NCLA Stands With Cato And IJ In Federal Lawsuit Against the SEC

WASHINGTON, DC, January 10, 2019 — The New Civil Liberties Alliance supports and commends the legal action taken by the Cato Institute and the Institute for Justice against the U.S. Securities and Exchange Commission’s unconstitutional ‘gag rule.’ In the federal lawsuit, IJ represents Cato as a publisher seeking to publish a former businessman’s book about what he went through being sued by the SEC. But like so many other defendants, the SEC’s 1972 gag rule silenced him. The rule not only prevents him from discussing the case—but it also prevents Cato from publishing his book.

As NCLA Senior Litigation Counsel Peggy Little’s recent opinion editorial states, “The gag rule violates a hornbook’s worth of legal doctrine: It is a prior restraint and a content-based restriction on speech. It serves no compelling government interest while employing the most restrictive means to accomplish its ends. It prohibits truthful speech, compels government-scripted speech, violates due process, impairs the First Amendment rights to petition government, and infringes the right of the public to hear criticisms of the government.”

NCLA filed a petition in October asking the SEC to amend its controversial ‘gag rule,’ and Senator Tom Cotton (R-Ark.) questioned SEC Chairman Jay Clayton on the issue at a Banking Committee hearing in December.

“Silencing Americans is just the tip of the iceberg when it comes to the administrative state’s power grabs. It will take an alliance of organizations like Cato, IJ, NCLA and others willing to represent the rights of Americans impacted by the expansion of the administrative state to end this injustice. We are up for that fight—and glad to have strong allies on our side.” – Mark Chenoweth, NCLA Executive Director and General Counsel

About NCLA
NCLA is a nonprofit civil rights organization founded by prominent legal scholar Philip Hamburger to protect constitutional freedoms from violations by the administrative state. NCLA’s pro bono public-interest litigation and other advocacy strive to tame the unchecked power of state and federal agencies and to foster a new civil liberties movement that will help restore Americans’ fundamental rights. For more information visit us online: NCLAlegal.org

Media Inquiries: Please contact Judy Pino, 202-869-5218 or email Judy.Pino@NCLA.legal

Secretary of State Tries End Run Around The Constitution

Michael P. DeGrandis, Las Cruces Sun- News

 “I’m Just a Bill” is an iconic episode from the 1970s Schoolhouse Rock educational series. The catchy tune taught us how a bill becomes a law where he “wait(s) in line, with a lot of other bills” for the executive to sign. It also explains that a vetoed bill will only become law with an override in the Legislature.

 Based on her actions of late, it would appear that New Mexico Secretary of State Maggie Toulouse Oliver missed the cartoon. She seems to think that an administrator such as herself may “veto a veto” by simply turning a dead bill’s policies and strictures into a regulation. That’s not how the Constitution works.

 Oliver’s end-run around New Mexico’s Constitution started when the Legislature passed Senate Bill 96, which proposed to amend the state’s Campaign Reporting Act by adding an independent expenditure reporting requirement to the existing law. When the Legislature presented the bill to Gov. Susana Martinez, however, the governor vetoed it because she feared that the new reporting requirements cast such a wide net that they could discourage individuals from giving to charities.

 The veto did not deter Oliver. “I’m left with no other choice,” she said, than “to go forward utilizing my rulemaking authority to address many of these much needed reforms before the next statewide election.”

 As constitutionally unhinged as this statement may be, the secretary deserves credit for being a woman of her word. The adopted regulation is materially identical to SB96, creating new campaign finance reporting rights and duties for a new class of regulated citizens, as if the governor’s veto had never happened.

 This regulation poses a grave threat to the essential nature of constitutional government in New Mexico. It violates New Mexico Constitution Article III, Section 1, the separation of powers, which guarantees that governmental powers are divided into three distinct departments—and that no branch may exercise any powers properly belonging to either of the others.

 The secretary has violated this essential principle several times over by usurping legislative policymaking and lawmaking authority, by pre-empting the legislative veto override authority, and by annulling the gubernatorial veto prerogative.

 The secretary has put the Legislature and the governor in the untenable position of responding to, rather than initiating, core public policy choices because she hijacked their constitutional functions.

