WESTERN MICHIGAN UNIVERSITY COOLEY LAW REVIEW Volume 35
Spring 2019
Issue 1
Articles Compliance – A Major Change in Employment Opportunities for Law School Graduates Fueled by Major Changes in the Economic History of the United States
Renalia Smith DuBose
“Business Activity” and the Common Control Exception to “Transfers of Ownership” Under Michigan’s General Property Tax Act
Jason C. Long
Comment “America First” - Reclaiming War Powers
Derek Grisard
Distinguished Brief AFT Michigan, et al v. State of Michigan
Gary P. Gordon, Steven C. Liedel, W. Alan Wilk & Jason T. Hanselman
A Publication of Western Michigan University Thomas M. Cooley Law School
WESTERN MICHIGAN UNIVERSITY THOMAS M. COOLEY LAW SCHOOL Jeffrey L. Martlew, Interim President, Retired Associate Dean & Professor
BOARD OF DIRECTORS Hon. Louise Alderson, Vice Chair Aaron V. Burrell Christina L. Corl Scott A. Dienes Sharon M. Hanlon Kenneth V. Miller Edward H. Pappas
Mustafa Ameen James W. Butler III Thomas W. Cranmer John Dunn Hon. Jane E. Markey Lawrence P. Nolan, Chairman Hon. Bart Stupak
Cherie L. Beck – Corporate Secretary
Kathleen A. Conklin – Senior Vice President of Operations and Finance, & Treasurer
PROFESSOR, FOUNDER, AND PAST PRESIDENT The Honorable Thomas E. Brennan (deceased)
DEANS EMERITI Michael P. Cox, Dean and Distinguished Professor Emeritus Keith J. Hey, Dean and Distinguished Professor Emeritus Robert E. Krinock, Dean and Professor Emeritus (deceased) Don LeDuc, Dean Emeritus
DISTINGUISHED PROFESSORS EMERITI Curt Benson Kathleen Butler Karen Chadwick Pat Corbett Mark Dotson Gerald Fisher James Hicks John Kane Mara Kent Dena Marks Helen Micken Charles Palme Ernest Phillip Marjorie Russell Chris Shafer Norman Stockmeyer Ronald Trosty William Weiner
David Berry Evelyn Calogero Dennis Cichon David Cotter Cynthia Faulkner Judith Frank Emily Horvath Eileen Kavanagh R. Joseph Kimble John Marks Lawrence Morgan Nora Pasman-Green Philip Prygoski John Scott Jane Siegel John Taylor William Wagner F. Georgann Wing Ann Miller Wood
Ronald Bretz Terrence Cavanaugh Julie Clement Mary D’Isa Norman Fell Elliot Glicksman (deceased) Peter Jason (deceased) Peter Kempel (deceased) Dorean Koenig Dan McNeal Maurice Munroe James Peden John Rooney Charles Senger Brent Simmons Gina Torielli Cynthia Ward Nancy Wonch
PROFESSORS EMERITI Sherry Batzer Lewis Langham Donna McKneelen Norman Plate Lorna Patricia Thorpe-Mock
James Carey Ashley Lowe Monica Navarro Dan Ray Karen Truszkowski
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Heather Garretson Paul Marineau Florise Neville-Ewell Kevin Scott
DEANS Tracey Brame
Christine Church
Associate Dean of the Grand Rapids Campus & Professor
Associate Dean of Academic Programs & Professor
Katherine Gustafson
Lisa Halushka
Assistant Dean of the Tampa Bay Campus & Associate Professor
Assistant Dean of Auburn Hills Campus & Professor
Laura LeDuc
Mable Martin-Scott
Associate Dean of Planning, Assessment & Accreditation
Assistant Dean of Lansing Campus & Professor
Daniel W. Matthews
Michael McDaniel
Associate Dean of Tampa Bay Campus & Professor
Associate Dean of the Lansing Campus & Professor
Charles C. Mickens
James D. Robb
Chief Information Officer and Associate Dean of Innovation & Technology
Associate Dean of External Affairs & General Counsel
Duane A. Strojny
Amy Timmer
Associate Dean of Library & Instructional Support & Professor
Interim Dean & Professor
Charles R. Toy
Joan Vestrand
Associate Dean of Career & Professional Development
Associate Dean of the Auburn Hills Campus & Professor
Victoria Vuletich
Paul J. Zelenski
Assistant Dean of the Grand Rapids Campus & Professor
Senior Vice President and Associate Dean of Enrollment & Student Services
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PROFESSORS Frank C. Aiello Brendan Beery Paul Carrier Victoria Cruz-Garcia Renalia Dubose Gerald Fisher Marjorie Gell Emily Horvath Tonya Krause-Phelan Daniel W. Matthews Martha Moore Kimberly O’Leary Devin Schindler Paul Sorensen David Tarrien Victoria Vuletich
Tammy Asher Erika Breitfeld Bradley Charles Lisa DeMoss Heather Dunbar Anthony Flores Christopher Hastings Barbara Kalinowski Don LeDuc Marla Mitchell-Cichon Florise Neville-Ewell Toree Randall John N. Scott Stevie J. Swanson Patrick Tolan Carly Wolf
Gary Bauer Jeanette Buttrey Mark Cooney Mark Dotson David Finnegan Dustin Foster Richard C. Henke Linda Kisabeth Gerald MacDonald Michael K. Molitor Monica Nuckolls Lauren Rousseau Daniel Sheaffer Jeffrey Swartz Gerald Tschura
ADJUNCT PROFESSORS Andrew Arena Laura Bare David Bilson Joseph Burgess James Carey Karen Chadwick Stacey Dinser Steve Dulan Joshua Fahlsing Laura Genovich Jonathan Grossman Daniel Houlf Theresa Jean-Pierre Coy Shannon King Shari Lesnick Peggy MacDougall Paul Marineau Michael McClory Thomas Moga Mikhail Murshak John Nicolucci Christine Piatkowski Rebecca Pugliesi Daniel Ray Kelsey San Antonio Traci Schenkel Robert Stocker John Taylor Victor Veschio Shaun Willis
Byron Babbish David Berry Scott Brinkmeyer William Burleson Terrence Cavanaugh Marshall Deason Mary D’Isa Peter Durand William Fleener Jack Gilbreath Christi Henke Ieisha Humphrey Amy Jonker Broersma Lewis Langham Justin Lighty Daryl Manning John Mashni Catherine McCollum Julie Mullens Thomas Myers Steven Owen Karen Poole Alissa Raasch Dale Rietberg Ronald Sangster Ben Shotten Timothy Stoepker Gregory Ulrich Graham Ward John Wojcik
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Amy Bandow Kristina Bilowus Charles Bullock Lindsay Canan Joseph Celello Elizabeth Devolder Michelle Donovan Lisa Fadler Richard Garcia Phillip Green Nancy Hillary Timothy Innes Caroline Johnson Levine Michael Leffler Matthew Lucas Matthew Marin Ellen Mason Scott Mertens Andrea Muroto-Bilabaye Nicholas Nazaretian Kevin Peterson Kerry Przybylo Antoinette Raheem Christopher Sabella Michael Shea Samantha Sliney Cari Sullivan Miriam Velez Geoffrey Weed
WESTERN MICHIGAN UNIVERSITY COOLEY LAW REVIEW HILARY (4*=
BOARD OF EDITORS Arturo Alfaro Editor-in-Chief
Jonathan W. Brignall
Ashley Kagey
Executive Managing Editor
Interim Editor-in-Chief
Rebecca Gorbutt
Amia Banks
Executive Subcite Editor
Executive Symposium Editor
Aisha Henry
Jenae Stolarzyk
Executive Articles Editor
Executive Solicitation Editor
Uduak-Obong T. Eyo
Mark Cooney
Interim Executive Articles Editor
Faculty Advisor
ASSISTANT EDITORS
Ashley E. Chalut Jacob Chappelle Idaewikphe Ivowi Lynette McAlpine
Omojomiloju Ogunfiditimi Lauren Simasko Lemontr/e Taylor Karen Valdez Ra!uel Wollaston
MANAGING ASSOCIATE EDITORS Megan L. Babut Alexis Morris
SENIOR ASSOCIATE EDITORS
Brandon Crabill 1arenis Martinez Kishnee Theus
LeChana Waldon-Bailey Charlotte M. Williams Jameel S. Williams Kyle Zielinski
ASSOCIATE EDITORS
Giuliana Allevato Laila Malki Patrick Batterson DeVante McCullom Keith Brown Hannah Roberts Crystal M. Grantham Blaise Ryan Isabelle Gavriloski Lona Sayej Domini!ue Talaga
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JOHN D. VOEL;ER AWARD This award is presented to the Senior Associate Editors of the Western Michigan University Cooley Law Review who made the most significant contributions to publication of the Law Review. Hilary ,.-& Recipients% 1arenis Martinez Kyle Zielinski EUGENE ;RASIC;Y AWARD This award is presented to the Assistant Editors of the Western Michigan University Cooley Law Review who made the most significant contributions to the publication of the Law Review. Hilary ,.-& Recipients% Jacob Chappelle Alexis Morris DAWN C. BEACHNAU AWARD This award is presented to the member of the Western Michigan University Cooley Law Review Voting Board of Editors who made the most significant contribution to the Law Review through leadership and dedication. Hilary ,.-& Recipient% Rebecca Gorbutt
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WESTERN MICHIGAN UNIVERSITY COOLEY LAW REVIEW MICHAELMAS (4*? BOARD OF EDITORS Arturo Alfaro Editor-In-Chief
Matthew Miller
Derek Grisard
Symposium Editor
Managing Editor
Amia Banks
Ashley Kagey
Interim Managing Editor
Interim Symposium Editor
Sawyer Rozgowski
Geofrey Bilabaye
Subcite Editor
Solicitation Editor
Rebecca Gorbutt
Jenae Stolarzyk
Interim Subcite Editor
Interim Solicitation Editor
Aisha Henry
Mark Cooney
Faculty Advisor
Articles Editor
ASSISTANT EDITORS Ashley Chalut Ashley Kajy Chiung Ying Shophia Cheng Megan Mckeon Matthew Hotchkiss Raquel Wollaston MANAGING ASSOCIATE EDITORS Megan Babut Mary Anne Simmering
SENIOR ASSOCIATE EDITORS Keith Goodwin Shelika Tate Lawrence Hoff Ashley Van Fleet Victoria Okereke Jameel Williams ASSOCIATE EDITORS Brandon Crabill LeChana Waldon-Bailey Yarenis Martinez Charlotte Williams Kishnee Theus Kyle Zielinski
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JOHN D. VOEL;ER AWARD This award is presented to the Senior Associate Editors of the Western Michigan University Cooley Law Review who made the most significant contributions to publication of the Law Review. Michaelmas 2018 Recipients: Mary Anne Simmering Megan McKeon EUGENE ;RASIC;Y AWARD This award is presented to the Assistant Editors of the Western Michigan University Cooley Law Review who made the most significant contributions to the publication of the Law Review. Michaelmas 2018 Recipients: Raquel Wollaston Yarenis Martinez DAWN C. BEACHNAU AWARD This award is presented to the member of the Western Michigan University Cooley Law Review Voting Board of Editors who made the most significant contribution to the Law Review through leadership and dedication. Michaelmas 2018 Recipient: Ashley Kagey
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WESTERN MICHIGAN UNIVERSITY COOLEY LAW REVIEW TRINITY (4*?
BOARD OF EDITORS Tami Salzbrenner Editor-in-Chief
Arturo Alfaro
Derek Grisard
Interim Editor-in-Chief
Managing Editor
Sawyer Rozgowski
Matt Miller
Subcite Editor
Symposium Editor
Jessie Thueme
Geofrey Bilabaye
Articles Editor
Solicitation Editor
Aisha Henry
Mark Cooney
Interim Articles Editor
Faculty Advisor
ASSISTANT EDITORS
Joshua Elliott Chiung Ying Shophia Cheng Matthew Hotchkiss
Ashley Kajy Megan Mckeon Amanda Mendez
MANAGING ASSOCIATE EDITORS Mary Anne Simmering Ashley Kagey
SENIOR ASSOCIATE EDITORS
Lawrence Hoff Olivia Cummings Sabrina Franco Robert Jarvis Kris Johnson Keith Goodwin Kristyna Nunzio
ASSOCIATE EDITORS Victoria Okereke Jameel Williams Ashley Van Fleet
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JOHN D. VOEL;ER AWARD This award is presented to the Senior Associate Editors of the Western Michigan University Cooley Law Review who made the most significant contributions to publication of the Law Review. Trinity 2018 Recipients: Joshua Elliott Lawrence Hoff EUGENE ;RASIC;Y AWARD This award is presented to the Assistant Editors of the Western Michigan University Cooley Law Review who made the most significant contributions to the publication of the Law Review. Trinity 2018 Recipients: Chiung Ying Sophia Cheng Ashley Kagey DAWN C. BEACHNAU AWARD This award is presented to the member of the Western Michigan University Cooley Law Review Voting Board of Editors who made the most significant contribution to the Law Review through leadership and dedication. Trinity 2018 Recipient: Tami Salzbrenner
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WESTERN MICHIGAN UNIVERSITY COOLEY LAW REVIEW
VOLUME 35
SPRING 2019
ISSUE 1
CONTENTS FROM THE EDITOR ........................................................................ xiii ARTICLES Compliance – A Major Change in Employment Opportunities for Law School Graduates Fueled by Major Changes in the Economic History of the United States
Renalia Smith DuBose........................................................ 1 “Business Activity” and the Common Control Exception to “Transfers of Ownership” Under Michigan’s General Property Tax Act
Jason C. Long.................................................................... 41 COMMENT “America First” - Reclaiming War Powers
Derek Grisard ................................................................... 61 DISTINGUISHED BRIEF ATF Michigan, et al v. State of Michigan
Gary P. Gordon, Steven C. Liedel, W. Alan Wilk, & Jason T. Hanselman...................................................... 85
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The Executive Board of Editors is delighted and honored to present you with this edition of our journal. First, I want to thank each one of you, our readers, for your continued support and patronage of our publication. Second, I want to thank all the members of WMU Cooley Law Review who worked in each article presented in this edition because their passion for writing, dedication, and $uest for excellence is evident in the finished product. Finally, I want to thank the contributing authors for their confidence in our team and allowing us to collaborate in advancing the legal discourse in their respective fields. This edition brings you three articles that share a common thread of crafting future solutions from lessons learned from the past. The first article considers our nation’s evolution through each major economic change, the increase of regulations, and the future opportunities in regulatory compliance for legal professionals. The second article advocates for the plain-language application of the Common Control Exception of Michigan’s General Property Tax Act without re$uiring a “business activity” element in the definition of transfer of ownership. The author explains that such re$uirement inappropriately narrows the exemption and renders it inconsistent with the act. The final article examines the modern use of military force, by contrasting executive overreach with congressional inaction, and proposes a solution drawing from past and present legislative proposals. As our nation’s courts face societal changes and future legal challenges, there is much we can draw from our history, legal precedent, and always-evolving jurisprudence. Thus, we continue the conversation and look forward to developing solutions crafted with insight from our past and vision for our future. I trust you will enjoy this edition and wish you well in your endeavors. With appreciation, Arturo Alfaro !iii
Compliance – A Major Change in Employment Opportunities for Law School Graduates Fueled by Major Changes in the Economic History of the United States BY RENALIA SMITH DUBOSE1 ABSTRACT
This article presents various periods of major economic change in United States history and explores the corresponding growth in compliance laws and regulations. A survey of changes in the practice of law is undertaken with emphasis on the showman litigator of the 1800s and the 20th century, business-oriented transactional lawyer. A third option is explored, the practice area of compliance. d ;P0lILl :2L)M r("/*P +P*LRP* L0 =Il0) !L)hb \I/+LRl` :MP L* l )ML+)haO/(+a hPl+ PR(Sl)/+ l0R jl* l */SLlI *)(RLP* )PlSMP+b :(-P+'L*/+ /O 9PlSMP+ 9+lL0L0Nb l0R rL+PS)/+ /O :)lOO rP'PI/-2P0) O/+ )MP :SM//I rL*)+LS) /O ZLII*k/+/(NM !/(0)h L0 9l2-lb \I/+LRl` :MP jl* ]iPS()L'P rL+PS)/+ /O 9+lL0L0N l0R "P0POL)* O/+ >+l0NP !/(0)h =(kILS :SM//I* L0 >+Il0R/b \I/+LRl` ;P0lILl jl* )MP #**L*)l0) :(-P+L0)P0RP0) O/+ #R2L0L*)+l)L/0 O/+ =l*S/ !/(0)h =(kILS :SM//I* L0 Vl0R >7VlJP*b \I/+LRl jMP+P *MP /'P+*lj Z(2l0 ;P*/(+SP*b ]2-I/hPP ;PIl)L/0*b !Ml+)P+ :SM//Ib Y0O/+2l)L/0 9PSM0/I/Nhb 9+l0*-/+)l)L/0b l0R )MP ]R(Sl)L/0 \/(0Rl)L/0` Y0 lRRL)L/0b ;P0lILl S//+RL0l)PR l )/)lI +Pj+L)P /O )MP rL*)+LS)7* =/ILSh Ul0(lI` ;P0lILl )l(NM) :SM//I Vlj O/+ )MP 80L'P+*L)h /O :/()M \I/+LRl` :MP )l(NM) :SM//I Vljb Y0*)+(S)L/0lI VPlRP+*ML-b Z(2l0 ;P*/(+SP*b :SM//I \L0l0SPb l0R :SM//I Ul0lNP2P0) O/+ :)` VP/ 80L'P+*L)h` ;P0lILl Ml* l "lSMPI/+7* rPN+PP L0 :/SLlI :)(RLP* ]R(Sl)L/0 O+/2 )MP 80L'P+*L)h /O \I/+LRl fH@BAeb l Ul*)P+7* rPN+PP L0 =(kILS #R2L0L*)+l)L/0 O+/2 )MP 80L'P+*L)h /O :/()M \I/+LRl fH@B@eb l :-PSLlIL*) rPN+PP L0 ]R(Sl)L/0 VPlRP+*ML- O+/2 T/'l :/()MPl*)P+0 80L'P+*L)h fH@@Heb l0R l X(+L* r/S)/+l)P O+/2 \I/+LRl #N+LS(I)(+lI l0R UPSMl0LSlI 80L'P+*L)h fG^^De` ;P0lILl L* S(++P0)Ih l0 #**/SLl)P =+/OP**/+ /O Vlj l) 5P*)P+0 ULSMLNl0 80L'P+*L)h 9M/2l* U` !//IPh Vlj :SM//I L0 9l2-lb jMP+P *MP )PlSMP* !/0)+lS)* Yb !/0)+lS)* YYb =P+*/0lI l0R =+/OP**L/0lI ])MLS*b ]2-I/h2P0) Vljb l0R ]R(Sl)L/0 Vlj` #RRL)L/0lIIhb L0 G^HBb ;P0lILl RP'PI/-PR )MP !/2-ILl0SP l0R ;PN(Il)L/0* -+/N+l2 l) !//IPh Vlj :SM//I` :MP MPIR L0O/+2l)L/0 *P**L/0* O/+ *)(RP0)*b *(+'PhPR 'l+L/(* )Pi)*b RP'PI/-PR )MP S(++LS(I(2b Nl+0P+PR S/2-ILl0SP Pi)P+0*ML-* O/+ *)(RP0)*b l0R S(++P0)Ih )PlSMP* )MP )M+PPaM/(+ O/(0Rl)L/0lI PIPS)L'P P'P+h )P+2` Y0 lRRL)L/0b *MP L* L0 'l+L/(* *)lNP* /O S//+RL0l)L0N )MP RP'PI/-2P0) /O O/(+ *(--IP2P0)l+h )j/aM/(+ PIPS)L'P* L0 )MP l+Pl* /O \L0l0SPb ZLNMP+ ]R(Sl)L/0 9L)IP Y4b V/SlI [/'P+02P0)b l0R ZPlI)MSl+P S/2-ILl0SP`
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Data from the American Bar Association and the National Association of Law Placement outlining the decline in employment in the two aforementioned practice areas and the upswing in the third practice area, compliance, are presented. In-depth information regarding the practice area of compliance is included in the article. The author is a retired thirty-four-year public educator, administrator, and assistant superintendent in central Florida urban districts, a member of the Florida Bar, and a current Associate Professor at Western Michigan University Cooley Law School’s Tampa Bay Campus. The author attended law school late in her public education career and was responsible for various areas of compliance as an assistant superintendent while a member of the Florida Bar. TABLE OF CONTENTS I. INTRODUCTION ......................................................................3 II. CHANGES IN THE LEGAL PROFESSION ..................................6 III. MAJOR CHANGES IN THE ECONOMIC HISTORY OF THE UNITED STATES..................................................................8 A. The Progressive Era ..................................................8
