Category: Elections

A View From Washington, DC — Budgets, Bills, and Elections

February in Washington, DC, usually ushers in the start of a new federal budget approval process, but that will not be the case this year. President Joe Biden is not expected to release his fiscal year 2023 budget until later this spring, which will be followed by congressional hearings and oversight on our nation’s federal spending. While the president’s budget is not binding, in a Congress controlled by his own party, his suggestions on how Congress should appropriate our federal dollars are certainly taken seriously.

Furthering delays, Congress is still mired in passing the fiscal year 2022 appropriations bills — which appear to now be on target for passage in mid-March. Part of the slowdown on passing these bills revolves around an agreement on the overall topline spending number. The House approved $1.506 trillion in spending in its versions of the 12 annual appropriations bills. The Senate never released a topline number. President Biden’s budget request was for $1.523 trillion, $770 billion for nondefense spending and $753 billion for defense spending. Also of note, assuming these bills are enacted, it will be the first time in a decade that Congress has provided funds for earmarks (now referred to as “community projects”) through appropriations legislation.

Another weighty item on Congress’ agenda is the reauthorization of the nation’s flood insurance program. The National Flood Insurance Program (NFIP) was last reauthorized in 2012, when Congress passed the Biggert-Waters Flood Insurance Reform Act of 2012. The NFIP’s five-year reauthorization ended on September 30, 2017, and since then, the program has been funded by a series of short-term measures. The program is currently operating under an extension that expired on February 18, 2022. The purpose of the Biggert-Waters Act was to make the NFIP solvent, as the program faced a $24 billion deficit. But anyone who has kept apprised of the program knows it’s not solvent and is broken in many respects. Current policyholders are facing an 18% policy rate increase in the coming year.

Finally, once summer arrives, many in Congress will turn their attention in earnest to the mid-term elections in November. Several states have new congressional maps due to redistricting. The released census data gave Texas, Florida, North Carolina, Montana, and Oregon additional seats, while California, New York, and Pennsylvania (among others) lost seats. In an almost evenly divided House, the Republicans only need to pick up three to five seats in order to take control, and most observers expect that to happen. The current US Senate is evenly divided and most incumbent Senate seats are safe, but a few states, such as Georgia, Nevada, Wisconsin, and Pennsylvania, are statistically tied in current polling and are truly toss-up elections at this point, leaving control of the US Senate up for grabs.

© 2022 Jones Walker LLP
For more articles about election and legislative updates, visit the NLR Election & Legislative section.

When Board Conflict Crosses the Line…

Elected officials are, naturally, sometimes at the center of conflict and division within their board.  Conflict is to be expected.  However, what happens when board members take action to freeze out a minority board member from information that he or she needs to do his or her respective job?  The use of information-control tactics against minority members on a board, impeding their ability to receive that information necessary to perform his or her duties is problematic – and it may be unconstitutional.\

Elected officials have duty to be informed. Palm v.Centre Tp., 415 A.2d 990, 992 (Pa. Commw. Ct. 1980):

It is the duty of a school board member, a commissioner, a councilman, or a supervisor to be informed. Supervisors are not restricted to information furnished at a public meeting. A supervisor has the right to study, investigate, discuss and argue problems and issues prior to the public meeting at which he may vote. Nor is a supervisor restricted to communicating with the people he represents. He is not a judge. He can talk with interested parties as does any legislator.

This responsibility extends beyond the contours of the public meeting and what is discussed at those meetings.

Elected officials have protections under the First Amendment. The Third Circuit has historically recognized that a public official’s right to free speech under the First Amendment will be violated when the retaliatory conduct of her peers interferes with her ability to adequately perform her elected duties. See Werkheiser v. Pocono Tp., 780 F.3d. 172, 182 (3d Cir. 2015); Monteiro v. City of Elizabeth, 436 F.3d 397, 404 (3d Cir. 2006).

To avoid entering the territory of this kind of interference, everyone can play a role in ensuring the government functions adequately and that Board members’ rights, duties, and privileges are protected.  Board division, when gone too far, can cross constitutional lines.  To avoid walking that line, there are things that everyone can do to make for a well-functioning Board or meeting:

  • Managers can stay neutral and ensure that every board member is kept up to date on significant municipal operations and projects.
  • Solicitors can host a meeting with the board to educate the board on laws pertaining to their position, such as a municipal code and the Pennsylvania Sunshine Act.
  • Board members can foster respect for fellow board members and learn how to communicate so that each board member can participate in healthy debate on contentious issues.  Enacting policies related to meeting decorum can be helpful, but they need to be enforced evenhandedly.

For more tips for handling divisiveness among a board, see the December 2021 article on “Tips for Handling Board Conflicts” in the Pa Township News.

©2022 Strassburger McKenna Gutnick & Gefsky
          

“Key Legislative Limits to Nuisance-Based Attacks on the Right to Farm Live on.”

The North Carolina Chamber of Commerce, through its “Ag Allies: Landscape-Shifting Legal Developments” webinar on August 18, 2021, featured North Carolina’s Right to Farm Act (the “Act”), and appropriately so, as it has been at the forefront of North Carolina law and politics over the past few years.

