Petition — Tax Analysts & Advocates v. Blumenthal

Supreme Court brief1978

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MICHAEL Ro!

TAX ANALYSTS AND ADYOCATES,

THOMAS F. FIELD,

Petitioners,

W. MICHAEL BLUMENTHAL, Secretary

of the Treasury of the United States, et al,

Respondents.

PETITION FOR A WRIT OF CERTIORARI TO THE

UNITED STATES COURT OF APPEALS FOR

THE DISTRICT OF COLUMBIA CIRCUIT

THOMAS F. FIELD,

Attorney for Petitioners

Suite 204, 1523 L St. N.W.

Washington, D.C. 20005

THE CASILLAS PRESS, INC.—1717 K Street. N. W.—Washington, 0. C.-223-1220

(i)

TABLE OF CONTENTS

CITATIONS TO OPINIONS BELOW .

JURISDICTION .

QUESTIONS PRESENTED

STATUTES INVOLVED .

STATEMENT OF THE CASE

REASONS FOR GRANTING THE WRIT:

I. The Court of Appeals decision conflicts with the

teaching of this Court in all of its recent majority

opinions about standing

Il. The Court of Appeals decision conflicts with the

decisions of other appellate courts —

A. As to whether the zone test is dead .

B. As to whether maintenance of competitive

fairness is one of the interests protected by

the Internal Revenue Code

III. The Court of Appeals decision has important

implications both within and beyond the tax area.

A. The decision will further aggravate the

chaotic situation faced by the lower courts

when they seek to determine the status of

the zone test

B. The decision will produce unfettered and

unreviewable administrative discretion with

respect to IRS rulings that lose revenue

Page

(ii)

CONCLUSION

CERTIFICATE OF SERVICE

APPENDICES:

A. Majority opinion of the Court of Appeals for

the District of Columbia Circuit .

B. Majority opinion in American Society of Travel

Agents v. Bhimenthal, and common dissent in

that case and the instant case .

TA TABLE OF AUTHORITIES

Cases Cited:

American Society of Travel Agents, Inc. v. Blumenthal,

decided September 15, 1977(C.A.D.C.) .

Association of Data Processing Organizations v. Camp,

397 U.S. 150 (1970)

Barlow v. Collins,

397 U.S. 159 (1970)

International Business Machines Corp. v. United States,

343 F.2d 914(Ct. Cls. 1965), cert. denied 382 US.

1028 (1966) ’

Park View Heights Corporation v. City of Black Jack,

467 F.2d 1208 (C.A. 8, 1972) ae

Statutes:

5 U.S.C. Sec. 702.

28a

11,14

(iii)

Page

26 U.S.C. Sec. 901 a SF

26 U.S.C. Sec. 7805 . » &4&460..8

28 U.S.C. Sec. 1254(1) . 2

Other Authorities:

Brannon, Gerard M., Energy Taxes and Subsidies: A Report

to the Energy Policy Project of the Ford Foundation

(1974) oe a ee oe ; 6

Davis, Kenneth Culp, Administrative Law of the Seventies,

Supplementing Administrative Law Treatise, July 1977

Cumulative Supplement Oe bi er q

Economic Report of the President (1975) 3

Middle East Economic Survey, December 28, 1973 and

December 13, 1974 . cere 6

Petroleum Intelligence Weekly, January 14,1974 . 6

Rev. Rul 55-296, 1955-1 Cum. Bull. 386 . 4

Rev. Rul 68-552, 1968-2 Cum. Bull. 306 . 4

Walker, Charles M., Speech before the National Foreign

Trade Council, November 18, 1975. ; 5

In the

Supreme Court of the United States

October Term, 1977

No.

TAX ANALYSTS AND ADVOCATES,

THOMAS F. FIELD,

Petiticners,

W. MICHAEL BLUMENTHAL, Secretary

of the Treasury of the United States, er al.,

Respondents.

PETITION FOR A WRIT OF CERTIORARI TO THE

UNITED STATES COURT OF APPEALS FOR

THE DISTRICT OF COLUMBIA CIRCUIT

To the Honorable the Chief Justice and Associate Jus-

tices of the Supreme Court of the United States:

Petitioners pray that a writ of certiorari issue to review

the decision in this case of the United States Court of

Appeals for the District of Columbia Circuit, rendered on

June 15, 1977.

CITATIONS TO OPINIONS BELOW

The decision of the District Court is reported at 390

F. Supp. 927 (D.D.C. 1975). The majority decision of

the Court of Appeals is as yet unreported and is printed

as Appendix A, hereto. The common dissent in the in-

stant case and in American Society of Travel Agents, Inc.

v. Blumenthal is also unreported and is reprinted as Ap-

pendix B, together with the majority opinion in the Jrave/

Agents case.

JURISDICTION

The judgment of the District Court was filed on Febru-

ary 5, 1975. The majority opinion of the Court of Ap-

peals was filed on June 15, 1977. Thereafter. on June

27, 1977, the petitioners filed a motion asking for an ex-

tention of time for filing a motion for rehearing until 14

days after the dissenting judge filed his separate views,

but this motion was denied. Petitioners then asked this

Court for an extension of time for filing a petition for a

writ of certiorari, and, by order dated August 22, 1977,

the period for filing this petition was extended to and in-

cluding November 12, 1977. The opinion of the dissent-

ing judge in the Court of Appeals was filed September 15,

1977.

The jurisdiction of this Court is invoked under 28 U.S.C.,

Section 1254(1).

QUESTIONS PRESENTED

1. When determining whether a plaintiff has standing

to sue, has this Court allowed the zone of interest test to

“become extinct’?

2. If not, was the zone of interest test properly ap-

plied by the Court of Appeals to bar a suit by a domes-

tic oil producer who suffers actual competitive injury as

a result of erroneous and illegal Internal Revenue Service

rulings which benefit the foreign operations of his compe-

titors?

STATUTES INVOLVED

The statutes involved are 5 U.S.C. Sec. 702, and 26

U.S.C. Secs. 901 and 7805.

STATEMENT OF THE CASE

Petitioner Tax Analysts and Advocates (TAA) is a non-

profit corporation organized under the laws of the District

of Columbia in 1970 for the purpose of promoting tax

reform. It represents over 175 individual supporters, each

of whom is a United States taxpayer who has contributed

financially to TAA to ensure that the Internal Revenue

Service (IRS) does not grant special interest groups unduly

favorable tax treatment beyond that which the IRS may

lawfully provide.

Petitioner Thomas F. Field is the owner of the entire

working interest in a small, currently producing oil well

located in Venango County, Pennsylvania. The well is

not subject to price controls, and the price received for

its output is therefore determined by “the price of the

approximateiy 15 percent of energy imported [into the

U.S.] as oil. . .”!

| The quoted language is from the 1975 Economic Report of the

President, transmitted to Congress in February 1975. That report

states, at pages 74-5, that “The structure of the U.S. energy market

is such that the price of the approximately 15 percent of energy im-

ported as oil sets the unconstrained domestic energy price as well.”

Section 7805 of the Internal Revenue Code empowers

the Secretary of the Treasury to promulgate rules and

regulations for the enforcement “of this title”. Section

901 of the Code is among those with respect to which

both rules and regulations have been published. That sec-

tion allows qualifying United States taxpayers to claim a

foreign tax credit for “the amount of any income, war

profits, and excess profits taxes paid or accrued during

the taxable year to any foreign country or to any pos-

session of the United States.”

Under Section 901(b), a credit against federal income

taxes can be taken only for foreign income taxes paid;

no credit is allowed for foreign sales taxes, excise taxes,

or severance taxes. Nor may a credit be claimed for ro-

yalties paid to a foreign government. These non-income

taxes and royalties are treated as ordinary business ex-

penses; they therefore result in a deduction from gross

income rather than in tax credits which can offset U.S.

tax on a dollar-for-dollar basis.

Beginning in the 1950’s, the principal oil producing na-

tions in the Middle East, North Africa, and South America

promulgated a series of formal income tax statutes which

appeared to impose net income taxes on United States

companies producing oil in those nations. In 1955 and

1968, the Internal Revenue Service published rulings that

the “income taxes” paid on oil production to Saudi Arabia

and Libya, respectively, were creditable taxes. Rev. Rul.

55-296, 1955-1 Cum. Bull. 386; Rev. Rul. 68-552, 1968-2

Cum. Bull. 306. In addition, the Internal Revenue Service

has issued a substantial number of unpublished rulings to

United States oil companies, holding that payments of

“income taxes” made to the other principal OPEC nations

are also creditable taxes under Section 901.

In recent years, the nature of the purported “income

taxes’ imposed on oil production by the principal oil ex-

porting nations has changed both in character and amount.

Since at least 1973, if not earlier, the purported “income

taxes” imposed by the OPEC governments have been cal-

culated so as to produce a fixed per barrel “government

take” without regard to the profits or losses of the pro-

ducing firms.? Because these imposts are calculated on

a fixed per barrel basis, and because they have no relation-

ship to the actual gross or net income of the oil compa-

nies paying them, it seems quite obvious that they no

longer constitute creditable income taxes — if they ever

did.

The Treasury Department is aware of these facts. For

example, in his November 18, 1975 speech to the Na-

tional Foreign Trade Council, Charles M. Walker, who was

then the Assistant Secretary of the Treasury for Tax Pol-

icy, stated that “. . . the tax systems of the OPEC coun-

tries impose very high taxes which have many of the

characteristics of royalties.” And a prominent, recent

scholarly study makes the same point:

There is every reason to assert that the bulk

of the oil company payments to host countries

are in fact royalties and that this is relevant to

the eligibility of these payments for full foreign

tax credit.

* 7 *

> The computation of the OPEC “government take” involves multi-

plication of the number of barrels produced in a given period oy a

constant figure which is a percentage of a fictional reference price

selected by the respective foreign governments to provide the desired

per barrel government revenue, reduced by a fixed per barrel amount

(continued)

On the grounds of tax theory, therefore, the

extension of the foreign tax credit to the OPEC

charge is highly questionable.?

In light of these facts, petitioner Tax Analysts and Ad-

vocates on February 19, 1974 filed a detailed administra-

tive petition with the Commissioner of Internal Revenue

explaining the impact of the conversion of OPEC taxes

into a fixed per barrel “government take” and pointing

out the illegality under those circumstances of the Inter-

nal Revenue Service rulings permitting the “income taxes”

in question to be credited against U.S. tax liabilities. The

petition also called on the Commissioner to exercise the

discretion granted by Section 7805 to revoke the rulings

in question. The Commissioner did not respond.

Petitioners Tax Analysts and Advocates and Field then

filed a complaint on June 17, 1974, seeking a declaratory

judgment that the challenged Internal Revenue Service rul-

ings were unlawful, and asking for an injunction requiring

the Internal Revenue Service to withdraw them. This com-

plaint was subsequently amended on August 13, 1974.

Both the original and the amended complaint pointed out

2 (continued)

denominated as a “royalty” and small per barrel operating costs.

For further information on the computation, see Petroleum Intelli-

gence Weekly, January 14, 1974, at page 6. For further informa-

tion on the changes made by OPEC in the method of computing

the “government take”, see the Middle East Economic Survey, De-

cember 28, 1973, p. 3a and December 13, 1974 (supplement).

”

3 Gerard M. Brannon, Energy Taxes and Subsidies: A Report

to the Energy Policy Project of the Ford Foundation (1974) pages

94-96.

that the revenue loss to the United States Treasury, if the

challenged rulings were not revoked, would be approxi-

mately $3 billion in 1974.

In addition to this revenue loss to the Treasury, peti-

tioner Field sought relief in the amended complaint from

two injurious effects of the challenged IRS rulings which

he suffered in his capacity as a domestic oil producer. He

pointed out, first, that the price for foreign oil charged by

the oH producers who have received the challenged rulings

determines the market price for oil in the United States

(see footnote 1, supra) and that these prices are lower be-

cause of the tax advantages conferred by the rulings.

Therefore, the rulings result in his obtaining lower prices

for his oil production.

Field also alleged that the Internal Revenue Service rul-

ings increase the net income from foreign oil production

over what it would be if payments to foreign governments

could only be deducted from gross income, as is the case

domestically. This results in higher investment returns

from foreign oil production than from domestic produc-

tion, and lessens the price that Field could receive if he

were to offer his working interest for sale.

Petitioner Field also alleged that he would be required

to pay higher federal income taxes because the Internal

Revenue Service rulings improperly reduce the tax burden

of American companies producing oil abroad. Petitioner

Tax Analysts and Advocates alleged that its supporters, as

federal taxpayers, would likewise be required to pay higher

federal income taxes.

On February 5, 1975, the District Court issued an opin-

ion and order dismissing the complaint solely on the ground

that petitioners lacked standing. 390 F. Supp. 927 (D.D.C.)

Thereafter, both petitioners appealed.

The Court of Appeals, with one judge dissenting, con-

cluded that both petitioners, as taxpayers, lacked standing

“because they have suffered no judicially cognizable in-

jury in this capacity...” In addition, while acknowledg-

ing “that appellant Field has suffered injury in fact” in

his capacity as a domestic oil producer, it also held that

he failed to satisfy the “zone test’’ which was announced

by this Court in 1970.4 The existence (or lack of exist-

ence) of the zone test, and its possible contours, are there-

fore the focus of this petition.

REASONS FOR GRANTING THE WRIT

THE COURT OF APPEALS DECISION CONFLICTS WITH

THE TEACHING OF THIS COURT IN ALL OF ITS RE-

CENT MAJORITY OPINIONS ABOUT STANDING.

Since 1970, when it announced the “zone test” in As-

sociation of Data Processing Organization v. Camp, 397

U.S. 150, this Court has decided twenty major standing

cases, almost all of them by a divided Court. With re-

spect to the so-called “zone test,’ the teaching of the

eighteen most recent of these decisions seems to be un-

equivocal: the zone test is dead.

The suggestion that the zone test for standing has been

allowed to die a natural death has been strongly advanced

+ The zone test was developed and applied in two companion

cases: Association of Data Processing Organizations v. Camp, 397

U.S. 150, and Barlow y. Collins, 397 U.S. 159.

by Professor Kenneth Culp Davis, probably the leading

American writer on the subject of administrative law. In

the introduction to the July 1977 Cumulative Supplement

to his Administrative Law of the Seventies he states (p. 6)

that:

The “zone” test enunciated in 1970 was unsatis-

factory, but it has apparently died from neglect;

the Supreme Court has not asserted it since 1970

although it has been relevant to many cases.

Similarly, in the text of his July 1977 Supplement, Profes-

sor Davis states (at p. 181) that:

The [Supreme] Court deserves commendation

for its benign neglect of the “zone”’ test it enun-

ciated in 1970 in the Data Processing opinion.

Since the Court has not mentioned that test in

its latest eighteen majority opinions about stand-

ing, and since it was relevant to a good many

of the cases .. . it has become extinct, as it

should.

Thus, if the teaching of the leading American scholar

on the subject of standing is accepted, the Court below

has erred by reviving an “unsatisfactory” test of standing,

which this Court has allowed to “become extinct.” Not

only does this deny justice to the petitioners, but it im-

properly prevents adjudication of a case which presents

questions of considerable public importance.

On the other hand, if Professor Davis is wrong in his

interpretation of this Court’s eighteen most recent siand-

ing decisions, it is highly important to make that point

clear, for the guidance of the lower courts and practition-

ers. Otherwise, the unfortunate ambiguity that now sur-

rounds the zone test will continue to create mischief.

THE COURT OF APPEALS DECISION CONFLICTS

WITH THOSE OF OTHER APPELLATE COURTS.

A. As to whether the zone of interest test is dead:

As the majority opinion of the Court of Appeals in

this case has pointed out, “‘at least one circuit court has

chosen forthrightly to state its opposition to the [zone

of interest] test." The case to which the majority refers

is Park View Heights Corporation yv. City of Black Jack,

467 F.2d 1208 (C.A. 8, 1972). That case re ersed a Dis-

trict Court’s holding that two nonprofit corporations and

eight individual plaintiffs lacked standing to challenge a

municipal zoning ordinance. At the beginning of its dis-

cussion of the standing issue (p. 1212. n. 4) the Eighth

Circuit stated:

At this beginning point of our “standing” dis-

cussion, we record our preference for simplify-

ing the “law on standing.” We think that all

that is required for a plaintiff to have standing

to sue for a constitutional or a statutory viola-

tion is a showing of “injury in fact”.

Accordingly. if petitioner Field, or another similarly

situated individual, were to bring the present suit in the

Eighth Circuit, he would have standing. An important

right, such as access to the courts for the redress of in-

juries, should not depend to such an extent on the geo-

graphical location in which suit is brought. Review by

this court is needed to establish greater geographical uni-

formity with respect to the zone test, assuming that test

still exists.

B. As to whether maintenance of compctitive fair-

ness is one of the interests protected by the In-

ternal Revenue Code.

The result of the Court of Appeals decision in this case

is to leave business competitors without effective judicial

protection when the Commissioner of Internal Revenue

abuses the discretion granted him under Section 7805 of

the Internal Revenue Code, through the issuance of rulings

that favor one competitor at the expense of another. The

Appeals Court is quite frank about this: ‘The existence

of competitive ramifications flowing from the challenged

agency action,” it states at page 26 of the slip opinion,

“is not sufficient evidence to infer that Congress arguably

intended to protect or regulate competitive interests.”

