stipulation or affidavit limiting recovery to $75,000 or less. Here, because it was not obvious that the plaintiffs’ claims would reach the amount-in-controversy, the defendant was required to set forth summary-judgment type evidence to establish the jurisdictional amount-in-controversy by a preponderance of the evidence. The allegation of treble damages under the DTPA and a pre-suit demand letter asserting plaintiffs had incurred damages in the amount of $188,000 plus attorney’s fees was sufficient. The court clarified that Rule 408 of the Federal Rules of Evidence does not bar use of the pre-suit demand letter; rather, the Fifth Circuit has considered such letters as evidence of the amount-in-controversy. Because plaintiffs failed to demonstrate to a legal certainty that the amount-in-controversy was under the requisite amount, plaintiffs were not entitled to remand.
Appeal Bond and Motion to Stay Mission Pharmacal Company v. Molecular Biologicals, Inc., SA-20-CV-01454-JKP (Pulliam, J. July 17, 2023). After a bench trial, the court awarded the plaintiff $60,508 for unpaid services fees, as well as attorneys’ fees, costs, and interest. The court awarded the defendant nothing on its counterclaims and awarded the plaintiff
nothing on its claim for reimbursement for returned goods. The plaintiff appealed the court’s denial of reimbursement. Although the $60,508 was not appealed, the defendant moved pursuant to FRCP 62(b) for a reduced supersedeas bond on the ground that it was insolvent. Rule 62(b) does not expressly require that the bond cover the entire judgment, but courts have interpreted it that way. The burden is on a party seeking a lower bond to demonstrate reasons for the departure and that a reduced bond would still serve the dual purposes of preserving the status quo and protecting the non-appealing party’s rights pending appeal. The court recognized that a supersedeas bond might not be appropriate for a judgment that is not being appealed; however, as the rule is not limited to appellants and the plaintiff did not object, the court proceeded to consider the proper amount of the bond. The court rejected the request for a lower bond, concluding the defendant’s insolvency made it likely that the defendant would be unable to pay the full amount of the judgment in the future, meaning that a lower amount would not protect the plaintiff’s rights.
Forum Selection Clause; Motion to Transfer Venue Cruz v. Carnival Corp., SA-23-CV-00834XR (Rodriguez, X., August 1, 2023). The plaintiff sued Carnival, alleging claims for breach of contract, DTPA violations, and common law torts relating to Carnival’s allegedly misleading COVID-19 policies and procedures. Carnival moved to transfer venue, relying on the following forum selection clause contained in the contract plaintiff acknowledged electronically during the online check-in process: [I]t is agreed by and between the Guest and Carnival that all disputes and matters whatsoever arising under, in connection with or incident to this Contract or the Guest’s cruise, including travel to and from the vessel, shall be litigated, if at all, before the United States District Court for the Southern District of Miami, or as to those lawsuits to which the Federal Courts of the United States lack subject matter jurisdiction, before a court located in Miami-Dade County, Florida, U.S.A. to the exclusion of the Courts of any other county, state or country.
The first page of the contract drew special attention to the forum-selection clause in bold letters stating “THE ATTENTION OF THE GUEST IS ESPECIALLY DIRECTED TO SECTIONS 1, 4, AND 12 THROUGH 15, WHICH CONTAIN IMPORTANT LIMITATIONS ON THE RIGHTS OF GUESTS TO ASSERT CLAIMS AGAINST CARNIVAL CRUISE LINE . . . INCLUDING FORUM SELECTION.” The court recognized that forum-selection clauses in passenger ticket contracts are presumptively valid and enforceable, and that a party challenging the clause has a “heavy burden” of establishing that enforcement of the clause would be “unreasonable under the circumstances.” Finding plaintiff (1) had presented no evidence that consent to the clause was obtained by fraud or overreaching, or that the provisions were otherwise invalid or unreasonable; (2) had not identified any “extraordinary circumstances” that would warrant denying Carnival’s motion; and (3) asserts a claim against Carnival for breach of the very same contract containing the forum-selection clause, the court concluded the forum-selection clause was valid and enforceable and transferred the case to the Miami Division of the Southern District of Florida pursuant to 28 U.S.C. § 1404.
Soledad Valenciano practices commercial and real estate litigation with Spivey Valenciano, PLLC.
Melanie Fry practices commercial litigation and appellate law with Dykema Gossett PLLC.
Jeffrie B. Lewis is Assistant General Counsel with Zachry Group.
