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Posts Tagged ‘Congress’

BREAKING – Supreme Court Severs Government-Debt Exception From TCPA

Posted on: July 7th, 2020

By: Matt Foree

Yesterday, the Supreme Court of the United States issued its decision in Barr vs American Association of Political Consultants, Inc. As we reported earlier here, this case deals with the constitutionality of the government-debt exception to the Telephone Consumer Protection Act (“TCPA”). In a 2015 amendment to the TCPA, Congress exempted from the robocall prohibition calls “made solely to collect a debt owed to or guaranteed by the United States.” The Supreme Court decision, in an opinion written by Justice Kavanaugh, determined that the government-debt exception (the “Exception”) is unconstitutional and severed it from the statute.

In analyzing the Exception, the court first looked at the question of whether the robocall restriction, with the Exception, is content-based. The Court found that, under the TCPA, the constitutionality of a robocall turns on whether it is made solely to collect a debt owed to or guaranteed by the United States. The Court noted that a robocall that says “Please pay your government debt” is legal while a robocall that says “Please donate to our political campaign” is illegal. According to the Court, “[t]hat is about as content-based as it gets.” Because the law favors speech made for collecting government debt over political and other speech, the Court found that the law is a content-based restriction on speech. Accordingly, under the Court’s precedents, a law that is content-based is subject to strict scrutiny. The Government conceded that it could not satisfy strict scrutiny to justify the Exception and the Court agreed.

The Court then considered whether to invalidate the entire robocall restriction under the TCPA or instead invalidate and sever the Exception. The Court agreed with the Government that it must invalidate the Exception and sever it from the remainder of the statute. In doing so, the Court reviewed general severability principles. Among other things, the Court determined that its precedents have steered it to a presumption of severability. As Justice Kavanaugh stated, “Applying the presumption, the Court invalidates and severs unconstitutional provisions from the remainder of the law rather than razing whole statutes or Acts of Congress.  Put in common parlance, the tail (one unconstitutional provision) does not wag the dog (the rest of the codified statute or the Act as passed by Congress).” The Court further stated that “[c]onstitutional litigation is not a game of gotcha against Congress, where litigants can ride a discrete constitutional flaw in a statue to take down the whole, otherwise constitutional statute.”

The Court then noted that before severing a provision and leaving the remainder of a law intact, the Court must determine that the remainder of the statute is capable of functioning independently and will be fully operative as a law. The Court noted that the Communications Act of 1934, to which the TCPA is an amendment, includes an express severability clause stating, “If any provision of this chapter or the application thereof to any person or circumstance is held invalid, the remainder of the chapter and the application of such provision to other persons or circumstances shall not be affected thereby.” The Court held that the Exception added an unconstitutional, discriminatory exception to the robocall restriction of the TCPA. It further determined that the text of the severability clause squarely covers the unconstitutional Exception and requires severance. The Court held that even if the text of the severability clause did not apply here, the presumption of severability would require that the Court sever the Exception from the remainder of the statute.

In sum, the Court held that by carving out an exception that allowed robocalls made to collect government debt, Congress favored debt-collection speech over plaintiff’s political speech. Accordingly, the Court held that the Exception was unconstitutional and cured the violation by invalidating the Exception and severing it from the remainder of the TCPA.

The Supreme Court’s long-awaited decision lays to rest speculation that the Court would strike down the entire statute as unconstitutional.  As such, it appears that litigation will continue, with several issues outstanding concerning the troubled statute, including the ongoing issue with the patchwork of decisions related to the requirements of an “automatic telephone dialing system” under the TCPA. Only time will tell if these and other issues will be remedied in the near future. 

If you have any questions or would like more information, please contact Matt Foree at [email protected].