This aspect of the Court of Appeals opinion is sharply

in conflict with the landmark decision of the Court of

Claims in /nternational Business Machines Corp. v. United

States, 343 F.2d 914 (1965), cert. denied, 382 U.S. 1028

(1966). That case, like this one, involved a situation in

which the Internal Revenue Service had favored one com-

petitor over another by the issuance of a ruling that was

erroneous and illegal. The International Business Machines

Corporation argued that the Internal Revenue Code did

not permit discrimination of this sort.

In the course of accepting IBM’s arguments, the Court

of Claims pointed out (at p. 920) that abuse of the discre-

tion granted to the Commissioner’of Internal Revenue with

respect to rulings is reviewable “‘in the same way as other

discretionary administrative determinations.’ It alsc stated

that Section 7805(b) of the Internal Revenue Code embodied

the Congressional intent that the Court of Appeals in the

present case was unable to discern:

Congress can direct the Service and the courts to

take account, in a specified area, of discrimina-

tion, of equality of treatment, and of the tax bur-

dens imposed on competitors or persons in the

same or a comparable situation. Where that is

what Congress has declared, the policy of the tax

law emphasizes, in that particular sector more

than in the rest of the tax field, the component

of equal treatment; courts are then bound to vin-

dicate that special interest just as they are, gen-

erally, to see that the uniform taxes Congress has

sought to levy are paid .. . With respect to In-

ternal Revenue Service rulings and regulations,

the Congressional mandate does direct administra-

tive and judicial attention to this factor of equa-

lity (among others). /nternational Business Ma-

chines Corp., supra, at 919

The fact that the present case involves competitive dis-

crimination arising from IRS rulings issued under Section

901 of the Internal Revenue Code, whereas the /BM case

involved rulings issued under Section 4191, is not a point

of distinction, because the discretion granted under Sec-

tion 7805 of the Code extends to all rulings and regula-

tions “for the enforcement of this title.” As a conse-

quence, were the /BM case to arise today, it seems prob-

able that, in addition to the other standing objections

raised in the 1965 case by the government, the firm would

also be faced with the claim that the Internal Reveuue

Service has what the dissenting judge in the present case

calls “virtually unfettered discretion in adjusting . . . eco-

nomic relationships.”’ (See dissent, p. 2, n. 2)

Ill

THE COURT OF APPEALS DFCISION HAS IMPORTANT

IMPLICATIONS BOTH WITHIN AND BEYOND THE TAX

AREA.

A. The decision will further aggravate the chaotic

situation faced by the lower courts when they

seek to determine the status of the zone test.

Currently, both judges and litigants face a chaotic situa-

tion when seeking to determine the justiciability of a claim

in light of the zone of interest test. The existing confu-

sion should be ended. The majority opinion in the Court

of Appeals in the present case contains (slip opinion, p. 13)

a plea for greater clarity in this area:

.. . [The Supreme] Court has not attempted a

detailed explanation of the purpose, meaning, or

scope of the [zone test] standard. The deficien-

cies, ambiguities, and unresolved questions inher-

ent in the zone test have been the subject of

voluminous criticism. There has also been con-

fusion in the application of this prudential stand-

ard in the courts. Some courts have chosen to

ignore the zone test; at least one circuit court

has chosen forthrightly to state its opposition to

the test. Perhaps the most common pattern is

to announce in conclusory terms that the zone

standard has or has not been satisfied. (Foot-

notes omitted.)

A judicial standard which is so thoroughly riven with

ambiguity and imprecision is a fertile source of both wasted

judicial effort and inequality in the treatment of similarly

situated parties. Accordingly, the zone of interest test

cries out for clarification — or for decent burial.

B. The decision of the Court of Appeals will pro-

duce unfettered and unreviewable administra-

tive discretion with respect to IRS rulings that

lose revenue.

Internal Revenue Service rulings are regularly reviewed

by the courts, but the rulings which are commonly sub-

jected to judicial scrutiny are those that have increased an

individual's or a firm’s tax payments. The peculiarity of

this case, like the /BM case, supra, is that it involves so-

called “giveaway rulings.” These are IRS administrative

determinations that /ose rather than raise revenue.

Revenue-losing IRS rulings have had — and continue to

have — an important impact on our tax system. Whether

they can be subjected to judicial scrutiny will be deter-

mined to a considerable degree by the outcome of this

case. Unless such rulings can be subjected to judicial review

in an orderly manner, we will be faced vith what the dis-

senting judge in the Court of Appeals calls (dissent, p. 2,

n. 2) “The spectre of . . . unreviewable discretion [which

can be] exercised in contradiction to the commands of

Congress...”

Provided that injury in fact is demonstrated, both revenue-

lesing and revenue-raising IRS rulings should be subjected to

judicial review in the same fashion. To the extent that

the zone of interest test is a barrier to that legitimate

goal, it should be interred or appropriately modified. The

Commissioner of Internal Revenue should not be empow-

ered to commit wrongs for which there is no judicial re-

medy.

CONCLUSION

For the foregoing reasons, this petition for a writ of

certiorari should be granted.

Respectfully submitted,

THOMAS F. FIELD

Counsel for Petitioners

CERTIFICATE OF SERVICE

I, Thomas F. Field, attorney for the petitioners and a

member of the bar of the United States Supreme Court,

do hereby certify that on this 11th day of November

1977, I served copies of the foregoing petition for writ

of certiorari on the attorneys of record for the respon-

dents herein, Scott P. Crampton, Earl J. Silbert, Richard

Farber, and Leonard J. Henzke, Jr. and on the Solicitor

General of the United States, Wade H. McCree, Jr., by

mailing three copies of the same, postage prepaid, to each

of them at their offices at the Department of Justice,

Washington, D.C. 20530, and (in the case of Silbert) at

the U.S. Courthouse, Washington, D.C. 20001.

Thomas F. Field

Attorney for Petitioners

APPENDIX A

Notice: This opinion is subject to formal revision before publication

in the Federal Reporter or U.S.App.D.C. Reports. Users are requested

to notify the Clerk of any formal errors in order that corrections may be

made before the bound volumes go to press.

United States Court of Appeals

FOR THE DISTRICT OF COLUMBIA CIRCUIT

No. 76-1304

TAX ANALYSTS AND ADVOCATES,

THOMAS F. FIELD, APPELLANTS

Vv.

MICHAEL BLUMENTHAL, Secretary of

Treas iry of the United States, et al.

Appeal from the United States District Court

/ for the District of Columbia

/ (D.C. Civil 74-917)

Argued 8 January 1976

Decided 15 June 1977

Joseph Onek, with whom Eldon V. C. Greenberg and

Richard A. Frank were on the brief, for appellants.

Leonard J. Henzke, Jr., Attorney, Tax Division De-

partment of Justice, with whom Scott P. Crampton, As-

sistant Attorney General, Earl J. Silbert, United States

Attorney, and Richard Farber, Attorney, Tax Division

Department of Justice, were on the brief, for appellees.

Before: BAZELON, Chief Judge, TAMM and WILKEY,*

Circuit Judges

Opinion for the Court filed by Circuit Judge WILKEY.

Chief Judge Bazelon dissents and will file a statement

of separate views at a later date.

WILKEY, Circuit Judge: The appellants in this case

are Tax Analysts and Advocates (TAA), a non-profit

corporation organized under the laws of the District of

Columbia for the purpose of promoting tax reform, and

Thomas F. Field, Executive Director of TAA. Appel-

lants filed suit in the District Court’ seeking a declara-

tory judgment that certain published and private rulings

of the Internal Revenue Service (IRS) allowing tax

credits for payments made to foreign nations in con-

nection with oil extraction and production are contrary

to the Internal Revenue Code (Code) and therefore un-

. ™ After oral argument, District Judge Justice, United States

District Judge for the Eastern District of Texas, the third

member of the panel, who was sitting by designation pur-

suant to 28 U.S.C. § 292(d), found it necessary to recuse

himself. By random selection, Circuit Judge Wilkey was

assigned to replace him on the panel and was assigned to

write the opinion on 9 February 1977.

1 Jurisdiction is alleged under 28 U.S.C. §§ 1340, 2201, 2202,

and 5 U.S.C. §§ 702, 703. Amended Complaint, { 2, Joint

Appendix (J.A.) at 39. These latter statutory provisions

no longer serve as a basis for jurisdiction in the federal

courts. See Califano v. Sanders, 45 U.S.L.W. 4209, 4211 (23

Feb. 1977).

Prior to the filing of this suit in the District Court, appel-

lants filed a petition with the Commissioner of the Internal

Revenue Service seeking to have the Revenue Rulings at

issue in this case revoked. According to appellants, no re-

sponse was made to the petition. Amended Complaint, §{ 23,

24, J.A. at 45.

lawful.? In addition, appellants sought an injunction

requiring the IRS to withdraw the rulings and to collect

taxes from oil companies for all periods not barred by the

statute of limitations in those cases where foreign tax

credits were taken pursuant to the ruling.* Both appel-

lants claim to have standing to sue as federal taxpayers;

TAA makes this claim as the representative of its mem-

bers, who are federal taxpayers,‘ while appellant Field

relies on his status as an individual taxpayer.’ In ad-

dition, appellant Field contends that he had standing

as a competitor in his capacity as the owner of the en-

tire working interest in a currently producing domestic

oil well.’

On a motion by the defendants,’ the District Court

(Hart, J.) dismissed the complaint * on the grounds that

appellants lacked standing to bring the action.” We

agree with the District Judge and conclude that both

appellants lack standing as federal taxpayers because

they have suffered no judicially cognizable injury in this

* Amendment Complaint, J.A. at 45.

* Id. at 45-46.

‘Id. 13, J.A. at 39.

‘Id. 9 4(a), J.A. at 39.

*Id.© 4(b), J.A. at 39-40. The oil well is located in Venango

County, Pennsylvania; the oil produced at this location is

not subject to price controls imposed by the federal gov-

ernment. Id.

’The defendants in this case are the Secretary of the

Treasury and the Commsisioner of the IRS. Both are sued in

their official capacities. Amended Complaint, ©* 5, 6, J.A.

at 40.

* Appellants filed their original complaint on 17 June 1974.

The complaint was amended on 13 August 1974 to reflect

appellant Field’s acquisition of the entire working interest

in a domestic oil well.

°390 F. Supp. 927 (D.D.C. 1975).

capacity, and thus affirm the District Court on the ra-

tionale stated in its opinion.’® In addition, we conclude

that Appellant Field, while suffering injury in a fact

as a competitor dealing in oil extraction and production,

does not assert an interest that falls within the ‘zone

of interests” protected by the relevant provisions of the

Code and therefore does not have standing in this con-

text. Accordingly, we affirm the order of the District

Court. |

I. THE NATURE OF APPELLANTS’ CHALLENGE

A. The Challenged Agency Action

Section 901(b) of the Code allows qualified citizens

of the United States and domestic corporations to claim

*° As federal taxpayers, both appellants claim ‘a personal

pecuniary interest in requiring that the IRS assess and

collect taxes owed by other taxpayers to the fullest possible

extent under the provisions of the Code.”” Amended Complaint,

11 3, 4, J.A. at 39. According to the appellants, the published

and private IRS rulings at issue in the case cause injury in

fact to this interest by decreasing the amount of taxes paid

into the Federal Treasury by United States companies oper-

ating abroad in the area of oil extraction and production.

Appellants aver that the monetary loss to the United States

Treasury attributable to the treatment of the foreign income

taxes on income from oil production as creditable against

United States tax liability, rather than as deductible costs

of business, amounted to $3 billion in 1974. Amended Com-

plaint, § 16, J.A. at 42. According to appellants, this decrease

in revenue causes their federal income taxes to rise in some

unstated amount.

With respect to these claims of taxpayer standing, we

affirm the District Court’s finding of no injury in fact and

adopt the reasoning of the District Court as put forth at 390

F.Supp. 932-38. Since appellants have not satisfied this basic

constitutional requirement of injury in fact, there is no need

to explore the other inquiries relevant to prudential limita-

tions on standing. See text and notes at notes 29 to 34, infra.

See also Harrington V. Bush, No. 75-1862, Slip Op. at 28 n.68

(D.C. Cir. 18 February 1977).

a tax credit for “the amount of any income, war profits,

and excess profits taxes paid or accrued during the tax-

able year to any foreign country. ...”* This credit

can be taken only for foreign income taxes paid;* no

credit is allowed for the payment of excise taxes, sever-

ance taxes, mineral royalties, or similar payments to

foreign governments. Excise taxes, severance taxes, and

royalty payments are treated, when appropriate, as or-

dinary business expenses and therefore result in deduc-

tions from gross income rather than in tax credits which

can offset tax liability on a dollar-for-dollar basis.

Beginning in the 1950’s, the principal oil producing

nations in the Middle East. North Africa and South

America promulgated a series of formal income tax

statutes which imposed net income taxes on United States

companies producing oil in those nations.** In 1955, the

IRS published Revenue Ruling 55-296 which allowed a

foreign tax credit for income taxes paid to Saudi

Arabia."* In 1968 the Service promulgated Revenue Rul-

ing 68-552 allowing a foreign tax credit for income taxes

imposed by Libya.** In addition, the IRS has issued sev-

eral private rulings allowing foreign tax credits for

1 28 U.S.C. § 901(b) (1).

1228 U.S.C. § 903 provides that “the term ‘income, war

profits, and excess profits taxes’ shall include a tax paid in

lieu of a tax on income, war profits, or excess profits other-

wise generally imposed by any foreign country... .” Appel-

lants claim that the payments to foreign nations at issue in

this case cannot be considered as “in lieu of’ taxes within

the meaning of Section 903. We accept this contention as

being true for the limited purpose of ruling on the question

of standing. See note 19, infra.

1s Amended Complaint, 9 9, J.A. at 40.

** 1955-1 Cum. Bull. 386.

income taxes levied by Iran, Kuwait, and Venezuela in

connection with oil production in those countries.**

Appellants contend that the income taxes paid by

United States companies to the foreign nations listed

above are not creditable taxes within the meaning of Sec-

tion 901(b) of the Code. Rather, appellants assert that

these taxes are in substance either rolayties paid for the

right to extract oil from land owned by the foreign na-

tions, or excise, severance, or similar taxes which are not

creditable under Section 901(b).*° Appellant Field, as

the owner of a domestic oil well, pays the owner of the

land on which his well is located a regular royalty pay-

ment for the right to extract oil from the land;*> under

the Code, appellant can deduct these payments from gross

income but cannot credit them against his tax liability.

In effect, appellants allege that the IRS has exalted form

over substance in allowing the tax credits at issue; all

of the injuries which appellants put forth to support

their standing flow from this decision to treat the for-

eign income taxes as creditable taxes, rather than as

deductible expenses, for their taxpaying competitors.

Having outlined the substantive merits of appellants’

claims, it remains to relate this aspect of the case to the

issue of standing. Under the relevant Supreme Court

directive, we “must accept as true all material allega-

tions of the complaint, and must construe the complaint

in favor of the complaining party.” This standard of

review dictates that we assume that the IRS has im-

properly allowed a tax credit for the payments to foreign

nations in connection with oil extraction and production.

** Amended Complaint, { 10, J.A. at 41; Brief for Appellees

at 5.

** Amended Complaint, © 12, J.A. at 41.

** Amended Complaint, © 18, 19, J.A. at 42.

** Warth v. Seldin, 422 U.S. 490, 501 (1975).

This assumption as to illegality does not in and of itself

confer standing on anyone to challenge the illegality.*°

Rather, as this court has stated, “the proper inquiry is

whether the illegality does injury to an interest of the

complaining party.” ** We now turn to an examination

of the interests and injuries put forth by appellant

Field to support his standing as a competitor in this

case.*? :

B. Competitor Standing

As an independent domestic oil producer, appellant

Field competes in the domestic market with those com-

panies which are granted tax credits for the income

taxes paid to foreign nations. As a competitor, appellant

Field claims that the Internal Revenue Code grants him

a protected interest in competitive fairness and equity

in matters of federal taxation which has been injured

by the published and private rulings made pursuant

to Section 901(b). Appellant believes that this asserted

interest confers on him the right to “challenge[] as

inequitable and illegal the favorable treatment received

by others as a result of Internal Revenue Service ac-

tion.” **

* See United States v. Richardson, 418 U.S. 166, 179

(1974) ; Harrington v. Bush, supra, note 10, Slip. op. at 11

n.31.

** Harrington v. Bush, supra note 10, Slip. op. at 11

(emphasis in original).

2 The issue of taxpayer standing has been dealt with in

text and notes at notes 4 to 10, supra, and will not concern us

during the remainder of our analysis.

** Brief for Appellants at 18. There are statutory provisions

providing for judicial review of IRS action at the request of

one whose taxes are in question. See 26 U.S.C. § 6123(a).

These challenges usually take place within the context of a

refund or deficiency suit.

[Continued]

Appellant alleges two injuries in his capacity as a

competitor. As the first injury appellant Field alleges

that the IRS rulings “result in his obtaining lower prices

for his oi] production than he would receive if the in-

ternational companies could only deduct and not credit

their oil production related payments.” *' The rulings

at issue in this case enable the international companies

to pay far less income tax to the United States than

if these payments were merely deductible. A substantial

portion of the oil produced in Saudi Arabia, Libya, Ku-

wait, Iran and Venezuela by United States companies is

exported to the United States. The prices charged by

the international companies largely determine the market

price for uncontrolled crude oil received by independent

producers such as appellant Field. According to ap-

pellants, the lower taxes paid by the international com-

panies allow these companies to sell their foreign oil in

the United States at lower prices than would prevail if

the companies could only deduct and not credit their

foreign income tax payments.** Thus, as a consequence,

appellant Field contends that the IRS rulings result in

competitive injury due to the loss of potential income

in the sale of his domestically produced oil.