November–December 2023 | San Antonio Lawyer® 27
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ENDNOTES Stephen G. Breyer, Comment: Liberty, Prosperity, and a Strong Judicial Institution, 61 Law & Contemp. Probs. 3, 3 (1998). 2 See Steven Levitsky & Daniel Ziblatt, How Democracies Die 1, 2 (1st ed. 2019). 3 Tom Ginsburg & Aziz Z. Huq, How to Save A Constitutional Democracy 71 (University of Chicago Press 2018). 4 See Leslie Green, Law and the Role of a Judge, pp.18-19 (Sept. 13, 2014), Oxford Legal Studies Research Paper No. 47/2014, available at http:// dx.doi.org/10.2139/ssrn.2495953. 5 See Amin Saikal, Democracy and Democratization, Encyclopedia Princetoniensis, https://pesd. princeton.edu/node/251. 6 Lincoln, Abraham. “Gettysburg Address.” Speech, Gettysburg, PA, November 19, 1863, National Archives, https://www.archives.gov/historicaldocs/todays-doc/index.html?dod-date=1119&_ ga=2.163401080.558260933.16774485731406567298.1677448573. 7 Russell J. Russell, Doh Shull Shin & Willy Jou, Popular Conceptions of the Meaning of Democracy: Democratic Understanding in Unlikely Places, UC Irvine: Center for the Study of Democracy (2007) Retrieved from https://escholarship.org/uc/item/2j74b860. 8 Id. 9 See, e.g., David Collier & Steven Levitsky, Democracy With Adjectives: Conceptual Innovation In Comparative Research World Politics, 49 World Politics 430, 433 (April 1997); see also Jeffrey K. Staton, Christopher Reenock & Jordan Holsinger, Can US Courts be Bulwarks of Democracy? Judges And The Politics of Prudence, 16 (Cambridge University Press 1st ed. 2022); Livitsky, supra note 2 at 212-13; Ginsburg, supra note 3, at 87. 10 See Joan Biskupic, Trump’s disdain for the rule of law, CNN Politics, July 26, 2017, retrieved from http://edition.cnn.com/2017/07/26/politics/trumprule-of-law/index.html; Richard North Patterson, Trump Assaults The Rule Of Law, Boston Globe, June 9, 2017, retrieved from https://www.bostonglobe.com/opinion/2017/06/09/trump-assaultsrule-law/w4jL2MmvVZQLj4f3evTZyO/story.html; Jonathan Chait, Trump Is Mobilizing For War Against The Rule Of Law, New York Magazine, 17 July 2017, at 9, retrieved from http://nymag.com/daily/ intelligencer/2017/07/trump-is-mobilizing-for-waragainst-the-rule-of-law.html. 11 Alani Golanski, A Structuralist Concept of the Rule 1
of Law, 10 Brit. J. Am. Legal Stud. 119, 121 (2021). 12 For example, in a 2016 speech at the Federalist Society National Lawyers Convention, Senator Ted Cruz announced that Justice Antonin Scalia’s death gave the Republican Party “an opportunity to revive the rule of law in America” and that “[u]nder the Obama administration, we’ve witnessed an unprecedented erosion of the rule of law... we saw the government manipulate the law as though it were infinitely malleable...we saw the government ignore the law or treat it as a mere suggestion.” See https://www.cruz.senate. gov/newsroom/press-releases/2016/11/18/sen-cruzwe-have-the-opportunity-to-revive-the-rule-oflaw-in-america. Congresswoman Liz Cheney also invoked the Rule of Law. As a member of the Select Committee investigating the 6th of January attack on the Capital, she said, “our most important obligation” is “to defend the Rule of Law” and then rhetorically raised the question, “Will we adhere to the Rule of Law?” Hearing Before The Select Committee To Investigate The January 6th Attack On The United States Capitol House Of Representatives One Hundred Seventeenth Congress First Session, Serial No. 117-1 at p. 4 (July 27, 2021), retrieved from https://www.govinfo.gov/ content/pkg/CHRG-117hhrg45472/html/CHRG117hhrg45472.htm. 13 Anne Applebaum, Twilight of Democracy (Doubleday 2020); Levitsky, supra note 2, at 73; Ginsburg, supra note 8, at 68-69. 14 Laurence H. Tribe, Barbara McQuade & Joyce White Vance, Opinion Here’s a Roadmap For the Justice Department to Follow In Investigating Trump, The Washington Post, August 5, 2021, retrieved from https://www.washingtonpost.com/opinions/2021/08/05/heres-roadmap-justice-department-follow-investigating-trump/. 15 Paul Gowder, Resisting The Rule of Men, 62 St. Louis U. L. J. 333, 334-35 (Winter 2018). 16 Id. at 335. 17 Julian Sempill, The Rule of Law and the Rule of Men: History, Legacy, Obscurity, 12 Hague J. on the Rule of Law 511, 512, 535 (Jan. 7, 2020) (https://doi-org. proxy.lib.duke.edu/10.1007/s40803-020-00149-9). 18 Id.; see also Gowder, supra note 15, at 334. 19 John D. Bessler, The Rule Of Law: A Necessary Pillar Of Free And Democratic Societies For Protecting Human Rights, 61 Santa Clara L. Rev. 467, 482 (2021); see also Richard H. Fallon, Jr., “The Rule of Law” as a Concept in Constitutional Discourse, 97 Colum. L. Rev. 1, 2 (January 1997) (if officials, including courts, make law “in the guise of applying it, we would have the very ‘rule of men’ with which the Rule of Law is supposed to contrast.”).
