Petition — American Society of Travel Agents, Inc. v. Blumenthal
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Supreme Court, U.S.
FILED
JAN $0 1978 |
ds
4
- CLERK
IN THE
Supreme Court of the United States
OCTOBER TERM, 1977
nolZZ- 1075
AMERICAN SOCIETY OF TRAVEL AGENTS, INC., et al.,
Petitioners,
Vv.
MICHAEL BLUMENTHAL, SECRETARY OF THE TREASURY,
et al.,
Respondents.
PETITION FOR WRIT OF CERTIORARI TO THE
UNITED STATES COURT OF APPEALS FOR
THE DISTRICT OF COLUMBIA CIRCUIT
PIERRE J. LAFORCE
1785 New York Avenue, N.W.
Washington, D.C. 20006
Attorney for Petitioners
Of Counsel:
WILKINSON, CRAGUN & BARKER
PAUuL S. QUINN
EDWARD M. FoGARTY
WILSON - Eres PRINTING Co.. INC. - RE 7-6002 - WASHINGTON. D.C. 20001
TABLE OF CONTENTS
areal lanlialeemennelial
PERE SE REEL SE oe OO ee PERN Oe RT Se Nant
Questions Presented ...........---..---.-.-...----
EEE LAI RET TO TO EN
Cg
Reasons for Granting the Writ ......................000.......-......-
I.
II.
III.
The Court of Appeals Has Effectively Foreclosed
the Only Legal Forum Available to Tax-Paying
Business Entities Adversely Affected by Unfair
‘Competition Arising Out of the Unlawful Re
fusal of Federal Tax Authorities to Enforce Sec-
tions 501(c) (3) and 511(a) (1) of the Internal
Revenue Code. In So Doing, the Court of Ap-
peals Has Decided an Important Question of
Federal Law Which Has Not Been, But Should
Be, Settled by This Court .....................................
The Decision of the Court of Appeals Is in Con-
flict With a Decision of the United States Court
of Appeals for the First Circuit on the Issue of
TEA ie TS SE aan AS ck a
The Decision of the Court of Appeals Conflicts
With Applicable Decisions of This Court on the
8g SIRE ATS SSS a ese nee a
The Court of Appeals Dismissed Petitioners’
Complaint Without Accepting as True the Alle-
gations of That Complaint, Without Construing
the Complaint in Favor of Petitioners, and With-
out Providing Petitioners an Opportunity to
Supply Further Particularized Allegations of
Fact in Support of Their Standing to Sue. In
So Doing, the Court of Appeals Has So Far De-
parted From the Accepted Course of Judicial
Proceedings as to Call for an Exercise of This
Court’s Power of Supervision .........................
ac i
NI oowwn
10
12
16
18
II
TABLE OF AUTHORITIES
Cases: Page
Arnold Tours, Inc. v. Camp, 400 U.S. 45 (1970) .... 13
Association of Data Processing Service Organiza-
tions, Inc. v. Camp, 397 U.S. 150 (1970) -...12, 18, 14, 15
Conley v. Gibson, 355 U.S. 41 (1957) —......-..... 17
Constructores Civiles de Centroamerica v. Hannah,
459 F.2d 1183 (D.C. Cir. 1972) —............. REALS ™ 13
Flast v. Cohen, 392 U.S. 83 (1968) -—................... 18, 14
Hardin v. Kentucky Utilities Co., 390 U.S. 1
I SESRERE GP SBR RET oye er ee 13
Investment Co. Institute v. Camp, 401 U.S. 617
PERRET Se eee = EY oe ae 13
Jenkins v. McKeithen, 395 U.S. 411 (1969) —........ 17
Linda R. S. v. Richard D., 410 U.S. 614 (1973) -.... 9,16
National Ass’n of Neighborhood Health Centers,
Inc. v. Mathews, 551 F.2d 321 (D.C. Cir. 1976) .. 12
P.A.M. News Corp. v. Hardin, 440 F.2d 255 (D.C.
a 13
Ray Baillie Trash Hauling, Inc. v. Kleppe, 447 F.2d
696 (5th Cir. 1973), cert. denied, 415 U.S. 914
a 14
Rental Housing Ass’n v. Hills, 548 F.2d 388 (1st
i ll passim
Simon v. Eastern Kentucky Welfare Rights Organ-
Me GE GE ee passim
Tax Analysts and Advocates v. Blumenthal, No. 75-
1304 (D.C. Cir. June 15, 1977), petition for cert.
filed, 46 U.S.L.W. 3338 (U.S. Nov. 14, 1977)
REE ERE Cee RCo 2,12, 14, 15
Warth v. Seldin, 422 U.S. 490 (1975) -.................. 17
Statutes and Regulations:
Internal Revenue Code of 1954, § 501(c) (3), as
amended by Pub. L. No. 94-455, §§ 1307 (d) (1)
(A), 13138(a), 90 Stat. 1727, 1730 (Oct. 4,
ee Se EAE ORI ON Ns fe Ae passim
26 U.S.C. § 511 (a) (1) passim
26 U.S.C. § 512(a) (1) (1970) ................................. 3
——. Se
Tit
TABLE OF AUTHORITIES—Continued
S36 USS. §SE8(a) (i000) ..........................--
28 U.S.C. § 1254(1) (1970) .............
26 C.F.R. § 1.513-1(b) (1977) .....................
Other Authorities:
meee eeenn
H.R. Rep. No. 2319, 81st Cong., 2d Sess. (1950) ....
S. Rep. No. 2375, 81st Cong., 2d Sess. (1950)
10
10
we
IV
LIST OF APPENDICES
» PRS CD cccccteccursintistmmseneiianiniiinaiiines
Memorandum Opinion of the United States District
Court for the District of Columbia .................__...
Majority Opinion of the United States Court of Ap-
peals for the District of Columbia Circuit, Together
with Dissenting Opinion of Chief Judge Bazelon _....
Judgment of the United States Court of Appeals
for the District of Columbia Circuit —.........-......
. Order of the United States Court of Appeals for the
District of Columbia Circuit, Denying Petitioners’
a a
Order ot the United States Court of Appeals for the
District of Columbia Circuit, Denying Petitioners’
Suggestion for Rehearing En Bane __........................
