Feed aggregator

WLF Asks Supreme Court to Reverse Ninth Circuit, Uphold Defendants’ Rights under CAFA

WLF Legal Pulse - Thu, 07/25/2019 - 2:00pm

“The lower court decisions frustrate the will of Congress that large class and ‘mass’ actions be removable to federal court as a means of ensuring that defendants can have their cases heard in an impartial forum. If allowed to stand, the decision will serve as a roadmap for plaintiffs’ lawyers seeking to keep their lawsuits out of federal court.”
—Richard Samp, WLF Chief Counsel

Click here for WLF brief

WASHINGTON, DC—Washington Legal Foundation (WLF) today urged the U.S. Supreme Court to review (and ultimately overturn) a Ninth Circuit decision that makes it nearly impossible for defendants to remove “mass actions” to federal court. WLF’s amicus curiae brief argued that Congress adopted the Class Action Fairness Act of 2005 (CAFA) to ensure that state-court defendants would have the option of removing substantial, multi-plaintiff cases but that the appeals court’s decision unduly restricts CAFA’s application.

One of the prerequisites for a CAFA “mass action” is that it must involve at least 100 plaintiffs with largely similar claims. Plaintiffs’ lawyers responded to CAFA by adopting a tactic designed to evade the statute: they routinely file multiple suits raising identical claims in a single state court, but making sure to include 99 or fewer plaintiffs in each suit. They then “suggest” to the state court that the claims of the hundreds plaintiffs be coordinated by a single judge—all the while being careful not to file a formal motion for coordination. They resist removal petitions by arguing that CAFA is inapplicable if the claims are brought together at the behest of the state courts rather than in response to a formal motion from the plaintiffs.

The Ninth Circuit case involves more than 4,300 individuals from throughout the country who filed suit in California state court, claiming that use of the drug Lipitor caused them to develop Type II diabetes. Pfizer, Lipitor’s manufacturer, sought to remove the cases to federal court. But a district court remanded the cases to state court, ruling that the state courts acted on their own initiative in ordering the cases coordinated “for all purposes” before a single judge, and that CAFA only permits removal if it is the plaintiffs themselves who initiate coordination of 100+ cases. The Ninth Circuit issued an order allowing the district court remand decision to stand.

In its brief urging review, WLF argued that CAFA authorizes removal of mass actions without regard to whether the 100+ claims were brought together by the plaintiffs or by the courts. WLF asserted that Congress adopted CAFA to eliminate precisely the sort of “gamesmanship” being displayed by plaintiffs’ lawyers in this case.

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 WLF Asks Supreme Court to Reverse Ninth Circuit, Uphold Defendants’ Rights under CAFA appeared first on Washington Legal Foundation.

Categories: Latest News

Committee Announces Markup on July 31

U.S. Sen. Roger Wicker, R-Miss., chairman of the Committee on Commerce, Science, and Transportation, will convene an executive session on Wednesday, July 31, 2019 at 10:00 a.m. in Hart Senate Office Building 216 to consider the following legislative measures.

Wicker Welcomes NASA Green Run Test Announcement

U.S. Sen. Roger Wicker, R-Miss., chairman of the Committee on Commerce, Science, and Transportation, welcomed an announcement from National Aeronautics and Space Administration (NASA) Administrator Jim Bridenstine that the agency will conduct the “Green Run” rocket testing campaign at Stennis Space Center in Mississippi.

Colorado High Court: U.S. Constitution’s 8th Amendment Protects Businesses from Excessive Civil Fines

WLF Legal Pulse - Thu, 07/25/2019 - 10:02am

Jodee R. Rankin is a 2019 Judge K.K. Legett Fellow at Washington Legal Foundation who will be entering her third year at Texas Tech University School of Law in the fall.

The Eighth Amendment prohibits excessive bail, excessive fines, and cruel and unusual punishment. Yet while these constitutional limits on governmental powers have protected individuals, the protection of corporations from excessive fines has remained a long-standing question. But, last month, the Colorado Supreme Court, in Colorado Department of Labor and Employment, Division of Workers’ Compensation  v. Dami Hospitality, WL 2332246 (Colo. June 3, 2019), concluded that the protections of the Excessive Fines Clause are not so limited—corporations are clearly covered by the text and the purpose of the Eighth Amendment.

The Colorado case involved the owner-operator of a Denver motel, employing four to ten employees at a given time. As an employer, Dami was required to maintain workers’ compensation insurance. When the Division of Workers’ Compensation discovered that Dami’s insurance had lapsed for nearly four years, the Division calculated Dami’s fine under the applicable statutory and regulatory framework. The resulting fine amounted to $841,200.00—an amount that exceeded the motel’s annual income.

