If Medical Marijuana Businesses Are Legalized In Oklahoma What Clauses Should Your Lease Include?
As Oklahoma citizens consider State Question 788, landlords and property managers need to know how to address medical marijuana use in their buildings.
The supremacy clause in the U.S. Constitution says that states must not (and cannot) enact laws that conflict with Federal law—but states have been doing just that when it comes to legalizing marijuana. Until now, the Federal government’s marijuana policy has been to essentially turn a blind eye to the changing marijuana laws. And now Oklahoma will consider SQ 788 and possibly another ballot measure in 2018 to legalize medical marijuana. Half of the states, including Arkansas, and the District of Columbia have already legalized medical marijuana so it is a safe bet that marijuana will be legalized in some form in Oklahoma. Although cannabis remains illegal under Federal law, the U.S. Drug Enforcement Agency — which made marijuana a primary target in its “war on drugs” — is considering reclassifying it as a Schedule II drug, which could open the door to decriminalizing pot on a Federal level.
As a result, Oklahoma landlords and property managers could face new considerations when it comes to how marijuana laws affect their lease agreements. There are a number of scenarios related to marijuana legalization you could find yourself in, but if you stay informed, you can take steps to address any changes in the legal landscape.
Landlords and property managers are not required to accommodate recreational pot use under state law, but they may choose to make some exceptions for tenants who use marijuana for medical purposes. Still, that doesn’t mean you have no control over how it’s used inside your building. And unless federal law is changed, you may still prohibit marijuana use in any form.
One of the first things you need to decide is whether you want to allow smoking of any kind in the building (e.g., rent houses). Tobacco, for example, is a legal substance nationwide, but most property and business owners — restaurants, bars, apartment buildings — have the right to ban smoking cigarettes inside. The case for marijuana is no different.
It is extremely important for landlords to recognize that they may be dealing with a medical marijuana tenant who may have a disability as defined under the Fair Housing Act. So, for example, it would not be a good policy to reject a rental applicant because the person uses medical marijuana to treat a disability. It may be better to simply inform the applicant that smoking marijuana or growing plants is not allowed on the property, and give the disabled applicant the opportunity to decide whether to pursue the vacancy (or use other forms of medical marijuana such as edibles). Past drug addiction also is protected under anti-discrimination statutes, and is not a topic that should be explored during tenant screening. Because the use of marijuana remains a Federal offense, there is an argument that you may deny a reasonable accommodation claim for the use of medical marijuana under the Federal Fair Housing Act. However, the Federal Courts are not in agreement on this issue and the law is changing. In the employment area, courts have denied medical marijuana as a reasonable accommodation. Given the Federal government’s express intention to not allow US Department of Justice enforcement of the law prohibiting the use, sale and cultivation of medical marijuana (Specifically, see page 230: Section 537 of the Consolidated Appropriations Act of 2017), this may lead Oklahoma state courts to be more lenient when it comes to requiring reasonable accommodations.
What Can Landlords Do to Regulate Marijuana Use?
There are a number of strategies that landlords may employ to prohibit marijuana use. It is helpful to remember the reasons why landlords may want to regulate marijuana — for instance, to minimize tenant complaints, to minimize property damage, to reduce crime, and so on. The most encompassing strategy is to prohibit marijuana possession and use because it is illegal under Federal law.
If Oklahoma does legalize medical marijuana, it will very likely apply only to tenants over the age of 21. Those landlords who manage student rentals and typically deal with younger tenants, would want to ban marijuana use entirely. Marijuana use or cultivation may be viewed as a disturbance which violates other tenants’ quiet enjoyment.
Can You Evict a Tenant for Using Medical Marijuana?
Currently in Oklahoma all marijuana is banned, so issuing an eviction notice to a tenant who violates your anti-drug policy or anti-marijuana clause is fairly straightforward. But even if medical marijuana is legalized, you have the right to evict tenants who violate the terms of your lease, which would be an eviction for engaging in federally illegal activity. If you ban smoking marijuana — but not other forms of consumption of the drug — and a tenant continually violates that term, you can evict. This is why it is so important for a landlord to clearly state the rules concerning marijuana use in their lease agreements.
Can You Ban Growing Marijuana on Your Property?
When it comes to cultivation, you would want to require tenants to receive written consent from the landlord before growing cannabis on the premises. The language of the written consent should allow the landlord or property manager to inspect the unit from time to time to ensure that tenants are not growing more cannabis than is legally allowed.
Something to keep in mind: Cultivation often requires higher electricity and water usage—and plants require a lot of moisture, which can be harmful to the building. So you have very legitimate reasons to prohibit all cultivation on the premises.
Hopefully, landlord-tenant disputes about marijuana use will be covered by a well drafted lease agreement. Complaints typically come from other tenants who are concerned about marijuana smoke or odors. If you find yourself in this situation, act quickly in devising a solution that works for all parties—for example, perhaps the marijuana user would happily switch to edibles.
Over the last 20 years, the number of states allowing use of marijuana has been increasing, and with a recent poll showing over 60% of Americans support legalization, we can expect that trend to continue. The implications for real estate are numerous. The conflict between Oklahoma and Federal law creates extra considerations. Owners/managers should take care to be up-to-date on the laws, and ensure their lease provisions specifically address their policies related to these laws along with any other special considerations.
Oklahoma voters will get the chance to legalize medical marijuana in 2018.
While supporters had gathered enough signatures to place the measure before voters in 2016, advocates had filed a lawsuit against then-Attorney General E. Scott Pruit after he rewrote the initiative’s ballot title, delaying the vote. Advocates were successful in their lawsuit earlier this year, when the Supreme Court of Oklahoma ruled 7-1 in their favor. The measure will appear on the ballot as State Question 788. The finalized ballot title, which is the original title submitted by opponents, was formally approved by Oklahoma Secretary of State. The measure will most likely appear on the November 2018 ballot, unless Oklahoma Governor Mary Fallin calls a special election for the measure. If approved by voters, medical marijuana would be subject to a 7 percent sales tax.
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Oklahoma has expanded its limited protection for patients who use low-THC, high-CBD cannabis oil for certain medical conditions, which was initially passed in 2015. HB 2835 allows adults to use low-THC cannabis oil (minors were already covered by existing law) and added “spasticity due to multiple sclerosis or due to paraplegia, intractable nausea and vomiting, and appetite stimulation with chronic wasting diseases” to the list of qualifying conditions, in addition to severe epilepsy. Click here for a summary of the law.
