Monthly Archives: October 2016


Author: Ryan Kenny, Associate Member, University of Cincinnati Law Review

The past several years have seen the development of the revolutionary financial technology industry (FinTech), including the peer-to-peer payments industry (P2P), which transfers fund though an internet connection, rather than a bank transfer. However, variances in law and high costs at the state level have harmed the innovation in this industry.[1] Since the Dodd-Frank Act’s enactment in 2010, several federal agencies started to make rules for consumer financial products and services. The framework of this regulation, particularly between the Office of the Comptroller of the Currency(OCC) and the Consumer Financial Protection Bureau (CFPB), will depend largely on how the CFPB defines “large participants” in the market are in accordance with the Federal Trade Commission (FTC) per 12 U.S.C. §5514(a)(1)(B). If “large participant” is defined broadly by the CFPB to include risky companies, companies that are still not as profitable as larger P2P companies will be more vulnerable to fines from the CFPB. This scenario would require, per 12 U.S.C. §5514(a)(2), the OCC to have a greater say in regulations along with the CFPB and FTC. A less-inclusive definition from the CFPB would exempt many small P2P payment companies from federal consumer law oversight, then the OCC would be better adept at trying to creating more uniformity and lower costs with state regulations.

I. The Hurdles of Regulation for P2P Companies at the State Level.

The focus of federal regulation has been primarily anti-money laundering, covered by the Bank Secrecy Act and the Financial Crimes Enforcement Network, while state regulation is more complex and fragmented.[2] This has created issues for P2P companies. Some states, such as Texas and Illinois, have remained relatively silent on the issue, while others, such as New York, have enacted a multitude or regulations.[3] Because of the variations that exist state-to-state, there exists confusion for P2P companies attempting to comply with all of the state laws. Moreover, some of these state laws may be outdated or inept at regulating P2P companies because they are focused on the traditional method of money transfers, which have become more diversified with the development of P2P platforms.[4] Because the regulations are not fitted for these new products and services, it can be difficult for a P2P company to know whether it is complying with the law.

Additionally, state licensing is expensive. Some states require minimum surety bonds, which for the most populated states, California, Texas, Florida, New York, and Illinois, this would amount to a minimum of $1.2 million, with an annual maintenance cost of $140,000.[5] The upfront cost of nationwide licensing is $180,000.[6] Compared to these costs, the average seed funding for P2P startups in 2014 was just over $1 million.[7] P2P companies face enormous regulatory and financial hurdles at the state level. Large P2P companies can absorb these costs. Startups do not have that luxury. This places startups in a precarious position, where even a minor infraction of a state law with relatively modest fines can be crippling, or even fatal.

II. Given that P2P Companies Face Great Challenges at the State Level, Federal Regulators Need to Minimize the Burden at the Federal Level to Keep Innovation Going.

In May of 2012, the CFPB and the OCC, along with other agencies, signed a Memorandum of Understanding (MOU), addressing how the agencies would move forward in regulating consumer financial companies, both depository and non-depository, under federal consumer protection laws. The MOU gave the objectives of the agencies going forward, including examining these companies, coordinating and synergizing their efforts, minimizing regulatory burdens, avoiding duplicate and conflicting regulations, and allow agencies to operate efficiently.[8]

In regulating nondepository businesses, governed under 12 U.S.C. §5514(a)(1)(B), the CFPB and the FTC can negotiate agreements on how to define “large participants” of the consumer financial services and products market.[9] It is imperative for P2P companies that these regulations be as minimally burdensome as possible, as agreed upon in the MOU, given the challenges at the state level. However, the CFPB does not have a track record of being as minimally burdensome as possible, leveeing $10.1 billion in fines since its inception.[10] Fifteen million dollars alone was directed at PayPal, a P2P payment company.[11]

Given the CFPB’s tendency for hefty regulations and fines, the OCC needs to play a critical role in regulating P2P companies in the future. In a white paper released in March of this year, the OCC outlined its goal to foster responsible innovation in the banking industry[12], and one can assume this goal will extend to non-depository companies in the P2P payments industry. One of the best suggestions by the OCC was the creation of a centralized office on innovation to help answer non-bank companies’ questions about new products and innovations before introducing them to the market.[13] Due to challenges of multiple contact points amongst the states and federal government, having a central contact point for P2P companies can help compliance standards and avoid infractions of the law by avoiding conflicting statements and more personalized attention for each company.

III. The OCC’s Role in the Federal Regulation of P2P Payment Companies Will Depend on How a “Large Participant” in the P2P Payment Industry is Defined.

The OCC’s role in improving and developing state and federal regulations of P2P payment companies will largely be determined by how the CFPB chooses to define a “large participant” in the P2P payments market, as it is authorized to do by §5514(a)(1)(B) of the Dodd-Frank Act. The CFPB’s definition could depend simply on a company’s size in the market, or could consider the risks the company poses to consumers, which the CFPB can consider per §5514(b)(2). The CFPB defines a risky enterprise based upon the company’s asset size, the number of transactions it handles, the risk to consumers, extent of state regulations already in place, and whatever else the CFPB considers relevant.[14] The subsections most likely to be used to determine a large market participant are 12 U.S.C. §5514(b)(2)(A) (asset size) and (B) (transaction volume).

