Category: Uncategorized

Water, Water, Everywhere: The Clean Water Act

If it isn’t already, water should be on your mind this year.  The excitement of Scituate storm surge and coastal flooding aside, the region – and the U.S. as a whole – is facing a slew of legal developments that may change how citizens, businesses, and governments operate under the federal Clean Water Act and similar state programs.  In particular, the scope of Clean Water Act jurisdiction is in play following a pair of Supreme Court decisions, as is the potential delegation of permitting authority to Massachusetts and New Hampshire, two of only four states in which the EPA administers permitting under the National Pollutant Discharge Elimination System (NPDES).

Clean Water Act Jurisdiction

Since well before Samuel Taylor Coleridge penned those famous lines in the Rime of the Ancient Mariner – “Water, water, every where, / Nor any drop to drink” – people have worried about access to clean water.  It makes sense, then, that the Clean Water Act is one of our oldest environmental laws, with its origins in the Rivers and Harbors Act of 1899.  The Rivers and Harbors Act – the nation’s very first environmental law – imposed the first “dredge and fill” requirements, made it illegal to dam rivers without federal approval, and prohibited the discharge of “any refuse  matter  of  any  kind  or  description” into “any  navigable  water  of  the  United  States, or  into  any  tributary  of  any  navigable  water.”

The Federal Water Pollution Control Act of 1948, with major amendments in 1961, 1966, 1970, 1972, 1977, and 1987, largely superseded the Rivers and Harbors Act and resulted in what we know today as the federal Clean Water Act (CWA).  And although today’s statute is very different from its 1899 precursor, one thing has remained constant: an intense and lasting fight over the scope and jurisdiction of federal regulation.  Federal CWA jurisdiction is premised on the Commerce Clause of the U.S. Constitution, and prohibits (without a permit) “dredge and fill” activities and the discharge of pollutants into “navigable waters,” which the CWA defines as “the waters of the United States.”  But what, exactly, are “waters of the United States”?

The 1870 Supreme Court decision in The Daniel Ball held that waterways were subject to federal jurisdiction if they were “navigable in fact.”  But what has never been clear is the extent to which non-navigable waters, like certain tributaries to navigable waters or wetlands, constitute “waters of the United States” such that they are subject to federal regulation.

The Supreme Court Punts (Again)

The 2006 Supreme Court decision in Rapanos v. United States represented a key turning point in CWA jurisdiction, holding that certain remote wetlands are not subject to CWA jurisdiction.  But the decision was badly fractured, with no majority of justices agreeing on a single standard for determining what, exactly, constitute “waters of the United States” such that the CWA applies.  Minor chaos ensued, as regulators and courts applied varying interpretations of Rapanos in permitting decisions and enforcement actions.

In 2015, the Obama administration attempted to clarify the scope of CWA jurisdiction by promulgating a rule known as the “Waters of the United States” (or “WOTUS”) rule that attempted to define exactly which waters were regulated by the CWA.  That rule, which was based on Justice Anthony Kennedy’s “significant nexus” test in the Rapanos decision, was quickly challenged by 31 states, numerous industries, and landowner groups.  At bottom, challengers argued that the WOTUS rule represented significant federal overreach and extended CWA jurisdiction well beyond what the Commerce Clause allows. The numerous appeals were consolidated into a single Sixth Circuit case, National Association of Manufacturers v. Department of Defense (NAM), and in late 2015 the Sixth Circuit stayed the WOTUS rule pending resolution of legal challenges.

