Volume 62, No. 2 . . . . . .Founded in 1900 . . . . . .October 1999

Consumers League of New Jersey

In this issue:
Confederate Flag in D.C.? Supreme Court Plays With Fire With States' Rights Ruling
Confederate Flag in N.J.? Bankruptcy Judges Uphold Federal Sovereignty
Who is a Federalist?
In memoriam: Hon. Frank M. Johnson
Home Repair Class Action Back In N.J. Supreme Court
Late Fees Upheld
CLNJ in The New York Times: Pay Day Loans and the Civil Usury Law
Senate Defers Bankruptcy Bill
N.J. Rent to Own Bills Looming
Class Action Hypocrisy

Confederate Flag in N.J.?
Bankruptcy Judges Uphold
Federal Sovereignty

Our nation won, and the office of the New Jersey Attorney General lost, in U.S. Bankruptcy Court recently. New Jersey had actually argued that the laws of the United States, including the federal bankruptcy law, did not apply to New Jersey, based on a skewed view of "sovereign immunity." Bankruptcy Judges Novalyn Winfield and Stephen Stripp flatly rejected that constitutional monstrosity. Judge Winfield held that "the Court is perplexed by this latter stance as there is no support for such a position in the Constitution or the case law construing its provisions." In re De Oliveira.

The cases arose because the DMV continues to collect "insurance surcharges" after their discharge in bankruptcy by the motorist. Judge Stripp held in Kish (Gail Chester was the attorney) that the surcharge was not in the "fine" exception. Now New Jersey is expected to claim that insurance surcharges are excise taxes. The Judge did not rule on that moot argument, since excise taxes older than 3 years are discharged.

These cases stand for the principle (called "Ex parte Young") that even if a citizen may not sue a state agency (because state agencies have sovereign immunity in federal court), that a citizen may sue a state official for an injunction to make the state official obey federal law: the Constitution and laws of the United States. For the sake of the sovereignty of the United States of America, as one nation, it could not be otherwise.

Home Repair Class Action Back
In N.J. Supreme Court

CLNJ, represented by Michaelene Loughlin, Esq., Loughlin & Latimer, Hackensack, is amicus curiae in Scott v. Mayflower Home Improvement. The N.J. Supreme Court told the Appellate Division to consider whether a case should be a class action when 400 homeowners were all cheated in the same way. Instead the Appellate Division dismissed the suit, holding that the homeowner does not get a chance to present his defense unless the creditor first sues for foreclosure. This is very unfair: it should not matter "who goes first." Homeowners should be able to sue to settle accounts. Why should they pay debts they do not owe because of consumer fraud? So the homeowners, represented by Madeline Houston, Esq. (Paterson) are back asking the Supreme Court to compel the Appellate Division to grant relief to the homeowners.

Late Fees Upheld

CLNJ was an unsuccessful amicus in the Metlife case in the N.J. Supreme Court, where the Court upheld percentage late fees in a commercial mortgage case. The Court did say that a consumer case might be different.

CLNJ in The New York Times:
Pay Day Loans and
Civil Usury Law

The New York Times printed a Letter to the Editor from CLNJ stating that pay day loans ( two week loans until pay day at 300% interest) are illegal in New Jersey; they violate both the 30% criminal usury law and the 16% civil usury limit. Lending above 16% requires a license. Thus CLNJ opposes A.2355, a misguided bill to repeal the civil usury law. Usury laws were the first consumer protection laws. For 300 years, this law has protected consumers. Where does Governor Whitman stand? Silence on rent to own and similar usury issues is very disturbing.

Senate Defers Bankruptcy Bill

S.625, a bill to punish bankrupts for accepting the promiscuous credit card offers in their mailbox, was stalled in the Senate. Senator Kennedy attached a raise in the minimum wage to the bill, and the pro-bank Senators were not able to break off debate. Our Senator Torricelli, a sponsor of S.625, is offering fewer consumer protections in his manager's amendments than last year. The creditors believe that spending many millions on lobbying and campaign contributions will deliver what they are paying for.

