But all these years that I’ve been here, ain’t nobody got past Red – except Article III.

“Those who prefer to hunt deer without the use of dogs (still-deer hunters) complain that
dog-deer hunting is disruptive and unsportsmanlike. Adjacent landowners complain that dog-deer hunting leads to shooting near houses and from roads, fights between dog-deer hunters and landowners, roads being blocked by dog-deer hunters, dogs running across private property, and trespass.  Dog-deer hunters defend the practice based on its history as a traditional method of hunting in Louisiana dating back to the colonial period.”  The plaintiffs in Louisiana Sportsmen Alliance, LLC v. Vilsack sought to enjoin the U.S. Forest Service from banning dog-deer hunting in the Kisatchie National Forest.  The Forest Service won on the merits in the district court, and for the first time on appeal, argued that the plaintiff organization lacked standing. Expressing vexation: “The district court was ill-served by the Forest Service in this regard, because the Forest Service never argued that the Alliance lacked organizational standing until this appeal,” the Court nevertheless considered the issue because “Article III standing is a jurisdictional requirement that cannot be waived,” and then dismissed the appeal because the plaintiff association had not shown its standing to bring suit.  No.13-31260 (Oct. 28, 2014, unpublished).

Was Deepwater Horizon a “stationary source”?

The Chemical Safety and Hazard Investigation Board served administrative subpoenas on Transocean in connection with the Deepwater Horizon disaster.  United States v. Transocean Deepwater Drilling, Inc., No. 13-20243 (Sept. 18, 2014).  Transocean contended that the Board lacked jurisdiction because the ill-fated rig was not a “stationary source” within the meaning of the Board’s enabling statute; the majority disagreed, concluding that at the time of the accident, the rig “was physically connected (though not anchored) at that site and maintained a fixed position.”

Transocean also contended that this sentence deprived the Board of jurisidiction: “The Board shall not be authorized to investigate marine oil spills, which the National Transportation Safety Board is authorized to investigate.”  After a foray into the grammatical thicket of “which” v. “that,” the majority concluded that the Board was not categorically barred from investigating oil spills in light of the “overall regulatory scheme.”

A dissent disagreed with both conclusions, reminded that “[f]or the sake of maintaining limited government under the rule of law, courts must be vigilant to sanction improper administrative overreach,” and noted that at least 17 other investigations were conducted into the accident.

The regulation, my friend, is blowin’ in the wind.

TexasBarToday_TopTen_Badge_SmallThe Public Utilities Regulatory Policies Act (“PURPA”) directs the FERC to encourage alternative energy providers, called “Qualifying Facilities” under that statute.  In a novel arrangement that encourages flexibility but also can raise “troublesome” Tenth Amendment concerns, PURPA directs state agencies — such as the Texas PUC — to adopt rules that comply with FERC’s regulations and help implement PURPA.  Exelon Wind 1, LLC v. Nelson, No. 12-51228 (Sept. 8, 2014) (quoting Power Resource Group v. Public Utility Comm’n of Texas, 422 F.3d 231 (5th Cir. 2005), and FERC v. Mississippi, 456 U.S. 742 (1982)).

The Texas PUC, acknowledging this mandate as well as the vagaries of wind power generation in the Texas Panhandle, enacted a rule limiting the pricing benefits of PURPA to “Qualifying Facilities able to forecast when they will deliver energy to the utility.”  Exelon, a wind power producer, challenged the validity of this rule under PURPA.

The Fifth Circuit first rejected a jurisdictional challenge, finding that Exelon’s attack on the rule was an “as-applied” challenge — over which federal courts have jurisdiction – as opposed to a “facial” challenge reserved to state courts.  In so reasoning, the Court declined to give Chevron deference to a “Declaratory Order” by FERC.  On the merits, — again declining to give the FERC letter deference — the Court upheld the PUC regulation: “The PUC had the discretion to determine the specific parameters for ehwn a wind farm can form a Legally Enforceable Obligation, and . . . left open the possibility that other wind farms might be able to provide firm power . . . .”

A dissent, agreeing with the jurisdictional analysis, differed on the merits, finding that the PUC rule conflicts on its face with the applicable FERC regulation, and that deference was due to the “FERC’s reasonable interpretation of that regulation according to well-established principles of adminstrative deference.”

How taxing is it to enter the Ritz?

