Legal News for Thurs 1/16 - CA Wildfire Lawsuits Against Utilities, Pam Bondi's AG Nomination, DOJ Independence, and Retirement Account Tax Advocates Should Lay Low

Minimum Competence

This Day in Legal History: Pendleton Civil Service Reform Act

On January 16, 1883, the U.S. Congress enacted the Pendleton Civil Service Reform Act, a landmark piece of legislation that fundamentally transformed federal employment practices. The act was a response to widespread corruption and inefficiency in the government, fueled by the patronage or "spoils" system, which awarded jobs based on political loyalty rather than competence. Signed into law by President Chester A. Arthur, the Pendleton Act marked a critical shift toward merit-based hiring and promotion within the federal workforce.

The law initially applied to only about 10% of federal jobs, requiring competitive examinations to determine qualifications. However, it granted the president authority to expand the classified service, allowing successive administrations to broaden its scope. The act also established the Civil Service Commission, the first federal agency tasked with overseeing adherence to these new standards of fairness and efficiency.

This reform was catalyzed by public outcry following the assassination of President James A. Garfield in 1881 by a disgruntled office seeker. The tragedy underscored the dangers of a system rife with favoritism and incompetence, galvanizing bipartisan support for change. Over time, the principles of the Pendleton Act have become cornerstones of American civil service, contributing to the professionalization and stability of the federal government.

By curbing patronage and introducing accountability, the act helped restore public trust in government operations. It also served as a model for state and local reforms and influenced broader discussions about the role of expertise in public administration. Today, the Pendleton Act is recognized as a foundational moment in the evolution of modern governance in the United States, laying the groundwork for a more impartial and effective civil service system.

Victims of recent Los Angeles wildfires are leveraging California's unique legal doctrine of "inverse condemnation" to seek damages from Southern California Edison (SCE), even if the utility was not negligent. This doctrine, traditionally used against government entities for property damage, has been extended to utilities, making them liable for property damage caused during public service operations, regardless of fault. SCE is facing numerous lawsuits over the Eaton Fire, which destroyed thousands of structures and caused at least 24 deaths. Plaintiffs claim the fire originated near SCE's high-voltage transmission towers, although the company reports no operational anomalies on its lines before or during the fire.

California law does not require plaintiffs to prove negligence for property damage claims under inverse condemnation. However, proving negligence could enable claims for personal injuries and wrongful death. The lawsuits cite substantial economic losses and damages exceeding insurance coverage. To mitigate financial impacts, a $21 billion state wildfire insurance fund is available, capping SCE's exposure at $3.9 billion.

These cases, expected to take years to resolve, highlight the escalating legal and financial consequences for utilities in wildfire-prone areas.

California utility faces billions in claims for fire damage even if it did nothing wrong | Reuters

Pam Bondi, nominated by Donald Trump for U.S. attorney general, assured the Senate Judiciary Committee that she would not politicize the Justice Department, but refused to rule out investigating Trump critics. Bondi, who previously served as Florida’s attorney general and defended Trump during his 2019 impeachment trial, emphasized her focus on issues like violent crime and human trafficking while acknowledging she would evaluate investigations and potential pardons on a case-by-case basis.

Democratic lawmakers expressed concerns about her independence, referencing Trump’s pledge to target his adversaries and the dismissal of two past attorneys general who defied him. Bondi criticized Special Counsel Jack Smith’s investigations into Trump as partisan but claimed she would maintain fairness.

Republicans praised Bondi, urging her to restore the Justice Department’s reputation and combat crime and border issues. Democrats questioned her involvement in promoting Trump’s election fraud claims and her support for FBI director nominee Kash Patel, who has been linked to controversial conspiracy theories. Bondi acknowledged Biden’s 2020 victory but suggested irregularities in Pennsylvania. The committee continues vetting other controversial cabinet nominees ahead of Trump’s upcoming inauguration.

Trump nominee Pam Bondi vows independence, but won't rule out probes of Trump critics | Reuters

In my column for Bloomberg this week I focus on the strategic risks of advocating for retirement account tax reforms during the anticipated extension of the Tax Cuts and Jobs Act (TCJA) provisions under a new Trump administration. Extending these provisions, a top priority, will cost an estimated $4.6 trillion over the next decade, creating a politically and fiscally sensitive environment where other tax code changes could face heightened scrutiny. The 403(b) retirement accounts, designed for public employees and nonprofit workers, are particularly vulnerable because of their association with significant tax expenditures, which totaled over $300 billion in 2022 and are projected to exceed $2 trillion by 2026.

Advocates for reform in areas like expanding 403(b) investment options should avoid pushing these changes now, as drawing attention to retirement accounts could lead to cuts framed as cost-saving measures. History shows that retirement savings provisions are not immune to political pressure, with past examples including the TCJA’s elimination of Roth IRA recharacterizations and narrowly avoided cuts to 401(k) benefits. In this high-stakes fiscal landscape, strategic patience is essential. Advocates are advised to focus on preserving existing provisions rather than risking unintended consequences by pursuing reform during an unfavorable political moment.

Retirement Account Reformists Should Wait to Push Tax Code Changes

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