Government Urges Limited Relief in Easement Listing Notice Case

GBX ASSOCIATES LLC,
Plaintiff,
v.
UNITED STATES OF AMERICA, et al.,
Defendants.

IN THE UNITED STATES DISTRICT COURT
FOR THE NORTHERN DISTRICT OF OHIO
EASTERN DIVISION

Judge Pamela A. Barker

REPLY IN SUPPORT OF
DEFENDANTS' CROSS-MOTION FOR SUMMARY JUDGMENT

Respectfully Submitted,

DAVID A. HUBBERT
Deputy Assistant Attorney General
U.S. Department of Justice,
Tax Division

EDWARD J. MURPHY
RYAN D. GALISEWSKI
Trial Attorneys, Tax Division
U.S. Department of Justice
P.O. Box 55
Washington, D.C. 20044
Tel: (202) 307-6064/(202) 305-3719
Fax: (202) 514-5238
Edward.J.Murphy@usdoj.gov
Ryan.D.Galisewski@usdoj.gov

I certify that this memorandum adheres to the 20-page limit for memoranda in support of dispositive motions in cases with unassigned classification, as set forth in Local Civil Rule 7.1(f). /s/ Edward J. Murphy 7/8/22.

---

TABLE OF CONTENTS

I. Introduction

II. Argument

III. Conclusion

TABLE OF AUTHORITIES

Cases

A.C.L.U. of Ky. v. McCreary Cnty., 607 F.3d 439 (6th Cir. 2010)

Alabama Ass'n of Realtors v. HHS, 539 F. Supp. 3d 211, 217 (D.D.C. 2021)

Amoco Prod. Co. v. Village of Gambell, 480 U.S. 531 (1987))

Arizona v. Biden, 31 F.4th 469 (6th Cir. Apr. 12, 2022) (Sutton, C.J., concurring)

Arizona v. City & County of San Francisco, California, 142 S. Ct. 1926 (Mem.), 2022 WL 2135493 (June 15, 2022)

Ass'n of Am. Physicians & Surgeons v. FDA, 13 F.4th 531 (6th Cir. 2021)

Baeder v. Heckler, 768 F.2d 547 (3d Cir. 1985)

Belmont Partners, LLC v. Mina Mar Group, Inc., 741 F. Supp. 2d 743 (E.D. Va. 2010)

Berryhill v. United States, 199 F.2d 217 (6th Cir. 1952)

Bethesda Hospital v. Heckler, 609 F. Supp. 1360 (S.D. Ohio 1985)

Biggs v. Quicken Loans, Inc., 990 F. Supp. 2d 780 (E.D. Mich. 2014)

Black Warrior Riverkeeper, Inc. v. U.S. Army Corps of Eng'rs, 781 F.3d 1271 (11th Cir. 2015)

Brotherhood Mut. Ins. Co. v. DeLauter, 156 F.3d 1228 (Table), 1998 WL 432482 (6th Cir. 1998)

California v. Azar, 911 F.3d 558 (9th Cir. 2018)

California v. Texas, 141 S. Ct. 2104 (2021)

Chapman v. Deutsche Bank Nat. Trust Co., 651 F.3d 1039 (9th Cir. 2011)

Chevron Corp. v. Donziger, 974 F. Supp. 2d 362 (S.D.N.Y. 2014)

Cook County v. Wolf, 498 F. Supp. 3d 999 (N.D. Ill. 2020)

Cumberland Medical Center v. Secretary of Health & Human Services, 781 F.2d 536 (6th Cir. 1986)

Dalton v. Specter, 511 U.S. 462 (1994)

D.A.M. v. Barr, 486 F. Supp. 3d 404 (D.D.C. 2020)

Driftless Area Land Conservancy v. Valcq, 16 F.4th 508 (7th Cir. 2021)

E. Bay Sanctuary Covenant v. Biden, 993 F.3d 640 (9th Cir. 2021)

E. Bay Sanctuary Covenant v. Garland, 994 F.3d 962 (9th Cir. 2020)

FAA v. Cooper, 566 U.S. 284 (2012)

Fry v. Ctrs. for Medicare and Medicaid Servs., 402 F. Supp. 3d 460 (N.D. Ill. 2019)

Gorss Motels, Inc. v. FCC, 20 F.4th 87 (2d Cir. 2021)

Green Rock, LLC v. IRS, Case No. 2:21-cv-1320 (N.D. Ala.)

Griffin v. Hope Fed. Credit Union, 810 F. App'x 450 (6th Cir. 2020)

Guinness PLC v. Ward, 955 F.2d 875 (4th Cir.1992)

Haines v. Fed. Motor Carrier Safety Admin., 814 F.3d 417 (6th Cir. 2016)

Hart v. Sansom, 110 U.S. 151 (1884)

Hecht Co. v. Bowles, 321 U.S. 321 (1944)

High Country Citizens Alliance v. Clarke, 454 F.3d 1177 (10th Cir. 2006)

Home Depot U.S.A., Inc. v. Jackson, 139 S. Ct. 1743 (2019)

IAP Worldwide Servs., Inc. v. United States, 2022 WL 1671697 (Fed. Cl. May 25, 2022)

In re Clean Water Act Rulemaking, 568 F. Supp. 3d 1013 (N.D. Cal. 2021)

