White House Issues Executive Orders Curtailing Use of Guidance Documents to Bypass Notice-and-Comment Rulemaking and Imposing Public Disclosure Requirement

On October 9, 2019, the White House issued two executive orders designed to curtail the abuse of guidance documents by government agencies. Both orders address due process violations by agencies by requiring notice and an opportunity to be heard before action can be taken or liability imposed against alleged wrongdoers. Learn More

CoA Institute Submits Comment to FTC, Recommends Multiple Reforms to Curb Agency Overreach and Abuse

Cause of Action Institute (“CoA Institute”) today submitted a public comment to the Federal Trade Commission (“FTC” or “Commission”) in advance of a series of hearings concerning the agency’s efforts to evaluate its law enforcement and policy agenda, improve investigative processes, and otherwise reform its implementation of the FTC Act.

CoA Institute’s recommendations are based on considerable experience dealing with the FTC.  Our attorneys regularly practice before the Commission.  At present, CoA Institute represents D-Link Systems, a networking equipment manufacturer, which is fighting vague and unsubstantiated allegations that it placed consumers “at risk,” despite any evidence of actual or likely substantial injury.  CoA Institute also represents Vylah Tec, LLC, a family-run technical support company that has been targeted on suspicion of “deceptive” sales practices.  The FTC has failed to uncover any concrete evidence of wrongdoing, yet the company remains subject to a punitive injunctive order.  In the past, CoA Institute represented LabMD, Inc., a small cancer-detection company, against claims that it had unreasonable data-security practices.  And CoA Institute has directly litigated against the FTC over matters related to the Freedom of Information Act.

As explained in the comment, CoA Institute’s track-record with the FTC gives it unique insight into how the agency can be improved in four general areas:

Reforming the FTC’s Enforcement Processes

When FTC staff believes there has been a violation of the law, the agency typically threatens a regulated entity with an enforcement proceeding and attempts to settle the matter by consent order.  This is the outcome in most cases.  But these consent orders tend to be vague; they provide little guidance about the standards with which other regulated companies are expected to comply.  This opens the door to regulatory overreach.  The FTC should provide specificity in its consent orders.

The FTC also should refine its use of ex parte injunctions, which are an extraordinary remedy.  Without clearer guidance limiting the use of temporary restraining orders and asset freezes, the FTC may continue to raise due process concerns and impose unjustifiable hardships on regulated entities defending themselves in enforcement proceedings.

Concerns about due process likewise arise with respect to the FTC’s own rules of procedure, which differ in material ways from well-accepted rules of procedure and evidence in federal courts.  The Commission’s rules provide its staff a decided advantage, particularly given the relatively boundless resources available to the agency.  This is unfair and flouts the rule of law.

Finally, the FTC should eliminate its practice of seeking legal damages in excess of what the agency is statutorily authorized to pursue.  Although the FTC may request equitable monetary damages, including restitution or disgorgement of ill-gotten gains, in practice the damages sought by the Commission are pecuniary and ultra vires.  In short, they amount to the imposition of personal liability on defendants.  This approach cannot be countenanced by the FTC Act.

Increasing FTC Transparency

Related to the reforms of the FTC’s enforcement regime are the changes that should be made to its disclosure practices.  As mentioned, the FTC regularly relies on consent orders to settle matters before an actual enforcement proceeding is opened.  The use of these negotiated orders, which are party-specific and, again, vague, fails to provide the requisite notice of legal standards to which regulated parties are expected to conform.  The FTC should abandon efforts to treat consent orders as a “common law” body of precedent that shapes future obligations for regulated parties.

To the extent the FTC continues to use consent orders in this problematic way, however, it should aim to make the orders specific, with detailed analysis about the application of generally applicable standards.  The Commission also should proactively disclose the closing letters and closing memoranda from matters where enforcement is not pursued.  In these cases, the FTC has determined that a potential respondent is operating within legal bounds.  The Commission itself admits that these documents are useful, but they are not uniformly disclosed to the public.

