Argentina Attempts To Overcome Perónism

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Perónism1 has ruled Argentina for over half the time since Juan Perón’s first presidency in the 1940s. To this day, Perónists are politically powerful, particularly in the trade unions and political classes. The Justicialist Party (“PJ”) has been the largest political party in Congress almost consistently since 1987 and is the largest branch within Perónism. Alberto Fernández, who was President of Argentina until December 10, 2023, has been a member of the Justicialist Party for most of his political life. Other PJ members include Carlos Menem, Néstor Kirchner and Cristina Fernández de Kirchner.

Javier Milei, a self-described anarcho-capitalist, was recently elected President of Argentina and was sworn into office on December 10, 2023. Milei won Argentina’s presidential election with nearly 56 percent of the vote, defeating the country’s economy minister, Sergio Massa (a former member of the Justicialist Party). Milei is pledging economic shock therapy in an effort to resolve Argentina’s chronic economic malaise.2 His plans include shutting the central bank, abandoning the peso (dollarization of the economy),3 slashing spending, deregulation and privatization. He has also promised to cut the number of federal ministries from 18 to eight and to dismiss public officials hired in this calendar year. FT reports that on December 20, Milei unveiled a sweeping emergency decree4 that mandated more than 300 measures to deregulate the country’s economy. According to El País, during the week of December 11, “prices in supermarkets [rose] by up to 40 percent after the end of the freeze on costs for basic groceries promoted by Peronism, while the price of fuels [increased] by at least 30 percent.”

According to The Washington Post, Milei studied economics at the University of Belgrano in Buenos Aires. As stated in the Buenos Aires Times, he “also has postgraduate work in economic theory at the Instituto de Desarrollo Económico y Social and a postgraduate degree in economics at the Universidad Torcuato DiTella.” The Post reports further that Milei has taught economics and written several books, including “The Path of the Libertarian” and “The End of Inflation”; that he worked as a risk analyst for Corporacion America; and that was a television pundit.

In his victory speech, Milei is quoted as stating: “[e]nough of the impoverishing model of the [political] caste, today we return to embrace the model of freedom to be a world power.” According to the Buenos Aires Times, Milei considers the “caste” to be those who implement policies “harming people…  to protect” their own privileges while arguing that they can do no other. The caste, according to Milei, “are the corrupt politicians, the businessmen living off state contracts and bribed journalists.”

A Macroeconomic Snapshot of Argentina

Argentina has a Gross Domestic Product (GDP) of approximately US$650 billion, according to The World Bank, which also reports that “[a]ccording to national statistics published in September 2023, poverty stands at 40.1 percent and extreme poverty stands at 9.1 percent.” Trading Economics (citing data from Instituto Nacional de Estadística y Censos (INDEC)) reports that in Q2-2023, the unemployment rate in Argentina was at 5.7 percent, the employment rate was 45.5 percent, and the labor force participation rate was 48.2 percent. In November, DW reported that the annual inflation rate in Argentina hit 143 percent. Consumer price inflation averaged 38.8 percent in the ten years to 2022 in Argentina, compared to the Latin America regional average of 8.4 percent. The soaring inflation rate has prompted the central bank to raise interest rates to as high as 133 percent. Argentina has defaulted on its international sovereign debt nine times, including three times during the past two decades. Almost one-third of the current total IMF lending is to Argentina, which is $44 billion in debt to the IMF, according to Vox.

The Buenos Aires Real Estate Market

According to JLL, the Q-3 2023 vacancy rate for the corporate office market of Buenos Aires was 13.4 percent. At 11,000 square meters (sm), net absorption during Q3-2023 outperformed the same period last year (4,900sm), according to the report, which states that the general asking price during Q3-2023 was US$23.10/sm/month—slightly below the preceding quarter (US$23.30/sm/month).

In Q1-2023, the average price of apartments in Buenos Aires fell by 5.41 percent year-over-year to US$1,731/sm, following annual declines of 6.03 percent in Q4-2022, 7.11 percent in Q3-2022, 6.31 percent in Q2-2022 and 7.01 percent in Q1-2022, according to Global Property Guide (citing data published by Reporte Inmobiliario). When adjusted for inflation, prices fell by 53.71 percent year-over-year in Q1-2023, according to the report.

According to Cushman & Wakefield, in H1-2022, the Buenos Aires logistics/industrial real estate market had a vacancy rate of 9.4 percent, net absorption of 150,134sm, and an average asking rent rate of US$5.40/sm/month. Mass consumption companies (mostly supermarkets) dominated the demand for industrial space, according to the report, which also states that construction projects reached 61,000sm—a level deemed insufficient to meet the 160,134sm demanded in the first six months of 2022.

The main retail corridors of the City of Buenos Aires total 1,372 stores, averaging 228 commercial spaces per corridor, according to JLL, which reports the average vacancy rate of all the retail corridors included in its survey to be 2.6 percent (as of the end of 2022)—significantly below the year-end 2019 average (6.3 percent). The retail corridors of “Santa Fe & Pueyrredón” and “Rivadavia & Acoyte” recorded full retail occupancy throughout 2022, while the Calle Florida pedestrian shopping street—a retail corridor that is dependent on office workers and tourists and that was most affected by the pandemic—had the highest vacancy and turnover rates of the retail corridors surveyed by JLL. During the last quarter of 2022, the average asking price for retail space in Buenos Aires was US$17.00/sm/month—22 percent below 2018, when they averaged US$22.00/sm/month, according to JLL. The report notes that the highest-priced corridors in 2022 were “Rivadavia & Acoyte” (US$68.90/sm/month), “Santa & Pueyerredón” (US$39.70/sm/month) and “Puerto Madero Oeste” (US$25.00/sm/month).