The Pandemic Risk Insurance Act of 2020 is Introduced in Congress

Posted on: June 29th, 2020

By: Wayne Hammack

Since March 2020 the House Financial Services Committee has considered the creation of a federal reinsurance program to provide a safeguard for businesses against future pandemic-related business interruption losses. An early memorandum calling for the creation of the Pandemic Risk Insurance Act (PRIA) has been revised and augmented, and on May 26, 2020 legislation was introduced by Congresswoman Carolyn B. Maloney (D-NY). The PRIA (H.R. 7011) is intended to provide for a transparent system of shared public and private compensation for business interruption losses resulting from a pandemic or outbreak of communicable disease. The legislation has been crafted to protect consumers by addressing market disruptions; to ensure the continued widespread availability and affordability of business interruption coverage for losses resulting from a pandemic or outbreak of a communicable disease; and to allow for a transitional period for the private markets to stabilize, resume pricing of such insurance, and build capacity to absorb any future losses, while preserving state insurance regulation and consumer protections. 

The proposed legislation would create the Pandemic Risk Reinsurance Program (PRRP), a system of shared public and private compensation or business interruption losses resulting from future pandemics or public health emergencies. In introducing the legislation, Congresswoman Maloney stated, “Millions of small businesses, nonprofits, mom-and-pop shops, retailers, and other businesses are being left out in the cold and will never be able to financially recover from the coronavirus crisis because their business interruption insurance excludes pandemics. We cannot allow this to happen again.” 

As drafted, the PRIA defines a “Covered Public Health Emergency” as any outbreak or infectious disease or pandemic for which an emergency is declared on or after January 1, 2021, under the Public Health Service Act, and is certified as a public health emergency by the Secretary of Health and Human Services. Under the PRIA, the PRRP will be administered by the Treasury Secretary, and participation will be voluntary for insurers, who may sign up on an annual basis. Participating insurers will be required to have business interruption policies, including event cancellation, that include coverage for pandemics. 

The PRRP would only be triggered when aggregate insured losses for a covered public health emergency exceed $250 million. Once triggered, the federal share of compensation would be equal to 95% of insured losses that exceed the insurer deductible. The PRIA would set each participating insurer’s deductible at 5% of the value of the insurer’s direct earned premiums during the preceding calendar year. 

The PRIA would provide for a $750 billion cap for federal compensation.  Should losses exceed that cap, the Treasury Secretary is authorized to determine the pro-rata share of insured losses beyond the cap. (In contrast, an early memorandum outlining the PRIA would have capped the amount insurers would have to pay out against a public health emergency at $500 billion per year). Insurers are not prohibited from purchasing reinsurance coverage in the private markets.

The proposed legislation gives the Treasury Secretary the authority to investigate and audit claims and prescribe regulations and procedures. Participating insurers are required to submit information relating to insurance coverage for business interruption resulting from covered public health emergencies, and the Treasury Secretary is required to submit annual reports to Congress on the PRRP.

Since the onset of the most recent coronavirus pandemic, there have been numerous state and federal legislative proposals to expand business interruption coverage to cover pandemic-related losses. For insurers participating in the PRIA as currently drafted, exclusions in effect on the date of enactment of the Act that specifically exclude losses covered under the PRRP would be deemed void, and any state approval of those exclusions would be preempted, unless the exclusion meets certain criteria, such as a written statement from the insured that affirmatively authorizes the reinstatement of the exclusion.

The legislation proposed by Congresswoman Maloney would terminate on December 31, 2027. 

While the proposed legislation has been endorsed by a number of industry groups including Marsh & McLennan Companies, the Retail Industry Leaders Association, and The Council of Insurance Agents & Brokers, among others, the National Association of Mutual Insurance Companies and the American Property Casualty Insurance Association are calling for an alternative approach. Whereas PRIA was modeled after the Terrorism Risk Insurance Act (TRIA), certain participants in the insurance industry have suggested a Federal Pandemic Loss Program as an alternative to PRIA, which as outlined would fully back future losses due to pandemic response initiatives, providing direct funding to businesses through a predetermined formula. 

While there remains significant work to be done to reconcile the competing interests, the introduction of PRIA and other alternative proposals are an indication that federal relief is an inevitability given the catastrophic losses suffered to date as a result of Covid-19 and the potential for a resurgence in the coming months and years.

We will continue monitoring developments related to the PRIA legislation and alternative proposals and provide updates as the legislative proposals move forward. 