B. The Great Depression and Post-World War II Recovery ...................................................................10 C. The Latter 1990s and Early 2000s .........................13
IV. FEDERAL RESPONSES TO RECENT MAJOR COMPLIANCE FAILURES .........................................................................14 V. WHAT IS COMPLIANCE! ......................................................18 A. Yesterday and Today ..............................................18
B. The Three Areas of Compliance Practice for Attorneys .................................................................20
1. Regulated Private Sector Organi4ations...........20 2. The Public Sector and Related Rule-Making and Standard-Setting Organi4ations .......................24 3. Outside Counselors and Advisors......................28 VI. WHY ARE LAWYERS PREFERRED IN COMPLIANCE CAREERS!.........................................................................30 VII. OPPORTUNITIES FOR LAWYERS IN THE COMPLIANCE INDUSTRY! .......................................................................33
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VIII. THE AMERICAN BAR ASSOCIATION’S RESPONSE .............36 I'. NEGATIVE RESPONSES TO THE JD ADVANTAGE MOVEMENT ......................................................................3'. THE FUTURE OF COMPLIANCE EMPLOYMENT OPPORTUNITIES FOR LAW SCHOOL GRADUATES ...............38 'I. CONCLUSION .....................................................................39 I. INTRODUCTION Americans watched in disbelief as Enron filed for bankruptcy on December 2, 2001. It was the largest bankruptcy filing in United States history.1 Enron, led by chairman and chief executive officer /enneth Lay, was created when Houston Natural Gas and Internorth merged in 1985.2 Before bankruptcy, Enron was a major energy trading corporation, listed as the United States’ seventh largest corporation in the Fortune 500, and the sixth largest energy company in the world.3 Enron’s growth came from its status in the e-commerce movement of the 1990s and investments in non-energy related commodities.4 At its peak, Enron was valued at approximately &-0 billion with stock valued at approximately &90 per share.5 By the close of business on November 30, 2001, Enron’s stock was valued at only &0.26 per share.6 Thousands of investors and employees, whose retirement accounts were held by Enron, lost billions of dollars.Arthur Andersen, Enron’s external auditor, was the largest of the “Big Five” accounting firms in the United
H. The Rise and Fall of Enron: A Brief Historyb !"! T]5: fUlh GDb G^^Cb HG?GH =Ueb M))-?__jjj`SkS`Sl_0Pj*_k(*L0P**_)MPa+L*Pal0RaOlIIa/OaP0+/0alak+LPOa ML*)/+haH`D@HDD@` G. Enron Files for Bankruptcyb ZY:9>;q`!>Ub M))-?__jjj`ML*)/+h`S/2_)ML*a RlhaL0aML*)/+h_P0+/0aOLIP*aO/+akl0J+(-)Sh fIl*) (-Rl)PR #(N` GHb G^HAe` F. The Rise and Fall of Enron, supra 0/)P H` E. The Fall of Enronb T=;b M))-*?__jjj`0-+`/+N_0Pj*_*-PSLlI*_P0+/0_ fIl*) 'L*L)PR Xl0` GFb G^HAe` D. Id. C. Enron Files for Bankruptcyb supra 0/)P G` B. The Fall of Enronb supra 0/)P E`
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States.8 Andersen, which received over &25 million in auditing fees in 2001 alone, admitted it was bad judgment to let Enron hide debt by assigning it to other Enron associated entities.9 Years after Enron’s economic catastrophe, /enneth Lay, who faced the possibility of life in prison for a fraud conspiracy conviction, died of heart disease.10 Jeffrey Skilling, once the chief executive officer, was convicted of fraud, conspiracy, insider trading, and lying to auditors. After years of appealing his conviction, Skilling’s twenty-four-year prison sentence was reduced to fourteen years.11 Andrew Fastow, former chief financial officer, was convicted of conspiracy and was sentenced to six years in prison.12 Not to be outdone, telecommunications giant WorldCom, the second largest long-distance and data service provider in the United States, announced a revision to its financial statements in the amount of &3.85 billion on June 25, 2002, a result of recording line costs as capital expenditures. 13 At that time, WorldCom was the result of the largest corporate merger in the United States" it included MCI Communications Corporation, Brooks Fiber Properties, Inc., and CompuServe Corporation.14 As a result of the revision, A. Enron, Arthur Anderson, Kenneth L. Layb T]5:5]]W fXl0` GFb G^^Gb B?^^ =Ueb M))-?__jjj`0Pj*jPPJ`S/2_P0+/0al+)M(+al0RP+*P0aJP00P)MaIaIlhaHEFDAB` @. Enron the Real Scandalb 9Z] ]!>T>UY:9 fXl0` HBb G^^Geb M))-?__jjj`PS/0/2L*)`S/2_0/RP_@E^^@H` H^` #**/SLl)PR =+P**b Enron Founder Ken Lay Dies of Heart Diseaseb T"! T]5:`!>U fX(Ih Db G^^Cb A?FB =Ueb M))-?__jjj`0kS0Pj*`S/2_LR_HFBHD@GD_0*_ k(*L0P**aS/+-/+l)Pm*Sl0RlI*_)_P0+/0aO/(0RP+aJP0aIlhaRLP*aMPl+)a RL*Pl*P_3`52OY2^i\jl*` HH` #l+/0 :2L)Mb Ex-Enron CEO Skilling Has 10 Years Lopped Off Sentenceb !TT fX(0P GHb G^HFb D?^G =Ueb M))-?__2/0Ph`S00`S/2_G^HF_^C_GH_ 0Pj*_S/2-l0LP*_*JLIIL0NaP0+/0a+P*P0)P0SL0N_L0RPi`M)2I` HG` :MlMPP0 =l*Mlb Former Enron CFO Sentenced to 6 Yearsb !TT U>T]q f:P-)` GBb G^^Cb B?F@ #Ueb M))-?__2/0Ph`S00`S/2_G^^C_^@_GC_0Pj*_0Pj*2lJP+*_ Ol*)/jm*P0)P0SL0N_` HF. What Went Wrong at WorldCom? 5Z#;9>T? WT>5V]r[]$5Z#;9>T fX(Ih ^Fb G^^Geb M))-?__J0/jIPRNP`jMl+)/0`(-P00`PR(_l+)LSIP_jMl)ajP0)aj+/0Nal)a j/+IRS/2_` HE` ;P()P+*b MCI-WorldCom Timeline, 1983-Presentb \>4 T]5: fUl+` HDb G^^Deb M))-?__jjj`O/i0Pj*`S/2_*)/+h_G^^D_^F_HD_2SLaj/+IRS/2a)L2PIL0PaHAFa -+P*P0)`M)2I`
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on July 21, 2002, WorldCom, based in Clinton, Mississippi, filed the largest bankruptcy in the United States, surpassing Enron by listing its assets at &10- billion.15 In January 2002, WorldCom’s shares were trading at about &15" however, by June 2002, the shares were trading at &0.20. Over 1-,000 workers were laid off.16 Arthur Andersen audited WorldCom’s 2001 financial statements and conducted the first $uarter review of its 2002 finances, yet failed to identify WorldCom’s practice of transferring line costs to capital expenditures.1- The practice of transferring line costs to capital expenditures is contrary to generally accepted accounting principles.18 Shortly before WorldCom’s bankruptcy filing, but after Andersen’s conviction of obstruction of justice for destruction of documents related to Enron’s scandal, Andersen was replaced by /PMG as the external auditor.19 In the aftermath of the scandal, Bernard Ebbers, chief executive officer, was convicted of fraud and conspiracy" he received a twenty-five year prison sentence. Scott Sullivan, chief financial officer, received a five-year sentence with three years of probation after he helped with Ebbers’s conviction. David Myers, the controller, was sentenced to a year and a day.20 Unlike Enron, WorldCom survived its financial scandal because it had tangible assets that generated revenue.21 Three years after it filed the largest HD` :L2/0 ;/2P+/ . ;L'l r` #)Il*b WorldCom’s Collapse: The Overview; WorldCom Files for Bankruptcy; Largest U.S. Caseb T`q` 9YU]: fX(Ih GGb G^^Geb M))-?__jjj`0h)L2P*`S/2_G^^G_^B_GG_(*_j/+IRS/2a*aS/IIl-*Pa)MPa/'P+'LPja j/+IRS/2aOLIP*aO/+akl0J+(-)ShaIl+NP*)a(*aSl*P`M)2I` HC` rl'LR Zl0S/SJb World-Class Scandal at WorldComb !": T]5: fX(0P GCb G^^Gb @?GF #Ueb M))-*?__jjj`Sk*0Pj*`S/2_0Pj*_j/+IRaSIl**a*Sl0RlIal)a j/+IRS/2_` HB. Id. HA. What Went Wrong at WorldCom?b supra 0/)P HF` H@` X/0 6l0 . rPI+/h #IPib Anderson was WorldCom Auditorb !ZY` 9;Y"` fX(0P GCb G^^Geb M))-?__jjj`SMLSlN/)+Lk(0P`S/2_*0*aj/+IRS/2al0RP+*P0aS)a *)/+h`M)2I` G^. WorldCom Convictions Handed Downb #!!>8T9YT[5]" f#(N` HCb G^^Deb M))-*?__jjj`lSS/(0)L0NjPk`S/2_ll_Iljal0RaP0O/+SP2P0)_j/+IRS/2aS/0'LS)L/0*a Ml0RPRaR/j0` GH` ;/2P+/ . #)Il*b supra 0/)P HDb l) G`
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bankruptcy to date, MCI0WorldCom was purchased by Veri4on Communications, but lucky for Veri4on they did not assume the &35 billion in debt that was declared in bankruptcy.22 The aforementioned disasters are only two of many that have changed employment opportunities for law school graduates in the United States. Numerous corporations, to include BP, J.P. Morgan Chase, and Johnson & Johnson, received their own wake-up calls after they paid billions of dollars in fines for violating laws and regulations.23 Such corporate scandals have spurred growth of compliance departments and senior-staff-level positions across the country in both the private and public sectors, and attorneys are assuming these roles at a rapid rate. 24 II. CHANGES IN THE LEGAL PROFESSION The face of the legal profession in America is changing and has been since colonial days. In pre-Revolutionary America, lawyers were treated with disdain. One critical reason for this disdain was that American laws were based on the English common law at a time when everything English was deemed to be contrary to the independence movement.25 Many colonies banned the collection of legal fees as a means to eliminate the legal profession from the colonial landscape.26 Members of the legal profession in colonial America did not help their cause, as they often exhibited traits associated with British aristocracy and GG` ]Rjl+R X` ;/2l+ . Ul+)L0 !lIJL0*b WorldCom Case Study Updateb :#T9# !V#;# 8TY6`? U#;WW8V# !]T9]; \>; #==VY]r ]9ZY!: f\Pk+(l+h G^^Ceb M))-*?__jjj`*S(`PR(_P)MLS*_O/S(*al+Pl*_k(*L0P**aP)MLS*_+P*/(+SP*_j/+IRS/2aSl*Pa *)(Rha(-Rl)P_` GF. Fact Sheet: Significant False Claims Act Settlements & Judgements, Fiscal Years 2009-2016b 8`:` r]=79 X8:9`b M))-?__jjj`K(*)LSP`N/'_/-l_-+P**a+PIPl*P_ OLIP_@HAFCC_R/j0I/lR fIl*) 'L*L)PR T/'` Db G^HAe` GE` []>\\;]q =#;:>T: UYVV];b 9Z] V#5 >\ [>6];T#T!]b ;Y:W U#T#[]U]T9b #Tr !>U=VY#T!] H@C f5/I)P+* WI(jP+b GR PR` G^HBe` GD. See G #T9>TaZ];U#TT !Z;>8:9b 9Z] ;Y:] >\ 9Z] V][#V =;>\]::Y>T YT #U];Y!# D fH@CDe` GC` VY:# [` V];U#T . =ZYVY= [` :!Z;#[b ]9ZY!#V =;>"V]U: YT 9Z] =;#!9Y!] >\ V#5 AHB f]+jL0 !MP2P+L0*Jh P) lI` PR*`b E)M PR` G^HCe`
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wore tight clothing, silk stockings, silver buckles, and lace.2Additionally, they supported causes that were not popular with the common people, such as conservatism and limited voting rights.28 Furthermore, at that time, the law was handled by “theologians, politicians, farmers, fisherman, and merchants.”29 As a result, the predominant employment opportunity for lawyers was in courtroom litigation as advocates for their clients. The typical lawyer was a showman whose litigation skills re$uired lengthy, flamboyant, oratorical skills. For instance, Daniel Webster’s emotional argument before the United States Supreme Court in Dartmouth College v. Woodward lasted four hours.30 A notable change came courtesy of the Industrial Revolution in the United States 31-90s to 1830s2, which involved a major transition from a predominantly agricultural economy to an industrial one. Investments in machine-made production systems, such as New England’s textile mills and the necessary transportation systems to move those products, changed the American landscape. Financial systems changed as the government-chartered banks throughout the nation.31 The Industrial Revolution ushered in a significant change in employment opportunities for attorneys. For example, in the late 1800s, the role of the transactional lawyer emerged. The transactional lawyer was different from the courtroomlitigating showman. The role of the transactional lawyer was to conduct business for clients, and hopefully, prevent unwanted litigation. Additionally, the transactional lawyer “made more money and had more prestige” than the litigating showman.32
GB` !Z;>8:9b supra 0/)P GDb l) GD` GA. Id. G@` V];U#T . :!Z;#[b supra 0/)P GCb l) AHA` F^. Id. l) AHAQH@` FH. Economic Growth and the Early Industrial Revolutionb 8`:` ZY:9>;qb M))-?__jjj`(*ML*)/+h`/+N_(*_GGl`l*- fIl*) 'L*L)PR :P-)` F^b G^HAe` FG` V];U#T . :!Z;#[b supra 0/)P GCb l) AH@`
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Litigation or transaction! In most law schools, these are the two career options that you hear about from the first day of orientation. No ifs, ands, or buts, you have just two possible career paths. However, more recent law school grads are discovering a third option.the compliance attorney.33 So, what has fueled this significant change in employment opportunities for lawyers! Major scandals and economic greed, such as Enron, caused the United States’ capitalist system, the most successful economic system in the world, to demand oversight and regulation.34 Thus, new compliance positions have created major changes in employment opportunities for law school graduates. However, America’s history of major scandals, economic greed, and the need for oversight and regulation is not new. III. MAJOR CHANGES IN THE ECONOMIC HISTORY OF THE UNITED STATES
A. The Progressive Era Before the Industrial Revolution, government officials envisioned a laisse4-faire attitude regarding government regulation of the economy. However, that attitude did not last long. A rising middle class sought economic protection from unfair treatment by big business.35 The laisse4-faire attitude, though ade$uate for the pre-Industrial Revolution and agricultural economic system, ultimately fell short in a nation of industries and big business. Workers, fearing unfair treatment, sought protection. That protection came in the form of federal regulatory agencies during the Progressive Era 31890–19202, when social activists sought FF` rl'LR #` Ul)lb The New Career Choice: The Compliance Attorneyb T#97V X8;Y:9 f\Pk` Hb G^HAb F?FF =Ueb M))-?__jjj`0l)L/0lIK(+L*)`S/2_IljhP+a *)l)P*2l0_0PjaSl+PP+aSM/LSPaS/2-ILl0SPal))/+0Ph` FE. Enron the Real Scandalb supra 0/)P @` FD. See, e.g.b 8`:` rP-7) /O :)l)Pb A Brief History of Government Involvement in the American Economyb 9Z>8[Z9!>` f>S)` Bb G^HBeb M))-*?__jjj`)M/(NM)S/`S/2_ N/'P+02P0)aL0'/I'P2P0)aL0a)MPa(*aPS/0/2haHHEAHDH`
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government regulation to address greed and corruption brought on by the Industrial Revolution.+) A century later, federal regulatory laws and agencies established during the Progressive Era remain critical to the United States’ economic landscape. The Interstate Commerce Act, enacted February *, -''(, established the Interstate Commerce Commission as an independent regulatory agency to regulate interstate commerce by overseeing surface transportation, namely railroads. +( The Sherman Antitrust Act was passed in -'&. to prevent a few large companies from controlling a single industry by re!uiring competition among corporations.+' The Pure Food and Drugs Act of -&.) was the result of the efforts of progressive activists like Upton Sinclair, author of The Jungle, which detailed grotes!ue practices of the meatpacking industry.+& Harvey Wiley, chief of the Chemistry Bureau, later renamed the Food and Drug Administration, had members of his $Poison S!uad# ingest food additives and preservatives to show the effects on the public’s health.*. President Woodrow Wilson signed the Federal Trade Act on September ,), -&-*, designed to promote corporate competition and protect consumers. The regulatory agency tasked with administering the Act is the Federal Trade Commission.*- Though American political and economic viewpoints have changed, the onset of federal oversight and regulatory agencies created during the
FC. See, e.g.b The Progressive Era (1890 - 1920)b 9Z] ]V]#T>; ;>>:]6]V9 =#=];: =;>X]!9b M))-*?__jjjG`Nj(`PR(_cP+-l-P+*_)PlSML0NP+_NI/**l+h_-+/N+P**L'P aP+l`SO2 fIl*) 'L*L)PR \Pk` Cb G^HAe` FB` YT9];:9#9] !>UU];!] !>UU7Tb M))-*?__jjj`N-/`N/'_OR*h*_-JN_ [>6U#TaH@@Da^Ba^H_-RO_[>6U#TaH@@Da^Ba^Ha=ND@C`-RO fIl*) 'L*L)PR T/'` Db G^HAe` FA. Sherman Anti-Trust Act (1890)b M))-*?__jjj`/(+R/S(2P0)*`N/'_R/S`-M-% OIl*M&OlI*P.R/S&DH fIl*) 'L*L)PR \Pk` Cb G^HAe` F@` rl0LPI "` WIPL0 . #IPil0RP+ 9lkl++/Jb History of Federal Regulation: 1902–Presentb \r#;]6Y]5`>;[b jjj`ORl+P'LPj`/+N_^HmML*)/+h`-M- fIl*) 'L*L)PR :P-)` F^b G^HAe` E^. Id` EH. Our Historyb \]r` 9;#r] !>UU7Tb M))-*?__jjj`O)S`N/'_lk/()aO)S_/(+a ML*)/+h fIl*) 'L*L)PR \Pk` Cb G^HAe`
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Progressive Era, established a new norm for the economic landscape.42 While the Progressive Era ushered in a new norm for America’s economic engines, there was also intense discourse about the positive and negative effects. The belief that economic markets would self-adjust without government regulation.laisse4-faire economics.was challenged. Politicians debated, and political parties at the highest levels were fractured amidst the debate. In 1912, Republican Theodore Roosevelt came out of retirement and ran against William Howard Taft, under the Bull-Moose Party, because Taft revealed conservative tendencies regarding federal regulation that were not evident during his first administration. Taft and Roosevelt split the Republican vote, allowing Democrat Woodrow Wilson to win the election.43 It is the opinion of this article that the Progressive Era’s introduction of federal regulation and regulatory agencies caused a permanent change in U.S. economic history. This led to the first major change in employment opportunities for lawyers since the Industrial Revolution, employment in the compliance industry.