Developing a Proper Understanding of “Substantial Injury”

At the heart of Section 5 of the FTC Act is the concept of “substantial injury.”  Without actual, or the threat of “likely,” substantial injury, the FTC can do nothing.  But the exact scope of what is “likely” and “substantial” harm is unclear.  The FTC does not define the terms precisely, and the body of consent orders that reflect settled matters provide little further detail.  What is clear, however, is that the FTC prefers to maintain ambiguity to facilitate its overreach.

The Commission should do a better job considering the countervailing benefits to consumers or competition provided by allegedly unfair acts or practices, too.  This can be done with rigorous cost-benefit analysis.  The FTC often focus on amorphous concepts of harm while ignoring how regulated entities’ practices benefit the consumer or, more broadly, competition in the marketplace.

How Congress Should Amend the FTC Act

Although CoA Institute’s recommendations are principally directed to the FTC, Congress should play a key role in reforming the Commission’s enforcement processes.  We propose that legislators amend the FTC Act to allow direct appeals to a U.S. Court of Appeals following an administrative law judge decision.  This would replace the current process by which an appeal is first made to the full Commission.  It would be better to permit respondents to seek appellate relief in an Article III venue, and bypass the full Commission, because the FTC has a remarkable track record of never losing its own administrative appeals.  Regulatory agencies should not be allowed to wear the dual hats of prosecutor and judge.

Ryan P. Mulvey is Counsel at Cause of Action Institute

Click here to access the full comment or read below.


Cause of Action Applauds Settlement in Qualified Immunity Case

Washington, D.C. (Aug. 14, 2018) – Cause of Action Institute (CoA Institute) today applauds the settlement in the case of Allah v. Milling. The case revolved around the prison officials denying an inmate named Almighty Supreme Born Allah, due process and holding him in solitary confinement. The District Court ruled in favor of the inmate. That decision was overturned by the Appellate Court, citing the broad definition of “qualified immunity,” even though the Appellate Court recognized that the inmate was denied due process. Qualified immunity is a legal doctrine that shields public officials from civil suits. Cause of Action supports narrowing the scope to ensure citizens who are harmed by corrupt public officials can have relief in court.

John J. Vecchione, president and CEO of Cause of Action Institute issued the following statement:

“We are pleased to see the state of Connecticut recognize that Mr. Allah was harmed and has settled this case. Although we were anxious to see an overbroad application of qualified immunity redressed in the United States Supreme Court, we hope this case serves as a reminder that public officials are accountable to the citizens they serve, and an overbroad definition of qualified immunity undermines the trust we place in those who choose a path of public service by providing far too much protection to individuals who violate their commitment and the public’s trust.”

The case was unique for many reasons, most notably, the diverse coalition that came together in defense of Mr. Allah and to challenge qualified immunity. Cause of Action Institute signed an amicus brief alongside American Civil Liberties Union, American Association for Justice, Alliance Defending Freedom, Americans for Prosperity, The Institute for Justice, Law Enforcement Action Partnership, National Association of Criminal Defense Lawyers, among many others and led by the Cato Institute.

Allah v. Milling Background:

While awaiting trial on a drug charge, Mr. Allah was kept in solitary confinement for seven months because he had once asked a question to a guard during a previous period of incarceration. Both the District Court and Appellate Court agreed that the defendants had denied Mr. Allah due process. However, the Appellate Court ultimately reversed the lower court’s ruling citing qualified immunity.

Qualified immunity has become a broad legal doctrine that protects government employees from civil lawsuits. In the amici, we argued, “qualified immunity denies justice to victims of unconstitutional misconduct.” We had hoped the United States Supreme Court would recognize that the defendants constitutional right to due process had been violated and therefore narrow the legal doctrine of qualified immunity to ensure defendants like Mr. Allah receive the justifiable relief they’re owed.


About Cause of Action Institute

Cause of Action Institute is a 501(c)(3) non-profit working to enhance individual and economic liberty by limiting the power of the administrative state to make decisions that are contrary to freedom and prosperity by advocating for a transparent and accountable government free from abuse.

Media Contact:
Matt Frendewey

Justice Gorsuch Opines on Due Process and Civil Asset Forfeiture

In Sessions v. Dimaya,1 Justice Gorsuch concurred in the judgment of a fragmented Supreme Court but only in part of the plurality opinion by four other justices. Justice Gorsuch wrote a separate opinion to explain something he (but not the plurality) thinks is fundamental about due process. His concurring opinion highlights how civil cases, including forfeitures, now frequently impose harsher penalties than criminal prosecutions.

