War Story – Judge Henry J. Friendly (8/31/23)

I am writing an article that, for reasons not relevant to this blog entry, I have to address Judge Henry J. Friendly’s lament about two inconsistent lines of authority for deference in Pittston Stevedoring Corp. v. Dellaventura, 544 F.2d 35, 49 (2d Cir. 1976), here, aff’d sub nom. Northeast Marine Terminal Co. v. Caputo, 432 U.S. 249 (1977). As many, particularly older practitioners, will know, Judge Friendly was a giant among appellate judges, said to be the best of his generation. See, e.g., Pierre Laval (a 2d Circuit Judge), Remarks on Henry Friendly, 15 Green Bag 2d 257 (2012), here (highly recommended for practitioners who are not very familiar with Judge Friendly).

I have a personal Judge Friendly anecdote from an appearance for DOJ Tax Division Appellate Section in my first brief and oral argument. Fishman v. Commissioner, 420 F. 2d 491 (2d Cir. 1970) (Per Curiam with authorship not attributed), here. I was assigned the case on the first day in the Appellate Section in June 1969. The Chief of Appellate, the great and wonderful Lee Jackson, did not assign a difficult case to newbies but he did say that if I lost the case (involving the timely-mailing timely filing, § 7502 regulations), a large part of the edifice of tax administration would fall. (He was trying to infuse importance into a case that would be hard to lose.) He also told me that my opposing counsel was Morton Ginsburg of New York but, since I heard that orally, I could only think of Marty Ginsburg who I had as a Professor of tax law (yes, that Marty Ginsburg, see Wikipedia here) and once testified was the smartest tax lawyer in the universe. (Some hyperbole there, but not much.) After I got over the shock of thinking it was Marty, I settled down to write the brief.

Being my first, the Appellate Section gave me a practice oral argument before three seasoned appellate lawyers, as best I recall Mickey Rothwacks, Bill Friedlander, and Grant Wiprud. At the conclusion, they pronounced that I would be a better oral advocate than brief writer. (I got much better at brief writing but started very low; which surprises me because one of the best lawyers in Section, Tom Stapleton, reviewed the brief and always in my experience brought the brief up to high standards on review.)

At oral argument before the 2d Circuit before Judges Friendly, Smith, and Anderson, though, I had 30 minutes for argument and planned to use no more than 15 minutes unless some of the judges’ questions prompted me to go longer. About 3 minutes into the argument, I concluded that each panel member was reading something other than paying attention to my oral argument (I inferred each was reading either the briefs or clerks’ briefing memoranda for the next case). So, I quickly and succinctly summarized my argument and closed in 5 or 6 minutes total. After I concluded, Judge Friendly thanked me and allowed opposing counsel to rebut. I don’t know whether Judge Friendly’s thanks was courtesy for a fresh but unpolished lawyer, a comment on the quality of the argument (I doubt), or that I quickly brought it to a close in 5 or 6 minutes rather than 15 or 30 minutes wasting everybody's time (I suspect).

Republicans Press Again on SOPRA Legislation that, They Claim, Eliminates Deference (8/30/23)

I am presently drafting an article, the principal point of which is to bring deference in tax cases to the discussion of the original meaning of APA § 10(e) of the original APA in 1946 (now codified at 5 USC § 706, here), which requires court review of agency action, in this case, agency regulations interpretations of ambiguous statutory text. The question is whether de novo review includes or does not include deference. For an example where prominent scholars have agreed upon de novo review including deference, see Conference of the United States (“ACUS”) and the American Bar Association Section of Administrative Practice and Regulatory Practice (“ACUS/ABA Site”), here:

Agency conclusions on questions of law are reviewed de novo. When a court reviews an agency’s construction of the statute it administers, the court is required to uphold Congress’s intent where Congress has directly spoken to the precise statutory question at issue. If the statute is silent or ambiguous with respect to the specific issue, however, the agency’s interpretation of the statute must be upheld if the agency’s construction of the statute is “permissible.” See Chevron USA Inc. v. Nat. Res. Def. Council, Inc., 467 US 837 (1984).