Dami, through its registered agent, explained its failure to maintain insurance, informed the Division that it was unable to pay the fine, and requested a penalty more reasonable to the size of the business. The Division responded with a settlement offer of $425,000.00, the minimum per-diem fine allowed by the statute. Dami refused the offer and instead sought review. Despite Dami’s efforts, the Division upheld the fines. Next, Dami appealed to the Industrial Claims Appeals Office (“ICAO”).

The ICAO upheld the Division’s order, but this time Dami’s efforts were not entirely rejected—Dami’s excessive fines argument survived and the matter was remanded back to the Division for review under a standard borrowed from Fourteenth Amendment jurisprudence.  Again, the Division upheld the order, so Dami appealed to the court of appeals. The court of appeals assumed that the Excessive Fines Clause applied to corporations but did not decide so. Finding that the Division incorrectly applied the Associated Business Product factors (the borrowed Fourteenth Amendment standard), the court of appeals remanded the order to the Division to recalculate. The Division petitioned for certiorari.

Applicability of the clause

The Colorado Supreme Court examined both the purpose of the clause as well as the appropriateness of applying it to corporations. It found that the clause doesn’t suggest that its protections are limited to natural persons—it’s simply a directive on the government not to impose excessive fines. Arguing that the other clauses of the amendment provide textual clues to the limits of protection afforded by the excessive fines clause, the Division urged that the maxim noscitur a sociis should apply (meaning that the phrase should be informed by its neighboring words). Because the Supreme Court had already rejected that interpretation in Austin v. United States, 509 U.S. 602 (1993), the court instead focused on the purpose of the clause—the prevention of government overreach and abuse of power. The question boiled down to whether the purpose of the clause supported its application to corporations, which turned out to be a straightforward analysis covered succinctly in the court’s opinion.

Contrasting those guarantees that are purely personal and limited to the protection of individuals—such as the privilege against self-incrimination and the right to privacy—with the payment of penalties, the court reasoned that the latter is something a corporation can do and is therefore protected from excessive fines under the clause. The court relied on Hale v. Henkel, 201 U.S. 43 (1906), and reasoned that when a guarantee protects government overreach, constitutional limitations on government power can apply to protect a corporation just as it protects a natural person. Analyzing the text and purpose of the clause closely, the court came to the clear conclusion that corporations are protected by the Excessive Fines Clause.

At the same time Dami was being decided, specifically after oral argument, the U.S. Supreme Court held in Timbs v. Indiana, 139 S. Ct. 682 (2019), that the Excessive Fines Clause is an incorporated protection applicable to the states. Therefore, Colorado’s Division of Workers’ Compensation became subject to its limits.

The gross disproportionality standard

After the court determined that the clause did apply, it considered the appropriate standard. The U.S. Supreme Court, in United States v. Bajakajian, 524 U.S. 321 (1998), described the touchstone of the constitutional inquiry under the Excessive Fines Clause as “the principle of proportionality.” The Colorado Supreme Court followed suit and reasoned that the Bajakajian Court had developed an applicable standard. The Bajakajian gross-proportionality standard involves consideration of the amount of the fine in proportion to the gravity of the offense and includes an evaluation of the essence of the crime/offense, whether the defendant fits into the class of persons at which the statute was directed, and the nature of the harm caused. And although the Supreme Court hasn’t addressed whether the defendant’s ability to pay the fine should be taken into consideration, the Dami court went beyond Bajakajian as it believed the defendant’s ability to pay to be “persuasive evidence” of a fine’s excessiveness.

Conclusion

Despite the long-standing question and lack of doctrinal clarity surrounding whether corporations are protected from excessive fines, the Colorado Supreme Court took a logical and well-reasoned approach that considered the clause’s text and its purpose; an approach that other courts should follow. No loophole in the Eighth Amendment’s text exempts business enterprises from the Excessive Fines Clause’s protection. That constitutional provision provides an explicit limit to the reach and power of the government to penalize, a limit that extends to all who are subjected to its reach.

The post Colorado High Court: U.S. Constitution’s 8th Amendment Protects Businesses from Excessive Civil Fines appeared first on Washington Legal Foundation.

Categories: Latest News

Supporting the Next Generation of Agricultural Businesses

House Small Business Committee News - Thu, 07/25/2019 - 10:00am

The Committee on Small Business Subcommittee on Rural Development, Agriculture, Trade, and Entrepreneurship will meet for a hearing titled, “Supporting the Next Generation of Agricultural Businesses.” The hearing is scheduled to begin at 10:00 A.M. on Thursday, July 25, 2019 in Room 2360 of the Rayburn House Office Building.

