On this day in legal history, September 12, 1958 the Supreme Court unanimously rejected Kansas’ challenge to the court’s authority to desegregate schools. The decision was authored by all nine justices – the only time that had happened to that point or since.
The Cooper v. Aaron case, decided on September 12, 1958, was a significant milestone in the civil rights movement in the United States. Following the landmark decision in Brown v. Board of Education (1954), which declared state laws establishing separate public schools for black and white students to be unconstitutional, there were numerous attempts by state governments to resist the implementation of desegregation.
In this context, the state of Arkansas openly defied the federal mandate to desegregate public schools. The Governor of Arkansas, Orval Faubus, even used the National Guard to prevent African American students, known as the Little Rock Nine, from attending Little Rock Central High School, a previously all-white institution.
This led to the Cooper v. Aaron case, where the Supreme Court reaffirmed its commitment to the principle of supremacy of federal law, as established in the Constitution. The court unanimously asserted that states could not pass legislation or enact policies that contradicted federal law, and that state officials were bound by the court's decisions. This case reinforced the court's authority and the federal government's power over the states, making it clear that state governments could not resist or undermine the implementation of federal court rulings.
The ruling in Cooper v. Aaron was seen as a powerful affirmation of the federal judiciary's role in protecting civil rights and ensuring the implementation of desegregation policies across the United States. It underscored the Supreme Court's commitment to upholding the principles of justice and equality, as enshrined in the Constitution–if only in that one facet, in that one moment.
Burford Capital stands to gain a substantial return of over 37,000% on its initial investment, potentially receiving around $6.2 billion from a $16 billion award ordered by a US judge against Argentina, pertaining to the 2012 seizure of oil company YPF SA. However, Argentina has vowed to appeal this decision, terming it as "unprecedented and erroneous", which might delay or even prevent the payment. Burford Capital's CEO, Christopher Bogart, and CIO, Jonathan Molot, both have prestigious backgrounds and have expressed a conciliatory stance towards Argentina, understanding the financial challenges the country is currently facing.
Burford, which specializes in identifying and investing in undervalued legal claims, has already spent about $50 million in lawyer fees for this case and sold a significant portion of its interest to large hedge funds for $236 million. Despite facing criticism and a significant dip in share price in 2019, the company has managed to sustain by adapting its business structure. The recent court ruling rejected Argentina's argument that Burford's involvement would result in an undeserved windfall, emphasizing that the award amount was a consequence of Argentina's actions. The final judgment on the award is pending as is the final word on the broader question of litigation financing.
Microsoft has promised to defend its customers from copyright infringement lawsuits stemming from its Copilot artificial intelligence tools. The company believes its systems are unlikely to produce content that so closely copies its source material that it violates copyright. And legal professionals largely agree that the risk of customers facing a copyright infringement suit related to AI's outputs is low.
Microsoft is extending indemnification to protect commercial customers of its Copilot tools when they're sued for copyright infringement based on outputs. This means that Microsoft will defend the customer and pay any adverse judgments or settlements. The move aims to quell fears among potential customers that using generative AI-derived content will expose them to copyright suits.
The indemnification doesn't take pressure off the most critical legal questions about generative AI and intellectual property. Lawsuits so far haven't targeted end-users of generative AI, and users shouldn't be liable for how AI companies train their machines. However, the real issue is whether the models were trained by scraping vast quantities of data across the internet, including materials that are under copyright. Ongoing litigation will decide whether that constitutes copying under copyright law, and if so, whether it's fair use.
Microsoft has built features into the models designed to reduce purely duplicative outputs that could raise copyright concerns. For example, they have natural language filters that try to limit the number of verbatim outputs that can be included in any particular response. The company would rather control the litigation than have their customers control it.
While Microsoft's announcement may reassure customers, bigger legal questions still remain, including ones that extend beyond copyright. The legal environment for generative AI is still in its early stages, and it's unclear how the courts will ultimately rule on these issues. However, Microsoft's move is a positive step in the right direction, and it should help to encourage the development and use of generative AI.
The U.S. Consumer Financial Protection Bureau (CFPB), established to counter predatory lending practices post the 2008 financial crisis, is facing a significant threat to its existence due to a pending Supreme Court case, which will review the constitutionality of its funding structure. This case is instigated by two trade groups representing the payday loan industry and is set to be heard on October 3, with a ruling anticipated by end-June. The challenge hinges on the fact that the agency is funded through the Federal Reserve, not congressional appropriations, potentially violating the Constitution's "appropriations clause".
Throughout its existence from 2012 to 2022, the CFPB has initiated over 300 enforcement actions, recovering approximately $16 billion for American consumers. However, the agency has been criticized by conservatives and pro-business groups for fostering an "administrative state" with excessive regulations and perceived abuses of power. They have long sought to dismantle the CFPB, asserting it imposes undue burdens on financial institutions.
The Biden administration has contested a lower court ruling that sided with the challengers, emphasizing the potential repercussions if the CFPB's existing rules and protections are invalidated. Consumer advocacy groups warn that this could expose consumers to deceptive and exploitative practices from lenders and debt collectors. They underscore the potential for market disruption and a recurrence of issues that necessitated the CFPB's inception. The case initiated in 2018 primarily targets a 2017 CFPB rule that aimed to limit "unfair" and "abusive" actions by certain high-interest lenders.
Former critics of the agency, including Mick Mulvaney and over 130 Republican lawmakers, have joined in urging the Supreme Court to dismantle the CFPB. They maintain that the agency, since its creation in 2010, has lacked transparency and demonstrated potential for abuse. The Supreme Court's verdict could potentially influence the funding and structure of other federal agencies with similar financial arrangements.
In my column this week, I discuss the forthcoming Low-Income Communities Bonus Credit initiative by the IRS, which aims to incentivize clean energy investments in low-income and tribal communities. I emphasize that the focus should be on creating the most efficient strategies for generating renewable energy, rather than merely situating clean energy facilities in these communities. I thus advocate for the centralization of Category 4 facilities, which are designed to economically benefit underserved communities, regardless of their geographical location.
I also highlight the current administrative hurdles associated with applying for similar programs, suggesting that the process needs to be streamlined to avoid favoring applicants with more substantial financial and administrative resources. I then propose a collaborative approach involving various stakeholders, including state and local governments, the private sector, and community leaders, to develop guidelines that best meet the needs of individual communities.
Furthermore, I encourage the fostering of public-private partnerships and ongoing community engagement to ensure the success of these projects. I would caution against making assumptions about the motivations of low-income communities and stress the importance of engaging with these communities to understand their needs and motivations better.