Opposition Brief — Indian River County, Florida, et al., Petitioners v. Department of Transportation, et al.
Supreme Court briefAug 21, 2020
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No. 19-1304
In the
Supreme Court of the United States
INDIAN RIVER COUNTY, FLORIDA; AND INDIAN
RIVER COUNTY EMERGENCY SERVICES DISTRICT,
Petitioners,
v.
UNITED STATES DEPARTMENT OF
TRANSPORTATION; ELAINE L. CHAO, IN HER
OFFICIAL CAPACITY AS SECRETARY OF
TRANSPORTATION; UNDER SECRETARY OF
TRANSPORTATION FOR POLICY; FEDERAL
RAILROAD ADMINISTRATION; PAUL NISSENBAUM,
IN HIS OFFICIAL CAPACITY AS ASSOCIATE
ADMINISTRATOR OF THE FEDERAL RAILROAD
ADMINISTRATION; AND AAF HOLDINGS LLC,
Respondents.
On Petition for a Writ of Certiorari to the United
States Court of A ppeals for the D.C. Circuit
BRIEF IN OPPOSITION OF
RESPONDENT AAF HOLDINGS LLC
Eugene E. Stearns
Matthew Buttrick
Stearns Weaver Miller
Weissler A lhadeff &
Sitterson, P.A.
150 West Flagler Street,
Suite 2200
Miami, FL 33130
(305) 789-3200
Shannen W. Coffin
Counsel of Record
David H. Coburn
Mark C. Savignac
Steptoe & Johnson LLP
1330 Connecticut Avenue, NW
Washington, DC 20036
(202) 429-3000
scoffin@steptoe.com
Counsel for Respondent AAF Holdings LLC
i
QUESTION PRESENTED
The Internal Revenue Code authorizes the
allocation of tax-exempt bonds to finance certain
construction projects, including “qualified highway or
surface freight transfer facilities.”
26 U.S.C.
§ 142(a)(15). This phrase is defined, in turn, to
include “any surface transportation project which
receives Federal assistance under title 23, United
States Code.” Id. § 142(m)(1)(A).
Here, applying Skidmore v. Swift & Co., 323 U.S.
134 (1944), the D.C. Circuit deferred to the
Department of Transportation’s “long-standing” and
“consistent interpretation of the statute that a project
‘receives assistance’ for purposes of § 142(m) even if
only a constituent portion was directly financed with
Title 23 funds.” Pet. App. 24a, 26a. Reasoning that
the agency’s interpretation “is based on persuasive
considerations that are consistent with the statute,”
the court upheld the allocation of tax-exempt bonds to
construct a passenger railway because Title 23 funds
were “used to upgrade railway-highway crossings”
along the railway’s corridor, and “railroad grade
crossings are part of a railroad ‘project’ on any
ordinary understanding.” Id.
The question presented is:
Whether the D.C. Circuit properly deferred under
Skidmore to the Department of Transportation’s
interpretation of 26 U.S.C. § 142(m)(1)(A), a tax
provision that has never been addressed in any other
case.
ii
CORPORATE DISCLOSURE STATEMENT
AAF Holdings LLC is not a public company and no
publicly-held company has a 10% or greater
ownership interest in the entity. The parent company
of AAF Holdings LLC, Florida East Coast Industries,
LLC, is not a public company.
iii
TABLE OF CONTENTS
QUESTION PRESENTED........................................... i
CORPORATE DISCLOSURE STATEMENT ........... ii
INTRODUCTION ........................................................ 1
STATEMENT OF THE CASE .................................... 4
I.
STATUTORY AND REGULATORY BACKGROUND .... 4
II.
FACTUAL BACKGROUND ..................................... 6
III.
A.
The All Aboard Florida Project ............. 6
B.
The Department of Transportation’s
Allocation of Tax-Exempt Bonds to
Finance the Project ................................ 8
PRIOR LITIGATION AND PROCEEDINGS BELOW . 10
A.
Indian River County and Its Lawsuits 10
B.
The District Court Decision ................. 11
C.
The D.C. Circuit Decision .................... 12
REASONS FOR DENYING THE PETITION........... 16
I.
THERE IS NO CONFLICT IN THE LOWER COURTS
ON THE STATUTORY QUESTION DECIDED BY THE
D.C. CIRCUIT .................................................... 16
II.
THERE IS NO CONFLICT OF AUTHORITY WITH
RESPECT TO THE PROPER APPLICATION OF
SKIDMORE DEFERENCE .................................... 16
A.
The D.C. Circuit Did Not Defer to the
Agency
Without
Considering
the
Statutory Text ...................................... 17
B.
The Decision Below Does Not Conflict
with Any Decision of This Court ......... 23
iv
C.
The Lower Courts All Agree that
Skidmore Requires Consideration of
Statutory Text ...................................... 25
III.
PETITIONER’S DISAGREEMENT WITH THE COURT
OF APPEALS’ READING OF STATUTORY TEXT DOES
NOT MERIT THIS COURT’S REVIEW ................... 27
IV.
THE PETITION EXAGGERATES THE IMPORTANCE
OF THE CASE .................................................... 32
V.
THIS CASE IS A POOR VEHICLE TO RESOLVE THE
QUESTION PRESENTED ..................................... 33
CONCLUSION .......................................................... 34
v
TABLE OF AUTHORITIES
Page(s)
Cases
Alaska Department of Environmental
Conservation v. EPA,
540 U.S. 461 (2004) .............................................. 23
Ammex, Inc. v. United States,
367 F.3d 530 (6th Cir. 2004) ...........................26-27
Campanale & Sons, Inc. v. Evans,
311 F.3d 109 (1st Cir. 2002) ................................ 25
Catskill Mountains Chapter of Trout
Unlimited, Inc. v. EPA,
846 F.3d 492 (2d Cir. 2017) ............................25-26
Cervantes v. Holder,
597 F.3d 229 (4th Cir. 2010) ................................ 26
Chevron U.S.A., Inc. v. Natural Resources
Defense Council, Inc.,
467 U.S. 837 (1984) ............................ 13, 20, 24, 25
Clark v. USDA,
537 F.3d 934 (8th Cir. 2008) ................................ 26
Close v. Thomas,
653 F.3d 970 (9th Cir. 2011) ................................ 26
EEOC v. Arabian Am. Oil Co.,
499 U.S. 244 (1991) .............................................. 24
vi
Entergy Corp. v. Riverkeeper, Inc.,
556 U.S. 208 (2009) ........................................ 20, 24
Federal Express Corp. v. Holowecki,
552 U.S. 389 (2008) ........................................ 23, 24
Harmon v. Holder,
758 F.3d 728 (6th Cir. 2014) ................................ 26
Indian River Cty. v. Rogoff,
254 F. Supp. 3d 15 (D.D.C. 2017) ........................ 10
John Hancock Mut. Life Ins. Co. v. Harris
Tr. & Sav. Bank,
510 U.S. 86 (1993) ...........................................23-24
Kientz v. Comm’r, SSA,
954 F.3d 1277 (10th Cir. 2020) ............................ 26
Legacy Cmty. Health Servs., Inc. v. Smith,
881 F.3d 358 (5th Cir. 2018) ................................ 26
Martin v. Comm’r, SSA,
903 F.3d 1154 (11th Cir. 2018) ............................ 26
Mendoza v. Sessions,
891 F.3d 672 (7th Cir. 2018) ................................ 26
Nahigian v. Juno-Loudoun, LLC,
677 F.3d 579 (4th Cir. 2012) ................................ 26
Nat’l R.R. Passenger Corp. v. United States,
431 F.3d 374 (D.C. Cir. 2005) .............................. 25
Orlando Food Corp. v. United States,
423 F.3d 1318 (Fed. Cir. 2005) ............................ 26
vii
Riegel v. Medtronic, Inc.,
552 U.S. 312 (2008) .............................................. 23
Seaview Trading, LLC v. Commissioner,
858 F.3d 1281 (9th Cir. 2017) .............................. 26
Skidmore v. Swift & Co.,
323 U.S. 134 (1944) ...................................... passim
United States v. Home Concrete & Supply,
LLC,
556 U.S. 478 (2012) .............................................. 20
University of Texas Southwestern Medical
Center v. Nassar,
570 U.S. 338 (2013) .............................................. 23
Vorchheimer v. Philadelphian Owners
Ass’n,
903 F.3d 100 (3d Cir. 2018) ................................. 26
Statutes
23 U.S.C. § 101 .......................................................... 22
23 U.S.C. § 130 .....................................................4, 8-9
26 U.S.C. § 142 .................................................. passim
viii
Other Authorities
Kent Barnett & Christopher J. Walker,
Chevron in the Circuit Courts, 116 Mich.
