D.C. Circuit Review – Reviewed: King Solomon and the APA

by Aaron Nielson — Saturday, Aug. 15, 2015@Aaron_L_Nielson

The D.C. Circuit’s theme today was, of all things, the Bible. Start with Settling Devotional Claimants v. CRB. The case concerns whether the ( now constitutional) Copyright Royalty Board correctly divvied up a pool of royalties among “religious ministries that own copyrights for devotional television programming.” Certain “Devotional Claimants” argued, among other things, that “the Royalty Judges’ final allocation simply split the difference between the two parties, and that decision was arbitrary and capricious and unsupported by substantial evidence.” Invoking both the Bible of administrative law and the actual Bible, Judge Millett (joined by Judges Brown and Kavanaugh) agreed with the Devotional Claimants: “King Solomon was not subject to the Administrative Procedure Act; the Royalty Judges are. Congress thus required that the Royalty Judges’ determinations rest on a focused analysis of the record, not an arbitrary splitting of the baby.” Hence, though upholding many of the CRB’s decisions, the panel unanimously vacated the CRB’s allocation as arbitrary and capricious. It seems that although “rough justice” sometimes is enough in our fallen world, there must be at least “some relevant and creditable methodological evidence.” What worked for Solomon does not work for a federal agency.

The next case, Humane Society v. Vilsack, also has a biblical theme: Thou shalt not steal. Various pork producers believe that the “National Pork Board” – this one, not this one* – has “misappropriated” money. “In 2006, the Board, with the approval of the Secretary of the Department of Agriculture, bought four trademarks associated with the slogan Pork: The Other White Meat … from the National Pork Producers Council, an industry trade group, for $60 million. The payment terms provide that the Board will pay the Council $3 million annually for twenty years. The Board can terminate the payments at any time with one year’s notice, in which case ownership of the phrase reverts back to the Council. Five years after buying the mark, the Board replaced it with a new motto, Pork: Be Inspired. Now the Board keeps the initial slogan around as a ‘heritage brand’ that it does not feature in its advertising.” But did the Board buy “Pork: The Other White Meat” because it wanted to use it as a marketing tool, or to secretly subsidize the lobbying efforts of the National Pork Producers Council through “a sweetheart deal”? Plaintiffs think the latter, and say that is an arbitrary and capricious use of their money (pork producers, as is common, are required to pay into the pork-promotion fund.) So who is right? We don’t know yet; all we know from Judge Pillard’s opinion (joined by Judges Griffith and Srinivasan) is that a pork producer has standing to make the claim. If in fact the National Pork Board wrongfully paid too much for “Pork: The Other White Meat,” then pork producers suffered “actual economic loss,” and “traceability and redressability readily follow.”

Next up is a pair of tax cases involving judicial review. The first, Ryskamp v. Commissioner of IRS, a pro se case (with appointed counsel), prompted a majority opinion by Judge Pillard (joined by Judge Kavanaugh) and a dissent by Judge Brown. The second, Florida Bankers v. TREA, triggered a majority opinion by Judge Kavanaugh and a dissent by Judge Henderson (plus a short concurrence by Judge Randolph). Those who know a lot about the intersection of tax and administrative law surely will have deeper things to say about both of these cases. But what’s interesting to me is that we have another Bible reference. Judge Brown—for whom I clerked—opened her Ryskamp dissent thusly: “Answer a fool according to his folly. Proverbs 26:5.” In large part, the disagreement in Ryskamp boils down to whether courts have jurisdiction to review IRS decisions “to disregard frivolous Collection Due Process (CDP) hearing requests.” Florida Bankers, on the other hand, involves the Anti-Injunction Act and “IRS regulation that imposes a ‘penalty’ on U.S. banks that fail to report interest paid to certain foreign account-holders.” Judge Kavanaugh concluded that challenges to this penalty are covered by the bar on tax injunctions, relying in large part on what has been described as the Supreme Court’s “ Solomon-like” decision in NFIB v. Sebelius. Judge Henderson, by contrast, rejected the court’s “government-empowering” holding, which, in her view, means that “no party can obtain pre-enforcement review of a regulation that is enforced by a tax penalty; instead, he must violate the regulation (i.e., break the law) and be assessed a tax penalty before he can have his day in court.” I’m not sure who is right in either of these cases – these are hard issues. But each of the opinions has a lot of say about judicial review. And tax collection.

