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The Case for Uniform Standards Grows as States Sew More Laws into Patchwork of Data-Privacy Regulations

WLF Legal Pulse - Thu, 09/26/2019 - 4:54pm

By Boyd Garriott, an Associate, Megan Brown, a Partner, and Wes Weeks, an Associate, with Wiley Rein LLP in Washington, DC.

Businesses in the United States face a patchwork of different state privacy and data security laws—a patchwork that is only expected to grow in the coming years.  These laws differ state by state and often include vague requirements, such as demanding “reasonable” cybersecurity controls.  With this multiplicity of state laws comes the specter of significant damages, stemming from statutorily granted private rights of action to sue.  This collection of uncertain and—often—excessively punitive state laws can be a nightmare for businesses with little clear benefit to consumers.  Luckily, this status quo is not set in stone.  Federal preemption—either via a comprehensive federal privacy law or through the courts—could solve these problems and encourage a uniform national approach to an inherently interstate digital economy.

The State Privacy Landscape Is Complex and Is Worsening

While federal policymakers and agencies consider privacy regulation, states are taking action—and not necessarily in ways that are good for business.

Take, for example, data breach laws. Every state, the District of Columbia, Guam, Puerto Rico, and the Virgin Islands have data breach notification laws.1  Jurisdictions impose a wide variety of requirements.  For example, in New York, post-breach disclosure requires (1) the contact information for the business and (2) a description of information that was improperly obtained.2  Happen to also operate in Wyoming?  There, a business must disclose:

  • a description of the information that was improperly obtained;
  • a general description of the breach;
  • the approximate date of the breach;
  • the general actions taken to protect from further breaches;
  • advice to consumers to remain vigilant by checking their finances;
  • whether the notification was delayed as a result of law enforcement investigation; and
  • a toll-free number from which consumers can obtain the toll-free numbers and addresses of credit-reporting agencies.

It’s not just the content of the breach notification that varies across state lines.  States have different triggers for when a notification is even required.  In Colorado, businesses must notify consumers if a student ID number is released with a first initial and last name.3  Other state laws are triggered instead by release of biometric identifiers, mother’s maiden name, or date of birth.4  Some states require businesses to notify the state attorney general, others the state’s consumer protection agency.  Still others require businesses to notify credit-reporting agencies—some within a specific number of days (or hours) and others “without unreasonable delay.”  For organizations operating in multiple states, this patchwork is vexing.  Compliance with varied statutes imposes serious burdens and costs on organizations that handle data.

In addition to data breach laws, states are enacting new privacy statutes.  The 2018 California Consumer Privacy Act (“CCPA”) grants a number of privacy “rights” to consumers, including the right to request that a business delete personal information about the consumer (with numerous exceptions) and the right to direct a business to not sell consumer information to a third party.5  Some businesses are subject to additional obligations, like maintaining “a clear and conspicuous link” on the business’s homepage to facilitate these rights.

Not all state privacy laws are as broad as the CCPA.  Maine passed a privacy bill that prohibits Internet Service Providers from using, selling, or distributing subscribers’ data without their “express, affirmative consent.”6  In May of this year Nevada passed a law that requires operators of Internet websites or online services that collect personally identifiable information (“PII”) to comply with requests by consumers to not sell their data.7  Vermont enacted a comprehensive “data broker” law last year that requires data brokers to register with the state Attorney General, file annual reports about their practices, and develop an information security program.8

Additional legislation is pending that would continue to restructure the privacy landscape of the United States.  S. 120 in Massachusetts would, like the CCPA, give consumers multiple new privacy rights, including the right to have personal information deleted.  It would also require businesses that collect personal information to notify consumers of what information it is collecting, why it is collecting the information, consumers’ substantive rights granted by the statute, and more.  Significantly, the law would create a private right of action for consumers against businesses with liquidated damages of up to $750 “per consumer per incident” and without showing any “loss of money or property.”  S. 224 in New York would similarly create new substantive consumer privacy rights and a private right of action for violations of the law.

Two states have passed Internet of Things (“IoT”) security laws, opening up another area for divergent state regulation.  Oregon and California require manufacturers of IoT devices to equip connected devices with “reasonable security features.”9  However, there are notable distinctions between the laws.  The definition of “connected device” is broader in California:  California regulates “any device, or other physical object that is capable of connecting to the Internet, directly or indirectly, and that is assigned an Internet Protocol address or Bluetooth address,” whereas Oregon focuses on devices that are “used primarily for personal, family or household purposes.”  As others have noted, “the Oregon law applies to fewer devices and to a narrower set of manufacturers.”10  Such differences will become more pronounced if additional states pass IoT security laws, imposing technical mandates on manufacturers of devices that are created, sold, and managed across state lines.

 These Laws Impose Real Costs on Businesses and Innovators, Large and Small

 These laws drive up costs, imposing a drag on economic actors who shift resources to compliance

Complying with this assortment of diverse state laws imposes real and significant costs on the private sector, including small business and the innovation base.  In preparation for the European Union’s General Data Protection Regulation (“GDPR”), American Fortune 500 companies spent a combined $7.8 billion.11  And while Fortune 500 companies might have multi-billion-dollar resources to foot the compliance bill, smaller companies will have a significantly tougher time.  Indeed, earlier this year, a report from the Connected Commerce Council found that nearly half of all businesses agreed with the statement:  “At this stage, the business wouldn’t have the resources to cope with significant changes to data privacy regulations.”12

These laws create operational inefficiencies and distort interstate markets for data, products, and services

The burdens of varied regulations go far beyond out of pocket expenses for new policies and legal bills.  Businesses are evaluating and changing multi-state operations to account for shifting state obligations, resulting in the export of California’s legal preferences across the country.  This can affect how companies collect, store, and use data, and affect the architecture of their information systems and networks.  It also affects organizations’ consumer disclosures and websites, which may have to become more complex to address varied state rules.  State inconsistency in regulating products like IoT or technology like biometrics and facial recognition can also impact product and service design, as well as the marketing, sale, and use of technology, products, and services.

Litigation risk will drive up costs and chill innovation

In addition to enormous compliance costs and the distortion of inter-state production, distribution, and marketing, several states are choosing to expose companies to significant legal liability—even where they have taken precautions to protect consumer data.  For example, Illinois’ Biometric Information Privacy Act (“BIPA”) requires businesses to comply with several “procedural” requirements, such as obtaining written consent before collecting biometric identifiers and publishing a schedule for destroying biometric information.13  BIPA also provides a private right of action—with damages ranging from $1,000 to $5,000 per violation—without any showing of actual harm

The risk from this sort of statute is substantial.  Just last month, in Patel v. Facebook, 932 F.3d 1264 (9th Cir. 2019), the Ninth Circuit held that plaintiffs could bring a class action against Facebook over the social network’s use of “Tag Suggestions,” a feature where Facebook uses facial recognition technology to suggest users to “tag” in photographs uploaded to the website.  The Ninth Circuit determined that the suit was appropriate even where the plaintiffs were not harmed, had the opportunity to opt out, and the lead plaintiff admitted that he thought Tag Suggestions was a “nice feature.”  As the authors wrote at the time:  “There are hundreds of pending BIPA suits.  Facebook is looking at thousands of dollars in liquidated damages per violation.  Sitting at just over 2 billion users, that can add up fast.”14  These astronomical damages appear to be here to stay.  With the go-ahead by the Ninth Circuit, BIPA suits are likely to proliferate at an even faster rate.  Moreover, both Massachusetts’ S. 120 and New York’s S. 224—if passed in their current form—would allow for private rights of action without requiring a showing of harm.  These regimes create significant risks for businesses of all sizes—even if they are doing a great job at protecting consumers. 

Congress or the Supreme Court Should Address this Problem.

Two entities could significantly alleviate the patchwork problem:  Congress and the courts.