Unfortunately, it is still hard for patients to gain access to cannabis oil in Oklahoma. And, as with all current laws providing access to high-CBD products, the law is very limited and leaves behind most patients who could benefit from whole-plant medical marijuana in various forms, such as people with cancer, intractable pain, and other serious illnesses. For a broader look at CBD laws and where they fall short, take a look at an analysis available here.
Oklahoma State Question 780 made all marijuana possession offenses misdemeanors.
On November 8 2016, 58% of Oklahoma voters supported State Question 780, which makes all marijuana possession offenses misdemeanors effective July 1, 2017.
Oklahoma still has further to go, as the penalty for first-time marijuana possession will remain up to one year of incarceration and a fine of up to $1,000. Removing possible jail time for marijuana possession altogether, as 21 states have already done, will allow police to focus on solving violent and property crime. In addition, enforcement of these laws is racially biased. According to this report by the ACLU, African Americans in Oklahoma are 2.9 times more likely than whites to be arrested for possession of marijuana, even though blacks and whites consume marijuana at similar rates.
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Street Law School: I passed a School Bus and they want to suspend my driver’s license for a year! Now what?
If you do not stop when those red lights are activated for a school bus, or a church bus, and you drive past that bus, in addition to a fine and other penalties such as points on your license and record, you’re going to lose your driver’s license for a year. The law is found at 47 O.S. § 6-205.A.11 (OSCN 2017). The purpose of this article is help people from being shocked by finding out after they have paid a fairly small ticket that they are losing their driver’s license. When you get a ticket that is for anything more than a minimal speeding ticket, you should contest the charge. Failing to do so can be devastating for a family, for wage earners or for moms who drive to and from school and work.
Oklahoma DPS will suspend your Oklahoma driver’s license if you’re convicted of illegally passing a school bus or a church bus. You must act quickly if you have received a notice of driver’s license suspension for this offense. You may have received a ticket in the mail for meeting or overtaking a school bus. The police don’t even have to be present at the time of the alleged violation for you to receive the citation. The school bus driver who observed the alleged violation merely needs to fill out a simple report and submit it to the police within 24 hours of the violation. 47 O.S. § 11-705.D (OSCN 2017).
While paying the $100.00 ticket may be the easiest and quickest thing to do, it also is the equivalent of pleading guilty to the offense. You should instead request a hearing for the ticket. Often the school bus driver is unable to identify the person who allegedly passed the bus. If convicted of passing a school bus or church bus, Oklahoma DPS will suspend your Oklahoma driver’s license for one year and add 4 points to your driving record according to the Oklahoma license points schedule.
If you received a passing a school bus ticket in the mail or notice of license suspension, you should talk to an attorney about having the conviction overturned and appealing the suspension.
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In the unfortunate event you have to move forward with an eviction, you will likely want to evict your non-paying or nuisance tenant(s) just as quickly as the law allows. When you have tenants in your properties that aren’t paying or are in violation of their Rental/Lease Contract, acting quickly will minimize the amount of lost rent, vacancy loss, property damage and make ready expenses.
I am pleased to announce that I have another recent appellate court victory. This time in an unreported case where, as is often the case, the trial court granted the bank’s motion for summary judgment for foreclosure against the homeowner, but the Oklahoma Court of Appeals reversed and remanded the case, finding that there exists a material issue of disputed fact as to whether HSBC was the holder of the promissory note at the time that it filed its amended petition. The opinion makes it clear that a motion for summary judgment in a foreclosure case must present undisputed facts supported by acceptable evidentiary materials showing that the bank is a person entitled to enforce the note at the time that the petition is filed. The bank’s evidentiary materials were deficient because it had made inherently contradictory allegations in its pleadings and affidavit in support of its motion for summary judgment. Here is a link to the slip opinion: HSBC vs Williamson.
When property is leased for exploration, the lessee has the right to go out and drill on that property. However, this exercise often causes damage to the surface of the land — damage to crops and land, pollution, damage caused by pipelines, access roads, etc. The issue of surface damages is addressed in the Oklahoma Surface Damages Act. While one individual may own the surface of property, another may own the land below the surface. This can rapidly become a complicated legal situation when surface damages occur.
Surface owners may become involved in a surface damages claim and require legal representation. Although the lessee can drill on the property they are leasing, they are ultimately responsible for compensating the surface owner for any damage done to the surface property. If you are a surface owner we can explain the legalities of the Oklahoma Surface Damages Act and how this law affects you.
2. “Surface owner” means the owner or owners of record of the surface of the property on which the drilling operation is to occur.
§52-318.3. Notice of intent to drill – Negotiating surface damages.
Before entering upon a site for oil or gas drilling, except in instances where there are non-state resident surface owners, non-state resident surface tenants, unknown heirs, imperfect titles, surface owners, or surface tenants whose whereabouts cannot be ascertained with reasonable diligence, the operator shall give to the surface owner a written notice of his intent to drill containing a designation of the proposed location and the approximate date that the operator proposes to commence drilling.
Such notice shall be given to the surface owner in any manner as provided for in paragraph 1 and paragraph 2 of subsection C of Section 2004 of Title 12 of the Oklahoma Statutes for the service by personal delivery or by mail of a summons in a civil action. If the operator makes an affidavit that he has conducted a search with reasonable diligence and the whereabouts of the surface owner cannot be ascertained or such notice cannot be delivered, then constructive notice of the intent to drill may be given in the same manner as provided for the notice of proceedings to appoint appraisers.
Within five (5) days of the date of delivery or service of the notice of intent to drill, it shall be the duty of the operator and the surface owner to enter into good faith negotiations to determine the surface damages.
§52-318.4. Undertakings which may be posted as damage deposit.
A. Every operator doing business in this state shall file a corporate surety bond, letter of credit from a banking institution, cash, or a certificate of deposit with the Secretary of State in the sum of Twenty-five Thousand Dollars ($25,000.00) conditioned upon compliance with Sections 318.2 through 318.9 of this title for payment of any location damages due which the operator cannot otherwise pay. The Secretary of State shall hold such corporate surety bond, letter of credit from a banking institution, cash or certificate of deposit for the benefit of the surface owners of this state and shall ensure that such security is in a form readily payable to a surface owner awarded damages in an action brought pursuant to this act. Each corporate surety bond, letter of credit, cash, or certificate of deposit filed with the Secretary of State shall be accompanied by a filing fee of Ten Dollars ($10.00).
