Some important (and promising) news that otherwise might be missed: last week President Trump signed executive orders curtailing the use of subregulatory guidance, such as Dear Colleague letters and informal field advice, to create binding law [Susan Dudley, Forbes (guidance should be shield for regulated, not sword for regulators), Michael P. DeGrandis, Reason; first (rules for development of guidance and transparency) and second (use of guidance in civil enforcement) executive orders; background here and here]
For small businesses, regulation vies with taxes as the most complained-of public policy issue. Commonly, however, no one regulation is singled out as causing most of the problem: it’s more the cumulative and interactive hassle of various burdens, especially as a company grows or tries to enter new markets or take on new functions. The Federalist Society has launched a “regulatory thicket” project aimed at shedding light on the problem. Among its products so far: an overview paper by Anastasia Boden et al.; a paper on how the thicket operates in one urban jurisdiction, the District of Columbia [Yesim Sayin Taylor]; a video on how it affects an Oregon couple’s home-based telecommunications services firm; and a teleforum with Brooks Rainwater and Luke Wake.
A related op-ed [Braden Boucek and Luke Wake, Real Clear Policy] notes that reformers often appeal to state legislators, with ideas such as sunset laws and regulatory impact statements for new legislation. But other actors can be involved too:
One especially interesting proposal that has been tried in Arizona with success is giving people a way to challenge regulations in court when they needlessly burden the right to earn a living. That way lawmakers are not the sole party able to bring about reform.
State governors are also in a position to help trim the regulatory thicket in many cases. Governors might follow Canada’s success in controlling the growth of regulation by requiring government agencies to eliminate regulatory impositions for every new mandate. President Trump’s executive order to eliminate two regulations for every new regulation is another instructive example. Likewise, state legislatures might assign the task of reviewing and eliminating regulation to a special commission.
My new post at Cato finds some real progress in grappling with a longstanding problem of the administrative state:
Since my update post last year, there have been a number of new developments. Soon after then-Attorney General Jeff Sessions’s announcement of the new policy, followed by the revocation of dozens of existing guidance documents, then-Associate Attorney General Rachel Brand issued a January 2018 directive telling Department of Justice attorneys not to rely on allegations of noncompliance with agency guidance, in and of themselves, as reason to initiate civil enforcement actions. And this past winter, DOJ updated its Justice Manual to limit the use of guidance as a basis for direct liability in both civil and criminal enforcement. “Guidance is not law. It’s not binding. And it shouldn’t be given the force or effect of law,” said Deputy Assistant Attorney General Charles Cox in a January speech.
Plus OMB guidance on the Congressional Review Act (it applies to some guidance documents) and a new study by Prof. Nicholas Parrillo for the Administrative Conference, which found that
regulated parties are most likely to feel that they have no real choice but to obey guidance 1) when they need to obtain preapproval before doing business, 2) when repeat interactions with regulators are inevitable and full compliance all the time is unlikely no matter how hard they try; 3) when the consequences of agency enforcement, or even the opening of an enforcement action, are severe; and 4) when the regulated party employs a large dedicated compliance staff.
These might serve as interesting guideposts in looking for ways to revamp regulatory schemes in such a way that agencies’ whims will no longer be received as law.
- Lawyer don’ts: Don’t steal your client’s book advance [Rebecca R. Ruiz, New York Times on Michael Avenatti indictment]
- “This isn’t science, it’s witchcraft”: latest verdict against Bayer/Monsanto in Roundup weedkiller/non-Hodgkin’s lymphoma case rests on ultra-loose standards of causation [David Bernstein, related video, earlier]
- Blazing sunset: Idaho legislature fails to reauthorize state’s code of more than 8,000 regulations, which expire. Between now and July 1, Gov. Brad Little “gets to pick and choose which ones to reinstate as emergency regs until legislature meets again.” [James Broughel, Mercatus]
- News blackout on STEM Charter School shooting (Highlands Ranch, Colorado) has judicial origins: entire court file in murder case against older of the two shooters “is ‘suppressed’ from public inspection. This even over the express request of the prosecutor” to have the judge unseal most records [Eugene Volokh]
- Baltimore corruption and development, red flag law, Montgomery Countyites for private toll lanes, Yuripzy Morgan show and more in my latest Maryland policy roundup;
- A point I’ve been making for years about the Electoral College: one of its underrated benefits is in bolstering election integrity by much shortening the list of jurisdictions in which a material chance of fraud might throw overall result into doubt with consequences for legitimacy [Stephen Sachs and followup]
