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Home My WebLink About10-Council Office CITY OF SAN BERNARDINO - REQUEST FOR COUNCIL r'S 'I�'I I A I From: Councilwoman Wendy McCammack Subject: Report to Mayor and Council Seventh Ward on Subject Matter Related to Municipal Governance Learned Dept. Council Office While Attending the April 2007 Date: May 16, 2007 IMLA Conference MCC Date: May 21, 2007 Synopsis of Previous Council Action: Recommended Motion: Report be discussed, received and filed. Signature Contact Person:__ Councilwoman Wendy McCammack Phone: 5068 Supporting Data Attached: Ward: FUNDING REQUIREMENTS: Amount: Source: (Acct. No.) (Acct. Description) Finance: Council Notes: Agenda Item No. 10 it I i INTERNATIONAL MUNICIPAL Item #10 LAWYERS ASSOCIATION 4 11X t" INTERNATIONAL MUNICIPAL ' LAWYERS ASSOCIATION Work Session: Large Population Centers Track Title: Confronting Major Transportation Projects: Managing Litigation Risks and Maximizing Local Influence and Control by Presenter: Ian A. Shavitz Presenter' s Title: Counsel Presenter' s Office: Akin Gump Strauss Hauer & Feld LLP 2007 International Municipal Lawyers Association. This is an informational and educational report distributed by the International Municipal Lawyers Association during its 2007 Mid Year Seminar, held April 22-24, 2007 in Washington, D.C. IMLA assumes no responsibility for the policies or positions presented in the report or for the presentation of its contents. a Confronting Major Transportation Projects: Managing Litigation Risks and Maximizing Local Influence and Control Ian A. Shavitz Akin Gump Strauss Hauer & Feld LLP March 20, 2007 I. Introduction With growing transportation problems in and around major population centers, municipalities must often confront the development of major transportation infrastructure projects within or close to their boundaries. Projects can include roadways, transit lines, and major transportation facilities. These projects often benefit municipalities by relieving congestion, increasing safety and providing economic opportunities. But these projects also require large expenditures of municipal funds, require years of construction activities and subject municipalities to extensive litigation. This paper(i) provides an overview of the types of major transportation projects, the agencies and governments responsible for undertaking these projects, and the sources of and mechanisms for funding these projects, (ii) identifies the actions municipalities can take to maximize local influence and control over these projects and (iii) discusses ways to manage litigation risks associated with major transportation projects. II. Major Transportation Projects: An Overview Metropolitan areas throughout the country are facing significant transportation problems. A primary source of these problems is roadway congestion. As compared to years past, roadways are now more congested, roadways experience congestion for longer periods during the day (i.e., outside of rush hours), more roadways are experiencing congestion, and drivers spend more time in traffic.' Roadway congestion has real economic and environmental consequences. In 2003, the 85 largest metropolitan areas experienced 3.7 billion vehicle-hours of delay, which translates into 2.3 billion gallons of wasted fuel and $63 billion dollars of lost productivity.2 Congestion also results in consequences that are less tangible, such as loss of time with family, stressful driving circumstances., and loss of travel reliability. Demand for roadway travel is out-pacing the capacity of our roadways. The situation is not improving, which is causing congestion to get even worse. "Between 1980 and 1999, route miles of highways increased 1.5 percent while vehicle miles of travel increased 76 percent."3 This disparity results in real capacity problems on roadways in and around municipalities. In addition to loss of driver time and productivity, congestion also results in accidents and increased pollution. A primary purpose in developing major transportation projects is to address inadequate roadway capacity. The need to increase safety on roadways is also driving the development of major transportation projects. A range of factors contribute to unsafe roadway conditions, including outdated roadway designs, sharp curves, lack of site lines, narrow lanes and congestion. These safety problems can result in minor traffic accidents.(i.e., fender-benders), but also can cause major accidents resulting in serious injuries and fatalities. For example, in 2002 there were 226 fatal motor vehicle accidents in the City of Houston with 607 fatalities, which equates to nearly two ' FHWA, Traffic Congestion and Reliability:Linking Solutions to Problems Report(July 19,2004), http://ops.tbwa.dot.gov/congestion_report_04/executive_summary.htm. 2 Texas Transp. Inst.,The 2005 Urban Mobility Report(2005);see also Editorial,A Dose of Decongestant,Wash. Post,February 14,2007,at A18. 3 See FWHA,Focus on Congestion Relief,http://www.fbwa.dot.gov/congestion/index.htm(last visited March 19, 2007). persons killed in traffic accidents each day.4 Traffic accidents also can result in significant property damage. Major transit projects are also being developed in and around major cities. These transit projects are being driven by a wide range of factors, including mounting congestion problems, the negative environmental impacts resulting from increased automobile usage, cost savings to the traveling public, and changes in land use and development. A more detailed discussion of the primary types of major transportation projects that municipalities may confront is presented below. a. Roadway Projects Major roadways are being constructed and existing roadways are being expanded in and around major cities to address growing travel demands. These roadway projects increase roadway capacity, which is the maximum amount of traffic that a roadway can handle. Capacity is influenced by a range of factors, including the number and width of lanes and shoulders, the existence of merge areas at interchanges and the alignment of the roadway, including grades and curves. When a roadway is at or nearing capacity, traffic "bottlenecks" are created. Roadway capacity can be increased by adding lanes or building new roadways, both of which could result in years of construction, potential environmental impacts and significant project opposition. Adding lanes to existing roadways is generally less controversial than constructing a new roadway, and can be accomplished by adding lanes in a median or outside of existing roadway lanes. Adding lanes outside of an existing roadway could have more significant impacts and effects than locating additional lanes in a median, especially where the roadway is lined with existing development. Developing a roadway where one previously did not exist may have significant environmental impacts, require the taking of historic resources and public parks, displace existing residences and businesses, and impact endangered species or their habitat. Developing a new roadway may also cause secondary residential and commercial growth by providing new or improved access to a previously undeveloped or sparsely developed area. New roadway capacity may be developed as general purpose lanes, where there is no control or management strategy, or as managed lanes. Managed lanes use management techniques to improve freeway efficiency. Managed lanes relieve congestion by placing controls on roadways or select lanes of a roadway to increase the free flow of traffic. Common management strategies include: • High Occupancy Vehicle Lanes (HOV). HOV lanes require that automobiles traveling in the lanes contain a minimum number of occupants, generally two to three. HOV lanes limit the number of vehicles that can use these lanes, which allows traffic to flow better than in the general purpose (or unrestricted) lanes. HOV lanes also encourage car pooling, which reduces environmental impacts from automobile use. °Light Rail Now, Epidemic of Destructive Motorists is Accentuated in Crashes with Light Rail(2004), http://www.lightrailnow.org/news/n_hou006.htm(citing Nat'l Highway Transp. Safety Admin., Fatality Analysis Reporting System(2002)). 2 • Tolled Roadways or Tolled Lanes. Drivers must pay a fee to travel on a toll road or in tolled lanes. Toll roadways increase roadway efficiency and generate revenue. Traditional tolling requires drivers to pay a set fee to travel on the roadway or to travel a specific distance on the roadway (i.e., the further a car drives, the greater the toll that is due). Variations on traditional tolling include: - High Occupancy Toll Lanes (HOT). HOT lanes combine HOV lanes with tolling. To drive in HOT lanes, automobiles must have a minimum number of passengers and must pay a toll. - Value Priced Tollings. Value priced tolling involves setting toll prices to ensure the free flow of traffic. To accomplish this, toll rates increase as congestion increases. As the price increases, fewer cars will use the value priced lanes, ensuring free flow of traffic for those that choose to pay the higher price. • Special Use Lanes. Special use lanes limit the types of vehicles that can use the lanes. Examples of special use lanes include truck only or bus only lanes. Special use lanes could also include limitations on access, such as express lanes that are not serviced by all roadway entrances and exits. These various management strategies can be imposed on entire roadways or may only be used for selected lanes, where there would also be free or general purpose lanes. b. Transit Projects A second category of major transportation projects that municipalities may confront includes the development and expansion of transit systems. Transit systems use vehicles larger than automobiles to transport significant volumes of people on roadways and fixed rail. Transit systems generally operate on set schedules and defined routes. Transit projects provide affordable transportation, address roadway congestion, serve sections of the public that cannot or choose not to drive and provide economic benefits and increased mobility within densely populated and urban areas. • Affordable Transportation. Transit service provides its users with low cost transportation and regular access to multiple destinations. The primary users of transit include people who do not, or cannot, drive an automobile because of personal preference, low income, disability, youth or old age. • Congestion Management. By carrying many more people than automobiles, transit delivers people to their desired destinations while removing cars from the roadways. Fewer cars on the roads result in less traffic and congestion, improved air quality and energy savings. • Economic Benefits. Transit provides significant economic benefits to households and businesses. According to FTA figures, during the 1990's transit returned: • $23 billion per year in affordable mobility for households without drivers; 3 • $19.4 billion per year in reduced congestion delays for rush-hour passengers and motorists; • $10 billion per year in reduced auto ownership costs for residents of neighborhoods efficiently served by transit; • up to $12 billion per year in reduced auto emissions; • $2 billion savings per year in local human service agency budgets; and • 2 percent boost in property tax receipts from commercial real estate.5 • Support to densely populated and pedestrian-friendly te. Transit supports densely developed areas such as pedestrian-oriented and multiple-purpose central business districts and urban residential communities. Pedestrian access to transit allows households and businesses to reduce their automobile use, supports "smart growth," and reduces the demand for parking. The primary types of transit projects being developed in and around municipalities include: • Bus Rapid Transit (BRT). Buses operate on roadways, and are based upon fixed routes and schedules. BRT projects give priority to transit buses by running bus service on exclusive rights-of-way such as busways and exclusive lanes on roadways. BRT maximizes person-throughput and reduces travel times. • Commuter Rail. Commuter rail is a passenger train service for local short-distance travel, generally within urbanized areas or between urbanized areas and outlying areas. • Light Rail. Light rail involves lightweight passenger rail cars that operate on fixed rails in right-of-way that is generally not separated from other roadway traffic. Light rail vehicles are driven electrically with power being drawn from overhead electric lines. • Heavy Rail. Heavy rail involves high-speed, passenger rail cars that operate on fixed rails in rights-of-way that are separate from other traffic. Heavy rail includes metrorail and subway systems that are common in urban areas.b In addition to transit systems, major transportation projects may also include the development of transit stations and support facilities. These projects may be stand-alone projects, such as a new rail or bus station, or could be one part of a larger transit project, such as a transit station located on a new transit line. It is sometimes the case that these transit station projects may also include private development such as office buildings, malls, parking garages or residential units. 5 FTA,Public Transit in the U.S.,http://www.fta.dot.gov/publications/reports/other_reports/publications_134.html (last visited March 19,2007). 6 FTA, Transit Glossary, http://www.fta.dot.gov/publications/publications_2434.htmi(last visited March 19,2007). 4 C. Funding Major Transportation Projects Developing a major transportation project can be very costly. For example, the Intercounty Connector project, an 18-mile, 6-lane all tolled roadway in Montgomery County, Maryland (a suburb of Washington, D.C.) is estimated to cost$2.4 to $3 billion.7 In New York City, the East Side Access project, which will bring Long Island Rail Road service into Grand Central Station in Manhattan is projected to cost $3 billions Similarly, the Second Avenue Subway project in New York City, involving running a subway line under Second Avenue in Manhattan, is projected to cost$16.8 billion.9 One of the greatest examples of a high cost project (that spiraled out of control) is the Big Dig project in Boston, which cost$14.6 billion.10 A significant number of major transportation projects are funded with a combination of federal and state funds. • Federal Funds. Many major transportation projects will seek federal funding for some aspect of the project, either as a direct grant or as part of a financing mechanism such as a Transportation Infrastructure Finance and Innovation Act (TIFIA) loan or loan guarantee or Grant Anticipation Revenue Vehicle (GARVEE) bonds. Federal transportation funds are appropriated and distributed to fund specific programs and projects through formula programs, discretionary programs, and project-specific legislation. Formula-based program funds are distributed to each state for eligible programs on an annual basis according to statutory calculations." Discretionary program funds are allocated by the Secretary of the U.S. Department of Transportation for specific projects or programs that meet enumerated statutory, regulatory or administrative criteria without regard to any distribution formula. Congress can also expressly appropriate federal funds in project- specific statutes or as direct earmarks in highway authorization legislation.12 • Local Share Requirements. As a general rule, projects that include federal funds also require a"local share" (or"local match"). A local share is a percentage of capital costs that a state or local government must pay with non-federal funds. The federal share and local share splits vary based upon the type of project to be funded and the federal program that will fund the project. Generally, the federal share will cover 80 percent to 90 percent of project costs, with states and local governments covering the remaining 10 percent to 20 percent. Sources of public revenue to develop transportation projects are beginning to decline. The Highway Trust Fund, which is funded by gasoline and diesel taxes and is a primary source of funding for transportation projects, is estimated to be depleted by 2009. Further, federal funding 'Steven Ginsburg,Intercounty Connector Gets Final Approval,Wash.Post,May 31,2006,at Al. s Bobby Cuza,MTA Takes Major Step Towards Completing East Side Access Plan,NYI,July 12,2006,available at htip://www.nyI.com/nvI/content/index.isp?stid=5&aid=60962. 9 Rep.Carolyn Maloney,Press Release,February 10,2005. 10 Seth Stern,$14.6 Billion Later, Boston's Big Dig Wraps Up,Christian Science Monitor, December 19,2003. 11 The statutory calculations are included in 23 U.S.C. § 104. 12 See The Woodrow Wilson Mem'1 Bridge Auth.Act of 1995(project specific statute);Transp. Equity Act for the 21S`Century,H.R.2400, 105`h Cong. § 1601 (1998)(earmarked projects). 5 available for transportation projects is also being reduced. As for transit, fare box revenues on average account for only 40 percent of system operating costs. With the costs of developing major transportation projects continuing to rise and availability of public funds beginning to drop, innovative financing solutions are becoming more common as a means of developing major transportation projects. In order to supplement(or even replace) the public funds needed to develop transportation projects, states are beginning to seek private investment through public private partnerships (PPP) to fund and develop projects. PPPs are arrangements between private sector companies and government units or agencies where the private sector entities typically contribute capital towards, play a role in the development of, and/or assume risks associated with developing major transportation projects. PPPs are becoming common in connection with toll road projects. While these arrangements can take multiple forms and structures, a common structure for toll road projects involves the private partner making a payment to the public partner in exchange for the private partner designing, building, and/or maintaining the roadway, with the private partner also collecting the toll revenue for a set period of time. PPPs are highly attractive means of funding transportation projects. For example, in 2006, Indiana received $3.6 billion in connection with its PPP for the Indiana Toll Road. The state is using this money to fund other transportation projects in the state. d. Developing Major Transportation Projects There are a range of governments and agencies that can develop or"sponsor" major transportation projects. Municipalities can serve as project sponsors, and have often served as sponsors where there is a transportation problem or need that must be addressed within the municipality. The state, through a state transportation agency such as a state department of transportation, a state toll road agency, or a state or municipal transit agency could also be a project sponsor. For transit projects, a regional transit agency or authority may also serve as the project sponsor. While not necessarily project sponsors, federal agencies often play a role in major transportation projects. The most common federal agencies involved in developing these projects include the Federal Highway Administration (FHWA) for roadway projects and the Federal Transit Administration (FTA) for transit projects. The FHWA or FTA role is generally based upon the need for a federal approval (i.e. a roadway project that accesses an Interstate) or the agency's responsibility as the administrator of federal funds for a state or local project. Other federal agencies may also play a role in a major transportation project as follows: • U.S. Army Coms of Engineers. If the project will cross or disturb a"water of the United States," including a wetland, river, or stream, the U.S.Army Corps of Engineers must issue a permit under Section 404 of the Clean Water Act. • U.S. Fish and Wildlife Service. If the project will impact a threatened or endangered species, a project sponsor must consult with the U.S. Fish and Wildlife Service pursuant to Section 7 of the Endangered Species Act. 6 • Advisory Council on Historic Preservation. If a project will impact historic resources that are listed in or eligible for listing in the National Register of Historic Places, the State Historic Preservation Office must be consulted, and the matter could be referred to the Advisory Council on Historic Preservation, an independent federal agency that promotes the preservation of historic resources. • U.S. Environmental Projection Agency. If a project is subject to the National Environmental Policy Act (NEPA), which is often the case for major transportation projects due to FHWA or FTA actions, the U.S. Environmental Protection Agency would have a role in reviewing a project and determining whether it conforms with the State Implementation Plan under the Clean Air Act. Many of these laws that govern the development of a project and its environmental review can dictate the success or failure of a project—not to mention may be targets for claims in litigation. Therefore, these agencies play important roles in developing major transportation projects. In addition to federal agencies, state and local agencies also have a role in major transportation projects. On the state level, agencies that may have a role in a project include the state department of transportation and the state environmental resource agency. On the local level, agencies may include the municipal department of transportation, land use boards and possibly a historic preservation board. (The role of a municipality as a "regulator" for major transportation projects is discussed below.) III. Maximizing Local Influence and Control Generally, transportation projects provide many benefits. Benefits may relate to improved safety, access, and emergency response; increased revenue, mobility and economic development; and better traffic patterns and land use planning. Despite these benefits, major transportation projects can have negative impacts as well. These negative impacts may be short term (i.e., during construction only) or may be long term (i.e., resulting from the location of or the operations of the project). Negative impacts may include years of disruptive construction, the triggering of explosive growth, change of character of an area, physical splitting of communities, high capital costs, and adverse environmental or historic resource impacts. These negative impacts are not limited to bad projects. Some very positive projects result in some of these negative impacts—even if only on a temporary basis. A municipality's goal should be to find ways to balance the positive and the negative—minimize or eliminate the negative impacts of a project while still allowing a project to move forward so that the positive impacts can be realized. Municipalities can work to strike this balance by being pro-active and seeking to maximize local control and influence on these projects. Fortunately, through environmental review laws, a municipality's role as a project sponsor, funding partner, regulator, or even a stakeholder allows a municipality to strike this delicate balance. a. Taking an Active Role in a Project's Environmental Review Environmental laws and the required environmental review processes provide significant opportunities for municipalities to influence project development. The National Environmental 7 Policy Act is the "umbrella"process for reviewing the project's impacts and also supports the other permits, approvals and consultations necessary for a project to proceed. NEPA is also frequently used by project opponents to challenge a project. 1. The National Environmental Policy Act (NEPA) NEPA mandates that federal agencies follow enumerated procedures prior to taking actions in connection with projects that will affect the environment. For major transportation projects, NEPA is usually triggered by FHWA or FTA administering federal funds for the project or issuing an approval for the project. NEPA may also be triggered by the need for the U.S.Army Corps of Engineers to issue a permit to allow a project to impact a wetland or waterway. NEPA does not require that federal agencies reach particular substantive results or decisions, even where adverse environmental impacts are identified. Instead, NEPA"simply sets forth procedures that agencies must follow."13 FHWA and FTA must take a "hard look" at the environmental effects of transportation projects that are subject to NEPA. To mandate this "hard look,"NEPA requires federal agencies to prepare environmental study documents. Federal agencies prepare Environmental Assessments (EA) to determine whether a project will have significant environmental impacts and Environmental Impact Statements (EIS) for"major Federal actions significantly affecting the quality of the human environment."14 While an EIS is generally more detailed than an EA, both require an analysis that details the project development process, identifies the purpose and need for undertaking the project, considers a range of alternatives, analyzes the potential impacts resulting from the alternatives, and demonstrates compliance with applicable laws and executive orders. The EIS process concludes with a Record of Decision that sets forth the agency's decision and summarizes the analysis used to reach the decision.15 NEPA also provides extensive opportunities for the public and interested agencies to play an informed role in the project's decision-making process through comment periods and public hearings. NEPA provides significant opportunities for a city to play a role in project decision-making, thus maximizing a city's control and influence over a project. A city will generally have the greatest influence when it serves as the project sponsor. Even if not a project sponsor, a municipality can play an important role as a project stakeholder or advisor. The City as a Project Sponsor For purposes of NEPA, the project sponsor is the governmental entity or agency that is seeking a project approval.16 Where a city is a project sponsor and is receiving federal funds for a project, the municipality is the NEPA joint lead agency with FHWA or FTA.17 Joint lead agencies run the 13 See Hughes River Watershed Conserv. v. Glickman, 81 F.3d 437,443 (4th Cir. 1996). See also Robertson v. Methow Valley Citizens Council,490 U.S.332,350(1989)("[I]f the adverse environmental effects of. . .proposed action[s] are adequately identified and evaluated, [agencies are]not constrained by NEPA from deciding that other values outweigh the environmental costs."). t4 42 U.S.C. §4332(2)(C). '5 40 C.F.R. § 1505.2. 16 23 U.S.C. § 139(a)(7). 17 23 U.S.C. § 139(c). 8 NEPA process and make decisions that define the project and are critical to project success. As a project sponsor and joint lead agency, a city can influence a project by taking measures to have the project developed in a way that will maximize the benefits to the city and minimize adverse effects—especially those that will be borne specifically or disproportionately by the city. Some potential ways for a project sponsor to influence the NEPA process include: • Determining Purpose and Need. NEPA requires the project sponsor and federal agency to identify the purpose for developing a project and the needs that a project is being developed to address. The statement of purpose and need defines the scope of the project, and is often a key criterion in selecting the alternative that will be developed. • Identifying ing and Selecting Alternatives. NEPA requires that a project sponsor identify and analyze "all reasonable alternatives" that meet or address a transportation need. Reasonable alternatives analyzed in the NEPA process may include the location of the transportation project(i.e. where to put the road, rail line or transportation facility), the type of project (i.e. the mode of transportation), or the termini of the project. • Analog Impacts. While NEPA does not require that a project sponsor select or a federal agency approve the alternative with the least environmental impacts, alternatives generally succeed or fail based upon their impacts. The data and methodologies used to identify and analyze impacts play a key role in determining the project's impact. Again, while not determinative, an alternative's impacts play a large role in the project that is ultimately developed. By playing an active role in project planning, including its NEPA review, a municipality can help to assure that its interests are considered. The City as a Stakeholder The city could also be a stakeholder in the NEPA process.18 In this role, a city can influence a project by submitting comments, participating in a working group, or otherwise providing information to a project sponsor. NEPA requires a public and open decision-making process, and requires project sponsors to take steps to inform agencies and the public of project developments and to solicit and consider public and agency comments. NEPA provides multiple opportunities for providing comments, including comment periods following distribution of environmental study documents and at public hearings, which are held for many, but not all, transportation projects. A city can also provide input by participating in working groups or focus groups. As a stakeholder, a municipality should keep apprised of project developments by looking out for project notices and following project developments on a project website, if one exists. IB While the precise definition of"stakeholder"may vary,for purposes of this paper, it means an agency or group of individuals that have a legitimate interest in a project. 9 ENSOMMMUMM 2. Section 106 of the National Historic Preservation Act Section 106 of the National Historic Preservation Act(Section 106), 16 U.S.C. § 470f, requires federal agencies to take into account the effects of their actions on historic properties and to afford the Advisory Council on Historic Preservation (ACHP) an opportunity to comment on their actions. Pursuant to Section 106, federal agencies identify and assess the effects of their actions on historic resources, and consult with appropriate State and local officials, including the State Historic Preservation Officer(SHPO), and members of the public. The Section 106 process entails four primary steps. First, in consultation with the SHPO, there must be a"reasonable and good faith effort" to identify the Area of Potential Effect(APE) for the project and the properties that are listed in or eligible for listing in the National Register of Historic Places that are located in the APE.19 Next, any"adverse effects" of the project on these historic resources must be identified and analyzed.20 If the effects of the undertaking are not "adverse," a finding of no adverse effect will be made and the Section 106 process essentially ends. If, however, adverse effects are identified, consultation continues and often results in a Memorandum of Agreement(MOA) that sets forth binding commitments to avoid, minimize, and/or mitigate the adverse effects.21 The Section 106 process is run by the federal agency that is ultimately responsible for undertaking the project—usually FHWA or FTA. The parties that must be part of the consultation process, which are known as the "consulting parties,"may include local governments, as well as individuals or organizations that have an interest in the outcome of the project. A municipality should request that it be a consulting party to maximize its influence in the project's review. 3. Section 4(f) of the Department of Transportation Act Section 4(f) requires FTA and FHWA to make certain findings before approving a project that "uses"protected resources, including any publicly owned public park, recreation area, or any land from a historic site of national, state, or local significance. In contrast to Section 106, which is procedural, Section 4(f) is substantive; it prohibits the "use"of Section 4(f) resources unless certain circumstances exist. If a proposed project will "use" a Section 4(f)resource, FHWA must determine if a"prudent and feasible" alternative exists that avoids the use of any Section 4(f) resource. If such an avoidance alternative exists, FHWA must select it. If all prudent and feasible alternatives (including the proposed project) will use a Section 4(f)resource, FHWA must select the alternative that minimizes harm to Section 4(f) resources. Because Section 4(f) dictates the alternatives that may be selected, it is a particularly stringent law. In advocating for or against a project or specific alternative, a municipality must consider the federal agency's ability to approve the project or alternative under Section 4(f), and, where possible, use the Section 4(f) process to advance its position. '9 See 36 C.F.R. § 800.4(c)(2). '" 36 C.F.R. § 800.5. '' 36 C.F.R. § 800.6(c). 10 4. State Review Processes Certain states have instituted their own "mini-NEPA" laws, which can require a state or local agency or government that funds or approves a project to consider the environmental impacts of that project. States with mini-NEPA laws include New York, California, Massachusetts, Hawaii, and Washington. Often, compliance with the state law can be coordinated with NEPA. Where a project does not trigger NEPA because there is no federal approval or funding, the state environmental review process provides a significant opportunity for a municipality to dictate project outcomes (as a project sponsor) or influence a project (as a stakeholder). A city would seek to influence a project by the same means as discussed above for NEPA; as a project sponsor the city should be heavily involved in identifying and analyzing alternatives and impacts, and as a stakeholder the city should provide comments and become part of working groups and focus groups. b. Be a Stringent Regulator A city may have its own regulatory process imposed by local code or regulation where it must issue a permit or approval or undertake a review process before a project may proceed. Examples may include a local environmental permit, land use approval, or historic preservation board review. A city could also be responsible for approving traffic studies or changes to the local roadway network. A city should take full advantage of its role as a regulator to influence the development of a project. While not a specific regulatory role, where a city is not the project sponsor, a federal or state agency may require the project sponsor to obtain concurrence from a locality as a condition of funding or project approval. Even in this role, a city can play an important part in determining how a project proceeds, or at least in assuring that the city's views and positions are heard, and, ideally, considered. It is important to note that federal or state law may exempt certain aspects of a project—or the project as a whole—from having to comply with local regulation. Even in these circumstances, a project sponsor may voluntarily agree to develop the project (or a state or federal agency may require that the project be developed) consistent with local law. A city may play a similar role in a PPP, where controlling PPP law may require that the public and private entity consult with or solicit comments from local governments. Thus, even in circumstances where a city is not technically a regulator, a city may function in an advisory role as part of a project sponsor's efforts to develop the project in a manner that is consistent with local law. C. Add Funding Conditions or Restrictions In many circumstances, a municipality will contribute money to a project as part of a local share of funding. For large projects, this local share could constitute a significant sum of money and could "make or break" a project. A city can use its "power of the purse" to impose conditions or restrictions on a project The Fairfax County Board of Supervisors, a municipal legislative body in metropolitan Washington, D.C., recently sought to influence a major transit project that was to be located in the county. The Board, which is responsible for approving a significant amount of project local II funding, made its position clear by passing a resolution stating, among other things, its "strong preference" for the project to be developed with a tunnel, affirming its role as an"integral financing partner in the review and concurrence of significant project-related decisions and agreements before they are finalized," and calling for consideration of construction impacts on local communities.22 d. Initiate or Join Litigation A city could initiate or join a lawsuit seeking to stop, delay, or force some change to a project. There are many considerations that a city must weigh before deciding to proceed with litigation, including at the very least, political implications and the cost of litigation. While it might appear to be an extreme measure, there is precedent for municipal challenges to major transportation projects.23 IV. Managing Litigation Risk: What Can a City Do When It Finds Itself Part of a Controversial Project? Many lawsuits are filed each year challenging major transportation projects. A successful challenge can stop a project. The simple act of initiating litigation can also delay a project. In certain circumstances, delay caused by litigation may be enough to stop the project, if, during the delay, funding is shifted away from the project or a new administration comes into power and chooses not to pursue the project. a. NEPA Challenges Project opponents often allege violations of NEPA and other environmental laws when challenging transportation projects. In some cases, project opponents may have a genuine interest in the environmental impacts of a project; in other cases, their opposition may have nothing to do with environmental impacts at all. Notwithstanding the motivation for challenging a project,the practical result is that major transportation projects often result in protracted, contentious and costly litigation. Challenges to federal agency decisions under NEPA are filed under the Administrative Procedures Act(APA). Under the APA, a court must defer to or uphold the agency's decision, unless the court finds the decision to be arbitrary and capricious, an abuse of agency discretion, or otherwise not in accordance with law. Under this standard, courts give agency decision- makers the benefit of the doubt, but courts do not simply rubberstamp agency decisions. Courts Z'Fairfax County Board of Supervisors Resolution,January 8,2007. '-'See, e.g., Utahns for Better Transp. v. U.S. Dep't of Transp.,305 F.3d 1152(10`h Cir.2002)(Salt Lake City challenged NEPA compliance); City of Carmel-by-the-Sea v. U.S.Dep't of Transp., 123 F.3d 1142(9`h Cir. 1997) (City of Cannel-by-the-Sea challenged highway location); City of Carmel-by-the-Sea v. U.S.Dep't of Transp.,95 F.3d 892(9`h Cir. 1996)(City of Cannel-by-the-Sea challenged NEPA and Executive Order compliance); Clallam County v.Dep't of Transp. of Wash.,849 F.2d 494(91h Cir. 1988)(Clallam County challenged toll collection); City of Alexandria, Va. v.Fed.Highway Admin.,756 F.2d 1014(0 Cir. 1985)(City of Alexandria challenged entrance ramp metering system); City of Burlington v. Fed.Highway Admin.,471 F.2d 120(8`h Cir. 1988)(City of Burlington challenged toll collection). 12 must carefully review agency decisions to assure that the decisions are properly supported and that the agency took a"hard look" at the environmental issues related to the project. Assessing litigation risk is inherently subjective and uncertain, making managing litigation risk somewhat difficult. Notwithstanding this, considerations that may be instructive in assessing litigation risk include: the amount of controversy surrounding the project; the grounds for the controversy; the amount of opposition; the types of groups and individuals that publicly oppose the project; the type and degree of environmental impacts; and project cost. In addition, the public and agency comments also shed light on the potential for litigation. If these factors point toward a likely lawsuit, defendants have to be prepared to take actions far in advance of the initiation of the lawsuit to improve their chances of success in the litigation. b. Who Are the Potential Defendants? In the "sue anybody and everybody" mentality, it is not uncommon for a city to find itself as a defendant in a lawsuit. A city may get sued even if it is not the project sponsor. Project opponents often seek to enjoin a municipality from taking any action that supports or advances the project. Defendants may also include federal agencies, states, and transit agencies. Municipalities have been named as defendants in lawsuits related to a variety of transportation projects, including construction of new roadways, reconstruction of existing roadways (to improve traffic and safety), upgrades to highway interchanges, and construction of transit centers and bridge crossings. The municipalities named as defendants in these lawsuits have occupied a range of roles in connection with the transportation projects. For example, these municipalities have formed or otherwise been involved in task forces and advisory committees to evaluate transportation issues and projects; prepared (or hired consultants to prepare) environmental study documents; been involved in the historic review process, either through assessing properties for historic resource qualities or approving the destruction of historic resources; and provided funding for projects. The grounds for project challenges also vary. Cities have been sued for violations of NEPA based upon plaintiff dissatisfaction with the selected alternative, the negative impacts of a transportation project, or the level of the NEPA documentation. Plaintiffs also commonly challenge Section 4(f) evaluations and Section 106 historic resources reviews. Finally, plaintiffs have challenged compliance with the Clean Water Act, the Clean Air Act and a variety of environmental and transportation-related state statutes. Appendix A provides summaries of cases in which project opponents named municipalities as defendants in lawsuits challenging transportation projects. While not an exhaustive survey, the cases cited and discussed provide an overview of the types of litigation risks cities face when involved in transportation projects. C. Potential Ways to Manage Litigation Risk While the possibility of litigation can never be eliminated, project sponsors can take calculated steps to reduce the chances that a project will be challenged or to increase the chances of succeeding in litigation. A primary focus in managing litigation risk is identifying those areas where a project is vulnerable and taking affirmative steps to address those vulnerabilities. For 13 example, if a roadway project is controversial because it will require the crossing of significant numbers of wetlands and waterways, a project sponsor should focus on supporting the U.S. Army Corps of Engineers wetland permitting decision. The project sponsor should also find ways to "improve" the project's wetlands situation. For example, the project's design could include bridges to minimize impacts to wetlands and the project sponsor could commit to wetland mitigation that is above and beyond what is otherwise required. A project sponsor can take the following actions in connection with the NEPA process to manage litigation risks: • Prepare a comprehensive and complete administrative record that fully supports the agency decision. Courts decide NEPA lawsuits based upon the information that is included in the administrative record. The administrative record is to include all of the information that the federal decision-maker considered in making its decision to approve or fund the project. While some limited exceptions exist, a general rule of thumb is that a court can only base its decision on the facts that are included in and supported by the administrative record (i.e., if it is not in the administrative record, it did not happen and the court cannot consider it). Thus, during the NEPA process, a project sponsor must be sure to document all studies, analyses, determinations and data that support the federal agency's decision, and include this data in the project's administrative record. • Follow all required process steps and procedures. NEPA requires project sponsors and agency decision-makers to follow certain procedures in making project decisions. The NEPA lead agency should strive to follow all required processes and procedures to the letter of the law in order to avoid NEPA liability. • Undertake a thorough environmental review. NEPA does not require that the alternative with the least impact be selected. However, NEPA does require a"hard look" at the environmental issues related to a project decision. To defend against a claim that the NEPA decision was arbitrary and capricious because it was not based on sufficient analysis of impacts, the lead agencies must assure that the environmental review is thorough both as to the types of impacts analyzed and the level of detail of the analysis. • Encourage Public Participation. Putting aside that NEPA requires lead agencies to solicit public participation, soliciting, considering and responding to public comments and concerns often leads to a project that has fewer impacts and is better for the community. In addition, allowing a person to submit comments and then responding to the comments may be enough to turn a project opponent into a project supporter, or at the very least, cause that person not to join or support a lawsuit challenging the project. Effective ways to encourage public participation include organizing working groups and focus groups, holding regular project meetings and assuring that hearings, meetings and comment periods are well-publicized. • Reach out to potential project opponents. While it may not always be the case, at times a lawsuit can be avoided by reaching out to likely project opponents and exploring ways to address their concerns. This could both avoid a lawsuit (or lessen the likelihood of a successful lawsuit) and could potentially increase support for a project. To be most 14 effective, this outreach should occur early in the development process and should not be a one-time occurrence. • Trigger 180-day Statute of Limitations. The law governing NEPA for transportation projects was recently changed to provide for a 180-day statute of limitations period.24 In order to commence this period, a notice must be filed in the Federal Register that identifies the final agency action. This 180-day period applies to challenges to any "permit, license or approval issued by a Federal agency for a highway or public „2s transportation or public transportation capital project. A municipality should be sure to file the Federal Register notice to limit the time period in which project challenges can be filed, and reference all project approvals (e.g., the U.S.Army Corps of Engineers Clean Water Act permit) in the Notice. In order to assist in taking the specific actions discussed above and to more generally assure that litigation risk is managed to the greatest degree possible, a municipality should consider the following: • Establish a strategy or approach for the project development process. Regardless of whether a municipality is a project sponsor or a stakeholder, a well thought-out approach or strategy for the project development process is essential. Such an approach or strategy will help identify and address project vulnerabilities—which are among the most likely candidates for challenge—and will allow for more efficient and effective project planning. • Retain the proper professionals. There are numerous consulting firms with professionals such as engineers, land use planners and scientists that specialize in planning and developing transportation projects. The project development process is a complicated web of many procedures governed by even more laws. Even more, the issues and impacts that must be studied and analyzed are highly technical and complex. A municipality will be best served with a team of professionals that have expertise in the procedural and technical aspects of the project development process. • Consult with counsel (before litigation is commenced). Municipalities should consult with experienced project development counsel during the project planning process. Decisions made during the planning process can have profound impacts on whether a claim will be brought or the likelihood of success of a claim that is brought. Experienced counsel can assist municipalities in creating the necessary record and making the right decisions before a lawsuit is filed, in addition to assisting a municipality that finds itself as a defendant in a lawsuit. V. Conclusion Municipalities must often confront the development of major transportation infrastructure projects within or close to their boundaries. While confronting these projects may seem like a 24 23 U.S.C. § 139(1). 25 id. 15 daunting task, there are ample ways that municipalities can maximize their control over these projects and minimize any associated litigation risk. 16 Appendix A Caselaw Survey: Municipalities as Defendants in Project Challenges Appendix A includes brief summaries of court decisions where municipalities were named as defendants in lawsuits challenging transportation projects. Where available, the following information is provided for each decision: (i) description of the project, (ii) the role of the municipality, (iii) the basis for the challenge, and(iv) the outcome of the challenge. 1. Park & River Alliance, Inc. v Slater, 1998 U.S. Dist. LEXIS 22131 (D. Minn. 1998), aff'd, 177 F.3d 1062 (8th Cir. 1999) • Description of Project. Project involved reconstructing Highway 55 in the Minneapolis area to improve traffic and safety. The reconstruction included the Hiawatha Avenue section of Highway 55, which passes through Minnehaha Park at its southern end. • City's Role in Project. The Minneapolis City Council created the Hiawatha Avenue Task Force, which, along with the City of Minneapolis and the Minnesota Department of Transportation ("MN DOT"), issued a report identifying issues, goals, and objectives for the reconstruction of Highway 55. The MN DOT prepared a Draft Environmental Impact Statement ("DEIS"), which identified Minnehaha Park as a Section 4(f) property under the Department of Transportation Act of 1966 ("DTA"). Section 4(f) of the DTA prohibits approval of construction projects "requiring the use of publicly owned land of a public park, recreation area, or ... historic site of national, state, or local significance" unless there is no prudent or feasible alternative to using the land." Consequently, the DEIS reviewed the project's potential impact on Minnehaha Park. In 1985, the City, FHWA and the Minnesota DOT issued a Final Environmental Impact Statement ("FEIS"), which identified a four-lane divided arterial road way, a covered road way through Minnehaha Park, and light rail transit as the preferred construction alternative for Highway 55 through the City of Minneapolis, and this preferred alternative was approved in a Record of Decision on April 10, 1985. • Basis of Challenge. On October 24, 1996, the Park and River Alliance, Inc. filed a three-count complaint seeking to enjoin construction on the section of the Highway 55 reconstruction that would run through Minnehaha Park, alleging that this section of the reconstruction failed to comply with Section 4(f) of the DTA. • Outcome of Challenge. The Court denied the Plaintiff's motion for summary judgment because its claim was barred by the six-year statute of limitations applicable to the challenge under 28 U.S.C. § 2401(a), and consequently granted the Defendants' motion for summary judgment. The Eighth Circuit affirmed the district court decision. See Park& River Alliance, Inc. a Slater, 177 F.3d 1062 (8th Cir. 1999). 17 2. Van Raden v. City of Portland, 2001 U.S. Dist. LEXIS 7745 (D. Or. 2001) • Description of Project. To resolve traffic and safety issues in the Lower Albina Industrial Area, the City of Portland decided to separate the grades between the Union Pacific railroad tracks and motor-vehicle routes in the Lower Albina area ("Overcrossing Project"). The Overcrossing Project would create a new elevated access road to the industrial area that would span the railroad tracks, and would require the destruction of the Tucker Building, which was eligible for listing on the National Historic Register. The Overcrosssing Project also would require bisecting Plaintiff Van Raden's commercial property and the removal or demolition of a modular office building on the Plaintiffs'property. • City's Role in Project. The FHWA issued a Project Prospectus for the Overcrossing Project and recommended that the project receive a categorical exclusion under NEPA. The FHWA identified the Tucker Building as a"significant building" and recommended evaluation of its historical significance. The city performed the evaluation, and the Oregon State Historic Preservation Office concluded that the Tucker Building was eligible for listing as a historic building. The city agreed to take mitigative measures before removing the structure. The Portland Historic Landmarks Commission also approved the destruction of the building and recommended mitigative measures. The City of Portland was responsible for the Project, but partial funding was obtained from the FHWA($4 million of the estimated $14 million to complete the project). Additionally, construction of the Overcrossing Project coincided with construction of a section of the Interstate MAX light rail line. Local officials sought to coordinate the contracting and construction for the two projects and did so by transferring funding for the Overcrossing Project to the FHWA to the Federal Transit Administration ("FTA"). • Basis of Challenge. Plaintiffs sought injunctive and declaratory relief under NEPA, the National Historic Preservation Act("NHPA") and the DTA, alleging that"they enjoy the historic Tucker Building"and its destruction will have a negative impact on them "as a result of an irreplaceable loss of an historic resource." Plaintiffs alleged Defendants violated NEPA by relying on a categorical exclusion for the Overcrossing Project, failing to perform a"Section 106"analysis of the Tucker Building as required under the NHPA, failing to complete a Section 4(f) evaluation, and failing to supplement the FEIS issued in connection with the North Corridor Interstate MAX Light Rail Project to incorporate an analysis of the environmental impact of the Overcrossing Project. • Outcome of Challenge. The court denied injunctive relief for the NEPA claims on the grounds that Plaintiffs failed to demonstrate that Defendants'choice to proceed under a documented categorical exclusion was procedurally improper. The court, however, continued to enjoin further destructive action by the Defendants under the Plaintiffs' claim that Defendants failed to prepare a SEIS for the Interstate MAX light rail project after funding for that project was combined with the Overcrossing Project, 18 providing the Plaintiffs with the opportunity to pursue a Temporary Restraining Order under that claim. 