Agribusiness is the backbone of the North Carolina economy, accounting for 17.5 percent of total jobs and having a total estimated economic impact of over 95 billion dollars in 2019 alone.  The evidence suggests that this impact has, despite recent challenges, only grown since then.  However, the agricultural operations that make up this market have a unique impact on the land and on their neighbors as noise, odor, storage, and dangerous equipment and structures are all unavoidable parts of agriculture.  These effects are compounded by the fact that many agricultural operations are located in rural areas in close proximity to residential zones.  This mix has long resulted in tensions, and those tensions can come to a head in lawsuits for nuisance.  “Nuisance” is a legal claim that allows for the recovery of damages for unreasonable interference with the use of one’s land.

This presented a particular problem for North Carolina agricultural operations, especially meat production.  These and other agricultural operations were deemed too valuable to be left subject to nuisance actions without some protections, and the North Carolina General Assembly sought to help by passing the Act in 1979.  Its stated objective was to decrease losses to the State of its agricultural and forestry resources by curtailing the situations in which agricultural and forestry operations could be deemed a nuisance.  The Act featured prominently in the recent mass nuisance litigation brought by over 500 plaintiffs against Murphy-Brown/Smithfield and the threat that future litigation like it presented for the State’s agribusiness industry.  Ultimately, the Act did not serve to protect the defendants from substantial jury verdicts, prompting the General Assembly to revisit and strengthen its protections.

The Act received boosts from the General Assembly through amendments in 2017 (capped recoverable damages to the fair market value of a plaintiff’s property) and in 2018 (narrowed who can bring a nuisance lawsuit against a farm and the time in which they can bring a nuisance suit).  But these boosts were not without opposition.  In 2019, three non-profit organizations filed suit challenging the 2017 and 2018 amendments.  The organizations argued that the amendments, on their face, violated North Carolina’s Constitution.  Facial constitutional challenges require proof that the law in question is unconstitutional in all of its applications.  A court cannot strike down the law if there is any “reasonable ground” to uphold it.  Finding the organizations had failed to state a claim, the trial court dismissed the organizations’ suit.  After their challenge was dismissed, the organizations appealed their case to the North Carolina Court of Appeals.  In upholding the trial court’s dismissal of the organizations’ suit, the Court of Appeals held that Plaintiffs’ had failed to state a legal claim and that the amendments in question do not violate North Carolina’s Constitution on their face.

Here are the highlights of the arguments presented in the appeal:

  • The organizations argued on appeal that the amendments violated private property rights under the Law of the Land Clause contained in the State’s Constitution, which prohibits a person from being deprived of life, liberty, or property except as allowed “by the law of the land.”  The Court disagreed.  It found the amendments to be reasonably necessary to promote a public benefit (through limiting nuisance claims against the State’s agricultural and forestry operations).  It also determined that the amendments’ interference on property use rights to be reasonable.
  • In response to the organizations’ argument that the amendments exceeded the authority of the State’s police power, the Court pointed to North Carolina’s historied interest in preserving and promoting agricultural and agricultural-related industries and found the amendments to be within the scope of the State’s police power.
  • The organizations also argued that the amendments violated the fundamental right to enjoy property.  In disposing of that argument, the Court noted the organizations had not alleged a taking by the government and reiterated its conclusions regarding the facial constitutionality of the amendments.
  • Another provision of the State’s Constitution at issue in the appeal was the prohibition on the General Assembly from enacting local, private, or special acts (as opposed to generally applicable laws) concerning the abatement of nuisances.  The organizations took the position that the amendments provide private protections to the hog industry.  The Court disagreed, noting that the amendments generally apply to the agricultural and forestry industries and are not limited to a particular subset of those industries or groups within them.
  • Finally, the organizations asserted that the 2017 amendment, which capped recoverable damages, violates the constitutional right to a trial by jury.  In rejecting their position, the Court cited the General Assembly’s power to modify the State’s common law by statute to define what remedies are recognized by law.  The Court then pointed to statutory caps on recoverable damages that the General Assembly had enacted for other civil torts.

In affirming the trial court’s dismissal of the organizations’ lawsuit, the Court delivered a “win” to the State’s agricultural and forestry industries by upholding the amendments’ limitations on nuisance claims.  Only time will tell whether the win it delivered will stay on the books.  The Court’s ruling was limited to considering the facial challenges the organizations had presented in attacking the amendments.  The Court was not tasked with evaluating whether the amendments would withstand an-as applied constitutional challenge, and it remains to be seen how the Court would rule if asked to consider an as-applied challenge.  Still, the ruling is an encouraging nod to the important role the agricultural and forestry industries play in North Carolina and the State’s interest in protecting those industries.

© 2022 Ward and Smith, P.A.. All Rights Reserved.
For more about North Carolina law, visit the NLR North Carolina jurisdiction page.

Don’t Use “Build Back Better” to Sabotage the False Claims Act

Congress is on the verge of setting a dangerous precedent.  As part of the Build Back Better Act, it has added two provisions equivalent to a “get out of jail free card” for Big Banks that violate federal law when they hand out billions in federal mortgage-related benefits.   The two provisions create exemptions to False Claims Act liability by creating blanket immunity from liability when banks fail to exercise due diligence, violate FHA housing regulations, or even directly violate federal laws such as the Truth in Lending Act.