But on January 22, 2018, the Supreme Court unanimously held that federal District Courts – not appellate courts – have jurisdiction over challenges to the WOTUS rule.  While the CWA generally requires challenges to CWA rules to be brought in district courts, there are seven situations where courts of appeal have jurisdiction.  In this case, the government argued that the challenge should be heard in the courts of appeal, under CWA Sections 1369(b)(1)(E)-(F) which allow appellate courts to hear cases related to the approval of certain effluent limits or permits, respectively.  Petitioners, on the other hand, maintained that the case should be heard in federal district court in the first instance.  In a procedural victory for the petitioners, the Supreme Court held that the WOTUS rule does not qualify for direct appellate review under CWA Sections 1369(b)(1)(E)-(F).  Following this decision, future challenges to the WOTUS rule will be brought in federal district courts, potentially with divergent outcomes around the country.  Appeals of those decisions will move to the courts of appeals, where there is yet again the possibility for inconsistency.  The upshot is a longer litigation timeline – and continued jurisdictional uncertainty – before the Supreme Court will have another chance to address the appropriate scope of CWA jurisdiction.

In the meantime, the Trump administration is working on a replacement rule for the WOTUS rule that is likely to apply the less expansive jurisdictional test described by Justice Antonin Scalia in Rapanos.  Under that interpretation, only tributaries that are “relatively permanent, standing or flowing bodies of water,” and only wetlands with a continuous surface connection to a “water of the United States” are themselves “waters of the United States” subject to CWA jurisdiction.  And on February 6, 2018, EPA and the Army Corps of Engineers promulgated a rule delaying implementation of the WOTUS rule until February, 2020.  That action preserves the Rapanos status quo (such as it is) until EPA can craft a new rule.  Ultimately, it is likely that any WOTUS replacement rule will be challenged, and the Supreme Court will then have a chance to revisit its decision in Rapanos and redefine federal jurisdiction under the CWA, a process that could easily extend past 2020.

Defer much?

On February 26, 2018, the Supreme Court weighed in again on the Clean Water Act, this time by refusing to take up a challenge to a 2017 decision by the Second Circuit that upheld a 2008 EPA rule exempting water transfers from CWA permitting requirements.  Water transfers happen when water from one waterbody is diverted into another waterbody, such as diverting a stream into a nearby lake or reservoir. Drinking water systems have conducted water transfers for decades, and EPA has never required NPDES permitting for such transfers.  But in 2008, in response to pressure by environmental groups to require NPDES permits for water transfers, EPA adopted the Water Transfers Rule expressly exempting such transfers from NPDES permitting.

Environmentalists and states challenged the Water Transfers Rule, arguing that moving water from one waterbody to another requires a permit if the “donor” water contains pollutants that would have the effect of degrading the receiving water.  Both the Obama and Trump administrations defended the rule, arguing that it preserved long-standing practice and was justified by EPA’s ability to interpret CWA requirements.  Ultimately, the Second Circuit deferred to EPA and allowed the rule to stand.  In turn, the February 26 decision by the Supreme Court allows the Second Circuit decision to stand, thereby affirming the validity of the Water Transfers Rule.  The case was widely seen as a test for Justice Neil Gorsuch, who has expressed hostility to the deference doctrine and EPA regulations alike.  By declining to hear the case, the Court has deferred that test for another day.

Who’s in Charge?

Under a process known as “delegation,” states may assume permitting and other authority under the CWA.  To-date, 46 states have received such delegation from EPA, and all but Massachusetts, New Hampshire, Idaho, and New Mexico now administer their own NPDES permitting programs.  In the absence of delegation, EPA manages the Clean Water Act and NPDES program in those four states, which often overlap and may duplicate separate state law requirements.

New Hampshire is currently evaluating whether to seek CWA delegation from EPA, and has established a legislative commission to explore its options.  And as we have previously reported, Massachusetts has explored CWA delegation in the past, but those efforts largely fizzled out.  But both of these efforts may have new life: the EPA, under Administrator Pruitt, is very focused on “cooperative federalism” and with EPA seeking to slash its budgets, CWA delegation is likely on EPA’s radar as an action item over the next several years.  And, in late 2017, MassDEP Commissioner Martin Suuberg expressed strong support for CWA delegation, as has Governor Baker.  Whether delegation will become a reality for Massachusetts or New Hampshire is anyone’s guess, but regardless of the outcome 2018 is shaping up to be an interesting year for water law.

 

© 2018 Beveridge & Diamond PC
This post was written by Brook J. Detterman of Beveridge & Diamond PC.