3. Alaska Ctr.for the Env't v Armbrister, 131 F.3d 1285 (9th Cir. 1997) • Description of Project. The FHWA approved construction of a road from Portage to Whittier,Alaska. The project was an endeavor of the Alaska Department of Transportation ("Alaska DOT") with support from the FHWA. The Alaska DOT and FHWA published their combined FEIS and draft Section 4(f) evaluation, proposing four alternatives: (1) no action; (2) improve the existing rail service from Portage to Whittier; (3) build a two lane road from Portage to Whittier and use an existing rail service tunnel, for a portion of the new road, as a one-way road; (4) build a road as described in third alternative but with a wider shoulder through the existing tunnel, allowing cars to travel in both directions. The FEIS identified the third alternative as the preferred alternative. The ROD discussed the various alternatives and concluded that only the third and fourth alternatives met the purposes of and need for the project. • City's Role in Project. The City's role in the project is not discussed in the decision, but the City of Whittier is named as a defendant. • Basis of Challenge. Plaintiffs sought a preliminary injunction on the grounds that the decision to construct and fund the road violated Section 4(f) of the DTA because improving the existing rail system was a feasible and prudent alternative to constructing a road. Plaintiffs also alleged that the FEIS violated NEPA because it failed adequately to discuss the safety concerns associated with the road and rail system alternatives, and it defined the purpose of the project too narrowly. • Outcome of Challenge. The court affirmed the district court's denial of the Plaintiffs' request for preliminary injunction and grant of summary judgment to FHWA. 4. One Thousand Friends of Iowa v Mineta, 364 F.3d 890 (8th Cir. 2004) • Description of Project. The Iowa Department of Transportation ("Iowa DOT") and the City of West Des Moines proposed changes to three highway interchanges in West Des Moines. The FHWA reviewed the Environmental Assessment ("EA") and issued a Finding of No Significant Impact ("FONSI"). • City's Role in Project. The City along with the Iowa DOT prepared the EA to address two of the three interchanges, but the third was not included in the EA. • Basis of Challenge. Plaintiffs alleged that the EA was unlawful, and that the FHWA acted arbitrarily and capriciously in issuing the FONSI. The district court had denied preliminary injunctive relief, finding that FHWA had fulfilled its NEPA obligations. On appeal, the Plaintiffs alleged that the project was not complete as originally defined and sought a more thorough environmental review to identify ways to mitigate the environmental impacts of the completed highway interchanges. The Plaintiffs also alleged that the FHWA improperly segmented the third highway 19 interchange from the other two interchanges, and that a supplemental EA could impact the third interchange. • Outcome of Challenge. The court denied injunctive relief on the ground that challenges were moot with respect to the two interchanges that were complete, and that challenges with respect to the third interchange were premature at that point. The court also denied the Defendants' request for declaratory relief, holding that this relief was moot because the project was complete, and that a new project that any new EA would assess was already in place. The court further held that segmentation of the third interchange in the EA was not improper. 5. Save Ardmore Coal v Lower Merion Twp., 419 F. Supp. 2d 663 (E.D. Pa. 2005) • Description of Project. The project at issue was the Ardmore transit center, which was part of a redevelopment project, for which Congress appropriated over $5 million. • City's Role in Project. The Ardmore Redevelopment Area Plan ("Redevelopment Plan") had three phases of the redevelopment process. The first phase, the Ardmore Transit Center Conceptual Master Plan ("Conceptual Master Plan"), was developed based on an evaluation of transit and economic revitalization needs in Ardmore and was accepted by Lower Merion Township ("LMT") in September 2003. The second phase examined the design and feasibility of various components of the Conceptual Master Plan. The LMT Planning Commission "certified" the redevelopment area on July 29, 2004. The Montgomery County Planning Commission ("MCPC") CPC certified the area on August 11, 2004. LMT conducted stakeholder interviews and two public workshops, and LMT's consultant team then prepared the Redevelopment Plan, which was adopted by the MCPC on March 9, 2005. During the final phase of the redevelopment process, the Redevelopment Authority planned to prepare redevelopment proposals, through a request for proposal ("UP") process. These proposals were to be reviewed by the Boards of Commissioners of LMT and Montgomery County. If a proposal were to be accepted, the Redevelopment Authority would then be authorized to acquire properties via negotiations or eminent domain power to implement the plan by private developers. Angela Murray, the Assistant Director of Building and Planning for LMT, elaborated on the initial planning stages as outlined in the Redevelopment Plan, and noted that many additional phases remain. Murray stated that LMT anticipated the project would change before the approval of the Redevelopment Proposal, because developers would likely suggest alternatives to the Redevelopment Plan as part of the RFP process, and the public might advocate for revisions at numerous public hearings. Murray noted that since the specifics of the project had not been finalized, it was unclear which properties, if any, would be affected by the project. LMT had a consultant prepare an Environmental Assessment Work Plan, which coordinated the reviews required under the NEPA, NHPA, and DTA. • Basis of Challenge. Plaintiffs alleged, among other claims, violations of NEPA, Section 4(f) of the DTA and Section 106 of the NHPA. Plaintiffs claimed that the 20 Defendants violated NEPA by failing to complete an EIS prior to using federal funding for the project, violated Section 4(f) by failing to establish feasible and prudent alternatives that would reduce the harmful impact on historic properties, violated Section 106 of the NHPA by failing to consult with the Advisory Committee on Historic Preservation prior to planning and implementing the project(which would adversely impact historic resources). In addition to the federal claims, Plaintiffs claimed that MCPC's approval of the redevelopment plan was arbitrary and capricious under Pennsylvania's Urban Development Law. Plaintiffs sought, among other remedies, to enjoin the redevelopment project until Defendants complied with the federal environmental requirements. • Outcome of Challenge. The court found that the NEPA and the NHPA claims were not ripe and that the court lacked subject matter jurisdiction over the Section 4(f) claim. The court declined to exercise supplemental jurisdiction over state law claim because the court had dismissed all of the Plaintiffs' federal claims. 6. Sierra Club v. Slater, 120 F.3d 623 (6th Cir. 1997) • Description of Project. The project was the Buckeye Basin Greenbelt Project ("Project"), which included a 3.5-mile-long four-lane highway connecting downtown Toledo and its northern suburbs ("Parkway"). All of the parties agreed that the Parkway was the "centerpiece" of the Project, but the City of Toledo had contemplated other construction projects, and the parties could not agree on whether those projects were part of the "Project." (For example, defendants defined the Project to include the Parkway; a paved bikeway parallel to part of the Parkway; and an extension of Champlain Street, whereas the plaintiffs claimed that two other construction projects were also part of the Project. The defendants contended that these were separate projects that had never received federal funding and for which no federal permit or certification had ever been requested.) • City's Role in Project. The FHWA delegated preparation of the EIS to the Ohio Department of Transportation("Ohio DOT"). The Ohio DOT delegated responsibility for conducting the necessary environmental studies to the City. A DEIS (198 1) and FEIS (1984) were completed and the FHWA approved the FEIS in a ROD (1984). • Basis of Challenge. Plaintiffs alleged NEPA violations in the preparation of the FEIS and that a SEIS should have been prepared because certain adverse effects of the Project were not adequately taken into account. Plaintiffs also alleged that the project was improperly segmented because of the exclusion of two projects(the CBD Connector and the Development Scheme) from the 1984 FEIS. Plaintiffs also alleged that these two projects were improperly excluded at the time of a 1990 application for a Section 404 wetlands permit. Plaintiffs further alleged that the Secretary of Transportation failed to determine whether there were feasible prudent alternatives before taking Section 4(f) properties required for the Project. Finally, the Plaintiffs alleged a number of complaints against the U.S.Army Corps of Engineers (the "Corps"), including that the Corps should have prepared an EIS in connection with 21 the Section 404 permit process; the Corps' EA/FONSI did not comply with Section 404; the Corps failed to give the Advisory Council on Historic Preservation an opportunity to review and comment on the Corps'conclusion of"no adverse effect" on historic properties; the Corps' Section 404 permit was invalid because the Corps did not prepare a final mitigation implementation plan and the mitigation goals the Corps did formulate were too vague and general; and that the Corps failed to adequately consider alternatives to the Project. Lastly, Plaintiffs alleged that the Corps failed to refer in their public notice to the requirement that the Project receive quality certifications from the Ohio Environmental Protection Agency ("Ohio EPA"), which is required under 33 C.F.R. § 325.3(a)(8). • Outcome of Challenge. The court found that the Plaintiffs'NEPA claims were time- barred, and that consequently, the claims regarding the improper segmentation of the Project were also time-barred. Plaintiffs' claims under Section 4(f) were similarly time-barred. With respect to the SEIS claim, the court found that the Plaintiffs had failed to demonstrate that the agency decision not to prepare an SEIS was not arbitrary and capricious. Finally, with respect to the claims against the Corps, the court found that the Corps had conducted the necessary detailed survey, considered the impact of the project in finding, and determined that there would be no significant adverse effects under Section 404. The court held that the Advisory Council on Historic Preservation was "fully apprised" of the Corps findings, in part because the FHWA had submitted its own"no adverse impact" findings to the Council, which were "identical" to the findings of the Corps. The court also held that the mitigation plan relied upon by the Corps was sufficiently specific, and that a final, detailed mitigation plan prior to approval of a Section 404 permit was not necessary. Likewise, the court held that the Corps properly rejected the Plaintiffs'proposed alternatives to the Project. 7. Jersey Heights Neighborhood Assn. v Glendening, 174 F.3d 180 (4th Cir. 1999) • Description of Project. The project involved constructing a new highway adjacent to the Jersey Heights neighborhood, a predominantly African-American neighborhood. Prior to selecting the proposed location, the project sponsor undertook several rounds of studies for alternative locations, with at least two DEISs prepared since the highway was proposed in 1976. In 1989, the State Highway Administration("SHA") issued the FEIS, and the FHWA issued a ROD approving the alignment that ran adjacent to the Jersey Heights neighborhood. • City's Role in Project. Wicomico County was named as a defendant, but the decision did not specifically address its role. • Basis of Challenge. Plaintiffs challenged the project under the Federal-Aid Highway Act, NEPA and the Maryland Environmental Policy Act("MEPA"). Specifically, the Plaintiffs alleged procedural flaws in the environmental review process because the African-American residents did not receive individual notice that the highway was being studied or that public meetings were being held. Plaintiffs also alleged that the decision to approve the project was arbitrary and capricious, because the DEIS and 22 FEIS utilized inaccurate data, ignored socioeconomic impacts, and failed to adequately compare siting alternatives and mitigation measures. • Outcome of Challenge. The district court found that the Plaintiffs'claims were time- barred by the six-year statute of limitations, and the appellate court affirmed the trial court's decision. 8. Citizen Advocate Team a United States Dep't of Transp., 2004 U.S. Dist. LEXIS 5419 (N.D. Ill. 2004) • Description of Project. In 1989, the Kane County DOT initiated a project that would provide alternative bridge crossings over the Fox River. • City's Role in Project. In 1990, representatives from townships, municipalities and counties located near the Fox River formed the Fox River Bridge Advisory Committee. The Advisory Committee evaluated a Traffic Study and selected four potential bridge sites for further investigation. On November 1, 2001, the defendants issued the FEIS and Section 4(f) Evaluation. On May 13, 2002, the FHWA issued its ROD approving the three bridge crossings recommended in the EIS. The FHWA found that the selected alternative (1) best satisfied the purpose and need developed for the study; (2) posed the least impact to the natural and human environment; (3) was properly selected based on processes in compliance with NEPA and other applicable requirements; and(4) remained eligible for Federal Highway funding. As a result, FHWA determined that Kane County, as project sponsor, could begin developing the bridge projects. • Basis of Challenge. Plaintiffs claimed that the FHWA's approval to issue the ROD was arbitrary and capricious because it was based on an inadequate FEIS that (i) failed to address growth-inducing and traffic-inducing impacts associated with the Bolz Bridge Project; (ii) failed to measure the impact of the proposed bridges upon projected ozone and carbon monoxide levels; (iii) did not support the dismissal of the socioeconomic effect of the Bolz Bridge project on the neighboring lower-income areas, including the impact the project would have on the Fox View Apartment Complex, which was located south of the proposed alignment, and the barrier between lower-income and higher-income neighborhoods the proposed corridor would create; (iv) did not consider a sufficient range of alternatives to the Bolz Bridge Project; (v) and did not justify the use of property protected by Section 4(f). • Outcome of Challenge. With respect to the plaintiffs' growth and traffic inducing impacts, the court held that the FEIS's limited discussion of the projected traffic and population increases was adequate in light of the minor role these growth-inducing impacts had on the surrounding area. The court held that the FEIS analysis on the project's compliance with state and federal air quality standards was reasonably thorough. The court concluded that the FHWA thoroughly considered the socioeconomic impacts of the project in the FEIS. The court held that the FHWA followed the proper procedures and reached a reasonable decision in analyzing the alternatives. The court also held that the FHWA properly determined that the 23 alternative properties at issue under Section 4(f) were properly considered and determined not to be prudent or feasible. 9. Ross v Fed. HighwayAdmin., 972 F. Supp. 552 (D. Kansas 1997), aff'd, 162 F.3d 1046 (10th Cir. 1998) • Description of Project. The project involved construction on the South Lawrence Trafficway in Douglas County, Kansas. The highway project was segmented into four segments to "facilitate construction phasing and available funding limits." The last segment, which was the subject of dispute between the parties, originally had received federal funding, but the Kansas Department of Transportation ("Kansas DOT") and Douglass County agreed to "defederalize" that segment by completing the segment without using federal funds. • City's Role in Project. Local, state and federal agencies had conducted studies on a southern bypass trafficway around the city of Lawrence since 1964. In 1986, the FHWA became involved in the project and informed the Kansas DOT and Douglas County that eligibility of federal funding for the project required an EIS. Originally, the highway project was conceived as a federal-aid highway project to be jointly funded by local, state, and federal funds. This would require local and state officials to contract for the planning and construction work, subject to FHWA's oversight. The FHWA approved an FEIS and issued a ROD in 1990, selecting an alignment for the eastern leg of the trafficway along 31st Street. The U.S. Army Corps of Engineers (the "Corps") issued a Section 404 permit under the Clean Water Act for this route in 1993. Later that year, the Haskell Indian Nations University expressed concern over the 31 st Street alignment that ran next to the campus. Consequently, the FHWA, the Kansas DOT and Douglas County determined that an SEIS was necessary to address the University's concerns. The Kansas DOT requested that FHWA allow segmentation of the trafficway to "facilitate construction phasing and available funding limits." The FHWA approved the request, and the Kansas DOT divided the trafficway project into four segments. One of the segments was the eastern leg running along the Haskell campus. The FHWA issued a draft SEIS in 1994 to address Haskell's concerns, but the cooperating agencies never reached agreement on a preferred alignment to 31 st Street. Consequently, Douglas County wrote to FHWA stating that the SEIS process was "deadlocked" and requesting that the FHWA state its position in writing and recommend a method to resolve the SEIS process. Subsequently, the Kansas DOT and Douglas County entered into an agreement to construct the eastern segment of the highway without federal funds. • Basis of Challenge. The plaintiffs alleged that defendants violated NEPA by continuing construction on the eastern segment of a four-segment highway project without completing the SEIS. The plaintiffs alleged that the defendants' "defederalization" of the eastern segment of the four-segment highway project was an attempt to circumvent the NEPA process with respect to the eastern segment of the highway project. Plaintiffs brought claims under the APA, seeking mandamus relief under 28 U.S.C. § 1361, declaratory relief under 28 U.S.C. § 2201, and injunctive relief under 28 U.S.C. § 2202. 24 • Outcome of Challenge. The court issued an injunction prohibiting defendants from taking any action or expending any funds to complete the eastern leg of the Trafficway before completing the SEIS process, issuing a final SEIS, and entering a new ROD. On appeal, the Tenth Circuit affirmed the district court's grant of a preliminary injunction and concluded that, at the advanced stage of the trafficway project, the state of Kansas could not convert the eastern segment into a locally- funded project. Ross a Fed. HighwayAdmin., 162 F.3d 1046 (10th Cir. 1998) (holding that"[t]he federal nature of the trafficway was so pervasive that the Kansas authorities could not rid the project of federal involvement simply by withdrawing the last segment of the project from federal funding"). [NOTE: There was also a dispute about attorneys' fees in both the district and appellate court. Ross a Fed. Highway Admin., 1999 U.S. Dist. LEXIS 8870 (D. Kansas 1999), aff Cir. 2001).] 'd, 3 Fed. Appx. 692 (10th 10. Mathews a Mineta, 2003 U.S. Dist. LEXIS 14460 (S.D. Iowa 2003) • Description of Project. The project involved reconstruction of Martin Luther King, Jr. Parkway in Des Moines, Iowa. In a 1988 EIS, the FHWA found that the Water Works property that would be affected by the project did not qualify as a "park"under Section 4(f). Furthermore, the FHWA determined that even if the Water Works property did qualify as a park, there were no feasible and prudent alternatives to using the property and all possible planning to minimize harm had been incorporated into the proposed project. The ROD, issued March 9, 1988, identified the "selected alternative" as a four-to-six lane divided highway. A SEIS was prepared and a Supplemental ROD was issued in 1999. The federal defendants claimed, however, that these documents did not address any issue pertaining to the Water Works property. • City's Role in Project. The city is a named defendant in the lawsuit, but the decision did not discuss specifically the city's role. • Basis of Challenge. Plaintiffs alleged that construction of a roadway in Des Moines, Iowa, violated Section 4(f) of FHA and Sections 314.23 and 314.24 of the Iowa Code. • Outcome of Challenge. Plaintiffs'claim was time-barred because they did not file their complaint until December 31, 2002. The statute of limitations began running as soon as the ROD was issued in 1988. Plaintiffs argued that there had been significant changes to the reconstruction plan over the last six years. In response to Plaintiffs' allegations that recently proposed changes to the project impacted the Water Works property more significantly than the 1988 EIS Selected Alternative would have, the court found in a supplemental hearing (Mathews a Mineta, 2003 U.S. Dist. LEXIS 14469 (S.D. Iowa 2003)) that the property affected by the construction was the same and that the more significant impact was merely the number of trees affected, but not the kinds of species. Furthermore, the court found that the impact on the number of trees was not that significant. Therefore, the Plaintiffs' claims were time-barred under the APA. The court also declined to exercise its supplemental jurisdiction over the Iowa Code. 25 INTERNATIONAL MUNICIPAL Item #10 LAWYERS ASSOCIATION VENABLEILLP International Municipal Lawyers Association 2007 Mid-Year Seminar Work Sessions I: Construction Law LIMITING CHANGE ORDERS AND DELAY DAMAGES USING ALTERNATIVE CONTRACT TERMS AND THE DESIGN-BUILD DELIVERY SYSTEM Leonard S. Goodman, Esq. Hillary S. Gebler, Esq. Greg Brown, Esq. Venable LLP Rockville, Maryland April 23, 2007 Omni Shoreham Hotel, Washington, DC l www.Venable.com VENABLE'll-P LIMITING CHANGE ORDERS AND DELAY DAMAGES USING ALTERNATIVE CONTRACT TERMS AND THE DESIGN-BUILD DELIVERY SYSTEM I. Limiting the Frequency of Change Orders Due to Incomplete_ or Inadequate Plans or Specifications A. The Spearin Gap. Based upon the Supreme Court's decision in United States v. Spearin, 248 U.S. 132 (1918), a project owner warrants that owner-furnished plans and specifications are accurate, complete and suitable and, if followed, a satisfactory product will result. See also, United Constr. Co. v. United States, 10 Cl. Ct. 257 (1986); R.M. Hollingshead Corp. v. United States, 111 F. Supp. 285, 2856 (Ct. Cl. 1953). See generally Harrington, Thum & Clark, The Owner's Warranty of the Plans & Specifications for a Construction Project, 14 Pub. Cont. L.J. 240 (Feb. 1984). A breach of the Spearin warranty not only enables the contractor to avoid liability for defective work or delays in completion, but entitles the contractor to recover the additional costs of performance necessitated by defects in plans and specifications. See, e.g., Havens Steel v. Randolph Engineering Company, 613 F. Supp. 514 (D.C. Mo. 1985) affd, 813 F.2d 186 (8" Cir. 1987); Miller v. Guy H. James Constr. Co., 653 P.2d 221 (Okla. 1982).' ' In order to recover for breach of the Spearin warranty, the contractor must show that it complied with the specifications and that any failure occurred in spite of that compliance. Davison Constr. Co., ASBCA 22237, 79-1 BCA 13,610 (1979). However, a contractor who has actual knowledge of errors in the specifications, or who should have noted errors because they were obvious, cannot proceed to perform and then expect relief for the resulting difficulties. L.W. Foster Sportswear Co.,405 F.2d 1285 (Ct. Cl. 1969). 2 www.Venable.com VENABLEOLLP' The lengthy list of decisions set out in 6 A.L.R. 1394 (1966) demonstrates that the Spearin warranty and its financial ramifications have received almost universal approval in the state courts.2 The owner's warranty of suitability and completeness to a contractor under Spearin, however, is not co-extensive with a design professional's concomitant obligation to the owner since it is as equally well established that a design professional's plans and specifications need not be perfect. See, e.g. Borman's, Inc. v. Lake State Development Co. (1975), 230 N.W.2d 363 (Mich. 1975); 25 A.L.R.2d 1085 at §5 (1985) and the cases cited therein. Instead, absent a specific contractual standard of performance to the contrary, a design professional's duty is to perform in accordance with the applicable standard of care, i.e., to not be negligent. Consequently, while an owner is obligated under Spearin to compensate the contractor for the additional costs associated with a design that is incomplete or not coordinated, there is no guarantee that the owner can recover these additional costs from its designer because not all design errors or omissions that can create additional cost or other damage are the product of negligence.3 Even worse for owners, the consequences of non-negligent errors or omissions are uninsurable as well under standard professional practice liability polices. 2 The Spearin rule has been applied to subcontractors as well. For example, in Keller Construction Corp. v George W. McCoy& Co., 119 So.2d 450(La. 1960),the court held that the general contractor was liable to the subcontractor for costs incurred in correcting a design defect in a sewer line and that the owner was liable to the general contractor for amounts paid to the subcontractor. 3 Recently, the author was involved in dozens of cases concerning water intrusion damage at similarly designed buildings across the country. The design specified a barrier EIFS exterior and nail fin windows without sill flashing. Without sill flashing, defective windows were able to leak directly into the buildings' wall cavities undetected for years. The absence of sill flashing was not a design error under the standard of care applicable at the time. 3 www.Venable.com VENABLVL' LP The risk of issues "falling into this gap" facing every owner in the traditional design-bid-build delivery system has been denoted the "Spearin Gap."4 B. Minding the "Gap" in Owner-Contractor Agreements. A government- owner can address the financial risks posed by the Spearin Gap in several ways. This paper will focus on two of these methods: alternatives to the AIA's "General Conditions" and electing the design-build delivery system instead of the traditional design-bid-build model. It should be noted, in addition, that the owner's warranty of suitability under Spearin does not attach where an owner supplies performance specifications, without details or limitations as to how these requirements are to be met. Compare e.g. Midwest Dredging Co. v. McAninch Corp., 424 N.W.2d 216, 222 (Iowa 1988) (contractor was not responsible for discovering actual site conditions before bidding because government furnished, and thereby warranted, suitability of specifications for hydraulically dredging and piping material from one site to another even though government disclaimed accuracy of its test borings) with Stuyvesant Dredging Co. v. U.S., 11 Cl. Ct. 853 (1987) (in denying contractor denied extra costs on dredging contract court found that since the contract did not address the nature of the material to be dredged and called only for a result, the specifications were of a "performance" nature and carried no warrant Y)5 4 While beyond the scope of this paper, the typical professional liability policy often may possess insufficient limits and include inadequate coverages compounding the risk to an owner of defective plans and specifications. For example, such policies are subject to exhaustion of aggregate limits on other projects, as well as the risk of cancellation or non-renewal. Moreover, project specific policies are extremely expensive and are no longer readily available with limits that might be required on large, complex projects. Finally, the owner does not benefit from direct coverage as an insured. In response to these concerns, an insurance product that has grown in popularity is the owner's protective professional indemnity policy (OPPI). The purpose of the OPPI is to supplement, but not replace, the design professional's practice policy. Under the OPPI, the owner is the named insured and is indemnified for damages due to negligent acts, errors or omissions of the design professional that are in excess of the design professional's insurance. 4 www.Venable.com VENABLEOLLP 1. Exculpatory Clauses. An owner can limit Spearin's impact by attempting to disclaim its Spearin warranty in its entirety or, less aggressively, by requiring the contractor to investigate the accuracy and completeness of the plans and the conditions of the site. However, broadly worded clauses designed to exculpate a government owner from liability for defective plans and specifications have not been favored by some courts. For example, in Federal Electric Corp., ASBCA 13030, 69-2 BCA¶7792 (1969), a contractor sought an equitable adjustment asserting that the specifications included components which were incompatible with one another. The contract included the following clause: The Government does not guarantee the accuracy and/or completeness of the data and drawings furnished with this RFP. In no event will the Government assume liability for any additional cost allegedly incurred as a result of inaccuracies or errors in the government furnished data or drawings. Id. At 36,167. Finding the clause too general to warn the contractor of component incompatibility, the Board granted the contractor relief. See also, Therm-Air Mfg. Co., ASBCA 15842, 74-2 BCA ¶10,818 (1974); Chantilly Constr. Corp v. Commonwealth of Virginia Dept. of Highways and Transp., 369 S.E.2d 438 (Va. App. 1988). But see Claterbos, Inc., IBCA 1786-3-84, 86-3 BCA 19,254 (1986), in which the Board upheld the Government's specific disclaimer of responsibility for the fitness of specified fill materials.6 However, even if the market or an owner's bargaining power may allow for such a disclaimer, it would be unrealistic for an owner to expect not to pay more for a project that contractually deprives a contractor of relief for additional costs attributable to defective plans and specifications. 5 A prudent project owner also should address the financial risks posed by the Spearin Gap by establishing a contingency within the contract sum for use in the event of plan defects. Of course, while this approach does not transfer the Spearin Gap risk, it will avoid surprises and a potential overrun. 6 Exculpatory clauses also may run afoul of a state's "anti-indemnity" statute. In City of Dillingham v. CH2M Hill Northwest, Inc. 873 P.2d 1271 (Alaska 1994), the Supreme Court of Alaska held that Alaska's Anti-Indemnity statute rendered the limitation of liability clause in an engineer's contract void. Rejecting the engineering firm's contention that a limitation of liability was distinct from an indemnification provision, the Court found that the legislature intended to prohibit a party to a construction contract from bargaining away liability for its own negligent acts. 5 www.Venable.com VENABLELLP 2. Alternatives to AIA's General Conditions. Ordinarily, a contractor is not required to conduct an independent investigation to determine whether plans and specifications are adequate if a duty to investigate is not set forth in the contract. Ithaca Gun Co., Inc. v. United States, 176 Ct. Cl. 437 (1966). For example, in Dawson Constr. Co., VABCA 2202 et al., 87-1 BCA X19,502 (1986), the Board ruled that, in the absence of a specified duty, the contractor need not coordinate contract drawings in order to discover potential conflicts. Similarly, a site investigation clause renders the contractor bound by any actual knowledge it acquires, and all knowledge it would have acquired had it conducted a reasonable site investigation. The.standard applies whether or not a site investigation was actually made. Chris Berg Inc. v. United States, 389 F.2d 401 (Ct. Cl. 1968); S.S. Mullen Inc. v. United States, 389 F.2d 390 (Ct. Cl. 1968). Section 3.2 of the AIA's "Document A201-1997, General Conditions of the Contract for Construction" addresses the extent to which a contractor is obligated to review the plans and specifications supplied by the project architect. By itself, Section 3.2 affords an owner little protection to avoid contractor-initiated change orders based upon alleged errors, omissions or failures of coordination in its architect's plans discovered after the contract has been signed. The alternative to Section 3.2 suggested below is designed to limit the opportunity for change orders attributable to the owner's Spearin warranty by requiring the contractor, inter alia, to (1) verify field conditions with those reflected in the plans and specifications; (2) represent that the plans are sufficiently complete and detailed as to enable the work to be completed as the Contract Documents 6 www.Venable.com EN B1 �R LE LLP require; and (3) represent that the construction details are consistent with industry practice and applicable law. The intent of the Contract-Documents-is to include all-items necessary for the proper execution and completion of the Work by the Contractor. The Contract Documents are complementary, and what is required by one shall be as binding as if required by all; performance by the Contractor shall be required only to the extent consistent with the Contract Documents and reasonably inferable from them as being necessary to produce the indicated results. In the event of inconsistencies within or between parts of the Contract Documents, or between the Contract Documents and applicable standards, codes, and ordinances, the Contractor shall (i) provide the better quali or er after quantity of Work or (ii) comply with more strip eng t requirement; either or both. The terms and conditions of this Section 1.2.1, however, shall not relieve the Contractor of any of the obligations set forth in Sections 3.2 and 3.7. Since the Contract Documents are complementary,before starting each portion of the Work,the Contractor shall carefully study and compare the various Drawings and other Contract Documents relative to that portion of the Work,as well as the information furnished by the Owner pursuant to Section 2.2.3,shall take field measurements of any existing conditions related to that portion of the Work and shall observe any conditions at the site affecting it. These obligations are for the purpose of facilitating construction by the Contractor and are not for the purpose of discovering errors, omissions, or inconsistencies in the design information contained in the Contract Documents; however, any errors, inconsistencies or omissions discovered by the Contractor shall be reported promptly to the Architect and Owner as a request for information in such form as the Architect or Owner may require. .1 The exactness of grades, elevations, dimensions, or locations given on any Drawings issued by the Architect, or the work installed by other contractors, is not guaranteed by the Architect or the Owner. .2 The Contractor shall, therefore, satisfy itself as to the accuracy of all grades, elevations, dimensions, and locations. In all cases of interconnection of its Work with existing or other work, it shall verify at the site all dimensions relating to such existing or other work. Any errors due to Contractor's failure to so verify all such grades, elevations, dimensions, or locations shall be promptly rectified by the Contractor at Contractor's sole cost. Any design errors or omissions noted by the Contractor during this review shall be reported promptly to the Architect, but it is recognized that the Contractor's review is made in the Contractor's capacity as a contractor and not as a licensed design professional unless otherwise specifically provided in the Contract Documents. The Contractor is not required to ascertain that the Contract Documents are in accordance with applicable laws, statutes, ordinances, building codes, and rules and regulations, except as they bear upon the Contractor's performance of the Work, but any nonconformity discovered by or made known to the Contractor shall be reported promptly to the Architect. Except as to any reported errors, inconsistencies or omissions, and to concealed or unknown conditions by executing this Contract Contractor represents the following: .1 The Contract Documents are sufficiently omplete and detailed for the Contractor to (i) perform the Work required to produce the results intended by the Contract Documents and (ii) comply with all the requirements of the Contract Documents;and .2 The Work required by the Contract Documents, including, without limitation all construction details, construction means, methods, procedures and techniques necessary to perform the Work use of materials, selection of equipment and requirements of product manufacturers, is consistent with: (1) good and sound practices within the construction industry (2) generally prevailing and 7 www.Venable.com VENABLE"LLP accepted industry standards applicable to the Work• (3)requirements of any warranties applicable to the Work; and (4) all laws ordinances regulations rules and orders which bear upon Contractor's performance of the Work. The terms "knowledge," "recognize," "observe" and "discover," their respective derivatives, and similar - terms in the Contract Documents as used in reference to the Contractor, shall be interpreted to mean that which the Contractor knows (or should know) recognizes (or should recognize), observes (or should observe) and discovers (or should discover) in exercising the care skill and diligence required by the Contract Documents Analogously, the expression "reasonably inferable" and similar terms in the Contract Documents shall be interpreted to mean reasonably inferable by a contractor familiar with the Proiect and exercising the care skill and diligence required of the Contractor by the Contract Documents. Most general contractors invariably will push back, at least initially, against contract terms that even so much as suggest them undertaking to review plans and specifications for accuracy and completeness. Nevertheless, it has been our experience that eventually most general contractors will acknowledge that their fee represents compensation not only to coordinate and supervise their subcontractors but to contribute their expertise regarding the means and methods of construction and the constructability of their owner's designs. C. Minding the "Gap" Utilizing the Design-Build Delivery System. The design-build delivery system offers government owners another means of avoiding the ramifications of Spearin and of shifting altogether the risk of design errors and omissions (negligent or otherwise) to the contractor. As its name implies, design-build contracting requires the design-builder to assume responsibility for the design and construction of the project; as a result, the design-builder(and not the owner) assumes ultimate responsibility for the adequacy of the design, constructing the work consistent with the contract documents and delivering a project that meets the owner's requirements. 8 www.Venable.com VENABLELLP Since it is the design-build contractor that engages the design professional, and not the owner, the design-build contractor inherits the Spearin Gap that is the owner's legacy in the traditional design-bid-build system. The single point of responsibility that is the sine qua non of the design-build model creates several other advantages for an owner (provided the design-build system is understood by its participants and is undertaken properly). For example, an owner often achieves cost savings in design-build contracting because design and construction professionals functioning together are better able to evaluate alternate designs, to engage in value engineering, and to resolve constructability issues as part of the design effort. In addition, design-build contracting permits the parties to "fast track" a project permitting the parties to procure materials and equipment, and to commence construction of various activities before completion of the entire design and the development of fully completed construction documents. The single contract approach also reduces administration costs as it requires the monitoring of one contract rather than the multiple contracts which are required in traditional procurement methods. Finally, design-build contracting offers the greatest opportunity to minimize disputes by ending the finger pointing that invariably arises between the contractor and the owner's designer. j At the same time, design-build is not a panacea. The process has certain limitations and presents certain challenges that must first be understood, and then managed, if the project is to be a success. Most notably, the owner no longer has complete control over the project's design having engaged the design-build contractor for 9 www.Venable.com VENABLE'L' LP this purpose. Compounding this reality is the fear that since the design-builder is asked to guarantee its price based on an incomplete design the design-builder will cut corners in the design to reduce the overall cost of the project. The second challenge presented by the design-build process has to do with the design-build team itself. Design-build contracting completely alters the relationship between the designer and builder. It is imperative therefore that the design-build team understands this new relationship and properly structures and manages it in light of this new paradigm. Since the success of a design-build project depends to a large extent upon the selection of a design-builder with a demonstrated record of success, a procurement method that is based on price alone runs a real risk that the benefits of the design-build process will not be achieved since these benefits are in large part tied to the experience and qualifications of the design-builder. Owners need to inquire whether the design and construction firms comprising the design-build team have worked together before, how this new entity will be managed, and whether this new entity has mechanisms in place to ensure that it will in fact function as one cohesive entity as opposed to distinct entities.8 7 See,United States, General Accounting Office,Surface Transportation:States Are Experimenting With Design-Build Contracting(Washington:,GAO, 1997)4. 8 Alternatives to "cost-weighted competitive bidding" that place little or no emphasis on factors other than price that have been utilized by federal and state public agencies include: "Higher qualification competitive bidding" which, in addition to emphasizing the end price; bases selection on greater pre-qualification standards, such as technical managerial and financial capabilities, as well as past-performance and industry reputation; and "Weighted Award Based on Several Factors" which allows the public agency to assign a value or weight to various factors in the evaluation process. For more discussion on procurement options, see "Utilizing Competitive Selection," Design-Build Institute of America; http://www.dbia.ora/pubs/pd- ucs.htm. 10 www.Venable.com VENABLEL' LP As noted infra, in 1996, the Federal Government required a two step selection process with the first step concentrating solely upon specialized experience and technical competence of the proposers.9 One answer to the owner's concern over losing control over the project's design is a process called "bridging." Under a design-build bridging process, the owner initially retains a design consultant to develop design documents, and then contracts with a design-builder who uses those documents to develop its contract price and assumes responsibility for completing the design consistent with the design development documents. Another strategy owners can employ to help ensure that its program requirements are met is to benchmark the design of its project to other projects of a similar nature. Under this approach, the design-builder is asked to price a set of preliminary design documents and assume responsibility to complete the design and construction consistent with these reliminar documents. p Y Another approach that owners can employ to retain control over the design process is to establish a process whereby the owner and design-builder are in close communication throughout the development and completion of the design documents. The Design-Build Institute of America ("DBIA"), for example, in its standard form documents has adopted a "meet and confer" approach, whereby the owner and design- builder meet at agreed upon intervals to ensure that the design documents are being completed consistent with the owner's program requirements.to 9 10 U.S.C. § 2305a and 41 U.S.C. §253m. 1OSection 2.4.1 of the DBIA's Document No. 535, "Standard Form of General Conditions of Contract Between Owner and Design-Builder"provides as follows: 1 1 www.Venable.com VENABLE'LLP As noted above, design-build typically asks the design builder to commit to a price based on incomplete design information. However, many design builders refuse to commit to a firm, fixed price in light of this uncertainty. Since owners have a budget, the "cost plus contract with a guaranteed maximum price" has become the preferred method on design build projects. Availability of Design Build as a Delivery Option in Public Contracting. Just ten years ago, there was very little authority to use design-build in the public sector. The Federal government began using design-build in 1994, based largely on authority granted by passage of the Federal Acquisition Streamlining Act of 1994 (FASA) and the National Defense Authorization Act of 1996. These two laws permitted the Federal government to procure design-build services using a two-phase selection process.�1 Under the 1996 Act, all Federal "executive agencies" are permitted to use design-build if that method is appropriate for the public project. If so, then the first phase of the process involves Design-Builder and Owner shall, consistent with Owner's Project Criteria and any applicable provision of the Contract Documents, agree upon any interim design submissions that Owner may wish to review, which interim design submissions may include design criteria, drawings, diagrams,narratives,models, samples, finish and color boards, and specifications setting forth the Project requirements. On or about the time of the scheduled submissions, Design-Builder and Owner shall meet and confer about the submissions, with Design-Builder identifying during such meetings, among other things, the evolution of the design and any significant changes or deviations from the Contract Documents, or, if applicable, previously submitted design submissions. Minutes of the meetings will be maintained by Design-Builder and provided to all attendees for review. Following the design review meeting, Owner shall review and approve the interim design submissions in a time that is consistent with the turnaround times set forth in Design-Builder's schedule. The Owner shall have the right to disapprove any design submission for any reason (or no reason), including but not limited to, aesthetics or construction cost. In the event of such disapproval by the Owner, the Design-Builder shall proceed, when requested by Owner, with revisions to such documents to achieve Owner's stated needs. The revisions will be made at the sole cost and expense of Design-Builder unless revisions are made to submissions previously approved by the Owner provided that Design Builder has fully disclosed to the Owner all the information necessary for the Owner to make an informed decision as to the subject matter of those approvals. 12 www.Venable.com VEXA1BLE!'L' LP evaluation of specialized experience and technical competence of the proposers. Cost- related evaluation factors are not permitted in this phase. Then, proposers submit bids for the project. The contract is awarded to the design-build team with the highest overall ranking, based on qualifications and price.12 As a result of passage of the 1996 Federal design-build statute, the Federal Acquisition Regulations (FAR) were amended in 1997 to incorporate design-build procedures.13 Following the lead of the Federal government, states across the country have passed laws to enable public agencies to use design-build as an alternative method of delivery in certain circumstances. There are now only five states left that have no authority to use design-build on public projects: Alabama, Iowa, Michigan, Rhode Island and Wyoming.14 Of the states permitting design-build contracting, many have installed certain established conditions for its use. Given the wide disparity in design-build legislation, the applicable statutory provisions should be researched before the use of the design-build delivery system is considered. On its website, the DBIA has published a fifty-state map of"State Public Procurement Laws" identifying where design-build (1) is permitted for all agencies for all types of design and construction; (2) is widely permitted; " Pub. L.No. 103-355, 108 Stat. 3243 and Pub.L.No. 104-106, §4001, 110 Stat. 186,642. The portion of the 1996 Act that adopted the two-phase selection process has been re-named the"Clinger-Cohen Act." 12 10 U.S.C. §2305a and 41 U.S.C. §253m. 13 48 C.F.R. §§ 36.102 - 36.104 and 36.300-36.303 outline the process of soliciting and evaluating design- build proposals. 14 G. William Quatman, FAIA, Esq. Chairman, AIA Design-Build Advisory Group, Design-Build Legislation Sweeps The Nation (2006). Even without specific legislation, court cases in Alabama have permitted the use of design-build in limited situations, even over challenges that the process violated state competitive bidding laws. See e.g.,Anderson v. Fayette County Bd. of Educ., 738 So.2d 854 (Ala. 1999). Even without state legislation, the City of Providence, Rhode Island contracted with a private developer for the design-build of its new Public Safety Complex, a 135,000 s.f., $43 million project, which was completed on time and$1 million under budget. Id. 13 www.Venable.com VENABLE'L' LP (3) is a limited option; and (4) is not specifically authorized by for public agencies. http://www.dbia.org/ind info/procurementmap.htm. II. Managing the Risk of Differing Site Conditions Another area of owner risk and cost that can be managed through contract terms concerns the possibility that during construction subsurface conditions will prove to be different than anticipated by the parties. This issue most often arises during excavation, but can also arise during demolition or renovation of structures. An example of differing site conditions discovered during excavation would be a situation where the contractor tasked with excavating a large area for an underground garage finds significantly more solid rock than it anticipated. Another example relating to demolition and renovation would be where a contractor opens a wall to find unexpected asbestos insulation or rusted or rotted framing. The problem to be solved in these situations is the allocation of risk and the costs associated with that allocation. If a contractor assumes the risk of the differing site conditions, it must include a contingency in its pricing to protect it against the possibility of discovering site conditions that substantially increase the cost to the contractor of performing the work. If the site conditions are as expected, then the owner has paid for a contingency that did not occur and is not receiving any value (other than reduced risk) for the amount of the contingency. On the other hand, if the owner assumes all risk with respect to the possibility of differing subsurface conditions, then the owner will be responsible for any increased costs associated with those conditions and therefore lacks 14 www.Venable.com VENABLE"LLP certainty with respect to the anticipated cost of the work, which can make budgeting and preparation of pro formas difficult. In general, there is some uniformity among contractual approaches to the problem of differing site conditions. Contracts generally break such conditions into two categories referred to in the industry as "Type I" and "Type II" conditions. Conditions described as "Type I" can be generally characterized as "subsurface or latent physical conditions at the site which differ materially from those indicated in [the] contract."'' While this definition is taken from the Federal Acquisition Regulations relevant to government contracts, the concept is. carried throughout the standard form contracts used in other projects as well. For example, in its form General Conditions of the Contract for Construction, the American Institute of Architects (AIA) defines Type I conditions as "subsurface or otherwise concealed physical conditions which differ materially from those indicated in the contract documents." The Design-Build Institute, in its forms, defines these conditions as "[c]oncealed or latent physical conditions or subsurface conditions at the site that [] materially differ from the conditions indicated in the contract documents." The primary difference between Type I and Type II conditions is that Type I conditions are different than what the contract (or contract documents) represented the conditions should be. It is typical for an owner, as part of its due diligence, to have some investigation conducted to determine what subsurface conditions exist, whether in the form of geotechnical boring reports or some other type. The results of these preliminary 15 48 C.F.R. §52.236-2(1984). 15 www.Venable.com VENABLE'll-P investigations are often provided to contractors as part of a bid package or, in some cases, the resulting anticipated conditions are reflected in the architectural and engineering design of the project. As noted above, where the owner provides plans and specifications for the project, it impliedly warrants that the plans and specifications are adequate for construction of the project.16 Plans and specifications cannot be deemed adequate without reference to the condition of the site where construction is to be performed." Thus, where latent conditions render the plans unsuitable or inadequate, the owner may be responsible for increased costs by virtue of its implied representation that the plans were adequate, regardless of whether the conditions are expressly indicated in the plans. An example of this can be seen in Foster Construction C.A. & Williams Bros. Co. v. United States,18 where the court found that the specification of types of materials and sequences of construction impliedly represented subsurface conditions. Where the actual conditions required different materials, the contractor was held to be entitled to compensation for differing site conditions despite the fact that the owner had not expressly represented what the conditions were. Some effort can be made by the owner to limit its exposure to liability for changes due to Type I claims. In order to be successful on a Type I claim, the contractor must show (1) what the conditions encountered during construction were, (2) what the conditions were represented to be, (3) that the difference was material, and (4) that it 16 See United States v. Spearin, 248 U.S. 132(1918). 17 See, e.g., Ridley Inv. Co. v. Croll, 192 A.2d 925 (Del. Sup. 1963);Pittman Constr. Co. v. Housing Auth y of New Orleans, 169 So. 2d 122 (La. App. 1964); Adams v. Tri-City Amusement Co., 98 S.E. 647 (Va. 1919). See generally 6 A.L.R.3d 1394, 1409-1412. 16 www.Venable.com VENABLEOLLP complied with all conditions precedent contained in the contract, including notice to the owner.19 The proposed contract language set forth in Section I(B)(2) attempts to limit any description in the contract documents regarding the site conditions and impose investigative duties on the contractor. Since whether a condition is a Type I condition turns on whether it is described in the contract, what is included in the definition of "Contract Documents" should be enumerated in the contract, and the contract should specify that any documents not so enumerated are not contract documents regardless of whether they were provided to the contractor by the owner. Even where the report of a consultant retained by the owner is provided to the contractor, the owner can make the consultant primarily responsible to the contractor for errors in the consultant's report. In some jurisdictions, the consultant can be liable to the contractor simply be making it clear in the consultant's contract or in the circumstances that the report will be used by the contractor.20 If the contractor can look to the consultant that prepared the site condition report, then there will be less need to include a contingency in its bid for unknown site conditions even if the owner has disclaimed any responsibility for the subsurface conditions. Another approach to this same problem is to include the consultant's fee in the cost of the work and have the contractor directly retain the consultant. This is most "$435 F.2d 873 (Ct. Cl. 1970). 