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Criminal Investigations, Crypto Exchange Accounts, and the Expectation of Privacy

WLF Legal Pulse - Mon, 07/20/2020 - 11:53am

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.

According to the United States Court of Appeals for the Fifth Circuit, law enforcement officials do not need a search warrant to get account records from a cryptocurrency exchange.  This past June, in U.S. v. Gratkowski, 2020 WL 3530575 (5th Cir. June 20, 2020), the court ruled that crypto exchange account holders do not have a constitutionally cognizable privacy interest in their records and therefore do not enjoy the search and seizure protections ensured by the Fourth Amendment.  The rationale for the court’s decision both is ironic and raises more questions than it answers.  It is certainly out of step with the Supreme Court’s developing approach to the intersection of Fourth Amendment challenges and rapidly evolving technology.

The defendant in Gratkowski was convicted of possessing child pornography, which he had bought online using bitcoin.  During their investigation, federal authorities used a grand jury subpoena to get Gratkowski’s account records from Coinbase, a leading cryptocurrency exchange.  Those records disclosed that Gratkowski had sent bitcoin to an address associated with a child pornography website.  Based upon that information, the authorities were subsequently able to get a judicial warrant to search Gratkowski’s home and to seize his computer containing the banned pornography.

Gratkowski moved in the district court to suppress the incriminating evidence arguing, in part, that the criminal investigators needed a search warrant to access his Coinbase account, not just a subpoena.  Gratkowski claimed that, under Fourth Amendment principles, he had a reasonable expectation that his Coinbase account would remain private.  The district court rejected that claim and denied his suppression motion.

On appeal, Gratkowski renewed his Fourth Amendment claim.  The Fifth Circuit rejected it too.  In finding no Fourth Amendment violation, the court of appeals relied primarily on U.S. v. Miller, 425 U.S. 435 (1976), in which the Supreme Court held that bank account holders do not have a reasonable expectation of privacy in their bank records.  The majority in Miller reasoned that: first, account records are “business records of the bank,” not property of the depositor, 425 U.S. at 440; and second, that such documents “are not confidential communications but negotiable instruments to be used in commercial transactions” and thus “contain only information voluntarily conveyed to the banks and exposed to their employees in the ordinary course of business,” id. at 442.

The Fifth Circuit concluded that crypto exchange records are “akin to bank records” and are thus governed by Miller. Gratkowski, 2020 WL 3530575, at *4.  Indeed, as the court saw it, the “main difference between Coinbase and traditional banks . . . is that Coinbase deals with virtual currency while traditional banks deal with physical currency.”  Id.

At this point in reading the decision, a true crypto enthusiast will likely get up and scream.

But the Gratkowski opinion goes on.  To bolster its determination, the court further observed that “Bitcoin users have the option to maintain a high level of privacy by transacting without a third-party intermediary.” 2020 WL 3530575, at *4. The Fifth Circuit surmised, though, that “Bitcoin users may elect to sacrifice some privacy by transacting through an intermediary” because transacting without an intermediary “requires technical expertise.”   Id. (emphasis added).

By now, the crypto enthusiast has probably gone from a scream to a howl.

Gratkowski is a reflexive application of the “third-party doctrine,” a principle of Fourth Amendment law under which “a person has no legitimate expectation of privacy in information he voluntarily turns over to third parties.”  Carpenter v. U.S., 138 S. Ct. 2206, 2216 (2018).  But the Supreme Court has recently warned against “mechanically applying the third-party doctrine,” especially considering “the seismic shifts in digital technology.”  Id. at 2219.  

Thus, in cases dealing with advanced technology, the present mode of analysis is much more nuanced.  “When an individual seeks to preserve something as private, and his expectation of privacy is one that society is prepared to recognize as reasonable, . . . official intrusion into that private sphere generally qualifies as a search and requires a warrant supported by probable cause.”  Carpenter, 138 U.S. S. Ct. at 2213 (internal quotation marks omitted).  Lower courts should calibrate this test keeping in mind that at least five present justices well understand that “technological advances” are “shaping the evolution of societal privacy expectations.”  U.S. v. Jones, 565 U.S. 400, 415 (2012) (Sotomayor, J., concurring); see also id. at 427 (Alito, J., concurring in the judgment).

Justice Sotomayor has even gone so far as to suggest that it “may be necessary to reconsider the premise that an individual has no reasonable expectation of privacy in information voluntarily disclosed.”  Jones, 565 U.S. at 417 (Sotomayor, J., concurring).  In her view, the third-party doctrine is “ill suited to the digital age, in which people reveal a great deal of information about themselves to third parties in the course of carrying out mundane tasks.”  Id. at 417 (Sotomayor, J., concurring).

But without going that far, many would still strongly disagree with the Fifth Circuit’s assertion that crypto exchange transactions are “akin” to those of ordinary banks.  Objectively speaking, they differ in many ways.

To start, the very use of cryptocurrency—which is the practical offspring of advanced digital cryptography—is often motivated by the users’ efforts to remain anonymous.  In other words, at the core of many cryptocurrency transactions is an additional effort “to preserve something as private.” Carpenter, 138 U.S. S. Ct. at 2213.  The same can’t be said for ordinary banking transactions.  But whether an expectation of privacy through cryptography is reasonable in light of a technologically fluid culture remains an open legal question of immense importance.