First, Congress could solve this problem by passing an expressly preemptive federal privacy law.  Article VI, Paragraph 2 of the U.S. Constitution provides that the “Laws of the United States” are “the supreme Law of the Land.”  Known as the Supremacy Clause, this provision grants Congress the authority to preempt state laws.  Congress could use this authority to pass a comprehensive privacy law that would preempt the patchwork of state laws described above.  In so doing, it could give businesses a single standard with which to comply—instead of 50—and therefore ensure more consistent compliance with evolving privacy standards. 

While Congress is actively working on federal privacy legislation, it remains to be seen whether that work will materialize into a bill.  Moreover, some in Congress are opposed to preemption, arguing that it could water down privacy protections. Opposition to preemption is driven in part by a concern that government enforcement is inadequate, but also by attorneys and others who benefit from large settlements and damages awards.  The legal system is no stranger to abusive litigation over “injury-free” technical violations that offer a reward of statutory damages, as the U.S. Chamber’s Institute for Legal Reform has shown in research papers on the Telephone Consumer Protection Act and privacy class actions.15

Second, federal courts could find that state privacy and cybersecurity requirements violate the Dormant Commerce Clause.  The Dormant Commerce Clause prohibits states from imposing substantial burdens on interstate commerce because such burdens undermine the policy of free trade between the states articulated by the Constitution’s grant of authority to Congress to regulate interstate commerce.  The Internet is the quintessential “instrumentality of commerce” and should not lightly be regulated by states.16 

Most of the digital economy is interstate and the interstate movement and use of data and technology facilitate additional interstate commerce.  According to the United States Department of Commerce’s Bureau of Economic Analysis,17 “the digital economy” is made up of “three major types of goods and services:

  • the digital-enabling infrastructure needed for an interconnected computer network to exist and operate;
  • the e-commerce transactions that take place using that system; and
  • digital media, which is the content that digital economy users create and access.”

State privacy and security laws affect each of these categories. 

The Supreme Court has held that laws regulating out-of-state activity or that substantially burden interstate commerce can be unconstitutional.  For example, in Bibb v. Navajo Freight Lines, Inc., 359 U.S. 520 (1959), it struck down an Illinois statute that required certain mudguards on trucks and trailers on Illinois highways.  Finding that the statute conflicted with other state regulations and would have severely disrupted trucking operations through Illinois, the Court held that the law “place[d] an unconstitutional burden on interstate commerce.” 

Here, courts could find that state privacy laws substantially burden interstate commerce and are unconstitutional under the Dormant Commerce Clause.  Consider, for example, the Nevada law described above that requires website operators to establish a way for consumers to request that the website operator not sell their data.  The law applies to any website operator that (1) collects and maintains PII from Nevada residents; and (2) “[p]urposefully direct[] its activities toward” Nevada.  This law will subject most public-facing websites that engage in any kind of nationwide commerce to comply with the statute’s procedural requirements.  Regulating Internet communications and commerce targets a channel that is at least as fundamental to our system of interstate commerce now as the interstate highway system was when the Supreme Court decided Bibb.  Likewise, regulation of the handling and use of data that is collected, moved, used, and stored across jurisdictional lines targets the lifeblood of the Internet economy. 


The status quo is challenging and likely to worsen for organizations trying to comply with a shifting array of obligations.  Companies face exploding compliance costs and may have to adjust interstate operations, manufacturing, marketing, and distribution of their products and services.  Nationwide markets may be effectively regulated by one or a few states.

Worse, the specter of ever-growing statutory damages from lawsuits exploiting this patchwork of state privacy and security laws looms large.  Things are likely to get worse if states are left unchecked.  States—including New York, with its population of nearly 20 million—are contemplating far-reaching privacy laws with private rights of action.

Immeasurable dead-weight losses to the economy can be avoided, however.  The most direct course of action would be for Congress to pass preemptive federal privacy and data security legislation.  Congress can clarify the primacy of federal superintendence over the inherently interstate digital economy.  In doing so, Congress should recognize the mistake it made with statutory damages in the TCPA and reject calls for enforcement of privacy and data security through private litigation.  However, Congress need not be the only actor.  Regulated entities can and should present courts with the opportunity to protect the interstate digital economy from disruptive and burdensome state privacy laws that unconstitutionally burden interstate commerce.

The post The Case for Uniform Standards Grows as States Sew More Laws into Patchwork of Data-Privacy Regulations appeared first on Washington Legal Foundation.

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The Fuss over Stare Decisis: Four October Term 2018 Rulings Open Window to Justices’ Current Thinking

WLF Legal Pulse - Thu, 09/26/2019 - 4:53pm

By Lawrence S. Ebner, founder of Capital Appellate Advocacy PLLC, a boutique law firm that provides independent advocacy for businesses and industries in the Supreme Court, federal courts of appeals, and state appellate courts.

Late last term, the U.S. Supreme Court issued several decisions that reveal, in a variety of contexts, the justices’ current thinking on the role and application of stare decisis. That “let the decision stand” doctrine is a fundamental precept of American jurisprudence. The Court has explained that stare decisis “promotes the evenhanded, predictable, and consistent development of legal principles, fosters reliance on judicial decisions, and contributes to the actual and perceived integrity of the judicial process.” Payne v. Tennessee, 501 U.S. 808, 827 (1991). But does it? Or in reality, has stare decisis become an expedient for justices and litigants who, for whatever reason, want the Court to hang onto deeply flawed precedents?  

Franchise Tax Board of California v. Hyatt, 139 S. Ct. 1485 (2019)

In a 5 to 4 decision, the Court overruled Nevada v. Hall, 440 U.S. 410 (1979), which “held that the Constitution does not bar private suits against a State in the Courts of another State.” According to Justice Thomas’s majority opinion, Hall “is contrary to our Constitutional design and the understanding of sovereign immunity shared by the States that ratified the Constitution.” Hyatt, 139 S. Ct. at 1492.

The petitioner, who filed a Nevada state-court tort suit against California’s tax collection agency, defended Hall on the basis of stare decisis. The majority opinion explains, however, that “stare decisis is not an inexorable command [and] is at its weakest when we interpret the Constitution because our interpretation can be altered only by constitutional amendment.” Id. at 1499. Citing “the Court’s precedents” on stare decisis, the majority relied on three factors in “deciding whether Nevada v. Hall should be overruled”: “the quality of the decision’s reasoning; its consistency with related decisions; [and] legal developments since the decision.” Id. On the first factor, the majority opinion discusses at length why Hall “misreads the historical record” concerning interstate sovereign immunity. Id. at 1492.

Justice Breyer dissented because he could “find no good reason to overrule Hall.” Id. at 1500 (Breyer, J. dissenting). He argued that “stare decisis requires us to follow Hall [because] [o]verruling a case always requires ‘special justification’ [and] [t]he majority does not find one,” including as to “the relevant history” on interstate sovereign immunity. Id. at 1505. Justice Breyer asserted that “an argument that we got something wrong—even a good argument to that effect—cannot by itself justify scrapping precedent.” Id. The “very fact [that] Hall is not obviously wrong [shows] that [the] majority is obviously wrong to overrule it.” Id. Justice Breyer expressed concern that it is “dangerous to overrule a decision only because five Members of a later Court come to agree with earlier dissenters on a difficult legal question.” Id. at 1506. He openly wondered “which cases the Court will overrule next.” Id. 

Gamble v. United States, 139 S. Ct. 1960 (2019)

The Court declined to overturn “170 years of precedent” concerning the “dual-sovereignty doctrine,” an interpretation of the Constitution’s Double Jeopardy Clause. Gamble, 139 S. Ct. at 1964. Under that doctrine, “two offenses are not ‘the same offence’ for double jeopardy purposes if prosecuted by different sovereigns.” Id. (quoting Heath v. Alabama, 474 U.S. 82, 92 (1985)).

