Category Archives: Government Transparency

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9th Circuit Ruling Issued In Midst Of Debate Over Federal Agency “Sue-and-Settle” Tactics

Northwest Forest Plan

Northwest Forest Plan

Cross-posted at WLF’s Forbes.com contributor page

Complying with notice-and-comment and other due process requirements is expensive and time-consuming for federal agencies. Those procedural duties also make agencies accountable to the public and regulated entities. So it’s no surprise that regulators avoid formal rulemaking like the plague. As we’ve spotlighted at The Legal Pulse, agencies instead  issue “guidance” documents or utilize even more perversely creative tactics, such as setting new standards by replying to a U.S. Senator’s inquiry letter. Another evasive maneuver which has drawn the ire of not only affected businesses, but also state attorneys general and Members of Congress, is “sue-and-settle.”

Please Sue Us. Special interest groups, especially those with environmental-oriented missions, routinely sue federal agencies to compel actions, especially in situations where the regulators have missed deadlines, or, for political or other reasons, have stopped short of the most rigorous approach. The agencies are presented with an offer they can’t (and often don’t want to) resist: settle the citizen’s suit in a way that implements new mandates (and expands agency authority) without public input.

Judicial Rejection: Conservation Northwest v. Sherman. As noted above, elected officials are expressing their concern with this and seeking remedies (a bit on that below). In the meantime, however, an April 25 U.S. Court of Appeals for the Ninth Circuit decision reflects that judges can and should very closely scrutinize any friendly settlements between federal agencies and activists. In 2007, a throng of environmental groups sued the Bureau of Land Management (BLM) for attempting to eliminate a costly and complex surveying mandate from the management of the Northwest Forest Plan (a land use agreement arising from the 1990s’ spotted owl litigation wars). Continue reading →

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Appeals Court Rejects EPA Effort to Avoid Judicial Review Through Guidance Documents

wood_allisonFeatured Expert Column

Allison D. Wood, Hunton & Williams LLP

Guidance documents and letters setting forth so-called “agency-policy” present unique challenges to industry, particularly in the context of permitting.  Rather than undergo notice-and-comment rulemaking, which would be subject to judicial review, EPA has instead developed a practice of issuing “guidance”–often in the form of memoranda–that set forth requirements that EPA expects states and EPA regions to follow in issuing permits.  The dilemma arises because courts often find that these documents cannot be challenged, and a permit applicant then faces an unpleasant choice:  agree to permit conditions that may not be required by law to obtain the permit, or have the permit application denied and head into uncertain and expensive litigation.  When the permit is critical for business operations, this really presents a Hobson’s Choice and almost all permit applicants capitulate and accept the terms.

The U.S. Court of Appeals for the Eighth Circuit recently offered some relief to those seeking to challenge guidance documents.  In Iowa League of Cities v. EPA, some cities that owned wastewater treatment facilities challenged two EPA letters that responded to inquiries by Senator Charles Grassley about certain Clean Water Act (CWA) requirements for wastewater treatment facilities involving “bacteria mixing zones” and “blending.”  The cities contended that EPA’s letters were new rules promulgated without notice-and-comment rulemaking in violation of the Administrative Procedure Act.  EPA countered that the letters were merely agency guidance which the court lacked jurisdiction to review.

The court began by examining whether EPA’s act of sending the letters could be considered a “promulgation” of a rule under the CWA.  The court adopted the three factor test set forth in Molycorp, Inc. v. EPA, 197 F.3d 543, 545 (D.C. Cir. 1999), for determining whether an agency action constitutes promulgation of a regulation:  “(1) the Agency’s own characterization of the action; (2) whether the action was published in the Federal Register . . . .; and (3) whether the action has binding effects on private parties or the agency.”  The court said that the third factor “should be the touchstone of our analysis,” because “plac[ing] any great weight on the first two . . . factors potentially could permit an agency to disguise its promulgations through superficial formality, regardless of the brute force of reality.” Continue reading →

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Newest Commissioner Makes the “Wright” Call for FTC Act’s Section 5

MurinoGuest Commentary

By Andrea Agathoklis Murino, Wilson Sonsini Goodrich & Rosati

In a speech last week, the Federal Trade Commission’s (FTC) newest Commissioner, Joshua D. Wright, provided an unusually candid and public exploration of his would-be agenda as a sitting Commissioner.  Foremost among his to-do list is the issuance of a binding public “Unfair Methods Policy Statement,” that would specify both guiding and limiting principles the FTC would use in the application of Section 5 of the Federal Trade Commission Act.  Section 5, though deceptively straight-forward in language, has a tortured history of enforcement and remains among the more muddled doctrines in United States competition law today.  Commissioner Wright’s bold attempt to eliminate this uncertainty is assuredly the “Wright” call.

