Archives for June 2017

LabMD and the FTC–Rough Day for the Government

On January 21, 2017 LabMD v. FTC, a case where we here at Cause of Action Institute weighed in with a friend of the Court brief on behalf of affected medical professionals [see brief here], was argued.  You should listen to it here.

CoA Institute also represented LabMD in the FTC proceedings and in collateral federal court actions seeking to halt the FTC’s administrative prosecution in the U.S. District Court for the Northern District of Georgia and in the U.S. Court of Appeals for the Eleventh Circuit. The arguments made here, and seemingly grasped by the 11th Circuit at oral argument, have been made by CoA Institute for quite some time.  This case was heard before three experienced jurists Gerald B. Tjoflat, Charles R. Wilson and Senior U.S District Court Judge Eduardo C. Robreno. (Interestingly, Judge Robreno is within the Third Circuit but sat on the 11th here).

Suffice to say it was not a good day for the ham-handed actions of the FTC in this case. The Court focused on the fact there appeared to be no harm to anyone from the action sued upon.  “A tree fell and nobody heard it, that’s the case we have here,” said Judge Tjoflat (if my memory for voices is accurate).  A nice summary of some of the more pungent comments from the bench were listened to, are found in Westlaw, and transcribed here:

“Counsel, let me put it this way. What the aroma that comes out of this case is that Tiversa was shaking down private industry with the help of the FTC, with the threat of going to the FTC. If you don’t cooperate, we will go to the FTC. It may well be how they got some of their clients…

“That’s an aroma, with falsifications to the commission. The administrative law judge just shredded Tiversa’s presentation, just totally annihilated it.”

In this case, the FTC with no consumer complaints, and no evidence of injury, and with no prior standards issued by the FTC for data security, put a company many physicians relied upon completely out of business. This is so even though the medical privacy act embodied by HIPAA was not violated.

The FTC relied on false information from Tiversa. “Oh, Come on!” said Judge Tjoflat responding to the assertion the FTC did not rely on that information to prosecute the matter.   Their own ALJ heard the facts (presented by CoAI) and destroyed the case and the Commission just overruled it; an appeal to Power and not Reason.  Judge Wilson specifically asked how LabMD would know it’s procedures would violate any standard.

The 11th Circuit already stayed the FTC Order with an Order of its own that bodes ill for Government.  Now we have this oral argument where the FTC was completely friendless.

Douglas Meal of Ropes & Gray, who argued the matter for LabMD, deserves kudos for a job well done. as does the rest of the Ropes & Gray team.  I will also note that Patrick Massari and Michael Pepson did a splendid job on the amicus brief which argument was also mentioned by the Court.

John J. Vecchione is President and CEO of Cause of Action Institute.

Supreme Court to Hear Case on Obstruction of the Tax Code

The Supreme Court this week announced that it will hear the case of Carlo Marinello, II v. United States next fall.  The Supreme Court granted Mr. Marinello’s petition for a writ of certiorari after considering it in conference on June 26, 2017, the Court’s last day of the summer session.  Cause of Action Institute filed an amicus curiae brief in support of Mr. Marinello’s petition, urging the Supreme Court to hear the case to address the Second Circuit’s expansive reading of a tax statute that could be interpreted to criminalize routine conduct of everyday American taxpayers and business owners.

Mr. Marinello owned a small courier service in New York. In 2012, the United States obtained an indictment against him under 26 U.S.C. 7212(a)’s “omnibus clause” of the criminal tax code, which makes it a felony to “in any other way corruptly…obstruct [] or impede [] or endeavor to obstruct or impede, the due administration” of the tax code.  The government argued that Mr. Marinello could be guilty of corruptly obstructing or impeding the administration of the tax code by performing acts as common as failing to maintain books and records for his small business, failing to provide his accountant with complete information, and discarding business records, all because he did these acts with the goal of not paying taxes.  However, the tax code already outlaws tax evasion, and it requires that the government prove a heightened criminal intent—that the defendant acted “willfully.”  The Sixth Circuit, in order to cabin its expansive language, has held that an individual must have knowledge that his or her conduct is obstructing an ongoing IRS investigation in order to be found guilty under the omnibus provision.  The Second Circuit and other courts of appeals have interpreted the language much more broadly, however, causing a circuit split.

