text:
The request was refused by Council of the EU.
Under the right of access to documents in the EU treaties, as developed in Regulation 1049/2001, on behalf of Access Info Europe and the NYU-HEC Law Clinic, I hereby seek access to all the Article 255 Panel’s opinions regarding all judicial candidates nominated for the CJEU and General Court since the Panel’s establishment.
I note that, in the first instance, I am particularly interested in the options of receiving either the opinions on judges currently serving, and/or the positive panel opinions in their entirety, and/or the opinions excluding some aspects of the substantive evaluations.
Should the request be voluminous, particularly in light of the possible need to redact information from the documents, I am at your disposition to discuss narrowing the request.
Please do not hestiate to contact me should any further clarification be needed.
concerning your request for access under Regulation 1049/2001.
Thanks for your message and the update on the status of this request.
I appreciate that you have quite a quantity of documents to review, and am happy for the answer to my request to be sent towards the end of April. I would, however, hope that the request is not delayed much beyond that.
I am sending the text of my confirmatory here and also by email as a courtesy (so that you have the formatting in a more readable format, with headers and footnotes).
Pursuant to Article 7(2) of Regulation (EC) 1049/2001, and having been refused our original request for access to Council documents dated on 19 February 2016, we hereby submit a confirmatory application for access to Council documents in response to your refusal to grant these documents dated 4 May 2016.
Under the right of access to documents in the EU Treaties, as enshrined in Regulation (EC) 1049/2001, we submitted our original application in order to request access to copies of the opinions given by the Panel provided for by Article 255 of TFEU for all judicial candidates for the Court of Justice and the General Court since its establishment.
a. Opinions given by the Panel provided for by Article 255 of the TFEU for all judicial candidates for the Court of Justice and the General Court since its establishment.
b. Opinions given by the Panel provided for by Article 255 of the TFEU for all actual members of the Court of Justice and the General Court.
While we do seek the names and certain bibliographic information of candidates to the Courts, which we argue should be released for reasons of overriding public interest as laid out in section D of this confirmatory application, we do not seek information such as medical records or bank statements. Moreover, we note that, as written in the Panel’s yearly activity reports, it appears that much of the information on which the Panel bases its opinions are the candidate's CV and capabilities, which we understand to be public credentials, not personal information. Such credentials are the type of information that is usually accessible to the public via the Internet, and it is common for judges to make publicly available information such as the positions they have held, languages they speak, and the educational institutions they attended. We would argue that such credentials likely do not constitute “personal data.” Without explanation as to what the Council includes in this term, we must assume that not all of the information about the candidates received by the Council qualifies as “personal data.” Unfortunately the redacted versions of the panel opinions you granted us do not enable us to determine the nature of the personal data, as they contain none, not even the public credentials of the candidates.
If it can be shown that the information and documents used to assess the suitability of the judicial candidates contain “personal data” as defined by European legislation, we would like to clarify and emphasise that we request only the information related to the judicial candidates' qualification to serve on the Court of Justice and the General Court—their credentials and the reasoning employed by the Panel in accepting or rejecting these candidates—and therefore we are ready to accept justified redactions of other "personal data."
We note that the letter we received dated 4 May 2016 does not provide an explanation for the statement that “their disclosure would necessarily undermine the protection of privacy and the integrity of the candidates”, “even if it occurs after they have been appointed”. We believe that if even if it were appropriate for some such information to be protected, a redacted version of the opinions containing some information, such as public credentials, would not automatically lead to a breach of privacy.
Importantly, if the opinions themselves contain “personal data” as defined by European legislation, such “personal data” refers only to information about the candidate, and not to “an assessment of his suitability to the position he is proposed for”, as you stated in your letter. The assessment itself is not “personal data”, and therefore falls outside of the exception Article 4(1) let b) of Regulation (EC) 1049/2001. If for some reason the assessment does contain such personal data, a redacted version of the opinion can be provided.
Additionally, the argument that these opinions would be covered by the exception within Article 4(1) let. b) of Regulation (EC) 1049/2001, protection of privacy and integrity of the individual, does not address our argument that the EU’s overriding policy interests of openness, transparency and legitimacy outweigh any potential privacy concerns. We would like to reemphasize that the exception laid down in Article 4(1) let. b) of Regulation (EC) 1049/2001 should not be applied to our request. While the relevant opinions of the Panel, which include an assessment of the suitability of the candidates for the office of member of the Court of Justice or at the General Court of the European Union, likely contain some personal data within the meaning of Article 2(a) of Regulation (EC) 45/2001, this does not automatically imply that access to the opinion should be denied. Rather, as interpreted by the Court of Justice, institutions should, in dealing with a request for access to documents containing personal data, apply the provisions of Regulation (EC) 45/2001. Under the provisions of Regulation (EC) 45/2001, publication of personal data could be justifiable if the disclosure is necessary in a democratic society for a legitimate public interest. In addition, personal data could be transferred under Article 8(b) of Regulation (EC) 45/2001 if the proponent of disclosure establishes the necessity of having the data transferred and if there is no reason to assume that the data subject's legitimate interests might be prejudiced. Where the Court of Justice has denied requests for access to documents containing personal data, it has focused on the lack of necessity and lack of a legitimate justification for the requested documents. In contrast, we can demonstrate that, with respect to the Court of Justice, EU citizens have a legitimate interest in knowing the names of judicial candidates to the Courts and the reasons the Panel recommended for or against their election. The names and credentials of judges are essential to ensuring trust in EU institutions, and are in line with the EU’s principles of transparency, openness, and democracy, as elaborated below of this confirmatory application. Moreover, the names and credentials of judges are intimately tied to the rights of European Citizens to access to documents under Article 42 of the EU Charter of Fundamental Rights.
Additionally, because almost all of the judicial candidates for whom we request access to the Panel’s opinion have already been appointed to the post, none of his or her legitimate interests appear at stake. The judges of the Court of Justice “cannot demand the anonymity of earlier years, hiding behind literal or metaphorical wigs.” This reasoning applies equally to judges who were not recommended for appointment by the Panel; the public has a right to know the reasons for which a candidate is deemed unsuitable for the position. This increases the legitimacy of the Courts and does not necessarily harm the rejected candidate; for example, in countries in which judicial candidates for the highest court are confirmed by a public hearing, such as in the United States, it has been shown that making public the reasons for which a candidate was confirmed or rejected can increase both the independence and legitimacy of a court in the eyes of the public, without harming the reputation of rejected candidates, who were largely rejected based on legitimate factors such as partisanship, political philosophy, or insufficient experience. This is in keeping with the fact that judges are beholden to internal and external pressures in they must maintain a strong judicial reputation within the judiciary and outside of it, and it has been shown repeatedly that both internal and external pressures are vital to the functioning and overall reputation of courts. We understand that the Council is worried about potential reputational repercussions for judicial candidates following the release of opinions regarding their candidacies. However, the Panel’s ultimate decision-making process is aimed at creating the most independent and legitimate CJEU possible and its strengths must be judged accordingly. Hiding behind alleged reputational repercussions overlooks the fact that a judge’s integrity—and therefore his (and the Panel’s) legitimacy—is likely to be affirmed by disclosing the reasons for which the Panel supported his or her appointment to the CJEU. Even in cases where a candidate is not recommended by the Panel, disclosing the reasons for which judicial candidates are rejected generally increases independence and legitimacy in the eyes of the public and allows citizens to ascertain whether the rejection of that candidate was fair or not. This appears all the more true in those numerous Member States in which a public selection of the candidates is organised. The national candidates who have not been selected and put forward by their governments are entitled to know how the selected candidate has performed in front of the 255 panel.
Reputational issues should likewise not be problematic vis-à-vis Panel Opinions, which are not to contain degrading or demeaning elements concerning the candidate under any circumstances. Jean Marc Sauvé, Panel President since its creation, recently detailed the two potential causes for a negative opinion from the Panel: a candidate’s lack of professional experience in high-level judicial institutions, or his insufficient knowledge regarding the EU judicial or legal system. As such, a negative Panel Opinion does not undermine the candidate’s ability to hold a national-level position; it should have no more than limited effects on his or her career. A Nobel-Prize-winning economist, Peter Diamond, failed to qualify to join the US Federal Reserve board of governors.
Moreover, the same 255 panel provides in its annual report an extremely detailed analysis of the circumstances that led it to adopt a negative opinion. This significantly contributes to the identification of ‘what went wrong’ in relation to every single candidate, without however enabling the wide public to understand how the Panel assessed the candidate. Once more, the Council bases its central privacy argument on protecting personal information that is already public. Ironically, the only information it effectively shields through non-disclosure of the Panel Opinions is a transparent, detailed understanding of the Panel’s selection process. Indeed, the argument that disclosure of candidates’ identities violates their privacy (point b of Article 4(1) of Regulation 1049/2011) does not seem convincing in the era of the Internet. All candidates are – by definition – public figures and their identity is disclosed when they are designated by their own country. More important, the private nature of the proceedings has not shielded unsuccessful candidates from public exposure. It is relatively easy to trace unsuccessful candidates online. Passing comments by public officials regarding a rejected candidate, when coupled with a simple Internet search, reveal significant information regarding the name and circumstances of the candidate. Scholars have also identified Member States that have proposed candidates who received negative Opinions.
The Council argues in its letter of 4 May 2016 that “it cannot be ruled out that full disclosure of the panel’s opinions could seriously undermine the protection of the candidates’ commercial interests, in the event that they carry out or intend to carry out paid work as lawyers or legal advisers”. Such a risk would be even more important, the Council argues, “where disclosure relates to an unfavourable opinion on the appointment of the candidate”.