B. The bonding company or banking institution shall file, for such fee as is provided for by law, a certificate that said bond or letter of credit is in effect or has been canceled, or that a claim has been made against it in the office of the court clerk in each county in which the operator is drilling or planning to drill. Said bond or letter of credit must remain in full force and effect as long as the operator continues drilling operations in this state. Each such filing shall be accompanied by a filing fee of Ten Dollars ($10.00).
C. Upon deposit of the bond, letter of credit, cash, or certificate of deposit, the operator shall be permitted entry upon the property and shall be permitted to commence drilling of a well in accordance with the terms and conditions of any lease or other existing contractual or lawful right.
D. If the damages agreed to by the parties or awarded by the court are greater than the bond, letter of credit, cash, or certificate of deposit posted, the operator shall pay the damages immediately or post an additional bond, letter of credit, cash, or certificate of deposit sufficient to cover the damages. Said increase in bond, letter of credit, cash, or certificate of deposit shall comply with the requirements of this section.
§52-318.5. Negotiating surface damages – Appraisers – Report and exceptions thereto – Jury trial.
A. Prior to entering the site with heavy equipment, the operator shall negotiate with the surface owner for the payment of any damages which may be caused by the drilling operation. If the parties agree, and a written contract is signed, the operator may enter the site to drill. If agreement is not reached, or if the operator is not able to contact all parties, the operator shall petition the district court in the county in which the drilling site is located for appointment of appraisers to make recommendations to the parties and to the court concerning the amount of damages, if any. Once the operator has petitioned for appointment of appraisers, the operator may enter the site to drill.
B. Ten (10) days’ notice of the petition to appoint appraisers shall be given to the opposite party, either by personal service or by leaving a copy thereof at the party’s usual place of residence with some family member over fifteen (15) years of age, or, in the case of nonresidents, unknown heirs or other persons whose whereabouts cannot be ascertained, by publication in one issue of a newspaper qualified to publish legal notices in said county, as provided in Section 106 of Title 25 of the Oklahoma Statutes, said ten-day period to begin with the first publication.
C. The operator shall select one appraiser, the surface owner shall select one appraiser, and the two selected appraisers shall select a third appraiser for appointment by the court, which such third appraiser shall be a state-certified general real estate appraiser and be in good standing with the Oklahoma Real Estate Appraisal Board. Unless for good cause shown, additional time is allowed by the district court, the three (3) appraisers shall be selected within twenty (20) days of service of the notice of the petition to appoint appraisers or within twenty (20) days of the first date of publication of the notice as specified in subsection B of this section. If either of the parties fails to appoint an appraiser or if the two appraisers cannot agree on the selection of the third appraiser within the required time period, the remaining required appraisers shall be selected by the district court upon application of either party of which at least one shall be a state-certified general real estate appraiser and be in good standing with the Oklahoma Real Estate Appraisal Board. Before entering upon their duties, such appraisers shall take and subscribe an oath, before a notary public or some other person authorized to administer oaths, that they will perform their duties faithfully and impartially to the best of their ability. They shall inspect the real property and consider the surface damages which the owner has sustained or will sustain by reason of entry upon the subject land and by reason of drilling or maintenance of oil or gas production on the subject tract of land. The appraisers shall then file a written report within thirty (30) days of the date of their appointment with the clerk of the court. The report shall set forth the quantity, boundaries and value of the property entered on or to be utilized in said oil or gas drilling, and the amount of surface damages done or to be done to the property. The appraisers shall make a valuation and determine the amount of compensation to be paid by the operator to the surface owner and the manner in which the amount shall be paid. Said appraisers shall then make a report of their proceedings to the court. The compensation of the appraisers shall be fixed and determined by the court. The operator and the surface owner shall share equally in the payment of the appraisers’ fees and court costs.
D. Within ten (10) days after the report of the appraisers is filed, the clerk of the court shall forward to each attorney of record, each party, and interested party of record, a copy of the report of the appraisers and a notice stating the time limits for filing an exception or a demand for jury trial as provided for in this section. The operator shall provide the clerk of the court with the names and last-known addresses of the parties to whom the notice and report shall be mailed, sufficient copies of the notice and report to be mailed, and pre-addressed, postage-paid envelopes.
1. This notice shall be on a form prepared by the Administrative Director of the Courts, approved by the Oklahoma Supreme Court, and supplied to all district court clerks.
2. If a party has been served by publication, the clerk shall forward a copy of the report of the appraisers and the notice of time limits for filing either an exception or a demand for jury trial to the last-known mailing address of each party, if any, and shall cause a copy of the notice of time limits to be published in one issue of a newspaper qualified to publish legal notices as provided in Section 106 of Title 25 of the Oklahoma Statutes.
3. After issuing the notice provided herein, the clerk shall endorse on the notice form filed in the case the date that a copy of the report and the notice form was forwarded to each attorney of record, each party, and each interested party of record, or the date the notice was published.
E. The time for filing an exception to the report or a demand for jury trial shall be calculated as commencing from the date the report of the appraisers is filed with the court. Upon failure of the clerk to give notice within the time prescribed, the court, upon application by any interested party, may extend the time for filing an exception to the report or filing a demand for trial by jury for a reasonable period of time not less than twenty (20) days from the date the application is heard by the court. Appraisers’ fees and court costs may be the subject of an exception, may be included in an action by the petitioner, and may be set and allowed by the court.
F. The report of the appraisers may be reviewed by the court, upon written exceptions filed with the court by either party within thirty (30) days after the filing of the report. After the hearing the court shall enter the appropriate order either by confirmation, rejection, modification, or order of a new appraisal for good cause shown. Provided, that in the event a new appraisal is ordered, the operator shall have continuing right of entry subject to the continuance of the bond required herein. Either party may, within sixty (60) days after the filing of such report, file with the clerk a written demand for a trial by jury, in which case the amount of damages shall be assessed by a jury. The trial shall be conducted and judgment entered in the same manner as railroad condemnation actions tried in the court. A copy of the final judgment shall be forwarded to the county assessor in the county or counties in which the property is located. If the party demanding the jury trial does not recover a more favorable verdict than the assessment award of the appraisers, all court costs including reasonable attorney fees shall be assessed against the party.
