Trapped in the Freezing Cold: Federal Defenders File Lawsuit Against the Metropolitan Detention Center

Written by Julia Wingfield

 

Last week’s “Polar Vortex”, caused sub-zero temperatures and high-speed winds to grip the east coast. New York City was particularly affected by this weather pattern—with temperatures plunging into the single digits. It was so cold that firefighters, combating a fire in a commercial building, took turns warming up on nearby buses. Schools, services and businesses shut down, and people hunkered down in their homes to stay warm.

At the Metropolitan Detention Center, a federal jail located in Brooklyn, the inmates were not given such an option. At the end of January, an electrical fire knocked out the power in most of the building, which resulted in inmates being confined in their cells, without hot water or heat.

As news of the conditions reached the general public, both the warden of the jail and the Bureau of Prisons initially denied there was any loss of power, claiming inmate housing conditions had been minimally impacted.

After dozens of interviews with staff, inmates, and inmates’ family members, this proved not to be the case. The week-long blackout resulted in freezing cold temperatures inside the cells. Inmates could see their breath, food was served undercooked, and to keep warm inmates filled cans with water and used contraband lighters to heat them. Inmates were kept locked in their cells for twenty-three hours a day in the dark and cold.

After public outcry and a series of protests, on February 3 power was restored. A few days later the Bureau of Prisons opened an investigation into the conditions of the jail. The Justice Department, in their oversight capacity of the Bureau of Prisons, released a statement, declaring they were “committed to the safe and humane living and working conditions of all inmates and employees.”

Not the First Accusation of Mistreatment

This is not the first time the Metropolitan Detention Center has been accused of mistreatment. Investigations by the Inspector General have been opened in the facility before.

First, after the September 11, 2001 terrorist attacks, investigations showed that staff were physically abusing Muslin inmates. These inmates were slammed into walls, and staff threatened their lives while they were behind bars. The Inspector General has also looked into other physical abuse. Both in 2002 and in 2006, investigations were opened after claims of staff beating inmates.

More recently, in 2013 and 2016, the Inspector General opened investigations into officers who were accused of sexually assaulting female inmates. After the investigation, three staff members were convicted. One of the staff members was convicted of repeatedly raping a victim and threatened to send her to solitary confinement if she reported it.

The Lawsuit

As a result of this pattern of mistreatment, and because of the recent conditions in the jail, the Federal Defenders of New York have filed a lawsuit against the Metropolitan Detention Center. According to the Federal Defender’s office, ““The I.G. previously has investigated M.D.C. and issued harshly critical reports. But nothing has changed.”

The complaint names both the Bureau of Prisons and the jail’s warden as parties to the lawsuit. After outlining the conditions at the jail, and the Bureau of Prison’s lack of response to those conditions, the complaint states two causes of action.

First, the Bureau of Prisons violated the inmates’ Sixth Amendment right to Counsel. The Sixth Amendment to the Constitution guarantees that, “in all criminal prosecution, the accused shall enjoy the right…to have Assistance of Counsel for his defense.”

During the blackout, the Bureau of Prisons cancelled nearly all legal visitation to one of the buildings from January 27 until February 4. No detailed information was provided to defense attorneys regarding the reasons for these cancellations. Additionally, no information was provided to attorneys about the “dire” conditions in the Metropolitan Detention Center. The Federal Defender argues that these actions substantially interfere with the right to counsel, and constitute a violation of the Sixth Amendment.

Second, the complaint claims the Bureau of Prisons violated their own regulations, the Administrative Procedure Act. These regulations require wardens to “provide the opportunity for pretrial inmate attorney visits on a seven-days-a-week basis.” Additionally, they prohibit the limitation of the frequency of visits for all inmates, requiring wards to “make every effort to arrange for a visit.” The Federal Defender argues that these failures show the BOP’s inability to follow its own regulations is “arbitrary and capricious and contrary to the law.”

The complaint seeks declaratory and injunctive relief, specifically the appointment of an outside monitor for the jail.

The Bureau of Prisons continues to underscore their narrative, with their lawyer arguing that the conditions only affected a handful of inmates, which does not warrant the appointment of an outside monitor. They also point out that the conditions have been fixed.

Ultimately, the Bureau of Prisons is investigating into the conditions of the jail, and the effect those conditions had on the inmates. The question remains: will this internal investigation be sufficient to address any mistreatment? The pressure of a lawsuit, and the public outcry, may be enough to push the Bureau of Prisons toward change.


Sources

Complaint for Petitioner, Federal Defenders of N.Y., Inc., No. 1:19-cv-00660-MKB-SMG, (E.D.N.Y 2019).

Annie Correal and Joseph Goldtein, ‘Its Cold as Hell’: Inside a Brooklyn Jail’s Weeklong Collapse, N.Y. Times, (Feb. 9, 2019.

Benjamin Weiser and Ali Winston, Brooklyn Federal Jail Had Heat Failures Weeks Before Crisis, Employees Say, N.Y. Times, (Feb. 5, 2019.

28 C.F.R. §551.117(a).

28 U.S.C. § 543.13(b), (d).

5 U.S.C. § 706(2).

Photo courtesy of the Washington Post.

New York Abandons Link Between Students’ Standardized Test Scores and Teacher Evaluations

Written by Kristian Stefanides

 

History

In 2015, Governor Andrew Cuomo spearheaded a national movement in American public education to revamp the system by determining a teacher’s rating by their students’ standardized test results. Cuomo promised that half of a teacher’s ratings would be based on how well (or how poorly) students performed on standardized tests.

The decision was met with resistance by parents and educators, who felt the system was an unfair way to evaluate job performance, as well as the anticipated stress this initiative would produce. Advocates held news conferences and rallies in protest of Cuomo’s new plan. New York parents, backed by teacher’s unions, showed the largest display of opposition by refusing to permit their children to sit for portions of the tests. As a result, 240,000 students did not sit for the English and math sections of the test last year.

Moving in a New Direction

Four years later, Cuomo has moved in a new direction, and New York is about to become a part of a larger group of states, including Colorado and California, dispensing with this form of teacher evaluations.

