Three highlights from the past week in regulatory practice: One court of appeals found that an agency regulation likely violated a plaintiffs’ rights to free speech as applied and remanded for the district court to enter a preliminary injunction. A district court brought the long-running competition over preparing tax forms one step closer to resolution – or perhaps like taxes, not. And an agency necessarily waded into the thorny issues of nonacquiescence by publishing a final rule refining its regional administrators’ authority.
Political Free Speech: The United States Court of Appeals for the District of Columbia Circuit, in Pursuing America’s Greatness [PAG] v. Federal Elections Commission (FEC), last Tuesday reversed a district court judgment and directed the lower court to enjoin the FEC from enforcing regulations that barred the use of a political candidate’s name by an unaffiliated political action committee. This latest challenge to FEC election regulations presents a quintessential United States Constitution’s First Amendment Freedom of Speech as applied challenge: the speech being regulated is specifically being regulated because of its content and its content is unequivocally political.
The regulations in question provide for a binary set of organizations: politician authorized committees and the projects they run must use the authorizing candidate’s name in the politician’s name; unauthorized committees may not. But the FEC also grants an exception from the naming prohibition for unauthorized committees in opposing a named candidate. Plaintiff unauthorized committee sued because it wanted to support a candidate for the Presidency by naming that candidate: “I like [not Ike].”
Without deciding any of the underlying tensions in preliminary injunction precedent, the D.C. Circuit found that there is a substantial likelihood that the naming regulations violates the First Amendment as applied to PAG. Characterization is critical here – the regulations are not a “disclosure” requirement, but a prohibition of speech subject to strict scrutiny. On its face, the regulations draw distinctions based solely on the content of what PAG says (or wanted to say). Further, the FEC did not establish that a speech ban was the least restrictive means of achieving an assumed governmental compelling interest, leaving a substantial likelihood that the bar fails strict scrutiny and violates the First Amendment as applied to PAG.
► The panel avoided deciding, once again, issues of whether the four traditional factors for a preliminary injunction must be established by a likelihood or a substantial likelihood, and whether a court may apply a “sliding scale” that reaches below “likelihood” when a showing of one factor outweighs others. In fact, however, the panel applied that very sliding scale, because seeing likely success in PAG’s constitutional challenge, the panel viewed “more favorably” PAG’s arguments regarding irreparable injury, the balance of the equities, and the public interest. The court needs to decide these issues transparently.
Tax Preparers’ End: The United States District Court for the District of Columbia granted judgment on the pleadings (read: failure to state a claim) to the agency in the most recent edition of the long-running economic competition over preparing taxes in American Institute of Certified Public Accountants [AICPA] v. IRS (III). Like taxes, however, the competition will continue without end between attorneys, certified public accountants, enrolled agents, and unenrolled tax-return preparers.
In 2011, the Internal Revenue Service (IRS) promulgated a rule requiring unenrolled preparers to pass a qualifying examination, complete fifteen hours of continuing-education courses annually, and be subject to discipline. The D.C. Circuit, in Loving v. IRS, ultimately struck down that rule as not authorized by the statute relied upon by the IRS – concluding that unenrolled tax-return preparers are not representatives of the client as that term is used in a pre-IRS statute.
In response, the IRS released a new Revenue Procedure, without advance notice and an opportunity for public comment, creating a voluntary Annual Filing Season Program to encourage unenrolled tax return preparers “to complete continuing education courses for the purpose of increasing their knowledge of the law relevant to federal tax returns.” The IRS would grant participants reputational benefits (i.e. competitive advantages) through a “record of completion” and listing in an IRS directory (along with the attorneys, CPA’s and enrolled agents) and the ability to appear in examinations of forms they prepared. The CPAs sued, ultimately gaining competitive-injury-via-brand-dilution-standing from the D.C. Circuit in AICPA II and a remand to the district court. Of course, the “voluntary program” has its own internal issues.
Now the district court is faced with a motion for judgment on the pleadings arguing that the CPAs’ interest does not fall within the substantive “zone-of-interests” protected by the statute that gives rise to a cause of action under the Administrative Procedure Act (APA) – i.e. substance, not jurisdiction. Here, the court found that the CPAs fall outside the zone of interest protected by Congress’ enactment of the Internal Revenue Code.
► Critical here is the notion that the APA does not create the substantive zone of interest, but creates a set of procedural requirements and jurisdiction to enforce statutory grants of that interest. The CPAs’ did not argue that any IRS’ APA procedural faults harmed them. The APA requires a careful structuring of constitutional, statutory, and procedural arguments.
Intercircuit Nonacquiescence and Consistency: Environmental Protection Agency (EPA) published an Amendments to Regional Consistency Regulations final rule last Wednesday that presents difficult issues. All agencies contend with multiple circuit decisions affecting the same regulations and even intercircuit conflicts, but EPA operates under a more complicated version of federalism that can exacerbate conflicting judicial interpretations.
As with most agencies, EPA is geographically organized differently from the geographic organization of the United States Courts of Appeal. To oversimplify the Clean Air Act (CAA), EPA sets national emissions standards that are judicially reviewable only in the D.C. Circuit. States promulgate implementation plans and EPA makes individualized determinations that are reviewable in the regional Courts of Appeal. EPA’s interpretation can cross state lines and Regional Administrators cross Court of Appeals jurisdictional boundaries.
The United States Court of Appeals for the Sixth Circuit, in Summit Petroleum Corp. v. EPA, rejected EPA’s interpretation that facilities satisfy the regulatory requirement of being “located on . . . adjacent properties” because, although physically independent, they are “truly interrelated.” EPA took the position that it would not acquiesce outside the Sixth Circuit – a not uncommon position because the decision applied to a specific case before a specific court of appeals – that EPA “does not intend to change its longstanding practice of considering interrelatedness in the EPA permitting actions in other jurisdictions.” Doctrinally, arguments can be made pro and con for nonacquiescence and other agencies have contended with equally problematic inconsistent precedent (e.g. Social Security Administration (SSA) benefits decisions).
Upon challenge to that directive, the D.C. Circuit, in National Environmental Development Association’s Clean Air Project v. EPA, held that EPA violated its own “consistency regulations.” EPA now is amending the regional consistency regulations to provide flexibility. That regulation might now be challenged based on the CAA’s command for national consistency.
► EPA’s uniformity / nonacquiescence under the CAA is more complicated than similar issues in other agencies, in part, because the CAA imperfectly supplants and supplements the requirements of the APA – some provisions of both may apply to a given regulation or adjudication. At the same time, EPA presents the problems of national uniformity and nonacquiescence with greater clarity than in the past. Although complicated by the specialized nature of the process, this example is worth much further thought and study to better understand the larger issues of agency nonacquiescence.
Some caution must also be exercised because EPA treads also an equally delicate line between an agency’s interpretation of its delegated authority and how that authority is judicially reviewed. EPA may not fully appreciate the potential remedial consequences (both interim and final) of that imperfect CAA / APA statutory relationship, and may have stumbled by suggesting an interpretation of the courts’ jurisdiction, not its own.
EPA correctly points out that the United States Supreme Court (SCOTUS) has limited capacity to resolve intercircuit conflicts. Agencies, however, just like other litigants with nationwide portfolios, will attempt to percolate conflicts and nonacquiescence to their advantage – but no litigant has that capacity to either percolate or to resolve conflicts like the United States.