The Fifth Circuit’s attempt to answer the matter is not very persuasive.  For example, the court’s observation that both crypto exchanges and banks “are subject to the Bank Secrecy Act,” and therefore must “keep records of customer identities and currency transactions,” is largely beside the point.  Gratkowski, 2020 WL 3530575, at *4.  Although the Bank Secrecy Act maintains a reservoir of data for criminal investigations, the statute cannot displace Fourth Amendment protections against unreasonable searches and seizures.  In appropriate cases, the government may still need a search warrant to access Bank Secrecy Act material.

Carpenter illustrates the point clearly.  There, the Supreme Court ruled that a court order under the Stored Communications Act directing a mobile phone company to provide an individual’s cell-site phone data to police “was not a permissible mechanism for accessing historical cell-site records.”  138 S. Ct. at 2221.  Because the statutory showing required for authorities to get such an order “falls well short of the probable cause required for a warrant,” the Court instructed, “the Government’s obligation is a familiar one – get a warrant.”  Id.

More fundamentally, though, and from a privacy perspective, crypto exchange records and ordinary bank records are actually quite different.  Crypto exchange records usually show only an account holder’s virtual currency deposits from, and transfers to, numerically identified accounts at other exchanges or locations on the blockchain.  They do not identify the transacting parties or the purpose of the transaction as does “information voluntarily conveyed to the banks and exposed to their employees in the ordinary course of business.”  Miller, 425 U.S. at 442.

And finally, the Fifth Circuit arguably drew the wrong conclusion from the fact that bitcoin users could achieve even greater confidentiality “by transacting without third-party intermediaries.” Gratkowski, 2020 WL 3530575, at *4.  The court interpreted a party’s decision to transact in virtual currency through a crypto exchange as an election “to sacrifice some privacy.” Id.  There is another, equally valid interpretation of such conduct, however—a view that sees the glass more full than empty.  By using a crypto exchange in place of a bank, an individual clearly demonstrates a desire to increase his or her transactional privacy.

Gratkowski tries only half-heartedly to address what Justice Sotomayor has described as “difficult questions” concerning digital technology and Fourth Amendment jurisprudence.  Jones, 565 U.S. at 418 (Sotomayor, J., concurring).  Consider also that constitutional adjudication may not be the most effective way to deal with privacy issues generated by scientific innovation.  As Justice Alito has astutely observed, in “circumstances involving dramatic technological change, the best solution to privacy concerns may be legislative.”  Jones, 565 U.S. at 429 (Alito, J., concurring in the judgment).  Legislatures, he recommends, are “well situated to gauge changing public attitudes, to draw detailed lines, and to balance privacy and public safety in a comprehensive way.”  Id. at 429-30 (Alito, J., concurring in the judgment).

Whatever the approach, judicial or legislative, the level of privacy associated with cryptocurrency transactions certainly merits deeper consideration.  The cryptographic technology underlying virtual currencies is by no means limited to financial applications.  And with its expansion into other digital infrastructures, this technology could someday soon offer “an intimate window into a person’s life, revealing . . . his familial, political, professional, religious, and sexual associations.”  Carpenter, 138 S. Ct. at 2217 (internal quotation marks omitted).  It therefore bears remembering that, in law, superficial analogies to the past can take you only just so far in governing the future.

The post Criminal Investigations, Crypto Exchange Accounts, and the Expectation of Privacy appeared first on Washington Legal Foundation.

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GSA Announces Sale of Former U.S. Forest Service Evans Notch Administration Site in Bethel, Maine

GSA news releases - Mon, 07/20/2020 - 12:00am
BOSTON – The former Evans Notch Administrative Site in Bethel, Maine, was recently conveyed by the U.S. Forest Service (USFS) after a successful marketing and sales effort led by the U.S. General Services Administration (GSA). The former USFS property was sold to the highest bidder for $245,005....

Oversight of the Small Business Administration and Department of Treasury Pandemic Programs

House Small Business Committee News - Fri, 07/17/2020 - 10:30am
The Committee on Small Business will hold a hearing entitled “Oversight of the Small Business Administration and Department of Treasury Pandemic Programs.” The hearing is scheduled to begin at 10:30 AM (EST) on Friday, July 17, 2020 and will take place in room 2118 of the Rayburn House Office Building. Members who wish to participate remotely may do so via Cisco Webex, information to be provided separately.

In light of the pandemic, Congress acted swiftly to make certain small employers could use the existing SBA Economic Injury Disaster Loan (EIDL) program to access much needed financial assistance and created the Paycheck Protection Program (PPP) at SBA, which has been implemented with the assistance of the Department of Treasury. The hearing gives Members the ability to hear from administration officials about the interpretation, implementation, and effectiveness of the programs in providing economic assistance to employers throughout the ongoing pandemic.