Dimaya involved federal statutes authorizing deportation of criminal aliens. The law designates specific crimes which, when an alien is convicted of them, allow nearly automatic deportation. It also has a “catch-all” provision that includes any felony that “by its nature” involves “substantial risk” of “physical force” against property or another person.2 The question in Dimaya was whether this catch-all provision was so vague that it did not provide fair notice about what crimes carry the risk of deportation, thereby violating the due process clause of the Fifth Amendment. The plurality (Justices Kagan, Ginsburg, Breyer, and Sotomayor) and Justice Gorsuch answered Yes, and together they held the statute void for vagueness. Dimaya, the convicted alien, won; Attorney General Sessions lost.

Justice Gorsuch’s opinion about why the winner won takes a different tack than the plurality took. Civil asset forfeiture is key to understanding why.

Deportation, like most forfeitures, is a civil matter, even after an alien is convicted and even though deportation is “a particularly severe penalty which may be of greater concern to a convicted alien than any potential jail sentence.”3 More than one commentator quickly noted that Justice Gorsuch did not join the plurality’s opinion that “the most exacting vagueness standard should apply to removal cases, because the penalty of deportation is so severe.”4

That’s where Justice Gorsuch draws the line. “My colleagues suggest the law before us should be assessed under the fair notice standard because of the special gravity of its civil deportation penalty. But, grave as that penalty may be, I cannot see why we would single it out for special treatment when (again) so many civil laws today impose so many similarly sever sanctions.”5

Enter forfeiture.

Ours is a world filled with more and more civil laws bearing more and more extravagant punishments. Today’s “civil” penalties include confiscatory rather than compensatory fines, forfeiture provisions that allow homes to be taken…. Some of these penalties are routinely imposed and are routinely graver than those associated with misdemeanor crimes—and often harsher than the punishment for felonies. And not only are punitive civil sanctions … rapidly expanding, they are sometimes more severely punitive than the parallel criminal sanctions for the same conduct. … Given all this, any suggestion that criminal cases warrant a heightened standard of review does more to persuade me that the criminal standard should be set above our precedent’s current threshold than to suggest the civil standard should be buried below it.

*             *             *

Why, for example, would due process require Congress to speak more clearly when it seeks to deport a lawfully resident alien than when it wishes to … confiscate [a citizen’s] home? I can think of no good answer.”6

Tyler Arnold and I have made similar points here about civil asset forfeiture. Justice Gorsuch’s point is both broader (also touching civil commitments and broad business licensing requirements) and narrower (not foreclosing the possibility that particular civil forfeitures can meet the requirements of the Due Process Clause) than ours. So be careful what you wish for. A constitutional due process challenge to civil asset forfeiture generally could still come out exactly wrong at this Supreme Court.

Mike Geske is counsel at Cause of Action Institute

Sessions v. Dimaya, 584 U.S.       , 138 S.Ct. 1204, 200 L. Ed. 549, 2018 U.S. LEXIS 2497 (April 17, 2018).

2 See 18 U.S.C. §16(b); see also 8 U.S.C. §1101(a)(43).

3 Dimaya, 138 S. Ct. at 1213, 200 L. Ed. at 558, 2018 LEXIS 2497 at * 15-16 (Kagan, J., plurality op.) (citations and quotations omitted).

4 Dimaya, 138 S. Ct. at 1213, 200 L. Ed. at 557-58, 2018 LEXIS 2497 at * 15 (Kagan, J., plurality op.) (citations and quotations omitted).

5 Dimaya, 138 S. Ct. at 1231, 200 L. Ed. at 578, 2018 LEXIS 2497 at * 56 (Gorsuch, J., concurring in part, concurring in judgment) (citations and quotations omitted).

6 Dimaya, 138 S. Ct. at 1229, 1231, 200 L. Ed. at 575-76, 578, 2018 LEXIS 2497 at *52-53, *56-57 (Gorsuch, J., concurring in part, concurring in judgment) (citations and quotations omitted; emphases by Justice Gorsuch).

Civil asset forfeiture policies shrug off due process

In 2014, American police seized more assets from American citizens through civil asset forfeiture policies than burglars stole.

