Supreme Court Review: A Preview

Each fall, during Georgia College’s Constitution Week, I host a panel on recent U.S. Supreme Court decisions.  On September 17, from 6-8pm, a group of lawyers and law professors will join me in Milledgeville, GA to talk about same-sex marriage, ACA subsidies, and other major decisions of the 2014-15 Roberts Court.  The event is free and open to the public.

WRGC 88.3 radio host Daniel McDonald and I met to discuss the Court and its recent rulings.

 

Oh Say Can U.A.V.?

Today, I heard a research presentation on the economics of drone warfare and it reminded me to follow up on my Drone Home post.  Congress gave the FAA until 2015 to integrate drones (or Unmanned Aerial Vehicles to you sophisticates) into U.S. commercial airspace. The New Year is upon us, and so is the question – Dude, where’s my TacoCopter?

To be fair, Congress gave the FAA until September.  But why wait?  Just file for an exemption, and you can join the lucky UA-VIPs who already fly the red, white, and blue skies.

Academic community -- Attend my open house or be destroyed.

Academic community: attend my open house or be destroyed.

Lest you think the FAA hands out drone licenses like TicTacs, you’ll still have to wait in a pretty long line. The FAA currently is considering exemption requests from hundreds of companies and individuals.  I hoped to find a few really strange proposals, but most of them appear reasonable – agriculture surveys, aerial photography, search and rescue, and, of course, training people how to operate drones. Some of the more entrepreneurial applicants requested exemptions for every use that the FAA has approved for other companies.  After all, once you get permission for commercial drone use, why limit yourself?

Sadly, taco delivery is not yet on the horizon.

Buckyballs Bails Out of Magnet Litigation, leaves Zen Magnets Holding the Bag

zen bagIn my Toys for Torts post, I covered the Consumer Product Safety Commission’s fight to force a recall of magnetballs.  These toys (or should I say “science kits?”) have become the modern lawn dart.  Federal regulators say the product poses an inherent danger to children and animals.  Magnetball sellers say the dangers are exaggerated and warning labels should suffice.

Two of the largest magnetball companies were named Buckyballs and Zen Magnets.  Each sold millions of magnetballs into the U.S. market, starting around 2009.  The companies had some friction in 2011 when Buckyballs CEO threatened to sue Zen Magnets and got this YouTube video in return.  But regulatory enforcement makes strange bedfellows, and the intra-industry tiff took a back seat in 2012 when the CPSC sued both companies, trying to force a recall.

The companies had different reactions to the lawsuit.  Buckyballs CEO Craig Zucker fought the lawsuit in the press and with lobbying efforts in Washington, but eventually shut down the LLC that was selling the product.  The CPSC responded by amending its lawsuit to add Zucker as an individual defendant.  Zen Magnets, on the other hand, continued business as usual.  It still offers magnetballs for sale through its website.

Just last month, Zucker and the CPSC signed a consent order.  Zucker, with no admission of wrongdoing, pledged $375,000 toward a recall of Buckyballs.  Here is the consent order.  It looks like Zucker will need to put up $100k towards publication of a website, to last five years, and administration of a six-month recall, with the rest of the money put in escrow to pay claims.  However, if there are any unclaimed funds left in the escrow after one year, Zucker gets the money back.  (It’s not clear to me what would happen if there were more recalls in one year than could be supported by the escrow account.  Do the U.S. taxpayers foot the bill?)

Both sides claimed victory – Zucker (or an anonymous supporter) through a WSJ opinion piece, and the CPSC Commissioners through their website.  However, each Commissioner had a different reaction.  Robinson’s press release crows almost as loudly as Zucker’s.  Buerkle supports the settlement, but takes offense at the fact that Zucker was added as a defendant by unilateral action of the Presiding Officer, and not by a vote of the Commission.  Only Adler, who dissented from the settlement, says it didn’t go far enough.  He makes two points that were in my mind upon reading the consent order – why pay to maintain a recall website for five years if customers only have six months to respond?  And is $375k enough?

The second point is significant in deciding who really won this battle.  Did Zucker beat City Hall?  Or did he end up doing basically what the CPSC wanted in the first place?  Let’s do a little back-of-the-napkin math.  In its Complaint, the CPSC estimated 2.5 million Buckyballs (or variants) were sold.  A set of 10 cost $3.50.  250k sets at $3.50 each gives us $875k.  Now, Zucker himself has been quoted as saying he made millions off Buckyballs, so we might assume the $875k number is low.  But how many purchasers are likely to actually return their Buckyballs?  Presumably anyone who finds the product dangerous already got rid of it.  The $275k in escrow covers the return of about 78,000 sets.  Of course there is postage, etc., but I have a hard time believing Zucker would have experienced this level of returns even if he agreed to a recall at the outset (and he might have saved some hefty litigation fees).

What effect will this consent order have on future market behavior?  Does a penalty of this size have a deterrent effect?  I doubt it, but the CPSC’s willingness to hold LLC members personally liable might.  Or the maneuver may simply have made Zucker a hero to small gov advocates, with a strong base of support for his future projects.

And what now for Zen Magnets?  They are still in the fight and beginning the discovery phase of litigation.  Zucker is out of the CPSC’s sights but might still be on its deposition list.  Will Zucker take the chance to sink his former rivals?  I think Zucker wants to preserve his anti-establishment image, and he still might be on the hook for tort liability.  So, for now, I expect these magnetball magnates to stick together.

LawTunes*

I started playing music just before class.  It fills the awkward few minutes when most of the students are already in their seats, and when the song ends, it’s a signal for them to put away their cellphones.  It’s also a subliminal business law lesson!  I pick a song to match each day’s topic.  Help me find more!