19 The notice requirement should not be minimized, as the purpose of it is to give the owner an opportunity to observe the actual conditions and participate in any remediation plan. Failure of the contractor to give the owner notice before disturbing the unforeseen conditions can relieve the owner of any liability for increased costs due to the conditions. 17 www.Venable.com E appropriate in design-build projects, discussed above, and will help exclude any representations about subsurface conditions from the contract documents. If the Contract Documents contain representations about the conditions at the site, an argument that the contractor should have known the conditions to be different will generally be unavailing. Where the Contract Documents describe conditions the contractor can expect to encounter, the courts will not imply an obligation on the contractor to conduct independent investigations. As one court held: "A party to whom a positive, distinct and definite representation has been made is entitled to rely on that representation and need not make further inquiry concerning the particular facts involved."2 1 The AIA form General Conditions of the Contract for Construction describes Type II conditions as "unknown physical conditions of an unusual nature, which differ materially from those ordinarily found to exist and generally recognized as inherent in construction activities of the character provided for in the Contract Documents."22 Similarly, the Design Build Institute's Standard Form of General Conditions of Contract Between Owner and Design-Builder defines them as: "Concealed or latent physical conditions or subsurface conditions at the site that [] are of an unusual nature, differing materially from the conditions ordinarily encountered and generally recognized as inherent in the work. . . ." 20 See First American Title Ins. Co., Inc. v. First Title Serv. Co. of the Fla. Keys, 457 So. 2d 467 (Fla. 1984);Southland Construction,Inc. v. Richeson Corp., 642 So.2d 5(Fla.50i DCA 1994). 2' Douglas Northwest v. Bill O'Brien&Sons, 828 P.2d 565 (Wash. App. 1992). 22 AIA A201 ¶4.3.4(1997). The Federal Acquisition Regulations include nearly identical language. 18 www.Venable.com �� EX�BT I JI J LLP The major difference from a Type I condition is that instead of showing that the conditions vary from a description in the contract documents, the conditions are different than what should reasonably have been anticipated. A contractor has to show that its bid was based on (1) a reasonable site inspection, (2) his study of the contract documents, and (3) generally intelligent interpretation of these factors grounded in sound construction experience.23 Failure to exercise this diligence alone, however, will not preclude a contractor from recovering for conditions that could not have been anticipated if the contractor had been diligent.24 Owners can take instruction from the contract language and court decision in Joseph F Trionfo & Sons v. Board of Educ.,2S a Maryland case. The contract in Trionfo contained the following language: Excavation work under this contract is unclassified, and includes (without limitation thereto) excavation and removal of all soil, shale, rock, boulders, existing foundations, fill, and every kind of subsurface condition encountered in contract area. No extra or additional compensation for excavation will be paid under this contract for work included in Bid Proposal at time of bidding. Subsurface Soil Data: Data concerning subsurface materials or conditions which is based upon soundings, test pits, or test borings, has been obtained by Architect for his own use in designing the project. Its accuracy or completeness is not guaranteed by Owner or Architect and in no event is it to be considered as part of contract plans or specifications. Contractor must assume all responsibility in excavating for this project and shall not rely on subsurface information obtained from Architect, or indirectly from Owner. Bidders shall make their own investigation of existing subsurface conditions; neither Owner nor Architect will be responsible in any way for additional compensation for excavation work performed under the 23 See Youngdale&Sons Contr. Co. v. United States,27 Fed.CI. 516,537-38(1994). 24 See Servidone Construction Corp. v. United States, 19 CI.Ct. 346(1990). zs 395 A.2d 1207(Md.App. 1979). 19 www.Venable.com T �� VE W �1 LLP Contract due to Contractor's assumptions based on sub-soil data prepared solely for Architect's use.26 The test boring data obtained by the architect was not provided to bidders with the bid package, but bidders could obtain the data by executing the following written request: Please forward copies of test boring data sheets for the subject property. The contracting firm herein named releases the owner and Architect from any responsibility or obligation as to its accuracy or completeness or for any additional compensation for work performed under the contract due to assumptions based on use of such furnished information.27 When the contractor sued the owner for additional compensation due to unexpected additional rock, the court held that the contract provision, together with the explicit waiver in the request for the test data, should have caused the contractor not to rely on the data. The contractor's argument that he did not have time to conduct his own investigation was denied. Similarly, in Central Penn Indus., Inc. v. Commonwealth,28 the contract contained the following language: The contractor further covenants and warrants that he has had sufficient time to examine the site of the work; that he has examined the site of the work; that he has had sufficient time to examine the site of the work to determine the character of the subsurface material and conditions to be encountered; that he is fully aware and knows of the character of the subsurface material and conditions to be encountered; and that he has based the within contract prices on his own independent examination and investigation of the site, subsurface materials, and conditions and has not relied on any subsurface information furnished to him by the Commonwealth of Pennsylvania, Department of Highways.29 26 Id. at 1209. 27 Id. 2'358 A.2d 445 (Pa.Commw. Ct. 1976). 291d. at 447. 20 www.Venable.com VENABLL'LLP When the contractor encountered conditions that required additional work, the court denied additional compensation. The effect of the language in these cases is to shift the risk of differing conditions to the contractor. As noted above, a contractor that is managing risk well will include a contingency built into its bid to hedge against the possibility that latent conditions will be other than as expected. Factoring in all of the above the authors prefer to use the following language in place of the standard language contained in AIA A201 ¶4.3.4: Claims for Concealed or Unknown Conditions. The contractor covenants and warrants that he has had sufficient time to examine the site of the work and to determine the character of subsurface materials and conditions; that he has examined the site of the work; that he is fully aware and knows of the character of the subsurface material and conditions to be encountered; and that he has based the contract prices on his own independent examination and investigation of the site, subsurface materials, and conditions and has not relied on any subsurface information furnished to him by Owner. If conditions are encountered at the site which are (1) subsurface or otherwise concealed physical conditions which differ materially from those indicated in the Contract Documents or (2) unknown physical conditions of an unusual nature, which differ materially from those ordinarily found to exist and generally recognized as inherent in construction activities of the character provided for in the Contract Documents, then notice by the observing party shall be given to the other party promptly before conditions are disturbed and in no event later than seven 7 24 days after first observance of the conditions. The Architect will promptly investigate such conditions and, if they differ materially and cause an increase or decrease in the Contractor's cost of, or time required for, performance of any part of the Work, W94 may recommend an equitable adjustment in the Contract Sum or Contract Time, or both. If the Architect determines that the conditions at the site are not materially different from those indicated in the Contract Documents and that no change in the terms of the Contract is justified, the Architect shall so notify the Owner and Contractor in writing, stating the reasons. Claims by either party in opposition to such determination must be made within 21 days after the Architect has given notice of the decision. If the conditions encountered are materially different, the 21 www.Venable.com VENABLE"LLP Contract Sum and Contract Time shall be equitably adjusted, but if the Owner and Contractor cannot agree on an adjustment in the Contract Sum or Contract Time, the adjustment shall be referred to the Architect for initial determination, subject to further proceedings pursuant to Section 4.4. No adjustment in the Contract Time or Guaranteed Maximum Price shall be permitted, however, in connection with a concealed or unknown condition that does not differ materially from those conditions that were or could have been disclosed by the Contractor's (i) prior inspections, tests, reviews, and preconstruction services for the Project, or (ii) inspections, tests, reviews, and preconstruction services that the Contractor could have performed in connection with the Project and in accordance with the foregoing warranty and covenant. III. Limiting An Owner's Exposure Through "No Damage for Delay" Provisions Generally, a "no damages for delay" clause exculpates an owner-contractee from liability for damages suffered by a contractor by reason of being delayed in the performance of its work. Under the AIA form contracts, the right of a contractor to claim damages for delay is expressly preserved. See e.g., AIA Document A201, §8.3.3 (Remedy of time extension for delays not the fault of the Contractor "does not preclude recovery of damages for delay by either party under other provisions of the Contract Documents."). Substituting a "no damages for delay" clause negates this risk. A typical "no damage for delay" clause would provide: "No claim for damages . . other than for an extension of time shall be made or asserted against the Owner by reason of any delays. The contractor shall not be entitled to an increase in the Contract Sum or payment or compensation of any kind from the Owner for direct, indirect, consequential, impact or other costs, expenses or damages, including but not limited to costs of acceleration or inefficiency, arising because of delay, disruption, interference or hindrance..." See Lecusay, The Collapsing "No Damages for Delay" Clause in Florida 22 www.Venable.com VENABLE'l-LP Public Construction Contracts: A Call for Legislative Change, 15 St. Thomas L. Rev. 425 (2002). Such clauses are generally valid, and not void as against public policy, provided it meets the ordinary rules governing the validity of contracts. See generally, 74 ALR 3d 187 (1976 and Supp. 2007). At the same time, however, courts will scrutinize "no damage for delay" provisions because of their tendency to cause harsh, and often inequitable, results. Accordingly, there are a widely recognized exceptions to enforcement that threaten to swallow the general rule of validity. Numerous cases have established that a contractor may still recover delay damages despite the presence of such a clause if the delay: (1) Was a kind not contemplated by the parties (Sheehan v. City of Pittsburgh, 62 A. 642 (Pa. 1905); Pittsburgh Constr. Co. v. City of Dayton, 237 F. 305 (6`' Cir. 1916)); see also Wells Bros. Co. v. United States, 254 U.S. 83 (1920); Ericksen v. Edmonds School Dist. No. 1S, 125 P.2d 275 (Wash. 1942); Ace Stone, Inc. v. Wayne Township, 221 A.2d 515 (N.J. 1966)(clauses strictly construed in determining whether a particular delay was contemplated); (2) Was such as to amount to an abandonment of the contract (American Pipe & Constr. Co. v. Westchester County, 292 F. 941 (2d Cir. 1923)); (3) Was the result of bad faith or arbitrary action (American Bridge Co. v. State, 283 N.Y.S. 577 (N.Y.A.D. 1935)); or (4) Was the result of active interference with the contractor's work on the part of the owner or unreasonable compliance on the owner's part with a contract provision 23 www.Venable.com VENABLVL' LP (John T. Brady & Co. v. Board of Education, 226 N.Y.S. 707 (N.Y.A.D. 1928); DeRiso Bros. v. State, 293 N.Y.S. 436 (N.Y. Ct. Cl. 1937)). As summarized in the above-cited ALR annotation: Certain of these exceptions are generally agreed upon by the courts, while others are either controverted or subject to different interpretations. The former embrace delays not within the terms of the "no damage" clause or not within the contemplation of the parties; delay due to certain tortious, wrongful, or willful action of the contractee, particularly fraud or bad faith, and direct or active interference with the work of the contractor. Other exceptions which have been recognized but are not so clearly agreed upon by the courts involve delay due to the contractee's negligence, breach of contract, or arbitrary or capricious action; and also involve unreasonable delay by the contractee. In the case of government contracts in particular, a "no damages for delay" clause" is ordinarily subject to the same rules of construction as other contracts. Thus, whether the "no damage" clause does or does not preclude the recovery of damages for delay in a particular case depends upon the terms of the particular contract provisions, the objectives of the parties, the nature of the default or cause of the delay, and the various other circumstances of the individual case. Id. Arguably to eliminate the potential for harsh or inequitable results, a number of states have adopted legislation prohibiting "no damage for delay" clauses in public entity construction contracts. See, e.g., Ariz. Rev. Stat. § 41-2617 (2000); Cal. Pub. Cont. Code § 7102 (West 2000); Colo. Rev. Stat. § 24-91-103.5 (2000); Mo. Rev. Stat. § 34.058 (2002); N.C. Gen Stat. § 143-134.3 (2000); N.J. Stat. Ann. § 2A:5813-3 (West 2001); Ohio Rev. Code Ann. § 4113.62 (2001); Va. Code Ann. § 2.2-4335 (Michie 2001); Wash. Rev. Code § 4.24.360 (2000). See also Mass. Gen. Laws ch. 30, § 390 24 www.Venable.com VENABLE'L' LP (2001); R.I. Gen. Laws § 37-2-42 (2000) (statutory entitlement to price increase in case of government imposed delay). See Lecusay, supra at 425. Where a "no damages for delay" provision is prohibited, or where the owner decides such a provision is too harsh or too controversial for its negotiation, there are alternative clauses that can limit the extent of recoverable delay damages. Since a time extension is a condition precedent to the right of contractor to seek delay damages, the first step is to more narrowly circumscribe the contractor's right to a time extension than is set forth in Section 8.3.1 of the AIA's Form A201: If the Contractor is delayed at any time in the commencement or progress of the Work by an act or neglect of the Owner or Architect, or of an employee of either, or of a separate contractor employed by the Owner, or by changes ordered in the Work, or by area-wide labor disputes, fire, unusual delay in deliveries, unavoidable casualties or other causes beyond the Contractor's control, or by delay authorized by the Owner pending negotiation or mediation of a Claim or dispute, or by other causes which the Owner determines may justify delay, then the Contract Time shall be extended by Change Order to the extent such delay will prevent the Contractor from achieving Substantial Completion within the Contract Time and so long as the performance of the Work is not. was not, or would not have been delayed by any other cause for which the Contractor is not entitled to an extension in the Contract Time under the Contract Documents. The Contractor further acknowledges and as4rees that adjustments in the Contract Time will be permitted for a delay only to the extent such delay (i) is not caused, or could not have been anticipated, by the Contractor. (ii) could not be limited or avoided by the Contractor's timely notice to the Owner of the delay or reasonable likelihood that a delay will occur, and (iii) is of a duration not less than one (1) day. Thereafter, delay damages can be limited solely to the contractor's "extended general conditions" as follows: Notwithstanding anything to the contrary in the Contract Documents, a time extension, to the extent permitted under [the contract] shall be the sole remedy of the Contractor for any (1) delay in the commencement, 25 www.Venable.com VENABLE'L' LP prosecution or completion of the Work, (2) hindrance, impact or obstruction in the performance of the Work, (3) loss of productivity, or(4) other similar claims (collectively referred to in this Paragraph as Delays) whether or not such Delays are foreseeable. The Contractor expressly agrees not to make, and hereby waives, any claim for damages on account of any Delay, obstruction, impact or hindrance for any cause whatsoever, including, without limitation, consequential damages, lost opportunity costs, actual or alleged loss of efficiency, home office overhead, extended overhead, impact damages or other similar remuneration, provided however that if a delay is not due to an act or omission of Contractor, any Subcontractor, anyone directly or indirectly employed by them, or anyone they control or exercise control over, Contractor shall be entitled to recover an amount equal to the Contractor's "general conditions" costs included in the Contract Sum and specified on the attached Schedule of Values, divided by the number of days in the Contract Time (exclusive of extensions), multiplied by the number of days the Contract Time for that portion of the Project is extended. Similarly, allowable damages can be conditioned on notice to Owner, and/or limited to those damages that Contractor could not reasonably avoid: Notwithstanding anything to the contrary in the Contract Documents, an extension in the Contract Time, to the extent permitted under [the contract] shall be the sole remedy of the Contractor for any Delays, whether or not such Delays are foreseeable, unless a Delay is caused solely by acts or omissions of the Owner or its agents ("Compensable Delay"). Contractor will notify Owner of a Compensable Delay as soon as practicable but in no event later than five (5) business days after Contractor learns of the circumstances giving rise to such delay. Failure to give Notice as provided herein shall result in a waiver of all damages incurred prior to Notice. Allowable damages for Compensable Delay hereunder shall be limited to the demonstrable increase in Contractor's, subcontractor's, and suppliers' direct costs caused by the delay (including increased labor, material and equipment costs) and direct site overhead expenses (including but not limited to site supervision salary, Project management, Project oversight personnel, Contractor's or Subcontractors' main office employees who directly perform work for the Project, temporary site office expense, temporary site facilities, and temporary site utilities including basic telephone service, electricity, heat, water, and sanitary/toilets, cleanup, cleanup labor, storage and extended warranties), with no markup of these 26 www.Venable.com VENABt-E"'LLP expenses to compensate Contractor for home office overhead expenses. Other than as set forth above, Contractor expressly agrees not to make and hereby waives any claim for damages in connection with any Delay, including, without limitation, consequential damages, lost opportunity costs, impact damages, or other damages. Requests made by the Contractor for compensation for Compensable Delay shall be substantiated by evidence clearly showing that the Work delayed was on the critical path of the CPM schedule or on the sequence of Work on the bar graph schedule, as modified, and that the additional costs incurred by the Contractor are directly attributable to the delay in the Work claimed, and could not be avoided by Contractor through reasonably commercial efforts. 27 www.Venable.com INTERNATIONAL MUNICIPAL Item #10 LAWYERS ASSOCIATION M I L L E R & V A N E A T O N P. L. L. C. MATTHEW C.AMES 1155 CONNECTICUT AVENUE,N.W. KENNETH A.BRUNETTI* SUITE 1000 OF COUNSEL: FREDERICK E.ELLROD III WASHINGTON,D.C. 20036-4320 JAMES R.HOBSON MARCI L.FRISCHKORN TELEPHONE(202)785-0600 GERARD L.LEDERER GAIL A.KARISH* FAX(202)785-1234 WILLIAM R.MALONE WILLIAM L.LOWERY NANNETTE M.WINTERt NICHOLAS P.MILLER MILLER&VAN EATON,L.L.P. MATTHEW K.SCHETTENHELM 580 CALIFORNIA STREET tAdmitted to Practice in JOSEPH VAN EATON SUITE 1600 New Mexico Only SAN FRANCISCO,CALIFORNIA 94104 *Admitted to Practice in TELEPHONE (415)477-3650 California Only FAX(415) 477-3652 W W W.W LLERV ANEATON.COM THE COMMUNICATIONS INDUSTRY AND LOCAL GOVERNMENTS: STRATEGIES FOR PROTECTING MUNICIPAL INTERESTS JOSEPH VAN EATON Miller & Van Eaton, P.L.L.C. INTERNATIONAL MUNICIPAL LAWYERS ASSOCIATION © 2007 Miller & Van Eaton P.L.L.C. TABLE OF CONTENTS Overview ......................................................................................................................................1 I. LOCAL AUTHORITY OVER CABLE SYSTEMS .......................................................2 A. Scope of Local Authority Under Federal Law. ....................................................2 B. The Impact of State Laws..................................................................................... C. FCC Intrusion Into the Franchising Process.........................................................6 II. LOCAL AUTHORITY OVER TELECOMMUNICATIONS SYSTEMS......................8 11I. LOCAL AUTHORITY OVER WIRELESS DEPLOYMENT...................................... 16 A. Tower Siting and Zoning Ordinances................................................................. 16 B. Municipal Wi-Fi and the Over-the-Air Reception Devices Rule.......................18 ©2007 Miller& Van Eaton P.L.L.C. Page i THE COMMUNICATIONS INDUSTRY AND LOCAL GOVERNMENTS: STRATEGIES FOR PROTECTING MUNICIPAL INTERESTS By Joseph Van Eaton Partner, Miller & Van Eaton P.L.L.C. OVERVIEW Local governments are facing significant challenges to their authority to manage and to obtain compensation for use of municipal rights-of-way by communications companies, and significant challenges to their authority to use traditional zoning and permitting processes to control the size and placement of communications facilities (such as utility cabinets, towers, and the like) within and outside of the rights-of-way. The article will survey key recent federal law decisions involving local governments and communications companies. The case law at this point is not consistent and the law is in flux, but four broad points seem clear: The first is that technological and legal developments demand that city attorneys develop a more holistic view in their approach to communications and right-of-way issues. A holistic approach does not mean that every communications company, or every utility, must be treated identically. It does suggest that, as far as possible, differences in treatment should be rationally based (sometimes difficult because of problems inherent in state and federal law), applied consistently and (because change is the byword in the communications industry) reviewed periodically in light of changes in the law and technology. That holistic view should consider the impact of decisions on long term municipal interests, and across industries. For example, if a community permits one telecommunications company to place a utility cabinet aboveground, the community may arguably place itself in a position where it must permit every similarly situated company to place cabinets above-ground. If a community allows a Wi-fi provider to place facilities on municipal light poles based on a long-term, exclusive lease, it may find that it loses some authority to control the size of the facilities the user places on the pole, and as importantly, may find other wireless companies demand access to poles on the same terms and conditions (even where those other companies are not willing to make the same contribution to the community). Many localities have relied on provisions in cable franchises to control the placement of cable facilities in the rights-of-way. Now, local telephone companies are seeking cable franchises (or other local authorizations to provide video services). Some refuse to sign franchises containing right-of-way provisions, on the theory that their facilities, although used to deliver video services, should be treated as telephone facilities, and not subjected to local regulation. If that approach is accepted, one cable service provider will be subject to right-of-way rules that do not apply to the other. Municipal attorneys must decide whether that approach can be defended—and whether it is in the long-term interests of the community. © 2007 Miller& Van Eaton P.L.L.c. Page 1 Third, developing a holistic approach requires cross-departmental planning and coordination. Departments responsible for economic development may be primarily responsible for Wi-fi development, but decisions made with respect to Wi-fi may affect local authority to control size and placement of cellular towers (often an issue for zoning). A different department may be responsible for regulating cable television systems than the department that is responsible for managing use of the rights-of-way by telephone companies, leading to divergent approaches to undergrounding and placement of facilities— yet legally, decisions by one department may affect others. Finally, in order to defend the choices it makes, a community may be required to support its decisions with facts, and may be required to show that it has pursued pro-competitive policies. It may be wise to marshal those facts sooner, rather than later in the planning process. Municipal attorneys have a key role to play in guiding clients in the collection and evaluation of facts. This article focuses on federal law. However, state law adds additional complexities to the legal planning process by limiting local authority over utility facilities regulated by state public utilities commissions and by establishing specific limits on regulation of communications facilities. Additional information on these topics can be found at www.millervaneaton.com. I. LOCAL AUTHORITY OVER CABLE SERVICE Federal law draws important distinctions between services cable services (involving the one-way transmission of video or other services to subscribers, and the interaction required to use those services); telecommunications services (transmission of information selected by the subscriber on a common carrier basis); and information services (which include Internet services). We begin with a discussion of local authority over cable services. A. Scope of Local Authority Under Federal Law. In 1984, Congress adopted what has become known as the "Cable Act," 47 U.S.C. § 521 et seq. While municipalities had been regulating cable systems for years, there was significant debate as to the scope of Federal Communications Commission authority over cable systems, as to the appropriate scope of cable regulation, and as to what level of government (federal, state or local) should have what regulatory responsibilities. The Cable Act attempted to resolve these issues. It placed significant and primary responsibility for key elements of cable regulation at the local level. The Act was intended to "establish franchise procedures and standards which encourage the growth and development of cable systems and which assure that cable systems are responsive to the needs and interests of the local community." 47 U.S.C. § 521. 0 2007 Miller & Van Eaton P.L.L.C. Page 2 Under federal law, local governments are given the primary responsibility for ensuring that cable systems serve community interests. That is not to say that local authority is unlimited. It is limited in some important ways: • The Cable Act was intended to limit government authority to require cable operators to carry specific, commercial programming. Thus, 47 U.S.C. § 544 states that "a franchising authority may not establish in its request for proposals for a [cable] franchise" requirements for "video programming or other information services." By agreement, an operator and a community can establish enforceable requirements "for broad categories of video programming or other services." The Cable Act limits, but does not eliminate, local authority to regulate rates. 47 U.S.C. § 543. Service rates are deregulated in any community where the FCC finds the operator faces "effective competition." While the FCC has deregulated rates in many communities, in communities where there has been no finding of effective competition, a local government can regulate rates for "basic" service and for equipment. In addition, local governments can regulate non-service charges, such as charges for late fees and disconnection. • The Cable Act states that no locality may 'prohibit, condition, or restrict a cable system's use of any type of subscriber equipment or any transmission technology. " 47 U.S.C. § 544(e). FCC orders suggest that a city could not require an operator to use fiber optics as opposed to coaxial copper, microwave or other technologies to deliver service. There is a strong argument that localities can require that the cable system have certain characteristics regardless of the transmission technology used (for example, a locality could require that the system be highly reliable and capable of delivering advanced cable services). • The Cable Act states that a locality may not, as a condition of granting or renewing a cable franchise, "require a cable operator to provide any telecommunications service or facilities, other than institutional networks" except as provided in the Cable Act sections regarding PEG access and commercial leased access. 47 U.S.C. § 541(b). This limitation is one of a series of provisions that are designed (with important exceptions for PEG and institutional networks) to prevent localities from leveraging their Cable Act authority to regulate the provision of telecommunications services and facilities. The Cable Act does not prohibit localities from regulating cable companies that provide telecommunications services in the same manner as other telecommunications providers are regulated — but the authority to do so would come from state law, and not from the Cable Act. Federal law states that franchising authorities may: © 2007 Miller& Van Eaton P.L.L.c. Page 3 • Adopt and enforce customer service standards. The FCC has adopted minimum customer service standards, and a locality can choose to enforce these, but a locality can also adopt more stringent standards. 47 U.S.C. § 552. • Include a franchise requirement requiring the operator to pay a franchise fee equal to 5% of the gross revenues derived from the operation of the cable system to provide cable services. 47 U.S.C. § 542. • Require an operator, through the franchising process, to submit a proposal for facilities, equipment and services adequate to meet the cable-related needs and interests of the community. 47 U.S.C. §§546, 541(a) (4), 544(6). • Require the cable operator, through the franchising process, to build an institutional network, and to dedicate capacity on that network for educational and government use. An institutional network is a portion of the cable system designed primarily to serve customers other than residential customers. In many communities, operators have agreed to construct institutional networks that link schools, libraries and other government buildings. An institutional network can replace expensive phone lines that might otherwise be required, and can significantly enhance a local government's communications capabilities. Id., 47 U.S.C. § 531. • Require an operator, through the franchising process, to provide channels, facilities, equipment and capital support for public, educational and government use of the cable system. Thus, for example, many franchises require the operator to provide channels, equipment and studios that non-profit groups and others can use to produce programming. PEG requirements can significantly enhance the ability of government, schools, non-profits and others to deliver information to the community cost-effectively. Through the franchising process a locality also can define where an operator must serve, and set the time for build-out of the system. 47 U.S.C. § 552(a). Some franchises require the operator to construct its system so that it can provide service to all residences in a community; some require that the system be constructed so that it can serve all businesses and residences; and some require operators to serve all areas with a certain population density. The community is in a position to ensure that service is available universally. The Cable Act suggests that some requirements (such as PEG requirements) may only be imposed through the franchising process. However, a municipality may establish and enforce some requirements that affect cable operators by ordinance, through the unilateral exercise of its police and regulatory powers. The advantage of establishing some requirements through an ordinance is that, generally, the ordinance can be unilaterally changed over time, while a franchise, because it is a contract, generally cannot (except as the parties may agree otherwise). At the very least, it is important that franchises be drafted so that they do not prevent a municipality from responding to new challenges to rights-of-way and land use management. The problems and risks are illustrated by Southern California Gas Co. v. City of Santa Ana, 336 F.3d 0 2007 Miller & Van Eaton P.L.L.c. Page 4 885 (9`h Cir. 2003) (Municipal ordinance requiring advance payment by anyone wishing to perform excavations or trench cuts "substantially impaired" gas utility's rights under prior franchise agreement). Other developments in state and federal law suggest that continued reliance on franchises as the primary means for governing cable's use of rights-of-way rules may carry substantial risks. B. The Impact of State Laws. Although local franchising authorities have substantial authority over cable systems under federal law, in the last two years several states have moved cable franchising authority to the state level; several other states continue to allow localities to issue cable franchises, but have severely restricted that authority. See, e.g. Ariz. Rev. Stat. §§ 9-505-510 (authorizing localities to issue cable licenses, but limiting what localities may require through the franchising process); Cal. Pub. Util. Code §§ 5800-5970 (making state utilities commission the cable franchising authority for the state). Whether these laws can be squared with the Cable Act is an open question, beyond the scope of this article. What is important is that in almost every case, the laws protect local authority to manage the rights-of-way, but place conditions on the exercise of that authority. For example, in Arizona the cable licensing law provides: [A] licensing authority may require that a cable operator: 1. Bear reasonable costs that are associated with damage caused to public streets, roads and alleys by construction, maintenance and operation of its facilities in the public streets, roads and alleys and that are imposed on a competitively neutral and nondiscriminatory basis in relation to costs borne by telecommunications corporations under § 9-582, subsection C. Ariz. Rev. Stat. § 9-506(F) (emphasis added). The telecommunications licensing law provides: As a condition of issuing a license or franchise to use the public highways to construct, install, operate and maintain telecommunications facilities, or a renewal thereof, a political subdivision may impose reasonable, competitively neutral and nondiscriminatory requirements on applicants which may include...Public highway use requirements.... Ariz. Rev. Stat. § 9-583(B) (emphasis supplied). The law goes on to indicate that the same right- of-way rules can be applied to cable companies providing telecommunications services: A political subdivision may not discriminate against a cable operator in its provision of telecommunications services if that cable operator complies with requirements applicable to telecommunications corporations. Nothing in this subsection limits the authority of any political subdivision to license cable systems and to establish conditions on those licenses consistent with federal law. Ariz. Rev. Stat. § 9-582(G). Similarly, California law provides: ©2007 Miller& Van Eaton P.L.L.c. Page 5 The local entity shall allow the holder of a state franchise under this division to install, construct, and maintain a network within public rights-of-way under the same time, place, and manner as the provisions governing telephone corporations under applicable state and federal law, including, but not limited to, the provisions of Section 7901.1. Cal. Pub. Util. Code § 5885(a). Thus, local authority over cable system use of the rights-of-way is preserved, but now must be consistent with the treatment of telephone corporations. The law goes on to provide: [N]othing in this section shall be construed to limit a local entity's ability to impose utility user taxes and other generally applicable taxes, fees, and charges under other applicable provisions of state law that are applied in a nondiscriminatory and competitively neutral manner. Cal. Pub. Util. Code § 5860(c) (emphasis supplied). These provisions and similar provisions in other state laws require municipal attorneys to carefully review local ordinances and practices cross-industry. Local rights can be preserved — and local interests can be protected — but only if a consistent approach to management of rights-of-way is developed. C. FCC Intrusion Into the Franchising Process. The FCC recently issued an order to "expedite the entry of new cable competitors" by addressing what it labels "a variety of means by which local franchising authorities...are unreasonably refusing to award competitive franchises." In the Matter of Implementation of Section 621(a) of the Cable Communications Policy Act of 1984 as amended by the Cable Television Consumer Protection and Competition Act of 1992, MB Docket No. 05-311, FCC 06-180 (March 5, 2007). The Order significantly intrudes on local franchising authority. The Order is being appealed. There are strong arguments that the FCC has exceeded the limits of its authority, and a strong likelihood that the Order will ultimately be reversed on appeal. Nonetheless, the Order requires careful review by municipal attorneys because it affects not only the substance of franchises, but the time within which a locality must act on a franchise application by a new entrant.I The Order imposes a "time limit" on franchise negotiations based on whether a company applying for a cable franchise has "existing authority" to the rights-of-way, or not. Id. at � 66- 81. Specifically, the Commission established a "maximum time frame of 90 days for entities with existing authority to access public rights-of-way, and six months for entities that do not have authority to access public rights-of-way." Id. at ¶ 67. The Commission justified its different treatment of companies based on their right-of-way access as follows: First, one of the primary justifications for cable franchising is the locality's need to regulate and receive compensation for the use of public rights-of-way. In considering an application for a cable franchise by an entity that already has rights-of-way access, however, and LFA need not devote substantial attention to © 2007 Miller& Van Eaton P.L.L.C. Page 6 issues of rights-of-way management. Second, in obtaining a certificate for public convenience and necessity from a state, a facilities-based provider generally has demonstrated its legal, technical, and financial fitness to be a provider of telecommunications services. Thus, an LFA need not spend a significant amount of time considering the fitness of such applicants to access public rights-of-way. Id. ¶ 67 (footnotes omitted). The FCC also addressed the regulation of "mixed-use" networks — networks that are used to deliver both cable services and non-cable services, such as telephone service. Id. at ¶¶ 121-124. The Commission found that "[t]o the extent a cable operator provides non-cable services and/or operates facilities that do not qualify as a cable system, it is unreasonable for an LFA to refuse to award a franchise based on issues related to such services or facilities." The Commission found that: [A]n LFA has no authority to insist on an entity obtain a separate cable franchise in order to upgrade non-cable facilities. For example, assuming an entity (e.g., a LEC) already possesses authority to access the public rights-of-way, an LFA may not require the LEC to obtain a franchise solely for the purpose of upgrading its network. So long as there is a non-cable purpose associated with the network upgrade, the LEC is not required to obtain a franchise until and unless it proposes to offer cable services. For example, if a LEC deploys fiber optic cable that can be used for cable and non-cable services, this deployment alone does not trigger the obligation to obtain a cable franchise. The same is true for boxes housing infrastructure to be used for cable and non-cable services. Id. at ¶ 121 (footnotes omitted). This is of course precisely what is happening in many communities around the country — telephone companies are "upgrading" their telephone networks to provide cable service, but claiming the "upgrade" is required for telephone service as well. Additionally, the Commission ruled that "an LFA may not use its video franchising authority to attempt to regulate a LEC's entire network beyond the provision of cable services." Id. at ¶ 122. Thus, the Commission found that provision of cable services pursuant to a cable franchise "does not provide a basis for customer service regulation by local laws or franchise agreement of a cable operator's entire network, or any services beyond cable services." Id. The effect of this decision may be to force localities to rely on ordinances applicable to cable and non-cable systems to establish rules for use of the rights-of-way — and to ensure that permitting processes do not automatically authorize placement of facilities in the rights-of-way without proper oversight or review. The franchising process traditionally provided a mechanism for conducting that review before a cable system was built. At least with respect to new entrants that already have some facilities in the rights-of-way, that is no longer clearly the case. Communities that have in the past relied on cable franchises to determine where and how cable facilities will be placed may find themselves in a position where it is too late to address serious right-of-way use problems. © 2007 Miller & Van Eaton P.L.L.C. Page 7 Lessons Learned • Federal law allows localities to establish some requirements (such as PEG access requirements) that are designed to ensure that cable serves public needs. Cable companies obtain valuable rights — and opportunities to earn private profits using public property — in return for satisfying these obligations. One cannot assume that the same obligations can or should be applied to different communications utilities, which may be subject to very different public service obligations. • In addition, cable systems are subject to a variety of regulatory requirements (e.g., rules related to placement of facilities) that relate to the fact that cable systems place physical burdens on public and private property. Traditionally, many cities have used the franchising process to establish these requirements as well. • As mixed-use facilities continue to enter the market, some of the traditional franchise tools which local governments have employed to manage the rights-of- way may become less useful. • It is becoming more useful to develop carefully-drawn right-of-way policies that can apply cross-industry, rather than attempt to regulate right-of-way use solely through individually negotiated franchises. II. LOCAL AUTHORITY OVER TELECOMMUNICATIONS SYSTEMS. Telecommunications law for municipalities is currently characterized by a basic underlying clash with respect to local governments' right to control and to gain the benefit of their property. As a general matter, local governments either own their public rights-of-way in fee, or at least are trustees for their use for the benefit of the whole community. Localities grant private parties, including communications companies, valuable rights to use and occupy those rights-of-way. This gives the typical grantee who intends to provide service in a community: (1) The option to place facilities throughout the public rights-of-way, and thus to burden those rights-of-way; (2) A right to burden the public rights-of-way through construction work, and then on an ongoing basis through repairing and maintaining facilities in the limited space within the streets and public utility easements; and (3) The ability to use the public rights-of-way in doing business. The central questions for local governments in telecommunications under federal law are (a) Can the City charge for the rights granted, and if so, on what basis? (b) What regulations can and should be imposed in connection with the rights granted? (c) What rights does a community have to refuse to enter into a franchise (a contract) granting such rights? The answer to these © 2007 Miller& Van Eaton P.L.L.C. Page 8 questions will of course be strongly shaped by state law: in some states, certain telecommunications providers are deemed to hold a state franchise, and local authority is limited to time, place and manner control of rights-of-way (California); in others, there is broad authority to franchise telecommunications providers (Oregon); and in others, state law grants a franchise to some providers, but permits localities to franchise others (Arizona). Two provisions of federal law are of particular importance. The first-- and the principal focus of federal judicial decisions since 1996 -- is Section 253 of the 1996 Act, 47 U.S.C. § 253, titled "Removal of Barriers to Entry." Sections 253(a)-(c) provide: (a) IN GENERAL.--No State or local statute or regulation, or other State or local legal requirement, may prohibit or have the effect of prohibiting the ability of any entity to provide any interstate or intrastate telecommunications service. (b) STATE REGULATORY AUTHORITY.--Nothing in this section shall affect the ability of a State to impose, on a competitively neutral basis and consistent with section 254, requirements necessary to preserve and advance universal service, protect the public safety and welfare, ensure the continued quality of telecommunications services, and safeguard the rights of consumers. (c) STATE AND LOCAL GOVERNMENT AUTHORITY.--Nothing in this section affects the authority of a State or local government to manage the public rights-of-way or to require fair and reasonable compensation from telecommunications providers, on a competitively neutral and nondiscriminatory basis, for use of public rights-of-way on a nondiscriminatory basis, if the compensation required is publicly disclosed by such government. While Section 253(b) refers only to the authority of a "State," the FCC has concluded that the subsection also protects the exercise of authority delegated by the state to a locality. In re Classic Telephone, 11 F.C.C.R. 13802 at ¶34 (1996). As responsibility for "public safety and welfare" is often at least in part the responsibility of local governments, this exception may prove quite important, although it has not been much-litigated to this point. Subsection (d) of § 253 gives the FCC authority to determine whether a particular requirement prohibits entry, but provides that the FCC has no jurisdiction to determine whether a particular provision is protected by the safe harbor of§ 253(c). See 141 Cong. Rec. S8308 (1995) (statement of Sen. Gorton). Also critical, but less litigated, is Section 601 of the Telecommunications Act, which appears at 47 US.C. § 152 nt. Section 601 provides: (c) FEDERAL, STATE AND LOCAL LAW. (1) NO IMPLIED EFFECT. This Act and the amendments made by this Act shall not be construed to modify, impair, or supersede Federal, State or local law unless expressly so provided in such Act or amendments. © 2007 Miller& Van Eaton P.L.L.C. Page 9 (2) STATE TAX SAVINGS PROVISION.- Notwithstanding paragraph (1), nothing in this Act or the amendments made by this Act shall be construed to modify, impair, or supersede, or authorize the modification, impairment, or supersession of, any State or local law pertaining to taxation, except as provided in sections 622 and 653(c) of the Communications Act of 1934 and section 602 of this Act. Taken together, Section 601 and Section 253 indicate that: (a) State and local taxing authority is completely protected from preemption under Section 253, and a telecommunications provider challenge to a tax (as opposed to a rent levied in return for the right to use the rights-of-way to provide service) should be dismissed. The only case to address the issue so holds. Qwest Corporation v. City of Globe, 237 F. Supp. 2d 1115, 1118 (D.Az. 2003) affirmed by 434 F.3d 1176, 1184 (9th Cir. 2006). (b) A local law should only be subject to preemption if it prohibits or has the effect of prohibiting service. (c) Even if a local law prohibits or effectively prohibits an entity from providing service, a local law should only be preempted if it falls outside the safe harbors of Section 253(b) or (c). (d) Local authority to obtain reasonable compensation for use of public rights- of-way is preserved, consistent with applicable state law. (e) Local authority to manage the rights-of-way is protected, consistent with applicable state law. (f) Local police powers, exercised consistent with state law limits, are also protected. There is substantial confusion reflected in the case law on all of the last five points. Section 253(a) Some courts have departed from the plain language of the law and suggested that a local law is preempted if it falls outside the safe harbors of Section 253(b)-(c), even if there is no prohibition within the meaning of Section 253(a). Compare Bell Atlantic-Maryland, Inc., v. Prince George's County, Maryland, 49 F. Supp. 2d 805, 816 (D. Md. 1999), vacated 212 F.3d 863 (4th Cir. 2000) with City of Auburn v. Qwest Corporation, 247 F.3d 966 (9th Cir. 2001), cert. denied, 122 S. Ct. 809 (2002); BellSouth Telecommunications, Inc., v. Town of Palm Beach, 252 F.3d 1169 (11th Cir. May 25, 2001). However, most appeals courts have rejected the Prince George's approach. As importantly, the FCC has adopted an approach to Section 253(a) that is generally favorable to localities. In re California Payphone Ass'n, Opinion and Order, 12 FCC Rcd. 14,191 (1997) 0 2007 Miller& Van Eaton P.L.L.C. Page 10 states that the first question in any Section 253(a) analysis is whether there is an explicit prohibition on entry. If there is none "[w]e then consider whether the Ordinance has the practical effect of prohibiting the ability of any entity to provide any interstate or intrastate telecommunications service." Id. at 14,204 ¶ 27. Another decision, In re Public Utility Comm'n of Texas, 13 FCC Red. 3460, emphasized that there is no effective prohibition unless challenged requirements "materially inhibit or limit the ability" of an entity to compete. Id. at 3470 ¶22. 