Howard and Karen Baldwin v. U.S.

CASE SUMMARY

Howard and Karen Baldwin, who produced the critically acclaimed movie Ray(2004) based on Ray Charles’ life, had filed a claim for the refund of their 2005 income tax. Four months before the deadline to claim a refund, they mailed a refund claim to the Internal Revenue Service (IRS) to recover approximately $168,000 in overpaid taxes by regular United States mail.

IRS claimed it never received their refund claim and refused to give them their money back. The Baldwins then sued IRS to obtain the refund. There was an easy way to prove—and they did so at trial—that they had in fact mailed the claim on June 21, 2011, four months before the October 15 refund-filing deadline.

The relevant statute, Ninth Circuit precedent, and the centuries-old common-law mailbox rule were all on the Baldwins’ side. That precedent clearly allowed the Baldwins to prove the postmark date, which is deemed the date of delivery, by using extrinsic evidence such as witness testimony.

After trial, the district court entered judgment against IRS. On appeal, however, the Ninth Circuit concluded that IRS’s later-in-time interpretation (issued in August 2011) trumps the centuries-old common-law mailbox rule, the Ninth Circuit’s longstanding precedent, and the plain text of Section 7502, all under the Brand X doctrine. IRS’s new interpretation did not allow use of extrinsic evidence to prove the postmark date of a tax document sent by regular U.S. mail.

Thanks to Brand X, the court below reversed the favorable outcome the Baldwins had obtained after full trial. Absent Brand X, the Ninth Circuit precedent based on ordinary tools of statutory construction would have controlled. Consequently, the Baldwins, who prevailed in district court, would have obtained a tax refund of about $168,000, plus statutory interest and attorneys’ fees.

The Supreme Court’s 2005 Brand X case, therefore, was outcome-determinative in the Baldwins’ case. Thus, they are asking the Supreme Court to overrule the Brand X doctrine, or in the alternative, to determine whether Brand X permits an agency to uproot the common law and plug the hole with its own rule.

In National Cable & Telecommunications Association v. Brand X Internet Services, the Supreme Court held that an agency’s “permissible reading” of a statute trumps circuit-court precedent if the prior court had interpreted a statute that was silent or ambiguous with respect to the specific issue. In all other situations, stare decisis dictates that opinions issued by federal appellate panels can be overruled only by en banc courts of appeals, by this Court, or by a properly enacted statute.

Brand X subverts stare decisis by empowering agencies to take out precedents they do not like via regulation. The agencies may then replace unfavorable precedents by providing only cursory justification—not “special justification”—for the changes. Brand X allows agencies to undercut predictability, stability, fair notice to parties like the Baldwins, reasonable reliance, and settled expectations—values that stare decisis protects.

Brand X also violates due process, Article III judicial independence, and it undermines the judiciary’s role to say what the law is.

 

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CASE STATUS:
Filed Petition for a Writ of Certiorari in the United States Supreme Court.

CASE START DATE:
September 23, 2019

DECIDING COURT:
The Supreme Court of the United States

ORIGINAL COURT:
The United States Court of Appeals for the Ninth Circuit
The United States District Court for the Central District of California

 

CASE DOCUMENTS

Sept. 23, 2019 | Petition for Writ of Certiorari – Baldwin v. US

Howard and Karen Baldwin, who produced the critically acclaimed movie Ray (2004) based on Ray Charles’ life, had filed a claim fo rate refund of their 2005 income tax. Four months before the deadline to claim a refund, they mailed a refund claim to the Internal Revenue Service (IRS) to recover $167,663 in overpaid taxes by regular United States mail.

IRS claimed it never received their refund claim and refused to pay them. The Baldwins sued IRS to get their money back. There was an easy way to prove– and they did so at trial– that they had in fact mailed the claim on June 21, 2011, four months before the October 15 refund deadline…

Read complete Petition for Writ of Certiorari

PRESS RELEASES

Sep 23, 2019 | NCLA Files Petition with the U.S. Supreme Court Seeking to Abolish Brand X Deference

Washington, D.C., — The New Civil Liberties Alliance today filed a Petition for a Writ of Certiorari with the U.S. Supreme Court seeking to overturn the so-called Brand X doctrine. Under the Court’s 2005 case, National Cable & Telecommunications Ass’n v. Brand X Internet Services, federal courts are supposed to defer to federal agencies’ reasonable statutory interpretations even when those interpretations contradict a previous court ruling interpreting the same statute. Lower federal courts have found this rule to be unworkable, and federal agencies have taken advantage of Brand Xdeference in ways that deny due process and fair notice to people like Howard and Karen Baldwin.   

NCLA’s petition seeks review of the United States Court of Appeals for the Ninth Circuit’s decision in Baldwin v. United States. The two questions presented before the Court are the following: 1) Should Brand X be overruled? and (2) What, if any, deference should a federal agency’s statutory construction receive when it contradicts a court’s precedent and disregards traditional tools of statutory interpretation?

The Baldwins are producers of multiple films including the Academy Award-winner, Ray (2004), about the life of singer Ray Charles. But they are also law-abiding Americans who had overpaid their 2005 income taxes. Four months before the October 15, 2011 deadline for refiling, they mailed their refund claim for $167,663 in overpaid taxes to the Internal Revenue Service by regular United States mail. But the IRS alleges it never received their refund claim and refused to pay. The IRS also argued that a new regulation the agency issued in August 2011 ended the common-law mailbox rule for refund claims.

The Baldwins were forced to sue the IRS to get their money back, and they won at trial in the U.S. District Court for the Central District of California, which upheld the common law mailbox rule under a 1992 court of appeals precedent. On appeal, however, the Ninth Circuit, invoking the Brand X doctrine, decided that it had to defer to the IRS’s new regulation over the court’s own precedent. The IRS’s regulation did not allow use of extrinsic evidence to prove the Baldwins mailed their tax return on time. The court gave Chevrondeference to IRS’s interpretation and reversed the favorable outcome the Baldwins had obtained after trial in district court.

NCLA is asking the Court to grant certiorari to revisit Brand X in order to abolish the doctrine or say that it does not apply when a previous court ruling interpreted the same statute using traditional tools of statutory interpretation.

The Brand X doctrine gives litigants like the Baldwins a Hobson’s Choice—follow court precedent and thereby violate federal regulations or follow the federal regulations and thereby violate court-set precedent. Brand X is incompatible with the Constitution. The Supreme Court should take the Baldwins’ case and recommit the Nation to the rule of law.”Adi Dynar,  NCLA Litigation Counsel

This is the case opponents of Brand X deference have been waiting for. You would be hard pressed to find the injustice at the heart of Brand X illustrated more clearly or set up for reconsideration more cleanly. A world where federal agencies can overrule the prior statutory interpretations of the federal courts has proven to be totally unworkable, and this case provides the U.S. Supreme Court a golden opportunity to correct course. – Mark Chenoweth, NCLA Executive Director and General Counsel

See full case summary here.

ABOUT NCLA 

NCLA is a nonprofit civil rights organization founded by prominent legal scholar Philip Hamburger to protect constitutional freedoms from violations by the Administrative State. NCLA’s public-interest litigation and other pro bono advocacy strive to tame the unlawful power of state and federal agencies and to foster a new civil liberties movement that will help restore Americans’ fundamental rights.

For more information visit us online: NCLAlegal.org.

Judy Pino
New Civil Liberties Alliance
202-869-5218
judy.pino@ncla.legal