In Los Angeles, the nation’s second-largest school district, the city’s teachers’ union held a massive strike, partly due to this issue, and after one week, they were offered a deal by the city’s school district to create a new plan that would be less focused on the use of standardized exams. In Denver, the city’s teachers authorized a strike by vote that was in part due to a bonus system that rewarded teachers who had the privilege of working at schools with high exam scores.

The New York State Legislature’s new bill was originally passed last spring in the Assembly but did not move through the Senate until this year. Now that it has passed, teachers’ unions and local school districts in New York, along with some guidance from the Education Department, will be the official determinants of an educators rating. Standardized tests will not be a requirement in this evaluation, a move heavily backed by the New York State United Teachers (NYSUT) Union and Democrats. The NYSUT is fearful of a future reversion to Cuomo’s previous stance, but many have shown support for Cuomo’s new direction.

“Most parents believe their local school and teachers are good. To have evaluations that contradict that creates some dissonance,” said Columbia University Teachers College professor, Aaron Pallas. “The state tests seem so far removed from day-to-day classroom practice.”

When his original evaluation plan passed a few years ago, Cuomo pushed the Board of Regents to place a ban on the use of standardized testing scores as a means for the evaluation of teachers due to the protests. Essentially, this ban will be codified into New York state law with the new bill.

Data shows that in 2016, ninety-six percent of teachers were rated “highly effective” or “effective” while only one percent was found to be “ineffective.” However, that same year, less than forty percent of students passed the standardized exams in math and English.

What evidence of low test scores was once used as a factor for rating a teacher as ineffective and as a way to fire them will now be disregarded in determining a teacher’s fate. Rather, educators will not be penalized over poor test results, but instead, will be protected.

President of the United Federation of Teachers based in New York City was pleased with Cuomo’s new plan stating, he “now understands what standardized tests are, and their limitations, and I give him credit for that.” No longer will teachers have to worry that their students’ standardized test scores will be linked to their teaching evaluations, and potentially the loss of their jobs.

Although many teachers, parents, and scholars are in favor of the new bill, evaluation advocates are unsatisfied.

“People overplayed their hands,” president of the National Council on Teacher Quality, Kate Walsh, said. “Instead of adjusting, they threw the cards in and went home sulking.

But Cuomo’s new plan came from listening to local communities. Jim. Malatra, former top aide, served as the governor’s office’s soundboard for the 2015 education agenda. Parents and teachers voiced concerns about the old bill and wanted something different.

New York City is Following Suit

Similar to Cuomo’s prior stance, longtime New York City Mayor Michael Bloomberg envisioned a teacher evaluation system where students’ test results defined a teacher’s rating. But since taking office in 2014, Mayor Bill de Blasio has worked to take the City into a new direction.

The Future of Teacher Evaluations

“What we’ve heard from teachers is that there’s a sweet spot where assessments are useful for informing the teaching and learning process,” Paula White, executive director of Educators for Excellence in Excellence, a teacher organization in New York, said. “Teachers invented tests” after all, she noted.

With notable advantages and disadvantages to both sides, a compromise in the middle may be suitable to not overly rely on standardized tests for teacher evaluations, but not to eliminate those tests completely.

While basing teachers’ evaluations on students’ exam performances may motivate teachers to give students their best efforts, it is difficult to determine whether test scores are the best way to evaluate more than half of a teacher’s performance when many other factors can play into a student’s score. “Our teachers and students are more than their test scores,” bill sponsor, Senator Shelley Mayer, said in a statement. “Thank you to Majority Leader Andrea Stewart-Cousins and

my colleagues for changing state law to allow districts to determine the most effective ways to measure student and teacher performance.”


Sources

Eliza Shapiro, New York Joins Movement to Abandon Use of Student Tests in Teacher Evaluations, THE NEW YORK TIMES (Feb. 1, 2019.

Rick Karlin, Major education bills on tap for New York Legislature next week, TIMESUNION (Jan. 18, 2019.

Zak Failla, New York Abandons Use of Tests In Teacher Evaluations, DAILY VOICE (Feb. 3, 2019.

Photo courtesy of Washington Post.

Supreme Court Allows Transgender Military Ban to Remain in Effect

Written by Molly McDermid

 

On January 15, 2019, the United States Supreme Court decided in a 5-4 decision to allow the Trump Administration’s transgender military ban to remain in effect for the time being. The decision to stay lower court injunctions allows the policy to continue while cases challenging the ban, Trump v. Karnski and Trump v. Stockman, make their way through the United States Court of Appeals for the Ninth Circuit. The Court additionally denied the Government’s request to grant certiorari immediately in an effort to bypass the Court of Appeals decisions. Supreme Court Rules indicate that the process of reviewing a federal trial court decision, prior to the ruling of a Court of Appeals, occurs only in cases of imperative public importance requiring immediate action by the Court. By refusing to grant certiorari without comment, the Supreme Court’s decision indicates that this case is not one of those rare occasions. Therefore, the nation must wait for the issue to proceed through the courts in its normal manner.

Background

The ban at issue is the product of a series of tweets and memoranda issued by President Donald J. Trump. A tweet stated, “the Unites States government will not accept or allow . . . [t]ransgender individuals to serve in any capacity in the U.S. Military.” In his later released memo, the President directed the Secretary of Defense and the Secretary of Homeland Security “to return to the longstanding policy and practice on military service by transgender individuals that was in place prior to June 2016.” President Trump’s policy effectively reverses the Obama-era policy, which allowed transgender Americans to openly serve in the military. The Obama Administration’s policy additionally prohibited transgender individuals from being discharged solely based on being transgender.

The Trump Administration’s policy prohibits most transgender Americans from serving in the military, with some exceptions. Exceptions include: (1) current active-duty members of the military diagnosed with gender dysphoria; (2) those stable in their biological sex for thirty-six consecutive months prior to entering military service; (3) those diagnosed with gender dysphoria after beginning service, but do not require gender change; and (4) those with a history of gender dysphoria, but who serve in their biological sex.

Supreme Court Ruling

The Government argued for the Court to bypass the Ninth Circuit decision and grant certiorari to rule on the District Courts’ nationwide preliminary injunction against the  transgender policy. However, the Court denied certiorari and accepted the Government’s alternative argument for a stay, in turn reinstating the transgender military ban while the matter is decided by the Ninth Circuit.

