bonuses

[Rosenthal, Lawrence]

When you reduce everyone's welfare payments in order to save money, there is no need for individualized notice and hearing.  Atkins v. Parker.  
 
The real problem here is that Professor Schweber is assuming that contractual rights are somehow vested as against the federal government.  The Contracts Clause, however, does not apply to the federal government.  Thus, everyone enters contracts against the background law that Congress is free to impair the obligation of contracts if it otherwise has a permissible reason to do so.
 
Larry Rosenthal
Chapman University School of Law
 
________________________________

From: Howard Schweber [mailto:schweber at polisci.wisc.edu]
Sent: Wed 3/18/2009 7:10 PM
To: Rosenthal, Lawrence
Cc: Scarberry, Mark; conlawprof at lists.ucla.edu
Subject: Re: bonuses


Rosenthal, Lawrence wrote: 

	What would be the issue to be determined at a hearing, I wonder?
	 
	If we agree that Congress has the power to permit or even require AIG to repudiate its obligations, either pursuant to the power it has over insolvent entities under the Bankruptcy Clause (I do not see why the Bankruptcy Clause does not permit Congress to develop special procedures for the obligations of entities "too big to fail," 




But they didn't.  If Congress had passed appropriate legislation we might be having a different conversation, but if my aunt had wheels she'd be a teacart.





	then an individualized hearing is required only if there is some issue suitable for individualized determination.
	  




But that's exactly the case here!  The claim is that payment of each and every one of these bonuses, independently, interferes with a legitiamte government purposes and on that ground -- and that ground only -- loses its status as a constitutionally protected property interest.  How, within the confines of procedural due process, is that determination reached in each individual case absent a hearing?




	 For example, in Gilbert v. Homar, a police officer was suspended without pay and without a hearing upon being charged with a drug offense.  The Court reasoned that if, as the employer argued, state law required any employee charged with a felony to be suspended, then there was no point in having a hearing because there was no dispute of fact to be determined at a hearing.



Sure, and if there were a law in place that said "no one working at any firm that receives government money may ever be paid a bonus," and if the contracts containing the bonus clauses were made AFTER the enactment of that law, then this would be a relevant precedent.  Background law is always a presumed element in a contract, and so is the possibility that a legislature will alter the legal scheme -- but not if that alteration results in a derogation of vested property rights.  Palazzolo v Rhode Island is the case I can think of offhand.  

I'm still waiting to hear any response to my other hypothetical cases, or even to the question of whether this principle applies to all contracts held by all banks receiving bailout money.



	  The same could be true of AIG.  If Congress determines that no bonuses should be paid in order to prevent a form of waste, then there is no factual dispute to be adjudicated at a hearing.
	  


What?  Congress can determine the existence of "waste" across an entire category of transactions independent of consideration of the particular transactions at issue?  Interesting.  Last time I checked, "waste" was a fact-dependent equitable property law doctrine that did not remotely translate into "use of property contrary to the government's purposes in providing a subsidy."  I don't think "waste" is helpful here, at all.  The claim on the table is that  any time an entity accepts government funds, the government's interest in the use of those funds supercedes all constitutional protections of property rights of third parties -- employees and creditors.   The doctrine of waste doesn't come within a light year of establishing this proposition.  

Can Congress pass a law determining that denial of welfare benefits is always justified and thereby preclude the necessity of a hearing in those cases, as well?  Can Congress say that one particular firm that receives money may not pay bonuses?  Can Congress pass a law that identifies named individuals as ineligible for bonuses?  Okay, those are extrapolations.  Let's be specific.  Can Congress pass a law that says that anyone who receives a student loan is thereby relieved of the responsibility of paying credit card debts on the grounds that Congress finds that "credit card debts" are a class of obligations the honoring of which would contravene the purpose of granting the student loan?

How about this:  if a company gets a grant from the Dept. of Homeland Security, can said Department order that all contracts with foreign governments are null and void?  Is there a name for this theory?

hs