Many real estate transactions in Argentina are agreed in U.S. Dollars.

Looking Ahead

As Milei transitions from campaign to Casa Rosada, the following factors are likely to affect and determine his government’s level of success in helping Argentina turn the page:

1.) Political and ideological authenticity. Milei should clarify the nature of his government and commit to an ideological stance. Either Milei is a libertarian (and/or an Austrian), or he is a right-wing populist. He cannot be both, because the two are incompatible and fundamentally at odds. The burden is on Milei to show that his movement (and now his government) is different from the right-wing populist trends seen recently in other major countries of the Americas. It is acknowledged5 that Milei will need to make compromises and form alliances in order to advance his agenda. However, there is a difference between being politically flexible and astute and being ideologically feeble and recreant.

2.) Incrementalism and maturity in governance. Milei should pursue policies and methods that achieve sustainable change and growth. Reforming Argentina is a long-term process and requires a cultural shift. After identifying and committing to an ideological stance, Milei’s administration should ensure that its policies are implemented in a non-ideological, grounded, gradual and compassionate manner that aims to win the hearts and minds of Argentinians from across the political spectrum. Deregulation should be coupled with enhancements in government transparency and accountability. Privatization should go in tandem with new, vigorous measures to combat corruption. Dollarization (or the adoption of a currency peg or currency board) should occur simultaneously with efforts to preserve and improve Argentina’s social safety net.6 Furthermore, Milei’s government should take a pragmatic and sophisticated approach toward foreign policy and eschew ideologically motivated statements that oversimplify and potentially compromise Argentina’s important and complex role in the region and the world. Finally, Milei should heed the wise words of James Madison that “the advancement [and] diffusion of knowledge,” … “is the only guardian of true liberty” and ensure that under his leadership, education is a top priority.

3.) Protection of fundamental rights. In part because of Argentina’s dark past, the Milei administration should spare no effort to ensure that the fundamental rights of Argentinians are protected without exception. Particularly during periods of major reform, the freedom to exercise fundamental rights becomes sacrosanct. The rights of speech and peaceful assembly should not be constrained under the guise of public safety and order.

  1. Collins dictionary defines Perónism as “the principles or policies of Juan Perón.” Perón served as President of Argentina from 1946 to 1955, and again from October 1973 to his death in July 1974. Perónism is also known as Justicialism. In a speech made on October 17, 1950 at the Plaza de Mayo, Perón listed the twenty truths of Perónist Justicialism which Perón stated formed the core of his Justicialist political movement. ↩︎
  2. In 1913, Argentina was ranked among the world’s ten wealthiest countries, with a GDP per capita on par with France and Germany. Beginning in the 1930s, Argentina’s economy deteriorated notably. ↩︎
  3. According to Vox, Milei’s team estimates that dollarization could cost around $40 billion. ↩︎
  4. FT states further that “[u]nder Argentina’s constitution, presidents can issue ‘decrees of urgency and necessity’ on most areas of policy — except tax, penal and electoral matters and rules for political parties — when ‘exceptional circumstances make it impossible to follow ordinary procedures.’ Decrees stay in place until both houses of congress vote to strike them down.” ↩︎
  5. In Congress, Milei’s La Libertad Avanza coalition holds 15 percent of seats in the lower house and less than 10 percent of the senate, according to FT. ↩︎
  6. To the extent that Milei is a Hayekian, it should be noted that Hayek was not opposed to the concept of a social safety net (see, e.g., Bernard Levin in conversation with Friedrich Hayek (“What we can but can only in a wealthy society is to assure for all a certain minimum below which nobody need to fall.”); see also, Law, Legislation and Liberty, volume 3, chapter 3, p. 55 (1979) (“The assurance of a certain minimum income for everyone, or a sort of floor below which nobody need fall even when he is unable to provide for himself, appears not only to be a wholly legitimate protection against a risk common to all, but a necessary part of the Great Society in which the individual no longer has specific claims on the members of the particular small group into which he was born.” … “It is unfortunate that the endeavor to secure a uniform minimum for all who cannot provide for themselves has become connected with the wholly different aims of securing a ‘just’ distribution of incomes.”)). Hayek’s views regarding the nature and breadth of a social safety net and/or a universal basic income are subject to debate. ↩︎
National Congress of Argentina, Buenos Aires
Photo: Ramin Seddiq

Let Berry Stand

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On March 23, 2023, the Supreme Court of Virginia issued an opinion in Berry v. Board of Supervisors (Record No. 211143) reversing the Fairfax County Circuit Court (hereinafter, “Circuit Court”) and finding the county’s 2021 zoning ordinance adopted in March 2021 (“Z-Mod”) to be void ab initio. According to the opinion, on March 3, 2021, the Fairfax County Planning Commission voted to recommend that the Board of Supervisors of Fairfax County (the “Board”) adopt Z-Mod. Two days later, citing the open meeting provisions of the Virginia Freedom of Information Act (“VFOIA”), David Berry, Carol A. Hawn, Helen H. Webb, and Adrienne A. Whyte, resident taxpayers of Fairfax County (collectively “Residents”) filed a “Verified Complaint for Declaratory Judgment and Temporary/Preliminary and Permanent Injunctive Relief,” seeking to enjoin the Board from adopting Z-Mod at an electronic public hearing which was scheduled for March 9, 2021. The Residents alleged that the Board lacked the authority under Virginia law to consider and vote on Z-Mod in an electronic meeting, and, as such, any resulting action or approval concerning Z-Mod should be declared void ab initio. During the March 9 meeting, the Board considered the adoption of Z-Mod but deferred its ultimate decision until later in the month and on March 23, the Board met electronically and voted to adopt Z-Mod. The Residents appealed the Circuit Court’s decision dismissing their claims against the Board.

