Archives for December 2016

CoA Institute Sues CFPB for Refusing to Release Records Underpinning Anti-Arbitration Rule

Washington D.C. – Cause of Action Institute (“CoA Institute”) today filed a lawsuit in the U.S. District Court for the District of Columbia to compel the Consumer Financial Protection Bureau (“CFPB”) to provide records the agency used in formulating its rule to prohibit the use of mandatory binding arbitration clauses in financial services contracts.

Cause of Action Institute Vice President John Vecchione: “To issue a regulation affecting such a vast swath of the economy, and then attempt to conceal the bulk of the documents reflecting how that decision was made from public view, violates the law and the American people’s right to know.”

Prohibiting the use of third-party arbitration in financial contracts would subject numerous financial institutions to a flood of class action lawsuits, further burdening the courts and ultimately injuring consumers by increasing the costs associated with bank loans and other financial services. The CFPB’s proposed rule was largely based on a study commissioned by the agency in 2015. 

In April 2016, CoA Institute filed a Freedom of Information Act (“FOIA”) request for records that would show how the agency conducted its study. Although CFPB produced some documents, the agency withheld a large number of responsive records and information. 

In September, 2016, CFPB issued a final determination, indicating the agency would withhold 1,877 pages of responsive records. CoA Institute appealed the CFPB’s determination and challenged each FOIA exemption the agency applied to the production. Last month, CFPB denied the appeal.

In its lawsuit, CoA Institute argues that CFPB is required to produce all responsive records not covered by a valid exemption.  The burden is on the agency to justify the use of any exemption to withhold or redact information, which CFPB has failed to do. The lawsuit compels the agency to produce all records improperly withheld within twenty business days of the court’s order.

The full lawsuit can be found here


FOX News: East Coast fishermen file appeal over cost of government-required ‘at-sea monitors’

East Coast fishermen file appeal over cost of government-required ‘at-sea monitors’


By Cristina Corbin | Published December 09, 2016

SEABROOK, N.H. – David Goethel built his life off the profits of cod, trolling the waters of New England for 30 years netting the region’s once-abundant signature fish.

“My slice of the American Dream was paid for from fishing,” Goethel said from behind the wheel of his 44-foot fishing trawler on a windy Friday afternoon in December. “Cape Cod house, two cars, four college educations – it all came out of the fish hole in this boat.”

But a controversial federal mandate is threatening to put him out of business, he claims. Read More

CoA Institute Challenges SEC’s Unlawful Expansion of Criminal Liability

Washington D.C. – Cause of Action Institute (CoA Institute) has filed an Amicus Curiae Brief in the First Circuit Court of Appeals challenging the District Court’s decision to defer to the U.S. Securities and Exchange Commission’s (SEC’s) interpretation of a law in a criminal case where that interpretation actually contradicts the text of the statute.

In May 2016, Richard Weed, a California-based attorney, was convicted on charges of conspiracy to commit securities fraud, which included a “pump-and-dump” scheme involving penny stocks. The government alleged that Mr. Weed performed legal work for two co-conspirators that enabled them to evade SEC stock registration requirements. Mr. Weed was sentenced to forty-eight months in prison.

The government’s case was premised on the fact that the co-conspirators were required to register the stock with the SEC. However, the stock at issue did not require registration under the Securities Act. The government conceded this point, but nevertheless argued that registration was required in accordance with the SEC’s interpretation of the law.

In its Amicus Brief, following a long line of judicial precedent, CoA Institute argued that Section 3(a)(9) of the Securities Act is unambiguous and should be construed as such, something the District Court of Massachusetts failed to do. More broadly, the Brief contends that federal agencies should not be able to administratively rewrite federal statutes to create new crimes that Congress never intended and then demand that the courts “defer” to the agency’s views on what the law prohibits or requires. Such a constitutionally dangerous practice violates the separation of powers and threatens individual liberty. The Amicus Brief argues that criminal statutes should be narrowly interpreted to protect citizens from arbitrary, overreaching prosecutions.

CoA Institute Counsel Patrick Massari: “The Constitution provides for the courts to have exclusive authority to interpret criminal laws passed by Congress. The SEC overstepped its authority by interpreting the law in a way that is directly contrary to the plain text of Section 3(a)(9). The unchecked power of the SEC and the administrative state harms individual liberty and threatens free market principles. CoA Institute is uniquely situated to assist the Court in reaching its decision because this case deals with the intersection of overcriminalization and administrative law.”

The full Amicus Brief can be found here.

CoA Institute Sues IRS for Improperly Shielding Records

Washington D.C. – Cause of Action Institute (CoA Institute) today filed a lawsuit against the IRS after the agency refused to produce records under the Freedom of Information Act (FOIA) relating to its dealings with Congress’s Joint Committee on Taxation (JCT).

In December 2015, the IRS Office of Chief Counsel issued new guidance claiming that nearly all IRS records relating to the JCT should be treated as “congressional records” and therefore shielded from public disclosure under FOIA. This revised guidance contradicts long-standing precedent for what records government agencies must provide in response to FOIA requests.

CoA Institute Vice President John Vecchione: “The IRS continues to withhold agency records that the American people have a right to see. Agency records, including communications with Congress, are subject to FOIA. But the IRS is now attempting to change the rules and withhold all of its communications with, and other records relating to, the JCT. Our lawsuit challenges what appears to be a ploy by the IRS to avoid transparency.”

For months, CoA Institute has sought IRS communications with JCT and other JCT-related records, including those that reflect internal deliberations concerning the agency’s dealings with the JCT.  By definition, these are agency records, as they would necessarily have been received or created by the IRS and are currently in the possession of the agency.  Such records would have been used by IRS employees and uploaded or stored into IRS recordkeeping systems, including e-mail or correspondence tracking databases.

On November 22, 2016, in response to CoA Institute’s administrative appeal, the IRS re-affirmed its conclusion that the requested records were not subject to FOIA and went a step further to describe CoA Institute’s FOIA requests as “too broad and too nebulous.” The Department of Justice has explained, however, that “[t]he sheer size or burdensomeness of a FOIA request, in and of itself, does not entitle an agency to deny that request on the ground that it does not ‘reasonably describe’ records.” The IRS never indicated that it was unable to locate records responsive to CoA Institute’s FOIA requests, nor did it suggest it required a narrowed scope or clarification as to the records sought.

CoA Institute’s lawsuit seeks to prevent the IRS from improperly shielding agency records from disclosure under FOIA.

The lawsuit can be found here
Exhibits can be found here