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04/4/2018

Sixth Circuit Should Follow Supreme Court’s Precedent and Recognize Limits of Anti-Injunction Act

Today, Cause of Action Institute filed an amicus brief in CIC Services, Inc. v. IRS in the U.S. Court of Appeals for the Sixth Circuit.  At issue in the case is whether the Anti-Injunction Act prohibits courts from reviewing whether the IRS complied with the Administrative Procedure Act (“APA”) when it issued a notice related to captive insurance companies.  We urged to appellate court to reverse the district court’s ruling that the Act blocks the suit and to resist the temptation to extend the D.C. Circuit’s flawed reasoning from Florida Bankers.

Notice 2016-66 and Captive Insurance

The rule at issue is contained in Notice 2016-66.  The IRS believes that small companies are using captive insurance companies (i.e., a type of self-insurance vehicle owned by the company or an affiliate) as a tax shelter.  But the IRS isn’t really sure if they are or what types of captives could be problematic.  So the IRS created a new category of “reportable transaction” known as a “transaction of interest,” which requires companies to proactively disclose when they are using a captive insurance company to self-insure.

The problem is that this creates a recordkeeping and reporting burden on small businesses and threatens fines if they do not comply.  CIC Services, the plaintiff-appellant in the case, estimates it would require hundreds of hours of labor and more than $100,000 to comply with the notice.  Further, “reportable transactions” are a scarlet letter in the tax world, and many businesses would rather avoid the underlying behavior than disclose they are engaging in a “reportable transaction.”

The IRS is doing all of this without notice and comment, without studying the adverse impact of its fishing expedition, and in conflict with Congress repeatedly authorizing captive insurance vehicles for small businesses.  CIC Services is also challenging whether the IRS can create a “transaction of interest” without issuing a formal regulation because Congress has limited the IRS’s ability to make “reportable transactions” to those “as determined under regulations prescribed” by the agency.[1]  A simple notice does not meet this standard.

An Overbroad Use of the Anti-Injunction Act Stands in the Way

The parties’ dispute over Notice 2016-66 and whether it violates substantive and procedural limitations on the agency has all the makings of a rather pedestrian APA case.  This is why we have preenforcement judicial review of agency rulemaking.  Enter the Anti-Injunction Act, which prohibits suits “for the purpose of restraining the assessment or collection of any tax shall be maintained in any court by any person.”[2]  The district court agreed with the IRS that the Act blocked the CIC Services suit.

But Notice 2016-66 deals with neither the “assessment” nor the “collection” of any tax; it creates a reporting requirement.  The U.S. Supreme Court unanimously has held that “notice and reporting requirements precede the steps of ‘assessment’ and ‘collection’” and that suits challenging reporting requirements do not “restrain” those activities and do not trigger the Anti-Injunction Act.[3]    But the D.C. Circuit recently ignored the Supreme Court’s decision in Direct Marketing in Florida Bankers[4] and the Six Circuit may be tempted to extend the D.C. Circuit’s ruling.  CoA Institute submitted an amicus brief in support of a cert petition in Florida Bankers, but the Supreme Court declined to hear the case.

CoA Institute Shows the Court the Consequences of an Overbroad Anti-Injunction Act

The litigants in the case will present the court with all of the issues above.  CoA Institute’s contribution was to introduce the court to the consequences of allowing IRS rulemaking to go unreviewed.  We presented the research underlying our recent investigative report, Evading Oversight: the Origins and Implications of the IRS Claim that its Rules Do Not Have an Economic Impact.  The danger of allowing the IRS to continue to use an over-expansive reading of the Anti-Injunction Act to block judicial review of its rulemakings is that the IRS will continue to ignore the substantive and procedural limitations on its authority.

Congress and the president have established a series of oversight mechanisms to ensure that agencies are complying with procedural requirements, taking public comments into account, and properly mitigating the adverse impacts of their rules, when possible.  But the IRS has erected a series of self-made exemptions from these oversight requirements.  One of those exemptions is at issue in CIC Services: does the IRS have to comply with the APA when it promulgates legislative rules?  A broad reading of the AIA blocks the courts from answering that question and so the IRS continues to flout the rules.

