Herring fishermen appeal district court decision upholding industry-killing at-sea monitoring regulations

Washington D.C. – Cause of Action Institute today filed a notice of appeal to the U.S. Court of Appeals for the District of Columbia Circuit on behalf of several family-owned fishing companies based in New Jersey, who hope to block a new regulation that would force them to pay for third-party “at-sea monitors.”  That regulation—which was designed by the New England Fishery Management Council and promulgated by the National Oceanic Atmospheric Administration—requires certain boats in the Atlantic herring fishery to carry “at-sea monitors” and at industry’s cost, all without congressional authorization.

Last month, Judge Emmet Sullivan of the U.S. District Court for the District of Columbia granted the government’s motion for summary judgment, ruling federal regulators had statutory authorization to force fishermen to bear the cost of monitoring, regardless of the severe economic impacts and lack of scientific justification.  Judge Sullivan also discounted procedural deficiencies in the government’s rulemaking, including its prejudgment of the legality of industry funding.

Jeff Kaelin, Director of Sustainability and Government Relations at Lund’s Fisheries, Inc., and representative for the New Jersey plaintiffs:

The district court reached an unfortunate decision, providing deference to the government, which is enforcing the industry-funded monitoring program without the statutory authority to do so.  The commercial herring fleet has been over-regulated for years, but with little demonstrated biological benefit to the Atlantic herring resource itself.  Industry-funded monitoring, along with reduced quotas and other burdensome regulations, is forcing some herring fishermen out of business and increasing costs to those who still hope to hang on.  The district court’s decision is likely to perpetuate that trend.  We are grateful for the work Cause of Action Institute has undertaken, and we look forward to pursuing our appeal at the D.C. Circuit.  In the end, we hope the rule of law will prevail.

Ryan P. Mulvey, Counsel at Cause of Action Institute:

We aim to convince the D.C. Circuit that Judge Sullivan’s ruling is contrary to the law and facts.  The federal government has overextended its regulatory power far beyond what Congress authorized.  The Magnuson-Stevens Act simply does not give the government and fishery management councils a blank check to regulate according to their whim. The imposition of industry-funded at-sea monitoring is likely to weigh down an already beleaguered commercial fishing industry.

The herring fishermen filed their lawsuit in February 2020.  Further information is available here and here.

Media Contact: James Valvo, james.valvo@causeofaction.org | (571) 482-4182

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Family Fishermen Move to Block Industry-Killing At-Sea Monitoring Rule

Herring Fishermen are Fighting Burdensome Regulation, COVID-19, and New, Unlawful Monitoring Requirements to Stay Afloat

Arlington, VA (June 8, 2020) – Cause of Action Institute (CoA Institute) today filed a motion for summary judgement on behalf of a group of New Jersey fishermen, asking a D.C. Federal Court to vacate job-killing fisheries regulations called the “Omnibus Amendment.” CoA Institute filed suit in February to challenge the industry-killing rule, which requires certain boats in the Atlantic herring fishery to carry “at-sea monitors” at their own cost.

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Family Fishermen Challenge Illegal, Industry-Killing At-Sea Monitoring Rule from Department of Commerce

Arlington, VA (Feb. 19, 2020) – Cause of Action Institute (“CoA Institute”) today filed a lawsuit on behalf of a group of New Jersey family fishermen to block a new regulation that would force them to pay for third-party “at-sea monitors.”  The industry-killing rule—which was designed by the New England Fishery Management Council and promulgated by the National Oceanic and Atmospheric Administration and U.S. Department of Commerce—will require certain boats in the Atlantic herring fishery to carry “at-sea monitors” and at their own cost. Learn More

Supreme Court Signals Nondelegation Doctrine Has Life

This week, the Supreme Court indicated that it may be on the verge of, for the first time in eight decades, applying the nondelegation doctrine and requiring Congress, not government bureaucrats, to make law.  This critical development could result in significant advancement of economic freedom, political accountability, and the liberty of individual citizens.

