The D. C. Circuit issued four opinions this week. One involved an employment contract. Two were whistleblower appeals from the Tax Court. The fourth was from FERC. 

In Wright v. Eugene & Agnes E. Meyer Foundation, No. 22-7004, a divided panel of the D.C. Circuit reversed the district court’s dismissal of claims arising out of a dispute over the meaning of an employment contract as it applied to the employer’s conduct after firing the employee. Judge Wilkins, joined by Judge Millett, reinstated claims that the employer breached a contractual obligation not to disparage the employee and had done so in a racially animated and defamatory manner. Judge Walker would have affirmed the dismissal of each of these claims.

Internal Revenue Code § 7623(b)(4) awards whistleblowers with part of the compensation from administrative actions that proceed “based on” information the whistleblower provides. In Michael Lissack v. Commissioner of Internal Revenue, No. 21-1268, Judge Pillard, joined by Judge Katsas and Senior Judge Randolph, affirmed the Tax Court’s denial of a whistleblower’s claim to proceeds from a IRS tax adjustment that was not based on information the whistleblower provided even though it was discovered during the investigation launched to probe the whistleblower’s allegations. The D.C. Circuit rejected the IRS argument that the Tax Court lacked jurisdiction to review the IRS decision, explaining that § 7623(b)(4) gives the Tax Court jurisdiction over appeals of “[a]ny determination” regarding a whistleblower award under § 7623. The court distinguished this case from Li v. Commissioner, 22 F.4th 1014 (D.C. Cir. 2022), which held that a “threshold rejection” of a whistleblower’s information did not constitute such a determination regarding an award. Unlike in Li, the IRS initiated an examination based on the whistleblower’s information, even though it did not result in a tax adjustment.

The D.C. Circuit also issued its decision in a related case—Luis Villa-Arce v. Commissioner of Internal Revenue, No. 22-1006. Luis Villa-Arce sent information to the IRS Whistleblower Office that he believed showed that a company was falsely claiming deductions per employee every month and overpaying its parent company for IT services. The Whistleblower Office denied Villa-Arce’s application for an award because the IRS took no action on the issues he raised, and instead, recovered on different violations. The Tax Court granted summary judgment for the IRS. In an opinion authored by Judge Pillard, joined by Judge Katsas and Senior Judge Randolph, the court affirmed. It first rejected the argument that the Tax Court lacked jurisdiction, citing Lissack. It then concluded that the IRS decision was not arbitrary and capricious because the administrative record shows that the IRS recovered proceeds based only on its own independent information gathering and not the information Villa-Arce supplied. It was immaterial that the IRS would not have investigated the company but for Villa-Arce’s information.

In the latest twist and turn in the ongoing saga of the delayed construction of the Mountain Valley Pipeline (“MVP”), which when finally complete will bring Appalachian shale gas to the Eastern seaboard, the D.C. Circuit heard challenges to orders of the Federal Energy Regulatory Commission (“FERC”) that included authorization for MVP to resume construction and an extension of MVP’s deadline to finish construction. In Sierra Club v. FERC, Nos. 20-1512 and 21-1040, environmental groups (“Petitioners”) opposed the orders and filed requests for rehearing with FERC, but those requests were denied by operation of law when the agency failed to act on the requests within 30 days. 15 U.S.C. § 717r(a). Petitioners then filed petitions for review in the D.C. Circuit.  While those petitions were pending, the extended deadline to finish construction lapsed, FERC issued a new order with an additional extension, and FERC modified some of the challenged orders in light of arguments raised by Petitioners’ in support of rehearing.   *My law firm, Hunton Andrew Kurth, is involved in related litigation concerning construction of the pipeline.

In an opinion written by Chief Judge Srinivasan and joined by Judges Millett and Wilkins, the court dismissed in part, denied in part, and granted in part the petitions for review.  First, the court determined that the challenge to the deadline extension was moot because that deadline had passed and been superseded.  Second, the court held that it had statutory jurisdiction over the challenges to the modified FERC orders under its recent en banc decision in Allegheny Defense Project v. FERC, 964 F.3d 1 (D.C. Cir. 2020), and that Petitioners did not need to file new petitions for review once the orders were modified.  Third, the court held that FERC acted arbitrarily and capriciously in declining to issue a supplemental environmental impact statement in light of recent state enforcement actions by Virginia and West Virginia against MVP for environmental violations in the pipeline construction process.  FERC failed to offer a reasoned explanation why these developments did not constitute a “significant new circumstance[] or information relevant to environmental concerns and bearing on the proposed action or its impacts.”  40 C.F.R. § 1502.9(d)(1)(ii).  In all other respects, the court upheld FERC’s decisionmaking.  The court remanded the challenged orders (other than the moot extension order) to FERC without vacatur.