National Labor Relations Act; Arbitrary and Capricious; Chenery I Doctrine.

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1 National Labor Relations Act; Arbitrary and Capricious; Chenery I Doctrine. National Labor Relations Board v. Southwest Regional Council of Carpenters, --- F.3d WL (D.C. Cir. June 21, 2016)(Griffith, J.). National Labor Relations Act; Deference to Arbitral Awards; Abuse of Discretion. Verizon New England Inc. v. National Labor Relations Board --- F.3d ----, 2016 WL (D.C. Cir. June 21, 2016)(Kavanaugh, J., with whom Henderson, J., joins as to all but Parts II-A and II-C-1 and with whom Srinivasan, J., joins as to Parts I, II-A, II-B, and II-C-1). National Labor Relations Act; Mootness. Sands v. National Labor Relations Board, --- F.3d -- --, 2016 WL (D.C. Cir. June 17, 2016)(Griffith, J.). ***[Circuit Split] Railroad Retirement Act; Jurisdiction to Review Denial to Reopen Determinations; Absurdity Canon; Arbitrary and Capricious. Stovic v. Railroad Retirement Board, --- F.3d ----, 2016 WL (D.C. Cir. June 24, 2016)(Kavanaugh, J.). * * * National Labor Relations Act; Arbitrary and Capricious; Chenery I Doctrine. National Labor Relations Board v. Southwest Regional Council of Carpenters, --- F.3d WL (D.C. Cir. June 21, 2016)(Griffith, J.). A construction company had employees who were represented by the Painters Union and other employees who were represented by the Carpenters Union. When the contract with the Painters Union ran out, the company approached the Carpenters Union about representing the former Painters Union members. The Carpenters Union rented a hall for a meeting with those employees, most of whom attended. At the meeting were the owners of the company as well as union officials. The owners started the meeting by telling the workers that they should listen to the union s pitch, which the owners said they thought was a good deal and a better deal than with the Painters Union. Then the union officials made their case for why the workers should join with them. Finally, they told the workers that there would be a sign-up in the back of the conference room. At that point, the workers went to the back of the room where Carpenters Union representatives urged the employees to sign union authorization cards to signal that they wanted to "designate the [Carpenters] [U]nion as their collective-bargaining representative. A majority of the employees did sign the cards, and the owners immediately signed an agreement with the union. The Painters Union filed a complaint with the NLRB, and it ultimately found that the company had violated section 8(a)(1) of the NLRA by engaging in unlawful surveillance of its workers at the meeting at which the workers were asked by the Carpenters Union to sign authorization cards. An employer's surveillance of employees is unlawful under section 8(a)(1) where it "interfere[s] with, restrain[s], or coerce[s] employees in the exercise" of their collective-bargaining rights. The NLRB also found that the company violated section 8(a)(2) of the NLRA, which prohibits an employer from unlawfully assisting a union, by being present at the meeting while the Carpenters Union collected authorization cards and unlawfully recognizing the Carpenters Union as the bargaining representative of the workers. Finally, the Board found that the Carpenters Union improperly accepted the company's unlawful recognition and assistance.

2 The D.C. Circuit granted the company s and Carpenters Union s petition for review. The problem was the Board s failure to adequately address an earlier case involving similar facts in which it had found no violations. The court said that a decision of the Board that "departs from established precedent without a reasoned explanation" is arbitrary and capricious. The earlier case was Coamo Knitting Mills, Inc., 150 N.L.R.B. No. 35 (1964). The court said: Coamo closely resembles this case. In both, the union held a meeting for the company's employees. In both, management made statements in support of the union. In both, management was present while union representatives spoke to employees about why they should join the union and urged the employees to sign union authorization cards. And in both, the signing of those cards led to majority support for the union. Importantly, in neither case did the Board conclude that the company representative(s) saw what the employees were signing. And in Coamo the Board found no violation. Here, the Board attempted to distinguish Coamo on the ground that Coamo did not involve a claim of unlawful surveillance, but the court noted that the term unlawful surveillance is not what the statute forbids; it prohibits an employer from "interfer[ing] with, restrain[ing], or coerc[ing] employees in the exercise" of their protected rights. As used by the Board and the D.C. Circuit, "unlawful surveillance" has simply been a shorthand for a type of conduct that "interferes with, restrains or coerces the employee in the exercise of protected organizational activities." The court said that there was nearly identical conduct and the same legal questions in this case and in Coamo. The only material difference was the result. Without any other justification for distinguishing Coamo, the court said the Board's decision could not stand. The Board also tried to argue that the facts were different in Coamo, but the court cited Chenery I and said that it could not address this argument because it did not appear in the Board's orders below. National Labor Relations Act; Deference to Arbitral Awards; Abuse of Discretion. Verizon New England Inc. v. National Labor Relations Board --- F.3d ----, 2016 WL (D.C. Cir. June 21, 2016)(Kavanaugh, J., with whom Henderson, J., joins as to all but Parts II-A and II-C-1 and with whom Srinivasan, J., joins as to Parts I, II-A, II-B, and II-C-1). A union and Verizon New England entered into a collective bargaining agreement in which the union waived its members' right to picket, a right the members otherwise would possess under the National Labor Relations Act. During a subsequent labor dispute, Verizon employees visibly displayed pro-union signs in cars that were parked on Verizon property and lined up so that passers-by would see the signs. Verizon ordered the employees to stop displaying the signs. The union challenged Verizon's action. The collective bargaining agreement between the union and Verizon provided for arbitration of disputes arising out of that agreement. Verizon and the union therefore proceeded to arbitration to resolve their dispute about the signs in the cars. An arbitration panel interpreted the collective bargaining agreement in Verizon's favor, finding that the display of signs constituted picketing. Not satisfied, the union then took the matter to the NLRB. An administrative law judge again ruled in favor of Verizon. The union appealed the matter to the Board. Although the Board reviews arbitration decisions under a highly deferential standard, the Board in a 2-1 ruling overturned this arbitration decision. The court reviewed the Board s decision under an abuse of discretion standard. Under Board precedent, known as the Spielberg-Olin standard, the Board is to defer to an arbitration award unless the award is "clearly repugnant" to the NLRA. Based on their interpretation of

