Press coverage of Judge Neil Gorsuch’s nomination to the Supreme Court has noted his intelligent and accessible writing style, including use of a sentence diagram (left) in a criminal case that turned on what elements of the crime required proof of intent. In the same spirit, in dissent from the denial of en banc rehearing in a highly technical case about protection of the dusky gopher frog (right), Judge Edith Jones used a pair of Venn diagrams to illustrate her view of how the Endangered Species Act should operate (below left), contrasted with the panel opinion’s (below right). Markle Interests v. U.S. Fish & Wildlife Service, No. 14-31008 (Feb. 14, 2017).
A detailed review of tax statutes and other authorities resulted in affirmance of a judgment against Bombardier related to the taxation of its “Flexjet” program; the Court summarized: “Because the law and its application to the real world is continually evolving, it is only natural that guidance in Revenue Rulings evolves too. We find a consistent theme, though, in the IRS’s guidance from the earliest Revenue Rulings grappling with this issue: where an entity is responsible for nearly every service and precondition necessary to transport persons in an aircraft, and it charges for those services, it is providing taxable transportation – even if the bona fide owner of the aircraft itself is the person traveling.” Bombardier Aerospace Corp. v. United States, No. 15-10468 (July 25, 2016).
In an uncommon example of a successful application for an appellate stay, the Fifth Circuit stayed the EPA’s rulings about Texas’s haze reduction plans. The Court found a likelihood of success on the merits, based on, inter alia, the degree of deference required by EPA, the lack of on-point authority supporting its position, and statutory limits on its power. As to irreparable injury, the Court noted the substantial compliance costs faced by power companies (to the point of risking “unemployment and the permanent closure plants”), and the lack of any mechanism for them to recover those costs if the EPA’s rule was invalidated. The Court also noted “the threat of grid instability and potential brownouts,” as well as the potential injury from a violation of the federalism principles in the Clean Air Act. Finally, the court “agree[s] with Petitioners that the public’s interest in ready access to affordable electricity outweighs the inconsequential visibility differences that the federal implementation plan would achieve in the near future.” Texas v. EPA, No. 16-60118 (July 15, 2016).
In a significant and technical dispute about Clean Air Act liability related to emissions at Exxon’s complex in Baytown Texas, the Fifth Circuit touched on a matter of broader interest about restitution/calculation of “benefit.” In its analysis of a proper civil penalty, the Court noted that “the effect of spending money to achieve compliance is often not mitigation of economic benefit — rather, plaintiffs may point to such expenditures as evidence of the regulated entity’s economic benefit to the extent the delay in making those expenditures allowed the regulated entity to use the money it saved productively.” Environment Texas Citizens Lobby v. ExxonMobil Corp., No. 15-20030 (May 27, 2016).
The Houston Professional Towing Association, a persistent if unsuccessful litigant, brought its third challenge to the City of Houston’s “SafeClear” freeway towing program. It argued that recent changes to those ordinances had changed the facts enough to remove a res judicata bar from a previous lawsuit. The Fifth Circuit disagreed, concluding that the purpose of the law remained the same (“to promote safety by expeditiously clearing stalled and wrecked vehicles”), and statistics about collisions after the program began were either indeterminate or showed that it enhanced safety. Houston Professional Towing Association v. City of Houston, No. 15-20117 (Feb. 3, 2016).
Dr. Barrash, a member of a professional association of neurosurgeons, testified against Dr. Oishi, who was also a group member. Dr. Oishi settled his case and filed a complaint with the association about Dr. Barrash, alleging (among other claims) that Dr. Barrash failed to review all relevant records. The association censured Dr. Barrash, who then sued the association, claiming a denial of due process and a breach of the association’s contract with its members.
The district court found a denial of due process as to part of the censure, which the association did not appeal. The Fifth Circuit affirmed the Rule 12 dismissal of the rest of Dr. Barrash’s claims: “Dr. Barrash received sufficient due process, including notice, a hearing, and multiple levels of appeal, before he was censured for failing to review all pertinent and available records prior to testifying. Because the district court found only one basis of the censure to be unsupported by due process, the district court was correct in setting aside only that portion of the censure. Furthermore, no Texas court has recognized a breach of contract challenge to a private association’s disciplinary process.” Barrash v. American Association of Neurological Surgeons, No. 14-20764 (Feb. 3, 2016).