Conclusion

The Sixth Circuit should reject any invitation to extend Florida Bankers, adhere to Supreme Court precedent from Direct Marketing, and reverse the district court’s ruling that the Anti-Injunction Act prevents preenforcement judicial review of whether the IRS complied with the APA when it issued Notice 2016-66.

James Valvo is Counsel and Senior Policy Advisor at Cause of Action Institute.  He is the principal author of Evading Oversight.  You can follow him on Twitter @JamesValvo.

[1] 26 U.S.C. § 6707A(c)(1).

[2] 26 U.S.C. § 7421.

[3] Direct Mktg. Ass’n v. Brohl, 135 S. Ct. 1124, 1131 (2015).

[4] Florida Bankers Ass’n v. Dep’t of Treasury, 799 F.3d 1065 (D.C. Cir. 2015)

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04/4/2018

Investigation Update: EPA Employees Used a Range of Messaging Apps and Other Non-Work-Related Programs on Agency-Issued Mobile Devices

Shortly after President Trump took office, Politico reported that a small group of career employees at the Environmental Protection Agency (“EPA”) were using an encrypted messaging application, called “Signal,” to discuss ways to prevent incoming political appointees from implementing the Trump Administration’s policy agenda.  The use of Signal at the EPA mirrored reports about the use of other electronic messaging platforms across the government.

Records recently released to CoA Institute under the Freedom of Information Act (“FOIA”) now confirm that a number of EPA employees installed Signal, WhatsApp, and at least sixteen other messaging applications on their agency-furnished devices.  These records also reveal that EPA employees installed a panoply of other applications—including email, sports betting, dating, and entertainment applications—that raise questions about the use of government-issued and taxpayer-funded mobile devices for personal purposes.

CoA Institute’s Investigation of Messaging Apps at the EPA

Cause of Action Institute (“CoA Institute”) opened its investigation into the use of Signal because we were concerned that the application might be used to conceal internal agency communications from oversight and to avoid EPA obligations under the FOIA and the Federal Records Act (“FRA”).  We were not alone in our suspicions.  After the House Committee on Science, Space, and Technology’s requested that the EPA Inspector General analyze the allegations reported in the press, the National Archives and Records Administration (“NARA”) opened its own inquiry into the potential violation of federal records management laws.  That inquiry remains open.

Over the past year we have slowly pieced together details about the Signal scandal.  In response to our first FOIA lawsuit, the EPA acknowledged that there was an “open law enforcement” investigation.  Although the EPA initially claimed that many records would be withheld in full, it changed its position and released records that corroborated the alarming facts reported by the media.  But, as we have explained, the records also revealed much more.  Among other things, they confirmed that CoA Institute’s original FOIA request, as reported by the Washington Times, was the actual impetus for the EPA Inspector General’s (“IG”) investigation.  As Assistant Inspector General Patrick Sullivan noted at the time:

The records also confirmed that an EPA contractor “scanned” most agency-furnished devices for the different applications that had been installed by employees.  This scan, which was requested by the IG, was conducted with a software tool known as “Mobile Device Management,” or “MDM.”  As part CoA Institute’s second FOIA lawsuit, the EPA disclosed that contractor-generated report, as well as other documents.

The EPA IG’s Investigatory Conclusions on Signal

The EPA IG memorialized its findings about the Signal scandal in a series of investigatory memoranda.  The watchdog determined that Signal was not used to “purposefully circumvent the applicable Federal record retention rules.”  Nevertheless, it concluded that two employees—one in the Office of the Inspector General and the other in the Office of the Science Advisor—violated agency policy by downloading the unapproved application, as revealed by a summary of a subset of the MDM report.

In each instance, the IG interviewed the offending employee and consulted the Department of Justice before concluding that no “discernable crime” had been committed.  The employee in the Office of Inspector General had downloaded Signal “to see if there was a suitable law enforcement purpose for the application.”

The employee in the Office of the Science Advisor denied having the application on his or her device, but consented to an examination of the phone.  Although Signal “did not appear to be currently installed,” there was no final explanation for how the application originally found its way onto the phone.  The IG opined that it could have happened due to unintentional synching with a personal Apple account.

But Maybe the Problem Was Never Signal . . .