Justice Alito’s 7 to 2 majority opinion explains that under the dual-sovereignty doctrine, “a State may prosecute a defendant under state law even if the Federal Government has prosecuted him for the same conduct under a federal statute.” Id. Or as in Gamble, “the reverse may happen.” Id. Gamble pleaded guilty to an Alabama felon-in-possession-of-a-firearm offense. Later, he pleaded guilty to a federal offense arising out of the same instance of firearms possession, but preserved his right to challenge the denial of his motion to dismiss the federal indictment on double-jeopardy grounds. Citing the dual-sovereignty doctrine, the Eleventh Circuit affirmed denial of Gamble’s motion to dismiss.

Gamble asked the Supreme Court “to overrule the dual-sovereignty doctrine.” He contended that “the Double Jeopardy Clause must forbid successive prosecutions by different sovereigns because that is what the founding-era common law did.” Id. at 1964-65. The majority opinion concludes, however, that Gamble “failed to meet [his] particular burden under stare decisis,” in part because “the historical evidence [he] assembled” on the Double Jeopardy Clause “is feeble.” Id. at 1965.

Significantly, Justice Thomas concurred that the dual-sovereignty doctrine should be preserved, but authored a lengthy separate opinion “to address the proper role of the doctrine of stare decisis.Id. at 1981 (Thomas, J. concurring). He observed that “[t]he Court currently views stare decisis as a principle of policy that balances several factors to decide whether the scales tip in favor of overruling precedent.” Id. In Justice Thomas’s view, however, the Court’s “multifactor approach to stare decisis invites conflict with [the Court’s] constitutional duty” because “it elevates demonstrably erroneous decisions . . . over the text of the Constitution and other duly enacted federal law.” Id. at 1988. Justice Thomas asserted that “we should not invoke stare decisis to uphold precedents that are demonstrably erroneous.” Id. at 1989. He explained that “[w]hen faced with a demonstrably erroneous precedent, my rule is simple: We should not follow it.” Id. at 1984. According to Justice Thomas, “[t]he true irony of our modern stare decisis doctrine lies in the fact that proponents of stare decisis tend to invoke it most fervently when the precedent at issue is least defensible.” Id. at 1988.

Justices Ginsburg and Gorsuch each filed dissenting opinions. The latter dissent argues that although the stare decisis doctrine “has many virtues . . . blind obedience to stare decisis would leave this Court still abiding grotesque errors.” Id. at 2005 (Gorsuch, J. dissenting). Along the same lines, in Gundy v. United States, 139 S. Ct. 2116 (2019) (holding that a statutory delegation to the Attorney General in connection with sex offender registration is constitutional), Justice Gorsuch argued in a dissenting opinion that an earlier relevant precedent “would make a difference only if it bound us as a matter of stare decisis to adopt an interpretation inconsistent with the statute’s terms. And, of course, it does no such thing.” Id. at 2148 (Gorsuch, J. dissenting).

Knick v. Township of Scott, Pennsylvania, 139 S. Ct. 2162 (2019)

In another 5 to 4 decision, this one authored by Chief Justice Roberts, the Court overruled Williamson County Regional Planning Commission v. Hamilton Bank of Johnson City, 473 U.S. 172 (1985). Williamson held that a “takings plaintiff” must unsuccessfully seek just compensation under state law in state court in order to have a ripe federal takings claim that can be filed in federal court. But a subsequent case, San Remo Hotel, L.P. v. City and County of San Francisco, 545 U.S. 323 (2005), held that a state court’s resolution of a state-law claim for just compensation generally has a preclusive effect in any subsequent federal court action. The Court “granted certiorari to reconsider the holding of Williamson.” Knick, 139 S. Ct. at 2169.

The majority opinion in Knick indicates that this “San Remo preclusion trap”—a “Catch-22”—“should tip us off that the [Williamson] state-litigation requirement rests on a mistaken view of the Fifth Amendment.” Id. at 2167. The opinion discusses at length why stare decisis does not “counsel[] in favor of adhering to the [Williamson] decision, despite its error.” Id. at 2177. Applying three well-established stare decisis factors to the question of whether Williamson should be overruled, the Court explained that (i) the decision’s “reasoning was exceptionally ill-founded” and “has come in for repeated criticism” by justices and scholars, (ii) its state-litigation requirement “has proved to be unworkable in practice,” and (iii) “there are no reliance interests on the state-litigation requirement.” Id. at 2178.

Justice Kagan wrote a dissenting opinion, which the majority opinion characterizes as presenting “extreme assertions regarding our application of the principle of stare decisis.Id. at 2179. Her dissent argues that “Williamson should stay on the books because of stare decisis.Id. at 2189 (Kagan, J. dissenting). Citing stare decisis case law, she explains that “[a]dherence to precedent is a foundation stone of the rule of law.” Id. According to Justice Kagan, “it is not enough that five Justices believe a precedent wrong. Reversing course demands a special justification [and] [t]he majority offers no reason that qualifies.” Id. In particular, she contended that “evolution in a way that a decision is described has never been a ground for abandoning stare decisis.” Id. at 2190. “What is left is simply the majority’s view that Williamson County was wrong.” Id. 

Kisor v. Wilkie, 139 S. Ct. 2400 (2019)

The Court unanimously declined to overrule “Auer deference” (sometimes referred to as “Seminole Rock deference”), a prudential doctrine which “defer[s] to agencies’ reasonable readings of [their own] genuinely ambiguous regulations.” Kisor, 139 S. Ct. at 2408; see Auer v. Robbins, 519 U.S. 452 (1997); Bowles v. Seminole Rock & Sand Co., 325 U.S. 410 (1945). Justice Kagan’s lead opinion indicates that “Auer deference retains an important role in construing agency regulations,” but has “its limits.” Justice Kagan continued, “Auer deference is sometimes appropriate, and sometimes not [and] [w]hether to apply it depends on a range of considerations.” Id.

The petitioner in Kisor was a veteran denied certain disability benefits by the VA based on its interpretation of one of its own regulations. The lead opinion explains that even if Kisor convinced the Court “that Auer deference is wrong,” he then “must overcome stare decisis—the special care we take to preserve our precedents.” Id. at 2418. “[A]ny departure from the [stare decisis] doctrine demands ‘special justification’—something more than ‘an argument that the precedent was wrongly decided.’” Id. at 2422 (quoting Halliburton Co. v. Erica P. John Fund, 573 U.S. 258, 266 (2014)). But according to Justice Kagan’s opinion, “Kisor does not offer the kind of special justification need to overrule Auer, and Seminole Rock, and all our many other decisions deferring to reasonable agency constructions of ambiguous rules.” Id. at 2418.

More specifically, Justice Kagan’s opinion declares that “stare decisis cuts strongly against Kisor’s position.” Id. at 2422. “First, Kisor asks us to overrule not a single case, but a long line of precedents—each one reaffirming the rest and going back 75 years or more. … Deference to reasonable agency interpretations of ambiguous rules pervades the whole corpus of administrative law.” Id. “Second, because that is so, abandoning Auer deference would cast doubt on many settled constructions of rules.” Id.  “And third, even if we are wrong about Auer, Congress remains free to alter what we have done.” Id. The Court remanded the case back to the court of appeals for further consideration of whether Auer deference is warranted as to the VA’s interpretation of the regulation at issue.

Justice Gorsuch filed a lengthy separate opinion, concurring only in the judgment. The opinion is highly critical of Auer, and the limitations that a Kisor majority placed on its application. It also strongly criticized the Court’s reliance on stare decisis to avoid overruling the Auer doctrine. Justice Gorsuch contended that “today’s decision is more of a stay of execution than a pardon. The Court cannot even muster five votes to say that Auer is lawful or wise. Instead, a majority retains Auer only because of stare decisis.Id. at 2425 (Gorsuch, J. dissenting).

According to Justice Gorsuch, “far from standing by that precedent, the majority proceeds to impose so many new and nebulous qualifications and limitations on Auer . . . the doctrine emerges maimed and enfeebled—in truth, zombified.” Id. “[W]hether we formally overrule Auer or merely neuter it, the results in most cases will prove the same. . . . All to what end? So that we may pretend to abide by stare decisis?” Id.

