Archives for November 2015

Weekly Rundown 11-13-2015

Cause of Action in the News:


Earlier this month, Cause of Action argued on behalf of entrepreneur Rhea Lana in Rhea Lana v. U.S. Department of Labor before the D.C. Circuit. The Franchise Action Network wrote “Rhea Lana is faced with a Hobson’s choice; either continue running her businesses and face significant potential monetary penalties or cease operating as she has for years even though she has done nothing wrong.”  Cause of Action will continue to fight for people like Rhea Lana and continue to call for government transparency.

In Other News:

ForbesAmazingly, IRS Says You Can’t Rely On IRS Instructions

If you thought following IRS instructions to complete your taxes was a safe bet, think again. As it turns out, the agency can penalize good-intentioned taxpayers who follow those instructions as courts have held them to be non-authoritative.  There have been many instances of regular Americans losing to the IRS although they tried to do everything right. This kind of behavior would never be tolerated in the private sector and demonstrates an egregious double standard for federal agencies.

Fox NewsFBI expands probe of Clinton emails, launches independent classification

Former Secretary of State Hillary Clinton’s emails are under heightened IRS scrutiny as investigators seek to find evidence of False Claims Act violations.  You may recall, Martha Stewart famously graced West Virginia’s Alderson Federal Prison Camp in 2004 after conviction under the same statute.  Former FBI intelligence officer Timothy Gill said “[t]his is a broad, brush statute that punishes individuals who are not direct and fulsome in their answers.”

Fox NewsStudy claims EPA’s Clean Power Plan may hike electricity prices in 47 states

Boston-based firm NERA Economic Consulting has concluded the EPA’s Clean Power Plan will cost around $292 billion, leading to increased electricity bills in 47 states. Laura Sheehan, Senior Vice President of Communications at the American Coalition for Clean Coal Electricity, noted “[S]tates should be braced to pay higher costs,” and “[c]onsumers only lose in the Clean Power Plan.”  The EPA rejects these results, while curiously maintaining the agency has not even reviewed the report.

AllGovMost U.S. Agencies Fail to Conduct Required Reviews of Federal Regulations

In 2011, President Obama required federal agencies to review the regulations they created by issuing executive orders to clean up rules “that may be outmoded, ineffective, insufficient, or excessively burdensome, and to modify, streamline, expand, or repeal them in accordance with what has been learned.”  However, a recent study reports that of the 2,400 to 4,500 new regulations promulgated annually, very few are ever reviewed.  The Regulatory Studies Center at George Washington University examined 22 rules that “had an effect of $100 million or more on productivity, jobs, competition, the environment, public health and safety or local governments,” and concluded the government has no plans in place to review them, arguably violating executive directives.

Washington TimesPunishing the Obama way (The president’s enforcers are treating ordinary Americans like enemies)

The Department of Justice has let Lois Lerner off the hook, concluding there was no evidence of Tea Party targeting.  James Clapper, Director of National Intelligence, abandoned his inspector general and opined that Hillary Clinton’s use of a private server for government business was above-board.  These are just a few examples of why it is imperative to fight for a transparent government that demands the same compliance from its officials as it does from the American public.

Weekly Rundown 11-6-2015

Cause of Action in the News:

Full MeasureFull Measure with Sharyl Attkisson

In the fight for government transparency, Cause of Action graded federal agencies on their transparency and response time to FOIA requests. Not surprisingly, many agencies earned very poor grades while two received A’s. Interestingly, the Department of Veterans Affairs scored an A, despite public exposure of the agency’s notorious wait-time scandal the same year. Cause of Action Executive Director Dan Epstein opined, “if you think about it, part of the reason the public knows about the VA scandal is because of the easy ability to get documents. That should show why transparency is actually a good thing for reforming federal agencies.”

Wall Street JournalFranz Kafka in Footie Pajamas (My consignment company for secondhand children’s clothes has somehow run afoul of federal regulators.)

