“Perez v. MBA”: Clashing Perspective on Administrative Law Meet at the Supreme Court

supreme courtThe contrasting perspectives of the stakes in Perez v. Mortgage Bankers Ass’n, an administrative law case that the U.S. Supreme Court will hear on Monday, December 1, could not be starker. Law professors are allegedly unanimous that the Court should reverse the U.S. Court of Appeals for the D.C. Circuit doctrine at issue, a doctrine that, in their view, severely hampers the ability of federal administrative agencies to respond to changing conditions. On the other hand, lawyers representing regulated entities have rallied to the defense of the D.C. Circuit’s doctrine; they view it as an essential check on arbitrary agency rulemaking. What explains these contrasting visions? The explanation could lie in the ongoing battle over how much deference courts should accord to agencies’ interpretations of their own rules. At time when courts are increasingly deferential to agencies, regulated entities will forcefully act to preserve other tools—such as the D.C. Circuit doctrine at issue in Perez—to keep federal agencies in check.

Perez concerns the scope of notice-and-comment rulemaking. The Administrative Procedure Act (APA) requires federal agencies, before they adopt a “substantive” or “legislative” rule, to provide notice of the proposed rule and a meaningful opportunity for members of the public to comment on the proposal. Exempted from the APA’s notice-and-comment requirement are “interpretive” rules. Agencies seek to avoid notice-and-comment requirements where possible; it is a burdensome process that can delay rulemaking for months and even years. Yet, despite nearly 70 years of APA litigation, the meaning of exempt “interpretive” rules has never been fully pinned down. Continue reading

Antitrust and Health Care: FTC’s Off-Again, On-Again Challenge to Georgia Hospital Merger

amurinoFeatured Expert Column – Antitrust/Federal Trade Commission

Andrea Agathoklis Murino, Wilson Sonsini Goodrich & Rosati

Consolidation in the health care industry, and the Federal Trade Commission’s (“FTC” or “Commission”) perspective on such activity, are being closely watched in antitrust law and policy circles. In April 2011, the FTC challenged the acquisition of Palmyra Park Hospital by Phoebe Putney Health System Inc. (“Phoebe”) in Albany, Georgia. The Commission argued that the combination would result in unduly high market shares (>85%) in the provision of acute care services in a six-county region and result in anticompetitive price increases. Shortly thereafter, the FTC sought and obtained a preliminary injunction (“PI”) from the United States District Court for the Middle District of Georgia halting the transaction pending trial. Typical enough. But here’s where our story starts to take some strange twists. What began that April in a federal district court is an adventure leading from the Supreme Court to local Georgia healthcare regulatory bodies…and possibly, back again. Here’s what happened.

Phoebe responded to the PI not by throwing itself into a trial on the merits, but rather by filing a motion to dismiss on the grounds that by virtue of the state action doctrine, Phoebe’s conduct was permissible. Generally, the state action doctrine provides that where (1) there is a clearly articulated state policy to displace competition and (2) there is active supervision by the state of the policy or activity, otherwise anticompetitive activity will be permitted. Here, Phoebe argued that because it was owned by the Hospital Authority of Albany-Dougherty County, and operated under Georgia’s Hospital Authorities Law, it was immune. Phoebe prevailed on its motion to dismiss in the district court and then again at the U.S. Court of Appeals for the Eleventh Circuit. Phoebe then completed its purchase of Palmyra, closing the transaction. Continue reading

First Circuit Permits Challenge to Massachusetts Prior Restraint on Billboards

billboardIn recognition of Free Speech Week, the WLF Legal Pulse celebrates what may be the First Amendment’s greatest virtue: it protects speech that may be unpopular due to the nature of the speaker or the medium within which it is spoken. We do so by applauding an October 20 U.S. Court of Appeals for the First Circuit ruling that addressed a prior restraint on a method of communication that some disfavor—billboards—and that predominantly carries messages some consider unworthy of full constitutional protection—advertisements.

Unbridled regulatory authority. Section 302 of the Massachusetts Code of Regulations requires all outdoor advertisers to obtain both an operating license and a permit for each specific sign. The regulation vests the Director of the Office of Outdoor Advertising (“Director”) with broad discretion to grant, withhold, or revoke licenses and permits for billboards. Section 302 enumerates several factors that the Director “may” consider, including “health, safety, and general welfare” and “not [being] in harmony with the surrounding area.” The regulation, however, states the listed factors are non-exclusive and that the Director’s authority is “[w]ithout limitation.”

Van Wagner Communications, which lobbied against the 2012 amendments to Section 302, filed a facial challenge to the regulation in federal court, arguing that it imposed an unconstitutional prior restraint on the company’s speech. The U.S. District Court for the District of Massachusetts held that because the Director had approved Van Wagner’s license and all 70 of its permit requests over two years, the company suffered no injury and thus lacked standing to sue. Continue reading

U.S. Officals Continue Push for Broader International Consensus on Competition Enforcement

Botti2Featured Expert Contributor – Antitrust & Competition, U.S. Department of Justice

Mark J. Botti, Squire Patton Boggs (US) LLP with Anthony W. Swisher, Squire Patton Boggs (US) LLP

*Editor’s Note: With this post we welcome the participation in The WLF Legal Pulse of Featured Expert Contributor on Justice Department-related competition law and policy matters, Mark Botti. Mark is co-leader of Squire Patton Boggs’s Global Antitrust & Competition Practice Group and previously spent 13 years at DOJ’s Antitrust Division. 