A. The CFPB’s Definition of a Large Participant in the International Money Transfers Industry in Proposed Rule 79 F.R. 56631 Provides Insight into How a Large Participant May Be Defined in the Domestic Transfers Market.

In September 2014, the CFPB proposed a rule to define large participants in the international money transfers market.[15] The international money transfers market, which facilitates the outflow of money from the United States to other countries—also known as remittances—and is about fifty billion dollars.[16] There are about three hundred and forty nonbank participants in the market facilitating about one hundred and fifty million transactions per year.[17] There are a total of about twenty five nonbank institutions that transact one to three million transfers annually.[18] The proposed rule took effect on December 1, 2014.[19] The standard for deciding a large participant is a nonbank institution that has one million or more “aggregate annual international money transfers.”[20] Aggregate annual transfers include the company’s transfers and any subsidiaries owned that also provide international transfers.[21] The transfer data from the preceding calendar year determines the aggregate annual transfers.[22] The result of this Rule was the regulation of twenty five nonbank entities, making up less than ten percent of the market, but providing one hundred and forty million transfers at a value of forty billion dollars.[23] Even though these entities made up just over seven percent of all nonbanks providing international transfers (25 of 340 total), their market caps encompassed ninety three percent of all transfers (140m of 150m total) and eighty percent of the market’s total value ($40b of $50b total). The CFPB opted out of using the dollar value due to concerns of economic fluctuations, and because the transfer amounts per transaction might be so small that they may not truly capture the entities real market impact.[24]

It is important to note that the CFPB does not use broad standards to define large participants across markets, but rather defines a large participant on a market-by-market basis. Some of the commenters on the Proposed Rule suggesting including the domestic money transfer market, but the CFPB felt that, while the markets are similar, each warranted its own consideration.[25] Nevertheless, this is a good reference point for how the CFPB might consider defining P2P payment companies that service the domestic United States market.

B. The Conservative Approach: OCC’s Role if the CFPB Applies the Same High Threshold to the Domestic Market for P2P Payment Companies.

The OCC should play a more active role in updating state regulations and bringing licensing fees down should the CFPB’s definition of a large participant in the domestic market apply to as narrow a number of companies as it did regarding international money transfer companies.

By 2020, the domestic P2P payments market is expected to go over two hundred billion dollars.[26] Applying   the same percentages from the Proposed Rule regarding large participants in the international money transfer market, this would include: less than 10% of companies in market worth two hundred billion dollars and eighty percent of the market’s value, equal to one hundred and sixty billion dollars. The biggest P2P payment company is PayPal, with a market share of fifty percent.[27] If that remains the same, PayPal would most certainly be considered a large participant. Most of the market is then shared by eight other big P2P payment companies.[28]

It seems likely that applying a similar standard to the domestic P2P payments market would result in focused regulation on these top nine companies. This would benefit smaller P2P payments companies, who are the most burdened by onerous state regulations, because they would be less burdened at the federal level. While the CFPB may develop different criteria for the domestic market, it would be a reasonable inference that the domestic market will be treated relatively the same as the international market given the similarities.

If the CFPB did choose a more targeted approach to regulating the domestic P2P payments market, the OCC should focus its attention on addressing the issues at the state level. One initiative could be trying to get more state compliance with the Uniform Money Services Act (UMSA). The UMSA was created with the purpose of investigating and reporting issues of money transfers in money laundering and terrorism, tax purposes, and regulatory investigations or proceedings, and also to assist with counterintelligence work and to avoid money laundering or funding of terrorist organizations.[29] The UMSA requires money transmitting businesses (MTBs), including nondepository companies that transfer funds, to register with the Secretary of Treasury and submit reports on their operations.[30] However, to date, only Alaska, Arkansas, Iowa, New Mexico, Puerto Rico, Texas, U.S. Virgin Islands, Vermont, and Washington have fully adopted the UMSA.[31] By working with state governments, policy centers, and lobbying groups to get more adoption of UMSA, the OCC can help foster responsible innovation in the P2P payments industry by lowering the licensing costs and bringing clarity and uniformity to state MTB registration. This can help to ensure that P2P payment companies have more funds available for research and development, and more entrepreneurs will enter the market as ease of doing business

C. The Expansive Approach: The OCC’s Role if the CFPB Defines a Large Participant Broadly to Include Many Small- and Medium-Sized P2P Payment Companies.

The CFPB has stated that there will not be a one-size-fits-all definition of a large market participant, but rather the term will be defined based on each market’s characteristics.[32] Moreover, the CFPB can also consider risk to consumers, regulations at the state level, and any other factor the CFPB determines is “relevant.”[33] It is possible that the CFPB could define a large participant for the P2P payments market broadly, this could include small and medium P2P payments companies that are particularly burdened by the state regulations.