More industry groups petition Department of Defense to withdraw MLA interpretation on GAP insurance financing—is a response coming?

We previously reported that several trade groups had sent letters petitioning the Department of Defense (DoD) to rescind or withdraw Question and Answer #2 (Q&A 2) from its 2016 interpretative rule for the Military Lending Act (MLA) final rule and itsDecember 2017 amendments. Q&A 2 generated much uncertainty regarding application of the MLA’s exemption for purchase money transactions that also finance the purchase of GAP insurance.

In addition to the letters mentioned in our earlier post, the American Bankers Association (ABA) submitted a similar petition to DOD, and the National Automotive Dealers Association (NADA) and the American Financial Services Association (AFSA) likewise sent a joint letter to DoD requesting withdrawal of Q&A 2.

Both letters highlight a key concern that has arisen in light of  Q&A 2: that MLA–covered borrowers and their families are likely to have diminished access to GAP insurance as a result of Dodd’s guidance. The NADA/AFSA petition describes Q&A 2 as “drying up the availability of these products to covered members (and in some cases all consumers) overnight,” with association members “seeking to structure their transactions so as not to trigger application of the statute in the first instance by staying within DOD’s newly constricted motor vehicle financing exclusion.” The ABA letter also states that, “the new interpretation in the amendments has created uncertainty and confusion in the market and potential substantial liability for automobile dealers and lenders who in good faith relied on the plain language of the statute and regulation,” noting that because the December 2017 amendments appear to be retroactive, “vehicle financing loans made after the MLA Regulation effective date of October 3, 2016 may be void and subject to significant penalties and attorneys’ fees.”

It seems these petitions may be achieving their desired effect. We are hearing murmurings that DoD intends to rescind its prior guidance. At least one other blog has made a similar observation,  and our understanding is that the interpretation could be withdrawn as soon as May of this year. If these predictions prove true, it would be a welcome development.

Copyright © by Ballard Spahr LLP
This article was written by Jeremy C. Sairsingh of Ballard Spahr LLP

What US-Based Companies Need to Know About the GDPR, And Why Now?

If you are a US-based or multinational company, you may have noticed that in the past few months you have started to see a significant increase in the number of vendor (or other) agreements that you have been asked to modify or verification forms that you have been asked to execute. If you have not yet, you probably will. The reason for this uptick is simple, the European Union (EU) General Data Protection Regulation (GDPR) goes into effect on May 25, 2018, and companies you work with must be GDPR compliant, which, in turn, puts obligations on you.

The Reach of the GDPR

If you have nothing to do with the EU, i.e., no physical presence in the EU, no employees, no nothing, you are probably wondering why the GDPR impacts you at all. The answer to that comes down to how far the GDPR reaches, which includes its application to US-based companies and what that means for those companies. While the GDPR is the most significant change to European data privacy and security in over 20 years, it is also the most significant change to US data privacy security since HIPAA (impacting the healthcare industry) as many US-based companies will fall within the GDPR’s reach, one way or another.

The GDPR reaches into US-based companies because the GDPR is designed to protect the “personal data” of individuals. Despite what you might have read in others sources, the GDPR does not say EU “residents” or EU “citizens,” it says it applies to the processing of “personal data or data subjects” by controllers and processors who are in the EU. It also applies to “processing activities” related to: (1) offering goods or services; or (b) monitoring data subject behavior that takes place in the EU. See GDPR Article 3(2).

The GDPR replaces the 1995 EU Data Protection Directive which generally did not regulate businesses based outside the EU. However, now even if a US-based business has no employees or offices within the boundaries of the EU, the GDPR may still apply.

Privacy and Personal Data: EU v. US

Stepping back for a second to understand the GDPR, it is important to understand that most of the world views privacy very differently than the US. Where many Americans put a lot of their personal information online via social media right down to what they ate for breakfast, privacy is a very tightly-held right in other parts of the globe, and the definition of privacy is far more robust.