Meet Cause of Action client Rhea Lana Riner, a business woman who started a small and successful consignment business in 1997 that now has franchises in 24 states. Rhea Lana relies heavily on volunteers who are willing to help before and during the events who then get rewarded with perks such as being able to shop first. The Department of Labor decided that her volunteers must actually be considered employees and that she owes them back wages. Even though none of the volunteers have come forward demanding payment for their volunteer hours, the Dept. of Labor continues to try to obstruct Rhea Lana’s business.

In Other News:

Government ExecInspectors General Continue Battle With Justice Over Document Access

The Justice Department has written to Congress that there should be a change in the law that would allow federal agencies to deny access to certain information by inspectors general. They write this as congress holds hearings on a bill that would empower the inspectors general to do their job. The IGs responded saying “While the DOJ agrees with CIGIE that legislation is needed and should be passed by Congress to reverse the impact of the OLC opinion, the DOJ’s proposal only applies to the DOJ Inspector General’s access to records and fails to ensure that all other federal inspectors general have the same independent access at their respective agencies. As such, DOJ’s proposed legislative language is not acceptable.”

PoliticoState Dept.: Outlook crashes delay release of Hillary Clinton schedules

The State Department has been unable to meet the deadline for turning over former Secretary of State Hillary Clinton’s emails due to multiple Microsoft Outlook crashes.  Kelly Degnan, the State Deputy Executive Secretary, wrote a declaration that stated, “[t]hroughout August and the early part of September, problems with the Microsoft Outlook software caused Outlook to crash during the indexing process (a process that is necessary in order to conduct searches of emails which have been retained as .pst files) for searches [State’s executive secretariat within the office of the secretary] was running for other requests, preventing S/ES-S from applying search terms to the records and forcing S/ES-S to restart the indexing process[.]”

Daily CallerEPA’s Smog Regulation Will Cost 40x More Than It Predicted

A new report by the American Action Forum says the Environmental Protection Agency estimate on the cost of the new smog limits is highly inaccurate.  According to the EPA, the new limits will cost $1.4 billion per year; however, AAF has determined the American people will be losing $56.5 billion in income. The report, which looked at counties who were not compliant with the 2008 standard, explains “[o]bserved nonattainment counties experienced losses of $56.5 billion in total wage earnings, $690 in pay per worker, and 242,000 jobs between 2008 and 2013.”  With so many penalties for noncompliance with the 2008 smog standard, it makes sense that the new standards will have an even harsher impact.

SF GateFeinstein calls for end to controversial EB-5 immigration program

The EB-5 visa program gives out green cards to foreign nationals and their families if they invest into U.S. businesses.  Without Congressional action, the program is set to expire in December.  One of the strongest opponents is Senator Diane Feinstein, who noted “[a]t its most basic, the EB-5 program allows a foreigner to invest $500,000 in a U.S. business, in return receive a visa that puts them and their direct family on a special path toward citizenship.  At the same time, individuals unable to buy their way into the country remain trapped in seemingly endless visa backlogs that often last more than 20 years. I believe the program is deeply unfair, sends the wrong message about this country’s values and is prone to fraud and abuse.”

What the Department of Labor Is Doing To This Woman and Her Business Is Absolutely Absurd

Rhea Lana Riner needed clothes for her three young children, but couldn’t afford anything she liked. Fed up, she decided to do something about it.

Back in 1997 – almost two decades ago – Rhea Lana invited some close friends over to her home in Conway, Arkansas. What began that day as a small gathering in her living room blossomed into a children’s clothing consignment business that would eventually grow beyond her wildest dreams.

Today, thousands of parents from throughout the U.S. participate in Rhea Lana’s consignment events, which are run by 80 franchises across 24 states. Consigners register online, bring their items to the sale location, label them with preprinted price of their choosing and sell the clothes. They keep 70%; Rhea Lana’s business keeps 30%. It’s a win-win for everyone involved; sellers are basically getting paid to clean out their closets while buyers are able to save tons of money on clothes and other goods.