In discussing the appropriate remedy, the Supreme Court of Virginia stated in part: “By failing to hold the meetings at which Z-Mod was considered and ultimately adopted in compliance with VFOIA’s open meeting requirements, the Board’s actions prevented the public from participating in the manner required by VFOIA, and thus, potentially limited public participation and input into the process. As such, the Board’s failure here is analogous to the circumstances in our prior cases in which a zoning ordinance was adopted despite the failure of the locality to provide the statutorily required public notice. In such cases, we have held that such ordinances are void ab initio.”

The Meetings Subcommittee of the Virginia Freedom of Information Advisory Council (hereinafter, the “VFOIA Council”) is discussing possible legislative action in response to the Berry decision. As part of its statutory duties, the VFOIA Council is tasked with reporting “annually on or before December 1 of each year on its activities and findings regarding [VFOIA] (§ 2.2-3700 et seq.), including recommendations for changes in the law, to the General Assembly and the Governor.” Va. Code § 30-179(7). The High Court’s decision is appropriate, and the General Assembly should let Berry stand.

First, VFOIA, by its very language and stated policy, supports the Berry decision. VFOIA states that “[b]y enacting this chapter, the General Assembly ensures [emphasis added] the people of the Commonwealth ready access to public records in the custody of a public body or its officers and employees, and free entry to meetings of public bodies wherein the business of the people is being conducted.” Va. Code § 2.2-3700(B). The statute goes on to state that “[u]nless a public body or its officers or employees specifically elect to exercise an exemption provided by this chapter or any other statute, every [emphasis added] meeting shall [emphasis added] be open to the public and all public records shall be available for inspection and copying upon request.” Va. Code § 2.2-3700(B). A meeting that fails to comply with VFOIA’s open meeting requirements does not ensure the people of the Commonwealth free entry to meetings of public bodies wherein the business of the people is being conducted, and it conflicts with VFOIA’s statement that every meeting shall be open to the public. If such a meeting (or action taken at a meeting), that is violative of VFOIA, cannot be declared void ab initio, then VFOIA’s stated policy is rendered trivial.

Second, the Berry decision brings potency to VFOIA. A law is only as effective as its enforcement mechanism. The ability to seek a declaration that an improperly held meeting (or action taken at a meeting) is void ab initio creates an impetus for compliance. Virginia’s public bodies are more likely to take an astute, responsible and deferential approach toward VFOIA under such a regime. If Berry stands, VFOIA’s open meeting requirements, as set forth in Va. Code § 2.2-3707, are likely to become more meaningful and impactful. The authority of public bodies to act becomes inextricably linked to compliance with VFOIA. Such a linkage sends a clear and unambiguous message that the “affairs of government are not intended to be conducted in an atmosphere of secrecy since at all times the public is to be the beneficiary of any action taken at any level of government.” Va. Code § 2.2-3700(B).

Third, Virginians expect, and the law demands (in both letter and spirit), that public bodies be trained and competent in VFOIA procedure (see Va. Code §§ 2.2-3704.2(E), 2.2-3704.3 and 30-179(2)). Public bodies do not always comply with VFOIA’s training requirements. The Berry decision is likely to improve compliance. According to the VFOIA Council, “just as § 2.2-3704.2 does not require any specific subject matter or other contents for training FOIA officers, § 2.2-3704.3 and subdivision 2 of § 30-179 do not require any specific subject matter or other contents for training local officials. However, our training presentations designed for local officials do cover both records and meetings issues as well as other topics such as FOIA remedies.” The important takeaway is that the VFOIA Council offers training presentations that cover meetings. It is incumbent upon public bodies to seek the training they need to comply with the law. Even if the VFOIA Council has neither expectation nor presumption that the government officials, members and staff identified in Va. Code §§ 2.2-3704.3 and 30-179(2) are competent in VFOIA’s open meeting requirements (a concerning prospect in and of itself), the expectation of Virginians and the demands of the letter and spirit of the law remain.

Fourth, in those likely rare and sporadic situations when a declaration of void ab initio produces costly consequences, Virginia’s courts are (or should be) empowered1 to equitably adjudicate those matters—the adjudication of which could have the added effect of producing healthy and substantive public debate. Such situations are going to be the rare exception, and the exception should not dictate the rule. The General Assembly should not enfeeble VFOIA and give public bodies a pass to be heedless just because of occasional and seldom-occurring costly situations that may arise because of the Berry decision.

Fifth, Berry should stand and its remedy ought to be subject to a two-year statute of limitations. It is unclear whether a mechanism and procedure permitting the declaration of a meeting (or action taken at a meeting) as being void ab initio could coexist with, and be limited by, a statute of limitations. The inherently permanent status of “void ab initio” (having no legal effect from inception) is distinct from, and likely can be restrained by, a statute of limitations, which acts as a procedural bar to bringing a claim. Virginia case law2 related to court orders may or may not be applicable to ordinances and meetings. At least one other jurisdiction has noted3 that a statute of limitations applies to a cause of action claiming that contracts were void ab initio. Furthermore, even if under current Virginia law, a petition or lawsuit seeking to declare as void ab initio, a meeting (or action taken at a meeting) of a public body is not subject to any statute of limitations, legislation could potentially change this.