The Government’s argument focused on the district courts’ “trend” of issuing nationwide injunctions against major Executive policy decisions. The Government stated that in two years, the district courts have issued twenty-five nationwide injunctions against major Executive policy decisions. Additionally, the Government stated that these nationwide preliminary injunctions have led to “intrusive discovery into Executive Branch decision-making, in a number of instances, blanket abrogation’s of the deliberative-process privilege.” The Government argued that these acts by the lower courts have significantly infringed on the Executive Branch’s ability to implement its policies. The Supreme Court responded by lifting the injunctions that were blocked the implementation of the Executive’s transgender military policy.

Although the decision was viewed negatively to those advocating for transgender rights, advocates are also pleased by the Court’s decision not to immediately grant certiorari prior to the Ninth Circuit’s decisions. Jennifer L. Levi, director of the Transgender Rights Project of GLBTQ Legal Advocates and Defenders  stated, “In declining to hear these cases, the Supreme Court saw through the contrived efforts to gin up a national crisis.” Further, advocates say that the decision to deny certiorari at this time may have avoided an expedited decision in favor of the Trump Administration’s policy, due to the conservative majority on the bench.

Conclusion

For now, the status of transgender service members remains uncertain. According to the Supreme Court ruling, the Trump Administration’s transgender restrictions will remain in effect until the Ninth Circuit rules on the issue.


Sources

Adam Liptak, Supreme Court Revives Transgender Ban for Military Service, N.Y. TIMES, (Jan. 22, 2019).

Application for a Stay in the Alternative to a Writ of Certiorari Before Judgement to the United States Court of Appeals for the District of Columbia, Donald J. Trump v. Jane Doe 2, No. 18-667.

Ariane de Vogue and Zachary Cohen, Supreme Court Allows Transgender Military Ban to go into Effect, CNN, (Jan. 22, 2019).

David Welna and Bill Chappell, Supreme Court Revives Trump’s Ban on Transgender Military Personnel, For Now, NPR, (Jan. 22, 2019).

Memorandum from President Donald J. Trump to the Secretary of Defense and the Secretary of Homeland Security (Aug. 25, 2017) (on file with author).

Photo courtesy of The Hill.

Supreme Court Unanimously Defends Workers’ Rights in New Prime Inc. v. Oliveira

written by matt Bemis

 

On January 15th, 2019, in an 8-0 unanimous decision, the United States Supreme Court ruled that independent contractors who work in transportation cannot be forced into mandatory arbitration (Justice Brett Kavanaugh, who joined the Court after oral arguments in the case, did not participate in the decision). The ruling, written by Justice Neil Gorsuch, holds that a court’s authority to compel arbitration under the Federal Arbitration Act does not extend to all private contracts, and under Section 1 of the Act, excludes independent contractors engaged in foreign or interstate commerce.

Background Information

The petitioner, New Prime, Inc. is an interstate trucking company. The respondent, Dominic Oliveira, joined New Prime’s “Student Truck Driver Program,” a company-specific apprenticeship program. During his membership in this program, Oliveira had to first drive 10,000 miles as an unpaid trainee, followed by an additional 30,000 miles as an “apprentice,” working for approximately four dollars an hour. After his successful completion of the program, New Prime offered Oliveira a permanent position at the firm and gave him the option to work as an employee or as an independent contractor, the latter of which New Prime asserted would be more economical and beneficial to Oliveira. Oliveira ultimately elected independent contractor status, but soon found that, by virtue of his elected status, he would be responsible for a number of different additional expenses, including truck leasing fees, fuel, and equipment paycheck deductions. These costs often exceeded Oliveira’s base rate. He later rejoined New Prime as an employee, and although his duties remained the same, his take home pay greatly increased. In 2015, Oliveira started a class-action lawsuit against New Prime, arguing the company failed to pay fair wages to its independent contractors.

After filing a class action suit, New Prime asked the United States District Court for the District of Massachusetts (and later, on appeal, the United States Court of Appeals for the First Circuit) to invoke its statutory authority under the Federal Arbitration Act to compel arbitration. Oliveira countered and argued that Section 1 of the Act exempts disputes involving “contracts of employment” of certain transportation workers engaged in interstate commerce, and therefore, contractors hired by New Prime were exempt from compulsory arbitration. In response, New Prime argued that “contracts of employment” referred only to contracts that establish an employer-employee relationship, and not to agreements with independent contractors.

What is the Federal Arbitration Act (FAA)?

Generally speaking, arbitration is a method of legal dispute resolution in which a neutral, private third party, rather than a judge or jury, renders a decision on a particular matter. Although cheaper and more expedient than a traditional judicial proceeding, critics of arbitration contend that mandatory arbitration agreements create one-sided outcomes that deny consumers and employees the advantages (such as a jury trial) afforded in a court proceeding. President Calvin Coolidge signed the FAA in 1925. Congress’s primary motivation for drafting the Act was to protect the enforcement of arbitration agreements as agreed to by contracting parties. Under Section 2 of the Act, a written arbitration provision in any contract involving commerce is valid, irrevocable and enforceable. If either party fails to abide by the arbitration terms in the relevant agreement, a federal court may compel arbitration under Section 4 of the Act. However, Section 1 of the Act includes several transactions exempt from the scope of the Act, notably, “contracts of employment of. . .any class of workers engaged in foreign or interstate commerce,” the language at the heart of the dispute in the New Prime case.

Supreme Court Ruling

In its analysis, the Court employed a traditional textualist approach to the statutory question presented. To ascertain whether “contracts of employment” in Section 1 of the FAA includes employment contracts only (with a formal employer-employee relationship present), or more broadly includes independent contractor agreements, the Court interpreted the words within the FAA by looking to their ordinary meaning at the time Congress enacted the statute. According to the Court, in 1925, a “contract for employment” meant nothing more than an agreement to perform work, and was not yet a phrase of art implying a formalized employer-employee relationship. This interpretation is in step with other 20th century cases where the Court itself used the phrase “contract of employment” to describe work agreements involving independent contractors. Further, the Court looked to the statutory text to glean meaning. In Section 1 of the FAA, the Act excludes “contracts of employment of. . . any. . . class of workers. . .” (emphasis added). By using the word “workers,” the Court reasons, Congress intended to reach a broad class of work arrangements. As such, Dominic Oliveira’s independent contractor agreement with New Prime (as well as those of his similarly situated peers) falls within Section 1 of the FAA’s exception and as a result, the lower courts’ refusal to compel arbitration was correct and in keeping with FAA requirements.