The second injury of a competitive nature alleged by

Appellant Field concerns the impact of the challenged

rulings on the value of his operating interest in his

domestic oil well. According to appellant Field, the

7s [Continued]

Appellant presents a different type of case in this action

by attempting to use alleged competitive injury to himself as

the basis for the challenge of the IRS action; he does not put

forth the question of his own tax liability or that of the

international companies taking advantage of the tax credit

allowed by the challenged rulings as the basis for his standing.

** Amended Complaint, © 18, J.A. at 44.

** Id. § 19, J.A. at 44.

challenged IRS rulings increase the net income from

foreign oil production over what it would be if the for-

eign payments could only be deducted from gross income

for federal tax purposes.” Thus, as a result of the rul-

ings, foreign oil production yields higher investment re-

turns and investors are more willing to invest in foreign

oil production than they would be if the rulings had not

been promulgated.*’ The value of foreign oil well invest-

ments is therefore increased relative to similar domestic

investments, to the alleged competitive detriment of ap-

pellant Field.

The asserted competitive interest and alleged injuries

presented by appellant Field will now be tested against

the standards developed by the Supreme Court in the

area of standing.”

II. ANALYSIS OF STANDING CLAIMS

A. Preliminary Considerations

The standing doetrine has two sources: the “case or

controversy” requirement of Article III of the Constitu-

tion,” and judicially imposed rules of self-restraint

known as “prudential limitations.” In the context of

this case, we have occasion to apply both the constitu-

tional and prudential dimensions of the standing doc-

trine and thus to illuminate the relationship between

26 Td.

7 Td.

*® Sec Harrington Vv. Bush, supra note 10, Slip. op. at 28

n.68.

** The Supreme Court first clearly stated the constitutional

nature of the injury in fact requirement in Flast v. Cohen,

392 U.S. 83 (1968) and has been consistent in this interpreta-

tion in all subsequent discussions of standing.

” Sce Warth v. Seldin, 422 U.S. 490, 498 (1975).

10a

these two elements of the doctrine.*' The Article III con-

stitutional requirement is one of “injury in fact, economic

or otherwise;” * such injury is the “irreducible constitu-

tional minimum which must be present in every case.” *’

If a court finds that there is no injury in fact, ‘no

other inquiry is relevant to consideration of . . . stand-

ing.” ** The vast majority of the case law on standing

at all levels of the federal court system has been di-

rected at defining this constitutionally based concept of

injury in fact.

Prudential limitations, on the other hand, are not

constitutional requirements; these limitations are de

veloped and imposed by the Supreme Court in its super-

visory capacity over the federal judiciary.* It is clear

that Congress may remove these prudential limitations

by statute; Congress has chosen to exercise this authority

on various occasions.** There has been no Congressional

authorization of appellants’ action here; therefore, the

prudential limitations developed by the Supreme Court

‘1 We deny the claims as to taxpayer standing because we

find no injury in fact; see note 10, supra. With respect to

competitor standing, however, we recognize that injury in

fact has occurred but proceed to deny standing based on a

prudential limitation; see Part II.B.2, infra.

3: Ass'n of Data Processing Serv. Orgs., Inc. Vv. Camp, 397

U.S. 150, 152 (1970).

3s Harrington V. Bush, supra note 10, Slip op. at 28 n.68.

%* Schlesinger V. Reservists to Stop the War, 418 U.S. 208,

227 n.16 (1974).

> See, e.g., Warth v. Seldin, 422 U.S. 490, 498 (1975).

* For a collection of statutes in which Congress has re-

moved the prudential standing barriers, see C. Wright, et al.,

Federal Practice and Procedure § 3531 (p. 71, 1977 Supple-

ment). For the clearest example of the operation of this

Congressional control over prudential limitations in the ju-

lla

are fully applicable in this context.*’ To date, at least

three prudential limitations have been announced by the

Court. The first of these limitations to be enunciated,

and the one which will be the focus of our concern in

Part B.2, infra, is the so-called “zone test: “whether

the interest sought to be protected by the complainant

is arguably within the zone of interests to be protected

or regulated by the statute or consitutional guarantee

in question.” ** The two additional prudential limitations

relating to causation “ and redressability of the griev-

dicial context, see Trafficante v. Metropolitan Life Ins. Co.,

409 U.S. 205 (1972).

**We believe that the fact that the limitations of the

standing doctrine beyond injury in fact are termed “pru-

dential limitations,” does not mean that the lower courts

have discretion as to whether to apply these limitations or

not. The Supreme Court has announced these prudential

limitations in its supervisory capacity over the federal ju-

diciary and, in the context of cases such as the one now

before us, we believe there is a nondiscretionary duty to

apply the limitations. This duty to apply the standard does

not detract from the discretion involved in determining

whether the standard has been satisfied.

** The “zone test” is not a “test” in the sense that it is

capable of mechanical application to a set of facts with an

easily discernable and certain result. Rather, it is, as this

court has stated, one of a “series of inquiries” designed

to determine if a particular party has standing. Harrington v.

Bush, supra note 10, Slip op. at 28 (emphasis in original).

As an inquiry, the standard involves a great deal of discre-

tion in its application. See note 64, infra. It is, therefore,

for purposes of convenience that we refer to it as a “‘test;”

this lable is not intended to obscure the discretion and neces-

sary ambiguity inherent in the inquiry.

* Ass'n of Data Processing Serv. Orgs., Inc. v. Camp, 397

U.S. 150, 153 (1970).

*° See Linda R.S. v. Richard D., 410 U.S. 614, 617 (19738) :

Simon v. Eastern Ky. Welfare Rights Org., 426 U.S. 26, 41-

42 (1973). See also Harrington Vv. Bush, supra note 10, Slip

op. at 28 n.68.

ance‘! need not be faced in the context of this case.

The application of the zone test to deny standing in this

case bears out the notion that, as this court has stated,

“a valid claim of standing rests on more than [the]

assertion of {a judicially} cognizable injury.” *

B. Competitor Standing

1. Injury in Fact. We conclude that appellant Field

has suffered injury in fact in his capacity as a com-

petitor.** Although appellant’s economic injury is rela-

tively small in magnitude,‘ this does not negate our

finding of injury in fact.“ Appellant Field has alleged

“a distinct and palpable injury to himself” ** which meets

the requirements of Article III of the Constitution; given

that the constitutional hurdle has been surmounted, we

must now proceed to examine appellant’s claim in light

of the zone test.“

*t See Simon V. Eastern Ky. Welfare Rights Org., 426 U.S.

26, 28 (1976) ; Schlesinger Vv. Reservists to Stop the War, 418

U.S. 208, 222 (1974). See also Harrington v. Bush, supra

note 10, Slip op. at 28 n.68.

*? Harrington V. Bush, supra note 10, Slip op. at 28 n.68.

*? See Ass'n of Data Processing Serv. Orgs., Inc. Vv. Camp,

397 U.S. 150 (1970); Arnold Tours, Inc. Vv. Camp, 400 U.S.

45 (1970).

* The oil well owned by appellant Field is quite small: see

Brief for Appellants at 11.

** See United States v. SCRAP, 412 U.S. 669, 689 n.14

(1973) (identifiable trifle is sufficient for purposes of standing

doctrine). The appellee’s arguments to the contrary are

frivolous; see Brief for Appellees at 10, 26-27.

‘© Warth v. Seldin, 422 U.S. 490, 501 (1975).

** See Simon V. Eastern Ky. Welfare Rights Org., 426 U.S.

26, 39 n.19 (1976).

l3a

Zz. Zone of Interests. The zone test was announced

and applied in 1970 in the companion cases of Associa-

tion of Data Processing Organizations v. Camp“ and

Barlow v. Collins.” In addition, the test has been ap-

plied by the Court in two subsequent cases.” In apply-

ing the zone test in these four cases, the Court has not

attempted a detailed explanation of the purpose, meaning,

or scope of the standard. The deficiencies, ambiguities,

and unresolved questions inherent in the zone test have

been the subject of voluminous criticism."* There has also

been confusion in the application of this prudential stand-

ard in the courts.“* Some courts have chosen to ignore

the zone test;™* at least one circuit court has chosen

forthrightly to state its opposition to the test.‘ Perhaps

the most common pattern is to announce in conclusory

terms that the zone standard has or has not been satis-

fied.”*

**See note 32, supra. The Data Processing case also in-

volved a claim of competitive injury.

**° 397 U.S. 159 (1970).

*° Investment Co. Inst., v. Camp, 401 U.S. 617 (1971);

Arnold Tours, Inc. v. Camp, 400 U.S. 45 (1970).

** A complete bibliography of these criticisms is set forth in

Note, Standing to Challenge Exclusionary Land Use Control

Devices in Federal Courts after Warth v. Seldin, 29 Stan.L.

Rev. 323 (1977). (hereinafter referred to as Note).

*? See, e.g., Pecos Ass'n V. Stans, 452 F.2d 1233, 1235 (10th

Cir. 1971) (“The interests are within the zone protected by

the APA").

*? See, e.g., Florida v. Weinberger, 492 F.2d 488 (5th Cir.

1974).

** Park View Hetghts Corp. v. City of Black Jack, 467 F.2d

1208 (&th Cir. 1972).

** See K. Davis, Administrative Law of the Seventies 512

(1976).

EEE

l4a

The zone test admittedly presents the courts with an

ambiguous and imprecise standard to apply; such am-

biguity and imprecision are certainly not foreign to the

courts, however, and none of the approaches to the zone

test outlined above has contributed to the clarification of

the concept.” Suggestions that the zone test is no longer

a constituent element of the standing doctrine are, in our

view, clearly incorrect. Indeed, all of the available evi-

dence in Supreme Court cases suggests that the zone

standard remains the law in this context.*’ We believe

that the zone test is fully applicable in this context; since

we rest our denial of standing to appellant Field as a

competitor squarely on the zone standard, we shal! put

forth in some detail the manner in which this decision

has been reached.

a. Purpose of Zone Test. The zone test serves no inde-

pendent purpose but, rather, constitutes one method to

ensure that the basic purposes and policies of the stand-

ing doctrine itself are effectuated. Although the purpose

of the standing doctrine has been the subject of consider-

% See notes 52 to 54, supra. In another context, Justice

Powell has recognized that the prudential limitations are

“less easily defined” inquiries than those involving injury

in fact. Singleton v. Wueff, 44 U.S.L.W. 5218 (29 June 1976)

(Powell, J., concurring in part and dissenting in part). The

ambiguous nature of the prudential inquiries is not, without

more, a valid reason to ignore the zone standard.

‘7 In all of the Supreme Court’s standing decisions rendered

since the zone test was announced in 1970 in which the zone

standard has not been applied but in which it has been

appropriate to make reference to this test, the Court has cited

this standard with approval. See Sierra Club v. Morton, 405

U.S. 727, 733 (1972) ; United States v. SCRAP, 412 U.S. 669,

686 n.13 (1973); United States v. Richardson, 418 U.S. 166,

176 n.9 (1974); Schlesinger V. Reservists to Stop the War,

418 U.S. 208, 224 n.14 (1974); Simon v. Eastern Ky. Welfare

Rights Org., 426 U.S. 26, 39 n.19 (1976).

lSa

able debate among the commentators,** the Supreme

Court has been consistent in identifying two basic pur-

poses of the doctrine. The first purpose, or basic policy,

is to ensure the complete adversarial presentation of the

issues before the court.** The second purpose concerns

the “proper—and properly limited—role of the courts in

a democratic society.” * That is, the standing doctrine

can be employed to define the proper judicial role rela-

tive to the other major governmental institutions in the

society."* As the Court has stated, the “prudential rules

of standing .. . serve to limit the role of the courts in

resolving public disputes.” *

We believe that the zone test is particularly suited to

the task of furthering the second stated purpose of the

standing doctrine relating to the role of the federal judi-

ciary. The zone test, by its very language, implicates

the relationship between the legislative and judicial

branches as the predominant factor in its operation—

“the zone of interests to be protected or regulated by the

statute ...in question.” “* Thus, the zone test serves the

purpose of allowing courts to define those instances when

it believes the exercise of its power at the instigation of

a particular party is not congruent with the mandate of

the legislative branch in a particular subject area.

** See Note, supra note 51, at 335 n.72.

** See Baker v. Carr, 369 U.S. 186, 204 (1962); Flast v.

Cohen, 392 U.S. 83, 95 (1968).

* Warth v. Seldin, 422 U.S. 490, 498 (1975).

*! See generally United States v. Richardson, 418 U.S. 166

(1974); Schlesinger V. Reservists to Stop the War, 418 U.S.

208 (1974).

* Warth v. Seldin, 422 U.S. 490, 500 (1975).

°3 See note 39, supra. (emphasis added).

l6a

By its choice of language, the Supreme Court has indi-

cated that the zone test is a quite generous standard; “

on the other hand, the test is obviously meant to serve as

a limitation on those who can use the federal courts as

a forum for grievances emanating from agency action

taken pursuant to a particular statutory mandate. These

competing considerations serve to frame the bounds of

a court’s discretion in applying the zone test. The discre-

tion of a court to deny standing on the basis of the zone

standard is not undefined; the zone test limitation is

grounded in Congressional action as embodied in statute.

The zone test therefore cannot be used arbitrarily to

deny access to the courts; it is based on discerned Con-

gressional purpose, a purpose which can be more clearly

or differently defined as Congress wishes.

The most severe difficulties with the zone test derive

from questions as to the proper technique to employ in

order to discern the Congressional intention in a manner

which does not defeat other basic tenets of the law of

standing. In particular, these difficulties revolve around

the decision as to which statutory provision to examine

for evidence of regulatory or protective intent and the

proper role of legislative history in making the threshold

decision on standing.

b. Proper Statutory Provision. The IRS rulings being

challenged in this case were issued pursuant to Section

901 of the Code. The question then becomes: does the

court look to this section of the statute (the Code) to

determine which interests are arguably to be regulated

or protected for purposes of the zone test, or should the

court look to other sections of the statute for evidence of

arguable regulatory or protective intent? The Supreme

Court decisions dealing with the zone test do not provide

** The particular words which give the test this quality are

“arguably” and “zone”.

17a

a conclusive answer to this inquiry.** As will be seen,

this decision is of particular significance in the context

of this case.*° Appellants urge us to adopt the second

alternative—to examine statutory provisions other than

those which form the basis for the lawsuit.*’ In this

regard, appellants refer us to additional provisions in

the Code which they believe contain the necessary evi-

dence of Congressional intent sufficient to satisfy the zone

test in this case.** We cannot agree with this approach;

instead, we shall look only to Section 901 of the Code in

our application of the zone test. Why we should do so

readily becomes apparent.

Our decision to adopt this approacii rests on two rea-

sons—one general, the other with particular reference to

the statutory scheme involved in this case. Generally, the

statutory provision at issue in a given case, in this in-

stance Section 901 of the Code, frames the substantive

issue which a court will decide if the action proceeds to

a determination on the merits. If the necessary arguable

intent is found in the particular provision, this fact fur-

ther ensures that the complaining party will have a strong

connection to the controversy and that it will serve the

policy of complete adversariness in the litigation which

has as its focus the particular statutory provision.” If,

on the other hand, standing is granted on the basis of

* See cases listed at notes 48, 50, supra.

** See text at notes 69 to 70, infra.

*’ Appellants contend that we “must examine [the] general

purpose” of the Code. (Brief at 20) to determine if the com-

petitive interests “are within the zone of interests protected

by the Internal Revenue Code.” (Brief at 8). See also Brief

for Appellants at 17-19.

** These additional provisions of the Code are sections 501,

502, 511-13, and 7805(b).

** See text and notes at notes 58 to 59, supra.

18a

intent inferred from statutory provisions which perhaps

embody different goals and policies, this connection to the

controversy may well be lessened. Therefore, as a gen-

eral rule we believe that the particular statutory section

should be the focus of analysis when applying the zone

test.

The wisdom of this decision to examine the particular

statutory section is particularly apparent in the context

of this case. The Internal Revenue Code is a extraordi-

narily complex statute which does not have a single, uni-

fied purpose. Rather, the Code is intended to accomplish

a wide variety of economic and social goals and purposes.

If litigants are allowed to transfer the Congressional

purpose and intent embodied in one section of the Code

into other contexts and situations regulated by different

provisions of the Code, the possibilities for litigation

would indeed be endless. We do not therefore believe

that litigants can “borrow” the arguable regulatory or

protective intent embodied in one provision of the Code,

and apply it to a provision where that intent is not evi-

dent, in order to satisfy the zone test. A contrary deci-

sion in this context would distort the role of the courts

in relation to the legislative branch, precisely what the

zone test serves to prevent, in the area of revenue col-

lection.

In support of their argument that the court should

look beyond the particular statutory provision, appellants

refer us to the decision of this court in Constructores

Civiles de Centroamerica, S.A. v. Hannah.” In that case

action taken pursuant to the Foreign Assistance Act of

1961” was challenged. In determining that appellants in

that case satisfied the zone test, the court looked to the

7° 459 F.2d 1183 (D.C. Cir., 1972).

71 22 U.S.C. § 2251 et. seq. (1970).