A neutered VFOIA moves the Commonwealth away from government transparency and accountability. If the General Assembly legislates to dismantle, defang and debilitate Berry, it will send the message that Virginia’s government can operate outside the scope of its authority and do so with impunity. If, on the other hand, Berry is permitted to stand, it will elevate standards, protect public access to the meetings of public bodies, and promote due process.

“[VFOIA] essentially represents a mechanism by which those who ultimately hold sovereign power (i.e., the citizens of the Commonwealth) may obtain an accounting from the public officials to whom they delegate the exercise of that power. See Va. Const., Art. I, §2; Va. Code Ann. §2.2–3700(B).” McBurney v. Young, 569 U.S. 221, 228 (2013). For the betterment of the Commonwealth, the General Assembly should strive for a robust VFOIA and let Berry stand.

  1. Two cases referenced in Berry are illustrative: Town of Jonesville v. Powell Valley Village, 254 Va. 70, 77 (1997) (“We agree with the Town’s assertion concerning the prospective nature of the decision and direct that the holding in this case — that adoption of a comprehensive plan is a prerequisite to the adoption of a zoning ordinance — is limited to the instant case and shall operate prospectively only. We disagree, however, that suspension of the decision in this case is consistent with, or required by, our previous cases.”) (internal citation omitted); and City of Alexandria v. Potomac Greens, 245 Va. 371, 378 (1993) (“Alexandria represents that it routinely has enacted zoning amendments following only one notice for the public hearings before the Planning Commission. In oral argument, Alexandria asserted that an affirmative answer to the third certified question would nullify all zoning amendments since 1950. We direct, however, that our decision today shall be limited to the present case, shall operate prospectively only, and shall not affect other amendments enacted prior to our decision in this case.”) (internal citation omitted). ↩︎
  2. “[A court] order is void ab initio if entered by a court in the absence of jurisdiction of the subject matter or over the parties, if the character of the order is such that the court had no power to render it, or if the mode of procedure used by the court was one that the court could not lawfully adopt. The lack of jurisdiction to enter an order under any of these circumstances renders the order a complete nullity and it may be impeached directly or collaterally by all persons, anywhere, at any time, or in any manner.” Singh v. Mooney, 261 Va. 48, 49 (2001). ↩︎
  3. “Appellants’ first contention, that no statute of limitations applies because the contracts were void ab initio, is meritless. Assuming that the contracts were void ab initio, [1] a three-year statute of limitations would apply.” Woodruff v. McConkey, 524 A.2d 722, 724 (D.C. 1987) (footnote omitted). ↩︎
The great seal of the Commonwealth.

Thanks to Alan Gernhardt, Esq., Executive Director of the Virginia Freedom of Information Advisory Council, for expeditiously responding to the citizen inquiry of November 27, 2023.

5 WTC

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A 900-foot-tall mixed-use skyscraper is planned for 5 World Trade Center (“5 WTC”) in lower Manhattan. Located at the southern end of the World Trade Center campus at 130 Liberty Street, the building is slated to have 190,000sf of office space, a 12,000sf community facility space, 55,000sf of public amenity space, 7,000sf of retail space, and 1.2 million square feet of residential space divided into 1,325 apartments, of which 330 units (25 percent) will be affordable, according to Silverstein Properties. A portion of the affordable units will be offered to those living and working in lower Manhattan during the 9/11 terrorist attacks, according to the New York State Governor’s website. GlobeSt reports that the supertall will be jointly developed by Brookfield Properties, Silverstein Properties, Omni New York and Dabar Development Partners. Construction of 5 WTC is expected to start in 2024, according to CBS News.

5 WTC – Project Overview
Image Source: Urbanize New York
Credit: PANYNJ / Kohn Pedersen Fox

Outback’s Brazil Portfolio Is Its Shining Star

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Tampa-based Outback Steakhouse has done extraordinarily well in Brazil. According to CNBC, in the first half of 2023, Brazilian sales rose by 61 percent, foot traffic increased by 42 percent and the average check increased by 19.2 percent compared with the same period in 2022. By the end of Q2–2023, Brazil had 148 Outback Steakhouse restaurants (a net of eight store debuts during the period) and Bloomin’ Brands (Outback’s parent company) expects that figure to reach 300 by 2028, according to FSR Magazine. Outback’s Brazil portfolio makes up almost half of its international stores (148 out of 322), according to CNBC. Brazil now accounts for 83 percent of Outback’s international revenue, according to The Washington Post, which also reports that the chain’s entry into Brazil’s shopping malls has brought it into direct competition with the country’s traditional restaurants. Outback’s Brazil stores are concentrated in shopping malls, downtowns and city centers and predominantly in São Paulo and Rio, according to CNBC, which assesses that there is opportunity for further growth in underpenetrated areas within the country.