Majority Opinion of the United States Court of Ap-
peals for the District of Columbia Circuit in Taz
Analysts and Advocates v. Blumenthal, No. 75-1304
(D.C. Cir. June 15, 1977), petition for cert. filed,
46 U.S.L.W. 3338 (U.S. Nov. 14, 1977) (No. 77-
ee nia
IN THE
Supreme Court of the United States
OCTOBER TERM, 1977
No.
AMERICAN SOCIETY OF TRAVEL AGENTS, INC., et al.,
Petitioners,
Vv.
MICHAEL BLUMENTHAL, SECRETARY OF THE TREASURY,
et al.,
Respondents.
PETITION FOR WRIT OF CERTIORARI TO THE
UNITED STATES COURT OF APPEALS FOR
THE DISTRICT OF COLUMBIA CIRCUIT
Petitioners, the American Society of Travel Agents,
Inc. and twelve of its individual travel agency members,
pray that a writ of certiorari issue to review the judg-
ment rendered in this case by the United States Court of
Appeals for the District of Columbia Circuit.
OPINIONS BELOW
On May 23, 1975, the United States District Court for
the District of Columbia dismissed petitioners’ complaint '
for failure to state a claim upon which relief can be
1 Petitioners’ complaint appears as Appendix A hereto.
2
granted. The district court’s memorandum opinion, not
officially reported, is unofficially reported at 36 A.F.T.R.2d
75-5142 (D.D.C. May 23, 1975), and appears as Ap-
pendix B to this petition.
On September 15, 1977, the United States Court of
Appeals for the District of Columbia Circuit affirmed that
decision on the ground that petitioners lacked standing
to maintain this action. The opinion of the court of
appeals, not yet reported, appears as Appendix C hereto.’
The judgment of the court of appeals, entered on Sep-
tember 15, 1977, appears as Appendix D.
Petitioners’ timely petition for rehearing and sugges-
tion for rehearing en banc were denied by the court of
appeals on November 1, 1977. The court’s order denying
the petition for rehearing appears as Appendix E hereto,
and its denial of petitioners’ suggestion for rehearing
en bane appears as Appendix F.
JURISDICTION
As indicated, petitioners’ timely petition for rehearing
and suggestion for rehearing en banc were denied by the
court of appeals on November 1, 1977.*
The jurisdiction of this Court is invoked under 28
U.S.C. § 1254(1) (1970).
? Appendix C also includes the dissenting opinion of Chief Judge
Bazelon, which was filed as a common dissent in the instant case and
in Tax Analysts and Advocates v. Blumenthal, No. 75-1304 (D.C.
Cir. June 15, 1977), petition for cert. filed, 46 U.S.L.W. 3338
(U.S. Nov. 14, 1977) (No. 77-681). See Appendix C, at 30a. The
majority opinion in the Taz Analysts case appears as Appendix G
to this petition.
* See Appendices E, F.
QUESTIONS PRESENTED
1. Whether the refusal of federal tax authorities to en-
force Sections 501(c) (3) and 511(a)(1) of the In-
ternal Revenue Code against tax-exempt organizations
which operate business enterprises unrelated to their
tax-exempt purposes may ever be challenged by ad-
versely affected tax-paying competitors of such enter-
prises. ;
2. Whether tax-paying business entities adversely affected
by unfair and unlawful competition arising out of the
refusal of federal tax authorities to enforce Sec-
tions 501(c) (3) and 511(a) (1) of the Internal Rev-
enue Code must, in their complaint, identify specific
lost customers in order to establish “injury in fact”
for standing purposes.
STATUTES INVOLVED
The statutory provisions involved in this proceeding
are Section 501(c)(3) of the Internal Revenue Code of
1954, as amended by Pub. L. No. 94-455, §§ 1307(d)
(1) (A), 1813(a), 90 Stat. 1727, 1730 (Oct. 4, 1976),
and Sections 511(a) (1), 512(a)(1) and 513(a) of the
Internal Revenue Code of 1954, as amended, 26 U.S.C.
§§ 511(a) (1), 512(a) (1), 518(a) (1970). Those sections
of the Internal Revenue Code appear as Appendix H
to this petition.
STATEMENT OF THE CASE
Petitioner American Society of Travel Agents, Inc.
(“ASTA”) is a not-for-profit trade association which rep-
resents more than 8,000 travel agents located throughout
the United States. The other petitioners herein are
twelve individual travel agency members of ASTA which,
* ASTA’s membership has increased dramatically in recent years
from the “more than 4,000” members indicated in the complaint
herein. See Appendix A, { 1, at 3a.
4
typical of the industry, are small independent businesses
operating in local communities.*
On July 19, 1974, petitioners instituted this action for
injunctive and declaratory relief in the United States
District Court for the District of Columbia, against the
Secretary of the Treasury and the Commissioner of In-
ternal Revenue (“respondents”). In a two-count com-
plaint, petitioners sought to eliminate the unfair competi-
tion of certain tax-exempt organizations which, with the
specific approval of respondents, were taking unlawful
advantage of their special tax-exempt status by engaging
in extensive commercial travel programs—unrelated to
their tax-exempt purposes—in direct competition with
petitioners and other tax-paying travel agents.
Petitioners’ first count alleged that the American Jew-
ish Congress (“AJC”) and certain other organizations
deemed by respondents to be tax-exempt under Section
501(c)(3) of the Internal Revenue Code of 1954, as
amended, 26 U.S.C. § 501(c) (3) (1970),° were operating
extensive commercial travel programs, in contravention
of Section 501(c)(3) which limits such organizations
exclusively to educational, literary, religious, charitable,
5 The travel agency petitioners in this action are: Vega Interna-
tional Travel Service (Chicago, Illinois), Garber Travel (Brookline,
Massachusetts), George Kronengold Travel Service (Miami, Flor-
ida), Trade Wind Tours of Hawaii (San Francisco, California),
Arnold Tours, Inc. (Boston, Massachusetts), Columbus Travel Serv-
ice (Dorchester, Massachusetts), Fort Collins Travel Agency, Inc.
(Fort Collins, Colorado), Platt World Travel Service (Lisle, Illi-
nois), Rex Travel Organization, Inc. (Chicago, Illinois), Beverly
Hills Travel Bureau, Inc. (Beverly Hills, California), George
Kronengold Travel Service, Inc. (New York, New York) and Farr
Tours (Miami Beach, Florida). Appendix A, {ff 2-13, at 3a-4a.
