Thank you Mr. Chairman, and thank you for working on these two important pieces of legislation, and having another mark-up in the committee. I want to first thank our staffs for working so hard and diligently through the night last night to finalize these two pieces of legislation, and again, as you mentioned last mark-up, they do an excellent job and we so much appreciate everybody’s collaboration on getting these important issues addressed.
I also want to thank Senators Sullivan and Markey today for their work related to the Coast Guard bill. We are just a few days away from celebrating the Coast Guard Day on August 4th, and this is a great piece of legislation to help in celebrating that. I appreciate Senator Markey’s work on the commercial fishing vessel safety part of this legislation, Senator Baldwin’s great lakes icebreaker authorization, Senator Peters’ oil spill improvements in Lake Michigan, Senator Blumenthal’s sexual assault prevention and support of the academy that is part of this legislation.
In the state of Washington we have a proud maritime heritage, so the Coast Guard is an integral part of our community, and this legislation moves the ball forward on important priorities, as the chair mentioned, for the men and women that work for the Coast Guard. We found out that the Coast Guard has one of the first paid family leave programs in the nation, and that was because the Coast Guard determined – with 40 percent of their work force being women – that they wanted to continue to promote them up the ranks, that they better figure out how to do a paid leave program. So this legislation continues to improve on that in several ways.
I also want to thank the chairman for this important legislation, which I believe is a milestone in the recognition that we are an Arctic nation. I believe that the Arctic is a national security issue. If we want ships to pass through the Arctic as other countries do – because it is a cheaper, faster way from Asia to Europe – and we want to have access to that in an untold way, and we want fishing and environmental issues to be addressed, we too need to recognize that we need an icebreaking fleet. So this legislation formally authorizes three new heavy icebreakers and three new medium icebreakers for the first time. I think this is a giant step forward in recognizing that we are an Arctic nation, and we plan to participate in the Northwest Passage.
I look forward to the work that will be done on other pieces of important legislation here, particularly in Puget Sound, and the need to protect the southern resident orcas. That is why this legislation moves the needle on orca conservation – in a better way to protect southern resident orcas in Puget Sound, it creates a pilot program based on successful pilot programs in Vancouver, British Columbia, to reduce the impact of vessel noise from large ships, and it also requires an assessment and recommendation to improve Coast Guard efforts to enforce vessel traffic buffer zones in Puget Sound.
Also, we know that it’s important for our communities to continue to improve safety, and that is why this bill requires a GAO study to make recommendations regarding tsunami vertical evacuation infrastructure needs. So much of Washington’s coast is populated by communities that don’t have the resources to prepare to the response, and so this bill will help in providing resources to make sure communities are planning for such an event.
The bill also, as the chairman mentioned, helps in the recruitment, retainment, and investment in women in the Coast Guard workforce, and even though the Coast Guard Academy is almost 40 percent women, the Coast Guard as a whole is only 15 percent, so we need to invest in recruiting and keeping this talent, and this bill will help take a major step forward. Also, the bill invests in vital child care facilities for the Coast Guard, and we so appreciate working across the aisle to make this part of the legislation.
Finally, the bill includes critical improvements to oil spill response and prevention. It responds to oil spill in the future, it mandates a requirement to update the U.S. research plan to improve oil spill response and prevention over ten years, and requires research and technology evaluation for all classes of oil, because the Coast Guard needs to be an expert on the technology that is needed if such a catastrophic event happens. So I want to again thank all the men and women who serve in the Coast Guard, thank Chairman Wicker, Senator Sullivan, and Senator Markey for working in such a bipartisan fashion on this bill.
Now, on the Pipelines Act, I too want to applaud the work of Senator Fischer and Senator Duckworth on this important legislation. Senator Duckworth’s contributions, not just as the ranking member, but increasing state grants for pipeline safety particularly, addressing the PHMSA workforce capacity issues, just strengthening what we need to do in this important area. I also thank the chairman for working on this issue, and I know at times provided some challenging issues for us to work through, but this year marks the 20th anniversary of a major pipeline explosion in Bellingham, Washington, where a series of negligent failures led to a spill of 237,000 gallons of gasoline and tragically claimed the lives of three young people.
So in response Congress, led by this committee, passed the Pipeline Safety Act of 2002 to strengthen regulation and improve pipeline safety. In last September, in Merrimack Valley, Massachusetts, systematic failures caused fires in three towns and killed a young man. So now this committee must act again to improve pipeline safety. The Pipes Act of 2019 contains important provisions by Senator Markey’s Leonel Rondon Pipeline Safety Act, which will keep all our families and neighborhoods safer.