L. Rev. 1, 31-32 (2017) ......................................... 25
Kristin E. Hickman & Matthew D. Krueger,
In Search of the Modern Skidmore
Standard, 107 Colum. L. Rev. 1235,
1264 (2007) ......................................................24-25
U.S. Dept. of Transp., Private Activity
Bonds, available at https://
www.transportation.gov/buildamerica/fi
nancing/private-activity-bondspabs/private-activity-bonds (last visited
Aug. 13, 2020) ...................................................... 32
INTRODUCTION
Respondent AAF Holdings LLC, intervenordefendant in the proceedings below, is developing an
express passenger railway line from Miami to
Orlando, Florida. Petitioner Indian River County
claims to be aggrieved by AAF’s plan to run its
passenger rail service through the County, despite the
fact that AAF will use an existing rail corridor that
has been in continuous operation for 125 years.1 In an
effort to thwart AAF’s plan, petitioner sued to
invalidate the U.S. Department of Transportation’s
authorization of tax-exempt private activity bonds to
fund portions of the railway’s development.
Petitioner’s challenges were rejected by the district
court and a unanimous panel of the U.S. Court of
Appeals for the District of Columbia Circuit. Those
courts held that the Department of Transportation
properly allocated tax-exempt bonds to AAF’s
passenger railway under 26 U.S.C. § 142(m)(1)(a),
which permits such allocations for “any surface
transportation project which receives Federal
assistance under title 23.” Because AAF’s passenger
rail project has received federal assistance in the form
of
federally
funded
railroad
grade-crossing
improvements along AAF’s right-of-way, the court of
appeals affirmed the challenged allocation of taxexempt bonds for the project.
This is the only case in which a court has
interpreted the statutory provisions governing the
1 As used herein, “petitioner” or “the County” refers to both
Indian River County and the Indian River County Emergency
Services District.
2
allocation of bonds at issue here. There is no conflict
among the circuits as to their proper interpretation—
and the petition does not suggest otherwise.
Instead, petitioner seeks to cast this as an instance
of judicial deference run amok, arguing that the
decision below is characteristic of “disarray” in the
lower courts (and in this Court) on the application of
deference to informal agency interpretations under
Skidmore v. Swift & Co., 323 U.S. 134 (1944). But to
get there, the petition distorts what the D.C. Circuit
actually held. The decision below did not hold that
Skidmore permits a court to disregard statutory text
in deferring to an informal agency interpretation. The
court of appeals made clear throughout its opinion
that it was properly carrying out its judicial function
of interpreting the statute. The D.C. Circuit decision
reasonably invoked Skidmore to defer to a
longstanding and consistent agency position—that “a
project ‘receives assistance’ for purposes of § 142(m)
even if only a constituent portion was directly
financed with Title 23 funds,” Pet. App. 24a—because
that agency position is “based on persuasive
considerations that are consistent with the statute.”
Pet. App. 26a (emphasis added).
That decision is thus harmonious with the
universal judicial consensus that Skidmore deference
cannot apply to agency interpretations that
contravene unambiguous statutory text.
There
simply is no “disarray”—either in this case or in other
decisions—over whether Skidmore deference allows
courts to adopt agency interpretations inconsistent
with statutory text. No one thinks that they can, and
petitioner does not seriously attempt to identify
3
appellate decisions that have made such an obvious
error.
Petitioner is left with arguing that one aspect of
the decision below disregards the plain text of the
statute. The petition contends that the court of
appeals erroneously equated the statutory phrase
“receives federal assistance” with “benefits from
federal assistance.” See Pet. i. But it is not clear that
the D.C. Circuit actually concluded that a project
“receives” federal assistance whenever it “benefits
from” such assistance, and that reasoning is not
necessary to the result below. The D.C. Circuit relied
on the unique factual context of this case—where
federal funds were expended to improve railroad
grade crossings on a right-of-way shared by corporate
affiliates—to properly conclude that the AAF project
“received” federal assistance under § 142(m)(1)(A).
Pet. App. 27a-28a. And in any event, the narrow
question of statutory interpretation that petitioner
seeks to raise is simply not important enough to merit
this Court’s review.
In sum, petitioner cannot support its claim of
“disarray,” and nor can it offer the Court a good reason
to take this case, out of the hundreds of appellate
decisions that invoke Skidmore each year by
petitioner’s own count. See Pet. 30. This case
concerns a tax exemption statute that has never
previously been subject to judicial interpretation in its
15-year existence and has little fiscal importance
beyond the interest paid on privately funded
investments in critical public transportation projects.
The Court should deny the petition.
4
STATEMENT OF THE CASE
I.
STATUTORY AND REGULATORY BACKGROUND
Section 142 of the Internal Revenue Code
authorizes the Secretary of Transportation to grant a
federal tax exemption for interest payments on
private activity bonds issued by state development
agencies to finance “facilities” that fall into any of
fifteen categories. 26 U.S.C. § 142(a). One of the
categories is “qualified highway or surface freight
transfer facilities.” Id. § 142(a)(15). That phrase is
defined to include “any surface transportation project
which receives Federal assistance under title 23,
United States Code . . . . ” Id. § 142(m)(1)(A). Title
23, in turn, provides qualifying federal assistance for
a number of specified programs, including, as relevant
here, “the elimination of hazards of railway-highway
crossings.” 23 U.S.C. § 130(a).
Shortly after enactment in 2005, the Department
of Transportation conveyed its interpretation of 26
U.S.C. §§ 142(a)(15) and (m)(1) to the Internal
Revenue Service in a letter from the Federal Highway
Administration’s then-Acting Chief Counsel, Edward
Kussy. See Pet. App. 128a-132a (the Kussy letter).
The Kussy letter explained that “the most reasonable
reading of [§ 142(m)(1)(A)] permits the proceeds of
private activity bonds (PAB) authorized by this
provision to be used on the entire transportation
facility that is being financed and constructed even
though only a portion of that facility receives Federal
assistance under title 23.” Id. at 129a-130a. The
letter provides a series of textual justifications for that
interpretation, beginning with the fact that “[t]he
statute references certain eligible ‘facilities’ as
5
meaning ‘projects’ that receive Federal assistance.”