In Justice Gorsuch’s view, “[t]here are serious questions about whether stare decisis should apply here at all.” Id. at 2443-44. “While pretending to bow to stare decisis, the majority goes about reshaping our precedent in new and experimental ways.” Id. at 2443. Justice Gorsuch poses the following question: “If stare decisis allows us to so freely remodel Auer, it’s hard to see on what account it might require us to retain it.” Id. at 2445. He asserted that when the traditional factors for applying stare decisis are taken into account, “all of these considerations weigh strongly in favor of bidding farewell to the [Auer] doctrine rather than keeping it on life support.” Id. Justice Gorsuch contended, for example, that “no persuasive rationale supports Auer¸” and that “the explosive growth of the administrative state over the last half-century has exacerbated Auer’s potential for mischief.” Id. at 2446. In response to one of Justice Kagan’s reasons for applying stare decisis, he suggested that “decisions construing particular regulations might retain stare decisis effect even if the Court announced that it would no longer adhere to Auer’s interpretive methodology.” Id. at 2447.

In a final rebuke to retaining Auer deference on the ground of stare decisis, Justice Gorsuch concluded his separate opinion with a challenge to the Court:  “If today’s opinion ends up reducing Auer to the role of a tin god—officious, but ulti­mately powerless—then a future Court should candidly admit as much and stop requiring litigants and lower courts to pay token homage to it.” Id. at 2448. 


The foregoing recent cases (including the concurring and/or dissenting opinions that they encompass) provide several justices’ insights on what they consider to be the proper role and application of stare decisis. Justices Thomas and Gorsuch in particular appear to believe that the Court’s reliance on stare decisis in deciding cases has strayed too far, at least where the reasoning or holding of a prior case is demonstrably flawed. The extent to which stare decisis will continue to be used in the future to preserve precedents whose wisdom is merely disputable, however, remains to be seen.

The post The Fuss over <em>Stare Decisis</em>: Four October Term 2018 Rulings Open Window to Justices’ Current Thinking appeared first on Washington Legal Foundation.

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Consequences Must Be Carefully Assessed before PFAS Are Pushed into the Superfund Quagmire

WLF Legal Pulse - Thu, 09/26/2019 - 3:48pm

As the Carter Administration neared its end, and under pressure to respond after the Love Canal revelations, Congress rushed the Comprehensive Environmental Response, Compensation, and Liability Act (CERCLA, or more commonly, Superfund) into law in December 1980. Despite good intentions, robust amendments, and billions of public and private dollars spent, hundreds of thousands of properties remain contaminated with hazardous substances as CERCLA nears its 40th anniversary. Yet, in 2019 and with little debate, scores of professional activists and elected officials want to subject another group of man-made chemicals to the law’s deeply flawed process. 

Per- and poly fluoro alkyl substances (PFAS) are a class of several thousand chemicals. A stable structure makes PFAS chemicals such as PFOA and PFOS ideal for food packaging, cookware production, textile- and leather-product waterproofing, and firefighting. PFAS structures are so stable, in fact, that despite their being largely phased out at the turn of this century, traces of PFOS, PFOA, and others persistently turn up in testing of soil and water, as well as animals and humans. 

Scientific views differ on whether, and at what level, the presence of PFAS pose environmental and public-health risks. Studies of workers exposed to PFAS chemicals reach divergent conclusions on an association between the substances and health harms. No studies have established and cause-and-effect relationship for any health condition. Federal agencies have conducted a limited amount of research, but the Centers for Disease Control emphasized in a 2018 report that “[f]inding a measurable amount [of PFAS] in blood does not imply that the levels . . . cause an adverse health effect.”

Over the past several years, many states and localities have conducted PFAS testing, prompting some states to lower the regulatory tolerance levels for the chemicals’ presence in soil and water. Individuals and government entities, some represented by private contingent-fee counsel, have sued PFAS manufacturers and users under state-tort theories such as trespass, negligence, and public nuisance. One firefighter filed a class action on behalf of 99% of the nation’s population seeking monetary damages and the creation of an “independent science panel.” A July 18 WLF Webinar addressed these and other aspects of the PFAS regulatory and litigation landscape.

Through one proposal being considered at the federal level, Congress would order EPA to designate the entire class of PFAS as hazardous under CERCLA. If PFAS in fact threaten public health and the environment, CERCLA is an entirely inapt tool for accomplishing the rapid response activists and elected officials demand.

The Superfund process has become more about assigning blame and apportioning costs than hazardous-waste cleanup. The search for “potentially responsible parties” (PRPs) may begin with the targeted substance’s manufacturer, but it rarely ends there, leading to litigation and negotiation that can drag on for years. That’s great for lawyers, but not good for the environment or public health. In 1994, EPA Administrator Carol Browner said of CERCLA, “A lot of time and money is taken up with companies suing each other over how much they owe to clean up a particular site.” The problem persists. 

A hazardous designation for every PFAS, rather than one that focuses on specific, more prevalent substances like PFOA or PFOS, could seriously complicate remediation. Overwhelmed by the number of chemicals, regulators will struggle to single out those that pose the most risk. The CERCLA designation proposal would lead to the designation of hundreds, if not thousands, of PFAS sites as brownfields, areas that possibly contain hazardous substances and could at some point become priorities. There are over 450,000 such sites stuck in a regulatory state of purgatory.  Those vacant properties, many in urban areas, lie mostly dormant. Their Scarlet Letter status spooks real estate developers and lenders alike from investing capital. Perhaps PFAS hazardous-designation supporters should ask mayors what they think before imposing yet more brownfields on their cities.

A massive number of PRPs could be on the hook for cleanup, natural resources damages, and other costs. Under CERCLA, EPA can hold each entity jointly and severally liable for entire Superfund sites. The Environmental Working Group (EWG), which supports CERCLA for PFAS, declares in a September 18 analysis that affirmative defenses and EPA “enforcement discretion” will protect public utilities and other “non-polluters” from federal action. That’s a quaint notion. Once the CERCLA regulatory wrecking ball swings into action, however, no PRP can realistically rely on government to not act.  

EWG also states that “[m]ere designation does not impose any potential liability on current manufacturers and users . . . unless there has been a ‘release.’ Statutorily speaking, that’s correct. But the statement takes a decidedly cramped view of a hazardous designation’s impact. A federal law or regulation that labels something “hazardous” is catnip for the plaintiffs’ bar.  Such an official pronouncement will supercharge pending PFAS litigation and inspire a new wave of lawsuits against the many businesses that manufactured and used PFAS. We’ve seen this happen before to makers and users of lead, MTBE, and PCBs, whose CERCLA-hazardous designation fueled years of collateral public-nuisance and other state-tort litigation.

Finally, even once a business has accepted and funded a cleanup, they still remain vulnerable to state-law claims that demand additional or different remediation. Atlantic Richfield faces this conundrum in Montana, where the state supreme court awarded private landowners cleanup costs for a cleanup plan that conflicts with the EPA-directed cleanup of the Anaconda Smelter Superfund site. The company persuaded  the U.S. Supreme Court (helped by a WLF amicus brief) to review the state court’s decision. The Court will hold oral arguments on whether CERCLA preempts such state actions on December 3.

Given the many potential downsides of labeling every chemical in the PFAS class as per se hazardous, policymakers should fully debate the idea’s pros and cons before acting. CERCLA’s many shortcomings are thanks in no small part to the haste in which it was passed. As George Santayana wrote in Reason in Common Sense, “Those who cannot remember the past are condemned to repeat it.” 

Also published by Forbes.com on WLF’s contributor page.

The post Consequences Must Be Carefully Assessed before PFAS Are Pushed into the Superfund Quagmire appeared first on Washington Legal Foundation.

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SBA Management Review: Small Business Investment Company Program

House Small Business Committee News - Thu, 09/26/2019 - 11:30am

The Committee on Small Business will meet for a hearing titled, “SBA Management Review: Small Business Investment Company Program.” The hearing is scheduled to begin at 11:30 A.M. on Thursday, September 26, 2019 in Room 2360 of the Rayburn House Office Building.