3 language in a prior Board decision applying the clearly repugnant standard, Judges Kavanaugh and Srinivasan said the clearly repugnant standard could be satisfied in either of two ways: (i) if the arbitrator interpreted the contract to mean that one party waived a right that may not be waived under the NLRA, in which case the "arbitrator's decision" is deemed "not susceptible to an interpretation consistent with the Act"; or (ii) if the arbitrator interpreted the contract in a "palpably wrong" manner and thereby deprived the losing party of a right otherwise guaranteed under the Act. Judge Henderson, however, said that the standard only could be met the first way. Applying the first test, all the judges agreed that the union could waive its right to display signs (whether that was deemed picketing or not), so that the arbitrator s decision was not clearly repugnant under that test. Judge Kavanaugh opined that under the second test the arbitrator s decision that displaying the signs as the employees had constituted picketing under the agreement was not palpably wrong and for the Board to have found it so was an abuse of discretion. Judge Srinivasan, applying the second test, disagreed, believing that even if it was error for the Board to have so found, it was not an abuse of discretion. Therefore, he dissented from the granting of the petition to Verizon. Parsing the different opinions, one would conclude that there was a majority opinion that the test for clearly repugnant involves two questions, not just one. The actual grant of the petition, however, was not supported by a majority opinion, with Judges Kavanaugh and Henderson using different tracks to reach the conclusion that the Board abused its discretion. Judge Henderson also wrote to express concern that the Board now appears to defer to the arbitrator's interpretation of an agreement only if Board law reasonably permits, as opposed to a clearly repugnant standard. Such a change, she believed, would be inconsistent with the D.C. Circuit s standard for deference to an arbitrators agreement interpretation. National Labor Relations Act; Mootness. Sands v. National Labor Relations Board, --- F.3d -- --, 2016 WL (D.C. Cir. June 17, 2016)(Griffith, J.). When Sands began work at a grocery store, the union advised her that whether she joined the union or not she would be required to pay dues to the union to cover its bargaining activities, but that if she did not join the union, she would not have to pay for other union activities. The union did not say how much she would save by not joining the union, about $3.50 per month. Sands joined the union, but later when she quit her job, she filed an unfair labor charge with the NLRB, claiming that the union had misled her into joining the union by not telling her how much she would save. Despite D.C. Circuit precedent that was squarely in her favor, the Board ruled against her, and she petitioned for review of its decision. The D.C. Circuit, however, dismissed her petition as moot. The union had already repaid her all of what she would have saved, plus interest, so she had no continuing injury. She maintained that there was D.C. Circuit precedent for continuing an action where the sought-for remedy was posting of a notice that the employer or union had violated the law. The court acknowledged that they can still maintain an action for posting notices, even when the specific wrong has been righted, because they each have a continuing interest in the case, but here Sands was no longer an employee of the company or a member of the union, so she had no continuing interest. The court also acknowledged that the Sixth Circuit apparently had held that one in her position could continue the action, but the court said it disagreed with that conclusion and instead agreed with the Second Circuit, which had dismissed as moot cases like the present one. She