2 It also indicated that in determining whether a Section 253 violation has occurred, the key is "implementation," not speculation. Id. at 3465 ¶ 10. The burden is on the telecommunications service provider to prove that there is a prohibition. If that burden is not met, the case is over. If the burden is met (according to the FCC), the burden then shifts to the locality to explain why it believes that a challenged provision falls within the ambit of the safe harbors of Sections 253(b)- (c). Classic Telephone, Inc., Petition for Preemption of Local Entry Barriers, 11 FCC Red 13082 (1996). In a recent decision, the Eighth Circuit followed these FCC decisions in rejecting a Section 253 challenge brought by Level 3. Level 3 Communications v. City of St. Louis, 477 F.3d 528 (2007). The company's claim rested on the contention that the City's ordinance "may" (i.e., might) prohibit or effectively prohibit it from providing service. Id. at 533. The Court declared: "No reading [of Section 253] results in a preemption of regulations which might, or may at some point in the future, actually or effectively prohibit services.... Id. Instead, the Court held: [A] plaintiff suing a municipality under section 253(a) must show actual or effective prohibition, rather than the mere possibility of prohibition. The plaintiff need not show a complete or insurmountable prohibition, but it must show an existing material interference with the ability to compete in a fair and balanced market. Id. (citing Cal. Payphone Assn, 12 FCC Red. 14,206 (1997)) (internal citations omitted). The decision also suggests that Section 253(a) analysis should be limited to the impact on the plaintiff itself, and should not extend more generally to the impact on"any" entity: Level 3 further admits in its response to interrogatories that it "cannot state with specificity what additional services it might have provided had it been able to freely use the money that it was forced to pay to the City for access to the public rights-of-way." This admission establishes that Level 3 has not carried its burden of proof on the record we have before us. Id. at 533-534 (emphasis added). The Second Circuit appears to have adopted a similar approach, requiring a plaintiff to show that a regulation materially inhibits or limits its ability to enter the market. TCG New York, Inc., et al. v. City of White Plains, 305 F.3d 67 (2d Cir. 2002). Other circuit courts have read Section 253(a) slightly differently. The Ninth Circuit has held that a plaintiff need not show that any particular service has been effectively prohibited: © 2007 Miller & Van Eaton P.L.L.C. Page 11 The district court noted that Qwest has not pointed to a single telecommunications service that it, or any other entity, is effectively prohibited from providing because of the Cities' revenue-based fees or any of the other challenged requirements. We do not agree that Qwest was required to make an actual showing of a single telecommunications service that it...is effectively prohibited from providing. We have previously ruled that regulations that may have the effect of prohibiting the provision of telecommunications services are preempted. Qwest Corp. v. City of Portland, 385 F.3d 1236, 1241 (9th Cir. 2004) (citations and quotations marks omitted); Qwest Communications Inc. v. City of Berkeley, 433 F.3d 1253, 1256 (9th Cir. 2006). The First Circuit has suggested that Section 253(a) analysis is not limited to the burdens imposed by the challenged municipality's regulation, but may be satisfied by showing the burdens which would follow if the same regulation were adopted by "multiple municipalities." Puerto Rico Telephone Co. v. Municipality of Guayanilla, 450 F.3d 9, 17 (1st Cir. 2006). Both of these approaches are problematic, the Ninth Circuit's approach because it departs so clearly from the plain language of the statute, while the First Circuit's standard seems inconsistent with basic rules of standing and statutory interpretation. However, it is possible to imagine a reading of the FCC and Circuit court cases that would bring them closer in result, if not in rhetoric. For example, several district courts within the Ninth Circuit have found that while the "may prohibit" test does not require an "actual prohibition," it does require showing a "material impact." This appears to be the test adopted by Qwest v. Santa Fe, 224 F.Supp.2d 1305 (D. N.M. 2002), aff'd in part, Qwest Corp. v. City of Santa Fe, 380 F.3d 1258 (10th Cir. 2004) (refusing to find that rules that had long applied to Qwest were prohibitory, but finding that a regulation that substantially increased the amount Qwest had to pay to use the rights of way was effectively prohibitory within the meaning of Section 253(a), based on evidence presented by Qwest in that case. In Pacific Bell Telephone Co. v. California Dept. of Transp., 365 F. Supp. 2d 1085, 1088 (N.D.Cal. 2005), the district court suggested that a "may prohibit" test requires a plaintiff to show a significant economic impact. To the same effect are City of Portland, Or. v. Electric Lightwave, Inc., 452 F.Supp.2d 1049, 1061 (D. Or. 2005); and Time Warner Telecom of Oregon, LLC v. City of Portland, 452 F. Supp. 2d 1084, 1093, (D.Or. 2006). Time Warner emphasizes that the impact must be the result of the regulatory scheme, and not competition. In Qwest Corp. v. City of Portland, 200 F.Supp.2d 1250 (D. Or. 2002), Qwest challenged local franchising requirements, as well as local franchise fee and tax requirements. The district court granted summary judgment to defendant cities on the ground that Qwest had failed to show that any of the regulations it challenged "prohibited or had the effect of prohibiting" Qwest from providing service.3 In Portland, 385 F.3d at 1241-43, the appeals court affirmed the district court's holding with respect to the fee requirements: the Ninth Circuit ruled Qwest was barred by doctrine of claim preclusion from challenging ordinances of several Oregon cities which imposed revenue-based fees for use of public rights-of-ways. The Ninth Circuit remanded the case to the district court in other respects, directing it to (a) apply the "may prohibit" test; (b) conduct an individualized and cumulative analysis of each challenged provision; and (c) to distinguish between laws that were telecommunications-specific, and those which are not, noting that the latter are not generally subject to Section 253.4 The district court dismissed Qwest's © 2007 Miller & Van Eaton P.L.L.C. Page 12 claims on remand, finding that the company had not satisfied the "may prohibit" test. Qwest had argued the test could be satisfied by speculation. The district court ruled: [A] plaintiff challenging a city's telecommunications franchise provisions must rely on more than speculation to show a potential prohibitory effect. A telecommunications provider must at least demonstrate that that requirement is or may be a `barrier to entry' into the City's telecommunications market. Qwest Corp. v. City of Portland, 2006 WL 2679543 (D. Or. 2006). Qwest failed to do so. At this point, it is unclear what standards ultimately will govern Section 253 cases, and how those standards will be applied. However, a review of the cases shows one possible difference between cases where localities prevail and those cases where they do not. In the latter, the locality often concedes that its regulations are burdensome (Berkeley); does not raise a real Section 253(a) defense (Auburn); does not present facts to support its position (Guyanilla); or fails to rebut facts presented by the telecommunications provider (Santa Fe). By contrast, where a locality has prevailed, it often submits a significant factual case in support of the challenged regulations (Level 3, Qwest-Portland, Time Warner), including a showing that the City's policies have led to competition in fact. In addition, courts appear to take a more skeptical view of new, telecommunications-specific laws — particularly those which give a locality broad discretion to grant or deny franchises — as compared to laws that simply require telecommunications companies to comply with long-standing rules and requirements. Section 253(c) The breadth of the safe harbors under Section 253(c) is also in dispute. Telecommunications providers argue that compensation is limited to the marginal cost of issuing permits, while municipalities argue that the law permits them to charge a rent that is not confined to recovering costs. Puerto Rico Telephone Co., Inc. v. Municipality of Guayanilla, 283 F.Supp.2d 534 (D.P.R. 2003) summarizes the case law on point, and notes that the trend favors the municipal view. However, on appeal, the First Circuit found that the municipality's gross revenue fee was not saved by the subsection (c) safe harbor: We need not decide whether fees imposed on telecommunications providers by state and local governments must be limited to cost recovery. We agree with the district court's reasoning that fees should be, at the very least, related to the actual use of rights of way and that the costs of maintaining those rights of way are an essential part of the equation. In this case, the appellants have presented no evidence of the Municipality's costs of maintaining the public right of way. ...[A]bsent evidence of costs, the Court cannot determine whether the Ordinance results in fair and reasonable compensation as opposed to monopolistic pricing. Puerto Rico Telephone Co. v. Municipality of Guayanilla, 450 F.3d 9, 22 (9th Cir. 2006) (internal citations and quotation marks omitted). If read to require a locality to base the price it charges for rights-of-way on costs, the decision seems completely wrong-headed: competitive prices are often set without explicit consideration of cost. A property purchased in 1900 is not 0 2007 Miller & Van Eaton P.L.L.C. Page 13 priced based on its costs, but on the value of similar properties in the marketplace. The case is better understood as meaning that it is up to the locality to show that the price it charges is a reasonable price, and not a monopoly price. This could be done (as was the case in Level 3), by showing how the charges levied compare to charges for similar private properties. In the Portland cases, the City showed that the cost of managing and acquiring the rights of way significantly exceeded the rents it was receiving from utility companies, and also showed that the fee charged for use of the rights of way was consistent with charges for public and private rights- of-way. Recent case law also emphasizes that compensation must be "nondiscriminatory" and "competitively neutral." In some states, the incumbent local telephone company claims to operate pursuant to a state or pre-statehood franchise, and asserts the right to operate pursuant to that franchise without making any payment to localities. The ancient grants may not protect new entrants, however, and so the question arises as to whether one can charge a fee for use of the rights-of-way to a new entrant if the incumbent is not subject to such a requirement. The Sixth Circuit has recognized that differences in state law can justify different treatment of providers, at least in cases where the local government is willing to apply the fee to all providers, but state law prevents it (and the state law is not challenged). TCG Detroit v. City of Dearborn, 206 F.3d 618, 625 (6th Cir. 2000). The Second Circuit has questioned that analysis, but held explicitly that Section 253(c) "does not require precise parity of treatment" and that franchise fees "need not be equal." TCG New York v. City of White Plains, 305 F.3d 67, 80 (2d Cir. 2002).6 Finally, there is the issue of who must be treated in a nondiscriminatory manner. If a local government treats itself one way, must it treat others comparably? Or can a local government take advantage of the benefits that every landlord enjoys vis-a-vis his tenants? It is also not clear what constitutes protected "management of the rights-of-way" within the meaning of Section 253(c). As to some matters, there is little dispute. The FCC has indicated that: Section 253(c) preserves the authority of state and local governments to manage public rights-of-way. Local governments must be allowed to perform the range of vital tasks necessary to preserve the physical integrity of streets and highways, to control the orderly flow of vehicles and pedestrians, to manage gas, water, cable (both electric and cable television), and telephone facilities that crisscross the streets and public rights-of- way.... The types of activities that fall within the sphere of appropriate rights-of-way management ... include coordination of construction schedules, determination of insurance, bonding and indemnity requirements, establishment and enforcement of building codes, and keeping track of the various systems using the rights-of-way to prevent interference between them. In re TCI Cablevision of Oakland County, Inc., 12 FCC Rcd 21396 (1997), P103, 1997 WL 580831. The FCC based its analysis on statements by Senator Diane Feinstein, who read into the Congressional record a letter that urged Congress to protect local authority over rights-of-way, including the authority to: © 2007 Miller& Van Eaton P.L.L.C. Page 14 (1) "regulate the time or location of excavation to preserve effective traffic flow, prevent hazardous road conditions, or minimize notice impacts;" (2) "require a company to place its facilities underground, rather than overhead, consistent with the requirements imposed on other utility companies;" (3) "require a company to pay fees to recover an appropriate share of the increased street repair and paving costs that result from repeated excavation;" (4) "enforce local zoning regulations;" and (5) "require a company to indemnify the City against any claims of injury arising from the company's excavation."" In re Classic Telephone, Inc. 11 FCC Rcd 13082, 1996 WL 554531 (1996), P39 (quoting 141 Cong. Rec. S8172 (daily ed. June 12, 1995) (statement of Sen. Feinstein, quoting letter from the Office of City Attorney, City and County of San Francisco). Some courts have suggested that rights-of-way management encompasses only the specified activities, see Prince Georges. Auburn suggests that the distinction is between a regulation aimed at the rights-of-way, and a regulation of the provider (a line that is far from clear); White Plains made a similar distinction, but went on to suggest that the issue is whether the challenged requirement is "reasonably related to regulating the use of the rights-of-way." In order to fall within the "management" safe harbor, it appears a locality must at least be able to articulate a credible nexus between the proposed regulation and rights-of-way management. Cox Communications PCS v. City of San Marcos, 204 F. Supp. 2d 1260 and 1272 (S.D. Cal. 2002) (noting that provisions which have simply too tenuous a connection to the 'management of the rights-of-way' will not be saved under 253(c)). Courts are concerned that unless some line is drawn, almost any requirement could be justified as a rights-of-way management requirement. On the other hand, second-guessing the manner in which the rights-of-way is regulated should not be appropriate under Section 253(c), which was designed to protect municipal rights-of-way discretion and choices related to conflicting demands on rights-of-way. Lessons Learned While the ultimate interpretation of Section 253 is still in doubt on many key points, the federal case law increasingly recognizes the right of localities to charge rents for use of the rights-of- way (and not just recover costs) and to develop reasonable rules for use of the rights-of-way. However, that does not mean that local authority is unlimited. In the case of cable regulation, the law has tended to place significant regulatory authority at the local level. In the case of telecommunications providers, the reverse is true. Since early in the 20`h century, most rate, service, and facilities regulation has occurred at the state level. Courts have tended to be willing to protect traditional local authority, but unwilling to allow localities to leverage this traditional authority into broader regulation of telecommunications services. The lessons from the cases, at this point, may be that: • Telecommunications regulation must be developed with a close eye on state law requirements and the division of authority between state, local and federal rights. One mistake some localities have made is to take cable regulations and import them wholesale into the telecommunications environment. Courts have not been sympathetic to this approach. In fact, the Portland decision, 385 F.3d at 1242, © 2007 Miller& Van Eaton P.L.L.C. Page 15 may suggest that telecommunications-specific regulations may be less defensible than general requirements obligating persons who use the rights-of-way to obtain a franchise and pay a fee for use of the rights-of-way. • It is helpful to review proposed regulations to determine whether there is a clear relationship between the regulation and interests that the locality has a right to protect. Courts have been sympathetic where localities have been able to factually support the ordinances adopted. • Courts are reluctant to countenance an ad hoc approach to telecommunications regulation which leaves localities free to indefinitely delay or deny entry, at least where the requirements are embodied in a telecommunications-specific ordinance. III. LOCAL AUTHORITY OVER WIRELESS DEPLOYMENT. A. Tower Siting and Zoning Ordinances When Congress passed the Telecommunications Act of 1996, it adopted a new provision entitled "Preservation of Local Zoning Authority," 47 U.S.C. § 332(c) (7). Cell phone companies were placing towers throughout the nation, and Section 332(c)(7) ensured local governments could regulate the placement, construction, and modification of those towers consistent with normal land use planning processes. But Congress also wanted to promote deployment of cell services, so it placed certain conditions on the exercise of local zoning authority. The regulation of the "placement, construction and modification" of cell towers: • Cannot unreasonably discriminate among providers of functionally equivalent services; • Cannot prohibit or have the effect of prohibiting the provision of personal wireless services. In addition, certain procedural requirements must be satisfied: • A request for a tower authorization has to be acted on within a reasonable period of time; • Any decision to deny a request for authorization must be supported by "substantial evidence" contained in a "written record," and the decision denying the request must be "in writing." • No regulation of placement, construction or modification of towers on the basis of RF emissions if the facility complies with FCC regulations. The Act allows cell companies to obtain expedited judicial review,7 and a court can order a locality to issue a permit to construct a tower. © 2007 Miller & Van Eaton P.L.L.C. Page 16 Local authorities will continue to face challenges to local zoning authority in cases brought under Section 332. While there has been significant debate as to how the law is to be applied — with some Circuits providing substantially more latitude to local governments than others — in general courts have recognized that Section 332 was specifically designed to protect local zoning authority.$ Sprint Telephony PCS, L.P. v. County of San Diego, 479 F.3d 1061 (9th Cir. 2007) provides a useful summary underlining the differences in the approaches taken by various Circuits. Perhaps more significantly, in San Diego, the Ninth Circuit noted that while Section 332 governs challenges to individual zoning decisions, cellular telephone companies are providing a telecommunications service. The court went on to find that as telecommunications service providers, a cellular companies could raise a facial challenge under Section 253 to any wireless tower zoning law on the ground that it "may prohibit" entry. The Court then applied Auburn to hold that the County's zoning ordinance was preempted by Section 253(a), even though it applied traditional zoning tests and standards to cellular towers. Five days earlier, the district court for the District of New Mexico likewise held that Section 332(c)(7) is not the "exclusive vehicle" to challenge a zoning ordinance; instead, cell phone companies "may bring a facial challenge to the Ordinance under § 253 and § 332(c)(3)." Verizon Wireless LLC v. City of Rio Rancho, 2007 WL 706961 at *13 (D.N.M. 2007). The decisions are highly questionable. First, Section 332 assumes standard zoning rules will apply to wireless tower applications; yet San Diego indicates a telecommunications-specific zoning ordinance is defective under Section 253 if it applies such standard rules. Moreover, the decision in San Diego reverses the basic rule that an ordinance can survive a facial challenge if it could be legally applied in any set of circumstances. United States v. Salerno, 481 U.S. 739, 745 (1987) ("A facial challenge to a legislative Act is, of course, the most difficult challenge to mount successfully, since the challenger must establish that no set of circumstances exists under which the Act would be valid."). The cases thus raise significant constitutional and statutory questions — but until those questions are resolved, municipal attorneys can expect to see more cases that combine Section 253 and Section 332 challenges. Cell phone providers have also argued that they are entitled to seek damages and attorneys fees from cities under the nation's civil rights laws. The Ninth Circuit Court of Appeals concluded cell phone providers could obtain relief under the civil rights laws in Abrams v. City of Rancho Palos Verdes, 354 F.3d 1094 (9th Cir. 2004). The case involved an amateur radio operator who tried to convert an antenna used for noncommercial purposes into a commercial tower. The Seventh Circuit and Third Circuit both came to the opposite conclusion with respect to civil rights claims, Nextel Partners Inc. v. Kingston Township, 286 F.3d 687 (3d Cir. 2002); Primeco Personal Communications Ltd. (d/b/a Verizon Wireless) v. City of Mequon, 352 F.3d 1147 (7th Cir. 2003). The Supreme Court decided to resolve the dispute. On March 22, 2005, the Court ruled unanimously that wireless companies cannot obtain damages and attorneys' fees under the civil rights laws from local governments which make wireless tower zoning decisions that violate the Telecommunications Act. City of Rancho Palos Verdes v. Abrams, 544 U.S. 113, 125 S.Ct. 1453 (2005). As Justice Breyer wrote in a concurring opinion, "[T]o permit § 1983 actions here would undermine the compromise — between purely federal and purely local siting policies — that the statute reflects." Id. at 1463. In San Diego, the Ninth Circuit ruled that § 1983 also does not apply in cases brought under Section 253, but see NextG Networks of New York, Inc. v. © 2007 Miller& Van Eaton P.L.L.C. Page 17 City of New York, 2004 WL 2884308 (S.D.N.Y. Dec. 10, 2004)(§ 1983 does apply to claims under Section 253).9 Lessons Learned • While courts have generally reviewed local governments' zoning decisions with a fair amount of deference, such deference may be eroding as courts increasingly permit companies to bring challenges under Section 253 in addition to Section 332. • If Section 253 is applicable to wireless providers, localities may need to be sure that those providers are also subject to "non-discriminatory and competitively neutral" rules for use of the rights of way, and for compensation for use of the rights of way. B. Municipal Wi-fi and the Over-the-Air Reception Devices Rule Municipal Wi-fi systems have surged in popularity over the past three years. Several local governments have entered into contracts that allow Wi-fi providers to attach antennas to public property subject to (a) limits on the purposes for which the Wi-fi antennas can be used; and (b) limits on the size and configuration of the antennas. As local governments license or lease access to their rights-of-way for the delivery of Wi-fi or other wireless services, municipal attorneys need to consider the potential impact of the FCC's Over-the-Air Reception Devices ("OTARD") Rule. 47 C.F.R. § 1.4000. The OTARD Rule prohibits restrictions, including lease terms, that impair the installation, maintenance, or use of certain types of antennas installed "on property within the exclusive use or control" of the antenna user. A restriction "impairs" if it "unreasonably delays or prevents installation, maintenance or use;" "unreasonably increases the cost of installation, maintenance or use;" or "precludes reception of or transmission of an acceptable quality signal."10 The OTARD rule originated in Congress's desire to overturn local restrictions -- such as zoning ordinances and homeowners association rules —that limited the installation of satellite dishes and other television reception antennas." The rule's development since its adoption in 199612 has been an exercise in agency bootstrapping. In 1998, rejecting the argument that Congress never intended to regulate lease terms, the FCC expanded the original rule to include antennas located on leased property.13 This decision was upheld on appeal, on the theory that Congress had intended to give all "viewers" the benefit of the rule.14 Notwithstanding that rationale, in 2000 the agency again expanded the scope of the rule to include "fixed wireless" antennas, which at that time were primarily used to provide two-way telecommunications services.15 In 2004, to encourage deployment of "mesh" networks, the rule was further expanded to include antennas that serve not only a particular customer but that also route fixed wireless signals to other users.16 The OTARD rule has been applied by the FCC in about sixteen reported cases, all of them, until November of 2006, involving the installation of residential video reception antennas. © 2007 Miller& Van Eaton P.L.L.C. Page 18 On November 1, 2006, the FCC issued an Order extending the application of the OTARD rule to Wi-fi antennas.17 In the matter of Continental Airlines Petition for Declaratory Ruling Regarding the Over-the-Air Reception Devices (OTARD) Rules, FCC 06-157, ET Docket No. 05-247 (November 1, 2006). The dispute arose after Continental Airlines installed a Wi-fi antenna in its President's Club lounge at Logan International Airport. After Massachusetts Port Authority ("Massport"), the owner of the airport, found that Continental's signal extended far beyond the confines of the lounge, Massport asked Continental to operate at a lower power level. When this did not solve the problem, Massport directed Continental to remove the Wi-fi antenna, citing certain provisions in Continental's lease. Continental refused, and filed a Petition for Declaratory Ruling. The FCC ruled that "Massport's restrictions on Continental's use of its Wi- fe antenna are preempted by the OTARD rules." Id. at¶ 1. The FCC's reading of the OTARD rule could have implications for local governments that enter into agreements with commercial providers to use the rights-of-way to provide Wi-fi or other wireless services. Just as Continental challenged its lease agreement with Logan International Airport, wireless providers may challenge right-of-way agreements with local governments, contending that the portions of rights-of-way used for their service have become property within their "exclusive use or control" pursuant to a "leasehold interest." 47 C.F.R. § 1.4000(a)(1). As a result, a provider could argue that it is entitled to attach any device to such property, regardless of limitations and protections provided by the provider's agreement with the local government. This could extend not only to challenges to the size and shape of particular installations, but also limitations on the services that can be provided via an installation. Thus, for example, Wi-fi agreements often limit companies to providing Internet services, and make it clear that additional authorizations (and payments) would be required if different services, such as cable services, are offered. However, the OTARD rules may open the door to challenges to the basic terms of the agreement. And, in a worst-case scenario, it could result in a provider using locations originally intended for limited Wi-fi networks to provide cellular service — opening the door to demand from other cellular providers to access to the same facilities without the limitations typically imposed through the zoning process. Lessons Learned • Local governments should carefully draft right-of-way agreements to ensure that wireless providers are not conferred any "exclusive use of control" of rights-of- way or other local government property. • Local governments should understand that decisions made to encourage deployment of Wi-fi may have a significant effect on local property interests, and on local zoning authority, unless carefully drafted. © 2007 Miller & Van Eaton P.L.L.C. Page 19 A detailed discussion of the Order is beyond the scope of this paper. The Order finds that local franchising authorities have acted unreasonably and delayed competitive entry. See, e.g., ¶ 1. It claims to preempt local franchising authority and change the normal franchise process in the following respects, with respect to new applicants: • time limits for negotiation ("shot clock" and FCC grant of"interim" franchise) • build-out requirements • franchise fees, application fees, in-kind benefits • PEG and I-Net support • authority over non-cable services and mixed-use facilities The Order finds that the record is not sufficient to support a finding that state governments have acted unreasonably in issuing franchises, and thus state laws are not preempted by the Order. ¶ 1 n.2; ¶ 126. The Order indicates that local actions taken pursuant to state laws that constrain local discretion are also not preempted by the Order, but the scope of this exemption is far from clear. In the same document, the FCC issued a Further Notice of Proposed Rulemaking ("FNPRM") which calls for comment on extending the findings in the Order beyond new applicants to include existing cable operators when their franchises come up for renewal. ¶ 140. Moreover, it calls for comment on "local consumer protection and customer service standards as applied to new entrants." T¶ 5, 141-43. Z Even this test may be more generous to the telecommunications industry than is warranted by the law. 3 The district court also concluded, inter alia that Qwest could not challenge the fee requirements, as it had challenged the fee requirements in state courts, and lost. 4 The Ninth Circuit noted: "[w]e doubt whether City of Auburn can be read so broadly as to apply to ordinances that are not specific to the telecommunications permitting process. Based on the record before us, there is no indication that Portland or the other Cities, with the exception of Ashland, Eugene, and Springfield, have passed ordinances that are specific to the telecommunications process and apply to all telecommunications providers attempting to enter the market. Therefore, to the extent that Qwest challenges these ordinance provisions, it is questionable whether § 253 even applies." Id. at 1242. Telecommunications providers sometimes argue that any law that leaves a locality with any discretion is inherently prohibitory within the meaning of Section 253. That is because (they argue) a locality with "unfettered discretion" is in a position to prohibit entry, and that is itself a barrier to entry. The "unfettered discretion" issue is raised in many cases, and those cases (and in particular, Auburn and White Plains should be reviewed by any municipal attorney writing a telecommunications ordinance. However, there are strong arguments that the arguments of telecommunications providers go too far. The Supreme Court of Virginia rejected the notion that (Continued) © 2007 Miller& Van Eaton P.L.L.C. Page 20 omm "discretion" inherently violates Section 253, drawing a distinction between that standard as applied in the context of Section 253(b) and that standard as applied in the context of Section 253(c). Level 3 Communications of Virginia, Inc. v. State Corp. Comm'n, 604 S.E.2d 71 (Va. 2004). The White Plains court only found the test significant in determining whether a challenged regulation was protected by the safe harbors of Section 253(b)-(c), and did not apply the test to determine whether there was a prohibition under Section 253(a). 6 In White Plains, the locality had voluntarily chosen not to apply an ordinance requiring payment of rents to the incumbent. The fee provisions in the ordinance were struck down on the ground that they were discriminatory and not competitively neutral, although the Court also emphasized that it was not ruling that the same charge had to be applied to all market participants. In Dearborn, the court ruled that the City could not apply its fee to the incumbent consistent with state law. It is not clear how the White Plains court would have ruled if presented with the same facts presented to the Dearborn court, although the 2d Circuit clearly criticized the 6th Circuit's analysis. 7 In matters of RF emissions, the FCC also may hear complaints. s See, e.g., Omnipoint Holdings, Inc. v. City of Southfield, 355 F.3d 601 (6th Cir. 2004)(upholding summary judgment against Omnipoint); U.S. Cellular Corp. v. City of Wichita Falls, Tex., 364 F.3d 250 (5th Cir. 2004)(upholding denial of tower variance request that departed sharply from local land use regulations); Sprint Spectrum L.P. v. City of Carmel, Indiana, 361 F.3d 998(7th Cir. 2004)(dismissing challenge as unripe). 9 See also Qwest Communications Corp. v. City of New York, 387 F. Supp. 2d 191, 195 (E.D.N.Y. 2005).The district court also rejected a claim by the City that the rules challenged by NextG Networks — which involved access to light poles for placement of wireless facilities — involved a proprietary function as opposed to a regulatory function. However, the court did rule that the Telecommunications Act "does not preempt nonregulatory decisions of a local government entity or instrumentality acting in its proprietary capacity." 10 47 C.F.R. § 1.4000(a)(3). " In Section 207 of the Telecommunications Act of 1996, Pub. L. No. 104-104, 110 Stat. 56 (1996), Congress instructed the FCC to "promulgate regulations to prohibit restrictions that impair a viewer's ability to receive video programming services through devices designed for over-the-air reception of television broadcast signals, multichannel multipoint distribution service, or direct broadcast satellite service." 12 In re Implementation of Section 207 of the Telecommunications Act of 1996; Restrictions on Over-the-Air Reception Devices, CS Docket No. 98-83, Memorandum Opinion and Order and Further Notice of Proposed Rulemaking, 11 FCC Rcd 19276 (1996). (Continued) 0 2007 Miller& Van Eaton P.L.L.c. Page 21 13 In re Implementation of Section 207 of the Telecommunications Act of 1996; Restrictions on Over-the-Air Reception Devices, CS Docket No. 98-83, Second Report and Order, 13 FCC Rcd 23874 (1998). 14 Building Owners and ManagersAss'n Int'l v. FCC, 254 F.3d 89, 96 (D.C. Cir. 2001). 15 Promotion of Competitive Networks in Local Telecommunications Markets, First Report and Order, 15 FCC 22983 (2000). 16 Promotion of Competitive Networks in Local Telecommunications Markets, Order on Reconsideration, 19 FCC 5637 (2004). 17 An earlier staff notice had stated that because Wi-Fi antennas transmit fixed wireless signals, the OTARD rule applies to Wi-Fi antennas. Commission Staff Clarifies FCC's Role Regarding Radio Interference Matters and Its Rules Governing Customer Antennas and Other Unlicensed Equipment, Public Notice, DA 04-1844 (June 24, 2004). © 2007 Miller& Van Eaton P.L.L.C. Page 22 INTERNATIONAL MUNICIPAL Item #10 LAWYERS ASSOCIATION INTERNATIONAL MUNICIPAL LAWYERS ASSOCIATION 117i;1 Work Session: vl Title: Telecommunications: Evolution or Revolution? by Presenter: Alan S. Tilles Presenter's Title: Partner Presenter's Office: Shulman, Rogers, Gandal, Pordy & Ecker, P.A. (0 2004 International Municipal Lawyers Association. This is an informational and educational report distributed by the International Municipal Lawyers Association during its 2007 Mid Year Seminar,held April 22-24,2007 in Washington, D.C. 1MLA assumes no responsibility for the policies or positions presented in the report or for the presentation of its contents. Summary Of 800 MHz Rebanding Report & Orders "as'Esgwr -S G man,Rogers, andal Pordy 8 cker,PA 11921 Rockville Pike,Third Floor Rockville,Maryland 20852 301-231-0930 www.shulmanrogers.co m www.800mh7rebanding.com April 2007 Itr V� im at Who Are We? 0 Full Service Law Firm fn Rockville,Maryland Largest MO Law Firm Outside Of Baltimore • Corporate,Real Estate/Zoning,Litigation And Telecom,Depts. Telecommunications Department Counsel To Frequenry Coordinators,Public Safety And Private Radio Licensees And SMR Operators Since 1984 lcense Swap Negotiations NtJeeb�o- eel Hundreds IX RaTurc And Acquisition Agreements W ilb M1le�'Id Qi aelialrIX lncumbentl.iransees ftepe mtl In R.1A en ees(Saes,Cilss,Countie a d Commerdd Licensees)In ebararg Negodations Stales IXKansaz,Cdaado 8 Alabama CiGez IrdWe Denver, Sauamenlo,K.G.,St Louis,Plroenix Tallatiauae,SpnngRdd,d,Goo Columbus Fxpenerced FCC Licensing Preparation Personnel .WVFMLAN And Tower Negotiations e Broadband And 700 MHz Assistance 2 CURRENT CHANNEL PUN STAY tal a 0 0 t,,,I H*.--Band Plan Comparison FCC'S FINAL PLAN CeN,fr LWa E3MRidlodc 4 fLLliX Payment Of Costs •Nextel To Pay All Relocation Expenses • No$850 Million"Cap" • Nextel Pays For Transition Administrator Expenses •Nextel Required To Secure An Irrevocable Letter Of Credit Of$2.5 Billion • $2.5 Billion Strictly For 800 MHz Retunes,Not For Transition Administrator Or Other Compensation • Nextel May Be Required To Obtain Additional Letters Of Credit If Necessary 5 xs :4 Transition Administrator Duties •Mediates Disputes Between Licensees And Nextel • Mediation Decisions May Be Appealed To FCC For De Novo Review • Issues Draw Certificate To Letter Of Credit Trustee To Pay Relocation Costs If Nextel Does Not Timely Pay Licensees •Establishes Relocation Schedule 5 The Process • Licensee And Nextel Negotiate Agreement • Agreement Is Signed By Licensee And Nextel • FCC Applications Prepared By Whomever You Choose • FCC Grants Application(s) • Re-Banding Work Performed • Whenever A Payment Event Is Reached,Licensee Makes Payment Request . Vendor Payments May Be Made Directly To Vendor • When Work Completed,TA Audits Expenses . True-Up Of Expenditures,Only Actual Costs Are Paid fi 2 Licensee Approval & Signing Process 41 What Is The Procedure In Your Agency For Getting A Fully Executed Contract? • Who Reviews The Draft Contract? .Most Typical"Hot Button"Issue-Confidentiality Clause • Will It Have To Go To City/County Council? •Since No"Out Of Pocket"For Your Agency For Vendors, Is This Necessary? •Can The Council Give"Going Forward"Authority To Sign Future Rebanding Docs? • Timeline:How Long Will All Of This Take? 7 e e� Recoverable Costs • Inventory • Equipment Costs • Retuning,Reprogramming And Replacement(Where Necessary) • Preparation And Filing Of FCC Applications • Installation,Testing And Engineering • Legal Fees(Both In-House&Outside Counsel) • Preparing Cost Estimate And SOW(If Necessary) • Activities Of Licensee In-House Personnel Performing Reconfiguration Work • Licensee(And Vendor)Expenses Related To TA Mediation • Need To Negotiate Change Order Before Incurring Additional Expense a 11.UYN �VIU, MOLE, Mediation • Unfortunately,Mediation Is The Norm,Not The Exception • Don't Settle For Less,But Don't Force Yourself To Mediation By Failing To Negotiate In Good Faith • If You Don't Negotiate In Good Faith,You May Find That Your Mediation Costs Are Not Recoverable • Mediation Consists Of Numerous Conference Calls(Or Meetings) • If No Resolution,The Filing Of Proposed Resolution Memorandum PM)By Each Party Forms The Basis For Mediator Decision • Biggest Problem In Mediation Is Vendors I&Licensees)That Cannot Demonstrate Why A Task Takes XX Hours To Perform • Mediation Decision Forwarded To FCC You May Appeal Mediation Decison At FCC For De Now Review ed To d shed Th d 10 DonT Fal To Get Anythiry Relcvanl Into The t ,,hon Remrd 9 '1 J How's It Going So Far? a Progress Has Been Slow,Because: • Some Licensees Not Being Pi-Active Not Participating In Process • Not Keeping it l-1 a Counsel Informed Techs eelieting That They Gan Handle It AY Themselves Nextel Problems Problems With Temporary Equipment Supplied By Nextel Nexlel Ubgation Tac&s In Nation • Austin Powers"Mustata'Negobabons TA PmMZ 3 Negotiations On RFPFs . 0c Will TAUpm SuWrvmn,om WiTN•rtel.TM"TA Closing Dowmen1 8 Certification pauses • Delays In Getting Vendor Cost Estimates • Unrealistic Vendor Cost Estimates No Mexican Or Canadian Border Plan Vet • Waiting On FCC Decisions On"Big Picture'Items ,0 t1d44� .Ca The Use Of Outside Counsel • Fully Recoverable Expense • Unless Redundant Of In-House Counsel Tasks •Proper Roles • Municipal Counsel Ensures Compliance With Local Law • Outside Counsel Should Be Expert In Land Mobile Radio,Not Just Telecom •Should Be Familiar With Other Rebands •Should Have Technical Knowledge •Should Not Put Licensee"At Risk"For Services Which Are Deemed Outside Of Rebanding t, t3.4Y4V WA PA What Doe We Do For Licensees? •Assist With Creation Of Statement Of Work And/Or Cost Estimate •Assist With Selection Of Outside Vendors • Negotiate Rebanding Agreement With Nextel •Representation In Mediation And Appeals Before The FCC •Prepare,File And Negotiate Change Orders •Take You Through Closing •Take You Through An Audit List Of Relevant URLs • FCC Web S to • hftpil wireless.fcc.gov/publ icsafety/800MHz/bandreconfigurationfindex2.html • Shulman Rogers 800 MHz Web Site • Zh //www_800mhzrebanding.com o Transition Administration Web Site htti)Vw .800ta.om • APCO Web Site • hgp.h/ ".2pcoinb.org/frequency/Boohl).htm • Motorola's Web Site • http:Uwww.motorola.com/800rebanding • MIA-Com Web Site • http://www.macom-wireless.com/800rebanding/default.asp • E.F.Johnson Web Site • hM?:Owww.eflohnson.com/products/rebandina.aso 13 43lt�' A� THANK YOU! Alan S. Tilles, Esquire Shulman,Rogers,Ganda[,Pordy&Ecker,P.A. 11921 Rockville Pike,Third Floor Rockville,Maryland 20852 atilles(a)srgpe.com www.shulmanrogers.com www.800MHzRebanding.com ,4 5 INTERNATIONAL MUNICIPAL Item #10 LAWYERS ASSOCIATION O � d O O 3 0 � a � 4-o -' V O a CD Q -a cn J L 0 -0 s LL °a 0 L LL — LM J y y w 3 a _ m CL m 13 .V ._ L — V m m r^ Cl) w W N O E G1 N M 4) M M y � .� V1 ca Q ++ O Rid O Q � � aQ .j Q J Ica z � O � (o N LL U O x •� O O O '� N W m U u O >' U •V N (� Q 0 -0 ui ♦ 0- O O r W N OW CO i O cn L. to � •O O O C: +� E o � cn 0 X U) LL U) O 4- ._ O U) x 4. O .0 (n a� co C6 CO O +� O � • O O •— >' � O ._ CL E X (0-0 ♦ �. U) ♦ O O V co I LL O i IL a (n 4- o w d- ca v -1-, > C;) y 0 Q ,C •— (1) o • LL = > — N O of s C`7 • 00 Cl) o L CCS N vi 4- � 00 Y � p : � p -�-� � � +) � E CL cn -0 U 0 (D FD 0 � o lL I . a) ( 1 a) o U) X � E 0- m 0 'L ° Now cr 4� to 0 >, o , . , i •— .� o C: E o CLE 0 }' ;L � oQ E -0 o �� O (1) L) 0 .— %4- 0 c . L , LL M -0 J > ■ . 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ZN 06 0 a m co O = m • W p - C) CD m a U cY) O CY 0 00 Cn — � v o CY) N . = U ° L) LL Q c� N cn O r U 4� '— O O � O cn O r Q N N J LL um no T a INTERNATIONAL MUNICIPAL Item #10 LAWYERS ASSOCIATION f i I i i I I i Y I U OO Natian�r�Caumies I The Voice of America's Counties Why We Need to Watch Out for TABOR Jacqueline Byers Director of Research and Outreach National Association of Counties The Taxpayers Bill of Rights (TABOR) grew out of the movement started in the 1970's to limit property taxes and to restrict revenue raising and spending by governments. Proposition 13 (Prop 13) is the most well known among these efforts to limit revenue. Officially called "the People's Initiative to Limit Property Taxation," Prop 13, was put on the California ballot in 1978 using the citizen initiative process. This initiative, which passed with 65 percent of the vote, amended the state constitution to limit the growth of assessments of residential property to 2 percent a year. Prop 13, sponsored by Howard Jarvis and Paul Gann, and often called the Jarvis-Gann Amendment, started a wave of revenue limitation that swept across the country and even to the halls of Congress. Since its inception, nearly 29 states have adopted tax and expenditure limits. The Colorado Story In 1992 Colorado passed the largest anti-tax movement legislation in the history of the country. This bill established a base of expenditures for the state and county government. This base was tied to population growth, inflation and the actual revenue base of the previous year. In simple terms, general fund expenditures could increase only by 6percent over the previous year or 5 percent of personal income, whichever was lower. This law also required that any surplus above this amount be returned to the taxpayers. Throughout the boom years of the 90's, the bill did just what it was supposed to do, actually returning money to taxpayers as an offset of state tax liability. The only way to change this formula is to go to the people and ask for permission to keep more money in the state coffers than the law specifies. Local governments have done this numerous times,but the state had not. The first strike at TABOR came in 2000 when the voters approved an amendment to the constitution that increased state spending for elementary and secondary education. Amendment 23 requires the state funding per pupil to grow yearly by the rate of inflation, enrollment growth and an additional 1 percent through 2001. It was designed to tap TABOR surpluses. The state faced a recession in 2001-2002, lowering its state tax collections. There were no surpluses to fund the expenditures for education. The increased funding for education put a strain on the budget and required cuts elsewhere. Growing costs for the state share 1 senior citizens, both of which are segments that impact government budgets and service delivery. With the coming growth in seniors and the elderly population due to the aging of the Baby Boomers, formulas like TABOR that are based on total population growth will provide inadequate guidelines for governmental budgets. Finally, the formula embodied in the TABOR Legislation in Colorado, limited growth by tying the growth rate to the previous year's collection rate. During 2000-2002 when the recession hit state and county government's revenues severely, budgets and revenues dropped dramatically. When the state was trying to climb out of the recession, its growth was limited to the allowed collection under the formula base of the prior year. This means that in the years immediately following a recession, revenues are only allowed to grow from the lowest years at the rate of population growth and inflation imposed by the TABOR legislation. It is nearly impossible in the short run for governments to return to the prior recession revenue rates. The additional section in the Colorado Constitutional amendment that requires all revenues raised in excess of the allowable rate be returned to taxpayers also makes it virtually impossible for a state or local government to put away a "rainy day" or contingency fund. In the wake of September 11 and the dramatic growth in homeland security programs and in a Post Katrina landscape, it is apparent that a formula like the one embodied in TABOR makes it impossible for a government to respond to these kinds of unforeseen occurrences and fails to take into account the funding necessary to assure the well being and safety of people during these events. When Colorado was hit hard by the West Nile Virus, the state could not immediately respond because of lack of funding. TABOR in Colorado requires that the State Legislature cannot spend above the constitutionally imposed limits without a public vote. In nearly every other state that has adopted tax and expenditure limits, either a majority or supermajority of the legislature can vote to override the limits. Critics believe this specific provision in TABOR is what prohibits the government from being able to respond swiftly to an economic downturn, revenue shortfall, natural disaster or terrorist attack. Going to a public vote requires time and money and often involves huge campaigns waged by both sides to press their point of view on the vote. This was apparent during the campaigns waged around the November 2005 vote in Colorado that rescinded TABOR for five years. Finally, TABOR, in the version adopted in Colorado and the version most recently voted down in Oregon and Nebraska, is a constitutional amendment. In Maine, where it was also voted down, it was a statutory proposal because the state does not allow constitutional amendments by initiative. Once this type of legislation becomes part of the state constitution it is difficult to remove and ties the hands of elected officials. 3 INTERNATIONAL MUNICIPAL Item #10 LAWYERS ASSOCIATION INTERNATIONAL MUNICIPAL LAWYERS ASSOCIATION Personnel Section and Ethics Section Joint Workshop Electronic Communications and Open Government By Phillip M. Sparkes Director, Chase Local Government Law Center and Assistant Professor of Law, Salmon P. Chase College of Law Northern Kentucky University Highland Heights, KY ©2007 International Municipal Lawyers Association. This is an informational and educational report distributed by the International Municipal Lawyers Association during its 2007 Mid Year Seminar, held April 22-24, 2007 in Washington, D.C. IMLA assumes no responsibility for the policies or positions presented in the report or for the presentation of its contents. I. Email as a Public Record* In an Open Records Act appeal earlier this year, the Attorney General addressed the right of access to email under the act.' A city resident had requested certain email messages currently housed on the computer of a city commissioner covering a period of twelve months. Within three days of receiving the request, the city informed the citizen that the materials would be available in about a week's time. The city's letter provided no detailed explanation for the delay, an oversight for which the Attorney General would criticize the city in the open records decision. Objecting to the delay,the citizen initiated an open records appeal. On appeal, the city explained that the delay resulted from the city commissioner's inability to retrieve the information requested owing to the demands of his private employment and his campaign for re-election. This did not satisfy the Attorney General who said, "... the duty to provide timely access to nonexempt public records has been deemed to be `as much a legal obligation of a public agency as the provision of services to the public,' which should not yield to the press of other agency business .... It is the opinion of this office that campaigning for reelection, or discharging duties associated with private employment, do not provide a sufficient legal basis for temporarily suspending the legal obligations imposed on a public agency.... In our view, it is for the records custodian, and not the email account holder, to locate and retrieve these records and to make the determination as to which are exempt and which must be disclosed. ,2 In reaching that position, the Attorney General wrote, "It is well-recognized, and apparently undisputed,that electronic mail generated by public agency officials or employees is a public records as defined in KRS 61.870(2), and is therefore subject to the Open Records Act."3 As further support for this assertion, the Attorney General cited a policy of the Governor's Office for Technology, The Status of Electronic Mail as a Public Record.- The purpose of this document is to underscore the fact that electronic mail, created or maintained by public agencies, meets the statutory definition of a public record in Kentucky. As such, it is subject to management requirements which may be beyond those contemplated by regular mail users: electronic mail may be subject to open records requests, its users may have inappropriate expectations of privacy and informality; mail may be being destroyed inappropriately; or it may be accumulating in systems when it should more properly be destroyed as soon as it no longer has value to the agency. Case law shows that electronic mail certainly is discoverable under actions brought against the government, and its inappropriate retention therefore brings risk.4 For these reasons, the Kentucky Information Resources Management Commission (KIRM) advises that public agencies develop policies for managing electronic mail. This article originally appeared in Local Government Law News,Fall 2003. Op.Att'y. Gen. 03-ORD-005 (January 8,2003) Z Id at 4-5. 31d. at 4. 4 Governor's Office for Technology,Office of Policy and Customer Relations, The Status of Electronic Mail as a Public Record, adopted March 4, 1996,available at http://www.state.ky.us/kirm/emailpol.htm. More recently, the Kentucky Department of Libraries and Archives published its Guidelines for Managing E-Mail in Kentucky Government("Guidelines").5 The guidelines "represent best practices that are designed to assist agencies in effectively and efficiently managing the e-mail records."6 Echoing the KRIM policy, it states, "Since e-mail meets the statutory definition of a public record in Kentucky, it is subject to management requirements which may not be obvious."7 As a government record, an email message must be retained and managed for as long as it is needed for administrative, fiscal, legal, or historical requirements. According to the Guidelines, the first steps after receiving an email message are to determine whether it is an agency record and to determine the kind of record it is. The recipient is usually the person who will make the initial decision based on the scope of that person's responsibility within the agency. However, both senders and receivers of email messages may have a responsibility for retaining them. If the message has nothing to do with agency business—personal messages and "spam" are examples—it is non-record material. State ex rel. Wilson-Simmons v. Lake County Sheriff's Department, 693 N.E.2d 789 (Ohio 1998), demonstrates this concept of non-record material.$ Trudy Wilson-Simmons was a corrections office in the sheriff s department. After a co-worker alerted her, she complained to the administrator of the detention center at which she worked that other, unnamed corrections officers were using the jail's email system to make racial slurs against her. She asked to view the email of every officer at the facility. Later, at the administrator's request, she made a more specific request to view the email of five officers covering the period of a month. In response, the Chief Deputy advised her that she would have to pay$2,532.40 plus copying costs to see it because it would take the department's computer specialist 140 hours to reconstruct the email in question. It was on a backup system that was not readily accessible, and the current email system could not read the old data created by a different email system. Eventually, Wilson-Simmons filed suit under Ohio's Public Records Act to compel the sheriffs department to provide access to the requested email. The Sheriffs response was that the email did not constitute a record under the act. The Ohio Supreme Court agreed. Quoting a 1993 5 Kentucky Department for Libraries and Archives, Guidelines for Managing E-Mail in Kentucky, ("Guidelines") available at http://www.kdla.ky.gov/recmanagement/EmailGuidelines.pdf. See also Understanding Records Management: E-Mail Records,http://www.kdla.ky.gov/recmanagement/tutorial/email.htm. Examples of guidelines from other states include North Carolina Department of Cultural Resources,E-Mail as a Public Record in North Carolina(2002),available at http://www.ah.dcr.state.nc.us/sections/archives/ree/Email_8_02.pdf-,Montana State Records Committee,Email Guidelines(1998),available at http://www.sos.state.mt.us/Assets/email 98.pdf,The Library of Virginia,Electronic Mail(E-Mail)Retention Guidelines and Requirements(1997), available at http://www.Iva.lib.va.us/whatwedo/records/electron/em-pol.htm;Connecticut State Library,Electronic And Voice Mail:A Management And Retention Guide For State And Municipal Government Agencies, available at http://www.cslib.org/email.htm; and Massachusetts Archives SPR Bulletin No. 1-99,available at http://www.state.ma.us/sec/arc/arcrmu/rmubul/bul 199.htm. 6 Guidelines. Id. 8 Kentucky courts do not always distinguish between a personal document that is not a public record under KRS 61.870(2)and a personal document that is a public record,but is exempt from disclosure under KRS 61.878.Hardin County v. Valentine, 894 S.W.3d 151 (Ky. Ct.App. 1995)is a case that turns on the distinction. Now decision, it said, "to the extent that any item ... is not a `record,' i.e., does not serve to document the organization, etc., of the public office, it is not a public record and need not be disclosed." There was no allegation that the racist email documented sheriff's department policy or procedure. Times Publishing Company v. City of Clearwater, 830 So. 2d 844 (Fla. App. 2002), reached a similar result under the Florida Public Records Act. A newspaper, looking for evidence that two city employees were running an outside business from work, asked for all the email sent from or received by their government owned computers. The city permitted the employees to sort the email into personal and public categories and provided only the email identified as public to the paper. The paper asserted a right to all email, including that identified as private. The court rejected that position, concluding that email stored in government computers does not automatically become a public record by virtue of that storage. In the court's view there is little to distinguish such email from personal letters delivered to government workers via a government post office box and stored in a government-owned desk. Private or personal email was outside the definition of a public record. On appeal, the Florida Supreme Court agreed, citing its own rule about access to judicial emails. State of Florida v. City of Clearwater, So.2d_(2003). "[P]rvvate documents cannot be deemed public records solely by virtue of their placement on an agency-owned computer. The determining factor is the nature of the record, not its physical location."9 Although the emails in Wilson-Simmons and Clearwater did not constitute public records, there was no dispute that they were created by public employees on a public office's email system. Such situations such are why the Guidelines advise agencies to have in place an appropriate use policy that governs the amount of non-work related email on the system.10 The city of Clearwater had such a policy in place. The policy"which states that the City's computer resources are the property of the City and that users have no expectation of privacy, cannot be construed as expanding the constitutional or statutory definition of public records to include `personal' documents."11 For messages that are business related and meet the definition of public record, the recipient must identify the type of record it is and the appropriate retention period that applies.12 As public records, email messages are subject to the same retention requirements as records of the same type in another format or medium. In general, relevant messages will fall into one of three broad categories, discussed below. The Guidelines point out that all agency employees who use email must be trained to identify the kinds of records they create and receive and trained to use the records retention schedules. The first general category into which email messages may fall is Informational and Reference Material. These are records of transitory value, not meaningful in documenting agency business. Email messages in this category can be destroyed as soon as they are needed no 9 Slip opinion at 5. 