 Separation of powers is designed to prevent this coalescing of tyrannical power, and it is an essential feature of our constitutional system. Without a constitutionally defined structural separation, there can be no checks and balances to ward off overreach by ambitious legislators, judges—or even secretaries of state.

 If the secretary is permitted to invalidate the SB96 veto and circumvent legislative action on the veto, the constitutional requirements of bicameral bill passage and presentment of such bills to the governor for signing will cease to have any practical importance. This dangerous outcome would neutralize much of the liberty-preserving checks and balances scheme and jeopardize the viability of the republican form of government established by New Mexico’s Constitution, and guaranteed to all Americans under Article IV, Section 4 of the U.S. Constitution.

 The “sad little scrap of paper” named Bill, hoping he would become a law, feared a veto because a veto would send him back to the legislature where “they vote on me again, and by that time it’s … very unlikely that you’ll become a law!” I’m Just a Bill makes no mention of a secretary of state’s role in this process because administrators have no roles to play. This is the constitutional design, where the separation of powers coordinates a system of checks and balances between a governor and a Legislature to make policy and law. If vetoes don’t have consequences reconciled through these two branches, the entire constitutional system is turned on its head, and our civil liberties won’t be far behind.

 Michael P. DeGrandis is senior litigation counsel at the New Civil Liberties Alliance, a nonprofit civil rights organization that recently filed a Petition for a Writ of Mandamus in the Supreme Court of New Mexico on behalf of several senators and representatives asking the Court to declare the regulation unconstitutional.

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New Mexico's Secretary of State Tries to Veto Governor's Veto

NCLA Asks State Supreme Court to Vacate Unconstitutional Rulemaking

WASHINGTON, Dec. 20, 2018 -- The New Civil Liberties Alliance today filed a Petition for a Writ of Mandamus with the Supreme Court of New Mexico. The Petition asks the Justices to vacate New Mexico's 2017 "Campaign Finance Rule" (CFR) because it violates the separation of powers guaranteed to the state's citizens in Article III, Section 1 of the New Mexico Constitution.

The problem began when the Legislature passed Senate Bill 96, which required—among other things—reporting of "independent expenditures" to regulators. Governor Susana Martinez vetoed SB96, concerned that the bill would likely discourage individuals from giving to charities.

Despite the veto, Secretary of State Maggie Toulouse Oliver announced that she would "go forward utilizing [her] rulemaking authority" to enact a regulation to effectuate most of the vetoed bill's provisions. Secretary Oliver's resulting CFR, which is substantively identical to SB96, essentially vetoed the governor's veto by rewriting New Mexico campaign finance laws without legal authority.

Of course, the New Mexico Constitution does not confer such broad authority upon the Secretary of State, nor does it permit her to displace the governor's veto authority, the legislature's policymaking responsibility, and the Constitution's basic requirements for lawmaking. NCLA is asking the Supreme Court of New Mexico to strike down this unlawful regulation and restore constitutional order to the Land of Enchantment.

The New Civil Liberties Alliance released the following statements:

"At the heart of this case lies an extraordinary breach of New Mexico's constitution. It is constitutionally absurd to suggest that the Secretary of State may legally hijack legislative and gubernatorial authority to enact laws. Secretary Oliver's unilateral rule-by-decree threatens the essential nature of New Mexico's representative form of government. Every New Mexico resident should be troubled by this power grab."
—Michael P. DeGrandis, NCLA Senior Litigation Counsel

"The constitutional role of the Secretary of State is to execute the law, not to make it. When mere administrators overstep their legal authority and act like legislators, NCLA will call them out publicly and haul them into court." 
—Mark Chenoweth, NCLA Executive Director and General Counsel

The following petitioners have joined together in this effort to vacate the Secretary's Rule as unconstitutional:

  • Sen. William E. Sharer—District 1

  • Sen. Mark Moores—District 21

  • Rep. James R.J. Strickler—District 2

  • Rep. David M. Gallegos—District 61

About NCLA
NCLA is a nonprofit civil rights organization founded by prominent legal scholar Philip Hamburger to protect constitutional freedoms from violations by the administrative state. NCLA's pro bono public-interest litigation and other advocacy strive to tame the unchecked power of state and federal agencies and to foster a new civil liberties movement that will help restore Americans' fundamental rights. For more information visit us online: NCLAlegal.org