It is obvious why banks want to have their federally sponsored mortgage practices immunized from exposure to the False Claims Act (“FCA”).  The FCA works remarkably well and is widely recognized as “the most powerful tool the American people have to protect the government from fraud.”   The law has directly recovered over $64.450 billion in sanctions from fraudsters since Congress modernized it in 1986.  During the debates on the massive trillion-dollar infrastructure laws enacted or debated this year, corporate lobbyists have been extremely active in successfully preventing Congress from adding any new anti-fraud measures to protect taxpayers from fraud.  As part of these efforts, they targeted the False Claims Act as enemy #1 and already have blocked one key amendment needed to close some weaknesses in that law.

With the Build Back Better Act, these corporate lobbyists have taken their opposition to effective anti-fraud laws to a higher level.  Instead of trying to repeal the FCA, they are simply exempting Big Banks from liability under that law in two new programs.  It is obvious why the Big Banks want the exemption from FCA liability.  As a result of illegal or irresponsible lending and foreclosure practices, such as those that fueled the 2008 financial collapse, banks have had to pay billions in sanctions to the United States.

Two words explain why the FCA is “the most powerful tool” protecting taxpayers from fraud:  Whistleblowers and sanctions.  If you accept federal taxpayer monies, you are required to spend that money according to your contractual agreement or the law.  The FCA’s first secret weapon is whistleblowers.  The law encourages whistleblowers, known as qui tam “relators,” to report violations of the FCA.  Whistleblowers disclosures trigger the overwhelming majority of FCA cases, and the law incentivizes employees to risk their careers to serve the public interest. The second secret weapon is how you prove liability.  Second, when an institution accepts federal monies (such as banks that operate various federally sponsored loan programs), liability can attach if the institution acts in “deliberate ignorance of the truth” when spending federal dollars.  Similarly, if payments are made with “reckless disregard of the truth,” liability can attach.  In other words, corporations (including banks) that accept federal money must ensure that these monies are spent as required by law, regulation, or contract.  Safeguards must be in place to prevent fraud.  If a bank does not have adequate compliance programs to protect against fraud, it cannot plead ignorance when the law is broken and taxpayers are ripped off.

These two key elements of the False Claims Act are precisely what the banking lobby is attempting to undermine through the Build Back Better Act.  The tactics employed by the Big Banks are somewhat devious.  They are doing an end-run around the False Claims Act by exempting themselves from having to engage in any due diligence when spending billions in federal dollars.  The banks are seeking to add language to the Build Back Better Act that will immunize themselves from liability under the False Claims Act when they make payments in “reckless disregard” to the legality of those payments.  The immunities they are seeking legalize “deliberate ignorance” in the use of taxpayer money, in complete defiance of the False Claims Act. Thus, whistleblowers who report these frauds will be stripped of protections they have under the False Claims Act, and the federal government will have no effective way to recover damages from these frauds.

What language in the Build Back Better Act creates an exemption to False Claims Act liability?

Two highly technical provisions are deeply buried within the 2135 pages of the Build Back Better Act’s legislative text. The provisions are sections 40201 and 40202 of the Build Back Better Act.  These two sections establish helpful programs that will provide needed financial support to first-generation homebuyers.  Section 40201(d)(5) would provide $10 billion in down payment assistance. Section 40202(f) would give an interest rate reduction on new FHA 20-year mortgage products to first-time homeowners with a potential value of $60 billion.  But the banking lobby has corrupted these otherwise well-meaning programs. The exemptions obtained by the banks are incubators for massive fraud.  It permits the Big Banks to escape any liability when they abuse the generosity of taxpayers and dole out billions to unqualified individuals.

How do the exemptions work?  To qualify for these taxpayer-financed benefits, an applicant simply has to “attest” that they are first-time/first-generation homebuyers.  That would be the end of the inquiry a bank would need to approve making a payment from the billions allocated in these two programs. Anyone could simply stroll into a bank and “attest” to being such a first-time homebuyer and would thereafter qualify for the federal benefits.  The banks would not be required to do any diligence of their own to confirm the borrower’s eligibility.  Willful ignorance would be legalized.  Reckless disregard in the handling of taxpayer monies would be permitted under this law.  Safeguards, such as requiring banks to adhere to the Truth in Lending Act, which requires verification of a borrower’s statements, would not apply.

Under Sections 40201(d)(5) and 40202(f), banks will not be held liable once they are lied to, even if the bank has reason to know that the borrower is not eligible for the federal payout.  Banks can spend taxpayer money even if the information on an applicant’s loan application directly contradicts the borrower’s attestation that they are a first-time homeowner.  Given the lack of any compliance standards, the temptation to engage in fraud in these programs will be overwhelming.

Permitting banks to escape liability under the False Claims Act opens the door to paying billions of dollars in benefits to unqualified persons.  Such payments rip off the taxpayers and severely hurt all honest first-generation homebuyers denied benefits.  For every fraudster who benefits from this program, an honest homebuyer will be left in the cold due to the reckless disregard of the banks.

Congress should never use a back-door procedure to undermine the False Claim Act, as it sets a dangerous precedent.  It is a devious way to undermine America’s “most effective” anti-fraud law.  Instead of undermining the False Claims Act by granting immunities to Big Banks, Congress should be strengthening anti-fraud laws to protect the taxpayers and ensure that the trillions of dollars spent on COVID-19 relief programs and infrastructure improvement are lawfully spent in the public interest.

Copyright Kohn, Kohn & Colapinto, LLP 2021. All Rights Reserved.
For more articles about banking and finance, visit the NLR Financial, Securities & Banking section.

