Media

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.

The Obama administration on Tuesday published its Third Open Government National Action Plan to increase transparency and provide citizens with “unprecedented access” to government information. While this plan contains laudable sections to improve access to information through the Freedom of Information Act and to increase federal spending transparency, it neglects to identify and address two fundamental issues clouding this administration’s record on transparency.

This administration has demanded government agencies seek counsel from the White House on any matter that could be considered a “White House equity.” This policy threatens both the improvement of FOIA request transparency, and the public’s First Amendment rights.

The definition of “White House equities” is nebulous at best; most agencies are unsure exactly what the term means, although some have understood it to be anything of possible interest to the White House. This vague definition has caused confusion — and therefore delays — from many government agencies in processing FOIA requests, leaving the public waiting on information. Additionally, adding the White House onto the review process not only increases delays, but it actually provides the White House Counsel’s Office with documents it would not ordinarily have access to under FOIA.

White House equities are in clear conflict with government transparency, and should have been addressed in the National Action Plan.

In addition, the administration’s plan fails to address Executive Branch Earmarks.

In 2008, President Bush issued Executive Order 13457, aimed at ensuring that funds provided by Congress are transparent and merit-based, with all information made publicly available on the internet. However, the Executive Branch is currently ignoring Executive Order 13457 and still handing out its own earmarks behind closed doors.

Taxpayer dollars continue to be wasted in the absence of government transparency. A Cause of Action examination of federal discretionary spending through FOIA records and federal databases has revealed that efforts to ensure that discretionary grant decision-making is transparent and merit-based are ineffective. As a result, political appointees and others continue to use federal monies to reward political allies and appease powerful interests.

While the administration may have a plan to make government more transparent, there is a great deal that it has neglected. If the administration really wants to increase transparency, then it must address White House equities and Executive Branch Earmarks.

On Friday, Cause of Action appealed the Department of Justice’s (“DOJ”) determination that it has no publically releasable records relating to Cause of Action’s Freedom of Information Act (“FOIA”) request regarding DOJ’s settlement agreements with big banks in the wake of the 2008 financial crisis.

On June 16, 2015, Cause of Action sought records under FOIA to show whether DOJ exercised proper authority in executing its Residential Mortgage-Backed Securities (“RMBS”) settlement agreements, totaling $36.65 billion. Arguably, DOJ’s settlement agreements impermissibly settle claims of DOJ and other agencies, improperly distribute funds to unrelated third parties, and do not ensure that the funds DOJ and third parties receive are used to compensate bank victims. On July 29, DOJ stated that the agency could locate no responsive records and closed Cause of Action’s FOIA request.

Cause of Action’s appeal questions the adequacy of DOJ’s search for records and, alternatively, DOJ’s implicit determination that responsive records exist, but are not subject to the requirements of FOIA. Given the billion dollar price tag on these settlements and significant effort DOJ has expended to supposedly hold banks accountable, it is highly improbable that no records exist regarding DOJ’s power to make these deals obligating banks to pay billions to third parties in purported consumer relief efforts, which includes a mandatory minimum of $150 million in donations to certain non-profit organizations.

It follows that DOJ likely did not perform an adequate search, or is improperly excluding the records it found. Otherwise, DOJ did not have the power to enter into these billion dollar settlement agreements in the first place. That is an argument that Cause of Action has been exploring since DOJ announced these RMBS settlement agreements with considerable fanfare.

Cause of Action’s appeal asks DOJ to perform a reasonable search, adequately describe that search, and produce the responsive documents it identifies.

by David Fisher, Cause of Action Senior Counsel

Three truisms will collide this Friday in a Federal courtroom in Washington DC. The first two truisms – “secrecy breeds corruption” and “follow the money” – make the failure to disclose documents relating to an under-the-radar agreement that has generated billions of dollars for the United States Treasury exceedingly troubling. Cause of Action, and others, think the public has a right to know about this deal and its genesis.