In re Long-Distance Tel. Serv. Fed. Excise Tax Refund Litig., 853 F. Supp. 2d 138 (D.D.C. 2012)

Kiakombua v. Wolf, 498 F. Supp. 3d 1 (D.D.C. 2020)

King v. Burwell, 576 U.S. 473 (2015)

Lane v. Pena, 518 U.S. 187 (1996)

Los Angeles Haven Hospice, Inc. v. Sebelius, 638 F.3d 644 (9th Cir. 2011)

Lujan v. National Wildlife Federation, 497 U.S. 871 (1990)

Mann Constr., Inc. v. United States, 27 F.4th 1138 (6th Cir. 2022)

Mann Constr., Inc. v. United States, 539 F. Supp. 3d 745 (E.D. Mich. 2021)

Marshall v. Marshall, 547 U.S. 293 (2006))

Maximum Home Health Care, Inc. v. Shalala, 272 F.3d 318 (6th Cir. 2001)

Mayor & City Council of Baltimore v. Azar, 2020 WL 1873947 (D. Md. Apr. 15, 2020)

Menowitz v. Brown, 991 F.2d 36 (2d Cir. 1993)

Metro. Hosp., Inc. v. U.S. Dep't of Health & Human Servs., 2011 WL 13202159 (W.D. Mich. Sept. 16, 2011)

Morris v. U.S. Army Corps of Engineers, 60 F. Supp. 3d 1120 (D. Id. 2014)

Nat'l Min. Ass'n v. U.S. Army Corps of Eng'rs, 145 F.3d 1399 (D.C. Cir. 1998)

Nken v. Holder, 556 U.S. 419 (2009)

Northern New Mexico Stockman's Ass'n v. U.S. Fish & Wildlife Serv., 494 F. Supp. 3d 850 (D.N.M. 2020)

O.A. v. Trump, 404 F. Supp. 3d 109 (D.D.C. 2019)

Ohio v. EPA, 969 F.3d 306 (6th Cir. 2020)

Pennsylvania v. President of the United States, 930 F.3d 543 (3d Cir. 2019)

Rashid v. United States, 48 F. App'x 892 (4th Cir. 2002) (per curiam)

Right to Life of Dutchess County, Inc. v. FEC, 6 F. Supp. 2d 248 (S.D.N.Y. 1998)

Rimmer v. Holder, 700 F.3d 246 (6th Cir. 2012)

RYO Mach., LLC v. U.S. Dep't of Treas., 696 F.3d 467 (6th Cir. 2012)

Shaffer v. Heitner, 433 U.S. 186 (1977)

Skyworks, Ltd. v. CDC, 542 F. Supp. 3d 719 (N.D. Ohio 2021)

Standard Oil Co. v. Federal Energy Admin., 453 F. Supp. 203 (N.D. Ohio 1978)

State of Ohio Dep't of Human Servs. v. U.S. Dep't of Health & Human Servs., 862 F.2d 1228 (6th Cir. 1988)

Tennessee Hospital Association v. Azar, 908 F.3d 1029 (6th Cir. 2018)

TransUnion LLC v. Ramirez, 141 S. Ct. 2190 (2021)

United States v. Finley Coal Co., 493 F.2d 285 (6th Cir. 1974)

United States v. Mendoza, 464 U.S. 154 (1984)

Virginia Society for Human Life, Inc. v. FEC, 263 F.3d 379 (4th Cir. 2001)

Warth v. Seldin, 422 U.S. 490 (1975)

Statutes

5 U.S.C. § 702

5 U.S.C. § 703

5 U.S.C. § 704

5 U.S.C. § 706

26 U.S.C. § 7422

Other Authorities

Christopher J. Walker, The Lost World of the Administrative Procedure Act:
A Literature Review, 28 Geo. Mason L. Rev. 733, 760 (2021)

Fed. Practice & Procedure § 8385

Michael T. Morley, Disaggregating Nationwide Injunctions, 71 Ala. L. Rev. 1 (2019)

Mila Sohoni, The Power to Vacate a Rule, 88 Geo. Wash. L. Rev. 1121, 1138 (2020)

Ronald A. Cass, Nationwide Injunctions' Governance Problems: Forum Shopping, Politicizing Courts, and Eroding Constitutional Structure, 27 Geo. Mason L. Rev. 29 (2019)

Ronald M. Levin, The National Injunction and the Administrative Procedure Act, The Regulatory Review (Sept. 18, 2018), https://www.theregreview.org/2018/09/18/levin-national-injunction-administrative-procedure-act/ [https://perma.cc/3ATQ-GFZL]

Zayne Siddique, National Injunctions, 117 Colum. L. Rev. 2095, 2122 (2017)

---

I. Introduction

Plaintiff GBX and the defendant United States have cross-moved for summary judgment, disagreeing about the proper scope of APA relief following the United States' concession that the disputed Notice is invalid in the Sixth Circuit under the reasoning in Mann Construction, Inc. v. United States, 27 F.4th 1138 (6th Cir. 2022).¹ Seeking a remedy well beyond its own alleged injury, GBX relies on selected out-of-circuit case law in an attempt to make the Sixth Circuit's reasoning in Mann applicable nationwide. The United States, on the other hand, supported by persuasive authority from this circuit, contends that the APA does not authorize, and surely does not mandate by default, such a sweeping nationwide order, and that relief tailored to the circumstances of the case aligns with basic principles of Article III, equity jurisdiction, and sovereign immunity, as well as compelling policy reasons.

