The Rutgers Law Record

The HARD RIGHT now controls two branches of government. After President Trump fills the empty judicial appointments, including the Supreme Court, the Hard Right will control all three branches of the US government. The Hard Right has a plan that disenfranchises individuals from access to the courts to seek redress for consumer, environmental, civil rights, discrimination, and mass tort claims like voter suppression, which heaved President Trump over the 2016 goal line. This article previews the plan that the Hard Right seeks to execute. They seek to introduce legislation, roll back executive orders (by the former President and governors) which inevitably favors the legacy institutions and solvent parties who are the targets of these claims, and able to litigate endlessly without financial pain. The Hard Rights seeks to do this by perusing their plan through a legislative campaign in Congress, orders by the Executive Branch statutes from state legislative houses, and from governors. “Times, they are a changing”. The Hard Right seeks to flex its newly found legislative and executive muscle to suppress litigation. It seeks to impose liability on tort plaintiffs, victims of employment and gender discrimination, and consumer class actions litigants, among others. At the hands of the trial bar, The Hard Right seek to shift power to the hands of legacy institutions (and their brethren) who want to oust personal injury claims, class actions, consumer driven litigation, and other claims from the civil courts.

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With nothing less than the survival of the civil justice system hanging in the balance, tort reformers and tort law defenders have been locked in a conflict that spans the last four decades. Courts and legislatures at every level (federal, state, and local) are besieged by those who seek to limit or eliminate tort liability, limit or eliminate accountability for personal injury, and limit or eliminate the capacity of those wronged by misconduct of every type to have access to courts, juries, and justice. Defenders of the civil justice system, a loosely coalesced amalgam of consumer groups, attorneys, and academics, devote themselves to protecting that same system.
Those seeking the spoils of the tort reform wars (caps on punitive damages and non-economic loss, elimination of the capacity to pursue class actions at the state level, limitations on the use of evidence, elimination of strict liability, joint and several liability, and much, much more) would not only disagree with the above assessment, they would be offended. Tort reformers see theirs as a mission of essential change, reform, a quest for modernization of an outdated system that misallocates resources, suppresses innovation, weakens the U.S. economy and the U.S. position in international commerce, destroys jobs, and unduly privileges a very small number of consumers and their lawyers.

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The national debt of the United States stands at $19.7 trillion. Prospects are poor for federal tax revenues reaching a point where this debt can ever be repaid or successfully managed. Because of extended wars and the financial crisis of 2008, extraordinary measures were taken to fund governmental entities, inject liquidity into the economy, and drive down interest rates to stimulate the economy. The semi-independent Federal Reserve Bank (“the Fed”), operating as the central bank of the United States, purchased approximately $4.26 trillion of United States Treasury bonds and government sponsored enterprises (GSEs) obligations to help in this effort in what is known as “quantitative easing.” These securities were purchased in the private or secondary marketplace through primary dealers. The Fed did not pay for these Large Scale Asset Purchases (LSAPs) with paper money, but instead credited each bond seller’s bank “using newly created electronic funds.” The banks then added those funds to the bond sellers’ accounts, and these sellers elected to spend those funds or leave them in the bank. If the funds stayed in the banks, then the banks could increase lending, purchase more assets or build up reserves on deposit at the Fed.

More broadly, the Fed’s securities’ purchases increased the total amount of reserves that the banking system keeps at the Fed. The Federal Reserve Act provided for these indirect purchases of U.S. Treasury securities to implement monetary policy. However, the extent of these purchases after 2008 was unprecedented. The Fed’s balance sheet has exponentially expanded, leaving the Fed the owner of a ladder of bonds of differing maturities at no cost. To date, the Federal Reserve has been returning interest it earns on these securities to the Department of Treasury, thus allowing the federal government to earn interest on its own deficit generating bonds. Also, as payment of principal on these bonds becomes due, the Federal Reserve has up until now taken this money and rolled it over into more treasury obligations. At a future date, this practice will stop, and the Fed will either sell these bonds back to private parties to drain excess liquidity from the economy or force the U.S Treasury to repay the principal on these bonds to the Fed.

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Today’s youngest generation, known colloquially as “Generation Z,” has never known a life without technology. While demographers might disagree on when this generation actually began, marketers and trend forecasters characterize this group as those who were born during the fifteen year span from 1996 through 2011. Since the first generation of iPhones hit the market in 2007, “Generation Z is the first generation to be raised in the era of smartphones,” and many from this generation “do not remember a time before social media.” If Generation Y has been described as being “constantly plugged into technology,” then the next generation, where the average age for cell phone usage is six years old, is only more comfortable in the digital world. The newer generations of smartphones have the capability to take, send, and receive photographs, and open up a new realm of dangers for unwary users. Given that these devices are taken for granted, does Generation Z actually appreciate the risks associated with their picture taking and information sharing? The unfortunate answer is very little, if at all.

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Over the past decade Crowdfunding has become increasingly popular within the U.S. Crowdfunding originally was used as a way for performing artists to raise funds for their projects. Most recently, it has been used to fund projects outside of the entertainment industry. Businesses and local governments have been using this method to raise capital. Crowdfunding websites such as Indiegogo, Kickstarter, and Crowdfunder have made it easier for individuals, particularly entrepreneurs, to access capital.

The JOBS Act amended the Securities Act of 1933, and mandated that the Securities and Exchange Commission (“SEC”) promulgate rules that govern the eligibility and use of Crowdfunding. The SEC in 2011 and 2012 released proposed rules that would govern the Crowdfunding exemption, which eases regulation for small businesses. Critics have said that the JOBS Act and the SEC rules are both too liberal and too restrictive.

This note will discuss the SEC rules that are set to go into effect in May of 2016, and their potential effects on small business growth and investor protection. In particular, this note will highlight the potential conflict that will arise between the goal of the JOBS Act and the implementation of the SEC rules governing crowdfunding. This article will suggest that the SEC rules will only hinder the growth of small businesses instead of helping them raise capital.

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