During the 2008 financial crisis, taxpayers bailed out Fannie Mae and Freddie Mac at a cost of $187.5 billion. This bailout was styled as a loan and for several years Fannie and Freddie paid the interest due on this loan. By 2012 Fannie and Freddie were again profitable. In August 2012, Fannie, Freddie, the Department of Treasury and Federal Housing Finance Agency (FHFA) amended their deal with what is called “the Third Amendment.” Under the Third Amendment, the government began sweeping all the companies’ profits into the Treasury. As of last December 2014, the Treasury had received a total of $225.4 billion from the companies – $40.8 billion more than they borrowed from taxpayers.

Congress charged the FHFA with conserving Fannie and Freddie’s assets and stabilizing the institutions with, as the agency states, “the objective of returning the entities to normal business operations.” Instead, it appears to be allowing all of Fannie and Freddie profits to be funneled to the US Treasury rather to be used to stabilize the companies.

The government is taking what the New York Times called “extraordinary measures” to hide documents relating to the Third Amendment, and has even claimed “Presidential Privilege” to keep secret several documents.

What is our government hiding? Cause of Action believes that Americans deserve a government that is fair and open; preventing disclosure of documents relating to the government bailout of Fannie and Freddie hinders citizens from evaluating their elected officials and holding them to account.

This Friday, Judge Margaret Sweeney should apply a third truism, one credited to former Supreme Court Justice Brandeis, sunlight is the best disinfectant and make documents relating to the Third Amendment public.

Cause of Action in the News:

Daily Caller – Watchdog Wins Big FOIA Decision In Federal Appeals Court

Cause of Action has won a major victory for government transparency!  The courts have agreed that it isn’t right for government agencies to use expensive fees to pick and choose who is and who isn’t “a representative of the news media”.  Federal agencies would use this refuse FOIA request fee exemptions and stop smaller/lesser known news outlets and reporters, making them pay the very expensive FOIA fees.  Thanks to this victory, more people have access to the government documents that rightfully belong to the American people.

Daily Mail – Former attorney general says classified email scandal ‘disqualifies’ Hillary Clinton from serving as president – IF she’s prosecuted for breaking federal law

Former Attorney General Michael Mukasey says that by law Hillary Clinton should be disqualified from being president if she unlawfully destroyed government records.  Cause of Action Executive Director Dan Epstein said “The manner in which former Secretary Clinton stored official email correspondence during her tenure as Secretary of State, and her conduct with those emails subsequent to her resignation, trigger applicable laws and regulations relating to federal records and also raise criminal concerns. At least one applicable penalty is the disqualification from holding the office of President.”

In Other News:

Washington Times – IRS finds yet another Lois Lerner email account (‘Toby Miles’ account linked to government business)

It has been discovered that Lois Lerner was using an email address under the name “Toby Miles”.  This is at least the third email that Lerner was using in addition to her government email and another personal email.  This information was revealed years after the IRS targeting scandal started.

Daily Caller – Clinton’s New Three-Pronged Strategy To Respond To Email Scandal Doesn’t Even Address Emails, Server

Hillary Clinton has a strategy to win back the trust of the people, but not talk about what is the biggest concern the people have.  The former secretary of state plans on educating people on the process of how a document is classified.  Then she wants to focus on the issues, her private server not being one of them.  And finally Mrs. Clinton will actively attempt to defend her time as secretary of state.  With her having to change her story so many times, maybe that’s just easier.

NY Post – Caroline Kennedy used private email for government business

Although the State Department defends our ambassador to Japan, Inspector General Steve Linick reported, “confirmed that senior embassy staff used personal email accounts to send and receive messages containing official business.” The Inspector General confirmed that Ambassador Kennedy was using a personal email account in an official capacity.

Wall Street Journal – The EPA’s Own Email Problem (Another government employee, another private account, another crashed hard drive.)

That’s right, another government email scandal.  Phillip North, a biologist for the Environmental Protection Agency, was using a private email to conduct EPA business to ensure results fell in line with his own personal beliefs.  Instead of being the unbiased scientist, Mr. North used a private email account to advance his own agenda and has since left the country.