The OCC should take a more active role in coordinating with the CFPB on regulating these entities. The OCC stated in March that its goal is to foster innovation in a responsible way that encourages innovation while also protecting consumers.[34] The CFPB, on the other hand, is primarily concerned with protecting consumers.[35] The CFPB is not concerned with innovation, demonstrated by the Bureau’s leveeing of over ten billion dollars in fines. Moreover, the CFPB receives its funding from the Federal Reserve, not Congress, putting the CFPB outside the oversight of Congress.[36] The OCC therefore must act as a check on the CFPB’s rules for the P2P payments industry. The OCC needs to ensure that federal regulations do not exacerbate regulatory issues faced by P2P payment companies at the state level. The OCC is in the best position to represent P2P payment companies in the federal regulatory field because other agencies, such as the CFPB or the FTC, are more concerned with protecting consumers and market competition than ensuring that P2P payment companies operate in an innovation-friendly environment. While the CFPB retains the ultimate decision-making authority to regulate the P2P payments industry,[37] the OCC, per the MOU signed by the OCC, CFPB, and other agencies, should work closely with the CFPB to make sure that the CFPB understands the innovation impact of any rule, so that innovation in the P2P payments industry can continue.

IV. Conclusion

The OCC’s role in determining federal regulation of the P2P payments industry will depend largely on the CFPB’s scope of covered persons per 12 U.S.C. §5514(a). If vulnerable P2P payment companies fall outside the CFPB’s scope, then the OCC should focus its efforts on creating more uniformity at the state level. If the CFPB determines that a large scope of P2P payment companies will be regulated, the OCC should act as a safe-guard to ensure that CFPB regulations do not stifle innovation by compounding regulatory burden at the federal level with an already complex state regulatory field. If the OCC executes these goals well, it can ensure that consumers are protected and that innovation flourishes in the P2P payments industry.

[1] Benjamin Lo, Fatal Fragments: The Effect of Money Transmission Regulation on Payments Innovation, 18 Yale J. L. & Tech. 111, 119-20 (2016).

[2] Id. at 113-18.

[3] Id. at 117-18.

[4] Id. at 120.

[5] Id. at 132.

[6] Id.

[7] Id. at 133.

[8] Consumer Financial Protection Bureau, Memorandum of Understanding on Supervisory Coordination (May 16, 2012),

[9] 12 U.S.C. §5514(a)(1)(B) (2016) (LEXIS through Pub. L. No. 114-219).

[10] Karen Webster, Does the CFPB Really Help Consumers?, PYMNTS (Oct. 12, 2015),

[11] Consumer Financial Protection Bureau, Enforcing Consumer Protection Laws (July 15, 2015),

[12]The Office of the Comptroller of the Currency, Supporting Responsible Innovation in the Federal Banking System: An OCC Perspective (Mar. 31, 2016),

[13] Id.

[14] 12 U.S.C. §5514(b)(2); (A), (B), (C), (D), and (E) (LEXIS through Pub. L. No. 114-219).

[15] Defining Larger Participants of the International Money Transfer Market, 79 Fed. Reg. 184 (Sept. 23, 2014) (to be codified at 12 C.F.R. pt. 1090) LEXIS.

[16] Id. at 56635.

[17] Id. at 56634.

[18] Id. at 56635.

[19] 12 C.F.R. §1090.107 (2014) LEXIS.

[20] 12 C.F.R. §1090.107(b).

[21] 12 C.F.R. §1090.107(a)(iii).

[22] 12 C.F.R. §1090.107(a)(i).

[23] Defining Larger Participants of the International Money Transfer Market, 79 Fed. Reg. at 56641.

[24] Id.

[25] Id. at 56635.

[26] LTP Team, P2P Payments Market in the U.S. is Expected to Cross U.S. $200 Billion by 2020, Let’s Talk Payments (Jan. 19, 2016),

[27] Id.

[28] Aboli, Announcing the Top 9 U.S. Companies in P2P Payments, Let’s Talk Payments (Dec. 9, 2015),

[29] 31 U.S.C. §5311 (LEXIS through Pub. L. No. 114-219).

[30] 31 U.S.C. §5330(b).

[31] Lo, supra note 1.

[32] Defining Larger Participants of the International Money Transfer Market 79 Fed. Reg. at 56641, supra note 22.

[33] 12 U.S.C. §5514(b)(2)(C), (D), and (E).

[34] Supporting Responsible Innovation in the Federal Banking System: An OCC Perspective, Office of the Comptroller of the Currency.

[35] 12 U.S.C. §5511(a).

[36] Webster, supra note 9.

[37] 12 U.S.C. §5514(d).