I also want to thank Senators Udall and Blumenthal for important issues raised in the amendments they filed for this bill. Leaky natural gas pipes pose a significant hazard, and are major contributors to global warming, so we should be requiring the use of the latest technology to detect and prevent methane leaks from these pipes. I am pleased that we were able to come to some agreement with Senator Udall’s gas-gathering lines amendment, and many of the unregulated gathering lines effectively pose the same risks as the regulated lines, so this amendment that is incorporated directs the Department of Transportation in finishing its gathering line rulemaking in a timely manner.
And I’d also like to see issues such as whistleblower civil penalties addressed before the Senate sees final passage of this legislation onto the House. So again, Mr. Chairman, thank you for working on two very important issues to all of America, and I thank my colleagues for working so diligently to resolve the last remaining issues.
Thank you, Mr. Chairman, and thanks for holding this important hearing on the next steps for Positive Train Control implementation. I want to thank the panel of witnesses and we look forward to hearing your perspective on how railroads will meet that deadline of 2020 to fully implement PTC.
The importance of this life-saving technology was made abundantly clear in my state of Washington, December 2017, when the Amtrak Cascade 501 derailed around a bend near DuPont, Washington, and fell into the highway before claiming three lives and injuring 65 people. The National Transportation Safety Board investigation found that PTC would have prevented this tragedy, but sadly this is just one of many PTC-preventable tragedies. In fact, since the National Transportation Safety Board first recommended Positive Train Control implementation, PTC could have prevented over 150 different crashes, and many fatalities and injuries.
So I’m pleased that Chairman Wicker shares my commitment to making sure that 2020 is a full PTC implementation deadline, and that this committee takes its oversight role seriously when it comes to Positive Train Control. It’s unacceptable that in the year of 2019 we still have not fully implemented this important safety, and even when PTC has been fully implemented, according to the Federal Railroad Administration, there will still be miles of tracks that have not been part of PTC. They will be exempted, including over 1,400 miles of track used by Amtrak.
Both the NTSB and Amtrak expressed concerns about this during a previous committee hearing last month, and we followed up that hearing to seek more information from FRA about the safety measures that should be in place where PTC is not operational. This include speed limit action plans, adequate crew training, and PTC equivalent technologies. I want to thank Administrator Batory for the FRA response sent to my letter, and for your commitment to ensuring safety everywhere that Amtrak operates. This will help prevent another DuPont, Washington accident from happening again.
Even with PTC in place, we have to continue to prioritize safety. No technology is a cure-all, or a complete replacement for well-trained engineers and conductors who have strong safety cultures at a railroad, and for the track maintenance and the structurally-sound railroad cars that are needed. That said, implementing PTC is truly a major step forward for safety, and I know it has been a long time coming to get where we are today.
Railroads, and especially commuter railroad systems, have faced many challenges, so I look forward to the opportunity to hear from the witnesses about the steps to have PTC fully implemented everywhere, and to make sure it is required on our national rail system. And, look forward to asking specific questions about that implementation and the 1,400 miles of track that won’t be covered.
Thank you, Mr. Chairman.
The Committee on Small Business Subcommittee on Economic Growth, Tax, and Capital Access will hold a hearing titled, “Expanding Opportunities for Small Businesses at Military Bases.” The hearing is scheduled to begin at 11:00 A.M. on Thursday, August 1, 2019 at Town Hall, 111 West Second Street, Moorestown, NJ 08057.
Small contractors are pivotal to a competitive federal procurement marketplace and to local communities. The subcommittee hearing will highlight the opportunities available to small government contractors, particularly those located near military bases such as Joint Base McGuire-Dix-Lakehurst.
*Witness testimony will be posted within 24 hours after the hearing’s occurrence
The Federal Trade Commission’s (FTC) recent $5 billion settlement with Facebook is unprecedented in multiple respects:
- The $5 billion penalty represents the largest privacy and data security settlement in history – it is almost 20 times larger than the recent Equifax Inc. settlement and dwarfs recent EU data protection enforcement actions.
- As part of the settlement, new corporate governance measures relating to privacy and data security will be required, including an independent committee of the board of directors, with specific nomination requirements and subject matter coverage. This will place pressure on many boards and organizations to freshly examine information governance risk.
- The settlement also requires executive certifications, which, if modeled by other companies, will trigger dramatic changes in accountability as executives turn to rely on experts, internal compliance teams, audit and related expertise for assurance and attestation in order to avoid civil and criminal penalties and derivative litigation.