19a

genera! statement of policy found in the statute. Ap-

pellants in this case contend that the court’s reliance on

the broad general language of the preamble in the Con-

structores case supports their view that purposes em-

bodied in other sections of the Code support their stand-

ing under the zone test. The court’s action in Construc-

tores was not, however, inconsistent with the technique

we have chosen to employ in this case. In Constructores

it was acceptable to examine both particular and general

provisions because these provisions shared an identity of

purpose. Indeed, in this context, it was necessary to ex-

amine the general language of the preamble to ensure

that a grant of standing would not be inconsistent with

the statutory purpose. No such similar situation is pre-

sented in this case and we therefore confine our inquiry

to Section 901 of the Code.

ce. The Role of Legislative History. In the process of

deciding disputes which are properly before them, courts

regularly examine in some depth and in great detail the

legislative history of statutes involved in the disputes.

In the context of appiying the zone test to the issue of

standing, however, such full-scale examinations of legis-

lative history present special dangers and should there-

fore be avoided.** The dangers and deficiencies in the

traditional approach to legislative history in this context

are three in number.

First, and most significant, a full-scale examination of

the legislative policy underlying a statutory provision

may well lead to a prejudgment of the merits of the case.

A canvassing of the entire legislative background may

lead to a decision on the question of standing based on

an assessment of the strength or weakness of the claims

459 F.2d 1183, 1188-89 (1972).

** See Barlow v. Collins, 397 U.S. 159, 168 (1970) (Bren-

nan, J., concurring in the result and dissenting).

20a

being presented.* Such a result or tendency would be

inconsistent with a primary theme in the law of standing

—that the question of standing is a matter apart and

distinct from the merits of the substantive claims put

forth.* It is totally acceptable to grant standing to a

party to pursue an unsuccessful claim; a traditional ex-

amination of legislative history might well undermine

this basic proposition.

Second, the question as to precisely which interests are

meant to be regulated or protected by a statutory provi-

sion is not likely to have been faced in the legislative

history in any convincing or dispositive manner. Rather,

the express language of the statute is likely to be more

accurate in this regard. Thus, as.a source of evidence

as to whether the particular interests of a particular

plaintiff are within the relevant zone,” the legislative

**It was the fear of confusing the preliminary issue of

standing with the merits which caused Justices Brennan and

White in Barlow v. Collins, 897 U.S. 159, 168-170 (1970) to

argue that examination of standing should stop with the

constitutionally-spawned inquiry as to injury in fact and

should not reach the “zone of interest” inquiry at all. By not

relying on legislative history, as the Supreme Court indicated

in Arnold Tours, Inc. v. Camp, 400 U.S. 45, 46 (1970) was

proper, we avoid the danger of the court settling the merits in

the guise of ruling on standing and thus meet the concern

voiced by Justices Brennan and White.

"Ss See, e.g., Ass’n of Data Processing Serv. Orgs., Inc. V.

Camp, 397 U.S. 150, 153 (1970); Warth v. Seldin, 422 US.

490, 500 (1975).

** We are aware of the confusion surrounding the meaning

of which interests are relevant to the zone test. Sree K. Davis,

Administrative Law Treatise § 22.00-1 (1970 Supplement).

Essentially, the confusion surrounds what exactly has to fall -

within the relevant zone: 1) the parties themselves; 2) the

interests of the parties in general; or 3) the particular in-

terest the parties are asserting in the litigation. It seems

clear to us that the particular interests are the relevant in-

21a

history is likely to be unilluminating.”

Third, a full-scale examination of legislative history

presents the distinct possibility that the generous nature

of the zone test, which results from the language of the

test itself, will be undermined. Such an approach may

lead to a requirement that there be affirmative evidence

that the Congress intended that a plaintiff situated pre-

cisely as the plaintiff then standing before the court be

regulated or protected. Any tendency to move in this

direction would detract from the flexibility of the zone

standard provided by the requirement that the plaintiffs’

interest be only “arguably” within the zone. Thus, if

Congress had in general terms legislated against competi-

tion in a statute, it is not difficult to find that particular

competitive interests, which may not have been mentioned

in the legislative history at all, are “arguably” within

the zone of interests."* The “arguable” language of the

zone test thus serves to resolve potential ambiguities in

the legislative history and obviates the need to consult

it in the same detail as is done when the merits of the

dispute are being resolved.

Given these deficiencies in the traditional techniques

of fully examining legislative history, we believe the ap-

propriate test to be as follows: whether the complaining

party has stated an interest which is arguable from the

face of the statute. Although the Supreme Court has not

explicitly endorsed this as the appropriate operational

terests in the context of an application of the zone standard.

Professor Davis agrees. Id.

** The success of a workable standing doctrine must be

measured in some degree by the ease with which it can be

applied. This more limited role for legislative history at this

threshold stage in litigation promotes this additional goal.

** This is essentially what the Supreme Court did in Arnold

Tours v. Camp, 400 U.S. 45 (1970).

999

technique, it has come close to so doing in one case.”

Thus, we believe that this approach is both consistent

with the guidance we have been given by the Supreme

Court and that it is supportive of other policies underly-

ing the standing doctrine.*

C. Application of Zone Test to Appellant Field.

Having described what we believe.to be the purpose

of the zone test and the manner in which it should op-

erate, it is now possible to formulate with precision the

relevant zone test inquiry with respect to appellant

Field’s standing as a competitor: did Congress arguably

legislate with respect to competition in Section 901 of the

Code so as to protect the competitive interests of domestic

oil producers?

We answer the posed query in the negative for the

following reasons. The purpose of the tax credit pro-

vision of Section 901 of the Code is to prevent the double

taxation of any United States companies operating abroad.

This purpose is clear from the face of the statute itself,

and has been consistently confirmed in the case law

dealing with this particular provision in other contexts."

Id.

®°° Having stated and justified this general approach to legis-

lative history, it is necessary to state a caveat. We do not

rule out any role for legislative history at this stage, and we

would expect to be informed by the parties if the legislative

history contained clear evidence of an intent either to allow

the appellant’s interests as a basis for standing or to deny

standing to a party in this position.

** See, e.g., Bunet V. Chicago Portrait Co., 285 U.S. 1, 2

(1932); Bank of America National T.E.S. Ass'n Vv. United

States, 459 F.2d 513, 519 (Ct. Cl. 1972), cert. denied, 409 U.S.

949 (1972); Rinehart Vv. United States, 429 F.2d 1286, 1288

(10th Cir. 1970) ; Associated Tcl. & Tel. Co. v. United States,

306 F.2d 824, 832-33 (2d Cir. 1962), cert. denied, 371 U.S.

950 (1962).

23a

The tax credit envisioned in Section 901 is also available

to U.S. companies operating outside the sphere of oil

extraction and production, with the same purpose of

avoiding the double taxation of United States taxpayers,

whether such companies have domestic competition or

not. Given this purpose, it is obvious that the pro-

tective intent of the statutory section extends to all

those U.S. companies doing business abroad and paying

foreign income taxes.

in addition it cannot be said that parties in the posi-

tion of appellant Field are arguably intended to be

regulated by the provision granting tax credits; that is,

appellant Field cannot be said to fall within the regula-

tory field of concern without stretching the concept of

regulation to implausible limits.** Therefore, we con-

clude that the interests being asserted by Appellant

Field as a competitor are not the interests arguably in-

tended to be protected by the tax credit provision of sec-

tion 901 which is the statutory basis for the challenge

in this case. The congruence between the purpose of the

statute (to prevent the double taxation of particular

parties) and the interests asserted by appellant (com-

petitive interest in fairness) is not sufficient to invoke

the federal judicial power.”

® See text and notes at notes 86 to 89, infra. Appellant is

not directly regulated by the rulings being challenged in this

case. Rather, a more appropriate description is that he op-

erates in an industry which is regulated by the rulings but

does not operate in that sphere of the industry which is the

“object of the regulation.

** Cf. cases cited at notes 48-50, supra; in these cases the

congruence between the purpose of the statute (to legislate

against competition generally) and the asserted interests

(particular types of competition) was sufficient to satisfy the

“arguable” terminology of the zone test.

24a

We find it significant, as we noted earlier,‘ that ap-

pellants do not in their submissions to us attempt to

persuade the court that appellant Field’s asserted com-

petitive interests fall within the zone of interests rele-

vant to Section 901. Rather, appellants rely entirely

on other provisions of the Code to argue that the zone

sandard has been satisfied.” We have rejected this ap-

proach and put forth our reasons for so doing in part

II.B.2(b), supra. This failure to address the issue of

the zone standard as it relates to the statutory provision

being challenged suggests that a convincing argument

in this regard is lacking. Perhaps the most apprepriate

way in which we can emphasize the strength of our de-

cision to deny standing on the basis of the zone standard

is to sketch out the arguments which would need to be

made in order to satisfy the zone standard in this con-

text.

The argument that appellant Field’s interests fall

within the relevant zone of Section 901 rests on the

premise that Section 901 can arguably be read not only

as a decision to grant a tax credit to those who have

paid foreign income taxes but also as a decision not to

grant a tax credit to those who have made other sorts

of payments, such as royalties, to foreign governments.”

Under this “reverse zone of interest” analysis, competi-

tors such as appellant Field could argue that they fall

within the zone protected by the negative implication of

the statutory provision.

We cannot accept this “reverse zone of interest anal-

ysis” which would extend standing to all those who may

“* See note 67, supra.

** See note 68, supra.

** This seems to rest on the misapprehension that the stat-

ute is directed exclusively at the tax scheme and problems of

the petroleum industry, which we pointed out above was not so.

25a

be able to allege injury because they were not regulated

or protected by a particular statutory provision. Such

an approach would render the zone standard meaning-

less. Although the text is a generous one, the terms

“arguable” and “zone” are subject to definition in the

context of particular factual situations such as presented

in this case. To define the terms by reference to what

they do not mean in these factual settings is clearly

inappropriate.

There is one further argument concerning the zone of

interests surrounding Section 901 which deserves men-

tion. It can be argued that the decision to grant the

international companies a tax credit has competitive con-

sequences for parties such as appellant Field which bring

him within the relevant zone. That is, since the chal-

lenged rulings have an impact on appellant Field in his

capacity as an oil producer, he must therefore fall with-

in the intended zone of Section 901. Every decision by

a government agency generates consequences and various

forms of impact on a wide range of valid interests held

by a diverse range of parties. There is no doubt that

the decisions embodied in the challenged revenue rulings

have had an impact on appellant Field. But the con-

cepts of consequence and impact are not the proper guide

posts to define the relevant zone of interests; reference to

these concepts does not aid greatly in determining whether

a protected interest exists, but rather serve as part of

the vocabulary in defining the relationship between an

alleged injury and an asserted interest.

Thus, consequences and forms of impact do play an

important role in the law of standing; these concepts are

relevant in determining whether there has been injury

in fact. So, we have not ignored the competitive con-

sequences and impact of the challenged rulings on ap-

pellant Field; we have taken these into account in de

termining that appellant has suffered competitive injury

26a

in fact. A standing determination, such as the one in-

volved with appellant Field as a competitor, involves

separate stages of analysis;*’ we cannot simply trans-

fer the analytical concepts employed in one stage (injury

in fact) to the other stages of analysis dealing with

prudential limitations. We cannot define the zone of

interests as being the equivalent in every case of the

“zone of impact” or the “zone of consequences.” To do

so would establish a standing doctrine based solely on

the existence of harm to a party; it is clear that, under

current Supreme Court doctrine which we are obliged to

apply, such a result is unacceptable “ as contrary to the

stated purposes of the doctrine.”

In summary, we cannot look to a “reverse zone of

interests” or to the consequences and impact of the chal-

lenged agency action to define a zone within which ap-

pellant Field’s competitive interests fall. Rather, we

must make our decision as to whether the party before

us is an intended beneficiary of the statutory provision

on the basis of the interests we believe Congress argu-

ably intended to regulate or protect in the legislation.

We cannot conclude that Congress arguably intended to

regulate or protect the competitive interests of appel-

lant Field in Section 901. The existence of competitive

ramifications flowing from the challenged agency action

is not sufficient evidence to infer that Congress arguably

intended to protect or regulate competitive interests. The

arguments to the contrary fail for the reasons cited

above. Without a clearer indication from Congress from

which could be constructed a plausible argument that the

competitive interests are “arguably” to be regulated or

protected, we cannot as a prudential matter make the

** See Harrington V. Bush, supra note 10, Slip op. at 28 n.68.

8 Jd.

* See notes 59 and 60, supra.

27a

federal courts available as a forum for third-party chal-

lenges to IRS action such as the one presented here.”

CONCLUSION

We recognize that as the result of our decision in this

case it is likely that the revenue rulings at issue in the

case may go unchallenged in federal court due to the

lack of a proper party to sue. This eventuality does not,

however, operate in favor of granting standing to the

parties in this case." The standing doctrine should not

be manipulated to guarantee that there is a party to

bring any action in court that some persons may think de-

sirable to have adjudicated. Since we cannot conclude

that appellants have standing under the current frame-

work of analysis provided by the Supreme Court, the

order of the District Court in this case is

Affirmed.

*° A similar challenge to an IRS ruling was made in Simon

Vv. Eastern Ky. Welfare Rights Org., 426 U.S. 26 (1976). In-

deed, this case was held in abeyance by order of this court to

await guidance from the Supreme Court in this area. In

Simon, however, the Court denied standing on grounds not

relevant to this case.

The Court in Simon explicitly chose “not to reach the ques-

tion of whether a third party ever may challenge IRS treat-

ment of another... .” 426 U.S. at 37. The appellee in this

case has urged us to adopt such a blanket prohibition (Brief

for Appellees at 37-43), but we, too, decline to speak to this

issue.

* See note 20, supra.

28a

APPENDIX Be —_

Notice: This opinion is subject to formal revision before publication

in the Federal Reporter or U.S.App.D.C. Reports. Users are requested

to notify the Clerk of any formal errors in order that corrections may be

made before the bound volumes go to press. :

United States Court of Appeals

FOR THE DISTRICT OF COLUMBIA CIRCUIT

No. 75-1782

AMERICAN SOCIETY OF TRAVEL AGENTS, INC., ET AL.,

APPELLANTS

Vv.

MICHAEL BLUMENTHAL, SECRETARY OF TREASURY, ET AL.

Appeal from the United States District Court

for the District of Columbia

(D.C. Civil 74-1081)

Argued October 20, 1976

Decided September 15, 1977

Thomas J. Bacas, with whom Paul S. Quinn was on

the brief, for appellants.

Leonard J. Henzke, Jr., Attorney, Tax Division, De-

partment of Justice, with whom Scott P. Crampton, As-

sistant Attorney General, Earl J. Silbert, United States

Bills of costs must be filed within 14 days after entry of judgment. The

court looks with disfavor upon motions to file bills of costs out of time.

29a

Attorney, and Ann B. Durney, Attorney, Tax Division,

Department of Justice, were on the brief, for appellees.

Before BAZELON, Chief Judge, MCGOWAN and Robs,

Circuit Judges.

Opinion for the court filed by Circuit Judge McGowan.

Dissenting opinion filed by Chief Judge BAZELON.*

McGowan, Circuit Judge: This is an appeal from the

District Court’s dismissal of a complaint challenging the

administration of the federal tax laws, not in relation

to the tax liabilities of plaintiffs-appellants, but as to

third parties not before the court. It thus presents a

threshold issue of standing to sue reminiscent of Justice

Stewart’s observation, concurring in Simon v. Eastern

Kentucky Welfare Rights Organization, et al., 426 U.S.

26, 46 (1975), that he could not “imagine a case, at least

outside the First Amendment area, where a_ person

whose own tax liability was not affected ever could have

standing to litigate the federal tax liability of someone

else.” Because Eastern Kentucky—an obviously relevant

case—was pending before the Supreme Court at the time

this appeal was first scheduled for oral argument, we

deferred our consideration to await the Supreme Court’s

outcome. We now hold, by reference to the Supreme

Court’s disposition of Eastern Kentucky, that there was

a fatal want of standing here; and we affirm the District

Court’s judgment for that reason.

Appellants, the American Society of Travel Agents

(ASTA) and several individual travel agencies, complain

* The dissenting opinion filed by Chief Judge Bazelon in this

case is also to be filed as a dissent to No. 75-1304, Tax Ana-

lysts and Advocates v. Blumenthal (D.C. Cir., June 15, 1977).

30a

of the failure of the federal tax authorities to assess

taxes upon certain income received by the American

Jewish Congress (AJC) and other organizations enjoy-

ing tax exemptions under § 501(c)(3) of the Internal

Revenue Code.’ In particular, they object to the tax-

exempt treatment accorded to income derived from the

operation of travel programs by § 501(c) (3) organiza-

tions. Appellants assert that such income should be taxed

as so-called unrelated business income, i.e., income ob-

tained from a business the conduct of which is “not

substantially related . . . to the exercise of perform-

ance... {of the] purpose or function constituting the

basis” for an organization’s § 501 exemption. See I.R.C.

§513(a). Alternatively, appellants contend that the AJC

and other exempt organizations have become so heavily

involved in the travel business that their § 501(c) (3)

exemptions should be eliminated altogether.

By memorandum order, the District Court decided that

neither count of appellants’ complaint stated a claim

upon which relief could be granted. 36 A.F.T.R.2d 75-

1T.R.C. §501(c) (3) (as amended, 1976) contains the fol-

lowing list of exempt organizations:

Corporations, and any community chest, fund, or foun-

dation, organized and operated exclusively for religious,

charitable, scientific, testing for public safety, literary, or

educational purposes, or to foster national or international

amateur sports competition (but only if no part of its

activities involve the provision of athletic facilities or

equipment), or for the prevertion of cruelty to children

or animals, no part of the net earnings of which inures to

the benefit of any private shareholder or individual, no

substantial part of the activities of which is carrying on

propaganda, or otherwise attempting, to influence legis-

lation (except as otherwise provided in subsection (h)),

and which does not participate in, or intervene in (includ-

ing the publishing or distributing of statements), any

any political campaign on behalf of any candidate for pub-

lic office.