A focus of the subcommittee is to increase the economic development of rural areas of the country. The hearing will discuss the challenges the nation’s younger generation faces in rural areas, particularly in the agricultural industry. America’s farmers are getting older, with the average age of 58 years old. As older farmers look to retire or transition away from the business of farming, new farmers are presented with opportunities and difficult challenges. This hearing is designed to enable Members to have a dialogue about the problems and the potential solutions within the rural agricultural industry as it pertains to beginning farmers and younger entrepreneurs.

To view a livestream of the hearing, please click here. 

Hearing Notice 

Hearing Memo 

Witness List 

Witnesses 

Mr. Matthew Keesling Farm Manager
Bures' Organic Family Farm
Deerbrook, WI
*Testifying on behalf of the Dairy Grazing Apprenticeship
Testimony 

Mr. Jason Grimm Owner
Grimm Family Farm
Williamsburg, IA
*Testifying on behalf of the National Young Farmers Coalition and the Eastern Iowa Young Farmers 
Coalition
Testimony

 

*Witness testimony will be posted within 24 hours after the hearing’s occurrence



 

Joined by NAM and PhRMA, WLF Urges First Circuit to Limit Who Can Bring Antitrust Claims

WLF Legal Pulse - Wed, 07/24/2019 - 2:03pm

“The district court certified a plaintiff class in an antitrust case in which half of the class members never purchased any products from the defendants.  By expanding ‘antitrust standing’ in this manner, courts are increasing the threat of crippling antitrust awards that could end up deterring pro-competitive activity.”
—Richard Samp, WLF Chief Counsel

Click here for brief.

WASHINGTON, DC—Washington Legal Foundation (WLF) last evening asked the U.S. Court of Appeals for the First Circuit to impose limits on who can sue for damages for alleged antitrust violations.  In an amicus curiae brief urging the court to review a district court decision, WLF argued that antitrust standing should be limited to those who had direct financial dealings with an alleged antitrust violator.  WLF filed its brief on behalf of itself, the National Association of Manufacturers, and the Pharmaceutical Research and Manufacturers of America.

The defendants in this case are two pharmaceutical companies that had been involved in a dispute over patent rights.  They eventually settled the dispute. But then a group of customers alleged that the settlement was an improper restraint of trade that led to inflated prices, and they filed a class-action antitrust suit against the drug companies.

The question at issue is who has “antitrust standing” to be included in the plaintiff class.  The district court certified a class that includes customers that never purchased products from the defendants.  The district court reasoned that the defendants’ alleged misconduct might have induced other sellers, acting independently, to raise their prices as well.

WLF’s brief urged the First Circuit to review, and ultimately overturn, the district court’s class-certification decision.  WLF noted that antitrust law has traditionally limited “standing” to those who purchase directly from an alleged antitrust violator.  WLF argued that permitting others to sue would unduly complicate antitrust litigation when there is no direct causal link between alleged violations and a claimed injury.  WLF pointed out that expanding antitrust standing creates a threat of excessive antitrust liability that can deter pro-competitive activity.

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 Joined by NAM and PhRMA, WLF Urges First Circuit to Limit Who Can Bring Antitrust Claims appeared first on Washington Legal Foundation.

Categories: Latest News

Committee Announces Hearing on Positive Train Control Implementation

U.S. Sen. Roger Wicker, R-Miss., chairman of the Committee on Commerce, Science, and Transportation, will convene a hearing titled, “Next Steps for Positive Train Control Implementation,” at 2:00 p.m. on Wednesday, July 31, 2019. This hearing will focus on the implementation of positive train control (PTC) and anticipated compliance with the December 31, 2020 deadline. Witnesses will discuss the current status of PTC implementation and any challenges railroads may face by the final deadline.

Committee Approves 11 Bills, Coast Guard Nomination

The U.S. Senate Committee on Commerce, Science, and Transportation today approved 11 bills and a Coast Guard nomination, all subject to approval by the full Senate.

Wicker Statement on Confirmation of FAA Administrator

U.S. Sen. Roger Wicker, R-Miss., chairman of the Senate Committee on Commerce, Science, and Transportation, issued the following statement on the confirmation of Stephen Dickson as Administrator of the Federal Aviation Administration (FAA).