- “In the banking world, with which I am familiar, the general belief has been that you disobey supervisory guidance at your peril. That sounds like law and regulation, but without the open process and accountability. Over many years it has certainly felt that way.” [Wayne A. Abernathy, Federalist Society commentary]
- Some House Democrats use hearings to badger banks into cutting off clients in industry areas like guns, pipeline construction [Zachary Warmbrodt, Politico]
- New U.S. Chamber Institute for Legal Reform papers on reforming securities litigation: “Risk and Reward: The Securities Fraud Class Action Lottery” [Stephen J. Choi, Jessica Erickson, Adam C. Pritchard]; “Containing the Contagion: Proposals to Reform the Broken Securities Class Action System” [Andrew J. Pincus]
- “A pot banking bill is headed to House markup with bipartisan support” [Jim Saksa, Roll Call]
- Your periodic reminder that corporate law *is* a form of public interest law [Stephen Bainbridge quoting Hester Peirce]
- “History Shows Forcing Companies to Put Workers on Boards Is a Bad Idea” [Ryan Bourne, UK Telegraph/Cato, earlier on Elizabeth Warren proposals]
- Supreme Court could help rein in the administrative state by overruling Auer v. Robbins (1997), which directs courts to defer to agencies’ interpretations of their own regulations [Ilya Shapiro, Trevor Burrus, and William Yeatman on Cato amicus brief in Kisor v. Wilkie, earlier] “Does Kisor Really Threaten the Foundations of Administrative Law?” [William Yeatman]
- “What Is Regulation For?” [video panel from Federalist Society National Lawyers’ Convention with Richard Epstein, Philip Hamburger, Kathryn Kovacs, Jon Michaels, moderated by Hon. Britt Grant] Plus, panel on the use of adjudication in place of rulemaking [Jack Beermann, Allyson Ho, Stephen Vaden, Chris J. Walker, moderated by Hon. Gregory Katsas; Antonin Scalia, “Making Law Without Making Rules,” Regulation magazine 1981]
- “Businesses in regulated industries rely on the regulating agency’s advice to make decisions.” But if advice from agency staff can neither be relied upon for legal purposes nor be subject to judicial review, isn’t it worse than getting no advice at all? [Ilya Shapiro on Cato cert amicus brief in Soundboard Association v. FTC]
- “Administrative Law’s Assault On Civil Liberty: Lucia Vs. SEC” [Margaret Little, Federalist Society, earlier]
- Identifying regulations that disproportionately harm the poor [Cato Daily Podcast with Ryan Bourne, Vanessa Brown Calder, Diane Katz, and Caleb Brown]
- Seek permission to innovate, or innovate first and then seek forgiveness? How startups manage regulators [Sam Batkins, Regulation reviewing Regulatory Hacking by Evan Burfield with J.D. Harrison] Sides tend to switch on this each time White House changes partisan hands, so now it’s the left-liberals who see a silver lining in agencies’ procedural ossification [Stuart Shapiro, Regulation]
- “A Decade After Realizing It Can’t Threaten A Critic Online, UCLA Returns To Threaten A Critic Online” [Mike Masnick, TechDirt; Adam Steinbaugh, FIRE]
- “D.C. Bureaucrats Are Trying to Make Parents Get a License to Let Children Play Together” [Kerry McDonald, FEE; Karin Lips, Washington Post; Lenore Skenazy, Reason]
- “If you were ripped off by a couple of companies that enrolled consumers in membership-rewards programs without their consent, congratulations, you’re entitled to a $20 credit to buy more stuff from them. Ninth Circuit: Your class counsel, however, is probably not entitled to $8.7 million in attorney’s fees for winning you a coupon.” [John Kenneth Ross, IJ “Short Circuit” on In Re EasySaver Rewards Litigation]
- Congestion highway pricing and the “Lexus Lanes” epithet, supervised injection facilities, single payer in one state and more in my new Maryland roundup at Free State Notes;
- Chain that touched off public outrage stands to gain by reaction: “Licensing pet groomers won’t help pets. It will hurt low-income groomers.” [Shoshana Weissman and Jesse Kelley, R Street]
- “A Case for an Executive Order to Rein in Guidance Documents and other ‘Regulatory Dark Matter'” [Clyde Wayne Crews, CEI]
Since the termination of Operation Choke Point, some have questioned whether Obama-era federal regulators really did engage in systematic and top-down attempts to squeeze off access to financial services for businesses that were lawful but disliked. Now Rep. Blaine Luetkemeyer (R-Mo.) has released documents produced in connection with a lawsuit against the Federal Deposit Insurance Corporation. They show extensive pressure by numerous FDIC regional directors and other officials on regulated banks to terminate customer relationships with payday lenders (the banks were generally already not themselves engaged in such lending). They also include repeated wordings about how higher-ups wanted the pressure applied and that banks’ decisions to cut off customers should be styled as if it were a voluntary choice. [Luetkemeyer press release; Norbert Michel, Forbes; John Berlau, Forbes; trade group Community Financial Services of America]
Readers who watched the Cato forum last November on prosecutorial fallibility and accountability, or my coverage at Overlawyered, may recall the story of how a Federal Trade Commission enforcement action devastated a thriving company, LabMD, following a push from a spurned vendor. Company founder and president Mike Daugherty, who took part on the Cato panel, wrote a book about the episode entitled The Devil Inside the Beltway: The Shocking Exposé of the U.S. Government’s Surveillance and Overreach into Cybersecurity, Medicine and Small Business.