* Section 501(c)(3) was further amended in 1976, as reflected in
Appendix H hereto. The 1976 amendments, however, are not
germane to this action. See Pub. L. No. 94-455, §§ 1307(d)(1)(A),
1313(a), 90 Stat. 1727, 1730 (Oct. 4, 1976).
ee
5
scientific or other specifically enumerated purposes.’ Peti-
tioners further alleged that respondents had unlawfully
permitted the AJC and other such organizations to main-
tain their tax-exempt status despite the large amounts of
unrelated travel business income which they receive each
year.’ The complaint further alleged that, because of
their tax-exempt status and other privileges flowing from
such exempt status, the AJC and other similar organiza-
tions were able to and did in fact compete unfairly with
the petitioners. and other tax-paying travel agents by
offering lower-cost travel programs than they otherwise
would have been able to offer.’ The complaint alleged that
the petitioner travel agents and other tax-paying travel
agents were losing revenue as a result of respondents’
failure to revoke the exempt status of the AJC and other
similarly situated tax-exempt organizations.”
The second count of petitioners’ complaint alleged that
respondents had refused to enforce, assess, and levy the
unrelated business income tax imposed by Section 511
(a) (1) of the Internal Revenue Code of 1954, as amended,
26 U.S.C. §511(a)(1) (1970), on the AJC and other
tax-exempt organizations which engage in commercial
travel programs unrelated to their exempt purposes.”
The second count specifically alleged that the predeces-
sors in office of the respondent Commissioner of Internal
Revenue had issued a Technical Advice Memorandum on
May 15, 1970, advising that the AJC was not liable for
the unrelated business income tax on its substantial travel
income. The second count further alleged that, as a
* Appendix A, {[{] 20-21, 23, at 5a-6a.
8 Appendix A, {| 22-23, at 6a.
* Appendix A, {| 24, at 7a.
10 Appendix A, {f 24-26, at 7a.
11 Appendix A, { 28, at 7a.
12 Appendiz A, {] 29, at 7a-8a.
6
result of this specific determination and others similar to
it, the AJC and other tax-exempt organizations have
escaped the payment of taxes, required by law to be im-
posed on the unrelated business income of tax-exempt
organizations, thereby subjecting tax-paying competitors
to unlawful and unfair competition.”
Petitioners’ complaint prayed that the district court
issue an order (i) requiring respondents to withdraw
rulings granting tax-exempt status to the AJC and other
organizations substantially involved in unrelated travel
programs and permanently enjoining respondents from
granting tax-exempt status to such organizations in the
future; (ii) requiring respondents to undertake an ap-
propriate investigation into the activities of the AJC
and to take such action as necessary to comply with the
law; (iii) requiring the respondent Commissioner of In-
ternal Revenue to withdraw the Technical Advice Memo-
randum of May 15, 1970, which declared that the AJC
was not liable for the payment of the unrelated business
income tax on its income from travel operations, and to
withdraw other like rulings; and (iv) granting declara-
tory relief.**
In a memorandum decision issued on May 23, 1975, the
district court dismissed petitioners’ complaint for failure
to state a claim upon which relief can be granted.”
Petitioners appealed from that order to the United
States Court of Appeals for the District of Columbia Cir-
cuit. On June 15, 1976, the court of appeals, sua sponte,
ordered the parties to submit supplemental memoranda
addressing the question of whether petitioners have stand-
ing to maintain this action in light of this Court’s decision
18 Appendix A, {| 30-32, at 8a.
144A ppendix A, at 8a-9a.
15 Appendix B.
tine tatters = ow
7
in Simon v. Eastern Kentucky Welfare Rights Organiza-
tion, 426 U.S. 26 (1976). Such memoranda were sub-
mitted on or about July 15, 1976.
On September 15, 1977, the court of appeals affirmed
the dismissal of this case on the ground that petitioners
lacked standing to maintain the action. Petitioners’
timely petition for rehearing and suggestion for rehearing
en bane were denied on November 1, 1977.”
REASONS FOR GRANTING THE WRIT
I. The Court of Appeals Has Effectively Foreclosed the
Only Legal Forum Available to Tax-Paying Business
Entities Adversely Affected by Unfair Competition
Arising Out of the Unlawful Refusal of Federal Tax
Authorities to Enforce Sections 501(c)(3) and 511(a)(1)
of the Internal Revenue Code. In So Doing, the Court
of Appeals Has Decided an Important Question of
Federal Law Which Has Not Been, But Should Be,
Settled by This Court.
Dissenting from the court’s ruling below “that a tax-
payer suffering competitive injury lacks standing to chal-
lenge tax rulings applicable to a third party,” "* Chief
Judge Bazelon observed:
The majority . . . 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 stand-
ing to litigate the federal tax liability of someone
16 Appendix C, at 18a, 22a, 27a-28a.
17 Appendices E, F.
18 Appendix C, at 30a (Bazelon, C.J., dissenting) .
8
else.’” [Appendix C, at 18a.] 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 competi-
tive injury.”
In ruling as it did, the majority indicated that it felt
constrained by this Court’s ruling in Simon v. Eastern
Kentucky Welfare Rights Organization, supra, to dismiss
petitioners’ complaint.” The majority reasoned:
... [T}he lower cost of the tour packages offered by
the AJC and other tax-exempt organizations may well
be attributable at least in significant part to the use
of volunteer labor or the willingness to accept lower
profits than would commercial travel agents. More-
over, even if appellants were to prevail in this suit,
members of § 501(c) (3) organizations might for a
variety of reasons continue to prefer the travel pro-
grams operated by their own organizations. Alter-
nately, such organizations might shift to tour pack-
ages whose religious or educational orientation would
be more readily apparent. A third possibility is that
travel by members of § 501(c) (3) organizations
would simply decline.
If any of these consequences, or some combination
of them, ensued from a decision favorable to appel-
lants, private travel agents would enjoy no gain
whatever from their successful litigation. This is pre-
cisely the sort of situation in which the Supreme
Court failed to find standing in Eastern Kentucky.”
If the ruling of the majority below is permitted to stand,
then any complaint filed by any plaintiff suing as an ad-
versely affected competitor which alleges that favorable
and unlawful tax treatment of a third party has caused
19 Jd. n.1.
20 See Appendix C, at 18a, 22a, 27a-28a.
21 Appendix C, at 25a.
ee
8 er ee cette
wok. Deena, «5 4 Le hen
9
him to lose customers will be vulnerable to summary
dismissal.