Id. at 130a. It explains that “[t]his mixing of the
words ‘facilities’ and ‘projects’ makes little sense
unless one considers how the funding of
transportation facilities is accomplished under the
[Federal-Aid Highway Program].” Id. at 129a-130a.
Under the Federal-Aid Highway Program, “States
and other recipients [of Title 23 dollars] commonly
fund portions of the facility or activities associated
with the construction of the facility,” rather than
funding an entire facility. Id. at 130a. That is the
case even if the entire facility is eligible for Title 23
assistance because such funding is limited. Id. at
129a-130a.
The letter also explains that Congress’s use of the
terms “facilities” and “projects” together in
§ 142(m)(1) indicates that it “did not intend to
fundamentally change the way in which States
implement project financing.” Id. at 130a. “[T]here is
no reason to assume that in amending the Internal
Revenue Code, Congress intended to use precisely the
same definition of ‘project’ as is found in title 23.” Id.
at 131a. Rather, the statutory language “suggests
that the Congress had a broader concept in mind.” Id.
The letter goes on to describe how a narrower
interpretation of § 142(m) would have a “real
consequence” that Congress plainly did not intend:
[I]nsisting on the narrowest reading of the word
“project,” limiting PAB proceeds only to specific
projects actually subject to a funding agreement
under 23 U.S.C. § 106, would distort the
longstanding way in which facilities are actually
funded, create needless red tape, and artificially
6
result in the extension of Federal requirements
that have nothing to do with the bonding of
transportation facilities. This is because such a
reading would induce State grantees to
“sprinkle” title 23 funds to every separate project
or contract of an entire facility to make full use
of PAB proceeds. By so doing, a whole array of
Federal requirements would apply in ways that
are wholly inconsistent with the way in which
the construction activities are generally
administered, and extend many project specific
requirements simply because the State grantee
chose to use PAB funding rather than more
established funding mechanisms. This would
result in doing exactly what the Congress
indicated it did not intend to do.
Id. at 131a-132a. The Department has consistently
adhered to these views since the letter was sent in
2005. Id. at 134a.
II.
FACTUAL BACKGROUND
A.
The All Aboard Florida Project
Respondent AAF was formed to develop and
operate an express passenger rail service connecting
the four largest urban centers in Southern and
Central Florida: Miami, Fort Lauderdale, West Palm
Beach, and Orlando (the “AAF Project” or “Project”).
The passenger rail service uses an existing rail
corridor that runs along Florida’s east coast from
Miami to Jacksonville and has been in continuous use
since 1895. That rail corridor was designed to support
passenger and freight operations together on shared
double mainline tracks and was used in that fashion
until 1968.
The passenger service was then
7
terminated and portions of the second set of tracks
were removed, but the freight service remained, and
is now operated by the Florida East Coast Railway
(“FECR”). C.A. App. 1639, 1715, 1800, 2052, 2453,
4523.
Through the AAF Project, passenger rail service is
now being restored to the portion of the existing rail
corridor between Miami and Cocoa, Florida, which
measures approximately 195 miles. It will then
continue west along a 40-mile segment to be
constructed next to a limited-access highway system
that runs to Orlando. The Project is designed to
capitalize on the environmental advantages and
efficiencies that modern passenger trains enjoy over
other modes of transportation. C.A. App. 1644, 1768,
4523; Pet. App. 8a. AAF is funding the bulk of the
improvements needed for its rail service itself;
however, Title 23 funds were also used to improve the
safety and capacity of railway-roadway crossings
between Miami and Cocoa. C.A. App. 4536.
When the Project is fully operational, the service
will connect four of the five most populous counties in
Florida, comprising nearly 36% of its total population.
C.A. App. 1644-45, 1768; Pet. App. 10a. The service is
expected to take millions of cars off the road over time,
reducing traffic congestion as well as fossil fuel use
and greenhouse gas emissions. C.A. App. 1648-50,
1658. It is also expected to reduce the demand for
commercial aviation in Florida, which is largely
overburdened. C.A. App. 1648, 1772.
The AAF Project was conceived in 2007 and
publicly announced in 2011. AAF and FECR were
affiliated by related ownership at the time, and they
8
also became affiliated by contract. AAF obtained
permanent easements from FECR which gave it a
property interest in the portion of the rail corridor
between Miami and Cocoa, as well as the exclusive
right to improve and use that segment for the
provision of passenger service. The companies also
entered into a series of related agreements providing
for the shared use of the existing rail infrastructure
and other elements that would be upgraded or added
in connection with the Project. C.A. App. 28, 4362,
4559-60, 4715. AAF and FECR remained corporate
affiliates until July 2017, when FECR was sold to a
third party, and they continue to be affiliated by
contract. C.A. App. 28, 4559-60.
The AAF Project is being developed in two phases.
C.A. App. 1639-1641, 4524. Phase I, from Miami to
West Palm Beach, was completed in 2018, and
passenger trains began to run. C.A. App. 4524. Phase
II, from West Palm Beach to Orlando, is under
construction and expected to be completed in two
years. C.A. App. 4718.
B.
The Department of Transportation’s
Allocation of Tax-Exempt Bonds to
Finance the Project
In August 2014, AAF applied to the Department of
Transportation for an allocation of $1.75 billion in taxexempt private activity bonds to finance certain
aspects of the Project. C.A. App. 4511, 4542; Pet. App.
12a. The application recited that the Project was a
“surface transportation project that receives Federal
assistance under title 23,” 26 U.S.C. § 142(m)(1)(A),
by virtue of its receipt of funds to eliminate the
hazards of railway-highway crossings under 23 U.S.C.
9
§ 130. C.A. App. 4497-4510; Pet. App. 12a. In
December 2014, the Department authorized the
issuance of the bonds. C.A. App. 4511; Pet. App. 12a.
In 2016, AAF determined that it would be easier to
complete smaller targeted offerings of private activity
bonds given the prevailing market. AAF asked the
Department to withdraw its allocation of $1.75 billion
in private activity bonds and issue a new allocation of
up to $600 million in bonds to be used exclusively for
Phase I, with the possibility of a separate application
for Phase II once the Project was further along. C.A.
App. 4514-4516. That request was granted, and AAF
later completed an offering of $600 million in bonds
for Phase I. C.A. App. 4517, 4716.
On December 5, 2017, AAF applied for an
allocation of $1.15 billion in tax-exempt private
activity bonds to finance portions of Phase II. C.A.
App. 4521, 340. As with the prior allocations, the 2017
application relied on the fact that “[t]he Project has
received financial assistance under Title 23 of the U.S.
Code as follows:”
Railway-Highway Crossing Funding.
The
planning process for All Aboard Florida started
in December 2011. Since then, approximately $9
million from Section 130 of U.S. Code Title 23
has been invested in the entire corridor to
improve railway-highway grade crossings and
prepare the corridor for growth in rail traffic.
Future investments from the Section 130
program are planned for future calendar years.
C.A. App. 4536.
10
On December 20, 2017, the Department granted
AAF’s application. C.A. App. 4564. It is this
allocation that is the subject of the current lawsuit.
The $1.15 billion in private activity bonds have been
issued in full. Pet. App. 12a-13a
III.
A.