All seem to agree that Section 5 was established to reach conduct that could otherwise not be condemned under the Sherman or Clayton Acts.  There is uniform consensus behind the history of the legislation that the FTC was designed to be a tribunal which could assess potential Section 5 violations using its accumulated and competition-specific expertise and knowledge in ways that a generalist adjudicator could not.  Like so much in life, this was easier in theory than in practice.  I certainly agree with Commissioner Wright that Section 5 enforcement has fallen short.  You need look no further than the fact that not since the 1960s – over 50 years ago – is there a case where the FTC prevailed on a Section 5 appeal.  Indeed, for most of the years since, Section 5 was barely used as it was intended at all.

Using deliberate and determined language, Commissioner Wright’s call-to-arms begins with the premise that there is an “unfortunate gap between the theoretical promise of Section 5 as articulated by Congress and its application in practice by the Commission.”  He then moves on to explain that there is little hope for Section 5 application if the FTC cannot properly articulate its enforcement policy, and most importantly, that this Commission can “put an end to the state of affairs” by issuing a “policy statement articulating its views on the appropriate application of its signature statute in unfair methods of competition cases.”   Continue reading →

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DOJ’s Advantage-Seeking Delay Maneuvers at Supreme Court: Time for Transparency

delay of game

Cross-posted at WLF’s Forbes.com contributor page

When a litigant files a certiorari petition in the U.S. Supreme Court, seeking review of a lower court decision, the opposing party has 30 days to file a response.  The Supreme Court Clerk’s office can and does grant extensions of time to file a response when counsel for the opposing party sets out “specific reasons why an extension of time is justified.”  But one should reasonably expect complete candor from attorneys, particularly federal government attorneys, when requesting such extensions.  Events this week call into question whether the United States is being completely candid in explaining its extension requests.

The U.S. Court of Appeals for the Sixth Circuit last May handed the federal government a major victory when it largely rejected First Amendment challenges to the new federal law that strictly regulates the labeling of tobacco products.  The tobacco industry filed a Supreme Court certiorari petition in October, and the federal government’s brief in response to the petition was initially due on November 26, 2012.  Since then, the Solicitor General’s Office has sought and received three successive extensions of time to respond, first to December 26, then to February 1, and then (in response to a request submitted just this week) to March 8.  On all three occasions, the “specific reason” proffered for seeking an extension was that the government attorney assigned to the case was busy attending to other legal matters.

I have no inside knowledge regarding the workloads of government attorneys, but the too-busy-on-other-matters explanation is highly suspect in this instance.  While the federal government routinely obtains one 30-day extension of filing deadlines in its Supreme Court cases and not infrequently obtains a second, the 98-day extension in this case is very unusual, even by federal government standards.  Given the importance of the issues raised by the Sixth Circuit petition, entitled American Snuff Co. v. United States, and the Solicitor General’s ability to handle briefing in other cases, it does not seem plausible that his office could not have met the February 1 filing deadline. Continue reading →

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Update: DOJ/USPTO’s Curiously Timed “Statement” on Standards-Essential Patents

DOJusptoIn our January 8 post, FTC’s Standards-Essential Patent Settlement: The Real “Elephant” in the Room?, we advanced the question of how much of a role regulatory turf has played in motivating the Federal Trade Commission’s recent actions regarding “standard-essential patents” (SEPs). SEPs are a major legal policy issue, and the Commission and the Justice Department both want to be the cop on the beat regarding alleged competition-related abuses of such patents.

The concept of a turf battle seems a bit more plausible to us today after reading about, and then reading, a joint Justice Department-U.S. Patent Office “Policy Statement on Remedies for Standards-Essential Patents Subject to Voluntary F/Rand Commitments.” While not directed specifically at any case or open docket, the statement is clearly aimed at the U.S. International Trade Commission (USITC) and its consideration of injunction requests in cases involving SEP patents.