Federal, state and local officers have broad scope to seize assets from Americans without trial or criminal charge, let alone proof that they committed any offense. While property owners can challenge a seizure in court, the burden of proof is on them and costly attorney fees and arcane procedures often discourage them. The value of the property is often less than cost to hire an attorney.

Only a handful of states require that, in some or all cases, police clearly and convincingly prove seized assets are linked to a violation. More than half of states only ask police to show that at the time of the seizure they had probable cause to believe that the property was tied to a violation. Probable cause is usually defined as more than a mere suspicion but less than a prima facie case. This is a much lower burden of proof than “clear and convincing evidence” or “beyond a reasonable doubt”. Anything less than having to show beyond a reasonable doubt that the property was connected to a crime lets the state take property from citizens without a conviction or even charge.

This is a slap in the face to due process. The Fourth Amendment demands:

The right of the people to be secure in their persons, houses, papers, and effects, against unreasonable searches and seizures, shall not be violated, and no Warrants shall issue, but upon probable cause, supported by Oath or affirmation, and particularly describing the place to be searched, and the persons or things to be seized.

Before the American revolution, the English Crown would permit customs officials to seize homes and vessels for alleged contraband or for on- or off-loading cargo without proof of having paid import and export duties and taxes.  Legal scholars have suggested this was “among the key grievances that triggered the American Revolution.”

To combat this practice, the founders guaranteed in the Fifth Amendment that “No person shall … be deprived of life, liberty, or property, without due process of law; nor shall private property be taken for public use, without just compensation.”

According to the New Yorker, asset forfeiture became a serious problem in the U.S. in the 1970s.  The forfeiture was aimed at fighting crime bosses and drug lords and these federal statutes permitted the seizure of assets tied to illegal drug production. When Congress passed the Comprehensive Crime Control Act in 1984, which permitted police departments to keep the proceeds from the forfeitures, the practice expanded, especially in poor areas.

If there is no due process, there is no rule of law. Proper order is impossible when institutions do not maintain fair and constitutional laws. Rather, the government fortifies institutional violations of law and decreases trust in police and government overall.

Apart from its intrinsic problems, civil asset forfeiture policies are also rife with corruption.

In more than 40 states, police departments keep at least 50 percent of the seized assets for themselves. In about half of those states, police are able to keep 100 percent of the seized assets. This provides police with an incentive to seize assets.

As the Washington Post reported, police use hundreds of millions of dollars they received from asset forfeiture to fund “guns, armored cars and electronic surveillance gear,” as well as “luxury vehicles, travel and a clown named Sparkles.”

Chicago alone seized $72 million over seven years, and used the money to purchase items, which include cell-phone tracking devices. As Reason reported, some seized assets in Illinois include “Xbox controllers, televisions, nunchucks, 12 cans of peas, a pair of rhinestone cufflinks, and a bayonet” supposedly linked to crimes. Police hit low-income areas the hardest.

“These forfeiture operations frequently target the poor and other groups least able to defend their interests in forfeiture proceedings,” Supreme Court Justice Clarence Thomas, said on the issue. “Perversely, these same groups are often the most burdened by forfeiture. They are more likely to use cash than alternative forms of payment, like credit cards, which may be less susceptible to forfeiture. And they are more likely to suffer in their daily lives while they litigate for the return of a critical item of property, such as a car or a home.”

Advocates of civil asset forfeiture policies argue the procedure deters crime and helps fund the police. In truth, Constitutional rights are surrendered for a false sense of security. This legal theft traduces due process and law and order. Crime deterrents only work if criminals are being targeted. If everyone is harmed by these policies, it doesn’t deter crime; it just diminishes Americans’ trust in law enforcement.

Tyler Arnold is a communications associate at Cause of Action Institute

FTC Destroying Family-Run Tech Support Business Without Evidence of Wrongdoing or Due Process

Washington, D.C. – Cause of Action Institute (“CoA Institute”) is stepping in to defend a small family-run tech support company, Vylah Tec, LLC (“V-Tec”), after the Federal Trade Commission (“FTC”) targeted the company and conducted an hours-long raid of the company’s headquarters on suspicion of “deceptive” sales practices. The 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.