PRIOR LITIGATION AND PROCEEDINGS BELOW
Indian River County and Its Lawsuits
Petitioner Indian River County is one of seven
Florida counties traversed by the portion of the FECR
corridor that is to be used for the Project. The Indian
River County segment falls within Phase II of the
Project and is roughly 21 miles in length. When the
rail corridor was established in the late 1800s, the
County did not exist and the area was largely
unpopulated. The County was developed in large part
because of the railroad. See Pet. App. 10a, 38a; AAF
C.A. Br. at 10-11.
Nonetheless, the County opposes the Project, and
in the past five years, has commenced no fewer than
five legal proceedings relating to the Project. The first
of these proceedings challenged the Department of
Transportation’s initial $1.75 billion allocation of taxexempt bonds, but that case was dismissed as moot
after the allocation was withdrawn in favor of smaller
ones.2
The County filed this lawsuit in February 2018,
claiming that the Secretary of Transportation
exceeded her authority under § 142 when she
allocated $1.15 billion in tax-exempt bonds to finance
2 See Indian River Cty. v. Rogoff, 254 F. Supp. 3d 15, 17-18,
21-22 (D.D.C. 2017).
11
portions of Phase II. C.A. App. 92-103. AAF
intervened in support of the federal defendants. Pet.
App. 13a.
B.
The District Court Decision
In December 2018, the district court granted
summary judgment to the federal defendants and
AAF on all claims. Id. at 35a-115a. In relevant
respect, the court concluded that “the Secretary’s
allocation [of private activity bonds] conformed to the
statutory requirements and was a reasonable exercise
of her discretion” based on the administrative record.
Id. at 52a, 60a-62a.
In reaching that conclusion, the district court
upheld the Department’s longstanding view,
expressed in the Kussy letter, that a project receives
Federal assistance under Title 23 if any portion of the
project receives Title 23 funding. Id. at 61a. The court
concluded that the Kussy letter “reflects a reasonable
assessment of congressional intent and the statutory
text, and the Secretary’s interpretation of
§ 142(m)(1)(A) in this case conforms to it.” Id.
The district court also upheld the Secretary’s
application of the statute to the facts of this case. Id.
at 60a. The court explained that “[o]ver the ten-year
period from 2005 through 2014, the railway received
approximately $21 million dollars in Title 23 funding,
approximately 43% of which came in the three years
following the commencement of AAF’s planning” of
the Project. Id. During those three years, “Florida’s
Department
of
Transportation
disbursed
approximately $9 million [in Title 23 funds] to account
for increased rail traffic on the FECR railway”—both
from the reintroduction of passenger trains and
12
“planned increases in FECR freight traffic as well.”
Id. The court thus determined that “[t]he record here
supports the Secretary’s conclusion that the project
received Title 23 funding.” Id.3
C.
The D.C. Circuit Decision
The D.C. Circuit affirmed. Id. at 1a-32a. Like the
district court, the court of appeals concluded that
petitioner had failed to establish a transgression of 26
U.S.C. § 142(m)(1)(A). Id. at 23a-28a.
The D.C. Circuit began its analysis with the text of
the statute: “Section 142(m)(1)(A) authorizes
allocations of PABs for ‘any surface transportation
project which receives Federal assistance under title
23.’” Id. at 24a (quoting 26 U.S.C. § 142(m)(1)(A)). It
then noted the Department of Transportation’s
“consistent interpretation,” which says that “a project
‘receives assistance’ for purposes of § 142(m) even if
3 Petitioner quotes the district court’s reference to “planned
increases in FECR’s freight traffic,” Pet. 10, but notably omits
the words “as well.” Pet. App. 60a. The petition attempts to
create the impression that the $9 million in Title 23 funds were
used solely to accommodate planned increases in freight service,
but that is not accurate. The funds were used to help prepare
railway-highway crossings for both the reintroduction of
passenger service and planned increases in freight service. Id.
(citing C.A. App. 4536, 4497-4510). In fact, the “planned
increases” in freight service were in part related to the Project,
as the Complaint in this case acknowledged. See, e.g., C.A. App.
22 (discussing “the areas that will be impacted by the AAF
Project and related increases in freight rail traffic”); id. at 26
(“Phase II would also effect improvements to the tracks and
infrastructure within the right-of-way that would cause the
existing freight traffic to pass through at much higher speeds”)
(emphases added).
13
only a constituent portion was directly financed with
Title 23 funds.” Id. Here, “[a]bout $2.2 million of
those funds were used to upgrade 39 crossings in
Phase II of the Project.” Id. And the court reasoned
that “railroad grade crossings are part of a railroad
‘project’ on any ordinary understanding.” Id. Because
a “constituent portion” of the Project—the grade
crossings—had been funded under Title 23,
“[a]pplying [the agency’s] interpretation here” would
mean that “DOT permissibly and reasonably
determined that the Project qualified for tax-exempt
PABs.” Id.
In the remainder of its analysis, the D.C. Circuit
further explained the agency’s “constituent portion”
interpretation and its reasons for accepting that
interpretation. See id. at 25a-27a. It first addressed
the level of deference due to the Kussy letter’s
interpretation of § 142(m)(1)(A).
Petitioner had
argued against deference under Chevron U.S.A., Inc.
v. Natural Resources Defense Council, Inc., 467 U.S.
837 (1984), and instead that the court should “at
most” apply Skidmore deference. See Pet.’s C.A. Br.
at 17. The D.C. Circuit concluded that there was no
reason to decide whether the agency’s interpretation
in the Kussy letter was entitled to Chevron deference
“because it is clear on the record before us that DOT’s
position easily survives review under Skidmore.” Pet.
App. 25a.
The D.C. Circuit next set out its understanding of
the scope of, and prerequisites for, Skidmore
deference under this Court’s case law:
When an agency’s interpretation of a statute has
been binding on agency staff for a number of
14
years, and it is reasonable and consistent with
the statutory framework, deference to the
agency’s position is due under Skidmore. This is
because an agency’s views that are within its
area of expertise are entitled to a level of
deference commensurate with their power to
persuade.
Pet. App. 25a (citing Federal Express Corp. v.
Holowecki, 552 U.S. 389, 399-402 (2008), and United
States v. Mead Corp., 533 U.S. 218, 228 (2001)). The
court concluded that “DOT’s position has not only
been consistent; it is also eminently reasonable.” Id.
The court then quoted the Kussy letter at length:
“[T]he
most
reasonable
reading
of
[§ 142(m)(1)(A)] permits the proceeds of [PABs]
authorized by this provision to be used on the
entire transportation facility that is being
financed and constructed even though only a
portion of that facility receives Federal
assistance under title 23.” . . . [A] narrow
reading of the word “project” would “distort the
longstanding way in which facilities are actually
funded, create needless red tape, and artificially
result in the extension of Federal requirements
that have nothing to do with the bonding of
transportation facilities. . . . In summary, our
view is that PAB proceeds may be used on any
qualified facility that includes a project funded
with Federal-aid highway funds made available
under title 23.”
Id. at 26a (quoting C.A. App. 4494-95).
15
The D.C. Circuit found “DOT’s long-standing
position” to be “based on persuasive considerations
that are consistent with the statute,” concluding that
“DOT has reasonably interpreted ‘project which
receives Federal assistance under title 23’ to mean a
project which—in whole or part—benefits from
assistance under Title 23.” Id. (emphasis added). “We
have no reason to question this position because the
statute does not require an applicant for PABs to be
the direct recipient of Federal assistance under Title
23; rather, the ‘project’ at issue must receive federal
assistance under Title 23.” Id. at 26a-27a.