As exonerating as the IG’s conclusion may be, the story does not end there.  While investigating the use of Signal, the EPA and the IG also discovered that fifty-eight employees violated official policy by downloading another encrypted messaging app, named “WhatsApp.”

The IG similarly determined that federal records laws had not been violated based on voluntary interviews of the fifty-eight employees, but this finding is somewhat contradicted by the admission of two employees that they used WhatsApp for “official EPA work.”

When all fifty-eight employees were polled on their “motivation and intent” for downloading WhatsApp, the clear majority cited a “lack of clarity” in the agency’s policy for not installing unapproved applications.  More than half also suggested that they had downloaded WhatsApp for “the purpose of keeping in touch with family/friends domestically or overseas.”

A Potentially Serious Deficiency in the EPA IG’s Inquiry

When the EPA scanned the contents of most mobile devices during the Signal investigation, it also produced a summary of all the applications installed on agency-furnished devices, along with an “install count” for each program.  The list runs ninety-six pages long and its contents are shocking.

To begin with, although the Signal scandal originally concerned the use of that single program, and was later expanded to include WhatsApp, the complete MDM report, which was released to CoA Institute, indicates that at least another sixteen applications with electronic messaging capabilities were being used by EPA employees.  These applications—many of which are likely unapproved and raise the exact same FOIA and FRA concerns as Signal and WhatsApp—include:

AIM (1 phone)
BlackBerry Messenger (3 phones)
Facebook Messenger (227 phones)
Google Hangouts (27 phones)
GroupMe (10 phones)
Jabber (27 phones)
KakaoTalk (3 phones)
Kik (1 phone)
LINE (1 phone)
Skype (58 phones)
Slack (7 phones)
Snapchat (25 phones)
Telegram (1 phone)
Viber (19 phones)
WeChat (2 phones)
WickrMe (1 phone)

Why did the EPA IG fail to investigate these other applications, some of which are capable of encrypted messaging?  Perhaps because the EPA’s Office of Environmental Information never handed over the full MDM report.  This is suggested by two records.

First, the EPA admitted to CoA Institute that it prepared two attachments (here and here) containing subsets of data from the MDM report, namely, those data that revealed the number and identifies of users with Signal or WhatsApp installed on their phones.

Second, the transmission of only the two summaries is suggested by the email referenced above, which also was disclosed to CoA Institute.  An IT team leader, Greg Zurla, sent the heads of the Office of Environmental Information, Steven Fine and Harvey Simon, the data about Signal and WhatsApp, but nothing else.  The IG’s final investigatory memoranda likewise reflect a targeted investigation into Signal and WhatsApp, with no mention of a broader dataset that could expose the unapproved use of similar encrypted messaging applications.

To the extent the IG was not—or still is not—aware of so many other messaging applications, then further inquiries need to be made.  Whether these platforms were used for personal or work-related purposes, they are problematic and raise issues relating to federal records management.  Moreover, although the IG has suggested that the EPA disabled the ability of some iPhone and iPad users to download the “Apple Store app,” and thus to install unauthorized applications, it is unknown whether all unapproved messaging applications have been deleted or, alternatively, whether adequate procedures have been put in place so that the EPA can meet all recordkeeping obligations.

The Use of Government Property for Personal Use is Deeply Troubling

The results of the IG investigation raise other troubling questions.  Why should a government employee be able to justify his installation of an unapproved, and legally problematic, application on agency-furnished hardware by claiming that he wanted to use it for personal purposes?  Should taxpayers pay for EPA employees to use government data plans to communicate with “family and friends”?

