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01/6/2014

Arkansas Mom Takes on Big Government

FOR IMMEDIATE RELEASE                                                                                                                         CONTACT:   

                                             Adam Temple, 202-630-3532

                                             Mary Beth Hutchins, 202-499-4232

Arkansas Mom Takes on Big Government

The Department of Labor’s attempt to redefine employees is met with a lawsuit from Cause of Action on behalf of consignment company Rhea Lana’s

WASHINGTON – Cause of Action (CoA), a government accountability organization, filed a lawsuit today against the Department of Labor (DOL) on behalf of Rhea Lana, Inc. and Rhea Lana’s Franchise Systems, Inc. (jointly, “Rhea Lana’s”), a national children’s consignment event company, over the DOL’s attempt to ban volunteers at for-profit enterprises.  Should the DOL’s actions stand it could cripple not only Rhea Lana’s but also the entire consignment industry on which millions of Americans rely.

Cause of Action’s Executive Director, Dan Epstein stated, “This illogical move by the Department of Labor demonstrates just how out-of-date their regulations are and how far they are willing to go to shut down free enterprise.  We are facing a government that is essentially telling Americans:  we want to meddle in the minute details of how and where you volunteer. Thousands of entities operate with willing volunteers and to single out Rhea Lana’s is arbitrary, outside the law and damaging to families and entrepreneurs across the country.”

Rhea Lana’s hosts consignment sales in numerous cities that allow parents and other family members to sell children’s clothing and items to other families. Consignors keep approximately 70 percent of the profits generated from their items, and Rhea Lana’s keeps 30 percent.  The small family business has grown to include sales in 23 states across the country.  Consignors assist at sales events in exchange for the option to shop early. Given the tough economic reality facing many parents with young children, shopping for affordable, quality children’s items at Rhea Lana’s events has led to overwhelmingly positive experiences for many families.

In January of 2013, DOL commenced an investigation and concluded, despite the fact there were no apparent complaints from parents and other participants, that consignment event co-venturers were “employees” under the Fair Labor Standards Act.

The suit, filed in the U.S. District Court for the District of Columbia, argues that the DOL acted arbitrarily and outside the law when it classified Rhea Lana’s co-venturers as employees under the Fair Labor Standards Act (FLSA). Cause of Action seeks a declaration that Rhea Lana’s volunteers are not employees under the FLSA and an injunction prohibiting the DOL from bringing action against the company.

“For years we have received overwhelming support from the families who are trying to save money and provide for their children through our sales,” said Rhea Lana Riner, the entrepreneur and founder of Rhea Lana, Inc. “Yet now we find ourselves having to defend how moms choose to use their personal time to benefit their families.  For the government to step in and overregulate our business and our industry just makes no sense.  We’re fighting back to protect our business and the families we serve.”

“DOL erred in applying a categorical ban against volunteerism in this context,” stated Reed Rubinstein, senior vice president of litigation at Cause of Action.  “It should have applied the Supreme Court’s ‘economic realities’ test, which requires the agency to consider all relevant facts and circumstances when determining the applicability of the FLSA.  The economic realities of Rhea Lana’s consignment events do not create an employee-employer relationship between Rhea Lana’s and its volunteers.”

The Complaint for Declaratory and Injunctive Relief can be read in its entirety here. The government has 60 days to file a response.

About Cause of Action:

Cause of Action is a nonprofit, nonpartisan organization that uses investigative, legal, and communications tools to educate the public on how government accountability and transparency protects taxpayer interests and economic opportunity. For more information, visit www.causeofaction.org.

About Rhea Lana’s:

Founded by Rhea Lana Riner in her living room 16 years ago and headquartered in Conway, Arkansas, Rhea Lana’s Children’s Consignment hosts semi-annual sales. With Arkansas roots, Rhea Lana’s Franchise Systems, Inc. is rapidly growing with 69 locations in 23 states. The company is the first consignment sale business in the country to offer on-line management and real time tracking of merchandise through a computerized inventory system and a convenient mobile application. For more information, visit www.rhealana.com.

 

 

To schedule an interview concerning the litigation, contact Adam Temple, temple@jdafrontline.com, 202-630-3532.

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01/6/2014

Washington Post: Federal regulators suing Buckyballs founder in rare product-recall case

Read the full story: Washington Post

After Zucker shut down his company, the commission responded by naming him in its lawsuit. The commission supported that move with a legal precedent known as the Park doctrine, which allows the government to criminally prosecute corporate officers for failing to prevent violations of the Food, Drug and Cosmetic Act.