For example, where “personal data” is typically defined by US breach notification laws as an individual’s name accompanied by some other type of identifying information, such as a social security number or financial account information, “personal data” under the GDPR goes much further and includes, “information related to an identified or identifiable natural person.” This means that, if you can use any piece of information to learn or otherwise identify a natural person, the information is “personal data” under the GDPR, and the processing of that data is protected by the GDPR. This type of information includes an individual’s name, ID number, location data, online identifier or other factors specific to the physical, physiological, genetic, mental, economic, cultural or social identity of that person. It also includes, religion, trade union association, ethnicity, marital status, IP addresses, cookie strings, social media posts, online contacts, and mobile device IDs.

Am I a “Controller” or a “Processor”…or both?

This leads to the next set of logical questions: (1) what is processing of personal information? And (2) what is a “controller” and a “processor”?

The concepts of “controller”, “processor” and “processing of personal data” are part of the new lexicon that US-based companies falling under the GDPR are going to have to get familiar with because they are not terms that have much impact in the US, until now.

Simply put, “processing” personal data is basically collecting, recording, gathering, organizing, storing, altering, retrieving, using, disclosing, or otherwise making available personal data by electronic means. A “controller” is the entity that determines what to do with the personal data. Take for example, a company collects personal information from its customers in order to sell them products. In turn, the company provides that data to its shipping vendors and payment vendors to ship the products to the customers and to bill and collect payment from the customers. The company/seller is the controller, and the shipping company and the payment company are processors.

With this example, the scope of the GDPR to US-based companies also becomes a little clearer as you can start to see where US-based companies would fall somewhere in that controller → processor chain as far as they are selling to customers located in the EU.

The GDPR even applies if no financial transaction occurs if the US company sells or markets products via the Internet to EU residents and accepts the currency of an EU country, has a domain suffix for an EU country, offers shipping services to an EU country, provides translation in the language of an EU country, markets in the language of an EU country, etc.

The GDPR also applies to employee/HR data to the extent the individual employee is a data subject with rights in the EU.

As such, US-based companies with no physical presence in the EU, but in industries such as e-commerce, logistics, software services, travel and hospitality with business in the EU, etc., and/or with employees working or residing in the EU should be well in the process of ensuring they are GDPR compliant as should US-based companies with a strong Internet presence.

Why is this an issue now?

Why this is becoming even more of an issue for US-based companies now is that many companies that are required to be GDPR compliant have obligations that require them to take certain steps with their vendors. As such, many US-based companies that otherwise might not have any GDPR-compliance obligations are finding themselves Googling “GDPR” because they received an updated vendor contract that includes GDPR language or a verification request with similar references.

US-based companies should get prepared for these types of contract modification negotiations and verification requests and be ready to speak on the issues at hand; know what they are signing; know what they are agreeing to; know what they should not be agreeing to; know that they are in required compliance or will be in compliance by May 25, 2018; and know what the penalties are if they do not.

The fines and penalties are significant and many US-based companies will likely fall into the categories of controller and processor. While the GDPR provides for certain liability for each of those roles, some liability can be transferred by contract so contract review and GDPR understanding is critically important.

At a minimum, what should I know?

At a bare minimum, you should understand that if a company you work with is asking you to revise an agreement, sign off on a verification, or something similar, it might be related to their obligations under the GDPR and, in turn, yours.

One of the keys to the GDPR is that data subjects must be fully informed about what is happening to their data, why it is being collected, how it will be used, who will be processing it, where will it be transferred, how they can erase it, how they can protect it, how they can stop its processing, etc. The bulk of the consent and notification responsibility falls on the controller, but the processor and the controller have to work together to ensure the data subject’s rights are protected and this will happen in two separate but distinct steps:

The first step is in the overall physical compliance process, which takes the most time as it requires reviewing data collection and processing; ensuring there is a legal right to have the data and process it; gaining a fundamental understanding of what is going on with the data and where it is going; building security protocols around the data; etc.