Ranking Member Cantwell Statement on Facebook’s FTC Settlement

Today U.S. Senator Maria Cantwell (D-WA), the Ranking Member of the Senate Commerce, Science, and Transportation Committee, issued the following statement regarding the Federal Trade Commission’s (FTC) settlement with Facebook.

“This decision underscores the need for strong privacy legislation. When companies betray the public trust, there must be immediate and significant consequences. We need a strong data privacy bill to ensure that the Commission has the tools it needs to protect privacy—including the authority to levy fines on the first offense.”

Wicker Statement on FTC and Facebook Settlement

The settlement underlines the need for a strong federal data privacy law...

Nominations Hearing

WASHINGTON – U.S. Sen. Roger Wicker, R-Miss., chairman of the Committee on Commerce, Science, and Transportation, will convene a nominations hearing at 10:30 a.m. on Wednesday, July 24, 2019 to consider presidential nominations to the National Transportation Safety Board, Federal Maritime Commission, Amtrak Board of Directors, Office of Science and Technology Policy, and Department of Commerce.

Click here for additional information on nominees.

 Witnesses:

  • The Honorable Todd Rokita, of Indiana, to be a Director of the Amtrak Board of Directors
  • The Honorable Jennifer Homendy, of Virginia, to be a Member of the National Transportation Safety Board
  • Mr. Carl Bentzel, of Maryland, to be a Commissioner of the Federal Maritime Commission
  • Mr. Michael Graham, of Kansas, to be a Member of the National Transportation Safety Board
  • Mr. Michael Kratsios, of South Carolina, to be an Associate Director of the Office of Science and Technology Policy
  • Mr. Ian Paul Steff, of Indiana, to be Assistant Secretary of Commerce and Director General of the United States and Foreign Commercial Service

Hearing Details: 

Wednesday, July 24, 2019
10:30 a.m.
Committee on Commerce, Science, and Transportation 

This hearing will take place in the Hart Senate Office Building 216. Witness testimony, opening statements, and a live video of the hearing will be available on www.commerce.senate.gov.

 

Is the Tax Cuts and Jobs Act a Help or Hinderance to Main Street?

House Small Business Committee News - Wed, 07/24/2019 - 11:30am

The Committee on Small Business will meet for a hearing titled, “Is the Tax Cuts and Jobs Act a Help or Hinderance to Main Street?” The hearing is scheduled to begin at 11:30 A.M. on Wednesday, July 24, 2019 in Room 2360 of the Rayburn House Office Building.

The hearing will examine how the Tax Cuts and Jobs Act has affected small businesses. Members will hear from small business owners and tax experts regarding the impact the law has had on their operations since the law’s enactment on December 22, 2017.

To view a livestream of the hearing, please click here. 

Hearing Notice 

Hearing Memo 

Witness List 

Witnesses 

Ms. Jane Gravelle
Senior Specialist in Economic Policy
Congressional Research Service
Washington, DC
Testimony

Ms. Anne C. Zimmerman, CPA
President
Zimmerman & Co, CPAs, Inc.
Cincinnati, OH
Testimony

Mr. Justin Conger
President
Conger Construction Group
Lebanon, OH
Testimony

 

*Witness testimony will be posted within 24 hours after the hearing’s occurrence



 

<p><font face="Calibri" size="3">Thank

Thank you Mr. Chairman and thanks for that briefing on the bipartisan nature of the committee to date, and our continued work on trying to move privacy legislation in the future. I’m pleased that there are eleven bills on today’s agenda, and several nominations and Coast Guard promotions. I’m pleased that we are marking up the HOT CAR legislation that you’ve been a leader in in the past, and that we have taken action here to make sure that we’re moving a good bipartisan bill in the future, and I commend Senator Blumenthal for working on that legislation. I’m also happy to see the STEM Careers Act, because it’s such an important issue in the state of Washington with a record number of veterans and ways in which aerospace industry jobs can further go to veterans for the future. Likewise, the Composite Standards Act that our colleagues are promoting is also excellent legislation, in helping with Capito and Peters to promote something that is already a cost-effective source of designing for aerospace and for cars, now can look for ways to be a good source for transportation infrastructure investment. Also, I’d like to voice my strong support for the Great Lakes Environmental Sensitivity Act. We need to protect this great treasure that is part of the Midwest, and I certainty support our colleagues who have pushed this legislation here in the committee – Senator Peters and Senator Young. We need to protect our national treasures, and this Great Lakes legislation will help us do that.

I also support the Schultz nomination. Today Michelle Schultz is a member of the Surface Transportation Board. She’s already been favorably voted out of this committee, and I hope that she will be paired with a nominee on the floor so that we can have a full slate of confirmed nominees for this important job. 