100 Days of the Biden Administration, Part II: Key Labor and Employment Policy Developments

In its first 100 days in office, the Biden administration has advanced its policy priorities, many of which have involved repealing the policy accomplishments of the previous presidential administration. The Biden administration can be expected to advance its own proposals soon.

The first part of this two-part blog series focused on the Biden administration’s first 100 days and reviewed the administration’s legislative plans. The second part of the series addresses policy developments occurring at the executive branch agencies and independent agencies.

U.S. Department of Labor

Personnel Is Policy

On March 22, 2021, the U.S. Senate confirmed former Boston mayor and union official Martin Walsh as secretary of labor. While it is still early, many in the business community remain optimistic about Walsh’s willingness to listen to their concerns. As for other leadership positions at the U.S. Department of Labor (DOL), the deputy secretary of labor nominee, Julie Su, and solicitor of labor nominee, Seema Nanda, have had their confirmation hearings but have not been voted on by the full Senate. Su runs California’s Labor and Workforce Development Agency, while Nanda is an Obama-era DOL vet and former chief executive officer of the Democratic National Committee. If Su and Nanda are confirmed by the Senate, they will work with Walsh as the top three officials dictating policy at the DOL.

OSHA and Workplace Safety

  • Assistant secretary nominee. In early April 2021, President Joe Biden announced his intention to nominate Douglas L. Parker to be the assistant secretary of labor for the Occupational Safety and Health Administration (OSHA). Parker currently serves as chief of California’s Division of Occupational Safety and Health (Cal/OSHA).
  • OSHA emergency temporary standard. For months, workers’ advocates and Democrats have been calling on OSHA to issue an emergency temporary standard (ETS) to protect workers from COVID-19. On January 21, 2021, President Biden doubled down on these demands when he issued an executive order instructing the DOL and OSHA to consider issuing an emergency temporary standard by March 15, 2021. On April 26, 2021, more than a month past the deadline, OSHA sent its draft ETS to OIRA for approval. Any final ETS could be impacted by recent guidance from the U.S. Centers for Disease Control and Prevention, which recently eased mask requirements.
  • COVID-19 vaccine reactions. On April 20, 2021, OSHA issued new guidance on when an employer must record in its injury and illness logs an employee’s adverse reaction to a COVID-19 vaccination. In short, if an employer requires employees to get vaccinated, then any adverse action is “work-related” and, therefore, recordable.

Wage and Hour

  • Independent contractor rule. On May 6, 2021, the DOL rescinded its independent contractor rule, which had set forth a test for independent contractor status that focused on “the worker’s opportunity for profit or loss” due to individual initiative and investment. Although the rule was finalized on January 7, 2021, it never became effective.
  • Joint-employer rule. On March 12, 2021, the DOL proposed to rescind the Fair Labor Standards Act joint-employer rule that took effect in March 2020, but was subsequently vacated by a district judge in New York. The rule had set forth a four-factor test for determining joint-employer status.
  • Tip rule. While portions of the 2020 final tip rule went into effect on April 30, 2021, the Wage and Hour Division (WHD) delayed until December 31, 2021, the effective date of the provisions concerning civil money penalties and employees who perform tipped and non-tipped work.
  • Liquidated damages. On April 9, 2021, the WHD “return[ed] to pursuing pre-litigation liquidated damages” in lieu of litigation, after temporarily halting the practice in order to encourage economic recovery during the pandemic.
  • PAID program. The DOL discontinued the Payroll Audit Independent Determination (PAID) program, which the Trump administration initiated in 2018 to encourage employers to voluntarily correct certain underpayments to employees.

Federal Contractors and the Office of Federal Contract Compliance Programs (OFCCP)

  • OFCCP director. Jenny R. Yang, former chair of the U.S. Equal Employment Opportunity Commission, is now the director of the OFCCP. Expect her to focus the agency on increased enforcement, particularly around compensation discrimination.
  • Minimum wage increase. On April 27, 2021, President Biden issued an executive order that will require covered federal contractors and subcontractors to pay employees a minimum of $15 per hour by January 2022.
  • Diversity and inclusion training. President Biden revoked Executive Order 13950, relating to federal contractors’ diversity and inclusion training efforts.
  • Religious exemption. The OFCCP proposed to rescind a December 2020 regulation that is intended to provide protections for religious organizations to “hire employees who will further their religious missions, thereby providing clarity that may expand the eligible pool of federal contractors and subcontractors.”

Office of Labor-Management Standards

The DOL subagency that “promotes labor-management transparency as well as labor union democracy and financial integrity” proposed to rescind a Trump-era rule that required increased financial disclosures from labor organizations.

Labor-Management Relations

Unprecedented Firing of NLRB GC

Within hours of being inaugurated, President Biden fired Peter Robb, the National Labor Relations Board’s general counsel. Robb’s term wasn’t scheduled to expire until November 2021. This was an unprecedented decision, as NLRB general counsel are traditionally permitted to serve out their terms during changes in administrations. The move sends a message to stakeholders that the administration is going to be very aggressive in the traditional labor arena. It also allows the administration to begin “teeing up” cases in anticipation of taking full control of the Board by fall 2021.

A Republican Board. For Now.