Here it suffices to note that the Council failed to explain how disclosure of the requested documents could ‘specifically and actually undermine the interests protected by the exception among those provided for in Article 4 of Regulation 1049/2001”.
- second when examined in the light of the requirements for EU judicial appointment, as enshrined in Article 254 TFEU and further elaborated by the 255 panel.
Anyone who put himself / herself forward for the Court of Justice of the EU and the General Court must accept that his / her suitability for the job will be scrutinised by the 255 panel TFEU in the light of the requirements enlisted by the Treaty. In so doing the panel is not asked to verify the general competences of the candidate as a lawyer of legal adviser but a narrower set of skills required to the performance of a very specific job. It is inherent to the choice of someone to become a member of the court and to the task of the 255 panel that the candidate’s competences be publicly assessed for the reasons discussed under A supra. The 255 annual reports of activities state that candidates are evaluated based on two set of criteria—the legal capacities of the candidate and his professional experience (level, length, diversity). Should it be proven that disclosure might somehow affect the commercial interests of the candidate, this could only occur in relation to the former set of criteria, certainly not the latter. Once more, the current stance adopted by the Council (full confidentiality of the contents of the 255 opinions) appear disproportionate to its declared goals.
We also note with concern that the Council has failed to do any more than make very general references to the lack of an overriding public interest test for the commercial interest exception. There is an onus on the Council to explain how, in this specific case, such interests would be prejudiced, something that it has failed to do and that, by way of this confirmatory, we urge it to review, taking into full consideration the various public interest arguments that we hereby present.
The Council in its letter of 4 May 2016 rejects our request as “full disclosure of the panel’s opinions… would seriously undermine the aims and quality of the consultation and appointment procedures provided for Articles 253 and 255”. While this claim invokes verbatim the exception to disclosure set forth in Article 4(3) of Regulation 1049/2001, it does little to explain how disclosure of the Panel Opinions could foreseeably and more than hypothetically cause serious harm to the Panel's decision-making process. Simply put, the Council claims that disclosure would “make it impossible to safeguard the secrecy of the internal deliberations of the panel…or the secrecy of the deliberations of the intergovernmental conference at which the Judges and Advocates-General of the Court of Justice and General Court are appointed by the EU Member States”, thus impairing “the chances of reaching agreement at the intergovernmental conference”.
On this point, it is sufficient to observe that the secrecy of a deliberation – which governs also the work of the Court of Justice – is not automatically compromised by the publication of a final decision. It is indeed possible to convey to the reader both the process and outcome of a given decision without automatically unveiling the positions taken by the various actors taking part to that decision. Moreover, it is not clear in what way the disclosure of the panel’s opinions would affect “the chances to reach an agreement” by the Member States insofar as those have all access to those opinions and the full contents therein.
The Council also argues that disclosure would render the Panel more restrained and guarded with the result of drafting less detailed—and therefore less useful—Opinions. Once again, we are faced with the argument that more transparency would actually lead to less transparency, an argument that was not persuasive before the European Court of Justice when put forward in the case Access Info v Council of the European Union.
The Council’s argument seems in particular to be based on the fear that the disclosure of Panel Opinions would have a chilling effect on the willingness of qualified judicial actors to present themselves as candidates, were they to know that information about their selection (or not) would be made public - which would thwart the Panel’s decision-making process ex ante. However, this argument is flawed because “the [current] confidentiality policy is prone to speculation, chattering and manipulation” since the deliberation process is removed from public scrutiny. Publicising the Panel Opinions could therefore actually mitigate the reputational risk involved for each candidate in practice.
The Panel’s official activity reports highlight objectivity, neutrality and independence as Panel obligations. The reports state that candidates are evaluated based on two criteria—the legal capacities of the candidate and his professional experience (level, length, diversity)—to be assessed in as impartial a manner as possible. Disclosure of such factual information would not force the Panel to change its decision-making process or render its Opinions devoid of substance. Instead, disclosure would likely streamline the Panel’s functioning by deterring Member States from offering up candidates unlikely to meet the requirements of the office, improving efficiency of the selection process.
In the end, we are not claiming that the Panel Opinions will never contain information barred from public disclosure. If any portion of a given Opinion is legitimately deemed overly sensitive, it may be redacted from the disclosed version. However, the complete lack of transparency regarding the Panel’s activities – as confirmed by your letter of 4 May 2016 – is more likely to undermine its ability to function than the publication of (parts of) the Panel Opinions.
The Panel itself recognises the need for greater transparency is in its reports—and it should follow the criteria it champions, instead of arguing for non-disclosure.
Even if the Council’s arguments against disclosure of Panel Opinions are deemed to be convincing (notably, Article 4 (2) and Article 4 (3)), the public interest in accessing the Panel Opinions overrides the exceptions upon which the Council bases its position. The Council’s response letters fail to adequately address our arguments in this regard, which are relevant on three fronts.
Firstly, the CJEU has held that an overriding public interest may be found in Regulation 1049/2001’s underlying principles: openness, democracy, and giving “the fullest possible effect to the right of public access to documents.” If there were ever a legitimate need for openness and democracy, it is vis-à-vis the composition of the CJEU—which functions as the EU's supreme court and plays a quasi-legislative role in giving meaning to EU legislation. The European public must have a way of establishing a check on the independence, qualifications, and experience of members of this supreme judicial body. This issue is especially time-sensitive given the ongoing implementation of the General Court’s reform (entailing inter alia the doubling of its membership), and the Panel is set to prepare Opinions on at least 14 new candidates in in 2016. And the stakes are as high as they have ever been: although non-binding, all Panel Opinions to date regarding CJEU judges have been followed.
It is then contradictory that the Panel (and, in turn, the Council) continue to justify opacity in the name of the Panel’s functioning. The Panel itself is meant to increase the CJEU’s legitimacy by ensuring its judges are of the highest standards. Surely, this mandate would be best served by increased openness—fostering accountability to citizens and respect for fundamental rights.
Limiting public oversight of Panel Opinions may have a long-term corrosive effect on public access to EU documents. Opaquely-appointed members of the CJEU will determine the extent of EU institutions’ commitment to transparency as well as that of their appointing Member State. Operating rules written by the Panel itself will continue to serve to insulate its work from scrutiny instead of providing it guidance. The conflict of interest is too great, and we ask you to restore balance and transparency to the situation. Challenging your refusal in front of the EU Courts would inevitably result in the very same individuals whose suitability reports are at stake deciding upon the merit of their disclosure. We do not rule out such an avenue in case of lack of further disclosure.
An agent for the European Data Protection Supervisor (EDPS), tasked with ensuring that European Community institutions respect data protection, argued in court that professional data, such as that contained in the Panel Opinions, should tilt in the direction of disclosure. The EDPS judged that professional data is of a different nature than personal data and does not deserve the same protection. A similar line of argument has recently been endorsed by Advocate General Cruz Villalon, who argued that ‘the ‘necessity’ to which Regulation No 45/2001 refers cannot be understood with the same rigour or scope when access is sought to documents quite devoid of public interest as when the application concerns information of obvious public interest and relating to an individual’s professional activities...’. According to the Advocate General, the concept of ‘necessity’ must, therefore, be relaxed to a certain extent when the personal data is not, so to speak, the main object of the request for information, but the request relates instead to documents of a public nature that incidentally include information relating to individuals and, as such, contain ‘personal data’. Admittedly, the data is ‘personal’ in so far as it contains ‘information relating to an identified … natural person’ (Article 2(a) of Regulation No 45/2001), but this is prima facie ‘professional data’ and therefore less sensitive than information falling within the ambit of privacy or private life sensu stricto’.
In its recent decision, the EU Ombudsman also noted that “personal data relating to the professional competence and activities of a public figure, especially a person actually appointed to a high level public post, may not require the same level of protection as might apply in other circumstances”.
It is in light of the above that we claim that, when weighed against democratic concerns, the CJEU simply “cannot demand the anonymity of earlier years, hiding behind literal or metaphorical wigs.” If the Council determines that full disclosure would undermine the protection of privacy under Article 4(1)(b) of Regulation 1049/2001, or seriously undermine the Panel’s decision-making process under Article 4(3) of Regulation 1049/2001, the Council should make the most minimally redacted versions possible of all Panel Opinions publicly available in the light of the indications provided for the EU Ombudsman.
We trust that this confirmatory application will be addressed expeditiously and within the time limits set forth in Regulation (EC) 1049/2001. We thank you in advance for your timely and complete response.
1 European Commission, Why Do We Need An EU Data Protection Reform?, available at ec.europa.eu/justice/data-protection/document/review2012/factsheets/1_en.pdf.
2 Panel Provided for by Article 255 of the Treaty on the Functioning of the European Union, Third Activity Report, SN 1118/2014, p. 13 (2013).
3 See, e.g., Commission of the European Communities v. The Bavarian Lager Co. Ltd, Case C?28/08 P, 29 June 2010.
4 See id. (holding that the names of the attendees to a meeting are “personal data” under Article 2(a) of Regulation No 45/2001 and that Bavarian provided no “legitimate justification or any convincing argument in order to demonstrate the necessity for those personal data to be transferred.”).
7 The reasons a candidate was not appointed to the United States Supreme Court are openly discussed. See, e.g. eJournal, Issues of Democracy, Bureau of International Information Programs, U.S. Department of State (April 2005), available at photos.state.gov/libraries/amgov/30145/publications-english/EJ-courts-0405.pdf. See also William G. Ross, The Ratings Game: Factors that Influence Judicial Reputation, 79 Marq. L. Rev. 401 (1996).