The remaining cases –Anna Jacques Hospital v. Burwell, Cutler v. HHS, and Arpaio v. Obama – were unanimous. The hospital case involves health care reimbursements under the (also biblical) Medicare Act. Beyond that, I’ll say little and let Judge Millett’s opinion (joined by Judges Kavanaugh and Wilkins) on this topic speak for itself. In Cutler (also written by Judge Millett, and joined by Judges Henderson and Rogers), the appellant “filed suit challenging the religious exemption in the Affordable Care Act as an unconstitutional establishment of religion.” After finding standing (Cutler, it appears, is not a member of a religious group that qualifies for the exemption, so he has to buy insurance), the court unanimously concluded that the ACA’s exemption from the individual mandate does not establish a religion. “The exemption is available only to those (i) whose sincere religious beliefs prevent them from subscribing to any form of health insurance, and (ii) whose faith communities have a demonstrated track record of taking care of their dependent members.” Because of that latter requirement, the exemption “is carefully calibrated to protect the government—and thus taxpayers who do not share the religious sensibilities of those covered by the exemption—from later having to pick up the tab from which the adherent has been exempted.” And in Arpaio, Judge Pillard (joined by Judges Brown and Srinivasan), rejected Sherif Arpaio’s suit seeking to enjoin Homeland Security’s “deferred action” removal policies. Why? Because he lacks standing, i.e., he can’t meet the Constitution’s anti-busybody principle. Judge Brown’s concurrence is worth reading, for although she agrees with the court, she laments the “modern obsession with a myopic and constrained notion of standing.” (Note, there are lots of citations to law reviews.) In her view, “[s]ophisticated, well-resourced litigants can game the system, producing the types of proof that pass muster, while less sophisticated litigants may be left outside the courthouse doors.” Sure enough, the Bible has something to say about that too.

Finally, while I usually will only discuss the D.C. Circuit’s administrative law cases, I note that yesterday my good friend Winn Allen prevailed, pro bono, in a criminal case involving suppressed evidence. Judge Wilkins, joined by Judges Rogers and Griffith, reminded prosecutors that, although it is not one of the Five Commandments, there is “an inscription in the alcove outside the Attorney General’s Office [that] reads, ‘The United States wins its point whenever justice is done its citizens in the courts.’”

Well, that is the DC Circuit for August 14, 2015. Will next week be so biblical? Who knows, perhaps we’ll see a new theory of delegation.

* I’m joking. We’re too quick to bash Congress, whose job is hard. Remember charity.

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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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One thought on “D.C. Circuit Review – Reviewed: King Solomon and the APA

  1. John Ryskamp

    Both the tax court and the appeals court made absolutely certain that no attention would be given to what the Court called my “CFS facts” argument. What is that argument, and why was it ignored? The argument was that the Collection Financial Standards facts enjoy a higher level of scrutiny than minimum scrutiny. Why? There are several reasons, a few of which developed after briefing and which you will find on the D.C. docket for the case. What kind of fact enjoys a higher level of scrutiny than minimum scrutiny? What is the test? That is, how do we determine whether a fact is an individually enforceable right?

    This has always been a problem under the scrutiny regime, and it stems from the vagueness of West Virginia v. Barnette, which clearly understood that raising the level of scrutiny for a fact means moving a fact out of the political system and into the court, where individuals can enforce policies which maintain the fact (maintaining the fact is an issue the authors of the Supreme Court’s gun cases are just beginning to understand–as you will see from recent cert dissents in gun cases).

    But what Barnette did not provide is a practical test: a multi-pronged, factual test. I argue that, in choosing which facts to include in the CFS, the Government subjected them to the test which is implied, but was never stated, in Barnette or any other case. The test is as follows:

    A fact is a right (enjoys a higher level of scrutiny than minimum scrutiny), if it is:

    1. a fact of human experience
    2. which history demonstrates
    3. is unaffected by assaults upon it.

    That is, is it a robust, resilient and recurrent fact of human experience? To all the facts in the CFS, the Government answered, Yes, and that is why those facts are in the CFS. Thus, I asked the Court to apply a higher level of scrutiny than minimum scrutiny, to the facts in the context of the application of the CFS in CDP.

    After briefing, the U.S. issued the Affirmatively Furthering Fair Housing Rule, which said that housing is an indicium of dignity. The Court had earlier found, in Obergefell, that dignity is an individually enforceable right–an unchanging fact of human experience. Thus, housing is a dignitarial right. Housing is a CFS fact, and so must be enforced in the application of the CFS at a higher level of scrutiny than minimum scrutiny. The property right argument in Lindsey was overridden by the Government’s contention in the Rule that fairness is a factual indicium of property. There are many such Constitutional time bombs in the Rule.

    After briefing, the U.S. also issued its Statement of Interest in the Idaho homelessness law case. There, it stated that there is in fact no such thing as homelessness, that housing is an unchanging fact of human experience. So-called homelessness is, in fact, housed individuals whose housing is under assault. It must be seen as a dynamic situation involving a Constitutional violation, rather than as a result about which the Constitution can do nothing. This meant that the factual presumption of Lindsey v. Normet–homelessness–was not in fact true. The Statement overrode Lindsey, creating a right to housing.

    The Statement also maintained that assaults on housing are cruel and unusual punishment, since housing is in fact a status, not conduct. The analysis used to conclude that a fact is a status, is, again, the Barnette argument.

    The D.C. Circuit, desperate to avoid having to deal with these arguments, said they were not a “cognizable legal theory,” thus hoping that writers like this blogger would be frightened away from asking, Just what is the “CFS facts” argument? Brown’s quote in particular, calling me a fool, was meant to play to vanity of lawyers: what lawyer wants to listen to a fool?

    Reply

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