To view a livestream of the hearing, please click here

Hearing Notice 

Hearing Memo 

Witnesses 


The Honorable Jovita Carranza
Administrator
U.S. Small Business Administration
Washington, DC

The Honorable Steven Mnuchin
Secretary
U.S. Department of the Treasury
Washington, DC

States Are Embracing Proportional Discovery, Moving into Alignment with Federal Rules

WLF Legal Pulse - Thu, 07/16/2020 - 4:22pm

By Mark A. Behrens, co-chair of Shook, Hardy & Bacon L.L.P.’s Washington, D.C.-based Public Policy Group, and Christopher E. Appel, Of Counsel in the firm’s Public Policy Group. Mr. Behrens is a member of WLF’s Legal Policy Advisory Board.

Major changes to state civil discovery rules are quietly sweeping the country. At least 15 states and the District of Columbia have updated their state court civil discovery rules to more closely align with December 2015 amendments to the Federal Rules of Civil Procedure (FRCP).1 Perhaps the most significant change redefines the scope of discovery from any information “reasonably calculated to lead to the discovery of admissible evidence” to discovery that is “proportional to the needs of the case.” On July 1, 2020, Ohio became the latest state to adopt the proportionality concept along with other civil discovery provisions of the federal rules.

2015 FRCP Amendments Target Discovery Abuse

The federal judiciary spent years developing the 2015 amendments with a goal of improving early case management and addressing abuse of the discovery process. Surveys had found that litigation “takes too long and costs too much” in many jurisdictions.2 Civil defendants expressed concerns about the cost of overbroad discovery “fishing expeditions” and use of the tools of discovery to harass and pressure opponents into settlements. One survey found that “[i]nefficient and expensive discovery does not aid the fact finder. The ratio of pages discovered to pages entered as exhibits is as high as 1000/1.” The amended federal rules sought to address these concerns in several key ways:

  • Require discovery to be “proportional to the needs of the case” (FRCP 26(b)(1)).
  • Authorize protective orders that allocate expenses to the requester, such as when the requester seeks disproportionate or unduly burdensome discovery (FRCP 26(c)(1)(B)).
  • Establish a clear standard for sanctions and curative measures for a party’s failure to preserve electronically stored information (ESI) (g. emails) (FRCP 37(e)).

State Rule Changes Bring Greater Uniformity

The march toward greater harmony between federal and state court rules of civil procedure began shortly before the federal rules changes took effect3 and has progressed steadily. States have updated their civil rules by court rule in jurisdictions where such changes are addressed primarily by the judiciary, and through legislation in jurisdictions where the legislature traditionally plays an important role in the development and adoption of civil court rules.

The federal proportionality concept is well on its way to becoming the majority rule in the states4 along with the authority of courts to enter protective orders to shift the cost of overly burdensome discovery to requesters.5 States are also limiting the frequency or extent of discovery that is “cumulative or duplicative, or can be obtained from some other source that is more convenient, less burdensome, or less expensive.”6 Improvements to ESI rules are limiting production of ESI that is “not reasonably accessible”7 and clarifying the standard for imposing sanctions on parties who fail to preserve ESI.8 Momentum also exists for presumptive limits on interrogatories9 and depositions10 as in the federal civil rules. In addition to these changes, states are setting presumptive limits on requests for admission11 and some require disclosure of third-party litigation funding agreements.12

The March for Proportional Discovery Rules Will Continue

Other states should consider following the lead of the pioneering states that have adopted the proportionality concept and other key provisions of the current federal civil rules. Widespread adoption of reforms will curb discovery abuse and harmonize federal and state civil court rules.

Notes

The post States Are Embracing Proportional Discovery, Moving into Alignment with Federal Rules appeared first on Washington Legal Foundation.

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The Intersection of Chevron and Federal Prosecutions: Courts Shouldn’t Assist Agency Overcriminalization

WLF Legal Pulse - Thu, 07/16/2020 - 4:22pm

By John Lauro, a white-collar defense attorney who represented one of the WellCare defendants at trial and in the Eleventh Circuit.

Much has been written about the “Chevron Doctrine” and its impact on administrative law. In Chevron U.S.A. v. Natural Resources Defense Council, 467 U.S. 837 (1984), decided over a generation ago, the U.S. Supreme Court established a principle of judicial deference to an administrative agency’s interpretation of its operating statute where the agency reached a “reasonable” construction of an otherwise ambiguous statute. Chevron presumes that modern life has become so complicated that experts within agencies need latitude to fill in the details of how a legislative scheme should operate. The ruling became engrained in modern administrative law, while relegating the courts to a secondary role in statutory construction.

Less has been written about how Chevron deference has crept into federal criminal law and how the courts often give wide latitude to agencies to define criminal liability for regulated entities and their employees.1 Indeed, it is not unusual for a court in a criminal case to “defer” to an agency’s interpretation of a statute and accord that interpretation the force of law, even where the agency has not acted through formal rulemaking.

I was counsel in such a case several years ago where healthcare executives were convicted under the federal healthcare fraud statutes for failing to abide by an agency’s “informal guidance” regarding its interpretation of a Florida healthcare statute. The case, U.S. v. Clay, 832 F.3d 1259 (11th Cir. 2016), cert. denied, 137 S. Ct. 1814 (2017), illustrates how criminal liability can be created when the courts go too far in deferring to the administrative state.