4 also argued that the case should not be dismissed as moot, because the violation was capable of repetition. Noting that the union had repaid her for the purpose of mooting the case, the D.C. Circuit said that the Board and the union faced an uphill battle to show that it is "absolutely clear" that the labor violation at issue cannot "reasonably be expected" to happen again. They did, however, meet that burden because not only was it clear that Sands would not again join the union but also the state law had changed so that it was now a right-to-work state. Because the case became moot after the Board s decision, the court vacated that decision, as would normally be the case in civil litigation when one side acts to moot the case. Drug Testing; Arbitrary and Capricious; Due Process; Unconstitutional Vagueness. Swaters v. United States Department of Transportation, --- F.3d ----, 2016 WL (D.C. Cir. June 24, 2016)(Ginsburg, J.). Jeffrey Swaters, a former pilot with Spirit Airlines, challenges the Department of Transportation's refusal to consent to the release of the urine sample it says Swaters produced for a mandatory drug test. The sample, which tested positive for controlled substances, cost Swaters his job and his airman medical certificate. Swaters now wants the urine sample in order to conduct a DNA test in the hope of proving, in a state court negligence action against the company responsible for collecting his urine and transporting to the testing lab, that the urine is not his. DOT has a regulation prohibiting the release of urine samples for DNA testing. Swaters, after being rebuffed by DOT from obtaining the sample, brought this action challenging DOT's decision on three grounds. First, he argued the DOT's refusal to release his sample was arbitrary and capricious, both because the Department never explained its reasoning, and because it improperly interpreted its own regulations. Second, he argued that insofar as the DoT's regulations do prohibit the release of a sample for DNA testing, they are themselves arbitrary and capricious, and inconsistent with the Omnibus Transportation Employee Testing Act of Finally, he maintained that his inability to obtain his sample violated his constitutional rights. The D.C. Circuit made short work of each of his claims. First, the record was replete with the agency s explanation for its decision. Second, the Omnibus Act requires the FAA to follow HHS guidelines for testing, and those guidelines expressly state that specimens "must only be tested for drugs and to determine their validity," and that "[u]se of specimens by donors, their designees, or any other entity, for other purposes (e.g., deoxyribonucleic acid, DNA, testing) is prohibited unless authorized in accordance with applicable federal law." That is precisely what the DOT regulation provided. Third, the regulation is not arbitrary and capricious, because in the preamble to its testing regulations, the Department explained that it opposes DNA testing for "two main reasons." First, "a properly completed chain of custody conclusively establishes the identity of a specimen. No additional tests are required for this purpose." Second, "the only thing a DNA test can do is determine... whether a specimen and a reference specimen were produced by the same individual." That is, even if a DNA test were conclusively to prove the positive sample does not belong to Swaters, the DOT could not determine whether the mismatch was due to an error in handling or to the tested employee's substitution of someone else's urine in the original sample, the reference sample, or both. Because a properly preserved chain of custody renders the first possibility very unlikely, and the second possibility would arise only if a guilty employee was trying to defeat the test, the court said that DOT quite reasonably in view of the risk to airline safety wants to avoid reinstating a pilot's license on the basis of a DNA mismatch.

5 Swaters made two constitutional claims. First, he claimed that DOT's refusal to consent to release of his urine sample for DNA testing effectively blocks his access to the state court. Because to the courts is a fundamental due process right, Swaters argued that any government regulation that burdens that right must therefore stand up to strict scrutiny. However, in District Attorney's Office for the Third Judicial District v. Osborne, 557 U.S. 52 (2009), the Supreme Court said that a prisoner had no right "to obtain postconviction access to the State's evidence for DNA testing. The D.C. Circuit concluded that if postconviction incarceration is an insufficient deprivation of liberty to create a right to DNA testing, then a fortiori Swaters's liberty interest in being free of a government-imposed "stigma on [his] professional reputation" is likewise insufficient. Swaters also claimed that the DOT regulation was unconstitutionally vague, because it does not identify to whom samples cannot be furnished. The court found that the regulation s language a laboratory is prohibited from making a DOT urine specimen available for a DNA test clearly meant that the samples could not be released to anyone. Railroad Retirement Act; Jurisdiction to Review Denial to Reopen Determinations; Absurdity Canon; Arbitrary and Capricious. Stovic v. Railroad Retirement Board, --- F.3d --- -, 2016 WL (D.C. Cir. June 24, 2016)(Kavanaugh, J.). The Railroad Retirement Act acts in the place of Social Security for covered railroad workers. When Chris Stovic retired, the Railroad Retirement Board calculated the amount of his benefits. He appealed that decision but after a series of administrative appeals, the amount was confirmed. Fifteen years later, Stovic requested the Board to reopen its decision. Board regulations allow the Board to reopen initial benefits determinations at any time, under certain circumstances. In this case, the Board promptly denied Stovic's request to reopen. Stovic then petitioned for review of that denial. The first question was whether the court had jurisdiction over his petition for review. The applicable review provision states: Any claimant... may, only after all administrative remedies within the Board will have been availed of and exhausted, obtain a review of any final decision of the Board." The Board argued that a refusal to reopen a benefits determination was not a final decision of the Board. This was so primarily because a similar provision in the Social Security Act had been interpreted by the Supreme Court as not authorizing judicial review of denials to reopen. See Califano v. Sanders, 430 U.S. 99 (1977). The Third, Fourth, Fifth, Seventh, Ninth, and Tenth Circuits have accepted this argument. The D.C. Circuit, however, sided with the Second and Eighth Circuits in rejecting it. The court pointed out that the provision in the Social Security Act did not provide for review of any final decision but instead only of any final decision of the Secretary made after a hearing to which [the petitioner] was a party. Inasmuch as decisions to reopen an initial social security benefits determination are not made after a hearing, the Supreme Court s decision finding no judicial review of a denial to reopen flowed from the statutory language. The review provision in this case, however, had no such limitation on what final decisions of the Board were subject to review. The Board also claimed that it would be absurd to allow claimants like Stovic to circumvent the Railroad Retirement Act's one-year statute of limitations for review of a benefits determination simply by filing a request to reopen a prior benefits determination, and then obtaining judicial review of the denied request to reopen. The court said absurdity is a high bar, especially when the usual presumption is in favor of judicial review of agency action. The court found not absurdity here. It makes sense to provide for judicial review of potentially

6 arbitrary and mistaken Board decisions denying requests to reopen. Judicial review helps ensure accuracy and fairness. Having managed to have the court review the Board s denial, Stovic argued that its denial was arbitrary and capricious. The D.C. Circuit, however, found otherwise. The Board s regulation allowed for reopeners under any one of ten specified conditions. Stovic, who was pro se before the D.C. Circuit, had not identified in his request for reopening which of these conditions he believed applied to him. The Board, nonetheless, had attempted to discern which might be applicable to his case and explained why his request failed to meet those conditions. Consequently, the court concluded that the Board reasonably concluded and explained that reopener here was inappropriate.