Brazil’s growing middle class is a crucial factor in Outback’s success, according to CNBC, which cites a study by the Harvard Review of Latin America stating that 47 percent of Brazil’s more than 213 million people are considered middle class. The study, using IBGE definitions, identifies people with a per capita income between $188.12 and $727.86 per month as being middle class. Modernization and the rise of the middle class have led to changes in the Brazilian diet. According to the National Association of Restaurants (reported in The Post), in the past two decades, food consumption at fast food restaurants rose 70 percent and it is estimated that by 2025, the typical Brazilian will no longer eat rice and beans as often as five days per week. Outback has also responded to rising vegetarianism in Brazil. According to The New York Times (citing a poll by the research firm Ibope), the number of self-declared vegetarians in Brazil has nearly doubled over a six-year period. In response, Outback’s Brazil menu has been adapted to include “meatballs” made with smoked eggplant and a burger made with broccoli and cauliflower.

Nearshoring Elevates Laredo’s Prominence as a Logistics and Trade Hub

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Google/Oxford Languages defines nearshoring the “practice of transferring a business operation to a nearby country, especially in preference to a more distant one.” High shipping rates, political tension between the U.S. and China, global geopolitical uncertainty and USMCA advantages have fueled a nearshoring trend for companies that produce for the U.S. and Canadian markets.

Mexico is attracting increasing attention as a desirable location for production, as evidenced by the numbers. Total Mexican exports rose 5.8 percent from a year earlier in May to $52.9 billion, according to Bloomberg, which also reports (citing preliminary data from Mexico’s Secretariat of Economy) that Mexico’s foreign direct investment rose 48 percent in Q1-2023 from a year earlier, surging to $18.6 billion. According to the Census Bureau, Mexico was America’s largest trading partner in July 2023, making up 15.7 percent of total trade ($65.3 billion out of $415.3 billion). In 2022, goods traded between the U.S. and Mexico totaled almost $780 billion—an increase of nearly 18 percent from the previous year, according to The Wall Street Journal.

Port Laredo is at the forefront of nearshoring-related growth. According to the Texas Department of Transportation (“TxDOT”) 2023 Border District Trade Transportation Report, the Laredo Customs District is the third largest Customs District in the U.S., following Los Angeles and New York City. More than 97 percent of Port Laredo’s trade is with Mexico, according to the City of Laredo. In 2022, the port handled more than $268 billion in trade with Mexico, up by more than 20 percent from 2021, according to CBRE. The Wall Street Journal (quoting Daniel Covarrubias, Director of Texas Center for Economic and Enterprise Development), reports that 40 percent of the total trade between Mexico and the United States crosses through Port Laredo.

The Port Laredo trade activity is CMV-dominated and centered on two bridges. According to TxDOT, approximately 74.9 percent of the U.S.–Mexico goods trade that was processed in the TxDOT Laredo District1 in 2021 crossed the border by commercial motor vehicles (“CMVs”). Port Laredo has two CMV bridges—Columbia Solidarity Bridge (non-commercial and commercial) and World Trade Bridge (commercial), according to the Laredo Economic Development Corporation (LEDC), which estimates that about 14,000 commercial trucks cross these two bridges each day and that this level of traffic constitutes only about 40 percent of the capacity of these bridges. The World Trade Bridge is the largest border crossing (in terms of the value of U.S., Mexico, and Canada trade handled) in North America, according to TxDOT. The Wall Street Journal reports that 5.5 million trucks entered Laredo in 2022.

Port Laredo’s vigorous trade activity has intensified demand for industrial real estate and spurred development projects. Laredo’s industrial real estate supply (buildings of 20,000sf or more) increased 10 percent over the past five years to 36 million square feet, with a vacancy rate of 1.5 percent, according to CBRE, which also reports that the average industrial asking rent increased by 6.1 percent year-over-year in 2022 to $9.53/sf (triple-net) and is forecast to rise by another 10 percent in 2023. According to The Wall Street Journal (citing data from CoStar), more than 3.8 million square feet of warehouse space is under construction in Laredo. In March of this year, RXO announced the grand opening of the company’s new 127,000sf cross-border warehousing and distribution services facility in Laredo and this month, C.H. Robinson announced that it had opened a new, 400,000sf logistics facility in the city.

  1. In 2021, $210.6 billion in U.S.–Mexico CMV trade was processed at TxDOT’s Laredo District. Of that amount, $197.8 billion crossed at the Laredo POE, $8.2 billion crossed at the Eagle Pass POE, and $4.6 billion crossed at the Del Rio POE, according to TxDOT. ↩︎

Commonwealth Appeals Decision Related to VFOIA’s “Working Papers and Correspondence Exclusion”

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The Virginia Freedom of Information Act (“VFOIA”), located at § 2.2-3700 et seq. of the Code of Virginia, “ensures the people of the Commonwealth ready access to public records in the custody of a public body or its officers and employees, and free entry to meetings of public bodies wherein the business of the people is being conducted.” VFOIA § 2.2-3705.7 lists “[e]xclusions to application of [VFOIA]” and § 2.2-3705.7(2) includes “[w]orking papers and correspondence of the Office of the Governor …”.

The Commonwealth of Virginia, et al. (“Appellants”) have filed an appeal in the Court of Appeals of Virginia challenging the Circuit Court of Arlington’s overruling of Appellants’ demurrer and its grant of a petition for mandamus and injunctive relief to Heather Sawyer (“Appellee”). As described in the briefs, Petitioner/Appellee Heather Sawyer (who, according to Appellee, is a Virginia citizen and the Executive Director of American Oversight, a non-partisan, non-profit organization “committed to promoting transparency in government”) submitted a series of requests for records under VFOIA, two of which are at issue in the case:

1.) General Communications: (a) Communications about the “Tip Line” between persons inside the Office of the Governor and (i) persons outside of government or (ii) Commonwealth employees outside of the Office of the Governor, and (b) records about the “Tip Line” made available to (i) persons outside of government or (ii) Commonwealth employees outside of the Office of the Governor (Request 758). [The “Tip Line,” also referred to in the briefs as the “Help Education Email Address” was created to allow parents and others to report on the teaching of “inherently divisive concepts” in Virginia public schools.]