Clay involved WellCare Health Plans, Inc., a Tampa-based public holding company for certain HMO plans (“WellCare”) providing healthcare services to Florida Medicaid patients. The Agency for Healthcare Administration (“AHCA”) administered the Florida Medicaid program. In the early 2000s, the Florida legislature decided to engage HMOs in providing health care to Medicare patients under a managed-care system, rather than using an inefficient fee-for-service reimbursement scheme. Florida intended to contain healthcare costs that consumed a substantial part of the state’s budget each year and shift that economic risk to HMOs, while providing a broader array of clinicians for Medicaid recipients.2

In connection with this new regulatory scheme, the Florida legislature passed an “80/20 Statute,” Fla. Stat § 409.912(4)(b) (2006), requiring recipients of Medicaid funds to report back to the state expenditures for the provision of behavioral health care. Under the statute, if an HMO spent less than 80% of the dollars received for the provision of behavioral health care, then it had to return the difference to the state each year. For example, if an HMO received $100 for behavioral health care, but spent only $75 for the provision of that care, then $5 would be returned to the state.3

Although AHCA was responsible for administering this new statute, it chose not to engage in formal rulemaking to determine how to complete the calculation. The agency itself was deeply divided, and many bureaucrats resisted the use of HMOs in the provision of behavioral health care.  Instead of engaging in rulemaking, AHCA merely incorporated the legislative language in its contracts with HMOs and then sent out informal letters and templates suggesting how to complete the calculation. This critical decision to use “informal guidance” led to federal criminal prosecution.

WellCare had established a specialized behavioral healthcare organization (“BHO”) to coordinate all behavioral healthcare services and to hire frontline clinicians such as psychiatrists and community mental health centers. The care the BHO delivered was not in question and state auditors noted that the BHO “exceeded requirements” in providing clinical care. WellCare, in turn, counted the total amounts it paid to the BHO for its “80/20 calculations.” AHCA never adopted a rule prohibiting this methodology and WellCare’s counsel advised the company that other healthcare companies had safely taken a similar approach. Over several years of reporting, AHCA never specifically asked, and WellCare never specifically informed the agency that it was using a BHO for the calculation.

Federal prosecutors indicted the CFO of the company, along with four other executives, including WellCare’s CEO Todd Farha. The prosecution argued that WellCare had misled AHCA by including in its “80/20 calculation” payments made to an affiliated BHO, rather than including only the payments made to “frontline” providers. The prosecution did not rely on the “80/20 Statute” or the Medicaid contracts that actually supported WellCare’s method of calculation. Instead, they pointed to AHCA’s informal “guidance,” which included letters and calculation templates. Testimony from attorneys who had represented WellCare and a medical economics expert, however, confirmed that WellCare’s calculation methodology was “reasonable.”

Following a three-month trial and a deliberation spanning nearly a month, the jury rendered a mixed verdict. Although it convicted three of the executives of healthcare fraud for one of the “80/20 calculations,” the jury acquitted all the defendants of the primary conspiracy charge. The trial judge, recognizing that the case was very unique in that WellCare provided outstanding healthcare, sentenced the defendants to probation and 1-3 years—well below the draconian sentences of over 15 years recommended by the prosecutors. The defendants appealed.

The Eleventh Circuit rendered a problematic decision that upheld the convictions. The court rejected the defendants’ defense articulated in an Eleventh Circuit decision, U.S. v. Whiteside, 285 F. 3d 1345 (11th Cir. 2002), that the government had not proven beyond a reasonable doubt that their interpretation of governing legal authority was not objectively unreasonable. In Whiteside, the Eleventh Circuit held that “where the truth or falsity of the statement centers on an interpretative question of law, the government bears the burden of proving beyond a reasonable doubt that the defendant’s statement is not true under any reasonable interpretation of the law.” Whiteside, 285 F. 3d at 1351.

Not finding any inconsistencies between WellCare’s calculations and the “80/20 Statute” or WellCare’s Medicaid contracts, the Clay court held instead that the defendants had not scrupulously followed AHCA’s informal “guidance” found in its letters and calculation templates. Despite trial testimony from a former high-ranking AHCA official who had advised WellCare that, under Florida law, regulated entities did not have to follow informal guidance that had not been subjected to formal rulemaking, the Eleventh Circuit accorded these informal communications the status of governing law. The court concluded that failing to follow the “strict” interpretation of these informal communications constituted a crime. In other words, administrative agencies could make binding law through informal “guidance” that failing to follow informal agency guidance while not expressly informing the agency of that course of action, could be a criminal violation.

The defendants’ certiorari petition focused on the Eleventh Circuit’s watered-down interpretation of mens rea from a “knowing” violation  to “deliberate indifference.”4 Although the Court denied review, one wonders how the Court would address deference to agency interpretations in connection with criminal law. Justices Thomas, Gorsuch, and Kavanaugh have expressed doubt that Chevron deference can be squared with a republican form of government based upon separation of powers in the administrative and civil context.5 It is likely, therefore, that at least three justices, and perhaps more given the criminal context, would be even less tolerant of administrative agencies “making” federal criminal law.