 

Critics say it is a misuse of the doctrine. “At a minimum, this action is an obvious overreach of the CPSC’s authority,” said Dan Epstein, executive director of Cause of Action, a conservative legal group backing Zucker. “At a maximum, it is an illegal abuse of power by persons within the commission who seek to punish Mr. Zucker.”

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01/2/2014

The Hill: FTC official recuses self from cybersecurity case

Read the full story: The Hill

In recent weeks, LabMD and the watchdog organization Cause of Action, which is representing the testing lab, had unearthed speeches in which Brill referenced the ongoing case as an example of ways the FTC was cracking down on lax cybersecurity. They had requested Brill be disqualified from the case.

 

“Commissioner Brill has told the world that LabMD failed to secure consumer information and violated the law … No neutral judge with any regard for the due process requirement of avoiding the appearance of bias and prejudgment would ever say such things about a pending case,” the company said in a motion filed earlier this month.

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12/17/2013

Cause of Action responds to resignation of DHS Deputy IG Charles Edwards

Cause of Action, a government accountability group which has investigated Department of Homeland Security (DHS) Deputy Inspector General (IG) Charles Edwards, issued the following response to his resignation.

Executive Director Dan Epstein:

“Cause of Action has investigated Charles Edwards for two years, working with information from credible insiders, and filing a FOIA request for records related to Edwards’ misconduct on March 27, 2013, which DHS OIG ignored, prompting us to sue. Our lawsuit ultimately led to the receipt of documents revealing nepotism, mismanagement and the existence of several internal complaints against Edwards, compelling us to ask the President to remove him from office. Cause of Action sees the failure of the Administration to hold Edwards accountable and Edwards’ resignation, less than three days before a Senate hearing, as a cowardly excuse to avoid answering difficult questions about allegations of his abuse and misconduct, some of which may rise to violations of the law, in the Inspector General office.”

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12/16/2013

CoA requests investigation of Sen. Harry Reid, USCIS in EB-5 abuse

In light of Senator Harry Reid’s (D-NV) expected nomination announcement of Alejandro Mayorkas as Deputy Secretary of the Department of Homeland Security (DHS), Cause of Action (CoA) sent a request for investigation to Chairwoman Barbara Boxer (D-CA) of the U.S. Senate Select Committee on Ethics, calling for the investigation of Senator Reid’s communications with U.S. Citizenship and Immigration Services (USCIS) officials and the potential fast-tracking of EB-5 immigrant investor applications.

CoA is continuing to investigate EB-5 program abuse, and just last week, we wrote to Chairman Issa of the House Oversight and Government Reform Committee urging the committee to examine USCIS’ abuse of the EB-5 program.

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12/16/2013

Winston and Strawn: LabMD Files Suit Challenging FTC’s Authority to Regulate Data Security

Read the full story:  Winston and Strawn

LabMD joins Wyndham Hotels & Resorts LLC in challenging the FTC’s authority to regulate and punish entities for data security breaches. Like Wyndham, LabMD argues that because the FTC has never issued regulations, standards, or guidelines regarding data security under Section 5, LabMD had no constitutionally adequate fair notice of what Section 5 of the FTC Act requires, and thus, the FTC’s administrative actions against it violate the Fifth Amendment’s Due Process Clause. LabMD also argues that HHS, rather than the FTC should enforce patient security breach matters under the Health Insurance Portability and Accountability Act of 1996 (HIPAA) (LabMD is a covered entity and thus subject to HHS regulation). LabMD has requested a preliminary injunction in its favor, and the case is still pending.

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12/16/2013

Steptoe and Johnson: LabMD Goes On Offense Against FTC

Read the full story:  Steptoe and Johnson

We reported in September that LabMD (a laboratory services company) became the second company (after Wyndham Hotels & Resorts) to challenge the Federal Trade Commission’s authority to regulate cybersecurity, when it raised this issue in response to an administrative complaint filed by the Commission.  This month, LabMD switched to offense, filing a complaint in the U.S. District Court for the District of Columbia seeking to enjoin the FTC’s administrative action on various constitutional statutory grounds.  Also this month, the judge in the Wyndham case signaled that she is likely to reject Wyndham’s challenge.  So companies that want to see the FTC brought down a peg will now be pinning their hopes on LabMD’s suit.

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