Workers’ Rights Going Forward

Although this is a relatively narrow ruling, it is the second major case (following Epic Systems Corp. v. Lewis last year) addressing the confluence of workers’ rights and employer-friendly, compulsory arbitration. Following the release of the decision, shares of transportation stocks fell in the larger market. With millions of employees nationwide working under an independent contractor label in today’s “gig economy,” it is uncertain as to the extent that New Prime and future cases will permeate into the many commercial arenas where the definition of “work” has taken on new form.


Sources

9 U.S.C §§1–4 (2012).

Ed Kilgore, Gorsuch Defends Workers’ Rights in Trucking Arbitration Decision, NEW YORK MAG. (Jan. 15, 2019), .

JON O. SHIMABUKURO & JENNIFER A. STAMAN, CONG. RESEARCH SERV., 7-5700, MANDATORY ARBITRATION AND THE FEDERAL ARBITRATION ACT (2017).

New Prime Inc. v. Oliveira, 586 U.S. ______ (2019)

Tucker Higgins, Transportation stocks sink after Supreme Court backs truct who resisted being forced into arbitration after suing over wages, CNBC (Jan. 15, 2019, 4:39 PM).

Photo courtesy of Fueloyal.

Border Wall or . . . ?: The Legality of Declaring a National Emergency to Build a Border Wall

Written By Kali Schreiner

 

On December 22, 2018, the federal government came to a screeching halt in what is now the longest shutdown in United States history. The government shutdown is attributed to the inability of Congress and President Donald J. Trump to reach an agreement on the appropriation of funds for the 2019 fiscal year.

As a central promise of his campaign, President Trump ensured Americans he would build a border wall between the U.S. and Mexico. In order to achieve this, Trump requested approximately $5 billion in federal funds to be allocated toward the construction of a wall. The proposed spending bill which included the border wall funding failed and a partial shutdown ensued.

What’s Next?

Since the shutdown, President Trump has acknowledged his presidential power to declare a national emergency and move forward with plans to build the controversial wall. On January 4, 2019, he explained, “[w]e can call a national emergency because of the security of our country. We can call a national emergency and build it very quickly.” Several days later President Trump followed up on his previous remarks with a statement to reporters where he further explained, “I may declare a national emergency dependent on what’s going to happen over the next few days.” Although many believed these statements to be idle boasts by the President, Vice President Mike Pence has confirmed that the White House is looking into the legality of President Trump’s ability to declare a border emergency.

Declaring a National Emergency

To date, several legal scholars have expressed their opinion on President Trump’s ability to declare a national emergency in order to fund the border wall project. After a thorough review of constitutional law, most scholars believe that 10 U.S.C. § 2808(a) provides the most support to back the President’s claims that he has the power to declare a national emergency and build the wall. Under this statute, if a president declares a national emergency, military construction projects may be undertaken so long as they are “necessary to support such use of the armed forces.” Although critics question whether current issues at the U.S.­–Mexico border actually constitute a crisis, there is almost no restriction on the president’s ability to declare a national emergency. Additionally, in his most recent address to the nation, President Trump continued to stressing that there is a “growing humanitarian and security crisis at [the] southern border,” further bolstering his claim with respect to a national emergency.

In reviewing the plain meaning of the text of § 2808, the President’s authority to institute a construction project will only apply to a national emergency that requires the use of armed forces. As such, critics have questioned the applicability of § 2808 in relation to the current issues at the Mexican border. Specifically, U.S. Senator Jack Reed recently stated, “we are not at war with Mexico, and the proposed border wall has no core [Department of Defense] function.” To support his statement, he points to a review of the National Defense Strategy which makes no mention of the southern border as a national defense priority. Despite this argument, several scholars feel that President Trump’s deployment of troops to the southern border in October 2018 may have been sufficient to lay the groundwork for the involvement of the U.S. military.

Challenging the Declaration

After Congress revised the National Emergencies Act, it became considerably harder to override presidential power with respect to emergency declarations. Following the revision, termination of an emergency declaration requires a joint resolution signed by the president. Should the president refuse to sign, then a two–thirds majority vote in each chamber would be required to override the president’s veto. However, according to Elizabeth Goitein, “during the 40 years the law has been in place, Congress has not met even once. . . to vote on whether to end [an emergency declaration].”

In addition to any congressional challenge President Trump may face, an emergency declaration would almost certainly result in various legal challenges. After rigorous discussion among legal scholars, it remains unclear how such a challenge would play out in the court system. However, most agree that the questions at hand would ultimately focus on whether the emergency at the border actually exists and the limitations of presidential power.

Conclusion

Legal scholars across the world are grappling to determine what will likely happen in the coming weeks as uncertainty remains as to whether President Trump actually possesses the power to build the border wall through the declaration of a national emergency. As such, should Trump proceed with his plans, congressional and legal action will likely follow which could very well spill over into the 2020 election.


Sources

10 U.S.C. § 2808(a) (2012).

50 U.S.C. §§ 1601–1651 (2012).

Josh Dawsey & David Nakamura, “I can do it if I want”: Trump threatens to invoke emergency powers to build border wall, Washington Post (Jan. 4, 2019).

Eli Watkins, Manu Raju & Elizabeth Landers, Trump: “May declare a national emergency” to build wall, CNN (Jan. 7, 2019, 9:44 AM).

Jim Acosta & Betsy Klein, Pence says White House looking into Trump’s ability to declare border emergency, CNN (Jan. 7, 2019, 10:18 PM).

Trump Addresses Nation on Immigration, New York Times (Jan. 9, 2019).

Reed Opposes Trump Administration’s Plan to Declare National Emergency & Use Defense Dollars to Pay for Wall, Jack Reed (Jan. 4, 2019).