The review of tax cases applying deference before enactment of the APA in 1946 (thus setting the background for the meaning of the words in the APA), ignored or discussed only at the margins by most pundits pontificating. In my article, I will show that the mainstream discussion at the time of enactment of the APA in 1946 treated deference to agency interpretations as a process for interpreting de novo with deference, like tools of interpretation applied during the de novo review of the agency interpretation just as the quote above says it is. I discuss some tax deference cases and articles before 1940 (I peg that date to a claim by UVA Law Professor Bamzai in his acclaimed article, The Origins of Judicial Deference to Executive Interpretation, 126 Yale L.J. 908 (2017), here, that there are 2 key periods to understand the state of deference prior to enactment of the APA in 1946 -- (i) pre 1940 and (1940 (app) to the date of enactment. I read the case authority and scholarly discussion differently than does Professor Bamzai particularly because of the tax case authority and scholarly discussion which he basically ignores.

I pause from attention to that future (if ever article) to write this blog to bring attention to readers a recent Republican legislative initiative to statutorily repeal deference by amending § 706 to require de novo review without deference. (The current brouhaha and misinformation about Chevron and how and when it works is mostly political and ideological emerging from hatred and fear, at least imagined, of the administrative state.)  Actually, this Republican legislative initiative goes back several years to other Congresses, all pursued with smoke and mirrors but, thankfully, no legislation.

On June 15, 2023, the House passed an act with the “Short Title” of “This Act may be cited as the ‘Separation of Powers Restoration Act of 2023” or “SOPRA”. (See Congress.gov, here,  on the bill and its movement through Congress.) The net effect intended by the Republicans introducing SOPRA in the House and voting to pass it over Democrat opposition is, so Republicans believe, is to eliminate deference. The act thus would amend APA 5 USC 706(a) to read as follows (new language is redlined):

(a)         To the extent necessary to decision and when presented, the reviewing court shall decide all relevant questions of law, interpret constitutional and statutory provisions, and determine the meaning or applicability of the terms of an agency action and decide de novo all relevant questions of law, including the interpretation of constitutional and statutory provisions, rules made by agencies, and interpretative rules, general statements of policy, and all other agency guidance documents. Notwithstanding any other provision of law, this subsection shall apply in any action for judicial review of agency action authorized under any provision of law. No law may exempt any such civil action from the application of this section except by specific reference to this section.

For the House Committee Report showing the amended entire § 706 with the changes in italics, see here.

This quixotic Republican adventure with no reasonable prospect of being enacted any time soon is a play to their base who Republicans have convinced should hate the administrative state as much as Republican politicians claim they (the Republican politicians) do. They claim that deference  is an administrative agency takeover from the courts of a large swath of the interpretive process. See Daniel Goldbeck & Shantanu Kamat, The Administrative State After Chevron (American Action Forum: Insight 8/8/23), here (caveat, this is a screed by an organization, the American Action Forum which as the name implies is a Republican Group not surprisingly anti-deference; why do Republicans consistently wrap their political agendas in things like America First or, in this case, the American Action Forum to imply that those who oppose are unamerican? That’s a rhetorical question.) Why is it when Republicans raise such whipping boys (the IRS is one, but the deference whipping boy goes to all agencies) as this can we assume that there is much hyperbole exceeding the bounds of critical analysis?

I have the following questions:

Federal Tax Procedure Book 2023 Editions on SSRN (8/19/23)

The 2023 versions of the Federal Tax Procedure Book are now posted on SSRN. SSRN still has to approve them, but I think that those interested can view or download them in the interim. See here.

Liberty Global Court Holds that Government May Proceed by Collection Suit without a Notice of Deficiency (8/13/23)

I earlier wrote on an unresolved issue in United States v Liberty Global (D. Colo. Civil Dkt.22-cv-02622-RBJ), CL here. The issue was whether, as in this case, the Government could bring a tax collection suit without first issuing a notice of deficiency. See Further Commotion in Liberty Global Collection Suit Over Whether a Notice of Deficiency Is Required Before Collection Suit (1/16/23; 1/19/23), here.

The district court resolved the issue in United States v. Liberty Global, Inc. (D. Colo. Opinion dated June 1, 2023), CL here. The Court summarizes its holding (Slip Op.. 5-6):

          LGI’s proposition that § 6213(a) was intended to convert the administrative route to a plenary scheme for income tax collection is inconsistent with the weight of authority among courts who have addressed this issue. Moreover, the analysis required to reach that conclusion does not comport with canonical approaches to statutory interpretation, which charge courts to refrain from adopting interpretations that would displace longstanding common-law rights or disrupt established distributions of power among governmental bodies in the absence of clear language demonstrating Congress’s intent to do so. See FBI v. Fazaga, 142 S. Ct. 1051, 1060-1061 (2022). Because there is no indication that § 6213(a) was intended to supplant the existing common-law avenue for the government to recover unpaid taxes, the Court will not infer that intent here.