Studies by Creighton University/American Bankruptcy Institute show that perhaps 3-4% of bankrupts could afford a payment plan. Studies by Prof. Elizabeth Warren show that women are over-represented in the ranks of the bankrupts, hence bankruptcy is now "the new women's issue." Professor Bernard Trujillo notes that the cause of bankruptcy is quite simple: "If there are too many bankruptcies in America, this state of affairs could only exist because too much money is being borrowed. And that can only mean that too much money is being lent." Instead of the banks running credit checks before lending, the so-called reform shifts to bankruptcy judges the creditor's task of determining who is creditworthy after the fact. More information is available at the nonpartisan American Bankruptcy Institute: www.abiworld.org.

N.J. Rent to Own Bills Looming

No politician wants to vote in favor of fraud and loansharking in an election year. So their plan is to do the dirty work after the elections. N.J. Bills S.1343/A.1097 are poised to be voted on by the full Senate and Assembly. Citizens ought to let their legislators know how they feel about fraud. Three Judges held rent to own illegal in N.J., yet our Governor and Attorney General seem inclined to let the rent to own lobbyists (including the Governor's fund raiser) roll unimpeded through the halls of Trenton.

For more information about the rent-to-own scam, see CLNJ's
rent to own campaign.

Class Action Hypocrisy

Some states' rights activists in Congress (who hate the federal government) now propose to transfer all class actions from state courts to federal courts. The only sin of the state courts had been to rule in favor of the consumers. These same gents applaud when federal courts dismiss suits vs. states.

Another awful idea is a so-called Federalism bill where Congress would have to specify which state laws were preempted by the laws Congress passes. The trouble with this bill is that the U.S. Constitution, in the Supremacy Clause, already specifies that federal law is the supreme law of the land. Congress can't constitutionally elevate a state law so that it preempts federal law. Since it is impossible to know in advance what state laws will be affected by a federal law, the bill asks the impossible.

Consumers League has a word of advice for current members of Congress who hate the federal government: Resign! Get out of Washington, the sooner the better, before you sabotage a constitutional system which has worked for over 200 years.

Confederate Flag in D.C.?
Supreme Court Plays With Fire
With States' Rights Ruling

After revolting from the sovereign King of England, under the Articles of Confederation, pre-1789, the newly independent states acted like semi-sovereign countries. Trouble was, they were ungovernable because there was no effective national government. Statesmen with foresight, Federalists Alexander Hamilton, James Madison and John Jay, wrote The Federalist Papers to persuade the states to agree on a strong federal government and ratify the Constitution of the United States of America (1789). Our Constitution was sorely tested in 1860, but the civil war proved that states may not leave the Union, and must obey federal law. The Fourteenth Amendment was passed to force southern states to obey federal civil rights law. The "states' rights" crowd continued to oppress African-Americans with unjust laws, until the federal courts, starting with Brown v. Board of Education (1954) made segregation illegal. Brave federal judges, such as Frank Johnson, Jr. of Alabama (who died this summer), risked their lives for the Constitutional principle of equal justice under law. That civil rights struggle, combined with courts not afraid to promote justice, not afraid to apply the U.S. Constitution, are examples of what is right about the United States, a dedication to law and justice, an attempt to right past wrongs, for which Americans can be proud.

But recent U.S. Supreme Court decisions, with a slim 5-4 majority, have cast a "states' rights" cloud over the U.S. Constitution.

The Supremacy Clause of the Constitution says that federal law is the supreme law of the land, and that all state judges must obey it. Regrettably, five Justices of the U.S. Supreme Court (Rehnquist, Scalia, Thomas, Kennedy and O'Connor) have lost sight of that guiding principle. In Alden v. Maine (1999) Maine refused to obey federal law, refused to pay employees the overtime pay mandated by U.S. labor laws. The workers sued for their just pay. First the workers were thrown out of federal court, because the Eleventh Amendment is construed to stop a citizen from suing a state agency for money. The Supreme Court in Seminole Tribe v. Florida (1996) made it very hard to sue state agencies in federal court.

