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Racial Exclusion in Private Markets: How the New Accredited Investor Standard Is Arbitrary and Capricious

Grier E. Barnes

Private markets have exploded. This growth has created lucrative opportunities for businesses raising capital and those who qualify to invest. For decades, Securities and Exchange Commission (SEC) rules have restricted most private investments to “accredited investors,” a designation that, for members of the general public, was based exclusively on affluence. While critics of this regime have emphasized its role in exacerbating inequality, scholarship has neglected the economic divide between white and Black Americans specifically. This Note fills that void.

In August 2020, the SEC issued the first update to the accredited investor standard since its genesis in the 1980s. Using available data, this Note argues that the accredited investor regime—historically and as amended—systematically excludes Black investors and Black-owned businesses from private markets, which both perpetuates racial inequality and depresses the value of those markets. This Note proposes a framework for an Administrative Procedure Act lawsuit charging that the Securities Act required the SEC to consider these distributional effects when modernizing the accredited investor standard. Finding that the SEC failed to satisfy this statutory requirement and omitted other relevant data, this Note concludes that the accredited investor update was arbitrary and capricious in violation of the Administrative Procedure Act. It then offers guidance on how the agency can remedy its error and avoid repeating it in the future.

Expedited Removal of Visa Holders: Challenging Adverse Immigration Inspection Actions

John B. Corgan

Line-level immigration officers have virtually unreviewable discretion to deny noncitizens the ability to enter the United States. This power extends not only to those who enter without inspection or arrive with counterfeit documents, but also to those who travel to the United States with the U.S. government’s express permission—i.e., visa holders. These noncitizens can unwittingly be caught up in the expedited removal process, which affords only minimal procedural safeguards and heavily circumscribes judicial review of officers’ actions. This Note argues that, despite these limitations, federal habeas courts should take advantage of their ability under the statute to inquire into whether an expedited removal order in fact was issued. In particular, courts should insist upon compliance with critical procedures required by the agency’s own regulations, without which an expedited removal order may be said not to exist at all. Informed by fundamental principles of administrative law, such an insistence on procedural compliance could help correct some of the worst abuses of the system notwithstanding the lack of constitutional due process protections for arriving noncitizens.

Perfecting Participation: Arbitrariness and Accountability in Agency Enforcement

Jackson L. Frazier

Agencies often bring enforcement actions and propose and accept settlements that have significant repercussions for the public and those harmed by the alleged misconduct. However, few meaningful opportunities exist for the public, or for victims, to participate in the decisionmaking process, and no external constraints exist to ensure their interests are adequately considered. Focusing on the Federal Trade Commission and its settlement procedures, this Note asks whether more is needed to preserve administrative legitimacy. To do so, it situates rights of participation within the two dominant schools of thought about the administrative state: the arbitrariness model and the accountability model. It finds that these theories support more expansive, but distinct, participatory rights for the general public and for victims. Criminal law, and the victim participation movement within it, provides guidance for the path forward, and this Note concludes that Congress and agencies should act together to perfect participation rights in agency enforcement actions.

The Folklore of Unfairness

Luke Herrine

The Federal Trade Commission Act’s ban on “unfair . . . acts and practices” would, on its face, seem to give the FTC an awesome power to define proper treatment of consumers in changing conditions. But even in a world of widespread corporate surveillance, ongoing racial discrimination, impenetrably complex financial products, pyramid schemes, and more, the unfairness authority is used rarely, mostly in egregious cases of wrongdoing. Why?

The standard explanation is that the more expansive notion of unfairness was tried in the 1970s, and it failed spectacularly. The FTC of this era was staffed by bureaucrats convinced of their own moral superiority and blind to the self-correcting dynamics of the market. When the FTC finally reached too far and tried to ban television advertising of sugary cereals to children, it undermined its own legitimacy, causing Congress to put pressure on the agency to narrow its definition of unfairness.

