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.

 

Join the new civil liberties movement. Protect Americans from the Administrative State!

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

Oct. 25, 2019 | Brief of Amicus Curiae - New England Legal Foundation in Support of Petitioners
Oct. 25, 2019 | Brief of the Cato Institute and NFIB Small Business Legal Center as Amici Curiae Supporting Petitioners
Oct. 25 2019 | Brief of the National Right to Work Legal Defense Foundation, Inc. as Amicus Curiae Supporting Petitioners
Oct. 24, 2019 | Brief for Amici Curiae Americans for Prosperity and Cause of Action Institute in Support of Petitioners
Oct., 2019 | Brief Amicus Curiae - Goldwater Institute in Support of Petitioners
Oct., 2019 | Brief of Amicus Curiae - Center for Constitutional Jurisprudence in Support of Petitioners
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

Oct 31, 2019 | Eight Amici Join NCLA’s Cert. Petition With the Supreme Court to Nix Brand X Deference

WASHINGTON, DC, October 31, 2019 – The New Civil Liberties Alliance is grateful for the
overwhelming support our Petition for a Writ of Certiorari with the U.S. Supreme Court has
received. The petition seeks to overturn the so-called Brand X doctrine. Amici curiae, or friends
of the Court, submitted briefs urging the Court to hear NCLA’s case representing Howard and
Karen Baldwin against the Internal Revenue Service. NCLA’s petition seeks review of the Ninth
Circuit’s decision in Baldwin v. United States. The two questions presented before the Court are:

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, such as the common-law presumption canon? See full case
summary here.

“The Constitution is meant to protect the people’s liberties from intrusion by the government,
not vice versa. Yet Brand X protects government litigants from the people by instructing federal
judges to side with the government. The Court should heed the clarion call of these amici curiae
and grant certiorari in this case.” – Adi Dynar, NCLA Litigation Counsel
Excerpts from Amici Curiae submitted in support of NCLA’s Petition for a Writ of
Certiorari:

• Administrative agencies are “weaponizing Brand X” to undermine the people’s liberties.
“Congressional legislation responding to judicial precedent interpreting statutes reflects healthy
operation of the separation of powers,” which “is a central feature of our system of checks and
balances.” – Americans for Prosperity and Cause of Action Institute

• Brand X deference “occasion[s] a disconcerting disruption of the constitutional balance between the
separated powers.” The IRS’s “transparently superficial exercise,” “should not be rewarded” with
deference merely because IRS went “through the motions of a Chevron-begging rulemaking.”—Cato
Institute and NFIB Small Business Legal Center

• “Brand X is contrary to the plan of the Administrative Procedure Act which vests judicial review of
legal questions in the courts. The Court’s decision in Brand X abdicates the judiciary’s duty under
section 706 of the … Act … to rule on questions of law and to invalidate agency actions that are
contrary to statute.” – Claremont Institute’s Center for Constitutional Jurisprudence

• Brand X “enables federal administrative agencies to effectively rewrite state laws,” and “allows federal
executive bureaucracies”—despite the Court’s “presumption against preemption in the absence of a
‘clear statement’”—to also “override state court jurisprudence.” – Goldwater Institute

• Brand X deference is a “ubiquitous problem in administrative law,” and “a liberty destroying cocktail.”
The Court should “begin to crawl back from the abyss by reasserting Article III power and
abandoning Brand X.” – The National Right to Work Legal Defense Foundation, Inc.

• It is important that courts do not give “reflexive deference” to agency interpretations of Congressional
silence, especially “when the silence signals that the common law tacitly supplies a legal presumption.”
– The New England Legal Foundation

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.

Click to read here

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

WASHINGTON, DC, — 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 X deference 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 the use of extrinsic
evidence to prove the Baldwins mailed their tax return on time. The court gave Chevron deference 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 the 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

Click to read here

OPINION

Nov 6, 2019 | The Worst Doctrine Few Have Heard of: Brand X

Federal administrators must love Darth Vader’s iconic –and ominous– line, “I’m altering the deal. Pray I don’t alter it any further.” That’s because the Brand X deference doctrine lets them.