In Linda R. S. v. Richard D., 410 U.S. 614, 617 (1973),
and again in Simon v. Eastern Kentucky Welfare Rights
Organization, supra, this Court has held that “federal
plaintiffs must allege some threatened or actual injury
resulting from the putatively illegal action before a
federal court may assume jurisdiction.” 426 U.S. at 41.
Petitioners in the instant case have alleged that they
have suffered competitive injury, including loss of cus-
tomers, as a result of the unlawful refusal of respond-
ents to enforce Sections 501 (c) (3) and 511(a) (1) against
the AJC and other similar organizations. They are pre-
pared to prove that allegation. The court of appeals, how-
ever, has ruled that, because it can conceive of factors—
other than favorable tax treatment—which might bestow
some competitive advantage upon such organizations, peti-
tioners’ complaint should be dismissed. Any competitor’s
complaint, if subjected to such wholesale judicial specula-
tion, would fall at the hands of an imaginative court.
The ruling of the court of appeals is not a fair applica-
tion of the “causality” element of the “injury in fact”
test for purposes of legal standing.” It is, rather, an
absolute foreclosure of the only legal forum available to
tax-paying business entities adversely affected by the
failure of federal tax authorities to enforce Sections
501(c) (3) and 511(a) (1) of the Internal Revenue Code
against tax-exempt organizations which engage in exten-
sive business enterprises unrelated to their tax-exempt
purposes.
22 Engaging in similarly unfounded speculation as to what might
transpire in the event petitioners were to prevail herein, the court of
appeals also misconstrued and misapplied the “redressability” ele-
ment of the “injury in fact” test. See note 21 supra and accompany-
ing text; notes 36-37, 39 infra and accompanying text.
10
In Eastern Kentucky, this Court specifically stated:
“We do not reach . . . the question of whether a third
party ever may challenge IRS treatment of another... .”
426 U.S. at 37. The court of appeals below has reached
and decided that ‘question, at least with respect to ad-
versely affected competitors. The ramifications of that
decision are ominous indeed,” and should not be permitted
to obtain in the absence of specific consideration by this -
Court.
II. The Decision of the Court of Appeals Is in Conflict
With a Decision of the United States Court of Appeals
for the First Circuit on the Issue of Standing.
In Rental Housing Ass’n v. Hills, 548 F.2d 388 (1st
Cir. 1977), the United States Court of Appeals for the
First Circuit was called upon to determine the standing
vel non of a trade association of landlords which sought
to challenge prospectively an award by the Department
of Housing and Urban Development of financial assist-
ance to a project for the conversion of a factory into
low-income housing for the elderly. In its complaint, the
plaintiff trade association alleged (i) that the proposed
award of funding would reduce the amount of funds
available for existing-housing subsidies in the future and
(ii) that its members would “lose tenants to the new
28 For example, if permitted to stand, the decision below will
render a wide range of revenue-losing IRS determinations—other-
wise properly reviewable—beyond the reach of judicial scrutiny.
Where, such as here, the only persons (other than taxpayers gen-
erally) adversely affected by such rulings are competitors of an
improperly favored person or organization, the courts will be help-
less to remedy such administrative wrongs.
Moreover, the ruling below blatantly thwarts the express congres-
sional purpose of protecting competitors such as the petitioners
herein from unfair competition at the hands of tax-exempt organi-
zations. See H.R. Rep. No. 2319, 81st Cong., 2d Sess. 36 (1950):
S. Rep. No. 2375, 81st Cong., 2d Sess. 21-31 (1950). See also 26
C.F.R. § 1.513-1(b) (1977).
ee ct
RL. eed Pe ae i BOLI Ole ee We
te ae. ee ee
ll
project and thereby suffer competitive harm.” /d. at 389.
The plaintiff association’s standing was upheld specifically
on the basis of the allegation of prospective competitive
injury. The court held:
... [W]e think the allegation of competitive injury
sufficient [to satisfy the “injury in fact” test]. While
the . . . project is not yet completed, and hence spe-
cific proof of competitive injury is not possible, it
could hardly be thought that administrative action
likely to cause harm cannot be challenged until it is
too late... . We see no insurmountable obstacles to
proof of the likelihood that Rental Housing Associa-
tion’s members will lose tenants to the . . . project.
Defendants have cited, and we have found, no au-
thority for the proposition that competitive harm is
an insufficient allegation of injury in fact. Quite the
contrary, the cases finding allegations of competitive
injury sufficient are legion... .**
In the instant case, petitioners alleged not only that
they would in the future suffer competitive injury as a
result of respondents’ actions, but indeed that they had
suffered and were then suffering such injury, including
loss of customers.** Notwithstanding those allegations,
the majority below held:
. . . [A]ppellants [petitioners herein] have not indi-
cated with sufficient specificity either the manner in
which their alleged injury occurred or the nature of
that injury. Appellants point to no prospective cus-
tomers who spurned the services of ASTA members
because of appellees’ [respondents’] allegedly in-
equitable tax treatment of § 501(c) (3) organiza-
tions. Nor do appellants identify tour package pur-
chasers who in fact patronized the AJC or some other
tax-exempt organization, but who might legitimately
** 548 F.2d at 389-90 (emphasis added).
** Appendix A, {fj 24, 26, 27, 30, 32, at 7a-8a.
12
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... .*°
Characterizing petitioners’ allegations of competitive in-
jury as “too speculative to support standing,” *’ the court
of appeals dismissed their complaint.”
The ruling of the court of appeals in this proceeding
stands in direct conflict with the decision of the Court of
Appeals for the First Circuit in the Rental Housing
case. That conflict—which has arisen in the face of this
Court’s rulings in Association of Data Processing Service
Organizations, Inc. v. Camp, 397 U.S. 150 (1970), and
Simon v. Eastern Kentucky Welfare Rights Organization,
supra—should be resolved by this Court.”
III. The Decision of the Court of Appeals Conflicts With
Applicable Decisions of This Court on the Issue of
Standing.