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Id. at 7-8. Id. at 8. 22 Alexander Hamilton (Federalist No. 78), Judicial Department. 23 See Laura E. Little, Envy and Jealousy: A Study of Separation of Powers and Judicial Review, 52 Hastings L. J. 47, 52, 56 (2000). 24 See id.; see also Levitsky, supra note 2, at 97. 25 See Douglas M. Gibler & Kirk A. Randazzo, Testing the Effects of Independent Judiciaries on the Likelihood of Democratic Backsliding, 55 Am. J. of Pol. Sci. 696, 696 (July 2011). 26 See Allan R. Brewer-Carías, Judicial Review Comparative Constitutional Law Essays, Lectures and Courses (1986-2011) 29 (Editorial Jurídica Venezolana, 2014), (https://allanbrewercarias.com/wp-content/uploads/2014/02/JUDICIALREVIEW.-9789803652128-txt-PORTADA-Y-TEXTO-PAG-WEB.pdf). 27 Id. at 30; see also Rafael La Porta, Florencio Lópezde-Silanes, Cristian Pop-Eleches & Andrei Schleifer, Judicial Checks and Balances, 112 J. Pol. Econ. 445, 446 (April 2004) (because constitutional review is used to counter the tyranny of the majority, courts rather than legislators become final arbiters of law). 28 See Brewer-Carías, supra note 26, at 42. 29 Layne S. Keele, Why the Judicial Elections Debate Matters Less Than You Think: Retention As The Cornerstone of Independence and Accountability, 47 Akron L. Rev. 375, 383 (2014). 30 Sonia Sotomayor, Reflections About Judicial Independence, 97 N.Y.U. L. Rev. 875, 877-80 (2022), https://www.law.nyu.edu/news/sonia-sotomayorsupreme-court-katzmann-lecture. 31 Bradly v. Fisher¸ 80 U.S. 335, 347 (1871). 32 See Alex Kozinski, The Many Faces of Judicial Independence, 14 Ga. St. U. L. Rev. 861, 863 (1998). 33 Thomas R. Phillips, Electoral Accountability and Judicial Independence, 64 Ohio St. L. J. 137, 138 (2003). 34 See Sotomayor, supra note 30, at 877-80. 35 See Robert A. Katzmann, Courts and Congress 112 (1997). 36 Jeffrey M. Shaman, et al., Judicial Conduct and Ethics 8 (2d ed. 1995). 37 William H Rehnquist, et al., The Future Of The Federal Courts, 46 Am. Univ. L. Rev. 263, 274 (Dec. 1996); see Phillips, supra note 38, at 137 (“An independent judiciary has been the facet of American government most admired and most emulated by emerging democracies”). 38 Id. at 138 (citing Breyer, supra note 1, at 3). 39 Chief Justice William H. Rehnquist, Year-End Report on the Federal Judiciary 4 (2004), retrieved from https://www.supremecourt.gov/publicinfo/ year-end/2004year-endreport.pdf. 40 B.C. Smith, Judges and Democratization: Judicial Independence in New Democracies 10 (1st ed. 2017) (judicial independence is tied to the Rule of Law and without “an independent judiciary, there can be no rule of law”). 41 See generally Levitsky, supra note 2. 42 See id. at 78. 43 Id. 44 Id. at 22. The word “populist” may be broadly defined as “a general protest against the checks and balances introduced to prevent ‘the people’s’ direct rule.” Joanna Fomina and Jacek Kucharczyk, The Specter Haunting Europe: Populism and Protest in Poland, 27 J. of Dem. 58, 58 (2016). “[P]opulists assert a ‘moralized antipluralism’ based on a belief that ‘they, and they alone, represent the people,’ whereas any other electoral option or policy choice is illegitimate and 20 21