Last month two separate federal appeals courts issued rulings offering, when combined, some consolation for Daugherty and his now-shuttered company. True, a panel of the D.C. Circuit Court of Appeals, finding qualified immunity, disallowed the company’s claims that FTC staffers had violated its constitutional rights by acting in conscious retaliation for its criticism of the agency. On the other hand, an Eleventh Circuit panel sided with the company and (quoting TechFreedom) “decisively rejected the FTC’s use of broad, vague consent decrees, ruling that the Commission may only bar specific practices, and cannot require a company ‘to overhaul and replace its data-security program to meet an indeterminable standard of reasonableness.’” [More on the ruling here and here]
As usual, John Kenneth Ross’s coverage at the Institute for Justice’s Short Circuit newsletter is worth reading, both descriptions appearing in the same roundup since they were decided in such quick succession:
Allegation: Days after LabMD, a cancer-screening lab, publicly criticized the FTC’s yearslong investigation into a 2008 data breach at the lab, FTC staff recommend prosecuting the lab. Two staffers falsely represent to their superiors that sensitive patient data spread across the internet. (It hadn’t.) The FTC prosecutes; the lab lays off all workers and ceases operations. District court: Could be the staffers were unconstitutionally retaliating for the criticism. D.C. Circuit: Reversed. Qualified immunity. (Click here for some long-form journalism on the case.)…
Contrary to company policy, a billing manager at LabMD—a cancer-screening lab—installs music-sharing application on her work computer; a file containing patient data gets included in the music-sharing folder. In 2008 a cybersecurity firm finds it and tells LabMD the file has spread across the internet. (Which is false.) When LabMD declines to hire the cybersecurity firm, the firm reports the breach to the FTC, which prosecutes the case before its own FTC judge. LabMD does not settle; the expense of fighting forces the company to shutter. The FTC orders LabMD to adopt “reasonably designed” cybersecurity measures. Eleventh Circuit: The FTC’s vague order is unenforceable because it doesn’t tell LabMD how to improve its cybersecurity.
Our friend Berin Szóka of TechFreedom sums it up: “The court could hardly have been more clear: the FTC has been acting unlawfully for well over a decade.” He continues by calling this “a true David and Goliath story”:
Well over sixty companies, many of them America’s biggest corporations, have simply rolled over when the FTC threatened to sue them [over data security practices]. … Only Mike Daugherty, the entrepreneur who started and ran LabMD, had the temerity to see this case through all the way to a federal court. …After losing his business and a decade of his life, Daugherty is a hero to anyone who’s ever gotten the short end of the regulatory stick.
[cross-posted from Cato at Liberty]
Despite a surge in jobs in some rural states, housing hasn’t caught up, as one traditional method of meeting sudden housing demand there — manufactured housing — has floundered. One reason is the fairly recent enactment of federal regulations, say some locals [Andrew Van Dam, Washington Post/Ogden Standard-Examiner]:
In Nebraska, mobile-home retailers say it’s not just land costs that have lifted prices: It’s now more expensive to stick a mobile home into the ground. In December 2015, the Department of Housing and Urban Development began enforcing strict installation standards in Nebraska and other states that lacked local oversight.
Most notably, new homeowners are forced to spend an estimated $3,000 to $8,000 to lay a footing or foundation that will protect the home from being damaged when the ground underneath shifts as it freezes. The cost isn’t always covered by financing, which makes it unattainable to many buyers. On an entry-level home, installation cost could surpass the down payment.
Nebraska mobile-home retailers say the rules seem overzealous and appear especially cruel because the residents typically don’t own the plot of land into which they’re pouring thousands of dollars. Furthermore, the custom-built foundations aren’t guaranteed to fit the next home to use the lot, and they’ll have to go through the entire, costly process again when they move.