The court further rejected petitioner’s argument
“that it is not enough that the AAF Project received
some assistance under Title 23; rather, . . . the entire
proposed Project must be funded by Title 23.” Id. at
27a. The court explained that “there is nothing in the
statute to support this interpretation.” Id.
The court likewise rejected petitioner’s argument
that “the federally funded highway safety
improvement projects were not intended to benefit the
AAF project.” Id. “Assuming without deciding that
such intent is required,” the court held that “the
District Court correctly concluded that sufficient
evidence of intent was present here.” Id.
For all these reasons, the D.C. Circuit affirmed the
district court’s conclusion that that the Department
had reasonably construed § 142(m)(1)(A) to authorize
an allocation of private activity bonds to the Project.
Id. at 27a-28a. Petitioner declined to seek rehearing
or rehearing en banc.
16
REASONS FOR DENYING THE PETITION
I.
THERE IS NO CONFLICT IN THE LOWER COURTS
ON THE STATUTORY QUESTION DECIDED BY THE
D.C. CIRCUIT
As the petition appears to acknowledge, the D.C.
Circuit’s decision does not conflict with a decision of
any other court. The decision below concerned the
proper interpretation of 26 U.S.C. § 142(m)(1)(A) in
the context of the bond allocation to Phase II of AAF’s
passenger rail project. Petitioner does not suggest
that there is any division of authority on the
interpretation of § 142(m)(1)(A). The petition does not
point to any judicial decision outside this case that has
even considered the interpretation of the relevant
statutes. Nor is AAF aware of any such decision.
There is thus no conflict of authority on the statutory
question decided below.
II.
THERE IS NO CONFLICT OF AUTHORITY WITH
RESPECT TO THE PROPER APPLICATION OF
SKIDMORE DEFERENCE
Lacking a clear division of authority, the petition
instead posits broader doctrinal tension that it claims
is illustrated by the lower court’s decision.
Specifically, petitioner contends the D.C. Circuit’s
decision reveals a “disarray” in the courts of appeals
regarding the proper application of deference to
informal administrative decisions under Skidmore v.
Swift & Co., 323 U.S. 134 (1944). Petitioner suggests
the D.C. Circuit’s decision typifies a strain of lower
court decisions that defer to informal agency
interpretations of statutes “without finding the
statute ambiguous or applying (much less exhausting)
traditional interpretive tools.” Pet. i. The petition
17
contends this Skidmore disarray is the result of
inconsistent application of Skidmore by this Court.
But the petition is built on a fundamental
misreading of the decision below. The D.C. Circuit did
not defer “without finding the statute ambiguous or
applying (much less exhausting) traditional
interpretive tools.” Id. To the contrary, the D.C.
Circuit repeatedly quoted the text of the statute,
found that the agency’s interpretation was
“reasonable and consistent with the statutory
framework,” and rejected petitioner’s arguments
because they were unsupported by the text of the
statute. Pet. App. 25a-27a. Nothing in the decision
below supports petitioner’s thesis that the three
current or former chief judges of the D.C. Circuit on
the panel below ignored the text of the statute—which
is quoted on almost every page of the relevant section
of the opinion. See id. at 23a-28a.
Nor is there any “disarray” in the decisions of this
Court or the lower courts regarding when and how to
apply Skidmore deference. Neither the D.C. Circuit
nor other lower courts read Skidmore to permit the
judiciary to contradict the plain language of statutes.
The petition identifies no real tension in the decisions
of this Court or lower courts on proper application of
Skidmore deference. The question presented by the
petition is neither implicated by the decision below
nor worthy of this Court’s consideration.
A.
The D.C. Circuit Did Not Defer to the
Agency
Without
Considering
the
Statutory Text
The petition’s question presented presupposes that
the D.C. Circuit deferred to the Department of
18
Transportation without finding any ambiguity in the
statute or otherwise heeding the statutory text. But
that is simply not true. There is nothing in the
decision below to support petitioner’s characterization
of its reasoning. The decision thus does not illustrate
any incoherence in the application of Skidmore by
lower courts.
1. The petition claims that the D.C. Circuit read
“Skidmore to sanction abandonment of statutory
text.” Pet. 21. But it did nothing of the sort. To the
contrary, it acknowledged that an agency
interpretation can receive deference only if it is
“reasonable and consistent with the statutory
framework.” Pet. App. 25a (emphasis added). And it
ultimately held that DOT’s interpretation of the
statute was “based on persuasive considerations that
are consistent with the statute.” Id. at 26a (emphasis
added). These are the hallmarks of this Court’s
Skidmore deference doctrine.
The opinion below does not purport to sanction
Skidmore deference to an agency interpretation at
odds with an unambiguous statute. Petitioner argued
below that AAF’s passenger rail project had not itself
“received Federal assistance under title 23” as
required by 26 U.S.C. § 142(m)(1) because the rail
grade crossing improvements on which AAF premised
its tax-exempt bond application were made on “the
pre-existing freight corridor to be utilized by the AAF
project.” Pet. App. 23a. But the D.C. Circuit rejected
that argument, relying on the Department of
Transportation’s consistent, broader conception of the
ambiguous term “project” found in § 142(m)(1). The
D.C. Circuit read the Kussy letter, written in 2005, to
19
provide that “a project ‘receives assistance’ for
purposes of § 142(m) even if only a constituent portion
was directly financed with Title 23 funds.” Id. at 24a.
Based on that interpretation, the Court observed that
the “railway-highway crossings on the Project
corridor” were upgraded using $9 million in Title 23
funds, and about “$2.2 million of those funds were
used to upgrade 39 crossings in Phase II of the Project.
Id. Because “railroad grade crossings are part of a
railroad ‘project’ on any ordinary understanding, and
the record adequately supports the District Court’s
conclusion that crossing improvements were made in
contemplation of the All Aboard Florida initiative,”
the D.C. Circuit concluded that “DOT permissibly and
reasonably determined that the Project qualified for
tax-exempt [private activity bonds] under 26 U.S.C.
§ 142(m).” Id.
Petitioner complains that the D.C. Circuit made no
explicit finding that the statutory text is “ambiguous”
before embracing the Department of Transportation’s
longstanding interpretation. Pet. 14. That complaint
is misplaced. While the D.C. Circuit does not use the
word “ambiguous,” it repeatedly uses other terms that
courts typically use when finding that an agency’s
interpretation of statutory text merits deference. The
opinion below repeatedly pronounces the agency’s
position “permissibl[e] and reasonabl[e],” “eminently
reasonable,” and “based on persuasive considerations
that are consistent with the statute.” Pet. App. 24a26a. A judicial determination that an agency’s
position is “reasonable” and “consistent with the
statute” necessarily presupposes a determination that
the statute is at least ambiguous (or that it
20
unambiguously supports the agency). An explicit
declaration of ambiguity is unnecessary.
This Court said exactly that in Entergy Corp. v.
Riverkeeper, Inc., 556 U.S. 208 (2009). Citing Chevron
but eschewing the conventional two-step formulation,
the Court said simply that the agency’s “view governs
if it is a reasonable interpretation of the statute.” Id.
at 218. Against the dissent’s objection that the Court
had skipped the critical analysis of statutory
ambiguity before reaching deference, the Court
defended its “omi[ssion of] the supposedly prior
inquiry,” explaining that “if Congress has directly
spoken to an issue then any agency interpretation
contradicting what Congress has said would be
unreasonable.” Id. at 218 n.4.