In its latest brief (ECF No. 19, “Reply”), GBX misleadingly asserts that it is “settled” law that any APA violation inflexibly requires wholesale vacatur of agency rules and accuses the government of “obfuscating the fundamental distinction between vacatur and injunctive relief.” Reply at 1, 2. As explained below, GBX's position does not withstand scrutiny. Regardless of whether the APA's instruction to “set aside” invalid agency action generates a distinct and novel remedy called “vacatur” or rather gives substance to particular administrative-law forms of injunction and/or declaration, GBX's action is equitable in nature and the Court exercises discretion to tailor the remedy to the facts of the case. GBX has apparently retreated from its argument that a universal vacatur is necessary to give it complete relief for its alleged compliance injuries. Because GBX will get complete relief from an order relieving only GBX of its reporting and recordkeeping obligations with respect to transactions under the Notice, that should be the extent of any judgment. Accordingly, the Court should grant the United States' motion, deny GBX's, and enter judgment setting aside the Notice as to GBX only.

II. Argument

A. The Law Is Not “Settled”

GBX asserts the law is “settled” and that the “vacatur” remedy for any APA violation must necessarily apply to all regulated parties everywhere. Reply at 1-2. As purported proof, GBX quotes Alabama Ass'n of Realtors v. HHS, 539 F. Supp. 3d 211, 217 (D.D.C. 2021), to say, “[T]he law is clear” in this regard. Reply at 1. But the quoted sentence from that case actually says, “In this Circuit” — meaning the D.C. Circuit — “the law is clear.” Our case, of course, is in the Sixth Circuit, where there is no controlling precedent.² The misleadingly truncated quotation foreshadows broader misrepresentations about the state of the law in GBX's papers.

The reality, according to no less an authority than Wright & Miller, is that whether “the APA authorizes nationwide or universal injunctions against enforcement of a rule” is currently “the subject of controversy.” Fed. Practice & Procedure § 8385; see also Christopher J. Walker, The Lost World of the Administrative Procedure Act: A Literature Review, 28 Geo. Mason L. Rev. 733, 760 (2021) (citing “the unsettled nature of the scope of 'set aside' in the APA”). Some commentators favor the government's side in this controversy. See, e.g., Ronald A. Cass, Nationwide Injunctions' Governance Problems: Forum Shopping, Politicizing Courts, and Eroding Constitutional Structure, 27 Geo. Mason L. Rev. 29 (2019) (interpreting 5 U.S.C. § 706's “set aside” language as authorizing nationwide injunctions “is not the only or even the most natural reading of the APA's instruction”); Michael T. Morley, Disaggregating Nationwide Injunctions, 71 Ala. L. Rev. 1, 35 (2019) (“A court may 'hold unlawful and set aside' agency action within the context of a particular case, however, without necessarily invalidating the challenged provision as applied to third-party nonlitigants throughout the nation.”). Even those who favor GBX's view acknowledge that “this is an unstable time in administrative law.” Mila Sohoni, The Power to Vacate a Rule, 88 Geo. Wash. L. Rev. 1121, 1138 (2020).

Against this backdrop, the Court should disregard GBX's rhetorical flourishes disparaging our position as “radical” or “activist” (Reply at 8, 14) and consider the merits.

B. GBX Overstates the Distinction Between Vacatur and Injunctive Relief

GBX's central argument — that the “distinction” between vacaturs and injunctions should shield its position against our attacks and make its proposed remedy not subject to principles limiting injunctive relief based on equitable factors — fails both as a matter of theory and on the facts of the case. Tellingly, GBX's complaint was solely for “declaratory and injunctive relief” (see ECF No. 1), and as we noted in our opening brief, 5 U.S.C. § 703 limits available relief here to declaratory and injunctive relief (ECF No. 18-1, Br. at 12), a point GBX does not dispute.

1. Vacatur is an equitable remedy akin to an injunction

In APA cases, “federal courts possess broad discretion to fashion an equitable remedy.” Black Warrior Riverkeeper, Inc. v. U.S. Army Corps of Eng'rs, 781 F.3d 1271, 1290 (11th Cir. 2015). Indeed, relief for a freestanding APA challenge such as GBX's is limited to equitable remedies. See Haines v. Fed. Motor Carrier Safety Admin., 814 F.3d 417, 425 (6th Cir. 2016) (“[t]he [APA] waives sovereign immunity for claims for equitable relief” (alterations and emphasis in original)). Thus, “[u]ndeniably, vacatur is 'equitable relief.'” Black Warrior Riverkeeper, 781 F.3d at 1290. It is within this context of equitable remedies that vacatur — whether distinct or some amalgam of declaratory, injunctive, and other relief — must operate.

The firewall GBX attempts to build between vacatur and injunction does not hold up, as “vacatur under the APA is a form of discretionary relief, akin to an injunction.” Northern New Mexico Stockman's Ass'n v. U.S. Fish & Wildlife Serv., 494 F. Supp. 3d 850, 1030 (D.N.M. 2020); accord In re Clean Water Act Rulemaking, 568 F. Supp. 3d 1013 (N.D. Cal. 2021). Some courts classify APA vacatur as a form of injunction and state that vacatur, like any injunction, “requires . . . a balancing of the relative equities and a finding of irreparable harm.” IAP Worldwide Servs., Inc. v. United States, 2022 WL 1671697, at *5, 15 (Fed. Cl. May 25, 2022).

