The U.S. Court of Appeals for the Sixth Circuit has decided a new federalism case. In State of Tennessee, et al., v. Federal Communications Commission, decided on August 10, 2016, the Court of Appeals held that Section 706 of the Telecommunications Act of 1996 does not authorize the Federal Communications Commission (FCC), acting as a federal agency, to preempt laws enacted by the legislatures of Tennessee and North Carolina to confine municipalities engaged in telecommunications services (by providing internet service) to their current territorial boundaries. This decision is important because it helps to define federal agencies’ authority to act.
Can the federal government at times and, in all places, commandeer the states to act in a certain way? “Commandeering” refers to a federal requirement that state officials enact, administer, or enforce a federal regulatory program. There are limits to the federal government’s constitutional authority to do so, which are discussed in a recent decision by the U.S. Court of Appeals for the Third Circuit. On August 9, the Court of Appeals held that a 2014 New Jersey law, which partially repealed the state’s prohibitions on sports betting, was preempted by the federal Professional and Amateur Sports Protection Act. Consequently, the federal law prohibiting sports betting will prevail in New Jersey, where the Legislature was hoping to find a way to generate more revenues for its casinos and racetracks. The en banc Court of Appeals rejected New Jersey’s arguments that the federal law was unconstitutional because it “commandeered” the states to act in a way that violates the Constitution. This case is NCAA v. Governor of New Jersey. Of interest, the U.S. Supreme Court has held that, under the commandeering doctrine, the federal government cannot compel or coerce the states, as separate sovereigns, to enact legislation demanded by the federal government.
Also on August 9, 2016, the U.S. Court of Appeals for the DC Circuit held that the administrative law judges (ALJ) employed by the Securities and Exchange Commission were not “Officers” as that term is employed by the Constitution because their actions were also subject to review by the Commission. Since they are not constitutional officers, their decisions cannot be set aside simply because they were not appointed in accordance with the Appointments Clause. This case is Raymond J. Lucia Companies, Inc., et al., v. SEC. This ruling would appear to apply to many ALJS employed by the federal government.
Photo: KOMUnews, Airport Advisory Determines Future Plans After Election Results, Taken April 3, 2013 – Creative Commons
The federal Consumer Financial Protection Bureau (CFPB) was urged this week by some in Congress to speed up its rulemaking aimed at arbitration provisions in consumer contracts used by companies offering payment services or financial products to consumers. In May, the preliminary rule was released. In Arbitration Provisions Mauled by Consumer Watchdog, my colleagues Mercedes Tunstall, Amy Pierce, Andrew Caplan, and I discussed the proposed rule and the potential new reality for all consumer facing companies. At the heart of the proposal, the CFPB would ban consumer financial services providers from requiring consumers to waive class action rights in connection with pre-dispute arbitration clauses. (In a minor victory for the industry, the CFPB has not outright banned pre-dispute arbitration agreements—at least not yet.)
Photo: CafeCredit.com, CFPB, Uploaded June 13, 2016 – Creative Commons
Today, the Financial Crimes Enforcement Network (FinCEN) announced, effective August 28, 2016 and continuing for 180 days, it is expanding its earlier Geographic Targeting Orders (GTO) requiring information about the natural persons behind shell companies used to purchase high-end residential real estate for “all cash.” FinCEN has been collecting this data on Manhattan and Miami-Dade County, Florida since January and believes it is “on the right track” in its anti-money laundering (AML) efforts and investigation of possible money laundering using real estate deals. It will collect this information in California for San Francisco, San Mateo and Santa Clara counties; Los Angeles County; and San Diego County. It will expand to all boroughs of New York City and to Broward and Palm Beach counties in Florida. Bexar county in Texas, that includes San Antonio is also included. Monetary thresholds for each area identified are provided in FinCEN’s announcement. Title insurance companies are required to comply with the GTO and provide the information.
Photo: Images by John ‘K’, Blue and Gold, Taken April 1, 2013 – Creative Commons
On July 5, the U.S. Court of Appeals for the District of Columbia Circuit issued an important ruling interpreting the reach of the federal Freedom of Information Act (FOIA) in the case of Competitive Enterprise Institute v. Office of Science and Technology Policy. The Office is located in the Executive Branch, and it has been engaged in a long-running dispute with the Competitive Enterprise Institute (CEI) with respect to a short, two-minute video released by the Director of the Office, John Holdren. In the instant action, the Court of Appeals reviewed the CEI’s attempts to obtain the records of the Director found in emails sent to or from the Director’s private, non-governmental email account.
My colleagues Stephanie Amaru and Mark Elliott, in Open Wide: FOIA Reform Expands Public Access to U.S. Government Information, discuss the bipartisan Freedom of Information Improvement Act of 2016 (S. 337) signed into law by President Obama’s on June 30. The bill’s most notably requirement is that the government operate under a “presumption of openness” and help protect the public from government secrecy. Its goal otherwise is to make it more difficult for agency officials to withhold government records sought under the Freedom of Information Act (aka FOIA).
Photo: J. Albert Bowden II, Keep Calm and Use FOIA, Taken April 1, 2014 – Creative Commons
A recent U.S. Court of Appeals for the Second Circuit ruling is an important decision for corporations with foreign operations. In 2011, the U.S. Court of Appeals for the Second Circuit, in Kiobel v. Royal Dutch Petroleum Co., 642 F.3d 591 (2nd Cir. 2011), held that the Alien Tort Statute (ATS) does not regulate corporate conduct because customary international law does not recognize corporate liability, and therefore the litigation against the defendant could not proceed in the federal courts on the basis of the ATS. The defendant was alleged to have violated environmental human rights in the Nigeria. That ruling was very controversial, and an appeal was made to the U.S. Supreme Court, which upheld that ruling, but on different grounds. The Court held that the ATS is subject to a presumption against the extraterritorial application of domestic statutes, and that presumption had not been overcome by the plaintiffs. Other circuit have issued rulings which disagreed with the Second Circuit, but the original Kiobel decision is still the law of the circuit.
In late April, U.S. District Court Judge Mark A. Goldsmith, in Concerned Pastors for Social Action, et al. v. Nick A. Kouri, et al., issued an interesting Order Regarding Disqualification. During an April 6, 2016 status conference in this matter, the Court to the parties “information regarding its consumption of water whose source was the Flint River, during the period of April 2014 to August 2014, a time period when its duty station was at the Flint Divisional courthouse.” On the same day, the Court issued an order instructing “the parties to file any objections pertaining to the Court’s continued participation in the matter.” At issue was Title 28 U.S.C. § 455(a), which provides that any judge “of the United States shall disqualify himself in any proceeding in which his impartiality might reasonably be questioned.”
In The “Panama Papers” and the Secret World of Shell Corporations, my colleagues Carolina Fornos, Mark Hellerer, Maria Galeno, Joseph Jean, Alexander Hardiman, William Sullivan, Nancy Fischer, Nora Burke, Danielle Vrabie, and Matthew Putorti discuss a leak of 11.5 million documents from a law firm in Panama that may implicate politicians, criminals, and celebrities in sheltering of fortunes in offshore tax havens through the use of shell companies. Financial institutions and others may need to consider whether they are implicated by these events, assess the risks and how to minimize exposure, if any, and whether insurance coverage is available.
Photo: Sellchi Kusunoki, Bunch of Papers, Taken Oct. 16, 2011 – Creative Commons