Justia Government & Administrative Law Opinion Summaries

Articles Posted in Corporate Compliance
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Xanthopoulos, a Mercer consultant, detected securities fraud; his internal complaints failed. He went to the SEC website, and, in March 2014, Xanthopoulos submitted his first TCR Form. Unlike the Sarbanes-Oxley OSHA Form, which may be used to notify OSHA of a Sarbanes-Oxley complaint, the SEC’s TCR Form does not affirmatively indicate that submission of the form will initiate a formal lawsuit under the federal securities law. Xanthopoulos allegedly submitted seven TCR Forms through June 2018; in his 2018 submissions, he mentioned Mercer’s mistreatment of him as an employee, not just the securities fraud. Every TCR Form Xanthopoulos submitted specifically referenced a whistleblowing award.As Xanthopoulos predicted in those filings, Mercer fired him in October 2017. Xanthopoulos filed an OSHA administrative complaint in September 2018, alleging violations of Sarbanes-Oxley’s anti-retaliation provision, 18 U.S.C. 1514A. OSHA dismissed the complaint as untimely because Xanthopoulos filed 350 days after Mercer discharged him. He responded that “there was no[] 180-day-period[] in which [he] could have decided in clear conscience, that [he] had every information needed, to contact OSHA.” Xanthopoulos, then represented by counsel, argued that he filed his claim in the wrong forum, which tolled the statute of limitations: the TCR Forms constituted Sarbanes-Oxley claims mistakenly filed with the SEC. The Seventh Circuit affirmed the dismissal. The reports to the SEC did not toll the 180-day period for his Sarbanes-Oxley complaint. Xanthopoulos has not articulated a sufficient ground to equitably toll his untimely complaint. View "Xanthopoulos v. United States Department of Labor Administrative Review Board" on Justia Law

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CEW Properties, Inc. was a firearms dealer licensed by the U.S. Department of Justice, Bureau of Alcohol, Tobacco, Firearms, and Explosives (“ATF”). In 2017, the ATF conducted a compliance inspection of CEW. Inspectors found that CEW had failed to: (1) record properly the acquisition and disposition of firearms; (2) conduct background checks on transferees; and (3) complete correctly the ATF form that documents the transfer of a firearm. The inspection discovered hundreds of violations. ATF therefore issued a notice to revoke CEW’s license. CEW requested a hearing, stipulating to the violations but arguing they were not “willful.” Following the hearing, ATF issued a final notice of revocation. CEW sought judicial review in district court. The court found the violations to be willful and granted summary judgment for ATF. CEW contested the district court’s finding that its violations of the Gun Control Act were “willful.” Because there was no genuine dispute the evidence was sufficient for ATF to conclude that CEW willfully violated firearms regulations, the Tenth Circuit Court of Appeals affirmed. View "CEW Properties v. U.S. Department of Justice" on Justia Law

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The United States Leadership Against HIV/AIDS, Tuberculosis, and Malaria Act of 2003 limited the funding of American and foreign nongovernmental organizations to those with “a policy explicitly opposing prostitution and sex trafficking,” 22 U.S.C. 7631(f). In 2013, that Policy Requirement was held to be an unconstitutional restraint on free speech when applied to American organizations. Those American organizations then challenged the requirement’s constitutionality when applied to their legally distinct foreign affiliates. The Second Circuit affirmed that the government was prohibited from enforcing the requirement against the foreign affiliates.The Supreme Court reversed. The plaintiffs’ foreign affiliates possess no First Amendment rights. Foreign citizens outside U.S. territory do not possess rights under the U. S. Constitution and separately incorporated organizations are separate legal units with distinct legal rights and obligations.The Court rejected an argument that a foreign affiliate’s policy statement may be attributed to the plaintiffs, noting that there is no government compulsion to associate with another entity. Even protecting the free speech rights of only those foreign organizations that are closely identified with American organizations would deviate from the fundamental principle that foreign organizations operating abroad do not possess rights under the U.S. Constitution. The 2013 decision did not facially invalidate the Act’s funding condition, suggest that the First Amendment requires the government to exempt plaintiffs’ foreign affiliates from the Policy Requirement, or purport to override constitutional law and corporate law principles. View "Agency for International Development v. Alliance for Open Society International, Inc." on Justia Law