When it comes to the Dickson nomination, Mr. Chairman – we had a hearing on Mr. Dickson, and I think it was very clear from all the aviation hearings we’ve had today that safety is our top priority. I know that Mr. Dickson, at his hearing, did not discuss these issues, and it was after the hearing that we received considerable information from a whistleblower about activities that happened during Mr. Dickson’s time at Delta Airlines, since he was in charge of the flight safety regimen. A whistleblower, that just happens to reside in the State of Washington, brought forth various concerns to then Mr. Dickson and to the organization in the wake of A330 flights, the Air France flight and Qantas flight, that basically had had malfunctions, and in the Air France case, caused an accident that killed many people. 

As an A330 pilot, my constituent brought numerous concerns to the forefront of the Delta organization – because of the level of automation and lack of pilot training that may have existed and caused concerns about the A330 incidents. But instead of those concerns being brought forward in recommendations to the organization, instead this pilot was retaliated against. And I don’t mean a general retaliation, I mean an absurd retaliation – a retaliation in which she was sent to a psychiatrist who then claimed, just because she juggled marriage, children, and being a pilot, that somehow she must be manic. And she was, because of that action by Delta, removed from flying, even though she had been a pilot for many years – decades. Well thankfully, the reinstatement through the normal legal process of the ALPA process for pilots and the FAA, this pilot was recertified to fly by other psychiatrists who did not find her to be manic, but actually voicing safety concerns. 

Now this, in and of itself, may have been enough to say that Mr. Dickson either didn’t know about this or didn’t participate, but since our investigation it is very clear that Mr. Dickson did know, was involved with this pilot, did know what was happening, and failed to disclose it to this committee. Our committee routinely asks about whether people are involved in legal disputes; he failed to mention this very prominent case that Delta was involved in. Now it could be that he simply forgot, but as the committee has searched for more information on Mr. Dickson on this, he has made it clear he thinks the handling of the situation was just fine. 

Well I know this, that the A330 incidents, and the Max incidents on the Boeing planes, all mean that we are entering a new era of aviation, where automation and pilot training need to have further scrutiny, and certainly, certainly, more transparency. We certainly can’t have organizations who threaten pilots with this kind of retaliation to actually stop them from flying when in reality they are just reporting what they think are the needed improvements to a safety management system. That is why this nomination is also been objected to by Captain Sullenberger, who has come to the aid of this whistleblower to simply say: pilots have to be listened to.

So I hope our colleagues will take this issue seriously, look into the case of this whistleblower, and the fact that the lack of transparency before this committee about this egregious issue has not been given its due. Therefore I cannot support Mr. Dickson’s nomination, and I ask my colleagues to also not support his nomination.

<p><font face="Calibri"><font size="3"

Thank you Mr. Chairman, and thanks for holding this important NASA hearing today about the plans to return American astronauts to the surface of the moon by 2024. Fifty years ago yesterday, NASA launched the Apollo 11 mission and 5 days later, on July 20th, 1969, astronauts Neil Armstrong and Buzz Aldrin became the first people to walk on the moon. Five subsequent Apollo missions successfully landed 10 more Americans – and I should say 3 lunar rovers built in the state of Washington and we’re very proud of the role that we played.

Just as importantly, the Apollo program inspired an entire generation of engineers and scientists. Some of them went on to space careers, but many of them went on to other careers in other fields of high technology. This generation of dreamers and thinkers firmly established the United States as a global leader in innovation and technology. The space race and NASA’s investment in space also perpetrated a thriving commercial space industry that exists today - and again very proud of those companies that reside in the state of Washington, using the expertise of many Washington scientists and engineers to help us achieve this mission.

The benefits of space exploration are clear. NASA should continue to push the boundaries of space science, exploration, and technology, and I’m pleased that NASA has started to outline a plan deep into space. I also appreciate that NASA’s looking at the non-traditional partnerships that the commercial space community can give in that relationship, and in space exploration. Today NASA has been developing the rocket and spacecraft needed for deep space exploration missions for more than nine years, and NASA’s own estimate is that SLS and Orion won’t be ready to fly crew until 2022 at the earliest. So NASA has just started to study the lunar landers and other critical hardware needed for a moon mission. It’s hard to believe that all these key pieces can fall together in just the next five years.