Grace Segers, A Trump national emergency declaration could face challenges, CBS News (Jan. 10, 2019).

Elizabeth Goitein, What the President Could Do If He Declares a State of Emergency, Brennan Center for Justice (Dec. 12, 2018).

Photo courtesy of BBC.

FINRA Fines Morgan Stanley For Five Years Of Ineffective Anti-Money Laundering Monitoring

written by Madeline Sheffield

 

The Financial Industry Regulatory Authority (FINRA) announced on December 26, 2018, that it has fined Morgan Stanley Smith Barney LCC (Morgan Stanley) ten million dollars due to failures with the large investment bank’s anti-money laundering (AML) program. Specifically, Morgan Stanley failed to comply with the Bank Secrecy Act over a period of five years. FINRA noted three specific failures of the program:

First, Morgan Stanley’s automated AML surveillance system did not receive critical data from several systems, undermining the firm’s surveillance of tens of billions of dollars of wire and foreign currency transfers, including transfers to and from countries known for having high money-laundering risk. Second, Morgan Stanley failed to devote sufficient resources to review alerts generated by its automated AML surveillance system, and consequently, Morgan Stanley analysts often closed alerts without sufficiently conducting and/or documenting their investigations of potentially suspicious wire transfers. Third, Morgan Stanley’s AML Department did not reasonably monitor customers’ deposits and trades in penny stock for potentially suspicious activity, despite the fact that its customers deposited approximately 2.7 billion shares of penny stock, which resulted in subsequent sales totaling approximately $164 million during that time period.

Morgan Stanley agreed to the fine as part of a settlement and consented to the entry of the regulatory agency’s findings.

Bank Secrecy Act

FINRA requires that firms like Morgan Stanley comply with federal law. In this case, the federal law at issue is the Bank Secrecy Act. In 1970 Congress passed the Bank Secrecy Act to fight money laundering in the United States. The Act requires financial institutions to keep appropriate records and file reports pertaining to currency transactions and customer relationships. The Act further requires “certain transactions by and through financial institutions in excess of $10,000 into, out of, and within the U.S.,” be reported to the Treasury. Since the enactment of the Bank Secrecy Act, several laws and regulations have expanded the scope of anti-money laundering measures and counter-terrorist financing, most recently the USA Patriot Act. In response to the September 2001 terrorist attacks on the United States, Congress enacted the USA Patriot Act as a provision of the Bank Secrecy Act “to prevent, detect and prosecute those involved in money laundering and terrorist financing.”

The Effect of Failed Anti-Money Laundering Programs

The two following case studies illustrate situations where poor surveillance led to financing of drug and terror organizations. Six years ago, the United States Justice Department, the Office of the Comptroller of the Currency, the Federal Reserve, and the Treasury Department found HSBC Holdings Plc. to have ineffective money laundering programs and compliance monitoring. The U.S. Justice Department found that, working together, Mexico’s Sinaloa cartel and Colombia’s Norte Del Valle Cartel laundered $881 million through HSBC. At that time only one to four employees were responsible for reviewing alerts signaling suspicious wire transactions and one or two compliance officials monitored bulk cash transactions for approximately 600 customers. FINRA’s second finding against Morgan Stanley on December 26, 2018 specifying the failure to “devote sufficient resources to review alerts generated by its automated AML surveillance system” is not unlike HSBC’s failure to monitor due to inadequate staffing.

Prior to the September 2001 terrorist attacks, detecting terrorist financing was not a priority. The September 11 hijackers used U.S. financial institutions to move, hold, and retrieve their money, and primarily deposited money into U.S. accounts via wire transfer and deposits of cash. Because the money-laundering controls established at the time were focused on drug trafficking and large-scale financial fraud, the hijackers’ transactions went undetected. Since the attacks, bank officials are now alerted of suspicious deposits and transfers that may be involved with financing terrorist organizations.

Looking Forward

As noted from the two case studies above, both federal regulators and federal agencies have an interest in tracking money movement. Regulations set forth, such as the Bank Secrecy Act require financial institutions to do the monitoring and, if needed, provide federal agencies and regulators with pertinent information regarding laundering, fraud, and funding terrorist organizations. Morgan Stanley’s failure to comply with specific portions of the Bank Secrecy Act and the subsequent fine by FINRA exemplify the federal government’s continued interest in cutting off potential threats to the United States at the money source.


Sources

Aruna Viswanatha, Brett Wolf, HSBC to pay $1.9 billion U.S. fine in money-laundering case, REUTERS (Dec. 11, 2012, 12:45 AM).

FEDERAL DEPOSIT INSURANCE CORPORATION, DSC RISK MANAGEMENT MANUAL OF EXAMINATION POLICIES Section 8.1.

Finra fines Morgan Stanley $10 million for lapses in anti-money laundering program, INVESTMENTNEWS (Dec. 26, 2018, 12:43 PM).

NATIONAL COMMISSION ON TERRORIST ATTACKS UPON THE UNITED STATES, MONOGRAPH ON TERRORIST FINANCING.

News Release, Financial Industry Regulatory Authority, FINRA Fines Morgan Stanley $10 Million for AML Program and Supervisory Failures (Dec. 26, 2018).

Ross Snel, Morgan Stanley Fined Over Anti-Money Laundering Program, BARRON’S (Dec. 27, 2018, 5:44 PM).

Suzanne Barlyn, Morgan Stanley unit to pay $10 million fine for anti-money laundering violations, REUTERS (Dec. 26, 2018, 10:39 AM).

Photo courtesy of NewsBTC.

Battle Royale: A Showdown Over Creative Expression

Written By Matthew Taghavi

 

The Fortnite Phenomenon

Fortnite is a phenomenon that has, for gamers, combined two seemingly unrelated concepts into an entertaining video game. Fortnite combines the cartoon elements of building games like Minecraft with the action of shooters like Call of Duty, resulting in tremendous success. Fortnite has approximately 200 million players, has brought in an estimated $1 billion in revenue from microtransactions, and has received $1.25 billion via investments. The company behind Fortnite, Epic games, was recently valued at $15 billion.