2.) Specific Communications: (a) Emails between specifically identified government officials and specifically identified non-governmental individuals/organizations, and (b) emails sent by (or at the request of) specifically identified individuals containing certain key terms (the listed terms included, “CRT,” “Critical Race Theory,” “helpeducation@governor.virginia.gov,” and “inherently divisive practices”) (Request 759).

Brief of Appellants

In their first assignment of error, Appellants argue that the Circuit Court of Arlington (hereinafter, the “Circuit Court”) erred in overruling the demurrer because the petition did not sufficiently allege a cause of action under VFOIA; that “the documents at issue are exempt from disclosure because they are correspondence and working papers of the Governor’s Office”; that the correspondence and working papers exemptions “reflect the General Assembly’s recognition of constitutional limits on its ability to invade the confidentiality of the Governor’s communications”; that “[r]equiring disclosure of such correspondence and deliberations could impair the ability of the executive to perform his constitutionally required duties”; that VFOIA neither contains a “requirement that the documents must personally reflect the work of the specified high-ranking officials, nor does it state that the correspondence must be sent only from or to those officials”; that Appellee “did not plead facts showing that the withheld documents fall outside the correspondence and working papers exemptions”; that Appellee “failed to state a claim that the Governor’s Office conducted an inadequate search in response to Request 758”; and that the Circuit Court should have applied the presumption that public officials obey the law.

In their second assignment of error, Appellants argue that even if Appellee’s “petition stated a claim under [V]FOIA sufficient to survive demurrer, the [C]ircuit [C]ourt had no factual basis for holding that the Governor’s Office violated [V]FOIA”; that the Circuit Court “should have held further evidentiary procedures to determine whether the Governor’s Office properly withheld the documents under the correspondence and working papers exemptions”; that “[w]ithout examining the documents or ordering other evidentiary proceedings, the [Circuit Court] had no factual basis for holding the Governor’s Office violated [V]FOIA”; that “[t]he Governor’s Office did not have the burden of affirmatively proving that it complied with [V]FOIA in its demurrer”; and that given the far tighter deadlines set by VFOIA (compared to federal FOIA), the federal-style detailed, document-by-document response that Appellee proposes is not feasible.

Appellee’s Response Brief

In her Response Brief, Appellee argues that “public bodies are required to conduct reasonable searches, and requestors are entitled to challenge the reasonableness of searches where, [the public body has] alleged facts giving rise to an inference that the search failed to return expected records”; that “[t]he presumption of good faith owed the government does not prevent a petitioner from ever asking a court to review a public body’s compliance with its search responsibilities, nor [does it] absolve the government of any obligation to explain how it [conducted the search]”; that “[a] search may be inadequate for reasons having nothing to do with a public official’s motivation”; that “[Appellants’] search appears to have been inadequate under the circumstances”; that “[t]he public body is the party in sole possession of information about how it conducted the search [and f]lipping that burden of proof to the requestor would nonsensically require the requestor to prove a negative”; and that “[n]either [of the differences between VFOIA and federal FOIA] explains why it would be inappropriate to use similar evidentiary procedures [as federal FOIA] once in litigation.”

On the issue of application of the working papers and correspondence exemption, Appellee argues that “the mere fact that a record has been sent to one of the listed officials qualifying for the [correspondence portion of the] Exemption is not enough to establish the record as protected correspondence”; that “to properly withhold a record under the [correspondence portion of the] Exemption, the agency must show that it is (a) from an official covered by the Exemption, or (b) to—and only to—a person or persons covered by the Exemption”; that “Legislative restrictions on executive functions are not automatic violations of separation of powers”; that “[t]he ‘Working Papers’ portion of the Exemption also only covers the material of certain individuals, and only if that material is ‘deliberative’”; that “[w]ith respect to the [working papers] portion, the Governor’s Office may withhold otherwise deliberative information shared with lower-level officials not covered by the Exemption so long as it demonstrates that the information remained in the zone of privacy of a covered official”; that “[Appellee] adequately pleaded that the Exemption does not validly apply to the withheld records”; and that “because the hearing was on the merits of the Petition as well as the Demurrer, the Governor’s Office was required to meet its burden to demonstrate compliance with VFOIA in the hearing in case the Demurrer was denied” [and the Governor’s Office] “failed to offer any appropriate evidence that the [working papers and correspondence] Exemption applied to the withheld records.”

Reply Brief of Appellants

In their Reply Brief, Appellants argue that “[t]he Governor’s Office … had no evidentiary burden prior to the court’s ruling on the demurrer … [y]et the [C]ircuit [C]ourt … granted the petition immediately after denying the demurrer, with no evidentiary hearing at all”; that “the bare order stating the hearing would be ‘on the Petition and Demurrer,’ did not give notice that it would constitute the only such hearing”; that in camera [italics added] review is a proper method to determine whether withheld documents are exempt”; that the “Governor’s Office explained at the hearing that the review could be of ‘some or all of the records,’ and it asked the court for a further hearing on the ‘proper procedure’ for the review”; and that the Circuit Court “had no grounds to instead refuse to consider the evidence at all.”