Republicans will hold a majority on the NLRB through August 2021 because Board members’ terms are staggered. Expect a lot of political activity surround the Board during the late summer and early fall as President Biden tries to get his Board member nominees confirmed. The administration hopes that a Democratic-controlled Board can start enacting policy changes by the second half of the year.

Graduate Students

On March 15, 2021, the Board withdrew its regulatory proposal to exempt from the coverage of the National Labor Relations Act students who, in connection with their undergraduate and graduate studies, are financially compensated for the services they provide to private colleges or universities.

Contract Bar

On April 21, 2021, a bipartisan Board upheld its contract-bar doctrine, which bars union elections during the term of a collective bargaining agreement for up to three years.

Pending Matters

  • Uniform policies. The Board is reviewing the public feedback that it requested on its standard regarding employer uniform policies and whether they interfere with employees’ wearing of union insignia.
  • Employer investigations. The Board is also reviewing public feedback it requested on the issue of the proper standard to apply in situations in which employers question employees in the course of preparing defenses to unfair labor practice allegations.

 Immigration

USCIS Director Nominee

In mid-April 2021, President Biden announced his intent to nominate Ur Jaddou to be director of U.S. Citizenship and Immigration Services (USCIS). Jaddou previously served as USCIS chief counsel.

H-4 Work Authorization

On January 25, 2021, USCIS withdrew a Trump administration proposal that would have rescinded work authorization permits for dependent H-4 spouses.

“Executive Order on Restoring Faith in Our Legal Immigration Systems and Strengthening Integration and Inclusion Efforts for New Americans”

On February 2, 2021, President Biden issued an executive order to begin unwinding Trump-era immigration policies by directing the secretary of state, the attorney general, and the secretary of homeland security to “review existing regulations, orders, guidance documents, policies, and any other similar agency actions” that do not, among other things, “promote integration, inclusion, and citizenship, and … embrace the full participation of the newest Americans in our democracy.”

Public Charge Rule

The administration will no longer defend the public charge rule in the courts as it begins the process of repealing the regulation.

H-1B Wage Allocation Rule Postponed

On February 4, 2021, USCIS announced that it would postpone the effective date of its H-1B wage allocation selection rule until December 31, 2021. Published in the Federal Register on January 8, 2021, the rule was originally scheduled to go into effect on March 9, 2021.

H-1B Prevailing Wage Rule

The DOL’s Employment and Training Administration (ETA) proposed to delay the effective date of the rule entitled “Strengthening Wage Protections for the Temporary and Permanent Employment of Certain Aliens in the United States.” The original regulation was finalized in the final days of the Trump administration and was set to go into effect on March 15, 2021. The ETA postponed the rule’s effective date until May 14, 2021, and is seeking a further delay to November 14, 2022.

Trump-Era Visa Bans

On February 24, 2021, President Biden revoked Proclamation 10014, issued in April 2020, which banned individuals from seeking entry to the United States on immigrant visas. In addition, the Trump administration’s Proclamation 10052, which banned individuals from entering the United States on certain nonimmigrant visas (such as H-1B and L-1), expired on March 31, 2021.

© 2021, Ogletree, Deakins, Nash, Smoak & Stewart, P.C., All Rights Reserved.
For more articles on the Biden administration, visit the NLR Administrative & Regulatory section.

Russia Russia Russia! The Biden Administration Imposes Tough Sanctions on Russia

This week has been a week of significant foreign policy action. Today, President Biden issued a new Executive Order imposing new tough sanctions on Russia for its interference in the U.S. 2020 presidential election, as well as the SolarWinds cyber-attack that impacted multiple U.S. government agencies. This action was taken a day after Secretary of State Blinken stated strong concerns about the increase in Russian troops along the Ukrainian border. Earlier this week, the 2021 Threat Assessment report published by the Office of DNI (Director of National Intelligence) also cited Russia as presenting “one of the most serious intelligence threats to the United States,” noting a variety of provocative actions relating to cyber, military, and intelligence activities.

Background on the New Russia Sanctions

At a high level, today’s E.O. prohibits certain dealings in Russian sovereign debt, and authorizes targeted sanctions on technology companies that support the Russian Intelligence Services’ efforts to carry out malicious cyber activities against the United States and its partners and allies. Under the E.O, the Treasury Department also announced the designation of over 30 Russian individuals and entities that carried out Russian government-directed attempts to influence the 2020 U.S. presidential election, and other acts of disinformation and interference (see full list here). In conjunction with the E.O., the U.S. expelled ten Russian diplomats that include representatives of Russian Intelligence Services.

The White House’s statement noted that these measures send “a signal that the United States will impose costs in a strategic and economically impactful manner on Russia if it continues or escalates its destabilizing international actions. This includes, in particular, efforts to undermine the conduct of free and fair democratic elections and democratic institutions in the United States and its allies and partners; [and] engage in and facilitate malicious cyber activities against the United States and its allies and partners ….”

What Triggered these New Sanctions?

Last year, SolarWinds, a major U.S. information technology firm, was the subject of a cyberattack that impacted its clients’ data, including multiple U.S. government agencies and Fortune 500 companies. In December, then U.S. Secretary of State Mike Pompeo said he believed Russia was behind the attack but U.S. investigators “were still unpacking precisely what it is.” Today, the U.S. has formally named Russian Foreign Intelligence Service (SVR) as the force behind these cybersecurity hacks on SolarWinds.