In Association of Data Processing Service Organiza-
tions, Inc. v. Camp, 397 U.S. 150 (1970), this Court
upheld the legal standing of certain vendors of data
26 Appendix C, at 22a.
27 Td.
** Referring to the majority’s several hypotheses as to possible
reasons for the low cost of travel packages sold by tax-exempt
organizations and as to what might happen if petitioners prevailed
herein, Chief Judge Bazelon expressed the opinion that
+e it is the majority, not the appellants [petitioners], who is
engaging in speculation. The economic basis of appellants’ in-
jury is straightforward .. . [and] compelling... .
Appendix C, at 39a (Bazelon, C.J., dissenting).
** The ruling below is also in direct conflict with at least two deci-
sions rendered by other panels of the Court of Appeals for the Dis-
trict of Columbia Circuit since this Court’s decision in the Eastern
Kentucky case. See Tax Analysts and Advocates v. Blumenthal,
supra, Appendix G, at 77a-78a; National Aes'n of Neighborhood
Health Centers, Inc. v. Mathews, 551 F.2d 321 (D.C. Cir. 1976).
“ ee BO ere OO et nee eit el
ee om
oS ee
13
processing services to challenge an interpretive ruling of
the Comptroller of the Currency which suggested that
national banks may, consistent with the National Bank
Act, offer data processing services to banks and bank
customers.” Likewise, in Arnold Tours, Inc. v. Camp, 400
U.S. 45 (1970), the Court upheld the standing of travel
agents to challenge a similar ruling by the Comptroller
relating to travel services. And, as Chief Judge Bazelon
pointed out in his dissent below, this Court in Investment
Co. Institute v. Camp, 401 U.S. 617 (1971), upheld the
standing of several investment companies in a similar
action on the basis of allegations of competitive injury
which “were no more specific tha[n] those of the [peti-
tioners] in this case.” ™
Data Processing and its progeny stand firmly for the
proposition that competitive injury, suffered as a result
of unlawful third-party competition authorized by an
administrative ruling, constitutes “injury in fact” suffi-
cient to invest the adversely affected competitor with
standing to challenge that ruling.” See also Simon v.
30 The Court reaffirmed the principle that the constitutional dimen-
sion of the standing issue
“is related only to whether the dispute sought to be adjudi-
cated will be presented in an adversary context and in a form
historically viewed as capable of judicial resolution.”
397 U.S. at 151-52, quoting Flast v. Cohen, 392 U.S. 83, 101 (1968).
It expressly characterized Data Processing as “a competitor’s suit,”
and specifically held that the petitioners had satisfied the “injury in
fact” test. 397 U.S. at 152 (emphasis in original).
31 Appendix C, at 4la (Bazelon, C.J., dissenting).
82 Similarly, as the Court of Appeals for the First Circuit noted in
Rental Housing Ass'n v. Hills, supra:
Injury in fact has [also] been found where governmental agen-
cies .. . engaged in activities which compete with the plaintiff’s
business, Hardin v. Kentucky Utilities Co., 390 U.S. 1, 88 S.Ct.
651, 19 L.Ed.2d 787 (1968); P.A.M. News Corp. v. Hardin, 142
U.S.App.D.C. 227, 440 F.2d 255 (1971), awarded government
contracts to a competitor, Constructores Civiles de Centro-
14
Eastern Kentucky Welfare Rights Organization, supra,
426 U.S. at 45 n.25.
The court of appeals brushed aside petitioners’ re-
liance upon this well-established line of precedent with
the observation that “the rather cryptic phrasing of Data
Processing . . . provides little guidance as to the precise
nature of the requirements which must be satisfied before
competitor standing can be sustained.” *
The court then attempted, without elaboration, to dis-
tinguish Data Processing on the ground that it “was not
a tax case.” ** The mere fact that the Internal Revenue
Code is involved here, however, certainly does not render
the instant action “a tax case.” This case, like Data
Processing, “is a competitor’s suit,” * involving a chal-
lenge to an improper administrative authorization of
illegal competition by persons subject to the administra-
tors’ jurisdiction. Petitioners herein are not suing as
taxpayers, or as representatives of the general public, or
as guardians of some general public interest. They are
suing because they themselves are being injured by the
wrongful competition made possible by the actions of
respondents.
america v. Hannah, 148 U.S.App.D.C. 159, 459 F.2d 1183
(1972), or entered into a beneficial relationship with a competi-
tor which enhanced its competitive position vis-a-vis the plain-
tiff on nongovernmental business, Ray Baillie Trash Hauling,
Inc. v. Kleppe, 477 F.2d 696 (5th Cir. 1973) (alternate holding),
cert. denied, 415 U.S. 914, 94 S.Ct. 1410, 39 L.Ed.2d 468 (1974).
548 F.2d at 390.
33 Appendix C, at 26a. Contra, id. at 46a (Bazelon, C.J., dissent-
ing); Tax Analysts and Advocates v. Blumenthal, supra, Appendix
G, at 77a-78a; Rental Housing Ass'n v. Hills, supra, 543 F.2d at 390.
** Appendix C, at 27a.
* This Court, distinguishing Data Processing from Flast v.
Cohen, 392 U.S. 83 (1968), stated: “Flast was a tarpayer’s suit.
The present is a competitor's suit.” 397 U.S. at 152 (emphasis in
original).
— ee 4
2 ee De memeber see | oe ae
SND Ra LES. ACCOM Mie Athy Ril itt D.C gt Bhs BIEN ABP. Bt ye
a.
— ies at at
15
Finally, the majority below attempted to distinguish
Data Processing on the ground that the relief sought in
that case, if granted, would have completely barred na-
tional banks from the data processing business, whereas,
even if petitioners were to prevail herein, “the AJC and
other such groups will clearly remain free to pursue their
travel businesses ... .”* This attempted distinction
either ignores or misconstrues petitioners’ cause of ac-
tion. Petitioners do not complain about the fact that the
AJC and similar organizations conduct travel businesses.
Their complaint, rather, is directed at the illegal competi-
tive advantage conferred upon such businesses by im-
proper administrative rulings. Reversal of those adminis-
trative rulings would, eo instante, eliminate the illegality
complained of herein.”
Here, as in Data Processing, petitioners have alleged
that improper administrative action has caused them
economic injury in fact “directly traceable to the action
of the [respondent] federal official[s].” See Simon v.
Eastern Kentucky Welfare Rights Organization, supra,
426 U.S. at 45 n.25.* In ruling to the contrary, the court
of appeals has applied standards fundamentally in con-
flict with principles previously articulated by this Court.”