Justice Scalia elaborated on this point in a later
concurring opinion: “Whether a particular statute is
ambiguous makes no difference if the interpretation
adopted by the agency is clearly reasonable—and it
would be a waste of time to conduct that inquiry.”
United States v. Home Concrete & Supply, LLC, 556
U.S. 478, 493 n.1 (2012) (Scalia, J., concurring in part
and concurring in the judgment) (citation omitted)).
Thus, the D.C. Circuit’s alleged failure to use the
magic word “ambiguous” in analyzing the statutory
framework does not mean that it misapplied
Skidmore. It is just as true under Skidmore as under
Chevron that an agency interpretation is
“permissible” or “reasonable” only if it is consistent
with statutory text. Since the D.C. Circuit expressly
found the agency’s interpretation “permissibl[e],”
“eminently reasonable,” and “consistent with the
21
statute,” its omission of an explicit finding of statutory
ambiguity is of no moment.
2. Other aspects of the opinion below confirm that
the D.C. Circuit did not ignore the statutory text. The
court’s analysis begins by quoting the relevant
language:
“Section
142(m)(1)(A)
authorizes
allocations of PABs for ‘any surface transportation
project which receives Federal assistance under title
23.’”
Pet. App. 24a.
The court then rejected
petitioner’s arguments as inconsistent with the
statutory text.
First, petitioner urged that the allocation of taxexempt bonds to AAF was impermissible because “no
Title 23 monies were provided to AAF.” Pet. 17. But
here, as the court of appeals explained, that argument
can only be made by disregarding the text: “[T]he
statute does not require an applicant for PABs to be
the direct recipient of Federal assistance under Title
23; rather, the ‘project’ at issue must receive
assistance under Title 23.”
Pet. App. 26a-27a
(emphasis added).
Second, petitioner also argued that, “in order to
qualify for PABs under § 142(m)(1)(A), the entire
proposed Project must be funded by Title 23,” and not
just a “constituent portion.” Id. at 27a. As the D.C.
Circuit explained, however, “there is nothing in the
statute to support this interpretation.” Id. To say
that the text does not support petitioner’s proposed
“entire project” test is equivalent to saying that the
text is consistent with its opposite—the agency’s
“constituent portion” test.
Third, petitioner half-heartedly suggests that the
“constituent portion” test is wrong because the term
22
“project” must have the same meaning for purposes of
the provision at issue here, 26 U.S.C. § 142(m)(1)(A),
as it has in Title 23. See Pet. 17-19. But the agency
addressed this argument in the Kussy letter endorsed
by the court below, observing that “there is no reason
to assume that in amending the Internal Revenue
Code, Congress intended to use precisely the same
definition of ‘project’ as is found in title 23.” Pet. App.
131a. After all, Title 26 does not define the term, and
Title 23’s definition states expressly that it applies
only when the term is used “[i]n th[at] title.” 23 U.S.C.
§ 101(a). As the letter explains, the term “project” can
have a broader or a narrower meaning depending on
context, and “insisting on the narrowest reading of the
word ‘project’” in the context of § 142(m)(1)(A) would
be senseless. Pet. App. 26a; see id. at 129a, 131a.
Here, too, the text supports the decision below, not
petitioner.
*
*
*
In short, the fundamental premise of the
petition—that the court of appeals read Skidmore not
to require statutory ambiguity—is simply false. The
court of appeals deferred to the Department of
Transportation’s longstanding interpretation of 26
U.S.C. § 142(m)(1)(A) only after concluding that the
agency interpretation is fully consistent with the
statute and otherwise reasonable. The decision below
is not evidence of any disarray in the lower courts
regarding the proper application of Skidmore
deference.
23
B.
The Decision Below Does Not Conflict
with Any Decision of This Court
Petitioner does not contend that the decision below
conflicts with any decision of this Court. To the
contrary, it complains that that decision below is fully
consistent with this Court’s decisions in Federal
Express Corp. v. Holowecki, 552 U.S. 389 (2008), and
Alaska Department of Environmental Conservation v.
EPA, 540 U.S. 461 (2004). But consistency with this
Court’s decisions hardly merits a writ of certiorari.
Petitioner says that this Court should reexamine
those decisions because they supposedly “can be read”
to allow courts to defer to agencies under Skidmore
without regard for statutory text. Pet. 27. In support,
petitioner quotes approvingly Justice Kennedy’s
opinion for the Court in University of Texas
Southwestern Medical Center v. Nassar, 570 U.S. 338
(2013), and his dissent in the Alaska case (Pet. 26, 2728). Yet it was Justice Kennedy who wrote the opinion
for the seven-Justice majority that deferred to the
agency in Holowecki. That opinion cannot be read to
contradict his earlier statements in Alaska or his later
ones in Nassar.
Holowecki and Alaska did not break new ground
with respect to Skidmore doctrine. They do not—and
cannot be read to—dispense with the firmly
entrenched principle that no deference is possible
where an agency’s position is unreasonable in light of
the statutory text. See, e.g., Riegel v. Medtronic, Inc.,
552 U.S. 312, 326 (2008) (it is “unnecessary” to engage
in Skidmore analysis if “the statute itself speaks
clearly to the point at issue”); John Hancock Mut. Life
Ins. Co. v. Harris Tr. & Sav. Bank, 510 U.S. 86, 109
24
(1993) (no deference under Skidmore or Chevron
where agency interpretation “exceeded the scope of
available ambiguity”); EEOC v. Arabian Am. Oil Co.,
499 U.S. 244, 257-58 (1991) (no Skidmore deference
where agency interpretation “lack[ed] support in the
plain language of the statute”). Indeed, Holowecki
gave a full nod to the text (and related tools of
statutory interpretation) when it upheld the agency’s
position there as “a reasonable alternative
[interpretation] that is consistent with the statutory
framework.” Holowecki, 552 U.S. at 402.
There is also no support for petitioner’s assertion
that the court below read Holowecki to declare text
irrelevant. The D.C. Circuit cited Holowecki for the
uncontroversial proposition that, “[w]hen an agency’s
interpretation of a statute has been binding on agency
staff for a number of years, and it is reasonable and
consistent with the statutory framework, deference to
the agency’s position is due under Skidmore.” Pet.
App. 25a (emphasis added). Suffice it to say, an
agency’s interpretation is not “reasonable and
consistent with the statutory framework” if it is
contrary to the text or other “traditional interpretive
tools.” Pet. i; see Entergy, 556 U.S. at 218 n.4.
The law review articles that petitioner cites (see
Pet. 29 n.8, 31-32) also confirm that there is no
pressing need for clarification of Skidmore. The
Hickman & Krueger study excludes from its analysis
“cases in which a court finds the statute’s meaning
plain, clear, or unambiguous” because, in such cases,
“deference to an administrative interpretation is not
an option.” Kristin E. Hickman & Matthew D.
Krueger, In Search of the Modern Skidmore Standard,
25
107 Colum. L. Rev. 1235, 1264 (2007). Among cases
where the statute’s meaning was not held to be plain,
clear, or unambiguous, Hickman & Krueger found
that agencies win under Skidmore only about 60% of
the time and lose the other 40%—not much better
than even odds. Id. at 1275. Another, more recent
study cited by petitioner found that courts agree with
agencies 77.4% of the time under Chevron, but only in
about 56% of cases where Skidmore applies—though
petitioner mentions only the higher win rate under
Chevron, Pet. 32, while ignoring the more modest
Skidmore statistic. See Kent Barnett & Christopher
J. Walker, Chevron in the Circuit Courts, 116 Mich. L.
Rev. 1, 31-32 (2017). These findings hardly support
petitioner’s claim of widespread “abdication of the
court’s role.” Pet. 25.