B. The Great Depression and Post-World War II Recovery The role of governmental regulation, or lack thereof, in the causes of the Great Depression and post-World War II Recovery has been the source of fierce and passionate debate for nearly a century. According to one economic theorist, federal government regulation and actions, such as monetary contraction, tax hikes, international trade restrictions, and harassment of big business, caused the Great Depression and delayed the nation’s recovery. 44 Another theorist believes that the lesson from the Great EG. See 8`:` rP-7) /O :)l)Pb supra 0/)P FD` EF. The Progressive Era and Economicsb ZY:9` :>!7q >\ =#`b M))-?__M*-`/+N_ PR(Sl)L/0_(0L)a-Il0*_)MPa-+/N+P**L'PaP+lal0RaPS/0/2LS* fIl*) 'L*L)PR \Pk` Cb G^HAe` EE` !M+L* ]Rjl+R*b The Government and the Great Depressionb !#9> YT:9`b 9#4 . "8r[]9 "8VV` f:P-)` G^^Deb M))-*?__/kKPS)`Sl)/`/+N_*L)P*_Sl)/`/+N_ OLIP*_-(k*_-RO_)kka^D^AaGD`-RO`
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Depression is that financial regulation by the federal government must be bold and aggressive. The latter theorist puts forth the notion that Republican President Herbert Hoover’s hands-off policies perpetuated the Great Depression" but Democratic President Franklin Roosevelt’s New Deal regulations ended the Great Depression. 45 Many of Roosevelt’s New Deal regulations and regulatory agencies are still relevant almost a century later. The Glass-Steagall Act of 1933 created the Federal Deposit Insurance Corporation to protect depositors’ funds. 46 The Securities and Exchange Commission was created in 1934 to prevent another Black Tuesday stock market crash, which signaled the beginning of the Great Depression when investors borrowed large percentages of the cost of purchasing stocks.4- The Federal Housing Administration was created in 1934 to regulate mortgages because of the number of unemployed who were losing their homes. The Social Security Act was passed in 1935 to assist impoverished elderly and disabled Americans. 48 This list is only a fraction of the many federal regulations and regulatory agencies passed by Roosevelt during his unprecedented four Presidential administrations.49 With no Democratic successor ready to continue the process of passing and implementing New Deal regulations, and faced with the threat of Adolph Hitler and Joseph Stalin, Roosevelt broke the tradition of serving only two terms" he was elected in 1932, 1936, 1940, and 1944. When Roosevelt died during his fourth administration, he was succeeded by Harry S. Truman.50 Truman created a ED` UL)SMPII "l+Rb One Lesson from the 1930s: Financial Regulation Has to Be Boldb Z8\\YT[9>T =>:9 fUlh GDb G^HHeb M))-*?__jjj`M(OOL0N)/0-/*)`S/2_ 2L)SMPIIakl+R_/0PaIP**/0aO+/2a)MPaH@F^*mkmGHC@^H`M)2I` EC` Ul+)L0 WPIIPhb Top 10 New Deal Programs of the 1930s, FDR’s Signature Strategy to Combat The Great Depressionb 9Z>8[Z9!>`b M))-*?__ jjj`)M/(NM)S/`S/2_)/-a0PjaRPlIa-+/N+l2*aH^ECAB fIl*) (-Rl)PR :P-)` Bb G^HAe` EB. Id. EA. Id. E@. Id. D^. FDR diesb ZY:9>;qb M))-*?__jjj`ML*)/+h`S/2_)ML*aRlhaL0aML*)/+h_OR+aRLP* fIl*) 'L*L)PR >S)` Hb G^HAe`
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commission, chaired by former President Herbert Hoover, to make recommendations for reorgani4ing and reforming the federal government. In response to the Hoover Commission recommendations, Congress proposed the 22th Amendment on March 24, 194-, to limit the number of terms a President may serve to two.51 It is the opinion of this article that it was more than a coincidence that former President Herbert Hoover recommended term limits, as it is likely the New Deal regulatory legislation that Roosevelt shepherded through Congress which netted him an unprecedented four terms. Herbert Hoover may have disagreed with invasive regulations imposed on America’s economic systems through the New Deal’s regulations. Nevertheless, federal regulation and regulatory agencies took a major step forward as a result of the Great Depression and sparked major change in the United States’ economic history. 52 Economic theorists debated federal intervention during the Great Depression, and they continued to debate it in the post-World War II economy. Regardless, federal regulation and regulatory agencies expanded tremendously during the post-World War II era under both Democratic and Republican Presidents.53 One theorist opines that government regulations delayed economic recovery, believing the economy is able to self-regulate, in spite of a decrease in government spending in a post-World War II economy.54 Another theorist describes a scene in a 1939 classic film, entitled “Stagecoach”, where a banker complains about government regulation of banks while he skips town with a suitcase full of his depositors’ money. 55 DH` ULSMlPI VP'Ph . "+Ll0 =` :2P0)J/j*JLb Twenty-second Amendmentb ]T!q!` ";Y9#TTY!# f>S)` Fb G^HGeb M))-*?__jjj`k+L)l00LSl`S/2_)/-LS_9jP0)ha *PS/0Ra#2P0R2P0)` DG` "l+Rb supra 0/)P ED` DF` ;/kP+) ZLNN*b Government and the Economy since World War IIb YTr]=` YT:9` f#-+` G^b G^^Deb M))-?__jjj`L0RP-P0RP0)`/+N_-(kILSl)L/0*_ l+)LSIP`l*-%LR&HE@A` DE` !PSLI "/Ml0/0b Economic Recovery: Lessons from the Post-World War II Periodb U];!#98: !9;` f:P-)` H^b G^HGeb M))-*?__jjj`2P+Sl)(*`/+N_-(kILSl)L/0_ PS/0/2LSa+PS/'P+haIP**/0*a-/*)aj/+IRajl+aLLa-P+L/R` DD` =l(I W+(N2l0b Why We Regulate, T` q` 9YU]: fUlh HFb G^HGeb M))-?__jjj`0h)L2P*`S/2_G^HG_^D_HE_/-L0L/0_J+(N2l0ajMhajPa+PN(Il)P`M)2I`
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The latter theorist encouraged Barack Obama to be courageous with regulatory legislation as he guided the United States economy out of the recession of the late 2000s, ultimately showcasing Franklin Roosevelt’s New Deal regulation successes, that while not evident in the short run, served the economy well in the long run. 56
C. The Latter 1990s and Early 2000s Faced with unprecedented high-profile threats after World War II, such as containment of communism" the space race" the /orean and Vietnam conflicts" racial unrest" and environmental concerns, Americans accepted that federal regulation and regulatory agencies were not a byproduct of the Great Depression but were critical to American life. Even as a conservative president, Richard Nixon’s New Economic Policy included wage and price controls" furthermore, his Federal Energy Administration expanded regulation of the United States’ economy. 5Numerous regulations and regulatory agencies created during the latter half of the 1900s remain relevant today. Dwight Eisenhower, on August 23, 1958, signed the Federal Aviation Act, the precursor to the Federal Aviation Administration, to regulate national airspace. 58 On July 2, 1965, the E$ual Employment Opportunity Commission started to address employment discrimination based on race, color, religion, sex, and national origin through implementation of Title VII of the Civil Rights Act of 1964.59 The Clean Air Act, passed in 19-0, authori4ed the Environmental Protection Agency to regulate emissions from ha4ardous sources as a safeguard of public health. 60 DC` =l(I W+(N2l0b Franklin Delano Obama? T` q` 9YU]: fT/'` H^b G^^Aeb M))-?__jjj`0h)L2P*`S/2_G^^A_HH_H^_/-L0L/0_H^J+(N2l0`M)2I` DB` ZLNN*b supra 0/)P DF` DA. A Brief History of the FAAb \]r` #6Y#9Y>T #rUYT`b M))-*?__jjj`Oll`N/'_ lk/()_ML*)/+h_k+LPOmML*)/+h_ fIl*) 2/RLOLPR Xl0` Eb G^HBb E?EG =Ue` D@. EEOC at 50b 8`:` ]<8#V ]U=` >==>;98TY9q !>UU7Tb M))-*?__jjj`PP/S`N/'_PP/S_ML*)/+h_D^)M_ fIl*) 'L*L)PR \Pk` G^b G^HAe` C^. Summary of the Clean Air Actb 8`:` ]T69V` =;>9]!9Y>T #[]T!qb M))-*?__jjj`P-l`N/'_Ilj*a+PN(Il)L/0*_*(22l+haSIPl0alL+alS) fIl*) 'L*L)PR \Pk` G^b G^HAe`
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In 1981, Ronald Reagan was elected with an agenda focused on government regulation considered too intrusive in numerous areas, consumer, employment, and the environment.61 While some industries were deregulated, the net effect was minuscule. During the 1950s, the Federal Register, which posts federal agency’s proposed and final rules, contained 10-,000 pages for the entire decade" by the early 2000s, the number was approximately -31,000 pages per decade.62 Admittedly, the Federal Register contains more than just federal agencies’ proposed and final rules" it also contains administrative notices, presidential statements, corrections, and numerous other official documents.63 Nevertheless, the number of pages added in 2016, the end of Barack Obama’s administration, was 95,894.64 The number of pages devoted exclusively to final rules of federal agencies in 2016 was 38,652, and the number of cumulative final rules published in the Federal Register from 1993-2016 was 98,099.65 History has shown such increases often follow major economic changes in the United States. IV. FEDERAL RESPONSES TO RECENT MAJOR COMPLIANCE FAILURES High profile economic scandals have led to an increase in federal regulations. The scandals of Enron and WorldCom led to the passage of one of the most extensive federal compliance laws in American history, Sarbanes-Oxley. 66 Sarbanes-Oxley, titled the Public Company Accounting Reform and Investor Protection Act by the Senate and the CH` #2P+LSl0 ZL*)/+h? \+/2 )MP ;P'/I()L/0 )/ ;PS/0*)+(S)L/0 l0R "Ph/0R =+/KPS)b The Economy in the 1980s and 1990sb 8` [;>TYT[]Tb M))-?__jjj`IP)`+(N`0I_(*l_/()IL0P*_PS/0/2haH@@H_laML*)/+LSlIa-P+*-PS)L'Pa/0a)MPa l2P+LSl0aPS/0/2h_)MPaPS/0/2haL0a)MPaH@A^*al0RaH@@^*`-M- fIl*) 'L*L)PR T/'` Db G^HAe` CG` ZLNN*b supra 0/)P DFb l) GG` CF. Thousands of Pages and Rules in the Federal Registerb !>U=]9Y9Y6] ]T9];` YT:9` fUlh FHb G^HBeb M))-*?__SPL`/+N_H^W!_!Ml-)P+aE` CE. Id. CD. Id. CC` UYVV];b supra 0/)P GEb l) HD@`
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Corporate and Auditing Accountability and Responsibility Act by the House, is named for its sponsors, Democratic U.S. Senator Paul Sarbanes of Maryland and Republican U.S. Representative Michael G. Oxley of Ohio.6- Signed into law on July 30, 2002, by President Bush, Sarbanes-Oxley addresses corporate governance and financial transparency of publicly traded companies" it was the most sweeping legislation in this area since the Securities and Exchange Act of 1934. The law established the Public Companies Accounting Oversight Board as the regulatory agency to establish auditing standards, processes for attestations of auditing accuracy, and annual inspections of major auditing firms.68 The major intent of Sarbanes-Oxley is to protect investors and reduce corporate fraud. The deregulation of the oil and gas industry, that occurred prior to Enron’s bankruptcy, was a primary factor that allowed Enron to engage in fraudulent activities.69 Such ineffective regulation led former Securities and Exchange Commission Chairman Richard Breeden to make seventy-eight recommendations to change the corporate governance at Worldcom. However, the same corporate governance structure allowed corporate greed and an auditing firm, who was more interested in Worldcom’s interests than stockholders’, to drive Worldcom into bankruptcy.-0 Sarbanes-Oxley has eleven titles, and the summari4ed major compliance sections are, Section 302 - Corporate Responsibility for Financial Reports re$uires corporate officers to sign their financial reports indicating an attestation to their accuracy and to CB. The Sarbanes-Oxley Act of 2002b :#V"];[ . !>`b =`#`b M))-?__ jjj`*PSl(RL)/+`S/2_*l+kl0P*`-M- fIl*) 'L*L)PR \Pk` G^b G^HAe` CA. Before and after Sarbanes-Oxley - learning to live with changeb #!!>8T9YT[5]" f#(N` H@b G^^Aeb M))-*?__jjj`lSS/(0)L0NjPk`S/2_ -+lS)LSP_-+lS)LSPaPiSPIIP0SP_kPO/+Pal0RalO)P+a*l+kl0P*a/iIPhaIPl+0L0Na)/aIL'PajL)Ma SMl0NP` C@` ;/*P2l+h =Pl'IP+b The Enron Scandal that Prompted the Sarbanes-Oxley Actb "8:` \YT`b M))-*?__jjj`)MPklIl0SP*2k`S/2_*l+kl0P*a/iIPhalS)al0Ra)MPaP0+/0a *Sl0RlIaF@FE@B fIl*) (-Rl)PR #(N` HCb G^HAe` B^` :)l0O/+R [:" :)lOOb What Led to Enron, WorldCom and the Like?b :9#T` "8:` f>S)` HDb G^^Feb M))-*?__jjj`N*k`*)l0O/+R`PR(_L0*LNM)*_jMl)aIPRaP0+/0a j/+IRS/2`
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provide information regarding deficiencies in internal controls or acts of fraud by employees. Section 401 – Disclosures in Periodic Reports mandates that financial statements include all relevant offbalance sheet liabilities and that the Securities and Exchange Commission develop a process to determine if generally accepted accounting practices have been followed. Section 404 – Management Assessment of Internal Controls instructs corporate leaders to include information regarding the ade$uacy of their internal controls and procedures for financial reports in their annual reports. Section 409 – Real Time Issuer Disclosures obligates issuers of stocks to urgently provide notification to the public with information regarding material changes in the financial condition or operation of their corporation, and that the information must be easy for the public to understand. Section 802 – Criminal Penalties for Altering Documents imposes penalties and0or up to twenty years of imprisonment for altering, concealing, or destroying documents, or for impeding a legal investigation in any way. Additionally, it imposes penalties and0or imprisonment for up to ten years for accountants who knowingly and willfully do not maintain all audit documents for five years.-1 In 2010, the Dodd-Frank Wall Street Reform and Consumer Protection Act 3Dodd-Frank2, was passed and was the most extensive regulatory reform of American financial institutions since the Great Depression. It was passed as a result of the Great Recession.-2 The Great Recession lasted from December 200- to June 2009, during which time the real gross domestic product plummeted to its greatest decline since World War II" the Great Recession was the longest economic decline for the United States since
BH. A Guide to the Sarbanes-Oxley Actb :>4 V#5 fG^^Ceb M))-?__jjj`*/iIlj`S/2_L0RPi`M)2` BG` U/++L*/0 . \/P+*)P+b The Dodd-Frank Act: a cheat sheetb U>\>`!>U fG^H^eb M))-*?__2PRLl`2/O/`S/2_OLIP*_(-I/lR*_Y2lNP*_:(22l+hr/RR\+l0J#S)`-RO`
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World War II.-3 One of the primary reasons for this catastrophic event in Americaâ&#x20AC;&#x2122;s economic history was the lack of regulation in the financial industry and too much reliance on the stability of large banks. Americans watched in disbelief as the federal government engaged in taxpayer bailouts for various industries and exposed the depth of corruption in the financial industry.-4 At one point in 2009, the federal government owned approximately 80% of American International Group 3AIG2, the largest insurer in the United States, and 60% of General Motors. While Barack Obama had legislative victories resulting from bipartisan cooperation, Americans were outraged at the level of corruption and failings of financial institutions.-5 The Dodd-Frank Act, named after Democratic Senator Christopher J. Dodd of Connecticut and Democratic U.S. Representative Barney Frank of Maryland, addressed sixteen major areas of regulation in the financial industry. -6 Dodd-Frank created the Financial Stability Oversight Council to oversee financial institutions, and this council included the heads of the Office of the Comptroller of the Currency" Security and Exchange Commission" U.S. Commodities Trading Commission" Federal Deposit Insurance Corporation" Federal Finance Housing Agency" National Credit Union Association" and Bureau of Consumer Financial Protection. Additionally, non-voting members include the heads of the Office of Financial Research" Federal Insurance Office" and a state insurance commissioner" banking supervisor" and securities commissioner. One of the primary roles of the Financial Stability Oversight Council is to implement and enforce BF` ;/kP+) ;LSMb The Great Recession December 2007-June 2009b \]r` ;]:` ZY:9` fT/'` GGb G^HFeb M))-*?__jjj`OPRP+lI+P*P+'PML*)/+h`/+N_P**lh*_ N+Pl)m+PSP**L/0m/OmG^^B^@` BE` Ul+Nl+P) ;/(*Pb Dodd-Frank Actb 9]!Z9#;[]9b M))-?__ *Pl+SMOL0l0SLlI*PS(+L)h`)PSM)l+NP)`S/2_RPOL0L)L/0_r/RRa\+l0Ja#S) fIl*) (-Rl)PR \Pk` G^HBe` BD. The Great Recession of 2008â&#x20AC;&#x201C;09, ]T!q!` ";Y9#TTY!# fXl0` G@b G^H^eb M))-*?__jjj`k+L)l00LSl`S/2_)/-LS_[+Pl)a;PSP**L/0a/OaG^^AaG^^@a9MPaHCCHCEG` BC` Ul+J W/klb Dodd-Frank Act: CNBC Explainsb !T"!b M))-*?__jjj`S0kS`S/2_LR_EB^BDADE fIl*) (-Rl)PR #-+` F^b G^HFb HH?HB #Ue`
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consumer-related finance compliance regulations. DoddFrank is a very invasive regulation" it provides oversight for the financial industry and establishes re$uirements for large financial companies, including credit rating agencies. It examines corporate governance, executive compensation practices, and investor protection for both banking and nonbanking financial institutions.-Sarbanes-Oxley and Dodd-Frank are just two of the major pieces of recent federal legislation designed to regulate the United States economy, a necessary result of major compliance failures. Others, such as the GrammLeach-Bliley Act of 1999, were designed to protect consumers and increased the number of regulations and regulatory agencies.-8 Such increases have fueled the major change in employment opportunities for lawyers, the first major change since the Industrial Revolution. No longer do lawyers have only two options, litigation or transactional work. Regulation and regulatory agencies have created new opportunities for lawyers in the area of compliance.-9 V. WHAT IS COMPLIANCE!
A. Yesterday and Today Compliance can be traced back to ancient civili4ations. Hammurabiâ&#x20AC;&#x2122;s Code, created around 1-80 B.C., is viewed as being one of the first examples of written laws and regulations that could not be arbitrarily changed by the king, as was the practice in much of the ancient world.80 Unlike many ancient rulers, Babylonian Hammurabi of Mesopotamia in the Near East did not consider himself to be a god" he considered himself to be a maker of laws and regulations for citi4ensâ&#x20AC;&#x2122; conduct. 81 The system of 282 laws BB` U/++L*/0 . \/P+*)P+b supra 0/)P BG` BA` ;/(*Pb supra 0/)P BE` B@` Ul)lb supra 0/)P FF` A^. Code of Hammurabib T]5 5>;Vr ]T!q!`b M))-?__ jjj`0Pjj/+IRP0ShSI/-PRLl`/+N_P0)+h_!/RPm/OmZl22(+lkL fIl*) 'L*L)PR #-+` Cb G^H@e` AH. Id.
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inscribed on an eight-foot-tall stela of black diorite created stability and peace" it gave citi4ens a sense of order which led many to move about from Babylon to the Mediterranean Sea.82 Judges adjudicated disputes among citi4ens throughout the kingdom, and citi4ens had the right to appeal the rulings of the judges. The code addressed issues such as class designations, property law, commercial law, family law, and associated punishments.83 Ancient Persia is another example of an ancient civili4ation that had an organi4ed system of government that ensured compliance with its laws and regulations. In 539 B.C., /ing Cyrus began con$uering territory that would eventually extend from modern-day Iran to Egypt. 84 Persian kings created an organi4ed system of government, employing officials throughout the empire, that was unparalleled by their predecessors.85 Persia was divided into 20 provinces, called satrapies, which were ruled by the king’s governors, called satraps.86 To guarantee absolute compliance with the system of laws and regulations, the kings also installed a secretary and a military officer in each satrap.8- The Royal Road connected the important cities, and special inspectors traveled throughout the provinces as an additional layer of compliance.88 To spread the word about laws and regulations, there were post stations every fourteen miles along the Royal Road for the king’s couriers to rest and obtain fresh horses and supplies.89 This efficient system of communication allowed the messengers to cover the 1600-mile empire in one week.90 AG. Id. AF. Id. AE. The Early Middle East – Persia 539-333 B.C.b 8`:` ZY:9>;q`>;[? #T!Y]T9 !Y6YVYp#9Y>T: fG^HAe oMP+PL0lO)P+ The Early Middle Eastnb jjj`(*ML*)/+h`/+N_ SL'_EP`l*-` AD. Id. AC. Id. AB. Id. AA. Id. A@. Id. @^. The International History Project: Persiab ZY:9>;q 5>;Vr YT97V fG^^Eeb M))-?__ML*)/+haj/+IR`/+N_-P+*Ll0*`M)2 fIl*) 'L*L)PR \Pk` GAb G^HAe`
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The Persian Empire lasted from 539 B.C. until 331 B.C. when it was con$uered by Alexander the Great. 91 As has been expressed in this document, compliance in the United States has been on the fast-track since the Industrial Revolution.92 A current definition of compliance today commonly involves the following elements, An organi4ation0entity conforms its behavior to a standard or norm, The standard or norm does not originate from within the organi4ation0entity, and The organi4ation0entity would not necessarily act in accordance with the norm or standard on its own without some effort, incentive, or compulsion.93
B. The Three Areas of Compliance Practice for Attorneys 1. Regulated Private Sector Organi4ations The three most common areas of compliance practice for attorneys in the United States are regulated private sector organi4ations" standard-setting and related rule-making organi4ations in the public sector" and outside counselors and advisors. Regulated private sector organi4ations are mostly commercial businesses and nonprofit organi4ations that are under compliance mandates from the government, $uasi-governmental organi4ations, and standard-setting associations. +uasi-governmental organi4ations implement government regulations set by agencies such as the Securities and Exchange Commission.94 Standard-setting associations regulate professions and typically grant, deny or take action against certifications, e.g. American Board of Anesthesiology.95
@H. The Early Middle Eastb supra 0/)P AE` @G. The Progressive Era (1890 - 1920)b supra 0/)P FC` @F` UYVV];b supra 0/)P GE l) HDB` @E` G ;Y!Z#;r V` Z];U#TTb !#;]];: YT !>U=VY#T!] Xr: 5#T9]r @ fGH*) !P0)(+h VPNlI !l+PP+ :P+LP*b G^HBe` @D` 9Z] #U];Y!#T ">#;r >\ #T]:9Z]:Y>V>[qb M))-?__jjj`)MPlkl`/+N_ U>!#_#k/()aU>!#aGa^ fIl*) 'L*L)PR \Pk` GAb G^HAe`
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Private sector compliance has fueled a significant change in employment opportunities for lawyers. In the past, lawyers were typically called upon to address the damaging effects after a disaster caused havoc upon the organi4ation" presently, the role of a lawyer employed in a compliance position is primarily preventive in nature. Major responsibilities for the private sector compliance attorney include analy4ing new laws and regulations" developing policies and procedures for implementation" alerting senior management when violations occur" interacting with regulators" and reporting violations to the appropriate enforcement regulators when necessary. New laws, new regulations, massive fines, and other penalties for misconduct motivate private sector organi4ations to implement internal compliance programs as a preventive and proactive measure. The oversight of the compliance program is more and more the responsibility of the compliance attorney. Effective November 1, 1991, Congress passed the Federal Organi4ational Sentencing Guidelines as an incentive for corporations to develop compliance programs" these programs can mitigate the penalties for an organi4ation facing employee misconduct. 96 On October 1, 2014, United States Assistant Attorney General for the Criminal Division Leslie R. Caldwell, speaking at the 22nd Annual Ethics and Compliance Conference in Atlanta, stated that it is rare for a company listed on the New York Stock Exchange not to have a viable compliance program since the enactment of Sarbanes-Oxley. She referenced a situation involving Weatherford Internationalâ&#x20AC;&#x2122;s guilty plea for violating the Foreign Corrupt Practices Actâ&#x20AC;&#x2122;s anti-bribery provision, resulting in &252 million in penalties and fines. Weatherford had a very weak compliance program that resulted in weak enforcement. 9@C` =l(Il rP*L/b An Overview of the Organizational Guidelinesb 8`:` :]T9]T!YT[ !>UU7Tb M))-*?__jjj`(**S`N/'_*L)P*_RPOl(I)_OLIP*_-RO_)+lL0L0N_ /+Nl0Lgl)L/0lIaN(LRPIL0P*_>;[>6];6Y]5`-RO fIl*) 'L*L)PR T/'` Cb G^HAe` @B` VP*ILP ;` !lIRjPIIb Remarks by Assistant Attorney General for the Criminal Division Leslie R. Caldwell at the 22nd Annual Ethics and Compliance Conferenceb r]=79 >\ X8:9Y!] f>S)` Hb G^HEeb M))-*?__jjj`K(*)LSP`N/'_
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As a result of the compliance laws and regulations, including the Federal Organi4ational Sentencing Guidelines, a body of knowledge has emerged regarding the necessary elements for internal compliance programs summari4ed as follows, Organi4ational Leadership and Culture – The organi4ation’s highest authority, such as the board of directors, sets the compliance tone for the organi4ation and exercises reasonable oversight for the organi4ation’s compliance program. High-level Management Responsibility – The individual responsible for internal compliance, typically a chief compliance officer, has reasonable and regular access to the organi4ation’s highest authority and is a member of the organi4ation’s executive team. Ade$uate resources, including staff, are available for the compliance team to operate the compliance program. Standards and Procedures – The organi4ation has clear standards of conduct and internal controls to minimi4e the possibility of misconduct, including criminal behavior. Additionally, the organi4ation has policies and procedures specific to departments to provide clear guidance for employees. Training and Education – Appropriate training is re$uired for all employees, including the organi4ations highest authority, and the training is documented. Speciali4ed training is conducted for specific employees who need it for their speciali4ed employment functions. Monitoring, Auditing, and Evaluation of Compliance Program Effectiveness – The implementation of the Compliance Program must be monitored, audited, and evaluated to detect misconduct and0or criminal behavior. Both internal and external audits are necessary prior to examination by a government regulator in order to minimi4e the possibility of violations and punishments. Remedial Action – If either the auditors or the government regulators find misconduct or criminal /-l_*-PPSM_+P2l+J*al**L*)l0)al))/+0PhaNP0P+lIaS+L2L0lIaRL'L*L/0aIP*ILPa+aSlIRjPIIa GG0Ral00(lIaP)MLS*`