Providing defense attorneys with some ammunition, the Justice Department issued a memorandum in January 20186 that agency “[g]uidance documents cannot create binding requirements that do not already exist by statute or regulations. . . the Department may not use its enforcement authority to effectively convert agency guidance documents into binding rules.” Although the memorandum was directed primarily at civil enforcement, it has equal (if not more) force with regard to criminal prosecutions, which result in the deprivation of liberty. The memorandum warns federal prosecutors that if “a party fails to comply with agency guidance expanding upon statutory or regulatory requirements [that] does not mean that the party violated those underlying legal requirements; agency guidance documents cannot create any additional legal obligations.” Under current DOJ policy, then, government prosecutors would be precluded—as they did in the Clay case—from arguing that informal agency letters could constitute binding authority on the regulated public.

Deference to informal agency guidance is yet another manifestation of the scourge of overcriminalization, which includes prosecutorial misconduct;7 relaxed standards for mens rea/criminal intent;8 ambiguous jury instructions9 and the use of negligence or conscious avoidance concepts to convict individuals.10

Chevron deference emanated from the belief that administrative agencies are simply following the law and carrying out the directions of elected official in a politically neutral way.  Those days are plainly over. Defense attorneys know all too well that the entrenched bureaucracy has its own agenda—often at odds with elected legislatures. The judiciary should not imbue unaccountable bureaucrats with the authority to create law—let alone criminal law. Citizens’ lives and freedom are at stake. Just ask the WellCare executives.

Notes

The post The Intersection of Chevron and Federal Prosecutions: Courts Shouldn’t Assist Agency Overcriminalization appeared first on Washington Legal Foundation.

Categories: Latest News

FDA’s First Amendment Blindspot Widens with Overzealous Interpretation of Modified-Risk Tobacco Regulation

WLF Legal Pulse - Thu, 07/16/2020 - 4:21pm

By Joel Kurtzberg, a Partner, Adam Mintz, Counsel, and John MacGregor, an Associate, in the New York, NY office of Cahill Gordon & Reindel LLP.

Executive Summary

The Food and Drug Administration has a complicated relationship with the First Amendment. The agency consistently chafes against arguments that the Constitution limits its regulation of promotional and other types of speech. Over the past three decades, regulated entities have been increasingly successfully challenging FDA actions that prohibit, limit, or compel speech about their products or services. Despite those defeats, FDA has continued its confrontational approach.

One example of that approach is the agency’s overzealous implementation of a 2009 tobacco control law’s section on modified-risk tobacco products. Two courts have rejected facial First Amendment challenges to the law’s limits on risk-related speech. FDA has set an extremely high approval bar, under which it has granted only two applications for reduced-risk promotion. And the agency has taken informal action against purported “switch claims” made about specific e-cigarettes as well as one company’s support of a ballot proposition to reverse a city’s ban on some tobacco alternatives.

This Working Paper explains that modified-risk tobacco manufacturers could successfully bring as-applied First Amendment challenges against FDA actions under the tobacco control law. FDA’s chilling of speech on the benefits of switching to tobacco alternatives not only singles out speech based on its content, but it also undermines Congress’s goal of improving public health. The agency’s inquiry on financial support for ballot proposition impermissibly targets the company’s fully protected right to participate in public debates.

The Working Paper also notes that the two court decisions upholding the tobacco control law’s provision on modified-risk communication leave open one form of promotion. The law curbs messages “directed to consumers . . . respecting the product.” That language, as one court specifically acknowledged, does not limit manufacturers’ ability to engage in generic advertising about tobacco alternative products in general.

The post FDA’s First Amendment Blindspot Widens with Overzealous Interpretation of Modified-Risk Tobacco Regulation appeared first on Washington Legal Foundation.

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Putting America Back to Work: The Role of Workforce Development and Small Business Rehiring

House Small Business Committee News - Thu, 07/16/2020 - 1:00pm
The Committee on Small Business Subcommittee on Innovation and Workforce Development will meet for a hearing titled, “Putting America Back to Work: The Role of Workforce Development and Small Business Rehiring.” The hearing is scheduled to begin at 1:00 P.M. on Thursday, July 16, 2020, via CISCO WebEx.

Since March, over 45 million Americans have applied for unemployment and some experts estimate that many of these jobs will not return. Many of the new jobs that are created to replace the old ones may require different skills for which workers may not be trained. Unfortunately, many of the workforce development programs in America have been severely underfunded for years, creating additional challenges in responding to mass unemployment. This hearing will analyze federal programs intended to develop the nation’s workforce and allow Members to hear from experts and officials about how to put Americans back to work.

To watch the livestream of the hearing, please click here. 

Hearing Notice 

Hearing Memo 

Witnesses 

Ms. Demetra Smith Nightingale
Institute Fellow
Urban Institute
Washington, DC

Ms. Kelly Folks
Arapahoe/Douglas Workforce Director
Workforce Center
Centennial, CO
*Testifying on behalf of Workforce Boards and Centers and the Rocky Mountain Workforce Development Association (RMWDA)







Long-Lasting Solutions for a Small Business Recovery

House Small Business Committee News - Wed, 07/15/2020 - 1:00pm
The Committee on Small Business will meet for a hearing titled, “Long-Lasting Solutions for a Small Business Recovery.” The hearing is scheduled to begin at 1:00 P.M. on Wednesday, July 15, 2020, via CISCO WebEx.