36 Appendix C, at 27a.
37 Moreover, as Chief Judge Bazelon noted in dissent, the major-
ity’s purported distinction “goes only to the extent of the injury
suffered, not to its speculative or hypothetical nature.” Appendix C,
at 45a-46a (Bazelon, C.J., dissenting). See also Tax Analysts and
Advocates v. Blumenthal, supra, Appendix G, at 77a-78a.
38 See also Appendix C, at 45a (Bazelon, C.J., dissenting) .
%® The majority, while professing adherence to this Court’s ruling
in Eastern Kentucky, has in fact created a new, virtually insur-
mountable barrier to standing which is clearly unwarranted by that
decision. In Eastern Kentucky, this Court held:
16
IV. The Court of Appeals Dismissed Petitioners’ Complaint
Without Accepting as True the Allegations of That
Complaint, Without Construing the Complaint in Favor
of Petitioners, and Without Providing Petitioners an
Opportunity to Supply Further Particularized Allega-
tions of Fact in Support of Their Standing to Sue. In
So Doing, the Court of Appeals Has So Far Departed
From the Accepted Course of Judicial Proceedings as
to Call for an Exercise of This Court’s Power of
Supervision.
This case came to the court of appeals from a judg-
ment of the district court dismissing petitioners’ com-
plaint, on its merits, for failure to state a claim upon
which relief can be granted. The court of appeals, sua
sponte, ordered the parties to submit memoranda of law
discussing the issue of standing in light of this Court’s
decision in Simon v. Eastern Kentucky Welfare Rights
Organization, supra. On the basis of those memoranda,
the court of appeals affirmed the dismissal of the case,
not on its merits, but on the wholly different ground that
petitioners lacked standing to maintain this action.“ The
In sum, when a plaintiff’s standing is brought into issue the
relevant inquiry is whether, assuming justiciability of the
claim, the plaintiff has shown an injury to himself that is
likely to be redressed by a favorable decision.
426 U.S. at 38. As noted previously, the wrongful and injurious
competition of which petitioners complain is clearly and immediately
redressable by a favorable judicial ruling. See note 37 supra and
accompanying text. Unlike the situations in Eastern Kentucky and
Linda R. S. v. Richard D., 410 U.S. 614 (1973)—where the relief
sought may or may not have removed the alleged deprivations—the
benefit which petitioners here seek to attain is not dependent upon
some speculative coercive effect which the requested ruling might
have upon the affected third parties. Here, the ruling sought will,
in and of itself, remove the illegal competitive advantage of the
subject tax-exempt organizations, regardless of how those organiza-
tions react thereto. By its failure to recognize this fact, the court
of appeals has undermined the principles of legal standing devel-
oped by this Court.
*° See note 16 supra and accompanying text.
—— se
17
appelate court’s summary disposition of this case was
manifestly improper.
In Warth v. Seldin, 422 U.S. 490 (1975), this Court
ruled that:
For purposes of ruling on a motion to dismiss for
want of standing, both the trial and reviewing courts
must accept as true all material allegations of the
complaint, and must construe the complaint in favor
of the complaining party.”
The Court went on to state that a complaint should be
dismissed for want of standing only after the plaintiff
has been afforded an opportunity to supply “further
particularized allegations of fact deemed supportive” of
standing.*
Clearly, the majority below did not “accept as true all
material allegations of the complaint” and did not “con-
strue the complaint in favor of the [petitioners].” To the
contrary, it ignored specific allegations of competitive in-
jury (including loss of customers), and engaged freely in
speculation as to possible explanations for the competitive
advantages of tax-exempt organizations and the possible
impact of the relief sought by the petitioners. It denied
petitioners any opportunity—by way of affidavit, discov-
ery, or evidentiary hearing—to make a particularized
showing of economic injury.
The proper course of judicial consideration of standing
issues was clearly charted by this Court in Warth v.
Seldin, supra. The summary and extreme departure by
the court of appeals from that course in this proceeding
warrants an exercise of this Court’s plenary power of
supervision.
#1 422 U.S. at 501.
*2 Id. at 501-02. See also Jenkins v. McKeithen, 395 U.S. 411, 421-
22 (1969); Conley v. Gibson, 355 U.S. 41, 45-46 (1957).
18
CONCLUSION
For the foregoing reasons, the petition for a writ of
certiorari should be granted.
Respectfully submitted,
PIERRE J. LAFORCE
1735 New York Avenue, N.W.
Washington, D.C. 20006
Attorney for Petitioners
Of Counsel:
WILKINSON, CRAGUN & BARKER
PAUL S. QUINN
EDWARD M. FOGARTY
January 30, 1978
APPENDICES
la
APPENDIX A
Petitioners’ Complaint
IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF COLUMBIA
Civil Action No. 74-1081
[Filed Jul. 19, 1974]
THE AMERICAN SOCIETY OF TRAVEL AGENTS, INC.
360 Lexington Avenue
New York, New York 10017 (212) 661-2424
VEGA INTERNATIONAL TRAVEL SERVICE
201 North Wells Street
Chicago, Illinois 60606 (312) 332-7211
GARBER TRAVEL
1406 Beacon Street
Brookline, Massachusetts 02146 (617) 566-2100
GEORGE KRONENGOLD TRAVEL SERVICE
540 Arthur Godfrey Road
Miami, Florida 33140 (805) 531-0455
TRADE WIND TOURS OF HAWAII
209 Post Street Suite 808
San Francisco, California 94108 (415) 392-6740
ARNOLD Tours, INC.
79 Newbury Street
Boston, Massachusetts 02116 (617) 536-0981
COLUMBUS TRAVEL SERVICE
15-17 Stoughton Street
Dorchester, Massachusetts 02125 (617) 288-3040
2a
Fort COLLINS TRAVEL AGENCY, INC.
First National Tower Building
Fort Collins, Colorado 80521 (303) 481-5555
PLATT WORLD TRAVEL SERVICE
4726 Main Street
Lisle, Illinois 60532 (312) 852-8050
REX TRAVEL ORGANIZATION, INC.
One North La Salle Street
Chicago, Illinois 60602 (312) 641-6633
BEVERLY HILLS TRAVEL BUREAU, INC.
9641 Sunset Blvd., Beverly Hills Hotel
Beverly Hills, California 90210 (213) 271-2171
GEORGE KRONENGOLD TRAVEL SERVICE, INC.