Furthermore, last week I know you made some changes at the organization – the head of human exploration – and so with that and NASA’s retirement of the space shuttle, the question of where is the leadership within the organization to deliver on this goal will be some of the things I’m going to drill down on in the Q&A part of this hearing this morning. And finally, NASA has yet to deliver a congressional budget for the mission beyond 2020, so it’s difficult for us to approve the mission if we don’t know what the ultimate cost will be to the taxpayers.

While we celebrate this unbelievable accomplishment and the fact that you’re continuing to be pioneers in space, we also need to look at the next chapter of exploration and make sure it’s a successful one. I appreciate the value of ambition and vision, but I also look forward to hearing from you, Administrator Bridenstine, on just exactly we’re going to meet this challenge.

So again, thank you Mr. Chairman for holding this hearing, and I would like to include for the record the testimony of Dr. Patricia Sanders, the head of NASA’s aerospace safety advisory board, was highlighted some of the challenges I mentioned.

<p><font face="Calibri"><font size="3"

Thank you Mr. Chairman, and thanks for holding this important NASA hearing today about the plans to return American astronauts to the surface of the moon by 2024. Fifty years ago yesterday, NASA launched the Apollo 11 mission and 5 days later, on July 20th, 1969, astronauts Neil Armstrong and Buzz Aldrin became the first people to walk on the moon. Five subsequent Apollo missions successfully landed 10 more Americans – and I should say 3 lunar rovers built in the state of Washington and we’re very proud of the role that we played.

Just as importantly, the Apollo program inspired an entire generation of engineers and scientists. Some of them went on to space careers, but many of them went on to other careers in other fields of high technology. This generation of dreamers and thinkers firmly established the United States as a global leader in innovation and technology. The space race and NASA’s investment in space also perpetrated a thriving commercial space industry that exists today - and again very proud of those companies that reside in the state of Washington, using the expertise of many Washington scientists and engineers to help us achieve this mission.

The benefits of space exploration are clear. NASA should continue to push the boundaries of space science, exploration, and technology, and I’m pleased that NASA has started to outline a plan deep into space. I also appreciate that NASA’s looking at the non-traditional partnerships that the commercial space community can give in that relationship, and in space exploration. Today NASA has been developing the rocket and spacecraft needed for deep space exploration missions for more than nine years, and NASA’s own estimate is that SLS and Orion won’t be ready to fly crew until 2022 at the earliest. So NASA has just started to study the lunar landers and other critical hardware needed for a moon mission. It’s hard to believe that all these key pieces can fall together in just the next five years.

Furthermore, last week I know you made some changes at the organization – the head of human exploration – and so with that and NASA’s retirement of the space shuttle, the question of where is the leadership within the organization to deliver on this goal will be some of the things I’m going to drill down on in the Q&A part of this hearing this morning. And finally, NASA has yet to deliver a congressional budget for the mission beyond 2020, so it’s difficult for us to approve the mission if we don’t know what the ultimate cost will be to the taxpayers.

While we celebrate this unbelievable accomplishment and the fact that you’re continuing to be pioneers in space, we also need to look at the next chapter of exploration and make sure it’s a successful one. I appreciate the value of ambition and vision, but I also look forward to hearing from you, Administrator Bridenstine, on just exactly we’re going to meet this challenge.

So again, thank you Mr. Chairman for holding this hearing, and I would like to include for the record the testimony of Dr. Patricia Sanders, the head of NASA’s aerospace safety advisory board, was highlighted some of the challenges I mentioned.

Any Press is Good Press: Libra and the Regulatory Awakening

WLF Legal Pulse - Wed, 07/24/2019 - 9:00am

Daniel S. Alter is a Shareholder in the New York, NY office of Murphy & McGonigle P.C. and is the WLF Legal Pulse’s Featured Expert Contributor, Legal & Regulatory Challenges for Digital Assets.

In the past several weeks, cryptocurrency has engendered its greatest congressional response to date.  Although the reaction seems overwhelmingly negative, those who ascribe to the philosophy that any press is good press may nevertheless welcome the attention.  Finally, something has caught Congress’ serious attention.

On June 18, 2019, Facebook announced the creation of Calibra, a newly formed subsidiary that will provide wallet services for Libra, a Facebook-backed cryptocurrency planned to launch in 2020.  The Libra white paper outlines an initially “permissioned” (i.e., private) crypto-payments system that, at first, will be maintained by a group of 28 institutions.  This founding consortium will include major fintech and credit card companies, venture capital firms, and several nonprofit organizations.  As  self-described, the payment network will be “built on a secure, scalable, and reliable blockchain,” which is “backed by a reserve of assets designed to give it intrinsic value” and “governed by the independent Libra association.”