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The North Dakota Private Investigative and Security Board appealed, and TigerSwan, LLC and James Reese cross-appealed, a judgment dismissing the Board’s request for an injunction prohibiting TigerSwan and Reese from providing private investigative and security services without a license. Reese was the majority interest owner in TigerSwan, a limited liability company organized under North Carolina law. TigerSwan was registered in North Dakota as a foreign LLC. During protests over construction of the Dakota Access Pipeline, TigerSwan was hired to provide security services, though the company denied providing such services when it received a notice from the Board. Concurrent to denying providing security services to the pipeline, TigerSwan submitted an application packet to become a licensed private security provider in North Dakota. The North Dakota Supreme Court concluded the district court did not abuse its discretion in denying the injunction or in the denial of a motion for sanctions and attorney fees. View "North Dakota Private Investigative & Security Board v. TigerSwan, LLC, et al." on Justia Law

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Emerald had an Illinois gaming license to operate in East Dubuque. Emerald operated profitably in 1993 but then struggled to compete with an Iowa casino. By 1996, Emerald had closed the casino and was lobbying for an act that would allow it to relocate. The Board denied Emerald’s license renewal application. While an appeal was pending, 230 ILCS 10/11.2 was enacted, permitting relocation. In 1998, before the enactment, defendants met with Rosemont’s mayor and representatives of Rosemont corporations about moving to Rosemont. After the enactment, the parties memorialized the terms of Emerald’s relocation. Emerald did not disclose the agreements as required by Illinois Gaming Board rules. By October 1999, Emerald had contracts with construction companies and architecture firms but had not disclosed them. Emerald altered its ownership structure; several new “investors” had connections to Rosemont’s mayor and state representative. stock transfers occurred without required Board approval. In 2001, the Board voted to revoke Emerald’s license. Its 15-month investigation was apparently based on a belief that Emerald had associated with organized crime but the denial notice focused on inadequate disclosures. The Board listed five counts but did not list who was responsible for which violation. Illinois courts affirmed the revocation but held that the Board had not proven an association with organized crime. Emerald was forced into bankruptcy. The trustee sued the defendants, asserting breach of contract and breach of fiduciary duty. The district court dismissed the breach‐of‐fiduciary‐duty claim as time-barred. The Shareholder’s Agreement required that shareholders comply with IGB rules; the court held that each defendant had violated at least one rule, calculated damages by valuing Emerald’s license, and held all but one defendant severally liable for the loss. The Seventh Circuit concluded that the defendants should be held jointly and severally liable, but otherwise affirmed. View "Estate of Pedersen v. Gecker" on Justia Law

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This dispute arose from violations issued by the Department of Labor's Mine Safety and Health Administration. At issue was whether the word "corporation" includes limited liability companies (LLCs) for purposes of the Federal Mine Safety and Health Act of 1977 (the Mine Act), 30 U.S.C. 801 et seq. The court concluded that the terms "corporation" and "corporate operator" in the Mine Act are ambiguous. Applying Chevron deference, the court concluded that the Secretary's interpretation is reasonable where, most importantly, construing section 110(c) to include agents of LLCs is consistent with the legislative history. Therefore, the court held that an LLC is a corporation for purposes of the Mine Act and that section 110(c) can be used to assess civil penalties against agents of an LLC. Because substantial evidence supported the ALJ's decision to hold petitioners personally liable for the order at issue, the court affirmed on this issue. Finally, the order underlying their civil penalties was not duplicative. Accordingly, the court affirmed the ALJ's decision. View "Sumpter, et al. v. Secretary of Labor, et al." on Justia Law