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behavior, the organi4ation takes appropriate remedial action. Failure to make corrections is detrimental to the organi4ation, and recurrence of similar behavior creates doubts in the minds of the regulators that the organi4ation is serious about applicable laws and regulations. Risk Assessment – Periodically the organi4ation’s highest authority, in consultation with the executive team, determines the level of acceptable risk the organi4ation is willing to assume in order to achieve the desired benefits. The assessment is measured against the applicable laws, regulations, and industry enforcement trends associated with the organi4ation.98 Revised on November 2015, the U.S. Department of Justice Attorneys’ Manual, under Principles of Federal Prosecution of Business Organi4ations, listed factors to consider when making the decision whether to prosecute for criminal or civil misconduct" the list includes “the existence and effectiveness of the corporation’s pre-existing compliance program.”99 Furthermore, the Manual details the expectations for corporate compliance programs. The expectation is that the compliance program is more than a paper document with good faith implementation designed to detect and prevent civil and criminal misconduct. The Department of Justice understands that no program prevents all employee misconduct, but its expectation is that employees are informed and are convinced that management has established a culture of compliance with laws and regulations. If these important elements are present when the Department of Justice is making its determination to prosecute, then the organi4ation may have its charges mitigated. Since the Department of Justice attorneys acknowledge that they are not experts in the many areas of compliance regulations, they may consult @A` Wjl2L0l 5LIILO/+R . rl0LPI :2lIIb Establishing an Effective Compliance Program: An Overview to Protecting Your Organizationb #::7T >\ !>;=` !>8T:` fXl0` GDb G^HFeb M))-?__jjj`lSS`S/2_IPNlI+P*/(+SP*_,(LSJS/(0*PI_PlPS-`SO2% 2lJP-RO&H` @@. U.S. Attorneys’ Manualb 9-28.300b 8`:` r]=79 >\ X8:9`b M))-*?__ jjj`K(*)LSP`N/'_K2_K2a@aGA^^^a-+L0SL-IP*aOPRP+lIa-+/*PS()L/0ak(*L0P**a /+Nl0Lgl)L/0*3@aGA`F^^ f;P'L*PR T/'` G^HDe`
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with relevant federal and state regulatory agencies to assist in the review of compliance programs, thus ensuring accurate evaluative information in their assessment of the ade$uacy of the program.100 2. The Public Sector and Related Rule-Making and Standard-Setting Organi4ations The second area of compliance practice for attorneys is in the public sector, with rule-making and standard-setting related organi4ations. This area of practice is the opposite of regulated private sector organi4ations discussed above. Public sector compliance often involves government regulators who have four major jobs, writing compliance regulations and establishing standards for compliance" monitoring implementation" investigating potential misconduct" and enforcing standards when misconduct occurs.101 Codified in 1946, the Administrative Procedure Act 3APA2 formali4ed the process of writing regulations and establishing standards for compliance at the federal level, and it defines rule as “the whole or part of an agency statement of general or particular applicability and future effect designed to implement, interpret, or prescribe law or policy.”102 This act uses the terms “rules” and “regulations” interchangeably.103 Many states have adopted a similar process as described in the APA for the promulgation of rules as the Model State Administrative Procedure Act, under the auspices of the National Conference of Commissioners of Uniform State Laws.104 Legislative action empowers public sector, and related rule-making and H^^. U.S. Attorneys’ Manualb 9-28.800b 8`:` r]=79 >\ X8:9`b M))-*?__jjj`K(*)LSP`N/'_K2_K2a@aGA^^^a-+L0SL-IP*aOPRP+lIa-+/*PS()L/0ak(*L0P**a /+Nl0Lgl)L/0*3@aGA`A^^ f;P'L*PR T/'` G^HDe` H^H` G Z];U#TTb supra 0/)P @Eb l) HFb HE` H^G` UlP'P =` !l+Phb The Federal Rulemaking Process: An Overviewb !>T[` ;]:` :];6` fX(0P HBb G^HFeb M))-*?__Ol*`/+N_*N-_S+*_2L*S_;VFGGE^`-RO` H^F. Id. H^E. State Administrative Procedure Act, Revisedb 8TY\` V` !>UU7Tb M))-*?__jjj`(0LO/+2Ilj*`/+N_S/22L))PP*_S/22(0L)haM/2P%!/22(0L)hWPh& OHAEOk^SaDPFHaESCRaAGGAaBOGk^HHGOlEG fIl*) 'L*L)PR #-+` Cb G^HAe`
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standard-setting organi4ations, to issue regulations and standards" however, the President may also delegate presidential authority to a public agency for the rulemaking and standard-setting process.105 The rule-making process for attorneys in this area of practice typically involves a variation of the following, Meeting with agency leaders to draft the rules and standards after legislation has been passed, Publishing the drafts for public review for a specified period of time, Participating in public hearings as the expert government representative, Amending the regulation after public input, Managing the legislative and agency review of the proposed final draft of the rule, and Issuing the final rule for publication.106 The last three major jobs in public sector compliance for attorneys are monitoring, investigating, and enforcing regulations involving private organi4ations. The authority of federal agencies to monitor, investigate, and enforce regulations in the private organi4ation arena has been hard-fought, pitting the judicial model of regulation against the administrative model of regulation. With the judicial model, regulation of private organi4ations is based on the judicial common law, while regulation with the administrative model is based on federal agency rules and regulations. During the Progressive Era, this model of regulation was vociferously challenged due to the growth and complexity of federal regulation brought about to address the ills visited upon society by big business. 10In the government regulation versus private sector rights debate, private commercial organi4ations became more complex and speciali4ed over time, while courts H^D. A Guide to the Rulemaking Processb >\\` >\ 9Z] \]r` ;][` fG^HHeb M))-*?__jjj`OPRP+lI+PNL*)P+`N/'_(-I/lR*_G^HH_^H_)MPm+(IP2lJL0Nm-+/SP**`-RO` H^C` G Z];U#TTb supra 0/)P @Eb l) HFb HE` H^B` UYVV];b supra 0/)P GEb l) HCH`
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became overloaded and slow to react to the needs of society.108 Constitutional $uestions were asked and answered as the judicial model gave way to the administrative model. Geoffrey Parsons Miller addressed four main $uestions in The Law of Government Risk Management, Are the Due Process Clauses of the Fifth and Fourteenth Amendments a guarantee that parties called to answer to the compulsory power of the government satisfied if the parties are brought before an administrative agency rather than before a judicial court of law! 109 In 1932, the United States Supreme Court answered this $uestion in Crowell v. Benson by ruling that due process is satisfied by administrative hearings with an administrative law judge if the regulated party receives the protections of judicial proceedings such as a notice and a hearing.110 Is the Seventh Amendment, which guarantees federal court litigants the right to a trial by jury, violated when juries are not empaneled in administrative agency proceedings!111 United States Supreme Court Justice Byron White answered this $uestion in 19-- when he opined in Atlas
Roofing Co., Inc. v. Occupational Safety and Health Review Commission, “Congress is not re$uired by the Seventh Amendment to choke the already crowded federal courts with new types of litigation or prevented from committing some new types of litigation to administrative agencies with special competence in the relevant field.” 112 Do proceedings before administrative law judges rule afoul of Article III of the United States Constitution which provides that federal judges are subject to checks and balances and serve during a period of good behavior!113
H^A. See id. l) HBH` H^@. See id. f+POP+P0SL0N 8`:` !>T:9` l2P0R*` 6b 4Y6e` HH^. Id. l) HBG f+POP+P0SL0N !+/jPII '` "P0*/0, GAD 8`:` GG fH@FGee` HHH. Id. l) HBH f+POP+P0SL0N 8`:` !>T:9` l2P0R` 6YYe` HHG. Id. l) HBD fSL)L0N #)Il* ;//OL0N !/`b Y0S` '` >SS(-l)L/0lI :lOP)h l0R ZPlI)M ;P' !/22`b EF^ 8`:` EEGb EDD fH@BBee` HHF. See id. l) HBH f+POP+P0SL0N 8`:` !>T:9` l+)` YYYe`
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In Crowell v. Benson, the United States Supreme Court issued a ruling that Congress has the power to establish “legislative” courts as distinguished from constitutional courts to serve as special tribunals which do not re$uire judicial determinations.114 ÿ Do administrative judges have the power to adjudicate hearings between administrative agencies and private organi4ations if they are not appointed in conformity with the Appointments Clause of the United States Constitution, art. II, #2, cl. 2! The Appointment Clause mandates that, 6the President5 shall nominate, and, by and with the Advice and Consent of the Senate, shall appoint Ambassadors, other public Ministers and Consuls, Judges of the Supreme Court, and all other Officers of the United States, whose Appointments are not herein otherwise provided for, and which shall be established by Law, but the Congress may by Law vest the Appointment of such inferior
Officers, as they think proper, in the President alone, in the Courts of Law, or in the Heads of Departments!115
The United States Supreme Court has not yet considered this issue, and federal courts are split on this issue. Presently, administrative law judges are selected through bureaucratic civil-services processes. In Gray Financial Group, Inc. v. Securities and Exchange Commission, a federal district court enjoined the Securities and Exchange Commission from conducting administrative proceedings against Gray Financial Group, Inc., because the administrative law judge was not appointed by either the President or the department head of the Securities and Exchange Commission.116 HHE. See id. f+POP+P0SL0N !+/jPII '` "P0*/0, GAD 8`:` GGb D^ fH@FGee` HHD. Id. f+POP+P0SL0N 8`:` !>T:9` l+)` YY fP2-Ml*L* lRRPRee` HHC. See [+lh \L0` [+-`b Y0S` '` :]!b HCC \`:(--`FR HFFDb HFDE fHH)M !L+` G^HDe`
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The tasks of monitoring federal regulatory implementation, misconduct investigations, and enforcement become overwhelming for administrative law judges because the federal government currently has 445 regulatory agencies.11- These three tasks, when coupled with the need for compliance attorneys to establish standards and write the compliance regulations, helped create the additional compliance practice area of â&#x20AC;&#x153;public sector and related rule-making and standard-setting organi4ations,â&#x20AC;? which fueled a significant change in employment opportunities for lawyers. 118 3. Outside Counselors and Advisors The third area of compliance practice for attorneys is the role of outside counselors and advisors for commercial companies and nonprofits. This area of practice involves lawyers that are outside counsel, temporary legal advisors on specific issues, and consulting firms that provide numerous compliance-related services including legal services.119 When attorneys are engaged for these services, they are not full-time employees of the entities who employ them, so they must tread lightly by keeping in mind that the clientâ&#x20AC;&#x2122;s noncompliance could damage their legal reputation.120 These attorneys must address the tension between the role of an advocate for the client and the role of the public servant as this tension may negatively impact their opportunities for future engagements.121
In re American Continental0Lincoln Savings & Loan Securities Litigation 3ACC0Lincoln2 is an example of a
private consulting firm, Lexecon, that provided compliance services to commercial companies, including legal services. 122 Daniel Fischel, a tenured professor and former Dean of HHB. Agenciesb \]r];#V ;][Y:9];b M))-*?__jjj`OPRP+lI+PNL*)P+`N/'_lNP0SLP* fIl*) 'L*L)PR T/'` Cb G^HAe` HHA` G Z];U#TTb supra 0/)P @Eb l) HFQHD` HH@. Id. l) HD` HG^` UYVV];b supra 0/)P GEb l) EDD` HGH. Id. HGG. See id.
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the University of Chicago Law School, was fre$uently employed by Lexecon to provide legal services for their clients.123 A class of investors sought over &360 million in damages claiming that ACC0Lincoln violated securities laws by misleading investors.124 The investors’ attorneys directly attacked the credibility of Fischel, claiming the reports he prepared for federal regulators assisted in ACC0Lincoln’s attempts to stall the regulators’ investigation, while they sold worthless stocks.125 While Fischel was later exonerated, Lexecon claimed on Fischel’s behalf “that defendants were making good on Melvyn Weiss’ threat to destroy Fischel because his testimony was widely believed to have produced several big victories against clients represented by Millberg Weiss. . . .”126 An additional service provided by outside counselors and advisors is that of monitoring commercial companies on behalf of public regulators.12- Because public regulators do not have the resources necessary to monitor the many organi4ations found to be involved in compliance misconduct, public regulators engage the services of private monitors to determine whether commercial companies adhere to the terms of consent agreements or settlements.128 The International Association of Independent Private Sector Inspectors General 3IPSIG2 is a notable entity involved in this area of consulting.129 The conundrum private consultants face – regarding the tension between the role of an advocate for the client and the role of the public servant – is resolved in IPSIG’s Preamble and Introduction, as an independent organi4ation, unethical and noncompliant behavior uncovered by IPSIG is reported to HGF. See id. HGE. See id. HGD. Id. l) EDC` HGC. Id. l) EDD fSL)L0N In re #2P+LSl0 !/0)L0P0)lI_VL0S/I0 :l'L0N* . V/l0 :PS(+L)LP* VL)LNl)L/0b AAE \` :(-` HFAA f#+Lg` H@@Dee` HGB. Id` l) EEA` HGA. Id. HG@. International Association of Independent Private Sector Inspectors Generalb []9TY!W . []9TY!W fXl0` Hb H@@Ceb M))-*?__NP)0LSJIlj`S/2_H@@C_^H_ L0)P+0l)L/0lIal**/SLl)L/0a/OaL0RP-P0RP0)a-+L'l)Pa*PS)/+aL0*-PS)/+*aNP0P+lI_`
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both the private organi4ation and the government regulators.130 As outside counselors and advisors, the third area of compliance practice is providing traditional law firms with opportunities to be involved in entrepreneurial ventures without violating state bar limitations regarding fee sharing.131 Because law firms involved in compliance work use attorneys with speciali4ed skills in areas such as financial, higher education, and healthcare regulation, they are able to earn additional fees from existing clients, provide non-legal and $uasi-legal services that attract new clients, and counteract moves by non-law firms who are attempting to provide law-related services in a competitive market.132 VI. WHY ARE LAWYERS PREFERRED IN COMPLIANCE CAREERS! A survey of various executive-level job descriptions reveals no re$uirement that the applicant be a Juris Doctor or a member of a state bar association" however, holding a Juris Doctorate is a significant advantage in securing a senior staff compliance position.133 Why, then, are lawyers preferred in compliance positions! First, the knowledge and skills re$uired for the compliance officer position are legal in nature.134 Compliance officers for financial institutions must possess knowledge of laws and regulations governing deposits and banking" be able to ensure compliance with those laws and regulations" maintain a beneficial relationship with regulatory agencies" develop a compliance program based on laws and regulations" and oversee the implementation of the compliance program.135 Compliance HF^. HFH` HFG. HFF.
See id. G Z];U#TTb supra 0/)P @Eb l) HD` Id. l) FD` See ;LSMl+R V` ZP+2l00b Compliance Careers: J.D.s Wantedb T#97V X8;Y:9b :-+L0N G^HBb l) A` HFE. See UYVV];b supra 0/)P GEb l) D` HFD` ;#qU>Tr X#U]:b M))-*?__K/k*`+lh2/0RKl2P*`S/2_K/k_*)a-P)P+*k(+N_*'-a SMLPOaS/2-ILl0SPa/OOLSP+akl0JaM/IRL0NaS/_@DE_C^ADDFG fIl*) 'L*L)PR Ul+` HFb G^HAe`
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officers for healthcare institutions are responsible for programs, policies, and practices related to compliance, knowledge of laws and regulations that affect the programs, policies, and practices, and compliance with federal, state, and local laws and regulations.136 Because of the legal nature of compliance programs and increasing scarcity of lawyer positions, law schools in the United States are beginning to understand the need to prepare students for careers in the compliance field.13Why are attorneys preferred in compliance positions! The role of a compliance officer has a strong ethical component.138 While the legal nature of compliance drives the practical duties of the compliance officer, developing and maintaining an ethical culture of compliance are e$ually critical to success of heavily regulated organi4ations. 139 The compliance officer must be principled, fair, modest, proactive, and strong to make difficult decisions in the workplace.140 Unlike many other professions, training in ethics and professional responsibility has been foundational in legal education programs since the 19-0s. For example, twenty-nine lawyers, including Attorney General John Mitchell, were convicted of crimes, named as coconspirators, or disciplined for misconduct in the Watergate scandal. President Richard Nixon, himself a lawyer, resigned to avoid impeachment. Americans were able to see the unethical side of lawyering at a high level, and the legal profession took drastic steps to address the issues associated with Watergate.141 The American Bar Association 3ABA2 Rules of Professional Conduct are the HFC` :#V#;q`!>Ub M))-*?__*jg`*lIl+h`S/2_*lIl+h5Lgl+R_!/+-/+l)Pa!/2-ILl0SPa >OOLSP+aZPlI)MSl+PaX/karP*S+L-)L/0`l*-i fIl*) 'L*L)PR Ul+` HFb G^HAe` HFB. See [P/OO+Ph =` ULIIP+b Compliance and Risk Management: Area for Legal Teaching and Scholarship?b Z#;6` V` :!Z` \` >T !>;=` [>6];T#T!] #Tr \YT` ;][` fUlh GGb G^HEeb M))-*?__S/+-N/'`Ilj`Ml+'l+R`PR(_G^HE_^D_GG_S/2-ILl0SPal0Ra +L*Ja2l0lNP2P0)al+PlaO/+aIPNlIa)PlSML0Nal0Ra*SM/Il+*ML-_` HFA` ;>"];9 5#V9];:b M))-*?__jjj`+/kP+)jlI)P+*a(*l`S/2_Sl+PP+alR'LSP_)MPa +/IPa/OalaS/2-ILl0SPa/OOLSP+`M)2I fIl*) 'L*L)PR Ul+` HFb G^HAe` HF@. See id. HE^. See id. HEH` V];U#T . :!Z;#[b *(-+l 0/)P GCb l) AGH`
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basis for the Multistate Professional Responsibility Examination, which is re$uired for admission to the bars of all but three jurisdictions in the United States" it is also the basis for ethical conduct among lawyers.142 Ethical characteristics such as truthfulness, trustworthiness, impartiality, loyalty, financial responsibility, and modesty are a few of the issues addressed in the ABA Model Rules of Professional Conduct, which are the basis for re$uired ethics courses in law schools.143 Attorneys are preferred in compliance positions because investigations are critical to the compliance function. The compliance officer must ascertain whether violations of laws and regulations are present in the organi4ation. Attorneys have three advantages in conducting investigations over non-lawyers who are not bar certified, the ABA Model Rule 1.6 on Confidentiality, professional training during law school in investigation skills, and status among employees of the organi4ation associated with being an attorney.144 ABA Model Rule 1.6 provides an almost impenetrable wall of confidentiality between attorneys and clients. As a result, attorneys are not subject to the subpoena process regarding information gathered during investigations for an administrative action against the organi4ation.145 In Upjohn v. United States, the Supreme Court held that an attorney enjoys broad protection for the people interviewed, information gathered in anticipation of litigation, and work product involving the information gathered during the investigation.146 Compliance officer job descriptions typically do not re$uire that applicants be trained attorneys, and there are no specific degrees re$uired for most compliance jobs. HEG` T#9Y>T#V !>T\];]T!] >\ "#; ]4#UYT];:b M))-?__jjj`0SkPi`/+N_ Pil2*_2-+P_ fIl*) 'L*L)PR Ul+` HFb G^HAe` HEF` #U];Y!#T "#; #::>!Y#9Y>Tb M))-*?__jjj`l2P+LSl0kl+`/+N_N+/(-*_ -+/OP**L/0lIm+P*-/0*LkLIL)h_-(kILSl)L/0*_2/RPIm+(IP*m/Om-+/OP**L/0lImS/0R(S)_2/ RPIm+(IP*m/Om-+/OP**L/0lImS/0R(S)m)lkIPm/OmS/0)P0)*`M)2I fIl*) 'L*L)PR Ul+` HFb G^HAe` HEE. See UYVV];b supra 0/)P GEb l) GGF` HED` U>r]V ;8V]: >\ =;>\7V !>Tr8!9 +` H`C fG^HAe` HEC` 8-K/M0 !/` '` 80L)PR :)l)P*b EE@ 8`:` FAF fH@AHe`
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Nevertheless, lawyers are well-suited for the position.14Major changes in U.S. economic history have fueled a significant change in employment opportunities for lawyers in compliance. As opportunities in the traditional job market for lawyers decrease, opportunities in compliance rapidly increase. Law schools were once slow to recogni4e the need and to refocus legal education on this booming industry, but they are now focusing on training students for compliance jobs.148 VII. OPPORTUNITIES FOR LAWYERS IN THE COMPLIANCE INDUSTRY! In 2014, only 59.9 percent of law school graduates had jobs in fields that re$uired bar passage within ten months after graduation.149 Opportunities for lawyers to work in the traditional model of law firm employment began to change in 2004, and most economic theorists believe that the change is permanent. According to the United States Census Bureau, law firm employment grew by more than 169,000 jobs from 1998 to 2004" yet, from 2004 to 2008, law firms laid off almost 20,000 lawyers.150 There are three reasons for the permanent decline in law firm employment, they have cost-conscious clients who use techni$ues such as using in-house counsel and seeking discounts from outside firms" economic globali4ation creates competition for lawyers in the United States" and information technology automates functions traditionally performed by law firms.151
HEB. See UYVV];b supra 0/)P GEb l) H@C` HEA. See X(ILP rLUl(+/b U.S. Compliance Education Expands as Demand Increases â&#x20AC;&#x201C; Part One: Law Schoolsb ;]89];:? \YT` ;][` \` frPS` Fb G^HEeb M))-?__kI/N*`+P()P+*`S/2_OL0l0SLlIa+PN(Il)/+haO/+(2_G^HE_HG_^F_(a*aS/2-ILl0SPa PR(Sl)L/0aPi-l0R*al*aRP2l0RaL0S+Pl*P*a-l+)a/0PaIlja*SM//I*_` HE@` :)lSL pl+P)*Jhb The State of the Legal Profession in 2015b #">6] 9Z] V` f:P-)` G@b G^HDb HH?^H #Ueb M))-*?__lk/'P)MPIlj`S/2_G^HD_^@_)MPa*)l)Pa/Oa)MPa IPNlIa-+/OP**L/0aL0aG^HD_` HD^` 5LIILl2 r` ZP0RP+*/0 . ;lSMPI U` plM/+*Jhb Law Job Stagnation May Have Started Before the Recessionâ&#x20AC;&#x201D;And It May Be a Sign of Lasting Changeb #"# X` fX(Ih G^HHeb jjj`lklK/(+0lI`S/2_2lNlgL0P_l+)LSIP_-l+lRLN2m*MLO)` HDH. Id.
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At the same time, many jobs in the compliance industry are rapidly increasing because of major changes in the economic history of the United States. According to the Bureau of Labor Statistics of the U. S. Department of Labor, there were approximately 210,000 compliance officer jobs in the United States in 2011, and that number is predicted to grow by 15 percent by 2020.152 In fact, the Bureau of Labor Statistics has listed compliance as one of its fastest growing professions for the past eight years.153 Compliance is a major part of operations for private companies, and these companies hire compliance officers for their compliance functions. Deloitte is one of the largest international consulting firms and speciali4es in human capital services, risk management, and financial services" it is listed as one of Fortune Maga4ine’s 2018 Top 20 Best Companies to Work For.154 Deloitte conducts research on human capital, including compliance. In its 2015 Compliance Trends report, Deloitte gauged the scope and complexity of corporate compliance in the United States and abroad via a thirty-five-$uestion survey. The survey had four broad categories, resources allocated to compliance, responsibilities of compliance departments, compliance risk areas, and use of technology. 82 percent of the executives responded that they have enterprise-wide compliance functions.155 A recent survey called “Understanding the Costs of Compliance” was conducted under the auspices of Stanford University.156 The survey showed that regulatory mandates can cost employers as much as &-,000 annually per employee, and publicly-held companies with revenue over HDG` UYVV];b supra 0/)P GEb l) H@C` HDF. See Z];U#TTb supra 0/)P @Eb l) C` HDE. About Usb About Deloitteb r]V>Y99]b M))-*?__jjjG`RPI/L))P`S/2_(*_P0_ -lNP*_lk/()aRPI/L))P_l+)LSIP*_lk/()aRPI/L))P`M)2I fIl*) 'L*L)PR Ul+` HFb G^HAe` HDD` r]V>Y99]b M))-*?__jjjG`RPI/L))P`S/2_S/0)P0)_Rl2_rPI/L))P_(*_r/S(2P0)*_+PN(Il)/+h_(*alP+*a +PNaS+*aG^HDaS/2-ILl0SPa)+P0R*a*(+'Pha^DHDHD`-RO fIl*) 'L*L)PR T/'` Bb G^HAe` HDC` X/M0 "lSP P) lI`b Understanding the Costs of Complianceb [#;9]; fX(Ih Bb G^^Ceb M))-?__I/NLS`*)l0O/+R`PR(_-/P2_Pi)P+0lI-l-P+*_(0RP+*)l0RL0Nm)MPmS/*)*m /OmSmHFA^@A`-RO`
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&1 billion spend approximately &1.8 million on Section 404 of Sarbanes-Oxley annually.15Public entities are not exempt from the increasing costs of compliance. A Vanderbilt University study recently reported that higher education spends approximately &2billion annually on compliance.158 The University of North Carolina, with seventeen campuses, spends an estimated seven to eight percent of its operating budget on compliance annually.159 Higher education institutions are under an estimated 265 federal statutes, and noncompliance puts all federal funding at risk, which includes the ability to distribute federal financial aid to students.160 Violations in high profile and highly publici4ed areas, including Title I' sexual harassment and sexual misconduct among students and staff, can be catastrophic for colleges and universities.161 A PricewaterhouseCoopers survey reported that the healthcare industry is one of the most regulated industries in the United States.162 In their State of Compliance 2014 Healthcare Provider Industry Brief, PricewaterhouseCoopers reported that -0 percent of all healthcare providers had departments devoted exclusively to compliance.163 Additionally, over 30 percent of those providers spend between &1 million and &5 million on the compliance function annually.164 The National Jurist has listed the â&#x20AC;&#x153;hot alternative legal career6s5â&#x20AC;? as compliance,
HDB. Id` HDA` UPIl0LP U/+l0b Study Estimates Cost of Regulatory Compliance at 13 Colleges and Universitiesb Vanderbilt Newsb 6#Tr];"YV9 8TY6];:Y9qb f>S)` H@b G^HD HG?^H #Ueb M))-*?__0Pj*`'l0RP+kLI)`PR(_G^HD_H^_H@_+PN(Il)/+haS/2-ILl0SP` HD@. Id. HC^. See Ul+SLl Vlh)/0 9(+0P+b Colleges are Closing in on Complianceb 8` "8:` f\Pk` G^HAeb M))-*?__(0L'P+*L)hk(*L0P**`S/2_S/IIPNP*al+PaSI/*L0NaL0a/0aS/2-ILl0SP_` HCH. Id. HCG. State of Compliance 2014 Healthcare Provider Industry Briefb =;Y!]5#9];Z>8:] !>>=];: fG^HEeb M))-*?__jjj`-jS`S/2_(*_P0_+L*Ja 2l0lNP2P0)_*)l)Pa/OaS/2-ILl0SPa*(+'Ph_l**P)*_-jSa*/Sa-+/'LRP+`-RO` HCF. Id. HCE. Id.