§52-318.6. Appeal of decision on exceptions to report of appraiser or verdict upon jury trial – Execution of instruments of conveyance.
Any aggrieved party may appeal from the decision of the court on exceptions to the report of the appraisers or the verdict rendered upon jury trial. Such appeal shall not serve to delay the prosecution of the work on the premises in question if the award of the appraisers or jury has been deposited with the clerk for the use and benefit of the surface owner. In case of review or appeal, a certified copy of the final order or judgment shall be transmitted by the clerk to the appropriate county clerk to be filed and recorded.
When an estate is being probated, or when a minor or incompetent person has a legal guardian or conservator, the administrator or executor of the estate, or guardian of the minor or of the incompetent person or the conservator, shall have the authority to execute all instruments of conveyance provided for in this act on behalf of the estate, or minor or incompetent person with no other proceedings than approval by the judge of the court of jurisdiction being endorsed on the instrument of conveyance.
§52-318.7. Effect of act on existing contractual rights and contracts to establish correlative rights – Indian lands.
Nothing herein contained shall be construed to impair existing contractual rights nor shall it prohibit parties from contracting to establish correlative rights on the subject matter contained in this act.
This act shall not be applicable to nor affect in any way property held by an Indian whose interest is restricted against voluntary or involuntary alienation under the laws of the United States or property held by an Indian tribe or by the United States for any Indian tribe.
§52-318.8. Effect of act on jurisdiction, authority and power of Corporation Commission.
Nothing in this act shall be construed as repealing or limiting the jurisdiction, authority and power of the Oklahoma Corporation Commission.
§52-318.9. Violation of act – Damages.
Upon presentation of clear, cogent and convincing evidence that the operator willfully and knowingly entered upon the premises for the purpose of commencing the drilling of a well before giving notice of such entry or without the agreement of the surface owner, the court may, in a separate action, award treble damages. The issue of noncompliance shall be a fact question, determinable without jury, and a de novo issue in the event of appeal.
Any operator who willfully and knowingly fails to keep posted the required bond or who fails to notify the surface owner, prior to entering, or fails to come to an agreement and does not ask the court for appraisers, shall pay, at the direction of the court, treble damages to the surface owner.
Damages collected pursuant to this act shall not preclude the surface owner from collecting any additional damages caused by the operator at a subsequent date.
STREET LAW SCHOOL: My mortgage company is out of business and it never released its lien, now what?
Title Insurance and Closing Company settlement agents bear the bulk of responsibility when it comes down to closing a real estate transaction. After all, they are the ones who need to verify a clear title and facilitate resolution of any outstanding issues.
Unfortunately, this process is typically opaque, and can take a lot of time and resources, particularly when it comes to locating appropriate documentation to resolve outstanding mortgage liens. Even more difficult is knowing what to do when an original lender has disappeared or is now defunct. Luckily, there is a resource that can help smooth the difficult process of finding lenders who no longer exist.
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I am pleased to announce that I have another appellate court victory. This time in an unreported case where I was hired only after the homeowner had already had judgment granted against him by the trial court in 2007. That’s right. In 2017, 10 years after the default judgment, the Oklahoma Court of Appeals reversed and remanded the case, giving no credence to US Bank’s statute of limitations argument under 12 O.S. § 1038.
The pro se defendants had a default judgment entered against them for their failure to file an Answer. The homeowners hired me in 2015 after they were served with a Notice of Sheriff’s Sale. I filed a petition to vacate the 2007 default judgment, which the trial court denied, but we won a reversal on appeal. The opinion contains a good discussion of § 1038, the statute of limitations to challenge judgments, and when the refusal to vacate a default judgment is an abuse of discretion.
Here is a link to the slip opinion: U.S. Bank vs. Smith.


The Secretary is authorized and directed to administer and enforce all of the provisions of the Convention, this chapter, and regulations issued pursuant thereto, except to the extent otherwise provided for in this chapter. In carrying out such functions the Secretary is authorized and directed to adopt such regulations as may be necessary to carry out the purposes and objectives of the Convention and this chapter, and with the concurrence of the Secretary of State, he may cooperate with the duly authorized officials of the government of any party to the Convention. In addition, the Secretary may utilize, with the concurrence of the Secretary of the department in which the Coast Guard is operating insofar as such utilization involves enforcement at sea, with or without reimbursement and by agreement with any other Federal department or agency, or with any agency of any State, the personnel, services, and facilities of that agency for enforcement purposes with respect to any vessel in the exclusive economic zone, or wherever found, with respect to any vessel documented under the laws of the United States, and any vessel numbered or otherwise licensed under the laws of any State. When so utilized, such personnel of the States of the United States are authorized to function as Federal law enforcement agents for these purposes, but they shall not be held and considered as employees of the United States for the purposes of any laws administered by the Director of the Office of Personnel Management.
Enforcement activities at sea under the provisions of this chapter for fishing vessels subject to the jurisdiction of the United States shall be primarily the responsibility of the Secretary of the department in which the Coast Guard is operating, in cooperation with the Secretary and the United States Customs Service. The Secretary after consultation with the Secretary of the department in which the Coast Guard is operating, shall adopt such regulations as may be necessary to provide for procedures and methods of enforcement pursuant to article IX of the Convention.
Upon favorable action by the Secretary of State under section 971c(a) of this title on any recommendation of the Commission made pursuant to article VIII of the Convention, the Secretary shall promulgate, pursuant to this subsection, such regulations as may be necessary and appropriate to carry out such recommendation.
Not later than June 30, 1991, the Secretary shall promulgate any additional regulations necessary to ensure that the United States is in full compliance with all recommendations made by the Commission that have been accepted by the United States and with other agreements under the Convention between the United States and any nation which is a party to the Convention.
Regulations promulgated under this paragraph shall, to the extent practicable, be consistent with fishery management plans prepared and implemented under the Magnuson-Stevens Fishery Conservation and Management Act (16 U.S.C. 1801 et seq.).