Appellants argue further that “[t]he Governor’s correspondence is no less his correspondence if a staff member or aide also receives it, or assists the Governor in preparing a response”; that “requiring public disclosure of the Governor’s correspondence would compromise the executive’s consultation and decision-making process and have a chilling effect on communications, to the detriment of the decision[-]making process”; that no statutory language or Virginia precedent supports the argument that the government bears the burden of demonstrating a search was reasonable; and that just because a court can assess the reasonableness of a search “does not mean that the petitioner bears no pleading burden on this issue.”

The Reporters Committee Amicus Brief

The Reporters Committee for Freedom of the Press (the “Reporters Committee”) and nine media and transparency organizations submitted an amicus brief in support of Appellee. The amicus brief argues that “when it is clear from the terms of a request that responsive records are held by those outside the small group of executive officials named in [VFOIA], a trial court is well within its discretion to find that those records are not personal or deliberative”; that “Appellee’s requests, by their terms, were limited to records that do not necessarily implicate the Working Papers Exemption”; that “the plain language of [VFOIA] does not permit application of the Working Papers Exemption to all correspondence to and from every employee of the Governor’s Office … [n]or does the exemption, by its plain terms, apply to any and all records that cross the desk of any individual within the Office of the Governor”; that the General Assembly deliberately placed the burden on agencies to demonstrate compliance with VFOIA and that the presumption that public officials have complied with VFOIA—a presumption that, if not overcome, would justify granting a demurrer—does not exist; that “[b]ased on the wording of Appellee’s requests, which ultimately sought records outside the scope of the Working Papers Exemption … the Circuit Court had a sufficient basis to decide as a matter of law that all responsive records should be disclosed”; and that without a narrow interpretation of VFOIA’s exemptions from disclosure, “government officials would be free to circumvent public oversight and avoid accountability for malfeasance and mismanagement.”

[Citations and some internal quotations omitted from the summaries of the briefs.]

Conclusion

Regardless of the circumstances, merits and outcome of this particular appeal, three points are clear: 1.) A robust VFOIA benefits the people and commerce of Virginia; 2.) The parameters of an adequate and lawful VFOIA search are woefully underdefined in Virginia law; and 3.) For the purposes of ensuring justice, promoting judicial efficiency and improving transparency, it is incumbent upon the courts to follow procedure, to communicate accurately and completely with the parties during litigation, and to enunciate the bases and reasonings for their decisions.

The case is Commonwealth of Virginia, et al. (Appellants) v. Heather Sawyer (Appellee); Record No.: 0330-23-4; Court of Appeals of Virginia.

The Resurgence and Evolution of the Health and Fitness Club Industry

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The $32 billion U.S. fitness industry is experiencing a resurgence and evolution, with promising future prospects. According to the Houston Chronicle, Placer.ai named the fitness industry as one of 2022’s top industries in its annual overview of industries. Globally, health club industry revenue totaled $96.7 billion in 2019, according to a 2020 report by the International Health, Racquet & Sportsclub Association (IHRSA). Following the COVID-related downturn, global revenue in 2023 is estimated to be $81.5 billion, according to Wellness Creative Co. Research by McKinsey & Company indicates that the market for health and wellness products and services is growing by five to 10 percent per year, depending on the region.

The pandemic had a detrimental impact on health clubs, gyms and studios (hereinafter collectively also referred to as “gyms”). According to IHRSA, comparing the number of health clubs, gyms, and studios in operation as of March 2020 to those same facilities remaining in operation as of December 31, 2021, twenty-five percent of all health and fitness facilities closed and thirty percent of studios closed. AP (citing a statistic from the National Health & Fitness Alliance) reports that twenty-five percent of U.S. health clubs and studios have closed permanently since the pandemic began.

In the port-pandemic era, the fitness industry is returning to retail real estate and is evolving to meet changing consumer behavior. As described by PerfectGym, the pandemic acted as a catalyst for the industry’s digital transformation, with virtual fitness classes, live-streamed workouts, and on-demand fitness content gaining popularity, and fitness providers adapting to offer online services. Although this transformation will have some permanent effect, it is mitigated by the consumer desire and demand to interact in person and return to normalcy. This dynamic has led to the development of hybrid programs which offer both in-person and remote experiences. Another change is the surge in the popularity of strength/weight training. ClassPass reports that strength training was the most popular workout for 2021 and 2022 and that there was a 94 percent increase in reservations for strength training classes from 2021 to 2022.

The health and fitness consumer’s physical return to gyms is evident in the data. Monthly visits to gyms from March through August 2022 increased by more than 18 percent from the same period in 2019, according to The New York Times (citing data from Placer.ai). The Times also reports (citing information from Datex Property Solutions) that new memberships have increased, with sales per square foot at gyms up 34 percent in August 2022 from a year earlier and almost on a level with 2019. According to Mordor Intelligence, the Health and Fitness Club Market size is expected to grow from $87.07 billion in 2023 to $154.21 billion by 2028, at a CAGR of 12.11 percent during the forecast period (2023-2028). Meanwhile, WUSA9 reports that stocks for home-based fitness products like Peleton fell in 2022 as people headed back to in-person fitness classes.

