In this episode, Mark Chenoweth and John Vecchione sit down with NCLA Litigation Counsel Casey Norman to break down a major regulatory win: stopping FERC’s sweeping “Duty of Candor” rule before it ever hit the books. The proposed rule would have allowed the Federal Energy Regulatory Commission to punish any speaker — from corporations to ordinary citizens — for any statement, email, or phone call the agency deemed “false,” “misleading,” or missing “material information,” with no mens rea requirement and no defined limits.

Casey walks through why this vague, overbroad rule was a First Amendment disaster waiting to happen; how it risked chilling public debate on energy and environmental policy; and how NCLA’s detailed comments helped persuade FERC to scrap the rule entirely. The team also explores how the proposal fit into a broader pattern of government attempts to police “truth,” and why regulatory speech controls should worry everyone.

It’s a rare victory in the world of administrative rulemaking — and a reminder that sometimes the best lawsuit is the one you never have to file.

Mark Chenoweth: Welcome to “Unwritten Law” with Mark Cheoweth and John Vecchione. We are joined on today’s program by our colleague here at the New Civil Liberties Alliance, Casey Norman, to talk about a wonderful little regulatory victory that NCLA can claim from last month. That’s something at FERC called the Duty of Candor rule. First of all, what is the Federal Energy Regulatory Commission? What is FERC, and then what is the Duty of Candor rule?

Casey Norman: So, FERC is one of two, actually, energy-related agencies; there’s also the Department of Energy. I’m not quite sure why there are two. I’m not sure what overlap there is, but they regulate energy policy related to environmental concerns — fair electricity rates, that kind of thing — that covers a broad amount of important information that affects a lot of Americans.

Mark Chenoweth: Yeah, transmission lines and all that sort of thing.

Casey Norman: Right, right.

Casey Norman: Yeah, so it’s a nice kind of Orwellian little rule that they wanted to implement. And I have the text right here. So, what it says is, any entity — and they specify later in the rule any entity means whether you’re a sophisticated corporation, a normal everyday American — anyone who’s speaking must provide accurate and factual information and not submit false or misleading information or omit material information in any communication. And I should stop there and say “any communication” — the commission specified that means informal conversation, emails, phone calls, literally any communication at all with the FERC itself, or with a number of FERC-related entities.

And where such communication relates to any subject matter within the jurisdiction of FERC — which again, like we kind of touched upon, is a broad array of energy policy, environmental concerns, a kind of debated array of topics — and unless the entity speaking exercises due diligence to prevent such occurrences. There are a lot of issues there. One of which is this rule affects any speaker at all — anyone who’s speaking on the phone or email. And there’s a lot that’s not defined in this rule, including what does due diligence mean. How much work do you have to put in before you’re allowed to speak without being penalized by this commission?

Mark Chenoweth: No, absolutely. And among the problems with this rule, there’s no materiality threshold, right?

Casey Norman: Right.

Mark Chenoweth: So, they can come after you even if it didn’t make a difference at all.

John Vecchione: Not only is there no materiality, but if you’re talking to somebody — there’s so much stuff you don’t say, right? You assume the other side knows something already, and particularly in conversation, we omit stuff all the time. And it reminds me also of the FDC, where if they don’t like a label, they say, “Oh, you omitted this material that you should’ve had there.” And you have a disagreement with them, but suddenly you’re in the wrong. I mean, omission of speaking language? It’s incredible. You can’t say everything.

Casey Norman: Right. And FERC, they say in the rule — they try to lessen the blow of that and say, “Oh, don’t worry. It’s only an omission of any material information. But we’re not gonna tell you what that really means, and we’re the ones who choose whether it’s material or not.” So, how does any normal speaker, or even a sophisticated party, know if the commission is later gonna say, “Oh, that was material, so you’re on the hook”?

Mark Chenoweth: Well, it’s interesting that there’s a materiality threshold for omissions, but not for the things that you say. But the other thing that there isn’t in the rule — there’s no mens rea requirement, right? So, even if you don’t know that you’re misleading them in some way, you’re still on the hook.

Casey Norman: Yeah, no mens rea, no materiality. It does not matter how sophisticated an entity you are. There’s a lot that could impact a lot of people and just a lot that’s not defined here. I mean, I think that one of our issues was there’s a lot of vagueness. The one issue is they don’t tell you what penalties will be in place. What procedures do you take if somebody supposedly violates this rule of candor? A lot is just not included in the rule, and people are left guessing, and I think that would chill a lot of speech.