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legal information providers, business and legal affairs, and government affairs.165 VIII. THE AMERICAN BAR ASSOCIATIONâ&#x20AC;&#x2122;S RESPONSE The ABA collects employment data of law school graduates annually and uses a partnership with the National Association for Law Placement 3NALP2 to analy4e and publish the findings of its Data Policy and Collection Committee.166 Membership of NALP consists of over 2,500 legal-career professionals whose goal is to provide accurate legal employment data to the legal community and enhance recruitment, professional and career development, and diversity in the legal profession.16- In 2011, the ABA and NALP coined a new term for their system of data collection, JD Advantage, designed to describe a category of jobs that do not re$uire bar passage but where a JD is a clear advantage.168 In the past these jobs were listed as JD Preferred but the definition changed with the name change in 2011.169 JD Advantage employment includes jobs in compliance for business and industry, government regulatory analyst, corporate contracts administration, and human resources.1-0 The Great Recession of 2008 sparked major economic change and increased interest in JD Advantage jobs.1-1 In 2001, upon graduation, JD Preferred employment was 6 percent of law school graduates" in 2011, JD Advantage was 12.5 percent.1-2 The Great Recession, while boosting JD HCD` ZLIIl+h Ul0)L*b What are the Hot Alternative Legal Careers Right now? T#97V X8;Y:9 fUlh GHb G^HGb E?EC =Ueb jjj`0l)L/0lIK(+L*)`S/2_S/0)P0)_jMl)al+Pa M/)alI)P+0l)L'PaIPNlIaSl+PP+*a+LNM)a0/j` HCC. Detailed Analysis of JD Advantage Jobsb T#97V` #::7T` \>; V` =V#!]U]T9 fUlh G^HFeb M))-*?__jjj`0lI-`/+N_KRmlR'l0)lNPmK/k*mRP)lLIm2lhG^HF%*& KR1G^lR'l0)lNP1G^K/k` HCB. What is the NALP? T#97V` #::7T` \>; V` =V#!]U]T9 fUlh G^HFeb https://www.nalp.org/whatisnalp. HCA` T#97V` #::7T` \>; V` =V#!]U]T9b supra 0/)P HCC` HC@. Id. HB^. Id. HBH. Id. HBG. Id.
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Advantage jobs, led to an overall decline in the market for entry-level legal positions, a true shift in legal employment.1-3 Regarding jobs for the 2011 class of law school graduates, the largest group as of February 15, 2012, was jobs that re$uire bar passage, -6.4 percent, and the second largest was JD Advantage, 14.6 percent. Approximately one out of seven jobs for the graduating class of 2011 was filled by JD Advantage candidates.1-4 More recently, in 2016, 14.1 percent of the 3-,124 law school graduates had JD Advantage positions ten months after graduation while the number of jobs re$uiring bar passage declined by 4 percent.1-5 I'. NEGATIVE RESPONSES TO THE JD ADVANTAGE MOVEMENT â&#x20AC;&#x153;Litigation or transaction! In most law schools, these are the two career options that you hear about from the first day of orientation. No ifs, ands, or buts, you have just two possible career paths. However, more recent law school grads are discovering a third option.the compliance attorney.â&#x20AC;?1-6 This $uote and the data presented regarding increases in JD Advantage jobs have not been universally well-received by the legal community. Law schools have been slow to respond to the changing employment opportunities for their graduates" in fact, very few offer courses designed to train students for compliance-related employment.1-- Nevertheless, law school graduates are seeking these positions in increasing numbers as salaries in JD Advantage jobs typically range from &45,000-&-5,000.1-8 Compliance personnel in the banking industry with a couple years of experience earn &65,000-&85,000, and the number HBF. Id. HBE. Id. HBD` :)P-Ml0LP \` 5l+Rb 4% Decline in Jobs Requiring Bar Passage for Law Class of 2016, ABA Employment Data Showsb #"# X` fUlh HHb G^HBb G?GB =Ueb M))-?__jjj`lklK/(+0lI`S/2_0Pj*_l+)LSIP_P2-I/h2P0)mRl)lm*M/j*mSMlIIP0NL0NmK/k m2l+JP)mO/+mG^HCmIljmN+lR*` HBC` Ul)lb supra 0/)P FF` HBB` rLUl(+/b supra 0/)P HEA` HBA` T#97V` #::7T` >\ V` =V#!]U]T9b supra 0/)P HCC`
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is approximately &150,000 with five to ten years of experience.1-9 “I think 6emphasis added5 the number of long-term fulltime JD-advantage jobs supports what people have been saying.some graduates want those jobs, but many take them only when they can’t find jobs that re$uire a JD,” said Deborah J. Merritt, Ohio State University law professor.180 This is the sentiment of many law schools in the United States regarding changes in employment opportunities for law school graduates. The Faculty Lounge – Conversations About Law, Culture and Academia 3an online site for conversations among legal professionals2 had an October 1, 2014, posting entitled, The Threat from JD Advantage, that described the JD Advantage movement as a “disruptive innovation” for law schools.181 Disruptive innovators pursue a market that is not foundational to a legacy program and destroy the integrity of the legacy program. 182 This premise suggests that because law schools provide poor training for JD Advantage job seekers, law schools should not be concerned with preparing students for JD Advantage jobs. Accordingly, the role of law schools is to provide training in the common law not in complex regulatory fields. 183 '. THE FUTURE OF COMPLIANCE EMPLOYMENT OPPORTUNITIES FOR LAW SCHOOL GRADUATES Employment opportunities for lawyers are changing as a result of complex compliance laws and regulations that have been put in place to serve the needs of our complex society.184 These complex laws and regulations passed by legislative bodies and regulatory agencies are necessary due to major changes in the economic history of the United HB@` rLUl(+/b supra 0/)P HEA` HA^` 5l+Rb supra 0/)P HBDb l) G` HAH. See ;lhSl2b The Threat from JD Advantageb \#!` V>8T[] f>S)` Hb G^HEb @?GH #Ueb M))-?__jjj`)MPOlS(I)hI/(0NP`/+N_G^HE_H^_)MPa)M+Pl)aO+/2aKRa lR'l0)lNP`M)2I` HAG. Id. HAF. Id. HAE` ZP+2l00b supra 0/)P HFFb l) D`
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States, even as early as the Industrial Revolution.185 Throughout the 20th century, especially during the Great Depression, compliance laws and regulations increased. 186 Faced with unprecedented political and economic threats after mid-century and late-century wars and conflicts, Americans came to accept that compliance laws and regulations are woven into the fabric of their lives.18Towards the end of the 20th century and the beginning of the 21st century, high profile economic scandals, laced with corporate greed, led to some of the most invasive compliance laws and accompanying regulations that Americans had ever witnessed.188 The ever-increasing number of compliance laws and regulations, fueled by major changes in the economic history of the United States, re$uires professionals to fill the compliance positions. Because of the legal nature of compliance, various industries seek lawyers to fill their compliance positions.189 At a time when the Great Recession of 2008 caused entry-level jobs to decrease for law school graduates, compliance jobs were increasing. 190 In spite of the new employment opportunities for unemployed lawyers, the idea of a third field of practice for lawyers has not been universally accepted among all members of the legal community.191 'I. CONCLUSION This article concludes that the economic history of the past 150 years has created a golden opportunity for lawyers. Not every lawyer has the desire to be a litigating or a transactional lawyer. Regardless of oneâ&#x20AC;&#x2122;s political leanings, most Americans understand that compliance laws and regulations will remain a prominent feature of the HAD. HAC` HAB` HAA. HA@. H@^` H@H`
The Progressive Era (1890 - 1920), supra 0/)P FC` WPIIPhb supra 0/)P EC` ZLNN*b supra 0/)P DF` See UYVV];b supra 0/)P GE` Id. l) D` T#97V` #::7T` >\ V` =V#!]U]T9b supra 0/)P HCC` ;lhSl2b supra 0/)P HAH`
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American landscape for the foreseeable future, and the compliance industry needs highly-skilled professionals to fill those positions because noncompliance can have catastrophic conse$uences for organi4ations. These changes in the U.S. economic history and employment opportunities for law school graduates, most notably in the compliance area, are beneficial for the present and future of the legal community.
=!usiness Acti"ity0 and the Common Control EKception to =/ransfers of Ownership0 Under Michigan.s General 2roperty /aK Act JASON C. LONG1 ABSTRACT
Michigan’s property tax laws generally limit property taxes from increasing year to year by more than the inflation rate so long as the property’s ownership does not change. In the year after an ownership change, known as a “transfer of ownership,” however, the property may be exposed to a larger tax increase. Michigan law defines most types of property conveyances as “transfers of ownership,” but expressly excludes some conveyances from this definition. Among them is a straightforward exclusion for conveyances between legal entities under common control. But guidelines from the Michigan agency that supervises property tax administration concerning transfers between commonly-controlled legal entities re$uire that the entities must be engaged in “business activity” for the exclusion to apply. This article argues that Michigan courts should not apply this business activity re$uirement because it has no basis in Michigan’s property tax laws, and only appears in the non-binding guidelines because the guidelines borrowed a definition from a now-repealed tax system that was unrelated to property taxation. To ensure that the courts faithfully apply Michigan law, and do not alter the policies * Jason C. Long is an attorney with Steinhardt Pesick & Cohen, PC, in Birmingham, Michigan. He represents clients confronting property tax problems and has dealt with issues including valuation; transfers of ownership; principal residence exemptions; exemptions for religious, charitable, agricultural, and other uses; taxation of governmental property; errors in billing; tax foreclosure; incentives and cancellation of incentives; and many others. Mr. Long has represented clients including both taxing jurisdictions and property owners before municipal bodies and circuit courts across the state, the State Tax Commission, the Tax Tribunal, the court of appeals, and the supreme court. He is a former judicial clerk at the Michigan Supreme Court who graduated with highest honors from the University of Detroit Mercy School of Law and Oakland University, and studied real estate development at the University of Michigan Ross School of Business.
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that the law contains, they must decline the purported business activity re$uirement for legal entities under common control. TABLE OF CONTENTS I. INTRODUCTION .............................................................................42 II. MICHIGAN’S PROPERTY TA' SYSTEM ......................................44 A. Assessed Value................................................................45 B. Proposal A and Taxable Value ....................................46
C. Transfers of Ownership and the Common Control Exception ..........................................................................48 D. Interpretations of the Common Control Exception ..........................................................................50
III. A BUSINESS ACTIVITY RE+UIREMENT IS INCONSISTENT WITH THE GPTA.......................................................................52
A. The GPTA’s Plain Language Does Not Support a Business Activity ............................................................52 Re$uirement for Legal Entities to be Commonly Controlled...................................................................52 B. The Single Business Tax Act Definition of Common Control is not Compatible with the GPTA ...............54 C. The Legal Entities Identified in the Common Control Exception do not Suggest that Business Activity is Re$uired .......................................................55 D. A Business Activity Re$uirement Inappropriately Narrows the Common Control Exception .................57 E. Courts do not Need to Follow Bulletin 16.................58
IV. CONCLUSION ..............................................................................60 I. INTRODUCTION Historically, the Michigan Constitution provided for a system of property taxation in which property was taxed based on its market value.1 During March 1994, Michigan voters amended the Michigan Constitution to alter that system. The amendment provided a new basis for taxation known as “taxable value.” Generally, taxable value cannot 1. MICH. CONST. art. IX, § 3 (amended 1994).
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increase year-to-year by more than the inflation rate until “ownership of the parcel of property is transferred.” 2 Once a property experiences a transfer of ownership, its value for tax purposes may be based on its market value and the process starts again.3 The constitutional amendment that created this system left it to the Michigan Legislature to define the term “transfer of ownership.”4 Shortly after the amendment’s adoption, the Michigan Legislature approved a definition, as well as a list of transactions that do not $ualify as transfers of ownership. Among the transactions excepted are transfers “of real property or other ownership interests” among “legal entities if the legal entities involved are commonly controlled.”5 The Michigan State Tax Commission 3“STC”2, an executive agency that supervises property tax administration in Michigan, then issued interpretive guidance for the common control exception from transfers of ownership.6 That guidance relied on a business tax definition of the term “common control.” But differences between the business tax system where the STC obtained the definition, and the property tax system created through the constitutional amendment, resulted in the STC’s interpretive guidance incorporating a “business activity” re$uirement into the common control exception. - The effect is to narrow the exception for those transactions between legal entities under common control that the Michigan Legislature approved. No binding Michigan precedent has addressed whether the business activity re$uirement is a proper interpretation 2. MICH. CONST. art. IX, § 3. 3. Id. 4. Id. 5. MICH. COMP. LAWS ANN. § 211.27a(7)(m) (West 2016). 6. See MICH. COMP. LAWS ANN. § 209.104 (West 2018) (stating that the STC “shall have general supervision of the administration of the tax laws of the state, and shall render such assistance and give such advice and counsel to the assessing officers of the state as they may deem necessary and essential. . .”); STATE TAX COMM’N, BULLETIN 16 OF 1995 (Sept. 20, 1995) [hereinafter “BULLETIN 16”]. 7. See discussion infra Sections II.D., III.B.
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of the Michigan Legislature’s common control exception.8 This has led to conflicting decisions within the Michigan Tax Tribunal, which possesses primary jurisdiction over property tax issues, in that the Tribunal has applied the business activity re$uirement in some instances and declined to apply it in others. This article will analy4e the statutory language establishing the exception from transfers of ownership for transactions between legal entities under common control and explain that the business activity re$uirement should not be applied. First, it will provide a brief background on Michigan property tax law, the 1994 amendment to the Michigan Constitution, and the legislation governing transfers of ownership. It will then discuss the common control exception and the administrative material that is intended to provide guidance on its application. Finally, the article concludes that Michigan courts should not apply the business activity re$uirement because it narrows the common control exception in a manner that the General Property Tax Act does not support. II. MICHIGAN’S PROPERTY TA' SYSTEM Michigan’s ad valorem property tax system provides for general taxation of all property based on its value.9 In the past, that value was the property’s “assessed value.” Assessed value is based on, and fluctuates with, market value such that an increase or decrease in the market will generally result in an increase or decrease in a property’s assessed value. Beginning in 1995, however, every taxable property in Michigan was assigned a taxable value in addition to its assessed value.10 Taxable value generally cannot increase by more than the inflation rate, protecting property owners against increasing taxes. This cap on 8. Scott v. City of S. Haven, No. 339007, 2018 WL 1881633, at *5 (Mich. Ct. App. Apr. 19, 2018) (The parties acknowledged that the STC guidelines do not have force of law and are explanatory.). 9. See Meijer, Inc. v. City of Midland, 610 N.W.2d 242, 245 (Mich. Ct. App. 2000). 10. MICH. CONST. art. IX, § 3.
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taxable value can be lifted such that taxable value may e$ual assessed value in the year after a property experiences a transfer of ownership. 11 This is known as an “uncapping.”12 But not every transfer in a property’s ownership will result in an uncapping such that taxable value can e$ual assessed value. The Michigan Legislature chose to protect certain changes in ownership, such as conveyances among legal entities under common control, against such adjustments.13
A. Assessed Value The Michigan Constitution directs the Michigan Legislature to “provide for the uniform general ad valorem taxation of real and tangible personal property.”14 The Legislature implemented this direction in the General Property Tax Act 3 “GPTA”2, which provides for a property tax based on the value of property.15 Under the GPTA, cities and townships in Michigan determine values for property, and the tax rate is applied to each property’s value to calculate the property’s tax obligation.16 Historically, the GPTA provided that a property’s tax obligation was determined by applying the tax rate to the property’s assessed value, which is also commonly referred to as state e$uali4ed value.1- A property’s assessed value should generally e$ual 50% of its “true cash value.”18 11. Id. 12. STATE TAX COMM’N, TRANSFER OF OWNERSHIP GUIDELINES 3 (2017) [hereinafter “GUIDELINES”]. 13. MICH. COMP. LAWS ANN. § 211.27a(7)(m) (West 2016). 14. MICH. CONST. art. IX, § 3. 15. See MICH. COMP. LAWS ANN. § 211.39(1) (West 1999). 16. See MICH. COMP. LAWS ANN. § 211.27 (West 2013) (providing for city and township assessors to determine properties’ values for tax purposes). 17. See Bullinger v. Gremore, 72 N.W.2d 777, 787 (Mich. 1955); see also MICH. STATE TAX COMM’N, GUIDE TO BASIC ASSESSING 29 (2018). In Michigan, property taxes are calculated using a millage rate. This means that property is taxed at a rate equaling a certain number of dollars for every $1,000 of the property’s taxable value. The number of dollars per $1,000 of taxable value equals the “millage rate.” See REAL PROPERTY TAXES IN MICHIGAN 10–11 (Gina M. Torielli ed., Rev. ed. 2015). 18. See MICH. COMP. LAWS ANN. § 211.27a(1) (West 2016).
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Michigan courts have long held that the concept of true cash value is generally e$uivalent to market value. The conse$uence is that a property’s assessed value should e$ual half its market value.19 When the GPTA provided for taxation based on assessed value, which was tied to market value, a property’s tax burden could rise or fall with the real estate market. During the early 1990s, this created a concern among Michigan’s policymakers, a rising real estate market could result in citi4ens being “taxed out of their homes” as property values, and accordingly property taxes, were increasing.20 Michigan sought legislative solutions for this concern, including legislation to prevent assessed values from increasing year to year.21 However, as parties challenged such legislation in the courts, the State sought a more permanent solution for the specter of rising property taxes.
B. Proposal A and Taxable Value In March 1994, Michigan voters adopted a ballot proposal identified as Proposal A to amend the Michigan Constitution to limit property tax increases. The amendment accomplished this by introducing the concept of taxable value. Although cities and townships continued to determine each property’s assessed value, Proposal A provided that cities and townships would also determine each property’s taxable value beginning in 1995. Taxable value replaced assessed value as the value to which the tax
19. See WPW Acquisition Co. v. City of Troy, 646 N.W.2d 487, 494 (Mich. Ct. App. 2002). 20. Chris Christoff, Michigan Property Law has Pricey Pitfall for Home Buyers, TRIB. BUS. NEWS, Apr. 25, 2002, at 1 (“protecting people from being taxed out of their homes was just what the authors of Proposal A had in mind when they presented it to voters”). 21. See 1991 Mich. Pub. Acts 15 (requiring assessed values for 1992 to remain constant with 1991 values subject to exceptions pertaining to construction and demolition). See also Taylor Commons v. City of Taylor, No. 206653, 1999 WL 33444318 (Mich. Ct. App. May 21, 1999) (discussed this legislation, commonly known as the “tax-freeze act.”).
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rate is applied to determine a property’s tax obligation.22 Under Proposal A, taxable value may increase year to year only by the inflation rate or 5%, whichever is less. 23 This became known as the taxable value “cap.” 24 The cap ensures that a rapidly rising real estate market will not result in rapidly increasing property taxes. In 1995, the first year that Proposal A was in effect, each property’s assessed value and taxable value were e$ual. But from that point forward, assessed value would follow market value, as it had done in the past, while taxable value would follow the inflation rate. This cap on taxable value can create a disparity between a property’s assessed value and its taxable value when the real estate market is increasing.25 Under Proposal A, such a disparity would continue to grow until the property’s ownership is transferred, For taxes levied in 1995 and each year thereafter, the legislature shall provide that the taxable value of each parcel of property adjusted for additions and losses, shall not increase each year by more than the increase in the immediately preceding year in the general price level . . . or 5 percent, whichever is less until ownership of the parcel of property is transferred. When ownership of the parcel of property is transferred as defined by law, the 22. See MICH. COMP. LAWS ANN. § 211.27a (West 2016); see also WPW Acquisition Co., 646 N.W.2d at 495. 23. “Taxable value” can also be adjusted to take into account “additions” and “losses.” MICH. CONST., art. IX, § 3. In general, “additions” include new construction and property that previously had not been taken into account in a property’s assessment. “Losses” generally include property that was destroyed, removed, has become exempt, or has become contaminated. See MICH. COMP. LAWS ANN. § 211.34d(1) (West 2014). 24. See WPW Acquisition Co., 646 N.W.2d at 495. 25. See MICH. CONST. art. IX, § 3; see also WPW Acquisition. Co., 646 N.W.2d at 495. (“Property whose value is increasing faster than the rate of inflation will, due to the cap, have a taxable value below (perhaps, over time, far below) state equalized valuation. Upon its sale or other transfer of ownership, the property’s taxable value and SEV would be the same until the cap was applied once again.”).
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parcel shall be assessed at the applicable proportion of current true cash value.26 Thus, after a property is transferred, its taxable value can be uncapped to again e$ual its assessed value, which is based on market value. Depending on factors including the duration of a property’s ownership and the real estate market, a transfer of ownership can result in a significant tax increase for the new owner, whose taxes will be based on current market value, as compared with the prior owner, whose taxes were based on the capped taxable value.2- The process then starts over for the new owner.28
C. Transfers of Ownership and the Common Control Exception In light of this potential for a transfer to result in a significant tax increase, the types of transactions that $ualify as transfers became an important component of Michigan’s property tax system. Proposal A did not define “transfer,” instead leaving that for the Michigan Legislature.29 The Legislature provides in the GPTA that a “transfer of ownership” generally means “the conveyance of title to or a present interest in property, including the beneficial use of the property, the value of which is substantially e$ual to the value of the fee interest.” 30 The 26. MICH. CONST. art. IX, § 3. 27. See Christoff, supra note 20. Proposal A can also result in property tax increases in a declining market. After a period of market increases, properties in long-term ownership will have gaps between their taxable and assessed values. If the real estate market begins to flatten or decline, assessed values will remain constant or begin to decrease. But even when assessed values are constant or declining, taxable values may nevertheless increase by the inflation rate as long as the resulting taxable value does not exceed the assessed value. See MICH. COMP. LAWS ANN. § 211.27a(2) (West 2016). Thus, even in a declining market, a property’s taxable value may increase, which will result in an increase in tax. See REAL PROPERTY TAXES IN MICHIGAN, supra note 17 at 30. During the “Great Recession” that began in 2007, this led to a number of proposals to amend the Michigan Constitution and the GPTA to change this. See, e.g., H.R.J. Res. B, 95th Leg., Reg. Sess. (Mich. 2009). None of the proposals were adopted. 28. See WPW Acquisition Co., 646 N.W.2d at 495. 29. See MICH. CONST. art. IX, § 3. 30. MICH. COMP. LAWS ANN. § 211.27a(6) (West 2016).