If you have questions or would like more information, please contact Wayne Hammack at [email protected].

Congress makes PPP forgiveness easier to obtain in passing the PPP Flexibility Act

Posted on: June 5th, 2020

By: Justin Boron

You just got a reprieve on your forgiveness.

In passing an amendment to the Paycheck Protection Program on Wednesday evening, Congress—among other changes it made to the PPP—extended the period to spend forgivable loan money from eight weeks to 24 weeks. 

The PPP Flexibility Act—which passed by unanimous consent in the Senate and 417-1 in the House—became law upon the president’s signature Friday and aims to resolve several of the problems that have emerged during the PPP’s implementation through the SBA and private lenders. 

In addition to the extension of time to spend the PPP loan proceeds, the PPP Flexibility Act makes several other changes that will give borrowers more flexibility to ensure 100 percent forgiveness of their PPP loans:

  • Reducing the amount of payroll costs required from 75 percent to 60 percent.  This will allow borrowers to spend more on forgivable, non-payroll costs, i.e. certain payments on rent, utilities, and mortgage interest.  However, a question remains about the consequences of failing to meet the 60 percent threshold:  Is forgiveness reduced proportionally or is it an “all-or-nothing” requirement? Based on floor speeches for the bill, we expect the SBA to issue guidance allowing for a sliding scale on forgiveness.
  • Extending the period of time to restore workforce and wage levels.  This will give employers more time to re-constitute their workforces without sustaining a reduction in forgiveness.
  • Formalizing exceptions to reductions in forgiveness.  The SBA’s guidance allowed borrowers to avoid reductions for employees who turned down good faith written offers to be re-hired or recalled.  Additionally, the bill allows borrowers to avoid forgiveness if they could not find qualified employees or were unable to restore business operations due to COVID-19 related operating restrictions.
  • Increase the payback period from 2 to 5 years.  The SBA set the maturity date on the loans for two years.  Congress elevated the minimum to five years, so PPP lenders will have to adjust the maturity date on the notes for PPP loans accordingly.  That means any unforgiven loan amount could be repaid over five years.  The interest rate remains at 1%.
  • Extending payroll tax deferral to PPP borrowers.  PPP borrowers were excluded from the payroll tax deferral under the original CARES Act legislation, but the new bill affords them that option as well.  That means PPP borrowers may also defer certain payroll taxes—i.e. the employer portion of the social security tax—from March 27, 2020 through December 31, 2020.  Fifty percent of the deferred tax would be due by December 31, 2021, and the remainder would be due by December 31, 2022.

If you have questions or would like more information, please contact Justin Boron at [email protected].

The CARES Act and What It Means for State and Local Governments

Posted on: March 31st, 2020

By: Jacob Daly

Much of the focus on the Coronavirus Aid, Relief, and Economic Security (CARES) Act has been on the relief it provides for individuals and both large and small businesses, as well as the funding it provides for public health initiatives.  Rightfully so.  But the relief it provides for state and local governments should not be overlooked.  Of the $2 trillion appropriated by the law, about $424 billion is allocated for state, local, and tribal governments.  The law also provides additional funding for joint federal-state programs such as Medicaid and unemployment compensation.

The largest single appropriation in the CARES Act for state, local, and tribal governments is $150 billion for the creation of a Coronavirus Relief Fund.  (Note that local governments are eligible to participate in this fund only if they have a population of more than 500,000.)  Of this amount, $3 billion is allocated for Washington, D.C., Puerto Rico, the U.S. Virgin Islands, Guam, the Northern Mariana Islands, and American Samoa, and $8 billion is allocated for tribal governments.  The remaining $139 billion is to be allocated proportionally among the states, with each state receiving at least $1.25 billion.  Eligible local governments may not receive more than 45% of the amount allocated to the state in which they are located.  A chart prepared by Federal Funds Information for States showing the estimated allocation of the entire Coronavirus Relief Fund among the states, District of Columbia, Territories, and Tribes can be accessed here.