7 Standing; Mootness; Natural Gas Act; NEPA; Chenery I; Arbitrary and Capricious; Issue Exhaustion. Sierra Club v. Federal Energy Regulatory Commission, --- F.3d ----, 2016 WL (D.C. Cir. June 28, 2016)(Millett, J.). Air Carrier Access Act of 1986; What Constitutes an Order over which the Court of Appeals has Exclusive Jurisdiction. National Federation of the Blind v. United States Department of Transportation, --- F.3d ----, 2016 WL (D.C. Cir. June 28, 2016)(Henderson, J.). FOIA; Mootness; Exhaustion. Bayala v. United States Department of Homeland Security, Office of General Counsel, --- F.3d ----, 2016 WL (D.C. Cir. June 28, 2016)(Millett, J.). Affordable Care Act; Standing; 10 th Amendment; Unconstitutional Commandeering. West Virginia ex rel. Morrisey v. United States Department of Health and Human Services, --- F.3d WL (D.C. Cir. July 1, 2016)(Silberman, J.). Mootness; Effect of Recission of a Regulation on Challenges to the Regulation. Akiachak Native Community v. United States Department of Interior, --- F.3d ----, 2016 WL (D.C. Cir. July 1, 2016)(Tatel, J.). Interstate Commerce Act; Arbitrary and Capricious. United Airlines, Inc. v. Federal Energy Regulatory Commission, --- F.3d ----, 2016 WL (D.C. Cir. July 1, 2016)(Sentelle, J.). Federal Power Act; Mobile-Sierra Doctrine; Non-deference to Agency s Interpretation of Supreme Court Opinions. Oklahoma Gas and Electric Company v. Federal Energy Regulatory Commission, --- F.3d ----, 2016 WL (D.C. Cir. July 1, 2016)(Wilkins, J.). Public Health Service Act; Affordable Care Act; Chevron Deference. Central United Life Insurance Co. v. Burwell, --- F.3d ----, 2016 WL (D.C. Cir. July 1, 2016)(Brown, J.). * * * Standing; Mootness; Natural Gas Act; NEPA; Chenery I; Arbitrary and Capricious; Issue Exhaustion. Sierra Club v. Federal Energy Regulatory Commission, --- F.3d ----, 2016 WL (D.C. Cir. June 28, 2016)(Millett, J.). FERC authorized the redesign of a liquefied natural gas terminal in Texas to support export operations. Environmental plaintiffs challenged that decision on the basis that FERC s Environmental Impact Statement did not sufficiently address certain indirect effects associated with the decision and did not consider the appropriate cumulative effects of the decision. Under the Natural Gas Act, the Department of Energy is responsible for permitting the export of natural gas, but it has delegated to FERC the authority to permit the construction of facilities for the export of natural gas. Thus, a person who wishes to export natural gas will need the permission of both FERC and DOE. This case only involved a challenge to FERC s decision. As an initial matter, the government objected to the plaintiffs standing. There was a

8 member of one of the plaintiff organizations who lived in the vicinity of where the facility would be built and therefore would be esthetically injured by the noise and disturbance caused by the construction. The government argued, however, that the plaintiffs claim as to the inadequacy of the EIS did not relate to the noise and disturbance of the construction, so that injury could not be the basis for standing. The D.C. Circuit rejected this argument, saying it sliced the salami too thin. Citing to its earlier WildEarth Guardians v. Jewell, 738 F.3d 298, 305 (D.C. Cir. 2013), the court said: it is sufficient for standing purposes that the aesthetic injury follows from an inadequate [Environmental Impact Statement] whether or not the inadequacy concerns the same environmental issue that causes their injury. Here, if the court overturned the agency decision because of an inadequate EIS, the facility would not be built, thereby avoiding the plaintiff member s injury. The government also argued that the claim as to the inadequacy of the EIS was moot, because the DOE had supplemented FERC s EIS, and thus it should be the latter EIS rather than the former that might be challenged. The court noted that FERC s decision was based on its EIS. Thus, whether or not DOE supplemented it for the purposes of DOE s consideration of export permission was irrelevant to the adequacy of FERC s EIS with respect to the construction of the facilities. On the merits, the court found that the EIS adequately considered the indirect and cumulative effects of the facilities construction. The plaintiffs argued that the EIS did not consider the effects of induced, increased natural gas production resulting from the export of natural gas from the facilities. The court, however, said that critical to triggering that chain of events is the intervening action of the Department of Energy in granting an export license. The Department's independent decision to allow exports a decision over which the Commission has no regulatory authority breaks the NEPA causal chain and absolves the Commission of responsibility to include in its NEPA analysis considerations that it could not act on and for which it cannot be the legally relevant cause. The court conceded that FERC had not relied on this break in the NEPA causal chain to explain its failure to address the effects of increased exports, raising Chenery I concerns. The court explained, though, that there is an exception to Chenery restrictions on judicial review when the appellate court concludes that the decision already made * * * should properly be based on another ground within the power of the appellate court to formulate that is, one that does not depend upon a factual determination or a policy judgment that [the agency] alone is authorized to make. It concluded that its decision here follows not from de novo factual findings or independent policy judgments, but from [its] interpretation of NEPA and binding Supreme Court precedent neither of which trenches upon a determination specially entrusted to [the Commission's] expertise. The plaintiffs claimed that the EIS should have considered the cumulative effects on the environment nationwide of the approval of these facilities as well as those whose applications were pending or had already been approved. The court s response was that this drew the NEPA circle too wide. Prior precedent only requires consideration of cumulative impacts in the same geographic area as the project under review. Here, FERC had considered the cumulative impacts of the construction in the 1600 square-mile county in which the facilities were to be constructed, and the plaintiffs had no complaint as to the adequacy of that analysis. The plaintiffs raised a final challenge, but it was rebuffed as not within the court s jurisdiction because the plaintiffs had not raised the issue before FERC, as required by the Natural Gas Act.