This hearing will examine the SBA’s Small Business Investment Company (SBIC) Program.  As the Committee continues to explore the issue of access to capital, this hearing will provide Members the opportunity to hear directly from government and private witnesses about the program and its operations.

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

Hearing Notice 

Hearing Memo 

Witness List 


Panel One:
Mr. Joseph Shepard
Associate Administrator
Office of Investment and Innovation
United States Small Business Administration
Washington, DC

Panel Two:
Mr. Brett Palmer
Small Business Investor Alliance
Washington, DC

Mr. John Paglia
Professor of Finance
Graziadio Business School – Pepperdine University
Malibu, CA

Mr. Walt Rodgers
Chief Executive Officer
Family RV
Cincinnati, OH

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


WLF Argues in Montana Supreme Court that FELA Preempts State-Law Claims Against Railroads

WLF Legal Pulse - Wed, 09/25/2019 - 1:34pm

“Montana courts have adopted a one-of-a-kind tort system that prevents railroads from effectively defending themselves in worker-injury lawsuits.  This system defies congressional intent and should be eliminated.”
—Richard Samp, WLF Chief Counsel

Click here for WLF’s brief.

WASHINGTON, DC—Washington Legal Foundation (WLF) late yesterday called on the Montana Supreme Court to eliminate court rules that unfairly hamstring railroads in their efforts to defend personal-injury suits filed by employees. In an amicus curiae brief filed in Dannels v. BNSF Railway Co., WLF argues that the Federal Employers Liability Act (FELA), the federal law governing railroad-worker injury claims, is the exclusive vehicle for raising such claims and preempts the bad-faith tort system that Montana courts have superimposed on the one established by Congress.

Ever since 1908, FELA has provided railroad workers with an effective means of obtaining compensation for on-the-job injuries. Congress adopted FELA to replace a patchwork of state laws that often prevented injured railroad employees from obtaining any compensation. The U.S. Supreme Court has repeatedly held that FELA is an exclusive remedy; it is intended to establish nationwide, uniform standards governing compensation claims, and injured workers are not permitted to seek compensation under state law.

But for the past 20 years, Montana courts have recognized a unique bad-faith cause of action against railroads. Under Montana law, railroads owe their employees a fiduciary duty that bars them from resisting FELA claims too strongly. The result is that many injured employees in Montana file both a FELA claim and a state-law bad-faith claim seeking punitive damages. In the case now before the Montana Supreme Court, the plaintiff won a $1.7 million FELA judgment that fully compensated him for his injuries but now seeks millions more for the railroad’s alleged bad faith. WLF’s brief argues that when Congress adopted FELA it intended to preempt the entire field of railroad injury claims and thus that the state-law claims routinely recognized by Montana courts are barred under the Constitution’s Supremacy Clause.

Celebrating its 42nd year, WLF is America’s premier public-interest law firm and policy center advocating for free-market principles, limited government, individual liberty, and the rule of law.

The post WLF Argues in Montana Supreme Court that FELA Preempts State-Law Claims Against Railroads appeared first on Washington Legal Foundation.

Categories: Latest News

09/25/19 SBC Markup

House Small Business Committee News - Wed, 09/25/2019 - 11:30am

The Committee on Small Business will hold a markup of legislation to amend the Small Business Act. The markup will be held at 11:30 A.M. on Wednesday, September 25, 2019, in Room 2360 of the Rayburn House Office Building. The items that will be marked up include:

To view a livestream of the markup, click here. 

H.R. 4406, “Small Business Development Centers Improvement Act of 2019”

H.R. 4405, “Women’s Business Centers Improvements Act of 2019”

H.R. 4407, “SCORE for Small Business Act of 2019”

H.R. 4387, “To establish Growth Accelerator Fund Competition within the Small Business Administration, and for other purposes”


Markup Notice 


Fishery Failures: Improving the Disaster Declaration and Relief Process

U.S. Sen. Roger Wicker, R-Miss., chairman of the Committee on Commerce, Science, and Transportation, will convene a hearing titled, “Fishery Failures: Improving the Disaster Declaration and Relief Process,” at 10:00 a.m. on Wednesday, September 25, 2019. This hearing will examine federal and stakeholder perspectives on the fishery disaster process and how those disasters impact local communities. The hearing will also examine recent and pending disaster declarations and how the process for both declaration and relief could be improved.

Improving Air Traffic Control for the American People: Examining the Current System

U.S. Sen. Ted Cruz, R-Texas, chairman of the Subcommittee on Aviation and Space, will convene a hearing titled, “Improving Air Traffic Control for the American People: Examining the Current System,” at 2:30 p.m. on Tuesday, September 24, 2019. The hearing will examine the current state of the United States’ air traffic control (ATC) system. Witnesses will discuss challenges and highlight possible improvements to the efficiency and safety of the ATC system.

WLF Urges Advisory Committee on Civil Rules to Adopt Meaningful MDL Reforms

WLF Legal Pulse - Mon, 09/23/2019 - 11:24am

“Without meaningful reform, MDLs will continue to erode public confidence in the value and fairness of MDL proceedings.”
—Cory Andrews, Senior Litigation Counsel

Click here for WLF’s comments.

(Washington, DC)—Washington Legal Foundation (WLF) earlier today submitted comments to the Advisory Committee on Civil Rules in response to the Committee’s review of the procedures used in multi-district litigation proceedings (MDLs).

Created by Congress in 1968 to promote efficiency and conserve finite judicial resources, MDLs have not always lived up to their initial promise. By adopting ad hoc procedures calculated to avoid a trial on the merits, MDLs exert tremendous pressure—especially on defendants—for global settlement. MDLs thus encourage the filing of baseless claims. Nonetheless, a majority of all civil cases in federal court eventually end up in MDLs. As the share of cases consolidated into MDLs has risen markedly in recent years, MDLs’ many shortcomings have come into sharper focus. To address these deficiencies, WLF commends three concrete proposals to improve the efficiency and fairness of MDLs.

First, to curtail the filing of baseless claims in MDLs, WLF urges a rule mandating early evidentiary disclosures by plaintiffs bringing consolidated cases. Such a rule would not only ensure that MDL judges won’t waste valuable time on meritless claims, but it will create a strong disincentive for plaintiffs to bring such claims in the first place.

Second, because access to interlocutory appellate review is asymmetrical, WLF proposes a rule that gives any party the right to immediately appeal from the denial of broadly applicable dispositive motions under Rules 12(b)(1), 12(b)(2), 12(b)(6), or Rule 56.

Third, to increase transparency of third-party litigation-financing arrangements, WLF asks the Committee to adopt a mandatory disclosure rule. Such a rule, which could be inserted into Rule 26, would require disclosure of any agreement under which any person has a contractual right to receive money that is contingent on, or sourced from, any proceeds of the lawsuit—by settlement, judgment, or otherwise.

Celebrating its 42nd year, WLF is America’s premier public-interest law firm and policy center advocating for free-market principles, limited government, individual liberty, and the rule of law.

The post WLF Urges Advisory Committee on Civil Rules to Adopt Meaningful MDL Reforms appeared first on Washington Legal Foundation.

Categories: Latest News

Third Circuit Decision Offers Lessons for Class-Action Settlements

WLF Legal Pulse - Fri, 09/20/2019 - 3:15pm

By Frank Cruz-Alvarez, a Partner in the Miami, FL office of Shook, Hardy & Bacon L.L.P., with Melissa Madsen, Of Counsel to Shook, Hardy & Bacon L.L.P. in its Miami, FL office. Mr. Cruz-Alvarez is the WLF Legal Pulse’s Featured Expert Contributor on Civil Justice/Class Actions.

“The vista view of this case is not pretty.”  The United States Court of Appeals for the Third Circuit did not mince words when it vacated and remanded to the District Court a proposed class settlement between Google, Inc. and class members in an invasion of privacy action.  In re: Google Inc. Cookie Placement Consumer Privacy Litigation, No. 17-1480 (3d Cir. Aug. 6, 2019).