          Therefore, this analysis adopts the proposition that there exist two avenues for the government to collect unpaid taxes: the administrative route (assessment and collection) and the common-law route (filing suit on the debt). Defendant alleges a defect in the government’s compliance with the requirements to proceed via the administrative route. However, compliance with those requirements is irrelevant here because the government does not seek to proceed via the administrative route (and in fact was foreclosed from doing so by defendant’s own maneuvers), and because defendant has not shown that the notice requirements in the administrative process have been or should be read onto the alternative common-law process.

 JAT Notes:

Some Justices' Aversions to Tax Cases (8/4/23; 9/6/23)

 Over the years, I have accumulated some interesting insights from Supreme Court Justices on how they view tax cases. Generally, in the snippets I have accumulated, it appears that Supreme Court Justices (or some representative number of them) dislike tax cases. I wanted to say in my article that part of which may have motivated Justice Jackson, Wikipedia here, the author of a key deference case, Dobson v. Commissioner, 320 U.S. 489 (1943), here, (Caveat, Dobson is a key case but subtle on the issue of deference to agency interpretations; I discuss Dobson in my article; suffice it to say here Dobson adopted a strong form of deference to Tax Court interpretations, but treated the Tax Court as an agency (as the statute said it was); so the strong form of deference Dobson adopted can be applied to agency interpretations.)

I wanted to say in my article what may have motivated Justice Jackson to adopt a strong form of deference to Tax Court tax interpretations. There are some good reasons to do so--agency expertise, etc. But another reason might be that deference could prevent the courts from being overwhelmed where agency interpretations of the esoterica of tax law when deference would promote more uniformity in the tax law.  (Maybe there's some notion that tax interpretations are good enough for government work; for the surprising history of the idiom, see Good enough for government work and close enough for government work (Grammarist undated, here viewed 8/2/23)) .

In order to support that claim of Justice aversion to tax cases, I had a footnote addressing some anecdotal instances where Justices since then have asserted (sometimes tongue in cheek) aversions to tax cases. The source for some of these is an article titled "Tax Cases" at Greenbag here.

• Justice Souter when asked why he sang with Chief Justice Rehnquist at the Court’s annual Christmas party, responded “I have to. Otherwise I get all the tax cases.”  
• As reported in Bernard Schwartz, The Unpublished Opinions of the Rehnquist Court 7-8 (1996), “Some justices have said that they would rather volunteer to wash windows than be assigned the chore of writing tax opinions.”
• Justice Brennan’s normal reactions to tax case cert petitions: “This is a tax case. Deny.”
• Justice Blackmun, the only Justice with extensive tax background: “If one’s in the doghouse with the Chief, he gets the crud, He gets the tax cases, and some of the Indian cases.”
• Quoting Justice Powell:  “A dog is a case that you wish the Chief Justice had assigned to some other Justice.” A deadly dull case, “a tax case, for example.” 
• Scholars have also noted “the widespread view among the Supreme Court justices that tax cases are boring.”  Lawrence Zelenak, The Court and the Code: A Response to the Warp and Woof of Statutory Interpretation, 58 Duke L.J. 1783, 1789 (2009) (citing James J. Brudney & Corey Ditslear, The Warp and Woof of Statutory Interpretation: Comparing Supreme Court Approaches in Tax Law and Workplace Law, 58 Duke L.J. 1231, 1272-1273 (2009) (“"Some of the Justices likely deferred to Justice Blackmun simply because they were not interested in tax law - something Blackmun recognized inside the Court as well as in public statements.”).

It is interesting that the last quote said that some of the other Justices "deferred" to Justice Blackmun because of his practice prior to coming to the court and supposed interest in and expertise in tax. As my own poster child to show the other Justices should not have deferred to Justice Blackmun, see Frank Lyon Co. v. United States, 435 U.S. 561 (1978), here. And, it is notable that Justice Stevens. the author of Chevron dissented in Frank Lyon (rightly so, I think; I have some atypical reasons for believing that the Court accepted cert in Frank Lyon for one wrong reason, but I may develop that later.). Justice Stevens, not a tax lawyer, got it right; Justice Blackmun, a tax lawyer, got it wrong. Justice Blackmun's opinion for the Court in Frank Lyon breathed hope into the bullshit tax shelter industry that persisted well into the 2000s. I don't recall many tax shelter "more likely than not" opinions that did not claim support from Frank Lyon.