In addition to the attack on SolarWinds, the Biden Administration cited Russia’s attempts to influence the 2020 U.S. presidential elections, and other acts of disinformation and interference as triggers for these sanctions.

New Prohibitions on U.S. Financial Institutions on Dealing in Russian Sovereign Debt

Under the E.O., the Biden Administration issued Directive 1 generally prohibiting U.S. financial institutions from transacting in ruble and non-ruble denominated funds and bonds. This directive expands upon existing prohibitions on certain dealings in Russian sovereign debt that have been in place since August 2019.

Specifically, as of June 14, 2021, U.S. financial institution are prohibited from:

  • Participating in the primary market for ruble or non-ruble denominated bonds issued after June 14, 2021 by the Central Bank of the Russian Federation, the National Wealth Fund of the Russian Federation, or the Ministry of Finance of the Russian Federation; and
  • lending ruble or non-ruble denominated funds to the three aforementioned entities.

The immediate impact is on U.S. financial institutions, including its foreign branches, that may be dealing with Russian sovereign debt.

E.O. Authorizes Targeted Sanctions

The E.O. also authorizes targeted sanctions on persons that have supported Russia’s efforts to carry out malicious cyber activities against the United States and its interference in U.S. or foreign elections, among other things (see Section 1 of the E.O., found here). Any action taken pursuant to the E.O. requires a determination by the Treasury Department in consultation with the State Department. But, we wouldn’t be surprised if additional designations come out in the next days or weeks under this authority.

We expect that measures will be taken against high-ranking Russian officials and technology companies with close ties to Russia’s Intelligence Services. For example, among those entities already designated under the E.O. are ERA Technopolis; Pasit, AO (Pasit); Federal State Autonomous Scientific Establishment Scientific Research Institute Specialized Security Computing Devices and Automation (SVA); Neobit, OOO (Neobit); Advanced System Technology, AO (AST); and Pozitiv Teknolodzhiz, AO (Positive Technologies) (see here).

In addition to the primary sanctions outlined above, the E.O. authorizes secondary sanctions to non-U.S. persons that provide “financial, materials, or technological” support to persons sanctioned under the E.O.

While the short-term impact will likely be on U.S. financial institutions, the broader message is that this Administration is not going to be shy about stiffer sanctions on Russia. Though the financial sector will always be a ripe target for sanctions as a foreign policy tool, if Russia’s aggression increases, we may see other sectors being targeted as well.

We will keep monitoring and updating as news develops.

Copyright © 2021, Sheppard Mullin Richter & Hampton LLP.

ARTICLE BY Fatema K. Merchant and Mario Andres Torrico of
Sheppard, Mullin, Richter & Hampton LLP
For more articles on Biden Administration sanctions, visit the NLR  Election Law / Legislative News section.

Heavy Metals In Baby Food Pose Concern For Baby Food Industry

On February 4, 2021, the U.S. House of Representative’s Committee On Oversight and Reform (Subcommittee on Economic and Consumer Policy) issued a report entitled “Baby Foods Are Tainted With Dangerous Levels of Arsenic, Lead, Cadmium and Mercury“, which sent ripples of concern through the consumer ranks and the baby food industry. Heavy metals in baby food has received attention before, but never before in such a significant way from a House Subcommittee report like the one published this month. The findings and the proposed changes to regulations for the baby food industry that the subcommittee put forth will have significant compliance impacts on companies, as well as open certain baby food companies up to litigation risks that cannot be ignored.

Findings In the House Report

On November 6, 2019, the House Subcommittee requested internal documents from seven of the largest manufacturers of baby food in the United States, which included companies making both organic and conventional products. The request was prompted by reports that alleged that there are high levels of heavy metals in baby foods, specifically arsenic, lead, cadmium and mercury. The Food and Drug Administration (FDA) and World Health Organization (WHO) have both found these heavy metals to be dangerous to human health, especially infants and children. Four of the baby food manufacturers complied with the House Subcommittee’s request.

From the documents obtained from the four companies, the House Subcommittee concluded that there was evidence that “commercial baby foods are tainted with significant levels of toxic heavy metals,
including arsenic, lead, cadmium, and mercury.” The report said that internal company standards “permit dangerously high levels of toxic heavy metals, and documents revealed that the manufacturers have often sold foods that exceeded those levels.”

The FDA currently has maximum allowable limits for the heavy metals at issue in certain circumstances, including 10 parts per billion (ppb) of arsenic, 5 ppb of lead, and 5 ppb of cadmium in bottled water. The Environmental Protection Agency has also set the permissible level of mercury in drinking water at 2 ppb. However, the House Subcommittee concluded that  “the test results of baby foods and their ingredients
eclipse those levels: including results up to 91 times the arsenic level, up to 177 times the
lead level, up to 69 times the cadmium level, and up to 5 times the mercury level.”

The FDA indicated that it is reviewing the House Subcommittee’s report. It also noted that the heavy metals at issue in the report are present naturally in the environment and can enter baby food through the soil, water or air.