Predictably, the federal government doesn’t see it that way.

In 2013, the U.S. Department of Labor wrote a letter to Rhea Lana informing her that her mom volunteers must actually be classified as employees under the Fair Labor Standards Act.

That’s nonsense, of course. Rhea Lana’s volunteers are not employees or independent contractors. They’re customers! It would be like the federal government telling eBay or Craigslist that their users are entitled to hourly wages for the time they put in online. What’s next? Will self-serving at the bulk food section of Whole Foods make you a store employee?

Amazingly, that’s not even the worst part.

After the Labor Department wrote to Rhea Lana, she sued the agency in an effort to put a stop to the harassment. However, a federal district court dismissed her complaint, saying it couldn’t weigh in until a “final agency action” had been taken.

Rhea Lana isn’t standing for that. With the help of the strategic oversight group Cause of Action, Rhea Lana is appealing the ruling. Today, the D.C. Circuit Court of Appeals will hear oral arguments in her case.

What kind of world are we living in where the American government truly believes that if someone wants to spend a weekend helping others find and sell affordable clothes and toys, they should not be allowed to?

This post originally appeared on IJ Review.

We Were In Federal Court Today on Behalf of Our Client, Rhea Lana Riner. Here’s What We Argued

Today, Cause of Action presented oral argument before the U.S. Court of Appeals for the D.C. Circuit in the case of Rhea Lana, Inc. v. Department of Labor (Case No. 15-5014).

Rhea Lana is an organizer of children’s clothing consignment events; it was founded by a stay-at-home mother in Conway, Arkansas and has since expanded into a franchise with 80 locations in 24 states. In Rhea Lana’s business model – consistent with other businesses in the consignment industry – consignors provide items to be sold, and have the option of “volunteering” at the sales event. Participating in the sale in that way helps ensure that consigned items sell, and consignors who choose to do so have the opportunity to shop early in order to get the best deals. What Rhea Lana provides is the organization, branding, and technology to help consignors make their sales.

Notwithstanding the obvious benefits of this arrangement for all concerned, the Department of Labor sent Rhea Lana a letter determining that the model violates the Fair Labor Standards Act (FLSA): specifically, that the participating consignors are actually Rhea Lana employees entitled to minimum wage and overtime. Although the agency did not initiate an enforcement action, it encouraged Rhea Lana’s consignors to sue for back wages (none did) and threatened Rhea Lana with civil monetary penalties if Rhea Lana doesn’t conform to the agency’s views. Rhea Lana filed suit under the APA seeking injunctive and declaratory relief, but to make matters worse, the district court dismissed the complaint for lack of any reviewable “final agency action.”

On appeal, Cause of Action has argued that the Department of Labor’s decision is indeed final and reviewable. First, the agency’s decision changes Rhea Lana’s legal status. In order to extract civil monetary penalties from Rhea Lana in a future enforcement action, the agency must prove that Rhea Lana either (1) is a repeat FLSA offender, or (2) violated the statute willfully.  See 29 CFR 578.3. Under the text of the agency’s regulations, notice from the agency has an important legal role in satisfying those requirements. Notice from the agency is an element of repeatedness, which the letter facially appears to satisfy.  Furthermore, notice will allow the agency to argue that Rhea Lana acted willfully not just factually, but as a matter of law. By sending Rhea Lana a letter, the agency thus created legal liabilities that wouldn’t have existed otherwise – one of the hallmarks of reviewable agency action. See, e.g.Sackett v. EPA, 132 S. Ct. 1367 (2013). Second, as the Supreme Court also recently reaffirmed in Sackett, when an agency demands a party’s compliance, the party can go to court instead of waiting for the hammer of enforcement to drop.

We await the Court of Appeals’ decision. If we are successful, the case will return to the district court for consideration on the merits of Rhea Lana’s claim that the Fair Labor Standards Act allows businesses and individuals to collaborate for their mutual benefit.