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CoA Institute Case Study on the CFPB’s Arbitration Rule: How the Bureau Evaded Scientific Guidelines and Bypassed Peer Review—And How to Fix It

 

Executive Summary

The Consumer Financial Protection Bureau (“CFPB” or “Bureau”) is an agency unlike most any other in the history of the United States.  It possesses untold power over the American people and businesses, and the heft of this power is in a single agency director accountable to no one.  As Judge Kavanaugh of the U.S. Court of Appeals for the D.C. Circuit held in a since-vacated decision, “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.”[1]

In the Dodd-Frank Act of 2010, Congress delegated to the CFPB the power to regulate, if necessary, mandatory-binding arbitration clauses in consumer financial contracts.  This power came with an important caveat: the CFPB must first conduct a study on the effect arbitration clauses have on consumers, and any regulation promulgated by the agency must be based on that study.  Yet the CFPB already had the goal in mind to regulate and ban these arbitration clauses, driven largely by internal bias and promoted by third-party interests.  Instead of conducting an objective study backed by peer review, the agency sought a pre-determined result, abusing junk science and methodology to get there.  In doing so, it ignored the requirements of the Information Quality Act (“IQA”) and the ensuing Office of Management and Budget (“OMB”) bulletin requiring agency peer review.  This paper examines the failings of the arbitration study and offers solutions to the potential new agency head to ensure future policy is informed by sound science.

Recommendations

The best way to curtail the CFPB’s abuse of junk science is to force the agency to follow the standards contained within the IQA and the OMB peer review bulletin.  If the CFPB were to strictly adhere to the IQA’s standards of data quality—objectivity, integrity, and utility—and conduct rigorous, academic peer review, outcomes like the one detailed in this paper would be avoided.

Cause of Action Institute (“CoA Institute”) recommends that the new CFPB Director, once confirmed, immediately institute rulemaking actions to codify these already-mandatory requirements of the IQA and peer review.  This should apply to all studies or scientific findings released by the agency, whether they undergird a rule or not.[2]  Although the Director could just order agency personnel to follow these directives through a memorandum, that would only be a temporary solution.  Rulemaking under the Administrative Procedure Act (“APA”) would ensure that these science-based requirements have more permanence and apply regardless of who is running the agency five years from now.[3]  Furthermore, the new Director should require, whether through rulemaking or otherwise, that all published scientific findings be accompanied by full disclosure of outside datasets, sources, and lobbying.

Eric Bolinder is Counsel at Cause of Action Institute

[1] PHH Corp. v. Consumer Fin. Prot. Bureau, 839 F.3d 1, 7 (D.C. Cir. 2016), vacated on reh’g en banc, 881 F.3d 75 (D.C. Cir. 2018); see Consumer Fin. Prot. Bureau v. RD Legal Funding, LLC, No. 17-890, 2018 WL 3094916, at *35 (S.D.N.Y. June 21, 2018) (“Respectfully, the Court disagrees with the holding of the en banc court and instead adopts Sections I-IV of Judge Brett Kavanaugh’s dissent[.]”).
[2] This, of course, would extend to any scientific findings that are part of a proposed rule.
[3] A future Director could institute rulemaking to reverse the requirements, but that is a cumbersome process subject to judicial review.

 

Federal Court Upholds Cigar Labeling Requirements — Why and What This Means

Cause of Action Institute (“CoA Institute”) has been active as an amicus curiae (friend of the court) in an ongoing federal lawsuit regarding cigars and other tobacco products.  Meaning, while we don’t represent any of the parties, we have been submitting briefs to help the Court reach its final decision. The Food and Drug Administration (“FDA”) originally proposed a burdensome tobacco-safety regulation that would have effectively crippled the premium cigar market, putting countless American small businesses out on the street.  After the 2016 election, however, new FDA leadership delayed that rule with the intent to change it. This was a wonderful development for both cigar companies and hobbyists alike. However, the FDA kept pushing a scaled-back rule that would require large, intrusive warning labels on premium cigar products.  We submitted a brief opposing that rule.

CoA Institute did not take a position on the efficacy or utility of tobacco warning labels.  Our concern was, as it frequently is, that agencies must show their work when they enact a new regulation.  The governing statute here, the Family Smoking Prevention and Tobacco Control Act (“FTA”), required the FDA to show that any new regulations would be appropriate for the protection of the public health.  Plaintiffs, as well as CoA Institute, argued that the FDA had not done its work and, indeed, had conceded it had no real quantitative data or analysis for the efficacy of these new warning labels for cigar products.  Regulatory action for the sake of regulatory action is bad policy.