After five pages of extolling the purposes and virtues of SEPs, the statement offers that in “some circumstances” injunctions or exclusions “may be inconsistent with the public interest.” One page later though, the agencies state, “This is not to say that consideration of the public interest factors set out in the statute would always counsel against the issuance of an exclusion” where patents are encumbered by a F/RAND commitment. It goes on to note some of those exceptional circumstances, adding, “This list is not an exhaustive one.”

The statement also declares, “The DOJ is the executive-branch agency charged with protecting U.S. consumers by promoting and protecting competition” (emphasis ours). FTC shares the same consumer protection mission, though it is an independent, not an “executive-branch,” agency.

The DOJ/USPTO statement’s declaration of regulatory primacy, the timing of its release (one week after the FTC settlement with Google), and the statement’s complete failure to reference the very relevant Google consent decree, are certainly all very curious.

The possibility of regulatory turf battles should be of interest not only to inside-the-Beltway antitrust policy types, but also to anyone effected by government action on standards-essential patents. In its statement, DOJ/USPTO related a desire to “ensure greater certainty concerning the meaning of a F/RAND commitment.” DOJ/USPTO’s perspective on SEPs and injunctions arguably differs in some significant respects from what four FTC Commissioners said regarding the Google consent decree, fomenting, not alleviating, uncertainty from the U.S. government.

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From the Waning Days of 2012, Five Developments You May Have Missed

dec12Before fully moving forward into 2013, The Legal Pulse offers five late December developments our readers may have missed during the holiday season:

1. Administration’s Regulatory Plan Released.  The federal government waited until late December to release its Spring 2012 Unified Agenda of Regulatory and Deregulatory Actions. This is the list of regulatory plans that the Office of Information and Regulatory Affairs at the Office of Management and Budget requires all federal agencies to submit to it by April of each year. As noted by the House Oversight Committee, the Unified Agenda has traditionally been issued between April and July. We’re in the process of reviewing it, but one item from the EPA’s priorities list jumped off the screen: “Expanding the Conversation on Environmentalism and Working for Environmental Justice.” We’ve consistently raised red flags about environmental justice here at The Legal Pulse, and will keep an even closer eye on that going forward.

2. FTC Issues Report on “Child-Directed” Food Advertising. What a difference a year makes. At the end of 2011, we were still talking about the threat posed to free speech and freedom of choice by the Interagency Working Group’s (IWG)  Nutrition Principles to Guide Industry Self-Regulatory Efforts. As that Legal Pulse post explained, Congress all-but terminated that effort by requiring a cost-benefit analysis. Last March, FTC Chairman Leibowitz told a congressional panel that it was “time to move on” from the IWG “self-regulatory” effort.On December 21, the Commission released what it termed a “follow-up” study on food ads directed at children. FTC’s study credited the food industry for expanding its self-regulatory efforts, but remained critical of the amount of money devoted to advertising foods the FTC deemed less-than-nutritious. The study has one major flaw: it is based on data that is three years old. It’s fair to say that a significant amount of improvement in the nutritional value of foods has occurred in those three years. Continue reading →

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Spot the Conflict of Interest? Federal Courts Can’t in Expanding Qui Tam Suits

Two recent federal appellate court opinions have expanded the availability of qui tam suits under the False Claims Act (FCA), and created new incentives for abuse.  Briefly, the FCA’s qui tam provisions incentivize private parties, called relators, to bring litigation on behalf of the government by providing a relator with a share of the recovery.  Like private attorney general suits, this mechanism has been criticized for its abuse by politically unaccountable individuals seeking personal gain–monetary, political, or otherwise­–and the Act’s vast expansion beyond its original Civil War era purpose.

In United States ex rel. Little v. Shell Exploration & Production Co., the Fifth Circuit, addressing “who may sue,” determined that government employees–even those whose job is to investigate fraud for the government–can bring a private qui tam suit under the FCA.  The court dismissed the obvious conflict of interest problems as “extraneous” to the legal interpretation of the FCA, and found no textual basis for excluding government employees from the scope of “person[s]” eligible to bring a qui tam suits.