The signaling effect of the settlement to the broader business community intended by the primary privacy regulator in the United States cannot be overstated. Similar enforcement actions, such as individual prosecutions in Europe under the EU Data Protection Directive, triggered immediate response and attention from corporations just as the emergence of breach notification laws resulted in massive new investments in information security programs in the United States.
Summary of the settlement
The FTC accused the company of failing to adequately protect users’ privacy and comply with a 2012 consent decree with the agency. Under the settlement terms, in addition to paying a $5 billion penalty and other requirements, the company must:
- Exercise greater oversight over third-party apps and app developers;
- Establish and maintain a new, comprehensive data security program;
- Complete a rigorous prerelease privacy assessment before rolling out new or modified products and services;
- Subject itself to quarterly reporting and biennial assessments of its new privacy program by independent third-party assessors;
- Appoint an independent committee of the board of directors focused on privacy, which is appointed by an independent nominating committee; and
- Designate compliance officers approved by the new board committee who are tasked with ensuring and certifying privacy and data security compliance.
The company must regularly certify its compliance to the FTC, and its compliance officers and chief executive officer are subject to civil and criminal penalties resulting from false certifications.
Several aspects of the settlement are especially relevant for many businesses, especially in relation to corporate governance.
Privacy and security enforcement has (sharp) teeth. This latest settlement, along with the Equifax settlement and large fines in the EU, make clear that direct financial consequences, beyond reputational injury, will increasingly threaten organizations whose data governance practices are questioned. With dramatic new civil penalty authority becoming available in California in July of 2020 under the California Consumer Privacy Act, incentives for aggressive enforcement and related headlines could create a terrible bite for all organizations, but especially those deemed by regulators to be ill-prepared.
The Golden Rule of Privacy isn’t alchemy. Many practitioners have advised clients for more than a decade that the Golden Rule of Privacy is to “do as you say and say as you do.” The latest settlement highlights $5 billion reasons why now, more than ever, hostile regulators may scrutinize every statement a company makes and, where penalties are available, aggressively allege violations in the name of future deterrence. Companies whose revenue models and strategy are undeveloped or who are dependent on digital advertising and marketing will be especially at risk. The risks and consequences of data supply chain management gone awry have just increased exponentially.
Agency action reaffirms information is the asset class of the twenty-first century. In levying such a large penalty, and doing so where actual and concrete injury to consumers would have been very difficult to prove in court, the agency has set off an alert beacon warning global corporations. Those in positions of responsibility for privacy and data security can expect heightened scrutiny and accountability. At the same time, the insistence by the FTC in this case on independent board-level governance and personal executive accountability going forward represents a dramatic acceleration of changes that were set off with the EU’s General Data Protection Regulation.
While there are many other subtleties to the complaint and settlement, this latest enforcement action signals something that we have said for a long time to clients. Privacy and data security risks are here to stay, and data governance and accountability risks will continue to grow in the next decade.
U.S. Senator Maria Cantwell (D-WA), the Ranking Member of the Senate Commerce, Science, and Transportation Committee, today lauded the Coast Guard Authorization Act of 2019 for its commitment not only to Coast Guard women but to the children and families of women who serve our country.
“The bill also helps in the recruitment, retainment, and investment in women in the Coast Guard workforce,” Senator Cantwell said. “Even though the Coast Guard Academy is almost 40 percent women, the Coast Guard as a whole is only 15 percent, so we need to invest in recruiting and keeping this talent, and this bill will help take a major step forward. Also, the bill invests in vital child care facilities for the Coast Guard, and we so appreciate working across the aisle to make this part of the legislation.”
Ranking Member Cantwell’s legislation makes significant improvements to the services needed to recruit, retain and invest in women in the Coast Guard workforce, addressing the significant problems retaining skilled female Coasties indicated by the statistics on women in the service.
The bill takes aim at this issue by improving access to child care for Coast Guard members and their families. The legislation includes a pilot program to expand access to child care, a comprehensive study on Coast Guard child care needs, and expanded opportunities for Coast Guard spouses to start their own in-home child care centers.
The bill also ensures timely and full implementation of the RAND Coast Guard Women’s Retention Study. This section of the bill would require the establishment of a National Coast Guard Women’s Leadership Committee to advise the Commandant on the RAND study implementation plan and on women’s issues at large. It would also create an Advisory Committee on Women’s Leadership at the Coast Guard Academy to reach women early in their Coast Guard Careers and improve their access to leadership training, mentorship, and engagement.