Mark Chenoweth: For sure. But what do you say to folks who say, “But, Casey, I don’t understand. All the government is saying is you can’t lie to us. People shouldn’t lie. This seems like a really reasonable rule. Why are you objecting to that?”

Casey Norman: I mean, I think a big reason is the First Amendment, which we point out, and the government cannot — again, this is a content-based restriction of speech. And the commission, the agency here, did not really provide any reason why this very, very strict, very broad rule of candor is necessary. They even said in the rule — they said, “Most parties are actually already exercising sufficient levels of candor, and this probably won’t impact that many people. But we feel the need to have 100% accurate information, so we need this rule, just in case.” Which, for First Amendment purposes, that’s not gonna cut it. You need a compelling state reason. It needs to be narrowly tailored, and this is the exact opposite of that.

Mark Chenoweth: Yeah, not a prophylactic rule. That’s not gonna pass muster.

Casey Norman: Right.

John Vecchione: And as usual, it doesn’t apply to FERC.

Casey Norman: Right.

John Vecchione: Right? FERC can lie to you all it wants or — I don’t really think they do that much, but I —

Mark Chenoweth: They might omit something.

John Vecchione: They omit things all the time. And you go, “Oh, well, you didn’t tell us that.” And they say, “Ah, sorry.” Go back and do it again, so.

Casey Norman: Right. Yeah, I mean, they say, in essence, “Just trust us.” I think, for some of these issues, they say, “We didn’t really specify what’s going on,” and “It doesn’t apply to us,” and “We have a lot of discretion, but we promise we won’t exercise this rule in a way that will target people that didn’t have scient or non-sophisticated parties.” But there’s nothing actually, explicitly in the rule that would prevent them from exercising that discretion.

Mark Chenoweth: Yeah, I always love the “trust us” approach from government bureaucrats. Excuse me if I don’t.

Casey Norman: Yeah. Right.

Casey Norman: Yeah. Well, I think the big one, which we touched on already, is the First Amendment aspect of the amount of chilled speech I think this rule would result in. And the fact that this, of course, is not a narrowly tailored rule with a compelling state interest. Or if there is a compelling state interest, it was not included in the explanation of why this is necessary.

Mark Chenoweth: They have to articulate one. If they have one and they don’t say it, that’s not good enough under First Amendment doctrine.

Casey Norman: Right, right. And that ties to the APA as well. I mean, when you’re doing this kind of public notice and rule-making process, you have to actually give sufficient notice to the public on the rule. What does the rule entail? And if you’re not gonna include key details like that or what penalties someone would face if they violate the rule, we can’t really meaningfully comment on the rule without that really key knowledge. So, that was something else that we focused on.

And there’s also the aspect of the attorney-client privilege. I think when you’re talking about this material omission of information and how much due diligence you have to exercise before you’re allowed to speak. And I should’ve mentioned before, this rule applies not only to the speaking party, but to an attorney — to an entity that’s acting on behalf of the speaker. So, this would apply clearly to attorneys as well, and I think that would impact the attorney-client relationship, where you’re wondering, what am I actually allowed to say on behalf of my client?

Mark Chenoweth: How zealously can I advocate?

Casey Norman: Right. Exactly. So, that was another big issue we included, and then, the vagueness too. I mean, you just don’t know. What does due diligence mean? What is this discretion? I mean, clearly, it’s broad discretion, but they don’t discuss any kind of limitations or safe harbor for materiality, or anything like that, so. It was just riddled with issues, and it took them three years, but luckily, they’ve taken it off the table.

Mark Chenoweth: Yeah, so, three years. So, the other thing that jumped out at me about this is — I know this isn’t the same kind of censorship that you’ve been dealing with in some of the other litigation that you’re bringing, but it is a kind of chilling of speech. And it’s of a piece with some of the other things that the Biden administration was doing. And the particular piece that’s similar to me is they think that the government should be in the business of policing truth, and the Supreme Court has ruled on this.

The First Amendment protects false speech, too, but the last administration just couldn’t get that through its thick skull. They seemed to want to have the government in the business of policing truth. That’s what was happening in the censorship cases. Where they’re telling the social media companies, “Take down those posts that” — well, in fact, they were truthful posts, but they didn’t agree with the government’s perspective, so they thought that they were — what was it — misinformation, disinformation, malinformation?