10 See Stuart J.Kaplan,E-Mail Policies in the Public Sector Workplace: Balancing Management Responsibilities With Employee Privacy Interests,LERC Monograph Series 1998. " Slip opinion at 5. 12 See the various local records schedules available at http://www.kdla.ky.gov/recmanagement/localschedule.htm. longer.13 The Guidelines recommend removal of non-business related and transitory email messages as soon as possible. The second category into which email messages may fall is Temporary Records. These are records with some documentary value to the agency, but that do not need to be retained permanently. Agencies may need to keep email messages in this category for periods of a few months to several years. The third category is Permanent Records. These are records of the agency that have lasting value because they document the functions and duties of the agency over time. The Guidelines recommend training employees in the use of the agency's email application to create folders for organizing their email messages into a structure that mirrors the agency's record keeping system. As the Attorney General noted 03-ORD-005, it is for the records custodian, and not the email account holder, to locate and retrieve email messages and to make the determination whether they are subject to disclosure. It follows that the folders into which senders and receivers place messages ought not to be on individual computer hard drives, but instead should be on an agency network drive or in an electronic record keeping system. This allows agencies promptly to respond to open records requests. It also allows the custodian of the record to segregate, manage, and secure messages that are the subject of open records requests or discovery demands. Consult the Guidelines for advice about the preservation of email records. " See,e.g., General Schedule for Local Agencies: Common Records,Administrative: Series L4956 Informational and Reference Material(Disposition:Destroy when no longer useful.) H. E-mail, Chat Rooms, and Open Meetings" Modern communications technologies sometimes pose challenges for open records laws as shown in an article in the last issue of this newsletter.' Those technologies also present challenges for open meetings acts, too, as shown in the recent case of Beck v. Shelton.2 Beck involved the open meetings provisions of the Virginia Freedom of Information Act. The plaintiffs complained that the mayor, vice-mayor, and three members of the city council of Fredericksburg, Virginia"`deliberately e-mailed each other in a knowing, willful and deliberate attempt to hold secret meetings, avoid public scrutiny' and `discuss City business and decide City issues without the input of all the council members and the public."'4 Both sides agreed that those public officials corresponded with each other by e-mail concerning specific items of public business. They disagreed about whether the exchange was a meeting subject to the act.5 At the beginning of its open meetings analysis, the Virginia Supreme Court noted that the use of computers for textual communication takes different forms. In one form it is the functional equivalent of a letter sent by ordinary mail, courier, or facsimile transmission. In this form there may be significant delay between its preparation and its receipt, and there may be additional delay between receipt and reply. In another form textual communication is the functional equivalent of a discussion potentially involving multiple persons. Chat rooms and instant messaging are examples. The e-mail at issue in Beck fell into the former category. The shortest interval between sending a message and receiving a response was more than four hours; the longest interval was more than two days. The trial court held that such use of e-mail was a meeting for the purpose of Virginia act.6 Because the officials held this meeting in private, without notice to the public and without opportunity for the public to attend, the lower court said this was a violation of the Freedom of Information Act. For the trial court the issue was not the electronic nature of the transmission, but the way in which e-mail was used. The Virginia Supreme Court agreed that the manner of use was dispositive, but disagreed that this use constituted a meeting. k;This article originally appeared in Local Government Law News, Winter,2004. 1 E-mail as a Public Record, Local Government Law News,Fall 2003, 1. 2 Beck v. Shelton, 593 S.E.3d 195 (Va.2004). 3 Some of the conduct complained of occurred while the members were still members-elect. The court had to decide whether the Virginia Freedom of Information Law applied to members-elect and concluded it did not. 593 S.E.3d at 197-8. 4 593 S.E.at 198. 5 The court also had to decide whether certain other conduct that was unrelated to the exchan ge of e-mail(a street gathering characterized as a citizen-organized informational forum)was a meeting subject to the act. The court affirmed the trial court finding that it was not. 593 S.E. 3d at 200-1. 6"Meeting"or"meetings"means the meetings including work sessions,when sitting physically,or through telephonic or video equipment pursuant to §2.2-3708, as a body or entity, or as an informal assemblage of(i)as many as three members or(ii)a quorum, if less than three,of the constituent membership,wherever held, with or without minutes being taken,whether or not votes are case,of any public body. The gathering of employees of a public body shall not be deemed a"meeting"subject to the provision of this chapter.Va. Code Ann. §2.2-3701. There is no question, said the high court, that e-mails fall within the definition of public records. The question was whether they also fell within the definition of a meeting. This turned on whether there was an "assemblage" of members. An assemblage, the court reasoned, "entails the quality of simultaneity."7 That quality may be present in a chat room or in instant messaging, but it is not present when e-mail is the functional equivalent of ordinary mail, courier, or facsimile transmission. Drawing support from another section of the Freedom of Information Act,8 the court concluded that some electronic communication may constitute a meeting and some may not. The key difference is the feature of simultaneity. To reinforce its conclusion, the Virginia Supreme Court cited an opinion of the Virginia Attorney General.9 That opinion did not address chat rooms or instant messaging, but it did discuss an exchange of e-mails like that in Beck. The Virginia Attorney General concluded that this was essentially a form of written communication. Although not binding on it, the court said the opinion was "entitled to due consideration,"particularly where the General Assembly had known of the opinion for five years and had done nothing to change it.'0 A less permissive approach than that of the Virginia Supreme Court is the one taken by the Washington Court of Appeals in Wood v. Battle Ground School District.11 Wood alleged that school board members violated Washington's Open Public Meetings Act when they discussed board business by exchanging e-mail over a period of several days. The Washington court noted that elected officials no longer conduct public business solely at in-person meetings. The court said that if face-to-face contact were necessary for a meeting it would be too easy to evade the requirements of an open meetings act.12 It followed that a definition of meeting that required physical presence of members in the same location would defeat the purpose of the Washington act. Virtual presence is enough.13 As the Washington Attorney General interprets it, "[a] meeting occurs if a majority of the members of the governing body were to discuss or consider [agency business] no matter where that discussion or consideration might occur,"14 to which the court might add "... and regardless of the particular means used to conduct it."15 Thus, the Wood court concluded that the exchange of 593 S.E.3d at 199. 8"[N]othing contained herein shall be construed to prohibit separately contacting the membership, or-any part thereof,of any public body for the purpose of ascertaining a member's position with respect to the transaction of public business,whether such contact is done in person,by telephone or by electronic communication,provided the contact is done on a basis that does not constitute a meeting as defined in the chapter."Va.Code Ann. § 2.2- 3710(B). See also Va. Code Ann. § 2.2-3708, "Electronic communication meetings." 9 1999 Va. Op. Atty. Gen. 12. 10 593 S.E.3d at 200. 11 Wood v. Battle Ground School District, 27 P.3d 1208 (Wash. Ct.App. 2001).As in Beck, a threshold issue was the applicability of the open meetings act to members-elect. Noting that the Washington Open Public Meetings Act was modeled on those in California and Florida, and that courts in those states had reached dissimilar conclusions on the question,the Washington court concluded that its act did not apply to members-elect.Id. at 1213-5. 12 Id. at 1216, citing with favor Stockton Newspapers, Inc. v. Members of the Redevelopment Agency, 171 Cal.App.3d 95 (1985). 13 See Jessica M.Natale,Exploring Virtual Legal Presence: The Present and the Promise, 1 J. High Tech. L. 157, 158(2002) ["Virtual presence is achieved through a number of electronic means such as email,teleconferencing, videoconferencing,and even electronic bulletin boards."). "27 P.3d at 1216-7 citing Attorney General's Open Records& Open Meetings Deskbook, 1.313. 1527P3dat1216. e-mail, even without the feature of simultaneity important to the Beck court, could constitute a meeting. In Kentucky, the Open Meetings Act defines "meeting" as "all gatherings of every kind, including video teleconferences, regardless of where the meeting is held, and whether regular or special and informational or casual gatherings held in anticipation of or in conjunction with a regular or special meeting."16 The inclusion of video teleconferences in the definition of meeting reinforces the conclusion that electronic meetings are meetings for the purpose of the Open Meetings Act. One can draw several inferences from KRS 61.826, which grants authority to a public agency to conduct any meeting, other than a closed session, through video teleconferencing. One is that physical presence is not necessary condition for a meeting for the reasons stated by the Wood court. Another, which follows from the rule of statutory construction that the expression of one thing is to the exclusion of another, is that the statute precludes any kind of electronic meeting other than video teleconferencing. Legal authority tends to support this inference.17 Because the word "gathering" in the Kentucky definition of meeting is similar the word "assemblage"18 on which the Virginia Supreme Court focused in Beck, one might be tempted to infer that simultaneity would be important in Kentucky. After all, the fact that video teleconferencing shares the feature in common with traditional gatherings in person was probably important to General Assembly when it enacted KRS 61.826. However, to stop there is to ignore the implications of the serial meetings provision in KRS 61.810(2). A recent open meetings decision, Ky. Op. Atty. Gen. 03-OMD-092, suggests how that provision might apply. In 03-OMD-092, the Attorney General addressed the situation where less than a quorum of a city council attended a meeting with representatives of bidders on a city contract. Following that meeting,the mayor conducted telephone discussions with at least one absent council member. A citizen asked the Attorney General to declare this a violation of KRS 62.810(1) or(2) which provide: (1) All meetings of the members of any public agency at which any public business is discussed or at which any action is taken by the agency shall be public meetings, open to the public at all times.... (2) Any series of less than quorum meetings, where the members attending one (1) or more meetings collectively constitute at least a quorum of the members of the public agency and where the meetings are held for the purpose of avoiding the requirements of subsection(1) of this section shall be subject to the requirement of subsection(1) of this section. Nothing in this subsection shall bee construed to prohibit discussions between individual members where the purpose of the discussion is to educate the members on specific issues. 16 KRS 61.805(1). 17 See,e.g.,Fiscal Court of Jefferson County v. Courier Journal, 554 S.W.2d 72(Ky. 1977)(telephone votes void). See also Ky.Op.Atty. Gen. 03-OMD-092 at 4(citing previous opinions). 18 See, e.g., Stephen Glazier,Random House Word Menu 612(1992)which defines assemblage as"a gathering of persons for specific purpose"(emphasis added). The Attorney General said that on the facts of this appeal a series of meetings of less than a quorum occurred. The Shively City Council, consisting of six members, acknowledges a meeting of the Mayor, three council members, and the two responsive bidders, and a second telephone meeting between the Mayor and at least one absent council member, arguing that a telephone conversation between two members of a public agency should not be considered a meeting. We agree that, standing alone, a single telephone conversation between two members of a public agency cannot be said to constitute a violation of the Open Meetings Act. Where, however, that telephonic meeting follows an earlier less than quorum meeting of the members of a public agency, and the members attending one or more of the meetings collectively constitute at least a quorum, here four members of the six member body, that series of less than quorum meetings constitutes a violation of KRS 61.810(2) if the meetings "are held for the purpose of avoiding the requirements of[KRS 61.810(1)1." Following these meetings, and with little or no discussion, the city council approved a municipal order awarding a contract to Derrick Manufacturing at its next regular meeting. We find that the record on appeal confirms two of the three elements of the conduct proscribed in KRS 61.810(2), and that the final sentence of that statute, upon which the city council relies as a defense to its actions, did not authorize a series of less than quorum discussions of the "alternatives to a given issue about which the [council] has the option to take action." Ky. Op. Atty. Gen. 03-OMD-092 at 4. Only the inability to determine whether the participants intended to avoid the requirements of the Open Meetings Act prevented the Attorney General from concluding that a violation of the act occurred. As 03-OMD-092 shows, simultaneity is not a condition necessary to a violation of the Kentucky Open Meetings Act. In addition, it is easy to see from the Wood decision how an exchange of e-mail could substitute for the first (in person) meeting in 03-OMD-092 and easy to see from the Beck decision how an exchange of e-mail could substitute for the second (phone) meeting. Making those substitutions leads to the conclusion that an exchange of e-mail among a quorum of members of a public body could constitute a meeting for the purpose of the Kentucky Open Meetings Act. Hawaii recently addressed this issue using language similar to that used in 03-OMD-092. It said, "[T]he Legislature's intent in enacting the statute was to ensure that the formation and conduct of public policy, i.e., discussions, deliberations, decision and actions, are conducted openly. The Sunshine Law requires that Committee members discuss Official Business in a meeting, not through position statements circulated outside of a meeting. Stated differently, the forum for `committee members to record and inform other members of their position on certain matters' is at a properly noticed meeting...."19 The opinion goes on to say that serial 19 Haw. OIP Op. Ur. 04-01 at 8-9(2004). communications "violate[], at a minimum, the spirit of the Sunshine Law"20 and that e-mail "cannot be used to circumvent the spirit or requirements of the Sunshine Law or to make a decision upon a matter concerning Official Business."21 20 Id. at 9. "Id. at 10. INTERNATIONAL MUNICIPAL Item #10 LAWYERS ASSOCIATION INTERNATIONAL MUNICIPAL LAWYERS ASSOCIATION Work Session: X: Ethics Title: Preservintj and Divulging Confidential Information in the Organizational Setting By Presenter: Peter H. Pierotti, Es Presenter's Title: Assistant City Attorney Presenter's Office: City of Albuquerque I ©2007 International Municipal Lawyers Association. This is an informational and educational report distributed by the International Municipal Lawyers Association during its 2007 Mid Year Seminar, held April 22-24, 2007 in Washington, D.C. IMLA assumes no responsibility for the policies or positions presented in the report or for the presentation of its contents. INTERNATIONAL MUNICIPAL LAWYERS ASSOCIATION 2007 MID YEAR SEMINAR WASHINGTON D.C., APRIL 2007 PRESERVING AND DIVULGING CONFIDENTIAL INFORMATION IN THE ORGANIZATIONAL SETTING by Peter H. Pierotti, Esq. Assistant City Attorney Albuquerque, New Mexico ppierotti(a,caba.2ov 505-768-4500 Program Outline Ex Parte Contact of Former Municipal Managers Regarding Matter in Litigation - ABA Model Rule of Professional Conduct 4.2 Development of Rules of Ethics Applying to Confidentiality in the Organizational Setting - Status of"Ethics 2000" revisions to ABA Model Rules of Professional Conduct - Development of lawyer ethics in wake of Sarbanes-Oxley Act of 2002, 15 USC §§ 7201, 7245 - 2003 ABA Model Rules of Professional Conduct 1.6 and 1.13 i EX PARTE CONTACT OF FORMER MANAGERIAL EMPLOYEES by Peter H.Pierotti,Esq. City of Albuquerque You are defending your municipality in litigation. The plaintiff's counsel is attempting to contact a former municipal department manager who has information about the subject matter of the litigation. Because you represent the municipality, can the plaintiff's counsel ethically contact the former manager and conduct an ex parte interview? Improper ex parte contact with organizational representatives can have serious consequences in litigation. Sanctions imposed could include disqualification of counsel and suppression of the evidence improperly obtained. Camden v. Maryland, 910 F.Supp. 1115 (D.Md. 1996). The applicable ABA Model Rule of Professional Conduct 4.2 does not specifically address ex parte contact with current or former employees: In representing a client, a lawyer shall not communicate about the subject of the representation with a person the lawyer knows to be represented by another lawyer in the matter, unless the lawyer has the consent of the other lawyer or is authorized to do so by law or a court order. However, the ABA Comment to Model Rule 4.2 does address a number of issues pertinent to organizational employees, as follows: [4] This Rule does not prohibit communication with a represented person, or an employee or agent of such a person, concerning matters outside the representation. For example, the existence of a controversy between a government agency and a private party, or between two organizations, does not prohibit a lawyer for either from communicating with nonlawyer representatives of the other regarding a separate matter. ... [5] Communications authorized by law may include communications by a lawyer on behalf of a client who is exercising a constitutional or other legal right to communicate with the government. Communications authorized by law may also include investigative activities of lawyers representing governmental entities, directly or through investigative agents, prior to the commencement of criminal or civil enforcement proceedings. ... [7] In the case of a represented organization, this Rule prohibits communications with a constituent of the organization who supervises, directs or regularly consults with the organization's lawyer concerning the matter or has authority to obligate the organization with respect to the matter or whose act or omission in connection with the matter may be imputed to the organization for purposes of civil or criminal liability. Consent of the organization's lawyer is not required for communication with a former constituent. If a constituent of the organization is represented in the matter by his or her own counsel, the consent by that counsel to a communication will be sufficient for purposes of this Rule. Compare Rule 3.4(f). In communicating with a current or former constituent of an organization, a lawyer must not use methods of obtaining evidence that violate the legal rights of the organization. See Rule 4.4. The ABA Committee on Ethics and Professional Responsibility has previously interpreted Model Rule 4.2 to "not prohibit contacts with former officers and employees of a represented corporation, even if they were in one of the categories with which communication was prohibited while they were employed." ABA Formal Opinion 95-396, p. 7, n. 47 (1995). Paragraph 7 above clarifies that "consent of the organization's lawyer is not required for communication with a former constituent." However, the commentary--is -not--completely clear whether ex parte communication with a former employee is authorized if the former employee's acts or omissions in connection with the matter may be imputed to the organization for purposes of civil or criminal liability. Courts are divided over whether former managerial employees have any protection from ex parte contacts by opposing counsel in litigation. Most courts which have considered the issue agree that ABA Model Rule 4.2 does not bar ex parte communications with an adversary's former employees. However, some courts have recognized circumstances in which the policies underlying Rule 4.2 survive the termination of the employment relationship. In Olson v. Snap Products, Inc., 183 F.R.D. 539 (D Minn. 1998), the court adopted the flexible approach of determining whether ex parte communications with former managerial employees is appropriate by assessing the likelihood that the contact in question would impair the policy of protecting privileged information from being disclosed to an opponent in litigation. The Decision in Olson requires counsel to focus on the likelihood that any information gathered by counsel will actually intrude upon any legally privileged matters. The court in Olson determined that a lawyer who informed former corporate managers of his representation of the plaintiff and did not ask the former managers to discuss matters which would be privileged, did not violate ethical rules, and refused to order disqualification of the lawyer. The court cautioned, however, as follows: As a prospective matter, we emphasize that an attorney's discussions with former members of an organizational party-opponent's management could intrude upon privileged matters, which would not be permissible under Rule 4.2. When viewed in the context of the potential sanctions for such an intrusion, we think caution suggests deliberate avoidance of even the appearance of unprofessionalism, particularly when the result could be the deprivation of the client's access to legal representation of his or her own choice. We need not say more. Id., 183 F.R.D at 545. The policy objectives addressed in Olson have been promoted in other jurisdictions, with varying results depending on factual distinctions. In Rogosin v. Mayor and City Council of Baltimore, 164 F.Supp. 2d 684 (D.Md. 2001), the court held that ex parte communications with a former employee that result in a lawyer obtaining confidential information or documents may result in sanctions regardless of whether ethical rules prohibit the ex parte communication. See also FleetBoston Robertson Stephens, Inc. v. Innovex, Inc., 172 F.Supp.2d 1190, 1195 (D.Minn.2001) (quoting from Olson with approval); Michaels v. Woodland, 988 F.Supp. 468, 471 (D.N.J.1997) ("Nothing in the Rules prohibits ex parte communications with a former employee i who was not within the litigation control group and who is not otherwise represented by counsel."); P.T. Barnum's Nightclub v. Duhamell, 766 N.E.2d 729, 736-737 (Ind.App.,2002) (Acknowledging Olson concerns, but holding that Indiana's Rule 4.2 does not prohibit an attorney from contacting the former employee of a party adverse to the attorney's client in litigation); Arnold v. Cargill Inc., 2004 WL 2203410 (USDC MN 2004) (granting motion to disqualify based on contact with former managerial employee). Because ethical rules regarding ex parte contact with employees of an organization differ with each jurisdiction and require a fact specific analysis, lawyers are well advised to proceed with extreme caution in Mis area. One law review commentator, upon thoroughly reviewing variances application of the rules and nuances in the principles underlying the rules, advises that lawyers "must carefully research local ethical rules and common practices before initiating I contact with a party's former employees." 81 Neb. L. Rev. 868, 901 (2003), Discovery of Information and Documents from a Litigant's Former Employees: Synergy and Synthesis of Civil Rules, Ethical Standards, Privilege Doctrines, and Common Law Principles. As a municipal lawyer defending the litigated matter, the potential for ex parte contact by opposing counsel should be considered. The above referenced cases may provide a good faith basis for seeking a protective order against ex parte contact as to specific former employees. A lawyer adverse to the municipality should be careful to avoid discussing confidential or privileged matters, obtaining privileged documents, or obtaining other information which a lawyer otherwise could not lawfully obtain through formal discovery. If concerns exist regarding the propriety of ex parte contact, lawyers adverse to the organization should consider obtaining the consent of the organization's counsel or a protective order to avoid potential disqualification or other sanctions which may prejudice the representation and the litigation. What is the Status of "Ethics 2000" in Your Jurisdiction? by Peter H. Pierotti Assistant City Attorney, Litigation Dept. One Civic Plaza, NW Albuquerque, NM 87102 (505) 768-4500 - - - ---ppierotti @cabq-.gov- Beginning in 1997, the American Bar Association announced its "Ethics 2000" initiative to revise the Model Rules of Professional Conduct for Lawyers. The ABA's previous Model Rules, first promulgated in 1983, were adopted in large part by almost all state jurisdictions. Since then, the interpretation and application of the Model Rules have been significantly developed by case law and ethical opinions produced by the ABA and authoritative bodies in the various jurisdictions. The goal of the Ethics 2000 initiative was to revise the Model Rules to correspond to the body of law developed in the intervening years. The ABA completed the Ethics 2000 revisions and adopted corresponding amendments to the Model Rules in 2002. According to the ABA, 29 states and the District of Columbia have adopted revisions based on the new Model Rules (AZ, AR, CT, DE, DC, FL, ID, IN, IA, LA, MD, MN, MS, MT, NE, NV, NJ, NC, ND, OH, OR, PA, RI, SC, SD, LIT, VA, WA, WI, WY). 12 states have circulated proposed rules (AK, CA, CO, IL, KS, ME, MI, MO, NH, NY, OK, VT). Eight states have committees that have not yet issued a report (GA, HI, KY, MA, NM, TN, TX, WV). Alabama is the only state not considering the recent revisions. The ABA maintains an updated chart with web links to individual state initiatives at http://www.abanet.org/cpr/jclr/ethics_2000_status_chart.pdf. Even if the new rules have not yet been adopted in your jurisdiction, valuable insights can be gained by reviewing the modified text and additional commentary contained in the new Model Rules. At least one state appellate court has cited to the text of the commentary to the new ABA Model Rules for guidance in disciplinary matters, despite the fact that the new rules have not yet been adopted in that state. See, In re Estrada, 2006-NMSC-047, ¶¶ 21, 24, 140 N.M. 492, 143 P.3d 731 . Practitioners faced with an ethical dilemma are well advised to become familiar with the text of the new ABA Model Rules and commentary, which can be accessed on the ABA web site, http://www.abanet.org/cpr/mrpc/mrpc_toc.html. THE SARBANES-OXLEY ACT AND ATTORNEY-CLIENT CONFIDENTIALITY IN THE ORGANIZATIONAL SETTING The Sarbanes-Oxley Act (15 U.S.C. § 7201, the "Act") was signed into law by President George W. Bush on July 30, 2002. The Act was promulgated in the wake of corporate scandals to protect investors in publicly traded companies by providing governance standards and improving the - accuracy and reliability of corporate disclosures made pursuant to securities aws. Section 307 of the Act (15 U.S.C. § 7245) mandates that the Securities and Exchange Commission: shall issue rules, in the public interest and for the protection of investors, setting forth minimum standards of professional conduct for attorneys appearing and practicing before the Commission in any way in the representation of issuers, including a rule -- (1) requiring an attorney to report evidence of a material violation of securities law or breach of fiduciary duty or similar violation by the company or any agent thereof, to the chief legal counsel or the chief executive officer of the company (or the equivalent thereof); and (2) if the counsel or officer does not appropriately respond to the evidence (adopting, as necessary, appropriate remedial measures or sanctions with respect to the violation), requiring the attorney to report the evidence to the audit committee of the board of directors of the issuer or to another committee of the board of directors comprised solely of directors not employed directly or indirectly by the issuer, or to the board of directors. The Securities and Exchange Commission ("Commission") adopted final rules establishing standards of professional conduct for attorneys who appear and practice before the Commission on behalf of issuers. 17 CFR Part 205 responds to the Act's directive and is intended to protect investors and increase their confidence in public companies by ensuring that attorneys who work for those companies respond appropriately to evidence of material misconduct. The final rules were issued on January 29, 2003, and became effective on August 5, 2003. In response to the Act and Commission rules, The American Bar association amended Model Rule of Professional Conduct 1.6, regarding client confidentiality, and Rule 1.13, regarding organization as client. The Amended rules were Adopted at the ABA annual meeting on August 12, 2003. Derivatives of the changes have been adopted in most jurisdictions, but sometimes with significant variances. Although the rule changes were developed in response to corporate scandals in the private sector, these rules apply with equal force to municipal lawyers. Model Rule 1.6 now permits disclosure of confidential lawyer-client information as necessary to comply with law, and to prevent, mitigate, or rectify a client's crime or fraud reasonably certain to result in substantial injury to financial interests or property damage of another and in furtherance of which the client has used the lawyer's services. Model Rule 1.13 requires a lawyer for an organization to report improper actions of persons in the organization "up the chain" to a higher organizational authority. The rule also permits disclosure of confidential lawyer-client information to the extent necessary to prevent substantial injury to the organization. The provisions and ABA commentary of these two rules are included below in their entirety. i American Bar Association Model Rules of Professional Conduct 1.6 and 1.13 Rule 1.6 Confidentiality of Information (a) A lawyer shall not reveal information relating to the representation of a client unless the client gives informed consent, the disclosure is impliedly authorized in order to carry out the representation or the disclosure is permitted by paragraph(b). (bj A—lawyer-may__-mveat-inormat er reasonably believes necessary: (1)to prevent reasonably certain death or substantial bodily harm; (2) to prevent the client from committing a crime or fraud that is reasonably certain to result in substantial injury to the financial interests or property of another and in furtherance of which the client has used or is using the lawyer's services; (3)to prevent, mitigate or rectify substantial injury to the financial interests or property of another that is reasonably certain to result or has resulted from the client's commission of a crime or fraud in furtherance of which the client has used the lawyer's services; (4)to secure legal advice about the lawyer's compliance with these Rules; (5) to establish a claim or defense on behalf of the lawyer in a controversy between the lawyer and the client,to establish a defense to a criminal charge or civil claim against the lawyer based upon conduct in which the client was involved, or to respond to allegations in any proceeding concerning the lawyer's representation of the client; or (6)to comply with other law or a court order. III i Comment [1] This Rule governs the disclosure by a lawyer of information relating to the representation of a client during the lawyer's representation of the client. See Rule 1.18 for the lawyer's duties with respect to information provided to the lawyer by a prospective client, Rule 1.9(c)(2) for the lawyer's duty not to reveal information relating to the lawyer's prior representation of a former client and Rules 1.8(b)and 1.9(c)(1)for the lawyer's duties with respect to the use of such information to the disadvantage of clients and former clients. [2] A fundamental principle in the client-lawyer relationship is that, in the absence of the client's informed consent, the lawyer must not reveal information relating to the representation. See Rule LO(e) for the definition of informed consent. This contributes to the trust that is the hallmark of the client-lawyer relationship. The client is thereby encouraged to seek legal assistance and to conununicate fully and frankly with the lawyer even as to embarrassing or legally damaging subject matter. The lawyer needs this information to represent the client effectively and, if necessary,to advise the client to refrain from wrongful conduct. Almost without exception,clients come to lawyers in order to determine their rights and what is, in the complex of laws and regulations, deemed to be legal and correct. ! Based upon experience,lawyers know that almost all clients follow the advice given,and the law is upheld. [3] The principle of client-lawyer confidentiality is given effect by related bodies of law: the attorney-client privilege, the work product doctrine and the rule of confidentiality established in professional ethics. The attorney-client privilege and work-product doctrine apply in judicial and other proceedings in which a lawyer may be called as a witness or otherwise required to produce evidence concerning a client. The rule of client-lawyer confidentiality. applies in situations other than those where evidence is sought from the lawyer through compulsion of law. The confidentiality rule, for example, applies not only to matters communicated in confidence by the client but also to all information relating to the representation, whatever its source. A lawyer may not disclose such information except as authorized or required by the Rules of Professional Conduct or other law. See also Scope. I �I [4] Paragraph (a) prohibits a lawyer from revealing information relating to the representation of a client. This prohibition also applies to disclosures by a lawyer that do not in themselves reveal protected information but could reasonably lead to the discovery of such information by a third person. A lawyer's use of a hypothetical to discuss issues relating to the representation is permissible so long as there is no reasonable likelihood that the listener will be able to ascertain the identity of the client or the situation involved. Authorized Disclosure [5] Except to the extent that the client's instructions or special circumstances limit that authority, a lawyer is impliedly authorized to make disclosures about a client when appropriate in carrying out the representation. In some situations, for example, a lawyer may be impliedly authorized to admit a fact that cannot properly be disputed or to ake-a-disclosure--that-facilitates-x-satisfkaory-conclusion-to a matter. Lawyers in a fim-r-may, in the course.of the firm's practice, disclose to each other information relating to a client of the firm, unless the client has instructed that particular information be confined to specified lawyers. Disclosure Adverse to Client [6] Although the public interest is usually best served by a strict rule requiring lawyers to preserve the confidentiality of information relating to the representation of their clients, the confidentiality rule is subject to limited exceptions. Paragraph (b)(1) recognizes the overriding value of life and physical integrity and permits disclosure reasonably necessary to prevent reasonably certain death or substantial bodily harm. Such harm is reasonably certain to occur if it will be suffered imminently or if there is a present and substantial threat that a person will suffer such harm at a later date if the lawyer fails to take action necessary to eliminate the threat. Thus, a lawyer who knows that a client has accidentally discharged toxic waste into a town's water supply may reveal this information to the authorities if there is a present and substantial risk that a person who drinks the water will contract a life-threatening or debilitating disease and the lawyer's disclosure is necessary to eliminate the threat or reduce the member of victims. [7] Paragraph(b)(2) is a limited exception to the rule of confidentiality that pen-nits the lawyer to reveal information to the extent necessary to enable affected persons or appropriate authorities to prevent the client from committing a crime or fraud, as defined in Rule 1.0(d), that is reasonably certain to result in substantial injury to the financial or property interests of another and in furtherance of which the client has used or is using the lawyer's services. Such a serious abuse of the client-lawyer relationship by the client forfeits the protection of this Rule. The client can, of course, prevent such disclosure by refraining from the wrongful conduct. Although paragraph (b)(2) does not require the lawyer to reveal the client's misconduct, the lawyer may not counsel or assist the client in conduct the lawyer knows is criminal or fraudulent. See Rule 1.2(d). See also Rule 1.16 with respect to the lawyer's obligation or right to withdraw from the representation of the client in such circumstances, and Rule 1.13(c), which permits the lawyer, where the client is an organization,to reveal information relating to the representation in limited circumstances. [8] Paragraph(b)(3)addresses the situation in which the lawyer does not learn of the client's crime or fraud until after it has been consummated. Although the client no longer has the option of preventing disclosure by refraining from the wrongful conduct,there will be situations in which the loss suffered by the affected person can be prevented,rectified or mitigated. In such situations, the lawyer may disclose information relating to the representation to the extent necessary to enable the affected persons to prevent or mitigate reasonably certain losses or to attempt to recoup their losses. Paragraph (b)(3) does not apply when a person who has committed a crime or fraud thereafter employs a lawyer for representation concerning that offense. I [9] A lawyer's confidentiality obligations do not preclude a lawyer from securing confidential legal advice about the lawyer's personal responsibility to comply with these Rules. In most situations, disclosing information to secure such advice will be impliedly authorized for the lawyer to carry out the representation. Even when the disclosure is not impliedly authorized, paragraph (b)(4) permits such disclosure because of the importance of a lawyer's compliance with the Rules of Professional Conduct. I [10] Where a legal claim or disciplinary charge alleges complicity of the lawyer in a client's conduct or other misconduct of the lawyer involving representation of the client, the lawyer may respond to the extent the lawyer reasonably believes necessary to establish a defense. The same is true with respect to a claim involving the conduct or representation of a former client. Such a charge can arise in a civil,criminal, disciplinary or other proceeding and can be based on a wrong allegedly committed by the lawyer against the client or on a wrong alleged by a third person, for example, a person claiming to have been defrauded by the lawyer and client acting together. The lawyer's right to respond arises when an assertion of such complicity has been made. Paragraph (b)(5) does not require the lawyer to await the commencement of an action or proceeding that charges such complicity, so that the defense may be 4 established by responding directly to a third party who has made such an assertion. The right to defend also applies, of course, where a proceeding has been commenced. [I I] A lawyer entitled to a fee is permitted by paragraph(b)(5) to prove the services rendered in an action to collect it. This aspect of the rule expresses the principle that the beneficiary of a fiduciary relationship may not exploit it to the detriment of the fiduciary. [12] Other law may require that a lawyer disclose information about a client. Whether such a law supersedes Rule 1.6 is a question of law beyond the scope of these Rules. When disclosure of information relating to the representation appears to be required by other law, the lawyer must discuss the matter with the client to the extent required by Rule 1.4. If, however, the other law supersedes this Rule and requires disclosure, paragraph (b)(6) permits the lawyer to make such- san comply the law [13] A lawyer may be ordered to reveal information relating to the representation of a client by a court or by another tribunal or governmental entity claiming authority pursuant to other law to compel the disclosure. Absent informed consent of the client to do otherwise, the lawyer should assert on behalf of the client all nonfrivolous claims that the order is not authorized by other law or that the information sought is protected against disclosure by the attorney- client privilege or other applicable law. In the event of an adverse ruling, the lawyer must consult with the client about the possibility of appeal to the extent required by Rule 1.4. Unless review is sought, however,paragraph(b)(6) pen-nits the lawyer to comply with the court's order. [14] Paragraph(b)pen-nits disclosure only to the extent the lawyer reasonably believes the disclosure is necessary to accomplish one of the purposes specified. Where practicable, the lawyer should first seek to persuade the client to take suitable action to obviate the need for disclosure. In any case, a disclosure adverse to the client's interest should be no greater than the lawyer reasonably believes necessary to accomplish the purpose. If the disclosure will be made in connection with a judicial proceeding, the disclosure should be trade in a manner that limits access to the information to the tribunal or other persons having a need to know it and appropriate protective orders or other arrangements should be sought by the lawyer to the fullest extent practicable. [15] Paragraph (b) permits but does not require the disclosure of information relating to a client's representation to accomplish the purposes specified in paragraphs (b)(1) through (b)(6). In exercising the discretion conferred by this Rule, the lawyer may consider such factors as the nature of the lawyer's relationship with the client and with those who might be injured by the client, the lawyer's own involvement in the transaction and factors that may extenuate the conduct in question. A lawyer's decision not to disclose as permitted by paragraph (b) does not violate this Rule. Disclosure may be required,however,by other Rules. Some Rules require disclosure only if such disclosure would be permitted by paragraph (b). See Rules 1.2(d), 4.1(b), 8.1 and 8.3. Rule 3.3, on the other hand, requires disclosure in some circumstances regardless of whether such disclosure is permitted by this Rule. See Rule 3.3(c). Acting Competently to Preserve Confidentiality [16] A lawyer must act competently to safeguard information relating to the representation of a client against inadvertent or unauthorized disclosure by the lawyer or other persons who are participating in the representation of the client or who are subject to the lawyer's supervision. See Rules 1.1,5.1 and 5.3. [17] When transmitting a communication that includes information relating to the representation of a client, the lawyer must take reasonable precautions to prevent the information from coming into the hands of unintended recipients. This duty, however, does not require that the lawyer use special security measures if the method of cotrununication affords a reasonable expectation of privacy. Special circumstances, however, may warrant special precautions. Factors to be considered in determining the reasonableness of the lawyer's expectation of confidentiality include the sensitivity of the information and the extent to which the privacy of the communication is protected by law or by a confidentiality agreement. A client may require the lawyer to implement special security measures not required by this Rule or may give informed consent to the use of a means of communication that would otherwise be prohibited by this Rule. Former Client [18] The duty of confidentiality continues after the client-lawyer relationship has terminated. See Rule 1.9(c)(2). See Rule 1.9(c)(1)for the prohibition against using such information to the disadvantage of the former client. a Rule 1.13 Organization As Client (a) A lawyer employed or retained by an organization represents the organization acting through its duly authorized constituents. (b) If a lawyer for an organization knows that an officer, employee or other person associated with the organization is engaged in action, intends to act or refuses to act in a matter related to the representation that is a violation of a legal obligation to the organization, or a violation of law that reasonably might be imputed to the organization, and that is likely to result in substantial injury to the organization, then the lawyer shall proceed as is reasonably necessary in the best interest of the organization. Unless the lawyer reasonably believes that it is not necessary in the best interest ot the organization to do so, the lawyer shall refer the matter to higher authority in the organization, including, if warranted by the circumstances to the highest authority that can act on behalf of the organization as determined by applicable law. (c)Except as provided in paragraph(d), if (1) despite the lawyer's efforts in accordance with paragraph (b) the highest authority that can act on behalf of the organization insists upon or fails to address in a timely and appropriate manner an action, or a refusal to act,that is clearly a violation of law, and (2) the lawyer reasonably believes that the violation is reasonably certain to result in substantial injury to the organization, then the lawyer may reveal information relating to the representation whether or not Rule 1.6 permits such disclosure, but only if and to the extent the lawyer reasonably believes necessary to prevent substantial injury to the organization. (d) Paragraph (c) shall not apply with respect to information relating to a lawyer's representation of an organization to investigate an alleged violation of law, or to defend the organization or an officer, employee or other constituent associated with the organization against a claim arising out of an alleged violation of law. (e) A lawyer who reasonably believes that he or she has been discharged because of the lawyer's actions taken pursuant to paragraphs (b) or (c), or who withdraws under circumstances that require or permit the lawyer to take action under either of those paragraphs, shall proceed as the lawyer reasonably believes necessary to assure that the organization's highest authority is informed of the lawyer's discharge or withdrawal. (f) In dealing with an organization's directors, officers, employees, members, shareholders or other constituents, a lawyer shall explain the identity of the client when the lawyer knows or reasonably should know that the organization's interests are adverse to those of the constituents with whom the lawyer is dealing. (g) A lawyer representing an organization may also represent any of its directors, officers, employees, members, shareholders or other constituents, subject to the provisions of Rule 1.7. If the organization's consent to the dual representation is required by Rule 1.7, the consent shall be given by an appropriate official of the organization other than the individual who is to be represented,or by the shareholders. Comment i The Entity as the Client [1] An organizational client is a legal entity, but it cannot act except through its officers, directors, employees, shareholders and other constituents. Officers, directors, employees and shareholders are the constituents of the corporate organizational client. The duties defined in this Comment apply equally to unincorporated associations. "Other constituents" as used in this Coimnent means the positions equivalent to officers, directors, employees and shareholders held by persons acting for organizational clients that are not corporations. [2] When one of the constituents of an organizational client communicates with the organization's lawyer in that person's organizational capacity, the communication is protected by Rule 1.6. Thus, by way of example, if an organizational client requests its lawyer to investigate allegations of wrongdoing, interviews made in the course of that investigation between the lawyer and the client's employees or other constituents are covered by Rule 1.6. This does not mean, however, that constituents of an organizational client are the clients of the lawyer. The lawyer may not disclose to such constituents information relating to the representation except for disclosures explicitly or impliedly authorized by the organizational client in order to carry out the representation or as otherwise permitted by Rule 1.6. [3] When constituents of the organization make decisions for it, the decisions ordinarily must be accepted by the lawyer even if their utility or prudence is doubtful. Decisions concerning policy and operations, including ones entailing serious risk, we not as such '111 the 's-proving Paragraph (b) makes clear, however, that when the lawyer knows that the organization is likely to be substantially injured by action of an officer or other constituent that violates a legal obligation to the organization or is in violation of law that might be imputed to the organization, the lawyer must proceed as is reasonably necessary in the best interest of the organization. As defined in Rule 1.0(0, knowledge can be inferred from circumstances,and a lawyer cannot ignore the obvious. [4] In determining how to proceed under paragraph(b),the lawyer should give due consideration to the seriousness of the violation and its consequences, the responsibility in the organization and the apparent motivation of the person involved, the policies of the organization concerning such matters, and any other relevant considerations. Ordinarily, referral to a higher authority would be necessary. In some circumstances, however, it may be appropriate for the lawyer to ask the constituent to reconsider the matter; for example, if the circumstances involve a constituent's innocent misunderstanding of law and subsequent acceptance of the lawyer's advice, the lawyer may reasonably conclude that the best interest of the organization does not require that the matter be referred to higher authority. If a constituent persists in conduct contrary to the lawyer's advice,it will be necessary for the lawyer to take steps to have the matter reviewed by a higher authority in the organization. If the matter is of sufficient seriousness and importance or urgency to the organization, referral to higher authority in the organization may be necessary even if the lawyer has not communicated with the constituent. Any measures taken should, to the extent practicable, minimize the risk of revealing information relating to the representation to persons outside the organization. Even in circumstances where a lawyer is not obligated by Rule 1.13 to proceed, a lawyer may bring to the attention of an organizational client, including its highest authority, matters that the lawyer reasonably believes to be of sufficient importance to warrant doing so in the best interest of the organization. [5] Paragraph (b) also makes clear that when it is reasonably necessary to enable the organization to address the { matter in a timely and appropriate manner, the lawyer must refer the matter to higher authority, including, if warranted by the circumstances,the highest authority that can act on behalf of the organization under applicable law. The organization's highest authority to whom a matter may be referred ordinarily will be the board of directors or similar governing body. However, applicable law may prescribe that under certain conditions the highest authority reposes elsewhere,for example, in the independent directors of a corporation. Relation to Other Rules [6] The authority and responsibility provided in this Rule are concurrent with the authority and responsibility provided in other Rules. In particular, this Rule does not limit or expand the lawyer's responsibility under Rules 1.8, 1.16, 3.3 or 4.1. Paragraph (c) of this Rule supplements Rule 1.6(b) by providing an additional basis upon which the lawyer may reveal information relating to the representation, but does not modify, restrict, or limit the provisions of Rule 1.6(b)(1) - (6). Under paragraph (c) the lawyer may reveal such information only when the organization's highest authority insists upon or fails to address threatened or ongoing action that is clearly a violation of law, and then only to the extent the lawyer reasonably believes necessary to prevent reasonably certain substantial injury to the organization. It is not necessary that the lawyer's services be used in furtherance of the violation,but it is required that the matter be related to the lawyer's representation of the organization. If the lawyer's services are being used by an organization to further a crime or fraud by the organization, Rules 1.6(b)(2) and 1.6(b)(3) may permit the lawyer to disclose confidential information. In such circumstances Rule 1.2(d) may also be applicable, in which event, withdrawal from the representation under Rule 1.16(a)(1)may be required. [7] Paragraph (d) makes clear that the authority of a lawyer to disclose information relating to a representation in circumstances described in paragraph(c)does not apply with respect to information relating to a lawyer's engagement by an organization to investigate an alleged violation of law or to defend the organization or an officer, employee or other person associated with the organization against a claim arising out of an alleged violation of law. This is necessary in order to enable organizational- clients to enjoy the full benefits of legal counsel in conducting an investigation or defending against a claim. [8] A lawyer who reasonably believes that he or she has been discharged because of the lawyer's actions taken pursuant to paragraph (b) or(c), or who withdraws in circumstances that require or permit the lawyer to take action under either of these paragraphs, must proceed as the lawyer reasonably believes necessary to assure that the organization's highest authority is informed of the lawyer's discharge or withdrawal. Government Agency [9] The duty defined in this Rule applies to governmental organizations. Defining precisely the identity of the client and prescribing the resulting obligations of such lawyers may be more difficult in the government context and is a matter beyond the scope of these Rules. See Scope [18]. Although in some circumstances the client may be a specific agency, it may also be a branch of government, such as the executive branch, or the government as a whole. For example, if the action or failure to act involves the head of a bureau, either the department of which the bureau is a part or the relevant branch of government may be the client for purposes of this Rule.Moreover,in a matter involving the conduct of government officials, a government lawyer may have authority under applicable law to question such conduct more extensively than that of a lawyer for a private organization in similar circumstances. Thus, when the client is a governmental organization,a different balance may be appropriate between maintaining confidentiality and assuring that the wrongful act is prevented or rectified, for public business is involved. In addition, duties of lawyers employed by the government or lawyers in military service may be defined by statutes and regulation. This Rule does not limit that authority. See Scope. Clarifying the Lawyer's Role [10] There are times when the organization's interest may be or become adverse to those of one or more of its constituents. In such circumstances the lawyer should advise any constituent, whose interest the lawyer finds adverse to that of the organization of the conflict or potential conflict of interest, that the lawyer cannot represent such constituent,and that such person may wish to obtain independent representation. Care must be taken to assure that the individual understands that, when there is such adversity of interest, the lawyer for the organization cannot provide legal representation for that constituent individual, and that discussions between the lawyer for the organization and the individual may not be privileged. [I I] Whether such a warning should be given by the lawyer for the organization to any constituent individual may turn on the facts of each case. Dual Representation [12] Paragraph (g) recognizes that a lawyer for an organization may also represent a principal officer or major shareholder. Derivative Actions [13] Under generally prevailing law, the shareholders or members of a corporation may bring suit to compel the directors to perform their legal obligations in the supervision of the organization. Members of unincorporated associations have essentially the same right. Such an action may be brought nominally by the organization, but usually is,in fact,a legal controversy over management of the organization. [14]The question can arise whether counsel for the organization may defend such an action. The proposition that the organization is the lawyer's client does not alone resolve the issue. Most derivative actions are a normal incident of an organization's affairs, to be defended by the organization's lawyer like any other suit. However, if the claim involves serious charges of wrongdoing by those in control of the organization, a conflict may arise between the lawyer's duty to the organization and the lawyer's relationship with the board. In those circumstances, Rule 1.7 governs who should represent the directors and the organization. INTERNATIONAL MUNICIPAL Item #10 LAWYERS ASSOCIATION INTERNATIONAL MUNICIPAL LAWYERS ASSOCIATION Work Session: Fi'n a nc e. Title: `Plys 4r eaansel ib Mt(nic:P&I 8oAd lssuerS by Presenter: /)7a r � /Makes, i nes Presenter's Title: /'btu rt� aX SeCu r��i'e� Presenter's Office: U. S. Setur'�ej a*W F�e Amnia oh © 2007 International Municipal Lawyers Association. This is an informational and educational report distributed by the International Municipal Lawyers Association during its 2007 Mid Year Seminar,held April 22-24,2007 in Washington, D.C. IMLA assumes no responsibility for the policies or positions presented in the report or for the presentation of its contents. TIPS FOR COUNSEL TO MUNICIPAL BOND ISSUERS' 1. Issuers of municipal securities must comply with the antifraud provisions of the federal securities laws. Exchange Act Rule l Ob-5 states: "It shall be unlawful for any person, directly or indirectly, by the use of any means or instrumentality of interstate commerce, or of the mails or of any facility of any national securities exchange, a. To employ any device, scheme, or artifice to defraud, b. To make any untrue statement of a material fact or to omit to state a material fact necessary in order to make the statements made, in the light of the circumstances under which they were made, not misleading, or c. To engage in any act, practice, or course of business which operates or would operate as a fraud or deceit upon any person, in connection with the purchase or sale of any security." However, issuers of municipal securities are not required to be registered with the Commission or to file periodic reports with the Commission that public companies must. Some issuers must, however, make other filings (see below). The U.S. Securities and Exchange Commission has taken many enforcement actions against issuers, issuer officials and others involved in municipal securities offerings. A compendium of these actions is available at: http://www.sec gov/info/municipal shtml. 