As the retail real estate industry adjusts to altered consumer patterns and behaviors, many landlords are eager to incorporate fitness into their retail portfolios, in part because of the co-tenancy advantages. According to The New York Times (reporting data from Creditntell) a retailer in a shopping center with a gym receives, on average, 2.5 percent more visits per month than the same retailer’s locations in centers without fitness businesses. Gyms have the potential of bringing consistent/daily traffic to shopping centers. They are usually able to operate out of spaces that other retail tenants may deem unsuitable or less than ideal (e.g., basement level or second floor, limited visibility, inadequate storefront, etc.…). Gyms tend to attract retailers with a focus on health (e.g., smoothie and açaí shops, nutrition stores and healthy fast-casual restaurants) and they pair well with other retailers that invite consistent/daily traffic, such as grocery stores, dry cleaners and physical therapy.

Deed in Lieu of Foreclosure

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A deed in lieu of foreclosure (also known as a deed in lieu) is a deed instrument that conveys title of a property encumbered by a mortgage, to the mortgagee, usually in full satisfaction of the obligation secured by the mortgage. Borrowers who are in default may choose this arrangement as an alternative to a foreclosure or a short sale.

Compared to the foreclosure process, which could take months or years, involve the judicial system and entail the risk of negative publicity, a deed in lieu might be less disruptive to the property, allowing the lender to quickly take control and stabilize operations, thus protecting the condition of the real estate and preserving tenants and income. A deed in lieu is generally a less expensive procedure for both the borrower and the lender and it is likely to have less impact on a borrower’s credit score.

A borrower contemplating a deed in lieu agreement should consult with counsel and take into consideration such factors as the allocation of transaction costs (including transfer taxes), the effect on income taxes, the rights of any mezzanine/subordinated lenders that may be present, and how the deed in lieu could be viewed and treated in a potential future bankruptcy proceeding.

JLL Prevails on Appeal in Lawsuit Concerning Dual Representation in DC

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The U.S. Court of Appeals for the DC Circuit (the “Court”) recently issued a ruling vacating the District Court’s grant of summary judgment to 1441 L Associates, LLC (“Landlord”) in a $781,000 leasing commission dispute with brokerage firm Jones Lang LaSalle (“JLL”). In granting summary judgment, the District Court had accepted Landlord’s contention that JLL could not enforce Landlord’s contractual promise to pay a commission because JLL had not disclosed its dual representation in the format set forth in § 42-1703(i)(2) of the Brokerage Act.

The relevant section (§ 42-1703(i)(1)–(2)) of the Brokerage Act (Title 42, Chapter 17 of the  Code of the District of Columbia) states as follows:

§ 42–1703. Duties of real estate brokers, salespersons, and property managers.

(i) Disclosed dual or designated representation authorized.

(1) A licensee may act as a dual representative only with the written consent of all clients to the transaction. Such written consent and disclosure of the brokerage relationship as required by this section shall be presumed to have been given as against any client who signs a disclosure as provided in this section.

(2) Such disclosure may be given in combination with other disclosures or provided with other information, but if so, the disclosure must be conspicuous, printed in bold lettering, all capitals, underlined, or within a separate box. Any disclosure which complies substantially in effect with the following [model disclosure form] shall be deemed in compliance with this disclosure requirement: [model disclosure form provisions]

As explained in the opinion, Landlord asserted that JLL disclosed its dual representation in a non-standalone disclosure (i.e., given in combination with other disclosures or provided with other information) but that the disclosure did not meet the formatting specifications stated in the law (i.e., it was not “conspicuous, printed in bold lettering, all capitals, underlined, or within a separate box”). Therefore, the question on appeal was whether the Brokerage Act invariably requires adherence to these formatting specifications whenever a broker discloses a dual representation in a non-standalone disclosure. The Court concluded that it does not and that a broker disclosing dual representation in a non-standalone disclosure can still meet the Brokerage Act’s requirements even without adhering to the formatting specifications.

The Court noted that “[a]fter the first sentence of [§] 42-1703(i)(1) sets out the written consent requirement, the provision’s second sentence adds: ‘Such written consent and disclosure of the brokerage relationship as required by this section shall be presumed [emphasis in the Court opinion] to have been given as against any client who signs a disclosure as provided in this section.’ D.C. Code § 42-1703(i)(1).” The Court thus determined that the Brokerage Act does not categorically require a broker involved in dual representation to obtain a signed “disclosure as provided in this section” from all clients. Obtaining such a signed disclosure from a client establishes only a presumption that the written consent requirement has been satisfied with respect to that client. And because the formatting specifications go only to triggering the presumption, the Court explained, nothing in § 42-1703(i)(2) mandates adherence to the formatting specifications when a broker does not seek to take advantage of the presumption.

According to the Court, the “disclosure of the brokerage relationship” mentioned in § 42-1703(i)(1) does not concern the same disclosure as the “disclosure [that] must be conspicuous” mentioned in § 42-1703(i)(2). Rather, the “disclosure of the brokerage relationship” mentioned in § 42-1703(i)(1) refers to a distinct disclosure obligation set forth in the immediately preceding subsection (§ 42-1703(h)).

The Court advised that “[o]n remand, JLL will have the opportunity to show that, even if it failed to adhere to the formatting specifications and thus failed to qualify for the presumption of written consent, it still fulfilled the written consent requirement by obtaining [Landlord’s] truly informed written consent to the dual representation following full disclosure of the dual nature of the relationship” (citations and quotations omitted).

The property for which JLL secured a tenant (and claims a commission in this case) is located at 1441 L Street NW in Washington, DC. It is a Class A office building, built in 1967 and containing 206,799sf of space, according to Cushman & Wakefield. Its 2023 assessed value is $61,420,510, according to public record.