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In 2001, the Department of Justice Antitrust Division (DOJ) declined to block the proposed merger of General Electric and Honeywell, allowing the deal to proceed with certain limited divestitures. Announced in October of 2000, that deal would bring together two significant players in a number of related market segments, including aircraft engines, avionics, and landing gear. Despite DOJ’s decision not to block the deal outright, the European Union reached a different result, forbidding the transaction under a “conglomerate merger” theory that has long been out of favor in the United States and has drawn significant criticism in the economic and legal literature.

These diverging enforcement decisions spawned a wave of criticism directed at both jurisdictions. How were multinational businesses in a global economy to order their affairs in the face of such conflicting enforcement theories and outcomes? Were they facing a “race to the bottom,” where the most aggressive enforcers effectively held a veto over the decisions of other competition agencies? Continue reading

Eleventh Circuit Ruling a Welcome Judicial Pushback against Criminal Enforcement of Regulations

strickly skillz

On a balmy late August day in Orlando, Florida, nearly a dozen Orange County police officers, some dressed in ballistic vests and masked helmets, swept into Strictly Skillz barbershop with their guns drawn. As their colleagues blocked off the parking lot entrances and exits, the officers declared that the shop was closed and ordered its patrons to leave, depriving the shop of business and perhaps deterring future patrons. Two barbers and the owner were handcuffed. A plain-clothed member of the raiding party demanded to see the barbershop’s business license.

Yes, you read that correctly. On August 21, 2010, a veritable SWAT team of heavily armed police conducted a warrantless inspection to check for barbers’ licensing violations. The Florida Department of Business and Professional Regulation (DBPR) inspector soon determined that Strictly Skillz barbers were properly licensed (which, as you’ll learn below, they already knew), so the police uncuffed the detained barbers and owner and left the shop.

The owner and three barbers sued a number of the officers involved for violating their Fourth Amendment rights against unreasonable search and seizure, and a federal district court denied the defendants’ motion for summary judgment on qualified immunity grounds. On September 16, the U.S. Court of Appeals for the Eleventh Circuit issued a strongly worded opinion affirming the lower court (Berry v. Leslie). The ruling provides a forceful reminder that the Fourth Amendment protects businesses (and their employees) from overzealous regulatory inspections. Continue reading

Federal Workplace Police Cast Aside Rules that Inhibit Capitalist Punishment

oshaNLRBAn excellent Economist article recently critiqued the ever-increasing criminalization of the American business community by federal regulators:

The formula is simple: find a large company that may (or may not) have done something wrong; threaten its managers with commercial ruin, preferably with criminal charges; force them to use their shareholders’ money to pay an enormous fine to drop the charges in a secret settlement (so nobody can check the details). Then repeat with another large company.

None of this is news to us here at WLF, where we have long been at the forefront of those who are concerned about the federal erosion of business civil liberties.

But what if, despite the heavy-handed leverage, government regulators still don’t get the results they are looking for? That’s easy—change the rules. That’s precisely what OSHA Administrator David Michael recently revealed he intends to do with the standard of proof required in whistleblower merits determinations.

Despite boasting to a recent meeting of the Whistleblower Protection Advisory Committee that, from 2009 to 2014, OSHA more than doubled the number of complaints it found to have merit, recovering over $119,000,000 in damages for whistleblower complainants in the process, Michael announced that OSHA will soon release a policy memo that will change the burden of proof in whistleblower investigations.

No longer will whistleblowers be required to prove by a preponderance of the evidence that it is “more likely than not” that a violation occurred. Rather, under the new regime, whistleblowers will need only establish “reasonable cause” that a violation occurred. That lower bar will undoubtedly result in many, many more cases being found to have merit by OSHA, which is what OSHA wants.

OSHA is not the only federal workplace cop pursuing rule changes on the fly to advance its ideological agenda. As explained in a new WLF Legal Backgrounder by Littler Mendelsohn LLP attorneys Michael Lotito and Missy Parry, the National Labor Relations Board (NLRB) is poised to radically alter long-standing definitions of who counts as an employer to favor unions, plaintiffs’ lawyers, and, of course, federal regulators.

Under the view of agencies like OSHA and NLRB, due process in the face of a government-decreed worthy goal is no virtue.  And drumhead justice in pursuit of that same goal is no vice.

Also published by Forbes.com at WLF’s contributor page

Education and Information Sharing: Underutilized Tools in FTC’s Data Security Work

150px-US-FederalTradeCommission-Seal.svgThe Federal Trade Commission (FTC) has brought 52 enforcement actions involving data breaches. Fifty of those businesses, whose computer systems were illegally accessed by hackers, settled rather than fight FTC’s accusations that they acted “deceptively” or “unfairly” under § 5 of the FTC Act. And yet, the data breaches just keep on coming, with unlawful intrusions on Home Depot’s payment-card processing system and the federal HealthCare.gov website occurring just this past week. It’s high time the Commission utilized tools at its disposal aside from the enforcement hammer to address data security.

WLF is not the only organization advancing this notion. On March 25, 2014, Consumer Action, Consumer Federation of America, National Consumer League, and the Privacy Rights Clearinghouse wrote FTC Chairwoman Edith Ramirez, asking the Commission to “convene a public forum, bringing stakeholders together to discuss strategies for combating the growing threat of data breaches.”

FTC Commissioners routinely note in public statements that in addition to enforcement and advocacy, the Commission protects consumers and competition through education and information sharing. Public forums, workshops, and other events of the type the consumer groups sought in their letter have long been an integral part of FTC’s “educate and inform” function. Such events educate not only the public, but also the Commission and its staff. Continue reading