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02/9/2018

Rettig Nomination Gives Congress Chance to Hold IRS Accountable

Last month, Cause of Action Institute (“CoA Institute”) released an investigative report detailing a pernicious practice at the Internal Revenue Service (“IRS”).  The agency claims that none of the economic impact caused by its rules is attributable to its regulatory choices. Instead it says the impact flows from the underlying statute.  The IRS uses this claim to evade three important oversight mechanisms.  When we released the report, we called on Congress to press whomever President Trump nominated to be the next IRS commissioner to promise to reform this practice.  Well, Trump just nominated Chuck Rettig to head the agency.  So it’s time for Congress to stand up and hold the IRS accountable for its decades-long practice of playing by its own rules.

CoA Institute just sent a letter to Senate Finance Committee Chairman Orrin Hatch and Ranking Member Ron Wyden urging them to press Mr. Rettig on this issue during their face-to-face meetings and at a public hearing.

View the Letter Concerning Mr. Rettig’s Nomination Below

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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.

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02/7/2018

CFPB’s Constitutionality Problem: Who’s Afraid of the Big Bad Wolf?

Who’s Afraid of the Big Bad Wolf?

Could a dispute over the constitutionality of the Consumer Finance Protection Bureau (“CFPB”) overturn a thirty-year-old Supreme Court precedent and vindicate the late Justice Antonin Scalia in one of his most famous dissents?  On the last day of January, the D.C. Circuit issued an opinion on the structure of that controversial independent agency:  PHH Corporation, et. al., v. CFPB, No. 15-1177 (D.C. Cir., January 31, 2018) en banc.   This opinion, with concurrences and dissents, is two hundred fifty pages long.  There is an awful lot to unpack, but this post will only focus on one glaring precedent that jumps out from the Opinion and every concurrence and dissent:  Morrison v. Olson, 487 U.S. 654 (1988)

In a quick review, I counted 43 citations of it in the Opinion, 12 in a concurrence and 40 times in the dissents (many of these were to Scalia’s lone dissent).  There is only one Justice now on the Court who was on the Court when Morrison was decided.  But Justice Kennedy took no part in consideration of the case.  Of all the protagonists, only Kennedy and Ted Olson (the Olson in the caption and also counsel for PHH) are still in the picture.

In a nutshell, the majority and the concurrences rely on Morrison v. Olson for the proposition that the “independent” nature of the head of the CFPB is constitutional.  Not unreasonably, Judge Pillard and her majority believe that case is binding and it allows a single administrator insulated from at-will dismissal by the President.  The dissents believe they have distinguished that case and another older precedent, and the combination of insulation from Congress and from the Executive makes the CFPB different and worse from other agencies whose structures have been upheld in the past.  Judge Kavanaugh puts his finger on the shaky foundation upon which the majority builds. In footnote 3 of his dissent he notes:

Recall, moreover, that the independent counsel experiment ended with nearly universal consensus that the experiment had been a mistake and that Justice Scalia had been right back in 1988 to view the independent counsel system as an unwise and unconstitutional departure from historical practice and a serious threat to individual liberty. See Morrison v. Olson, 487 U.S. 654, 699 (1988) (Scalia, J., dissenting) (“this wolf comes as a wolf”); see also Stanford Lawyer 4 (Spring 2015) (quoting Justice Kagan’s statement that Justice Scalia’s dissent in Morrison is “one of the greatest dissents ever written and every year it gets better”). The independent counsel experience strongly counsels against single-Director independent agencies.

Scalia’s famous “called shot” of the trouble such a statute would cause has echoed down the years and is one reason why the Independent Counsel statute was not renewed.  It is also telling that when Morrison was decided the renaissance of originalism, textualism and the focus on separation of powers were in their infancy.  Now, a generation and a half of scholars and judges have grown up reading Scalia’s dissent.  Its most famous passage is:

Frequently an issue of this sort will come before the Court clad, so to speak, in sheep’s clothing: the potential of the asserted principle to effect important change in the equilibrium of power is not immediately evident, and must be discerned by a careful and perceptive analysis. But this wolf comes as a wolf.

I have little doubt this case will be before the Supreme Court before long, and Scalia (and Olson) might at long last be vindicated on the nature of the Executive and on separation of powers in the Constitution.

John J. Vecchione is president and CEO at Cause of Action Institute.