To promulgate regulations referred to in paragraph (1) of this subsection, the Secretary shall publish in the Federal Register a general notice of proposed rulemaking and shall afford interested persons an opportunity to participate in the rulemaking through (i) submission of written data, views, or arguments, and (ii) oral presentation at a public hearing. Such regulations shall be published in the Federal Register and shall be accompanied by a statement of the considerations involved in the issuance of the regulations, and by a statement, based on inquiries and investigations, assessing the nature and effectiveness of the measures for the implementation of the Commission’s recommendations which are being or will be carried out by countries whose vessels engage in fishing the species subject to such recommendations within the waters to which the Convention applies. After publication in the Federal Register, such regulations shall be applicable to all vessels and persons subject to the jurisdiction of the United States on such date as the Secretary shall prescribe. The Secretary shall suspend at any time the application of any such regulation when, after consultation with the Secretary of State and the United States Commissioners, he determines that fishing operations in the Convention area of a contracting party for whom the regulations are effective are such as to constitute a serious threat to the achievement of the Commission’s recommendations.
Notwithstanding the requirements of subparagraph (A) and subsections (b) and (c) of section 553 of title 5, the Secretary may issue final regulations to implement Commission recommendations referred to in paragraph (1) concerning trade restrictive measures against nations or fishing entities.
except that no regulation promulgated under this section may have the effect of increasing or decreasing any allocation or quota of fish or fishing mortality level to the United States agreed to pursuant to a recommendation of the Commission.
the entry into the United States, from any country when the vessels of such country are being used in the conduct of fishing operations in the Convention area in such manner or in such circumstances as would tend to diminish the effectiveness of the conservation recommendations of the Commission, of fish in any form of those species which are subject to regulation pursuant to a recommendation of the Commission and which were taken from the Convention area.
In the case of repeated and flagrant fishing operations in the Convention area by the vessels of any country which seriously threaten the achievement of the objectives of the Commission’s recommendations, the Secretary with the concurrence of the Secretary of State, may by regulations promulgated pursuant to paragraph (2) of this subsection prohibit the entry in any form from such country of other species covered by the Convention as may be under investigation by the Commission and which were taken in the Convention area. Any such prohibition shall continue until the Secretary is satisfied that the condition warranting the prohibition no longer exists, except that all fish in any form of the species under regulation which were previously prohibited from entry shall continue to be prohibited from entry.
publish a list of those Nations identified under clause (i).
In identifying those Nations, the Secretary shall consider, based on the best available information, whether those Nations have measures in place for reporting, monitoring, and enforcement, and whether those measures diminish the effectiveness of any conservation recommendation.
result in the establishment, if necessary, by such Nation of reporting, monitoring, and enforcement measures that are adequate to ensure the effectiveness of conservation recommendations.
It is the sense of the Congress that the Secretary, in consultation with the Secretary of State, should seek support for a recommendation by the Commission to ban large-scale driftnet fishing (as that term is defined in section 3(16)  of the Magnuson-Stevens Fishery Conservation and Management Act [16 U.S.C. 1802(16)]) in the Convention area.
The Secretary, in consultation with the Secretary of State, shall request the Commission to adopt recommendations necessary for the conservation and management of Atlantic swordfish. In making the request, the Secretary shall seek the establishment of an international minimum harvest size and a reduction in harvest levels to the extent necessary to conserve the stock. Until the Commission adopts all the conservation and management measures requested by the Secretary, the Secretary, within 3 months after each annual meeting of the Commission, shall notify Congress as to the nature and results of his request. These notifications shall identify those nations not acting to conserve and manage Atlantic swordfish, and recommend measures which could be taken to achieve effective international conservation and management of the stock.
The Magnuson-Stevens Fishery Conservation and Management Act, referred to in subsec. (c)(1)(C), is Pub. L. 94–265, Apr. 13, 1976, 90 Stat. 331, as amended, which is classified principally to chapter 38 (§ 1801 et seq.) of this title. For complete classification of this Act to the Code, see Short Title note set out under section 1801 of this title and Tables.
Section 3 of the Magnuson-Stevens Fishery Conservation and Management Act, referred to in subsec. (d)(1), was subsequently amended, and section 3(16) no longer defines the term “large-scale driftnet fishing”. However, such term is defined elsewhere in that section.
2015—Subsec. (c)(2). Pub. L. 114–81 designated existing provisions as subpar. (A), redesignated former subpars. (A) and (B) as cls. (i) and (ii), respectively, of subpar. (A), and added subpar. (B).
1998—Subsec. (c)(1)(C). Pub. L. 105–384, § 202(b)(1)(F), substituted “Magnuson-Stevens Fishery” for “Magnuson Fishery”.
Subsecs. (c)(6)(A)(iii), (B). Pub. L. 105–384, § 202(b)(1)(C), substituted “clause (i)” for “subparagraph (A)” in cl. (iii), and redesignated last sentence of subpar. (A) as subpar. (B) and realigned margin.
Subsec. (d)(1). Pub. L. 105–384, § 202(b)(1)(F), substituted “Magnuson-Stevens Fishery” for “Magnuson Fishery”.
1995—Subsec. (a). Pub. L. 104–43, § 303(3), substituted “exclusive economic zone” for “fisheries zone” after “any vessel in the” in third sentence.
Subsec. (c). Pub. L. 104–43, § 305(1), inserted “and other measures” after “Regulations” in heading.
Subsec. (c)(3). Pub. L. 104–43, § 305(2), inserted “or fishing mortality level” after “quota of fish” in concluding provisions.
Subsec. (c)(6), (7). Pub. L. 104–43, § 305(3), added pars. (6) and (7).
1990—Subsec. (c)(1). Pub. L. 101–627, § 206(a), designated existing provisions as subpar. (A) and added subpars. (B) and (C).
Subsec. (d). Pub. L. 101–627, § 207, amended subsec. (d) generally, substituting provisions relating to recommended Commission actions regarding large-scale driftnet fishing and conservation of Atlantic swordfish for provisions relating to Commission recommendations concerning bluefin tuna and issuance of regulations.
“Director of the Office of Personnel Management” substituted for “Civil Service Commission” in subsec. (a) pursuant to Reorg. Plan No. 2 of 1978, § 102, 43 F.R. 36037, 92 Stat. 3783, set out under section 1101 of Title 5, Government Organization and Employees, which transferred functions vested by statute in the Civil Service Commission to Director of Office of Personnel Management (except as otherwise specified), effective Jan. 1, 1979, as provided by section 1–102 of Ex. Ord. No. 12107, Dec. 28, 1978, 44 F.R. 1055, set out under section 1101 of Title 5.
