News From The Circuits

Second Circuit assesses subpoena for personal financial records by same standard as corporate records, distinguishing cases establishing higher standards in certain circumstances

In In re Subpoena of Gimbel, 77 F.3d 593 (2d Cir. 1996), the Federal Deposit Insurance Corporation sought the personal financial records of a former director of a failed bank. The director argued that the FDIC needed to show a reasonable basis for suspecting him of wrongdoing in order to subpoena his personal records, relying on Parks v. FDIC, which subsequently was vacated and for which hearing en banc has been granted. In Parks, the First Circuit held that the Fourth Amendment limitation on agency subpoenas is different for corporate and personal financial records, noting that United States v. Morton Salt Co., 338 U.S. 632 (1950), in upholding a subpoena of corporate records, had indicated a corporation was not entitled to the same privacy rights as an individual under the Fourth Amendment. Although the Second Circuit had also referred to this distinction in an earlier case involving a subpoena of the personal financial records of family members of a bank official, see In re McVane, 44 F.3d 1127 (1995), it was not persuaded that such a distinction was justified when the person whose records were subpoenaed was himself an officer of a highly regulated entity, respectfully disagreeing with the majority opinion in Parks. The court also distinguished the judicially created heightened standard when the FDIC subpoenas personal financial records solely for the purpose of determining the cost-effectiveness of bringing a case against a person, saying that it was not grounded in the Fourth Amendment, but in the FDIC's statutory authority. Accordingly, the only requirement of the Fourth Amendment was that the information sought be reasonably relevant to a lawful inquiry, which the subpoena here did.

Fifth Circuit splits with Third Circuit, finding that funds cut-off to process applications precludes judicial review of non-processing

Federal law prohibits ex-felons from possessing firearms, 18 U.S.C. Sec. 922(g)(1), but it provides for waiver of this disability if the Secretary of Treasury determines the person will not be a danger to public safety, 18 U.S.C. Sec. 925(c). An unfavorable determination may be reviewed by a federal district court, which can admit new evidence as necessary to avoid a "miscarriage of justice." Id. Unfortunately for former felons, since 1992 Congress has passed appropriations riders prohibiting the expenditure of any funds to investigate or act upon applications for waivers. When McGill had his application for a waiver returned unprocessed, he sued under the judicial review provision, asking the court to order the waiver, relying upon Rice v. Dept. of Alcohol, Tobacco and Firearms, 68 F.3d 702 (3d Cir. 1995), in which the court required the district court to conduct a hearing to receive evidence and determine whether the ex-felon should receive a waiver . In United States v. McGill, 74 F.3d 64 (1996), the Fifth Circuit refused to follow the Third Circuit and affirmed the dismissal of his suit. The McGill court interpreted the funds cut-off not just to cut off Treasury funds for processing and granting waivers but also to repeal the substantive waiver provision, so that the district court simply could not grant a waiver.

Federal Circuit joins Seventh Circuit, holding Chevron deference not applicable to an agency without substantive rulemaking powers

Under the Hatch-Waxman Act, 35 U.S.C. Sec. 156, certain drug patents can be extended to make up for part of the time that the drug was undergoing Food and Drug Administration approval. Under a more recent law, the Uruguay Round Agreements Act, 35 U.S.C. Sec. 154, in order to harmonize U.S. patent law with that of its major trading partners, Congress provided generally that U.S. patents would extend the longer of 20 years from filing the application or 17 years from the grant. When plaintiffs applied for a Hatch-Waxman extension, the Patent and Trademark Office issued a "Final Determination" ruling that such extensions could not be added to the 20-year term provided in the URAA. In Merck & Co. v. Kessler, 80 F.3d 1543 (1996), the Federal Circuit held that the PTO was in error. As a preliminary matter, the PTO asked the court to defer to its Final Determination under Chevron v. NRDC, 467 U.S. 837 (1984). The court noted that the PTO does not have substantive rulemaking powers. Accordingly, the PTO's determination could not have the force and effect of law. Citing the Seventh Circuit's decision in Atchison, Topeka and Santa Fe Ry. Co. v. Pena, 44 F.3d 437 (1994)(en banc), aff'd 116 S.Ct. 595 (1996), the court concluded that this meant that Chevron did not apply. This meant that only the lesser Skidmore deference applied, and it was not sufficient to overcome the court's interpretation of the statutes as allowing the extension.