Controllers

Controllers specifically must, at a minimum:

  1. Review data processing activities and conduct an Impact Assessment.

  2. Identify their data processing activities for which it is a controller and ensure it understands its responsibilities.

  3. Ensure that, in respect of each processing activity for which it is a controller, it has implemented appropriate technical and organizational measures to ensure compliance with the GDPR; and ensure it has appropriate processes and templates in place for identifying, reviewing and (and to the extent required) promptly reporting data breaches.

Processors

Processors must, at a minimum:

  1. Review all data processing activities.

  2. Ensure there is a lawful basis for each processing activity (or that there is consent or that an exemption or derogation applies).

  3. Where consent is the basis for processing, review existing mechanisms for obtaining consent, to ensure they meet GDPR.

  4. Where a legitimate interest is the basis for processing, maintain records of the organization’s assessment of that legitimate interest, to show the organization properly considered the rights of the data subjects.

  5. Update privacy policies.

  6. Train employees who process personal data to quickly recognize and appropriately respond to requests from data subjects to exercise their rights.

The second step is in contracting between the controller and processor to ensure their contracts meet all the legal specifications of the GDPR. The GDPR outlines a number of contractual requirements between controllers and processors including: identifying the subject matter and duration of the processing; identifying the nature and purpose of the processing; structuring the obligations and rights of the controller; acting only upon the written instructions of the controller; ensuring those processing data are doing it under written confidentiality agreement; assist the controller in meeting breach notification requirements.

Unlike US breach notification laws that allow more time to notify the appropriate individuals and authorities of a data breach, the GDPR requires notification be made within 72 hours of a breach.

There is a lot to take in and think about when it comes to the GDPR. This is a law that we have been reviewing, analyzing, and working with for almost two years. The hardest thing about the GDPR is changing your perspective and realizing it probably does have some applicability to your business; changing your lexicon to include words like “controller”, “processor”, and “data subject”; and learning to break the GDPR down to its manageable chunks so compliance stops being overwhelming and starts getting done, piece by piece.

© Copyright 2018 Dickinson Wright PLLC
This article was written by Sara H. Jodka of Dickinson Wright PLLC

Tribal Sovereign Immunity Does Not Apply to IPR

In a matter of first impression, the Patent and Trial Appeal Board (PTAB) denied a Native American tribe’s motion to terminate a finding that tribal sovereign immunity does not apply to inter partesreview (IPR) proceedings. Mylan Pharmaceuticals Inc. v. St. Regis Mohawk Tribe, Case No. 2016-01127, Paper No. 14 (PTAB, Feb. 23, 2018) (per curiam).

Based on petitions filed by Mylan, the PTAB instituted IPR proceedings on patents related to the drug Restasis. At the time of institution, the owner of the challenged patents was Allergen, Inc. Less than one week before the scheduled final hearing, Allergen assigned the challenged patents to the Saint Regis Mohawk Tribe. On that same day, the Tribe granted back to Allergen an irrevocable, perpetual, transferable and exclusive license under the challenged patents for all US Food and Drug Administration-approved uses in the United States. Allergen was also granted the first right to sue for infringement with respect to “generic equivalents,” while the Tribe retained the first right to sue for infringement of anything unrelated to generic equivalents. As the new owner of the challenged patents, the Tribe filed a motion to terminate the IPR proceedings for lack of jurisdiction based on tribal sovereign immunity.

The PTAB denied the motion to terminate, finding that tribal sovereign immunity does not apply to IPR proceedings. The PTAB found that while state sovereign immunity has been applied in IPR proceedings, the immunity possessed by Native American tribes is not co-extensive with that of the states. The PTAB explained that IPRs are not the type of suit to which a Native American tribe would traditionally enjoy immunity under common law. The PTAB also noted that Congress enacted a generally applicable statute that renders any patent (regardless of ownership) subject to IPR proceedings, and that the PTAB does not exercise jurisdiction over the patent owner, but instead exercises jurisdiction over patents in order correct its own errors in originally issuing the patents.