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GPTA includes illustrative transactions that can result in a “transfer of ownership,” such as conveyances by deed, land contracts, certain long-term leases, and exchanges of controlling interests in corporate entities that own real property.31 Although the GPTA generally provides that a change in a property’s ownership is a transfer of ownership, it specifically excepts certain transactions from treatment as transfers, even if those transactions involve an ownership change. Because of that, the “types of conveyances that are excepted from this definition . . . do not give rise to uncapping.”32 Certain of these transactions can be characteri4ed as instances when, although there is an ownership change, there is not a substantive change in a property’s control, such as in transactions between spouses.33 Another change in ownership that the GPTA excepts from treatment as a transfer of ownership, such that the change will not result in an uncapping, is a transfer of property between legal entities that are under common control. The GPTA’s language provides a straightforward exception for such transfers, “Transfer of ownership does not include the following, . . . 6a5 transfer of real property or other ownership interests among corporations, partnerships, limited liability companies, limited liability partnerships, or other legal entities if the entities involved are commonly controlled.”34 The Legislature also provided 31. See id. § 211.27a(6)(a)–(j). The GPTA introduces the list of “transfers” by stating that, “Transfer of ownership of property includes, but is not limited to, the following” examples. The Michigan Court of Appeals has explained that the list therefore represents “a nonexhaustive list of those conveyances deemed by the Legislature to fall within this definition.” Moshier v. Whitewater Twp., 745 N.W.2d 523, 524 n.1 (Mich. Ct. App. 2008). 32. Schwass v. Riverton Twp., 800 N.W.2d 758, 760 (Mich. Ct. App. 2010). 33. See, e.g., MICH. COMP. LAWS ANN. § 211.27a(7)(b) (West 2016) (“transfer from a husband, a wife, or a married couple creating or disjoining a tenancy by the entireties in the grantors or the grantor and his or her spouse”); M ICH. COMP. LAWS ANN. § 211.27a(7)(g) (West 2016) (“A conveyance to a trust if the settlor or the settlor’s spouse, or both, conveys the property to the trust . . .”). 34. See MICH. COMP. LAWS ANN. § 211.27a(7)(m).
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that such legal entities may need to provide proof of their common control.35
D. Interpretations of the Common Control Exception Shortly after the Legislature adopted provisions addressing transfers of ownership, the STC issued material discussing their application. The STC’s material provided that taxing jurisdictions should interpret the common control re$uirement according to the definition of that term provided “in Michigan Revenue Administrative Bulletin 1989-48.”36 In turn, Revenue Administrative Bulletin 198948 3“RAB 1989-48”2 defined “entities under common control” for purposes of Michigan’s now-repealed single business tax.3- It described several possible structures through which legal entities could be under common control, including parent-subsidiary and brother-sister entity structures. 38 In each instance, RAB 1989-48 provided that the entities were under common control when they were “conducting trades or businesses” or were otherwise “engaged in business activity.”39 The STC incorporated this business activity re$uirement into its guidance on the common control exception from transfers of ownership. In its Transfer of Ownership Guidelines, which gather and elaborate on the STC’s interpretations of the transfer of ownership provisions, the STC reiterated the business activity re$uirement for common control, “For entities to be commonly controlled under Michigan Revenue Administrative Bulletin 1989-48, the entities must be engaged in a business or trades activity. . . Entities which are not engaged in a business activity cannot be entities under common control under Michigan Revenue Administrative Bulletin 1989-48.”40 The 35. See id. 36. See BULLETIN 16 supra note 6. 37. MICHIGAN DEP’T OF TREASURY, REVENUE ADMINISTRATIVE BULLETIN 1989-48 (May 31, 1989). Michigan’s Single Business Tax Act was repealed by 2006 Mich. Pub. Acts 325. 38. See id. 39. Id. 40. GUIDELINES, supra note 12 at 35.
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Transfer of Ownership Guidelines further identify other transactions that the STC considers to be between commonly-controlled legal entities, even though typical “legal entities” may not be involved, so long as there is “business activity.”41 No published Michigan decision has analy4ed the STC’s direction that the common control exception includes a business activity re$uirement. The Michigan Court of Appeals discussed the topic in Sebastian J. Mancuso Family Trust v. City of Charlevoix,42 but did not reach the issue. In that case, the Mancuso Family Trust argued that, when it conveyed property to another related trust that had the same trustee, the common control exception should have applied even though the trusts were not engaged in any business activity.43 The court, however, concluded that the trusts were not “commonly controlled” based on the structure and control of trusts under Michigan law, regardless of any business activity.44 No other published decision has addressed the issue at all.45 This has led to conflicting decisions in the Michigan Tax Tribunal, which has jurisdiction over disputes concerning property tax assessment.46 For example, in its decision in Mancuso Family Trust, the Tribunal applied the business activity re$uirement and concluded that a conveyance between two related trusts did not $ualify for the common 41. Id. at 34. 42. 831 N.W.2d 907 (Mich. Ct. App. 2013). The author represented Sebastian J. Mancuso Family Trust in this action. 43. See id., 831 N.W.2d at 909. 44. See id., 831 N.W.2d at 910–11. 45. See C&J Inv. of Grayling, L.L.C. v. City of Grayling, No. 270989, slip op. at 3 (Mich. Ct. App. Nov. 13, 2007) (per curiam) (unpublished decision purported to apply the business activity requirement, but the same persons did not possess controlling interests in the two legal entities involved in that case, so it is not clear that the legal entities there were commonly controlled either). See also Scott v. City of S. Haven, No. 339007 at 6–7 (per curiam) (The court similarly concluded that there was no common control regardless of whether the entities involved engaged in “business activity.”). Regardless, neither C&J Investments nor Scott is a binding precedent in any event. See Mich. Ct. R. 7.215(C)(1) (West 2019) (“An unpublished opinion is not precedentially binding under the rule of stare decisis.”). 46. See MICH. COMP. LAWS ANN. § 205.731 (West 2008).
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control exception.4- On the other hand, in RGW RE, L.L.C. v. Hastings Charter Township, the Tribunal stated that it would not re$uire “business activity,” but only “common control,” to conclude that a transfer between two entities $ualified for the common control exception. 48 These conflicting views of the business activity re$uirement leave taxpayers and taxing jurisdictions without definitive guidance on which transactions $ualify as transfers between legal entities under common control, so that the transactions should not result in a potentially costly uncapping. III. A BUSINESS ACTIVITY RE+UIREMENT IS INCONSISTENT WITH THE GPTA Michigan courts should not apply a business activity re$uirement as part of the common control exception from the definition of transfer of ownership. In relying on the definition of common control issued under the Single Business Tax Act, the STC’s Guidelines incorporate a business activity re$uirement that narrows the exception in a manner that is not consistent with the GPTA. Accordingly, Michigan courts should focus on common control instead of business activity when applying this exception from transfers of ownership.
A. The GPTA’s Plain Language does not Support a Business Activity Re$uirement for Legal Entities to be Commonly Controlled First, the GPTA’s language that “6t5ransfer of ownership does not include . . .6a5 transfer of real property . . . among legal entities if the entities involved are commonly controlled,” does not include a business activity 47. See Order Denying Petitioner’s Motion for Summary Disposition, Mancuso Fam. Tr. v. City of Charlevoix, Mich. Tax Trib., No. 411641 (Mar. 23, 2012). The tribunal also applied the requirement in its decision in Scott v. City of S. Haven. See Order Denying Petitioner’s Motion for Summary Disposition, Scott v. City S. Haven, Mich. Tax Trib., No. 15-003121 (June 12, 2017). 48. See Order Granting Petitioner’s Motion for Summary Disposition, RGW RE, L.L.C. v. Hastings Charter Twp., Mich. Tax Trib., No. 438291 (July 11, 2013).
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re$uirement.49 Michigan courts generally focus on a statute’s plain language and the common and ordinary meaning of the terms in that statute when applying it.50 To determine a common and ordinary meaning, Michigan courts turn to dictionary definitions.51 The Michigan Court of Appeals applied this analysis to determine the meaning of “commonly controlled” in Mancuso Family Trust, The exception in MCL 211.2-a3-23l2 applies if 312 the transaction is between legal entities and 322 the legal entities involved are commonly controlled. . . MCL 211.2-a does not define “commonly controlled.” “A court may consult dictionary definitions when terms are not expressly defined by a statute.” The term “common” is defined adjectivally as “belonging e$ually to, or shared alike by, two or more or all in $uestion6.5” “Commonly” is the adverb related to that meaning. “Control” means “to exercise restraint or direction over" dominate, regulate, or command.”52 Although the court in the Mancuso Family Trust case considered, but did not decide, whether the business activity re$uirement applied, the court’s analysis of the common and ordinary meaning of commonly controlled demonstrates that the GPTA does not include such a re$uirement. After all, if the common and ordinary meaning of commonly controlled included a business activity component, that component would have been encompassed in those definitions. But those terms encompass no such concept, meaning that the GPTA’s plain language does not support a business activity re$uirement. 49. MICH. COMP. LAWS ANN. § 211.27a(7)(m) (West 2016). 50. See MICH. COMP. LAWS ANN. § 8.3a (West 2018) (“All words and phrases shall be construed and understood according to the common and approved usage of the language.”); see also Krusac v. Covenant Med. Ctr., Inc., 865 N.W.2d 908, 912 (2015). 51. Spectrum Health Hosps. v. Farm Bureau Mut. Ins. Co. of Mich., 821 N.W.2d 117, 124 (Mich. 2012). (“We may consult dictionary definitions to give words their common and ordinary meaning.”). 52. 831 N.W.2d at 910 (citations omitted). When Mancuso Family Trust was decided, the “common control” exception was codified at M ICH. COMP. LAWS ANN. § 211.27a(7)(l) (West 2016). Since then, amendments adding other subdivisions to subsection (7) resulted in the common control exception moving to M ICH. COMP. LAWS ANN. § 211.27a(7)(m) (West 2016).
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This was the Michigan Tax Tribunal’s reasoning in rejecting the business activity re$uirement in RGW RE, L.L.C. v. Hastings Charter Township. The Tribunal there reviewed the decision in Mancuso Family Trust and concluded that, “the only re$uirements that 6the taxpayer5 must establish, by a preponderance of the evidence,” are “that it and the 6related entity5 are legal entities and” that they “are commonly controlled.”53 Because the definition of commonly controlled did not include a business activity component, the Tribunal concluded that there was no re$uirement for a taxpayer to demonstrate that the entities engaged in any business activity.54
B. The Single Business Tax Act Definition of Common Control is not Compatible with the GPTA In relying on a definition of common control from the now-defunct Single Business Tax Act 3“SBTA”2, Bulletin 16 varied from the GPTA’s plain language and, perhaps inadvertently, introduced the business activity concept. According to the SBTA’s explicit terms, the Act applied to “the adjusted tax base of every person with business activity in this state . . . .”55 Such persons included entities under common control.56 In light of the SBTA’s application to persons with business activity in Michigan, the business activity re$uirement made sense in determining whether entities were commonly controlled for that Act’s purposes. That re$uirement does not make sense for the GPTA, which contains no re$uirement or limitation based on business activity. Rather, the GPTA applies to “all property, real and personal, within the jurisdiction of this state,” that is not expressly exempt.5- Incorporating a business activity re$uirement is inconsistent with the GPTA’s language, both 53. See RGW RE, No. 438291 at 3. 54. See id. 55. MICH. COMP. LAWS ANN. § 208.31(1) (emphasis added), repealed by 2006 Mich. Pub. Acts 325. 56. See MICH. COMP. LAWS ANN. § 208.31(a)(3), repealed by 2006 Mich. Pub. Acts 325. 57. MICH. COMP. LAWS ANN. § 211.1 (West 2018).
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in the GPTA’s general application and its specific provisions excepting conveyances from a transfer of ownership when the conveyances are between commonly-controlled legal entities. During the mid-1990s, the SBTA’s definition of common control may have been familiar to practitioners, administrators, and other persons addressing Michigan tax issues. Additionally, it may have seemed a ready-made definition adaptable to other contexts, including the GPTA’s transfer of ownership provisions. But because the SBTA conditioned its definition of common control on business activity, that definition is not compatible with the GPTA’s transfer of ownership provisions.
C. The Legal Entities Identified in the Common Control Exception do not Suggest that Business Activity is Re$uired Another argument sometimes asserted in support of a business activity re$uirement is that the entities that the GPTA identifies in the common control exception are all business entities, so the GPTA must include a business activity re$uirement. This argument suffers from a variety of problems because it conflicts with several principles that Michigan courts apply when interpreting statutes. Primarily, it conflicts with the re$uirement for Michigan courts to adhere to the plain language and the common and ordinary meaning of the terms in a statute.58 Again, nothing in the GPTA’s plain language supports a business activity re$uirement. Conse$uently, this argument also conflicts with the principle that a court may not read provisions into a statute that are not already included. 59 Even viewing the common control exception as an exemption statute does not support this argument, exemptions cannot be given a strained construction that does not comport with the
58. See MICH. COMP. LAWS ANN. § 8.3a (West 2018); see also Krusac, 865 N.W.2d at 912. 59. See, e.g., Bay City v. Bay Cty. Treas., 807 N.W.2d 892, 899 (Mich. Ct. App. 2011).
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statute’s plain language in an effort to narrowly construe the exemption.60 The argument seems to be built on an ejusdem generis analysis, but it turns that principle on its head. As a principle of statutory construction, ejusdem generis applies when a statute uses specific terms and a general term" it provides that “the general term is restricted to include only things of the same kind, class, character, or nature as those specifically enumerated.”61 Thus, the principle applies to assist in determining the meaning of a general term that occurs in the context of specific terms.62 At best, ejusdem generis would apply to give meaning to the general term “other legal entities” based on that general term following the specific terms “corporations, partnerships, limited liability companies, 6and5 limited liability partnerships. . . .”63 It does not apply to generali4e about the nature of terms in a list that includes both specific and general items. In any event, characteri4ing the “corporations, partnerships, limited liability companies, limited liability partnerships, and other legal entities”64 identified in the common control exception as business entities exclusively is incorrect. Michigan law explicitly provides that nonprofit corporations,65 for example, and limited liability companies may also be formed for charitable, educational, and other non-business purposes.66 In fact, limited liability companies are often formed as estate planning devices, and are also used as a form of joint ownership for non-business
60. See, e.g., Nat’l Ctr. for Mfg. Scis., Inc. v. City of Ann Arbor, 563 N.W.2d 65, 67 (Mich. Ct. App. 1997). 61. Huggett v. Dep’t of Nat. Res., 629 N.W.2d 915, 920 (Mich. 2001) (citation omitted). 62. See id. (“This canon gives effect to both the general and specific terms by ‘treating the particular words as indicating the class, and the general words as extending the provisions of the statute to everything embraced in that class, though not specifically named by the particular words.’”) 63. MICH. COMP. LAWS ANN. § 211.27a(7)(m) (West 2016). 64. Id. 65. See MICH. COMP. LAWS ANN. §§ 450.2101–3192 (West). 66. See MICH. COMP. LAWS ANN. § 450.4102(m) (West 2016).
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property.6- Likewise, the common control exception’s inclusion of “other legal entities” would include trusts, which can be formed for business or many other purposes. 68 Putting aside that attempting to incorporate a business activity re$uirement into the common control exception would be an improper graft onto the exception’s plain language, there is no support for a generali4ation about the entities identified in the exception because they cannot be characteri4ed as exclusively business entities.
D. A Business Activity Re$uirement Inappropriately Narrows the Common Control Exception Incorporating a business activity re$uirement adds an element to the common control exception that narrows its application. Such a re$uirement may not affect a conveyance between two legal entities that were part of the same business organi4ation but could affect legal entities in several other scenarios. A business activity re$uirement could result in a costly uncapping in the context of estate plan changes, conveyances among related charitable entities, and conveyances among entities organi4ed for purposes other than business activity.69 The GPTA’s plain 67. See, e.g., DAH Family L.L.C. v Dep’t of Treas., Mich. Tax Trib., No. 359042 (Mar. 11, 2011) (addressing a dispute involving a “family LLC” that was established “in furtherance of [the organizer’s] estate plan”); see also Thomas E. Dew, Sharing the Family’s Wealth: A Family LLC is Still an Attractive Way to Make Annual Exclusion Gifts, 81 Mich. B.J. 50, 51 (2002) (discussing a family LLC as a “viable and attractive estate planning device”); STUART J. HOLLANDER, ET AL., SAVING THE FAMILY COTTAGE 88 (4th ed., 2013) (identifying a limited liability company as “the best choice” of a legal entity to own a family property). 68. See Indep. Bank v. Hammel Assocs., L.L.C., 836 N.W.2d 737, 742 (Mich. Ct. App. 2013) (recognizing a trust as a “legal entity”); Forgan v. Mackie, 205 N.W. 600, 603 (Mich. 1925) (same). Michigan law also recognizes that a trust may be a “business trust” or a private or charitable trust. See, e.g., MICH. COMP. LAWS ANN. § 600.2202(c) (West 2013) (referring to “business trusts”); id. § 700.1107(n) (referring to “private or charitable” trusts as distinct from business trusts). 69. The STC did not offer a definition of “business activity.” See BULLETIN 16. The Single Business Tax Act defined that term to mean the transfer or rental of real, personal, or mixed tangible or intangible property, or the performance of services, or a combination of those, “with the object of gain, benefit, or advantage, whether direct or indirect,” to the taxpayer or others. MICH. COMP. LAWS ANN. § 208.3(2) (West 2007), repealed by 2006 Mich. Pub. Acts 325.
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language does not reflect such a policy. It reflects only a policy that, when entities are commonly controlled without regard to their purpose, they may transfer properties among themselves without risking an uncapping. A business activity re$uirement changes the policy reflected in the GPTA’s language by narrowing its application.
E. Courts do not Need to Follow Bulletin 16 Although the STC possesses authority to supervise property tax administration, its interpretation that the common control exception includes a business activity re$uirement is not subject to any deference from Michigan courts. First, as a general matter, no administrative interpretation can overcome plain statutory language.-0 The Michigan Court of Appeals emphasi4ed this point in TRJ&E, L.L.C. v. City of Lansing, where it rejected the STC’s interpretation that the common control exception re$uires 80% commonality to establish common control. -1 In that case, a limited liability company with three members that possessed 60% control conveyed a property to another limited liability company in which the same three persons possessed -5% control.-2 Lansing uncapped the property’s taxable value based on the STC’s instructions to use RAB 1989-48, which re$uires 80% commonality. -3 The court rejected this explaining that courts are “not bound to follow STC Guidelines that impose re$uirements not present within the statute’s plain language.”-4 Nothing in the GPTA supported an 80% commonality threshold, so the court held that Lansing was wrong to have uncapped the property’s taxable value on that basis.-5 Instead, the Court of Appeals explained that the proper analysis considered the 70. See Catalina Mktg. Sales Corp. v. Dep’t of Treas., 678 N.W.2d 619, 625 (Mich. 2004) (holding that an administrative bulletin was “not binding on [the] Court and cannot be used to overcome the statute’s plain meaning” (internal quotations omitted)). 71. 919 N.W.2d 795, 800-01 (Mich. Ct. App. 2018). 72. Id. at 801. 73. Id. 74. Id. 75. Id. at 801–02
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companies’ structures to determine whether they were under common control.-6 TRJ&E provides an example of a published court decision declining to apply the STC’s interpretation of the common control exception to the definition of transfer of ownership.-Michigan courts have also rejected STC’s interpretations of the transfer of ownership exceptions in other instances. In Moshier v. Whitewater Township, the Tax Tribunal applied the STC’s guidance to approve an uncapping, despite the taxpayer’s arguments that an exception from the definition of “transfer of ownership” relating to joint tenants applied.-8 When the taxpayer appealed, the Michigan Court of Appeals rejected the tribunal’s reliance on the STC’s directions. It explained that Bulletin 16, which the tribunal referenced in its decision, “does not have the force of law”-9 and concluded that the STC’s interpretation “impermissibly graft6ed5 onto the statute a re$uirement not contemplated by the statute’s plain and unambiguous language.”80 In any event, without the force of law, the Guidelines are not binding and present a flawed reading of the common control exception. Michigan courts should decline any business activity interpretation of the common control exception because the Guidelines conflict with the exception’s plain language, are based in a defunct business tax system that applied to activities different than those to which the GPTA applies, and change the GPTA’s application and policy. The Michigan Tax Tribunal has already declined to apply a business activity re$uirement as part of the common control exception, instead only focusing on whether the legal entities involved were subject to
76. Id. at 800–01. To this point, the court of appeals reasoned that, “no single percentage – whether the 80% that [Lansing] suggests, or the more than 50% that [TRJ&E] suggests – will apply universally to diverse corporate structures. For this reason, we decline to adopt any specific percentage as the definition of common control.” 77. Id. at 798. 78. Moshier, 745 N.W.2d at 524. 79. Id. at 526. 80. Id. at 527.
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control by the same persons or entities.81 Based on the GPTA’s plain language, other courts should follow the tribunal’s lead. IV. CONCLUSION Perhaps inadvertently, by using a familiar definition from the SBTA that was still in force when Proposal A came into effect, Bulletin 16 grafted a business activity re$uirement onto the GPTA’s common control exception that the GPTA’s plain language does not support. Because Michigan courts’ foremost duty in applying statutes is to be faithful to the common and ordinary meaning of the statutes’ plain language, courts should not apply a business activity re$uirement as part of the GPTA’s common control exception to transfer of ownership. The Michigan Tax Tribunal has already demonstrated a willingness to apply the common control exception according to its plain terms without any business activity re$uirement. Therefore, to provide definitive guidance to taxpayers and taxing jurisdictions, other Michigan courts must also decline to re$uire business activity to conclude whether legal entities are under common control.