The hearing will allow members to learn about current barriers and solutions to recovery for small businesses. The hearing will explore efforts to stimulate small business growth following the Great Recession, applying those programs to the COVID-19 crisis, and new ideas to help industries that have been disproportionally impacted by COVID-19.

To watch the livestream of the hearing, please click here. 

Hearing Notice 

Hearing Memo 

Witnesses 

Mr. Brett Palmer
President
Small Business Investor Alliance
Washington, DC

Ms. Amanda Cohen
Chef and Owner
Dirt Candy
New York, NY
*Testifying on behalf of the Independent Restaurant Association

Dr. Lisa D. Cook
Professor
Michigan State University
East Lansing, MI

Mr. Pete Blackshaw
CEO
Cintrifuse
Cincinnati, OH






GSA City Pair Program Saves $1.2 Billion for Federal Agencies

GSA news releases - Tue, 07/14/2020 - 12:00am
Even with COVID-19 travel cutbacks, government “Best-In-Class” air travel program saves agencies more than a billion dollars annually WASHINGTON — The U.S. General Services Administration awarded its Fiscal Year (FY) 2021 City Pair Program (CPP) air travel contracts, which will save the...

Supreme Court Grants Review Of Ninth Circuit Misapplication Of FTC Act Remedy Provision

WLF Legal Pulse - Thu, 07/09/2020 - 3:45pm

“The Supreme Court has seized a great chance to reconnect the judiciary’s reading of the FTC Act to what the FTC Act actually says.”

Corbin K. Barthold, WLF Senior Litigation Counsel

(Washington, DC)—The U.S. Supreme Court today granted review of a Ninth Circuit ruling that misreads an FTC Act remedy provision. WLF filed an amicus brief in support of the petition for review.

Section 13(b) of the FTC Act empowers the FTC to sue, in federal court, to obtain an injunction against deceptive trade practices. At least seven courts of appeals have said, however, that the word “injunction” in section 13(b) unlocks the entire vault of equitable remedies.

WLF’s brief urged the Supreme Court to review two Ninth Circuit decisions that affirm restitution awards meted out under section 13(b). WLF argued that the lower courts’ rewriting of section 13(b) resembles the English common-law courts’ use of the “equity of the statute,” a doctrine that empowered a judge to enforce his subjective sense of justice rather than a law’s text. The “equity of the statute” arose in the Late Middle Ages. It gradually died out, however, as judges came to realize that it is inconsistent with democratic governance.

In the mid-twentieth century the Supreme Court briefly adopted a new version of the equity of the statute to “imply” new rights and remedies into laws. The courts of appeals relied on that mid-twentieth century jurisprudence to justify stretching section 13(b). But as WLF explained in its brief, the Supreme Court later reversed course. It came to recognize that it is solely for Congress to decide how, and by whom, its statutes are enforced.

WLF plans to file a brief at the merits stage urging the Supreme Court to align the federal courts’ interpretation of section 13(b) with the modern and binding rules of statutory interpretation.

Celebrating its 43rd year as America’s premier public-interest law firm and policy center, WLF advocates for free-market principles, limited government, individual liberty, and the rule of law.

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The post Supreme Court Grants Review Of Ninth Circuit Misapplication Of FTC Act Remedy Provision appeared first on Washington Legal Foundation.

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WLF Urges Delaware Supreme Court To Enforce Contracts As Written

WLF Legal Pulse - Wed, 07/08/2020 - 2:14pm

“In the end, only the parties themselves can draft clear, thorough, workable contracts.”

Corbin K. Barthold, WLF Senior Litigation Counsel

Click here for WLF’s brief.

(Washington, DC)—Washington Legal Foundation today filed an amicus curiae brief urging the Delaware Supreme Court not to use the implied covenant of good faith and fair dealing to rewrite contracts.

The implied covenant bars contracting parties from exploiting each other in ways that could not possibly have been foreseen when the contract was signed. Delaware’s courts often correctly note that the implied covenant does not override a contract’s explicit terms. On occasion, however, those courts also say that the implied covenant can be used to create new terms the parties could have, but did not, think to place in their contract. In this case, a trial court let a jury add such terms to a contract involving drug-patent royalties.

WLF’s brief urges the Delaware Supreme Court not to let the implied covenant drift too far from the text of the contract. Especially where, as in this case, the contract at issue is an agreement between sophisticated companies, a court’s core assumption should be that parties can, and may be expected to, negotiate for what they want and then write it down.

Holding parties closely to their written agreements, WLF explains, keeps the courts out of the business of trying to “fix” contracts, something they cannot possibly do well. It also discourages implied-covenant litigation. Above all, it benefits the contracting parties, by encouraging them to draft well-written contracts. As Judge Learned Hand wrote: “If parties wish more certainty, they must use more certain words.”

WLF is grateful to Nicholas E. Skiles, of Swartz Campbell LLC, for his pro bono assistance with the filing of WLF’s brief.