The court noted that in cases where allegations are first publicly disclosed by another party, government officials cannot bring suit because of the FCA’s “original source” rule.  Such sources must voluntarily disclose allegations to the government.  Government officials, of course, cannot be said to voluntarily disclose allegations to the government because, well, that’s their job. Continue reading →

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Georgia Steps Up Transparency in State Attorney General-Trial Lawyer Contracts

Attorney General Sam Olens

Last week, the Peach State became the latest state to require full transparency on contingency fees for private lawyers when they are retained to litigate on the state’s behalf.On May 29, Georgia Attorney General Sam Olens issued an administrative order that requires all contingency-fee contracts with outside counsel (and details of all payments pursuant to such contracts) to be posted promptly on the Office of the Attorney General’s website. The new policy also requires any proceeds from litigation performed by outside counsel to be paid directly to the state agency involved in the litigation or otherwise to the state treasury for appropriate disposition through the normal appropriations process. It also calls for strict oversight by the AG’s office of all litigation undertaken by private attorneys, including all important decisions including settlement negotiations.

The recent trend among states to hire outside contingency-fee counsel is just another worrisome area for corporate defendants in facing prosecution under consumer protection laws.  The need for accountability in this area is great, and Georgia’s latest announcement continues a recent counter-trend where government is seeking more transparency.  As American Tort Reform Association President Tiger Joyce wrote for The Legal Pulse a little over a year ago, the Arizona legislature adopted reforms to require more transparency over AG-trial lawyer arrangements. And just last week, the Supreme Court of Mississippi ruled in two cases that the legislature, not the attorney general, is the entity responsible for paying contingent-fee lawyers their fees.  All very encouraging developments.

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FDA’s Way or the Highway: Its Unlawful Alteration of “Device” Definition

DSW in action

In a single response to a request from one company in 2009, and then subsequently in 2011 through a draft guidance document, the Food & Drug Administration (FDA) is sweeping aside decades of agency practice on how it determines what is a “medical device” and what is a “drug.” The distinction is a critical one for health product companies, as the drug approval process in generally far lengthier and more expensive than the device process. Equally or more important, however, is that FDA’s decision-making approach evaded public and legislative accountability.

 
The statutory definitions of ”drug” and “device” are very similar, with one provision in the law providing the key difference – it’s a device if the product “does not achieve its primary intended purposes through chemical action within or on the body of man or other animals and . . . is not dependent upon being metabolized for the achievement of its primary intended purposes.”
 
In 2009, Prevor, a company which produces products that address chemical risks and exposure, asked FDA to categorize its Diphoterine® Skin Wash (DSW) as a device. DSW’s “primary intended purpose” is to protect workers from toxic chemicals by displacing the chemicals from skin following an accidental spill. That is done through propelled liquid. The liquid contains 4% diphoterine, which can help neutralize some chemical agents on the skin. Prevor’s studies showed that this feature accounted for 10% of its therapeutic value. In its response in which it categorized DSW a “drug,” FDA wrote that this 10% was enough to indicate that DSW works, “at least in part” through chemical action. Continue reading →
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Overlooked Provisions in Appropriations Bill Bring Sunshine to ObamaCare Health Fund

Cross-posted by Forbes.com at WLF Contributor Site

For those concerned with the federal government’s desire to influence what Americans choose to eat and drink, one particular provision of the FY 2012 Consolidated Appropriations Act has garnered a fair amount of attention. The provision, § 262 of the Act, affects the Nutrition Principles to Guide Industry Self-Regulatory Efforts on child-directed advertising. The Legal Pulse did a post on that last week.

Two other provisions of the Act affecting public health and obesity have been almost entirely overlooked – Sections 220 and 503. Together, those sections will bring a needed dose of sunshine, and a compelled amount of restraint, to the use of funds handed out under § 2002 of the Affordable Care Act (aka “ObamaCare”). That section established the “Prevention and Public Health Fund,” which an August Guest Commentary Legal Pulse post discussed. As noted in the post, concerns had been raised that those administering the Health Fund eyed opportunities to push food police-type solutions, such as sugary-drink taxes. These aren’t nickel and dime amounts of taxpayer funds either; the Health Fund will increase to $2 billion annually by 2015. Continue reading →