The unfortunate taxpayer in Whitehouse Hotel Limited Partnership v. Commissioner of Internal Revenue lost a multi-million dollar dispute about the value of an easement, related to the spectacular Ritz-Carlton on Canal Street in New Orleans, and as a result faced a substantial penalty.  No. 13-60131 (June 11, 2014).  The Fifth Circuit affirmed the Tax Court on the merits but reversed as to the penalty, noting: “We are particularly persuaded by [Taxpayer’s] argument that the Commissioner, the Commissioner’s expert, and the tax court all reached different conclusions” on the core valuation issue.  Acknowledging that this area is fact-specific, the Court held as to the taxpayer’s conduct: “Obtaining a qualified appraisal, analyzing that appraisal, commissioning another appraisal, and submitting a professionally-prepared tax return is sufficient to show a good faith investigation as required by law.”

The rain, in main, did not fall on the cranes

Aransas Project v. Shaw presented a challenge to an injunction against the Texas Commission on Environmental Quality, prohibiting the TCEQ from issuing new permits to withdraw water from rivers that feed the estuary where whooping cranes live.  No. 13-40317 (June 30, 2014).  The whooping crane, described in the opinion as a “majestic bird that stands five feet tall,” is an endangered species, and the only known wild flock lives in Texas during winter.

The Fifth Circuit first rejected an argument for Burford abstention, finding that this case presented a “broader grant of administrative and judicial authority by state law to remedy environmental grievances” than a prior opinion where it allowed abstention in a similar sort of environmental dispute.  Cf. Sierra Club v. City of San Antonio, 112 F.3d 789 (5th Cir. 1997).

The Court then reversed the injunction, finding no causation “in the face of multiple, natural, independent, unpredictable and interrelated forces affecting the cranes’ estuary environment.”  While couched in language about proximate causation and environmental law, the Court’s analysis is a classic illustration of the recurring Daubert problem of excluding alternate causes.  (In the course of this discussion, the butterfly effect theory makes a cameo appearance in footnote 10.)

When does an administrative action trigger the duty to defend? — UPDATED

A company received “PRP” (Potentially Responsible Party) letters from the EPA, followed by a “Unilateral Administrative Order” requiring the company to do remedial work.  Its CGL insurer denied coverage, contending that these administrative communications under CERCLA were not a “suit” that triggered the duty to defend.  McGinnes Industrial Maintenance Corp. v. Phoenix Ins. Co., No. 13-20360 (June 11, 2014, unpublished).  The insured argued that the word “suit” was ambiguous and thus led to coverage; the insurer argued that a broad reading of “suit” was inconsistent with the word “claim” in the policy and the word “petition” in the usual phrasing of the Texas “eight corners” rule.  Finding the issue important and that “the parties each make reasonable arguments” about it, the Fifth Circuit certified this question to the Texas Supreme Court: “Whether the EPA’s PRP letters and/or unilateral administrative order, issued pursuant to CERCLA, constitute a ‘suit’ within the meaning of the CGL policies, triggering the duty to defend.”  That Court has now answered yes and the case has been remanded for further proceedings.

Giant.

Burnett Ranches, Inc. operates the sprawling Four Sixes and Dixon Creek ranches in the Texas Panhandle; its history runs to Captain Samuel “Burk” Burnett’s land dealings in the 19th Century with Comanche chief Quanah Parker.  The IRS contended that its current owner (Captain Burnett’s great-granddaughter) was subject to accrual rather than cash accounting pursuant to a law against “farm syndicate” tax shelters.  Burnett Ranches v. United States, No. 13-10403 (May 22, 2014).  The Fifth Circuit affirmed summary judgment for the ranch as to an exception to that law for active farm operators: “To accept the government’s overly expansive reading of § 464 by crediting its overly narrow reading of the Active Participation Exception would be to sanction ‘administrative legislation’ by an Article II executive agency.  This we decline to do, agreeing instead with the district court that the government’s efforts fail, grounded as they are in nothing more than the fact that legal title to Ms. Marion’s interest in Burnett Ranches stands in the name of her S corp.” Of general interest, the Court concluded that “interest” has a broad, nontechnical meaning so long as it does not have a “narrowing modifier.”

Chevron lives.

Even by the standards of tax cases, BNSF Railway Co. v. United States is arcane, but the underlying statutory analysis is of broad general interest.  No. 13-10014 (March 13, 2014). The first issue — the taxability of certain stock options — turned on whether a Treasury regulation about the meaning of the term “compensation” was entitled to Chevron deference.  The Fifth Circuit held that it was — as to the first Chevron factor, the Court found the term ambiguous, noting (1) the lack of a similar statute using the term, (2) variation among dictionary definitions, and (3) ambiguity in business usage, such as there was, at the time the relevant statute was passed in the 1920s-40s.  [Unintentional capitalist wit appears in footnote 63, which refers to the “Rand House Dictionary” rather than the “Random House Dictionary” in a citation about “capital or finance.”]  The Court then found the regulation reasonable, noting its general consistency with the goals and structure of the statute and its legislative history.  A second holding illustrates the application of the “specific-general canon” and “the rule against superfluities.”