Cause of Action’s amicus curiae brief highlighted the importance of preserving mens rea, or “guilty mind” requirements and the need for our criminal code to clearly inform people about what is, or is not, illegal.  As Judge Jacobs wrote in his dissent from the rest of the judges on the Second Circuit, “if this is the law, nobody is safe.”  Cause of Action hopes that the Supreme Court will cabin the omnibus clause as the Sixth Circuit has done and intends to file a new amicus curiae brief at the merits stage.  You can check out our prior blog post on this case here.

Erica Marshall is counsel at Cause of Action Institute.

John Vecchione discusses FBI’s involvement w/ Trump dossier on The John Fredericks Show

Cause of Action Institute Joins Broad Coalition Urging Congress to Reject New FOIA Exemption

Cause of Action Institute has signed a joint letter with dozens of groups from across the ideological spectrum urging the Chairmen and Ranking Members of the Senate and House Committees on Armed Services to oppose a Department of Defense (“DOD”) measure that could undermine the Freedom of Information Act’s (“FOIA”) goal of government transparency and accountability through a new FOIA exemption.

The DOD proposal would use the FY2018 National Defense Authorization Act to exempt from disclosure “information on military tactics, techniques, and procedures, and of military rules of engagements.” This proposal represents an effort by the Pentagon – the largest executive branch agency with the largest discretionary budget – to create a FOIA exemption that, if applied broadly, could hide much of the information and documents it creates.

This proposal is both procedurally problematic and unnecessary by DOD’s own practices, and the changes were proposed without the robust consideration and input of the committees with jurisdiction over FOIA. To date, no one has identified a disclosure of information that should not have occurred and that would be protected by this new language. DOD already has authority to withhold classified as well as unclassified information under FOIA for a variety of reasons. The proposed measure would give DOD license to further stretch its ability to shield documents from the public, which could be used to conceal information about matters of compelling public interest, such as the military’s oversight of contractors. This proposal would broaden a very narrowly drawn existing Exemption 3 statute. The risk in exempting more materials from disclosure does not appear to be justified in this case.

Cause of Action Institute shares DOD’s goal of ensuring that information that needs to be withheld for national security purposes is not disclosed.  However DOD’s most recent proposal is not the way to do so.

FBI “Can Neither Confirm Nor Deny” Existence of Records About Payment to Trump Dossier Researcher

Washington D.C. – The Federal Bureau of Investigation (“FBI”) has declined to confirm the existence of records responsive to a lawsuit filed by Cause of Action Institute (“CoA Institute”) in April 2017 for records about the relationship between the agency and  Trump dossier researcher Christopher Steele, a former British spy who made headlines after he was identified as the lead author of the infamous dossier.

According to a news report, the Trump dossier researcher entered an agreement with the FBI a few weeks before the November 2016 election to investigate then-candidate Donald Trump while, at the same time, he was employed by an opposition research firm to collect information for Democratic presidential nominee Hillary Clinton.

In part, the FBI’s response states:

“The nature of your request implicates records the FBI may or may not compile pursuant to its national security and foreign intelligence functions. Accordingly, the FBI cannot confirm or deny the existence of any records responsive to your request, as the mere acknowledgment of the existence or nonexistence of such records would, in and of itself, harm national security interests and reveal intelligence sources and methods.”

This so-called Glomar response gained notoriety in the CIA’s use of the Glomar Explorer to recover a downed Soviet submarine.

CoA Institute President and CEO John Vecchione: “The FBI is circling the wagons by claiming potential harm to national security if it discloses its relationship with Christopher Steele. Regardless of whether a payment was ever made, the FBI’s affiliation with a political opposition researcher in the midst of a presidential election deserves scrutiny. The FBI should be forthcoming about whether and how the agency was relying upon a former foreign spy who, in the pay of private parties, compiled a report of salacious accusations intended to harm the reputation of then-candidate Donald Trump.”

On March 7, 2017, CoA Institute sent a FOIA request to the FBI seeking access to records into whether the FBI paid money, or had plans to pay, Mr. Steele for any purpose.

The FBI’s full response can be found here.