This Article argues that this standard explanation gets the law and the history wrong, and, thus, that the FTC’s unfairness authority is more potent than commonly assumed. The regulatory initiatives of the 1970s were actually quite popular. The backlash against them was led by the businesses whose profit margins they threatened. Leaders of these businesses had become increasingly radicalized and well-organized and brought their new political clout to bear on an unsuspecting FTC. It was not the re-articulation of the unfairness standard in 1980 that narrowed unfairness to its current form, but rather the subsequent takeover of the FTC by neoliberal economists and lawyers who had been supported by these radicalized business leaders. The main limitation on the use of the unfairness authority since then has been the ideology of regulators charged with its enforcement. In fact, the conventional morality tale about the FTC’s efforts in the 1970s are part of what keeps this ideology dominant.

A reconsideration of the meaning of unfairness requires situating the drama of the 1970s and 80s in a longer struggle over governance of consumer markets. Since the creation of the FTC, and even before, an evolving set of coalitions have battled over what makes markets fair. These coalitions can be divided roughly into those who favor norm setting by government agencies informed by experts held accountable to democratic publics and those who favor norm setting by business leaders made accountable via the profit motive. The meaning of “unfair . . . acts and practices” has been defined and redefined through these struggles, and it can and should be redefined again to reconstruct the state capacity to define standards of fair dealing.

Litigation Risk as a Justification for Agency Action

Timothy G. Duncheon

To justify its rescission of the Deferred Action on Childhood Arrivals (DACA) program, the Department of Homeland Security (DHS) employed a novel rationale: risk of litigation. DHS argued that DACA was potentially unlawful and might be disruptively enjoined by a court and that the Agency could preemptively wind down the program in light of risk that it would be forced to do so in litigation. This Note argues that agencies can and should consider litigation risk in taking regulatory action—especially given the increasing frequency of nationwide injunctions. But it proposes that an agency invoking litigation risk must examine four elements: forgone benefits prior to a predicted disruptive injunction, probability of the injunction, costs of the injunction, and contrary litigation risk. Examination of these elements here suggests that litigation risk alone did not justify the DACA rescission and that regulatory changes will rarely be justified on this sole basis. Courts must carefully scrutinize litigation risk rationales, as excessive deference to this rationale may allow agencies to evade responsibility for their policy decisions by passing blame on to hypothetical future judicial action. 

FCA v. FDA: The Case Against the Presumption of Immateriality from Agency Inaction

Alexander Kristofcak

The False Claims Act is a powerful statutory vehicle for the federal government to deter fraud on its purse, a significant public policy concern. Under the Act, government contractors can be liable for violating material legal requirements of federal programs. In assessing materiality, the courts are asked to evaluate the natural tendency of a violation to influence payment. One question that has been raised in a series of cases in the health product domain is whether government’s payment, despite knowledge of a violation, necessarily means that the violation was immaterial for the purposes of FCA enforcement. The industry is asking the courts to adopt that defense—what this Note terms the “immateriality presumption from agency inaction”—at the pleading stage. To justify the presumption, the defendants argue that the nuanced judgments of the agency vested with the authority and the requisite expertise to regulate—here, the Food and Drug Administration—must prevail over both the private parties who bring actions under the statute’s qui tam provisions, as well as anyone else within the government. Using the Act’s evolution, structure, legislative history, and empirical data, this Note argues against the presumption. First, it shows that the Act’s design strikes a deliberate balance between encouraging private actors and their meaningful oversight by the government. As such, the presumption is not needed to combat unmeritorious private claims. Second, the Note argues that potential overlap between enforcement under the Act and agency oversight is valuable in several ways. The Note’s most significant contribution is in explaining why the immateriality presumption, by tethering fraud enforcement to judgments of the agencies, could be harmful to the agencies them- selves and public interest writ large. In doing that, the Note challenges the claim that the presumption honors the expertise and facilitates the discretion of agencies. 

Chevron and the Attorney General’s Certification Power

Jonathan P. Riedel

Congress has delegated power to the Attorney General to execute the nation’s immigration laws, adjudicate individual noncitizens’ cases, and fill interpretive gaps in the statute. The Attorney General has in turn delegated this authority, by regulation, to the Board of Immigration Appeals (BIA). Most BIA decisions are administratively final, and noncitizens appeal unfavorable decisions directly to federal courts of appeals. In a small but growing number of cases, however, the Attorney General will step in to decide a case himself de novo after the BIA has ruled. This power of intervention and decision, sometimes known as the “referral and review” power or “certification” power, has drawn some praise for being an efficient use of the broad power afforded to the executive branch in the immigration context, but more often has sustained criticism for potential abuse. In this Note, I analyze this certification power through the lens of Chevron. In particular, I argue that Chevron deference to the BIA is appropriate because it serves the values of the Chevron doctrine—expertise, procedural regularity, and public accountability— but that Chevron deference to the Attorney General’s certified opinions is inappropriate. Courts have a responsibility under Step Zero not to defer to an interpretation of law unless its issuance adheres sufficiently to fundamental tenets of administrative law. Certified opinions are insufficient on all counts: Deference to the Attorney General’s interpretations of law issued in this manner serves none of the values of the Chevron doctrine. 