The district court abstained under the “primary jurisdiction” doctrine in deference to a FERC proceeding. On the threshold question of appellate jurisdiction, the Court concluded that Hines v. D’Artois, 531 F.2d 726 (5th Cir. 1976) was still good law, and allowed it to consider an otherwise-interlocutory appeal: “[T]he district court’s order resulted in Occidental being ‘effectively out of court’ and therefore functioned as a final decision.” On the merits, the Court remanded with instructions to not stay the court case indefinitely, but to instead stay for 180 days and assess the status then. Occidental Chem. Corp. v. Louisiana Public Service Comm’n, No. 15-30100 (Jan. 4, 2016).
Susan Rothkamm sued for wrongful levy, after the IRS seized a CD in her name to satisfy a tax liability of her husband. The Fifth Circuit reversed the dismissal of her claim, finding that she had standing as a “taxpayer” under the broad definition of 7701 of the Internal Revenue Code: “The term ‘taxpayer’ means any person subject to any internal revenue tax.” The Court also found that limitations was tolled during the pendency of her application for a Taxpayer Assistance Order, and that the IRS did not have discretion to affect the length of that tolling period. Rothkamm v. United States, No. 14-31164 (Sept. 21, 2015). A dissent warned: “I dissent from the majority’s newly minted tolling rule. While this creativity is driven by a desire to achieve fairness, it suffers the vice common to such endeavors – it does the opposite by disrupting a carefully structured regime for the resolution of disputes between the IRS and property owners.”
The issue in United States v. CITGO was whether an “equalization tank” — a holding tank that plays a role in the process for handling oil refinery wastewater — is an “oil-water separator” within the meaning of the regulations implementing the Clean Water Act. The jury instructions quoted the regulation’s definition of an oil-water separator and then added: “[t]he definition of oil-water separator does not require that [it] have any or all of the ancillary equipment mentioned such as forebays, weirs, grit chambers, and sludge hoppers . . . . An oil-water separator is defined by how it is used.” The Fifth Circuit found an abuse of discretion in that additional sentence and reversed CITGO’s convictions: “This purely functional explanation is not what [the regulation] says, however: it defines an oil-water separator by how it is used and by its constituent parts. . . . Although the jury was also provided the exact text of Subpart QQQ, the court’s instruction told them what it means and thus undoubtedly affected the verdict. For this harmful error, the Clean Air Act convictions must be reversed.” No. 14-40128 (Sept. 4, 2015).
The Department of Agriculture fined Bodie Knapp (d/b/a “The Wild Side”) $395,000 for violations of regulations about the purchase and sale of exotic animals. The Fifth Circuit largely affirmed, reviewing several basic concepts of administrative law in the process:
- A clear regulation about a regulatory exemption trumps an arguably inconsistent summary of the regulation in an agency publication.
- Even in an environment of considerable deference, an agency ALJ must provide enough explanation so the appellate court can “reasonably discern the reason” for his ruling. Accordingly, the Court remanded for further findings as to whether “aoudad, alpaca, and miniature donkeys are ‘animals’ . . . and not ‘farm animals,'” and about the purchasers’ intentions to display “one alpaca, one auodad, two zebras, one wildebeest, two addax, seven buffalo, three nilgai, four chinchilla and one axis deer.” (No partridge in a pear tree was involved in the case.)
- It is a “heavy burden” to prove estoppel from statements made by an agency employee, and proof of a misrepresentation is only one element of that defense.
- A sale of two lemurs (as opposed to a donation) can be proven with evidence of the receipt of two zebras shortly after the delivery of the lemurs.
The opinion also affirmed on several challenges to the penalties, finding the agency’s position to not be unreasonable. Knapp v. U.S. Dep’t of Agriculture, No. 14-60002 (July 31, 2015).
Hamsher was admitted to “Timberline Knolls Residential Treatment Center” for mental health care; her employer did not pre-authorize her treatment. Unfortunately for the employer, its right under its healthcare plan to insist on precertification applied only to care in a “hospital,” and the Fifth Circuit concluded: “the administrative file contains only claim forms, none of which provide an indication as to whether Timberline is a ‘hospital’ as defined under the Plan. The name is suggestive, of course, but title alone does not constitute the type of ‘substantial evidence’ that [the employer] must put forward.” Accordingly, the Court rendered judgment for the employee, in a rare appellate reversal of an ERISA dispute.