D.C. Circuit Review – Reviewed: En Banc Review

by Aaron Nielson — Saturday, Sept. 30, 2017@Aaron_L_Nielson

The D.C. Circuit did a noteworthy yet routine thing this week — it denied rehearing en banc in Wrenn v. District of Columbia, the Court’s recent Second Amendment case. No judge even called for a vote. Why is this “noteworthy”? Because Wrenn addressed a constitutional issue and the panel opinion prompted a dissent. So why it is “routine”? Because the D.C. Circuit regularly denies rehearing en banc.*

As regular readers know, the D.C. Circuit decides many important cases. It is not by accident that it is often called the nation’s “second most important court.” And often after one of those important cases is decided, commentators speculate about rehearing en banc. But what usually happens? If a petition is even filed, the Court denies it. Indeed, I had the good folks in the BYU Law Library identify every discretionary en banc case since 2010. Here is the list:

1. Raymond J. Lucia Companies, Inc. v. SEC, 868 F.3d 1021 (D.C. Cir. 2017) [no opinion].

2. Bahlul v. United States, 840 F.3d 757 (D.C. Cir. 2016).

3. Halbig v. Burwell, No. 14-5018(D.C. Cir. Sep. 4, 2014) [no opinion].

4. Am. Meat Inst. v. Dep’t of Agric., 760 F.3d 18 (D.C. Cir. 2014).

5. Bahlul v. United States, 767 F.3d 1 (D.C. Cir. 2014).

6. United States v. Burwell, 690 F.3d 500 (D.C. Cir. 2012).

7. Cohen v. United States, 650 F.3d 717 (D.C. Cir. 2011).

8. El-Shifa Pharm. Indust. Co. v. United States, 607 F.3d 836 (D.C. Cir. 2010).

Those are important cases—and PHH Corp. is still coming. Even so, it is a small list, especially when one considers just how many high-profile cases panels of the Court decide.

Why doesn’t the Court take more cases en banc? It is not because everyone agrees about every case. Sure, unanimous opinions are the norm. But there are many cases with dissents—sometimes fiery dissents—and, even apart from those cases, other cases attract attention.

So what’s going on? It seems that the D.C. Circuit has concluded that rehearing en banc should be rare. It is not enough for a judge to think that the panel got it wrong — something more is required. As the Court’s internal procedures explain:

Like petitions for rehearing by a panel, petitions for rehearing en banc are frequently filed but rarely granted. Federal Rule of Appellate Procedure 35(a) expressly states that en banc hearings are not favored and ordinarily will not be ordered except to secure or maintain uniformity of decisions among the panels of the Court, or to decide questions of exceptional importance.

It has not always been thus. As Judge Douglas Ginsburg explained (with Donald Falk) in 1991: “About a half-dozen times each year the United States Court of Appeals for the District of Columbia Circuit hears a case en banc.” The number started to fall thereafter. As Judge Ginsburg later explained (this time with Brian Boyton) in 2002: “The most striking difference between the court’s en banc practice in the 1990s, as compared to the 1980s, is the number of cases the court heard en banc, which declined to 33 from 63. Moreover, only 28 of those 33 cases involved rehearing a case heard initially by a three-judge panel. Indeed, in the last two fiscal years (2001 and 2002) the court did not rehear a single case en banc; the only en banc proceeding was the Microsoft appeal, which was heard initially en banc.”

In 2004, Judge Edwards shared some interesting thoughts on the subject:

Collegiality cannot exist if every dissenting judge feels obliged to lobby his or her colleagues to rehear the case en banc in order to vindicate that judge’s position. Politicking will replace the thoughtful dialogue that characterizes a court where every judge respects the integrity of his or her colleagues. Furthermore, such politicking would impugn the integrity of panel judges, who are both intelligent enough to know the law and conscientious enough to abide by their oath to uphold it. …. In an uncollegial environment at its worst, decisions to rehear cases en banc can result in disastrous, ideologically driven, and result-oriented judicial decision making. A high rate of en banc rehearings can be a symptom of an absence of collegiality. … However, the complete absence of en banc review may also be detrimental to collegiality, because panels may become too independent of the rest of the court. On a collegial court, the court trusts panels to do their work, and the possibility of en banc rehearings constrains panels to be responsible to the full court.

