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Overnight Defense: Appeals court revives House lawsuit against military funding for border wall | Dems push for limits on transferring military gear to police | Lawmakers ask for IG probe into Pentagon's use of COVID-19 funds

Overnight Defense: Appeals court revives House lawsuit against military funding for border wall | Dems push for limits on transferring military gear to police | Lawmakers ask for IG probe into Pentagon's use of COVID-19 funds

Happy Friday and welcome to Overnight Defense. I'm Rebecca Kheel, and here's your nightly guide to the latest developments at the Pentagon, on Capitol Hill and beyond. CLICK HERE to subscribe to the newsletter.

THE TOPLINE: A federal appeals court sided with House Democrats on Friday in a lawsuit challenging the Trump administration’s authority to use military funds for the border wall.

In a 3-0 decision, the appeals court reversed a lower court's dismissal of the case, meaning the House has the right to sue. The case will be sent back to the trial court level.

The appeals court said Friday that the Trump administration “cut the House out of its constitutionally indispensable legislative role” of handling appropriations.

“To put it simply, the Appropriations Clause requires two keys to unlock the Treasury, and the House holds one of those keys. The executive branch has, in a word, snatched the House’s key out of its hands. That is the injury over which the House is suing,” the three-judge panel on the D.C. Circuit wrote.

The judges consisted of one Reagan appointee and two Obama appointees.

Background: The House filed its lawsuit last year, claiming President TrumpDonald TrumpEx-Trump lawyer Cohen to pen forward for impeachment book Murkowski says it would be 'appropriate' to bar Trump from holding office again Man known as 'QAnon Shaman' asks Trump for pardon after storming Capitol MORE’s use of a national emergency to divert military funds for border wall construction unconstitutionally bypassed Congress's authority to appropriate funds.

U.S. District Judge Trevor McFadden, a Trump appointee, dismissed the case in 2019, ruling that the House lacked standing to sue over the national emergency order that allowed Trump to divert military funds to the border wall.

Reaction: Speaker Nancy PelosiNancy PelosiTrump seeks to freeze .4 billion of programs in final week of presidency Dozens on FBI's terrorist watchlist were in DC day of Capitol riot Porter loses seat on House panel overseeing financial sector MORE (D-Calif.) hailed the Friday decision.

“On a bipartisan basis, Congress has repeatedly refused to fund the president’s immoral, ineffective and wasteful border wall,” Pelosi said in a statement. “Yet, the administration continues its illegal campaign to divert critical funding from national security and military construction projects that are essential to keep our troops, their families and all Americans safe.”

“With this ruling, the House will continue to fight in the courts and in Congress to uphold the Constitution and ensure the president cannot negate the separation of powers and the will of the American people in order to fulfill an outrageous campaign promise,” she added.

What does it mean? It is unclear what practical effect it would have if Democrats ultimately prevail in their lawsuit.

The Supreme Court has allowed the Trump administration to use defense funds amid litigation in the case, despite a California-based court's ruling that the scheme is unconstitutional.

DEMS PUSH FOR LIMITS ON TRANSFERRING MILITARY GEAR TO POLICE: The House and Senate still have not formally started negotiations to reconcile their versions of the annual defense policy bill, but the letters pushing for what the final version should include have been flying.

In one of the latest letters, on Friday, dozens of congressional Democrats urged the leaders of the House and Senate Armed Services committees to limit the types of military-grade equipment sent to local police departments amid ongoing protests over racial injustice.

“As House and Senate conferees negotiate the Fiscal Year (FY) 2021 National Defense Authorization Act (NDAA), we encourage you to ensure that the conference report includes provisions requiring reform of the Sec. 1033 Program by imposing additional conditions and limitations on the transfer of Department of Defense property for law enforcement activities,” the lawmakers wrote.