The PTAB held that even if the Tribe was entitled to assert immunity, the IPR proceedings could continue with Allergen as the patent owner. The PTAB found that the license agreement transferred “all substantial rights” in the challenged patents back to Allergen. The PTAB found that Allergen was granted primary control over commercially relevant infringement proceeding and the Tribe was granted only an illusory right to enforce the challenged patents. The PTAB also found that the license agreement provided Allergen with all rights to meaningful commercial activities under the challenged patents, rights to sublicense, reversionary rights in the patents, obligations to pay maintenance fees and control prosecution, and the rights to assign interests in the patents. Finally, the PTAB found that the Tribe was not an indispensable party and would not be significantly prejudiced if it chose not to participate in the IPR proceedings since Allergen could adequately represent the Tribe’s interest of defending the challenged patent’s validity.

Practice Note: Allergan and the Saint Regis Mohawk Tribe have filed a Notice of Appeal to the US Court of Appeals for the Federal Circuit on several issues, including whether tribal sovereign immunity applies to IPR proceedings.

© 2018 McDermott Will & Emery
This article was written by Amol Parikh of McDermott Will & Emery

Register for Raindance 2018! Early Rates End March 31st!

Register for LSSO’s 2018 Raindance Conference on June 6 & 7 at the Mid-America Club in Chicago, Illinois.

This is a don’t-miss opportunity to learn from the leaders. Join us for two days packed with great connections and new ways of thinking.  It’s guaranteed to benefit your firm or your business.

Register Now – Early Registration ends March 31, 2018 (special December rates now available)

Substitutions and Cancellations:  Substitutions may be made at any time. In the event that you can no longer attend RainDance, we will apply the fee toward another LSSO program (within in the next 12 months of RainDance).

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Hope for Regulatory Relief on the Horizon? State Regulators to Standardize Licensing Process for Money Transmitters

The Conference of State Bank Supervisors (CSBS) recently announced that seven states, Georgia, Illinois, Kansas, Massachusetts, Tennessee, Texas and Washington, have agreed to a multi-state compact (the Compact) that will standardize certain aspects of the licensing process for money services businesses (MSBs).

Under the Compact, if one of the participating states reviews “key elements of state licensing for a money transmitter” as part of that state’s initial licensing process, the other participating states agree to accept the findings of the review.  The CSBS identifies the key elements as IT, cybersecurity, business plan, background check, and compliance with federal Bank Secrecy Act requirements.  With the announcement of the Compact, the CSBS took a notable step toward accomplishing one of the six objectives provisioned under its “Vision 2020” initiative — harmonizing multistate supervision.  Its other objectives include: creating a FinTech advisory panel; redesigning the Nationwide Multistate Licensing System; assisting state banking regulators; enabling banks to service non-banks; and improving third-party supervision.

The Compact will begin as a pilot program in early April 2018, and MSBs that are interested in licensure through the program may contact the Washington State Department of Financial Institutions.  According to the CSBS, additional states are expected to join the Compact in the future.

Many industry participants will likely view the Compact as a welcome attempt at streamlined licensing and coordinated regulatory supervision at the state level, while they continue awaiting a decision from the Office of the Comptroller of the Currency (OCC) on possible issuance of a federal FinTech charter and the outcome of a pending lawsuit brought by the CSBS challenging the OCC’s authority to issue such a charter.  Others may view this effort as too little, too late.  Even with streamlined applications, licensed money transmitters will still have to obtain separate licenses, pay separate application fees, establish separate bonds, and comply with other separate, non-uniform state law requirements.  Nevertheless, it is good to see some states recognizing and trying to address the significant burdens of the current state money transmitter licensing framework.