Although the Third Circuit concluded that it could not give the District Court’s order approving the settlement meaningful review based on a lack of findings, its message was clear:  the settlement terms are “troubling” and raise a “red flag,” and the District Court failed to give the Settlement Agreement “the ‘scrupulous’ examination required of a court acting as a fiduciary for absent class members.”

This invasion of privacy class action, based on the California Constitution and state law, arose from a Stanford graduate student’s 2012 allegation that Google was using “cookies” to skirt the privacy settings of internet users and track users’ information.  As the Third Circuit described the alleged offense: “an internet behemoth with unprecedented tools for monitoring private conduct told millions of Americans it would not track their personal browser history, and then it did so anyway to profit from the data.”

Under the terms of the parties’ Settlement Agreement, class members received nothing, but agreed to a broad release of all potential claims for money damages against Google.  In turn, Google agreed to pay a couple million dollars to class counsel and make a cy pres donation to certain organizations to which it was already donating money.

In remanding, the Third Circuit discussed the two features of the Settlement Agreement that it found most troubling: (1) the Settlement Agreement’s broad release of claims for money damages, and (2) the Settlement Agreement’s designation of cy pres recipients.

The Broad Release of Claims for Money Damages Raises a Red Flag

The release of money damages as part of a class settlement is not unheard of when a class is properly certified under Rule 23(b)(3).  That said, certification of a class under Rule 23(b)(3) is difficult, a concept class counsel in this case fully acknowledged.  Indeed, with that in mind, the parties sought to certify an injunction class under Rule 23(b)(2) instead of the more “difficult” damages class under Rule 23(b)(3).  In doing so, Goggle and class counsel bypassed the “heightened certification and notice requirements” of a Rule 23(b)(3) class, but reaped the benefits: “namely, a broad class-wide release of claims for money damages for the defendant, and a percentage-of-fund calculation of attorneys’ fees for class counsel.”

The district court’s failure to fully examine this feature of the Settlement Agreement prevented the Third Circuit from reviewing the fairness, reasonableness, and adequacy of the Settlement Agreement.  Moreover, in remanding the case, the Third Circuit posed the following question to be answered by the district court: “Whether a defendant can ever obtain a class-wide release of claims for money damages in a Rule 23(b)(2) settlement, and if so, whether a release of that kind requires a heightened form of notice either under Rule 23(c)(2)(B) or due process tenets.”

Practitioners and litigants should keep watch for an answer to the Third Circuit’s question as it may bear on the type of class certification counsel seeks.  In the meantime, however, counsel looking to certify a class and counsel defending possible class action lawsuits, should always be mindful of the type of class certification sought, with particular attention paid to the type of damages at issue.  Always scrutinize whether the proper type of class is up for certification.  Moreover, as an extra cautionary measure in ensuring a settlement is pushed through, try to avoid seeking approval for class certification and settlement at the same time as there is a heightened duty of examination when certification and settlement are sought simultaneously.

Troubling Selection of Cy Pres Recipients

As a general matter, the Third Circuit concluded that cy pres settlements under Rule 23(b)(2) are not unfair per se and may even be proper in some instances.  Nonetheless, the Court noted the skepticism of such settlements (as stated by other federal courts and academia) in part because they prompt class counsel to put their own interests before that of their clients.  That said, the Third Circuit found no issue with the district court’s approval of the Settlement Agreement’s cy pres structure in this case.  The Third Circuit, however, questioned the selection of the specific cy pres recipients as they had pre-existing relationships with class counsel or Google.  On remand, the Third Circuit directed the district court, whose treatment of this issue was insufficient, to (1) consider whether the cy pres recipients have significant prior affiliations with Google, class counsel, or the Court, and if so, (2) determine whether the selection process failed to satisfy Rule 23(e)(2) by raising substantial questions whether the recipients were chosen on the merits.

Litigants seeking approval of a cy pres structured settlement agreement should be wise about choosing their recipients.  At the outset, do your homework—is there a significant prior affiliation with any party, counsel, or the court?  If the answer is yes, and substantial questions may arise as to whether the recipient was chosen on the merits, consider a new recipient, or be ready to answer questions.  As the Third Circuit stated, the parties seeking settlement approval must be prepared to explain why the cy pres recipient was fair.  And if a court suspects a conflict, the settlement should be subject to increased scrutiny.  As a helpful tip, try to involve class members

The post Third Circuit Decision Offers Lessons for Class-Action Settlements appeared first on Washington Legal Foundation.

Categories: Latest News

Wicker Emphasizes Importance of Public Awareness Campaigns for REAL ID

WASHINGTON – U.S. Sen. Roger Wicker, R-Miss., chairman of the Senate Committee on Commerce, Science, and Transportation, this week sent letters to the Department of Homeland Security (DHS) and Transportation Security Administration (TSA) requesting information on their efforts to ensure the public is aware of an impending change to the law that will require air travelers to have REAL ID compliant identification.

“Beginning October 1, 2020, every air traveler 18 years of age and older will need a REAL ID-compliant driver’s license (or other acceptable form of ID) to fly within the United States,” writes Wicker. “I am increasingly concerned about the potential disruption for air travel if there is widespread lack of compliance with the law among the flying public. DHS’s efforts will play a crucial role in ensuring that the public is aware and takes the necessary steps to acquire compliant identification.”

The full letter to DHS and TSA specifically requests information about steps being taken to inform the traveling public about the REAL ID compliance deadline, ways DHS is engaging aviation and travel industry stakeholders, actions DHS is taking to work with relevant state licensing officials, and the department’s contingency plans for potential disruptions to air travel after the October 1 deadline. Last week the committee held a TSA oversight hearing. During that hearing, the topic of REAL ID compliance was discussed in detail with Acting Deputy Administrator Patricia Cogswell.

In addition to the letter to DHS, the chairman sent letters to various travel industry stakeholders urging them to engage with DHS and TSA and to amplify the agencies’ message about ways to acquire a REAL ID-compliant identification card and the upcoming deadline.

Click here for the letter to DHS and TSA.

Click here for the letters to the Travel Technology Association, U.S. Travel Association, Airlines for America, and Global Business Travel Association.

SBA Programs Spurring Innovation

House Small Business Committee News - Thu, 09/19/2019 - 10:00am

The Committee on Small Business Subcommittee on Innovation and Workforce Development will hold a hearing titled, “SBA Programs Spurring Innovation.” The hearing is scheduled to begin at 10:00 A.M. on Thursday, September 19, 2019 in Room 2360 of the Rayburn House Office Building.

The hearing will examine how SBA’s programs, such as the Small Business Innovation Research (SBIR), Small Business Technology Transfer (STTR), and growth accelerators help innovative entrepreneurs, startups, and small businesses grow and create jobs.

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

Hearing Notice 

Hearing Memo 

Witness List 


Ms. Alison Brown
President and CEO
Navsys Corporation
Colorado Springs, CO

Mr. Rohit Shukla
Larta Industries
Los Angeles, CA

Mr. Javier Saade
Managing Partner & Venture Partner
Impact Master Holdings & Fenway Summer Ventures
Jackson, WY

Mr. Ron Shroder
CEO and President
Frontier Technology, Inc.
Beavercreek, OH

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


Upcoming Briefing—The U.S. Supreme Court: October Term 2019 Preview

WLF Legal Pulse - Wed, 09/18/2019 - 5:28pm


  • Lisa A. Blatt, Chair, Supreme Court and Appellate practice, Williams & Connolly LLP
  • Pratik A. Shah, Co-head, Supreme Court and Appellate practice, Akin Gump Strauss Hauer & Feld LLP

Moderated by:

  • Jay B. Stephens, Counsel, Kirkland & Ellis LLP and Chair, WLF Legal Policy Advisory Board

The post Upcoming Briefing—The U.S. Supreme Court: October Term 2019 Preview appeared first on Washington Legal Foundation.

Categories: Latest News

The Golden Use Case: The Intrinsic Value of Tokenized Precious Metals for Financial Regulators

WLF Legal Pulse - Wed, 09/18/2019 - 4:19pm

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.