9 Air Carrier Access Act of 1986; What Constitutes an Order over which the Court of Appeals has Exclusive Jurisdiction. National Federation of the Blind v. United States Department of Transportation, --- F.3d ----, 2016 WL (D.C. Cir. June 28, 2016)(Henderson, J.). The National Federation of the Blind (NFB) challenged a rule issued by the United States Department of Transportation (DOT). The rule requires that air carriers begin to purchase ticketing kiosks accessible to blind persons within three years of the rule taking effect so that 25 per cent of kiosks eventually will be blind-accessible. After DOT issued its final rule, NFB filed a complaint in district court, challenging the rule because it does not require air carriers to make all airport kiosks accessible to the blind. The district court concluded that it lacked jurisdiction under 49 U.S.C (a) because the rule is an "order" over which the court of appeals has exclusive jurisdiction. Instead of dismissing NFB's complaint, however, the district court transferred the complaint to the D.C. Circuit, re-styled as a petition for review. 49 U.S.C (a) provides that a person disclosing a substantial interest in an order issued by the Secretary of Transportation... may apply for review of the order by filing a petition for review in the United States Court of Appeals for the District of Columbia Circuit. The first question here was whether the rule adopted by DOT was an order for purposes of 46110(a). The court, citing to its recent decision in New York Republican State Committee v. SEC, 799 F.3d 1126 (D.C. Cir. 2015) which interpreted a nearly identical direct-review provision of the Investment Advisers Act said that [f]or nearly four decades, it has been blackletter administrative law that, absent countervailing indicia of congressional intent, statutory provisions for direct review of orders encompass challenges to rules. And, absent contrary congressional intent, a statutory review provision creating a right of direct judicial review in the court of appeals of an administrative order' authorizes such review of any agency action that is otherwise susceptible of review on the basis of the administrative record alone. Consequently, the district court did not have jurisdiction over the case. This raised the second question whether by reason of the district court s transfer of the case to the D.C. Circuit, the D.C. Circuit could now rule on the merits of the plaintiffs claims. The principal problem was that 46110(a) requires petitions for review within 60 days of the issuance of an order. Here, plaintiffs had filed in district court 71 days after the order issued. Section 46110(a) does allow for exceptions to the 60-day rule, but only if there are reasonable grounds for not filing by the 60th day. The court noted that it has rarely found such reasonable grounds, and consistent with other circuits the D.C. Circuit has said that a delay caused by filing a petition or complaint in the wrong court by itself is not a reasonable ground for failing to meet the statutory sixty-day deadline. Accordingly, the petition for review was dismissed. FOIA; Mootness; Exhaustion. Bayala v. United States Department of Homeland Security, Office of General Counsel, --- F.3d ----, 2016 WL (D.C. Cir. June 28, 2016)(Millett, J.). Florent Bayala filed a Freedom of Information Act ("FOIA") lawsuit when the Department of Homeland Security failed to disclose many of the immigration documents he had requested and gave no particularized explanation for its withholding decision. Shortly after Bayala filed suit, however, the Department reversed course and spontaneously released a number of previously withheld documents, while offering a heavily revamped explanation for its remaining withholdings. After it made that voluntary release, the Department turned around and argued that Bayala's case should be dismissed because he failed to exhaust the administrative