Celebrating its 43rd year as America’s premier public-interest law firm and policy center, WLF advocates for free-market principles, limited government, individual liberty, and the rule of law.

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The post WLF Urges Delaware Supreme Court To Enforce Contracts As Written appeared first on Washington Legal Foundation.

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WLF Backs Citizen Petition to End FDA’s Suppression of Truthful Scientific Speech

WLF Legal Pulse - Wed, 07/08/2020 - 9:30am

“The FDA should stop inserting itself between doctors and their patients and abandon its campaign to suppress the dissemination of PGx data.”
Cory Andrews, WLF Vice President of Litigation

Click HERE for WLF’s comment. 

(Washington, DC)—Washington Legal Foundation (WLF) today filed comments with the Food and Drug Administration (FDA) in support of the Citizen Petition of the Coalition to Preserve Access to Pharmacogenomics (PGx) information.

By identifying likely gene-drug interactions, PGx texting allows a physician to make better informed prescribing decisions, which should lead to better health outcomes and lower healthcare costs. The Coalition’s petition thus raises legitimate questions about the FDA’s ongoing campaign to “suppress communications by clinical laboratories and software providers about the role of PGx in the metabolism of, and response to, specific drugs.”

WLF’s comments make clear that the FDA’s suppression campaign not only threatens to undermine the public health, it also runs afoul of the Constitution. By prohibiting clinical labs and software providers from sharing accurate gene-drug testing data with physicians, the FDA directly infringes on truthful, non-misleading speech. If challenged in federal court, the FDA would need to show that it has a compelling governmental interest in suppressing that speech. As WLF’s comments explain, the FDA cannot possibly meet that burden.        

Celebrating its 43rd year as America’s premier public-interest law firm and policy center, WLF advocates for free-market principles, limited government, individual liberty, and the rule of law.

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The post WLF Backs Citizen Petition to End FDA’s Suppression of Truthful Scientific Speech appeared first on Washington Legal Foundation.

Categories: Latest News

June 2020 Month in Review

WLF Legal Pulse - Mon, 07/06/2020 - 8:00am

To read more about the items below, click the link above for a PDF of the newsletter.

NEW FILINGS

WLF urges the Second Circuit to affirm the dismissal of a “foreign-cubed” securities lawsuit. (Banco Safra v. Samarco Mineracao)

WLF  asks the First Circuit to declare that a federal statute blocks the State of Maine from forcing cable-television providers to offer channels, and even individual programs, à la carte. (Comcast v. Mills)

WLF files a formal comment urging the EPA to ensure an impartial and balanced scientific peer-review process. (In re Draft Risk Evaluation for Asbestos)

CASES DECIDED

The Supreme Court holds that Congress may not insulate sole-director federal agency heads from at-will removal by the President. (Seila Law LLC v. CFPB)

The Supreme Court clarifies that Congress may condition a U.S charity’s receipt of federal funds by imposing limits on the speech of a foreign affiliate of that charity. (USAID v. Alliance for Open Society Int’l)

The Eighth Circuit upholds certification of a large, unwieldy class of life-insurance policyholders. (Vogt v. State Farm Life Insurance)

The Pennsylvania Superior Court, sitting en banc, affirms dismissal of a multi-state mass action for lack of personal jurisdiction. (Murray v. American LaFrance, LLC)

The Eleventh Circuit affirms in part the district court’s setting aside a $350 million verdict against a network of nursing homes under the False Claims Act. (U.S. ex rel. Ruckh v. Salus Rehabilitation, LLC)

The Supreme Court holds that disgorgement is a statutorily available remedy under the federal securities laws. (Liu v. SEC)

The D.C. Circuit affirms invalidation of an agency rule that would have allowed the HHS Secretary to require drug makers to convey the wholesale acquisition cost, or “list price,” of any prescription drug advertised in direct-to-consumer television ads. (Merck & Co. v. HHS)

The Supreme Court declines to review a Ninth Circuit decision that improperly dilutes Civil RICO’s proximate-case element. (Takeda Pharmaceutical Co. v. Painters Fund)

The Supreme Court declines to review a California Supreme Court ruling that flouts the Federal Arbitration Act. (OTO, LLC v. Kho)

The Supreme Court holds that plaintiffs lacks standing to sue under ERISA if their receipt of future pension benefits was never at risk. (Thole v. U.S. Bank, N.A.)

The New Jersey Supreme Court affirms a decision that unduly expands a manufacturer’s strict-liability duty to warn of asbestos dangers in third-party replacement parts.  (Whelan v. A.O. Smith Corp.)

The Supreme Court declines to review a Ninth Circuit decision that misconstrues the Federal Arbitration Act’s saving clause. (Tillage v. Comcast)

The Supreme Court unanimously holds that the appointment of Puerto Rico’s Fi­nancial Oversight and Management Board without the advice and consent of the Senate did not violate the Appointments Clause. (Financial Oversight & Management Bd. v. Aurelius Investment Inc.)

The post June 2020 Month in Review appeared first on Washington Legal Foundation.