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02/6/2018

An overlooked bipartisan success story in 2017: VA reform

An overlooked bipartisan success story in 2017: VA reform

by John McGlothin | 
From the Grammy Awards to the Pro Bowl, it is an American tradition to start the new year by celebrating last year’s successes. These celebrations may seem indulgent, but they serve a purpose: to remind us about achievements that might otherwise be forgotten. Just like sports or entertainment, the end of the year dominated headlines when it came to what Congress accomplished (or didn’t) in 2017.
The push to pass tax cuts was hectic and eventful, with even Republicans saying a major legislative victory was needed after several attempts to repeal Obamacare failed. Yet there was another legislative victory in 2017, one at least as impressive as tax cuts in almost every way: reform at the U.S. Department of Veterans Affairs. The bill may have passed in another era — last June — but it should not be forgotten.
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02/5/2018

CoA Institute Asks Court to Order Enforcement Action in Colin Powell Email Case

Washington, D.C. – Cause of Action Institute (“CoA Institute”) today filed a motion for summary judgment in a lawsuit that seeks to compel Secretary of State Rex Tillerson and U.S. Archivist David Ferriero to fulfill their non-discretionary obligations under the Federal Records Act (“FRA”).  Specifically, CoA Institute has asked the court to order Tillerson and Ferriero to initiate an enforcement action through the Attorney General to recover the work-related email records of former Secretary of State Colin Powell from a personal account hosted by AOL, Inc.

“To date, Defendants have undertaken meagre recovery efforts that have proven entirely ineffectual,” argued CoA Institute.  “None of Secretary Powell’s work-related email records have been recovered.  And Defendants have not proven their fatal loss—the only exception in this case that would excuse their intransigence.  Now is the time to involve the Attorney General, the highest law enforcement authority of the federal government, as contemplated and required by the FRA.”

CoA Institute filed its lawsuit in October 2016 after then-Secretary John Kerry and Archivist Ferriero failed to act on CoA Institute’s FRA notice and Freedom of Information Act request.  Just last month, CoA Institute successfully defended its claims against the government’s motion to dismiss.  In denying that motion, U.S. District Court Judge Trevor McFadden highlighted the State Department’s “anemic” recovery efforts and its seeming disregard for the power of leveraging the law enforcement authority exercised by the Attorney General in recovering government records.

Cause of Action Institute President and CEO John J. Vecchione: “Executive Branch officials have no discretion in choosing when to recover unlawfully removed federal records.  For too long, agency leadership—particularly at the State Department—has not been held accountable for its failure to abide by federal record management laws.  Secretary Colin Powell conducted official government business on a private email account; records of his correspondence belong to the federal government and should have been retained for permanent preservation.  We are confident that the law requires more effort to recover the records at issue, including the initiation of an enforcement action through the Attorney General.”

Background

In September 2016, the House Oversight & Government Reform Committee held a hearing at which then-Under Secretary of State Patrick Kennedy testified that the State Department had undertaken minimal efforts to retrieve the work-related emails of Colin Powell.  After learning that Powell no longer had access to his AOL account or its contents, the State Department merely asked Powell to contact AOL to see if anything could be retrieved.  Despite a request from the National Archives and Records Administration (“NARA”) to contact AOL directly, the State Department never did so.  Ultimately, the agency relied on unreliable hearsay—namely, the reported representations of Secretary Powell’s personal secretary about an apparent phone conversation between someone at AOL and a staff member of the House Oversight Committee—to conclude that no records could be recovered.

CoA Institute’s memorandum in support of its motion can be read here.

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01/31/2018

Records show Richard Cordray scrambled in final days to name successor, thwart Trump’s nominee

The last-ditch coup by Richard Cordray was orchestrated despite apparent pushback from CFPB’s top attorney

Cause of Action Institute (“CoA Institute”) has uncovered documents that reveal Richard Cordray and his lieutenants, in Cordray’s last days as director of the Consumer Financial Protection Bureau (“CFPB”), scrambled to plan a gambit to usurp the president’s appointment authority and allow Cordray to name his own successor.

Cordray announced on November 15, 2017 that he would be stepping down as director of the CFPB, presumably to run for governor of Ohio.  Later that same day, the president announced his intention to appoint an acting director until a new director could be nominated and approved by the Senate.  Here’s where things get interesting.  On November 24, 2017, Cordray named the agency’s chief of staff, Leandra English, as the deputy director of the CFPB.  Then, he announced his resignation and tapped English as the acting director.

President Trump ignored this attempted unlawful action and appointed his own acting director, Mick Mulvaney.  Then the next day, the general counsel of the CFPB issued an opinion supporting the president and holding Mulvaney as the acting director.

Accordingly, as General Counsel for the Bureau, it is my legal opinion that the President possesses the authority to designate an Acting Director for the Bureau under the FVRA, notwithstanding § 5491(b)(5).