Fortnite’s business model is not unique, but it is effective. Fortnite is a “free to play” game, meaning it costs nothing to obtain and play—anyone with a video game console or mobile device can download it for free. Instead of charging to play, Fortnite makes money through transactions within the game itself, known as microtransactions. For example, for $9.99 players can purchase 1,000 “v-bucks.” These v-bucks can then be used to unlock cosmetic accessories in the game, such as costumes or dances for their in-game characters. An example is illustrative.

Fortnite’s success has not come without a price. Specifically, Fortnite is now being accused of stealing the intellectual property of various artists and individuals. Many of the dances Fortnite uses in its game are exact copies of dances created by people in the “real world.” Fortnite seemingly uses these dances without asking for consent. One of these artists, Terrence Ferguson (also known as rapper “2 Milly”), filed a lawsuit in the Central District of California alleging, among other things, that Fortnite illegally used his dance “Milly Rock,” in violation of the Copyright Act of 1976. Other artists followed his lead shortly thereafter. The question now is, do they have a case?

Copyright Law in the United States

The issue presented by these cases is seemingly simple, but complex in nature: can an individual copyright a dance? The Copyright Act of 1976 is the federal law that exclusively governs modern copyright disputes and protection. In order to have protection under the Copyright Act, a party must demonstrate three things: work of authorship, originality, and fixation. Because fixation is not at issue in the Fortnite case, only the first two requirements are relevant here.

Work of authorship is a requirement created by law. Copyright protection only exists in  “expression” which is legally recognized. The Copyright Act was the first federal law to recognize that dance movements, or “choreographic works” as the Act puts it, could be legally protected. However, the Act does not define what choreographic works means. The legislative history of the Act states that “choreographic works” is not defined because the term has a “fairly settled meaning.” The Congress that passed the Act felt that it was so obvious that “simple routines” are not protectible that it did not find it necessary to define the term. Ironically, the definition and scope of choreographic works is the issue here.

Originality is a requirement created by the constitution. In order to acquire copyright protection, an expression must have some minimum degree of creativity. When determining creativity, courts will not judge the artistic value of a work, but will look at whether the work has some creative spark. Ultimately, creative spark is nothing more than the selection and arrangement of ideas. A work becomes protectable expression when there are a sufficient number of choices made to display creativity. This is typically an easy standard to meet, but if a work of authorship involves no choices at all it cannot be protected.

Section 102(b) of the Copyright Act complicates the matter. Under the Act, only the expression of ideas may be protected, not the idea itself. For example, the Copyright Office has suggested that “commonplace movements,” such as yoga positions, are not eligible for copyright protection because they lack a “sufficient amount of authorship.” The Copyright Office has also ruled that copyright protection does not extend to individual words, short slogans, or phrases. These examples illustrate what is known as the “idea/expression dichotomy,” which is codified in Section 102(b). This legal concept exists to limit the scope of copyright protection described above. Thus, even original works of authorship will not be protected if they are characterized as ideas. This limitation is necessary to reinforce the basic purpose of copyright law, which is to incentivize the creation of new works.[1] Since all new expression borrows from basic concepts and ideas, it would be impossible to create new works if such ideas were protected by copyright. If the outline of a woman could be protected by copyright, the Mona Lisa would likely be an infringing and unlawful painting. Thus, a line between idea and expression must be drawn to ensure new works are created.

Frivolous lawsuit or legitimate complaint?

With regard to the Fortnite lawsuit, do the dances at issue here meet the requirements of copyright protection? The answer is maybe. The plaintiffs in these cases have alleged that Fortnite has directly infringed on their copyright by creating an unauthorized derivative work. However, before the court can deal with the issue of infringement, the plaintiffs will have to show that their dances are capable of being protected. They will have to demonstrate that these dances are sufficiently original by pointing to the different artistic choices they made. Epic Games, the creator of Fortnite, will likely respond by arguing that “choreographic works” does not include the type of dance moves at issue here because they are too simple. Epic Games may point to some of the elements that the Copyright Office has identified as being necessary to a choreographic work, such as a performance by a highly skilled individual or a story conveyed through movement. Epic games might argue that since the dances at issue here convey no message and require little skill that they are not deserving of copyright protection. While the Copyright Office’s statements are not binding law, they will be highly persuasive for the court in deciding this matter. Even if the court does find that the artists have protectable expression, they will then have to decide whether Epic Games infringed on this protection. In such a scenario, the court would have to decide whether the dances in Fortnite are similar enough to the dances in the real world. In short, the question would become whether Fortnite copied the expression or the idea.

This is a rather novel issue, and many scholars find these lawsuits are intriguing because the law is rather unclear. The California court will have to clarify the scope of protection afforded by the Copyright Act to choreographic works. Choreographers rarely litigate these types of matters, and artists have generally not taken legal action in these situations. In the past, the United States Court of Appeals for the Ninth Circuit has stated that “[e]xplicit federal copyright protection for choreography is a fairly recent development, and the scope of that protection is an uncharted area of the law.” This remains true today.


Sources

Feist Publ’ns, Inc. v. Rural Tel. Serv. Co., 499 U.S. 340 (1991)

Baker v. Selden, 101 U.S. 99 (1879)

Bikram’s Yoga College of India v. Evolation Yoga, LLC, 803 F.3d 1032, 1043 (9th Cir. 2015)

Horgan v. Macmillan, Inc., 789 F.2d 157, 160 (2d Cir. 1986)

United States Copyright Office, Copyright Registration of Choreography and Pantomime, Circular 52.

Shanti Sadtler, Preservation and Protection in Dance Licensing: How Choreographers Use Contract to Fill in the Gaps of Copyright and Custom, 35 Colum. J.L. & Arts 253, 257 (2012).

37 C.F.R. § 202.1

Copyright Act of 1976, Pub. L. No. 94-553, 90 Stat. 2541 (Oct. 19, 1976), codified at Title 17 U.S. Code Annotated.

Erica Yee, The real reason Epic landed a $15 billion valuation is not Fortnite’s viral video game success, CNBC.

Sarah E. Needleman and Katie Roof, Fortnite Creator Epic Games Valued at Nearly $15 Billion, Wall Street Journal.

Photo courtesy of Epic Games.