Introduction / Role of Attorneys in Business – “One Million Lawyers,” Tom Paxton (1985)

Civil Procedure – “Good Morning, Judge,”  Wynonie Harris (1950)

Civil Procedure – “So Sue Us,”  Dance Hall Crashers (1995)

Constitutional Law – “God and Guns,” Lynyrd Skynyrd (2009)

Privacy Rights – “Private Eyes,” Hall and Oates (1981) 

Civil Rights Act of 1964 – “The Way It Is,” Bruce Horsby and the Range (1986)

Crimes – “I Fought the Law,” The Bobby Fuller Four (1965) (I play this along with a slideshow of famous white-collar criminals.)

Offer and Acceptance – “My Only Offer,” Mates of State (2008)

Contractual Capacity (Minors) – “I’m Eighteen,” Alice Cooper (1971)

Consideration – “No Consideration,” Jimmy Burns (1999)

Promissory Estoppel – “Promises, Promises,” The Naked Eyes (1983)

Breach and Remedies – “The Remedy,”  Jason Mraz (2002)

Partnerships – “Do You Wanna Partner,” from the Bollywood romantic comedy, “Partner” (2007)

Partnerships – “It Takes Two,” Rob Base & DJ EZ Rock (1988)

Business Ethics – “Why Don’t You Do Right,” Peggy Lee (1950)

 

* After using the term “LawTunes” to describe these songs all semester, I learned that there is an actual band with this name.  They specialize in Xmas tunes for overworked JDs – such as “Another Billable Christmas,” “Yule Hear From Our Lawyers,”  and “I Got A Footnote in My Stocking.”  Rock on, fellas.  Just make sure you get that filing done first.

 

Drone Home

Drones have a few new places to spread their wings.  On Dec. 30, the FAA approved six “operators” to manage research and test sites for Unmanned Aircraft Systems (UAS).  The FAA press release and supporting documents are available here.

Test site operators include public universities in Alaska, Texas, and Virginia, as well as a New York airport, the North Dakota Department of Commerce, and most broadly, the State of Nevada.  But where exactly are the test sites?  On this point the FAA is quite vague.  Although at first glance the FAA documents indicate there are only six test sites (e.g. “FAA Selects Six Sites for Unmanned Aircraft Research“), a closer look reveals that there are six approved operators, and each operator may have several test sites, which might be located in more states than just the operator’s home state.  For example, “The University of Alaska proposal contained a diverse set of test site range locations in seven climatic zones as well as geographic diversity with test site range locations in Hawaii and Oregon.”

The FAA only provides information on test site location at the state level, leaving it unclear whether each state will contain one or multiple test sites, which part(s) of each state will host the test sites, or even whether major population centers will be part of the test sites.  It seems like a strange omission from FAA documents such as the UAS Test Site Fact Sheet, which has a section called “The Test Sites:  Who, What, Where.”

Always view a holiday press release with suspicion.  Is there a reason this couldn’t wait until Jan. 2?  Does the FAA hope any cries of protest will be lost among the popping of fireworks and champagne corks?

Of course, the FAA puts out a lot of important information over the holidays – just look at this Dec. 24 press release:  “FAA Gives Santa, Sleigh & Crew a GO for Launch.”  Santa’s sled is Wi-Fi enabled this year, and he put his flight plan on an iPad.  No, I am not making this up.

“We’re helping Santa fly smarter and faster while making sure he has a safe and successful mission” said FAA Administrator Michael Huerta.  Oh, and Nevada is now a drone test site. Happy Holidays!

To add a further element of paranoia, the FAA’s UAS test site gurus, Alison Duquette and Les Dorr, Jr. have the same contact number as the FAA’s Santa liaison,  Kristie “Elf on the Shelf” Greco.  Does Santa plan to deliver presents by drone next year, Jeff Bezos-style?   Or is this merely an FAA ploy to distract drone critics?  (Welcome to FAA public relations.  If you’d like to comment on drone testing, press 1.  If you’d like to leave a message for Santa, press 2.)

The FAA’s drone announcement may be flying under the radar, but those who have followed the issue shouldn’t be surprised.  In 2012, Congress passed bills requiring the FAA to establish the U.S. drone testing sites.  New Mexico already had a test range, and NASA’s been testing drones in California since at least 2004.

The FAA solicited public comments on both the site selection process and privacy requirements.  It also held a two-hour phone-in “public engagement session.”  The transcript is worth a read.  What sort of person calls the FAA on their lunch break to talk about drone privacy?  Mostly people who build and sell drones.  Also public privacy advocates.  And then there’s this guy:

While I’m a lawyer, I am actively developing several business models to use unmanned aerial vehicles to provide safety and security for all Americans and especially to cut energy use by one-third, specifically I am looking at a business model that incorporates unmanned aerial vehicles to constantly monitor our major metropolitan areas so that we can turn off the lights at night . . . what everyone who talks about this issue of privacy fails to consider is that the right of self defense is a constitutional dimension, the right to deploy drones to surveill the conduct of people in and around your environs is constitutionally protected.  So we have the entire debate flipped.  What we should be talking about is how promptly and quickly the FAA is going to move to recognize the self defense rights of all Americans to deploy drones in many different varieties in order to provide self defense.

I think this commenter is saying that we should fill our cities with weaponized mini-drones so we can save money on streetlights.  True, I might feel safer walking around at night with a Predator hovering over my shoulder.  Except that I couldn’t walk around at night.  Because there aren’t any lights.

Anyway, back to the test sites.  I’ve noticed that all the early FAA documents, including the public comment notice, refer to six test sites, not six operators.  This may seem like semantics, but it already appears to have expanded the states with test ranges from six to nine (University of Alaska also will test in Hawaii and Oregon, and Virginia Tech also will test in New Jersey, according to the fact sheet.)  Expect some pushback on this in the new year.