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The Pennsylvania Public Official and Employee Ethics Act has been in effect since 1979 and must be carefully followed by state and local officials and employees.  Mainly, the Act requires that public officials file annual statements disclosing their financial interests, but it also prohibits activities that have been deemed a violation of the public’s trust.  The Act is enforced by the State Ethics Commission, which is comprised of seven politically appointed commissioners assisted by a staff of investigators and prosecutors.  Repercussions for violating the Act include administrative penalties, civil fines/restitution, and sometimes criminal prosecution. Continue Reading Criminalizing Politics: Ethical Obligations of Pennsylvania’s Public Officials

The Internal Revenue Service, Tax Exempt & Government Entities Division, has released its Fiscal Year 2019 Program Letter, a copy of which is available here. Among other things, the Program Letter identifies the compliance areas for the tax-exempt bond community that will be a priority for the IRS in the new fiscal year which began on October 1. Continue Reading IRS Announces Tax-Exempt Bonds’ Program Priorities for 2019 Fiscal Year

The Third Circuit Court of Appeals, the appeals court that has jurisdiction over federal cases in Pennsylvania, New Jersey, Delaware and the U. S. Virgin Islands, recently held that a public employer violates the First Amendment of the United State Constitution when it retaliates against an employee based on the employee’s union membership.  In reaching its conclusion, the Court distinguished between First Amendment “free speech” claims and First Amendment “association” claims.

Palardy v. Township of Millburn involved a claim by a former police officer, who alleged that the Township refused to promote him to Chief, because of his affiliation with the police officers’ union.  In support of his claim, the former officer presented testimony that the Township’s business administrator made a number of derogatory comments about his role as a union leader.  Interestingly, the former police officer retired before the Chief position actually became vacant, because he believed that he would not be selected for the position.

The Township defended the claim and argued that union affiliation is not a matter of public concern, and therefore not protected by the First Amendment.  The trial court agreed, holding that speech on behalf of the union and association with the union were not constitutionally protected conduct. On appeal, the Third Circuit analyzed and rejected the trial court’s opinion, which also happened to be the same opinion reached by the majority of other circuit courts throughout the United States.

Instead, the Third Circuit adopted the minority view, and concluded that union affiliation is protected by the First Amendment freedom of association clause.  The Court agreed with the Fifth Circuit, which had previously held that the union activity of public employees is always a matter of public concern, and therefore, no additional proof is necessary to establish that the union affiliation is protected.

Accordingly, when an association claim arises from a public employee’s union affiliation, the employee or former employee need not establish that his association was a matter of public concern or that an specific free speech issues are implicated.

Keep in mind that First Amendment claims still require that the plaintiff establish three things: (1) that he engaged in constitutionally protected conduct; (2) the defendant engaged in retaliatory action sufficient to deter a person of ordinary firmness from exercising his constitutional rights; and (3) a casual link between the protected conduct and the retaliatory action.  In Palardy, the court only considered the first question, finding conclusively that union-affiliation is constitutionally protected conduct.  The court remanded the case for consideration of the additional two elements.

While we certainly believe that this decision will result in an increase in First Amendment “association” claims (anyone who is a member of a union can now establish the first element), whether any particular plaintiff will be successful will depend on whether he or she can establish the other necessary elements of the claim, and that will still depend on the specific facts of each case.

On August 20, 2018 the SEC approved amendments to Rule 15c2-12 of the Securities Exchange Act to add two additional disclosure events to written continuing disclosure undertakings required to be obtained by underwriters in primary securities offerings. A copy of the final rule approving the amendments can be accessed here.

The SEC originally proposed the amendments in March 2017. Read our previous commentary on the amendments here. The new event disclosures that will be added to the Rule remain the same as was originally proposed:

  1. Incurrence of a “financial obligation” of the obligated person, if material, or agreement to covenants, events of default, remedies, priority rights, or other similar terms of a financial obligation of the issuer or obligated person, any of which affect security holders, if material; and
  2. Default, event of acceleration, termination event, modification of terms, or other similar events under the terms of the financial obligation of the obligated person, any of which reflect financial difficulties.

The original proposed version of the amendments would have defined a “financial obligation” to mean a: (i) debt obligation, (ii) lease, (iii) guarantee, (iv) derivative instrument, or (v) monetary obligation resulting from a judicial, administrative or arbitration proceeding. A “financial obligation” would not include municipal securities as to which a final official statement has been provided to the MSRB.

The proposed amendments generated substantial comments from the municipal bond community. In response to those comments, the SEC softened the reach of the amendments by removing from the definition monetary obligations resulting from judicial, administrative or arbitration proceedings. The revised definition also limits the scope of covered guarantees, derivative instruments, and leases.

As revised, “financial obligation” now means a: (i) debt obligation; (ii) derivative instrument entered into in connection with, or, pledged as security or a source of payment for, an existing or planned debt obligation; or (iii) guarantee of (i) or (ii). The exclusion for municipal securities as to which a final official statement has been provided to the MSRB remains in place. And, while the separate, broad category for “leases” was removed, the SEC has changed its interpretation of “debt obligation” to include any lease which operates as a vehicle to borrow money.

The compliance date for the new event disclosures is 180 days after publication in the Federal Register. For bonds sold after the compliance date, underwriters will have to ensure that the new event disclosures are included in the continuing disclosure agreement entered into with the issuer or obligated person with respect to the bonds.

Act 33 was enacted and signed into law on June 18, 2018 to provide counties with greater flexibility in combating blight. The new law, which takes effect 60 days after signing, allows a county to designate a redevelopment authority as the land bank for its jurisdiction.