Hotel Penn Garden
7th Avenue & 31st Street
New York, New York 10001 (212) PE 6-4822
FARR TOURS
2323 Collins Avenue
Miami Beach, Florida 33139 (305) JE 1-5137
Vv.
WILLIAM E. SIMON
Secretary of the Treasury
15th and Pennsylvania Avenues, N.W.
Washington, D.C.
DONALD ALEXANDER, Commissioner
Internal Revenue Service
1111 Constitution Avenue, N.W.
Washington, D.C. 20224
iw Te aretha OM REL
ritad is \ ste inh enc PB RPE Bb iw. Pe teem
3a
COMPLAINT
I. JURISDICTION
This Court has jurisdiction pursuant to the Adminis-
trative Procedure Act, 5 U.S.C. § 702 and § 703; 28
U.S.C. § 1331; 28 U.S.C. § 1340; 28 U.S.C. § 1361; 28
U.S.C. § 2201 and 28 U.S.C. § 2202. The amount in con-
troversy exceeds $10,000 exclusive of interest and penal-
ties.
II. PARTIES
1. Plaintiff, American Society of Travel Agents, Inc.
(ASTA), is a non-profit corporation organized and oper-
ated under the laws of the State of New York. ASTA
is a professional association of travel agents with more
than 4,000 travel agent members in the United States, on
whose behalf ASTA is acting in a representative capacity.
2. Plaintiff, Vega International Travel Service, is a
tax-paying corporate entity organized and operated under
the laws of the State of Illinois.
3. Plaintiff, Garber Travel, is a tax-paying corporate
entity organized and operated under the laws of the State
of Massachusetts.
4. Plaintiff, George Kronengold Travel Service, is a
tax-paying corporate entity organized and operated under
the laws of the State of Florida.
5. Plaintiff, Trade Wind Tours of Hawaii, is a tax-
paying corporate entity organized and operated under the
laws of the State of California.
6. Plaintiff, Arnold Tours, Inc., is a tax-paying corpo-
rate entity organized and operated under the laws of the
State of Massachusetts.
4a
7. Plaintiff, Columbus Travel Service, is a tax-paying
corporate entity organized and operated under the laws
of the State of Masschusetts.
8. Plaintiff, Fort Collins Travel Agency, Inc., is a tax-
paying corporate entity organized and operated under the
laws of the State of Colorado.
9. Plaintiff, Platt World Travel Service, is a tax-pay-
ing corporate entity organized and operated under the
laws of the State of Illinois.
10. Plaintiff, Rex Travel Organization, Inc., is a tax-
paying corporate entity organized and operated under the
laws of the State of Illinois.
11. Plaintiff, Beverly Hills Travel Bureau, Inc., is a
tax-paying corporate entity organized and operated under
the laws of the State of California.
12. Plaintiff, George Kronengold Travel Service, is a
tax-paying corporate entity organized and operated under
the laws of the State of New York.
13. Plaintiff, Farr Tours, is a tax-paying corporate
entity organized and operated under the laws of the State
of Florida.
14. Defendant, William E. Simon, is the Secretary of
the Treasury with direct responsibility for the adminis-
tration of Federal income tax laws.
15. Defendant, Donald Alexander, is the Commissioner
of Internal Revenue who is responsible for the assess-
ment, levy and collection of federal taxes and various
duties and responsibilities with regard to enforcement of
the Internal Revenue Code of 1954, as amended, 26 U.S.C.
§ 1, et seq.
16. The agency plaintiffs are tax-paying travel agents
who earn their livelihood through the sale of transporta-
Ped se 6 BO eR oR gee red ok Rint oe 6 Eg ap
5a
tion, foreign and domestic tours and through arranging
various other travel accommodations.
17. The commissions received by the agency plaintiffs
on transportation sales are set by traffic conferences such
as the Air Traffic Conference, the International Air Traf-
fic Conference, the Transatlantic Steamship Passenger
Conference and others. These conferences are regulated
by the Civil Aeronautics Board and the Federal Maritime
Commission, respectively.
18. The agency plaintiffs sell domestic and interna-
tional inclusive tours, that is, a “travel package”, in
which transportation, accommodations, entertainment and
frequently meals are sold together for an inclusive price.
Plaintiffs receive commissions for travel and land por-
tions of the tour. Such commissions constitute a substan-
tial portion of the income of the agency plaintiffs and
other travel agents.
Ill. COUNT I
19. Tax-paying travel agents must compete with ex-
tensive travel programs operated by organizations which
are exempt from federal income tax, pursuant to specific
Code provisions, including 26 U.S.C. § 501(c) (3).
20. Section 501(c) (3) and the implementing Internal
Revenue Service regulations are very explicit in requiring
that, to qualify for an exemption, an organization must
be organized and operated exclusively for one or more of
the purposes enumerated in the section, namely for edu-
cational, literary, religious, charitable or scientific objec-
tives or for the purpose of testing for public safety or
preventing cruelty to children or animals. The operation
of commercial travel programs is not among the enumer-
ated purposes set forth in that section.
21. Notwithstanding the statutory terms of § 501(c)
(3), and contrary to them, certain organizations which
6a
claim to be entitled to tax-exempt status have engaged,
and are engaged in the providing of commercial travel
service.
22. Contrary to law, the defendants and their prede-
cessors in office have ruled that organizations are entitled
to federal tax exempt status under § 501(c) (3) and have
allowed organizations to operate under the umbrella of
the federal tax exemption even when they do not meet
the statutory requirements for such exemption because
of the large amounts of travel income which they receive
each year. Further, defendants and their predecessors in
office have ruled that contributions to such organizations
are deductible from the taxable income of their contribu-
tors pursuant to § 170 of the Code and have caused such
organizations to be listed in the IRS Annual Cumulative
List of Organizations Described in Section 170(c) of the
Internal Revenue Code of 1954, which list is published
and distributed to the public as a guide to organizations,
contributions to which are deductible from the donors’
federal taxable income.