3la

5142 (D.D.C. May 23, 1975). It observed that allega-

tions like those raised by plaintiffs would necessitate

“careful consideration of the particular facts and cir-

cumstances of each case.” Unwilling to embark upon

such an enterprise, the court declared that its jurisdic-

tion could “not be invoked to undertake continuing super-

= of IRS’s administration of the Internal Revenue

The District Court’s reluctance to become embroiled,

at the instance of taxpayers not directly involved, in the

intricacies of tax law enforcement is both understand-

able and far from irrational in terms of jurisictional

principles. However, we believe that, looking to the Su-

preme Court’s opinion in Eastern Kentucky, dismissal of

appellants’ action should be accomplished by resolution

of the preliminary question of standing. We conclude

that appellants have failed to demonstrate any actual

injury resulting from appellees’ administration, with re-

spect to third parties, of the statutory provisions govern-

ing tax-exempt organizations. We find that appellants

here, like the complainants in Eastern Kentucky, “have

failed to carry (the) burden” of establishing “that, in

fact, the asserted injury was the consequence of defend-

ants’ actions, or that prospective relief will remove the

harm.” 426 U.S. at 45, quoting Warth v. Seldin, 422 U.S.

490, 505 (1975).

Appellants’ basic grievance may be simply stated. Pri-

vate travel agents earn their livelihood, primarily on a

commission basis, through the sale of transportation and

travel-related services in both domestic and foreign mar-

kets. One especially common function performed by travel

agents is the arrangement of so-called tour packages, con-

sisting of transportation, accommodations, meals, and a

variety of other features. Such packages are sold together

——

32a

at one price, a portion of which the agent retains as a

commission.

Appellants allege that, in recent years, a number of

tax-exempt organizations, including the AJC, have be-

come increasingly involved in preparing tour packages

and offering such packages to their members. Appellants

further allege that the tax-exempt status of these or-

ganizations has enabled them to sell tour packages at

prices lower than those which private travel agents must

charge in order to earn a reasonable profit. Thus, so it

is said, the AJC and other unspecified organizations have

improperly used their tax exemptions to obtain an unfair

competitive advantage in the sale of tour packages.

Operation of an extensive travel program is, in appel-

lants’ view, substantially unrelated to the religious,

charitable, scientific, or educational purposes which jus-

tify many § 501(c) (3) exemptions, including that en-

joyed by the AJC. Consequently, appellants urge that

income from such a travel program should be subjected

to the same tax treatment accorded to income earned by

ordinary ASTA members. Somewhat less vigorously, ap-

pellants maintain that if the § 501(c) (3) organizations

at issue conduct travel businesses of significant size, then

those organizations are no longer operated “exclusively”

for religious, charitable, scientific, or educational pur-

poses, and thereby forfeit their § 501(c) (3) exemptions.

We do not reach the merits, because we believe ap-

pellants have not alleged any judicially cognizable “in-

jury in fact,’’ and thus have failed to establish their

standing to bring this suit. “Injury in fact” has long

been regarded as the foremost standing prerequisite, and

the only one of constitutional dimension. See, e.g., United

States v. SCRAP, 412 U.S. 669, 686-89 & n. 14 (1973);

Sierra Club v. Morton, 405 U.S. 727, 733 (1972); and

Flast v. Cohen, 392 U.S. 83, 99-101 (1968). Under Arti-

cle III of the Constitution, federal courts are limited to

33a

the adjudication of cases and controversies. In order to

guarantee the adversarial litigation posture demanded by

this constitutional language, plaintiffs seeking to invoke

federal court jurisdiction have been required to demon-

strate that they have suffered some acti:a! injury attribu-

table to defendants.

Here, appellants claim to have been injured by ap-

pellees’ improper administration of the Internal Revenue

Code, and seek injunctive relief. However, appellants

have not indicated with sufficient specificity either the

manner in which their alleged injury occurred or the

nature of that injury. Appellants point to no prospective

customers who spurned the services of ASTA members

because of appellees’ allegedly inequitable tax treatment

of § 501(c) (3) organizations. Nor do appellants identify

tour package purchasers who in fact patronized the AJC

or some other tax-exempt organization, but who might

legitimately be expected to do business with a private

travel agent in the event appellees enforced the relevant

tax code provisions according to appellants’ recommenda-

tions. Instead, appellants complain in more abstract

terms, alleging injury arising from appellees’ creation of

an unfair competitive atmosphere, and seeking relief in

the form of the more congenial competitive environment

which would supposedly result from proper tax enforce-

ment policy. We regard this sort of injury claim as too

speculative to support standing under the circumstances

presented here.

We conceive that this disposition is not only sustained,

but also largely mandated, by Eastern Kentucky. In that

case, several indigents and organizations composed of

indigents attacked a 1969 Revenue Ruling which revised

the criteria under which non-profit hospitals might qual-

ify for tax-exempt status as charitable institutions. In

particular, the challenged ruling eliminated the require-

ment contained in a 1956 ruling to the effect that a non-

profit hospital desirous of charitable classification “must

34a

be operated to the extent of its financial ability for those

not able to pay for the services rendered.” Deletion of

this language, argued the Eastern Kentucky plaintiffs,

was directly responsible for several refusals by tax-

exempt hospitals to provide needed services to indi-

viduals unable to pay a deposit or advance fee. Plain-

tiffs further alleged that similar refusals could be ex-

pected in the future if the offending Revenue Ruling was

not changed.

As indicated above, the Supreme Court held that

“'s]peculative inferences are necessary to connect [plain-

tiffs’] injury to the challenged actions...,” and “[m]ore-

over, the complaint suggests no substantial likelihood that

victory in this suit would result’ in receipt of the hos-

pital treatment desired. 426 U.S. at 45-46. The Court

explained its conclusion by commenting upon what it per-

ceived as the tenuous connection between the injury suf-

fered and the relief sought by plaintiffs:

‘I]t does not follow ... that the denial of access to

hospital services in fact results from petitioners’ new

Ruling, or that a court-ordered return by petitioners

to their previous policy would result in these respond-

ents’ receiving the hospital services they desire. It is

purely speculative whether the denials of service

specified in the complaint fairly can be traced to peti-

tioners’ “encouragement” or instead result from deci-

sions made by the hospitals without regard to the

tax implications.

It is equally speculative whether the desired exer-

cise of the court’s remedial powers in this suit would

result in the availability to respondents of such serv-

ices. So far as the complaint sheds light, it is just

as plausible that the hospitals to which respondents

may apply for service would elect to forego favorable

tax treatment to avoid the undetermined financial

Pts in pore

35a

drain of an increase in the level of uncompensated

services.”

Id. at 42-43.

s J ustice Powell’s opinion for the Court made clear that the

finding of a standing deficiency in Eastern Kentucky rested

upon a constitutional foundation.

[W]hen a plaintiff’s standing is brought into issue the

relevant inquiry is whether .. . the plaintiff has shown

an injury to himself that is likely to be redressed by a

favorable decision. Absent such a showing, exercise of its

power by a federal court would be gratuitous and thus

inconsistent with the Art. III limitation.

The necessity that the plaintiff who seeks to invoke ju-

dicial power stand to profit in some personal interest re-

mains an Art. III requirement.

The standing question in this suit therefore turns upon

whether any individual respondent has established an

actual injury, or whether the respondent organizations

have established actual injury to any of their indigent

members.

[T]he “case or controversy” limitation of Art. III still re-

quires that a federal court act only to redress injury that

fairly can be traced to the challenged action of the

defendant ....

Id. at 38-41 (footnotes omitted).

In a recent case decided by another panel of this court, in-

quiries relating to causation and redressability of an alleged

injury are characterized as “prudential limitations.” Tax

Analysts and Advocates v. Blumenthal, No. 75-1304, slip op.

at 11-12 (D.C. Cir. June 15, 1977); and see also Harrington v.

Bush, No. 75-1862, slip op. at 28 n. 68 (D.C. Cir. Feb. 18,

1977), where such inquiries are portrayed as being separate

and apart from the “constitutional threshold of injury-in-

fact.” The implication of these statements is that, although

36a

ASTA’s complaint in the appeal before us reveals in-

adequacies closely comparable to those which afflicted

the pleadings filed by the indigents and indigent organi-

zations in Eastern Kentucky. Appellants here must rely

solely on speculation in their attempt to assert that their

business or profits would improve in the event that ap-

pellees began to tax the travel-related income of § 501(c)

(3) organizations. Appellants have not demonstrated that

they would reap any tangible benefit if the court were to

order the relief sought.

As appellees argue in their supplemental memorandum,

the lower cost of the tour packages offered by the AJC

and other tax-exempt organizations may well be attribut-

able at least in significant part to the use of volunteer

labor or the willingness to accept lower profits than would

commercial travel agents. Moreover, even if appellants

were to prevail in this suit, members of $ 501(c) (3) or-

ganizations might for a variety of reasons continue to

prefer the travel programs operated by their own or-

ganizations. Alternately, such organizations might shift

to tour packages whose religious or educational orienta-

tion would be more readily apparent. A third possibility

is that travel by members of § 501(c) (3) organizations

would simply decline.

considerations of causation or redressability may conceivably

operate to deprive particular plaintiffs of standing, such

factors can in no event rise to the level of constitutional sig-

nificance. Justice Powell’s words in Eastern Kentucky, espe-

cially the passages quoted above, are at odds with this

approach. Causation and redressability, far from being pru-

dential matters to be evaluated seriatim only after constitu-

tional standing has been established, are part and parce! of the

“injury in fact” requirement arising from the “case or con-

troversy” language in Article III. Causation and redress-

ability thus represent not additional independent standing

hurdles which prospective litigants must clear, but rather

identifiable aspects of the “injury in fact” test which has long

been recognized as the primary standing criterion in the fed-

eral courts.

37a

If any of these consequences, or some combination of

them, ensued from a decision favorable to appellants, pri-

vate travel agents would enjoy no gain whatever from

their successful litigation. This is precisely the sort of

situation in which the Supreme Court failed to find

standing in Eastern Kentucky.*

By emphasizing their asserted competitor status, ap-

pellants seek to distinguish Eastern Kentucky. Appellants

contend that, as competitors of the AJC and certain other

$ 501(c) (3) organizations, they are entitled to protest

tax treatment of such organizations in federal court.‘

* Although Justice Stewart’s concurring statement in

Eastern Kentucky dramatically denotes the special problems

attendant upon the establishment of standing in the tax cases,

under the circumstances of this case we find, as did the

Eastern Kentucky majority, no need to reach “the question

of whether a third party ever may challenge IRS treatment

of another.” 426 U.S. at 37. The conventional “injury in fact”

prerequisite was simply not met by appellants in the record

before us.

* Appellants also rely on their competitor status to estab-

lish that they are within the “zone of interests to be protected

or regulated by” the relevant Internal Revenue Code pro-

visions. The so-called “zone of interests” test stems from the

Supreme Court’s companion opinions in Association of Data

Processing Organizations, Inc. v. Camp, 397 U.S. 150, 153

(1970) and Barlow v. Collins, 397 U.S. 159, 164-65 (1970).

As the Court observed in Eastern Kentucky, the “zone of

interests” test presents “a second, nonconstitutional standing

requirement.” 426 U.S. at 39 n.19. In an effort to demon-

strate that the “unrelated business” concept was incorporated

into the Code in order to protect competitors of tax-exempt

organizations, appellants point to both the legislative history

of I.R.C. §513 and the regulations promulgated regarding

that section. See, e.g., H.R. REP. No. 2319, 81st Cong., 2d

Sess. 36 (1950); S. REP. No. 2375, 81st Cong., 2d Sess. 27-31

(1950); and 26 C.F.R. § 1.513-1(b) (1976). Given our dis-

position of this case under the “injury in fact” rubric, we

need not address appellants’ “zone of interests” argument.

38a

For support of their position, appellants rely heavily on

Association of Data Processing Organizations, Inc. v.

Camp, 397 U.S. 150 (1970). In that case, the Court

held that private competitors had standing to challenge

a ruling by the Comptroller of the Currency which al-

lowed national banks to provide data processing services

to other banks and bank customers. Appellants emphasize

that the Supreme Court has, in its Eastern Kentucky

opinion, recently reaffirmed the vitality of the Data

Processing decision. See 426 U.S. at 45 n. 25.

Our response is threefold. First, the rather cryptic

phrasing of Data Processing does not clearly define the

contours of competitor standing as conceived by the Su-

preme Court. The opinion by Justice Douglas for the

Court provides little guidance as to the precise nature of

the requirements which must be satisfied before com-

petitor standing can be sustained.”

Secondly, and more significantly, Data Processing was

not a tax case. Whatever may be the impact of com-

petitor standing when ordinary administrative action is

* Two examples may be cited. The first involves the identity

of the parties who must be sued by a litigant alleging com-

petitor standing. In Data Processing, one of the respondents

was American National Bank & Trust Company, a national

bank which was offering data processing services pursuant

to the controverted ruling by the Comptroller of the Currency.

Justice Douglas’s opinion does not disclose whether a success-

ful claim of competitor standing necessitates naming one or

more specific competitors as party oponents. Here, only the

Secretary of the Treasury and the Commissioner of Internal

Revenue were named as defendants. No organizations holding

§ 501(c) (3) tax exemptions were made parties. We note that

in Eastern Kentucky, Justice Powell stressed the fact that no

tax-exempt hosp.tal was a defendant. See 426 U.S. at 41. Also

omitted from the Data Processing opinion was all discussion

of the chain of causation connecting the challenged adminis-

trative action to the injury allegedly suffered by competitors

of regulated enterprises. That chain was patently much shorter

and more direct in Data Processing than it is in this case.

39a

at issue, we do not believe that Data Processing should be

read to endorse standing for any private business, in-

dividual or corporate, which wishes to contest the tax

treatment of a competitor.

Finally, § 501(c) (3) organizations occupy a different

posture with respect to the sale of tour packages than

did the national banks with respect to the provision of

data processing services. Here, the AJC and other such

groups will clearly remain free to pursue their travel

businesses, however the tax status is finally re-

solved. By contrast, in Data Processing, if the Comp-

troller of the Currency’s ruling had been overturned on

judicial review, the offering of data processing services

by national Danks would have been illegal, and peti-

tioners undoubtedly would have faced no further com-

petition from that source, absent statutory revision.

For all these reasons, we do not believe that the Data

Processing decision controls the standing issue in the

present litigation.* Since we are convinced that the East-

ern Kentucky analysis of standing is the one we are

*In Taz Analysts, supra note 2, a panel of this court re-

cently found economic injury in fact, adequate to meet the

Article III test of standing. Appellant in that case was the

owner of a small domestic oil well. Rightly or wrongiy, he

characterized himself as a competitor of the major oi! com-

panies producing and importing oil from abroad. He claimed

to have suffered economic harm because the IRS had acqui-

esced in the tax credit treatment of certain sums paid by large

oil companies to foreign governments. Appellant in Taz

Analysts asserted that these sums represented foreign excise

taxes or royalties, not foreign income taxes, and that there-

fore, they should be treated as deductible business expenses,

not tax credits. Having found such allegations sufficient to

establish injury in fact, the Taz Analysts panel then addressed

the prudential “zone of interests” test, and found that the

court house door was barred on that score. By reason of this

latter finding, the panel did not think it necessary to pursue

what it termed the “two additional prudential limitations

relating to causation and redressability of the grievance... .”

Slip op. at 11-12 (footnote omitted); and see note 2 supra.

40a

bound to apply in this case, and that under it appellants

lacked standing to maintain this suit, the judgment of

dismissal is affirmed.’

It is so ordered.

’ The dissent observes of the foregoing opinion that “it con-

structs a constitutional standard of injury in fact that would

effectively preclude taxpayer suits claiming competitive in-

jury.” The word “constructs” is hardly an apt characteriza-

tion of the majority's effort, in purpose and effect, to follow

as faithfully as possible the Supreme Court’s disposition of

Eastern Kentucky—the case which, prior to that disposition,

all members of the panel appeared to regard as almost cer-

tainly controlling.

It would thus seem that the dissent’s quarrel is essentially

with the approach taken by the Supreme Court majority in

Eastern Kentucky, and not with anything the panel majority

has itself contrived. The dissent asserts that that approach

is an impolitic and unwarrantable return to the rigors of com-

mon law pleading, and one that is incompatible with a rational

determination of assessibility to the federal courts. Althouch

in this instance the dissent purports to see distinctions which

enable it to assert that Eastern Kentucky was rightly denied

by the Supreme Court, it is manifest that this is not an under-

taking it finds either necessary or congenial. As is usually

the case in such circumstances, the differentiations here made

in terms of economic probabilities are less than conclusive.

It is no disrespect to the Supreme Court to say that the

concept of standing appears to be undergoing development.

Warth v. Seldin, supra, and Eastern Kentucky, with their new

emphasis upon causation and redressibility, indicate that at

least a majority of the Court is no longer content with a con-

stitutional concept of injury in fact limited to an assurance

that the interest asserted will guarantee an effective adver-

sarial presentation. Causation and redressability have now

explicitly been comprehended within that concept. Whether

this is only a tightening up of pleading requirements, or

whether it is a way station on the road to a holding of non-

justiciability in certain classes of litigation, neither we nor

the dissent can say. In such circumstances it is surely the

function of an intermediate appellate court to be guided by

standing requirements as they are currently articulated by the

Supreme Court in closely comparable contexts.