In trying to manufacture a distinction between vacatur and the much-criticized nationwide injunction, GBX makes various claims about the nature of vacatur that are incorrect. For instance, GBX contrasts an injunction, which “naturally can be tailored solely to the parties in the case,” with vacatur, which GBX claims is a “single unitary action” that “cannot similarly be narrowed to particular parties.” Reply at 5. Thus, in GBX's view, vacatur must be applied in a rigid fashion such that a rule is either vacated as to everyone nationwide or vacated as to no one. See id. (“Either it is, or it isn't.”). But this approach is contrary to the traditional exercise of the Court's equity power, which is “to mould each decree to the necessities of the particular case.” Hecht Co. v. Bowles, 321 U.S. 321, 329 (1944). If vacatur is so unaccommodating, the Court should instead issue appropriate injunctive or declaratory relief after it “sets aside” the Notice.

Plaintiff also offers the unsupported contention that APA vacatur “operates essentially in rem as to the challenged agency action,” calling this a “fundamental distinction” from “in personam injunctions.” Reply at 6; see also id. at 10. But APA actions like GBX's must be based on in personam jurisdiction, because relief is limited to equitable remedies, which operate in personam, not in rem. See Chevron Corp. v. Donziger, 974 F. Supp. 2d 362, 556 (S.D.N.Y.

2014) (“equity acts in personam”); see also Hart v. Sansom, 110 U.S. 151, 154 (1884) (“Generally, if not universally, equity jurisdiction is exercised in personam and not in rem[.]”). Whether a form of injunction or “akin” to an injunction, vacatur is essentially “an order directing a party [the United States] to do or refrain from doing a particular thing,” and it therefore is in personam. See Griffin v. Hope Fed. Credit Union, 810 F. App'x 450, 453 (6th Cir. 2020).

Further, the APA provides judicial review of “[a]gency action,” e.g., 5 U.S.C. §§ 702 & 704, not regulation qua property, and is directed in personam “against the United States, the agency by its official title, or the appropriate officer,” 5 U.S.C. § 703. It would be nonsensical to apply the basic principles of in rem jurisdiction in the APA context. Whereas an action is only “in rem” when “jurisdiction is based on the court's power over property within its territory,” Shaffer v. Heitner, 433 U.S. 186, 199 (1977), agency action is not property located within a particular territory. And it would be absurd to claim that only one court in the country can have jurisdiction over a challenged agency action, but it is a basic proposition for in rem suits under the “prior exclusive jurisdiction doctrine.” See Chapman v. Deutsche Bank Nat. Trust Co., 651 F.3d 1039, 1043 (9th Cir. 2011) (citing Marshall v. Marshall, 547 U.S. 293, 311 (2006)).

GBX further tries to distinguish vacaturs from injunctions by claiming vacatur operates “retroactively,” but this is also incorrect. Reply at 4 (quoting Driftless Area Land Conservancy v. Valcq, 16 F.4th 508, 522 (7th Cir. 2021)).³ For one thing, it is unclear what exactly GBX means in the context of an APA challenge like this, since retroactive relief is generally outside the scope of the APA's sovereign immunity waiver. See, e.g., Rashid v. United States, 48 F. App'x 892, 893 (4th Cir. 2002) (per curiam) (“[T]o the extent that [plaintiff] sought retrospective relief, such relief was not available in the district court under the APA.”). Indeed, GBX seeks only prospective relief, specifically to be relieved of future reporting and recordkeeping obligations.⁴

GBX's view that APA vacatur operates retroactively is also directly refuted by a case cited on page 1 of its Reply, D.A.M. v. Barr, 486 F. Supp. 3d 404, 415-16 (D.D.C. 2020). That case observed, “it is one thing to say that vacatur protects everyone from having an invalid rule applied to them in future adjudications, and quite another to say that vacatur erases from legal existence all past adjudications under the vacated rule.” The court concluded that universal vacatur of the challenged rule “means the government cannot issue any more orders of removal under that rule, but it does not mean that petitioners' removal orders (along with thousands of others) were automatically extinguished by operation of his judgment.” See also Biggs v. Quicken Loans, Inc., 990 F. Supp. 2d 780, 786 (E.D. Mich. 2014) (when a court outside the Sixth Circuit has enjoined prospective enforcement of an agency rule nationwide, that “does not automatically invalidate the rule on a retrospective basis for courts in the Sixth Circuit”); In re Long-Distance Tel. Serv. Fed. Excise Tax Refund Litig., 853 F. Supp. 2d 138, 143-44 (D.D.C. 2012) (vacating IRS Notice 2006-50 on a prospective basis only, where “granting a retroactive vacatur would call into question” millions of tax refunds already issued).

In sum, the APA limits GBX to pursuing an equitable remedy that operates prospectively to remedy its alleged injury.

2. Universal vacatur of an agency rule is indistinguishable from a nationwide injunction against the rule's enforcement

Aside from providing a warped view of vacatur from a theoretical perspective, GBX's Reply ignores the practical reality that vacatur and injunctive relief in this case are the same.