The full MDM report disturbingly reveals the sheer number of non-work-related applications that EPA employees installed.  Some of these, such as web-based email programs, raise records management issues that have plagued other agencies like the Department of Homeland Security.  The applications can be grouped into a number of categories.  Here is a sampling:

  • Web-Based Email
    AOL (16 phones)
    Gmail (129 phones)
    Yahoo Mail (56 phones)
  • Social Media
    Facebook (466 phones)
    Instagram (162 phones)
    LinkedIn (117 phones)
    Pinterest (75 phones)
    Reddit (20 phones)
    Twitter (310 phones)
  • Dating
    Coffee Meets Bagel (1 phone)
    OK Cupid (1 phone)
  • Personal Banking and Finance
    AmEx (11 phones)
    Barclaycard (6 phones)
    Bank of America (29 phones)
    CitiMobile (10 phones)
    Wells Fargo (24 phones)
    Navy Federal (11 phones)
    PayPal (10 phones)
  • Entertainment and Sports Betting
    Angry Birds (14 phones)
    Blackjack (5 phones)
    Candy Crush (32 phones)
    Draft Kings (1 phone)
    Duolingo (10 phones)
    ESPN (60 phones)
    Fandango (15 phones)
    HBO (15 phones)
    Netflix (73 phones)
    Pokémon GO (7 phones)
    Shazam (22 phones)
    SiriusXM (19 phones)
    Spotify (71 phones)
    YouTube (237 phones)
  • Shopping
    Amazon (56 phones)
    eBay (16 phones)
  • Religious
    Bible apps (22 phones)
    Catholic TV (1 phone)
  • Political
    Boycott Trump (1 phone)

Again, this is a non-exhaustive list.  The full list can be accessed here.

Based on the EPA’s list of approved “Terms of Service” agreements, it appears that most of these applications were never authorized for work-related business.  To the extent they were used for personal purposes, the EPA should take its workforce to task for abusing the privilege of a government-furnished and taxpayer-funded phone.

Although the IG reports that the EPA has disabled the Apple Store on newer models of the iPhone and iPad, we hope the agency makes serious efforts to remove these troubling applications from all makes and models of the hardware furnished to employees.  Simply stated, the EPA does not exist so its bureaucrats can spend the day watching Netflix, browsing eBay, or swiping right on a dating application.

Ryan P. Mulvey is Counsel at Cause of Action Institute.

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03/30/2018

CoA Institute Lawsuit Prompts Archivist to Examine Potential Record Destruction at NOAA

Cause of Action Institute (“CoA Institute”) filed a lawsuit last summer against the National Oceanic and Atmospheric Administration (“NOAA”) seeking copies of electronic records created through the agency’s Google-based email platform.  These types of records are commonly known as “instant messages.”  The Freedom of Information Act (“FOIA”) requests at issue (available here and here) also sought formal agency guidance on the retention of “Google Chat” or “Google Hangouts” messages.  We had already learned, through earlier investigation, that at least one internal NOAA handbook, dating from March 2012, instructed agency employees to treat all chat messages as “off the record,” raising concerns about potential unlawful record destruction at NOAA.

Media Coverage of CoA Institute’s Lawsuit Tipped-off the National Archives

The Daily Caller News Foundation reported on CoA Institute’s lawsuit shortly after it was filed.  Officials at the National Archives and Records Administration (“NARA”), which is tasked with policing federal records management across the government, took notice of the story and subsequently opened an inquiry on July 17, 2017 into CoA Institute’s allegations.  NARA gave NOAA “30 calendar days” to indicate how it planned to address the retention of “Google Chat and Skype messages,” and, if necessary, to report an “unauthorized disposition,” that is, the improper destruction of records.

As far as we know, eight months later, NOAA still has not responded to NARA.  We only learned about the NARA inquiry due to the agency’s recent decision to proactively disclose information on all pending investigations into the unauthorized disposition of federal records.  We have filed FOIA requests with NOAA and NARA in order to discover the status of the inquiry, and we will provide further updates as more details become available.

The fact that CoA Institute had to file a FOIA request to obtain NOAA’s response to the NARA inquiry, as well as related communications, shows that NARA’s proactive disclosure regime on this topic could be improved.  NARA should add another category of materials to its webpage that includes all correspondence received from an agency under investigation for the improper treatment of records.

NOAA’s Questionably Legal Google Chat Policy Flouts NARA Guidance

It goes without saying that an agency-wide policy to treat all chat messages as categorically “off the record” is problematic.  Even if an agency expects its employees to keep business-related communications, which could qualify for retention under the Federal Records Act (“FRA”), off a chat-based platform, it is reasonable to assume that some messages worthy of preservation will be sent or received over instant messaging.  NARA Bulletin 2015-02 makes that point clear.  And even if some instant messages were not worthy of long-term historical preservation, they would still qualify as transitory records subject to NARA-approved disposition schedules.