English, however, refused to back down, creating the absurd situation where a government agency had two people claiming to be acting director.  She sued in federal court, asking Judge Timothy Keller to make her acting director.  The court, however, denied her request, holding that “[d]enying the president’s authority to appoint Mr. Mulvaney raises significant constitutional questions.”  The agency, relying both on the opinion of its general counsel and the court’s decision, has recognized Mulvaney as the leader.  The Court case continues.  What follows is the result of CoA Institute’s investigation into the final weeks of Cordray’s tenure as director.

Internal CFPB communications reveal that on November 15, the date Richard Cordray announced his intent to retire, English forwarded Cordray a Politico Pro email that contained a report of the president’s intention to appoint an acting director.  A number of top CFPB employees were CC’d on this email, including General Counsel Mary McLeod.

The next substantial action came on November 22, when “RC” (presumably Richard Cordray) circulated an article from creditslips.com that outlines a legal argument for Cordray to appoint his own successor. Just two minutes later, Cordray sent another article from theintercept.com which, relying on the creditslips.com article, posits that David Silberman, then acting deputy director, should succeed Cordray.  The article notes “[t]he legal argument that Silberman would become interim director would be greatly improved if Cordray officially named him deputy director[.]”  CC’d on both these emails is General Counsel McLeod.  The full subject of Cordray’s email includes the line: “Mary [McLeod], need you to have people consider it further please[.]”

On the day of the formal resignation, November 24, documents revealed a scramble inside CPFB to properly time the gambit.  In an email thread titled “Possible presser” sent between Zixta Martinez, associate director for external affairs, Jennifer Howard, assistant director for communications, Kate Fulton, deputy chief of staff,[1] Cordray, and English, the group appears to discuss a document that is distinct from Cordray’s formal resignation announcement.  The group is concerned about the resignation going out before this “presser” document which, presumably, was the announcement of Leandra English as deputy director.

Later that day, in Cordray’s final letter to the staff, he made public his intention to name Leandra English as deputy director and his self-proclaimed successor.  The email below reveals that the agency wanted to wait until virtually the last minute to put this all into process.

Cordray’s team grappled with when, and in what order, to update the website.

And, finally, discussion of the order of the email to staff and the resignation letter.

English confirms:

The general counsel, Mary McLeod, was obviously aware that this is all going on, given that she was CC’d on virtually all of these emails, including the one above.  Yet, in the biggest blow to Cordray’s gambit, General Counsel McLeod sends a letter memo to the CFPB Leadership Team the very next day, November 25, with a concrete conclusion:

I advise all Bureau personnel to act consistently with the understanding that Director Mulvaney is the Acting Director of the CFPB . . . . Accordingly, as General Counsel for the Bureau, it is my legal opinion that the President possesses the authority to designate an Acting Director for the Bureau under the FVRA, notwithstanding § 5491(b)(5).

Elsewhere in her letter, McLeod states, “[t]his confirms my oral advice to the Senior Leadership team[.]”  Oral advice that the team ignored when they tried to install English.

To make matters worse, English continued to send emails claiming to be the Acting Director.  The first came in an email to the Senior Leadership Team, which included the General Counsel.

She made the same claim in an email to the staff of Senator Elizabeth Warren:

And finally in a staff-wide email.

This brazen attempt to commandeer an entire agency threatens the Constitutional Order.  Were Richard Cordray and Leandra English successful, they would have essentially created an agency that fell outside of any of the three branches of government.  As D.C. Circuit Court of Appeals Judge Brett Kavanaugh stated, the Director of the CFPB holds “enormous power over American business, American consumers, and the overall U.S. economy. [ ] The Director alone decides what rules to issue; how to enforce, when to enforce, and against whom to enforce the law[.]”[3]  Judge Kavanaugh concluded, “the Director enjoys more unilateral authority than any other officer in any of the three branches of the U.S. Government, other than the President.”[4]  Deciding who wields such awesome power should not happen in a series of harried emails between bureaucrats.  It should be decided by the President[5] and, when a permanent successor is ultimately named, the Senate confirmation process.[6]

Eric Bolinder is counsel at Cause of Action Institute.

 

[1] According to LinkedIn.

[3] PHH Corp v. Consumer Fin. Prot. Bureau, 839 F.3d 1, 7 (D.C. Cir. 2016), vacated and granted en banc review, Feb. 16, 2017.  The D.C. Circuit granted en banc review for this case, which automatically vacates Judge Kavanaugh’s opinion.  A decision is still pending.

[4] Id.

[5] See U.S. Const. art. II, § 3, cl. 2. (the Appointments Clause).

