Week in Review

IN THE NEWS

• The Supreme Court unanimously ruled that the U.S. Securities and Exchange Commission (SEC) can disgorge companies of profits attained through fraud so long as the SEC does so within five years of any claim of fraud. This decision reversed a Tenth Circuit Court of Appeals ruling that disgorgement was not subject to a statute of limitations because it was not a penalty or a forfeiture. In writing the Court’s opinion, Justice Sonia Sotomayor said that disgorgement looks like a penalty because “it is imposed as a consequence of violating a public law and is intended to deter, not to compensate,” and thus it should be subject to the five-year statute of limitations.
• The U.S. House of Representatives passed the Financial CHOICE Act, which intends to “repeal the provisions of the Dodd-Frank Act that make America less prosperous, less stable, and less free.” The CHOICE Act calls for replacing the Consumer Financial Protection Bureau (CFPB) with a “Consumer Law Enforcement Agency” and “bringing the Agency into the regular appropriations process.” Under the Act, Congress would also take charge of “financial agency rulemaking” by requiring that those agencies “submit to each House of Congress and to the Comptroller General a report” analyzing new rules; Congress must approve any new “major rule.” House Democratic Leader Nancy Pelosi (D-CA) called the Act “a dangerous, Wall Street-first bill that would drag us right back to the days of the Great Recession.” Reportedly, the CHOICE Act is not expected to survive in the Senate.
• The U.S. Environmental Protection Agency (EPA) postponed for a year a deadline for states to comply with air quality standards for ozone, also known as smog. EPA justified the postponement by noting that states would have “more time to develop air quality plans,” and EPA hopes to “provide greater flexibility to states as they develop their plans.” EPA Administrator Scott Pruitt noted EPA’s intent to bolster “air quality improvement efforts without interfering with local decisions or impeding economic growth.”
• The U.S. Drug Enforcement Administration (DEA) declared it illegal for anyone to manufacture, distribute, dispense, or possess acetyl fentanyl, an opiate similar to heroin or oxycodone.  The DEA’s order followed an earlier determination by the agency that the drug offered no medical benefits and that its use can cause fatalities.
• The U.S. Department of Labor (DOL) eliminated “informal guidance on joint employment and independent contractors” that had been established during the Obama Administration. The former guidance had held companies jointly liable under the Fair Labor Standards Act and the Migrant and Seasonal Agricultural Worker Protection Act “when two or more employers jointly employed an employee.” Matt Haller, Vice President of Public Affairs for the International Franchise Association, praised the decision, saying, “We are pleased the DOL is taking first steps to undo this costly regulation created by the previous administration.” On the other hand, Christine Owens, Executive Director of the National Employment Law Project, called the decision “disappointing,” saying, “All it does is show the Trump Administration’s willingness to take symbolic steps to attack workers – here, at the expense of additional clarity for all parties.”
• Several environmental groups, including the Natural Resources Defense Council (NRDC) and the Sierra Club, sued the Trump Administration over EPA’s decision to delay Obama-era regulations intended to reduce methane pollution. The groups have argued that EPA’s issuance of this 90-day delay was procedurally defective, while EPA has claimed that it properly referenced a provision of the Clean Air Act that allows for delays in certain situations.
• Seattle Mayor Edward B. Murray signed an ordinance levying a consumer tax on sodas and other sugary beverages. Supporters said the measure would cut down on the consumption of sugary beverages linked to obesity, diabetes, and other health problems. Opponents said it would hurt the poor, burden small businesses, and cut jobs.
• Attorneys General from the states of California, Maine, Maryland, Massachusetts, New York, Washington, and Vermont filed an administrative action challenging EPA’s decision not to extend restrictions on the use of chlorpyrifos, a pesticide. The states have contended that EPA’s actions violate the Federal Food, Drug, and Cosmetic Act because EPA has left a food tolerance standard in place without finding out whether the pesticide is truly safe. Earthjustice, the NRDC, and the Pesticide Action Network have also separately challenged EPA’s decision not to reduce further use of chlorpyrifos.
• The Federal Communications Commission (FCC) published a proposed rule that would reinstate the information service classification of broadband Internet access service and return to the light-touch regulatory framework first established during the Clinton Administration. The FCC also announced that it seeks comment on the existing rules governing Internet service provider’s practices.

WHAT WE’RE READING THIS WEEK

• Diane Katz and Norbert Michel, both with the Heritage Foundation, argue in a recent report that Congress should dissolve the Consumer Financial Protection Bureau (CFPB). Katz and Michel contend that CFPB is not only unaccountable, but that it also restricts access to credit which erodes financial independence. They argue that, due to the existence of 22 federal statutes and state and local regulations related to consumer credit, Americans would remain just as protected against “unfair, deceptive, and fraudulent practices” if Congress were to dissolve the CFPB.
• In a new paper, Martin Kurzweil, Director of the Educational Transformation Program at Ithaka S+R and Wendell Pritchett, Provost of the University of Pennsylvania, propose a “management-based” approach to improving the quality of higher education. Following a model first developed by Professor Pritchett and published in The Regulatory Review, Kurzweil and Pritchett call for colleges and universities to document their own goals and develop plans for achieving them. Schools would then use third-parties to monitor their progress, which would be benchmarked against the experiences of peer organizations. If used effectively, this management-based approach would lead educational institutions to reexamine their performance continuously and keep improving their processes and results, conclude Kurzweil and Pritchett.
• In commentary appearing in Bloomberg, Cass Sunstein, a professor at Harvard Law School and the former Administrator of the Office of Information and Regulatory Affairs (OIRA), examines regulations approved by OIRA and observes that under the Trump Administration, “regulatory activity has nearly ground to a halt.” Given President Donald Trump’s “one in, two out” executive order, Sunstein predicts that agencies will likely “do nothing at all” to preserve existing regulations, “even if new regulations would produce significant benefits in terms of health and safety.” Sunstein draws what he calls an “interesting conclusion” from OIRA’s approvals under President Trump: while damage has been done to “Obama’s regulatory legacy,” OIRA is “hardly” undoing Obama Administration-era rules. Sunstein believes “Obama’s rules…are going to stick…because the law requires them.”  In a recent op-ed in The Hill, Stuart Shapiro of Rutgers University makes similar observations, noting that the Trump Administration has “so far . . . managed to repeal 14 out of nearly 2000 Obama administration significant regulations.”