Pub. L. 106–553, § 1(a)(2) [title VI, § 634], Dec. 21, 2000, 114 Stat. 2762, 2762A–114, provided that none of the funds of the Department of Commerce would be available to issue or renew, for any fishing vessel, any general or harpoon category fishing permit for Atlantic bluefin tuna that would allow the vessel to use an aircraft to locate, or otherwise assist in fishing for, catching, or possessing Atlantic bluefin tuna, or to fish for, catch, or possess Atlantic bluefin tuna located by the use of an aircraft.


TABLE OF CONTENTS Page TABLE OF AUTHORITIES ......................................................................................................... iii INTRODUCTION ...........................................................................................................................1 I.
STATEMENT OF THE CASE AND OF UNDISPUTED MATERIAL FACTS ...............3 A.
The ACA Established the Cost-Sharing Reduction Program to Help Make Healthcare Affordable for Those Who Most Need It ..............................................4 1.
The Government Owes the CSR Class Full Reimbursements for Their Post- September 2017 CSR Payments ...................................................................13 1.
The Federal Circuit panel deciding the case also found that certain riders Congress subsequently included in appropriations bills obviated the Government’s obligation to pay risk corridor amounts to the QHP issuers it induced to enter the ACA exchanges. Although Common Ground strongly believes the Moda majority reached the wrong conclusion, that issue will be decided in the remaining phases of the Moda appeal, and Common Ground has therefore asked that the Risk Corridors Class portion of this case remain stayed.
and legislative history, the Government cannot avoid its payment obligation by failing to appropriate funds to satisfy a money mandating obligation; failure to appropriate is not a valid defense to Common Ground’s (and the Class’s) claims for CSR payments. Common Ground respectfully requests the Court to enter judgment on its and the CSR Class’s behalf for their cost-sharing reduction claims as they are based upon a money-mandating statutory obligation to pay and there have been no spending bills that would impact this payment obligation. I.
STATEMENT OF THE ISSUE PRESENTED 1.
“periodic and timely payments” to Common Ground and the CSR Class for the final quarter of the 2017 benefit and the first two financial quarters of the 2018 benefit year? II.
STATEMENT OF THE CASE AND OF UNDISPUTED MATERIAL FACTS A.
Common Ground expects that Moda and/or Land of Lincoln (whose parallel appeal of the dismissal of its risk corridors claims was affirmed based on the Circuit’s reasoning in Moda) will take further steps to pursue their appellate rights.
language of the ACA itself, it did not have an obligation to pay QHP issuers full risk corridor amounts. The Federal Circuit held that because the statute’s language was clear and the Government’s arguments were attempts to write in limitations not present in Section 1342 or the ACA. Id. at 1320-22. B.
In addition to the risk corridors program (and the other “Three Rs,” see id. at 1314), the ACA attempted to stabilize the health insurance market and decrease the cost of health insurance by helping offset certain costs consumers must pay: insurance premiums and out-of-pocket expenses. For low-income insureds, the ACA did so by, inter alia, establishing the cost-sharing reduction (“CSR”) program. 1.
Section 1401 of the ACA provides premium tax credits for individuals with household income between 100% and 400% of the federal poverty level who purchase health insurance through ACA exchanges and meet certain other requirements. ACA § 1401 [26 U.S.C. § 36B]. Section 1402 of the ACA requires QHP issuers to reduce out-of-pocket costs for eligible insureds (those who are eligible to receive tax credits under Section 1401 and whose household income is below 250% of the poverty level) by making cost-sharing reduction (“CSR”) payments. Section 1402 then requires the Government to reimburse QHP issuers for the costs of those reductions. In relevant part, Section 1402 of the ACA provides: In the case of an eligible insured enrolled in a qualified health plan – (1) the Secretary shall notify the issuer of the plan of such eligibility; and (2) the issuer shall reduce the cost-sharing under the plan at the level and in the manner specified in subsection (c).
ACA § 1402(a) [42 U.S.C. § 18071]. “Cost-sharing” is defined to include “deductibles, coinsurance, copayments, or similar charges.” ACA § 1302(c)(3)(A)(i) [42 U.S.C. § 18022]. QHP issuers must reduce cost sharing for eligible insureds who enroll in “silver plans” through the exchanges, ACA § 1402(c)(2), and QHP issuers must offer at least one “silver” plan in order to participate in the exchanges, ACA § 1301(a)(1)(C)(ii) [42 U.S.C. § 18021]. Section 1402 of the ACA further requires the Secretaries of HHS and the Treasury to reimburse QHP issuers for these cost-sharing reductions: An issuer of a qualified health plan making reductions under this subsection shall notify the Secretary of such reductions and the Secretary shall make periodic and timely payments to the issuer equal to the value of the reductions. ACA § 1402(c)(3)(A) [42 U.S.C. § 18071] (emphasis added). Neither these statutory provisions nor the subsequent implementing regulations permit the government to make no payments or to make partial payments or reimbursements. Instead, they are clear that HHS shall make full payments—and, in the implementing regulations’ case, “advance” payments—for the cost-sharing reductions QHP issuers must by law provide. See generally 42 U.S.C. § 18071; 45 C.F.R. § 156.430(b), (d), & (e). Further, there are no cost-sharing reduction exceptions for QHP issuers. HHS has been consistent from the ACA’s inception through today that an issuer must make cost-sharing reduction payments if they wish to participate in the ACA exchanges. See, e.g., 45 C.F.R. § 156.410(a) (“A QHP issuer must ensure that an individual eligible for cost-sharing reductions, as demonstrated by assignment to a particular plan variation, pays only the cost sharing required of an eligible individual for the applicable covered service under the plan variation. The costsharing reduction for which an individual is eligible must be applied when the cost sharing is collected.”).
HHS Notice of Benefit and Payment Parameters for 2014, CMS (March 11, 2013), at 7, available at https://www.cms.gov/CCIIO/Resources/Files/Downloads/payment-noticetechnical-summary-3-11-2013.pdf.
then reconcile the advance payments and the actual cost-sharing reduction amounts.”4 Finally, the Government would reimburse the QHP issuer “any amounts necessary to reflect the CSR provided or, as appropriate, the issuer [would] be charged for excess amounts paid to it.”5 3.