V-Tec is a small start-up owned by Robert Cupo that operates out of a single office in Fort Myers, Florida, and provides tech support to customers who buy electronic devices from the Home Shopping Network and other shopping channels. Individuals who purchase electronic devices such as laptops, printers and tablets are provided pre-paid tech support with their purchase. On top of its tech support operation, V-Tec also generates revenue from selling third-party antivirus and other data security software to customers who want additional security on their devices.

The FTC’s sting-like raid, assisted by local police, included hands-in-the air orders, the temporary confiscation of employee cell phones, and police-escorted bathroom breaks. One mother was told she could not leave to pick up her kids from daycare and police officers would use her phone to call and tell them she had been detained for questioning. Despite the hostile raid, FTC investigators were apparently unable to uncover any concrete evidence of wrongdoing by the company.

Nevertheless, a Florida District Court judge was sufficiently convinced by FTC lawyers to grant the government a preliminary injunctive order against V-Tec. This punitive process includes turning the company’s operation over to a third-party receiver and freezing the assets of the Cupo family members. CoA Institute has filed a motion to stay the District Court’s order.

CoA Institute Senior Counsel Cynthia Crawford: “When the government puts a company in its crosshairs, the process becomes the penalty. In this case, the court’s decision to allow an injunctive order is akin to using a sledgehammer to swat a fly. Freezing assets and turning the business over to a receiver is steadily draining V-Tec’s finances and destroying its reputation. Meanwhile the court’s action is harming the thousands of customers who are not receiving the support they paid for. We urge the court to reevaluate the flawed evidence FTC presented and stay this destructive order so that the Cupo family can have their day in court before the company is destroyed.”

In court, the FTC argued that V-Tec’s sales pitches for the software are deceptive, citing two examples of recorded calls. However, the FTC clearly mischaracterized its evidence and failed to support accusations fundamental to FTC’s case. Much of the evidence presented is either incomplete or incorrect. For example, the government in open court, played a portion of a tech support call that they wrongly alleged as deceptive “upselling.” What the government omitted, however, was that the technical support representative stayed on the phone after the customer declined to purchase additional software and addressed the caller’s problem.

A second transcript the FTC submitted in court mislabeled the so-called guilty party as a V-Tec employee, when in fact the person trying to harm the consumer did not actually work for V-Tec. A brief investigation of the call and the surrounding context would have made that clear. A V-Tec support representative actually protected the consumer in that instance, disconnecting the other individual from the call and disabling his remote access to the caller’s computer.

Instead of protecting consumers, the court’s injunction order is causing the most significant consumer harm. Since May 3, 2017, V-Tec has failed to answer over 100,000 customer calls. Many of these are likely customers with lifetime service contracts who, instead of receiving the product they paid for, are stuck in a never-ending hold loop. The order also froze assets of individuals with no actual stake in V-Tec. These individuals cannot access their savings and are struggling to pay for basic life expenses, or in one case, access funds of a wholly unrelated business.

The full motion for stay is available here.

For information regarding this press release, please contact Zachary Kurz, Director of Communications: zachary.kurz@causeofaction.org



CoA Institute Supports Strong Due Process on College Campuses

In a letter today to Senator Lamar Alexander, Chairman of the Committee on Health, Education, Labor & Pensions, Cause of Action Institute (“CoA Institute”) expressed its support for the mission of the Foundation for Individual Rights in Education (“FIRE”) to “defend and sustain individual rights at America’s colleges and universities.”

FIRE’s wide-ranging mission seeks to preserve the individual liberties vital to a just and free society, specifically by protecting freedom of speech, legal equality, due process, religious liberty and sanctity of conscience on America’s college campuses.

The letter states:

“Critics of FIRE’s advocacy for sufficient due process protections for all students—both accusers and accused—fail to acknowledge traditional notions of justice. Justice is not served if adjudications are overwhelmingly stacked against the accused due to their inability to defend themselves from false accusations.  FIRE merely fights for the adoption of due process protections Americans often take for granted in other proceedings: “the right to the active participation of counsel; the right to see the evidence in one’s case and to meaningfully question witnesses; and the right to an impartial tribunal, among others.”

Read the full letter HERE.