Media Inquiries: Please contact Judy Pino, 202-869-5218 or email Judy.Pino@NCLA.legal




NCLA: Proposed 'Drug Pricing Rule' Gives Centers for Medicare and Medicaid Services Unwarranted Authority

NCLA Submits Comment to HHS and CMS Critical of Rulemaking

WASHINGTON, Dec. 17, 2018 -- The New Civil Liberties Alliance today submitted a Comment in response to a Proposed Rule from the Department of Health and Human Services (HHS), Centers for Medicare and Medicaid Services (CMS). The so-called Drug Pricing Rule would require direct-to-consumer television advertisements for certain prescription drugs to contain statements indicating the "wholesale acquisition cost" for a typical course of treatment. NCLA believes the Rule is flawed in that CMS lacks the statutory authority to regulate the subject of pharmaceutical market efficiency. Further, even if CMS had the authority to regulate this subject matter, it still lacks the authority to implement the restriction on television advertisement as the proposed regulatory means. NCLA recommends that CMS withdraw the proposed Rule from the Federal Register and notify interested parties that CMS will not pursue compelled disclosure of wholesale acquisition costs in advertisements of any kind.

The New Civil Liberties Alliance released the following statements:

"While there is no doubt that lower drug prices would aid CMS in its administration of Medicare and Medicaid, Congress has not authorized CMS to compel private parties to make public disclosures of drug pricing or to regulate drug advertising on television. Without such authority, CMS lacks the legal basis to promulgate the Drug Pricing Rule."—Michael P. DeGrandis, Senior Litigation Counsel of NCLA

"CMS's rulemaking authority is broad, but 'broad' does not mean 'unlimited.' HHS and CMS should curb their unlawful exercise of administrative power and withdraw the Proposed Drug Pricing Rule before the federal courts have to get involved." —Mark Chenoweth, Executive Director and General Counsel of NCLA

About NCLA
NCLA is a nonprofit civil rights organization founded by prominent legal scholar Philip Hamburger to protect constitutional freedoms from violations by the administrative state. NCLA's pro bono public-interest litigation and other advocacy strive to tame the unchecked power of state and federal agencies and to foster a new civil liberties movement that will help restore Americans' fundamental rights. For more information visit us online: NCLAlegal.org

Media Inquiries: For interviews with our subject matter experts please contact Judy Pino, 202-869-5218 or email Judy.Pino@NCLA.legal  

Wall Street Journal: How the SEC Silences Criticism

Its unconstitutional 1972 ‘gag rule’ is overdue for repeal.

By Peggy Little

Published in the Wall Street Journal, November 14, 2018

One of the strongest rules in free-speech law is that the government may not engage in “prior restraint” of speech except in extreme circumstances. Yet the Securities and Exchange Commission does so routinely. Under a rule adopted in 1972, the SEC demands that parties entering into settlements with the commission be silenced about the prosecution forever. If they question the merits of the case against them, the SEC reserves the authority to reopen it.

“The result is a stew of confusion and hypocrisy,” Judge Jed Rakoff observed in a 2011 ruling. “The defendant is free to proclaim that he has never remotely admitted the terrible wrongs alleged by the S.E.C.; but, by gosh, he had better be careful not to deny them either. . . . An agency of the United States is saying, in effect, ‘Although we claim that these defendants have done terrible things, they refuse to admit it and we do not propose to prove it, but will simply resort to gagging their right to deny it.’ ”

After the 2008 economic crisis, the rule faced blistering criticism from judges and scholars, who noted that it violates the First Amendment and permits potentially collusive settlements that bilk shareholders and taxpayers and shields a powerful agency’s practices from public scrutiny.

The gag rule violates a hornbook’s worth of legal doctrine: It is a prior restraint and a content-based restriction on speech. It serves no compelling government interest while employing the most restrictive means to accomplish its ends. It prohibits truthful speech, compels government-scripted speech, violates due process, impairs the First Amendment rights to petition government, and infringes the right of the public to hear criticisms of the government.