Way back in the day—say, between 2016 and 2018—there was a real rush by crypto- enthusiasts to mine (or otherwise create) all manner of coins on the blockchain.  The rallying cry of “disrupt or bust” was soon targeted at the global equities markets, with their collective trading volume in 2018 of $68.212 trillion.  There was a dewy-eyed expectation among true believers that world financial regulators, wowed by the redundancy, transparency, and incorruptibility of distributed ledger technology, would expedite the displacement of trusted intermediaries (e.g. banks and prime brokers) and their inefficient mechanisms for completing transactions.

As if . . .

In the United States, we have experienced the cautious pace at which the Securities and Exchange Commission (SEC) has prospected for appropriate rules to cover virtual assets and decentralized trading platforms.  And neither the Federal Reserve Board (FRB) nor the Office of the Comptroller of the Currency (OCC) has aggressively staked a governance claim covering the dissemination of cryptocurrencies and the myriad payment systems that employ them.  In large part, these regulators are panning for nuggets—waiting for smaller yet important marketplace applications to confirm that the transformative innovations on the blockchain are not digital pyrite.    

They may have just struck something.  On September 5, 2019, the New York State Department of Financial Services (DFS) announced that it had approved the issuance, sale, and trading of a tokenized ownership interest in gold bars by Paxos Trust Company, LLC (Paxos)—a New York State chartered financial institution.  The name of this new digital asset is PAX Gold, and DFS superintendent Linda Lacewell assured the public that her agency took adequate care to address “potential risks associated with [its] issuance and offering.”  

Full disclosure:  earlier in my career, I served as both DFS general counsel and general counsel to Paxos (when Paxos was known as itBit Trust Company).  I had nothing whatsoever to do, though, with the approval of PAX Gold, and I have no financial ties to either of them now.  I therefore can objectively say that this development is an important regulatory milestone—one worth its weight in tokens. 

Here’s why.

Founded at the end of the seventeenth century, the London gold market would be an excellent case-study in which to assay the value of using blockchain systems as infrastructure for large financial markets.  Each day in London, dealers trade approximately 75% of the world’s gold in over-the-counter transactions (in May 2019, nearly $24 billion per day).  Yet historically, the “banks, brokers and dealers” in the trade “have been reluctant to reveal their activity.”

In 1987, the Bank of England formed the London Bullion Market Association (LBMA), which is an international trade association that both represents and supervises its members from at least 24 countries.  But it was not until November 2018 that the London gold market—“for the first time in [its] long history”—replaced guesswork with reliable measurements of daily trading volumes.  The LBMA hailed this development as “an exciting moment for transparency in the global OTC market.”

Less than one year later, Paxos and DFS have taken what might be an even bigger step towards effective regulatory oversight.

Each PAX Gold token “encapsulat[es] the legal title to a physical bar of gold stored in the Brink’s London vault.”  Specifically, each token “represent[s] 1 fine troy ounce of London Good Delivery gold” that is “owned by holders of the token” and for which “access to the serial number, weight and various other attributes of their gold holdings” is available to token holders.  Consequently, under appropriate circumstances and careful protocols, such information could be available to regulators, too.  

That design is already unfolding.  In approving the issuance and trading of PAX Gold, Superintendent Lacewell underscored that DFS “applied New York’s high standards regarding anti-money laundering, anti-fraud, and consumer protection, and cybersecurity measures.”  And DFS—along with the rest of the world—can examine the expected independent auditor’s monthly online reports verifying “that the entire supply of PAX Gold tokens is consistent with troy ounces of gold held within the custody of third parties in the United Kingdom.” 

As a business strategy, Paxos is searching for treasure buried in market inefficiencies.  It believes that blockchain technology can eliminate many of the complications and costs associated with the precious metals trade by making such assets “easily moveable and divisible and not . . . tied to a manual, physical process.”  In other words, by increasing their liquidity. 

For this venture to grow and succeed on the blockchain, however, both Paxos and DFS will need to address a mountain of issues common to trade in other asset classes.  These challenges include establishing well-defined clearing and settlement procedures and securing adequate custody solutions for traded assets, just to name a few.  The SEC, FRB, and OCC (along with other market regulators) would do well to pay close attention to the technological and legal answers forged in New York.  There might be gold in them there hills.   

The post The Golden Use Case: The Intrinsic Value of Tokenized Precious Metals for Financial Regulators appeared first on Washington Legal Foundation.

Categories: Latest News

As Hate Crimes Surge, Cantwell Pushes Facebook, Google, Twitter on Actions to Counter Rise in Extremism

TV-Quality Video |YouTube | Audio 

Hearing comes a day after Cantwell joined colleagues on the Senate floor to call for expanded federal background checks, extreme risk protection orders 

Between 2013 and 2017, Senator Cantwell’s home state of Washington saw a 78 percent rise in hate crimes; state has third-highest rate of hate crimes per capita in the United States 

In 2017, 510 hate crimes were reported statewide – a 32 percent increase 

WASHINGTON, DC – As the United States continues to experience a surge in hate crimes and extremism throughout the country, U.S. Senator Maria Cantwell (D-WA), the Ranking Member of the Senate Committee on Commerce, Science, and Transportation, pushed representatives from Facebook, Google, and Twitter on what their companies are doing to push back against hate on their platforms.

“Across the country, we are seeing and experiencing a surge of hate and as a result we need to think much harder about the tools and resources we need to combat this problem both online and offline,” Senator Cantwell said. “I do want us to think about ways in which we can all work together to address these issues. I feel that working together, these are successful tools that we can deploy in trying to fight extremism that exists online.”

In addition to what more social media platforms can do to counter extremism and hate on their platforms, Cantwell also asked witnesses about incitement happening on the “dark web” and through websites that publish hate, like 8chan.

“What do you think we need to do to monitor incitement on dark websites?” Cantwell asked George Selim, the Senior Vice President of Programs at the Anti-Defamation League.

“A number of measures,” Mr. Selim replied. “The first is having our public policy be starting from a place where we’re victim-focused… We really need to start from a place that prevents and has a better accounting of hate crimes, bias motived crimes, hate-related incidents, etcetera. And when we start from that place, I think we can make better policy and better programs at the federal government and state and local and also in the private industry levels as well.”

In response, Cantwell announced that she will be calling on the U.S. Department of Justice (DOJ) to bolster its efforts against extremism, hatred, and violence on the internet and called on the companies testifying before the committee to join in these efforts, as well as to prevent people supporting hate and terror from moving from social media platforms to the dark web.

“I’m definitely going to be calling on the Department of Justice to ask what more we can do in this coordination,” Cantwell said. “Several years ago, Microsoft worked with [law enforcement] and others on trying to address, on an international basis, child pornography to better skill law enforcement at policing crime scenes online. And I would assume that the representatives today would be supportive, maybe helpful – maybe even financially helpful – in trying to address these crimes as they exist today as hate crimes on the dark side of the web.”

As Congress continues to consider responses to rising hatred and violence, Senator Cantwell joined a group of her colleagues on the Senate floor yesterday to call for a vote on expanded background checks legislation. At today’s hearing, Cantwell also commended a group of 145 companies for a letter last week expressing support for gun safety legislation.

“I do appreciate, just last week representatives from various companies of all sizes in the tech industry sending the Senate a letter, asking for passage of bills requiring extensive background checks,” Senator Cantwell said. “So very much appreciate that and your support of laws to keep guns out of the hands of people who a court has determined are dangerous.”

Senator Cantwell has taken a leadership role in the Senate in countering hate and hate crimes. In April 2017, she led a group of colleagues in sending a letter to President Trump calling for the establishment of a Presidential Task Force to address the alarming rise of hate crimes across many communities in the United States. She continued that push after white supremacist violence in Charlottesville later that year. That letter led the DOJ to form a Hate Crimes Subcommittee as part of the Task Force on Crime Reduction and Public Safety to combat hate crimes, which was later transformed into a freestanding, Department-wide Hate Crimes Enforcement and Prevention Initiative, led by the Civil Rights Division.