C.
The Lower Courts All Agree that
Skidmore Requires Consideration of
Statutory Text
Nor is there any disarray in the decisions of other
lower courts in the application of Skidmore, as the
petition claims. Pet. 28-30. To the contrary, all courts
agree that Skidmore deference can never override a
“statute’s unambiguous meaning.” Pet. 28.
This is true in the D.C. Circuit. See, e.g., Nat’l R.R.
Passenger Corp. v. United States, 431 F.3d 374, 379
(D.C. Cir. 2005) (court “could not let stand an agency
decision that deviates from the statute’s unambiguous
meaning”). And it is true in the decisions of every
other federal court of appeals. See, e.g., Campanale &
Sons, Inc. v. Evans, 311 F.3d 109, 117, 120 n.14 (1st
Cir. 2002); Catskill Mountains Chapter of Trout
Unlimited, Inc. v. EPA, 846 F.3d 492, 509 (2d Cir.
26
2017); Vorchheimer v. Philadelphian Owners Ass’n,
903 F.3d 100, 111 (3d Cir. 2018); Nahigian v. JunoLoudoun, LLC, 677 F.3d 579, 587 n.6 (4th Cir. 2012);
Legacy Cmty. Health Servs., Inc. v. Smith, 881 F.3d
358, 374-75 & n.22 (5th Cir. 2018); Harmon v. Holder,
758 F.3d 728, 732 n.1 (6th Cir. 2014); Mendoza v.
Sessions, 891 F.3d 672, 676, 680 (7th Cir. 2018); Clark
v. USDA, 537 F.3d 934, 940 (8th Cir. 2008); Close v.
Thomas, 653 F.3d 970, 975-76 n.3 (9th Cir. 2011);
Kientz v. Comm’r, SSA, 954 F.3d 1277, 1281 (10th Cir.
2020); Martin v. Comm’r, SSA, 903 F.3d 1154, 1163
(11th Cir. 2018); Orlando Food Corp. v. United States,
423 F.3d 1318, 1325 (Fed. Cir. 2005). The D.C.
Circuit’s approach to Skidmore here is entirely
consistent with this unanimous view that deference
cannot be invoked to override a statute’s plain
meaning.
There is simply no merit to petitioner’s claim that
there is an epidemic in the lower courts of Skidmore
deference being applied “to the virtual exclusion of the
statutory text.” Pet. 28. None of the cases that
petitioner cites deferred to an interpretation that
contradicted the plain text of the statute. Petitioner
does not even attempt to show that they did.4
4 See, e.g., Cervantes v. Holder, 597 F.3d 229, 235-36 & n.8
(4th Cir. 2010) (deferring to the agency’s interpretation and
explaining that the competing interpretation—grounded in
legislative history—was “belied by the relevant statutory
language”); Seaview Trading, LLC v. Commissioner, 858 F.3d
1281, 1284-87 (9th Cir. 2017) (holding, after detailed textual
analysis of technical tax provisions, that the Commissioner’s
position was “supported by reasoning set forth in both informal
and formal statements”); Ammex, Inc. v. United States, 367 F.3d
(Continued …)
27
III.
PETITIONER’S DISAGREEMENT WITH THE
COURT OF APPEALS’ READING OF STATUTORY
TEXT DOES NOT MERIT THIS COURT’S REVIEW
Denuded of its misreading of the D.C. Circuit’s
opinion, the petition boils down to a simple
disagreement with that court’s interpretation of one
aspect of the relevant statutory text. In particular,
petitioner takes issue with the D.C. Circuit’s
conclusion that DOT has reasonably interpreted
“project which receives Federal assistance under title
23” to mean a project which—in whole or in part—
“benefits from assistance under Title 23.” See Pet. 23 (quoting Pet. App. 26a). The petition argues that
the court of appeals disregarded the plain meaning of
“receives Federal assistance under title 23” by
equating “receives” with “benefits.” Pet. 13.
Petitioner’s disagreement with the D.C. Circuit’s
interpretation of “receives Federal assistance” does
not merit this Court’s review for at least two reasons.
First, the opinion below independently stands on
deference to the Department of Transportation’s
longstanding view that a project receives the
necessary federal assistance if some component part
of the project is funded with Title 23 dollars. Because
grade crossings that were funded with Title 23 dollars
are part of AAF’s passenger rail project, the statutory
requirement that the project “receive” federal
530, 535 (6th Cir. 2004) (deferring to agency’s “logical” view that
a sale of fuel to a car headed for the border is not a sale “for
export,” where plaintiff “failed to identify any infirmity” in the
agency’s “sensible interpretation”).
28
assistance is satisfied. Pet. App. 24a. In light of this
independent rationale, it is not clear that the D.C.
Circuit equated “receives” with “benefits” as a matter
of statutory interpretation, and it is even less clear
that this supposed statutory interpretation was
essential to its decision.
Second, apart from the fact that it simply was not
critical to the decision below, the application of this
statutory phrase in the unique context of this case is
sui generis. Petitioner complains that the project has
not met the “federal assistance” requirement even
though it concedes that millions of Title 23 dollars
were disbursed to an AAF affiliate to improve the
safety and capacity of grade crossings along the
shared rail corridor through which AAF’s right-of-way
passes. This narrow statutory issue—not considered
by another federal court before or since—simply does
give rise to an issue of sufficient importance to merit
certiorari. See Sup. Ct. R. 10.
1. The petition argues that the critical rationale of
the D.C. Circuit is that a project “receives” federal
assistance as long as it “benefits” from the
expenditure of federal funds. But the opinion does not
place any critical emphasis on that purported
rationale. Indeed, it is not readily apparent that the
D.C. Circuit actually endorsed this rationale, and it is
even less clear that this supposed statutory
interpretation was essential to its decision.
The decision would not change in any relevant
respect without the court of appeals’ purported
equation of “receives” with “benefits from.” Earlier in
its opinion, the D.C. Circuit cited three reasons for
concluding that the allocation of tax-exempt bonds
29
was lawful.
First, the Court endorsed the
Department’s longstanding view, first stated in the
Kussy letter, that a project “receives assistance”
within the meaning of § 142(m)(1)(A) “even if only a
constituent portion was directly financed with Title 23
funds.” Pet. App. 24a. Second, the court noted that
“[a]bout $2.2 million of [the federal funds directed at
upgrading rail-highway crossings on the Project
corridor] were used to upgrade 39 crossings in Phase
II of the Project.” Id. And finally, the court relied on
its own conclusion that “railroad grade crossings are
a part of a railroad ‘project’ on any ordinary
understanding.” Id. “Therefore,” the D.C. Circuit
concluded, the Department “permissibly and
reasonably determined that the [AAF] Project
qualified for tax-exempt [bonds] under 26 U.S.C. §
142(m).” Id.
This reasoning does not depend in any way on a
determination that “receives” means “benefits from.”
The context in which the challenged passage arises
suggests that the court of appeals was not really
concluding that “benefit[ting] from” federal assistance
was a sufficient condition to receiving tax-exempt
bonds.