Since 2012, counties have had the ability to establish land banks under the Pennsylvania Land Bank Act. Land banks are independent public entities created to expedite the process of acquiring and rehabilitating blighted, dilapidated and abandoned real estate. They often work together with redevelopment authorities to help eliminate blight in local communities. But while land banks have been crucial in this fight, many Pennsylvania counties have had active redevelopment authorities performing similar functions for over half a century.

Originally sponsored by Sen. Pat Stefano (R-Fayette) as SB 667, Act 33 will allow redevelopment authorities to possess powerful tools previously available only to land banks, such as acquiring tax-delinquent properties at judicial sale without competitive bidding, discharging tax liens on those properties and sharing up to half the real estate taxes for five years after their conveyance. For counties that have active redevelopment authorities but do not have land banks, the law will eliminate the need to form a new entity and staff a new board before being able to use these tools.

Act 33 does not limit the powers of land banks or restrict the ability of a county to use both a land bank and a redevelopment authority. The law simply provides more flexibility for counties to efficiently use their limited resources. Given the lack of resources and funding in many communities, the new law could benefit those counties with active redevelopment authorities already engaged in the elimination of blight. Act 33 could also help save time, money and resources by eliminating the need to establish separate boards, bylaws and other mechanics that may be cost-prohibitive and impede effective blight reduction efforts.

In a prior post we highlighted a recent podcast that McNees real estate attorney Kandice Hull recorded on eminent domain. Interested to know more about this topic? You can find her additional thoughts, including on the Supreme Court’s decision in Kelo v. City of New London, below.

Did you miss part 1 in this series? You can get caught up here. And, be sure to subscribe to our blog – as part 3 is in the works!

What almost every individual, business, and municipality have in common is that they have some sort of insurance coverage, and sooner or later they need to use it.  But if the insurance company won’t hold up its end of the bargain, how does an insured prove that an insurer acted in bad faith?

Although the issue has been well settled since the Superior Court decided Terletsky v. Prudential Property & Casualty Insurance Co. in 1994, there has been much confusion as to whether or not ill motive or ill will is required.  The Pennsylvania Supreme Court, however, recently weighed in, newly confirming the old standard. Continue Reading Rancosky: The (Clarified) Insurance Bad Faith Standard

A recent Commonwealth Court decision affirmed that municipalities within Pennsylvania are not immune from claims of adverse possession.  In City of Philadelphia v. Galdo, 181 A3d. 1289 (Pa. Commw. 2018), the Commonwealth Court held that the City of Philadelphia had lost title to a property that it had previously condemned to an adjacent property owner who adversely possessed the property. Continue Reading Municipalities Can Lose Property Through Adverse Possession

We’ve previously discussed on this blog the importance of continuing disclosure in the municipal bond industry, and the steps municipal issuers should take to ensure they remain in compliance with their obligations in this area. I recently recorded a video podcast on this topic. You can watch it below – or at the following link: https://www.mcneeslaw.com/continuing-disclosure-video/.

Have questions about continuing disclosure? Feel free to contact me or the Firm’s continuing disclosure specialist, Penny Pollick.

Last week the Supreme Court issued its long-awaited opinion in Janus v. AFCSME.  It held that requiring public sector employees to pay fair share fees to unions violates the First Amendment.  A fair share fee (sometimes called an agency fee) is a fee that non-union members must pay to the union to cover the expenses incurred by the union while representing an employee in collective bargaining and related matters.  Fair share fees were often required under state law, despite the employee opting not to join the union, because unions have a legal obligation to represent all employees within the bargaining unit, regardless of whether the employee is a member of the union.  These laws became common after the Supreme Court issued its 1977 opinion Abood v. Detroit Board of Education, which held that fair share fees were constitutional and maintained labor peace by preventing “free riders.”

In recent years, there have been increasing challenges to the constitutionality of fair share fees and the validity of AboodBack in 2014, we discussed the Supreme Court’s ruling in Harris v. Quinn.  The Court in Harris began to question the validity of Abood and its supporting rationale.  As we noted, the Court came close to overruling Abood but ultimately decided Harris on its specific facts.  It held that collection of the fair share fees in the specific context (personal assistants in Illinois) violated the First Amendment.  In 2016, another challenge of fair share fees made it to the Court, only for Justice Scalia to die after oral argument, leaving a 4-4 split decision.

With Justice Gorsuch now on the bench, as was foreshadowed in Harris, the Court ruled that fair share fees violate public sector employees’ right to free speech.  As a basic premise, the Court recognized that the right to free speech includes the right to refrain from speaking at all.  Thus, “[c]ompelling individuals to mouth support for views they find objectionable violates the cardinal constitutional command, and in most contexts, any such effort would be universally condemned.”  Accordingly, forcing employees to pay fair share fees (i.e., compelling employees to speak when they may otherwise remain silent) violates the First Amendment.  Finally, the Court overruled Abood, dissecting and dismantling its labor peace and free rider justifications.

The end result of the Court’s holding is clear: “States and public-sector unions may no longer extract agency fees from nonconsenting employees.  . . . Neither an agency fee nor any other payment to the union may be deducted from a non-member’s wages, nor may any other attempt be made to collect such payment, unless the employee affirmatively consents to pay.”  The Court recognized that the loss of these payments would cause unions to “experience unpleasant transition costs in the short term,” but it did think that such a challenge justified continued constitutional violations.  Rather, it pointed out that such a disadvantage must be weighed against the considerable windfall that unions received in fair share fees in the 41 years after Abood.

Surely there will be questions that follow.  Will unions continue to participate in public sector workforces?  Is there a process for employees who now want to opt out of union membership?  Do public sector employers now negotiate separately with non-union members?  All of these questions may take time to resolve and consultation with legal counsel.

A version of this post previously ran on the McNees Pennsylvania Labor and Employment Blog.