Taking care of Coast Guard members and their families has been a long-term priority for Senator Cantwell. In 2015, she passed an amendment to the Coast Guard authorization to make sure Coast Guard mothers received the same amount of maternity leave as their counterparts in other branches. In 2017, she wrote a letter to the then-Coast Guard Commandant advocating for an expansion of family leave policies to include benefits for same-sex couples, dual military couples, and adoptive parents. And in last year’s Coast Guard authorization, she secured provisions to strengthen paid family leave for Coast Guard members and their families.
A commentary published here last December criticized a Second Circuit decision, Mantikas v. Kellogg Company, for looking upon The Reasonable Consumer as myopic, naive, and in need of government protection. We opined that the decision’s easing of plaintiffs’ burden for proving deception would inspire more food-labeling consumer litigation in New York and other states in the circuit.
We were quite pleasantly surprised, then, by a July 28, 2019 Eastern District of New York memorandum and order in Reyes v. Crystal Farms Refrigerated Distribution Co. The ruling, which dismissed consumer-deception claims aimed at a ready-to-eat mashed-potato maker, offers some hope to consumer-product companies sued in Mantikas‘ wake.
The Mantikas plaintiffs had alleged that the terms “Whole Grain” and “Made with Whole Grain” misled them into thinking that the Cheez-It Crackers they purchased contained 100%, or nearly 100%, whole grain. The Second Circuit noted that judges should take into consideration a product’s packaging as a whole when undertaking the reasonable-consumer analysis. It ended up deciding, however, that a reasonable Cheez-It consumer would view the product with blinders on, ignoring all the other relevant labeling information, including “Made with 5g of whole grain per serving” and the Nutrition Facts panel.
With Reyes, we move from cheese snacks to mashed potatoes. Ms. Reyes alleges that the terms “Made with Real Butter” and “Made with Fresh Whole Potatoes” tricked her into paying a premium price for the defendant’s $3.99 “Diner’s Choice” brand. Ms Reyes argued that the presence of margarine in the product rendered the first statement deceptive, and that the unexpected presence of artificial ingredients meant that the potatoes weren’t “fresh.”
Those two statements, viewed in isolation from the rest of the labeling, could arguably be considered vague and, under the rationale of Mantikas, plausibly misleading. Yet the district court, per Judge Nicholas Garaufis, declined to take that approach. And rather than leave the fact-based reasonable-consumer determination to a jury, he decided deception as a matter of law.
Under New York consumer-protection principles, Judge Garaufis wrote, reasonable consumers understand that the “devil’s in the details” when it comes to vague product labeling. A contextual look at the package, including any verbal clarifications, the court explains, was in order.
On the first claim, the court reasons, it’s clear that the mashed potatoes did in fact contain real butter. The presence of margarine did not change that fact. And besides, the court adds, a reasonable consumer concerned with margarine could look on the back of the product, where margarine was mentioned twice.
The court found Reyes’ second deception claim equally implausible. FDA regulations define “fresh” as food in its “raw state” that has “not been frozen.” So Crystal Farms’ statement is truthful: it incorporates raw, unfrozen potatoes into its product. The court further explains that no reasonable consumer would interpret “made with fresh whole potatoes” to mean that the mashed potatoes are “fresh” as the term is generally understood. That’s because “potatoes must be cooked before they are mashed.” And for that reason, “a reasonable consumer would [not] be misled into believing Defendant’s mashed potatoes lacked artificial ingredients.”
As noted above, Judge Garaufis could have easily taken one of the “outs” that consumer class-action precedents provided to him. Instead, he undertook a completely defensible and, well, reasonable, reasonable-consumer analysis and rejected Reyes’ implausible deception claims. And although he referenced Mantikas, he deftly distinguished it.
Federal district court judges with post-Mantikas food-labeling class actions on their docket would do themselves, and consumer-product makers and consumers, a lot of good by following Judge Garaufis’s lead when the opportunities arise.
Also published by Forbes.com on WLF’s contributor page.
Good morning and welcome to the Commerce Committee’s eighth executive session of the 116th Congress. Before we turn to today’s agenda, I want to highlight the work this committee has done to bring two major bills to a vote today.
The Coast Guard Reauthorization Act of 2019, sponsored by Senator Sullivan, reflects several months of bipartisan work to support the Coast Guard’s broad mission to ensure the safety and security of our nation’s waters.