Added 9/6/23:

In preparing an article that features prominently Dobson v. Commissioner, 320 U.S. 489 (1943), I came across some more quotes, like sound bites, that grade the Supreme Court's output in tax cases as substandard which may be a reflected of the Justice's aversion to tax cases note above. Here are some:

Kirk J. Stark, The Unfulfilled Tax Legacy of Justice Robert H. Jackson, 54 Tax L. Rev. 171, 173 (2001) 

Tax lawyers have derided the Supreme Court, complaining that the Court "hates tax cases" and generally bungles the tax cases it does hear.19 Charles Lowndes echoed a longstanding sentiment of the tax bar  when he wrote, "[i]t is time to rescue the Supreme Court from federal taxation; it is time to rescue federal taxation from the Supreme Court.' 20 
   n19 See Erwin N. Griswold, Is the Tax Law Going to Seed? Remarks Before the Annual

Meeting of the American College of Tax Counsel (Feb. 5, 1993), in 11 Am. J. Tax Pol'y 1, 7

(1994). Writing about the Burger Court in 1975, Erwin Griswold commented that Supreme

Court Justices often find "no intellectual interest or challenge in tax cases....

Indeed,... it is hard to find a member of the present Court who has a real 'feel' for tax

law." Erwin N. Griswold, Foreword to Bernard Wolfman, Jonathan LF. Silver & Marjorie

A. Silver, Dissent Without Opinion: The Behavior of Justice William 0. Douglas in Federal

Tax Cases, at xii (1975) [hereinafter Foreword].

   n20 Charles L.B. Lowndes, Federal Taxation and the Supreme Court, 1960 Sup. Ct. Rev.

222, 222. The tax bar's disillusionment with the Supreme Court has provoked some scathing

critiques. See, e.g., Martin D. Ginsburg, The Federal Courts Study Committee on

Claims Court Tax Jurisdiction, 40 Cath. U. L. Rev. 631, 634-35 (1991) ([P]ractitioners

cannot expect, and surely, as rational men and women, practitioners ought not to hope,

that the Supreme Court will take too many tax cases. It is, history teaches, not a job the

high court performs superbly."); William A. Klein, Tailor to the Emperor With No Clothes:

The Supreme Court's Tax Rules for Deposits and Advance Payments, 41 UCLA L Rev.

1685, 1721, 1727 (1994) (characterizing Supreme Court tax opinion as "[gobbledegook"

and suggesting that Court may "lack the tools for effective development of new tax principles

and rules"); Bernard Wolfman, The Supreme Court in the Lyon's Den: A Failure of

Judicial Process, 66 Cornell L. Rev. 1075, 1099 (1981) (noting that "[A] Supreme Court

opinion ought not become the basis for tax lawyers to make a laughingstock of the Court

as they now do ... ").

FYI, the Martin D. Ginsburg noted above was the husband of Justice Ruth Bader Ginsburg. I once testified that I believed he was the smartest tax lawyer in the universe. That was hyperbole but not much.

Posting of General Interest Excisions of General Interest from Final Draft of Article on Chevron Deference (8/4/23)

I am on my last draft of an article discussing the tax angle to the issue of whether § 706 of the APA, 5 USC (originally enacted in 1946, requires, permits, or eliminates deference (a concept applied by the Supreme Court at least since the early 20th century). Deference has appeared in many articulations over the years, now referred to generally as Chevron deference. Chevron U.S.A., Inc. v. Natural Resources Defense Council, Inc., 467 U.S. 837 (1984). The issue is currently before the Supreme Court in  Loper Bright Enterprises v. Raimondo (SEC) (Dkt 22-451) to consider whether it should overrule or modify Chevron deference.  See Supreme Court Grants Cert to Consider Overruling or Clarifying Chevron (Federal Tax Procedure Blog 5/1/23), here.

The article explores the contribution of tax cases and scholarly discussions of how important Supreme Court tax cases are to the issue of deference. Most authorities have either ignored the tax cases and scholarly comments or treated them, shall I say, inadequately.

In preparing the earlier drafts, I find that I was too verbose, particularly in footnotes which may not be important to the reader audience I seek for the article. Accordingly, as I excise materials from the article that readers of this blog might be interested in, I will post them as blogs. (That way, also, in the article, I can just refer to the posts.)

So the next few blogs will have those excisions.