A categorical policy such as the one that NOAA has adopted creates a moral hazard.  Officials who want to thwart transparency can communicate with chat or instant messaging and, at least in this case, there is no way for the agency, NARA, or the public to catch them in the act.  NOAA officials have been observed using Google Chat to communicate during a contentious meeting of the New England Fishery Management Council.  If an agency like NOAA refuses to police how its employees are using the chat function on their Google-based email accounts, it should disable the function all together.

Regardless of whether electronic messages created through Google Chat or Google Hangouts are subject to the FRA, they may still be subject to the FOIA, which defines an “agency record” in broader terms than the FRA’s definition of a “federal record.”  By failing to implement any sort of mechanism for preserving chat messages—even for the briefest period—NOAA is depriving the American public of access to records that could be particularly important in showing how the agency operates and regulates.

The worst part of this saga is that NOAA knew it was treading a thin line in deciding to treat Google Chat messages as “off the record.”  According on documents obtained through the FOIA, NOAA’s lawyers and records management specialists were aware that electronic messages would need to be saved for public disclosure if Google Chat were “on the record.”  Notes from an October 20, 2011 meeting reflect this:

NOAA also recognized that chat messages could, in theory, be subject to the FRA.  Yet NOAA Records Officer Patricia Erdenberger reasoned that, by treating Google Chat as “off the record,” the agency’s FRA obligations could be bypassed.  Making a questionable analogy to phone calls, Erdenberger suggested that chat messages be “considered transient electrons.”

Agencies must do a better job at keeping pace with evolving forms of technology.  As one of my colleagues has argued, the use of non-email methods of electronic communication—including text and instant messaging, as well as encrypted phone applications like Signal—has serious implications for federal records management.  The Department of Commerce, NOAA’s parent agency, has not updated it policy for handling electronic records since May of 1987.  NARA, for its part, has been critical of the Department’s failure to revise this guidance, which is “heavily oriented towards the management of digital records on storage media such as diskettes and magnetic tape.”  Still, thirty years is a long time for such inaction, even for the federal government.  The transparency community must therefore intensify its efforts to hold the government accountable until more effective ways of handling electronic records are introduced.

Ryan Mulvey is Counsel at Cause of Action Institute

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03/28/2018

Obstruction of the Tax Code: Supreme Court Limits Gov’t Power to Criminalize Sloppy Tax Filers

Did you commit a felony when you made those cash payments to your babysitter?  Last week, the United States Supreme Court issued an opinion answering the question as decisively, no. “Please,” you are probably thinking, “that could never have been the case.” But according to the federal government’s arguments in a recent criminal tax case at our nation’s highest court, such conduct could have constituted felony obstruction of the tax code if you knew your babysitter was likely not going to report the income to the IRS.

Under the government’s requested interpretation of 26 U.S.C. § 7212(a), which punishes anyone who corruptly obstructs or impedes the due administration of the tax code, such a payment to the babysitter would be “corrupt” because it would help another obtain an unlawful benefit (not paying taxes) and impede the IRS’s ability to collect those taxes.  In Marinello v. United States, however, Justice Breyer delivered a 7-2 decision that decisively narrowed the scope of conduct that constitutes felony obstruction of the tax code.  The decision should leave every taxpayer relieved that they cannot unwittingly become subject to criminal prosecution.

Cause of Action Institute filed one of only two “friend of the court” briefs at the certiorari stage, in partnership with the National Association of Criminal Defense Lawyers.  The two organizations partnered again at the merits stage to file a second “friend of the court” brief in support of Mr. Marinello’s position.

Carlo Marinello, II owned a small courier service in New York.  In 2012, the United States obtained an indictment against him for failure to file tax returns and for obstruction 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 obstructed the administration of the tax code when he failed to maintain books and records for his small business, failed to provide his accountant with complete information, and discarded business records and receipts.  The government argued that these otherwise innocuous (and perfectly legal) acts were criminal because they impeded the IRS’s administration of the tax code and were done “corruptly” because they helped him obtain an unlawful benefit—evading taxes.  However, the tax code separately criminalizes tax evasion and failure to file tax returns and requires that the government prove that the defendant acted “willfully,” a heighted criminal intent, in committing these crimes.