It could not withstand the most cursory judicial scrutiny—and the SEC knows it. In fact, it has tucked away a caveat at the end of the rule that lifts the gag when a defendant testifies under oath, as long as the SEC is not a party. That suggests the SEC knows full well that its rule could silence truthful speech or even suborn perjury. What a clever device to avoid judicial scrutiny.

The SEC’s gag rule is a symptom of a broader problem: Administrative agency power tends to expand beyond its lawful scope. This is why the Founders were so obsessively concerned that the three branches of government operate publicly subject to carefully constructed checks and balances.

Ms. Little is senior litigation counsel with the New Civil Liberties Alliance, which has filed a petition with the SEC challenging provisions of the 1972 gag rule.

NCLA Commends Senator Tom Cotton for Bringing a Decades-Old SEC "Gag" Rule to Light

FOR IMMEDIATE RELEASE

 

WASHINGTON,  December 11, 2018-- Senator Tom Cotton pulled no punches in today’s Banking Committee Hearing on Capitol Hill when questioning SEC Chairman Jay Clayton about an unconstitutional 1972 SEC "Gag" Rule that the agency has used for decades to silence defendants.

“I think the SEC should probably reconsider it. It was passed at a time in 1972 when First Amendment precedent was much different and … more favorable to the government than frankly, it should have been … it’s quite over broad, it’s not at all narrowly tailored anymore and it can undermine other legitimate public interests,” said CottonHe also pressed Chairman Clayton about the SEC’s contradictory provisions on standard consent judgments and the constitutional infirmity of “gag” orders recognized by U.S. District Judge Jed Rakoff.

Senator Cotton specifically referenced an opinion piece written by NCLA Senior Litigation Counsel, Peggy Little, that appeared in the Wall Street Journal recently.

 “Senator Cotton’s concern for public interest in this matter is commendable. “When the SEC silences citizens after bringing enforcement actions against them, the public remains in the dark about this opaque form of regulation. SEC should stop leaving its targets speechless and should start allowing sunshine on how it brings the power of government to bear upon ordinary Americans.” —Peggy Little, NCLA Senior Litigation Counsel

The New Civil Liberties Alliance filed a Petition for Rulemaking earlier this Fall, asking the U.S. Securities and Exchange Commission to amend its controversial Gag Rule, 202.5e.

Click here to watch video of hearing.

About NCLA
NCLA is a nonprofit civil rights organization founded by prominent legal scholar Philip Hamburger to protect constitutional freedoms from violations by the administrative state. NCLA’s pro bono public-interest litigation and other advocacy strive to tame the unchecked power of state and federal agencies and to foster a new civil liberties movement that will help restore Americans’ fundamental rights. For more information visit us online: NCLAlegal.org

Media Inquiries: Please contact Judy Pino, 202-869-5218 or email Judy.Pino@NCLA.legal

 

NCLA Files Suit Over Unconstitutional SEC Appointees

Group Urges Court to Stop ALJ from Hearing Raymond Lucia Sr. Case

WASHINGTON, Nov. 29, 2018 -- The New Civil Liberties Alliance, a nonprofit civil-rights organization and public-interest law firm, has filed a complaint seeking declarative and injunctive relief against the U.S. Securities and Exchange Commission in the U.S. District Court for the Southern District of California. NCLA represents Ray Lucia(pronounced "loo-chee-aa") and his former company. The suit seeks to prevent these Plaintiffs from being compelled to submit—yet again—to a proceeding before an unconstitutional Administrative Law Judge (ALJ) at the SEC. NCLA is also seeking a stay in that proceeding today from the ALJ.

Mr. Lucia suffered irreparable professional, reputational and financial harm from the first unconstitutional proceeding. He should not have to endure another years-long, constitutionally flawed ALJ proceeding before getting heard—and vindicated—on his constitutional objections.

"There is a human toll that is rarely considered in cases like this. Even though the SEC's prior decision has been set aside, Ray Lucia Sr.'s name and reputation are still tainted. Haling a citizen before an unlawful ALJ once is a grave breach of his constitutional rights. Doing it twice is unthinkable," said Peggy Little, NCLA Senior Litigation Counsel.