Casey Norman: Malinformation, yeah.

Mark Chenoweth: This seems like a similar kind of thing if I’m perceiving it correctly.

Casey Norman: Definitely, correctly. And there was one dissenting commissioner. I believe Commissioner Danly.

Mark Chenoweth: Ah, yes, Jim Danly, my old college buddy.

Casey Norman: Oh, yeah. Well, he submitted a very powerful dissent, which kind of detailed what you’re saying.

Mark Chenoweth: By the way, it’s James Danly.

Casey Norman: Oh, James Danly.

Mark Chenoweth: I’ve known him a long time, so he’s still lets me call him Jim —

Casey Norman: Not Jimmy?

Mark Chenoweth: — but it’s James to the rest of you.

Casey Norman: But he basically went through the fact that this is speech of public concern. We’re not just talking about sophisticated parties talking about wholesale electricity. This is debated topics that are kind of swept in with this whole rule of candor. And when you’re talking about what kinds of sources are — what do we wanna go with: electricity, fossil fuels? But, I mean, a lot of people in different parts of the country are debating these topics. And you would have had this commission, who’s kind of reigning over it, saying, “We don’t like what you’re saying there, and that’s misleading. So, therefore, we’re gonna penalize you.”

And again, it is kind of like the Covid topics that we mentioned, where there’s a lot of uncertainty, a lot of debate, and a lot of silencing of voices who were counter to the government’s narrative and preferred policies. Which I think we would’ve seen here, too.

Mark Chenoweth: Well, sure, because FERC would be overseeing all of this new transmission-line construction. Because a lot of the sort of alternative sources of energy — solar, what have you — they’re not near population centers, and so you have to build — I’ve seen estimates in the hundreds of billions of dollars’ worth of new transmission lines. Well, guess what? That affects a lot of people’s property, and so forth. So, there’s a lot of contentious debate that’s going to be taking place if those transmission lines ever get built. And this was designed to, I think, squelch some of that speech.

Casey Norman: Yeah. Yeah, I would definitely agree, and I think Commissioner Danly, your good friend, would agree as well.

Mark Chenoweth: Yeah, for sure. So, where do things stand now? What’s the good news that we have to report here?

Casey Norman: So, the good news is they announced that because of the comments that the commission received on this rule, they are just taking it off the books. They are not going to implement it. They kind of vaguely acknowledged that there were First Amendment and constitutional concerns, and so, therefore, they’re not going forward with it, which is great news.

Mark Chenoweth: Well, congratulations, ‘cause I looked at some of the other comments. I think that yours was the strongest in terms of raising these issues front and center and really making it clear. And I think maybe an implicit threat to sue them if they went ahead and —

Casey Norman: It was explicit.

John Vecchione: And it was, maybe, one of the first things you did here. Three years ago is a long time.

Casey Norman: Yeah, I was a staff attorney.

Mark Chenoweth: Yeah. Yeah, but it just goes to show that sometimes comments can make a difference in preventing a rule from getting implemented in the first place. And gosh, it’s so much easier to stop a rule by keeping it from being implemented than to have to go to all the trouble of suing and —

John Vecchione: And save the government money.

Mark Chenoweth: Yeah, that’s right. We saved the government money, John. The taxpayers should be happy with us, but they shouldn’t support us financially. We take no taxpayer dollars. So, that’s great. So, the Biden administration never implemented it even after suggesting that they were going to. And now, the Trump administration — FERC has taken it down.

Casey Norman: Right. Yeah, I’m not sure why it was on the table so long. I’m sure they have a lot of probably problematic rules that they were considering, but I’m glad, eventually, that they got around to just knocking it out completely.

Mark Chenoweth: Yeah, well, it went from the back burner to off the stove entirely. So, that’s good. Well, congratulations, Casey, and thank you for joining us today to talk about the Duty of Candor rule and all of its problems. And glad that NCLA was able to knock that one off of the — well, I guess not off of the books, but prevent it from ever going into the Code of Federal Regulations. So, congratulations.

Casey Norman: Right. Thank you.

Mark Chenoweth: You’ve been listening to Unwritten Law.

[End of Audio]

Duration: 13 minutes