8 See Nuno Garoupa & Tom Ginsburg, Judicial Audiences and Reputation: Perspectives from Comparative Law, 47 Colum. J. Transnat'l L. 451 (2009).
9 Id. at 14 (citing Issues of Democracy, Bureau of International Information Programs, U.S. Dept. of State).
10 See Jean-Marc Sauvé, Selecting Europe’s Judges: A critical appraisal of appointment processes to the European courts (College of Europe, 4 November 2013, Bruges); see also Jean-Marc Sauvé, The role of the Advisory Panel of Article 255 TFEU in the separation of powers within the European Union at the occasion of the 130th anniversary of the French High Judiciary Council (Conseil supérieur de la magistrature, 24 October 2013, Paris).
11 For example, Joseph Filletti, a Maltese candidate for the General Court who received an unfavourable Opinion later became Malta’s permanent representative on the Council of Europe. See Judge Rejected for EU Court, Times of Malta, http://www.timesofmalta.com/Articles/vie... http://www.coe.int/t/cm/PRs_en.asp; see also Jean-Marc Sauvé, Selecting European Union's Judges: The Practice of the Article 255 Panel in M. Bobek, Selecting Europe’s Judges, OUP, 2015.
13 Alberto Alemanno, How Transparent is Transparent Enough?, in M. Bobek, Selecting Europe’s Judges, OUP, 2015.
14 See, e.g., Judge Rejected for EU Court, Times of Malta, http://www.timesofmalta.com/Articles/vie... Stefan Strömberg anses ej lämplig som EU-domare, Realtid.com, http://www.realtid.se/ArticlePages/20120... see generally Tomáš Dumbrovsky, Bilyana Petkova and Marijn Van Der Sluis, Judicial appointments : the Article 255 TFEU advisory panel and selection procedures in the Member States, Common Market L. R., 51: 455, 461 (2014).
15 For example, Dr. Niilo Jääskinen, an Advocate General of the CJEU, publicly stated that the Panel had rejected a candidate for the General Court from Sweden in his speech: Through Difficulties towards New Difficulties – Wandering in the European Judicial Landscape (15 February 2013). As a result, Internet sources such as Realtid have published articles disseminating the information. Stefan Strömberg anses ej lämplig som EU-domare, supra note 13.
16 See Tomáš Dumbrovsky et al., supra note 13, at 459.
17 See, e.g. Case T-115/13 Dennekamp v European Parliament, para 9.
18 Council letter 4 May 2016, para 2.2.
20 Case C-280/11 P - Council v Access Info Europe.
21 Council letter 4 May 2016, para 2.2.
22 See Alemanno, supra note 17, at 14.
23 See, e.g., Activity Report of the Panel.
24 See id. at 3.
25 Letter by the Council, para 2.4.
52/05 P Kingdom of Sweden and Maurizio Turco v Council of the European Union  ECR I-04723.
29 Recital 2, Regulation 1049/2001.
30 See, e.g., Joined Cases C-92/09 and C-93/09 Schecke  ECR I-11063; Case C-28/08 European Commission v. The Bavarian Lager Co. Ltd  ECR I-6055, paras 75–79; Case T-190/10 Hackett v. European Parliament  nyr.
31 Alemanno, supra note 17, at 13.
615/13 P, ClientEarth et al. / European Food Safety Authority, nyr, para 53.
35 See id. para 55.
36 European Ombudsman, decision on complaint 1011/2015/TN, para 24.
37 See Kate Malleson, ‘Parliamentary Scrutiny of Supreme Court Nominees: A View from the United Kingdom’, (2007) 44 OSGOODE HALL L J 557, (‘Citizens have a right to be properly informed about the people who sit in their top courts and determine controversial issues of great moral and political sensitivity.’).
38 European Ombudsman, decision on complaint 1011/2015/TN, para 24.
of the Council to your confirmatory request.
The original version of the letter was sent to you by registered mail.

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Q.1 What is a §1031 Exchange?
In order to structure a transaction as an IRC §1031 tax deferred exchange a taxpayer would follow the steps contained in our Checklist.
Simply put, an exchange is structured as a sale, just like any other sale, and a purchase, just like any other purchase, but with the inclusion of a qualified intermediary to structure the transaction as an exchange. It is very important to involve the qualified intermediary before you start your transaction. Without the involvement of a qualified intermediary before the sale of the relinquished property the proceeds become taxable and any proceeds used to acquire replacement property are with after-tax dollars.
A qualified intermediary may not be a “disqualified person” as further defined in the Treasury Regulations. A disqualified person normally includes, but is not limited to, your attorney, CPA or accountant, realtor, agents, employees, relatives, and entities in which you have an interest. It is important to perform some due diligence when choosing a Qualified Intermediary to structure your transaction. At Legal 1031 Exchange Services, Inc. we pride ourselves on our knowledge, customer services, and security of the 1031 exchange funds held in escrow for our clients.
One of the most misunderstood concepts of tax deferred exchanges is the concept of like kind. Many people wrongly believe that like kind means the same type of property must be purchased when completing an exchange. Nothing can be further from the truth. An Exchangers can sell one type of property and buy a completely different type of property as is explained below.
The relinquished property must be held for productive use in a trade or business, or for investment purposes, and be exchanged for property that is also to be held for productive use in a trade or business, or for investment purposes. IRC 1031(a)(1). However, real property can only be exchanged for real property. Although tax deferred exchanges are a creature of federal statute, it is state law that determines if a property is real. Reg. 1.1031(a)-1(b), (c), Aquilino v. United States, 363 U.S. 509 (1960). Furthermore, like kind only refers to the nature or character of the property, not to its grade or quality. Treas. Reg. 1.1031(a)-1(b).
What this means is that exchangers have the opportunity to purchase replacement property of any type. For example, an exchanger can sell vacant land and buy a strip mall; or sell an apartment building and buy a net leased property. Although §1031 exchanges are governed by federal law it is state law that determines what is and what is not real property. Therefore, exchanges of real estate interests such as air rights, easement, timber, conservation easements, and development rights may be possible. The graphic below illustrates how all property held for business or investment purposes is like kind to all other property held for business or investment purposes.
The Exchanger may change the properties identified as often as it wants during the 45 day identification period by revoking the previously identified properties and then identifying new potential replacement properties. It is essential that the identification is delivered by midnight of the 45th day, or postmarked by the 45th day, to the Exchanger's Qualified Intermediary or to a party related to the exchange who is not a disqualified person. Typically, delivering the identification to the Qualified Intermediary is the safest course of action to prevent disqualification of the transaction for an invalid and/or untimely identification. If the Exchanger fails to deliver the identification in a timely fashion or does not comply with one of the three identification options, the exchange will be disallowed.
1) The Three Property Rule: the "three property" identification rule allows an Exchanger to identify up to three replacement properties. There is no value limitation placed upon the prospective replacement properties and the exchanger can acquire one or more of the three properties as part of the exchange transaction. The "three property" rule is the most commonly used identification option, allowing an exchanger to identify fall back properties in the event the preferred replacement property can not be acquired.
For example, assume an Exchanger identifies ten properties of equal value. In order to satisfy the rule, the Exchanger would be required to acquire all ten identified properties within the exchange period to complete a successful exchange. If one of the properties fell through, the entire 1031 exchange would be disqualified because the exchanger did not acquire 95% of the fair market value identified. This rule should only be utilized in situations where there is a high level of certainty pertaining to the acquisition of the identified properties and the other two rules do not meet the Exchanger's objectives.
Q.5 What is the structure of a delayed exchange?
Tax deferred exchanges are normally structured as one of four variants: simultaneous, delayed [Treas. Reg. 1.1031(k)-1(a)], reverse [Revenue Procedure 2000-37], and build-to-suit. In the case of a simultaneous or delayed exchange, the exchanger first enters into a contract to sell the relinquished property or properties. Contrary to popular belief there is no “exchange contract” for a delayed exchange. The exchanger enters into a contract that they would normally use if they were not structuring the transaction as an exchange. However, the addition of an exchange cooperation clause is recommended to secure the cooperation of the buyer or seller of the relinquished property or replacement property, respectively.
A person or entity that is not a disqualified party [Treas. Reg. 1.1031(k)-1(g)(4)(iii)], usually a Qualified Intermediary, thereafter assigns into the rights, but not the obligations of the contract. This assignment creates the legal fiction that the Qualified Intermediary is actually swapping one property for another. In reality, the exchanger sells the relinquished property and purchases the replacement property from whomever he or she wishes in an arms length transaction. There is absolutely no requirement that an exchanger actually “swap” properties with another party.
In addition to the assignment of contract, there must be an exchange agreement entered into prior to the closing of the first property to be exchanged. The exchange agreement sets forth the rights and responsibilities of the exchanger and the entity acting as a qualified intermediary, and classifies the transactions as an exchange, rather than a sale and subsequent purchase. In addition, the exchange agreement must limit the exchanger’s rights “to receive, pledge, borrow, or otherwise obtain the benefits of money or other property before the end of the exchange period.” Treas. Reg. 1.1031(k)-1(g)(6). That is, the exchanger may only use the exchange funds to purchase new property, and to pay most expenses related to the sale and purchase of the properties.
Q.6 What kind of due diligence should I do when picking out a qualified intermediary?