4la

BAZELON, Chief Judge, dissenting in No. 75-1304, Tax

Analysts and Advocates v. Blumenthal, and in No. 75-

1782, American Society of Travel Agents, Inc. v. Blum-

enthal: Two panels of the Court hold, for partially in-

consistent reasons, that a taxpayer suffering competitive

injury lacks standing to challenge tax rulings applicable

to a third party. Because I disagree with the reasoning

of both panels, I must respectfully dissent.

I have decided to write a common dissent on both

decisions because I believe that, although each panel

develops a different aspect of standing doctrine, both are

in fact responding to a common but implicit apprehension

of taxpayer standing.’ I share that apprehension. The

spectre of the Internal Revenue Service (IRS) defending

a multiplicity of suits challenging the tax liabilities of

third parties is not a happy one.* Taxes and courts are a

* The majority opinion in No. 75-1782, American Society of

Travel Agents, Inc. v. Blumenthal, states with admirable

candor that the case “presents a threshold issue of standing

to sue reminiscent of Justice Stewart’s observation, concurring

in Simon v. Eastern Kentucky Welfare Rights Organization,

et al., 426 U.S. 26, 46 (1975), that he could not ‘imagine a

case, at least outside the First Amendment area, where a

person whose own tax liability was not affected ever could

have standing to litigate the federal tax liability of someone

else.’"” Maj. op. at 2. Although the opinion does not directly

address this question, it constructs a constitutional standard of

injury in fact that would effectively preclude taxpayer suits

claiming competitive injury. The majority opinion in No.

75-1304, Tax Analysts and Advocates v. Blumenthal, explicitly

declines to address the issue of “whether a third party ever

made challenge IRS treatment of another.” Maj. op. at 27

n.90. However, the discussion uf the “zone of interests” test

in the opinion seems designed, “as a prudential matter,” id.

at 26, to eliminate such challenges from a federal forum.

? On the other hand, it must be recognized that the Code is a

statutory system designed delicately to balance the relation-

ships among economic entities. To permit tax liability to be

challenged only by the taxpayer himself is in effect to permit

42a

volatile political combination; our jurisdiction in this area

has for that reason been circumscribed by statute.’ But

whether a federal forum should be closed to such suits

is a profound and complicated issue, and at base one

that should be decided by Congress. At present Congress

has decided that we do have jurisdiction to hear cases

such as those presently before us,‘ and we are obligated

to exercise this statutory jurisdiction.

the IRS virtually unfettered discretion in adjusting these eco-

nomic interrelationships. The spectre of such unreviewable

discretion, especially when, as is alleged in these two cases,

it is exercised in contradiction to the commands of Congress,

is also discomforting.

*26 U.S.C. § 7421(a), for example, provides that, exc t in

certain exceptional circumstances, “no suit for the purpose

of restraining the assessment or collection of any tax shall be

maintained in any court by any person, whether or not such

persun is the person against whom such tax was assessed.”

The purpose of the statute is “to permit the United States to

assess and collect taxes alleged to be due without judicial

intervention, and to require that the legal right to the disputed

sums be determined in a suit for refund.” Enochs v. Williams

Packing and Navigation Co., Inc., 370 U.S. 1, 7 (1962). Our

jurisdiction is similarly limited in the area of federal taxes by

the Declaratory Judgment Act, which authorizes courts of the

United States to issue declaratory judgments “except with

respect to Federal taxes....” 28 U.S.C. § 2201.

‘In Simon v. Eastern Kentucky Welfare Rights Org., 426

U.S. 26, 36-37 (1976), the Supreme Court specifically left open

the question of whether statutory or immunity bars would

ever permit a third party to ‘challenge IRS treatment of

another.” This court has held, however, that since 26 U.S.C.

§ 7421(a) only forbids suits instigated “for the purpose of

restraining the assessment or collection of any tax,” (emphasis

added), it does not bar suits seeking to compel the collection

of taxes. Eastern Kentucky Welfare Rights Org. v. Simon, 506

F.2d 1278, 1284 (D.C. Cir. 1974), vacated on other grounds,

426 U.S. 26 (1976). We have also held that the scope of the

prohibition in the Declaratory Judgment Act, 28 U.S.C. § 2201,

is “coterminous” with that of 26 U.S.C. § 7421(a), id. at

1284-85, and hence that in suits seeking to compel the collec-

tion of taxes we are authorize to provide declaratory relief.

43a

Appellants have alleged circumstances that would have

justified standing had they been seeking review of an or-

dinary administrative ruling. What concerns me most

deeply about these decisions is that both deny appellants

standing not on principles specifically applicable to tax-

payers suits, but on the basis of general doctrines of the

law of standing. The consequence is that general stand-

ing law is distorted to accommodate the purpose of shield-

ing the IRS.

In No. 75-1782, American Society of Travel Agents,

Inc. v. Blumenthal, appellants, numerous commercial

travel agencies and the American Society of Travel

Agents (ASTA), a non-profit corporation organized to

represent the professional interests of travel agents, al-

lege that certain organizations tax exempt under 26

U.S.C. § 501(c) (3),° and the American Jewish Congress

(AJC) in particular, actually package and offer to the

public large scale commercial travel programs. Appel-

lants argue that such commercial activities are illegal

in corporations exempt under § 501(c)(3),* and that

*26 U.S.C. § 501(c) (3) exempts from taxation

[c]orporations and any community chest, fund, or

foundation, organized and operated exclusively for re-

ligious, charitable, scientific, testing for public safety,

literary, or educational purposes, or to foster national or

international amateur sports competition (but only if no

part of its activities involve the provision of athletic

facilities or equipment), or for the prevention of cruelty

to children or animals, no part of the net earnings of

which inures to the benefit of any private shareholder or

individual, no substantial part of the activities of which

is carrying on propaganda, or otherwise attempting, to

influence legislation (except as otherwise provided in

subsection (h)), and which does not participate in, or

intervene in (including the publishing or distributing of

statements), any political campaign on behalf of any

candidate for public office.

* Complaint JJ 22, 23.

44a

appellants are injured by this illegality since tax-exempt

organizations can offer travel programs more cheaply

than tax-paying organizations.’ They ask that the AJC

and similar organizations be deprived of their tax-exempt

status, or, in the alternative, that income from these

commercial programs be taxed under 26 U.S.C. § 511

(a).* The majority holds that appellants fail to meet the

Article II] requirement of injury in fact. Because |

believe that appellants have alleged ordinary competitive

injury sufficient to meet the standards set out in Asso-

ciation of Data Processing Service Organizations, Inc. v.

Camp, 397 U.S. 150 (1970), I dissent from this holding.

In No. 75-1304, Tax Analysts and Advocates v. Blum-

enthal, the majority denies standing to appellant Tax

Analysts and Advocates (TAA), a non-profit corporation

organized for the purpose of promoting tax reform, and

to appellant Thomas Field, a United States taxpayer and

owner of the entire working interest in a currently

producing oil well in Pennsylvania. Appellants seek to

challenge published*® and private’ rulings by the IRS

that taxes imposed by Saudi Arabia, Libya, Iran, Ku-

wait and Venezuela are “income” taxes, and thus can

be credited against U.S. tax liability under 26 U.S.C.

7 Id. at {| 24.

*26 U.S.C. §511(a) imposes on corporations subject to

§ 501(c) (3) a tax on “unrelated business taxable income.”

“Unrelated business” is defined in § 513(a) to mean

any trade or business the conduct of which is not sub-

stantially related . . . to the exercise or performance by

such organization of its charitable, educational, or other

purpose or function constituting the basis for its exemp-

tion under section 501....

® See Revenue Ruling 55-296, 1955-1 Cum. Bull. 386; Reve-

nue Ruling 68-552, 1968-2 Cum. Bull. 306.

1° See Amended complaint § 10, Joint Appendix (JA) at 41.

ell

45a

$ 901 (b)."* Appellants allege that these taxes are in fact

either royalties or “excise, severance, or similar taxes

not creditable under Section 901(b).” ™

Appellant Field and appellant TAA as a representative

of its tax-paying members, claim injury as taxpayers.

They allege that the illegal IRS rulings cost the U.S.

Treasury approximately $3,000,000,000 in 1974, and ar-

gue that this loss causes them to pay higher federal in-

come taxes."* Appellant Field, in addition, claims that

he is injured as a competitor of those oil companies who

benefit from the illegal IRS rulings. Field alleges that

since the prices charged by these companies for imported

oil largely determine the market price for the uncon-

trolled crude oil of domestic independent producers, he

receives a lower price for his oil than would be the case

if such companies could only deduct these foreign taxes

from their gross income rather than illegally credit

them."* Moreover, since domestic producers can only de-

duct the royalties they pay to the land owners of their

oil wells,* Field claims that investment in foreign oil

production is relatively more profitable and attractive.

11 26 U.S.C. §901(b) permits a U.S. citizen or domestic

corporation to receive a tax credit for “the amount of any

income, war profits, and excess profits taxes paid or accrued

during the taxable year to any foreign country... .”

*? Amended Complaint § 14, JA at 42.

's Amended Complaint at J 14, 20, 21, JA at 42, 44.

‘* Amended Complaint at § 18, JA at 48-44.

os Appellant Field pays a royalty of one-eighth of the pro-

ceeds of all oil produced from his well to the owners of the

land on which the well is located. These royalties are ex-

pected to amount to $46.32 per year for the next five years.

See the findings of the District Court, Tax Analysts and

Advocates v. Simon, 390 F. Supp. 927, 929-30 (D.C.C. 1975).

46a

Field alleges that the IRS rulings thus “depress the

value of his operating interest in a domestic oil well.” *

The majority denies standing to both Field and the

TAA in their capacities as mere taxpayers.*’ Because as

taxpayers appellants have not met the “nexus” text of

Flast v. Cohen, 392 U.S. 83, 102-03 (1968),** and have

alleged only a “generalized grievance” the impact of

which “is plainly undifferentiated and ‘common to all

members of the public...’ Ex parte Lévitt, 302 US.

633, 634 (1937),”** I concur in that holding.”

1‘ The majority affirms the District Court’s finding of no

injury in fact and adopts its reasoning at 390 F. Supp. °32-

38. Maj. op. at 4 n.10.

18 Flast focused on the “logical nexus between the status

asserted and the claim sought to be adjudicated.” The decision

held that there were two aspects to the nexus required to sus-

tain taxpayer’s standing. “First, the taxpayer must establish

a logical link between [federal taxpayer] status and the type

of legislative enactment attacked . .. . Secondly, the taxpayer

must establish a nexus between that status and the precise

nature of the constitutional infringement alleged.” 392 U.S.

at 102.

1° United States v. Richardson, 418 U.S. 166, 176-77 (1974).

20 do not agree, however, with the majority’s conclusion

that appellants have suffered no injury in fact. Maj. op. at 4

n.10. A generalized grievance is a grievance nonetheless. Since

injury in fact is a constitutional prerequisite of standing, the

taxpayer in Flast must have suffered such an injury. Never-

theless, the Supreme Court has held that as a prudential mat-

ter, a grievance “shared in substantially equal measure by all

or a large class of citizens” should normally not “warrant

exercise of jurisdiction.” Warth v. Seldin, 422 U.S. 490, 499

(1975). Congress can, of course, “either expressly or by clear

implication” override this prudential consideration. Jd. at 501.

Appellants, however, have pointed to no statute in which

Congress has either expressly or implicitly authorized a right

of action for generalized taxpayer grievances.

Piers ser. fem an

47a

The majority also denies appellant Field standing. It

concedes the Field has suffered injury in fact sufficient

to meet Article III standards,” yet it finds that Field has

failed the second of the standing tests enunciated in

Association of Data Processing Service Organizations,

Inc. v. Camp, 397 U.S. 150 (1970). It concludes that the

interests Field seeks to protect are not “arguably within

the zone of interests to be protected or regulated” by

$901(b). In reaching this conclusion the majority is

forced to construe the “zone of interests” test in an un-

supportable manner, capable of causing unforeseeable

mischief in other areas of standing law. I dissent both

from the majority’s conclusion and from its construction.

I. INJURY IN FACT

_ Article III of the Constitution limits federal court ju-

risdiction to actual cases or controversies. The question

of standing “focuses on the party seeking to get his

complaint before a federal court,” Flast v. Cohen, 392

U.S. 83, 99 (1968), in order to determine if he “has

made out a ‘case or controversy’ between himself and the

defendant within the meaning of Act. III.” Warth v.

Seldin, 422 U.S. 490, 498 (1975). Two aspects of the

case and controversy standard are important for the law

of standing. The first is that cases and controversies

must be adversary; that is, they must be disputes over

actual or threatened injuries. Thus standing exists “only

when the plaintiff himself has suffered ‘some threatened

or actual injury resulting from the putatively illegal

action... .’ Linda R. S. v. Richard D., 410 U.S. 614,

617 (1973).” Id. at 499. Second, cases and controversies

must “be presented in a form historically viewed as

capable of judicial resolution.” Flast v. Cohen, 392 U.S.

83, 101 (1968). Thus federal courts cannot, consistent

with Article III, issue advisory opinions. Id. at 96-97.

71 Maj. op. at 12.

48a

Standing requires that a plaintiff demonstrate “an in-

jury to himself that is likely to be redressed by a favor-

able decision. Absent such a showing, exercise of its

power by a federal court would be gratuitous and thus

inconsistent with the Art. III limitation.” Simon v.

Eastern Kentucky Welfare Rights Org., 426 U.S. 26, 38

(1976). Eastern Kentucky makes clear that an injury

capable of being redressed is one that can fairly “be

traced to the challenged action of the defendant, and not

injury that results from the independent action of some

third party not before the court.” Jd. at 41-42.*°

It is, of course, settled law that in appropriate cir-

cumstances competitive injury constitutes sufficient in-

jury in fact to fulfill Article III requirements.** This is

acknowledged by the opinion in Tax Analysts.** In that

case appellant Field owns the entire working interest in a

Penrsylvania oil well. The well produces three barrels of

crude oil per month at a price of $10.28 per barrel.

Field’s anticipated profits before taxes are approximately

$203.76 per year.** He complains of economic injury be-

cause allegedly illegal IRS rulings have decreased the

value of his well and the price he receives for his crude

oil.

22 See United States v. Evans, 213 U.S. 297 (1909).

23 Like the majority in Travel Agents, I disagree with the

observation in Tar Analysts that “causation” and “redressa-

bility” are merely “prudential limitations” on standing. See

Taz Analysts at 11-12; Travel Agents at 8 n.2.

2« Schlesinger v. Reservists Committee to Stop the War, 418

U.S. 208, 223 (1974); Sierra Club v. Morton, 405 U.S. 727,

736-37 & n.11 (1972); Investment Co. Institute v. Camp, 401

U.S. 617 (1971); Arnold Tours, Inc. v. Camp, 400 U.S. 45

(1970); Association of Data Processing Service Organizations,

Inc. v. Camp, 397 U.S. 150 (1970).

?s Maj. op. at 12.

7 390 F. Supp. at 929.

etal ONG) ee OAD at A ws 8

49a

At first blush it is tempting to hold such economic

injury, if it exists, to be de minimis. However, it is ap-

parent that there can be no principled justification for

such a holding, and the Supreme Court has held that

any identifiable trifle of harm is enough to establish

standing. United States v. SCRAP, 412 U.S. 669, 689

n.14 (1973). It is also tempting to hold that Field’s

injury is too speculative. While it is true that we cannot

know with absolute certainty whether the elimination of

the allegedly illegal IRS ruling would redress Field’s

competitive injury, he has set forth a cogent economic

analysis that this would be the case. To require Field

to allege facts that would prove the laws of economics

would be ungainly, wasteful, and inconsistent with the

philosophy of pleading of the Federal Rules of Civil

Procedure. The modern conception of “notice pleading” *

does “not require a claimant to set out in detail the facts

upon which he bases his claim. To the contrary, all the

Rules require is ‘a short and plain statement of the

claim’ that will give the defendant fair notice of what

the plaintiff’s claim is and the grounds upon which it

rests.” Conley v. Gibson, 355 U.S. 41, 47 (1957). Re-

quiring Field to allege all of the facts supportive of

the chain of causation upon which his allegation of in-

jury rests would return us to the unpredictable and

fact-laden system of code pleading.**

Recognizing all this, the majority in Tax Analysts holds

that Field “has suffered injury in fact in his capacity as a

** Wright and Miller object to the term “notice pleading”

and suggest instead “modern pleading” or “simplified plead-

ing.”” WRIGHT & MILLER, FEDERAL PRACTICE AND PROCEDURE:

CiviL § 1202 (1969).

** See id.; 2A MOORE’S FEDERAL PRACTICE {YJ 8.12-8.13

(1975); CLARK, CODE PLEADING § 38 (1947); Skinner, Pre-

Trial and Discovery Under the Alabama Rules of Civil Pro-

cedure, 9 ALA. L. REV. 202, 203-05 (1957).

50a

competitor.” ** I concur in this holding. And, so far as I

can see, the competitive injury that ASTA and the other

appellants in Travel Agents claim to have suffered is

virtually indistinguishable. Yet the majority in that case

holds that appellants have no standing because they have

failed to demonstrate “any judicially cognizable ‘injury

in fact.’”*

The majority in Travel Agents holds, first, that the

very existence of appellants’ competitive injury is “too

speculative to support standing” since they do not allege

specific customers who would be gained if the AJC and

similar organizations were to lose their tax-exempt

status.** Second, the majority concludes that “[a] ppel-

lants have not demonstrated that they would reap any

tangible benefit if the court were to order the relief

sought.” If the tax-exempt status of the AJC or other

tax-exempt organizations were eliminated, these organiza-

tions might still maintain lower prices because of “volun-

teer labor or the willingness to accept lower profits”;

or members of these tax-exempt organizations might still

prefer the travel programs of their own organizations even

if more expensive; or such members might simply decide

not to travel at all.~

With all due respect, such reasoning reveals that it is

the majority, not the appellants, who is engaging in specu-

lation. The economic basis of appellants’ injury is straight-

forward, far more compelling even than that alleged by

appellant Field in Tax Analysts. Appellants allege that

because of the AJC’s

2? Maj. op. at 12. The majority terms the government’s

arguments to the contrary “frivolous.” Jd. at 12 n.45.