The bill would:
- Authorize funding for Coast Guard operations and critical shipbuilding programs such as the National Security Cutter and Polar Security Cutter Icebreaker;
- Include the “Pay Our Coast Guard Act” to protect pay and benefits for Coast Guard members and their families should a future lapse in appropriations occur;
- Address numerous personnel reforms to help the Coast Guard attract and retain the best and brightest talent;
- Ensure that the Coast Guard takes advantage of the latest in technology to accomplish its missions by streamlining the acquisition system, focusing on testing unmanned systems, and starting a pilot program to test commercial satellites to combat illegal fishing;
- Support our Coast Guard families through a child care title authored by Ranking Member Cantwell. Her contributions to this bill would give Congress a better understanding of child care and family support requirements and ensure that Child Development Centers are inspected. Our Coast Guard families deserve nothing less than access to high-quality child care; and
- Lastly, the bill would make a number of common-sense reforms to maritime law to make operating safer for our recreational boaters and fisherman.
We have a responsibility to pass this important legislation, and I look forward to advancing the Coast Guard Reauthorization Act during this session.
Today we also consider the “Protecting Our Infrastructure of Pipelines and Enhancing Safety Act of 2019.”
I would like to thank Senators Fischer and Duckworth for working on a bipartisan basis to introduce this bill to reauthorize the Department of Transportation’s pipeline safety program, which is administered by the Pipeline and Hazardous Materials Safety Administration (PHMSA).
This legislation would provide the necessary resources and tools to improve pipeline safety further, which is a top priority of this committee.
This bill would:
- Provide a four-year authorization for PHMSA’s pipeline safety program with greater resources allocated to state and local pipeline safety officials;
- Allow PHMSA to conduct pilot programs to evaluate innovative pipeline safety technologies;
- Provide greater congressional oversight on pending PHMSA rulemakings;
- Direct PHMSA to update its current regulations for large-scale liquefied natural gas, or LNG, facilities; and
- Establish an LNG Center of Excellence to promote and facilitate safety, education, training, and technological advancements for LNG operations.
In light of recent events, this bill also includes several safety-related provisions addressing distribution gas pipeline systems.
Today’s markup of the PIPES Act of 2019 is the first major step toward final passage to reauthorize PHMSA’s pipeline safety program as we continue to advance the safety of our pipeline transportation network.
I look forward to working with the members of this committee to pass this bipartisan bill.
With that, I turn to my friend and Ranking Member, Senator Cantwell, for any remarks she may have.
Six Outstanding Legal Minds from Top Law Firms, Corporations, and the Academy Join WLF’S Advisory Board
(Washington, DC)—Washington Legal Foundation (WLF) and the Chairman of its Legal Policy Advisory Board, Jay B. Stephens of Kirkland & Ellis LLP, are pleased to announce the addition of six new members to the Board:
- Lisa S. Blatt, a Partner with Williams & Connolly LLP. A former law clerk to Justice Ruth Bader Ginsburg, Ms. Blatt is Chair of the firm’s Supreme Court and Appellate practice.
- Michael J. Lotito, a Shareholder with Littler Mendelson LLP. Mr. Lotito is also Co-Chair of the firm’s Workplace Policy Institute.
- Leah L. Lorber, Assistant General Counsel of GlaxoSmithKline.
- Stephen McManus, Senior Vice President and General Counsel of State Farm Mutual Automobile Insurance Company.
- Maureen K. Ohlhausen, a Partner with Baker Botts L.L.P. and Practice Group Chair – Antitrust and Competition Law. Ms. Ohlhausen is a former Acting Chairman and Commissioner of the Federal Trade Commission.
- Joshua D. Wright, University Professor of Law at George Mason University, Antonin Scalia School of Law. Professor Wright is also Executive Director of the Global Antitrust Institute and is a former Commissioner at the Federal Trade Commission.
WLF’s Legal Policy Advisory Board includes nearly fifty distinguished professionals from the legal, academic, and public-policy communities who offer WLF valuable, informal guidance on a volunteer basis.
Today’s hearing will evaluate progress on implementation of positive train control (PTC) and discuss any potential challenges in meeting the final implementation deadline of December 31, 2020. As recent Committee hearings have highlighted, PTC is an important technology that has the ability to prevent accidents, including over-speed derailments, such as the tragic derailment in DuPont, Washington in 2017, as well as preventing train-to-train collisions.
PTC Enforcement and Implementation Act, passed by Congress and signed into law by President Obama in October 2015, required railroads to implement PTC by December 31, 2018, however it allowed a railroad to apply for an extension of up to 24 months if, and only if, a railroad met important milestones.
I am pleased to say that under Secretary Chao and Administrator Batory’s leadership, this framework has been faithfully implemented as of December 31, 2018, all railroads required to implement PTC by the deadline either submitted documentation to show that they met the requirements for system activation or qualified for an extension for up to two additional years to complete full implementation. As we will hear today, many railroads received such an extension. Since that December 2018 deadline, railroads have continued to make progress on PTC implementation.