Perhaps judges should be more aggressive; en banc review is a useful tool. That’s a question for another day. For today, it is enough to observe just how rare en banc review is in the D.C. Circuit.

This week the Court decided two new cases — each of which prompted a separate opinion.

In Lorenzo v. SEC (argued over a year ago), Judge Srinivasan, joined by Judge Griffith, largely upheld an SEC decision. Here is the panel’s summary:

The Securities and Exchange Commission found that Francis Lorenzo sent email messages to investors containing misrepresentations about key features of a securities offering. The Commission determined that Lorenzo’s conduct violated various securities-fraud provisions. We uphold the Commission’s findings that the statements in Lorenzo’s emails were false or misleading and that he possessed the requisite intent.

We cannot sustain, however, the Commission’s determination that Lorenzo’s conduct violated one of the provisions he was found to have infringed: Rule 10b-5(b). That rule bars the making of materially false statements in connection with the purchase or sale of securities. We conclude that Lorenzo did not “make” the false statements at issue for purposes of Rule 10b-5(b) because Lorenzo’s boss, and not Lorenzo himself, retained “ultimate authority” over the statements. Janus Capital Grp., Inc. v. First Derivative Traders, 564 U.S. 135, 142 (2011).

While Lorenzo’s boss, and not Lorenzo, thus was the “maker” of the false statements under Rule 10b-5(b), Lorenzo played an active role in perpetrating the fraud by folding the statements into emails he sent directly to investors in his capacity as director of investment banking, and by doing so with an intent to deceive. Lorenzo’s conduct therefore infringed the other securities-fraud provisions he was charged with violating. But because the Commission’s choice of sanctions to impose against Lorenzo turned in some measure on its misimpression that his conduct violated Rule 10b-5(b), we set aside the sanctions and remand the matter to enable the Commission to reassess the appropriate penalties.

Judge Kavanaugh dissented:

Suppose you work for a securities firm. Your boss drafts an email message and tells you to send the email on his behalf to two clients. You promptly send the emails to the two clients without thinking too much about the contents of the emails. You note in the emails that you are sending the message “at the request” of your boss. It turns out, however, that the message from your boss to the clients is false and defrauds the clients out of a total of $15,000. Your boss is then sanctioned by the Securities and Exchange Commission (as is appropriate) for the improper conduct.

What about you? For sending along those emails at the direct behest of your boss, are you too on the hook for the securities law violation of willfully making a false statement or willfully engaging in a scheme to defraud? According to the SEC, the answer is yes. And the SEC concludes that your behavior – in essence forwarding emails after being told to do so by your boss – warrants a lifetime suspension from the securities profession, on top of a monetary fine.

That is what happened to Frank Lorenzo in this case. The good news is that the majority opinion vacates the lifetime suspension. The bad news is that the majority opinion–invoking a standard of deference that, as applied here, seems akin to a standard of “hold your nose to avoid the stink”–upholds much of the SEC’s decision on liability. I would vacate the SEC’s conclusions as to both sanctions and liability. I therefore respectfully dissent.

The Kavanaugh dissent also included this provocative paragraph:

Administrative adjudication of individual disputes is usually accompanied by deferential review from the Article III Judiciary. That agency-centric process is in some tension with Article III of the Constitution, the Due Process Clause of the Fifth Amendment, and the Seventh Amendment right to a jury trial in civil cases. See generally PHILIP HAMBURGER, IS ADMINISTRATIVE LAW UNLAWFUL? 227-57 (2014). That tension is exacerbated when, as here, the agency’s political appointees–without hearing from any witnesses–disregard an administrative law judge’s factual findings. That said, the Supreme Court has allowed administrative adjudication ever since Crowell v. Benson, 285 U.S. 22 (1932). But the premise of Crowell v. Benson is that, putting aside any formal constitutional problems with the notion of administrative adjudication, the administrative adjudication process will at least operate with efficiency and with fairness to the parties involved. This case, among others, casts substantial doubt on that premise.

Judge Srinivasan responded by observing that the employee here himself “disclaimed” such ignorance:

Lorenzo’s arguments on the issue contain no suggestion that he sent his emails without giving thought to their contents. He instead contends he did think about the contents (and reasonably believed them to be truthful). In those circumstances, we do not so much defer to the Commission’s assessment of Lorenzo’s state of mind over the ALJ’s finding that Lorenzo gave no thought to his emails’ content. Rather, we accede to Lorenzo’s account of his own mental state, which is incompatible with the finding of the ALJ.