Make no mistake, though, Facebook is driving Libra’s global rollout and is admittedly “expected to maintain a leadership role through 2019.”  But if everything goes well in launching this new cryptocurrency, Facebook’s “leadership role” in the Libra association is likely to extend far beyond a year  With its approximately 2.4 billion users per month, only a fraction of Facebook patrons need open a Calibra wallet to make Facebook the preeminent force in a Libra economy.

Moreover, considering the billions of Facebook account holders that might opt to transact in Libra rather than U.S. dollars (or other fiat currencies), Chairman Powell of the Federal Reserve Board has expressed concern that the Libra network could quickly become a systemically important financial institution with the power to affect global financial stability.  That’s a jarring prospect for Congress, made all the more fraught with perceived peril specifically because Facebook is the face of Libra. So shaken, the House Committee on Financial Services called for a “moratorium” on developing the Libra network any further.

Congress does not trust Facebook.  Not even a little.  The recent oversight hearings targeting Libra make the misgivings clear.

Before the Senate Banking Committee, a senior Facebook executive “faced a dais of almost unanimous skepticism” where the “bipartisan opposition to Libra [was] on full display.”  As described by the Wall Street Journal, “the hearing in part showed the toll of a series of missteps and scandals over the past several years that have dented [Facebook’s] reputation.”

Senator Sherrod Brown, an Ohio Democrat, pulled no punches.  “Facebook’s motto is to move fast and break things,” Brown said.  “They’ve moved fast and are helping to undermine our democracy.  Now they are expecting us to trust them with our paychecks.”  He warned that “through scandal after scandal” Facebook “doesn’t deserve our trust” and that “[w]e’d be crazy to give [Facebook] a chance to experiment with people’s bank accounts.”

Republican Senator Martha McSally from Arizona echoed that sentiment.  In a verbal slap to Facebook, she made her suspicions succinctly clear.  “I don’t trust you guys,” she said.

The House Financial Services Committee held its own Libra hearing the following day.  One reporter characterized the “tone” of that examination as “far more harsh” than the Senate’s inquiry.  Another journalist branded the hearing as “combative.”  Like the senators before them, members of the House committee “expressed skepticism over Facebook’s decision to delve into digital currency and financial services before it tackled other problems around privacy and election meddling.”  Their comments ranged from the critical to the hysterical.

Republican Representative Ann Wagner from Missouri voiced her concern “that a 2020 launch date demonstrates deep insensitivities around how Libra could impact our national security, the global financial system, the privacy of people across the globe, criminal activity and international human rights.”  Congressman Andy Barr, a Republican from Kentucky, confirmed some of the same fears when he asked Facebook’s witness to tell him “how Libra will not undermine sovereign currencies and the power of central banks.”

Congresswoman Carolyn Maloney, a Democrat from New York and senior committee member, flatly stated that, “I don’t think [Facebook] should launch Libra at all because the creation of a new currency is a core government function.”  And Representative Brad Sherman, a California Democrat, apparently went over the edge when he opined that Libra “may do more to endanger America” than the 9/11 attacks.

The irony of this seemingly dyed-in-the-wool distrust for Libra should not be lost on anyone.   As those working in the fintech space know well, it is “not uncommon for those associated with cryptocurrency to claim that the blockchain replaces trust.” Rather than placing trust in a financial intermediary (like a bank), the argument goes, cryptocurrency users can instead rely on the objective integrity of “unchangeable mathematical algorithms” and a decentralized, redundant, and therefore incorruptible system of stored data.  Blockchain evangelists have used the promise of a trustless system as a “rallying cry” for those seeking “to completely eliminate trust from monetary relations.”

Others take a more “nuanced” view—that blockchains “don’t actually eliminate trust,” but instead “minimize the amount of trust required from any single actor in the system.”  That is to say “a transaction on the blockchain involves shifting the trust that would otherwise repose in a specific trusted intermediary . . . and instead placing that trust in the underlying blockchain system.”

Yet common sense tells us that blockchains are like any other technological system.  They “combine software code and human activity,” and it’s “not enough to trust the computers, which, after all, are built and programmed by people.”   By all indications, Congress would agree.

So, what should we expect to come?

Presently, regulation of cryptocurrency in the United States falls principally to state authorities (with some participation by the federal Treasury Department’s Financial Crime Enforcement Network) under the rubric of money transmission licensing.  Generally, that regulatory structure has been successful, as far as it goes.  To varying degrees, these state agencies supervise the safety and soundness of cryptocurrency exchanges and wallet companies, including their anti-money laundering efforts.