10 appeal process for the Department's original and now-displaced withholding decision. The district court agreed and dismissed the case. In the D.C. Circuit the government argued that the case was moot, but the court rejected that argument inasmuch as there were still documents that had not been released and as to which there was still a question regarding whether they were exempt from disclosure. As a second argument, the government maintained the case should be dismissed because Bayala had failed to exhaust his administrative remedies, going directly to court rather than first utilize the agency s internal appeal process for FOIA denials. But the requirement to exhaust is not jurisdictional; it may be waived. Here, the government, did not raise the failure to exhaust as an initial matter, but instead chose to abandon its initial determination, made a sua sponte disclosure of documents, and crafted a new, five-page-long explanation for this different withholding decision in the district court, the content and specificity of which went far beyond the original, perfunctory administrative decision. That new FOIA determination rendered the propriety of the original agency decision and any administrative challenges to it an entirely academic question. The lawfulness of the initial administrative disclosure and explanation for withholding, in other words, were no longer live controversies. Accordingly, the court reversed and remanded to the district court to consider the merits of the exemption claim. Affordable Care Act; Standing; 10 th Amendment; Unconstitutional Commandeering. West Virginia ex rel. Morrisey v. United States Department of Health and Human Services, --- F.3d WL (D.C. Cir. July 1, 2016)(Silberman, J.). West Virginia sued to challenge the President's determination not to enforce certain controversial provisions of the Affordable Care Act for a transitional period. That decision, implemented by a letter from the Secretary of the Department of Health and Human Services, left the responsibility to enforce or not to enforce these provisions to the States, and West Virginia objected to being put in that position. It argued that the Secretary s decision was contrary to law, that the letter was an unlawful rule because it did not go through notice and comment, that the decision was an unconstitutional delegation of federal enforcement authority, and that it was unconstitutional commandeering under the 10 th Amendment. The D.C. Circuit did not reach the merits, because it affirmed the dismissal of the case for lack of standing. The state argued that the letter required it to decide whether or not to enforce the ACA provisions, and the state suggested this was like the situation in Printz v. United States, 521 U.S. 898 (1997), where state legal officers were required to conduct background checks on gun purchases. The court did not agree. In Printz the state was required to take action, but the letter here did not require the state to take any action. The fact that the state might have to decide whether or not to take action was not a concrete injury. It said no court has ever recognized political discomfort as an injury-in-fact. Mootness; Effect of Recission of a Regulation on Challenges to the Regulation. Akiachak Native Community v. United States Department of Interior, --- F.3d ----, 2016 WL (D.C. Cir. July 1, 2016)(Tatel, J.). Due to the unique nature of the Alaska Native Claims Settlement Act (ANCSA), the Department of the Interior believed that law had divested the department of the authority to take land into trust for Indian tribes in Alaska and had adopted a regulation to that effect (the

11 Exception Rule). Several Alaska Native tribes sued the Department, challenging the Exception Rule. The state of Alaska intervened as a defendant to defend the Exception Rule. After the district court held that Interior's interpretation was contrary to law, both the Department and Alaska filed notices of appeal. Interior, however, upon reconsideration, decided to forego the appeal and instead, after notice and comment, revised its regulations to eliminate the Exception Rule. This left Alaska s appeal. The court, with Judge Brown dissenting, found the appeal moot and vacated the decision below. The court pointed out that Alaska had only been defending the challenge to the Exception Rule; it had not cross-claimed or counterclaimed against the Native tribes or Interior. Because the Exception Rule no longer existed, there could no longer be a live controversy over whether it was lawful or not. While Interior in adopting its rescission of the Exception Rule had not relied on the district court s decision, but independently determined that the Rule was no longer required. Inasmuch as Alaska had maintained that the Rule was required by ANSCA, it believed that the district court decision was incorrect and that Interior s recission of the Rule was contrary to ANCSA. The court indicated that Alaska was free to challenge Interior s rescission of the Rule, but that this case, which was a challenge to the Rule, was moot because the Rule no longer existed. It vacated the decision below so that there would be no precedent on the merits of whether the Rule is required by ANCSA. Judge Brown dissented to the finding of mootness, believing that properly viewed Alaska had done more than seek to defend against the Native tribes claims; it had also asked for affirmative relief by requesting a declaration that ANCSA compelled the Alaska exception. Interstate Commerce Act; Arbitrary and Capricious. United Airlines, Inc. v. Federal Energy Regulatory Commission, --- F.3d ----, 2016 WL (D.C. Cir. July 1, 2016)(Sentelle, J.). Petitioners SFPP, L.P. ("SFPP") and several shippers i.e., firms that pay to transport petroleum products over SFPP's pipelines challenge aspects of three orders from the Federal Energy Regulatory Commission ("FERC") related to filings by SFPP for cost-of-service tariffs on its pipelines. SFPP makes two arguments in its petition. First, it claims that FERC arbitrarily or capriciously failed to utilize the most recently-available data when assessing its so-called real return on equity. Second, SFPP asserts that FERC erred when it declined to apply the full value of the Commission's published index when setting SFPP's rates for the 2009 index year. The Shippers raise a separate challenge to FERC's current policy of granting to partnership pipelines an income tax allowance, which accounts for taxes paid by partner-investors that are attributable to the pipeline entity. Specifically, the Shippers claim that because FERC's ratemaking methodology already ensures a sufficient after-tax rate of return to attract investment capital, and partnership pipelines otherwise do not incur entity-level taxes, FERC's tax allowance policy permits partners in a partnership pipeline to "double recover" their taxes. The D.C. Circuit said that there was substantial evidence supporting FERC s decision not to use 2009 data, but FERC did not provide a reasoned explanation for why it used the 2008 data, and therefore its conclusion was arbitrary and capricious. As to FERC s failure to use the most recent data from FERC s published index, the court said that FERC had adequately explained why it did not follow the index. The court acknowledged that in a previous case it had held that, to the extent FERC has a reasoned basis for granting a tax allowance to partnership pipelines, it may do so, but here, the court said, FERC had not provided sufficient justification for its conclusion that there is no