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Irwin, a holding company, entered bankruptcy when its two subsidiary banks failed. The FDIC closed both in 2009. Their asset portfolios were dominated by mortgage loans, whose value plunged in 2007-2008. Irwin’s trustee in bankruptcy sued its directors and officers (Managers). The FDIC intervened because whatever Irwin collects will be unavailable to satisfy FDIC claims. Under 12 U.S.C. 821(d)(2)(A)(i), when taking over a bank, the FDIC acquires “all rights, titles, powers, and privileges of the insured depository institution, and of any stockholder, member, accountholder, depositor, officer, or director of such institution with respect to the institution and the assets of the institution.” The claims assert that the Managers violated fiduciary duties to Irwin by not implementing additional financial controls; allowing the banks to specialize in kinds of mortgages that were especially hard-hit; allowing Irwin to pay dividends (or repurchase stock) so that it was short of capital; “capitulating” to the FDIC and so that Irwin contributed millions of dollars in new capital to the banks. The district judge concluded that all claims belong to the FDIC and dismissed. The Seventh Circuit affirmed in part, but vacated with respect to claims that concern only what the Managers did at Irwin: supporting the financial distributions, informing Irwin about the banks’ loan portfolios, and causing Irwin to invest more money in the banks after they had failed. View "Levin v. Miller" on Justia Law

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Starr, AIG's former principal shareholder, filed suit against the FRBNY for breach of fiduciary duty in its rescue of AIG during the fall 2008 financial crisis. The district court dismissed Starr's claims and Starr appealed. The suit challenged the extraordinary measures taken by FRBNY to rescue AIG from bankruptcy at the height of the direst financial crisis in modern times. In light of the direct conflict these measures created between the private duties imposed by Delaware fiduciary duty law and the public duties imposed by FRBNY's governing statutes and regulations, the court held that, in this suit, state fiduciary duty law was preempted by federal common law. Accordingly, the court affirmed the judgment of the district court. View "Starr Int'l Co. v. Federal Reserve Bank of New York" on Justia Law

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Indiana Boxcar, a holding company that owns several railroads, petitioned for review of the Board's determination that Indiana Boxcar was an "employer" for purposes of the Railroad Retirement Act and the Railroad Unemployment Insurance Act, 45 U.S.C. 231, 351. To be an employer under those two Acts, a company such as Indiana Boxcar must be "under common control" with a railroad. Before this case, the Board repeatedly held that parent corporations like Indiana Boxcar were not under common control with their railroad subsidiaries. Under Board precedent, the term "common control" did not usually apply to two companies in a parent-subsidiary relationship. Here, however, the Board did not adhere to that precedent and did not reasonably explain and justify its deviation from its precedent. Therefore, the court held that the Board's decision was arbitrary and capricious under the Administrative Procedure Act, 5 U.S.C. 706(2)(A). Accordingly, the court vacated and remanded to the Board. View "Indiana Boxcar Corp. v. RRRB" on Justia Law

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Appellants were executives at the Purdue Frederick Company when it misbranded the painkiller OxyContin a schedule II controlled substance. The Company was convicted of fraudulent misbranding, and the executives were convicted under the "responsible corporate officer" doctrine of the misdemeanor of misbranding a drug. Based upon their convictions, the Secretary of Health and Human Services later excluded the individuals from participation in federal health care programs for twelve years under 42 U.S.C. 1320a-7(b). Appellants sought review, arguing that the statute did not authorize their exclusion and the Secretary's decision was unsupported by substantial evidence and was arbitrary and capricious. The district court granted summary judgment for the Secretary. The D.C. Circuit Court of Appeals reversed, holding (1) the statute authorized the Secretary's exclusion of Appellants, but (2) the Secretary's decision was arbitrary and capricious for want of a reasoned explanation for the length of the exclusions.