Copyright Law: Defining the Line between Inspiration and Infringement


Meg Franklin, Associate Member, University of Cincinnati Law Review

Many agency designers engage in the practice of “mood boarding” to inspire the design process.[1]  A successful mood board gives the client a peek into the designer’s vision for the final design.[2]  For example, a designer might create a collage with sample fonts, colors, and images on a board to accompany his or her presentation of the design concept.[3]  Mood boards are often preferred by design agencies due to their ability to solicit feedback from clients early in the design process.[4]  Yet, for the agency’s lawyer, an important question is: how much “inspiration” can designers transfer from the mood board to the final design?[5]  According to the court in the Southern District of New York, Hayuk v. Starbucks Corporation, design elements that fall within the public domain may be used to create new marketing designs and advertisements.[6]  This conclusion supports the purpose of copyrights because it promotes the creation of new artistic works.

The Hayuk Works

The dispute in Hayuk v. Starbucks Corporation was resolved after the court granted the defendant’s motion to dismiss.[7]  The motion to dismiss was granted in response to five claims of copyright infringement filed by visual artist, Maya Hayuk, against Starbucks Corporation and its advertising agency, 72andSunny Partners, LLC (hereinafter, collectively “Starbucks”).[8]  According to Hayuk, in October 2014, Starbucks contacted Hayuk to commission artwork for its “mini Frappuccino” (Frappuccino Works) advertising campaign.[9]  Hayuk’s Complaint alleges that even though she did not reach an agreement with Starbucks, the final advertisements were “substantially similar” to her copyrighted works of art.[10]Her five original works of art (Hayuk Works) were created and registered with the United States Copyright Office between 2009 and 2011.[11]  As described by the court, “[t]he Hayuk Works are typified by the use of bold colors, geometric shapes such as rays, lines, stripes and circles, layering of colors and hues, and texture produced by dripping or layering of paint.”[12]  According to Hayuk, the design in Starbucks’ marketing campaign included “the same abstract, radiating beams of black, white, yellow, magenta and azure that [she] had used in a series of five paintings.”[13]  Starbucks’ marketing campaign included retail signage, traditional advertisements, a YouTube video, product packaging, and the company website.[14]

Determining Substantial Similarity under the Discerning Observer Test

Starbucks argued in its motion to dismiss that Hayuk could not state a claim of infringement “because the allegedly infringing Frappuccino Works are not substantially similar to the Hayuk Works.”[15] [16]  The two elements to prove that the constituent elements of the work were copied are: “(1) the defendant actually copied the plaintiff’s work; and (2) the copying is illegal because a ‘substantial similarity’ exists between the defendant’s work and the protectable elements of the plaintiff’s work.”[17]  The distinction between protectable and non-protectable elements of the plaintiff’s work is important because it is “an axiom of copyright law that copyright does not protect “ideas,” only their expression.”[18]  However, if the idea and expression are tied so tightly together that they become “merged,” a court may “deny protection to the expression in order to avoid conferring a monopoly on the idea to which it inseparably is tied.”[19]

The standard test for “substantial similarity” is known as “the ordinary observer test.”[20]  This test asks “whether ‘an ordinary observer, unless he set out to detect the disparities [between the works], would be disposed to overlook them, and regard [the] aesthetic appeal as the same.’”[21]  However, the Second Circuit has directed that courts should use a “more discerning” test when the work contains protectable and non-protectable elements.[22]  Courts may compare the works in question when determining whether the works are substantially similar in a motion to dismiss.[23]  The court can then dismiss the case if “the similarity between two works concerns only non-copyrightable elements of the plaintiff’s work, or [that] no reasonable jury, properly instructed, could find [that] the two works are substantially similar.”[24]

The Core of the Hayuk Works Are a Non-Copyrightable Idea

Using the “discerning observer test,” the court reasoned that the alleged similarity between the works was not evidence of copying because the Starbucks design used elements that are part of the public domain.[25]  Hayuk described the “core” of her works as the overlapping colored rays that Starbucks allegedly copied in its Frappuccino Works advertisements.[26]  Yet, the court found this method of expression was tied so inseparably to its idea that extending copyright protection would give Hayuk a monopoly over the idea of overlapping colored rays.[27]  Therefore, the court concluded that, “[a]lthough the two sets of works can be said to share the use of overlapping colored rays in a general sense, such elements fall into the unprotectable category of ‘raw materials’ or ideas in the public domain.”[28]

The Effect of the Copyright Merger Doctrine on Hayuk

Although the court’s reasoning was layered under the “substantial similarity” analysis, the court’s decision ultimately turned on Hayuk’s ability to differentiate between the “idea” underlying her work and the scope of her “expression.”  For example, the paint drip marks and scrapings from Hayuk’s paintings would likely be considered original expression.  However, Starbucks’s designs did not contain any paint drip marks and scrapings.  Since Hayuk’s position was that the Starbucks designs were substantially similar, she had to find a way to articulate how her work was translated into Starbucks’s work.  Hayuk described this alleged infringement as a misappropriation of the “core” of her works.[29]  However, the court did not find this argument persuasive.  The court concluded that “what [Hayuk] has described as the ‘core’ of her work in the aggregate, namely the use of overlapping colored rays, and colors and shapes, is tantamount to a set of unprotectable concepts or methods over which there can be no copyright monopoly conferred.”[30]  In other words, Hayuk believed that the Frappuccino Works had taken too much inspiration from her works.  Yet, she was not able to articulate what had been inspired from her works outside of the use of overlapping colored rays which were part of the public domain.  Using the same idea of overlapping rays is not infringement because ideas are not copyrightable.