1. What is the experience of the person who you are speaking with? How long have they been in the industry? How often do they lecture on IRC §1031 tax deferred exchanges? Are they a published author, and were the articles published in a major legal publication such as a law journal? Are they a tax or legal professional such as an attorney or CPA? Remember, the person on the other end of the phone may be from a big company but may only have a few months experience. It is important to ask!
2. Does the Qualified Intermediary segregate the Exchange Funds into separate Qualified Escrow Accounts as provided in the Treasury Regulations or do they co-mingle the Exchange Funds? A Qualified Intermediary that uses internal “memorandum accounts” is not providing you or your client with the maximum protection that the Safe Harbors of the Treasury Regulations allow. Legal 1031 Exchange Services, Inc. only uses segregated accounts and can provide you with deposit verification letters directly from our depository bank.
3. Have you received a copy of the Fidelity Bond and Errors & Omissions coverage before you have started your Exchange? Is the amount of coverage for each transaction greater than the cash proceeds you will be sending? Have you verified that the Fidelity Bond and E&O coverage are in full force and effect? And perhaps most importantly, does the Fidelity Bond provide for principal liability? Many Fidelity Bonds only provide protection from employee malfeasance but leave the Exchanger uninsured in the case of malfeasance of a principal. Remember a Qualified Intermediary will be holding onto your funds or your client’s funds. It is imperative that you do some due diligence.
It goes without saying that service is an extremely important part of an IRC §1031 tax deferred exchange. Exchanges are subject to strict guidelines and requirements. Unless you can receive your exchange documents in a timely fashion and have your exchange proceeds. It is important that you are able to reach the people who have the expertise and have the ability to close your transaction in a timely fashion.


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Krauklis V.L., Nikolskii G.A., Safronova M.M., Shul'ts E.O. On the conditions for the appearance of anomalies in the aerosolextinction of UV radiation in a clear atmosphere. // Atmospheric and oceanic optics. 1990. V. 3. No. 03. P. 201-213.
Gorshkova N.I., Korostina O.M., Smerkalov V.A. Spectral extinction coefficients and asymmetry of scattering of light by aerosol with weighted-mean particle-size spectrum. // Atmospheric and oceanic optics. 1990. V. 3. No. 03. P. 214-218.
Begkhanov M., Kurbanmuradov O., Lebedinets V.M., Chopanov G. Semiempirical models of the aerosol composition of the upper atmosphere. I. Sedimental model. // Atmospheric and oceanic optics. 1990. V. 3. No. 03. P. 219-226.
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Ponomarev Yu.N. Absorption of lazer radiation by aerosol particles in an atmosphe conting of a resonantly absorbing gas. // Atmospheric and oceanic optics. 1990. V. 3. No. 03. P. 232-234.
Tvorogov S.D., Troitskii V.O. Frequency summing in focused beams. // Atmospheric and oceanic optics. 1990. V. 3. No. 03. P. 235-241.
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Polyakov S.V., Trofimov V.A. On the defocusing of a light beam under conditions of strong nonlinear response of the medium. // Atmospheric and oceanic optics. 1990. V. 3. No. 03. P. 247-250.
Bezuglov D.A., Vershigora A.A. Reconstruction of the phase front in a basis of orthogonal functions from measurements with a Hartman type sensor. // Atmospheric and oceanic optics. 1990. V. 3. No. 03. P. 251-254.
Oshlakov V.K. Combined-signal model in promblems of interpretation of photometric measurements of cloud fields. // Atmospheric and oceanic optics. 1990. V. 3. No. 03. P. 255-259.
Balashov S.G., Pakhomov A.A., Ryakhin A.D., Sadykov Ya.A. On the restoration of images distorted by symmetric blurring. // Atmospheric and oceanic optics. 1990. V. 3. No. 03. P. 260-263.
Murynin A.B., Lupyan E.A. Reconstruction of the spatial spectral characteristics of the ocean-atmosphere boundary from optical sounding data. // Atmospheric and oceanic optics. 1990. V. 3. No. 03. P. 264-270.
Vlasov D.V., Kostko O.K., Kostko N.N., Tulinov G.F. The possibility of using lidars for studying artificial clouds of barium and barium oxide in the upper atmosphere. // Atmospheric and oceanic optics. 1990. V. 3. No. 03. P. 271-276.
Lyadzhin V.A., Tashenov B.T., Toropova T.P. Some results of single-frequency sounding of the stratospheric aerosol. // Atmospheric and oceanic optics. 1990. V. 3. No. 03. P. 277-284.
Shaikov M.K., Chayanova E.A., Ivanov E.V. New method and correlation spectrometer for remote measurement of the nien dioxide content in the atmosphere. // Atmospheric and oceanic optics. 1990. V. 3. No. 03. P. 285-288.
Zvenigorodskii S.G., Khattatov V.U., Smyshlyaev S.P. Prediction of the ozonosphere for different CFC emission scenarios on a 1-D photochemical model. // Atmospheric and oceanic optics. 1990. V. 3. No. 03. P. 289-293.
Nadeev A.I., Shelevoi K.D. Determination of the accuracy of measuring systems by statistical methods. // Atmospheric and oceanic optics. 1990. V. 3. No. 03. P. 294-297.
Gordov E.P., Zhiliba A.I., Makogon M.M. Intracavity laser spectroscopy with nonlinear frequency converter and an external signal. // Atmospheric and oceanic optics. 1990. V. 3. No. 03. P. 298-300.
Kabanov M.V., Kolevatov A.S., Razenkov I.A., Kopylova T.N., Kitris A.N., Degtyarenko K.M. XeCl-excimer-laser multifunctional differential absorption and scattering lidar. // Atmospheric and oceanic optics. 1990. V. 3. No. 03. P. 301-303.

matches: V. V. V. V. V. V. V. V. V. V. V. V. V. V. V. V. V. V. V.


David M. Lubitz, Swidler Berlin Shereff Friedman, LLP, of Washington, DC, argued for claimant-appellant.
Sean C. Griffin, Trial Attorney, Commercial Litigation Branch, Civil Division, Department of Justice, of Washington, DC, argued for respondent-appellee. With him on the brief were David W. Ogden, Acting Assistant Attorney General; David M. Cohen, Director; and Harold D. Lester, Jr., Assistant Director. Of counsel on the brief was Y. Ken Lee, Attorney, Department of Veterans Affairs, of Washington, DC. Of counsel was Donald E. Zeglin, Department of Veterans Affairs, of Washington, DC.
Milton Santana-Venegas appeals from the decision of the Court of Appeals for Veterans Claims ("Veterans Court") dismissing as untimely his appeal from the Board of Veterans Appeals ("BVA"), which denied his claim for service-connected disability benefits. See Santana-Venegas v. West, 16 Vet. App. 464, No. 99-718, 1999 U.S.App. Vet. Claims LEXIS 622 (Jun. 22, 1999). Because Mr. Santana-Venegas' misfiled notice of appeal with the Department of Veterans Affairs Regional Office ("VARO") from which his claim originated equitably tolled the judicial appeal period for filing his notice of appeal to the Veterans Court, the Veterans Court's dismissal is reversed, and the case is remanded for further proceedings consistent with this opinion.
Mr. Santana-Venegas served in the United States Army from November 1967 to November 1969. Since the mid-1970s, he has been repeatedly hospitalized and has received treatment for various psychiatric illnesses. His treatment records have shown complaints of nightmares, sleeplessness, anxiety, and flashbacks. In April 1992, Mr. Santana-Venegas filed a disability claim with the VARO in Puerto Rico, alleging that he suffered from Post-Traumatic Stress Disorder ("PTSD") connected to his service in Vietnam. Mr. Santana-Venegas' VA treatment records indicate that he received a diagnosis of PTSD. In July 1992, he underwent a VA examination for PTSD. In June 1993, the VARO notified Mr. Santana-Venegas that it had denied service connection for PTSD because his condition did not present symptoms of a "reliable diagnosis" of PTSD. In August 1995, Mr. Santana-Venegas was again hospitalized for psychiatric conditions. He then requested a hearing before the VARO to present "new and material evidence to show [he was] a PTSD patient." In November 1996, after three psychiatric examinations, the VARO again concluded that Mr. Santana-Venegas did not suffer from PTSD and again denied his claim on the merits.
In December 1996, Mr. Santana-Venegas filed a notice of disagreement and requested a statement of the case from the VARO. In May 1997, the VARO sent Mr. Santana-Venegas a statement of the case. In September 1997, the VARO conducted an additional personal hearing for Mr. Santana-Venegas, at which his treating psychiatrist testified that he suffered from PTSD. In January 1998, after two more psychiatric examinations, the VARO again concluded that Mr. Santana-Venegas did not suffer from PTSD and issued a supplemental statement of the case. In February 1998, Mr. Santana-Venegas filed an appeal to the BVA with the VARO. In September 1998, the VARO informed Mr. Santana-Venegas that it had certified his appeal to the BVA in Washington, D.C., and that it would take "several months" before a decision would be rendered.
On November 17, 1998, the BVA affirmed the denial of Mr. Santana-Venegas' claim, triggering the 120-day statute of limitations for filing a notice of appeal with the Veterans Court. Mr. Santana-Venegas, however, never received a copy of the BVA decision and did not learn of the denial until January 1999, when he contacted the Puerto Rico Public Advocate for Veterans Affairs ("PRPAVA"). Accordingly, on January 22, 1999, he signed a notice of appeal to the Veterans Court. Additionally, on January 26, 1999, he filed a request with the VARO for a copy of the BVA decision. PRPAVA mistakenly mailed the notice of appeal to the VARO instead of the Veterans Court. The VARO received the notice of appeal on January 27, 1999.