To be eligible for these funds, the chief executive of the government must certify to the Secretary of Treasury that it will comply with the following three conditions:

  1. the funds may be used only for necessary expenditures relating to COVID-19;
  2. the funds may not be used for expenditures that are already accounted for in the government’s most recently approved budget as of March 27, 2020; and
  3. the funds must be used for costs incurred between March 1, 2020, and December 30, 2020.

The Inspector General of the Department of the Treasury has oversight responsibility for funds provided to state, local, and tribal governments, and if it is determined that these funds were used improperly, the offending government must reimburse the federal government.

Other funding for which for state, local, and tribal governments may be eligible includes the following:

  • $454 billion for loans to businesses, states, and cities
  • $30.75 billion for an Education Stabilization Fund for states, school districts, and institutions of higher education for costs relating to COVID-19
  • $45 billion for a Disaster Relief Fund
  • $1.4 billion for deployments of the National Guard
  • $4.3 billion, through the CDC, to support efforts of federal, state, and local public health agencies
  • $25 billion for transit systems
  • $400 million in election security grants for the 2020 federal election cycle
  • $100 million for Emergency Management Performance Grants for emergency management activities
  • $45 million in grants to states for child welfare services
  • $850 million in grants through the Edward Byrne Memorial Justice Assistance Grant program to states for continuation of criminal justice programs
  • $5 billion for the Community Development Block Grant program to enable state and local governments to expand community health facilities, child care centers, food banks, and senior services

The CARES Act was phase 3 of the federal government’s legislative response to the COVID-19 pandemic.  Some members of Congress are already talking about phase 4, and when that happens, FMG will provide timely information about what it means for you.

Additional Information:

The FMG Coronavirus Task Team will be conducting a series of webinars on Coronavirus issues on a regular basis. Topics include the CCPA, the CARES Act, Education Claims, Law Enforcement and the viruses’ impact on the Construction Industry. Click here to register.

FMG has formed a Coronavirus Task Force to provide up-to-the-minute information, strategic advice, and practical solutions for our clients.  Our group is an interdisciplinary team of attorneys who can address the multitude of legal issues arising out of the coronavirus pandemic, including issues related to Healthcare, Product Liability, Tort Liability, Data Privacy, and Cyber and Local Governments.  For more information about the Task Force, click here.

You can also contact your FMG relationship partner or email the team with any questions at [email protected].

**DISCLAIMER:  The attorneys at Freeman Mathis & Gary, LLP (“FMG”) have been working hard to produce educational content to address issues arising from the concern over COVID-19.  The webinars and our written material have produced many questions. Some we have been able to answer, but many we cannot without a specific legal engagement.  We can only give legal advice to clients.  Please be aware that your attendance at one of our webinars or receipt of our written material does not establish an attorney-client relationship between you and FMG.  An attorney-client relationship will not exist unless and until an FMG partner expressly and explicitly states IN WRITING that FMG will undertake an attorney-client relationship with you, after ascertaining that the firm does not have any legal conflicts of interest.  As a result, you should not transmit any personal or confidential information to FMG unless we have entered into a formal written agreement with you.  We will continue to produce education content for the public, but we must point out that none of our webinars, articles, blog posts, or other similar material constitutes legal advice, does not create an attorney client relationship and you cannot rely on it as such.  We hope you will continue to take advantage of the conferences and materials that may pertain to your work or interests.** 

“Sanctuary Cities” Get a Reprieve For Now

Posted on: January 10th, 2019

By: Pamela Everett

As many city, county and state attorneys are aware, in 2017 the US. Department of Justice (DOJ) added three conditions to the application process for the Edward Byrne Memorial Justice Assistance Grant (“Byrne JAG”) program in an effort to eliminate so called sanctuary cities. The Byrne JAG program originated from the Omnibus Crime Control and Safe Streets Act of 1968,  which created grants to assist the law enforcement efforts of state and local authorities. Under the Byrne JAG program, states and localities may apply for funds to support criminal justice programs in a variety of categories, including law enforcement, prosecution, crime prevention, corrections, drug treatment, technology, victim and witness services, and mental health.