Top Ten Articles of 2018

Quite a bit happened in the world of legal news in 2018, and our Editorial Staff members on hand to keep us all updated each week. To reflect on the year that has passed and look forward to the year ahead, we are celebrating our members and their hard work by counting down our most-read articles of 2018!

10. USSF: Playing Money or Soccer?

This March article, written by Nicholas Constantino, explores soccer leagues in the United States and discusses the NASL’s decision to cancel its season after its request for a preliminary injunction was not granted.

 

9. Georgia Tax Bill Clear for Takeoff While Second Amendment Grounds Delta’s Exception

This March article, written by Erika Simonson, explores the intersection between a $50 million tax cut and the national gun control debate, and its affect on Delta airlines.

 

 

8. What RBG Says (Or Doesn’t Say) Goes: Understanding the Debate Over the Ginsburg Standard’s Application in the Upcoming Confirmation Hearings of Supreme Court Nominee Brett Kavanaugh

This August article, written by Nicolette Zulli, explains the “Ginsburg Standard” and explores how the standard may be used in upcoming Supreme Court confirmation hearings.

 

7. Understanding Securities Laws: Why Elon Musk Might be in Hot Water After Tweeting About Taking Tesla Private

This September article, written by Nolan Kokkoris, explores a controversial tweet sent by Elon Musk, and explained how his company, Tesla, could be held liable for the message.

 

 

6. Closed Chambers: Sexual Misconduct in the Federal Judiciary

This January article, written by Nicolette Zulli, discusses the federal judiciary’s move to reform its reporting and investigation policies for sexual misconduct by federal judges.

5. Reevaluating Cross-Racial Identification: NY Juries to Be Informed of Potential for Inaccuracy

police line-up

This January article, written by Caitlyn Buckman, discusses a New York Court of Appeals decision holding that some cross-racial identifications can force a jury instruction on the “cross-race effect.”

4.  Facebook Faced with Data Breach Controversy

This March article, written by Amy Johnson, discusses the major Facebook data breach and the potential legal consequences that could follow.

 

 

3. Gorsuch and Sotomayor Criticize the Court for Not Hearing a 6th Amendment Right to Confrontation Issue

This November article, written by Julia Gorski, discusses a Supreme Court dissent criticizing the Court’s decision not to grant certiorari in a case regarding the right to confront one’s accusers.

2. Victim Impact Statements and the Case of Larry Nassar

This January article, written by Briannie Kraft, discusses the legality of victim impact statements at criminal sentencing hearings, using the case of former gymnastics doctor Larry Nassar as a prime and relevant example.

 

1. The Molineux Rule: How this Exception to the Rules of Evidence Could Impact the Harvey Weinstein Trial

Our most popular article of 2018 is this June article written by Sara Lupi, which discusses how a New York exception to the rules of evidence could be used in the sexual assault trial against disgraced former film producer Harvey Weinstein.

Could the Affordable Care Act Return to the Supreme Court for a Third Time?

Written by Alexandra Gladu DeSimone

 

Will it be, “Third time’s a charm,” or, “Three strikes, you’re out,” for the Affordable Care Act? The landmark health care overhaul became law in 2010, but it continues to draw substantial debate even eight years later. Challenges to the law have landed on the United States Supreme Court’s docket twice already, but a recent federal district court ruling in Texas could give rise to yet another petition for certiorari.

On December 14, 2018, Judge Reed C. O’Connor of the United States District Court for the Northern District of Texas declared the Affordable Care Act unconstitutional. The case, Texas v. United States, did not arise in a vacuum. Instead, the legal issue at the heart of the case has its roots in the previous Supreme Court decisions on the Affordable Care Act and Congress’s maneuvers since the law went into effect.

The Individual Mandate & Sebelius

The Affordable Care Act, also known as “Obamacare,” was President Barack Obama’s attempt to bring universal health care to the American people. The law sought to offer universal health care coverage by expanding Medicaid, creating coverage options for people with pre-existing conditions, and, most controversially, requiring all Americans to buy health insurance or pay a penalty fee. This final piece, known as the “Individual Mandate” has formed the basis for much of the debate and litigation around the law.

In 2012, the Supreme Court in National Federation of Independent Businesses v. Sebelius ruled the Individual Mandate constitutional under Congress’s tax power, grounded in Article I, Section 8 of the United States Constitution. Writing for the Court, Chief Justice John Roberts explained the tax power expansively. In his words, the power to tax granted by the U.S. Constitution “gives the Federal Government considerable influence even in areas where it cannot directly regulate.” The Court ultimately interpreted the penalty imposed on individuals who failed to purchase health insurance to be a tax, which brought the Affordable Care Act under the broad umbrella of Congress’s tax power. Although the Court’s decision in Sebelius upheld the Affordable Care Act, it did so only narrowly, with a 5-4 decision on the Individual Mandate issue. The Court upheld the law again in 2015 in the similar case of King v. Burwell.

A New Law & A New Case

Congress in 2017 passed the Tax Cuts and Jobs Act, which eliminated the penalty for failing to purchase health insurance. In this way, the 2017 law inevitably begged the question: If the tax disappears, can the Affordable Care Act still stand as a valid exercise of Congress’s tax power?

Texas v. United States asks that very question. In early 2018, twenty states, including Alabama, Georgia, North Dakota, and Texas, filed suit against the federal government to challenge the Affordable Care Act. Another sixteen states, including California, Delaware, North Carolina, and Virginia, plus the District of Columbia, intervened as defendants to oppose the suit. The states’ involvement is crucial. States carry out much of the Affordable Care Act’s policy through Medicaid administration and health care exchanges. What’s more, the federal government, under the Trump administration, has taken a much different stance on the Affordable Care Act than the previous administration, which defended the law in the 2012 case.

The plaintiffs have argued that the Affordable Care Act must fall for at least two reasons: First, the Individual Mandate, they say, cannot be a valid exercise of Congress’s tax power if it no longer imposes a tax. Second, the Affordable Care Act as a whole cannot stand without the Individual Mandate because the Individual Mandate represents an “essential” part of the law.

The defendants take different approaches that collectively attack both of the plaintiffs’ arguments. First, the federal government has argued that the Individual Mandate is unconstitutional without a tax component, but the other parts of the Affordable Care Act should stand. The states, on other hand, have argued that the Individual Mandate remains constitutional and, therefore, no part of the Affordable Care Act should fall.