Fulfilling the Purpose of Copyrights

One takeaway from the case is that Hayuk’s designs were too simple to translate into strong copyright protection.  Beyond exact duplication, the court’s reasoning would not provide strong protection for her artwork.  If the elements of her painting constitute raw materials that are part of the public domain, then the only possible infringement would be to reproduce a Hayuk Work in its entirety.  A practical effect of this conclusion is that Hayuk lost the opportunity to generate revenue from licensing her artwork to the Starbucks.  However, the purpose of United States copyrights is not to maximize economic compensation for the copyright holder.[31]  Instead, the purpose is to “promote the progress of science and the useful arts.”[32]  The ruling in this case furthered the progress of the arts because it maintained artists’ freedom to seek inspiration from existing works, promoting the creation of new works.  To further illustrate this point, the implication that Hayuk could stop Starbucks from creating any design with overlapping rays would chill the future creation of artistic works.  Instead, the court balanced these interests and maintained a copyright holder’s rights to reproduce his or her works while also providing artists the freedom to create.

Agencies May Draw Raw Inspiration from Mood Boards

The court’s ruling could be interpreted as giving design agencies the freedom to draw inspiration from mood boards when the inspiration can be described as ideas belonging to the public domain.  When transitioning from the mood board phase to the design phase, a designer must first refrain from directly reproducing an existing work.  Directly reproducing a copyrighted work is typically a strong case for copyright infringement.  If, like in Hayuk, the work is not a direct reproduction, there should still not be a “substantial similarity” between the two works.  To determine whether “substantial similarity” exists, one must separate the “idea” from the “expression.”  In Hayuk’s situation, a copyright claim over the idea of overlapping colored rays was more protection than the court was willing to give.  However, if a designer only transfers “raw materials” into his or her design, the materials that are part of the public domain should not be subject to copyright.  Therefore, if used as a tool for collecting raw design materials, mood boards may arguably be the perfect tool to guard against copyright infringement under the reasoning in Hayuk.

Inspiration Free of Infringement

The court did not find a substantial similarity between the Hayuk Works and the Frappuccino Works because the only elements that were substantially similar were “ideas” or “raw materials” not subject to copyright protection.  Although this limits the potential for Hayuk to license her paintings for commercial use, the ruling promotes the progress of the arts by allowing artists to gather inspiration from existing works.   Using the reasoning of Hayuk, mood boards can help guard against copyright infringement when the only elements that are translated from existing works to the final design are considered “raw materials.”

Creative directors in agencies have long advocated for the use of mood boards.[33]  Yet, the agency’s attorney should also encourage the use of mood boards to facilitate inspiration that is free of infringement.

[1] A mood board is a tool used by designers during the conceptual phase of the design process.  Often, before a designer builds an advertisement for a client, the designer will gain the client’s approval on the design concept by showing the client design elements that might be incorporated into the final design.  Design elements might include typefaces, images, colors, patterns, or anything else that falls within a desired “look and feel.”  The compilation of these design elements is often called a “mood board.”  The mood board can be formatted as an unstructured collage or as structured blocks of design elements. See, Why Mood Boards Matter, WEBDESIGNERDEPOT (Dec. 30, 2008),

[2] Id.

[3] Id.

[4] Id.

[5] Sharon Givon, Copyright and Wrong: A Basic Guide for Designers, Sex, Drugs & Helvetica (Dec. 13, 2015),

[6] 157 F. Supp. 3d 285, 292 (S.D.N.Y. 2016).

[7] Id. at 287.

[8] Id. at 286.

[9] Josh Saul & Laura Italiano, ‘Starbucks Stole My Artwork!,’ New York Post (June 24, 2015 at 11:43pm)

[10] Hayuk, 157 F. Supp. 3d at 288.

[11] Id. at 287.

[12] Id.

[13] Josh Saul, supra note 9, at 2.

[14] Patrick Coffee, Artist Sues Starbucks, 72andSunny for Copyright Infringement, AdWeek: AgencySpy (June 29, 2015 at 1:02pm)

[15] Hayuk, 157 F. Supp. 3d at 289.

[16]  “Substantial similarity” refers to one of the elements required to prove that a defendant copied the constituent elements of the plaintiff’s copyrighted work. Id.

[17] Streetwise Maps, Inc. v. VanDam, Inc., 159 F.3d 739, 747 (2d Cir.1998).

[18] Hayuk, 157 F. Supp. 3d at 289 (explaining the merger doctrine).

[19] Id. at 289-90 (internal citations omitted).

[20] Id. at 290.

[21] Hayuk, 157 F. Supp. 3d at 290 (quoting Peter F. Gaito Architecture LLC v. Simone Dev. Corp., 602 F.3d 57, 66 (2d Cir.2010).

[22] Id. at 290.

[23] Id.

[24] Peter F. Gaito Architecture, 602 F.3d at 64.