This hearing provides an opportunity for updates on the current status of PTC implementation across the network and the gains that have been made since the end of last year. Witnesses should discuss how freight and passenger railroads are implementing PTC and describe the remaining work needed to achieve full implementation.
Full PTC implementation requires, among other things, that railroads be interoperable or, in other words, they must be able to operate seamlessly across tracks owned by different railroads. Achieving interoperability requires coordination across the rail industry, including between the Federal Railroad Administration, host railroads, tenant railroads, vendors and suppliers, and other stakeholders. This undertaking is particularly complex in regions of this country where multiple railroads interact.
I hope witnesses will provide an update on interoperability testing and any successes or challenges identified through such testing. I also invite our expert witnesses to discuss any suggestions they have for further facilitating interoperability throughout the network.
With the final deadline for implementation less than a year and a half away, today’s hearing will help this committee focus on any other issues that require additional attention. For instance, at past PTC hearings, we heard about challenges related to vendors and software, as well as railroads in the early stages of field testing.
So, I invite our witness to update the Committee on the availability of vendors to support PTC installation and provide testing services. Witnesses might also identify any other challenges to full implementation as the final deadline approaches.
I look forward to a robust discussion of the progress of PTC implementation. I thank all of our witnesses for appearing today.
At the height of the Civil War, Congress passed, and President Lincoln signed, a law to deter and punish contractors who billed the Union army for worthless goods masquerading as necessities of war. Based on feudal England’s practice of deputizing private citizens to protect the king’s property, the False Claims Act’s (FCA) qui tam provision allows a “relator” to sue on the government’s behalf and share in any recovery. Or, as Senator Jacob M. Howard put it at the time, the FCA “set[s] a rogue to catch a rogue.”
Since the Civil War, of course, the government’s size and reach have steadily increased to Leviathan proportions. FCA fines have grown accordingly—from double the government’s damages plus a $2,000 penalty per false claim in 1863, to treble the government’s damages plus a maximum $21,536 penalty per false claim today. As the potential for bounties beyond the dreams of avarice has risen, so too has the number of rogues—and their lawyers—looking for a windfall.
In U.S. ex rel. Kasowitz Benson Torres LLP v. BASF Corp., the lawyers are the relators. And though the Supreme Court has emphasized that the FCA is not a vehicle for punishing “garden-variety” regulatory violations, that didn’t stop Kasowitz Benson from seeking billions of dollars in penalties by trying to weaponize the Toxic Substances Control Act (TSCA) via the FCA.
Under the law firm-relator’s novel theory of FCA liability, several large chemical manufacturers defrauded the government simply by failing to report substantial risk information to EPA under the TSCA. By withholding that information, the relators allege, the defendants engaged in a “reverse false claim” by depriving the government of money (TSCA civil penalties) and property (the undisclosed risk information). The district court rejected the relator’s legal theory and dismissed the complaint.
On appeal, the DC Circuit recently affirmed. Judge Karen LeCraft Henderson channeled Senator Howard with her opinion’s opening Latin phrase, “Pecunia non satiat avaritiam, sed inritat”: Money doesn’t satisfy greed; it stimulates it.
Joined by Judges Srinivasan and Pillard, Judge Henderson made quick work of the relator’s claims. Neither the FCA’s text nor its broader purpose could support the relator’s theory of the case.
First, the claim based on deprivation of a TSCA civil-penalty was “a non-starter.” An “obligation” to pay a civil penalty under the FCA doesn’t arise, the court explained, the moment a defendant violates some federal law. EPA has not yet assessed a penalty against the defendants. Besides, the TSCA grants EPA the discretion to reduce or forgive a penalty for any violation. Mere contingent exposure to penalties is not “money” capable of being concealed under the FCA.
Nor is the defendants’ alleged failure to provide the risk information through the TSCA’s voluntary Compliance Audit Program, which allows regulated entities to receive reduced civil penalties for belatedly submitting risk information. In short, the defendants’ non-disclosure did not result in a penalty, much less concealed “money” under the FCA.
Second, the TSCA’s requirement that companies transmit risk information isn’t an obligation to transmit property under the FCA. Here, the relators’ claim turned on whether the government had a property interest in the risk information. But the federal government’s only interest in the information is regulatory, an interest that does not rise to the level of “interests traditionally protected by property law.”
The court added that the relator’s property-interest claim also failed because regulatory agencies, not private relators, are charged with enforcing federal reporting requirements. The relator’s theory, “if adopted, would make any violation of countless reporting requirements actionable under the FCA.”
The federal government also rejected Kasowitz Benson’s theory. Although the firm was nominally suing on its behalf, the government supported the defendants’ motion to dismiss with a Statement of Interest in the trial court—a fact Judge Henderson noted in her opinion.