Disagreeing with the government, the Supreme Court held that the “due administration of the tax code” as referenced in section 7212(a) did not cover any and all governmental efforts to collect taxes.  Rather, the clause refers to the specific interference with targeted governmental tax-related proceedings, such as a particular investigation or audit.  Specifically, the Supreme Court held that to secure a conviction under the “omnibus clause,” the government must show (among other things) that there is a “nexus” between the defendant’s conduct and a particular administrative proceeding, such as an investigation, an audit, or other targeted administrative action.  The government must also prove that the investigation or audit was pending at the time the defendant engaged in in the obstructive conduct or was at least reasonably foreseeable by the defendant.  Marinello v. United States, 584 U.S. __, __ (2018) (slip op., at 11).   In other words, the defendant’s actions must obstruct a currently pending proceeding or specific IRS audit.  This reasoning was based on a similarly worded criminal statute pertaining to the obstruction of “justice” as interpreted by the Supreme Court.  See United States v. Aguilar, 515 U.S. 593 (1993) (requiring proof that the defendant obstructed a specific pending proceeding, not just the government’s broad administration of justice).

With regard to a taxpayer’s payment to a babysitter, and citing an IRS regulation, Justice Breyer remarked the government’s interpretation of the statute could result in felony prosecution for a person who pays a babysitter $41 per week in cash without withholding taxes, leaves a large cash tip in a restaurant, fails to keep charity donation receipts, or fails to provide every record to an accountant.  As Justice Breyer stated, “[a] taxpayer may know with a fair degree of certainty that her babysitter will not declare a cash payment as income—and, if so, a jury could readily find that the taxpayer acted to obtain an unlawful benefit for another.”  The Supreme Court stated that if Congress had intended this result, it would have spoken with more clarity.

Justice Breyer further emphasized that criminal statutes must be narrowly interpreted and that courts cannot rely on promises of prosecutorial discretion to narrow the scope of a statute.  The Supreme Court has “traditionally exercised restraint in assessing the reach of a federal criminal statute, both out of deference to the prerogatives of Congress and out of concern that a fair warning should be given to the world in language that the common world will understand of what the law intends to do if a certain line is passed.”  Marinello, 584 U.S. at __ (slip op., at 4).  Moreover, the Court’s review of the broader statutory context of the entire Internal Revenue Code further counseled against adopting the government’s broad reading.  The Court noted that the tax code “creates numerous misdemeanors, ranging from willful failure to furnish a required statement to employees, section 7204, to failure to keep required records, 7203, to misrepresenting the number of exemptions, 7205, to failure to pay any tax owed, however small the amount, 7203.”  The Court stated that to interpret the statute as applying to any administration of the tax code would potentially transform many, if not all, of these misdemeanor provisions into felony obstruction, making the specific provisions redundant, or perhaps the subject matter of plea bargaining.  Id.  According to Justice Breyer, the government’s preferred interpretation would render superfluous many of the provisions of the same enactment, something that Congress could not have intended when it codified section 7212(a).

The Court further noted that it could not trust that prosecutorial discretion would limit the government’s use of the clause.  At oral argument, the government attorney conceded that under the Attorney General’s Charging and Sentencing Policy, where a more-punitive and less-punitive criminal statute may apply to a case, the prosecutor must charge a violation of the most punitive statutory provision that it can readily prove at trial.  Office of the Attorney General, Department Charging and Sentencing Policy (May 10, 2017).  To rely upon prosecutorial discretion to narrow the otherwise wide-ranging scope of a criminal statute’s highly abstract general statutory language places great power in the hands of the prosecutor. Marinello, 584 U.S. at __ (slip op., at 9).  The Court refused to construe the criminal statute on the assumption that the government will use it responsibly. According to Justice Breyer, doing so risks allowing “policemen, prosecutors, and juries to pursue their personal predilections,” id. (citing Smith v. Goguen, 415 U.S. 566, 575 (1974), which could result in the nonuniform execution of that power across time and geographic location.” Marinello, 584 U.S. at __ (slip op., at 9).