To be sure, GBX fleetingly acknowledges that the vacatur of the Notice that it seeks would have a “similar practical result” to a nationwide injunction. Reply at 7. But it is crucial to realize that this will always be true of any blanket vacatur of an agency rule, as proponents of universal remedies readily concede. See Ronald M. Levin, The National Injunction and the Administrative Procedure Act, The Regulatory Review (Sept. 18, 2018), https://www.theregreview.org/2018/09/18/levin-national-injunction-administrative-procedure-act/ [https://perma.cc/3ATQ-GFZL] (universal vacatur means that “when the challenged agency action is a rule, a judicial order that 'sets it aside' looks equivalent, in practical effect, to an injunction that prevents the rule from applying to anyone.”). Courts recogniz this reality as well. For instance, in O.A. v. Trump, 404 F. Supp. 3d 109 (D.D.C. 2019), a case that GBX approvingly cites for the proposition that APA vacatur must be given nationwide effect, the court commented that universal “vacatur . . . obviates any need for the issuance of an injunction.” Id. at 118.

GBX recognized the same back in March, when it wrote, “there is no meaningful distinction between declaratory relief setting aside the Notice as unlawful and injunctive relief enjoining its enforcement.” ECF No. 10 at 5.⁵ In an effort to rebut our argument that a “speedy hearing” under Fed. R. Civ. P. 57 to determine plaintiff's right to declaratory relief would be inappropriate because the Complaint also sought an injunction, GBX wrote that “[i]t would be nonsensical for the court to allow Plaintiff a speedy hearing to declare that Notice 2017-10 is unlawful and set it aside, but then require Plaintiff to return to court to seek an order enjoining enforcement of the vacated rule.” Id. The identical effect of an injunction and “vacatur” in this case also helps to explain why GBX now says in a footnote that it “would be satisfied . . . with no injunction at all” if the Court were to vacate the Notice universally. Reply at 1 n.1. In the same footnote, GBX insists that its request for an injunction in the Complaint was a “separate and additional requested remedy” beyond vacatur. Reply at 1 n.1. But the Complaint does not mention vacatur at all, much less as a “separate” remedy that is distinguishable from the requests for “injunctive and declaratory relief” that appear in both the Complaint's caption and opening sentence. To the extent that GBX might now wish to amend its Complaint to request “vacatur” in lieu of an injunction, it cannot do so in a footnote to its summary judgment reply brief.⁶

For these reasons, the Court should reject GBX's false dichotomy between vacatur and injunctive relief, recognize that GBX is essentially requesting that the IRS be enjoined from enforcing the Notice against anyone, and limit the remedy in accordance with equity principles.⁷

3. Injunction cases are relevant

GBX manufactures a distinction between vacaturs and injunctions so it can criticize the government's opening brief for citing cases that “awarded narrow injunctive relief” (Reply at 9), calling them irrelevant to the “distinct” remedy of vacatur that GBX is seeking.⁸ To the contrary, these cases must be read with GBX's proposed vacatur in mind, since they were decided in accordance with the APA's instruction to “set aside” unlawful agency action. That is, APA cases awarding limited injunctions show not only that such relief is possible under the APA, but also that an inflexibly universal vacatur of the kind GBX proposes is not required. If it were, the injunctions would have been superfluous. Yet a limited injunction was deemed the appropriate remedy for an APA violation by the courts in Virginia Society for Human Life, Inc. v. FEC, 263 F.3d 379, 393-94 (4th Cir. 2001), and Los Angeles Haven Hospice, Inc. v. Sebelius, 638 F.3d 644, 665 (9th Cir. 2011), both of which we cited in our opening brief. See ECF No. 18-1, Br. at 13-14.

GBX also overlooks what the cases we cited actually say. For example, GBX dismisses Tennessee Hospital Association v. Azar, 908 F.3d 1029 (6th Cir. 2018), on the ground that the remedy in that case was a “permanent injunction,” and “not APA vacatur.” Reply at 9. But the opinion says the “payment-deduction policy is invalid because it failed to follow the proper notice-and-comment requirements” before adding that “defendants are permanently enjoined from enforcing [the policy] against plaintiffs.” 908 F.3d at 1046-47. Again, this shows that even a finding that a rule is invalid does not automatically vacate it as to everyone nationwide; if that were how vacatur always worked, then a further order enjoining a rule's application to plaintiffs would be superfluous. Yet many courts — including the Sixth Circuit — craft such orders.

C. GBX's Analysis of the Case Law Is Flawed

With the foregoing points in mind, two other problems with GBX's discussion of the case law become apparent: there are many cases supporting the government's position, and cases GBX relies upon actually support the idea that sweeping nationwide orders must be justified on the facts of a particular case — which GBX fails to do here.

1. Several cases adopt the government's position limiting vacatur of an agency rule, and the resulting injunction against the rule's enforcement, either geographically or to the parties before the court

First, GBX's claims that there are no cases adopting our position and that we have identified no case that is at odds with theirs (Reply at 2) are false. See, e.g., Mayor & City Council of Baltimore v. Azar, 2020 WL 1873947, at *4 (D. Md. Apr. 15, 2020) (“[T]he APA does not require a reviewing court vacating a rule to do so on a nationwide basis.”). In making this sweeping statement, GBX dismisses Judge Calabrese's thorough and nuanced analysis in Skyworks, Ltd. v. CDC, 542 F. Supp. 3d 719 (N.D. Ohio 2021), without addressing it in any detail, baldly asserting the case has no “firm holding.” Reply at 9-10. To the contrary, Skyworks is firmly on point as the court rejected plaintiff's request for a universal injunction and limited relief to “parties and their members.” 542 F. Supp. 3d at 736. The existence of such a recent, detailed opinion from this district is highly persuasive.