So then the employees sued the state in state court, arguing that state judges must obey the Supremacy Clause of the U.S. Constitution. To their everlasting shame, those five Justices held that Maine had "sovereign immunity" meaning no one, except the United States itself, can sue the state for money owed. They noted that this was the first time in over 200 years that the Supreme Court had so held.

The reason no prior Supreme Court had so held, is because Alden v. Maine is dead wrong. Alden undermines the Constitution of the United States. The Court said that Maine must obey federal labor laws, voluntarily, making those federal rights without a monetary remedy in any court. The Court stuck a knife in the Supremacy Clause of the Constitution. Had a similar decision been rendered in 1860, then perhaps the southern states would have been freed to start their separate country. Had Alden v. Maine been decided in 1954, then African-Americans would still be segregated out of their legal rights. Jefferson Davis would be mighty pleased.

Newspapers and commentators condemned the ruling, with headlines such as: "Supreme Court gives the South what Lee Couldn't" (Star-Ledger). Another author said in The New York Times that the Judges departed from the Constitution to impose their own sweeping changes in American government. Only the Wall Street Journal liked the decision, apparently because the WSJ has, since the New Deal, opposed our national government's role in protecting its citizens. Ironically, Alden v. Maine means that now a state cannot be forced to pay its just debts, in any Court in this land. So to WSJ investors, we advise: if you hold state bonds, sell them. Contracts of states are not enforceable in courts, unless states consent.

The Supreme Court, in other several cases, has told Congress that it has no power to pass certain laws, or it did not adequately justify its legislation! This is a naked power grab, which offends all the good principles of this country's history. The American revolution intended to overthrow a sovereign king, not create new sovereigns. Americans believe that no man is above the law, witness recent Presidents Nixon and Clinton who were forced to obey Court process. The idea that any person or state is above the law is profoundly offensive. To revive discredited "states' rights" is to play with gasoline, given the country's tortured history in race relations. African-Americans were first enslaved, then denied the vote, then segregated, by state laws duly enacted by state Legislators.

Consumers League calls on all political leaders, state and federal, to condemn Alden v. Maine, and to insist that current and future Supreme Court justices obey their oath to uphold the Constitution of the United States, and reject these radical ideas. With several Justices near retirement, the next President will have a chance to change the course of U.S. history - either to reaffirm the vision of our founding fathers, or to spur a confederate division of our country.

Who is a Federalist?

The true "Federalists," like Alexander Hamilton, fought for a strong national ("Federal") government. Some of the modern opponents of our federal government have called themselves "federalists" but we doubt they have read The Federalist Papers. In 1789 those opposed to a strong national government were called anti-federalists. We think the proper modern name for those who think that states' rights trump the U.S. Constitution is confederates.

In memoriam:
Hon. Frank M. Johnson

The New York Times
(go to NYT Archives) carried a moving obituary of U.S. District (and Circuit) Court Judge Frank M. Johnson of Alabama. Judge Johnson stood up to Governor George Wallace in the 1960s and repeatedly declared that state laws, policies and customs of the state of Alabama- such as school segregation - violated the United States Constitution. Judge Johnson issued many injunctions under Ex parte Young forcing state officials to obey federal law. After all, the purpose of the Fourteenth Amendment was to make the former confederate state obey the U.S. Constitution and its civil rights laws. Judge Johnson (and his mother) were the target of frequent death threats. CLNJ has the deepest admiration is for Judge Johnson, a federal judge who enforced federal law - and didn't make excuses for "states' rights." One decent man can make a big difference.

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Consumers League of New Jersey will be celebrating our One Hundredth Anniversary in the year 2000!

As we count down to our second century,
we have a simple plea:
if you can,please send us $100 for our next 100 years!

Please send your membership application and your check to:
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