Recommendations From the House Report

As a result of its findings, the House Subcommittee outlined five recommendations:

(1) Mandatory testing – this would require baby food manufacturers to test finished products (not just ingredients) for heavy metals. The House Subcommittee urged the FDA to set this requirement;

(2) Labeling – the Subcommittee proposed that the FDA require baby food manufacturers to list all heavy metals in the finished product on labelling so that consumers are aware of the elements’ prsence;

(3) Phase Out – the House Subcommittee urged manufacturers to voluntarily phase out heavy metals from products entirely, or at least phase out products that have high amounts of ingredients that test high in heavy metals;

(4) FDA Standards – the Subcommittee urged the FDA to set limits for permitted heavy metals in baby foods; and

(5) Parental Vigilance – the report urges parents to avoid baby foods that contain ingredients that test high in heavy metals. The Subcommittee indicated that implementing recommendations 1 through 4 would inform parents to make determinations soundly.

Immediate Litigation Impact

The day after the House Subcommittee’s report was published, three major baby food companies were sued for selling products with elevated levels of certain heavy metals. One such lawsuit was filed in New Jersey, while the other was filed in California. While the class actions lawsuits present several legal theories for liability, the one that may have some weight with courts is the simple allegation that the products were unsafe for consumption by the very class (infants and babies) for which the products were made.

Baby food has been on California’s Proposition 65 target list for quite some time, and many companies that manufacture or sell baby food products in California have been receiving customer and retailer inquiries regarding heavy metals in baby food products. Companies have also begun testing baby food products to ensure compliance with Prop 65 regulations. Ensuring proper responses to consumer and retailer inquiries, compliance auditing of ingredients and end products, and developing risk management plans are key for any company right now in the baby food industry, especially with the potential for future FDA regulations.

©2020 CMBG3 Law, LLC. All rights reserved.

ARTICLE BY John Gardella of CMBG3 Law
For more, visit the NLR Biotech, Food, Drug section.

President Biden Revokes ‘Buy American and Hire American’ Executive Order

On January 25, 2021, President Joe Biden signed Executive Order (EO) 14005 entitled “Ensuring the Future Is Made in All of America by All of America’s Workers,” which directs federal government agencies to “maximize the use of goods, products, and materials produced in, and services offered in, the United States.” While this order directs all agencies to follow this policy via the federal procurement and budgetary process, it also revoked the “Buy American and Hire American” executive order (EO 13788), which President Trump signed on April 18, 2017. Otherwise known as BAHA, EO 13788 had a stated goal of protecting U.S. workers, promoting job growth, and protecting the integrity of the U.S. immigration system.

The BAHA executive order prompted several federal agencies to issue numerous policy memos, with the net result being substantial changes to adjudication standards for applications for various immigration benefits. In October 2017, following the directives of BAHA, U.S. Citizenship and Immigration Services (USCIS) issued an updated policy memo that altered the longstanding policy of deferring to prior adjudications where the petitioner, beneficiary, and underlying facts remained unchanged from a previously approved petition for the same employee. USCIS issued the updated policy to “help advance policies that protect the interests of U.S. workers.” The updated policy created additional challenges for employers to get routine extension of stay petitions approved for workers who were already in the United States and where there had been no significant changes in the job details subsequent to the last petition’s approval.

The BAHA executive order has resulted in an overall increase in the rates of requests for evidence (RFE) and case denials. As recently as fiscal year (FY) 2020, H-1B RFE rates reached almost 30 percent, down from slightly more than 40 percent in FY 2019. Furthermore, H-1B visa petition denial rates exceeded 26 percent in FY 2020 and 34 percent in FY 2019 for cases where an RFE had been issued. For L-1 visa petitions, RFE rates had reached slightly more than 54 percent in both FY 2020 and FY 2019. Petitions for L-1 visas saw denial rates exceeding 43 percent in FY 2020 and 49 percent in FY 2019 for cases where an RFE was issued. In contrast, pre-BAHA RFE rates hovered around 21 percent for H-1B petitions and just over 30 percent for L-1 petitions. Denial rates before BAHA were generally about 20 percent for H-1B petitions post-RFE, and L-1 visa petitions were denied at about a 33 percent rate after receiving an RFE.

It remains to be seen how USCIS visa petition adjudication standards will change in the coming years, and particularly whether RFE and denial rates will drop following the end of the Trump administration and the revocation of BAHA. However, employers can expect that there will be a shift in immigration policy under the Biden administration with a more favorable view towards high-skilled business immigration.

ARTICLE BY Brian D. Bumgardner and
Andrew G. Drozdowski of Ogletree, Deakins, Nash, Smoak & Stewart, P.C.
For more, visit the NLR Government Contracts, Maritime & Military Law section.

Regology’s Analysis to Predict Lawmaking Activity by the 117th Congress

The term of the 116th Congress of the United States ended on January 3rd, 2021. This date also marked the beginning of the 117th Congress, with the start of the first of two sessions in this 24-month term. Just a few days later on January 6th, 2021, it became clear that the Democratic Party would control both houses of Congress.

To get a sense of what can be expected now that the 117th Congress is underway and controlled by a single party, Regology performed an analysis of the legislative activity of the past 9 terms of Congress.  Regology found that the beginning of a new Congress is marked by the introduction of a large number of bills.  Although a small percentage of bills make it to law, having both houses of Congress controlled by a single party point to a significant increase in the success rate of bills being enacted.

Lawmaking by Congress: Top Three Trends

Regology identified three key trends in lawmaking activity of each Congressional term. For its analysis, Regology reviewed the bills that were introduced during the last 9 Congressional terms by both the Senate and House of Representatives, covering 18 years of lawmaking activity that led to a total of 95,000 bills reviewed.  For the 9 Congressional terms reviewed, there were 6 terms where Congress was controlled by a single party and 3 terms where there was a divided Congress.