The first condition, called the “Notice Condition” requires grantees, upon request, to give advance notice to the Department of Homeland Security of the scheduled release date and time of aliens housed in state or local correctional facilities. The second condition, called the “Access Condition,” requires grantees to give federal agents access to aliens in state or local correctional facilities in order to question them about their immigration status. The third condition, called the “Compliance Condition” requires grantees to certify their compliance with 8 U.S.C. § 1373, which prohibits states and localities from restricting their officials from communicating with immigration authorities regarding anyone’s citizenship or immigration status. Grantees are also required to monitor any subgrantees’ compliance with the three conditions, and to notify DOJ if they become aware of credible evidence of a violation of the Compliance Condition. Additionally, all grantees must certify their compliance with the three conditions, which carries the risk of criminal prosecution, civil penalties, and administrative remedies. The DOJ also requires the jurisdictions’’ legal counsel to certify compliance with the conditions.

A number of jurisdictions have sued the DOJ and the U. S. Attorney General regarding these new conditions and sought a nationwide injunction; however, so far, none have  been successful in obtaining a nationwide injunction.  Recently a partial win was handed to the states of New York, Connecticut, New Jersey, Rhode Island, Washington, and Commonwealths of Massachusetts and Virginia and the City of New York. The States and the City challenged the imposition of the three conditions on five bases: (1) the conditions violates the separation of powers, (2) the conditions were ultra vires under the Administrative Procedure Act (“APA”), (3) the conditions were not in accordance with law under the APA, (4) the conditions were arbitrary and capricious under the APA, and (5) § 1373 violated the Tenth Amendment’s prohibition on commandeering.  This case challenged the authority of the Executive Branch of the federal government to compel states to adopt its preferred immigration policies by imposing conditions on congressionally authorized funding to which the states are otherwise entitled.

While the court held that the plaintiffs did not make a sufficient showing of nationwide impact to demonstrate that a nationwide injunction was necessary to provide relief to them, it did find as follows: (1) The Notice, Access, and Compliance Conditions were ultra vires and not in accordance with law under the APA. (2) 8 U.S.C. § 1373(a)–(b), insofar as it applies to states and localities, is facially unconstitutional under the anticommandeering doctrine of the Tenth Amendment. (3)  The Notice, Access, and Compliance Conditions violated the constitutional separation of powers. (4)The Notice, Access, and Compliance Conditions were arbitrary and capricious under the APA.  (5) The DOJ was mandated to reissue the States’ FY 2017 Byrne JAG award documents without the Notice, Access, or Compliance Conditions, and upon acceptance to disburse those awards as they would in the ordinary course without regard to those conditions.  Additionally, the DOJ was prohibited from imposing or enforcing the Notice, Access, or Compliance Conditions for FY 2017 Byrne JAG funding for the States, the City, or any of their agencies or political subdivisions.

The DOJ was prohibited from imposing or enforcing the Notice, Access, or Compliance Conditions for FY 2017 Byrne JAG funding for the States, the City, or any of their agencies or political subdivisions.

There are several other cases pending, including one filed by the City of San Francisco, seeking the issuance of a nationwide injunction to prohibit the enforcement of the new conditions. Stay tuned for more developments in this area.

If you have any questions or would like more information, please contact Pamela Everett at [email protected].

 

Related litigation: City of Chicago v. Sessions, 264 F. Supp. 3d 933 (N.D. Ill. 2017); affd. appeal, City of Chicago v. Sessions, 888 F.3d 272 (7th Cir. 2018), but later stayed the nationwide scope of the injunction pending en banc review. Conference City of Evanston v. Sessions, No. 18 Civ. 4853, slip op. at 11 (N.D. Ill. Aug. 9, 2018) City of Philadelphia v. Sessions, 280 F. Supp. 3d 579 (E.D. Pa. 2017); City of Philadelphia v. Sessions, 309 F. Supp. 3d 289 (E.D. Pa. 2018)(currently on appeal); California ex rel. Becerra v. Sessions, 284 F. Supp. 3d 1015 (N.D. Cal. 2018)