Ultimately, Judge O’Connor agreed with the plaintiffs. His opinion calls the state-defendants’ argument “logically inconsistent” because the Individual Mandate is essentially toothless without the non-coverage tax. Judge O’Connor ruled that the Individual Mandate was no longer constitutional under Congress’s tax power because Congress no longer imposed a tax. Furthermore, Judge O’Connor found that Congress likely would not have passed the Affordable Care Act without the Individual Mandate, making the provision essential to the statute as a whole. Thus, if the Individual Mandate is unconstitutional, then the entire law is void.

Looking Ahead

The defendants have already promised to appeal Judge O’Connor’s decision to the United States Court of Appeals for the Fifth Circuit. Given the change in circumstances since the Sebelius and King decisions, it seems likely that the Supreme Court will eventually consider a petition for certiorari in Texas v. United States. The narrow decision rendered in Sebelius signals that some Justices who voted to uphold the law in 2012 may see things differently in the light of new circumstances.

In the meantime, the case represents a deep divide, not only at the federal level, but also between the states. Some 36 states, plus the District of Columbia have officially taken a stand as parties on either side of the litigation. Their participation serves as a reminder that whatever decision becomes final will drastically affect the way that states administer health care issues and the way that the American people seek coverage.


Sources

Julie Rovner, Texas Judge Rules Affordable Care Act Unconstitutional, But Supporters Vow To Appeal, NPR (Dec. 14, 2018).

Nat’l Fed’n of Indep. Bus. v. Sebelius, 567 U.S. 519 (2012).

Nicholas Gerbis, The History of the Affordable Care Act, How Stuff Works.

Tex. v. United States, 2018 U.S. Dist. LEXIS 211547 (N.D. Tex. 2018).

Photo courtesy of Huffington Post.

Ninth Circuit Rejects Nationwide Block of Trump Administration’s ACA Birth Control Rules

written by carly rolph

 

A decision by the United States Court of Appeals for the Ninth Circuit has narrowed a lower court’s nationwide ban on Trump administration rules exempting employers with moral or religious objections from providing birth control coverage otherwise required by the Affordable Care Act. In a 2-1 decision, the Court held that the district court had abused its discretion when it issued a nationwide preliminary injunction blocking the rules, and that the injunction should have been limited to the five states that brought the legal challenge.

Background

The Affordable Care Act (“ACA”), passed under the Obama Administration, requires that plans in the health insurance marketplace cover contraceptive methods and counseling for all women, as prescribed by a health care provider. The ACA further mandates that these plans cover contraceptive services without charging a co-payment.

In October 2017, the Department of Health and Human Services (“HHS”) issued rules that vastly expanded the range of companies that could opt out of the ACA contraceptive mandate. These rules would allow some employers to deny insurance coverage of birth control because of their religious or moral beliefs.

In December 2017, California, Delaware, Maryland, New York and Virginia filed a lawsuit alleging that the new rules were illegally passed by federal agencies without giving notice or seeking public comment. The states contended that the Trump administration had made the change in policy a nationwide issue by failing to comply with the Administrative Procedure Act.

The Decision

In a 2-1 decision on December 13, 2018, the Ninth Circuit held that the district court had abused its discretion when it issued a nationwide preliminary injunction blocking the rules, and that the injunction should have been limited to the five states that brought the legal challenge. The majority found that the nationwide injunction was too broad, and that an injunction applying to just California, Delaware, Maryland, New York and Virginia, the states that brought the legal challenge, would have given them total relief.

The majority found that the record did not show what the economic impact would be on the rest of the nation. “District judges must require a showing of nationwide impact or sufficient similarity to the plaintiff states to foreclose litigation in other districts, from Alaska to Puerto Rico to Maine to Guam,” United States Circuit Judge J. Clifford Wallace wrote in the majority opinion.

However, the court did find that the district court correctly concluded that the five states were likely to suffer irreparable harm, and that the lower court did not abuse its discretion in finding that the balance of equities and the public interest leaning in favor of granting the injunction. The majority found that the record was well-developed on how the rules would harm the five states.

In addition, the court said the district court had properly found that California, Delaware, Maryland, New York and Virginia were likely to prevail on their allegations that the United States Departments of Treasury, Labor and HHS wrongly proposed the two interim final rules in October 2017 without a notice and comment period.

The majority did not find the agencies’ arguments in favor of foregoing the comment period convincing. The agencies asserted that bypassing the notice sand comment period was justified by the need to lessen legal and regulatory uncertainty on the issue, stop the Federal Religious Freedom Restoration Act violations, and reduce health care costs. The vourt classified the agencies’ arguments as “general [p]olicy justifications,” finding they weren’t enough to demonstrate good cause for forgoing the comment period. The majority also found that the agencies’ contentions that certain provisions in the ACA allowed them to bypass the comment period for the rules was also likely to fail.

Looking Forward

While the Ninth Circuit’s decision would allow enforcement of the new rules in many states, a preliminary injunction in a separate case in Pennsylvania remains in effect, so the rules are still blocked nationwide.

In addition, the Trump Administration recently issued a new set of rules similar to the 2017 rules, allowing for some companies to opt out of contraceptive e coverage on nonreligious “moral convictions.” These rules will take effect January 14, 2019, superseding the 2017 rules and leaving the injunctions in California and Pennsylvania moot.


Sources

Birth Control Benefits, HealthCare.gov,  (last visited Dec. 16, 2018).

https://www.washingtonpost.com/religion/2018/12/14/court-partially-blocks-trump-administration-rules-allowing-some-employers-deny-birth-control-coverage/?utm_term=.231b2608c425

Cara Bayles, Nationwide Ban OK For Trump Birth Control Rules, States Say, LAW 360 (Aug. 17, 2018).

Danielle Nichole Smith, 9th Circ. Pares Nationwide Block of ACA Birth Control Rules, LAW 360 (Dec. 14, 2018).

Samantha Schmidt, Court partially blocks Trump administration rules allowing some employers to deny birth control coverage, THE WASHINGTON POST (Dec. 13, 2018).