The letter, a draft of which was obtained by The Hill ahead of its release, was sent to Senate Armed Services Committee Chairman James InhofeJames (Jim) Mountain Inhofe'I saw my life flash before my eyes': An oral history of the Capitol attack Republican senators now regret not doing more to contain Trump GOP senator says he's never seen Pence so angry amid Trump calls to block election certification MORE (R-Okla.), House Armed Services Committee Chairman Adam SmithDavid (Adam) Adam SmithOvernight Defense: Pentagon watchdog to probe extremism in US military | FBI chief warns of 'online chatter' ahead of inauguration | House conservative bloc opposes Austin waiver Conservative caucus opposes waiver for Biden's Pentagon pick 'I saw my life flash before my eyes': An oral history of the Capitol attack MORE (D-Wash.), top Senate Armed Services Democrat Jack ReedJack ReedCongress overrides Trump veto for the first time Biden calls for the nation to 'unite, heal and rebuild in 2021' Lawmakers share New Year's messages: 'Cheers to brighter days ahead' MORE (R.I.) and top House Armed Services Republican Mac ThornberryWilliam (Mac) McClellan ThornberryUnnamed law enforcement banned under the new NDAA Lobbying world Senate poised to override Trump's defense bill veto MORE (Texas).

The letter was organized by House Armed Services Committee member Anthony BrownAnthony Gregory BrownDemocrats to levy fines on maskless lawmakers on House floor Growing number of lawmakers test positive for COVID-19 after Capitol siege Democrats offer bill fining lawmakers who don't wear masks in Capitol MORE (D-Md.) and Congressional Black Caucus Chair Karen BassKaren Ruth BassRep. Bass tweets photo of Trump in response to FBI call for information on rioters San Francisco mayor says Harris replacement pick 'a real blow to the African American community' Newsom picks Padilla for California Senate seat MORE (D-Calif.), and co-signed by 41 other House Democrats.

Context: Renewed attention has come to what’s known as the 1033 program amid nationwide protests against racial injustice and police violence. The program allows the Pentagon to transfer excess military equipment to U.S. police departments.

Former President Obama curtailed the program in 2015 after local police suppressed protests in Ferguson, Mo., using military-grade equipment. But the Trump administration rescinded the restrictions in 2017.

What’s in the bill: In July, the Senate rejected an amendment to the NDAA that would have placed broad restrictions on the 1033 program.

But the chamber did approve a more narrow NDAA amendment from Inhofe that would limit the transfer of bayonets, grenades, weaponized tracked combat vehicles and weaponized drones. The amendment would also require law enforcement to be trained in deescalation and citizens' constitutional rights.

A separate section of the Senate NDAA would require the Pentagon to give preference to “disaster-related emergency preparedness” in deciding whether to transfer equipment in addition to the current preferences for counter-drug, counterterrorism or border security activities.

The House did not include 1033 reforms in its version of the NDAA. But the chamber did approve broad 1033 restrictions as part of a separate, sweeping police reform bill it passed in June.

MORE CALLS FOR COVID-19 FUNDS INVESTIGATION: A pair of Democrats is asking the Pentagon’s internal watchdog to investigate how the department used $1 billion in coronavirus relief funds.

In a Friday letter to the Pentagon’s inspector general, Sen. Elizabeth WarrenElizabeth WarrenPorter loses seat on House panel overseeing financial sector OVERNIGHT ENERGY: Nine, including former Michigan governor, charged over Flint water crisis | Regulator finalizes rule forcing banks to serve oil, gun companies | Trump admin adds hurdle to increase efficiency standards for furnaces, water heaters DeVos mulled unilateral student loan forgiveness as COVID-19 wracked economy: memo MORE (D-Mass.) and Rep. Ro KhannaRohit (Ro) KhannaHouse impeaches Trump for second time — with some GOP support Stacey Abrams gets kudos for work in Georgia runoff election Sex workers warn of unintended consequences in Section 230 fight MORE (D-Calif.) asked the watchdog to “review the potential misuse of funds by the department that were meant "to prevent, prepare for, and respond to coronavirus, domestically or internationally.’”

“Instead of addressing the urgent needs of a pandemic that has killed over 200,000 Americans, it appears [the Department of Defense] DoD used taxpayer money meant to protect lives from COVID-19 to pad the pockets of defense contractors,” Senate Armed Services Committee member Warren and House Armed Services Committee member Khanna wrote in the letter to acting inspector general Sean O’Donnell.

“The reported misuse by DoD of federal funds meant for the response to the deadly pandemic plaguing our country is inconsistent with the will of Congress and may be illegal,” they added. “Accordingly, we request that the inspector general investigate DoD’s redistribution of CARES Act funds that were intended by Congress to respond to COVID-19 via the Defense Production Act.”

A spokesperson for the inspector general told The Hill the office received the letter and is reviewing their request.

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