Video from Senator Cantwell’s opening statement is available HERE, and audio is available HERE.

Video from Senator Cantwell’s witness Q&A is available HERE, and audio is available HERE.




Committee Announces Hearing on Fishery Disasters

U.S. Sen. Roger Wicker, R-Miss., chairman of the Committee on Commerce, Science, and Transportation, will convene a hearing titled, “Fishery Failures: Improving the Disaster Declaration and Relief Process,” at 10:00 a.m. on Wednesday, September 25, 2019. This hearing will examine federal and stakeholder perspectives on the fishery disaster process and how those disasters impact local communities. The hearing will also examine recent and pending disaster declarations and how the process for both declaration and relief could be improved.

<p align="center"><b>Senator Maria

Senator Maria Cantwell 

Opening Statement at Commerce Committee, Science, & Transportation Hearing on Mass Violence, Extremism, and Digital Responsibility 

Witness: Ms. Monika Bickert, Head of Global Policy Management, Facebook;

Mr. Nick Pickles, Public Policy Director, Twitter;

Mr. George Selim, Senior Vice President of Programs, Anti-Defamation League;

Mr. Derek Slater, Global Director of Information Policy, Google 

September 18, 2019

CANTWELL: Thank you Mr. Chairman and thank you for holding this important hearing and for our witnesses being here this morning.

Across the country, we are seeing and experiencing a surge of hate and as a result we need to think much harder about the tools and resources we need to combat this problem both online and offline. While the First Amendment to the Constitution protects free speech, speech that incites eminent violence is not protected and Congress should review and strengthen laws that prohibit threats of violence, harassment, stalking, and intimidation to make sure that we stop the online behavior that does incite violence.

In testimony before the Senate Judiciary Committee in July, Federal Bureau of Investigation FBI Director Chris Wray said that the white supremacist violence is on the rise. He said the FBI takes this threat “extremely seriously” and has made over 100 arrests so far this year.

We’re seeing in my state over the last several years. We’ve suffered a shooting at the Jewish community center in Seattle, a shooting of a Sikh in Kent, Washington, a bombing attempt at the MLK Day parade in Spokane, and over the last year, we’ve seen a rise in the desecration of both synagogues and mosques. The rise in hate across the country has also led to multiple mass shootings, including the Tree of Life congregation in Pittsburgh, the Pulse nightclub in Orlando and most recently, the Walmart in El Paso.

Social media is used to amplify that hate and the shooter at one high school in the Parkland posting said the image of himself with guns and knives on Instagram wrote social media posts prior to the attack on his fellow students. In El Paso, the killer published a white supremacist anti-immigration manifesto on 8chan message board, and my colleague just mentioned this streaming of live content related to the Christchurch shooting, the horrific incidents that happened there. In Miramar, the military engaged in a systematic engagement of Facebook, using fake names and sham accounts to promote violence against Muslim Rohingya. These human lives were all cut short by deep hatred and extremism that we have seen has become more common.

This is a particular problem on the dark web, where we see certain websites like 8chan and a host of 24/7, 365 hate rallies.  Adding technology tools to mainstream websites to stop the spread of these dark websites is a start, but there needs to be more to be a concentrated and coordinated effort to ensure that people are not directed into these cesspools. I believe calling on the Department of Justice to make sure that we are working across the board on an international basis with companies as well to fight this issue is an important thing to be done. We don’t want to push people off of social media platforms only to then being on the dark web, where we are finding less of them. We need to do more, the Department of Justice, to shut down these dark web sites and social media companies need to work with us to make sure that we are doing this.

I do want to mention, just last week, as there’s much discussion here in Washington, about initiatives. The state of Washington has passed three initiatives, gun initiatives, by the vote of the people, closing background loopholes and also relating to private sales and extreme person laws, all voted on by a majority of people in our state and have successfully passed. So I do appreciate, just last week representatives from various companies of all sizes in the tech industry sending the Senate a letter, asking for passage of bills requiring extensive background checks. So very much appreciate that and your support of extreme person laws to keep guns out of the hands of people who a court has determined are dangerous in the possession of that.

So this morning, we look forward to asking you about ways in which we can better fight these issues. I do want us to think about ways in which we can all work together to address these issues. I feel that working together, these are successful tools that we can deploy in trying to fight extremism that exists online.

Thank you Mr. Chairman for the hearing.

<p>Over the past two decades, the

Over the past two decades, the United States has led the world in the development of social media and other services that allow people to connect with one another. Open platform providers like Google, Twitter, and Facebook and products like Instagram and YouTube have dramatically changed the way we communicate and have been used positively in providing spaces for like-minded groups to come together and in shedding light on despotic regimes and abuses of power throughout the world. No matter how great the benefits to society these platforms provide, it is important to consider how they can be used for evil at home and abroad.

On August 3, 2019, twenty people were killed and more than two dozen were injured in a mass shooting at an El Paso shopping center. Police have said that they are “reasonably confident” that the suspect posted a manifesto to a website called “8chan” 27 minutes prior to the shooting. 8chan moderators removed the original post, though users continued sharing copies. Following the shooting, President Trump called on social media companies to work in partnership with local, state, and federal agencies to develop tools that can detect mass shooters before they strike – I certainly hope we talk about that challenge today.

Sadly, the El Paso shooting is not the only recent example of mass violence with an online dimension. On March 15, 2019, 51 people were killed and 49 were injured in shootings at two mosques in Christchurch, New Zealand. The perpetrator filmed the attacks using a body camera and live-streamed the footage to his Facebook followers, who began to re-upload the footage to Facebook and other sites. Access to the footage quickly spread, and Facebook stated that it removed 1.5 million videos of the massacre within 24 hours of the attack. 1.2 million views of the videos were blocked before they could be uploaded. Like the El Paso shooter, the Christchurch shooter also uploaded a manifesto to 8chan.

The 2016 shooting at the Pulse Nightclub in Orlando, Florida, killed 49 and injured 53 more. The Orlando shooter was reportedly radicalized by ISIS and other jihadist propaganda through online sources. Days after the attack, the FBI Director stated that investigators were “highly confident” that the shooter was self-radicalized through the internet. According to an official involved in the investigation, analysis of the shooter’s electronic devices revealed that he had “consumed a hell of a lot of jihadist propaganda,” including ISIS beheading videos. Shooting survivors and family members of victims brought a federal lawsuit against those three social media platforms under the Anti-Terrorism Act. The Sixth Circuit dismissed the lawsuit on the grounds that this was not an “act of international terrorism.”

With over 3.2 billion internet users, this Committee recognizes the challenge facing social media companies and online platforms’ their ability to act and remove content threatening violence from their sites. There are questions about tracking of a user’s online activity, does this invade an individual’s privacy, thwart due process, or violate constitutional rights. The automatic removal of threatening content may also impact an online platform’s ability to detect possible warning signs. Indeed, the First Amendment offers strong protections against restricting certain speech, this undeniably adds to the complexity of our task.

I hope these witnesses will speak to these challenges and how their companies are navigating these challenges.

In today’s internet-connected society, misinformation, fake news, deepfakes, and viral online conspiracy theories have become the norm.  This hearing is an opportunity for witnesses to discuss how their platforms go about identifying content and material that threatens violence and poses a real and potentially immediate danger to the public. I hope our witnesses will also discuss how their content moderation processes work.  This includes addressing how human review or technological tools are employed to remove or otherwise limit violent content before it is posted, copied, and disseminated across the internet.

Communication with law enforcement officials at the federal, state, and local levels is critical to protecting our neighborhoods and communities. We would like to know how companies are coordinating with law enforcement when violent or extremist content is identified. And finally, I hope witnesses will discuss how Congress can assist ongoing efforts to remove content promoting violence from online platforms and whether best practices or industry codes of conduct in this area would help increase safety both online and offline.

So, I look forward to hearing testimonies from our witnesses, and hope we engage in a constructive discussion about potential solutions to a pressing issue.


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