Deference doctrines require judges to abdicate their duty of independent judgment and instead be biased in favor of government litigants and against non-government litigants. The 2005 Supreme Court case of National Cable & Telecommunications Association v. Brand X Internet Services spawned a brand-new deference doctrine that has come to be known as “Brand X deference.” You might have heard of deference doctrines like Chevron, Auer or Kisor. But Brand X is the worst deference doctrine few have heard of. It empowers agencies to overrule federal-court decisions by unilaterally altering the meaning of statutes the courts have already interpreted. The late Justice Antonin Scalia said it best in a 2012 case: Brand X in a “poof” expands or abridges executive power, enables or disables “administrative contradiction of the federal courts,” and penalizes individuals for following court precedent in ordering their lives and civic duties.

That is exactly what happened to California couple, Howard and Karen Baldwin, who sent their tax refund claim to the IRS in June 2011. Two months later, the IRS changed its interpretation of a statute that Congress has not amended since the 1954 codification of federal income tax laws. Based on its one-sided change, the agency refused to issue a refund to the Baldwins. The Baldwins sued the IRS and luckily the district court saw through IRS’s after-the-fact deal switch and declined to defer to IRS’s interpretation. But in a strange turn of events, the 9th U.S. Circuit Court of Appeals reversed the district court’s decision, deferring to IRS’s statutory interpretation under Brand X. The IRS’s changed 2011 interpretation contradicted a 1992 decision of the 9th Circuit, decisions from several other circuits, and a centuries-old common-law rule. None of that mattered to the 9th Circuit, however. Under the Brand X doctrine, the court deferred to the IRS’s decision to overrule federal-court decisions and excise a well-settled common-law rule.

Typically, circuit-court cases decided by three-judge panels (as almost all cases are) can be overruled only an an en banc court of appeals (i.e., an 11-judge panel in the 9th Circuit), by the Supreme Court, or –in terms of their future effect on other parties– by a properly enacted statute. Brand X is an exception to that rule. It incentivizes agencies to target court decisions they do not like, reach an opposite conclusion via regulation, and then demand –and receive– an approving pat on the back from the courts.

Fortified by Brand X, the IRS put the Baldwins in a no-win predicament — follow court precedent and thereby violate federal regulations or follow federal regulations that did not exist at the time they mailed in their tax-refund claim and thereby violate court-set precedent. When longstanding legal principles established by the courts get in the way, agencies can switch them off at will with impunity. Enabling agencies to willfully disregard the rule of law –while everyone else is required to obey– is the central feature of the Brand X doctrine.

Courts usually do not overturn previous court decisions without compelling reasons for doing so. Brand X, however, federal agencies can overrule court decisions for cursory reasons. More importantly, Brand X requires federal judges to be biased in favor of the federal-agency litigant. And it divests the federal judiciary –and Congress– from performing functions that the Constitution separately vests in them. It is the judiciary’s duty and province to say what the law is, and it is Congress’ job to make the laws. Article II agencies, thanks to Brand X, however, sit as a super court of appeals with authority to overrule decisions of Article III courts, and a super legislature to rewrite laws written by the Article I Legislature. Brand X thus lobs a grenade into the due-process, judicial-independence, and separation-of-powers guarantees that infuse the Constitution.

Several jurists –including Brand X’s author Justice Clarence Thomas– have called upon the Supreme Court to nix Brand X. And there is an ever-louder chorus of frustration rising from the appellate courts urging the high court to do the same. The Supreme Court should take the Baldwins’ case and recommit the nation to adhering to the rule of law. There is much more at stake in Baldwin v. U.S. than the amount of the Baldwins’ rejected tax refund.


Originally published in the Daily Journal on November 6, 2019