[6] This author would like to note he agrees with Judge Kavanaugh that the overall structure of the CFPB is unconstitutional, regardless of who appoints the Director.

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01/30/2018

Commercial Speech Doctrine Needs an Overhaul

Cause of Action Institute joined with the Cato Institute and Competitive Enterprise Institute in filing an amicus brief urging the U.S. Supreme Court to grant the petition for certiorari in CTIA v. City of Berkeley.  The commercial speech case involves an ordinance in Berkeley, California requiring cell phone retailers to make the following statement to their customers:

The City of Berkeley requires that you be provided the following notice:

To assure safety, the Federal Government requires that cell phones meet radio frequency (RF) exposure guidelines.  If you carry or use your phone in a pants or shirt pocket or tucked into a bra when the phone is ON and connected to a wireless network, you may exceed the federal guidelines for exposure to RF radiation.  Refer to the instructions in your phone or user manual for information about how to use your phone safely.[1]

The problem is that it is not entirely clear whether the harm described in this statement is actually true.  The current First Amendment commercial speech doctrine allows governments to compel commercial speech that is both “purely factual” and “uncontroversial.”[2]

The standard of review by which courts determine whether a particular compelled commercial statement meets this requirement can be the deciding factor in a case.  Take Berkeley, for example.  In this case, the record in the district court did “not offer[] any evidence that carrying a cell phone in a pocket is in fact unsafe.”[3]  That is, there is “no evidence in the record that the message conveyed by the ordinance is true.”[4]

Under any serious review of a governmental action impinging on a constitutional right—which compelled speech does—the absence of evidence to show that the government was indeed advancing a legitimate interest would be enough to strike down the ordinance.  But not in Berkeley.  The Ninth Circuit held that any “more than trivial” interest will suffice.[5]  No attention was paid to whether that interest, however trivial, is actually a legitimate one or if the compelled speech is advancing it.

The Supreme Court must step in

The commercial-speech doctrine is notoriously muddy.  Both Justice Thomas and Justice Ginsburg have recognized that the lower courts are in need of “guidance” on the “oft-recurring” and “important” subject of “state-mandated disclaimers.”[6]  And this guidance is necessary, the Justices wrote, because the Court has not “sufficiently clarified the nature and the quality of the evidence a State must present to show that the challenged legislation directly advances the governmental interest.”[7]

This lack of clarity has given rise to governments at various levels forcing commercial speakers to communicate disputed and politically charged statements, sometimes where the underlying factual issues are not resolved.  And lower courts are expanding government’s ability to commandeer commercial speaker’s message.  This contravenes the Constitution’s command that “Congress shall make no law” against free speech (incorporated against the states by the 14th Amendment).  This is precisely the type of behavior one would expect in a legal environment where the lines are not clear.

Commercial Speech Doctrine Must be Clear

The Supreme Court should grant the cert petition in Berkeley and ensure that moving forward when a government tries to compel commercial speech to carry the government’s message, the government must be able to, at a minimum, adduce evidence that (1) the purported harm actually exists, (2) mitigating that harm is a compelling government interest, (3) that the infringement on the speaker’s rights is narrowly tailored to advance that interest, and (4) that the compelled commercial speech actually does advance the interest.  We will continue to see doctrinal confusion and unnecessary compelled commercial speech absent that clarity, which should be avoided.

James Valvo is Counsel and Senior Policy Advisor at Cause of Action Institute.  You can follow him on Twitter @JamesValvo.

[1] Berkeley Municipal Code § 9.96.030(A).

[2] Zauderer v. Office of Disciplinary Counsel of Supreme Court of Ohio, 471 U.S. 626, 651 (1985).

[3] CTIA–The Wireless Ass’n v. City of Berkeley, California, 854 F.3d 1105, 1125 (9th Cir. 2017) (Friedland, J., dissenting in part).

[4] Id.

[5] Id. at 1117.

[6] Borgner v. Florida Bd. of Dentistry, 537 U.S. 1080 (2002) (Thomas, J., joined by Ginsburg, J., dissenting from denial of certiorari).

[7] Id.

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01/17/2018

Fishing Wars: Drowning in Regulations

Commercial fishing boats in New England are going under at an alarming rate, and hard-working families are being demonized by a multimillion-dollar environmental industry whose only product to sell is fear.

On this episode of CRTV’s Michelle Malkin Investigates, Michelle travels to the Northeast to hear the stories of people in the fishing industry who are drowning in government regulations, including our client, David Goethel, who is fighting a fishing regulation that, by the government’s own estimate, could put 60% of his industry out of business.

Watch the full episode at CRTV.com 

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