On April 7, 1999, twenty days after the 120-day limitation period had expired and seventy days after having received the mistakenly addressed notice of appeal, the VARO informed Mr. Santana-Venegas that he should have filed the notice with the Veterans Court. Upon this advice, Mr. Santana-Venegas mailed the notice of appeal to the Veterans Court; the Veterans Court docketed the appeal on April 28, 1999, more than one month after the March 18, 1999 statutory deadline. On May 14, 1999, the Veterans Court sent Mr. Santana-Venegas an order to show cause why his case should not be dismissed for failure to file within the 120-day limitation period. On May 24, 1999, Mr. Santana-Venegas filed his response, claiming, among other things, that the appeal was mistakenly sent to the VARO without his knowledge. On June 22, 1999, the Veterans Court summarily dismissed the case, pursuant to 38 U.S.C. § 7266(a), for failure to file the notice of appeal "within 120 days after the date of mailing of the BVA decision."
The jurisdiction of this court to review decisions of the Veterans Court is limited by statute. 38 U.S.C. § 7292 (2000); Forshey v. Principi, 284 F.3d 1335, 1338 (Fed. Cir. 2002) (en banc). This court has "exclusive jurisdiction to review and decide any challenge to the validity of any statute or regulation or any interpretation thereof brought under [section 7292], and to interpret constitutional and statutory provisions, to the extent presented and necessary to a decision." 38 U.S.C. § 7292(c). Accordingly, questions regarding the validity and interpretation of constitutional and statutory provisions are questions of law to be reviewed without deference. Id.; Forshey, 284 F.3d at 1338.
However, we may only set aside interpretations of regulations relied upon in the decision of the Veterans Court that we find to be: "(A) arbitrary, capricious, an abuse of discretion, or otherwise not in accordance with law; (B) contrary to constitutional right, power, privilege, or immunity; (C) in excess of statutory jurisdiction, authority, or limitations, or in violation of a statutory right; or (D) without observance of procedure required by law." 38 U.S.C. § 7292(d) (1).
Equitable tolling is generally available in two types of situations: (1) "where the claimant has actively pursued his judicial remedies by filing a defective pleading during the statutory period," or (2) "where the complainant has been induced or tricked by his adversary's misconduct into allowing the filing deadline to pass." Jaquay v. Principi, 304 F.3d 1276, 1282-83 (Fed. Cir. 2002) (en banc) (quoting Irwin v. Dep't of Veterans Affairs, 498 U.S. 89, 96, 111 S. Ct. 453, 112 L. Ed. 2d 435 (1990) (footnotes omitted)); see also Young v. United States, 535 U.S. 43, 122 S. Ct. 1036, 1040, 152 L. Ed. 2d 79 (2002) ("It is hornbook law that limitations periods are customarily subject to equitable tolling unless tolling would be inconsistent with the text of the relevant statute." (internal quotations and citations omitted)). The Irwin Court noted, however, that courts are "less forgiving in receiving late filings where the claimant failed to exercise due diligence in preserving his legal rights," or where there is "a garden variety claim of excusable neglect." Irwin, 498 U.S. at 96, 111 S. Ct. 453 (internal citations omitted).
[T]he diligence requirement is more relaxed for cases where the claimant filed a pleading in the wrong place as opposed to filing it after a statutory deadline. Misfiling cases within the veterans' system are unlike the typical late-filing cases where the limitations period expires before the would-be claimants perform any action to preserve their legal rights. The filing of the misdirected paper itself satisfies the diligence requirement as a matter of law.
Id. at 1287-88 (citations omitted). Accordingly, this court held that a veteran, who seeks redress of a claim and misfiles his or her request at the same VARO from which the claim originated, is entitled to equitable tolling of the judicial appeal period pursuant to 38 U.S.C. § 7266 under the first Irwin prong. See id. at 1288-89.
In Bailey, a veteran signed a notice of appeal to the Veterans Court and presented it to an employee at a VARO. See 160 F.3d at 1361. The employee took the notice and informed the veteran that she would take care of the appeal. See id. The employee failed to file the notice of appeal with the Veterans Court, causing the veteran to miss the 120-day statutory limitation. See id. This court reasoned that the veteran was misled, especially given the paternalistic system of veterans' benefits. See id. Accordingly, this court held that a veteran, who is lulled into "accepting and relying upon the advice and aid of the government," is entitled to equitable tolling of the judicial appeal period pursuant to 38 U.S.C. § 7266 under the second Irwin prong. See id. at 1365.
While equitable tolling is available to toll the judicial appeal period of 38 U.S.C. § 7266, a veteran who files an untimely notice of appeal must nevertheless show that the veteran "exercised due diligence in preserving his legal rights." Jaquay, 304 F.3d at 1283 (citing Irwin, 498 U.S. at 96, 111 S. Ct. 453). In this case, the issue is whether a veteran who misfiles his or her notice of appeal at the same VARO from which the claim originated within the 120-day judicial appeal period of 38 U.S.C. § 7266(a), thereby actively pursues his judicial remedies, despite the defective filing, so as to toll the statute of limitations. Mr. Santana-Venegas acted diligently by filing his notice of appeal within 120 days of the BVA's decision affirming the denial of his claim. In the context of the non-adversarial, manifestly pro-claimant veterans' benefits system, and consistent with our decisions in Jaquay and Bailey, misfiling a notice of appeal at the VARO from which the claim originated shows that the claimant seeks redress before the Secretary despite the claimant's mistaken belief as to the accuracy of the filing location and does not involve "a garden variety claim of excusable neglect." Irwin, 498 U.S. at 96, 111 S. Ct. 453; see also Bailey, 160 F.3d at 1365. Once a veteran takes the affirmative act of seeking redress of his or her claim through a filing with the VARO from which the claim originated rather than the Veterans Court, " [t]he filing of the misdirected paper itself satisfies the diligence requirement as a matter of law." Jaquay, 304 F.3d at 1288 (citing Goldlawr, Inc. v. Heiman, 369 U.S. 463, 467, 82 S. Ct. 913, 8 L. Ed. 2d 39 (1962)).
Moreover, this is especially true in the circumstances of Mr. Santana-Venegas, who relied on the non-adversarial and pro-claimant character of the veterans' benefits system and pursued his statutory entitlements without the assistance of legal counsel. See 38 U.S.C. § 5904(c) (1) (prohibiting fee agreements with an attorney until the Board issues a final decision); Jaquay, 304 F.3d at 1282 (" [T]he law prohibiting lawyers from charging a fee has the practical effect of limiting the ability of veterans to retain a lawyer at the early stages of the claim process."). It is not unreasonable for veterans to rely on the VA to fully comply with the comprehensive policies adopted by the agency including the duty to assist timely. See 38 U.S.C. § 7721(a) ("ensuring that all veterans ... are provided timely and appropriate assistance to aid and encourage them in applying for and obtaining such benefits and services"); Dep't of Veterans Affairs Procedure Manual, M21-1, Part III § 11.02 (indicating that all correspondence must be acknowledged or answered within ten days of receipt). Such policies provide reasonable assurances that even misdirected mail will be forwarded or returned in due course and that proceedings will not be unduly delayed even where papers are inadvertently misfiled, provided they are misfiled at the same VARO from which the claim originated.
We hold as a matter of law that a veteran who misfiles his or her notice of appeal at the same VARO from which the claim originated within the 120-day judicial appeal period of 38 U.S.C. § 7266, thereby actively pursues his or her judicial remedies, despite the defective filing, so as to toll the statute of limitations. Thus, Mr. Santana-Venegas' filing of his notice of appeal at the same VARO from which his claim arose within the 120-day judicial appeal period of 38 U.S.C. § 7266 triggered equitable tolling, and the Veterans Court's dismissal for lack of jurisdiction of the appeal as being untimely was erroneous.
Our decision in this case does not involve the application of law to the facts of a particular case. See 38 U.S.C. § 7292(d) (2) (B); Leonard v. Gober, 223 F.3d 1374, 1376 (Fed. Cir. 2000) ("Because we lack jurisdiction to consider Leonard's arguments regarding the application of equitable tolling to the facts of her case, her appeal is dismissed."). Rather, our holding resolves whether the Veterans Court properly interpreted 38 U.S.C. § 7266(a) when it dismissed Mr. Santana-Venegas' appeal as being untimely. The Veterans Court erred by summarily dismissing Mr. Santana-Venegas' case as being untimely under 38 U.S.C § 7266(a) without evaluating the availability of equitable tolling. We now reverse this error and recognize that a veteran who misfiles his or her notice of appeal at the same VARO from which the claim originated within the 120-day judicial appeal period of 38 U.S.C. § 7266(a), thereby actively pursues his or her judicial remedies, despite the defective filing, so as to toll the statute of limitations under the first Irwin prong.
The judgment of the Court of Appeals for Veterans Claims is reversed and the case is remanded for further proceedings in accordance with this opinion.


On October 19, 2017, the Government Accountability Office ("GAO") determined that the Interagency Leveraged Lending Guidance ("LLG")1 issued by three federal banking agencies, the Board of Governors of the Federal Reserve System ("FRB"), Federal Deposit Insurance Corporation ("FDIC") and Office of the Comptroller of the Currency ("OCC") (collectively, the "Agencies"), is a "rule" for purposes of the Congressional Review Act ("CRA").2 In effect, this gives Congress the right to review the LLG and, pursuant to such review, issue a joint resolution to disapprove it.