Manual for Reconciliation of the Cost-Sharing Reduction Component of Advance Payments for Benefit Years 2014 and 2015, CMS, March 16, 2016, at 28, available at https://www.cms.gov/CCIIO/Resources/Regulations-and-Guidance/Downloads/CMS_Guidance_ on_CSR_Reconciliation-for_2014_and_2015_benefit_years.pdf; see also 45 C.F.R. 156.430(e).
for the payments. Br. for Defs. at 23, United States House of Representatives v. Burwell, 2015 WL 9316243 (D.D.C. Dec. 2, 2015) (No. 1:14-cv-01967), ECF No. 55-1.6 C.
The House of Representatives has also taken the position that portions of the ACA are “interdependent” and failing to implement some could lead to “skyrocketing premiums” or even “death spirals.” See Br. for Resp’t at 14-15, King v. Burwell, 135 S. Ct. 2480 (2015) (No. 14114), 2015 WL 349885, at *14-15 (Jan. 21, 2015) (“the individual-coverage provision could not perform its market-stabilizing function in the absence of subsidies making coverage broadly affordable” and “[t]he denial of tax credits and the resulting loss of customers would thus have disastrous consequences for the insurance markets in the affected States”); Br. for Resp’t at 26, Nat. Fed’n of Indep. Businesses v. Sebelius, 132 S. Ct. 2566 (2012) (Nos. 11-393, 11-398, 11400), 2012 WL 273133, at *26 (Jan. 27, 2012) (“without a minimum coverage provision, the guaranteed-issue and community-rating provisions would drive up costs and reduce coverage, the opposite of Congress’s goals”). The above arguments admittedly address different provisions of the ACA, but demonstrate that the Act is an interlocking statute designed to improve, not destroy, health insurance markets, and that full, annual payment regimes are critical to this functioning.
reimburse QHP issuers for cost sharing reductions pursuant to Sections 1401 and 1402.7 The Obama administration cited Section 1324 as the appropriation for these payments.8 D.
See Letter from Sylvia M. Burwell, Dir., OMB, to Senators Ted Cruz and Michael S. Lee, at Responses p. 4 (May 21, 2014), (“cost-sharing subsidy payments are being made through the advance payments program and will be paid out of the same account from which the premium tax credit portion of the advance payments for that program are paid”), available at http://www.cruz.senate.gov/files/documents/Letters/20140521_Burwell_Response.pdf.
“are legally intertwined,” and both “are made by the same payer (the Department of the Treasury), to the same recipient (the insurer), on behalf of the same person (the eligible insured), and for the same statutory purpose—‘to reduce the premiums payable by individuals eligible for such credit.’ 42 U.S.C. § 18082(a).” Id. at 2. The district court ruled in favor of the House of Representatives, finding that 31 U.S.C. § 1324 did not constitute a permanent appropriation for Section 1402 CSR reimbursements: “The Affordable Care Act unambiguously appropriates money for Section 1401 premium tax credits but not for Section 1402 reimbursements to insurers.” House v. Burwell, 185 F. Supp. 3d 165, 168 (D.D.C. 2016). Further, the district court found no other source of appropriation for Section 1402 payments: “Congress authorized reduced cost sharing but did not appropriate monies for it, in the FY 2014 budget or since.” Id. at 174-75. The District Court entered an injunction preventing any further reimbursements under Section 1402, but, recognizing the importance of CSR reimbursements, stayed the injunction pending resolution of any appeal. Id. at 189. The Obama administration appealed the ruling to the D.C. Circuit, and filed its opening brief in October 2016. However, in November 2016, Republican Donald Trump was elected President and the Republican-controlled House of Representatives filed a request that the appeal be “temporarily [held] in abeyance” to “provide the President-Elect and his future Administration time to consider whether to continue prosecuting or to otherwise resolve this appeal.” Appellee’s Mot. to Hold Briefing in Abeyance, House v. Burwell, Case No. 16-5202, Dkt. #1647228 (D.C. Cir. Nov. 21, 2016) at 1-2. The D.C. Circuit granted the request and the appeal has since been dismissed by agreement between the parties. Order, House v. Azar, Case No. 16-5202, Dkt. #1731071 (D.C. Cir. May 16, 2018).
Until October 2017, the current administration continued its predecessor’s practice of paying CSR reimbursements. However, on October 11, 2017, Attorney General Sessions submitted a letter to the Department of Treasury and HHS advising that 31 U.S.C. § 1324 could not be used to fund CSR reimbursements. (Ex. 1, Oct. 11, 2017 Ltr. from Sessions to Secretary of Treasury and Acting Secretary of HHS.) Attorney General Sessions concluded that Section 1401 premium tax credits and Section 1402 CSR reimbursements were two distinct programs, and the permanent appropriation in Section 1324 only provided funding for the Section 1401 premium tax credits. (Id. at 1-2.) The next day, on October 12, 2017, HHS announced that it would stop making CSR reimbursements: “In light of [Attorney General Session’s] opinion—and the absence of any other appropriation that could be used to fund CSR payments—CSR payments to issuers must stop, effective immediately. CSR payments are prohibited unless and until a valid appropriation exists.” (Ex. 2, Oct., 12, 2017 Mem. from E. Hargan to S. Verma re Payments to Issuers for Cost-Sharing Reductions (CSRs).) The Executive Branch submitted a Notice in the House v. Burwell appeal referencing the October 12 HHS Memorandum and noting that “[t]he upcoming October 18 [CSR reimbursement] payment thus will not occur.” Notice, House v. Burwell, Case No. 16-5202, Dkt. #1698827 (D.C. Cir. Oct. 13, 2017) at 1. As of the date of this motion, Common Ground and the other members of the CSR Class have not been reimbursed for any CSR payments they made from October 2017 through the present. III.
moving party is entitled to a judgment as a matter of law. RCFC 56(a); Celotex Corp. v. Catrett, 477 U.S. 317, 322 (1986). A fact is material if it “might affect the outcome of the suit under the governing law.” Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248 (1986). An issue is genuine if it “may reasonably be resolved in favor of either party.” Id. at 250. The moving party bears the initial burden of demonstrating the absence of any genuine issue of material fact. Celotex Corp., 477 U.S. at 323. The nonmoving party then bears the burden of showing that there are genuine issues of material fact for trial. Id. at 324. IV.