Trend 1– 23% of all Congressional bills were introduced during the first 1/8th of the Congressional term

On average, 23% of the total amount of bills that got introduced by a Congress were introduced during the first 3 months of a Congress’ 24-month term.  The large number of bills that are expected to come through in the next couple of months will not only create plenty of work for the members of Congress and their staff, law practitioners are also challenged to assess those bills that have a chance of being enacted and determine their implications on stakeholders.

Regology Chart 1

Click to view larger.

Trend 2 – 26% of a Congress’ successful bills were introduced during its first 3 months

With a success rate of approximately only 3.5%, meaning the percentage of bills that got signed into law, a lot of work is of short relevance.  Although this success rate may draw skepticism to pay close attention to the wave of bills the 117th Congress is introducing in its first 3 months, it is worth noting that Regology found that about 26% of the laws from the past 9 Congressional terms were introduced as bills in the first 3 months of the term.

Regology Chart 2

Click to view larger.

While on average it took 235 days for a successful bill to go from introduction to enactment, successful bills introduced during the first 3 months of Congress took 300+ days before they got enacted.  A visualization of the relationship between the introduction and enactment date of successful bills is shown next.

Regology Chart 3

Click to view larger.

Trend 3 – 38% of a Congress’ successful bills were enacted during its last 3 months

On average 38% of all bills that became law were enacted during the last 3 months of a Congress.

Regology Chart 4

Click to view larger.

Looking back: comparing the 116th Congress to the prior 8 Congressional terms

As we look at the lawmaking activity of the 116th Congress and compare it with the lawmaking activity of the prior 8 timers of Congress, the following observations can be made:

  • The 116th Congress was very active in introducing bills.  Some 14,000 bills were introduced compared to roughly 10,000 bills averaged by the prior 8 sessions of Congress.
  • The 116th Congress managed to get 333 bills signed into law versus an average of 379 laws by the 8 prior sessions of Congress.
  • The success rate of bills that got signed into law for the 116th Congress stands at 2.3% versus 3.7% during the prior 8 terms. It must be noted that the 116th Congress was divided.

Lawmaking in a divided Congress

Single party control of both chambers of Congress has relevance in the number of bills they are able to pass into law. Such a Congress saw an average success rate of 4% while a divided Congress saw a success rate of 2.7%. Further analysis of the single party controlled Congressional terms revealed that the success rate was 3.7% for the 2 terms Congress was controlled by the Democratic Party and 4.2% for the 4 times the Republican Party controlled Congress. Nevertheless, the last 2 terms of Congress controlled by the Republican Party saw an average success rate of 3.4%.

Expectations for the 117th Congress

Looking at what to expect from the 117th Congress’ lawmaking activity, historical data suggests that we will see a significant number of bills being introduced on the floor in the first quarter of 2021. Furthermore, with a single party controlling both houses of Congress, these bills will have an almost 50% higher chance of making it into law.

© 2021 Regology All Rights Reserved
ARTICLE BY Paul V. Bruin of Regology
For more, visit the NLR Election Law / Legislative News section.

How A Sack Of Flour Healed A Divided Electorate

In 1864, the voters of Austin, Nevada were almost evenly divided between supporters of the Union (Republicans) and advocates for an immediate peace treaty with the Confederacy (Copperheads).  Two eminent citizens bet on the outcome of the election.  Ruel C. Gridley, an ardent Copperhead, lost the bet and, as agreed, carried a 50 pound sack of flour from his store down the town’s main street, marching to the tune of “Old John Brown”.  At the end of the March, he auctioned off the sack with the proceeds going to the Sanitary Commission, a private agency for the support of sick and wounded Union soldiers.   Samuel Clemens, aka Mark Twain, gives an account of what happened next:

“Gridley mounted a dry-goods box and assumed the role of auctioneer. The bids went higher and higher, as the sympathies of the pioneers awoke and expanded, till at last the sack was knocked down to a mill man at two hundred and fifty dollars, and his check taken. He was asked where he would have the flour delivered, and he said:

“Nowhere–sell it again.”

Now the cheers went up royally, and the multitude were fairly in the spirit of the thing. So Gridley stood there and shouted and perspired till the sun went down; and when the crowd dispersed he had sold the sack to three hundred different people, and had taken in eight thousand dollars in gold. And still the flour sack was in his possession.”

Roughing It, Chap. XLV.   The local newspaper, The Reese River Reveille, publicized the story and soon Ridley was traveling the West auctioning and re-auctioning his famous sack of flour.  Ridley eventually raised about $275,000 for the Sanitary Commission.

Ridley eventually moved to California where he died in 1870.  He was interred in an unmark grave in Stockton, but in 1887 on California Admission Day (Sept. 9)  an imposing monument was erected to mark his burial site.

Austin’s mining boom did not last, but the town, unlike many other Nevada boomtowns, has lingered on.  Last month, I took this photo of Austin’s Main Street where Ridley so long ago marched with his flour sack:

Austin Nevada Main Street

Ridley’s store still stands in Austin, but apparently is no longer selling flour:

Gridley Store Austin Nevada

© 2010-2020 Allen Matkins Leck Gamble Mallory & Natsis LLP
For more, visit the NLR Election Law / Legislative News section.