Perhaps more important, according to the terms of the CRA, a rule must be submitted by the promulgating agency(ies) to Congress for Congressional review before the rule can take effect,3 suggesting a lack of regulatory authority where that process has not been followed as is the case for the LLG. However, the CRA appears to contradict itself in this regard by noting that "any rule that takes effect and later is made of no force or effect by enactment of a joint resolution [of Congress] shall be treated as though such rule had never taken effect."4 In practice, it appears the latter approach may be the one favored. The Congressional Research Service specifically addresses this approach, noting that if a rule has already taken effect, the rule shall not continue in effect5 and "shall be treated as though such rule had never taken effect,"6 i.e., if the rule is disapproved by a joint resolution of Congress that is signed by the President.
This calls into question how the Agencies will choose to treat the LLG should Congress not take any action to review and disapprove it, as well as the potential implications for banks if Congress does or does not disapprove the LLG. Complicating the picture is the possibility of retroactive effect if the LLG is disapproved (and, arguably, even if it is not under one reading of the CRA), as well as uncertainty about how the Agencies will proceed/respond under various scenarios, as discussed below.
The Agencies issued the LLG in the form of "interagency guidance" in 2013. The LLG establishes the Agencies' expectations for sound risk management of bank leveraged lending activities, including clear, written and measureable underwriting standards, based, among other things, on the premise that a borrower's leverage ratio in excess of six times total debt-to-EDITDA8 raises concerns for most industries. The LLG was intended to provide greater clarity regarding the Agencies' supervisory expectations regarding the leveraged lending exposure of regulated banks.
The GAO determination ("GAO Determination") makes the LLG's continued application uncertain. At a minimum, the GAO Determination paves the way for Congress to disapprove the LLG, rendering it to have no force or effect. As noted above, however, the literal terms of the CRA suggest that the LLG cannot take effect until the Agencies submit it to Congress. Moreover, Congress' joint resolution disapproving the LLG would mean that the LLG would not continue in effect and would result in the LLG being treated as if it had never taken effect.9 Until then or absent such eventuality, it appears the Agencies may continue to apply the LLG standards to monitor and assess the classification and corresponding regulatory capital treatment of syndicated and other leveraged loans. To date, the Agencies have not said publicly if or how they will address the GAO Determination.
While the Agencies published both the proposed and final LLG for notice and public comment in the Federal Register, the Agencies did not submit the final LLG to Congress pursuant to the CRA.
The determination that the LLG is a "rule" under the CRA enables Congress to disapprove the LLG by a joint resolution of both Houses, unless vetoed by the President. By the same token, Congress could elect not to disapprove, which would only require one House of Congress to not support a joint resolution disapproving the LLG. And the President could elect not to sign a joint resolution.
The GAO has made prior determinations that guidance or other issuances are rules in at least 11 prior instances.20 Seven of those resulted in a rule finding similar to the GAO Determination for the LLG. Notably, none of those led to a joint resolution of Congress disapproving the guidance/rule. It is unclear whether that record will remain intact with Congressional review, if any, of the LLG.
If the LLG is disapproved, the Agencies—in bank examinations and reviews of syndicated loans under the Shared National Credit ("SNC") Program—would not be able to cite a loan participation or syndication as not complying with the LLG. However, the Agencies would retain broad statutory "safety and soundness" authority to cite a loan as highly leveraged and/or take enforcement action against a banking organization for its participation in highly leveraged lending.
A Congressional resolution declaring the LLG disapproved could result in SNC reviews that rely to a lesser extent on whether a loan represents over 6.0X leverage for the borrower with the result that not all or fewer loans with a 6.0X or higher leverage ratio will be required to be treated as classified loans requiring banks to hold more capital against such loans. The Agencies, however, would retain their statutory authority to determine a loan to be unsafe or unsound or to constitute an unsafe or unsound banking practice by a lender.
The LLG replaced prior guidance issued by the Agencies in 2001 establishing safe and sound practices for leveraged lending that included the Agencies' expectations on well-defined underwriting standards. The 2001 guidance did not set a quantified leverage limit, only an expectation of "reasonable amortization of term loans" over a moderate period. Because the LLG replaced the 2001 guidance, the 2001 guidance would not become the resulting guidance if the LLG is disapproved.
The Agencies could decide jointly or individually to issue new guidance on leveraged lending. Given the GAO determination, the Agencies would likely treat any such "guidance" as a proposed rule that would be submitted for public comment. As noted above, the LLG was also submitted for public comment, but it was not submitted to Congress after it was adopted. Any new "guidance" issued by the Agencies that is not submitted to Congress would almost certainly face the prospect of being deemed a "rule" and the potential for CRA review and Congressional disapproval of such guidance, as with the LLG.
To date, the Agencies have not responded formally to the GAO Determination and have not indicated an intention to amend, change or reissue the LLG. Thus, it is unclear how the CRA process will unfold.
If the LLG is not disapproved by Congress, the Agencies might determine to replace the LLG with a revised version that would be subject to public comment as a rulemaking and that when adopted would be submitted to Congress. If Congress does take up review of the LLG based on its practice in prior instances of reviewing guidance and other issuances upon receiving a GAO determination, rather than upon receiving the rule from the promulgating agency as provided in the CRA, the Agencies might decide that Congress' failure to disapprove the rule renders the LLG a valid rule, notwithstanding the CRA requirement that "before a rule can take effect" the Agencies must submit it to Congress.
A staff report issued by the Federal Reserve Bank of New York on the efficacy of the LLG as a macroprudential policy tool concluded that, while the LLG "was effective at reducing leveraged lending activity among banks," in particular banks subject to supervision by the FRB's Large Institution Supervision Coordinating Committee, which were the main originators of leveraged loans, such reduction "did not lead to a commensurate reduction of risk in the banking sector because some of the leveraged lending business migrated to nonbanks which in turn resorted to banks to raise funding for this activity."29 The report finds that the migration to nonbanks makes it less clear that the LLG accomplished the stated objective of reducing the risk that leveraged loans pose to US financial stability. Members of Congress might look to the LLG's stated objective of financial stability to bolster a finding that the LLC is a "major rule" for purposes of the CRA.
"Banks should be encouraged to incorporate a clear but robust set of metrics when underwriting a leveraged loan, instead of solely relying on a 6x leverage ratio."
While it is clear that the GAO Determination gives Congress the right to review the LLG and, pursuant to such review, disapprove it, less clear are the potential implications of the GAO Determination, including application of the LLG since it was promulgated by the Agencies. While the CRA itself creates this ambiguity, what is not ambiguous is the impact on the LLG if Congress moves via a joint resolution to disapprove it, and the President signs such resolution. As noted above, the CRA specifies that if a rule has already taken effect, the rule shall not continue in effect and "shall be treated as though such rule had never taken effect." In this event, there are significant potential supervisory, regulatory and legal implications that will have to be considered by the Agencies, Congress and institutions impacted by the LLG.
3 5 U.S.C. § 801(a)(1)(A).
4 5 U.S.C. § 801(a)(1)(F).
5 Citing 5 U.S.C. § 801(b)(1).
6 Congressional Research Service, The Congressional Review Act: Frequently Asked Questions, No.7-5700 (Nov. 17. 2016); citing 5 U.S.C. § 801(f).
7 5 USC § 805.
8 EBITDA refers to "earnings before interest, tax, depreciation and amortization."
9 See supra, note 6.
11 5 USC § 801(a)(1).
12 5 USC §§ 801(a)(3)(A) and (d).
13 5 USC § 804(3).
14 GAO Determination at 3 – 4.
20 CRA FAQs, supra, at 12.
23 H.J. Res. 111 (115th Cong. Oct. 25, 2017).
24 5 USC § 801(f).
26 5 USC §§ 805 and 806.
27 5 USC § 801(b)(2).


text:
'In February and March, 1895, Rudolph Helwig, plaintiff in error, made three certain importations of wood pulp into the United States, entering the same at the custom house at the port of New York. As the facts are substantially the same in respect to each importation, except as to values, amounts, date, etc., they are spoken of herein as one importation.
'At the time when said wood pulp was imported the duty imposed by law on wood pulp was ten (10) per centum ad valorem (par. 303, act of August 27, 1894 [28 Stat. at L. 532, chap. 349]).
'Upon making the entries at the custom house, Helwig declared the invoice and market value to be marks 191 per ton; the aggregate invoice value of all three importations was $13,252 in United States currency; at the time of making the entries Helwig paid to the collector of customs $1, 325.20, being the duty upon said wood pulp at the rate of ten (10) per centum ad valorem based upon the invoice value.
'The merchandise was thereafter appraised by the United States appraiser, as provided in 7 of the act of June 10, 1890 (26 Stat. at L. 131, chap. 407, U. S. Comp. Stat. 1901, p. 1892), who reported that the foreign market value of said wood pulp was marks 263.70 per ton; Helwig thereupon requested a reappraisement by a United States general appraiser, in accordance with 13 of the act of June 10, 1890 [26 Stat. at L. 136, chap. 407, U. S. Comp. Stat. 1901, p. 1932], a reappraisement was had, and the United States general appraiser reappraised the market value of said wood pulp at marks 245 per ton net; thereupon Helwig appealed to the board of United States general appraisers, in accordance with said 13 of the act of June 10, 1890, and said board affirmed the decision of the United States general appraiser, thereby deciding that the foreign market value of said wood pulp was marks 245 per ton net, and making an advance over the invoice and entered value of over 27 per centum.