Unfortunately, the Judge disagreed, finding that the FDA had done its due diligence in determining that the warning labels would be effective.  He held that the FDA’s statements connecting the labels to public health, as well as their citation of certain data, such as the overall addictiveness of nicotine, was enough.  Furthermore, he found that the agency’s concession that it had no data available was merely an admission of the “agency’s inability to quantify the benefits of the Deeming Rule’s requirements prior to their implementation date.”  He held that a mere connection, quantifiable or not, between smoking prevention and the larger warning labels is enough.  He cited the agency’s prior work with other tobacco products, singling out cigarettes, as the foundation for the FDA’s contention that the new health warnings were appropriate and would affect cigar and pipe tobacco usage.

As any cigar aficionado knows, cigars and cigarettes are distinct products.  I regularly enjoy cigars, but I never touch cigarettes.  Why?  Because, in my opinion, the health risks are profoundly different for the two products.  More importantly, the addictive nature of the two is incomparable.  I regularly smoke cigars during the summer—which, for me, is 1-3 a week—and completely stop for the long winter months with no undesired effects or feelings of withdrawal.  That, to put it lightly, is not the usual experience with cigarettes.  Aficionados know: these are two different worlds.

Some might criticize me for relying on personal anecdotes to argue a federal regulation is unfounded.  I agree!  And that’s why the FDA should have conducted quantitative studies specific to premium cigars, rather than just relying on general science on nicotine addiction and the agency’s experience with a totally different product, cigarettes.  I suspect this is why Congress included language in the statute mandating that a “finding as to whether such regulation would be appropriate for the protection of the public health shall be determined[.]”  Of course, we live in the era of Chevron deference, where the Supreme Court has instructed the lower courts to defer to an agency’s interpretation of a statute and, sometimes by extension, the agency’s own science (or lack thereof).  Accordingly, the agency’s own statements in support of the rule were given enormous deference by the Court.

The Plaintiffs in the case argued that it was ridiculous for the FDA to claim to not have access to quantitative data, since they’ve had “sixteen years and an entire nation’s worth of data to examine the efficacy of the [prior-implemented] FTC warnings.”  After all, most of the cigars produced and sold in the United States are subject to an FTC consent decree that requires these companies to put warning labels on their products.  The FDA could have studied the efficacy of the FTC warnings on cigar use, but failed to do so.  In rejecting this argument, the Judge made an interesting comment: “Plaintiffs, however, have identified no requirement, statutory or otherwise, that compelled the FDA to undertake such studies to make the findings required by [the statute].”  CoA Institute, as amici, did just that though.  We contended that Chamber of Commerce of the United States v. Securities & Exchange Commission, which applied to similar statutory language in the financial sector, was controlling here.  The SEC made basically the same claim the FDA did, arguing “it was without a reliable basis” to determine costs associated with a regulation.  In Chamber, the D.C. Circuit recognized that limitations on data cannot “exclude the Commission from its statutory obligation to determine as best it can the economic implications of the rule it has proposed.” In its decision upholding the labeling rule, the District Court did not cite Chamber.

If this case were to be appealed—and, again, CoA Institute was just amici and did not represent any of the parties—we believe the D.C. Circuit would be faced with two interesting questions.  First, is the statutory language enforced by the Court in Chamber similar enough to the FTA that the case controls here?  And second, if Chamber does apply, can the FDA comply by simply reaching back and pointing to data based on cigarettes and other general science on tobacco?  We, of course, would argue no, given the distinct differences between premium cigars and cigarettes.

What does this all mean for cigar smokers?  Probably not that much, at least for now.  The original rule would have rocked the market, cutting off competition, reducing quality, and increasing prices exponentially.  The new, cutback rule might result in some increase in price, given the labeling costs cigar companies will now need to endure, but the same quality and quantity of cigars should be available for purchase.

But here’s the important point: there’s nothing preventing a future administration from bringing back the original rule.  And, given the Judge’s opinion in this case, the FDA would not have to reach a high bar to “deem” and regulate cigars the same way it does cigarettes.  This could be a death knell for the pastime.  The Courts and Congress must act to hold agencies accountable to good science and, most importantly, to doing their job.

*There were many other strong arguments made by the Plaintiffs, including Administrative Procedure Act and constitutional claims.  These were similarly rejected by the Court. For this blog post, I concentrated only on the arguments CoA Institute highlighted in our amicus brief.  The Court did vacate one part of the rule, which defined retailers who blend pipe tobacco in their stores as “manufacturers,” asking the agency to justify its reasoning.*

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.