2. The antifraud provisions cover all"disclosure documents." All documents used in offerings of municipal securities such as preliminary and final official statements, notices of sale, financial statements and other information reasonably expected to reach investors and the trading markets are all covered by the antifraud provisions. This includes information posted on an issuer's web site. 3. Issuers and issuer officials are responsible for the content of the information that they provide to investors. Martha Mahan Haines of the Securities and Exchange Commission prepared these suggestions. The SEC,as a matter of policy,disclaims responsibility for any private publication or statement by any of its employees. The views expressed herein are those of the author and do not necessarily reflect the views of the Commission or of the author's colleagues on the staff of the Commission. Issuer officials should take steps appropriate under the circumstances to assure that accurate disclosure is made to investors regarding material information. This generally includes reviewing disclosure documents before voting to approve them. Issuer officials may rely on others to review disclosure documents on their behalf, provided that reliance is reasonable. However, they cannot simply assume someone else is taking care of it. If an issuer official wishes to rely on someone else to review disclosure documents, the person who will undertake the review should be identified and, following that person's review, the issuer official should question him or her regarding the disclosures made. If statements are found that are wrong, confusing or misleading, or important information is missing, the issuer official should call this to the attention of its counsel and others on the financing team. Smart issuers make sure all the right people within its organization have reviewed the disclosure documents and have asked questions about any statements they do not understand. It may be a good idea—at least for large or complex issuers -to develop internal controls, policies and procedures to ensure accurate and complete disclosure. 4. Issuers should exercise care in choosing a financing team. Some issuers choose bond counsel and other participants solely on the basis of cost. This is not wise; it is important to choose competent, experienced professionals with high standards of integrity. Beware if an underwriter offers to take care of your offering "for free." In any event, issuers should ask from whom and for what the underwriter will receive compensation (other than underwriter's discount) directly or indirectly associated with a bond offering. Inquire of all financing team members about conflicts of interest and direct and indirect payments from others related to a pending bond issue. Be sure to inform bond counsel about this. In'some circumstances, such payments may cause bonds to be taxable. 5. Understand the role of each person and firm on the financing team. Often issuers have long term relationships with underwriters, who provide a variety of services to them between bond offerings, sometimes without charge. It is important to understand that, when the time comes for a bond offering, the underwriter and issuer are on opposite sides; the underwriter will be looking out for its own best interests, not the issuer's. Note that underwriter's counsel does not represent the issuer either. Bond counsel often limit their role to ensuring that the bonds are validly issued and tax- exempt. Issuers should find out if the bond counsel or another lawyer is representing them with regard to federal securities law matters. If they are not, the issuer may want to hire separate disclosure counsel or ask bond counsel to undertake this additional work. Give the members of the financing team the factual information they need to do their jobs. 2 6. Stale financial statements should be avoided. Stale financial statements may be misleading if the issuer's financial condition has changed significantly since the period they cover. Issuers should try to release their financial statements as soon as possible. In any event, issuers must disclose any material changes in their financial condition since the last audit. Obtain and include interim financial statements if necessary. Ordinarily, an issuer must obtain the consent of its auditor to include its audit opinion in an official statement or other offering document. Before giving such consent, auditors carry out some procedures to identify important after-occurring events. If financial statements are included in a disclosure without the consent of the auditor, that fact should be clearly stated. 7. Use care with swaps and other derivative products. Issuers should consider carefully before entering into swap agreements or deciding to purchase other derivative products. These are extremely complex instruments with many risks. Make sure the issuer understand these products or has hired independent advisers who are capable of determining their appropriate costs,legality, risks and benefits. 8. Many issuers must provide information to the market throughout the life of a bond. At the time bonds are issued, issuers frequently enter into continuing disclosure agreements required by Exchange Act Rule 15c2-12. These agreements require the issuer to provide its audited annual financial statements and certain other financial and operating information to a number of locations (commonly known as "NRMSIRs" and "SIDs") by an annual deadline. In addition, they must promptly file notices when specific events listed in the agreement occur or if the fail to make their annual filing in a timely manner. It is important for an issuer's regular counsel to be aware of the requirements of its continuing disclosure agreement. The antifraud provisions of the federal securities laws apply to documents filed with NRMSIRs and SIDs. 9. Sources of additional information. Additional information relevant to issuers of municipal securities and their counsel, including the names and addresses of the current nationally recognized municipal securities information repositories (NRMSIRs) and state information depositories (SIDs), are available from the SEC's Web site at http://www.sec.gov/info/municipal.shtm] You may telephone the SEC's Office of Municipal Securities for general guidance at (202) 551-5680. 3 INTERNATIONAL MUNICIPAL Item #10 LAWYERS ASSOCIATION 10 INTERNATIONAL MUNICIPAL LAWYERS ASSOCIATION Work Session IX: Day Laborer Employment Solicitation Balancing Community and Day Laborer Interests by Scott H. Howard City Attorney Glendale, CA c 2007 International Municipal Lawyers Association. This is an informational and educational report distributed by the International Municipal Lawyers Association during its 2007 Mid Year Seminar,held April 22-24,2007 in Washington, D.C. IMLA assumes no responsibility for the policies or positions presented in the report or for the presentation of its contents. EMPLOYMENT SOLICITATION BALANCING COMMUNITY & DAY LABORER INTERESTS HISTORICAL BACKGROUND As the pick-up truck leaves a large home improvement or paint store, it is suddenly swarmed by a dozen individuals seeking employment. Individuals approach the truck in the street, others lean off the curb - hands waving, and still dozens of others mill about on the sidewalk, parkway, and adjacent private property. This scene is replayed multiple times daily in communities across the nation. In response to community complaints including blocking pedestrian ways, distraction to motorists, danger to laborers, traff ic congestion, harassing women, damaging parkway landscaping, fighting with one another, petty crimes, and a drain on police resources,' local government began exploring means to address the problems. Many considered legislation prohibiting solicitation of employment. Others opened skilled worker or day laborer hiring centers in an attempt to "encourage" day laborers to move from the streets to the hiring centers. The approach adopted by some communities and initially deemed successful was a combination of hiring centers with legislation to limit solicitation from streets, sidewalks, parkways, private parking areas, and curbs.2 These early programmatic approaches were for the most part successful at achieving the balance sought. However,the anti-solicitation ordinances soon became the target of legal challenges. These early legal challenges were based on first amendment grounds and led to mixed results depending on the breadth or limitations of the ordinance under challenge.' It rapidly became clear that legislation could only survive if it was a content neutral regulation of time, place and manner narrowly crafted to address significant governmental interests, and that reasonable alternative avenues of communicating a solicitor's message `Glendale costs of enforcement were determined to be $109,200 annually. 'Glendale ordinance adopted in August 1996. Skilled worker center opened in February 1997. 'Acorn v. Phoenix (ACORN), 798 F.2d 1260 (9th Cir. 1986) - Ordinance upheld Coalition for Humane Immigrant Rights of Los Angeles (CHIRLA I) v. Burke, 1999 WL 33288183 (C.D. Cal.1999) - Ordinance found to be content neutral. Coalition for Humane Immigrant Rights of Los Angeles (CHIRLA II) v. Burke, 2000 WL 148147 (C.D. Cal.2000) - Ordinance struck down Xi1oj-1tzep v. Agoura Hills, 24 C.A. 4" 620 (1994) - Ordinance upheld ("hire me") were available. Many communities in California suspended enforcement of "anti-solicitation" ordinances since CHIRLA 11.4 In the aftermath of CHIRLA 11, many day workers began "drifting" back to street corners if for nothing more than to increase chances of obtaining employment.5 With the increasing number of workers again congregatinP on sidewalks, parkways, etc., came the inevitable increase in neighborhood complaints. In Glendale, police, code enforcement, city attorney's office and management concurred that the center alone would not address the quality of life issues that occur with the daily congregation of individuals milling about large home improvement centers, paint and hardware stores and vehicle rental establishments (U-Haul). COMITE de JORNALEROS & NDLON v. CITY OF GLENDALE BACKGROUND In late 2003, recognizing the need for revised legislation to both balance community needs and laborers' rights, and meet the concerns expressed by the Court in CHIRLA 11, staff began exploring appropriate legislation. During the process, the Mexican American Legal Defense and Education Fund (MALDEF) threatened suit over the then current ordinance even though enforcement had been suspended for some time. MALDEF was invited to meetings to discuss their concerns and provide input for possible amendments. They rejected the overture and demanded a repeal of the existing ordinance. (MALDEF did offer anecdotal information about alleged laborer abuse by police.' However, upon investigation, none of these claims were ever verified.) The City also received information that the National Day Laborer Organizing Network (NDLON) had people at street corners encouraging laborers to exercise their right to solicit from sidewalks, etc. As a result of NDLON's activities, rifts developed amongst the laborers (center supporters vs. street solicitation supporters). 4For example, Glendale suspended enforcement of its 1996 ordinance in 2001 in the aftermath of the CHIRLA 11 decision. 5Glendale's issues were further complicated as a result of management issues at the center, including instituting a $25 per month fee imposed on workers to partially defray the annual $90,000 operating cost. Ultimately, the fee was eliminated, management issues were resolved (worker lottery), and a number of workers came back to the center. 6Between January 2004 and early April 2004, the police department recorded 43 incidents on property surrounding the Home Depot on San Fernando Road - 20 involved citizen complaints. 7e.g., "I heard a laborer say they knew someone who was harmed by the police." NDLON, represented by MALDEF, filed suit in United States District Court to declare the "unenforced" ordinance unconstitutional. Before the hearing on a request for preliminary injunction, the City, on June 29, 2004, adopted Amended Ordinance 9.17.030.8 The amended ordinance provides: "No person shall stand in or on any street, roadway, curb, parkway, alley, highway and driveway, and solicit, or attempt to solicit, employment, business or contributions of money or other property from the occupant of any vehicle while that vehicle is located on any public street, roadway, alley, highway or driveway and not lawfully parked within, or immediately adjacent to, any Industrial or Commercial Zone within the City." Street is defined as "a way or place of whatever nature, publicly maintained and open to the use of the public for purpose of vehicular travel ..." (GMC 9.17.020) NDLON then filed an amended complaint challenging the amended ordinance (Comite de Jornaleros de Glendale & NDLON v. City of Glendale, CV-04-0352-SJ ("Comite"J). PLAINTIFF'S CHALLENGE In both the trial and appellate court, plaintiffs' basic contentions can be summarized as follows: (1) The amended ordinance is content based because it regulates solicitation speech and not other categories or exempts certain speakers. (2) The amended ordinance regulates speech, not the secondary effects thereof. (3) The amended ordinance is vague as laborers are uncertain where solicitation is permitted. (4) Even if not content based, it is not narrowly tailored to meet the City's interests. (5) The amended ordinance fails to leave open ample alternative avenues of communication. 'Ordinance attached. IS THE ANTI-SOLICITATION ORDINANCE "CONTENT BASED" Plaintiffs assert that the Glendale ordinance singles out a particular topic or category of s eech and as a result, is content based citing City of Cincinnati v. Discovery Network, Inc. Other similar casesi0 advance plaintiffs'claim that a blanket solicitation ordinance is subject to strict scrutiny and must be the least restrictive means to further a compelling governmental interest.11 If plaintiffs are correct,the anti-solicitation ordinance survives only if it is narrowly crafted to achieve a compelling governmental interest.12 Under a compelling interest test, the ability to craft an anti-solicitation ordinance to regulate anything more than in-roadway solicitation would be questionable. The City contends the anti-solicitation ordinance is not content based and is therefore subject to "intermediate scrutiny" as the anti-solicitation ordinance is viewpoint neutral and does not target protected speech, only the "secondary effects"of solicitation.13 The City relied on ACORN, (supra),where the Ninth Circuit determined that an anti- solicitation ordinance in the City of Phoenix was content neutral, as it applied to solicitors regardless of viewpoint. The District Court in its "Comite" opinion granting both a preliminary and permanent injunction agreed with Glendale that the amended ordinance was not content based and targeted secondary effects. However, the District Court found flaws with the City's ordinance under the "Narrow Tailoring" and "Ample Avenues of Communication" tests discussed below. DID THE CITY DEMONSTRATE SIGNIFICANT INTERESTS The Glendale Ordinance was supported by a legislative record which included increased calls to police for service at locations where day laborers congregated. The service calls included fights, intoxication, vehicle swarming, aggressive solicitation, inhibiting the flow of traffic, blocking pedestrians, and a myriad of misdemeanor offenses. The free flow of traffic/pedestrians has been found sufficient to justify a limitation on 9507 US 410 (1993) - A municipal ordinance which distinguishes between news racks containing commercial handbills and news racks that displayed newspapers was content-based). 10See also Int I Soc Y for Krishna Consciousness, Inc. v. Lee, 505 US 672 at 704 (1992) "ACLU v. City of Las Vegas, 333 F3d 1092 at 1099 (9th Cir. 2003) ''Perry Educ. Assn v. Perry Local Educators'Ass'n, 460 US 37 (1983) "U.S. v. Kokinda, 497 US 720 (1990) and ACORN v. City of Phoenix, 798 F2d 1260 at 1267 (9th Cir. 1986) solicitation.14 The District Court agreed with Glendale that its proffered reasons underpinning the amended ordinance were significant. IS THE ORDINANCE NARROWLY TAILORED TO SERVE THE CITY'S INTERESTS If an ordinance is content neutral, it may be enforced if it is narrowly tailored to serve a significant governmental interest and leaves open ample alternative avenues of communication. In general, narrow tailoring requires a particular "fit" between the regulation at issue and the asserted governmental purposes (in the case of day laborers, alleviating significant secondary effects, including traffic congestion, assuring the safety of drivers and pedestrians, preserving and improving the quality of life for residents and business owners, among other things). The ordinance does not have to be the least restrictive or the least intrusive means of furthering the city's interests. 15 A regulation is narrowly tailored if the means chosen are not substantially broader than necessary to achieve the government's interests. The Ninth Circuit applied this standard in ACORN, a case involving a solicitation ordinance similar to Glendale's. There the City of Phoenix' ordinance precluded solicitation or attempted solicitation by persons standing on a street or highway, from the occupants of any vehicle. The Ninth Circuit held that Phoenix's significant interest in promoting traffic flow and traffic safety justified the restriction of vehicle-addressed solicitation and that the restriction imposed-prohibiting fund solicitation from vehicles stopped at intersections, was narrowly tailored.16 The Eighth and Fifth Circuits likewise found similar solicitation ordinances narrowly tailored.17 In the Glendale ordinance, the governmental interests extend beyond only traffic concerns. Such solicitation activities in Glendale involve people running into the streets and swarming vehicles-conduct which obviously has traff ic safety concerns and impedes the free flow of traffic. in addition, such solicitation practices create pedestrian safety hazards as well as quality of life issues for residents and business owners. Solicitation and secondary effects which flow there from were found by the District Court as "significant governmental interests" which justify an appropriately tailored ordinance.18 14Heffron v. International Soc. for Krishna Consciousness, 452 US 640 (198 1) - Prohibition against distributing written material except from booths at state fair, found justified. ACORN v. Phoenix, (supra) ''Ward v. Rock Against Racism, 491 US 781 at 797 (198 1) 16 ACORN, supra, at 1268 and 1270. "Association of Community Organizations for Reform Now (ACORN) v. St. Louis County 930 F2d 591 (81h Cir. 199 1) and also Int 1 Soc y For Krishna Consciousness of New Orleans, Inc. (ISKCON) v. City of Baton Rouge 876 F2d 494, 498 (51h Cir. 1989) f13Preliminary injunction in Comite de Jornaleros de Glendale v. City of Glendale, pages 4, 13, and 16 and permanent injunction (order re response to Order to Show Cause), pg. 4 (permanent injunction available on request). Glendale has also asserted that additional restrictions on solicitation from curbs and parkways is narrowly tailored to promote a significant governmental interest - pedestrian safety and traffic concerns along with quality of life issues. Curbs and parkways are elevated areas immediately next to the street. Allowing individuals to stand in large numbers in those areas to solicit work, business or contributions presents a danger. Individuals could fall into the street and become injured by passing vehicles. Alternatively, vehicles driving in the curb lane or attempting to park could strike individuals standing on the curb with protruding mirrors, door handles or any other number of protrusions. Additionally, a large number of individuals standing on curbs and parkways could impact traffic flow as drivers slow down in anticipation of these individuals entering the street.19 As noted in City of Renton v. Playtime Theaters, Inc.20, cities are free to address particular problems individually or can further amend ordinances to include other types of conduct that are later shown to produce the same kinds of secondary effects. At this time, Glendale has not experienced problems with excessive numbers of jugglers or acrobats congregating on curbs or parkways. The District Court determined that allowing individuals to "stand on the curb" while prohibiting "solicitation speech alone"was not the"reasonable fit" between the interests of the City and the ordinance. The Court further wove into its analysis vagueness created by the uncertain meaning of sidewalks, curbs and parkways. The ordinance was therefore found by the District Court to fail the "narrow tailoring" test. DOES THE AMENDED ORDINANCE LEAVE OPEN AMPLE ALTERNATIVE AVENUES OF COMMUNICATION The second prong of the analysis when addressing a content-neutral ordinance is that the regulation must leave open ample alternative avenues of communication.21 The Ninth Circuit has noted that governmental action will generally not be stricken down for failure to leave open ample alternative avenues of communication unless the government enactment will foreclose an entire medium of public expression across the landscape of a particular community or setting.22 As noted in the previous discussion of narrow tailoring, the Ninth Circuit has already spoken to this issue in the solicitation context in ACORN (supra) by determining that it strains credulity to believe that ACORN is left without ample alternatives by the mere foreclosure of one questionable approach to soliciting contributions. 19Plaintiff and the District Court asserted that the curb restriction is not necessary because people other than solicitors, such as acrobats, jugglers and dog walkers, can stand on the curb all day without repercussion. 20475 U.S. 41 (1986) 2'Perry Educ. Assn v. Perry Local Educators'Assn, 460 US 37 (1983) 22Colacurcio v. City of Kent, 163 Fad 545, 554 (9t' Cir. 1995) In the Comite case, the evidence was uncontroverted that the ordinance does not ban communication or solicitation. The Glendale ordinance allows solicitation from city sidewalks and solicitors can announce their availability for work to legally parked vehicles from any location, or from any other public property not specifically excluded by the ordinance. Finally, solicitation can occur on private property or in residential areas or from the skilled worker's center(day laborer).23 Unfortunately, the District Court disagreed and determined that the skilled workers' center was not a reasonable alternative avenue for seeking work, as the center was not mentioned in the ordinance and is at the budgetary mercy of the city(or in the Court's words... "still remains in the unsteady hands of the city.") IS THE ORDINANCE UNCONSTITUTIONALLY VAGUE To overcome a constitutional vagueness challenge, a regulation must define a criminal offense with sufficient definitiveness that ordinary people can understand what conduct is prohibited and in a manner that does not encourage arbitrary discriminatory enforcement.24 While a greater degree of specificity is required when First Amendment rights are at stake, perfect clarity is not required even when a law regulates protected speech.25 In analyzing a vagueness challenge, if a statute is "readily susceptible" to a narrowing construction that would make it constitutional, it should be upheld.26 In addition, representation of counsel can support a narrowing construction that avoids constitutional difficulties.27 In the Comite case, the District Court held the terms "street"and"curb"were vague. However, the City's ordinance defines "street" and both the words "street" and "curb" should be easily understood by an ordinary individual based on the common sense understanding of the words.28 Even the Supreme Court has noted that sidewalks have been listed separately as an additional example of traditional public fora.29 Unfortunately, 23 See Xiloj-Itsep v. City of Agoura Hills, supra. 24See, for example, Gammoh v. City of La Habra 395 F3d 1121 (91'. Cir. 2005) 25Grayned v. City of Rockford 408 US 104, 110 (1972) - condemned to the use of words, we can never expect mathematical certainty from our language. 26 Erznoznik v. City of Jacksonville, 422 US 205 (1975) 21FriSby V. Schultz, 487 US 474 at 483 (1988) 28See American Communications Assn v. Douds, 339 US 382, 412 (1950) - it will always be true that the fertile legal imagination can conjure up hypothetical cases in which the meaning of (disputed) terms will be a nice question. 29Acorn v. Phoenix(supra) citing United States v. Grace, 461 U.S. 171 at 177 i i the District Court opted to look beyond the City's definition of the term "street" in the anti- solicitation ordinance and relied instead upon one of many definitions found in Webster's Collegiate Dictionary for conjuring up the argument that there exists disagreement among authorities (apparently between the dictionary and the Ninth Circuit) as to whether the term "street" can reasonably be interpreted to include sidewalks. The same sophistry was advanced in analyzing the meaning of the term "curb". At least one court has noted that the absence of a definition in the California Vehicle Code is due in no small part because "curb" is a term which is so commonly used and so generally understood.3o Although somewhat confusing, the District Court appears to intertwine vagueness with the narrow tailoring analysis finding an interconnection between the two. The Court finds vagueness in the fact that sidewalks, as a permissible location for soliciting, is not explicitly spelled out in the ordinance. In addition, speech could be chilled by the uncertainty over what is a curb, parkway, or sidewalk. It must be remembered that the challenge to the Glendale Anti-Solicitation Ordinance is a facial challenge which has been stated by at least one court to be manifestly strong medicine that has been employed by the court sparingly and only as a last resort 31 RECENT "SOLICITATION CASES" Solicitation as a form of protected speech has been the subject of divergent court decisions in the past year. In Ohio, the Court of Appeals upheld Cincinnati's "improper solicitation" ordinance.32 The Court determined that the ordinance was content neutral as the City did not disagree with the message expressed and is regulating the act of solicitation itself, a time, place and manner restriction. The Court further concluded the ordinance was narrowly tailored as it solely regulates vocal solicitation. Solicitors can use signs or other non-verbal forms of communication and solicitation is only regulated in specific areas. Those factors also led to the conclusion that the ordinance leaves open ample alternative avenues of communication. (1983). 3'Hyatt v. Sierra Boat Co., 79 CA3d 325 (1978) 3'Gospel Missions of America v. City of Los Angeles, 419 F3d 1042 at 1047 (9'h Cir. 2005) 32 State v. Dean (2007) W L 80029 (1/12/07). Similarly in New York, the Court of Appeals upheld an aggressive panhandling ordinance.33 The challenged ordinance, among other things, prohibited panhandling through soliciting funds from occupants of motor vehicles on City streets or other public places. Barton, cited for violating the ordinance, challenged same as overbroad as it applied to anyone who would solicit motorists from the sidewalk including firefighter's annual "fill- the-boot" campaign and someone merely holding a sign which said `food". The court first noted that an overbreadth challenge must examine whether the law on its face prohibits a real and substantial amount of constitutionally protected conduct. The fact that one can conceive of some impermissible applications of a statute is not sufficient to render it susceptible to an overbreadth challenge. Content neutrality and narrow tailoring were swiftly dispatched similar to the analysis in State v. Dean (supra). Here the governmental interests served were the reduction in distractions to motorists and the free and safe flow of traffic. The ban (on solicitation) covers all those seeking immediate donations from motorists regardless of the message. It is narrowly tailored as the ordinance is addressing a specific problem which the council has an interest in controlling in order to advance a significant content-neutral interest. In Nevada, the 9th Circuit recently determined that a Las Vegas ordinance designed to prohibit aggressive panhandling and repetitive solicitation on Fremont Street, was a content-based restriction on First Amendment protected speech.34 The flaws in the Las Vegas ordinance as expressed by the court were the exceptions or uneven application of the prohibition on solicitation. The ban applied to all forms of solicitation, including handbills or oral requests for money, charity, business, or patronage, whereas handbills which offer information are permitted. Since an officer must read the handbill(s) to determine which are permitted and which are not, this alone is indicative of content based replation. The court distinguished numerous cases (including those rendered by the 9t Circuit) which have held that solicitation is content neutral, by noting that no other case has held that a regulation that separates out words of solicitation for differential treatment is content-neutral. Finding the ordinance to be content based, the Court easily determined that the "compelling governmental interest" test was not met by the City's interests in protecting visitors from aggressive or intrusive solicitation through a ban which includes even peaceful, unobstructive distribution of handbills seeking future support.35 33 People v. Barton (2006) 8 NY 3d. 70. 34 ACLU v. City of Las Vegas (2006) 466 F.3d 784. 35 In somewhat troubling dicta, the Court noted that even if content neutral, the ordinance is not narrowly tailored as it does not "target" the exact source of "evil" it seeks to remedy. (ACLU at Footnote 13). Finally, in Indiana, the 7'h Circuit Court of Appeals found that a Vincennes University regulation limiting campus solicitations to a single walkway did not infringe on an itinerant preacher's free speech rights.36 The campus regulation prohibited sales or solicitation without prior approval, and, if approved, solicitors could solicit in the walkway in front of the student union. An itinerant preacher, "Brother Jim" chose to preach on the library lawn and was compelled to leave. The challenge he presented was whether the regulation could prohibit speakers who do not engage in "sales or solicitation speech". The Court noted that Brother Jim could have prevailed had he been able to demonstrate the library lawn area had been thrown open by the University as a public forum. In the final analysis, the Court rejected a "forum analysis approach" finding that such an analysis is not amenable to the unique facts (library lawn closed to outsiders, but reserved or open for those invited). CURRENT STATUS OF GLENDALE AND REDONDO BEACH CASES The Comite case has been fully briefed before the Ninth Circuit and the parties are awaiting a date for oral argument (anticipated some time in 2007). The League of California Cities has filed an amicus brief in support of Glendale. A similar case was filed in Comite de Jornaleros de Redondo Beach, NDLON v. the City of Redondo Beach, Case Number CD04-9396 CBM (Redondo case). The Honorable Consuelo B. Marshall entered judgment granting a permanent injunction against the enforcement of the Redondo Beach anti-solicitation ordinance.37 In her 29-page opinion, Judge Marshall determined that NDLON and Comite exist, has a membership, and the members do not have to be citizens to have standing to challenge the Redondo Beach anti-solicitation ordinance. In contrast to Judge Marshall's earlier predilection to find that the ordinance was content based, her opinion granting the permanent injunction finds that the anti-solicitation ordinance is content neutral as it focuses on the inherently disruptive nature of the solicitation itself and not the content of the speech (similar to the opinion of Judge Otero in the Comite case). Judge Marshall also determined that the secondary effects doctrine is applicable and even if the ordinance was content based, the regulation can be analyzed as content neutral if justified to eliminate a secondary affect indirectly related to the communicative impact of the speech. Judge Marshall acknowledged that the Redondo Beach ordinance was enacted to curtail traffic congestion, vandalism, litter, occasional fights, etc. Judge Marshall also determined that the secondary affects doctrine is not exclusive to adult 36 Gilles v. Blanchard(2007) WL 465853 (2/14/07). 37Permanent Injunction available on request. businesses and can be applicable to an ordinance such as one which regulates solicitation. Judge Marshall, like Judge Otero, determined that the City of Redondo Beach had a significant interest in protecting safety and the convenience of persons using a public forum. Crime prevention and aesthetics are significant interests. However, like Judge Otero in the Comite case, Judge Marshall determined that the application of the Redondo Beach ordinance was broader than the ordinance in ACORN, as the Redondo Beach ordinance applied to individuals who stand on the sidewalk as well as vehicles which are lawfully parked. This is in contrast to the Glendale ordinance which allows solicitation from sidewalks and also allows solicitation to vehicles which are lawfully parked. Under the narrow tailoring prong, Redondo Beach asserted that private parking lots were available as well as labor centers in the metropolitan Los Angeles area. Judge Marshall determined that allowing solicitation from private parking lots would create a possible trespass and as such does not leave open an alternative avenue of communication. In addition, the existence of labor centers in metropolitan Los Angeles was insufficient to support the requirement of an adequate alternative channel for speech as no center was located in Redondo Beach. Judge Marshall distinguished the Xiloj-Itzep (supra) case noting that Agoura Hills had a day laborer center within the community. Plaintiffs have been awarded $208,000 in costs and attorney's fees. Redondo Beach has appealed the judgment granting the permanent injunction to the Ninth Circuit. The opening brief is due March 9, 2007. In the Comite case, Glendale believes it has developed a strong record to support the anti-solicitation ordinance as a means to address the secondary effects (traffic congestion, etc.) along with keeping open available additional avenues of communication (sidewalks, soliciting legally parked vehicles, and the existence of a day laborer center),all of which establish the best possible posture for the case. OTHER ALTERNATIVES AND CHALLENGES FACED BY CITIES ANTI-IMMIGRATION GROUPS Challenges to cities which provide day laborer centers have now been launched from another front. With some, it is anti-immigration groups protesting near day laborer centers or areas where day laborers congregate, including filming of contractor's vehicles, leafleting, and posting company or personal information on websites,3"etc. The centers are targeted for protest to discourage use and operation, and possibly seek a political remedy (closure of the center and stringent enforcement of immigration laws). In others, litigation was commenced to halt the use of property for a laborer center. In Karunakaram, et al. v. 38 See, for example, WeHireAliens.com, Nolnvaders.org, operationshameonyou. om, firecoalition.com, and illegalemployers.org. Town of Herndon, and County of Fairfax, Virginia, plaintiffs sought to enjoin the use of taxpayer funds to finance Project Hope and Harmony, a private operator of a day laborer center on town owned property for which a conditional use permit (C.U.P.) was granted. The case was asserted under a theory that the town and county were aiding and abetting illegal immigrants to procure unlawful employment, and, as a result, were in violation of state and/or local laws which require the expenditure of funds to be for a lawful purpose or use of property in a lawful manner. Plaintiffs" second amended complaint is replete with citations to the Illegal Immigration and Control Act of 1986.38 The case is pending and, according to counsel, moving along very slowly, potentially as a result of a recent election which resulted in the seating of a new mayor and council. According to Town Counsel, continued political support for the center is in doubt. REGISTRATION OF EMPLOYERS At least one city has adopted an ordinance which regulates employers of day laborers. The City of Vista in June, 2006, adopted an ordinance targeted to address many conditions faced by day laborers and employers. In summary, the ordinance requires employees or agents who employ day laborers (as defined)to obtain a registration certificate. Obtaining a certificate is a no-fee ministerial process. The certificate must be displayed on the vehicle used to transport a day laborer from an "uncontrolled location" (as defined). Upon a day laborer accepting employment, the employer or agent must immediately provide a complete"term sheet" (as defined) prior to operation of the vehicle used to transport a day laborer. On July 17, 2006, Vista's ordinance was challenged in U.S. District Court 40 on grounds that it acts as a prior restraint on speech, as it sets no effective time limit for issuance of the permit, delegates unbridled discretion to the City, and negates meaningful judicial review. The City opposed an application for TRO asserting: (1) the ordinance and an adopted policy clarifying the ordinance mandates issuance of a certificate in two days and no other additional information to deem the application complete is necessary; (2) the employer can use a sample city "term sheet" which is in English and Spanish; and (3) a writ of mandate under CCP § 1094.8(a) and (d) is available for review of the issuance, revocation or denial of the permit. On August 1, 2006, the Court denied the requested TRO, finding the potential constitutional infirmities in the ordinance were addressed by a subsequent written implementation policy adopted by the city manager and that language which seeks to limit the imposition of a mandatory duty, although possibly precluding mandate relief was 398 U.S.C. 1324 (Part VIII - general penalty provisions) 40 Calderon, et al v. City of Vista, (2006) CV 1443 - L(LSP) severable. As a result, the District Court determined that plaintiff would not suffer irreparable harm if the TRO is denied. According to Vista, they anticipate the ACLU (representing the plaintiffs) will file an amended complaint. ENFORCEMENT OF EXISTING LAWS Agencies can enforce "nuisance" laws such as trespass, littering, and public urination in an attempt to address some of the problems associated with congregations of day laborers. However, enforcement of these laws is labor intensive and costly.41 IMMIGRATION BILLS There has been significant debate over immigration legislation at the federal level. Pending federal legislation could preempt local agencies'ability to require private business which attracts day laborers to fund, construct, provide or maintain a shelter or center. The legislation would also expose local agencies which do provide centers to penalties [HR 4437- Border Protection Anti-Terrorism and Illegal Immigration Control Act of 1986 - Sections 705 and 708 amending 8 U.S.C. 1342a(h)]. The Senate version of the immigration bill (Comprehensive Immigration Reform Act of 2006-S2611), although not as significant a threat against the construction or operation of a center, continues to prohibit the hiring, recruiting or referral for a fee an unauthorized alien, with knowledge or reckless disregard that the person is an unauthorized alien (Section 274A). HR 4437 has been referred to the Senate Committee on the Judiciary with no date on the horizon when or if a compromise bill may be forged.42 CONCLUSION As demonstrated by the Comite and Redondo cases, District Courts in California have been somewhat hostile to anti-solicitation ordinances. Efforts to regulate the secondary effects of solicitation will be scrutinized and vulnerable to constitutional challenge until the Ninth Circuit in either Comite, Redondo, or another case provides guidance on the legally permissible limits of anti-solicitation regulations. 41 The estimated cost in Glendale was approximately$2,100 per week or$109,200 annually based on nine man hours per day, five days per week. This does not include the cost of jailors or legal staff. 42 The Committee held a hearing February 28,2007 to discuss Comprehensive Immigration Reform. 9.17.010 Chapter 9.17 9.17.020 Definitions. For the purpose of this chapter, the following SOLICITATION OF EMPLOYMENT, meanings shall apply: BUSINESS OR CONTRIBUTIONS OF "Alley" means any highway or street not exceed- MONEY OR OTHER PROPERTY ing twenty-five(25)feet in width which is primarily used for access to the rear or side entrances of abut- Sections: ting property. 9.17.010 Legislative purpose. "Business"means and includes any type of prod- 9.17.015 Findings. uct, goods,service,performance or activity which is 9.17.020 Definitions. provided or performed or offered to be provided or 9.17.030 Prohibition of solicitation in performed in exchange for money, labor, goods or public right-of-way. any other form of consideration. 9.17.040 Prohibition of solicitation in "Employment' means the service, industry or la- unauthorized locations within bor performed by a person for wages or other com- private parking areas. pensation or under any contract of hire written or 9.17.050 Violation—Penalty. oral, express or implied. "Occupant"means a person who occupies a vehi- 9.17.010 Legislative purpose. cle. The purpose of this chapter is to protect the health "Parkway"means that portion of a street or high- and welfare of the general public and promote safer way'other than the roadway or the sidewalk. In gen- and more efficient traffic flow in industrial and com- eral terms,the space between the street and the side- mercial zones by reasonably regulating the time, walk. place and manner of the solicitation of employment "Pedestrian"means any individual who is utilizing and/or business from pedestrians and occupants of a public street, sidewalk,roadway,alleyway or pub- vehicles on the public right-of-way and in public and lic or private parking area while traveling without the private parking areas. These regulations are content benefit of any vehicle as defined herein or traveling neutral and are not intended and do not restrict the on a bicycle as defined by Section 10.60.010. right of free speech or alternative channels of com- "Person"means any individual,company, corpo- munication. (Ord. 5401 (part), 2004: Ord. 5132 § 1, ration,association,business or other legal entity. 1996) "Private parking area" means privately owned property which is designed or used primarily for the 9.17.015 Findings. parking of vehicles and which adjoins one (1) or The council of the city finds, determines and de- more commercial establishments or adjoins any clares that the approaching and solicitation by pedes- property in a nonresidential zone, including, but not trians directed to the occupants of vehicles which are limited to, driveways, setbacks and portions of that located in the public right-of-ways and roadways has area that are landscaped. caused a significant public safety risk by causing ve- "Roadway"means that portion of the street which hicles to stop,impede and block the flow of traffic in is improved, designed or ordinarily used for vehicu- travel lanes within or adjacent to industrial or com- lar travel. mercial zones and that it will be in the interest of the "Solicit"or"Solicitation"means and includes the public health,safety and welfare to restrict the solici- following: tation acts that occur in,within or directly affect traf- 1. The act of making a request, offer or an- tic conditions upon any public street,roadway or al- nouncement by use of the spoken word,bodily act or ley within the city. (Ord. 5401 (part),2004) gesture; 321 (Glendale Supp No.5,12-04) i 9.17.020 2. A solicitation as defined in this section shall 9.17.040 Prohibition of solicitation in be deemed completed when made,whether or not an unauthorized locations within employment relationship is created; private parking areas. 3. Solicitation does not include any request or A. No person shall solicit or attempt to solicit announcement made by a person using signs or the employment, business or contributions of money or delivering of flyers or leaflets from pedestrian to pe- other property from a location within a private park- destrian. ing area as defined in this chapter. This section shall "Street"means a way or place of whatever nature. not apply to a solicitation to perform employment or publicly maintained and open to the use of the public business for the owner or lawful tenants of the sub- for purpose of vehicular travel. For the purposes of ject premises. this chapter,"street"includes highway and any park- B. This section shall only apple to private park- ing area or lot owned or operated by city or the Glen- ing areas when the following occurs: dale Redevelopment Agency. 1. The owner or person in lawful possession of "Vehicle"means a vehicle as defined in California the private parking area establishes a written polic-, Vehicle Code Section 670 as the same now reads or which provides area(s) for the lawful solicitation of' may hereafter be amended. (Ord. 5401 (part), 2004: employment and/or business, in locations which are Ord. 5132 § 2, 1996) accessible to the public and do not interfere with normal business operations of the commercial prem- 9.17.030 Prohibition of solicitation in public ises. Nothing herein shall require a private propem right-of-way. owner to permit solicitations at their premises. A. No person shall stand in or on any street, 2. The owner or person in lawful possession of roadway, curb, parkway, alley, highway and drive- the private parking area has caused a notice to be way, and solicit or attempt to solicit employment, posted in a conspicuous place at each entrance to business or contributions of money or other property such private parking area not less than eighteen by from the occupant of any vehicle while that vehicle is fourteen inches in size with lettering not less than one located on any public street,roadway,alley,highway inch in height, but not to exceed in total area sit or driveway and not lawfully parked within, or im- square feet. Said notice shall be in substantially the mediately adjacent to, any industrial or commercial following form:"it is a misdemeanor to engage in the zone within the city. solicitation ofemployment, and/or business in areas B. No person,while the occupant of any vehicle of this private parking lot which are not approved for located on any public street,roadway,alley,highway such activity by the property_ owner."(Ord.5132 § 4. or driveway and not lawfully parked, shall solicit or 1996) attempt to solicit employment,business or contribu- tions of money or other property from a person who 9.17.050 Violation—Penalty. is on or within any street, roadway, curb, parkway, Any person or occupant of a vehicle violating the alley or driveway within,or immediately adjacent to, provisions of this chapter shall be guilty of a misde- any industrial or commercial zone within the city. meanor,punishable as set forth in Section 1.20.010A C. This section shall not apply to peddlers or of this code. Any such person or occupant shall be other vendors who have a permit and/or license pur- deemed guilty of a separate offense for each and suant to Title 5. (Ord_ 5401 (part), 2004: Ord. 5132 every act of solicitation which is a violation of this § 3, 1996) chapter_ (Ord. 5132 § 5, 1996) Glendale Supp.No 5, I2-04) 322 INTERNATIONAL MUNICIPAL Item #10 LAWYERS ASSOCIATION EMPLOYMENT WANTED T- - Balancing Community & Day Laborer Interests GLEN DALE'S EXPERIENCE ■ January 1996: Cite after study and analysis takes a multi-pronged approach to problems caused by solicitors. • \dopts Xiloj-ltiep type ordinance (Agoura Hills, Cali fornia) • Cite leases land and ohe«s center which includes I-SL classes, job training, etc. ■ Problems begin abating — success is demonstrable. 