[25] Hayuk, 157 F. Supp. 3d at 292.

[26] Id. at 291.

[27] Id. (applying the merger doctrine).

[28] Id. at 292.

[29] Id. at 291.

[30] Id. at 293.

[31] Note that this is unique to the U.S. system of copyright law.

[32] The power of Congress to confer copyrights is designated by the Patents and Copyrights Clause of the United States Constitution: “To promote the Progress of Science and useful Arts, by securing for limited Times to Authors and Inventors the exclusive Right to their respective Writings and Discoveries.” U.S. Const. art. I, § 8, cl. 8.

[33] Why Mood Boards Matter, supra note 1.


Author: Adam Pitchel, Associate Member, University of Cincinnati Law Review

The right to keep and bear arms has been constitutionally guaranteed since the Founding of the United States. It protects the right of the people to purchase, maintain, and use weapons for a variety of purposes. However, there is a question about whether this protection extends to noncitizens currently residing in the United States. A federal statute places most noncitizens outside of the protection of the Second Amendment.[1] The constitutionality of this statute has been challenged on several occasions, resulting in a split between the Seventh Circuit Court and the Fourth, Fifth, and Eighth Circuit Courts. The Seventh Circuit focuses on the definition of the word “people”, finding that noncitizens are included in this legal term of art and thus protected under the Second Amendment. This approach contrasts with the analyses of the Fourth, Fifth, and Eighth Circuits, which generally agree that the word “people” includes only law-abiding citizens. The later courts erred in their analyses as they mischaracterized the nature of the rights protected by the Second Amendment.

Persons as People

The Seventh Circuit, in Meza-Rodriguez, was asked to determine if the defendant could legally carry a .22 caliber pistol on his person.[2] The defendant was brought to the United States as a child; however he was not a naturalized citizen.[3] He asserted a number of defenses, including that 18 U.S.C. § 922(g)(5) violated his Second Amendment rights to carry a firearm.[4] The Seventh Circuit found that the defendant’s Second Amendment rights depended upon whether the word “people” included noncitizens.[5] To answer this question, the court looked to how “people” had been interpreted with regard to other rights protected by the Constitution.[6] The court determined that noncitizens are considered “people” under the First, Fourth, Fifth, and Fourteenth Amendments, consequently the definition of “people” should have a similar construction for the Second Amendment.[7] As part of this analysis, the court applied the “substantial connections” test outlined in United States v. Verdugo-Urquidez.[8]

Citizens as People

Between 2011 and 2012, the Fourth, Fifth, and Eighth Circuits decided to place noncitizens outside of the protections granted under the Second Amendment.[9] Each of these decisions leaned heavily on the Supreme Court decision District of Columbia v. Heller.[10] In Heller, the Court found that the right to bear arms is limited and, like the First Amendment, it is subject to certain restrictions.[11] The opinion made several references to “law-abiding citizens” and the importance of their right to bear arms remaining free from any infringement.[12] However, Heller did not specifically address a statute that attempted to proscribe a specific group of people from owning firearms.[13] Consequently, the Fourth Circuit in United States v. Carpio-Leon turned to United States v. Chester, where the Fourth Circuit outlined a two-part test to determine the validity of a law that banned certain people from owning firearms.[14] The test first questions whether the law imposes a burden on conduct that falls within the scope of the Second Amendment’s protections.[15] The court determined that the law fell outside of the scope, as noncitizens are not considered “people” for Second Amendment purposes.[16] Since the law fell outside the scope, the court did not address the second part of the Chester test.[17]

The Fifth Circuit in United States v. Portillo-Munoz also cited to the opinion in Heller, however it interpreted the word “people” to mean “members of the political community.”[18] The court also reasoned that rights provided by the Second Amendment were affirmative by giving people the right to do something.[19] Conversely, the rights described in the Fourth Amendment protect people and provides the right to be free from wrongful government intrusion.[20] The court in Portillo-Munoz concluded that the different purposes of the two amendments justified the different meanings attached to “people.”[21]

Second Amendment Rights: Affirmative or Protective

The Fifth Circuit in Portillo-Munoz outlined a dichotomy of rights guaranteed by the Bill of Rights. The court described the rights and the purposes behind them as either “protective” or “affirmative.” The court does not identify the characteristics of an “affirmative” right other than stating they can be limited to include fewer people than a “protective” right.[22] The Fifth Circuit construed the Second Amendment as an affirmative statement by the Framers permitting people to own weapons. Conversely, the Fifth Circuit interpreted the First and Fourth Amendments as negative statutes due to their prohibitive language.[23] However, applying these definitions to the text of the Second Amendment leads to a conclusion that contrasts starkly with the decision of the Fifth Circuit.

The last four words of the Second Amendment, “shall not be infringed,” are indicative of a negative right that forbids government from interfering with a pre-existing right.[24]
The First Amendment also has negative language.[25] The first five words of the text set an equally negative tone, stating the existence of pre-existing rights and preventing the government from intruding upon them. While it has been held that neither the First nor the Second Amendment are without limit, the applicable protection of rights afforded under both Amendments are essentially the same. What remains to be seen is whether the definition of “people” under the Second Amendment mirrors the definition of “people” used throughout the rest of the Constitution and Bill of Rights

Who are “The People?”