The Government Owes the CSR Class Full Reimbursements for Their PostSeptember 2017 CSR Payments 1.
execution the will of the Legislature.” Warner–Lambert Co. v. Apotex Corp., 316 F.3d 1348, 1355 (Fed. Cir. 2003) (quoting Kokoszka v. Belford, 417 U.S. 642, 650 (1974)); see also King, 135 S. Ct. at 2490 (refusing to read portion of the ACA “out of context” with the broader Act, because it would render other provisions in the Act senseless or contradictory). 2.
continuing until October 2017. When the current administration ceased making CSR reimbursements, it simply cited a lack of appropriations. See generally Ex. 1. It did not argue the Government had no obligation to pay. Id. HHS has similarly admitted, in writing and through past practice, that the statute requires periodic and timely reimbursements. Once the ACA exchanges opened and QHP issuers began providing cost-sharing reduction payments, HHS employed its limited discretion to make “periodic and timely” payments by doing so every month with an annual reconciliation. 45 C.F.R. § 156.430(b)-(e).9 To this day, HHS still defines “periodic and timely” the same way for the CSR program; it simply has not made any CSR reimbursements since October 2017 because of the lack of appropriations from Congress. Compare 45 C.F.R. § 156.430(b), (d), & (e) (requiring HHS to make reimbursements to QHP issuers); with Ex. 2 (noting that the only reason HHS ceased CSR payments is because of new guidance that it had no appropriation to continue making the payments). These are not innocuous statements and actions; they are straightforward admissions that HHS reads Section 1402 exactly as the Class does here. The situation in which the parties thus find themselves is that HHS concedes it must make periodic and timely CSR reimbursements by statute, but has withheld those reimbursements because it claims it does not have adequate appropriations for the payments.
Nowhere—not in this case or any other—has the Government ever offered an interpretation of Section 1402 in which its has no obligation to reimburse QHP issuers for their CSR payments. One can only surmise as to the political motivations for failing to appropriate funds for the CSR program in the new ACA health exchanges, but such political gamesmanship has no effect on a statutory obligation to pay, particularly when citizens’ lives are at stake. HHS must comply with its own interpretation of the statute: one where it makes “periodic and timely” (i.e., monthly) CSR reimbursements. 3.
obligation to pay amounts owed); Greenlee Cnty., Ariz. v. United States, 487 F.3d 871, 877 (Fed. Cir. 2007) (Congress’s failure to appropriate funds does not “defeat a Government obligation created by statute”); District of Columbia v. United States, 67 Fed. Cl. 292, 340 (2005) (holding that government had a statutory obligation to pay the plaintiff; statute did not expressly specify that payments made pursuant to it were an “obligation” of the Government); Gibney v. United States, 114 Ct. Cl. 38, 50-51 (1949) (requiring payment of overtime wages to government workers where such overtime was mandated by statute, but Congress forbade the employing agency from using appropriated funds for that purpose). There is “a very strong presumption” that appropriation acts do not substantively change existing law. Calloway v. District of Columbia, 216 F.3d 1, 9 (D.C. Cir. 2000). Here, where Congress never even mentioned the CSR program in its appropriations bills, that presumption is dispositive. The Government thus cannot rely on any later appropriations bills to argue they somehow obviated its obligation to make CSR reimbursements. B.
Another way the Government might defend this motion is to argue that the Government has discretion to change the CSR reimbursement schedule at its whim. Such an argument, however, fails as a matter of law and fact, largely due to a doctrine—Chevron deference—the Government originally invoked in the risk corridors cases. 1.
agency, must give effect to the unambiguously expressed intent of Congress.”). This is the socalled “step one” of any Chevron analysis. HHS has admitted since the ACA’s inception that it has no discretion whether or not to make CSR reimbursements. Indeed, HHS’s payment history from 2014 until October 2017 clearly demonstrates acknowledgement that the ACA requires it to make such reimbursements. By HHS’s own admission, the only reason it ceased reimbursing QHP issuers for CSR payments is because Attorney General Sessions changed the current administration’s position with respect to its contentions about the funding sources for those payments. As a consequence, HHS then deemed itself constrained from making payments for which it did not have appropriated funds. Ex. 2. HHS did not contend it had discretion to withhold the reimbursements. Id. 2.
The one area the ACA did provide HHS discretion was with respect to the schedule for “periodic and timely” CSR reimbursements. As previously noted, the ACA did not define what that term meant, so, utilizing its limited discretion, HHS implemented a “periodic and timely” schedule in which it provided monthly reimbursements to QHP issuers with an annual reconciliation. Given that this schedule was established through the notice and comment process, it is presumed valid unless and until HHS changes its approach with a reasoned explanation. Encino Motorcars, LLC v. Navarro, 136 S. Ct. 2117, 2125-26 (2016) (“Agencies are free to change their existing policies as long as they provide a reasoned explanation for the change,” which includes “at least display[ing] awareness that it is changing position and show[ing] that there are good reasons for the new policy”) (citations and internal quotations omitted).
HHS has never purported to change its CSR reimbursement schedule; it has only informed QHP issuers that it will not make further payments until and if Congress appropriates it the proper funds. Ex. 2. Accordingly, Chevron deference applies and every month that goes by without a CSR reimbursement accrues additional owed money to the CSR Class members. See Health Republic, 129 Fed. Cl. at 776-778 (collecting law on Chevron deference and noting that HHS’s interpretation that it must make annual risk corridor payments had “controlling weight” for future lawsuits over nonpayment of those amounts). C.
Ground cannot calculate the final amount until the parties complete their briefing on this motion and the Court is prepared to enter judgment on the CSR Class’s behalf. Once the opt-in deadline passes and the Court issues its order on this motion, Class Counsel will be able to determine the full scope of the Class and its damages. Common Ground therefore requests the right to supplement this motion at that time with the full amount of damages for which it seeks summary judgment. D.
CONCLUSION For the foregoing reasons, Common Ground respectfully requests that the Court grant summary judgment in the CSR Class’s favor.
Even if the Government claimed some QHP issuers owed it some amounts as the result of their higher premiums, a set-off defense is unavailable as a matter of law. See Local Oklahoma Bank, N.A. v. U.S., 59 Fed. Cl. 713, 721 (2004), aff'd, 452 F.3d 1371 (Fed. Cir. 2006).
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