8° Maj. op. at 5.

* Td. at 6.

2 Id. at 9.

8 Id,

——

ee ee a 0 ee Ne BS MeN pe, Mente am

Sla

tax-exempt status and the other privileges which flow

from it, such as reduced-rate postage, the [AJC] and

others are able to offer lower-cost travel programs

than plaintiffs and other tax-paying travel agents.

Plaintiffs allege and believe that numerous persons

who would otherwise use plaintiffs’ services and the

services of other tax-paying travel agents are instead

induced by the extensive mail solicitations and lower

costs and take business to tax-exempt organizations.”

It is true, of course, that all claims of competitive injury

are to some extent speculative, since they are predicated

on the independent decisions of third parties; i.e., custom-

ers. However economics is the science of predicting these

economic decisions, and it is the stuff of the most elemen-

tary economic texts that if two firms are offering a

similar product for different prices, the firm offering the

lower price will draw away customers from its competitor.

For us to fly in the face of this learning and require

a plaintiff to allege in his complaint the names of specific

customers who would be led to alter their consumption pat-

terns, would be to exalt form over substance and to take a

long, unfortunate step backwards into what Professor

Moore has termed “the morass” of code pleading.* I

know of no case, nor has one been cited by the majority,

in which such allegations have been adjudged a necessary

element in a complaint of competitive injury.*

** Complaint § 24.

2A MOoRE’S FEDERAL PRACTICE { 8.13 (1975). Stripped to

its essentials, the majority’s argument is that appellants have

alleged conclusions rather than facts. However, under the

philosophy of the Federal Rules, “it is immaterial whether

a pleading states ‘conclusions’ or ‘facts’ as long as fair notice

is given....” Id.

** See Arnold Tours, Inc. v. Camp, 400 U.S. 45 (1970);

Association of Data Processing Service. Organizations, Inc. v.

Camp, 397 U.S. 150 (1970); FCC v. Sanders Brothers Radio

Station, 309 U.S. 470 (1940); Rental Housing Ass’n of Greater

Lynn, Inc. v. Hills, 548 F.2d 388 (1st Cir. 1977); Concerned

52a

The majority’s reasoning, in fact, is flatly contradictory

to Investment Co. Institute v. Camp, 401 U.S. 617 (1971).

In that case plaintiffs complained of competitive injury

because of an allegedly illegal regulation of the Comp-

troller of the Currency permitting national banks to estab-

lish and operate collective investment funds. The Supreme

Court upheld the standing of the plaintiffs, id. at 620-21,

even though their allegations of injury were no more

specific that those of the appellants in this case. Plaintiffs

alleged merely that they would

suffer present and continuing serious and irreparable

injury as a direct result of the illegal activity au-

thorized by the Comptroller’s challenged regulations

and particularly as a result of the Bank’s proposed

illegal activity which was approved by the Comp-

troller under such regulations. This illegal activity

Residents of Buck Hill Falls v. Grant, 537 F.2d 29, 33 (3d

Cir. 1976).

It is unclear to me exactly what facts the majority would

require to be alleged. Surely an affidavit from a tour package

purchaser swearing that he would have patronized a com-

mercial travel agency had its prices been competitive would

constitute the height of speculation. See American Trucking

Ass’ns, Inc. v. United States, 364 U.S. 1 (1960), in which the

Court concluded that trucking companies had standing under

§ 205(g) of the Interstate Commerce Act and § 10(a) of the

Administrative Procedure Act to challenge the ICC’s granting

of a permit to a competitor to perform transportation services

for appellee General Motors Corporation, despite GM’s state-

ment in court that it would not do business with appellants.

The Court stated, “And surely the statement by General

Motors that it would not in any event give the business to

any appellant cannot deprive appellants of standing. The

interests of these independents cannot be placed in the hands

of a shipper to do with as it sees fit through predictions as to

whom its business will or will not go. ‘The decision we be-

lieve to be controlling is . . . Alton R. Co. v. United States,

315 U.S. 15, where the Court confirmed the standing of a

railroad to contest the award of a certificate to a competing

trucker.” Id. at 17-18.

53a

will subject the Institute’s mutual fund members to

illegal competition, will deprive them of legitimate

business, and will dilute, divert, and withdraw a sub-

stantial portion of the potential market for securities

in mutual funds to the substantial and irreparable

injury of such plaintiffs and the shareholders in such

funds. This illegal activity will also subject the Insti-

tute’s investment adviser and underwriter members,

including the additional plaintiffs, to illegal competi-

tion and to loss of opportunities for profit in their

trade and will dilute, divert and withdraw a substan-

tial portion of the potential market for their services

to the irreparable injury of such plaintiffs.”

The Supreme Court did not, as does the majority in this

case, require plaintiffs to allege in their complaint facts

sufficient to refute every possible anomaly of the market-

place such as the existence of voluntary labor or ideologic-

ally committed consumers. The Court assumed that the

marketplace would function in a normal, predictable

fashion,“ for to assume otherwise would be to foreclose the

** Complaint § 18. Investment Co. Institute v. Camp was a

consolidation of two cases, No. 61, Investment Co. Institute v.

Camp, and No. 59, National Ass’n of Securities Dealers, Inc.

v. SEC. The complaint quoted in text is from No. 61, the case

in which the Supreme Court specifically upheld standing.

Just last year, this court accepted jurisdiction of a case

in which plaintiffs had obtained standing on the basis of a

complaint reading very much like the complaint in the instant

case. Plaintiffs alleged competitive injury, yet named no spe-

cific customers who had been lost. This court not only ac-

cepted plaintiffs’ standing, but also upheld the district court

injunction because it was necessary to protect these plaintiffs

from “further economic and competitive injury.” Independent

Bankers Ass’n v. Smith, 534 F.2d 921, 952 (D.C.Cir.), cert.

denied sub nom. Bloom v. Independent Bankers Ass’n, 429

U.S. 862 (1976); Complaint § 31.

** The assumption is a common one. For example, in cases

under the Robinson-Patman Act, 15 U.S.C. § 13, “competitive

injury may be inferred when one set of customers buys at sub-

S4a

very possibility of ever satisfactorily alleging a competitive

injury. As the majority’s c_.nion demonstrates, one might

conjecture an indefinite number of such anomalies, some

more plausible than others. For every anomaly invented,

the plaintiffs’ claim can be made to appear more “specula-

tive.” Standing under such access rules would virtually

depend upon the imagination of the reviewing judge.

The majority argues that its conclusion is required by

Simon v. Eastern Kentucky Welfare Rights Org., 426

U.S. 26 (1976). I disagree. In Eastern Kentucky, plain-

tiffs alleged that a 1969 Revenue Ruling has “encouraged”

hospitals to deny services to indigents.” Under the tax

code, benefactors of institutions qualifying as “charitable”

under § 501(c) (3) can deduct the amount of their dona-

tions. Plaintiffs alleged that the new Revenue Ruling,

by permitting hospitals that offered only emergency room

services to indigents to qualify for § 501(c) (3) status,

“caused” the refusal of various hospitals to admit indigent

plaintiffs. The premise of the plaintiffs’ argument was

that hospitals were so dependent upon deductible donations

that they would perform whatever services were necessary

to qualify for §501(c)(3) status. That premise, as a

logical or economic prediction, was clearly false: there

stantially lower prices than other customers.” Hanson v. Pitts-

burgh Plate Glass Industries, Inc., 482 F.2d 220, 227 (5th Cir.

1973), cert. denied, 414 U.S. 1136 (1974). See FTC v. Morton

Salt Co., 334 U.S. 37, 46-47 (1948): “Here the Commission

found what would appear to be obvious, that the competitive

opportunities of certain merchants were injured when they

had to pay respondent substantially more for their goods than

their competitors had to pay.” The injury, of course, may be

inferred because merchants faced with higher prices and

therefore higher costs must in turn charge their customers

higher prices and thereby lose business and suffer competitive

injury. This is precisely the chain of economic reasoning

relied upon by appellants in Travel Agents.

*° 426 U.S. at 42.

ES ee en eas

SSa

was no way of knowing in advance whether the increased

income from charitable contributions would exceed the in-

creased costs of providing additional services. The result,

as the Supreme Court observed, would “vary from hos-

pital to hospital.” Jd. at 43. Plaintiffs had thus failed

to allege facts sufficient to predict whether the change in

the Revenue Ruling would affect the behavior of those par-

— hospitals that had refused to admit the plain-

_ Eastern Kentucky applies to fundamentally different

circumstances than those presented in Travel Agents. The

injury alleged by ASTA and the other appellant travel

agencies does not depend upon the discreet decisions of

particular institutions or specific customers. Appellants

allege a competitive injuiy, stemming from a systematic

distortion of the marketplace. They claim that, because

of illegal IRS rulings, their competitors pay no taxes and

therefore have lower costs and charge lower prices. There

is nothing hypothetical about this allegation: if we grant

the relief appellants seek, the costs of their competitors

would uecessarily increase. The ultimate injury alleged is

a loss of customers, and there is, of course, an implicit

prediction in appellants’ case that customers will, on the

whole, tend to buy similar items at the lowest possible

price. The majority can refer to this injury as “abstract”

and to this prediction as “speculative,” but these are ab-

stractions and speculations that every businessman must

confront every day.“ The majority’s corrosive skepti-

* Article Ill, of course, does not require absolute certainty

that prospective relief will redress the alleged harm. See

Simon v. Eastern Kentucky Welfare Rights Org., 426 U.S.

26, 44-45 (1976); City of Hartford v. Towns of Glaston-

bury, West Hartford, and East Hartford, Nos. 76-6049, -6050

-6059, slip op. at 1098 (2d Cir. 23 December 1976). This

court, for example, has held that an unsuccessful bidder for a

government contract has standing to challenge the validity of

the awarding of the contract, even though the plaintiff has

S6a

cism would altogether eliminate competitive injury as a

grounds for standing.‘' That would in fact be contrary

to the teaching of Eastern Kentucky, since the decision ex-

plicitly reaffirmed Association of Data Processing Service

Organizations v. Camp, 397 U.S. 150 (1970). Standing

was appropriate in Data Processing, the Court said, be-

cause in that case the complaint had “alleged injury that

was directly traceable to the action of the defendant fed-

eral official, for it complained of injurious competition that

would have been illegal without that action.” 426 U.S. at

45 n.25.

“no right ... to have the contract awarded to it in the event

the district court finds illegality in the award... .”” (Emphasis

added.) Scanwell Laboratories, Inc. v. Shaffer, 424 F.2d 859,

864 (D.C. Cir. 1970). See Cincinnati Electronics Corp. v.

Kleppe, 509 F.2d 1080 (6th Cir. 1975); Hayes International

Corp. v. McLucas, 509 F.2d 247 (5th Cir.), cert. denied, 423

U.S. 864 (1975); William F. Wilke, Inc. v. Department of

Army, 485 F.2d 180 (4th Cir. 1973); Merriam v. Kunzig, 476

F.2d 1233 (3d Cir.), cert. denied sub nom. Gateway Center

Corp. v. Merriam, 414 U.S. 911 (1973).

*1] share, of course, the majority’s concern “to follow as

faithfully as possible’ Eastern Kentucky. Maj. op. at 13 n.7.

We differ in our reading of that case, not in our respect for

the precedents of the Supreme Court. The majority seems to

have taken from Eastern Kentucky the concepts of “causa-

tion,” “redressability,” and “speculation,” without, in my

view, adequate appreciation of the malleableness—not to say

vagueness—of these ideas. They are the kind of standards

that acquire meaningful content only in application to partic-

ular circumstances. See Tushnet, The New Law of Standing:

A Plea for Abandonment, 62 CORNELL L. REV. 663, 681-88

(1977). The claim of competitive injury was not addressed in

Eastern Kentucky, and the majority’s result is therefore not

required by that case. If this area of the law, confused be-

cause “undergoing development,” maj. op. at 13 n.7, is to be

clarified, it will not be through the abstract application of

general principles, but through a detailed discussion of the

pertinent differences and similarities. I cannot believe that

this is an inappropriate function for “an intermediate appel-

late court.” Id.

neo My «tool. cae

57a

In Travel Agents appellants also allege “injurious com-

petition” that is “directly traceable to the action of the

defendant federal official.” The majority attempts to dis-

tinguish Data Processing by arguing that the relief re-

quested in that case was the total elimination of the

allegedly illegal competition, whereas in Travel Agents

“the AJC and other such groups will clearly remain free

to pursue their travel businesses, however their tax status

is finally resolved.” “ This distinction, however, goes only

to the extent of the injury suffered, not to its speculative

or hypothetical nature. And so long as appellants have al-

leged any “identifiable trifle’ of an injury, they should

be granted standing. United States v. SCRAP, 412 U.S.

669, 689 n.14 (1973); Tax Analysts and Advocates v.

Blumenthal, No. 75-1804, slip op. at 12 (D.C. Cir. 15

June 1977). Because I believe that Data Processing con-

trols this case, I would hold that appellants have alleged

injury in fact sufficient to meet the prerequisites of

Article ITI.

es Maj . op. at 12, The majority offers two addivional reasons

for distinguishing Data Processing. The first is that the case

did “not clearly define the contours of competitor standing as

conceived by the Supreme Court.” The majority states, for

example, that it is unclear whether “a successful claim of

competitor standing necessitates naming one or more specific

competitors as party opponents.” /d. at 11 n.5. But surely

this doubt should be laid to rest by the complaint in case No.

61 of Investment Co. Institute v. Camp, 401 U.S. 617 (1971),

see note 37 supra, in which, as in the instant case, only the

relevant federal official was made a party opponent and no

competitors were named defendants.

The majority also attempts to distinguish Data Processing

on the grounds that it “was not a tax case.” Maj. op. at 11.

While I believe this rather cryptic distinction goes to the heart

of the majority’s holding, it cannot without further elabora-

tion be the basis of a principled distinction. What is needed

is a full discussion of the difference between challenges of the

rulings of the IRS and challenges of the rulings of other

administrative agencies.

58a

II. ZONE OF INTERESTS

Data Processing announced two tests for standing: A

petitioner must allege injury in fact, and he must allege

that the “interest sought to be protected . . . is arguably

within the zone of interests to be protected or regulated

by the statute or constitutional guarantee in question.

397 U.S. at 153. The majority in Tax Analysts, follow-

ing a different approach from that in Travel Agents, finds

that appellant Field has suffered injury in fact, but con-

cludes that he must fail the zone test because he is not

arguably within the zone of interests protected or regula-

ted by the provisions of IRS § 901(b),* the foreign tax

credit.

As the majority in Tax Analysts candidly admits,“ the

ambiguities and analytic deficiencies of the zone test have

in recent years suffered scathing criticism.** In order to

reach its conclusion, the majority is forced to undertake

an extensive reevaluation of the purposes and operation of

the zone test. In my opinion not only does the majority

reach an incorrect conclusion in the instant case, but its

analysis only further confuses an already unfortunately

unsettled area of the law.

A. Defining the Zone of Interests

The majority begins with the premise that the zone test

must be “based on discerned Congressional purpose. ”

It concludes that the function of the zone test is to allow

48 See note 11 supra.

** Maj. op. at 13.

See, e.g., K.C. DAviIs, ADMINISTRATIVE LAW TREATISE

(Supp. 1970) § 22.00-3; Scott, Standing in the Supreme Court

_A Functional Analysis, 86 Harv. L. Rev. 645, 664 n.88

(1973).

59a

“courts to define those instances when it believes the

exercise of its power at the instigation of the particular

party is not congruent with the mandate of the legislative

branch in a particular subject area.” “

I agree with the majority’s premise. The real ques-

tion, however, is how “the mandate of the legislative

branch” is to be determined. In some cases congressional

intent will be manifest. In Travel Agents, for example,

the legislative history of sections 511-513 of the Code“

clearly indicates that Congress intended to eliminate the

unfair competition that results when tax-exempt organiza-

tions compete with tax-paying enterprises. Both House

and Senate Committee reports state that “(t]he problem

at which the tax on unrelated business income is directed

is primarily unfair competition.” H. R. Rep. No. 2819,

8lst Cong., 2d Sess. 36 (1950); S. Rep. No. 2875, 81st

Cong., 2d Sess. 28 (1950). There is no doubt, therefore,

that appellants would have satisfied the zone test.

In other cases, however, the legislative mandate will

be silent or ambiguous with respect to the interests of a

“particular party.” In such cases it is necessary to de-

velop rules for the constructive interpretation of con-

gressional purpose. Decisions of the Supreme Court that

have enunciated and applied the zone test are the most au-

thoritative source of such rules. These decisions indicate

that congressional intent must be construed to include

within the zone of interests to be protected or regulated

** Id. at 15.

*® See notes 5 and 8 supra.

** Treasury regulations recognize that the primary purpose

of the unrelated business income tax “was to eliminate a

source of unfair competition by placing the unrelated business

activities of certain exempt organizations upon the same tax

basis as the non-exempt business endeavors with which they

compete....” 26C.F.R. § 1.513-1(b).