12 double recovery of taxes for partnership pipelines receiving a tax allowance in addition to the discounted cash flow return on equity. In short, the Court: (i) granted-in-part SFPP's petition with respect to the choice of data for assessing SFPP's real return on equity, vacated FERC's orders accordingly, and remanded for further proceedings consistent with its opinion; (ii) denied-in-part SFPP's petition with respect to the indexing issue; and (iii) granted the Shippers' petition, vacated FERC's orders with respect to the double recovery issue, and remanded to FERC for further proceedings consistent with the court s opinion. Federal Power Act; Mobile-Sierra Doctrine; Non-deference to Agency s Interpretation of Supreme Court Opinions. Oklahoma Gas and Electric Company v. Federal Energy Regulatory Commission, --- F.3d ----, 2016 WL (D.C. Cir. July 1, 2016)(Wilkins, J.). Two Supreme Court cases, United Gas Pipe Line Co. v. Mobile Gas Serv. Corp., 350 U.S. 332 (1956), and Fed. Power Comm'n v. Sierra Pac. Power Co., 350 U.S. 348 (1956), established the so-called Mobile-Sierra Doctrine, which establishes that FERC must presume a contract rate for wholesale energy is just and reasonable and cannot set aside the rate unless it is contrary to the public interest. The underlying theory behind the doctrine is that a contract freely entered into at arms length by sophisticated companies should be presumed to be just and reasonable, as opposed to rates set by a monopolist with unfair bargaining power. In this case, included in the membership agreement between various utilities and the Southwest Power Pool Regional Transmission Organization was a right of first refusal to construct any new transmission facilities within their service areas. FERC, however, has found that these rights of first refusal act to impede the investment by non-utilities in constructing new and efficient facilities. Consequently, FERC issued an order requiring deletion of any such rights from utility contracts. The question raised by this case was whether FERC violated the Mobile-Sierra doctrine by requiring the deletion of these contract provisions. The D.C. Circuit began by noting that the Mobile-Sierra doctrine arose in the context of contracts governing rates, whereas the contracts in this case were not about rates. Thus, it was not clear whether Mobile-Sierra was relevant here. And it pointed out that courts need not defer to agencies interpretations of Supreme Court precedent. However, both FERC and the petitioners agreed that Mobile-Sierra was not limited to rate provisions, so the court said it need not decide that issue. Nevertheless, the court agreed with FERC that Mobile-Sierra was limited to contracts arranged at arms-length in a free bargain. Here, the court said, agreeing with the Seventh Circuit, that these contracts were self-protective and anti-competitive agreements, acting in a cartel-like fashion through which the parties are seeking to protect themselves from competition from third parties. This was a far cry from what the Supreme Court had in mind in Mobile-Sierra, so that in any case these agreements were not protected by that doctrine. Public Health Service Act; Affordable Care Act; Chevron Deference. Central United Life Insurance Co. v. Burwell, --- F.3d ----, 2016 WL (D.C. Cir. July 1, 2016)(Brown, J.). The Public Health Service Act establishes coverage requirements for all health insurance plans except those it deems "excepted benefits." Only those forms of insurance specifically enumerated in the PHSA can qualify as an excepted benefit and that status is further conditioned on specific requirements: (1) the insurance plans must be "provided under a separate policy,

13 certificate, or contract of insurance," and (2) they must be "offered as independent, noncoordinated benefits." Among the excepted benefits listed in the PHSA is a form of insurance known as "fixed indemnity." As their label suggests, these policies pay out a fixed amount of cash upon the occurrence of a particular medical event. For instance, if a policyholder visits a hospital or purchases prescription drugs, the provider pays out a predetermined amount, which the policyholder is then free to use however she chooses. The Affordable Care Act requires persons to maintain minimum essential coverage, and it provided that "minimum essential coverage" does not include the excepted benefits described in the PHSA. Nonetheless, there remained a market for fixed indemnity policies among persons who did preferred to pay the penalty rather than maintain the minimum essential coverage. Four years later, however, Health and Human Services adopted a regulation amending the criteria for fixed indemnity insurance to be treated as an excepted benefit. It added a further requirement for something to qualify as an excepted benefit: to be an "excepted benefit," the plan may be "provided only to individuals who have... minimum essential coverage. In other words, fixed indemnity policies now could only be offered to persons having minimum essential coverage. This effectively put these policies out of business, and the providers sued, challenging the regulation as beyond HHS s statutory authority. Applying Chevron, the D.C. Circuit found the language of the Public Health Service Act to be crystal clear. There were specific requirements in the statute the satisfaction of which rendered a policy an excepted beneft. The agency was not free to change this statutory standard by adding additional requirements. HHS claimed that the statute was ambiguous, but the court said that ambiguity "is a creature not of definitional possibilities but of statutory context. And here the context eliminated any ambiguity. Consequently, it affirmed the district court s permanent injunction against enforcement of the regulation.