Other examples abound of courts “setting aside” invalidly promulgated rules by just ignoring the invalid rule when providing the plaintiff relief, rather than ordering a universal vacatur. Indeed, several cases in this circuit have awarded injunctions limited exclusively to plaintiffs without also imposing GBX's version of universal vacatur. E.g., State of Ohio Dep't of Human Servs. v. U.S. Dep't of Health & Human Servs., 862 F.2d 1228, 1237 (6th Cir. 1988) (finding HHS rule invalid and remanding for review of denial of State of Ohio's Medicaid plan amendment that had been previously rejected under that rule); Standard Oil Co. v. Federal Energy Admin., 453 F. Supp. 203, 245-46 & n.244 (N.D. Ohio 1978) (finding rules “violate 5 U.S.C. [§] 706 because of procedural defects” and providing as relief not nationwide vacatur but declaratory judgment and permanent injunctions from enforcing rules “against any of the refiners who are plaintiffs to this action”); Metro. Hosp., Inc. v. U.S. Dep't of Health & Human Servs., 2011 WL 13202159, at *7 (W.D. Mich. Sept. 16, 2011) (clarifying that judgment only binds parties where an “injunction purporting to be nationwide or even district-wide, under these circumstances, would be an unnecessarily sweeping exercise of judicial power”).⁹

Thus, although some courts (especially in the D.C. Circuit) purport to issue orders that apply nationwide, others do not extrapolate such sweeping effect from another court's holding that a regulation violates the APA. Illustrative is Right to Life of Dutchess County, Inc. v. FEC, 6 F. Supp. 2d 248 (S.D.N.Y. 1998), in which plaintiff claimed a prior decision from the District of Maine declaring a regulation invalid under the APA should be given nationwide effect. The New York court rejected plaintiff's position because it “is flatly contradicted by the well-settled principle in the federal court system that decisions in one circuit are not binding on district courts in another circuit” and “nothing in [5 U.S.C. § 706] purports to require a reviewing court to adopt another court's conclusions and to enforce them by issuing injunctive relief without independent analysis, especially when the second court sits in another circuit.” Id. at 252-53.

In accord with this view, several courts have decided APA challenges to agency rules in ways that made clear they were not issuing nationwide orders forcing a particular decision on all the other courts. For instance, in Cumberland Medical Center v. Secretary of Health & Human Services, 781 F.2d 536, 538 (6th Cir. 1986), the Sixth Circuit came to its own conclusion that a rule was invalid after “[s]even circuits have struck down the” rule under the APA or other grounds. None of the other circuits that “struck down” the rule under the APA were deemed to have issued a universal vacatur. And in Bethesda Hospital v. Heckler, 609 F. Supp. 1360, 1372 (S.D. Ohio 1985), the court independently invalidated a regulation, and rather than automatically order the rule invalid everywhere, the court ordered briefing on the “appropriateness of relief.” The court did not deem itself bound by eighteen district court cases that had “invalidated” the rule already (nor four others upholding it). See id.at 1372 & n.2. As recently as 2020, the Sixth Circuit denied a request for preliminary injunction against enforcing a rule in two different states within the circuit that would only have effect if the enforcement of two later superseding rules were enjoined. In reasoning that there was not a “reasonable possibility” of both later rules being enjoined in both states, the Court endorsed the government's view that a “nationwide” injunction is extraordinary and stated instead that “the usual way” of enjoining a rule's enforcement is “within the issuing court's own jurisdiction.” Ohio v. EPA, 969 F.3d 306, 309 (6th Cir. 2020).

GBX's position that vacatur must be nationwide, all or nothing, is also contrary to Morris v. U.S. Army Corps of Engineers, 60 F. Supp. 3d 1120, 1125-26 (D. Id. 2014), cited in our opening brief, which held that a regulation was unconstitutional but entered an injunction “limited to enjoining enforcement on Corps' property in Idaho,” explaining that the injunction's “scope is dictated by the allegations of the two named plaintiffs[.]” Influencing the court's decision was that the same regulation was at issue in a then-pending lawsuit in Florida¹⁰ where a preliminary injunction had been denied. Id. at 1124. This geographic split would not have been possible if GBX's preferred approach of automatic nationwide vacatur had been adopted.

Even National Mining, which GBX repeatedly quotes, acknowledged a Third Circuit case that supports the government's position. See 145 F.3d at 1409. That case, Baeder v. Heckler, 768 F.2d 547, 553 (3d Cir. 1985), affirmed the district court's judgment to the extent that it “held the regulation invalid and directed the Secretary to proceed with Baeder's case without reference to it” but disagreed that “the district court had the authority to issue an injunction aimed at controlling the Secretary's behavior in every disability case in the country.”¹¹

All told, then, GBX's contention that no cases support our position is emphatically false.