'Thereupon the collector of customs liquidated said entries, [188 U.S. 605, 607] fixing the dutiable value of all of said merchandise at $16,792.20, and computing the duty thereon at the rate of 10 per centum at $1,679.20, and made demand upon said Helwig for the sum of $354, being the difference between the amount already paid by Helwig and the amount of duty at the rate of ten (10) per centum ad valorem found to be due on said final reappraisement; thereafter Helwig paid the sum of $354, and that amount is not in question on this appeal.
'At the time the collector of customs found said additional sum of $ 354 to be due, as aforesaid, he also found and decided that there was due from Helwig to the United States the further sum of nine thousand and sixty-seven dollars and sixty-eight cents ($9,067.68), and made demand for said amount, said amount being the further sum in addition to the duties imposed by law, ascertained, and fixed as provided in 7 of the said act of June 10, 1890, being 2 per centum of the total appraised value of said merchandise for each 1 per centum that such appraised value exceeded the value declared in the entry.
'Before the commencement of this action Helwig duly presented his petition to the United States district court for the southern district of New York, claiming that said sum of nine thousand and sixty-seven dollars and sixty-eight cents ($9,067.68) was a penalty, and praying that the district judge would cause an investigation of the facts to be made, in accordance with 5292 of the Revised Statutes (U. S. Comp. Stat. 1901, p. 3604) and 17 and 18 of the act of June 22, 1874 (18 Stat. at L. 186, chap. 391, U. S. Comp. Stat. 1901, p. 3606), and cause the facts to be stated and transmitted to the Secretary of the Treasury, and praying that said penalty be remitted on the ground that it had been incurred without wilful negligence or intent to defraud.
'The said district judge caused such summary investigation to be made, and a statement of the facts shown thereon was duly transmitted to the Secretary of the Treasury, who, thereafter, and on the 6th day of July, 1898, found and decided that said penalties had been incurred without wilful negligence or intention of fraud on the part of said Helwig, and thereupon [188 U.S. 605, 608] mitigatedthe penalties to one half of the amount thereof, namely, $4,533. 84.
'Subsequently the collector of customs reliquidated said entries, reducing the amount of said further sum to $4,533.84, and again made demand upon Helwig for payment. As Helwig did not pay the amount, suit was commenced against him in the circuit court for the southern district of New York on the 24th of August, 1898. Upon learning of the pendency of that suit, however, the Secretary of the Treasury advised the collector that he revoked his decision of the 6th of July, 1898, and directed the collector to reliquidate the entries at the original amount and to request the United States attorney to institute suit for nine thousand and sixty- seven dollars and sixty-eight cents ($9,067.68).
'The collector followed these instructions and again reliquidated the entries accordingly.
'The suit then pending was discontinued and the present action begun, including the full amount of the penalty, namely, nine thousand and sixty- seven dollars and sixty-eight cents ($9,067.68).
'The case was tried at the circuit court upon an agreed statement of facts.
'Upon the reading of the agreed statement of facts, the plaintiff in error moved to dismiss the complaint and for the direction of judgment in his favor on the ground that the action was to recover a penalty or penalties arising under the customs laws, and that under the provisions of 629 and 563 of the Revised Statutes (U. S. Comp. Stat. 1901, pp. 503, 455) the United States circuit court had no jurisdiction in such an action. The motion was denied and plaintiff in error duly excepted.
'The court subsequently directed judgment in favor of the United States for the amount of nine thousand and sixty-seven dollars and sixty- eight cents ($9,067.68), together with interest and costs.
'The defendant thereafter sued out his writ of error to this court.
Mr. Henry W. Rudd for plaintiff in error.
Assistant Attorney General Hoyt and Mr. James A. Finch for defendant in error.
That part of 7 of the customs administrative act of 1890 (26 Stat. at L. 131, 134, chap. 407, U. S. Comp. Stat. 1901, p. 1892), which relates to the question involved in this case is set forth in the margin. 1 [188 U.S. 605, 610] By 629, Revised Statutes (U. S. Comp. Stat. 1901, p. 503), subdivisions 3d and 4th, jurisdiction is granted to the circuit court of all suits at common law where the United States, or any officer thereof, suing under the authority of any act of Congress, are plaintiffs, and of all suits at law or equity, arising under any act providing for revenue from imports or tonnage, except suits for penalties and forfeitures.
Under this section the plaintiffs claim the circuit court had jurisdiction in this action as one at common law, etc., or as one arising under any act providing for revenue, and not being one for a penalty or forfeiture.
By 563, Revised Statutes (U. S. Comp. Stat. 1901, p. 455), jurisdiction is conferred upon the district court in various cases, the 3d subdivision of which section gives it jurisdiction of all suits for penalties and forfeitures incurred under any law of the United States.
It has been heretofore held that the act conferred exclusive jurisdiction upon the district court in suits for penalties or forfeitures. The early cases to that effect are cited in United States v. Mooney, 116 U.S. 104 , 29 L. ed. 550, 6 Sup. Ct. Rep. 304; Lees v. United States, 150 U.S. 476, 478 , 37 S. L. ed. 1150, 1151, 14 Sup. Ct. Rep. 163, and the above two cases reiterate the same holding. It would seem to be beyond the necessity of further argument since the decision of these cases, that the jurisdiction is exclusive in the district court of all actions to recover for a penalty or forfeiture. Indeed, the counsel for the government frankly concedes that if this action be one to recover a penalty or forfeiture exclusive jurisdiction is by the law vested in the district court.
The sole question is whether the sum imposed by 7, already quoted, is a penalty.
Without other reference than to the language of the statute itself, we should conclude that the sum imposed therein was a penalty. It is not imposed upon the importation of all goods, but only upon the importer in certain cases which are stated [188 U.S. 605, 611] in the statute, and it is clear that the sum is not imposed for any purpose of revenue, but is in addition to the duties imposed upon the particular article imported, and in each individual case when the sum is imposed it is based upon the particular act of the importer. That particular act is his undervaluation of the goods imported, and it is without doubt a punishment upon the importer on account of it. Whether the statute defines it in terms as a punishment or penalty is not important, if the nature of the provision itself be of that character. If it be said that the provision operates as a warning to importers to be careful and to be honest, it is a warning which is efficacious only by reason of the resulting imposition of the 'further sum,' in addition to the duties, provided for by the statute.
This case is a good illustration of the penal features of the statute. The aggregate value of the merchandise as entered by the importer was $13, 252, and the amount of duty provided for by the statute (10 per centum) was $1,325.20. The final reappraisement made under 13 of the same act was $16,792.20, and the duties $1,679.20, the difference being $354; yet this difference in valuation between the importer and the appraisers, though the valuation of the importer was made without intent to defraud, brought upon him the imposition, under the statute, 7, of the additional sum of $9,067.68, being the 'further sum' spoken of in the statute in addition to the payment of the $354 of duty, which was demanded of the importer by reason of this difference. Now what can this be but a punishment, or, in other words, a penalty for undervaluation, whether innocently done or not? It certainly was no reward of merit, and whether called a 'further sum' or an 'additional duty,' or by some other name, the amount imposed was so large in proportion to the value of the merchandise imported, as to show beyond doubt that it was a sum imposed not, in fact, as a duty upon an imported article, but as a penalty, and nothing else.
The statute also provides that, if the appraised value exceed by more than 40 per centum the value declared in the entry, then the entry value is presumed fraudulent and the whole proprty is to be seized by the collector, who is to proceed as [188 U.S. 605, 612] in the case of a forfeiture, and the burden of showing that the undervaluation was not fraudulent is cast upon the importer. Now, whether the excess in valuation on the reappraisement is more or less than 40 per centum of the value declared in the entry, seems to be important only upon the question of the presumption of fraud and the consequent forfeiture of the whole property. If more than 40 per centum, the presumption of fraud is declared by the statute and the property is forfeited, unless the importer shows there was no fraud. If less, the sum imposed by the statute is to be paid, but the property is not forfeited. In the case of good faith, it is simply a less penalty than in the case of fraud. It is, however, argued that the error for undervaluation not fraudulent is repaired by imposing an additional duty on the particular goods in such invoice with have been undervalued, and there is no penalty, a simple enlarged duty upon merchandise, while in the other case, the presumed fraudulent undervaluation (if the fraud be found), the whole of the merchandise is forfeited by the express terms of the statute.
Whether the error is repaired by imposing the sum named as an additional duty is not material in the consideration of the nature of the imposition. It is still a punishment and nothing else, because of the care lessness, ignorance, or mistake, without fraudulent intent, upon the part of the importer. If the fraudulent intent were present, the penalty would be enlarged and the goods forfeited. In both cases the nature of the penalty is the same, only in one case it is satisfied by the imposition of a certain amount of money, while in the other a total forfeiture is demanded.
To the question, why the additional sum is imposed in the one case, or why the goods are forfeited in the other, there can be but one answer. It is because of the action of the importer with relation to the importation in question, and in one case such action calls down upon his head punishment by way of a money imposition, and in the other it is a forfeiture of his property. In either case there is to be punishment, either for carelessness or fraud.