14 * * * FOIA; Duty to Search Private Records. Competitive Enterprise Institute v. Office of Science and Technology Policy, --- F.3d ----, 2016 WL (D.C. Cir. July 5, 2016)(Sentelle, J.). NEPA and other Environmental Laws; Arbitrary and Capricious. Public Employees for Environmental Responsibility v. Hopper, --- F.3d ----, 2016 WL (D.C. Cir. July 5, 2016)(Randolph, J.). Mine Safety and Health Act; Substantial Evidence; Arbitrary and Capricious. Rosebud Mining Company and Parkwood Resources, Inc. v. Mine Safety and Health Administration, --- F.3d ----, 2016 WL (D.C. Cir. July 5, 2016)(Henderson, J.). Correction of Military Records; Substantial Evidence; Arbitrary and Capricious. Coburn v. Murphy, --- F.3d ----, 2016 WL (D.C. Cir. July 8, 2016)(Brown, J.). Communications Act; Effect of a Court s Determination that an Agency s Decision was not Supported by Substantial Evidence; Standard of Review for Denial of Reopening of Proceeding; Arbitrary, Capricious, and Abuse of Discretion. Tennis Channel, Inc. v. Federal Communications Commission, --- F.3d ----, 2016 WL (D.C. Cir. July 5, 2016)(Rogers, J.). **** * * * FOIA; Duty to Search Private Records. Competitive Enterprise Institute v. Office of Science and Technology Policy, --- F.3d ----, 2016 WL (D.C. Cir. July 5, 2016)(Sentelle, J.). The Competitive Enterprise Institute (CEI) made an FOIA request to the Office of Science and Technology Policy (OSTP) for all policy/ostp-related sent to or from jholdren@whrc.org (including as cc: or bcc:). This account was maintained by John Holdren, the Director of OSTP, at the address of the Woods Hole Research Center, where he previously had been Director. CEI had learned from another, earlier FOIA litigation that the address had apparently been used for some work-related correspondence. OSTP sent a response refusing to provide records from the address on the basis that such records were "beyond the reach of FOIA" because they were in an "account" that "is under the control of the Woods Hole Research Center, a private organization." CEI sued, but the district court upheld the denial. The D.C. Circuit reversed, saying this was a case of first impression. While generally an agency is not required to search for records not under its possession or control, here, the court said, as far as the record showed, the s were under the possession or control of Director Holdren. It is, after all, his account. Director Holdren is not distinct from the agency, so any agency records he controls must be searched to see if they are responsive. The court siad that it agreed with CEI that an agency cannot shield its records from search or disclosure under FOIA by the expedient of storing them in a private account controlled by the agency head. The court distinguished Kissinger v. Reporters Committee for Freedom of the Press, 445 U.S. 136 (1980), which held that the State Department was not required to search for responsive

15 records that it did not possess or control, but which were under the control of the Secretary of State. There the Supreme Court said that Secretary Kissinger held the documents under a claim of right, i.e., that they were his private documents, not documents belonging to the State Department. The D.C. Circuit said that Director Holdren had made no such claim of right. Moreover, in Kissinger the agency had effectively and intentionally ceded control of the documents to Secretary Kissinger, and here the OSTP had not ceded control over the s. The court made clear that it was not requiring the release of any documents. They might qualify for an exemption, and it might be that whatever s are on that server are not in fact agency records. However, the agency must search these s to see if they are agency records. Judge Srinivasan concurred in the judgment. While he agreed that Kissinger was distinguishable, he read it slightly differently from the majority. Accordingly, he would leave open the possibility that Director Holdren would assert a claim of right over the s. NEPA and other Environmental Laws; Arbitrary and Capricious. Public Employees for Environmental Responsibility v. Hopper, --- F.3d ----, 2016 WL (D.C. Cir. July 5, 2016)(Randolph, J.). Environmental organizations brought action against federal agencies alleging that they violated the National Environmental Policy Act (NEPA), Outer Continental Shelf Lands Act, National Historic Preservation Act, Migratory Bird Treaty Act, Coast Guard and Maritime Transportation Act, and Endangered Species Act when they approved an off-shore wind energy project. The United States District Court for the District of Columbia granted summary judgment to the agencies, and the environmental organizations appealed. The D.C. Cir. held that: the Bureau of Ocean Energy Management's environmental impact statement (EIS) failed to take NEPA's required "hard look" at the geological and geophysical environment impacted by project. Accordingly, the court vacated the Bureau s EIS, and required the Bureau to supplement it with adequate geological surveys before construction could begin on the project. It did not, however, vacate lease or other regulatory approvals based on this NEPA violation. In addition, the Fish and Wildlife Service's decision to disregard environmental conservation organizations' submissions regarding feasibility of mitigation measures to prevent killing endangered and threatened migratory bird species by project was arbitrary and capricious in violation of Endangered Species Act, and it vacated the Service s incidental take statement. However, the Bureau's grant of a regulatory departure permitting the developer to depart from a requirement to submit geological surveys with its construction plans did not violate the Outer Continental Shelf Lands Act, the Historic Preservation Act, or NEPA. Moreover, the Coast Guard's terms and conditions imposed to ensure navigational safety complied with requirements of Maritime Transportation Act. Mine Safety and Health Act; Substantial Evidence; Arbitrary and Capricious. Rosebud Mining Company and Parkwood Resources, Inc. v. Mine Safety and Health Administration, --- F.3d ----, 2016 WL (D.C. Cir. July 5, 2016)(Henderson, J.).