Interesting.

In Animal Legal Defense Fund v. Perdue, Judge Edwards, joined by Chief Judge Garland, addressed the Animal Welfare Act, which requires the Secretary of Agriculture “to promulgate regulations governing minimum animal housing and care standards, and also to issue licenses to entities and individuals seeking to engage in exhibition activities.” It seems that “USDA has bifurcated its approach to licensing”; initial applications are not treated the same as license renewals. Here, a zoo in Iowa received a license in 1994 and has consistently received license renewals. The Animal Legal Defense Fund challenged the agency’s renewal of the license because, allegedly, the zoo was not adequately seeing to animal welfare and the agency should have accepted the zoo’s self-certification. The D.C. Circuit concluded that the scheme is lawful but that case should be remanded to consider an arbitrary and capricious challenge. (This is a complicated scheme; I’m butchering it. Sorry.)

Judge Griffith concurred in the judgment: “I would join our sister circuits and defer to USDA’s considered judgment that a renewal is not ‘issued’ under § 2133, and that its renewal scheme is therefore a permissible interpretation of the Act. Because the majority is clear that its analysis does not ‘reach the “issue” issue,’ there is nothing in the opinion that prevents the agency from interpreting ‘issue’ as it has in its arguments to us.”

(The Court also reissued American Wild Horse Preservation Campaign v. Perdue. Upon a quick review, the Court has now vacated in part rather than just remanded.)

This week’s cases are interesting. Yet I’ll go out on a limb and say that they will not be heard by the en banc Court.

* Indeed, the Court denied rehearing en banc regarding another Second Amendment case just last year; in that case, a judge requested a vote. For what it is worth, both of the Court’s Second Amendment opinions for which en banc rehearing was denied are formidable; perhaps that is another reason the Court had no appetite to rehear them.

 

D.C. Circuit Review – Reviewed is designed to help you keep track of the nation’s “second most important court” in just five minutes a week.

About Aaron Nielson

Professor Nielson is an associate professor at Brigham Young University Law School, where he teaches and writes in the areas of administrative law, civil procedure, federal courts, and antitrust. He currently serves as a public member of the Administrative Conference of the United States, a federal agency that studies the administrative process and makes recommendations on ways to improve it. He also co-chairs the Rulemaking Committee of the American Bar Association’s Section of Administrative Law & Regulatory Practice. Previously he chaired the Section's Antitrust & Trade Regulation Committee. Before joining the academy, Professor Nielson was a partner in the Washington, D.C. office of Kirkland & Ellis LLP (where he remains of counsel). He also has served as a law clerk to Justice Samuel A. Alito, Jr. of the U.S. Supreme Court, Judge Janice Rogers Brown of the U.S. Court of Appeals for the D.C. Circuit, and Judge Jerry E. Smith of the U.S. Court of Appeals for the Fifth Circuit. Follow him on Twitter @Aaron_L_Nielson.

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2 thoughts on “D.C. Circuit Review – Reviewed: En Banc Review

  1. Andy Patterson

    There were at least 3 other en bancs in the 2016-2017 term — were they not “discretionary” or is there some other reason not to include them?

    Tuesday, September 27, 2016 9:30 A.M. Courtroom 20 – Judges Henderson, Rogers, Tatel, Brown, Griffith, Kavanaugh, Srinivasan, Millett, Pillard, Wilkins
    15-1363 State of West Virginia v. EPA

    Wednesday, March 29, 2017 9:30 A.M. Courtroom 20 – Judges Garland, Henderson, Rogers, Tatel, Brown, Griffith, Kavanaugh, Srinivasan, Millett, Pillard, Wilkins
    16-5194 Laura Holmes v. FEC

    Wednesday, May 24, 2017 9:00 A.M. Courtroom 20 – Judges Henderson, Rogers, Tatel, Brown, Griffith, Kavanaugh, Srinivasan, Millett, Pillard, Wilkins, Randolph
    15-1177 PHH Corporation v. CFPB

    Reply
    1. Aaron Nielson Post author

      No opinions yet. The Clean Power Plan litigation has been frozen; we’re all waiting on PHH Corp.; and I don’t believe there is an opinion yet in Holmes (I also believe Holmes is a case of mandatory en banc).

      Reply

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