For information regarding this press release, please contact Zachary Kurz, Director of Communications:

White House Should Release 100K Public Comments on Reforming Government

Washington, D.C. – Cause of Action Institute (“CoA Institute”) today submitted a Freedom of Information Act (“FOIA”) request to the White House Office of Management and Budget (“OMB”) seeking access to the more than 100,000 public comments OMB collected regarding “improvements to the organization and functioning of the Executive Branch.”

Between May and June, 2017, Americans were invited to submit suggestions to OMB in response to President Trump’s March 13 executive order calling for a comprehensive plan to reorganize the Executive Branch. The comments, however, have not been made publicly available.

CoA Institute President and CEO John Vecchione: “Public input can be a fundamental component of government reform, but there is little reason to sacrifice transparency. Given that President Trump’s executive order calls for the possible overhaul of the entire Executive Branch, the need for transparency and open public scrutiny of this matter is paramount.”

In addition to the website, which is routinely used by the federal government for gathering public comments, OMB also collected comments via an online form housed on a White House website. There appears to be a discrepancy between the reported number of comments and suggestions submitted via the reorganizing website, which states that “100,000+ suggestions and ideas” were submitted, and, which states that only 2,019 comments were received.

CoA Institute today requested access to all comments, suggestions, and ideas submitted to the OMB as part of this effort. The FOIA request is available here.

For information regarding this press release, please contact Zachary Kurz, Director of Communications:

Can FTC Ignore the Law to Expand its Power to Regulate Internet Providers?

Cause of Action Institute (“CoA Institute”) has filed an amicus curiae (“friend of the Court”) brief in the U.S. Court of Appeals for the Ninth Circuit in FTC v. AT&T Mobility LLC (“AT&T”) in support of AT&T during the pendency of rehearing en banc of an appeal regarding whether the Federal Trade Commission (“FTC” or “Commission”) has statutory authority to regulate common carriers such as Internet Service Providers (“ISPs”) and telephone companies under Section 5 of the FTC Act.

In September 2016, a unanimous three-judge Panel on the U.S. Court of Appeals for the Ninth Circuit ruled that because the plain language of the FTC Act categorically exempts common carriers like AT&T from FTC regulation under Section 5, the FTC lacks statutory authority to regulate businesses like AT&T. (Instead, such businesses are regulated by a different federal agency, the Federal Communications Commission (“FCC”) under a different federal statute, the Communications Act.)  Consistent with the judicial role and respect for the separation of powers, the Panel explained that “[i]t is not for us to rewrite the statute so that it covers only what we think is necessary to achieve what we think Congress really intended.  That is a job for Congress, not the courts.”

The FTC subsequently filed a petition for rehearing en banc supported by a number of “friend of the Court” briefs arguing that the full Ninth Circuit should vacate the Panel decision and rehear the case because, among other things, the Panel decision was inconsistent with their views regarding sound public policy and left a supposed “regulatory gap” that the FTC should be allowed to “fill.” On May 9, 2017, the Ninth Circuit granted the FTC’s petition.

Concerned about this development, our brief argues that the Court should decide the case the same way the Panel did; that is, calling balls and strikes and deciding the case based on the statute’s plain text rather than a federal agency’s subjective views on what it thinks is enlightened public policy for the entire country. Our brief argues that such an approach respects Congress’s legislative role under Article I of the U.S. Constitution, as well as the separation of powers.  That is because under the U.S. Constitution only the People’s elected representatives in Congress—not a federal agency like the FTC or FCC and not a federal Court—are allowed to rewrite federal law in response to public policy arguments.

As our brief also notes at pages 3-4: “CoA’s interest in this case also stems from its view that, regardless of whether the FTC’s policy goals are sound, the FTC has now “spun out of the known legal universe and … [is] now orbiting alone in some cold, dark corner of a far-off galaxy, where no one can hear the scream ‘separation of powers.’”

These fitting words, describing FTC’s recent forays in Art. III Courts under Section 5, are not hyperbole, but instead reflect a very disturbing reality. FTC’s self-appointed mantle as perverse executive-agency posse comitatus, a poseur arrogant and lawless unto itself, whose overreach and overregulation do not serve the American people or the public interest.

The full brief can be found here.

Patrick Massari is assistant vice president at Cause of Action Institute