The SEC charged Mr. Lucia in 2012. Since then, he's endured six years of protracted litigation taking his case all the way to the U.S. Supreme Court -and winning- on the argument that the first ALJ he appeared before was improperly appointed. Rather than retrying the Lucia case before the Commission itself, the SEC is proceeding in front of another constitutionally defective ALJ. This time, the problem is that multiple layers of removal protection violate the Constitution's requirement that the President be able to remove all officers of the United States.

The Solicitor General's briefing to the Supreme Court in Lucia v. SEC flagged the President's inability to remove ALJs as constitutionally dubious and asked the Court to decide the issue then, which it declined to do (awaiting further input from lower courts). Despite this glaring constitutional problem, SEC persists in ignoring its due process obligation to bring enforcement actions in a lawful forum.

"The SEC could have brought its original enforcement proceeding in federal district court. Instead, it chose to bring the case before an unconstitutionally appointed in-house judge. And now it is violating Article II of the Constitution again. The process has become the punishment for Ray. Enough is enough," said Mark Chenoweth, Executive Director and General Counsel of NCLA.

About NCLA
NCLA is a nonprofit civil rights organization founded by prominent legal scholar Philip Hamburger to protect constitutional freedoms from violations by the administrative state. NCLA's pro bono public-interest litigation and other advocacy strive to tame the unchecked power of state and federal agencies and to foster a new civil liberties movement that will help restore Americans' fundamental rights. For more information visit us online: NCLAlegal.org

Media Inquiries: Please contact Judy Pino, 202-869-5218 or email Judy.Pino@NCLA.legal

Lucia v. SEC. et al Complaint for Declaratory and Injunctive Relief

Raymond J. Lucia Companies, Inc. (RJL) and Raymond J. Lucia, Sr. (Mr. Lucia) for their complaint against the United States Securities and Exchange Commission (SEC or the Commission), Jay Clayton, in his official capacity as Chairman of the U.S. Securities and Exchange Commission, and Matthew G. Whitaker, in his official capacity as Acting United States Attorney General, allege as follows:

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U.S. v. Havis Press Release

FOR IMMEDIATE RELEASE

Deference to Commentary to the U.S. Sentencing Guidelines Must Stop

NCLA files amicus brief for rehearing en banc in U.S. v. Havis

The New Civil Liberties Alliance, a nonprofit civil-rights organization and public-interest law firm, filed an amicus brief supporting a petition for rehearing en banc in the case of United States v. Jeffery Havis before the U.S. Circuit Court of Appeals for the Sixth Circuit in Cincinnati. NCLA is particularly disturbed by the spreading practice of extending judicial “deference” to commentary to the United States Sentencing Guidelines, Stinson v. United States, a 1993 Supreme Court case, held Sentencing Commission commentary that interprets guidelines may be cited as binding authority when courts issue sentences for criminal defendants.

NCLA Executive Director and General Counsel, Mark Chenoweth released the following statement:

“Rarely does a court encounter a more compelling case for en banc review than U.S. v. Havis. Stinson deference is nothing more than a command that courts abandon their duty of independent judgment and assign weight to a non-judicial entity’s interpretation of the law. Although NCLA acknowledges that the Supreme Court has instructed courts to defer to this commentary when interpreting the text of the federal Sentencing Guidelines, this deference regime raises grave constitutional concerns that the Supreme Court has never considered nor discussed. Rehearing en banc is warranted to enable the Sixth Circuit as a whole to consider these oft-overlooked or disregarded constitutional concerns.”

NCLA requests that the petition for rehearing en banc should be granted.

About the New Civil Liberties Alliance
NCLA is a nonprofit civil rights organization founded by prominent legal scholar Philip Hamburger to protect constitutional freedoms from violations by the administrative state. NCLA’s pro bono public-interest litigation and other advocacy strive to tame the unchecked power of state and federal agencies and to foster a new civil liberties movement that will help restore Americans’ fundamental rights. For more information visit us online: NCLAlegal.org

Media Inquiries: Please contact Judy Pino, 202-869-5218 or email Judy.Pino@NCLA.legal