81. See RGW RE, No. 438291.
=America First0 E 1eclaiming +ar 2owers BY DERE/ GRISARD1 ABSTRACT
“America First” examines the modern use of military force within the current legal precedent. The article critici4es executive overreach and congressional inaction while providing a potential solution based on past and present legislative proposals. Additionally, the analysis of government action, through the historical and original intent of the Founders, compares and contrasts varying opinions thereof. TABLE OF CONTENTS I. INTRODUCTION ............................................................................ 62 II. BAC/GROUND ............................................................................ 64 A. The War Powers Act of 19-3 ...................................... 66 B. Military Engagements, 9011 and Beyond ................ 66 1. 2001 Authori4ation for Use of Military Force ... 66 2. Libya, “We came, we saw, he died.”..................... 67 3. Syria, Redline Enforced.......................................... 68 4. *Fire and Fury’.......................................................... 68 C. Proposed Legislative Reforms .................................... 89 1. The War Powers Consultation Act of 2009 ........ 89 2. War Powers Consultation Act of 2014 ................ 70 D. Political +uestion Doctrine – Judiciary Sidelined 71 1. Meyers v. Nixon ....................................................... 71 * Derek Grisard, husband and father of two, served on active duty in the Air Force for eight-and-a-half years and now serves in the Air Force Reserves. Initially a calibration technician, he retrained into the intelligence field as an imagery analyst. Duty stations include& Ramstein, Germany; Davis-Monthan, Arizona; %atar; Langley, Virginia, and MacDill, Florida. Derek received two Community College of the Air Force degrees& Intelligence Studies and Technology, and Electronic Systems Technology. He earned his bachelor’s degree in Psychology from the University of Phoenix and is working towards his J.D. from WMU Cooley Law School with a schedule to graduate in December 2019. At WMU Cooley Law School, Derek served as the Managing Editor of the Law Review, and as a member of Phi Delta Phi, the Grade Appeals Board, and the Federalist Society. Derek is also ranked third out his class of 97 and received the Law Student of the Year award in 2018.
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2. /ucinich v. Obama .................................................. 71 III. ANALYSIS .................................................................................. 72 A. America First ................................................................. 72 B. Peace through restraint ............................................... 73 1. Action Leads to Endless Action ............................ 74 C. Congressional Solution ................................................ 74 1. Remove First Strike Capability............................ 76 2. Previously Proposed Legislation Re-examined. 76 i. “Stop Button” Clause ........................................... 77 ii. Defense of the “stop button” ............................. 78 D. Who Goes First, President or Congress! ................. 78 1. Scholars Divided ...................................................... 79 2. Check Please)............................................................ 80 E. Too Late! Precedent Set! ............................................ 81 F. Robots E$ual More War. ............................................. 81 G. It is Broken, Fix it. ....................................................... 82 IV. CONCLUSION ............................................................................. 82 I. INTRODUCTION “America First,” often repeated, became the winning theme of the 2016 Presidential election, thus electing a man who in private life chided his predecessors’ unilateral military action. Why then does the new executive wield the same power with impunity, asserting the same authority he once critici4ed! The United States has been at war for a long time, with President Obama being the first to preside over war every day of his presidency.1 The reality of global terrorism has paraly4ed Congress with the politically unpalatable position of either ending the current and arguably outdated authori4ation, or letting it continue with no end in sight.2 Aside from repeal, other solutions are limited because the Judiciary has classified “war powers” 1. See David Welna, After 8 Years of Unbroken War, Obama Hands Over Conflicts to Trump, NPR (Jan. 18, 2017, 6&50 PM), http&''www.npr.org' sections'parallels'2017'01'18'510447582'after-8-years-of-unbroken-war-obamahands-over-conflicts-to-trump. 2. See John Yoo, War Powers Belong to the President, ABA J. (Feb. 2012), www.abajournal.com'magazine'article'war)powers)belong)to)the)president.
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disputes as political $uestions, thus leaving the two branches to work out the disagreement.3 The $uestion is, how can Congress regain its power and meet the goals of allowing effective execution of military authori4ations while preventing abuses by the President! If Congress makes authori4ations too restrictive, they potentially endanger soldiers’ lives, but with broad authori4ations the Executive has a blank check to exercise military action to almost no end. This comment seeks a solution wherein Congress can balance the effective execution of authori4ations while retaining effective oversight. Part two will explore this issue’s background and the Founders’ original intent on the distribution of the war powers. Additionally, this comment will explore the ongoing development of Congress and the Executive’s relationship regarding war, with a focus on precedent-shifting moments – from the War Powers Act of 19-3 to President Trump’s current military operations and how each tilts the balance towards executive supremacy. Furthermore, the comment will highlight legislative reform that has been proposed but not passed. Finally, the political $uestion doctrine and its application to the topic will be presented. Part three begins with an analysis of President Trump’s statements prior to his presidency and the “America First” rhetoric within.4 Then, the comment will explain the current imbalance of *executive action first and congressional authori4ation later.’5 It will also explore the two potential interpretations of the Constitution that cause confusion on se$uence, “Congress-first or President-first,” 6 and the debate of which is best. Next, it will identify the issues of leaving the status $uo, the strained forces" the dedication of resources to
3. See Matthew Fleischman, A Functional Distribution of War Powers, 13 N.Y.U. LEGIS. & PUB. POL’Y 137, 145 (2010) (referencing Baker v. Carr, 369 U.S. 186 (1962)). 4. See Jeremy Diamond & Stephen Collinson, Donald Trump’s Foreign Policy: !America First’, CNN (Apr. 27, 2016, 7&59 PM), http&''www.cnn.com' 2016'04'27'politics'donald-trump-foreign-policy-speech'index.html. 5. See Yoo supra note 2. 6. See Fleischman supra note 3, at 141– 44.
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conflicts not debated by the peoples’ representatives"- and how such action invites dissent within military ranks.8 Thus, the solution proposed in this comment is to use key features from prior reform with an additional “stop button” provision to strengthen congressional oversight and examine a potential attack on the provision’s constitutionality. Part four will conclude with a restatement of the Founders’ original intent, how America has strayed, and how and why it is important to change. II. BAC/GROUND There has always been debate over the proper balance regarding war powers between the Executive and Legislative branches. The Founders’ debate over distribution of war powers resulted in, The Congress shall have the Power To . . . declare War . . . raise and support Armies . . . provide and maintain a Navy . . . make Rules for the Government and Regulation of the land and naval Forces . . . 6and5 To make all Laws which shall be necessary and proper for carrying into Execution the foregoing Powers6.59 “The President shall be Commander in Chief of the Army and Navy of the United States, and of the Militia of the several States, when called into the actual Service of the United States6.5”10 As read, the President would seem to enjoy a great deal of power, which is a concern for some. In defense of Executive power, Alexander Hamilton stated in 7. See Brooke Seipel, Rand Paul: Trump needs Congress to Authorize Military Action in Syria, THE HILL (Apr. 6, 2017, 10&32PM), http&''thehill.com'blogs'blogbriefing-room'news'327736-rand-paul-trump-needed-congressional-authorizationfor-military. 8. See Niraj Choski, !My conscience bothered me’: Army Captain sues Obama over !illegal war’ on Islamic State, WASH. POST (May 4, 2016), https&'' www.washingtonpost.com'news'checkpoint'wp'2016'05'04'my-consciencebothered-me-army-captain-sues-obama-over-illegal-war-onisis'"utm)term#.1bf8e84f09a5. 9. U.S. CONST. art. I, § 8. 10. U.S. CONST. art. II, § 2.
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The Federalist No. -4 that, the President of the United States being the Commander in Chief of the military was evident in itself.11 Hamilton continued the defense, Of all the cares or concerns of government, the direction of war most peculiarly demands those $ualities which distinguish the exercise of power by a single hand. The direction of war implies the direction of the common strength" and the power of directing and employing the common strength forms a usual and essential part in the definition of the executive authority.12 Early on, it was recogni4ed that incessant deliberation on war tactics would be both a hindrance and a danger.13 However, with the memory of hard-fought independence, the issue of balance loomed" as Michael Sevi explained in
Original Intent, Timetables, and Ira$, The Founders’ Views on War Powers, many were concerned about the
concentration of power in the Executive.14 To alleviate concern, multiple checks on Executive power were instituted, such as impeachment, a shortened term of office, and dependency upon the Electoral College.15 With some still skeptical, Sevi pointed out the Legislature’s control over war funds.16 However, as Sevi described, the normal constitutional remedies 3e.g., withdrawing funds2 might be politically unappealing.1- Few congressional leaders are willing to defund the ongoing sixteen-year campaign for fear of being labeled an impediment to the global war on terror. 18
11. THE FEDERALIST NO. 74 (Alexander Hamilton). 12. Id. 13. See Michael Sevi, Original Intent, Timetables, and Iraq: The Founders’ Views on War Powers, 13 TEX. REV. L. & POL. 73, 98–99 (2008) (discussing THE FEDERALIST PAPERS). 14. See id. at 94–95. 15. See id. at 97. 16. See id. at 76–77. 17. See id. at 102. 18. Sen. Paul, “The so-called Authorizations for Use of Military Force are being used to wage ‘unauthorized, unconstitutional and undeclared war’[.]” See Jeff Daniels, Senate blocks attempt to repeal authorizations for Afghanistan, Iraq war,
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With congressional options for ending military engagements unpopular and unlikely, Sevi suggested that the Founders, with great foresight, provided a check outside of Congress – elections.19 Sevi described how the limited term for the President allowed unpopular wars to be ended by voting in a new Commander in Chief.20 Elections aside, Congress, in response to unilateral Executive action, passed legislation hoping to tilt the balance back in its favor.
A. The War Powers Act of 19-3 The War Powers Act of 19-3 was preceded by what Brendan Flynn described as overreach from two prior Presidents" it was Congress’ attempt to clarify how the process should be.21 The Act re$uired the President to report to Congress every time troops were placed in hostilities.22 It further set a sixty-day limit for troop deployment without a declaration of war, authori4ation, or sixty-day extension, otherwise the President must remove forces within ninety days.23
B. Military Engagements, 9011 and Beyond 1. 2001 Authori4ation for Use of Military Force The next major congressional action came in response to the September 11, 2001, terrorist attacks on the United States when Congress passed the Authori4ation for Use of Military Force 3AUMF2. The AUMF, signed into law by President George W. Bush on September 18, 2001, states,
CNBC (Sept. 13, 2017, 4&30 PM), https&''www.cnbc.com'2017'09'13'senate-blocksrand-pauls-effort-to-repeal-war-authorizations.html. 19. See Sevi, supra note 13, at 102. 20. Id. 21. See, e.g., In response to Korean hostilities Truman sent troops to intervene; “[when asked] whether he would seek congressional authorization for war in Korea, the President answered that he would ‘take it under advisement’.” Brendan Flynn, The War Powers Consultation Act: Keeping War Out of the %one of Twilight, 64 CATH. U. L. REV. 1007, 1023, 1028–30 (2015). 22. See id. at 1029. 23. See id.
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6T5he President is authori4ed to use all necessary and appropriate force against those nations, organi4ations, or persons he determines planned, authori4ed, committed, or aided the terrorist attacks that occurred on September 11, 2001, or harbored such organi4ations or persons, in order to prevent any future acts of international terrorism against the United States by such nations, organi4ations or persons.24 In retrospect, Congress should have heeded Benjamin Franklin who said, “6i5f passion drives you, let reason hold the reins.”25 The AUMF permits “necessary and appropriate” force against groups connected to the 9011 attack.26 However, it provides no temporal limit. As Beau Barnes noted, the lack of restraint led to some congressional opposition.22. Libya, “We came, we saw, he died.” The next tick towards executive supremacy came with the infamous $uote from former Secretary of State Hillary Clinton, “6w5e came, we saw, he died,” referring to Libyan leader Muammar +addafi.28 In March of 2011, “the United States, with the support of a number of its coalition partners, launched airstrikes against Libyan targets” without specific congressional authori4ation.29 President Obama claimed the actions were to enforce a United Nations Security Council
24. Authorization for Use of Military Force, Pub. L. No. 107–40, § 2(a), 115 Stat. 224 (2001). 25. BOOKBROWSE, https&''www.bookbrowse.com'quotes'detail'index.cfm' quote)number'407'if-passion-drives-you-let-reason-hold-the-reins (last visited Oct. 12, 2017). 26. Authorization, supra note 24. 27. See Beau D. Barnes, Reauthorizing The $War on Terror": The Legal and Policy Implications of The AUMF’s Coming Obsolescence, 211 MIL. L. REV. 57, 69– 72 (2012). 28. See Corbett Daly, Clinton on #addafi: $We came, we saw, he died", CBS NEWS (Oct. 20, 2011, 11&21 PM), https&''www.cbsnews.com'news'clinton-onqaddafi-we-came-we-saw-he-died'. 29. Authority to Use Military Force in Libya, 35 Op. O.L.C. *1, *3 (2011).
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Resolution.30 President Obama’s administration argued that “the President had constitutional authority, as Commander in Chief and Chief Executive and pursuant to his foreign affairs powers, to direct such limited military operations abroad, even without prior specific congressional approval.”31 Authority fabricated from the Executive’s interpretation of the Constitution set a new precedent for military action, a move which caught the ire of Congress and should have caused skepticism among the people. 3. Syria, Redline Enforced In line with his predecessor’s actions and with images of dead children on his mind, President Trump directed a missile strike on Syrian air bases he believed were the source of chemical attacks.32 The President claimed the actions of the Syrian President “crossed a lot of lines for me.” 33 After the strike, President Trump sent Congress a letter saying he had the legal authority to authori4e the strike to protect “vital national security and foreign policy interests of the United States.”34 The specific interests were unstated and are unimportant because as the prior administration asserted, “the President had constitutional authority . . . to direct such limited military operations abroad, even without prior specific congressional approval.”35 While that justification was given under different circumstances, the precedent for unilateral executive action was set. 4. *Fire and Fury’ North /orea continues to develop its military capability and grows ever closer to coupling a nuclear device with an 30. See id. 31. Id. at *6. 32. See Paul D. Shinkman, Trump Orders Missile Strike Against Syria, U.S. NEWS (Apr. 6, 2017, 9&39 PM), https&''www.usnews.com'news'politics'articles' 2017-04-06'trump-orders-missile-strike-against-syria. 33. See id. 34. See Ellen Mitchell, Group sues Trump to get legal justification for Syria strike, THE HILL (May 8, 2017, 3&15 PM), http&''thehill.com'policy'defense'332412group-sues-trump-to-get-legal-justification-for-syria-strike. 35. Authority to Use Military Force in Libya, Op. 35 O.L.C. *1, *3 (2011).
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intercontinental ballistic missile 3ICBM2 in an attempt to threaten the United States and its allies.36 In response, President Trump stated, “North /orea best not make any more threats to the United States . . . 6t5hey will be met with fire and fury like the world has never seen.”3- Referring specifically to leader /im Jong-Un, President Trump said, “He has been very threatening beyond a normal state, and as I said, they will be met with fire and fury, and frankly power the likes of which this world has never seen before.” 38 Such language led many to wonder about the possibility of a preemptive strike by the United States, which Trump administration officials have confirmed as an option.39 With current precedent, such unilateral executive action would seem almost un$uestionable.40
C. Proposed Legislative Reforms 1. The War Powers Consultation Act of 2009 In recognition that the status $uo was inade$uate, Congress proposed the War Powers Consultation Act of 2009. Senator Warner described its four main parts, First, this legislation would replace the War Powers Resolution of 19-3. It would ensure that Congress has an opportunity to consult meaningfully and deliberately with the President regarding significant armed conflicts, and would ensure that Congress has the opportunity to express its views as part of a consultative process. Second, this statute would 36. See Peter Baker & Choe Sang-Hun, Trump Threatens !Fire and Fury’ Against North Korea if It Endangers U.S., N.Y. TIMES (Aug. 8, 2017), https&''www.nytimes.com'2017'08'08'world'asia'north-korea-un-sanctions-nuclearmissile-united-nations.html. 37. See id. 38. See id. 39. See id. 40. “The President had constitutional authority, as Commander in Chief and Chief Executive and pursuant to his foreign affairs powers, to direct such limited military operations abroad, even without prior specific congressional approval.” See Authority to Use Military Force in Libya, 35 Op. O.L.C. *1 (2011).
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create a process that will encourage the two coe$ual branches of government to cooperate and consult in a way that is deliberate, practical, and true to the spirit of the Constitution. Third, the act would establish a “Joint Congressional Consultation Committee” with a “permanent, bi-partisan joint professional staff” with access to all relevant intelligence and national security information. Fourth, and finally, the act would re$uire the President to consult with the Joint Congressional Consultation Committee “6b5efore ordering the deployment of United States armed forces into significant armed conflict”.lasting longer than one week.and would mandate regular consultation 41 thereafter. This bill reiterated that Congress should act first and also create a joint committee to streamline the legislative process. 2. War Powers Consultation Act of 2014 The next attempt at congressional reform was the War Powers Consultation Act of 2014. The bill’s stated intent was
not to alter the war powers of the Executive or Legislative branches.42 The intent was to repeal the War Powers Resolution, establish a joint congressional consultation committee that the President would meet with before deployment of military forces, and provide a report on scope, objectives, and potential duration of engagement.43 The President was to consult with the committee at least every two months for the duration of the military engagement.44 Furthermore, the bill stated that within thirty days of military deployment, if Congress had not already declared war or provided authori4ation, a joint resolution would be 41. See War Powers Consultation Act of 2009, S. 128, 110th Cong., 2d Sess., 154 CONG. REC. S 7769 (2008) (statement of Sen. Warner). 42. See War Powers Consultation Act of 2014, S. 1939, 113th Cong., 2d Sess. (2014). 43. See id. 44. See id.
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introduced for approval.45 This bill reiterated that Congress should authori4e before military action or at a minimum be consulted before troop deployment. At the end of the day, the details of proposed legislation may change, but the nonconfrontational stance of the Judiciary has not.
D. Political +uestion Doctrine – Judiciary Sidelined 1. Meyers v. Nixon The case, decided March 14, 19-2, was brought to enjoin the Nixon administration from allocating funds to the war in Southeast Asia.46 The plaintiffs alleged that only Congress could declare war, and without this declaration, the two million dollars allocated to military actions deprived them of their rights under the Declaration of War Clause.4- The second allegation was that the military’s actions violated international law and thus, funding them violated international conventions.48 The plaintiffs argued that the complaint was not a political $uestion" the issue was “whether explicit congressional authori4ation of the war is constitutionally re$uired in order for the Executive to engage in the military activities. . . .”49 The defendants moved to dismiss for lack of standing, and since the complaint was deemed nonjusticiable, the Court sided with the defendant, “the complaint does not allege a justiciable controversy and plaintiffs lack standing to seek the adjudication of political $uestions.”50 With that, the tradition of the Court’s nonconfrontational position regarding military action continued. 2. /ucinich v. Obama One of the most recent attempts to gain judicial relief arose when ten members of Congress sued President Obama
45. 46. 47. 48. 49. 50.
See id. See Meyers v. Nixon, 339 F. Supp. 1388, 1389–91 (S.D.N.Y. 1972). See id. See id. See id. See id.
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over military operations in Libya.51 The plaintiffs asked the court to declare the President’s military operations unconstitutional.52 Furthermore, they asked the court to deem attacks on a country that did not attack a NATO ally unconstitutional.53 Also, plaintiffs asked the court to find the President’s extension of NATO policy without congressional authori4ation unconstitutional54 The plaintiffs also wanted the Court to declare that NATO resolutions do not permit military action without congressional approval and that it is unconstitutional to redirect already apportioned funds to “an undeclared war.”55 Lastly, the plaintiffs wanted all military operations suspended in Libya, absent congressional authori4ation.56 The Court determined the plaintiffs did not have standing and granted the defendants’ motion to dismiss.5- This ruling is significant because the court solidified the President’s interpretation of his constitutional power regarding military force a power that extends beyond President Obama to President Trump and so on. If there were ever a time for the court to address such bra4en extraconstitutional executive action, it would have been this case" however, the court did not. III. ANALYSIS
A. America First Prolonged military engagement spurred $uestions in the public as to whether American interests were advanced. Interestingly, President Trump was a voice of opposition before he was elected. Tweets from the future Commander in Chief included, “Let’s get out of Afghanistan. Our troops are being killed by the Afghanis we train 6sic5 and we waste
51. 52. 53. 54. 55. 56. 57.
See Kucinich v. Obama, 821 F. Supp. 2d 110, 113–14 (D.C. 2011). See id. See id. See id. See id. See id. See Kucinich v. Obama, 821 F. Supp. 2d 110, 125 (D.C. 2011).
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billions there. Nonsense) Rebuild the USA"” 58 “84% of US troops wounded & -0% of our brave men & women killed in Afghanistan have all come under Obama. Time to get out of there.”59 During Trump’s presidential campaign, he regularly critici4ed the Ira$ war, taking a more isolationist view on foreign policy.60 As a candidate, President Trump shocked many when he declared NATO obsolete. 61 As Charles /rauthammer described, “Trump makes no distinction between friend and foe 3and no reference to liberty2. They’re all out to use, exploit, and surpass us.”62 Nonetheless, President Trump was elected with the promise of “America First foreign policy and peace through strength.”63
B. Peace through restraint President Trump often refers to the notion of “peace through strength,” a potential inference could be a restraint from using that force ourselves.64 Such an argument is not ahistorical. As Macken4ie Eaglen from The Heritage Foundation pointed out, George Washington once said, “the *most effectual means of preserving peace’ is *to be prepared for war.’”65 Furthermore, Eaglen highlighted a letter in which Thomas Jefferson advised George Washington that “the 58. Donald J. Trump (!realDonaldTrump), TWITTER (Jan. 11, 2013, 10&55 AM), https&''twitter.com'realDonaldTrump'status'289807790178959360. 59. Donald J. Trump (!realDonaldTrump), TWITTER (Sept. 11, 2012, 11&40 AM), https&''twitter.com'realDonaldTrump'status'245592603716907009. 60. See Andrew Kaczynski, Donald Trump criticized Obama in 2011 for not getting out of Iraq sooner, CNN (Oct. 26, 2016, 3&32 PM), http&''www.cnn.com' 2016'10'26'politics'trump-2011-troops-in-iraq'index.html. 61. See Charles Krauthammer, Trump’s Foreign-Policy Revolution, NAT’L REV. (Jan. 27, 2017, 1&00 AM), https&''www.nationalreview.com'2017'01'trump-foreignpolicy-isolationsim-america-first-allies-nato-trans-pacific-partnership'. 62. See id. 63. See Alexander Gray & Peter Navarro, Donald Trump’s Peace Through Strength Vision for the Asia-Pacific, FOREIGN POL’Y (Nov. 7, 2016, 2&14 PM), https&''foreignpolicy.com'2016'11'07'donald-trumps-peace-through-strengthvision-for-the-asia-pacific'. 64. See id. 65. See Mackenzie Eaglen, Why Provide for the Common Defense?, HERITAGE FOUND. (Jan. 19, 2011), http&''www.heritage.org'defense'report'why-provide-thecommon-defense$)ftnref4, (referencing George Washington, “First Annual Message to Congress on the State of the Union,” Jan. 8, 1790).
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power of making war often prevents it.” 66 Although a substantial military at-the-ready may become enticing, its use should not be taken lightly. 1. Action Leads to Endless Action When utili4ing the force of the United States military, behoove to remember there are conse$uences for actions. Following President Trump’s strike on Syria, Tamara Cofman Wittes, a former deputy assistant secretary for Near East Affairs stated, “I worry that Assad 6President of Syria, Bashar Al Assad5 could escalate. One possibility is that Assad could hasten his use of conventional weapons to end the war on his terms.”6- The after effects of force must be considered" the $uestion is by whom! If one military act can pull the country into all-out war, who should authori4e it! It is the opinion of this comment that Congress, the voice of the people, should.