Of course, Kasowitz Benson could have filed a citizen suit under § 2619 of TSCA for these alleged violations. But the amount of attorneys’ fees and costs available for a successful TSCA suit pale in comparison to the billions in damages the firm sought in its FCA suit.
The U.S. Supreme Court has tried to impose some rational limits to FCA litigation, most recently in Universal Health Services, Inc. v. United States ex rel. Escobar, but many federal appeals courts still view any false claim to be “material” and thus actionable. Ralph Waldo Emerson famously said “there is no den in the wide world to hide a rogue.” Kudos to this D.C. Circuit panel, then, for shutting down at least one rogue’s attempt to manufacture, rather than catch, another rogue.
Also published by Forbes.com on WLF’s contributor site.
The post No Money for Nothing: DC Circuit Rejects Law Firm’s False Claims Act Artifice appeared first on Washington Legal Foundation.
“The Florida Legislature having acted, the Florida Supreme Court has wisely chosen to stay in its own lane.”
—Cory Andrews, Vice President of Litigation
(Washington, D.C.)—Earlier today, the Florida Supreme Court discharged its jurisdiction over a high-profile insurance dispute. That dismissal leaves in place a decision by Florida’s Fourth District Court of Appeal upholding a homeowners insurance policy provision that conditions any assignment of claim benefits on the written consent of all insureds and mortgagees named in the policy.
In Restoration 1 of Port St. Lucie v. Ark Royal Insurance Co., the Florida high court had earlier agreed to decide whether homeowners insurance policies may impose conditions on a post-loss assignment of benefits. But after the case was fully briefed, the Florida Legislature passed and, the Governor signed, a Florida law that resolves the question presented “on a going-forward basis” as of July 1, 2019. Under section 627.7153 of the Florida Statutes, insurers are permitted to offer “a policy that restricts in whole or in part an insured’s right to execute an assignment agreement” if certain conditions are met.
The case arose from Ark Royal Insurance Company’s (Ark Royal) homeowners policy issued to John and Liza Squitieri. Under that policy, any assignment of claim benefits is invalid unless it contains the written consent of all insureds and mortgagees named in the policy. After a loss occurrence in 2016, Mrs. Squitieri contracted for clean-up services with Restoration 1 of Port St. Lucie (Restoration 1). At that time, Mrs. Squitieri unilaterally signed a blanket assignment-of-benefits agreement with Restoration 1. Yet PNC Bank, the mortgagee named in the policy, did not sign the agreement or otherwise consent in writing to the assignment. So when Restoration 1 (as Mrs. Squitieri’s purported assignee) sued Ark Royal for breach of contract, the trial court dismissed the suit for lack of standing, and Florida’s Fourth District Court of Appeal affirmed. That decision now stands.
Although unexpected, the court’s resolution of the case comports with arguments advanced in WLF’s amicus curiae brief, which emphasized that deciding major questions of public policy is a role reserved to the Legislature, not the Judiciary.
Celebrating its 42nd year as America’s premier public-interest law firm and policy center, WLF’s mission is to preserve and defend America’s free-enterprise system by litigating, educating, and advocating for free-market principles, a limited and accountable government, individual and business civil liberties, and the rule of law.
The post Florida High Court Dismisses Insurance Dispute, Leaving in Place Favorable Decision appeared first on Washington Legal Foundation.
Recently, the Second Circuit upheld a New York City ban on advertising in “for-hire vehicles”—companies like Uber and Lyft—against a First Amendment challenge in Vugo v. City of New York. In doing so, the court applied an outdated, severely watered-down version of Central Hudson’s intermediate scrutiny and opened the door to restrictive government speech regulations moving forward.
In Vugo, New York City banned all advertisements in for-hire vehicles. At the same time, New York City also banned advertisements in taxicabs with one exception: taxicabs are allowed to run advertisements on “Taxi TV.” Taxi TV is a screen that (1) displays passenger information, such as their route and fare as it accumulates; (2) allows payment via credit cards; and (3) runs ads to help taxi owners cover the costs of installing the Taxi TV system.
Vugo—a technology company—runs a business wherein it sells Internet-connected tablets to for-hire vehicle drivers, who then mount the tablet on the front seat’s headrest and have it run ads. Advertisers pay Vugo, which splits the proceeds with the for-hire vehicle drivers. Passengers are unable to turn off the ads, but they would be able to use on-screen controls to reduce the volume to a “near-mute” level. Because Vugo’s business is illegal under New York’s advertising ban, it brought a First Amendment challenge.