The immediately preceding paragraph
discusses at length the Kussy letter’s interpretation
that a project receives the necessary assistance
provided that such federal funding is provided to a
component part of the project—which the court later
restates as “in whole or in part.” The court ultimately
concludes that DOT’s view “that PAB proceeds may be
used on any qualified facility that includes a project
funded with Federal-aid highway funds made
available under title 23” is “based on persuasive
30
considerations that are consistent with the statute”
and thus “due deference.” Id. at 26a.
The passage from the decision below cited by the
petition (see Pet. 2-3) does not place any particular
emphasis on the word “benefits” but simply reinforces
the court’s earlier deference to the agency’s view that
a project “receives” federal assistance provided that
the project does so “in whole or in part.” Compare Pet.
App. 26a (endorsing DOT interpretation of a “project
which receives Federal assistance under title 23” to
mean “a project which—in whole or in part—benefits
from assistance under title 23’) with Pet. App. 24a (“a
project ‘receives assistance’ . . . even if only a
constituent portion was directly financed with Title 23
funds”). The challenged quote appears in response to
an argument petitioner made below that AAF’s
project “has not received federal assistance under
Title 23.” Id. at 26a. The court concluded that it had
“no reason to question” the Department’s position
“because the statute does not require an applicant for
PABs to be the direct recipient of Federal assistance
under Title 23; rather, the ‘project’ at issue must
receive assistance under Title 23.” Id. at 26a-27a.
Likewise, in rejecting petitioner’s argument that
“in order to qualify . . ., the entire proposed Project
must be funded by Title 23,” the court explained that
“there is nothing in the statute to support this”
interpretation. Id. at 27a. The court was not here
endorsing a rule that a project need merely “benefit
from” federal funding to qualify for private activity
bonds. It was instead restating the core holding that
a project qualifies for such bonds if any part of it was
31
funded with title 23 funds, which it appropriately held
was the case in light of the record here.
2. Even setting aside the fact that the court of
appeals did not squarely decide that a project
“receives” federal assistance by merely “benefiting
from” it, this statutory interpretation question simply
does not merit this Court’s review. This is especially
true in the unique factual context of this case. As the
court below reasoned (Pet. App. 27a-28a), AAF did not
merely reap some incidental or attenuated benefit
from Title 23 funds. Those funds were allocated to
AAF’s corporate affiliate FECR—as owner of the
shared rail corridor through which AAF’s railroad
easement passes—to improve grade crossings which
both AAF and FECR will use. See discussion, supra,
at 6-8. And those improvements were needed because
of, and motivated by, AAF’s passenger rail project.
See Pet. App. 27a-28a; C.A. App. 4536. Indeed, much
of the Title 23 money was spent after the AAF project
was publicly announced and formal planning for the
passenger railway began. See Pet. App. 24a, 27a-28a
(“approximately 43% of [relevant federal rail crossing
improvement funding] came in the three-years
following the commencement of AAF’s planning”).
The crux of petitioner’s argument here is that AAF
itself “had not received Title 23 funds.” See Pet. 8, 17.
Had AAF itself been cut the check and made the same
improvements to the same crossings, there would be
nothing left of petitioner’s argument. But as the D.C.
Circuit correctly observed, the statute does not
require the project sponsor to receive the Title 23
funds; rather, “the ‘project’ at issue must receive
assistance under Title 23.” Pet. App. 27a. The fact
32
that Title 23 funds were disbursed to AAF’s thencorporate affiliate FECR should not change the result
for purposes of this Court’s review of the petition.5
IV.
THE
PETITION
EXAGGERATES
IMPORTANCE OF THE CASE
THE
Petitioner exaggerates when it pronounces this “a
case with profound implications for the federal fisc.”
Pet. 2. Section 142(m) authorizes the Secretary of
Transportation to allocate tax-exempt bonds with an
aggregate face value of $15 billion to “qualified
highway or surface freight transfer facilities.” 26
U.S.C. § 142(m)(2); Pet. 5 n.1. Most of that $15 billion
has already been allocated. See U.S. Dept. of Transp.,
Private Activity Bonds, available at https://
www.transportation.gov/buildamerica/financing/priv
ate-activity-bonds-pabs/private-activity-bonds (last
visited Aug. 13, 2020). When the balance has been
doled out, § 142(m)(1)(A) will be a dead letter absent
further legislative action by Congress.
The petition seeks to draw support for the purported
irrationality of the court’s decision by reciting two allegedly more
attenuated tax-exempt bond decisions by the Department of
Transportation. See Pet. 9, 20 (citing to an “intermodal logistics
park” near Chicago and a light-rail facility in Maryland). But
the Court of Appeals did not cite those projects in support of its
decision or endorse the Department’s decisions on those projects.
Nor was there anything extraordinary about those allocations.
See Pet. App. 135a-136a (noting, for example, the shared use trail
was being upgraded with federal funds “as part of the Purple
Line Project”). Those allocations also did not involve the unique
facts here of affiliated companies sharing a railroad corridor.
Those unreviewed and unrelated decisions do not provide a
reason for this Court to review the decision in this case.
5
33
Moreover, contrary to petitioner’s suggestion, the
fiscal impact of this case is not the face value of the
bonds. Pet. 8. The federal outlay here is limited to
the forbearance of federal tax revenues on the interest
paid to bondholders. The value of that tax subsidy
depends on factors such as the interest rate on the
bonds and the marginal tax rates of the investors who
buy them. That outlay therefore varies from year to
year and is only a fraction of a fraction of the face
value of the bonds. It is much more proportionate to
the cost of other direct federal transportation
subsidies, such as Title 23 subsidies.
V.
THIS CASE IS A POOR VEHICLE TO RESOLVE
THE QUESTION PRESENTED
Finally, this case is an exceptionally poor vehicle
to resolve the question presented. The petition does
not challenge the existence of Skidmore deference,
only its application. And despite the petition’s
mischaracterizations, the D.C. Circuit did not
misapprehend Skidmore. For the reasons already
stated, there is no need to clarify the application of
the Skidmore doctrine.
The petition struggles
mightily to create doctrinal “disarray” where it simply
does not exist.
Moreover, even if the Court were inclined to
reconsider the ground rules for Skidmore deference,
this would not be the case to do so. The petition
challenges a split-less interpretation of a tax
exemption provision that had never previously been
the subject of judicial controversy since its enactment
a decade and a half ago. The decision below is also
based on peculiar facts that not only support the D.C.
Circuit’s application of Skidmore deference, but also
34
make this case particularly ill-suited to resolve the
question presented.
In short, this case does not give rise to an issue of
substantial public importance to justify this Court’s
review. To the extent the petition raises broader
challenges to Skidmore deference—challenges that
lack foundation here—there will be other
opportunities if such a re-examination were ever
deemed warranted. As Petitioner itself points out,
such cases arise frequently, with the courts of appeals
having “invoked Skidmore more than 1,300 times in
the [past] 19 years.” Pet. 30.
CONCLUSION
This Court should deny the petition.
Respectfully submitted,
EUGENE E. STEARNS
SHANNEN W. COFFIN
MATTHEW BUTTRICK
Counsel of Record
STEARNS WEAVER MILLER DAVID H. COBURN
WEISSLER ALHADEFF & MARK C. SAVIGNAC
SITTERSON, P.A.
STEPTOE & JOHNSON LLP
150 West Flagler Street 1330 Connecticut Ave., N.W.
Suite 2200
Washington, D.C. 20036
Miami, FL 33015
(202) 429-3000
scoffin@steptoe.com
August 21, 2020
Counsel for Respondent
AAF Holdings LLC
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