But state licensing of money transmitters simply regulates the behavior of market actors (cryptocurrency traders and custodians), not the market itself (cryptocurrency).  Thus, state money transmission licenses provide no controls over the volume and value of currencies—crypto or fiat—and the resulting economic stability.  The potential magnitude of Libra as a global currency, and the accompanying systemic risks, finally brought that obvious truth into sharp focus for Congress and federal financial regulators alike.

For many in Congress, it seemingly boils down to this:  federal law must now take seriously the broad implications of blockchain technology and cryptocurrency and regulate them responsibly.  As with all complex legislative efforts, the project will require a careful balancing – here, between promoting technological innovation and mitigating financial risk.  Any other path cannot be trusted.

The post Any Press is Good Press: Libra and the Regulatory Awakening appeared first on Washington Legal Foundation.

Categories: Latest News

Executive Session

U.S. Sen. Roger Wicker, R-Miss., chairman of the Committee on Commerce, Science, and Transportation, will convene an executive session on Wednesday, July 24, 2019 at 2:30 p.m. in Hart Senate Office Building 216 to consider the following legislative measures and nominations.

Cantwell on Dickson Nomination to FAA: “Not the Right Person for the Safety Culture We Need”

Today U.S. Senator Maria Cantwell (D-WA), the Ranking Member of the Senate Commerce, Science, and Transportation Committee, took to the Senate floor in opposition to Stephen Dickson’s nomination to head the Federal Aviation Administration (FAA).

“I rise today to speak in opposition to the nomination of Stephen Dickson to be the next administrator of the FAA. I have said that it is very important that in this day and age, when it comes to aviation, safety must always be our top priority,” Ranking Member Cantwell said. “We've considered Mr. Dickson's nomination, his record, an ongoing case of a whistleblower retaliation. And given all of that, it is clear to me he is not the right person for the safety culture that we need today at the FAA.”

Last month, CNN was first to report on Mr. Dickson’s role in the alleged retaliation against First Officer Karlene Petitt, a Delta Air Lines pilot with over 40 years of flying experience. After raising serious safety concerns with Mr. Dickson and several other senior Delta executives, First Officer Petitt was sent to a company-selected doctor who incorrectly diagnosed her with bipolar disorder and grounded her from flying for 18 months—a move she alleges was related to her status as a whistleblower at Delta. Mr. Dickson failed to disclose this troubling episode to the Commerce Committee, and then later tried to minimize his role in the episode but refused to acknowledge any error on his or Delta’s part in First Officer Petitt’s treatment.

“Can you imagine, as a whistleblower, bringing up concerns, and as a pilot flying for many years, and instead of being paid attention to, be sent for a psychiatric evaluation? Just a few months later, after First Officer Petitt continued to try to raise her concerns, that’s exactly what happened. Delta and Mr. Dickson removed her from duty and required her to undergo a mental health evaluation and forced her to protect her career and her reputation,” Ranking Member Cantwell said.

The doctor chosen for this sensitive task by Delta had serious red flags, raising the question of why he was hand-picked and paid an exorbitant fee for what turned out to be a consequential incorrect diagnosis. Just two weeks ago, new reporting from CNN showed that this doctor was already the subject of an investigation in the State of Illinois for his conduct in a totally separate case involving a Delta pilot. His line of questioning with First Officer Petitt—as detailed in the documents made available to the Commerce Committee—are extremely troubling as well.

“For example, the doctor cited that just because Officer Petitt had three kids, a job, and helped her husband with his career, she must be manic,” Ranking Member Cantwell said. “I don't know about you, Madam Chair, but to me it just sounds like being an American woman today – juggling many things. The psychiatrist even had the nerve to insist to ask when the first officer was breast-pumping milk for her children. That's the kind of questions that the officer had to answer?”

Mr. Dickson’s nomination also had the dubious distinction of being the first FAA nominee to receive a party-line vote out of committee.

“It is distressing to me that Mr. Dickson advanced out of committee on just a party line vote. We’ve never had a partisan vote on an FAA nominee in the past, and I believe that we should have found consensus on a nominee for the FAA, given all of the concerns the public has about flying safety,” Ranking Member Cantwell said.

On the eve of that party-line vote in committee, Captain Chesley “Sully” Sullenberger came out in opposition to Dickson’s nomination, imploring senators to oppose the nomination.

The transcript of Ranking Member Cantwell’s full statement is available HERE.

Copyright

© 2018 Women Construction Owners & Executives USA
WCOE grows your contacts, contracts & bottom line