The Supreme Court’s holding is an important one for the rule of law, limiting the scope of overly broad criminal statutes, and protecting average taxpayers.

Erica Marshall is counsel at Cause of Action Institute

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03/27/2018

Congress Throws Fishermen a Lifeline

Congress gave groundfishermen in New England a new lease on life when it appropriated funds last week to cover the cost of the At-Sea Monitoring program for 2018.  The National Oceanic and Atmospheric Administration (“NOAA”) requires groundfishermen—who target bottom-dwelling fish like cod or flounder—to carry at-sea monitors on their boats and, as of 2015, requires the fishermen to pay the costs associated with these monitors, which can exceed $700 per day.  By NOAA’s own estimates, this could put nearly 60% of the groundfishing fleet out of business.  Small, family-run businesses would be hit hardest.  CoA Institute released a short video with its client, David Goethel, that describes the destructive impact industry-funded monitoring will have on fishermen’s lives.

Judicial Review

CoA Institute filed suit on behalf of the fishermen in 2015. In 2017, the First Circuit Court of Appeals ruled that the fishermen filed their lawsuit too late because the underlying regulation was promulgated in 2010.[1]  The statute governing the fishing industry—the Magnuson-Stevens Act—has a review period of only thirty days after the finalization or implementation of a regulation for a legal challenge.  Although CoA Institute argued that imposing costs on industry for the first time in November 2015 should have restarted the clock for a legal challenge, the Court disagreed.  But the First Circuit did note that:

[G]iven NOAA’s own study which indicated that the groundfish sector could face serious difficulties as a result of the industry funding requirement, we note that this may be a situation where further clarification from Congress would be helpful for the regulated fisheries and the agency itself as it balances the competing goals of conservation and the economic vitality of the fishery.

Congress Steps Up

Congress appears to have taken notice by appropriating the funds necessary to cover at-sea monitoring costs for Fiscal Year 2018.  Congress also gave specific instructions to NOAA in order to avoid any ambiguity and ensure that the agency uses these funds for their intended purpose.

This is not a permanent solution but, for now, it will allow fishermen to stay afloat.  In the future, if regulators want to continue to impose constitutionally suspect monitors on an already-beleaguered American fishing industry, they must justify the cost to the American taxpayer.  The enormous public debt associated with the Omnibus Funding bill is reckless and unsustainable.  Eliminating at-sea monitoring would be a good start to curtailing spending.  But in the meantime, a federal agency like NOAA cannot be allowed to create a regulatory structure and then destroy an entire industry in order to fund it.  If the government cannot afford to fund its programs, those programs must end.  For 2018, at least, the government has chosen to cover the costs of monitoring, and our fishermen will get to keep on fishing.  The better solution, however, would be to eliminate at-sea monitoring altogether.

Eric Bolinder is counsel at Cause of Action Institute

[1] CoA Institute also filed a petition with the Supreme Court, which declined to take the case.

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03/26/2018

FTC Raids Small Business and then Obscures Participation in the Raid

Update: On Thursday, March 29, 2018, after clarifying that there was no legal impediment to its production, CoA Institute received from the FMPD the unredacted body cam footage showing the raid on Vylah Tec’s offices.

On May 3, 2017, the Federal Trade Commission (“FTC”) raided a small family-run tech support company, Vylah Tec, LLC (“V-Tec”), on suspicion of “deceptive” sales practices. The hours-long raid was initiated as part of a politically-hyped campaign known as Operation Tech Trap headed by the FTC in conjunction with the Florida Attorney General’s office. The FTC’s sting-like raid, assisted by local police, included hands-in-the air orders, temporary confiscation of employee cell phones, and police-escorted bathroom breaks.

On January 4, 2018, Cause of Action Institute (“CoA Institute”), under Florida’s “Sunshine Law,” requested from the Fort Myers Police Department access to the body camera recordings taken by officers participating in the raid at V-Tec’s headquarters. In the request, CoA Institute specifically  stated that any denial of access to the requested records should be accompanied by an identification of the statutory exemption relied upon.