6 IMLA spnng 2007 2 1 CHIRLA v. Burke (Los Angeles County) J i Moving back to problem via court decision 1999 WI,33288183(CD Ctrl. 1999)US District Court 2000 WL 1481467(CD CA 2000) US District Court IMLA Spring 2007 3 CHIRLA I ■ County ordinance — valicl re,;ulation of secondary effects ■ Content neutral ■ Colaeurcio Muld-l"acto�r "test (Colacutv'o t!. CO, of'Kent (9"' Cir. 1998) 163 l-.)cl 5=15) MCI- IMLA Spring 2007 q 2 CHIRI A II • Judge King finds County ordinance unconstitutional. • County ordinance imposes limits on speech broader than other anti-solicitation regulations — reaches sidewalks and people with signs. Includes speech which has not been shown to cause feared harms to traffic flow and safety. Ordinance also reaches individual solicitors which by themselves do not affect quality of life. IMLA Spring 2007 5 ■ Door-to-door canvassing, telephone solicitation, solicitation made by pedestrians of other pedestrians, private property — inadequate as alternative avenues of communication. • Relegates Y.iloj-Itzep case to the landfill of irrelevance. IMLA Spring 2007 0 3 POST CHIRLA II • Glendale suspends enforcement. • 2004 amends ordinance • G.IM.C.9.17.030: • Section A: "No person shall stand in or nn any street, roadway, curb, parkway, alley, highway and driveway,n rid solicit or attempt to solicit employment,business or contributions of money or other pn,perty from the Occupant of any vehicle while that vehicle is located on any public street,roadway,alley,highway or driveway and not lawfully parked within,or immediately adjacent to,any industrial or commercial zone within the city." • Section B: "No person, while the occupaml of any vehicle located on any public street, roadway,alley, highway or driveway and not lawfully parked, shall solicit or attempt to solicit employment, business or contributions of money or other property from a person who is on ur within any street,roadway,curb,parkway,alley or driveway within, ur imntediatcb adjacent to, any industrial or commercial zone within the cite." IMLA Spring 2007 7 • G.M.C. 9.17.020 defines "street" as: ■ "A way or place of whatever nature, publicly maintained and open to the use of the public for purpose of vehicular travel. For the purposes of this chapter, "street" includes highway and any parking area or lot owned or operated by city or the Glendale Redevelopment ,agency." • Cotvite de Jortialeros dr.' Gleizdale filed in United States District Court — May 2004 IMLA Spring 2007 g 4 THE COMITE ISSUES • Content based f • Vague • Not narrowly tailored to serve significant governmental interests • Fails to provide ample alternative avenues of communication • U.S.D.C. issues preliminary injunction finding vagueness, no narrow tailoring and failure to have ample alternative avenues of communication... . IMLA Spring 2007 9 CONTENT BASED • District Court followed.Ac•om /,. Phoem' 'and found: • Even though speech was regulated in areas which are traditional public fora, the regulation focuses on the inherently disruptive nature of solicitation, not the content (the ordinance targets secondary effects of solicitation). • Secondary effects doctrine not limited to analysis of adult business. IMLA Spring 200/ 10 5 SIGNIFICANT INTERESTS ■ Legislative record included: • Increased calls for police service • Fights • Intoxication • Vehicle swarming • Aggressive solicitation • Inhibiting traffic flow/pedestrians All supported District Court determination that City has significant interests which are addressed by the ordinance. IMLA Sprang 2007 11 NARROW TAILORING ■ Court found X9.17.030 not to be a "reasonable fit" between interests of City and the ordinance. I: - ■ ;plowing jugglers, etc., to stand cm curb while restricting solicitation is not "narrow" cnuugh. ■ Definition of street is V.WLIc cornparcd to dictionary (streets rnajr include sidewalks). IMI.A Spring 2007 12 6 .ALTERNATIVE AVENUES OF COMMUNICATION ■ City offered a number of "alternatives": sidewalks, signs, announcing availability from any location to legally parked vehicles, residential zones, private property, and day laborer center in Glendale. DAY 1A 9 IMLA Spring 2007 13 ■ Court's main objections: • Day laborer center not reasonable: • Not mentioned in onlitt;uxr. • In the financialh•"unstc;uh•hands of the City". • "Street"vague due to conflict between Ciry's ordinance and dictionary; sidewalk- exceptic,n should be clearly expressed in ordinance. ■ "Curb" vague due t(7 f:lilurc to rlefine. IMLA Sprang 2007 4 7 OTHER ALTERNATIVES ■ Regulation of "employers". Not full c_ y tested on th merits, but given legislative purpose, seems to meet first amendment requirements. • In Calderon, elal.. v. GO of l isla, elal.., TRO denied with court finding; ordinance coupled with administrative police contains standards to adcduatcly guide official's decision. • Advances City's purpose of protecting; day laborers from dangers and abuse by requiring; a bilingual registration certificate and "term" short. • Court severed language which noted the ordinance is not intended to impose a mandatory duty on the City or its employees. IMLA Spring 2007 15 ■ Be fortunate enough to advise a city or town in Ohio, New York, Indiana. ■ .S'tnte t� Ohio-January 12, 2007 ■ Improper solicitation ordinance is Cincinnati upheld as content neutral, narrowly tailored measure which allows alternative aveniu c>f communication. in Peorle P. Barton — December 19, 2006 in Aggressive panhandling; (including solicitation) ordinance upheld. Not cwerbroad, content neutral, etc. IMLA Sprrng 9007 lri 8 ■ Ordinances serve purposes unrelated to the content of expression — distraction to motorists (N.Y.) or freedom of citizens to move about without interference or intimidation (Ohio). ■ Content neutrality not negated because a sign must be read by police to determine whether code is violated. But compare ACLU P. Las Vegas (need to read sign is indicia of content based measure). IMLA Spring 2007 17 • Narrow tailoring is satisfied so long as regulation promotes substantial government interest and means chosen are not s«bstantially broader than necessary to achieve that intent. Dees not have to be the least restrictive or intrusive means (citing Vjrc�. • Allowing non-verbal solicitation and solicitation in other geographic areas = alternative channels of- communication. • Enforce existing "nuisance" laws — littering, public urination , trespass, etc. i IMLA Spring 2007 18 9 CHALLENGE TO APPROVAL OF DAY LABORER CENTERS ■ I`arnnakaram, et4rl. t1. "1 on7ii <f' Fl ermlon, County q1' vailjax ■ Allegations — Approval of (:.U.P. by town and use of County finds to operate center violate state and federal law. ■ State: prohibition on providing puhk assistance. to illegal aliens or employing illegal aliens. ■ Fcderat: prohibition on employment of illegal aliens;aiding and abettirn, ■ Demurrer Pending. IWA Spring 2007 19 ■ Comprehensive Immigration Reform Act 2006 (S 2611), Title III — unlawful to knowingly or with reckless disregard or refer for a fee, an unauthorized alien. ■ Passed by Senate, Matir 2006. IMLA Spring 2007 20 10 FEDERAL IMMIGRATION LEGISLATION ■ Sections 705 and 708 of Ii R — 44')7 (Border Protection, Anti-terrorism, Illegal lmmi ;ration Control Act of 2005) would, if it became law: • hxpose agencies to penalties for "referring" or "recruiting" an illegal alien for employnu:nt • Prohibit cities from reduirin(r a business entity to fund, build, or maintain a day laborer ccnrcr. • Current status — refct:rcd to Senate. Committee on the ,judiciary (Hearing on Comprehensive immigration Reform 2-28-07). IMI_A Sprang 2007 21 I I ■ APL-CIO "agreement" to work with NDLON to improve wages and working conditions of day laborers. ■ Minuteman and other anti-immigration groups. Dary Uborer Spot closed After Tip IMLA Sprang 2007 emu' 11 ■ Glendale and Redondo> Beach cases provide opportunity for Ninth Circuit to clarify limits of anti-solicitation ordinances. ■ For now we advise that states/cities within jurisdiction of 9" Circuit wait until Comite is decided or utilize an ACORN ordinance. IMLA Spring 2007 23 12 ..., _ � _..._..._. MW11Yf7rNVi1liiilllY"°'°•�-.__._._.._.__ ......... ...__.. __.....w- INTERNATIONAL MUNICIPAL Item #10 LAWYERS ASSOCIATION 12 INTERNATIONAL MUNICIPAL LAWYERS ASSOCIATION Immigration Issues Work Session: Enforcement of Immigration Laws by Local Police Title: by Presenter: Mark H. Newbold Presenter's Title: Deputy City Attomey - Police Charlotte-Mecklenburg Police Presenter's Office: Department O 2007 International Municipal Lawyers Association. This is an informational and educational report distributed by the International Municipal Lawyers Association during its 2007 Mid Year Seminar,held April 22-24,2007 in Washington, D.C. IMI.A assumes no responsibility for the policies or positions presented in the report or for the presentation of its contents. Enforcement of Immigration Laws by Local Police Mark H. Newbold Deputy City Attorney— Police Charlotte-Mecklenburg Police Department It is difficult to think of an issue more controversial, more divisive and challenging then the recent focus on immigration enforcement by local police officers. Major cities have been dealing with this issue for years, but now many towns and smaller cities grapple with the thorny task of developing a response to problems related to the surge of illegal aliens into their jurisdiction to look for work. Not all of us have had the same introduction to the issue. On one hand, some jurisdictions may have their first experience when a member of their community becomes the tragic victim of a crime where the immigrant is the suspect. Such is the case where an immigrant DUI driver collides and kills or seriously injures someone and flees the scene. The offender is soon captured and inevitably the media and others raise the question: Why is this person in our country? This question is usually met with a swift local political mandate to do something and do it quickly. On the other hand, the issue may come to light when the immigrant is a victim of a violent crime and the suspect a dangerous felon. First responders such as police, fire and medic have known for years that there was a silent, hidden and ever growing population of undocumented persons working in our areas. After all, they are the first ones called to the scene of an emergency be they a citizen or an illegal alien. The victim fearing deportation may not immediately report the crime thereby allowing the violent offender to escape which in turn may encourage the suspect and others to repeat the crime. In addition, mistrust of local authorities may drive the need for protection "underground." Predators thrive on those who cannot defend themselves. If the victims of this behavior mistrust the first responder because of the threat of deportation, then they may turn to a de-facto authority for protection just as other immigrant groups have done in the past. In response to these concerns some cities have shut the door on local enforcement of immigration law and have gone so far as to pass ordinances prohibiting first responders from asking anyone about their status. Whatever the incident that generates the political response of "do something and do it now", counsel for these agencies will be inevitably asked "Can we do this?" "Is this legal?" In the event the governmental entity opts for immigration enforcement by its local police. A common question asked is whether local police can enforce federal immigration law or more specifically do local police have the lawful authority to arrest and detain an undocumented alien for federal immigration officials? Below is a checklist of questionsand hopefully some insight to help counsel who has been tasked with answering the question of whether it is legal for local law enforcement officers to enforce federal immigration law. 1 Are local officers preempted by federal law from enforcing immigration laws? The United States Constitution has specifically granted Congress authority to establish a uniform rule of naturalization.' Pursuant to the Supremacy Clause, this authority exclusively resides within the United States Congress." The legislative implementation of this complete grant of power is found in the Immigration and Naturalization Act which sets forth the regulatory scheme that controls the entry and stay of aliens to enter the United States. Clearly, the field of uniform rule making concerning naturalization is preempted by Congress. However, the ability to enforce immigration law arguably is not. In order to enforce this regulatory scheme, the act contains both civil and criminal penalties for various violations. For example it is a criminal violation to hire an illegal alien"' or for an alien to the fail to depart this country after being ordered to do so.'v Civil violations also include penalties for failing to depart the country after being ordered by an immigration judge. Yet, no where in the Act is it specifically stated that only federal officers can enforce immigration law. Because of this, there is no reason to presume that Congress intended that only federal officers enforce the act. "In the absence of persuasive reasons either that the nature of the regulated subject matter permits no other conclusion, or that the Congress has unmistakably so ordained," we will not presume that federal regulation of a particular field preempts state enforcement activity, United States v. Haskin, 228 F.3d 151, 153-154 (2d Cir. 2000); See also De Canas v. Bica, 424 U.S. 351, 356, 47 L. Ed. 2d 43, 96 S. Ct. 933 (1976) where the Court held that a state may enforce federal law so long as it does not impair federal regulatory interests. See also Florida Lime & Avocado Growers, Inc. v. Paul, 373 U.S. 132, 142, 10 L. Ed. 2d 248, 83 S. Ct. 1210 (1963). Cf. Gonzales v. City of Peoria, 722 F.2d 468, 474 (9th Cir. 1983) holding that federal law does not preclude local enforcement of the criminal provisions of the Immigration and Naturalization Act, overruled on other grounds byHodgers -Durgin v. De La Vina, 199 F.3d 1037 (9th Cir. 1999). Is there explicit federal authority for local officers to enforce federal immigration laws? Even prior to 9/11 there were several express provisions under federal law that permitted local police to indirectly assist federal authorities with enforcement of criminal immigration violations.' These provisions encouraged the development of several programs including the Alien Criminal Apprehension Program (ACAP)v" Quick Response Programs (QRTs) and the Absconder Apprehension Initiative. More recently, Director Chertoff of the Department of Homeland Security, issued a press release on November 2, 2005 outlining the Secure Border Initiative which in addition to increasing federal enforcement initiatives, specifically encouraged partnerships between ICE and state and local law enforcement agencies under 8 USCA § 1357(g) agreements. (Sometimes referred to as 287(g) agreements.) However, as discussed in detail below, it has never been clear whether state and local authorities could independently enforce civil provisions of immigration law. In fact, it has only been recently opinioned by 2 the Office of Legal Counsel for the Department of Justice that local authorities have the "inherent" authority to enforce civil provisions, however this opinion has met with widespread skepticism within legal circles"' Currently, there are several specific sections of federal law that permit local officers to enforce federal immigration law subject to some control by the federal government. For example, under 8 U.S.0 §1252(c) local law enforcement officers have "federal" authority to detain and arrest an illegal alien (assuming their state law grants to them authority to enforce federal criminal law) if the alien has been arrested for a felony, deported and has illegally returned to the United States. 'X In addition, states and local authorities may enter into a written agreement pursuant to 8 U.S.C. § 1357(g) to perform specific functions of an immigration officer that are related to the investigation, apprehension and detention of an illegal alien.X To be in compliance with this grant of authority local officers must receive significant training in immigration law and be certified by the Attorney General to be qualified to perform the duties of an immigration officer. While performing a function of an immigration officer, the state or local officer is subject to the direction and supervision of the Attorney General. However, the cost of carrying out federal immigration functions under a 1357(g) MOU is expressly stated to be borne by the state or local authorities. Finally, in the event of an actual or imminent mass influx of aliens arriving off the coast or near a land border, the Attorney General may authorize state or local officers to perform particular powers conferred upon immigration officers.X' This provision has only been used once when Cuban and Haitian refugees fled to the coast of Florida. x" Is there inherent state power for the authority of local officers to enforce federal immigration law? The answer to this question is not as clear. According to at least one opinion issued by then Attorney General John Ashcroft, local officers do not need a specific grant of authority from the state to enforce federal immigration authority. "When federal, state and local law enforcement officers encounter an alien of national security concern who has been listed on the NCIC for violating immigration law, federal law permits them to arrest that person and transfer him to the custody of the INS. The Justice Department's Office of Legal Counsel has concluded that this narrow, limited mission that we are asking state an local police to undertake voluntarily— arresting aliens who have violated criminal provisions of the Immigration and Nationality Act or civil provisions that render an alien deportable, and who are listed on the NCIC — is within the inherent authority of states." However, this position begs the issue of whether the local authority needs a specific grant of authority to detain and arrest an individual. Officers may in part rely on an NCIC hit as a reason to detain an individual. Yet, local state law is the sole source for of the powers of arrest and detention. Specific grants of the power to arrest are shaped and limited by state law. For example, North Carolina law enforcement agencies can and do enforce specific federal criminal 3 violations. (e.g. drug violations and federal gun violations) This is true even without any specific delegfion of authority from the federal government. X"' However, North Carolina State law permits our officers to arrest.anyone who the officer has probable cause to believe has committed a criminal offense in his/her presence or has probable cause to believe the person has committed a felony (and specifically defined misdemeanors) out of the officer's presence.X"' Since our legislature choose not to limit local enforcement to just state crimes, it does appear that state law permits our local officers to enforce criminal violations of federal law subject to our state statutory procedural requirements. Yet, there are limits to the type of violations for which a local officer may make an arrest. For example, some states restrict an officer from arresting someone for a misdemeanor unless its commission occurred in the presence of the officer. Hence, that officer would not be able to arrest an immigrant for several violations that currently are only a misdemeanor such as illegally crossing the boarder. In addition and, unlike federal immigration agents who can stop and detain a person without a warrant, local officers' authority may be severely restricted from detaining someone without a warrant. Xv Currently, the Department of Justice continues to enter civil immigration detainer orders into NCIC without identifying them as such despite the request of the Major City Chiefs not to do so. These unilateral decision made by DOJ places local officers who are not acting under a 1357(g) at risk for causes of action under state law for false arrest. Are there any restrictions under state and or local laws that limit enforcement of immigration law? Local police draw their authority to arrest and detain from their state constitution, state statutes and state appellate case law. Counsel should review these sources to determine if there are further restrictions placed on officers when they are making an arrest. The position put forth by Ashcroft is still being debated and is not considered by many as binding on local authorities. The authority to arrest should be clear and unambiguous. For this reason, some states have opted to provide clear and unambiguous legislative authority for local officers to enforce immigration law. For example, the Virginia Legislature has provided specific authority for local officers to enforce immigration law when an illegal alien has been convicted of a felony and returned to this country after being deported. Section 19.2-81.6. of the Virginia Code specifically provides: All law-enforcement officers enumerated in § 19.2-81 shall have the authority to enforce immigration laws of the United States, pursuant to the provisions of this section. Any law- enforcement officer enumerated in § 19.2-81 may, in the course of acting upon reasonable suspicion that an individual has committed or is committing a crime, arrest the individual without a warrant upon receiving confirmation 4 from the Bureau of Immigration and Customs Enforcement of the United States Department of Homeland Security that the individual (i) is an alien illegally present in the United States, and (ii) has previously been convicted of a felony in the United States and deported or left the United States after such conviction. Upon receiving such confirmation, the officer shall take the individual forthwith before a magistrate or other issuing authority and proceed pursuant to § 19.2 82. Do you have specific authority to enforce civil violations of immigration law? Currently at issue, even in those jurisdictions that permit local law enforcement of federal criminal law is the unsettled question of whether local officers have the inherent authority tcenforce civil infractions of immigration law. The Department of Justice's Office of Legal Counsel under Ashcroft revisited the issue after 911 and in a legal opinion found that local officers indeed did have inherent authority to enforce civil violations of immigration law."' Yet it is the position of the International Association of the Chiefs of Police and the Major Cities Chiefs that it is not clear whether state and local authorities have the local authority to enforce civil violations of immigration law. "Therefore the IACP is greatly concerned that if the names of 314,000 deportable aliens are placed into the NCIC system withoutt he benefit of a felony warrant being issued for their arrest, state and local law enforcement officers will be placed in the position of being asked to detain and arrest these individuals without possession the proper authority to do so."" Within its Nine Point Position Statement, Major Cities Chiefs also expressed concern with the authority of local agencies to enforce civil violations of federal immigration law. Laws in their respective states define the authority of local police officers. The authority of local police officers to act to enforce against criminal acts is clear and well established. However, federal immigration laws include both civil and criminal process to address immigration to address immigration violations. It is within the authority of federal agencies such as I.C.E. and the Department of Justice to determine if an immigration violation will be dealt with as criminal matter or through a civil process. Given the complexity of the immigration laws, it would be difficult for local police agencies to determine if a particular violation would result in criminal charges or purely civil proceedings and regulation. This duality in immigration law creates a gap in authority for local police officers who generally are limited to acting only in criminal matters. XV"' 5 The bottom line is that without explicit state statutory authority a municipality's decision to enforce civil immigration violations is subject to challenge for failure to have the lawful authority to do so. Public Policy Issues Related Local Enforcement of Immigration Law. Breach of Trust vs. Contempt of law. Even if lawful, there has been plenty of debate on the wisdom of local police becoming involved with the enforcement of immigration law. On one hand, local enforcement of federal immigration law arguably engenders mistrust of police and a hesitancy to report crime to police by those who are not legally present. In addition, this may encourage predatory and illegitimate "protection" schemes to prey on a disenfranchised community that fears contact with law enforcement. Likewise, local enforcement of immigration law may actually hinder the ability of the government to obtain information about serious criminal activities by discouraging individuals from coming forward with information. On the other hand, the decision of local authorities to ignore a person's status, according to some, encourages contempt for the rule of law which in the keystone of civil society. The police should not be able to unilaterally pick and chose which laws should be enforced. To do so creates a de-facto sanctuary for those who deliberately have broken the law and encourages the breeding for the contempt of the rule of law.X"` Selective Enforcement and Racial Profiling: There may be an increase in complaints of "racial profiling" along with the accompanying social and legal costs in responding to such an allegation. Granted it has never been a violation of the 4th Amendment to simply ask someone a question Recently inMuehler v. Mena the United States Supreme Court reviewed the constitutional authority of officers to ask questions about a persons immigration status. In Muehler officers asked Mena questions about her immigration status while they were serving a search warrant for evidence of a gang shooting. Mena, an occupant of the house, was being detained while the warrant was being held. On appeal she argued that officers needed reasonable suspicion that she was not legally present before they could question her about her immigration status. The Court held that mere questioning by police is constitutionally sound. The Court reasoned that "[w]e have 'held repeatedly that mere police questioning does not constitute a seizure.' Florida v. Bostick, 501 U.S. 429, 434, 115 L. Ed. 2d 389, 111 S. Ct. 2382 (1991); see also INS v. Delgado, 466 U.S. 210, 212, 80 L. Ed. 2d 247, 104 S. Ct. 1758 (1984). "[E]ven when officers have no basis for suspecting a particular individual, they may generally ask questions of that individual; ask to examine the individual's identification; and request consent to search his or her luggage." Bostick, supra, at 434-435, 115 L. Ed. 2d 389, 111 S. Ct. 2382 (citations omitted). As the Court of Appeals did not hold that the detention was prolonged by the questioning, there was no additional seizure within the meaning of the Fourth Amendment. Hence, the officers did not need reasonable suspicion to ask Mena for her name, date and place of birth, or immigration status." Muehler v. 6 Mena, 125 S. Ct. 1465, 1471 (U.S. 2005) See also U.S. Alcanaz-Arellano, 441 F.3d 1252(1 0th Cir 2006); U. S. v Mendez F.3d (9th Cir. 212312007) As with any investigatory function that occurs during a seizure, it is always subject to the argument that the seizure was the product of an improper or illegal pretext. Even though an officer's subjective motive is not relevant to determine the legality of a seizure, it plays a role in determining whether the officer is denying someone equal protection under the 14th Amendment's due process clause. It has long been a well-settled principle that the state may not selectively enforce the law against racial minorities. Yick Wo v. Hopkins, 118 U.S. 356, 373- 74, 30 L. Ed. 220, 6 S. Ct. 1064 (1886);). Gibson v. Superintendent of N.J. Dept of Law & Pub. Safety-Division of State Police, 411 F.3d 427, 441 (3d Cir. 2005) More recently the Supreme Court in Whren v United States., 517 U.S. 806, 813, the Supreme Court held that police can temporarily detain a motorist when they have probable cause to believe that he violated a traffic ordinance, even if the police have some other motivation to stop the motorist. However, the Court in Whren expressly limited its analysis to the Fourth Amendment, and acknowledged that "the Constitution prohibits selective enforcement of the law based on considerations such as race . . . the constitutional basis for objecting to intentionally discriminatory application of laws is the Equal Protection Clause, not the Fourth Amendment." See also Gibson v. Superintendent of N.J. Dept of Law & Pub. Safety-Division of State Police, 411 F.3d 427, 440 (3d Cir. 2005) Over extension of local resources: Most local police departments are facing budget cuts and a shortage of officers. To take on the statutory functions of ICE officers may stretch a Department's resources too thin. Although reimbursement under the State Criminal Alien Assistance Program (SCAAP) may ease some of the costs incurred by local agencies for housing undocumented aliens, the level of federal funding for this program has been inconsistent` as well as the dedication of federal government to provide the necessary resources to assist with the detention and removal of undocumented immigrants. Conclusion These are just a few of the issues that may confront counsel assigned the task of reviewing the lawfulness of local enforcement of immigration law. Simply relying on the Federal Government's unilateral decision to draw local authorities into enforcement of immigration laws is not recommended until a there is a through review of state law and the surrounding policy issues 7 U.S. Const. Art. 1 §8 reads: The Congress shall have power . . . [4] To establish an uniform rule of naturalization, . . . " '' U.S. Const. Art. VI, cl.2. reads: "This constitution, and the laws of the United States which shall be made in pursuance thereof, and all treaties made, or which shall be made, under the authority of the United States, shall be the supreme law of the land; and the judges in every state shall be bound thereby, any thing in the constitution or laws of any state to the contrary notwithstanding." 8 USCA § 1324a. Unlawful employment of aliens (a) Making employment of unauthorized aliens unlawful. (1) In general. It is unlawful for a person or other entity (A)to hire, or to recruit or refer for a fee, for employment in the United States an alien knowing the alien is an unauthorized alien (as defined in subsection (h)(3))with respect to such employment, or (B) (i) to hire for employment in the United States an individual without complying with the requirements of subsection (b) or(ii) if the person or entity is an agricultural association, agricultural employer, or farm labor contractor(as defined in section 3 of the Migrant and Seasonal Agricultural Worker Protection Act[29 USCS § 1802], to hire, or to recruit or refer for a fee, for employment in the United States an individual without complying with the requirements of subsection (b). 'v 8 USCA§ 1253. Penalties related to removal (a) Penalty for failure to depart. (1) In general. Any alien against whom a final order of removal is outstanding by reason of being a member of any of the classes described in section 237(a) [8 USCS § 1227(a)], who-- (A)willfully fails or refuses to depart from the United States within a period of 90 days from the date of the final order of removal under administrative processes, or if judicial review is had, then from the date of the final order of the court, (B)willfully fails or refuses to make timely application in good faith for travel or other documents necessary to the alien's departure, (C)connives or conspires, or takes any other action, designed to prevent or hamper or with the purpose of preventing or hampering the alien's departure pursuant to such, or (D)willfully fails or refuses to present himself or herself for removal at the time and place required by the Attorney General pursuant to such order, shall be fined under title 18, United States Code, or imprisoned not more than four years (or 10 years if the alien is a member of any of the classes described in paragraph (1)(E), (2), (3), or(4) of section 237(a) [8 USCS 1227(a)1), or both. 8 USCA§ 1324d. Civil penalties for failure to depart (a) In general. Any alien subject to a final order of removal who-- (1) willfully fails or refuses to-- (A)depart from the United States pursuant to the order, (B) make timely application in good faith for travel or other documents necessary for departure, or (C)present for removal at the time and place required by the Attorney General; or (2) conspires to or takes any action designed to prevent or hamper the alien's departure pursuant to the order, shall pay a civil penalty of not more than $ 500 to the Commissioner for each day the alien is in violation of this section. (b) Construction. Nothing in this section shall be construed to diminish or qualify any penalties to which an alien may be subject for activities proscribed by section 243(a) [8 USCS 1253(a)1 or any other section of this Act. 8 "' Section 439 of the Antiterrorism and Effective Death Penalty Act(AEDPA; Sections 133 and 372 of the Illegal Immigration Reform and Immigrant Responsibility Act of 1996 (IIRIRA; P.L. 104- 206) "" See Enforcing Immigration Law: The Role of State and Local Law Enforcement CRS Report for Congress by Seghitti, Vina and Ester March 11 2004. According to this report, ACAP was established in 1991 by INS. Local authorities would contact INS when they came into contact with a criminal alien who would then determine that person's immigration status. If the person was here illegally then INS would take the alien into custody. QRT's were first authorized in 1999 and responded to notification by local authorities that they had an illegal alien in custody for a violation of state or local law. The Absconder Apprehension Initiative was developed to deal with a backlog of illegal aliens that were already subject to deportation orders and/or were criminal aliens. " See Authority of State and Local Officers to Arrest Aliens Suspected of Civil Infractions of Federal Immigration Law by Jeff Lewis, J.J. Gass, Amelie von Briessen, and Howard Master. 'X 8 U.S.C.§ 1252c. Authorizing state and local law enforcement officials to arrest and detain certain illegal aliens (a) In general. Notwithstanding any other provision of law, to the extent permitted by relevant State and local law, State and local law enforcement officials are authorized to arrest and detain an individual who-- (1) is an alien illegally present in the United States; and (2) has previously been convicted of a felony in the United States and deported or left the United States after such conviction, but only after the State or local law enforcement officials obtain appropriate confirmation from the Immigration and Naturalization Service of the status of such individual and only for such period of time as may be required for the Service to take the individual into Federal custody for purposes of deporting or removing the alien from the United States. (b) Cooperation. The Attorney General shall cooperate with the States to assure that information in the control of the Attorney General, including information in the National Crime Information Center, that would assist State and local law enforcement officials in carrying out duties under subsection (a) is made available to such officials. 8 U.S.C. §1357(g) Performance of certain functions by State officers and employees. (1) Notwithstanding section 1342 of title 31, United States Code, the Attorney General may enter into a written agreement with a State, or any political subdivision of a State, pursuant to which an officer or employee of the State or subdivision, who is determined by the Attorney General to be qualified to perform a function of an immigration officer in relation to the investigation, apprehension, or detention of aliens in the United States (including the transportation of such aliens across State lines to detention centers), may carry out such function at the expense of the State or political subdivision and to the extent consistent with State and local law. (2)An agreement under this subsection shall require that an officer or employee of a State or political subdivision of a State performing a function under the agreement shall have knowledge of, and adhere to, Federal law relating to the function, and shall contain a written certification that the officers or employees performing the function under the agreement have received adequate training regarding the enforcement of relevant Federal immigration laws. (3) In performing a function under this subsection, an officer or employee of a State or political subdivision of a State shall be subject to the direction and supervision of the Attorney General. (4) In performing function under this subsection,on, an officer or employee of a State or political subdivision of a State may use Federal property or facilities, as provided in a written agreement between the Attorney General and the State or subdivision. (5)With respect to each officer or employee of a State or political subdivision who is authorized to perform a function under this subsection, the specific powers and duties that may be, or are required to be, exercised or performed by the individual, the duration of the authority of the individual, and the position of the agency of the Attorney General who is required to supervise and direct the individual, shall be set forth in a written agreement between the Attorney General and the State or political subdivision. (6) The Attorney General may not accept a service under this subsection if the service will be 9 used to displace any Federal employee. (7) Except as provided in paragraph (8), an officer or employee of a State or political subdivision of a State performing functions under this subsection shall not be treated as a Federal employee for any purpose other than for purposes of chapter 81 of title 5, United States Code [5 USCS §§ 8101 et seq.] (relating to compensation for injury), and sections 2671 through 2680 of title 28, United States Code (relating to tort claims). (8)An officer or employee of a State or political subdivision of a State acting under color of authority under this subsection, or any agreement entered into under this subsection, shall be considered to be acting under color of Federal authority for purposes of determining the liability, and immunity from suit, of the officer or employee in a civil action brought under Federal or State law. (9) Nothing in this subsection shall be construed to require any State or political subdivision of a State to enter into an agreement with the Attorney General under this subsection. (10) Nothing in this subsection shall be construed to require an agreement under this subsection in order for any officer or employee of a State or political subdivision of a State-- (A)to communicate with the Attorney General regarding the immigration status of any individual, including reporting knowledge that a particular alien is not lawfully present in the United States; or (B) otherwise to cooperate with the Attorney General in the identification, apprehension, detention, or removal of aliens not lawfully present in the United States. X' 8 USCA§1103(a)(10) "In the event the Attorney General determines that an actual or imminent mass influx of aliens arriving off the coast of the United States, or near a land border, presents urgent circumstances requiring an immediate Federal response, the Attorney General may authorize any State or local law enforcement officer, with the consent of the head of the department, agency, or establishment under whose jurisdiction the individual is serving, to perform or exercise any of the powers, privileges, or duties conferred or imposed by this Act or regulations issued thereunder upon officers or employees of the Service." X" See Authority of State and Local Officers to Arrest Aliens Suspected of Civil Infractions of Federal Immigration Law by Jeff Lewis, J.J. Gass, Amelie von Briessen, and Howard Master. x"' See United States v. Haskin, 228 F.3d 151, 153-154 (2d Cir. 2000) "In the absence of persuasive reasons either that the nature of the regulated subject matter permits no other conclusion, or that the Congress has unmistakably so ordained,"we will not presume that federal regulation of a particular field preempts state enforcement activity, De Canas v. Bica, 424 U.S. 351, 356, 47 L. Ed. 2d 43, 96 S. Ct. 933 (1976) (internal citations and quotation marks omitted), where state enforcement activities do not impair federal regulatory interests, see Florida Lime & Avocado Growers, Inc. v. Paul, 373 U.S. 132, 142, 10 L. Ed. 2d 248, 83 S. Ct. 1210(1963). Cf. Gonzales v. City of Peoria, 722 F.2d 468, 474 (9th Cir. 1983) (holding that federal law does not preclude local enforcement of the criminal provisions of the Immigration and Naturalization Act), overruled on other grounds by Hodgers-Durgin v. De La Vina, 199 F.3d 1037(9th Cir. 1999). Thus, in the absence of federal preemption in the area of criminal firearm laws--of which there is no issue raised here--we look to state law to determine the authority of the state officers to arrest and seize evidence for violations of federal felonies in this arena." X'V 15A-401 (b)Arrest by Officer Without a Warrant. -- (1) Offense in Presence of Officer. --An officer may arrest without a warrant any person who I the officer has probable cause to believe has committed a criminal offense in the officer's presence. (2) Offense Out of Presence of Officer. --An officer may arrest without a warrant any person who the officer has probable cause to believe: a. Has committed a felony; or b. Has committed a misdemeanor, and: 1.Will not be apprehended unless immediately arrested, or 2. May cause physical injury to himself or others, or damage to property unless immediately j arrested; or c. Has committed a misdemeanor under G.S. 14-72.1, 14-134.3, 20-138.1, or 20-138.2; or 10 d. Has committed a misdemeanor under G.S. 14-33(a), 14-33(c)(1), 14-33(c)(2), or 14-34 when the offense was committed by a person with whom the alleged victim has a personal relationship as defined in G.S. 50B-1; or e. Has committed a misdemeanor under G.S. 50B-4.1(a); or f. Has violated a pretrial release order entered under G.S. 15A-534.1(a)(2). 'v See United States v. Martinez-Fuerte, 428 U.S. 543, 96 S.Ct. 3074, 44 L.Ed. 2d 1116(19 76) where the Court held that a fixed checkpoint for purpose of asking a person of their immigration status did not require judicial warrant and was consistent with the Fourth Amendment of the United States Constitution. In support the Court reasoned that to accommodate public and private interests some quantum of individualized suspicion is required but the 4th Amendment poses not irreducible requirement of such suspicion." "' See Enforcing Immigration Law: The Role of State and Local Law Enforcement CRS Report for Congress by Seghitti, Vina and Ester March 11 2004 in which they quote Ashcroft at a press conference who stated: "When federal, state and local law enforcement officers encounter an alien of national security concern who has been listed on the NCIC for violating immigration law, federal law permits them to arrest that person and transfer him to the custody of the INS. The Justice Department's Office of Legal Counsel has concluded that this narrow, limited mission that we are asking state an local police to undertake voluntarily—arresting aliens who have violated criminal provisions of the Immigration and Nationality Act or civil provisions that render an alien deportable, and who are listed on the NCIC —is within the inherent authority of states." 'v" Enforcing Immigration Law: The Role of State, Tribal, and Local Law Enforcement, International Association of Police. 'viii See Major City Chiefs: Immigration Committee Recommendations, by Greg Ferrell Jr., Chair of Major City Chief's Immigration Committee. =See "Immigration and the Alien Gang Epidemic: Problems and Solutions" Testimony of Heather Mac Donald, Senior Fellow, Manhattan Institute for Policy Research, before the House Judiciary Subcommittee on Immigration, Border Security, and Claims. xx According to the CRS Report for Congress dated March 11, 2004 entitled Enforcing Immigration Law, SCAPP funding in FY 2002 was 564 million but the amount was reduced to 250 million in FY2003 and then slightly increased to 300 million in FY 2004. I 11 INTERNATIONAL MUNICIPAL Item #10 LAWYERS ASSOCIATION 13 i INTERNATIONAL MUNICIPAL LAWYERS ASSOCIATION Work Session IX: Your Tired, Your Poor... " Irregular Migration" and Local Government State/Local Legislation/Regulation of Illegal Immigration by H. Lawrence Hoyt Boulder County Attorney Boulder County, Colorado 8 2007 International Municipal Lawyers Association. This is an informational and educational report distributed by the International Municipal Lawyers Association during its 2007 Mid Year Seminar, held April 22-24, 2007 in Washington, D.C. IMLA assumes no responsibility for the policies or positions presented in the report or for the presentation of its contents. 2007 IMLA Mid-Year Seminar Tuesday, April 24, 2007 Omni Shoreham Hotel, Washington, DC Work Session IX: " Irregular Migration" and Local Government State/Local Legislation/Regulation of Illegal Immigration By H. Lawrence Hoyt* Introduction: In the absence of effective federal programs to stop illegal immigration, states and local governments, as well as their citizens, have turned their attention to measures that can be adopted and implemented at those levels of government in order to deal with this issue.] This paper will categorize the types of state and local measures being adopted, focusing in particular on state efforts to prevent provision of publicly-funded benefits to undocumented persons. A. The Federal Law: The limitation on provision of publicly-funded benefits to persons whose lawful presence in the United States can be appropriately documented is not a new requirement. In fact, Title IV of the Personal Responsibility and Work Opportunity Reconciliation Act of 1996, 8 USCA §1621, (PRWORA) prohibits the provision of certain state and local public benefits to illegal aliens. "State and local public benefits" is defined as follows in subsection (c) of that section: (1) ... "State or local public benefit"means-- (A)any grant,contract, loan,professional license,or commercial license provided by an agency of a State or local government or by appropriated funds of a State or local government; and (B)any retirement,welfare,health, disability,public or assisted housing,postsecondary education,'food assistance,unemployment benefit, or any other similar benefit for which payments or assistance are provided to an individual, household,or family eligibility unit by an agency of a State or local government or by appropriated funds of a State or local government. The U.S. Attorney General is authorized to specify those types of programs, services, and assistance that aliens are entitled to receive, notwithstanding the provisions of 8 USC §1621. See 8 USC §1642(a)(3). In A.G. Order No. 2353-2001, issued January 16, 2001, Janet Reno, ] See,e.g.,the Report of the Colorado Attorney General Concerning the Recovery of Federal Reimbursement for Costs to the State of Colorado Associated with Illegal Immigration, issued December 29,2006, located at http://www.ago.state.co.us/press releases/AGImmierationRpt.pdf Z The Colorado Attorney General has opined that the state may not permit undocumented persons graduating from in-state secondary schools to be eligible for"in-state"tuition rates unless the legislature determines to allow all U.S. citizens to be eligible for such rates. Op.Colo.Atty.Gen. #06-01, January 23, 2006. 2 just before leaving office, specified that such programs, services, and assistance must be necessary to meet all of the following three criteria: (1) deliver in-kind services at the community level,including through public or private non-profit agencies; and (2) do not condition the provision of assistance,the amount of assistance provided,or the cost of assistance provided on the individual recipient's income or resources;and (3) are necessary for the protection of life or safety. Any programs that are exempted under this provision of the Act must meet all three of the foregoing requirements. A program meeting only one or two of the criteria does not qualify for exemption under this section of the Act.3 The Attorney General's opinion proceeds to list examples of programs that are exempt from PRWORA: 1. General government services that area widely available to the public without an individualized application process are not subject to the PRWORA,including things such as police,fire,ambulance, transportation(including paratransit),sanitation,and other regular,widely available services. 2. Other programs,services,and assistance that are exempt from PRWORA restrictions include: (a)Crisis counseling and intervention programs;services and assistance relating to child protection,adult protective services,violence and abuse prevention,victims of domestic violence or other criminal activity;or treatment of mental illness or substance abuse; (b)Short-term shelter or housing assistance for the homeless, for victims of domestic violence,or for runaway,abused,or abandoned children; (c)Programs,services,or assistance to help individuals during periods of heat,cold,or other adverse weather conditions; (d)Soup kitchens,community food banks,senior nutrition programs such as meals on wheels,and other such community nutritional services for persons requiring special assistance; (e)Medical and public health services(including treatment and prevention of diseases and injuries)and mental health,disability,or substance abuse assistance,necessary to protect life or safety; (f)Activities designed to protect the life or safety of workers,children and youths,or community residents;and (g)Any other programs,services,or assistance necessary for the protection of life or safety. The Order cautions "neither states nor other service providers may use the Act as a basis for prohibiting access of aliens to any programs, services, or assistance covered by the Order. Unless an alien fails to meet eligibility requirements provided by applicable law other than the Act, benefit providers may not restrict the access of any alien to the services covered by the Order, including, but not limited to, emergency shelters." Where documentation is required, "...the benefit provider may conduct verification of the non- exempt programs or services as specified in the applicable portions of the Interim Guidance on Verification of Citizenship Qualified Alien Status and Eligibility Under Title IV of the Personal 3 However,note that the US Department of Health and Human Services does not require state and local mental health service agencies which receive funds from the Community Mental Health Services Block Grant program verify lawful presence for clients to receive services,even where such services are not"necessary for the protection of life or safety." Letter dated November 21,2006 from A.Kathryn Power, Director,Center for Mental Health Services,US Department of HHS,to Kyle W. Sargent,Colorado Department of Human Services Division of Mental Health. 3 i Responsibility and Work Opportunity Reconciliation Act of 1996 62 FR 61344 (19971, or may be required to conduct verification as specified by any subsequent or superseding regulations. To the extent that it can be accomplished without undue administrative hardship, benefit providers should make every effort to provide information to all prospective benefit seekers about which benefits they qualify for and which benefits involve citizenship or immigration verification requirements." An issue that naturally arises for many state and local governments is whether the funding that they provide to non-profit service provider organizations for programs or services that would be "covered public benefits" if provided directly by the state or local government must be conditioned upon the practice by the service providers of documentation verification for lawful presence in the US by their clients. 8 USC §1642(d)provides: (d) No verification requirement for nonprofit charitable organizations. Subject to subsection (a) of this section, a nonprofit charitable organization, in providing any Federal public benefit(as defined in section 1611(c) of this title) or any State or local public benefit(as defined in section 1621(c) of this title), is not required under this chapter to determine, verify, or otherwise require proof of eligibility of any applicant for such benefits. B. Recent State Legislation: The Colorado Acts: Illegal immigration has been a public issue on the national front for some time. In Colorado, an organization known as Defend Colorado Now put this issue into the public agenda for the state when it proposed an initiative seeking to amend the state constitution,which would have mandated that state and local governments in Colorado provide essentially NO publicly-funded services to undocumented aliens, except for certain emergency services.5 This proposal, known as Initiative#55 (2005-06), was not permitted on the state election ballot for the November 8, 2006 general election,the Colorado Supreme Court having ruled that it violated the state constitution's single-subject rule. In the Matter of the Title And Ballot Title And Submission Clause For 2005-2006#55, 138 P.3d 273 (Colo. 2006). The ruling created a significant uproar amongst its proponents as well as from the Governor's office,but its publication on June 12th came a month after the constitutionally mandated end of the regular session of the state legislature. Then-Governor Bill Owens (R) called a special session of the state legislature in the July, 2006, limiting the agenda of the session to measures to control illegal immigration. The legislature, both houses of which were controlled by Democrats most of whom were up for re-election in November, responded by adopting a number of statutory provisions related to undocumented aliens and the provision of government services or benefits to such persons, in a session that lasted about a week. 4 See, as an example of the kinds of accommodations which are made for various benefit recipient families,the HUD regulations mandating local housing authority verification of lawful presence of such recipients,24 CFR Subtitle A, §5.508. 5 See http://www.defendcoloradonow.orp,/amendment/dcn original initiative.html 4 r One of the measures adopted by the legislature in that week was HB06S-1014, which mandates that the Attorney General use all available means to recoup the State of Colorado's costs incurred due to illegal immigration and the presence of illegal immigrants in the state. The legislature also adopted HB06S-1022, which became state Referendum K on the November 8, 2006 general election ballot, requiring the Attorney General to file suit against the federal government seeking such reimbursement.6 The Attorney General has estimated that, in 2005, there were 263,000 illegal immigrants in Colorado, and their presence cost Colorado taxpayers $1 billion in taxes funding incarceration, education, and Medicaid. The other enacted laws require local governments to implement a number of these measures, including requirements for verification of legal presence in the United States for all employees, for the employees of independent contractors of state/local governments, and for the provision of publicly-funded benefits, with certain exceptions. 1. PUBLIC CONTRACTS FOR SERVICES: HB06-1343: Effective date: August 8, 2006 Primary requirements: • Prohibits state agencies and local governments from entering into contracts for services (does not include supply or merchandise contracts, nor construction contracts which are either design build or where the agency is not the general contractor) with a services provider who knowingly employs, or contracts with a subcontractor who knowingly employs, illegal aliens. • Requires public contracts for services to include a certification by a services provider stating that it does not and will not knowingly employ illegal aliens in performing work under the contract. • Requires the services provider to apply to participate in the Basic Pilot Employment Verification Program created in Public Law 208, 104th Congress, as amended, and expanded in Public Law 156, 108th Congress, as amended, that is administered by the US Department of Homeland Security. See 8 USC §1324a and 8 C.F.R. §274A. • Requires the services provider to cooperate with the state Dept. of Labor and Employment in any investigation of its employment or subcontracting practices. • Remedies: Public agency can elect to terminate the contract for non-compliance with this provision by the services provider. If contract is terminated, public agency is required to report the services provider to the Secretary of State, who will place the services provider on a list on its website of vendors who have violated this provision during the past two years. [See Attachment: Sample Boulder County contract Sec. 17 language plus Exhibit A.] 2. ELECTIONS —VOTING SB06S-007: Effective date: July 31, 2006. Primary requirements: • Makes voting by a person who knows they are ineligible to vote a felony. Also makes the attempt to vote by a person who knows they are ineligible to vote a felony. Makes knowingly assisting voting by a person who is ineligible to vote a crime. 