Copyright 2018 K & L Gates
This article was written by Eric A. Love and Judith E. Rinearson of K&L Gates
For more finance news, follow @NatLawFinance

US Supreme Court Declines to Reconsider Key Agency Deference Standard

On March 19, 2018, the US Supreme Court denied a petition for writ of certiorari in Garco Construction, Inc. v. Speer.  In doing so, the Court declined an opportunity to revisit an important and controversial administrative deference standard, known as Auer or Seminole Rock deference, which requires courts to give “controlling weight” to an agency’s interpretation of its own regulations.  The deference afforded to an agency’s interpretation of its own regulations is often a critical issue in environmental litigation.  The Court’s decision not to reconsider the deference standard at this time means that agencies will continue to have great latitude to construe their own regulations.

However, while the Court denied the petition, Justice Thomas issued a dissent, joined by Justice Gorsuch, criticizing the Auer and Seminole Rock deference standard.  Justice Thomas wrote that “this would have been an ideal case to reconsider Seminole Rock deference, as it illustrates the problems that the doctrine creates,” and he described the doctrine as “constitutionally suspect” and “on its last gasp.”

Justice Thomas’s dissent will likely add fuel to the growing calls to reconsider Auer and Seminole Rock.  Legal commentators (see here, here, and here) have increasingly criticized the fact that under Auer and Seminole Rock courts are required to defer to an agency’s current interpretation of its own regulations, even if the agency’s own view of the regulation has changed over time and the interpretation in question has never been subject to notice-and-comment or other regulatory procedures.  This deference to untested or evolving interpretations generates bad incentives, commentators argue.  By giving administrators a broad mandate to interpret their own regulations, agencies are incentivized to produce vague regulations, which increases regulatory uncertainty and surprise.  Moreover, such broad deference increases the ease with which agencies may change their interpretations according to political pressures and changes in administrations.

If the Supreme Court continues to pass on opportunities to overturn Auer and Seminole Rock, a legislative fix may be pursued.  As discussed on this blog previously, Congress recently considered legislation that would have amended the Administrative Procedure Act to require that courts decide “de novo all relevant questions of law, including the interpretation of constitutional and statutory provisions and rules.”  Such legislation would overturn not just Auer and Seminole Rock, but also the related Chevron deference doctrine.  We will continue to monitor both judicial and legislative efforts to reconsider these important agency deference

© Copyright 2018 Squire Patton Boggs (US) LLP
This article was written by Alex M. Arensberg of Squire Patton Boggs (US) LLP
For more litigation news, follow @NatLawLitigator

Tax Reform – Consolidated Appropriations Act Provides Added Bonus for LIHTC Projects

On March 23, the President signed the Consolidated Appropriations Act, 2018 (H.R. 1625), a $1.3 trillion dollar spending bill that funds the federal government through September 30, 2018. In addition to preventing a government shutdown, this omnibus spending bill incorporated the following key provisions that help to strengthen and expand the Low Income Housing Tax Credit (LIHTC):

  • A 12.5% increase in the annual per capita LIHTC allocation ceiling (after any increases due to the applicable cost of living adjustment) for calendar years 2018 to 2021.
  • An expansion of the definition of the minimum set-aside test by incorporating a third optional test, the income-averaging test. Pursuant to the Code, a project meets the 40-60 minimum set aside test when 40% of the units in the project are both rent restricted and income restricted at 60% of the area median income. Under the new law, the income test is also met if the average of all the apartments within the property, rather than every individual tax credit unit, equals 60% of the area median income. Notwithstanding, the maximum income to qualify for any tax credit unit is limited to 80% of area median income.

This legislation is a great win for affordable housing advocates who have been pushing for LIHTC improvements through the Affordable Housing Credit Improvement Act, introduced in both the Senate (S. 548 sponsored by Senators Cantwell and Hatch) and the House (H.R. 1661 now sponsored by Congressmen Curbelo and Neal) in 2017, as discussed previously in a prior blog post.

We will continue to provide updates on legislation related to Tax Reform.

Read more coverage on tax reform on the National Law Review’s Tax page.

Copyright © by Ballard Spahr LLP
This post was written by Maia Shanklin Roberts of Ballard Spahr LLP.

