High court may agree to review Brand X, plaintiffs’ attorneys hope

As the U.S. Supreme Court decides whether to hear 21 relisted certiorari petitions, a lesser-known case that challenges the doctrine allowing government agencies to overturn federal court decisions could be a gamechanger for non-governmental litigants, say plaintiffs' attorneys.

The court was expected to decide by Friday whether to hear the case that challenges National Cable & Telecommunications Association v. Brand X Internet Services.

"Brand X applies to every federal agency that wants to ignore court precedents," Adi Dynar of the New Civil Liberties Alliance, petitioner in the case awaiting the high court's review, said Thursday. "It really is a silent constitutional crisis that needs to be revisited and revised sooner than later."

In Brand X, the high court held in 2005 that a government agency's "permissible reading" of a statute trumps circuit court precedent if the prior court interpreted a statute that was silent or ambiguous with respect to the specific issue stated in the petition.

In all other situations, stare decisis dictates that opinions of federal appellate panels can be overruled only by en banc panels, the Supreme Court or a properly enacted statute.

"The general critique of Brand X is that federal agencies should not be able to overturn federal court decisions they don't like just by writing a new regulation," said Mark Chenoweth, also of the New Civil Liberties Alliance and a petitioner in the case seeking a high court hearing, Baldwin v. U.S., 19-402

"No other litigant in federal court can change a federal court decision just by its own action, and federal agencies shouldn't be able to either," Chenoweth said in an interview Thursday. "Federal agencies should have to appeal decisions they don't like to a higher court, an en banc court, or else seek cert in the Supreme Court. But they shouldn't be able to change decisions just by writing a new regulation reinterpreting the statute."

In the extant case the Baldwins, a couple who produced the 2004 Academy Award-winning movie "Ray," sued the IRS when the agency told them it never received their tax refund claim for more than $160,000.

After the Baldwins' assistant testified in U.S. district court that he had physically mailed the refund claim himself, the Baldwins won. However, after the IRS appealed to the 9th U.S. Circuit Court of Appeals, Brand X deference was invoked and the decision was reversed.

As Dynar explained Thursday, the Baldwins mailed their refund in June 2011. Two months later, the IRS amended its own regulation regarding the kind of evidence required to prove a refund had been sent. The IRS narrowed a century-old common law mailbox rule which allows anyone seeking a refund to use standard mail. The agency instituted a new rule which only allows refund claims via registered or certified mail.

Deferring to the IRS, the 9th Circuit reversed the lower court's decision, prompting the Baldwins to file a certiorari petition.

"What were my clients supposed to do?" Chenoweth said. "There was an on-point 9th Circuit precedent interpreting the law, saying what they did was legal and the right thing to do and the right way to do it. However, two months after they acted, the IRS put out a new regulation changing the law. Were my clients supposed to not believe an on-point precedent from the circuit court of appeals in their jurisdiction? Were they supposed to predict that the IRS was going to change the law in two months and follow what was then still a proposed regulation, rather than settled 9th Circuit law? That's the kind of problem that Brand X creates for people by allowing agencies to overturn settled precedent."

If the doctrine is not entirely overturned, Chenoweth and Dynar seek to narrow the scope of Brand X's application or to limit the deference to only apply when a prior federal court did not use traditional tools of statutory analysis in interpreting the statutory provision at issue.

"Brand X is a way for an agency to simply ignore the stare decisis effect of prior court decision," Dynar said. "It allows any agency, like the IRS for example, to pick and choose decisions it dislikes and then discard them. However, it's not just a tax issue. Imagine a Veterans Administration issue, a Social Security Administration issue, an immigration issue."