6 Referendum K was approved by Colorado voters, 55.72%in favor,44.28%opposed. Op.Cit., fn. 1,p.2. 5 3. PUBLIC HEALTH SERVICES HB06S-1002: Effective date: July 31, 2006. Primary requirements: • Principal thrust of this legislation is to ensure that, notwithstanding any other law to the contrary, no person will be refused the eligible public health services on the basis of immigration status. Also includes several "anti-profiling" provisions. • Eligible public health services: • Emergency epidemic disease treatment • Serious communicable disease treatment • Venereal disease and HIV/AIDS testing and treatment • Drug resistant tuberculosis and other diseases requiring isolation/quarantine • Childhood immunizations • Maintenance of confidentiality of public health services records 4. PROFESSIONAL AND COMMERCIAL LICENSING HB06S-1007: Effective date: January 1, 2007. Primary requirements: • Prohibits professional and commercial licensing of persons who are not legally present in the US. • Requires applicants for such licenses to present to public agency "secure and verifiable" documents to prove their legal presence in the US. • "Secure and verifiable" documents include any document issued by a state or federal jurisdiction or recognized by the United States government and that is verifiable by federal or state law enforcement, intelligence, or homeland security agencies. These provisions primarily affect local governments in Colorado in the provision of business licenses, liquor licensing, and restaurant licensing: 5. EMPLOYMENT HB06S-1017: Effective date: January 1, 2007. Primary requirements: • Applies to all Colorado employers • Requires, as to all employee hiring, the employer to create and keep on file an affirmation of compliance with the statute: • that the employer has examined the legal work status of each employee hired; • that the employer has retained copies of all documents used by the employee to prove her/his legal eligibility to work in the US;8 • that the employer has not falsified or altered any of the documents; and • that the employer has not knowingly hired an "unauthorized alien."9 s Documents required to prove identity and authorization to work in the US as set forth in 8 USC §1324a are set forth in the attachment. 9"Unauthorized alien" is as defined in federal law(8 USC §1324a(h)(3)): "the term 'unauthorized alien' means, with respect to the employment of an alien at a particular time,that the alien is not at that time either(A)an alien lawfully admitted for permanent residence, or(B)authorized to be so employed by this chapter or by the Attorney General. 6 i • Employers shall provide access to all the affirmation statements to the state Division of Labor of DOLE upon request. The Division has the authority to conduct investigations upon any complaint filed with the Division. • Violations are subject to a$5,000 fine for a 1St offense, up to $25,000 for each subsequent offense. 6. PROVISION OF PUBLIC BENEFITS HB06S-1023: Effective date: August 1, 2006. Primary requirements: • Prohibits public agencies, including both state agencies and all local governments, from providing"state or local public benefits"to any person OVER THE AGE OF 17. • "State or local public benefits" is defined by federal law(8 USC 1621; see above, p. 1). to • However, exceptions (verification of lawful presence not required) differ, in that the federal exceptions are included,plus other express exceptions for: • Benefits paid to or for the benefit of children under age 18 • Emergency medical services other than organ transplants • Short term, non-cash, in-kind emergency disaster relief • Pre-natal care [States are expressly permitted to vary the state or local public benefits for which lawful presence is required, under 8 USC §1621(d).] • Anti-profiling provision included. • Required documentation: • a valid Colorado driver's license or a Colorado identification card; or • a United States military card or a military dependent's identification card; or • a United States Coast Guard Merchant Mariner card; or • a Native American tribal document; OR • execute an affidavit stating that he or she is a United States citizen or legal permanent resident, or that he or she is otherwise lawfully present in the United States pursuant to federal law. • Illegal for state or local agency to provide benefits in violation of this statute • Where an affidavit has been submitted, it must be checked through the US Dept. of Homeland Security's web-based SAVE program: SAVE program: Section 121 of the Immigration Reform and Control Act of 1986("IRCA"),Pub.L. 99- 603,codified at 42 U.S.C. 1320b-7 and elsewhere,required the Immigration and Naturalization Service to offer an automated or other system to verify the immigration status of alien applicants. Before the passage of IRCA,the Service had developed and tested through pilot programs an automated verification system entitled Systematic Alien Verification for Entitlements("SAVE"). See 63 FR 41662,Rules of Department 10 Many provisions of state law will give benefits to citizens,but are not necessarily"benefits"for purposes of federal or state laws mandating lawful presence,but the line is often blurred. Compare,e.g.,Direction of State Property Tax Administrator,Bulletin No. 9, http://www.dola.colorado.gov/dpt/dpt_news/docs/Bulletins/2006_bulletins/BULLETINNO09-06.pdf,concluding that the senior citizen property tax exemption and the property tax exemption for qualifying disabled veterans are not subject to lawful presence verification requirements,with opinion of Deputy Attorney General to state Department of Treasury,dated December 19,2006,concluding that property tax deferral program for senior citizens and active members of the armed forces of the US is a benefit requiring verification of lawful presence. 7 of Justice proposed August 4, 1998;no federal codification of the rules set forth therein has been accomplished thus far. Because the state has legislated these lawful presence verification requirements, there is a question about whether the funding that they provide to non-profit service provider organizations for programs or services that would be "covered public benefits" if provided directly by the state or local government must be conditioned upon the practice by the service providers of documentation verification for lawful presence in the US by their clients. Local governments in Colorado have answered this question in one of two ways: 1) No special lawful presence verification requirements will be required of non-profit providers, based upon the language of HB06-1023 (24-76.5-103. "Verification of lawful presence - exceptions - reporting. (3) Verification of lawful presence in the United States shall not be required: (a) for any purpose for which lawful presence in the United States is not required by law, ordinance, or rule...."; and exemption of 8 USC §1342(d) (see above), OR 2) All contracts for services with covered benefits providers shall require contractual commitment to compliance by the service provider. Contract will require compliance, consent to audits for compliance, and reimbursement of funds expended in violation of the statute. These local governments have concluded that, despite the language of 8 USC §1342(d), non-profit service providers providing "covered public benefits"must verify, because the state law only exempts from verification where "lawful presence in the United States" is not required by any law, ordinance, or rule. Boulder County finds itself in the latter category. We have required the County's over 70 non- profit service providers receiving County funding to sign annual funding contracts containing the verification obligation, except where the organization can show that its programs and services are not"covered public benefits".11 [See attachment- contract language for providers of "covered public benefits. '7 For all the hoopla and difficulty for local governments and state agencies to adjust to these new laws, the pay-off is illusory at best. In a recent feature on NPR, the reporter stated, "Seven months ago, Colorado passed one of the toughest set of anti-immigration laws in the country. Now, heads of state agencies report that illegal immigrants really didn't use state services—and the new laws cost more to implement than they save.12 C. Other States' Experience: Many states have numerous individual statutes dealing with undocumented aliens. A few, like Colorado, have adopted more comprehensive statutory schemes. 1' The Colorado Attorney General has opined that third-party providers of"covered public benefits" funded by public funds must verify lawful presence of their clients. Opinion Colo. Atty.Gen.dated July 28,2006. 12 Nation:Colorado Finds Anti-Immigration Law Costly,by Jeff Brady,February 13,2007. http://www.npr.org/temp lates/story/story.php?storyld=73 82343&sc=emaf 8 Most of the statutes concern one of basic areas: denial of unemployment compensation to undocumented persons; limitations on provision of benefits generally, or more specifically in the areas of welfare benefits and educational funding; prohibition of grant of drivers' licenses. Some of these statutes include: Alabama has created a Director of Homeland Security, whose job includes cooperation with the federal government in relation to immigration and the securing of the nation's borders. Ala.Code 1975§ 31-9A-5(c)(4) (2003). Arizona restricts participation in its state-funded Family Literacy Program to and its adult education programs, all post-secondary educational financial assistance, and child care assistance, to legal residents. A.R.S. § 15-191, A.R.S. § 15-232, A.R.S. § 15-1825, A.R.S. § 46- 803. Arizona also requires proof of lawful presence for persons seeking non-federally-funded public benefits. A.R.S. § 46-140.01[Added by Initiative Measure, Prop. 200, approved election Nov. 2, 2004, eff. Dec. 8, 2004; entitled 'Arizona Taxpayer and Citizen Protection Act'. California prohibits award of state contracts to any private entity that has been convicted of hiring undocumented aliens in the past 5 years. West's Ann.Cal.Pub.Con.Code § 6101. Georgia requires verification of lawful presence for receipt of public benefits, much like Colorado's HB06S-1023. Ga. Code Ann., § 50-36-1 (2006). Idaho requires proof of lawful presence in order to obtain a marriage license. I.C. § 32-403 Illinois requires proof of lawful presence in order to obtain a teaching credential. 105 ILCS 5114C-8(3). Louisiana adopted a"Prevention of Terrorism on the Highways" act which criminalizes operation of a motor vehicle on the public highways of the state by a person not legally present in the U.S. La. R.S. 14:100.13; however, this law has been overruled as preempted by the federal Real ID Act, Pub.L. No. 109-13, Div. B, Title II, § 202, 119 Stat 231(2005). State v. Lopez 2006 WL 3849943, *3 (La.App. 4' Cir. 2006). Massachusetts prohibits public funding of non-emergency medical services for undocumented aliens over the age of 18. M.G.L.A. 118E § 16D(2). Mississippi prohibits payment of relocation assistance to displaced persons who are not legally present in the U.S. Miss. Code Ann. § 43-39-12(1) (2000). Mississippi also prohibits firms who have been convicted of hiring undocumented workers from receiving any grants or other state economic development assistance. Miss. Code Ann. § 57-1-371(2005). New Jersey has established a"Council on Undocumented Aliens"which is charged with studying the numbers and trends in undocumented aliens, the source countries, and determining their impact on employment opportunities in the state. N.J.S.A. 34:1A-81. Ohio requires an employer who has hired an undocumented worker who has contracted a contagious or infectious disease to pay for all expenses occasioned by the treatment of the disease in that person or others who contracted it from that person. R.C. § 3707.15(1999). Rhode Island expressly prohibits payment of any public assistance benefits to persons not legally present in the U.S. Gen.Laws 1956, § 40-6-3, -3.1, & -27.1. Tennessee prohibits state entities from contracting with firms that hire undocumented workers, and imposes a 1-year disbarment from state contracts for any such firm. T. C. A. § 12-4-124. Virginia requires proof of legal presence for receipt of public assistance. Va. Code Ann. § 63.2- 503.1(2005). State of Washington debars qualified legal aid programs from use of public funding in the representation of undocumented persons. West's RCWA 2.53.030(5)(g) 9 Conclusion: Many states have concluded that the costs imposed upon them by the presence of undocumented aliens are unacceptable, and have enacted various statutes to deal with certain parts of that problem. None have gone as far as Colorado, which has adopted a comprehensive set of laws seeking to prevent public funds from being expended for the benefit of illegal aliens. Even so, Colorado still expends significant public funds due to incarceration, education,and provision of medical services to illegal aliens. The serious question is whether the federal government is willing to, and can, stop the illegal influx of persons into the U.S., since that will be the only way to staunch the funding woes of states in this area. 10 SAMPLE CONTRACT BOULDER COUNTY (nee of service contracting for) CONTRACT THIS CONTRACT ("Contract") is entered into between the County of Boulder, State of Colorado, acting by and through its Board of County Commissioners ("County") and (name of company) ("Contractor") . In consideration of the rights and obligations specified below, the County and the Contractor agree as follows : 17 . Prohibitions on Public Contract for Services : (REMOVE THIS SECTION IF NOT A SERVICE CONTRACT) a. The Contractor shall not knowingly employ or contract with an illegal alien to perform work under the public contract for services; or enter into a contract with a subcontractor that fails to certify to the contractor that the subcontractor shall not knowingly employ or contract with an illegal alien to perform work under the public contract for services . b. The Contractor shall verify or attempt to verify through participation in the Basic Pilot Verification program, as administered by the United States Department of Homeland Security, that the Contractor does not employ any illegal aliens. If the Contractor is not accepted into the Basic Pilot Verification Program prior to entering into a public contract for services, the contractor shall apply to participate in the Program every three months until the contractor is accepted or the public contract for services has been completed, whichever is earlier. Information on applying for the Basic Pilot Verification Program can be found at: https://www.vis-dhs.com\employerregistration C. The Contractor shall not use the Basic Pilot Verification Program procedures to undertake pre- employment screening of job applicants while the public contract for services is being performed. a. If the Contractor obtains actual knowledge that a Subcontractor performing work under the public contract for services knowingly employs or contracts with an illegal alien, the Contractor shall be required to: - Notify the Subcontractor and the County within three days that the Contractor has actual 11 i knowledge that the Subcontractor is employing or contracting with an illegal alien; and Terminate the Subcontract with the Subcontractor if within three days of receiving the notice required pursuant to sub-subparagraph (A) of the subparagraph (II) the Subcontractor does+ not stop - -employing or c-ontracting with the---- illegal alien; except that the Contractor shall' not terminate the contract with the Subcontractor if during such three days the Subcontractor provides information to establish; that the Subcontractor has not knowingly employed or contracted with an illegal alien. b. The Contractor shall comply with any reasonable request by the Department of Labor and Employment made in the course of an investigation that the department is undertaking pursuant to its authority. CONTRACTOR'S CERTIFICATE REGARDING EMPLOYING OR CONTRACTING WITH AN ILLEGAL ALIEN FROM: (Contractor) TO: Boulder County PO Box 471 Boulder, CO 80306 Project Name Bid Number Project No. As a contractor for the above-identified bid/project, I (we) do hereby certify that, as of the date of this certification, I (we) do not knowingly employ or contract with an illegal alien and that I (we) have participated in or attempted to participate in the basic pilot program of the state of Colorado in order to verify that I (we) do not employ any illegal aliens. Executed this day of , 2007. Contractor By: Its: Title (Insert the Individual, Corporate or Partnership Certificate as appropriate) 12 fllil NEW CONTRACT LANGUAGE FOR PROVISION OF "COVERED PUBLIC BENEFITS" FOR BOULDER COUNTY SERVICES PROVIDERS Services Covered by Article 76.5 of Title 24, Colorado Revised Statutes (Restrictions on Provision of Public Benefits to Undocumented Persons): - - - "Covered public benefits"*: - • Retirement • Welfare • Health • Disability • Public or assisted housing • Postsecondary education • Food assistance • Unemployment benefits *"Exceptions": where the payments qualify under the following categories: • Benefits paid for children under age 18 • Emergency medical services other than organ transplants • Short term, non-cash, in-kind emergency disaster relief • Immunizations and testing and treatment of communicable diseases • Programs, services, or in-kind assistance, such as soup kitchens, crisis counseling and intervention, and short-term shelter, which are not means- tested and are necessary for the preservation of life or safety • Pre-natal care a. Where the Contractor will provide"covered public benefits"not subject to the "Exceptions" as part of the services funded by this Contract, the Contractor shall verify the lawful presence in the United States of each natural person eighteen years of age or older who applies for state or local public benefits or for federal public benefits for the applicant. In addition, the verification requirements shall not apply to applicants for the following types of services: 1)for any purpose for which lawful presence in the united states is not required by law, ordinance, or rule; 2) for obtaining health care items and services that are necessary for the treatment of an emergency medical condition of the person involved and are not related to an organ transplant procedure; 3)for short-term, noncash, in-kind emergency disaster relief, 4) for public health assistance for immunizations with respect to immunizable diseases and for testing and treatment of symptoms of communicable diseases whether or not such symptoms are caused by a communicable disease; 5)for programs, services, or assistance, such as soup kitchens, crisis counseling and intervention, and short-term shelter specified by federal law or regulation that: (a) deliver in-kind services at the community level, including services through public or private nonprofit agencies; 14 (b) do not condition the provision of assistance,the amount of assistance provided, or the cost of assistance provided on the individual recipient's income or resources; and (c) are necessary for the protection of life or safety; or 6)for prenatal care. b. Verification shall be made by requiring production of one or more of the following -documents-by-the-applicant and inspection by Contractor: 1) a valid Colorado driver's license or a Colorado identification card, issued pursuant to article 2 of title 42, C.R.S.; or 2) a United States military card or a military dependent's identification card; or 3) a United States coast guard merchant mariner card; or 4) a Native American tribal document; OR 5) execution of an affidavit(the approved form for which is attached hereto) stating: (a)that he or she is a United States citizen or legal permanent resident; or (b)that he or she is otherwise lawfully present in the United States pursuant to federal law; OR 6) by any form of identification approved for this purpose by rule or regulation of the state Department of Revenue. c. For any applicant whose application for benefits is approved and whose lawful presence in the United States has been made via affidavit, the Contractor shall verify lawful presence for federal public benefits or state or local public benefits shall be made through the federal systematic alien verification of entitlement program,referred to in this section as the "SAVE program", operated by the United States Department of Homeland Security or a successor program designated by the United States Department of Homeland Security. Until such verification of lawful presence is made,the affidavit may be presumed to be proof of lawful presence for purposes of this section. d. Records of the verification process and documents used by Contractor shall be maintained for no less than 18 months beyond the end of the payment of the covered public benefits, in order to permit auditing by Boulder County or the state or federal government. 14 SAMPLE AFFIDAVIT I, , swear or affirm under penalty of perjury under the laws of the State of Colorado that(check one): I am a United States citizen; OR I am a Permanent Resident of the United States; OR I am lawfully present in the United States pursuant to federal law. I understand that this sworn statement is required by law because I have applied for a public benefit funded by public funds of the United States, the State of Colorado, and/or the County of Boulder. I understand that state law requires me to provide proof that I am lawfully present in the United States prior to receipt of this public benefit. I further acknowledge that making a false, fictitious, or fraudulent statement or representation in this sworn affidavit is punishable under the criminal laws of the State of Colorado as perjury in the second degree under §18-8-503 and it shall constitute a separate criminal offense each time a public benefit is fraudulently received. AFFIANT (APPLICANT) (Signature) (Date) (PRINTED Name) Social Security Number(where available) INTERNATIONAL MUNICIPAL Item #10 LAWYERS ASSOCIATION 14 INTERNATIONAL MUNICIPAL LAWYERS ASSOCIATION Work Session II: Liability The Impact of Illegal Immigration on Local Law Enforcement: Civil & Criminal Liability Considerations by Benjamin E. Griffith Board Attorney YMD Joint Water Mgt. Dist. © 2007 International Municipal Lawyers Association. This is an informational and educational report distributed by thelnternational Municipal Lawyers Association during its 2007 Mid Year Seminar, held April 22-24, 2007 in Washington, D.C. IMLA assumes no responsibility for the policies or positions presented in the report or for the presentation of its contents. 2007 IMLA Mid Year Seminar Monday, April 23, 2007 Omni Shoreham Hotel, Washington, DC Work Session: Liability The Impact of Illegal Immil4ration on Local Government Law Enforcement: Civil and Criminal Liability Considerations by Benjamin E. Griffith* and Michael S. Carr** Introduction Illegal immigration has triggered an avalanche of legislative responses from state and local governments throughout the nation,particularly in our border states.Many cities and counties have taken the brunt of this combined fiscal, socioeconomic and liability exposure and are exasperated with the apparent failure of the executive and legislative branches of the Federal Government to deal with and come up with workable solutions to the illegal immigration nightmare. State and local police are badly needed to help overwhelmed federal immigration authorities apprehend and detain illegal aliens in the interior of our country.' The problems that flow from ten to twelve million undocumented workers crossing our national borders in recent years are many, and solutions are complex. This presentation will focus on the policy choices and strategies that are being developed at the local government level to cope with the staggering costs that illegal immigration places on law enforcement,particularly in the context of civil liability and criminal liability of officers who are in harm's way. That "harm" is now coming not only from illegal immigrants intent on entering the United States through any means available, but also from the federal criminal prosecution of local law enforcement officers. Growing Pressure for Local Government Alternatives Local government officials from the border states of California, Arizona,New Mexico and Texas have strained to provide services for which there are few if any federal programs to reimburse them.Taxpayers who support these local governments pay an increasingly higher per capita amount of taxes to fund essential law enforcement efforts to stem the tide of illegal immigrants,and are now faced with what can rapidly escalate into a disproportionate financial impact flowing from civil liability exposure of local law enforcement officials being sued by illegal immigrants in federal civil rights actions predicated on constitutional claims of excessive force, wrongful arrest, and assault. To make matters worse,local law enforcement officers working in tandem with federal border patrol officers may be facing criminal liability arising from efforts to interdict illegal border crossings by illegal immigrants. Local solutions and strategies are being studied, developed and proposed from city halls to county courthouses to state legislature, all in an effort to minimize this disproportionate fiscal impact. These solutions and strategies will have to be implemented through the coordinated efforts of federal,state and local governments as well as such organizations as the Federation for American Immigration Reform(FAIR),the Center for Immigration Studies,the National League of Cities,the National Association of Counties,universities and other public and private sector organizations.As cities and counties seek relief from the financial burden incident to civil and criminal liability exposure of law enforcement officers involved in efforts to address illegal immigration, feasible alternatives will have to be identified at the local government level, with close coordination and collaboration between state and federal agencies, each with their own turf, each with their own concerns about cross jurisdictional conflicts,and each with their own unique perspective on illegal immigration. Illegal Immigration Crackdowns Within Local Government Many municipalities and counties across the nation have enacted ordinances and other laws targeting illegal immigration. Many have been met with fierce opposition. Resolution of these disputes that pit local governments against the federal government has been largely bogged down in temporary restraining orders (TRO's) and agreed orders pending trials on the merits. Hazelton, PA In Hazleton, Hispanic immigrants swelled the population by more than 30 percent. The city is currently defending its ordinance,the Illegal Immigration Relief Act, from a legal challenge filed by the ACLU and Hispanic activist groups. The law,which the city council revised four times in an attempt to put it on sounder legal footing, would impose fines on landlords who rent to illegal immigrants and deny business permits to companies that give them jobs. A companion ordinance -2- would require tenants to register with City Hall and pay for a rental permit. On October 31, 2006, U.S. District Judge James Munley entered a TRO enjoining enforcement of an ordinance enacted by this northeast Pennsylvania city, apparently accepting the argument of the ACLU that the measure trampled on the federal government's exclusive power to regulate immigration. In issuing a temporary restraining order against Hazleton on Oct. 31, 2006, U.S. District Judge James Munley said there was a "reasonable probability" its package of laws would be declared unconstitutional. Judge Munley also refused to order the ACLU to reveal the names of some of the plaintiffs,who had requested anonymity because they are illegal immigrants. This prompted Hazelton's Mayor Barletta to respond, "All I want is a fair playing field. It makes it very difficult to prove your case when you don't know who is suing you."' Hazelton Mayor Lou Barletta's efforts have been replicated in dozens of communities across the nation, and many of those efforts are the subject of pending federal and state civil litigation. Hazelton's high-profile campaign to eliminate illegal immigrants have prompted over 100 other municipalities in 27 states to consider enacting ordinances and other laws ranging from penalizing companies that employ illegal immigrants to making English the official language. Riverside, NJ In Riverside,NJ,lawsuits have been filed in state court, and the township has yet to enforce the ordinance. Riverside, with a population of about 8,000, is the latest community to pass local regulations on illegal immigration in the absence of a federal law that would address the estimated 12 million illegal immigrants currently in the United States. U.S. lawmakers are trying to reconcile a bill in the House of Representatives that emphasizes stronger border controls and stiff penalties, with that of the Senate,which seeks a path to citizenship for eligible immigrants.Both Hazleton and Riverside, about 20 miles from Philadelphia, are being sued on the grounds that only the federal government has legal authority over immigration.' Cherokee County, GA In Cherokee County, GA, a federal civil action was recently filed, prompting the county to agree to delay enforcement of immigration proposals similar to those passed in Hazleton, Pennsylvania. The proposals include fines and business revocation for landlords who rent to illegal aliens,as well as bringing forth English as the official language of Cherokee County. Commissioner -3- Derek Good is also pushing for the county to join in two federal programs that target illegal immigration: The Systematic Alien Verification for Entitlements (SAVE) program, which checks a federal database for the eligibility of anybody seeking public benefits,and the Basic Pilot program, which checks the employment authorization of all employees. The Association County Commissioners of Georgia believes Cherokee County's rent measure would be the first such ordinance in Georgia. The proposal is meant to send a message to immigrants that "it's not going to be so comfortable" to be in the country illegally".' Escondido, CA Other judges have expressed reservations, including U.S. District Judge John Houston in California who wrote that he had serious questions about the constitutionality of Escondido's law. In Escondido, CA, Judge Houston blocked enforcement,followed by the city council rescinding its ordinance and then considering developing a replacement. After the federal judge blocked the city from fining landlords who rent to illegal immigrants, the city council agreed to pay$90,000 to the opposing lawyers.' Farmers Branch, TX In Farmers Branch, TX., a state court judge blocked enforcement, following which the city council considered voting to repeal and then place a revised measure before the citizens for a vote. The Federation for American Immigration Reform(FAIR) recently filed a petition to intervene in the Farmers Branch case.' Valley Park, MO. In the Valley Park case, where a state court judge blocked enforcement pending a March 2007 trial, St. Louis County Circuit Judge Barbara Wallace issued a restraining order and said there were "big holes" in the city's ordinance,which would target businesses and landlords. The original law regarding illegal immigration was passed July 17 and, among other things, made English the city's official language;prohibits illegal aliens from leasing or renting property in the city; and bans any property owner or renter in control of property from renting to illegal aliens. A lawsuit challenging the law was filed Sept. 22 in St. Louis County Circuit Court. I County Circuit Court Judge Barbara Wallace issued a temporary restraining order Sept. 25 against the law's enforcement. Those same plaintiffs filed an amended complaint to the same lawsuit -4- Sept. 27,a day after Valley Park aldermen rescinded the July law and passed a revised version to try to address complaints in the initial lawsuit.Again,Wallace issued a temporary restraining order Sept. 27 against the second law. The lawsuit contends that, among other things:l) Both versions of the city's law are unconstitutional; 2) They conflict with federal immigration law; 3) They were enacted in excess of the city's authority; 4) They violate the federal Fair Housing Act; 5) They would penalize city employers and landlords who employ or provide housing to illegal aliens; and 6)The plaintiffs also contend the laws are "arbitrary and unreasonable" because, among other things, they have caused landlords to lose some tenants and that the city had done no research to determine the effects of illegal immigration on crime rates and educational opportunities.7 Will These Local Government Ordinances Survive? The first real test of whether the local crackdowns will survive judicial scrutiny will come in March, when Hazleton and Valley Park are scheduled to defend their ordinances at a trial on the merits. Many believe the issue will ultimately be decided by the U.S. Supreme Court, and municipalities that want to tackle illegal immigration are being urged to closely follow Hazleton's approach. Kris Kobach, a University of Missouri law professor and former immigration adviser under former U.S.Attorney General John Ashcroft,is defending the ordinances in the Hazleton and Valley Park cases, and recently remarked that these cities have federal law and Supreme Court precedent on their side. Kobach noted that "[m]ost of these temporary restraining orders don't represent a judicial consideration of the issues in any significant sense. They are just agreements by the attorneys to preserve the status quo." An ACLU attorney fighting the ordinances, Omar Jadwat, has said he believes the legal maneuvering has made many towns think twice about going after illegal immigrants and that these communities are holding off pending further clarification from the courts. The American Civil Liberties Union argues the measures trample on the federal government's exclusive power to regulate immigration. Even though the laws have yet to be enforced in any of the places where they have been challenged, many Hispanics - illegal or otherwise-have already left. Hispanic business districts in -5- Hazleton, Farmers Branch and Riverside, N.J., all report steep declines. While none of these municipalities and counties are enforcing their measures aimed at combating illegal immigration, usually in the face of perceived expensive legal battles with the federal government and well-funded civil rights organizations,the issue is boiling to the surface and demanding resolution on a national level. The Center for Community Change, an immigrants rights group based in Washington, has published an analysis showing that 35 towns have approved illegal immigrant laws, 35 have defeated them and 35 others have ordinances pending. Ordinances that have not been challenged are being enforced, though it is too early to tell what effect they are having, according to FAIR, which supports tougher border security and an end to illegal immigration. Despite the setbacks in communities where legal challenges have been raised,FAIR expects to see more towns pass such laws. FAIR stated recently through its spokesman, Bob Dane, "It's a reaction to the inaction in Washington, and you'll continue to see these happen because the local jurisdictions are hit so hard by the cost of illegal immigration." said Dane. Recently Introduced State Legislation Concerning Illegal Immigrants The National Conference of State Legislatures reported' that during 2006, 570 pieces of legislation concerning immigrants were introduced in state legislatures around the country. At least 90 bills and resolutions passed through the legislatures in 2006. Eighty-four bills were signed into law,more than double the amount of 2005. Six bills were vetoed. While legislation covered a wide variety of topics,many states focused on education,employment,identification and driver's licenses, law enforcement, legal services,public benefits, trafficking, and voting procedures. The following states enacted legislation dealing specifically with law enforcement authority in the context of illegal immigrants: Colorado Colorado SB 90 (signed 5/1/2006) prohibits any state or local government from enacting legislation that impedes law enforcement agencies from cooperating or communicating with federal officials concerning an arrestee who is suspected to be illegally present in the U.S.(section 1).Police officers are required to report any suspected illegal immigrant arrestees to ICE, although this does not apply to persons arrested for a suspected act of domestic violence until a conviction has been -6- reached. The act also declares that state and local law enforcement officials should actively pursue any and all federal monies available that reimburse states for enforcing federal immigration laws. Any local government that does not subscribe to this act will not be eligible for state grants (section 2) 9 Colorado HB 1014 (signed 7/31/2006) instructs the state attorney general to pursue reimbursement from the federal government for all costs associated with illegal immigration, including incarceration, education, and healthcare(section 1). Illinois Illinois SB 2962 (signed 7/3/2006) maintains that if an undocumented immigrant is found guilty of crime, the person may be deported (section 19). Illinois SB 624 (signed 7/18/2006) states that an alien who is convicted of a felony or misdemeanor may be deported if an order of deportation has already been ordered or if deportation wouldn't lessen the crime (section 5). New Jersey New Jersey SB 2007(signed 7/8/2006)appropriates$5,000,000 for the State Criminal Alien Assistance Program and $2,403,000 for the Alien Labor Certification service grant. Ohio Ohio SB 9 (signed 3/1/2006) states that state and local authorities should comply with the U.S. Patriot Act. This bill requires that a driver's license applicant be a resident or a temporary resident of the state of Ohio (section 4507.08). The legislation requires ICE to be notified when a suspected non-citizen pleads guilty to or is convicted of a felony. The bill also requires a list of all unauthorized immigrants currently serving prison terms to be compiled and given to ICE to determine if ICE wishes to gain custody of any undocumented prisoner. Aliens currently serving prison terms should be released to the custody of ICE upon completion of their prison term(section 2909.30). South Dakota South Dakota SB 63 (signed 2/28/2006) includes ICE officers in the definition of a federal law enforcement officer(section 1). -7- Virginia Virginia HB 1046(signed 4/5/2006)provides that juvenile intake officers shall report to ICE a juvenile who has been detained based on allegations of violent juvenile felony and who the intake officer has probable cause to believe is in the United States illegally. Law enforcement would be required to report juveniles to Immigration and Customs Enforcement if the juveniles are illegal immigrants accused of what would be crimes if they were adults.10 Spotlight on Litigation United States v. Gilmer Hernandez, In the border town of Rocksprings,Texas, in a county of about 2000 square miles,one of the three deputies responsible for patrolling this sparsely populated but massive land area, Deputy Sheriff Gilmer Hernandez, was on patrol the night of April 14, 2005. He observed a speeding Suburban run a red light. Deputy Hernandez stopped the Suburban, and as he approached it, he noticed numerous people lying on the floor of the vehicle. The vehicle suddenly took off and, according to Hernandez,the driver turned around and tried to run him down.Deputy Hernandez fired several shots at the vehicle, shooting out the rear tires. One of his shots also struck and caused a minor injury to one of the occupants,Maricela Rodriguez-Garcia. The fleeing vehicle stopped, and at least eight illegals jumped out and took off running for the sagebrush. Ms. Garcia was treated and released from the hospital that night. She and the other occupants of the fleeing vehicle were allegedly being smuggled across the border to Austin.Deputy Hernandez immediately called Sheriff Donald Letsinger, who showed up with three Texas Rangers to do the routine follow-up work. The Federal Government also showed up and took over the investigation after being notified by the Mexican Government that an illegal from Mexico had been wounded in the United States.All of the illegals were interviewed together, not a recommended law enforcement technique, but nonetheless gave conflicting stories during the subsequent criminal proceedings brought against Deputy Hernandez. The Federal Government gave the illegals green cards and allowed them to stay in the United States. Hernandez was thereafter charged by the United States Attorney with recklessly discharging his firearm in violation of the civil rights of the Mexican woman who sustained a minor gunshot wound while being smuggled to Austin. The United States government used the illegals as witnesses -8- against Hernandez at the criminal trial, and on December 1, 2006, Hernandez was convicted following a week-long trial in Del Rio. Sentencing was scheduled in March 2007, and Hernandez could face up to 10 years in federal prison. Texas Republican Ted Poe voiced the strongest objections to the criminal prosecution and conviction of Deputy Hernandez, stating in an address on the floor of the House of Representatives on February 8,2007 that"[o]nce again,our Federal Government has taken the other side,the wrong side of the border word. Our government is more concerned about illegals in the van than they are about the safety of Deputy Hernandez.... Deputy Hernandez did everything a normal person would have done in these circumstances,including immediately reporting the event.Why is our government so relentless and zealous in prosecuting border protectors and not protecting the borders?Why does our government work backroom deals with illegals to convict our law officers? Why does it seem the Federal Government is so quick to cooperate with Mexico to thwart border security? And why does it allow these illegals more consideration than it does American peace officers."'` U.S Border Patrol Agents Compean and Ramos Two border patrol agents were recently convicted of the February 17, 2005 shooting of a Mexican drug smuggler, Osbaldo Aldrete Davila, as he was fleeing back into Mexico from border patrol agents and attempting to avoid being apprehended. The circumstances were similar to those faced by Deputy Hernandez. Border Patrol Agent Jose Alonso Compean was monitoring the south side of a levee road near the Rio Grande on the U.S.-Mexico border when he spotted a suspicious van driving down the north end of the road. The van was being driven by a Mexican drug smuggler, Osbaldo Aldrete-Davila He called for backup, and Border Patrol agent Ignacio Ramos then headed to the small town of Fabens, about forty miles southeast of El Paso, a location where he thought he could intercept the van at one of only two roads leading in and out of the small town. Another agent was already following the van when Ramos arrived,and Ramos and the other agent followed the van through the center of the town of Fabens until it turned back toward the Rio Grande. Unable to outrun the border patrol agents, Aldrete-Davila stopped the van on a levee, got out and started running. Border Patrol agent, Jose Alonso Compean, was waiting for him on the other side of the levee. While Aldrete-Davila made his way through a canal, Compean was yelling for him to stop, and agent Ramos while crossing the same canal heard shots being fired.He later saw agent Compean -9- on the ground,but continued running after the drug smuggler. As agent Compean lay on the ground behind him, injured from a scuffle and confrontation with the drug smuggler just moments earlier, suddenly the drug smuggler turned toward agent Ramos,pointing what appeared to be a gun.Ramos shot at him, striking him in the back, but the drug smuggler was able to flee into the brush and escape the agents.The agents watched as the drug smuggler later jumped into a van waiting for him. The van was later found to have over 800 pounds of marijuana inside. More than two weeks after this shooting incident, a Department of Homeland Security investigator, Christopher Sanchez, acting on a tip from Rene Sanchez, a border patrol agent in Wilcox, Arizona, tracked down Aldrete-Davila in Mexico, offering him immunity if he testified against the border patrol agents who shot him. A confidential Homeland Security memo obtained by the media revealed that the drug smuggler's mother had contacted Rene Sanchez's mother-in-law and advised her about the border patrol agents shooting Aldrete-Davila, and the mother-in-law told her son-in-law, Rene Sanchez, of the incident, and he then spoke to Osbaldo Aldrete-Davila by telephone.`Z The drug smuggler was given full immunity to testify against both border patrol agents,and was provided complete medical care at El Paso's William Beaumont Army Medical Center. Both border patrol agents testified at trial, prosecuted by the same U.S. Attorney who brought similar charges against Hernandez,that they were defending themselves when they shot Aldrete, who they said was armed at the time. After the shooting, Aldrete retreated to Mexico and later admitted that he was trying to smuggle nearly 800 pounds of marijuana while in the United States illegally. Both agents were convicted of assault with serious bodily injury,assault with a deadly weapon,discharge of a firearm in relation to a crime of violence, and violation of the civil rights of the Mexican drug smuggler. On the heels of the criminal convictions, both agents now face a $5 million civil suit by the Mexican drug smuggler for violating his civil rights. Texas Representative Walter B. Jones in an August 21, 2006 letter to President George W. Bush, complained that"[t]he Justice Department's outrageous prosecution does nothing but tie the hands of our Border Patrol and prevent them from securing America against a flood of illegal immigrants, drugs, counterfeit goods and quite possibly, terrorists. This demoralizing prosecution puts the rights of illegal alien drug smugglers ahead of our homeland security and undermines the -10- critical mission of better enforcing current immigration laws. These two agents should not be made scapegoats for our government's enforcement failures."13 Although President Bush has indicated that a presidental pardon for the two Texas Border Patrol Agents remains a possibility, Bush has not taken that affirmative step.14 Bush Administration's "Stance"? President Bush claims that he is serious about immigration enforcement, however, the Orange County Ca., sheriff has asked the Immigration and Customs Enforcement Agency to train and deputize his detectives in immigration law and authorize them to enforce it. That way,when a sheriff's detective come across an illegal alien gang suspect, he can get him off the street immediately on an immigration charge. President Bush refused the proposal.15 Impact of Illegal Immigration on Border Towns and Counties: Crunching the --um ers If the border counties taken together were considered a 51" state, it would have 6.7 million residents-, and rank 13th in population. It would be the 2nd youngest state with almost 29 percent of its population under the age of 18. Border counties would rank last in per capita income if San Diego County is not included, and with San Diego the border counties rank 39th in per capita income. They would rank 5`h in unemployment, between Michigan and South Carolina if Pima County is excluded,and fall to last place without the San Diego County work force. Border counties would rank 12th as a 51st state in government and government enterprise employment; 10th in employment of federal civilians; and 4th in military employment. In 2000, 73 percent of border residents above the age of 25 had completed high school, compared with 80.4 percent nationally, ranking border counties 50th if considered a 51 st state.Without San Diego,that ranking would drop to last. As a 51 st state, southwest border counties would rank last in the presence of health care professionals.16 Finally,border counties report the largest number of federal offenses creating a 1 st ranking as a 51 st state, primarily as a result of drug and immigration arrests by federal agencies. Border prosecutors accept many cases from federal prosecutors, but are not fully funded to handle these cases. Federal arrests in U.S. District Courts in border counties are two times more likely to involve immigration offenses than other crimes." On August 17, 2006, Sheriff Leo Samaniego of El Paso County,Texas,testified at a House -11- Judiciary Committee hearing on the impact of illegal immigration on border towns. He stated that the large international border creates tremendous smuggling opportunities for terrorists and is fertile ground for recruitment and development of support networks for terrorist organizations. The Mexican drug trafficking and human smuggling organizations use their knowledge of the border to assist terrorist cell members in their attempts to exploit the United States. Sheriff Samaniego concluded by point out that amnesty only fuels the desire of millions more to come in illegally and hope that this practice will be repeated.18 Costs to American Taxpayers The National Research Council has estimated that the net fiscal cost of immigration ranges from$11 billion to$22 billion per year,with most government expenditures on immigrants coming e from state and local coffers,while most taxes paid by immigrants go to the federal treasury. The net deficit is caused by a low level of tax payments by immigrants,because they are disproportionately low-skilled and thus earn low wages,and a higher rate of consumption of government services,both because of their relative poverty and their higher fertility. This is especially true of illegal immigration. Even though illegal aliens make little use of welfare, from which they are generally barred,the costs of illegal immigration in terms of government expenditures for education,criminal justice, and emergency medical care are significant. California has estimated that the net cost to the state of providing government services to illegal immigrants approached$3 billion during a single fiscal year. The fact that states must bear the cost of federal failure turns illegal immigration, in effect, into one of the largest unfunded federal mandates.19 Conclusion Illegal immigration is placing more than a theoretical burden on law enforcement at the local government level.When officers are placed in harm's way each day and night they seek to carry out their duty to protect and serve the public, the imposition of civil and criminal liability upon those officers through the combination of§1983 excessive force suits by illegal immigrants apprehended while entering the United States and federal criminal prosecutions by zealous U.S. Attorneys raises the stakes of the illegal immigration debate considerably.These recent examples of local government legislative measures and law enforcement efforts to respond to illegal immigration in the absence of a clear and meaningful federal policy signal the critical need for a federal response.That response must come from Congress and the Executive Branch, working in tandem to bring coherency, -12- rationale justice and common sense back to our nation's immigration law and policy. The time for comprehensive reform is now. *Ben Griffith's federal and state civil litigation practice focuses on representation of state and local governments, agencies,boards and officials in the areas of election law, voting rights, civil rights, public sector insurance coverage and environmental law. He is a member of IMLA's International Committee, an IMLA Local Government Fellow and IMLA State Chair. He is Chair-Elect of the ABA Section of State and Local Government Law, and has served as President of the National Association of County Civil Attomeys,'President of the Mississippi Association of County Board Attorneys,and Chair of IMLA's Counties and Special Municipal Districts Department.He is Board Certified in Civil Trial Advocacy by the National Board of Trial Advocacy. He earned his Juris Doctor in 1975 from the University of Mississippi Law Center,after receiving a B.A.in English and German and is a partner in the Cleveland,MS law firm of Griffith&Griffith,Attorneys. He served as county board attorney for 21 years and serves as board attorney for a 17-county water management district, a position held since 1989. He and his wife, Kathy, are the parents of two children, Clark, age 26, and Julie, age 24. **Michael Carr is an associate at Griffith & Griffith practicing mainly in the areas of federal and state civil litigation, representation of state and local governments, civil rights defense, and public sector insurance coverage. He earned his Juris Doctor in 2005 from the University of Mississippi Law Center with an emphasis in immigration law and international policy. He,received a B.A. in History and Spanish from the University of Mississippi in 2003. 1."State and Local Police in Immigration Law Enforcement",Numbers USA, Available at http://www.numbersusa.com/hottopic/clearact.html 21ozano v. City of Hazleton, 2006 WL 3718087 (M.D.Pa.2006) 3.Hurdle, John, "Riverside, NJ Becomes Illegal Immigration Protest Hot Spot!"Reuters, available at http://www.alipac.us/modules.php?name=News&file=article&sid=1451 4. Associated Press, "Cherokee Co. to Vote on English as Official Language Measure" AccessNorthGa.com, available at: http://www.accessnorthga.com/news/ap newfullstory.asp?ID=84051 5.Garrett v. City of Escondido, 465 F.Supp.2d 1043 (S.D. Cal. 2006). 61n re Ramos,Not Reported in S.W.3d,2007 WL 29806, (Tex.App.-Dallas 2007). 7.Shapiro,Mary, "Immigration Law Backers Conduct Rally"Suburban Journals Oct 2006, available at http://www.smalltowndefenders.com/public/node/64 8.http://www.ncsl.org/programs/immig/61mmigEnactedLegis3.htm#Law%20Enforcement 9.Harp, Kelley, "Sanctuary Cities Banned in Colorado!" Colorado Alliance for Immigration Reform(CAIR) May 2, 2006. Available at http://www.cairco.org/sanctuary/sanctuary.html See also Muehler v. Mena, 544 U.S. 93, 125 S.Ct. 1465 (U.S. 2005)( holding that questioning -13- immigration status during a lawful police contact(or, by implication, any lawful contact) was as fundamental a question as asking for name, address and date of birth. Indeed, the Court made clear that no predicate "independent reasonable cause'need exist to inquire into immigration status.) 10. "Bills on Illegal Immigration" The Washington Post, January 25, 2006; Page B04 available at http://www.washingtonpost.com/wp-dyn/content/article/2006/01/24/AR2006012401546.html I l.http://poe.house.gov/News/DocumentsSingle.aspx?DocumentlD=58049 12.http://www.dailybulletin.com/news/ci 4141562 13. Letter from Walter B. Jones, Member of Congress, to President George W. Bush, dated August 21, 2006. 14.Burns, Alison, "Bush: Convicted Border Agents Could Be Pardoned"KFOX-TV, El Paso, TX, January 19, 2007. Available at http://www.kfoxtv.com/news/10785667/detail.html 15. Parker, Randall, "Bush Administration Stalls Loal immigration Law Enforcement" ParaPundit, August 8, 2006. Available at http://www.parapundit.com/archives/003635.html 16. "At the Crossroads: US/Mexico Border Counties in Transition,"Institute for Policy and Economic Development at the University of Texas El Paso. p. ES-1 to ES-4. Available at http://iped.utep.edu/bcc/bcc.pdf 17. Id at ES-S. 18. "Border Sheriff Discusses the Impact of Illegal Immigration on Local Law Enforcement and National Security",House Republican Border Security Bulletin, August 17, 2006 . 19.Center for Immigration Studies, "Costs" available at http://www.cis.org/topics/costs.html -14-