Same but different

The plaintiff in Bradberry v. Jefferson County, Texas alleged that he was terminated from his job as a county corrections officer, in violation of federal law, because he was called to service in the Army Reserve during Hurricane Ike.  No. 12-41040 (Oct. 17, 2013).  A key issue was whether a county administrative proceeding about his termination had collateral estoppel effect on his later federal lawsuit.  The Fifth Circuit, noting that administrative proceedings can create collateral estoppel if state law would allow it, held that the questions were different and no estoppel arose: “We conclude that a finding that Bradberry was discharged due to a disagreement about military service is not the equivalent of a finding that the County was motivated by his military status to discharge him.” While analogical reasoning from this fact-specific holding may pose challenges, it still provides a clearly-stated example of when issues become “identical” for purposes of issue preclusion.

No SEC, no Dodd-Frank whistleblower

The plaintiff in Asadi v. G.E. Energy (USA), LLC was terminated after making an internal report of a potential securities law violation.  No. 12-20522 (July 17, 2013).  The Fifth Circuit affirmed the Rule 12 dismissal of his whistleblower claim based on Dodd-Frank: “Based on our examination of the plain language and structure of the whistleblower-protection provision, we conclude that the whistleblower protection provision unambiguously requires individuals to provide information relating to a violation of the securities laws to the SEC to qualify for protection . . . . (emphasis in original)”  The Court acknowledged a more expansive SEC regulation on the point, but found it was not entitled to Chevron deference given the clarity of the statute.

“Filed rate” doctrine preempts misrepresentation claim about pipeline service

“The court subordinated the equities of a particular situation to the overmastering need for certainty in the transactions of commercial life.”  Benjamin Cardozo, The Growth of the Law 111 (1924).  In Medco Energi US, LLC v. Sea Robin Pipeline Co., the plaintiff — a natural gas producer — argued that the defendant pipeline company had misrepresented how long it would take to make repairs after Hurricane Ike.  No. 12-30791 (July 2, 2013).  The Fifth Circuit found this claim preempted by federal law under the “filed rate” doctrine, under which a rate filed with FERC is conclusive “[e]ven if a rate is misrepresented to a customer and the customer relies on that rate . . . .”  (citing AT&T v. Central Office Telephone, 524 U.S. 214 (1988).  Otherwise, “[b]ecause [plaintiff] only paid for interruptible service subject to these provisions, allowing recovery for damages incurred when it could not use [defendant’s] pipeline would conflict with the interruptible rate and the provisions of the [filed] tariff.”

 

“Much ado about nothing,” says IRS.

In Nevada Partners Fund LLC v. United States, the Fifth Circuit affirmed the district court’s approval of several IRS rulings about investment arrangements.  No. 10-60559 (June 24, 2013).  The thorough opinion details a “straddle trade” investment, which in theory can generate profit, but here “as designed and carried out, [the trades] simply could not produce a profit; they were calculated and managed to produce offsetting gains and losses.”  Various penalties based on the partnerships’ negligence and lack of care were also affirmed.

14th Amendment and regulation of monks building funeral caskets

“The thirty-eight monks of St. Joseph Abbey,” unable to earn income from the abbey’s timberland after Hurricane Katrina, began to sell handmade funeral caskets at a price significantly lower than that offered by funeral homes.  The Louisiana State Board of Embalmers and Funeral Directors contended that these sales violated state regulations, and the monks sought relief under the 14th Amendment, arguing that the regulations had no rational basis as applied to them.  St. Joseph Abbey v. Castille, No. 11-30756 (rev’d Nov. 21, 2012).  After an exceptionally thorough review of due process principles in the context of “rational basis review” of economic regulation (which Judge Haynes declined to join as unnecessary), the Court certified a question to the Louisiana Supreme Court about the scope of the relevant enabling statute.

Government immune in Katrina litigation – earlier panel opinion withdrawn

Earlier this year, the Fifth Circuit largely affirmed a series of rulings about governmental immunity in litigation about flood damage from Hurricane Katrina, allowing some cases to proceed and finding the government immune as to others.  On rehearing, the Court found that the “discretionary-function exemption” to the Federal Tort Claims Act created immunity even if the Flood Control Act did not.  In re Katrina Canal Breaches Litigation at 25-26 (Sept. 24, 2012) (“Our construction of the FCA leaves undisturbed the district court’s ruling on that issue.  Our application of the DFE, however, completely insulates the government from liability.”).