On March 15, 2018, two body cam recordings were produced to CoA Institute. Despite the multi-hour duration of the raid, the recordings were brief: ten minutes and eighteen minutes. The recordings showed Fort Myers police officers entering V-Tec’s offices, ordering V-Tec employees to put their hands in the air, and shepherding the employees into a small office vestibule where the employees were told they were being held until they were interviewed by unidentified people who had not yet arrived.

Curiously, although the police officers and the employees were clearly visible on the recording, several minutes into the recording, when other people entered the scene, the view immediately became obscured. Even more curiously, at times only a portion of the view is obscured so that the image of the employees is still clear, but people on the other side of the room cannot be seen – such as in the image below.

CoA Institute reached out the Fort Myers Police Department, seeking an explanation of what appeared to be redacted footage. In response, the FMPD confirmed that the footage had been redacted because they could not release the “agency” portion of the video. The Florida Sunshine law is very broad and does not include an exception to its broad disclosure requirements for images of agency personnel operating in their official capacity. It thus appears that the FMPD was instructed to deny access to body cam footage that shows the participation of those entities in the raid of V-Tec’s offices.

On March 16, 2018, CoA Institute requested that the FMPD “state in writing and with particularity the reasons for the conclusion that the record is exempt or confidential’ as required by Fla. Stat. § 119.07(1)(f)” because CoA Institute believes that the FMPD’s refusal to release an unredacted version of the footage to be improper.

Cynthia Crawford is senior counsel at Cause of Action Institute

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03/26/2018

Senators call for more transparency, support FOIA “Release to One, Release to All”

During a recent hearing on the Freedom of Information Act (“FOIA”), several senators complained about how federal agencies fail to respond to FOIA requests within the statutorily required time-frame. Senate Judiciary Committee Chairman Chuck Grassley complained that, in some cases, agencies may go more than a decade without producing documents that Americans have a legal right to access. “No one can say with a straight face that FOIA always works as intended,” he said. One step that Sen. Grassley suggested could enhance open government is the finalization of a policy known as Release to One, Release to All. This policy, which Cause of Action Institute supports, would expand access to government records by requiring agencies to post publicly online all records they’ve disclosed in response to FOIA requests. Currently, FOIA documents are only released to the individual or group who filed the request, and agencies are only required to post the records for the public if the record has been requested at least three times.

These records have already been vetted and deemed to be acceptable for public release, so there is little risk of personal or classified information becoming public knowledge though broader release. When documents are only provided to the requester, it is possible that other individuals may submit duplicate requests, which can amplify the problem of backlogs and make it harder for agencies to get information to the public. If these documents were to be released to everyone, however, journalists and watchdog groups could easily access them. Journalists could report on information while watchdog groups and think tanks could access records helpful for their work. A free flow of knowledge would help facilitate ideas to make government more efficient, which is why transparency is an essential aspect for a free and open society. Additionally, there may be unseen and unpredictable benefits that could arise from a massive increase in the amount of government information made public; last year there were more than 800,000 FOIA requests processed.

Cause of Action Institute submitted written testimony for the hearing supporting finalization of the “Release to One, Release to All” policy. CoA Institute President John Vecchione wrote:

Congress has long recognized that frequently requested records should be proactively disclosed by agencies. In the FOIA Improvement Act of 2016, Congress directed that once a record has been requested and released three times, the agency must post the record in its electronic reading room. Release to One, Release to All simply takes this idea one step further and would have agencies release information to the public after the first FOIA request and production.

When questioned by Senator Grassley on why “Release to One, Release to All” has stalled under the Trump Administration, Melanie Ann Pustay, the director of the Justice Department’s Office of Information Policy, cited compliance with Section 508 of the Rehabilitation Act of 1973. Section 508 requires that all federal agencies make public information accessible to people with disabilities, which includes people who are blind. Pustay argued this would require that these documents be accessible through audio, which would require additional time and resources. Senator Grassley was skeptical, stating, “It doesn’t meet the common-sense test.”

Expanded access to government records under “Release to One, Release to All” is an important policy. Rather than forcing every American to jump through hoops and pay substantial FOIA fees to obtain public records and duplicating work for FOIA officers, finalizing this policy would enhance the flow of information and allow Americans to use this information to benefit the public.

Tyler Arnold is a communications associate at Cause of Action Institute.

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