2. Even the cases that GBX relies upon show that nationwide vacatur is discretionary rather than automatic

Second, GBX overstates the extent to which the cases it cites support its view. Its opening brief interprets § 706 as “requiring,” in the event of APA non-compliance, an order that does more than “simply to preclude the agency from applying that rule.” ECF No. 17-1, Br. at 6. On reply, GBX adds that a nationwide remedy “is not only permissible, but is the normal result in APA challenges like this one,” meaning there need be no special justification for it. Reply at 1. But while GBX claims three circuits “hold that the APA authorizes complete vacatur of agency actions” (Reply at 10 (emphasis added)), that does not mean that the APA compels such relief in every case.¹² Thus, it does not answer whether such relief should be granted here. And GBX's briefs make no showing that universal relief, even if authorized, should be granted here either.

In the cases that GBX relies on, courts did not automatically grant universal vacatur; instead, they justified that relief based on the facts of the cases before them. For example, on page 2 of the Reply, GBX cites Pennsylvania v. President of the United States, 930 F.3d 543, 575 (3d Cir. 2019), which affirmed a “nationwide injunction” of a rule allowing employers to opt out of providing no-cost contraceptive coverage under the Affordable Care Act. It did so not just as a matter of course but because it was “necessary to afford complete relief to the States.” Id. The Third Circuit found that “[a]n injunction geographically limited to the States alone will not protect them from financial harm, as some share of their residents who work out-of-state will lose contraceptive coverage,” and that “[o]ut-of-state college attendance further exacerbates the States' injury.” Id. Notably, the Third Circuit's opinion recognized that the Ninth Circuit, in addressing the same issue, had declined to issue a nationwide injunction. Id. at 575 n.32; see California v. Azar, 911 F.3d 558, 584 (9th Cir. 2018) (“On the present record, an injunction that applies only to the plaintiff states would provide complete relief to them.”).

Also on page 2 of the Reply, GBX cites East Bay Sanctuary Covenant v. Biden, 993 F.3d 640, 681 (9th Cir. 2021),¹³ which says two “factors” supported the district court's nationwide injunction. First, the opinion quotes National Mining but explains that the “ordinary result” is universal relief because that “is often necessary to provide the plaintiffs with complete redress.” Id. (quotation omitted). This utilitarian framing contrasts with GBX's view that the “set aside” language of § 706 compels automatic nationwide relief for every APA violation. Second, the opinion justifies the broad injunction because of the “need for uniformity in immigration policy,” an interest not implicated by the present case. Id. (quotation omitted).

D. Standing Is Not a “Red Herring”

Having rebutted GBX's main contentions, we now return to what GBX calls the government's “miscellaneous arguments” that support limited relief. The first such argument is that GBX lacks standing to seek a remedy as to non-parties. Although GBX previously suggested that a plaintiff-specific remedy would be “unworkable in practice,” (ECF No. 17-1, Br. at 11),¹⁴ the Reply abandons this contention in favor of simply deriding our argument as “tangential” and a “red herring.” Reply at 11. But Article III standing “is the threshold question in every federal case,” Warth v. Seldin, 422 U.S. 490, 498 (1975), and so must be addressed.

GBX's substantive standing argument, such as it is, amounts to the claim that its preferred form of vacatur is not “[r]elief as to non-parties” but rather “relief that operates in rem on 'the challenged agency action itself.'” Reply at 11(quoting Driftless). In addition to the problems with this theory already addressed above, GBX's description of the remedy conflicts with the Supreme Court's admonition that remedies “ordinarily operate with respect to specific parties.” California v. Texas, 141 S. Ct. 2104, 2115 (2021) (quotation omitted); see also TransUnion LLC v. Ramirez, 141 S. Ct. 2190, 2205 (2021) (“Article III grants federal courts the power to redress harms that defendants cause plaintiffs, not a freewheeling power to hold defendants accountable for legal infractions.” (quotation omitted)). The Sixth Circuit has stated that this “recent guidance” from the Supreme Court on standing has established a “party-focused rule.” Ass'n of Am. Physicians & Surgeons v. FDA, 13 F.4th 531, 540 (6th Cir. 2021).¹⁵ Thus, GBX's attempt at circumventing Article III's requirements by calling the relief it seeks “in rem” and the benefit to non-parties “incidental” must be rejected. Reply at 11.¹⁶

E. Sovereign Immunity Is Relevant to Construing the Scope of “Set Aside”

Our opening brief also argued that the canon of statutory interpretation mandating strict construction of sovereign-immunity waivers, as applied here, requires reading the ambiguous “set aside” language of § 706 narrowly to permit relief to the named plaintiff only. See ECF No. 18-1 (Br. at 16-18). GBX responds that “the strict-construction canon simply does not come into play” because “the scope of 'set aside' in Section 706 does not define the scope of the APA's waiver of sovereign immunity, which is separately contained in Section 702.” Reply at 12.

The flaw in GBX's reasoning is evident from the titles of the two sections: “Right of review” (§ 702) and “Scope of review” (§ 706). To reiterate, “a waiver of the Government's sovereign immunity will be strictly construed, in terms of its scope, in favor of the sovereign.” Lane v. Pena, 518 U.S. 187, 192 (1996) (emphasis added); see also FAA v. Cooper, 566 U.S. 284, 291 (2012) (court must “construe any ambiguities in the scope of a waiver in favor of the sovereign.” (emphasis added)). Therefore, while § 702 waives immunity by providing the right to file an APA suit, the scope of that waiver as defined in § 706 must be strictly construed.