Japanese Toyobo Pays $66 Million to Settle False Claims Act Allegations Over Selling Defective Fiber to Government for Use in Bullet Proof Vests

The Department of Justice recently announced the settlement of a qui tam lawsuit against Toyobo, the sole manufacturer of Zylon fiber used in bulletproof vests, in relation to their violation of the False Claims Act (FCA). According to the allegations of the case, between 2001 and 2005, Toyobo actively marketed and sold defective Zylon fiber for bullet proof vests, knowing that Zylon degraded quickly in normal heat and humidity, which makes the material unfit for use in bullet proof vests. It is further alleged in the whistleblower lawsuit, that Toyobo published misleading degradation data, that underestimated the degradation issue and started a public campaign to influence body armor manufacturers to keep selling bullet proof vests made with Zylon fiber.

Within the Complaint that the United States filed following their decision to intervene in the case, the U.S. alleged that Toyobo’s actions delayed the government’s efforts to determine the defect in Zylon fiber by several years. After a study of the National Institute of Justice (NIJ) in August 2005 found out, that more than 50 percent of Zylon-containing vests could not stop bullets that they had been certified to stop, NIJ decertified all Zylon-containing vests.

The qui tam lawsuit is brought to Government’s attention by relator Aaron Westrick, Ph.D., who is a law enforcement officer, formerly employed as the Director of Research and Marketing at Second Chance Body Armor (SCBA), which used to be the largest bullet proof vest company in the United States. In the lawsuit, whistleblower Westrick alleged, that Toyobo knew the strength of Zylon fibers sold to the bullet resistant vest makers would degrade quickly under certain environment, and nevertheless Toyobo did not disclose such fact or made misleading disclosures, resulting in the United States’ payment for the defective bullet resistant vests.

The relator Westrick brought the qui tam lawsuit under the FCA, which allowed him to act on behalf of the U.S. government in exposing the government programs fraud. Under the FCA, relators receive a portion of the money that has been recovered by the government, which is known as the relator’s share. For his participation as a relator, or whistleblower, within the case Dr. Westrick will receive $5,775,000, as a reward for exposing the government fraud scheme. Such high rewards are not uncommon for individuals who file qui tam lawsuits on behalf of the federal government. If and when a case settles, whistleblowers can receive between 15% and 30% of the amount recovered by the government.

 

© 2018 by Tycko & Zavareei LLP.

What’s In and What’s Out of the Omnibus Spending Bill

The omnibus spending bill has been passed and signed by President Donald Trump in time to avoid a government shutdown. From an immigration perspective, here is what is “in” and what is “out” for the rest of the 2018 fiscal year.

In:

  • $1.6 billion in funding for southern border fencing (but not the $25 billion requested by the President for “the wall”);
  • Funding for 328 additional CBP officers;
  • Sanctuary cities were not defunded, so funding is in;
  • Reauthorization of EB-5 Regional Center Program, E-Verify, the Non-ministerial Special Immigration Religious Worker Program, and the Conrad State 30 J-1 Waiver for physicians; and
  • H-2B visa relief
    • Secretary of DHS has the discretion to raise the number of visas available for the fiscal year to 129,547 (from 66,000)
    • Employers may use private wage surveys
    • The 10-month work season is still in
    • Flexibility for the seafood industry to stagger the entry of workers is still in

Out:

  • DACA is not mentioned and is left in limbo;
  • ICE must cut its detention beds; and
  • The dairy industry lost the suspension of the “seasonal requirement” for H-2A visas.

At the last moment, Trump threatened to veto the bill because it did not include the wall funding and did not address the “dreamer” issue. During his signing announcement, the President expressed his unhappiness with the bill, but ultimately said he signed it as a matter of national security and to take care of the military.

Called on to speak about the bill, DHS Secretary Kirstjen Nielsen added that it was “unfortunate that Congress chose not to listen to the security on the front lines” about the wall. She also noted she will continue to work with Congress to “fund the department and give it the tools and resources it needs to execute the mission the American people have asked us to do.”

Jackson Lewis P.C. © 2018
This article was written by Jessica Feinstein of Jackson Lewis P.C.