C. Congressional Solution The War Powers Consultation Act of 2009 and the War Powers Consultation Act of 2014 sought to re$uire the Executive to seek guidance on authori4ations regularly, even during operations, as well as setting scope and temporal limits.68 While such legislation has merit, parts are antithetical to the Founders’ original intent of one person, the President, directing the military, free from persistent deliberation.69 Geographic limits on authori4ations seem impossible because ISIS, our current enemy, operates outside 66. See id. (referencing Thomas Jefferson, In a letter to George Washington, Dec. 4, 1788). 67. See David Nakamura, Continued bombing by Assad shows limits of single U.S. attack, WASH. POST (Apr. 8, 2017), https&''www.washingtonpost.com'politics' continued-bombing-by-assad-shows-limits-of-single-us-attack'2017'04'08' 1c70cb1a-1c83-11e7-bcc2-7d1a0973e7b2)story.html"utm)term#.14901a8e0beb, (quoting Tamara Cofman Wittes, a former deputy assistant secretary for Near East affairs at the State Department under President Obama). 68. See War Powers Consultation Act of 2014, S. 1939, 113th Cong., 2d Sess. (2014); See also War Powers Consultation Act of 2009, S. 128, 110th Cong., 2d Sess., 154 CONG. REC. S 7769 (2008) (statement of Sen. Warner). 69. See Sevi, supra note 13 at 97, 98.
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normal country borders in an attempt to establish their own country.-0 This has resulted in attacks carried out all over the globe under the banner of ISIS.-1 This presents an issue of where to authori4e forces. Additionally, groups previously unaffiliated with ISIS have pledged allegiance to them, which presents the $uestion of whether prior authori4ations also transfer to target those groups.-2 Thus, Congress has a problem. If they make the authori4ation too narrow, the Executive is restricted and unable to properly wage war which is a risk for military personnel.-3 However, if the authori4ation is too broad, the President will have authority to do whatever, whenever, ad infinitum. History has shown that given the opportunity, and regardless of political party, the President in office will use all power available.-4 Perhaps the Founders foresaw such behavior when they said, “6i5f men were angels, no government would be necessary. If angels were to govern men, neither external nor internal controls on government would be necessary.”-5 The breakdown seems to be one branch is unwilling to wield its constitutional checks against the other. The proposed solution offered in this comment is to take the structure of the War Powers Consultation Act of 2014 and strengthen it. 70. See Nick Thompson & Atika Shubert, The Anatomy of ISIS: How the !Islamic State’ is Run, from Oil to Beheadings, CNN (Jan. 14, 2015, 9&11 AM), http&'' www.cnn.com'2014'09'18'world'meast'isis-syria-iraq-hierarchy'index.html. 71. See Tim Lister et al., ISIS goes global: 143 attacks in 29 countries have killed 2,043, CNN (Feb. 12, 2018, 11&24 AM), http&''www.cnn.com'2015'12'17' world'mapping-isis-attacks-around-the-world'index.html. 72. “It’s wise not to include geographical restrictions in the legislation because ‘ISIL already shows signs of metastasizing outside of Syria and Iraq,’” then Defense Secretary Carter when discussing a new authorization for use of military force. Senator Rand Paul said, “If we’re going to go to war in Libya, I want to vote for war in Libya. If we’re going to go to war in Nigeria, I want to vote for war in Nigeria.” See Kate Brannen, Fighting ISIS Here, There, and Everywhere, FOREIGN POL’Y (Mar. 11, 2015 6&39 PM), http&''foreignpolicy.com'2015'03'11'fighting-isis-herethere-and-everywhere-aumf'. 73. See id., (Stephanie Sanok Kostro from the Center for Strategic and International Studies said, “I think when you’re talking about transnational groups like [the Islamic State] that aren’t affiliated with a particular state, putting a geographic limitation on it actually is harmful from a military perspective.”). 74. See Yoo, supra note 2. 75. THE FEDERALIST NO. 51, at 344 (James Madison).
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1. Remove First Strike Capability A provision in any future legislative proposal should remove the ability of the Executive to take any unilateral military action unless America is attacked, or to prevent an attack on the United States homeland or military bases. For too long Congress has taken up the rear, capitulating executive action while wagging their finger. A clear line drawn, that Congress authori4es before action, would best articulate to the American public that any violation would warrant a congressional response, even one including impeachment. 2. Previously Proposed Legislation Re-examined Both the War Powers Consultation Act of 2009 and the War Powers Consultation Act 2014 sought to re$uire the President to meet with a joint committee. -6 In such a tumultuous time, the committee provision should be implemented because keeping a committee abreast is more tenable than the entire body of Congress. The issues within the bills are the constant consultations between the President and the committee even during operations.-Deliberations during a war are antithetical to what the Founders envisioned.-8 The Founders recogni4ed each branchâ&#x20AC;&#x2122;s fundamental role, and once authori4ed, the Executive was the lone authority on war operations.-9 Alteration of the proposals would be to keep the committee and create a fast track for authori4ations. The committee would analy4e information, deliberate, and then draft an authori4ation, or a declaration of war for Congress to vote. Congress has the prerogative to pass the declaration or authori4ation and should do so without projected temporal limits or other restrictive geographic re$uirements. Proposed 76. See War Powers Consultation Act of 2014, S.1939, 113th Cong., 2d Sess. (2014); See also War Powers Consultation Act of 2009, S. 128, 110th Cong., 2d Sess., 154 CONG. REC. S 7769 (2008) (statement of Sen. Warner). 77. See War Powers Consultation Act of 2014, S.1939, 113th Cong., 2d Sess. (2014). 78. See Sevi, supra note 13. 79. See id.
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specifically by this comment would be each authori4ation or declaration have the “stop button” clause.
i. “Stop Button” Clause A “stop button” clause is a clause, wherein the committee can vote, for any reason, at any time, and if a majority is reached it starts a thirty-day countdown to defunding. Within the thirty-days Congress will have to vote to reauthori4e funds. If Congress fails to act in time, the authori4ation’s funds will cease. The President will be forced to withdraw troops and assets specific to that authori4ation. Opponents might ask, why thirty days! The thirty-day provision is arbitrary. Congress knows best how long something should take to address. Therefore, Congress can assign any amount of days. Additional $uestions could be how would this fit in the new era of war fighting 3i.e., cyberspace, space, unmanned drones, etc.2! This is a valid concern. The United States, like many other countries, has developed new non-conventional methods for fighting wars, even creating new units to fight in cyberspace. 80 The provision proposed by this comment would encompass any military action to include military cyber operations or otherwise. There could be other $uestions regarding actions not under the military designation such as the National Security Administration 3“NSA”2, Central Intelligence Agency 3“CIA”2, or some other yet named agency. That is a valid in$uiry but outside the scope of this comment as it seeks to restore a balance of military powers between the Legislative and Executive branches. As fighting turns more covert, it is incumbent on the populous to utili4e the ultimate check on government, the ballot box, to replace those not acting with their best interests in mind. Remember, humans are not angels" a restoration of balance is only as good as those who stand ready to impose it.
80. See Thomas Gibbons-Neff & Ellen Nakashima, President Trump Announces Move to Elevate Cyber Command, WASH. POST (Aug. 18, 2017), https&'' www.washingtonpost.com'news'checkpoint'wp'2017'08'18'president-trumpannounces-move-to-elevate-cyber-command'"utm)term#.621b6791d64e.
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ii. Defense of the “stop button” Is the “stop button” constitutional! Does one bi-cameral committee have the authority to stop funding of an authori4ation passed by Congress! 81 The committee, would not be authori4ing, funding, or defunding anything. The committee is tasked to stay up-to-date on intelligence and any potential military authori4ation sought by the Executive being ready to assist its drafting for Congress to pass. Congress will always be the ultimate decider whether authori4ations are passed or funded. The authority given to the committee is merely one of oversight and sensitivity to potential foreign conflicts. If the committee decides not to honor an authori4ation, Congress holds a vote. If a majority agree, the thirty-day countdown begins. The onus is on Congress to either reauthori4e funds or let the authori4ation lapse, not the committee.
D. Who Goes First, President or Congress! In an article titled War Powers Belong to the President, John Yoo laid out the history of executive action followed by congressional action.82 Yoo pointed to the historical record where force has been used more than 100 times, but the U.S. has only declared war five times.83 “Without any congressional approval, presidents have sent forces to battle Indians, Barbary pirates and Russian revolutionaries" to fight North /orean and Chinese communists in /orea" to engineer regime changes in South and Central America" and to prevent human rights disasters in 6the5 Balkans.” Yoo continued, “Other conflicts, such as the 1991 Persian Gulf war, the 2001 invasion of Afghanistan and the 2003 Ira$ war, 81. See I.N.S. v. Chadha, 462 U.S. 919 (1983) (The U.S. Supreme Court ruled that the House could not invalidate a decision of the Executive Branch because it violated the legislative process of both Houses reaching majority and signed by the President); compare Nixon v. United States, 506 U.S. 244 (D.C. 1993) (The Court determined that the use of a Senate committee to hear evidence in an impeachment trial did not violate the Constitution; furthermore, impeachment being enumerated fell under political question doctrine.). 82. See Yoo, supra note 2. 83. See id.
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received legislative *authori4ation’ but not declarations of war.”84 He insists that changing this dynamic would be against common sense, as the Founders wanted the President to be the unified voice when it came to military and foreign affairs.85 Without a doubt, the Founders wanted the Executive to be the sole voice, during war, which would infer an authori4ation exists. 86 1. Scholars Divided Many $uestion the Founders’ true intent, whether Congress authori4es the President to act, or whether the President acts and Congress follows.8- As Matthew Fleishman discussed in A Functional Distribution of War Powers, these two schools of thought are aptly called “President-first” and “Congress-first.”88 Either theory seemed to have historical validity. Therefore, when Yoo $uoted Alexander Hamilton89 to defend “President-first,” he fell into the trap of accepting evidence that supports, while ignoring evidence to the contrary.90 If historical texts and interpretations are unclear, or could support either proposition, it begs the $uestion of which direction should the country go. Yoo stated that historical precedent should stand, and that the President has always had broad discretion when it came to foreign affairs and war.91 However, the Constitution states explicitly that Congress declares war. 92 If the unilateral actions of the President were constitutional, 84. See id. 85. See id. 86. See Sevi, supra note 13, at 95, 96, 97, 98. 87. See Fleischman, supra note 3, at 141, 143. 88. See id. at 141, 142. 89. “As Alexander Hamilton wrote in Federalist 74, ‘The direction of war implies the direction of the common strength, and the power of directing and employing the common strength forms a usual and essential part in the definition of the executive authority.’ Presidents should conduct war, he wrote, because they could act with ‘decision, activity, secrecy and dispatch.’” See Yoo, supra note 2, at 3. 90. See Fleischman, supra note 3 (quoting John C. Yoo, Clio at War: The Misuse of History in the War Powers Debate, 70 U. COLO. L. REV. 1169, 1169 (1999)). 91. See Yoo, supra note 2, at 2, 6. 92. U.S. CONST. art. I, § 8.
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why bother putting such a clause in the Constitution! It is difficult to imagine the Founders placing such a superfluous phrase in our founding document" it is axiomatic that words have meaning and placing words in a document would effectuate that meaning. The Founders recogni4ed the argument for unilateral executive action in rare situations. 93 However, Article II of the Constitution provides that, “6t5he President shall be Commander in Chief of the Army and Navy of the United States, and of the Militia of the several States, when called into the actual Service of the United States.” 3emphasis added2.94 The text “when called into the actual service” before the president takes command seems to indicate a step before exercising power. The argument could be made that “when called into the actual service” refers to the formation of the military, and once Congress raises the army, those within were “called to service.” Thus, if a standing military exists, then the President can direct it at will. Another argument could be that “when called into the actual service” indicates a formal authori4ation or declaration of war. This author sides with the latter. 2. Check Please) Yoo described Congress’s available constitutional checks as either the ability to shrink the si4e of the military or restrict funds.95 The idea seems to be if the military is small, it is less capable and thus unlikely to be used hastily. This solution seems dangerous given current threats and the time it would take to rebuild" an issue faced by the current
93. “Many things there are which the law can by no means provide for, and those must necessarily be left to the discretion of him that has the executive power in his hands, to be ordered by him as the public good and advantage shall require . . . . [In some cases] it is fit that the laws themselves should . . . give way to the executive power . . . .” See Sevi, supra note 13 at 78, 79 (quoting John Locke, Charles Cooper et al., What the Constitution Means by Executive Power, 43 U. MIAMI L. REV. 165, 167 (1988) (quoting John Locke, Two Treatises of Government 384-85 (Peter Laslett ed., Cambridge Univ. Press 1988) (1690))). 94. U.S. CONST. art. II, § 2. 95. See Yoo, supra note 2, at 2.
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administration as it attempts to rebuild an anemic postse$uestration military.96
E. Too Late! Precedent Set! The status $uo must be reexamined. The Executive can launch a unilateral action against a sovereign country without public consideration or fear of congressional repercussions.9- Given current precedent, unilateral action against North /orea is a possible solution to stop their military development. The threat of war with current armaments is alarming" however, consider advanced future technology and how it will reshape the way countries fight wars.
F. Robots E$ual More War. One would hope the Executive considers the cost of human life in war, civilian and military. However, with new technology making war less human, will that calculus change! Will the United States and other countries be more apt to start conflicts when it is drones fighting instead of
96. “Air Force Secretary Mike Wynne has warned& Under the Obama administration, the Navy has shrunk to its smallest size since World War I. The Army is the smallest it has been since before World War II. The Air Force is the smallest in its history, and its aircraft are the oldest. Readiness levels across the services are the worst in a generation, with pilots facing significantly reduced cockpit time and deferring critical maintenance, Navy ships and crews deploying as long as 10 months, and Army units are deferring critical training before deployments. The horror story of naval aviators taking spare aircraft parts from museums to keep their planes flying is simply unacceptable for those who wear our nation’s uniform.” See Alexander Gray & Peter Navarro, Donald Trump’s Peace Through Strength Vision for the Asia-Pacific, FOREIGN POL’Y (Nov. 7, 2016, 2&14 PM), https&'' foreignpolicy.com'2016'11'07'donald-trumps-peace-through-strength-vision-forthe-asia-pacific'. 97. See Paul Shinkman, Trump Orders Missile Strike Against Syria, U.S. NEWS (Apr. 6, 2017, 9&39 PM), https&''www.usnews.com'news'politics'articles'2017-0406'trump-orders-missile-strike-against-syria; see also Authority to Use Military Force in Libya, supra note 29.
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people!98 With such a cynical view of the future, hopefully one can identify the issues and mitigate potential disaster.
G. It is Broken, Fix it. The phrase “if it ain’t broke don’t fix it” comes to mind. The idea is that precedent has worked and it should remain. This fails to recogni4e the issues arising out of perceived lawless behavior. Both Congress and soldiers have filed lawsuits to get the Court to either halt the Executive from acting or chastise its actions.99 When authori4ations seem to lack legitimacy or appear illegal, they invite dissent. One army captain sued President Obama over the continued use of the 2001 AUMF.100 When the text of an authori4ation is arguably stretched beyond its original intent, some feel obligated to speak up. Consideration should be given as to the effect such dissent has on those deployed. Additionally, continued global military action without worthwhile congressional oversight generates statements like that of Senator Lindsey Graham, “I didn’t know there was 1,000 troops in Niger.”101 A remarkable statement by a Senator that nonetheless illustrates the point that Congress needs to reclaim its constitutional authority. IV. CONCLUSION The history of the United States is replete with abuses of power by both the Legislative and Executive branches. The people, who are supposed to be the true masters of both, elect different parties in the hope it will change the course of 98. See Peter Apps, Commentary: The Coming Robot Arms Race, REUTERS (Sept. 18, 2017, 11&57 AM), https&''www.reuters.com'article'us-apps-robotscommentary'commentary-the-coming-robot-arms-race-idUSKCN1BT1XN. 99. See Kucinich v. Obama, 821 F. Supp. 2d 110, 113–14 (D.C. 2011); see also Rebecca Kheel, Army Captain Sues Obama Over Lack of ISIS War Authority, THE HILL (May 4, 2016, 1&20 PM), http&''thehill.com'policy'defense'278697-armycaptain-sues-obama-over-lack-of-isis-war-authorization. 100. See Kheel, supra note 99. 101. Following the tragic death of service members in Niger, Senators stated they did not know of the troops being there. See Daniella Diaz, Key Senators Say They Didn’t Know the US Had Troops in Niger, CNN (Oct. 23, 2017, 12&00 PM), http&''www.cnn.com'2017'10'23'politics'niger-troops-lawmakers'index.html.
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action. Though, in the context of military authori4ations, it often makes no difference. The office of the President affords power – power that can be abused. Given the potential cost of war, Congress should change and reassert its role. Each executive abuse pushes precedent that much more, to the point where President Trump has what amounts to executive supremacy. This almost limitless authority allows President Trump the discretion to unilaterally strike North /orea. Such action would unleash an unknown response on a global scale, as President Trump said, “like the world has never seen before.”102 If such power is to be reined in, when will it be! America’s interests should be foremost in decisions of war to ensure national safety and security. Such restraint should be welcomed by the people and supported by the current Commander-in-Chief since he is famous for declaring “America First)”103
102. See Peter Baker & Choe Sang-Hun, Trump Threatens !Fire and Fury’ Against North Korea if It Endangers U.S., N.Y. TIMES (Aug. 8, 2017), https&''www.nytimes.com'2017'08'08'world'asia'north-korea-un-sanctions-nuclearmissile-united-nations.html. 103. See Max Greenwood, Trump: I Will Always Put America First, THE HILL (Sept. 19, 2017, 10&33 AM), http&''thehill.com'homenews'administration'351320trump-i-will-always-put-america-first.
DISTINGUISHED BRIEF The Distinguished Brief Award is given in recognition of the most scholarly briefs filed before the Michigan Supreme Court* as determined by a panel of imminent jurists. Two briefs are chosen each year and printed in the Western Michigan University Thomas M. Cooley Law Review. To preserve the author's style* the brief has been reprinted in its entirety* e0actly as submitted to the Michigan Supreme Court. I.TRODUCTIO. ATF MICHIGA.* ET AL* v. STATE OF MICHIGA.*
(laintiffs-Appellees*
Defendant-Appellant.
BRIEF O. A((EAL OF DEFE.DA.TS-A((ELLA.TS ABSTRACT
In this brief* Defendant's counsel argues that the Court of Appeals decision finding that (A !$* which required all members of the Michigan (ublic School Employees Retirement System to contribute a percentage of their compensation to help fund the cost of health benefits* violated the Takings* Due (rocess* and Contracts Clauses is flawed. The Defendant argues this issue was corrected by (A &00 and the Court of Appeals should have granted summary disposition. The Michigan Supreme Court denied summary disposition* ruling that (A &00 was not retroactive* and the constitutional claims were not moot.
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BIOGRA(HICAL STATEME.T GARY (. GORDO. / Gary (. Gordon-s practice focuses on regulatory matters* state procurement issues* constitutional issues* and litigation. He appears before various State boards and commissions including the (ublic Service Commission* the Board of State Canvassers* and other administrative agencies and is recognized as one of the State-s leading authorities on Election and Campaign Finance law. He has litigated and continues to litigate cases at all levels of State and Federal courts. Mr. Gordon frequently speaks to groups on election and campaign finance matters and has been called on to provide advice and testimony to the Legislature on public employment issues. (rior to joining Dykema* Mr. Gordon was Chief Deputy Attorney General for the State of Michigan. He had responsibility for all operations of the office including human resources* budget* legislative liaison* communications* and oversight of all law divisions* consisting of appro0imately &00 attorneys. STEVE. C. LIEDEL / Steven C. Liedel focuses his practice on government organization and restructuring* economic development* state constitutional law* and ta0 policy. Mr. Liedel also provides counsel on legislative drafting* strategy* and interpretation) government policy) election law and campaign finance) government contracts and procurement) real estate* administrative law) and intergovernmental cooperation. Mr. Liedel has been e0tensively involved in drafting legislation* regulations* e0ecutive orders* e0ecutive directives* intergovernmental agreements* real estate finance* and government contracts. He also has been involved in lobbying legislative and e0ecutive branch officials and litigating public policy and constitutional issues. W. ALA. WILK /W. Alan Wilk focuses his practice on election* campaign finance and lobby law* gaming* and public retirement* as well as nonprofit organizations and trade associations. Mr. Wilk is the Team Leader for Dykema's
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(olitical Compliance Team* which represents and advises individuals and corporate entities on federal and state election* campaign finance* lobby law and other political activity. Mr. Wilk-s practice has also included representing both casino owners and gaming suppliers in regulatory matters before the Michigan Gaming Control Board as a member of the Firm-s Casino Team. He also advises those with casino interests on political contribution matters under the Michigan Gaming Act and Michigan Campaign Finance Act. JASO. T. HA.SELMA. / Jason T. Hanselman advises clients in highly-regulated fields* such as energy* elections* education* and health care. He regularly represents those clients in comple0 business matters* legislative drafting on multiple jurisdictions* litigation before state and federal courts* and regulatory proceedings before administrative boards and commissions. Mr. Hanselman regularly practices before the Michigan (ublic Services Commission. He also advises candidates* committees* and businesses regarding state and federal campaign finance law* election law* and compliance issues related to lobbying* ethics* and financial disclosure.
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Cite this volume as 35 W. MICH. U. COOLEY L. REV. (2019). The Western Michigan University Cooley Law Review is published twice annually by the students of Western Michigan University Thomas M. Cooley Law School, 300 South Capitol Avenue, Lansing, Michigan 48901. Subscriptions: Special Patrons, $50 per year; Law Firm Benefactors, $100 per year; regular subscriptions, $30 per year. Inquiries and changes of address may be directed to lawreview@cooley.edu or to WMU Cooley Law Review, care of Western Michigan University Thomas M. Cooley Law School, 300 South Capitol Avenue, Lansing, Michigan 48901. The Western Michigan University Cooley Law Review welcomes submission of articles. Manuscripts should be typed, doublespaced, with footnotes. Citations in manuscripts should follow the form prescribed in ALWD Guide to Legal Citation, Coleen M. Barger, 6th Ed. We regret that unsolicited manuscripts cannot be returned. E-mail to: lawreview@cooley.edu in Microsoft Word format. Editorial Policy: The views expressed in papers published herein are to be attributed to their authors and not to Western Michigan University Cooley Law Review, its editors, or Western Michigan University Thomas M. Cooley Law School. The Western Michigan University Cooley Law Review is a member of the National Conference of Law Reviews. Printed by The Sheridan Press, 450 Fame Ave., Hanover, Pennsylvania 17331. Nonprofit postage prepaid at Lansing, Michigan, and at additional offices. Back issues and volumes, as well as complete sets, are available from William S. Hein & Co., Inc., 1285 Main Street, Buffalo, New York 14209, phone number 1 (800) 828-7571. Printed on recycled paper.
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