What the Federal Reserve Board Tells Us About Agency Independence

Caroline W. Tan

In administrative law, the sine qua non of agency independence lies in the enabling statute. If the statute protects the agency’s head from removal except “for cause,” then the agency is considered insulated from presidential control and classified as independent. On the other hand, if the statute is silent on for-cause tenure protection, then the agency is classified as executive. This Note questions that central assumption by relying on the history of the Federal Reserve Board of Governors, arguably one of the most independent agencies in Washington. By tracing the Board’s history from a limited institution in 1913 to the powerful central bank of today, this Note demonstrates that in at least some cases, the driving factors behind operative independence have more to do with the practical realities of governance than the formalities of administrative law. Indeed, even though the Fed’s enabling statute is silent on the issue of for-cause tenure protection, the President has never fired the head of the agency. Even President Trump has declined to go so far. This Note addresses this paradox through a detailed look at the Board’s history and the major inflection points in its rise. Throughout, this Note also highlights the active role that the Board played in its own ascendency, demonstrating the dynamic life of administrative agencies and the powerful role they can play in shaping their own futures. 

Can a Statute Have More Than One Meaning?

Ryan D. Doerfler

What statutory language means can vary from statute to statute, or even provision to provision. But what about from case to case? The conventional wisdom is that the same language can mean different things as used in different places within the United States Code. As used in some specific place, however, that language means what it means. Put differently, the same statutory provision must mean the same thing in all cases. To hold otherwise, courts and scholars suggest, would be contrary both to the rules of grammar and to the rule of law.

This Article challenges that conventional wisdom. Building on the observation that speakers can and often do transparently communicate different things to different audiences with the same verbalization or written text, it argues that, as a purely linguistic matter, there is nothing to prevent Congress from doing the same with statutes. More still, because the practical advantages of using multiple meanings— in particular, linguistic economy—are at least as important to Congress as to ordinary speakers, this Article argues further that it would be just plain odd if Congress never chose to communicate multiple messages with the same statutory text.

As this Article goes on to show, recognizing the possibility of multiple statutory meanings would let courts reach sensible answers to important doctrinal questions they currently do their best to avoid. Most notably, thinking about multiple meanings in an informed way would help courts explain under what conditions more than one agency should receive deference when interpreting a multi-agency statute. Relatedly, it would let courts reject as false the choice between Chevron deference and the rule of lenity for statutes with both civil and criminal applications.

The Costs of Clean Water in Hoosick Falls: Private Civil Litigation and the Regulation of Drinking Water Quality

Bronwen B. O’Herin

Despite extensive statutory law and regulations governing drinking water quality in the United States, water-contamination crises have been a regular feature of the American news cycle in recent years, perhaps most notably in Flint, Michigan, but also in a disturbing number of localities across the United States, including the upstate New York town of Hoosick Falls. This Note uses the water-contamination crisis in Hoosick Falls as a case study to analyze why these apparent regulatory failings continue to persist. This case study reveals how scientific uncertainty, resource constraints, and the socio-political dynamics of public regulation in the drinking-water context limit public ex ante regulatory mechanisms’ power to deter drinking-water contamination and to rebalance the equities disrupted when drinking-water pollution occurs. In Hoosick, private tort litigation has the potential to be a powerful vehicle for addressing such regulatory shortcomings, but its ability to do so will turn on whether courts are willing to be more flexible in their conceptions of legally cognizable harm. I argue that such flexible conceptions are justified and would serve a crucial dual purpose—bolstering pollution deterrence and providing a forum in which social costs not accounted for during the regulatory, industrial, and political processes that drive public-resource governance may, finally, be accounted for.

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