Categories: Latest News

GSA Releases 8(a) STARS III GWAC Request for Proposals

GSA news releases - Mon, 07/06/2020 - 12:00am
New STARS GWAC will have $50 billion ceiling and focus on emerging technologies WASHINGTON — The U.S. General Services Administration issued the solicitation for the 8(a) STARS III Governmentwide Acquisition Contract (GWAC). The 8(a) STARS program is known governmentwide as a best-in-class, easy...

Update: Food Trade Group, Instacart Sue to Invalidate Seattle’s Premium-Pay Ordinance

WLF Legal Pulse - Thu, 07/02/2020 - 12:21pm

In a June 29 post, we argued that a Seattle ordinance imposing a premium-pay requirement on some grocery-delivery networks would poorly serve public health and couldn’t withstand a legal challenge. In unprecedented fashion, the ordinance threatened the companies with fines and business-license revocation if they made any adjustments to delivery workers’ compensation or service coverage in response to the ordinance.

The Washington Food Industry Association and Instacart will test the law’s legality in a declaratory judgment action filed in King County Superior Court. Represented by former Washington Attorney General (and WLF Legal Policy Advisory Board member) Rob McKenna of Orrick, Herrington & Sutcliffe LLP, the plaintiffs ask the court to declare the ordinance in violation of Washington state law and the U.S. Constitution.

The state-law claims argue that the ordinance exceeds Seattle’s police powers and that it is preempted by a 2018 voter initiative that prohibits local governments from imposing any tax or fee on certain grocery items. The lawsuit also alleges that the ordinance violates the plaintiffs’ Fifth Amendment right to just compensation for Seattle’s taking of the companies personal property, and their Fourteenth Amendment right to equal protection.

Other localities that may be contemplating laws similar to Seattle’s should follow the plaintiffs’ suit closely, as will we.

The post Update: Food Trade Group, Instacart Sue to Invalidate Seattle’s Premium-Pay Ordinance appeared first on Washington Legal Foundation.

Categories: Latest News

Supreme Court Agrees to Decide Scope of Liability Under the Alien Tort Statute

WLF Legal Pulse - Thu, 07/02/2020 - 11:47am

“The Ninth Circuit’s view of the reach of the Alien Tort Statute is dramatically out of step with that of the Supreme Court and every other federal circuit.”
Cory Andrews, WLF Vice President of Litigation

(Washington, DC)—The U.S. Supreme Court today agreed to review an appeals court decision that would invite activists to seek to impose aiding and abetting liability on U.S. entities for alleged human rights violations overseas. The Court’s decision to grant certiorari was a victory for Washington Legal Foundation (WLF), which filed an amicus brief urging review. WLF’s brief was joined by the Allied Educational Foundation.

The plaintiffs are citizens of Mali who claim to have worked, as children, on Ivory Coast cocoa farms. They allege that cocoa farmers mistreated them. The U.S. Court of Appeals for the Ninth Circuit held that their lawsuit could proceed under the Alien Tort Statute (ATS), which authorizes tort claims bottomed on a violation of “the law of nations.” Citing evidence that the defendants, U.S.-based cocoa processors and chocolate manufacturers, exploited the lower prices available for cocoa harvested on Ivory Coast farms, the Ninth Circuit held the defendants must stand trial for aiding and abetting human rights abuses.

In its brief in support of two related certiorari petitions, WLF argued that review was needed to put an end to abusive ATS lawsuits whose principal goal is to attract publicity by keeping litigation alive. WLF’s brief showed that the lawsuit is part of a 14-year-long human-rights campaign being waged in the press and before legislatures, not a legitimate effort to pursue a claim for any harm the defendants may have caused.

Celebrating its 43rd year as America’s premier public-interest law firm and policy center, WLF advocates for free-market principles, limited government, individual liberty, and the rule of law.

The post Supreme Court Agrees to Decide Scope of Liability Under the Alien Tort Statute appeared first on Washington Legal Foundation.

Categories: Latest News

Supply Chain Resiliency

House Small Business Committee News - Thu, 07/02/2020 - 10:00am
The Committee on Small Business Subcommittee on Economic Growth, Tax, and Capital Access will hold a hearing entitled “Supply Chain Resiliency.” The hearing is scheduled to begin at 10:00 AM (EST) on Thursday, July 2, 2020 and will take place in room 2118 of the Rayburn House Office Building. Members who wish to participate remotely may do so via Cisco Webex, information to be provided separately.

During the economic disaster caused by the COVID-19 pandemic, many small firms were left vulnerable to severe global supply chain disruptions. As the U.S. economy recovers, it is important we take steps to ensure greater supply chain resiliency in the face of future disasters. Members will hear from small business owners and experts about steps the federal government can take to ensure more resiliency and focus on ways we can correct the vulnerabilities of small firms and utilize their strengths moving forward.

To watch the livestream of the hearing, please click here. 

Hearing Notice 

Hearing Memo 

Witnesses 

Dr. Eswar Prasad
Professor of Trade Policy, Cornell University
Senior Fellow, Brookings Institution
Ithaca, NY

Ms. Christine Fagnani
Co – Owner and Vice President
Lynn Medical Instrumentation Company
Wixom, MI

Ms. Sheila Lawson
Chief Operations Officer and Vice President of Supply Chain
RL Hudson
Broken Arrow, OK









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