perhaps futile.” Ginsburg, supra note 3, at 78. They are “antiestablishment politicians—figures who, claiming to represent the voice of ‘the people,’ wage war on what they depict as a corrupt and conspiratorial elite.” Levitsky, supra note 2, at 22. 45 Levitsky, supra note 2, at 22, 46 Id. 47 Ginsburg, supra note 3, at 79. 48 Levitsky, supra note 2, at 92. 49 Id. at 92-93. 50 Id. 51 Ginsburg, supra note 8, at 90-91; see Levitsky, supra note 2, at 22. 52 Ginsburg, supra note 3, at 72-73. 53 Levitsky, supra note 2, at 7-8. 54 See Gabor Halmai, Dismantling Constitutional Review In Hungary, 1 Rivista Di Diritti Comparati 31, 44-45 (2019), https://acrobat.adobe.com/link/track?uri=urn%3A aaid%3Ascds%3AUS%3A62a9ba14-6f7b-44dd-bc c4-0e61a1eb66de&viewer%21megaVerb=groupdiscover. 55 Aylin Aydin-Cakir, The Varying Effect of CourtCurbing: Evidence from Hungary and Poland, J. European Pub. Pol. 9, 10 (2023), retrieved from: https://www.tandfonline.com/doi/full/10.1080/1350 1763.2023.2171089. 56 David Kosai and Katarina Sipulova, The Strasbourg Court Meets Abusive Constitutionalism: Baka v. Hungary and the Rule of Law, 10 Hague J. on the Rule of Law 83, 84 (2018). 57 Aydin-Cakir, supra note 55, at 10; see also Kosai, supra note 56, at 84; Ginsburg, supra note 3, at 67-68. 58 Kosai, supra note 56, at 86. 59 Id. 60 Id. 61 Id. 62 Ginsburg, supra note 3, at 92. 63 Id. 64 Id. 65 See Fomina, supra note 44, at 62. 66 Id. at 63. 67 Id. 68 Bill Chappell, Fate Of Poland’s Supreme Court Is Now In President’s Hands, Despite Protests, NPR Texas Tech Public Media, retrieved from https://www.npr. org/sections/thetwo-way/2017/07/22/538350711/ fate-of-polands-supreme-court-is-now-in-presidents-hands-despite-protests. 69 Vanessa Romo, Poland’s Government Forcing Supreme Court Justices To Step Down, , NPR Texas Tech Public Media, retrieved from https://www. npr.org/2018/07/03/625801721/polands-government-forcing-supreme-court-justices-to-step-down. 70 Allyson Duncan and John Macy, The Collapse of Judicial Independence in Poland: A Cautionary Tale, 104 Judicature 41 (Fall/Winter 2020-21). 71 Id. at 43. 72 Id. 73 Tex. Const. art. II, § 1. 74 Id. 75 Ex parte Lo, 424 S.W.3d 10, 28 (Tex. Crim. App. 2013) (citing Armadillo Bail Bonds v. State, 802 S.W.2d 237, 239 (Tex. Crim. App. 1990); Langever v. Miller, 124 Tex. 80, 76 S.W.2d 1025, 1035 (1934)). 76 CSSB 11 was the Senate Committee bill at issue. After the Republican majority of the Senate Judicial Committee voted to approve the bill, Senator Joann Hoffman, the chair, withdrew the bill from consideration by the Texas Senate. Although the bill has since been removed from the Senate’s website, in her letter of withdrawal, Senator Hoffman said she would
“continue to develop a plan for the appellate courts.” A copy of the bill is attainable by request to the article’s author. 77 Texas Commission on Judicial Selection Final Report 11 (December 2020). 78 Hugh Rice Kelly and David Haug, Evaluating Judicial Section in Texas A Comparative Study of State Judicial Selection Methods, Texans for Lawsuit Reform Foundation 1 (2019). 79 Emma Platoff, Texas Democrats’ biggest win on election night may have been the courts, The Texas Tribune, Nov. 8, 2018, retrieved from https://www. texastribune.org/2018/11/08/texas-courts-appeals2018-midterms-beto-orourke/.
See https://legiscan.com/TX/text/SB1045/ id/2814834; https://legiscan.com/TX.Bil/ SB1045/2023. 81 See https://legiscan.com/TX/text/HB19/ id/2720522; https://capitol.texas.gov/tlodocs/88R/ billtext/pdf/SB00027I.pdf. 82 Phillips, supra note 33, at 138. 83 See David Prendergast, The Judicial Role In Protecting Democracy From Populism, 20 German L. J. 245, 258 (April 2019). 80
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