The United States' position is consistent with how other language in the APA, though not contained in § 702 itself, restricts the scope of the waiver. For example, 5 U.S.C. § 704 limits review to “final agency action,” see Dalton v. Specter, 511 U.S. 462, 469 (1994), where “there is no other adequate remedy in a court,” see Rimmer v. Holder, 700 F.3d 246, 261 (6th Cir. 2012). And 5 U.S.C. § 701(a)(1) “withdraws that waiver of sovereign immunity” where another statute “precludes judicial review.” High Country Citizens Alliance v. Clarke, 454 F.3d 1177, 1181 (10th Cir. 2006). That interpreting the scope of the waiver requires examining the APA as a whole — rather than looking at a single section in isolation — is in keeping with the “fundamental canon of statutory construction that the words of a statute must be read in their context and with a view to their place in the overall statutory scheme.” Home Depot U.S.A., Inc. v. Jackson, 139 S. Ct. 1743, 1748 (2019) (quotation omitted). In other words, the task “is to construe statutes, not isolated provisions.” King v. Burwell, 576 U.S. 473, 486 (2015) (quotation omitted).

F. Policy Arguments Favor the Government

Finally, in response to our policy arguments, GBX makes three points, none of which is persuasive. First, GBX says, “the government does not explain why, in contrast to any other litigant, it should have more than one chance to win a case before it is bound by a valid Article III judgment.” Reply at 13.¹⁷ The explanation is in United States v. Mendoza, 464 U.S. 154 (1984), cited in our opening brief. According to that unanimous opinion, the Supreme Court has “long recognized that the Government is not in a position identical to that of a private litigant,” id. at 159 (quotation omitted), and so its “litigation conduct in a case is apt to differ,” id. at 161. For instance, “[u]nlike a private litigant who generally does not forego an appeal if he believes that he can prevail, the Solicitor General considers a variety of factors, such as the limited resources of the government and the crowded dockets of the courts, before authorizing an appeal.” Id. If courts adopted plaintiff's view that universal vacatur of agency rules is automatic whenever there is an APA violation, then, much like the prospect of nonmutual collateral estoppel at issue in Mendoza, that “would force the Solicitor General to abandon those prudential concerns and to appeal every adverse decision in order to avoid foreclosing further review.” Id.¹⁸

In the face of Mendoza, GBX persists with the blinkered view that the government should have petitioned for certiorari in Mann if it wanted to avoid being bound by the Sixth Circuit's decision nationwide (see Reply at 13), despite there currently being no circuit split that might have led the Supreme Court to take the case.¹⁹ At risk of belaboring the obvious, GBX's position is at odds with the basic rule that decisions of the U.S. Courts of Appeal are binding within their own circuits but not across the entire United States. See Berryhill v. United States, 199 F.2d 217, 219 (6th Cir. 1952). As the Second Circuit has bluntly explained, “until the Supreme Court speaks, the federal circuit courts are under duties to arrive at their own determinations of the merits of federal questions presented to them,” and “if a federal court simply accepts the interpretation of another circuit without independently addressing the merits, it is not doing its job.” Menowitz v. Brown, 991 F.2d 36, 40 (2d Cir. 1993) (cleaned up).

Second, GBX suggests that this Court should not worry about rendering a judgment that would moot another APA challenge to the Notice that is pending in a district court in the Eleventh Circuit, see Green Rock, LLC v. IRS, Case No. 2:21-cv-1320 (N.D. Ala.). That is because GBX thinks Green Rock “would not become moot until any appeals and petitions for certiorari in this case are completed.” Reply at 13. But that would not be true unless the government obtained a stay pending appeal. See Belmont Partners, LLC v. Mina Mar Group, Inc., 741 F. Supp. 2d 743, 750 n.5 (E.D. Va. 2010) (citing Guinness PLC v. Ward, 955 F.2d 875, 898 (4th Cir.1992))); see also Brotherhood Mut. Ins. Co. v. DeLauter, 156 F.3d 1228 (Table), 1998 WL 432482, at *2 (6th Cir. 1998) (“A judgment is final even though it is subject to nullification through a motion for a new trial, by reversal on appeal, or by similar post-judgment outcomes.”). In any event, GBX does not deny that the judgment it seeks would override the judgment of any other court that might consider the issue, and that outcome would be antithetical to the normal functioning of our court system.²⁰

Third, GBX says there is no point in allowing the issues in Mann to have further “percolation” because it is “straightforward” and obviously correct. Reply at 13. We respectfully disagree and direct the Court's attention to the government's brief in Green Rock (ECF No. 18-2) for a discussion of why we think Mann was incorrectly decided. Note also that the Sixth Circuit in Mann reversed the district judge, who had granted summary judgment in the government's favor. See Mann Constr., Inc. v. United States, 539 F. Supp. 3d 745 (E.D. Mich. 2021).*

III. Conclusion

Based on the foregoing, the Court should grant the United States' motion for summary judgment, deny GBX's motion, and enter judgment setting aside the Notice as to GBX only.

Respectfully Submitted,

DAVID A. HUBBERT
Deputy Assistant Attorney General
U.S. Department of Justice,
Tax Division

EDWARD J. MURPHY
RYAN D. GALISEWSKI
Trial Attorneys, Tax Division
U.S. Department of Justice
P.O. Box 55
Washington, D.C. 20044
Tel: (202) 307-6064/(202) 305-3719
Fax: (202) 514-5238
Edward.J.Murphy@usdoj.gov
Ryan.D.Galisewski@usdoj.gov