Although the statute, under 7, supra, terms the [188 U.S. 605, 613] money demanded as 'a further sum,' and does not describe it as a penalty, still the use of those words does not change the nature and character of the enactment. Congress may enact that such a provision shall not be considered as a penalty or in the nature of one, with reference to the further action of the officers of the government, or with reference to the distribution of the moneys thus paid, or with reference to its effect upon the individual, and it is the duty of the court to be governed by such statutory direction, but the intrinsic nature of the provision remains, and, in the absence of any declaration by Congress affecting the manner in which the provision shall be treated, courts must decide the matter in accordance with their views of the nature of the act. Although the sum imposed by reason of undervaluation may be simply described as 'a further sum' or 'an additional duty,' if it is yet so enormously in excess of the greatest amount of regular duty ever imposed upon an article of the same nature, and it is imposed by reason of the action of the importer, such facts clearly show it is a penalty in its intrinsic nature, and the failure of the statute to designate it as a penalty, but describing it as 'a further sum,' or 'an additional duty,' will not work a statutory alteration of the nature of the imposition, and it will be regarded as a penalty when by its very nature it is a penalty. It is impossible, judging simply from its language, to hold this provision to be other than penal in its nature.
But it is urged that although this part of the section may be of a penal character within the ordinary or general meaning of the words, yet as used in the various statutes upon the subject it will be seen that those words are not regarded by Congress as imposing a penalty and should not be so treated by the court. If it clearly appear that it is the will of Congress that the provision shall not be regarded as in the nature of a penalty, the court must be governed by that will. This leads to a short examination of the previous legislation upon the subject.
In an opinion delivered by Attorney General Wirt, February, 1821 (5 Ops. Atty. Gen., 730), that officer ruled that the 50 per centum provided by 11 could not be remitted, because he thought that by the language of the statute, Congress permitted the Secretary of the Treasury to remit penalties or forfeitures only in such cases where, by the provisions of the act, they could be recovered by suit. He did not deny that the additional sums imposed by statute were in the nature of penalties, but the 50 per centum not being recoverable by suit, he thought the Secretary of the Treasury had no power to mitigate or remit.
By the act of March 1, 1823 (3 Stat. at L. 729, 734, chap. 21, 13), reference was made to a penalty of 50 per centum (the same provision in substance as is set forth in the statute under consideration, only different amounts are provided for), and Congress described the provision as a penalty.
Section 9 of the act passed May 19, 1828 (4 Stat. at L. 270, 274, chap. 55), provided that where the appraisement exceeded by 10 per centum the invoice value there was to be imposed, in addition to the duty imposed by law on the same property, 50 per centum of the duty imposed on the same goods when fairly invoiced, and this amount is described in the statute as a duty of 50 per centum. Further on in the same section, it is provided that the penalty of 50 per centum imposed by the 13th section of the act approved March 1, 1823,supra, was not to attach to any of the property subject to the additional duty of 50 per centum imposed by 9 of the act of 1828. The sum imposed was in its nature no more a penalty under the 13th section of the act of 1823 than it was a penalty under the 9th section of the act of 1828, yet in the earlier act [188 U.S. 605, 615] it is described as a penalty, and in the later a duty. The mere description was evidently not regarded as of vital importance.
By 17 of the act of 1842, chap. 270 (5 Stat. at L. 548, 564), the amount imposed is stated to be 'in addition to the duty imposed by law on the same, there shall be levied and collected on the same goods, wares, and merchandise 50 per centum of the duty imposed on the same, when fairly invoiced.' Although this 50 per centum mentioned in the above act is not designated in terms as a penalty, yet it was regarded as such by the then Attorney General, Legare, who in response to the question put by the Secretary of the Treasury, whether the latter had power to remit it as a penalty within the meaning of the act of 1797, stated that in his opinion he had, as it was very clear that the 50 per centum was a penalty. 4 Ops. Atty. Gen. 182.
By the act of February 11, 1846, relative to collectors and other officers of the customs (9 Stat. at L. 3, chap. 7, 3), it was provided that no portion of the additional duties mentioned in the 17th section of the act of 1842, supra, 'shall be deemed a fine, penalty, or forfeiture' for the purpose of being distributed to any officer of the customs, but the whole amount thereof, when received, was to be paid directly into the Treasury. This would seem to be a recognition on the part of Congress, that the additional duties mentioned in the 17th section would be regarded as penalties, and that it was necessary to provide specifically that they should not be so treated, so far as distribution was concerned. It may possibly be that the legislation was enacted in order to meet the construction of the 17th section put upon it by the Attorney General in his answer to the Secretary of the Treasury, June 7, 1843. At any rate, the opinion and the legislation show that the additional duties had been regarded as penalties, and that such construction was only altered by Congress to the extent of providing that for the purpose of being distributed to any customs officer they should not be so regarded.
The statute of July 30, 1846, chap. 74 (9 Stat. at L. 42), relating to duties, by its 8th section provided that, in case of undervaluation, in addition to the duties imposed by law, a duty of [188 U.S. 605, 616] 20 per centum ad valorem on such appraised value should be imposed, using the same language substantially as had been used in the 17th section of the act of 1842, only reducing the amount from 50 to 20 per centum.
The language used in these various statutes, in making provision for the imposition of additional sums on account of the action of the importer in undervaluing the goods imported, does not give any clear indication on the part of Congress that the sum imposed shall not be regarded as a penalty excepting as to the act of 1846 (9 Stat. at L. 3, chap. 7), relative to collectors, etc., and there the provision is limited to the statement that the sum shall not be deemed a fine, penalty, or forfeiture for the purpose of being distributed to any officer of the customs. At that time, it must be remembered, moiety legislation was in force, by which a certain proportion of some fines and penalties was distributed to the customs officer.
By the act of July 24, 1897, chap. 11, 32 (30 Stat. at L. 212), Congress has plainly directed that the additional duty therein spoken of shall not be construed as a penalty, and shall not be remitted nor payment thereof in any way avoided, with the exception stated in the statute. As this statute was passed subsequently to the importation mentioned in this case, it does not affect the question as to the character of the legislation which preceded it and which had no such provision as is contained in the last act. It was under the act as it stood in the customs administrative act of 1890, the same under which the question here arises, that on September 9, 1893, Mr. Olney, who was then Attorney General, gave an opinion upon this same question in response to a communication from the Secretary of the Treasury (20 Ops. Atty. Gen. 660). In that opinion the Attorney General reviewed the previous legislation of Congress on this subject, and came to the conclusion that, as the law then stood, the additional duty, so-called, was in its [188 U.S. 605, 617] nature a penalty, and that being so, it was subject to remission like other fines, penalties and forfeitures by the Secretary of the Treasury.
In Ring v. Maxwell, 17 How. 147, 15 L. ed. 25, the court did not find it necessary to determine whether the additional duties prescribed under the acts of 1842 and 1846 might have been deemed penalties, because the court was of opinion that, whatever was the nature of the sums levied as additional duties under the 8th section of the act of 1846, they were not distributable to the customs officers as penalties.
See also Swanston v. Morton, 1 Curt. C. C. 294, Fed. Cas. No. 13,677, where the court described it as an additional duty, by way of penalty, and the court was by no means clear that the strictly technical term appropriate to such a demand would not be the word 'penalty,' though in that case it did not feel compelled to go so far.
In Passavant v. United States, 148 U.S. 214 , 37 L. ed. 426, 13 Sup. Ct. Rep. 572, the question of whether these sums are to be regarded as penalties or simply additional duties was not regarded as material, and consequently was not decided in terms, although the case of Bartlett v. Kane, 16 How. 263, 14 L. ed. 931, was quoted from as to the sums imposed by statute being a 'compensation for a violated law,' etc.
From these various decisions it is seen that the courts have either regarded the language used in these statutes as penal in its nature, and that the sums imposed under the various sections of the statutes were imposed as penalties or the property forfeited, for the careless or fraudulent conduct of the importer in making an undervaluation, or else they have declined to decide the question, because not involved. We think the sum sought to be recovered in this action was a penalty, and the circuit court, therefore, had no jurisdiction.
Whether the Secretary had the power, after he had once reduced the amount to be paid, to raise it to the original sum, as stated in the foregoing certificate, is not material to the question now before us, and we express no opinion regarding it.
The question propounded by the Circuit Court of Appeals is answered in the negative, and it will be so certified.
[ Footnote 1 ] Sec. 7. . . . And the collector within whose district any merchandise may be imported or entered, whether the same has been actually purchased or procured otherwise than by purchase, shall cause the actual market value or wholesale price of such merchandise to be appraised; and if the appraised value of any article of imported merchandise shall exceed by more than ten per centum the value declared in the entry, there shall be levied, collected, and paid, in addition to the duties imposed by law on such merchandise, a further sum equal to two per centum of the total appraised value for each one per centum that such appraised value exceeds the value declared in the entry; and the additional duties shall only apply to the particular article or articles in each invoice which are undervalued; and if such appraised value shall exceed the value declared in the entry more than forty per centum, such entry may be held to be presumptively fraudulent, and the collector of customs may seize such merchandise and proceed as in cases of forfeiture for violations of the customs laws; and in any legal proceedings which may result from such seizure the fact of such undervaluation shall be presumptive evidence of fraud, and the burden of proof shall be on the claimant to rebut the same, and forfeiture shall be adjudged unless he shall rebut said presumption of fraudulent intent by sufficient evidence: Provided, That the forfeitures provided for in this section shall apply to the whole of the merchandise or the value thereof in the case or package containing the particular article or articles in each invoice which are undervalued: And provided further, That all additional duties, penalties, or forfeitures applicable to merchandise entered by a duty certified invoice, shall be alike applicable to goods entered by a pro forma invoice or statement in form of an invoice. The duty shall not, however, be assessed upon an amount less than the invoice or entered value.

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