Accepting that most, if not all, of the rights mentioned in the Constitution are protective, it must be determined if those rights protect the same groups of people. In Portillo-Munoz and Carpio-Leon, the State makes several arguments that noncitizens do not fall within the category of people protected by the Second Amendment. Most prominently, the State argues that the government has previously been permitted to disarm those determined to be subversive or dangerous via statute.[26] The rationalization for those laws is based on the belief that the Founders intended the Second Amendment to only apply to the law-abiding citizen. Unfortunately, that rationalization cannot apply to noncitizens.

The connection between noncitizens and the disarmament of dangerous people is tentative at best. The court in Carpio-Leon used a historical analysis to justify the denial of Second Amendment rights to noncitizens.[27] Its analysis focuses on actions taken by colonial governments to prevent suspect populations from owning weapons.[28] It used these actions as historical evidence of the government’s ability to disarm people who are not “law-abiding members of the political community.” Unfortunately, those included in the court’s examples have a common trait that is not universal or even prominent in noncitizens. Each member of a suspect population did something to lose their Second Amendment rights, yet noncitizens are deemed presumptively dangerous and unworthy of Second Amendment protection. This difference is important because most noncitizens have no violent tendencies and have every incentive to behave appropriately or risk deportation. A study conducted by the American Immigration Council found that the number of unauthorized immigrants in the United States had tripled from 1990 and 2013, yet the violent crime rate had declined by forty-eight percent during that period.[29] The same study concluded that immigrants are less likely to engage in criminal activity than native-born American citizens.[30] These factors indicate that not only is the fear of the noncitizen gun-owner widely overblown, but also that the violent-immigrant stereotype continues to be perpetuated in Congress and in the courtroom.

The Supreme Court in United States v. Verdugo-Rodriguez reasoned that a noncitizen “[had to] have…developed substantial connections with the country,”[31] before the noncitizen would be considered part of the “people” and be guaranteed the protections provided under the Bill of Rights.[32] This test was originally devised to determine if noncitizens were considered “the people” and permitted to claim Fourth Amendment protections. In Meza-Rodriguez, the Seventh Circuit concluded that the definition of “people” under the Fourth and Second Amendments were the same because the Bill of Rights was adopted as a package without indication that the same term had different meanings between Amendments. However, the court missed an opportunity to strengthen its holding and failed to cite to a particularly relevant passage in the opinion of Johnson v. Eisentrager.[33] In Eisentrager, a noncitizen attempted to invoke their Fifth Amendment rights after being convicted of war crimes in Germany.[34] The Supreme Court denied the noncitizen’s argument however, in its opinion the Court stated “[t]he alien . . . has been accorded a generous and ascending scale of rights as he increases his identity with our society.”[35] This statement implies that the more a noncitizen mingles with society, the more rights the noncitizen gets. If the mere act of entering the United States indicates an intent to integrate into society, then that act alone must provide some basis for access to the rights protected by the Constitution. The Supreme Court in Verdugo-Rodriguez surmises that this initial connection is insufficient and that more connections are needed. However, economic struggles, high unemployment, and reduced demand for low-skilled workers has forced many noncitizens into social isolation, rendering them unable to make the necessary substantial connections.[36]

While the “substantial connections” test can be applied to unauthorized immigrants, this test struggles in its applicability to unnaturalized citizens lawfully in the United States. The statute declares that all people, with a few exceptions, residing in the United States under a nonimmigrant visa are denied protection under the Second Amendment.[37] Most of these nonimmigrant visas have a life span that limits the time a person can lawfully stay in the United States.[38] Consequently, owners of these visas cannot develop the connections to satisfy the “substantial connections” test.


While the court in Portillo-Munoz used suspect logic in its analysis, the history of deference to the legislature regarding immigration policy is too great to ignore. Several courts have held that the government can create laws that would be unconstitutional if applied to citizens, yet are permissible when applied to noncitizens.[39] This judicial and legislative history creates a burden for any noncitizen asserting constitutional rights and implies presumptive constitutionality of anti-immigrant laws. However, this statute applies to both lawful and unlawful noncitizens. While unlawful noncitizens have minimum constitutional protection, lawful noncitizens need more. These noncitizens did not violate the law and commit at crimes at a far lower rate than American-born citizens.[40] The overblown risk of noncitizens engaging in criminal activity is not a compelling argument to bar noncitizens from Second Amendment protections. Both Fourth and the Fifth Circuits used the “dangerous illegal immigrant” justification as their basis to uphold the statute under rational-basis review, yet there is no indication that this explanation would survive a constitutional challenge by a lawful noncitizen.[41]

[1] 18 U.S.C. § 922(g)(5) “It shall be unlawful for any person who, being an alien, is illegally or unlawfully in the United States or has been admitted to the United States under a nonimmigrant visa…to ship or transport in interstate or foreign commerce, or possess in or affecting commerce, any firearm or ammunition; or to receive any firearm or ammunition which has been shipped or transported in interstate or foreign commerce.”