60a

by a statute those interests upon which the statute will

have a readily forseeable impact.

In Arnold Tours, Inc. v. Camp, 400 U.S. 45 (1970), for

example, plaintiff travel agents challenged as contrary to

the Bank Service Corporation Act a ruling of the Comp-

troller of the Currency authorizing national banks to pro-

vide travel services for their customers. Plaintiffs them-

selves were clearly not the intended beneficiaries of the

Act. There were unchallenged findings in the court below

that the limitations on banking activity imposed by the

Act “were for the purpose of insuring the stability, liquid-

ity, and safety of the banks” and that Congress was un-

concerned “with competitors in the businesses impliedly

prohibited, much less in any particularity with travel

agents.” 408 F.2d 1147, 1151 (1st Cir. 1969). Never-

theless the Supreme Court concluded that the interests

asserted by plaintiffs were arguably within the zone of

interests protected by the Act. The only connection be-

tween plaintiffs’ interests and the Act was that “[w]hen

national banks begin to provide travel services for their

customers, they compete with travel agents... .” 400

U.S. at 46.

Investment Co. Institute v. Camp, 401 U.S. 617 (1971),

teaches a similar lesson. In that case plaintiff investment

companies challenged a regulation of the Comptroller au-

thorizing national banks to establish and operate collective

investment funds. Plaintiffs alleged that the regulation

violated provisions of the Glass-Steagall Banking Act.

Despite unchallenged evidence that “neither the language

of the pertinent provisions of the Glass-Steagall Act nor

the legislative history evinces any congressional concern

for the interests of the petitioners and others like them

in freedom from competition,” 401 U.S. at 640 (Harlan,

J., dissenting) ,*° the court held that plaintiffs satisfied

°° The Court even appeared to concede this point. 401 U.S.

at 634. See Scott, supra note 45, at 665-66.

wet a

6la

the requirements of the zone test. Again, the readily for-

seeable impact of the statute on plaintiffs’ interests was

their only connection to the legislation.

These decisions, then, stand for the proposition that, in

the absence of manifest congressional intent to the con-

trary, the zone of interests-arguably protected or regu-

lated by a statute should at a minimum include those in-

terests upon which the statute has a readily foreseeable

impact.” Plaintiffs asserting such interests should have

standing under the zone test.

The majority, however, rejects this conclusion, argu-

ing that “the concepts of consequence and impact are not

the proper guideposts to define the relevant zone of in-

terests.” ** The majority reasons that defining “the zone

of interests as being the equivalent in every case of the

‘zone of impact’ or the ‘zone of consequences’ . . . would

establish a standing doctrine based solely on the existence

of harm toa party... .”* But this reasoning is clearly

faulty: a statute’s zone of foreseeable impact or conse-

quences would not encompass every incidence of actual

impact. And, more importantly, the majority’s conclusion

4 flatly contradictory to the guidance of the Supreme

urt.

I sense yet another, implicit reason underlying the

majority’s rejection of the liberal standards of Arnold

Tours and Investment Co. Institute. Although the ma-

jority acknowledges that the zone test is meant to be

*! This formulation is consistent with the only case I have

found to give extensive consideration to this question,

Cotovsky-Kaplan Physical Therapy Ass’n, Ltd. v. United

: 507 F.2d 1363, 1366-67 (7th Cir. 1975) (per Stevens,

5? Maj. op. at 25.

58 Td. at 26.

62a

“a quite generous standard,” ** it nevertheless argues that

the test implements that aspect of standing doctrine de-

signed to define “the proper—and properly limited—role

of the courts in a democratic society.” “ This function

of standing law, however, has been used to justify the

restriction of access to federal courts.

Even if the majority has correctly identified the ap-

propriate function of the zone test, it does not follow that

the test must be interpreted in a restrictive fashion. The

Supreme Court decisions that have used standing doctrine

to define the role of the courts in a democracy have been

in the context of constitutional challenges to government

action.** Such challenges raise difficult issues about the

proper judicial role because they require a non-elected

judiciary on its own authority to pass on the actions of

the democratic branches of government. These issues

are not raised in so dramatic a fashion by the zone test,

however, at least in its statutory application.*’ In that

context courts are asked only to measure the authority of

* Id. at 16.

8s Warth v. Seldin, 422 U.S. 490, 498 (1975).

** E.g., id., United States v. Richardson, 418 U.S. 166, 188

(1974) (Powell, J. concurring); Schlesinger v. Reservists

Committee to Stop the War, 418 U.S. 208, 221-23 (1974);

Frothingham v. Mellon, 262 U.S. 447, 488 (1923). But sec

Flast v. Cohen, 392 U.S. 82, 100 (1968): “The question

whether a particular person is a proper party to maintain the

action does not, by its own force, raise separation of power

problems related to improper judicial interference in areas

committed to other branches of the Federal Government.”

** And the majority chooses to discuss the zone test only

in its statutory application. Maj. op. at 15. For an example

of the use of the zone test in the context of a constitutional

challenge to a state statute, see Boston Stock Exchange v.

State Tax Comm’n, 97 S.Ct. 599, 602 n.3 (1977).

distant sAncitly ctel Ll tal sal ihe Ba li GE BP oye ts 6 RO ABS eR AE BO Vn OY OB 2 is a Ot allie A OB:

63a

executive action under applicable statutes. Such suits

represent routine, accepted and legitimate exercises of ju-

dicial power, so much so that the Supreme Court has

repeatedly held that “judicial review of a final agency

action by an aggrieved person will not be cut off unless

there is persuasive reason to believe that such was the

purpose of Congress.” Abbott Laboratories v. Gardner,

387 U.S. 136, 140 (1967). Standing doctrine and re-

viewability doctrine raise identical issues about the na-

ture of the judicial role in the context of statutory re

view of executive action. The unproblematic nature of

that role is reflected in the generosity of the Abbott Lab-

oratories’ standard of reviewability, and it should be re

flected in an equally generous standard for standing,

assuming, of course, that the injury in fact requirement

of Article III has been met. And this, I take it, is the

underlying significance of the very liberal standards of

Arnold Tours and Investment Co. Institute.”

** Investment Co. Institute v. Camp, 401 U.S. 617 (1971);

Arnold Tours, Inc. v. Camp, 400 U.S. 45 (1970); Association

of Data Processing Service Organizations, Inc. v. Camp, 397

U.S. 150 (1970); Barlow v. Collins, 397 U.S. 159 (1970).

** See WRIGHT, MILLER & COOPER, FEDERAL PRACTICE AND

PROCEDURE: JURISDICTION § 3531, at 39 (Supp. 1977).

* See, e.g., Dunlop v. Bachowski, 421 U.S. 560, 567 (1975);

Barlow v. Collins, 397 U.S. 159, 166-67 (1970). This court

has noted that there is a “general rule that official adminis-

trative action is reviewable in courts when a person claims

injury from an act taken by a government official in excess of

his powers.” Curran v. Laird, 420 F.2d 122, 128 (D.C. Cir.

1969) (en banc). See Scanwell Laboratories, Inc. v. Shaffer,

424 F.2d 859, 874 (D.C. Cir. 1970).

* There are very few decisions that find injury in fact but

that deny standing on the basis of the zone test. K. C. Davis,

ADMINISTRATIVE LAW OF THE SEVENTIES § 22.02-11, at 510

(1976). See Gifford-Hill & Co., Inc. v. FTC, 523 F.2d 730

(D.C.Cir. 1975); Clinton Community Hospital Corp. v. South-

ern Maryland Medical Center, 510 F.2d 1037 (4th Cir.), cert.

64a

B. Technique in the Application of the Zone Test

The majority devotes much of its opinion to a dis-

cussion of “the proper technique to employ in order to

ciscern the Congressional intention in a manner which

does not defeat other basic tenets of the law of stand-

ing.” *? The majority first concludes that congressional

intent must be determined from the specific applicable

statutory provision and not from the statute as a whole.

It offers two reasons for this prescription: such a specific

focus will ensure “complete adversariness,” and it will

reduce the possibilities of endless litigation that would

“distort the role of the courts in relation to the legisla-

tive branch.” **

I have difficulty following the majority’s reasoning. If

the basis of the zone test is the discernment of congres-

sional purpose, a court should use whatever material is

relevant to that inquiry. As Chief Justice Marshall ad-

vised a very long time ago, “[w]here the mind labors to

discover the design of the legislature, it seizes everything

from which aid can be derived ... .” United States v.

Fisher, 6 U.S. (2 Cranch) 358, 386 (1805). A tradi-

tional canon of statutory interpretation is that laws are

to be read as a harmonious whole.“ “It is undoubtedly a

denied, 422 U.S. 1048 (1975); Higginbotham v. Barrett, 473

F.2d 745 (5th Cir. 1973); Colligan v. Activities Club of New

York, Ltd., 442 F.2d 686 (2d Cir.), cert. denied, 404 U.S. 1004

(1971).

*? Maj. op. at 16.

*s Jd. at 17-18.

“We believe it fundamental that a section of a statute

should not be read in isolation from the context of the whole

Act, and that in fulfilling our responsibility in interpreting

legislation, ‘we must not be guided by a single sentence or

member of a sentence, but [should] look to the provisions of

the whole !aw, and to its object and policy.’” Richards v.

United States, 369 U.S. 1, 11 (1962). “Emphasis should be

ee ee ee

Se ee Se Oe er

Pa iit tetceceretntesmeies ine ens. rindi at eas tole tones

65a

well-established principle in the exposition of statutes,

that every part is to be considered, and the intention of

the legislature to be extracted from the whole.” Jd. Con-

tradictory interpretations of differing statutory sections

are avoided on the assumption that statutes constitute the

expression of a coherent purpose, not a patchwork of con-

flicting intentions. Thus consideration of an entire

statute is often considered necessary to an informed in-

terpretation of any of its particular sections. And this

procedure, not surprisingly, has been a standard tech-

nique among courts applying the zone test.

laid . . . upon the necessity for appraisal of the purposes as

a whole of Congress in analyzing the meaning of clauses or

sections of general acts.” United States v. American Trucking

Ass’ns, Inc., 310 U.S. 534, 544 (1940). See Philbrook v.

Glodgett, 421 USS. 707, 713-14 (1975); Weinberger v. Hynson,

Wescott & Dunning, Inc., 412 U.S. 609, 631-32 (1978); United

States v. Alpers, 338 U.S. 680, 684 (1950); Markham v.

Cabell, 326 U.S. 404, 411 (1945).

** NLRB v. Lion Oil Co., 852 U.S. 282, 288 (1957); FPC v.

Panhandle Eastern Pipeline Co., 387 U.S. 498, 514 (1949);

ye Uebersee Finanz-Korporation, 332 U.S. 480, 488

* See, e.g., Eliis v. Department of Housing and Urban De-

velopment, 551 F.2d 13, 16 (8d Cir. 1977); City of Hartford v.

Towns of Glastonbury, West Hartford, and East Hartford,

Nos. 76-6049,-6050,-6059, slip op. at 1096 (2d Cir. 23 Decem-

ber 1976); Concerned Residents of Buck Hill Falls v. Grant,

537 F.2d 29, 33-34 (3d Cir. 1976); Cincinnati Electronics

Corp. v. Kleppe, 509 F.2d 1080, 1086 (6th Cir. 1975); Thomp-

son v. Washington, 497 F.2d 626, 632 (D. C. Cir. 1978); Davis

v. Romney, 490 F.2d 1360, 1865 & n.3 (3d Cir. 1974) ; Construc-

tores Civiles de Centroamerica v. Hannah, 459 F. 2d 1183,

1188-89 (D. C. Cir. 1972); Colligan v. Activities Club of New

York, Ltd., 442 F.2d 686, 691 (2d Cir.), cert. denied, 404 U.S.

1004 (1971).

The majority’s attempt to distinguish Constructores Civiles,

maj. op. at 18-19, simply will not wash. The majority states

that “[{i]n Constructores it was acceptable to examine both

66a

The majority’s reasons for abandoning this traditional

approach are simply not convincing. The “complete ad-

versariness” that it seeks, aside from being logically un-

connected to the question of how many statutory provi-

sions are at issue, is adequately served for the purposes

of standing by the injury in fact suffered by the plaintiff.

This injury ensures that plaintiffs have “such a personal

stake in the outcome of the controversy as to assure that

concrete adverseness which sharpens the presentation of

issues upon which the court so largely depends... .”

Baker v. Carr, 369 U.S. 186, 204 (1962). And I am even

more baffled by the majority’s second reason, that focus-

ing on a particular statutory section will create the pos-

sibility of endless litigation that “would distort the role

of the courts in relation to the legislative branch.” Ex-

amination of a particular provision in the context of an

entire statute will increase the accuracy of judicial dis-

cernment of congressional purpose. And I cannot com-

prehend how accurately ascertaining congressional pur-

pose can possibly distort the role of the courts with

respect to Congress. Surely, the majority does not mean

to argue that the possibility of increased litigation, by

itself, would constitute such a distortion.

Perhaps as an illustration of its analysis, the majority

blends into its theoretical reasoning a specific discussion

particular and general provisions because those provisions

shared an identity of purpose.” Whether two provisions of a

statute share a common purpose is a conclusion that can only

be reached after both provisions have been examined. It

therefore cannot function as a criterion of whether to examine

both provisions in the first place. Driven by the illogic of their

position, the majority ultimately concedes that in Constructores

“it was necessary to examine the general language of the pre-

amble to ensure that a grant of standing would not be incon-

sistent with the statutory purpose.” But this reason, of course,

would justify examining the general provisions of a statute

in every case.

————

67a

of the Internal Revenue Code. The Code, it notes, “does

not have a single, unified purpose,” and, therefore, liti-

gants should not be permitted to borrow “the arguable

regulatory or protective intent embodied in one provision

of the Code, and apply it to a provision where that intent

is not evident... .” *

. As a conclusion this observation is unimpeachable, but

it begs the real question. Even assuming, arguendo, that

the relevant zone of interests emanates only from a par-

ticular provision of the Code rather than from the Code

as a whole, the question of whether one provision of the

Code is relevant to the interpretation of another can only

be answered after both provisions have been examined. It

1S not a question that can be addressed in the abstract.

Yet this is just what the majority opinion, drawing on its

theoretical analysis, purports to do. A fortiori the major-

ity completely misses the thrust of appellant Field’s

argument that, although various sections of the Code have

different goals, the entire Code is infused with certain

general purposes.** These general purposes, he claims,

arguably give rise to a zone of protected interests that

emanates from the Code as a whole. The majority rejects

this argument on the grounds of nothing more convinci

than bald assertion. ' ae

The majority reaches a second major conclusion con-

cerning proper technique in the application of the zone

test: the examination of legislative history is to be avoided

and the appropriate zone determined from “the face of

** Maj. op. at 18.

** Appellant refers to the General Statement of H.R. REp.

No. 1337, 83d Cong., 2d Sess. 1 (1954), that accompanied the

enactment of the Internal Revenue Code of 1954: “In general,

the purpose of these changes has been to remove inequities, to

end harassment of the taxpayer and to reduce tax barriers to

future expansion of production and employment.”

68a

the statute.” * The majority is aware that courts regu-

larly resort to legislative history in order to discern the

intent of Congress. It shows less awareness that courts

also regularly use legislative history for the same pur-

pose in the application of the zone test.” The majority

argues, however, that there are three special reasons why

this latter practice should cease. First, the examination

of legislative history will lead to a prejudgment of the

merits of the case. Second, it is likely to be unilluminat-

ing; and third, it will undermine the generous nature of

the zone test.

Taking these reasons in order, there is, first, no logical

connection between the use of legislative history and a

prejudgment of the merits of the case." The majority

thus seems to be making a psychological point: “A can-

vassing of the entire legislative background may lead to

** Maj. op. at 21. It would be well to remember the counsel

of Justice Reed: “When aid to construction of the meaning of

words, as used in [a] statute, is available, there certainly can

be no ‘rule of law’ which forbids its use, however clear the

words may appear on ‘superficial examination.’” United

States v. American Trucking Ass’ns., Inc., 310 U.S. 534, 543-

44 (1940).

® See, e.g., Safir v. Kreps, 551 F.2d 447, 451 (D.C.Cir. 1977),

petition for cert. filed, 46 U.S.L.W. 3013 (U.S. July 11, 1977)

(No. 77-65); Rental Housing Ass’n of Greater Lynn, Inc. v.

Hills, 548 F.2d 388, 390 (1st Cir. 1977); Hayes International

Corp. v. McLucas, 509 F.2d 247, 256 (5th Cir.), cert. dented,

432 U.S. 864 (1975); Pesikoff v. Secretary of Labor, 501 F.2d

757, 760 n.2 (D.C.Cir.), cert. denied, 419 U.S. 1038 (1974):

Secretary of Labor v. Farino, 490 F.2d 885, 889 (7th Cir.

1973); Higgenbotham v. Barrett, 423 F.2d 745, 749 (5th Cir.

1975); City of Inglewood v. City of Los Angeles, 451 F.2d

948, 955 (9th Cir. 1971); Colligan v. Activities Club of New

York, Ltd., 442 F.2d 686, 691 (2d Cir.), cert. dented, 404

U.S. 1004 (1971).

I agree with the majority, however, that standing and the

merits are, and should remain, distinct issues.

la *,

Ce te aw

69a

a decision on the question of standing based on an assess-

ment of the strength or weakness of the claims being

presented.” * The majority’s assumption appears to be

that federal judges will not be able to keep distinct issues

of standing and of the merits when confronted with

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