Second Circuit defers to agency interpretation rather than follow its own precedent on issue

Under the Immigration and Nationality Act, 8 U.S.C. Sec. 1182(c), illegal immigrants are ineligible for relief from deportation or for asylum if they have been convicted of an "aggravated felony." In Jenkins v. INS, 32 F.3d 11 (1994), the Second Circuit had held that the term referred to felonies under either state or federal law. The Bureau of Immigration Appeals, however, interpreted the statute differently, holding that it only applies to felonies under federal law, noting the undesirability of subjecting aliens to varying consequences based on the vagaries of state laws. In Aguirre v. INS, 79 F.3d 315 (1996), the Second Circuit was asked to reconsider its Jenkins decision in light of the BIA's opinion. The court cited the recent Supreme Court decision in Neal v. United States, 116 S.Ct. 763 (1996), in which the Court held yet again that under the doctrine of stare decisis its previous decisions establish the settled law against which later agency interpretations are measured. Nevertheless, the court noted that even if it was not bound to defer to an agency's interpretation in these circumstances, it might still "voluntarily accept such guidance for the purpose of achieving a satisfactory interpretation." Concluding that "the interests of national uniformity outweigh our adherence to Circuit precedent in this instance," especially where as here the statutory point is "fairly debatable, the court, after seeking and obtaining the concurrence of the Jenkins panel, abandoned Jenkins and granted Aguirre's petition.

D.C. Circuit upholds FCC rule rescinding certain race- and gender-based preferences against a broad array of APA claims

In 1994 the Federal Communications Commission established a set aside of part of the mobile telephone services spectrum for a special auction for "entrepreneurs," generally small businesses. By rule it also created special advantages which women- and minority-owned companies could use to qualify for this group. Three days before the scheduled auction, the Supreme Court decided Adarand Constructors v. Pena, 115 S.Ct. 2097 (1995), declaring federal minority set asides unconstitutional unless they met "strict scrutiny." Believing this decision raised grave questions about its rule, the FCC postponed the auction for entrepreneurs and issued a proposed rule to eliminate all race and gender based provisions in its bidding rules. Believing it important to hold the auction as soon as possible, the FCC allowed only two weeks (one week after the proposed rule was published) for comments, did not invite reply comments, and made the final rule immediately effective. The final rule adopted the proposal in most respects, allowing all small businesses to use the special advantages formerly only available to women- and minority-owned businesses. Unfortunately, because of the short time period involved in the rulemaking, most non-minority or women-owned businesses did not have an opportunity to arrange their affairs to be able to use the new special advantages. In Omnipoint Corp. v. FCC, 78 F.3d 620 (D.C. Cir. 1996), they sued to enjoin the rule. As initial matter, the companies' standing was questioned because they were not in a position to qualify for the auction under the pre-rule standard, and therefore an injunction against the new rule would not give them redress. The court, however, held that "when a party challenges a government set-aside program, the injury in fact' is the denial of equal treatment resulting from the imposition of the barrier." On the merits, the court dismissed the claim that the comment period was too short to comply with the APA. Citing to Florida Power & Light Co. v. United States, 846 F.2d 765 (D.C. Cir. 1988), in which a fifteen-day comment period was upheld because of a congressional deadline, the court said that the statutory requirement to hold the auction "without administrative or judicial delays" plus the fact that delay would harm the competitive viability of later entrants justified the short period. Moreover, the court found that the petitioners were not prejudiced by the short period because many persons did make comments, and the petitioners failed to show what they would have added had they had time. Similarly, the court found no error in making the rule immediately effective. In an interesting twist, the court noted that the stay granted by the court has afforded parties much more than the normal 30 day delayed effective date. While the FCC's own rules require it to allow for reply comments, its rules also provide for a good cause waiver. Here, the court said, the FCC had shown good cause.

FERC license condition imposed pursuant to statutory reqirement to adopt USFWS fish measures not supported by substantial evidence in FERC's record

When Bangor Hydro-Electric Company applied to the Federal Energy Regulatory Commission for a license to continue operating a dam, it submitted a plan to truck salmon and alewives around the dam. Under Section 18 of the Federal Power Act, 16 U.S.C. Sec. 811, however, FERC must require the construction "of such fishways as may be prescribed by the [U.S. Fish and Wildlife Service]." The USFWS informed FERC that it would require Bangor to construct permanent upstream fish passages. When FERC included that requirement as a condition of the license, Bangor petitioned for review. Bangor Hydro-Electric Co. v. FERC, 78 F.3d 659 (D.C. Cir. 1996). Because the license had been issued by FERC, the court looked to FERC's record to find the justification for the condition. Because the material that supposedly would support the condition had been developed by USFWS and had not been placed in FERC's record, FERC asked for the case to be remanded to it to supplement the record, while USFWS as intervenor asked to supplement the record before the court. The court, noting that FERC's proceeding was a formal adjudication, denied both requests. Given Bangor's record evidence supporting its position of the adequacy of trucking and the absence in the record of data and studies supporting the USFWS' arguments for fish passages, the court held that there was not substantial evidence supporting USFWS finding of a need for construction of the fish passages.