[2] 798 F.3d 664, 666 (7th Cir. 2015).

[3] Id.

[4] Id. at 667.

[5] Id. at 669.

[6] Id. at 669-70.

[7] Id.

[8] Id. (citing United States v. Verdugo Rodriguez, 494 U.S. 259, 265 (1990), “aliens receive constitutional protections when they have come to the territory of the United States and developed substantial connections with this country”).

[9] See United States v. Carpio-Leon, 701 F.3d 974 (4th Cir. 2012); United States v. Flores, 663 F.3d 1022 (8th Cir. 2011); United States v. Portillo-Munoz, 643 F.3d 437 (5th Cir. 2011).

[10] District of Columbia v. Heller, 554 U.S. 570 (2008).

[11] Id. at 613.

[12] Id. at 625, 635, 644 (placing felons and the mentally-ill outside the class of “law-abiding citizens”).

[13] United States v. Meza-Rodriguez, 798 F.3d 664, 669 (7th Cir. 2011).

[14] United States v. Carpio-Leon, 701 F.3d 974 (4th Cir. 2012) (citing United States v. Chester, 628 F.3d 673 (4th Cir. 2010)).

[15] Id. at 977.

[16] Id. at 978.

[17] Id. at 982.

[18] United States v. Portillo-Munoz, 643 F.3d 437 (5th Cir. 2011) (stating that noncitizens were not members of the American political community and did not have rights under the Second Amendment).

[19] Id. at 440.

[20] Id. at 441.

[21] Id.

[22] Id; An “affirmative statute” is defined as one that directs or declares that something shall be done. (Black’s Law Dictionary, Second Edition).

[23] A “negative statute” is one that prohibits something from being done. (Black’s Law Dictionary, Second Edition).

[24] U.S. Const. amend. II, “A well-regulated militia, being necessary to the security of a free State, the right of the people to keep and bear arms, shall not be infringed.”

[25] U.S. Const. amend. I, “Congress shall make no law…abridging the freedom of speech, or of the press, or the      right of the people to peaceably assemble.”

[26] United States v. Carpio-Leon, 701 F.3d 974, 979 (4th Cir. 2012).

[27] Id.

[28] Id.

[29] Walter A. Ewing, Daniel E. Martinez & Ruben G. Rumbaut, The Criminalization of Immigration in the United States 1-2 (2015).

[30] Id. at 1.

[31] United States v. Verdugo Rodriguez, 494 U.S. 259, 265 (1990).

[32] Id.

[33] Johnson v. Estranger, 339 U.S. 763 (1950).

[34] Id.

[35] Id.

[36] Min Zhou, Growing Up American: The Challenge of Confronting Immigrant Children and Children of Immigrants, 23 Annual Review of Sociology 63, 68 (1997).

[37] 18 U.S.C. § 922(g)(5).

[38] “How Long Will Your U.S. Visa Allow You to Stay?” (last visited September 27, 2016).

[39] United States v. Portillo-Munoz, 643 F.3d 437, 441 (5th Cir. 2011).

[40] Walter A. Ewing, Daniel E. Martinez & Ruben G. Rumbaut, THE CRIMINALIZATION OF IMMIGRATION IN THE UNITED STATES 1-2 (2015).

[41] See Portillo-Munoz, 643 F.3d 437 at 441; United States v. Carpio-Leon, 701 F.3d 974, 983 (4th Cir. 2012).

Owen v. University of Kentucky: The ‘New’ Procedural Standard for the Kentucky Civil Rights Act

Author: Melanie Navamanikkam, Associate Member, University of Cincinnati Law Review

For the past twenty years, Kentucky jurisprudence has held that a plaintiff bringing an action under the Kentucky Civil Rights Act had to definitively choose between bringing their claim through a court of law or through an administrative proceeding. Once a plaintiff chose one of the forums, their claim was effectively precluded from the other forum. For employers defending against employment discrimination suits, this interpretation meant that the employer had to prepare to defend the case in only one forum. However, the recent Supreme Court of Kentucky decision in Owen has changed this, and has resulted in, what the Court itself agrees, is a “procedural mess.”[1]

The crux of the confusion stems from the fact that there are two versions of the statute which serve as procedural instructions for civil rights litigants.[2] One version is a pre-amended version from 1984,[3] and the other is the current amended version.[4] The pre-amended version of the statute instructed that a court or a human rights commission was not to take jurisdiction over a claim that was already pending in the other forum.[5] Furthermore, once a final determination was made by the other body, any further actions or proceedings were prohibited.[6] The current version, last amended in 1996, uses more restrictive language, instructing that while neither forum may take jurisdiction over a claim pending before the other forum, a final determination precludes only any other administrative action.[7] This shift in the language of the provision, from using general terms to more restrictive terms, has resulted in the confusing decision made in Owen.
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