Vugo prevailed in the U.S. District Court for the Southern District of New York, and the city appealed.
Vugo argued that New York City’s law was unconstitutional under Central Hudson v. Public Service Commission of New York.1 The seminal Supreme Court case holds that government restrictions on commercial speech may be upheld only where:
- the speech at issue is lawful and non-misleading;
- the government asserts a “substantial” interest;
- the speech restriction “directly advances the governmental interest asserted”; and
- the speech restriction is no “more extensive than is necessary to serve that interest.”
The Second Circuit rejected arguments concerning the second through fourth prongs. On the second prong, it held that the government has a substantial interest in “protect[ing] passengers from the annoying sight and sound of in-ride advertisements.” On the third prong, it rejected Vugo’s argument that the ban was constitutionally underinclusive because it excepted ads for Taxi TV, thereby undermining its purported rationale. The court found that the exception was rationally related to funding the pro-consumer services of Taxi TV and thus permissible under the third prong. Finally, on the fourth prong, the court found that the ban on advertising was no “more extensive than is necessary” to serve the government’s interest because the city’s decision as to how in-vehicle ads should be regulated was “reasonable.”
While there are a number of problems with this decision, the fourth prong analysis is the most troubling. The court, in no uncertain terms, held that it “must defer to the City’s judgment” when it comes to restricting commercial speech. To get that proposition, it relied heavily on three Supreme Court cases: Metromedia, Inc. v. City of San Diego (1981); Board of Trustees of State University of New York v. Fox (1989); and Members of the City Council of Los Angeles v. Taxpayers for Vincent (1984). In other words, the most recent Supreme Court case the Second Circuit relied upon was decided before the fall of the Berlin Wall.
While these cases do provide some support for the Second Circuit’s reasoning,2 the Supreme Court explicitly rejected deferring to the government under Central Hudson after those cases were decided, in 44 Liquormart, Inc. v. Rhode Island:
[Posadas de Puerto Rico Associates v. Tourism Co. of P.R.] clearly erred in concluding that it was “up to the legislature” to choose suppression over a less speech-restrictive policy. The Posadas majority’s conclusion on that point cannot be reconciled with the unbroken line of prior cases striking down similarly broad regulations on truthful, nonmisleading advertising when non-speech-related alternatives were available. [¶] [W]e decline to give force to [Posadas’] highly deferential approach.
And, post-44 Liquormart, the Court has continued to apply the stricter non-deferential approach to Central Hudson’s fourth prong. Most recently, in Matal v. Tam, the Supreme Court found that a speech restriction was not “narrowly drawn” because it went “much further than necessary to serve the interest asserted.”
Applying the correct test, it is clear that New York’s complete ban on all advertising in private vehicles cannot stand. There are clear and obvious alternatives to a complete ban that make a complete ban more intrusive than necessary.
As Vugo explained in its brief, New York could just mandate the inclusion of an off-switch for devices that run video ads. The Second Circuit rejected this argument, finding that Taxi TV had this feature, but consumers complained about “frustration with malfunctioning on-off switches and mute buttons—and with needing to navigate the on-screen interface in the first place.” This argument is easily answered: the city could just mandate an external off button (no need to navigate through any screens) and impose fines on drivers whose device’s on-off switches are not functioning.
Or—even more to the point—the city could just require all advertisements be muted and mandate that in-vehicle advertising devices contain an external flap that could be pulled over the screen. This rule would eliminate the prospects of mechanical failure and on-screen navigation completely. But the Second Circuit did not entertain these possibilities, finding that a complete advertising ban was “reasonable” and thus constitutional.
Going forward, this doctrine of putting the fox in charge of the henhouse—that is, giving the government deference on restricting speech that it does not like—could have unintended consequences. If a total ban on speech is reasonable when there are numerous obvious alternatives, it seems likely that a lot more speech will be banned. The Supreme Court should intervene to ensure that Central Hudson does not become a rational basis rubber stamp for government speech restrictions.
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Senator Maria Cantwell, the Ranking Member of the Senate Commerce, Science, and Transportation, today issued the following statement regarding the agreement between major automakers and the state of California on fuel economy standards.
“I am glad to see that a voluntary agreement has been struck between automakers and the state of California on fuel economy standards. This collaborative approach will avoid a lengthy court battle and move us forward with a plan to save families money, reduce greenhouse emissions, and allow America to better compete in the race to build the cars of the future. To that end, I am working on a bill in the Commerce Committee to codify a uniform set of standards for the country that will promote the production of clean and efficient cars and give automakers the certainty they need as they compete in the global marketplace.”