23. Among others, defendants have allowed the Amer-
ican Jewish Congress, Inc., a non-profit corporation or-
ganized under the laws of the State of New York, to
maintain under their auspices and with their express
approval, exemption from federal income tax, pursuant
to §501(c) (3) of the Code although defendants know
that said organization has operated extensive commercial
travel programs in violation of the express provisions of
the Code under which defendants have ruled the organ-
ization to be exempt. Plaintiffs allege and believe that
in violation of their duties of office, defendants have
failed and unless ordered by court, will continue to refuse
to levy, assess, and collect appropriate federal income
taxes from said organization and others similarly situ-
ated.
ie a e
Ta
24. Because of this tax exempt status and the other
privileges which flow from it, such as reduced-rate post-
age, the above-named organization and others are able
to offer lower-cost travel programs than plaintiffs and
other tax-paying travel agents. Plaintiffs allege and be-
lieve 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.
25. Further, plaintiffs and other tax-paying travel
agents are being forced to bear a greater share of the
public tax burden by virtue of defendants’ actions in al-
lowing tax-exempt status and deduction of contributions
to organizations which are substantially engaged in com-
merce and do not legally qualify for such tax benefits.
26. As a direct result of defendants’ action, plaintiffs
and other tax-paying travel agents are losing revenue
and suffering other damages and being denied the right
to equal and impartial treatment under the law guaran-
teed by the fifth amendment to the Constitution.
III. COUNT II
27. The allegations of paragraphs 1-27 are realleged
and incorporated into this count.
28. Plaintiffs further allege that in violation of law,
defendants have refused to enforce, assess and levy the
unrelated business income tax imposed by § 511, et. seg.
of the Code on tax-exempt organizations engaged in the
unrelated conduct of travel enterprises, including specifi-
cally the above-named organization.
29. Plaintiffs allege and believe that defendants’ prede-
sessors in office issued a ruling dated May 15, 1970 to the
above-named organization which advised the organization
8a
that it was not liable for unrelated busines income tax
on its substantial travel income.
30. The issuance of this ruling and the failure of de-
fendants to enforce these provisions and collect the appro-
priate tax results in tax-exempt organizations engaging
in travel having a competitive advantage over tax-paying
travel agents and deprives plaintiffs of the benefits of the
laws specifically enacted to protect tax-paying competitors
of tax-exempt organizations.
31. Further, plaintiffs allege and believe that defend-
ants and/or their predecessors in office have issued rulings
similar to that set out in paragraph 30, to other tax
exempt organizations competing with plaintiffs.
32. The defendants’ failure to enforce the laws en-
trusted to their administration have resulted in the above-
named organization, and other tax-exempt organizations
having lower business costs and being able to compete
for travel business unfairly with the plaintiffs who must
pay the full measure of federal, state and local taxes on
their income and who operate in the same travel markets
as do these organizations. Further, defendants’ discrimi-
natory taxation is in derogation of plaintiffs’ right to due
process under the fifth amendment to the Constitution.
WHEREFORE, the plaintiffs demand a judgment as
follows:
1. An order permanently enjoining the defendants
from granting organizations substantially involved in un-
related travel programs, rulings exempting them from
federal income tax and giving advance assurance of de-
ductibility of contributions to such organizations and re-
quiring withdrawal of such rulings granted to such or-
ganizations, specifically the above-named organization.
2. In the alternative, as regards the above-named and
similarly situated organizations, an order requiring the
4
}
’
.
4
:
M
€
9a
defendants to make an appropriate investigation into the
activities of the said organization and to take such action
as is necessary to comply with the law.
8. An order requiring defendant Commissioner to
withdraw the ruling of his predecessor in office to the
effect that the above-named organization is not liable for
the payment of the unrelated business income tax on its
income from travel operations to withdraw other such
rulings and to assess and collect said tax from this and
other similarly situated organizations.
4. A judgment of the Court declaring that the large-
scale travel activities are unrelated to the exempt pur-
poses enumerated in § 501(c) (3) of the Code.
5. Such other relief as the Court may deem necessary
and appropriate.
Respectfully submitted,
By: PAu. S. QUINN
PATRICIA L. BROWN
Attorneys for Plaintiffs
1735 New York Avenue, N.W.
Washington, D.C. 20006
Of Counsel
WILKINSON, CRAGUN & BARKER
PIERRE J. LA FORCE
6 te I eT
Nine et Ye ae ted ee BR oe
lla
APPENDIX B
Memorandum Opinion of the United States
District Court for the District of Columbia
UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF COLUMBIA
Civil Action No. 74-1081
AMERICAN SOCIETY OF TRAVEL AGENTS, INC., ET AL.,
Plaintiffs,
Vv.
WILLIAM E. SIMON AND DONALD ALEXANDER,
Defendants.
MEMORANDUM-ORDER
This matter is before the Court on defendants’ motion
to dismiss and plaintiffs’ opposition thereto. Plaintiffs are
a trade association of travel agencies and twelve incor-
porated travel agencies. Defendants are the Secretary
of the Treasury and the Commissioner of the Internal
Revenue Service (hereinafter referred to either as “De-
fendants” or “IRS”).
Plaintiffs challenge the IRS policy of granting tax
exempt status to organizations which operate extensive
travel programs for their members. Plaintiffs also chal-
lenge determinations by IRS not to levy the “unrelated
business income tax” on income derived from travel en-
terprises of tax-exempt organizations. Plaintiffs complain
that these determinations enable tax-exempt organizations
to offer lower-cost travel programs than can be offered
by commercial travel agencies, thereby damaging plain-
tiffs’ business.
12a
Plaintiffs seek an order enjoining IRS from granting
taX-eXempt status to organizations which are substan-
tially invelved in unrelated travel programs. [In the ai-
vernative, plaintiffs seek an order requiring IRS to in-
vestigate tax-exempt organizations which have travel pro-
grams to see whether they qualify for tax-exempt status.
Additionally, plaintiffs seek an order requiring [RS to
withdraw its rulings which do not levy the “unrelated
Dusimess tax” on travel income received by certain tax-
exempt organizadens; an order declaring that large-scale
travel activities are unrelated to the exempt purposes of
$ 501: ec! of the Internal Revenue Code (hereinafter, “the
Code”: and such other relief as the Court deems ap-
vrupriate.
Defendants have moved to dismiss om grounds that
‘Nese issues are not justiciable, that plaintiffs lack stand-
‘mg to sue, amd that the action is barred by the Anti-
Imjunetion Statute of the Code, the Tax Exception to
the Declaratory Judgments Act.* and by the doctrine of
Sovereign Immunity. For the reasoms stated below, the
-ourt grants defendants’ motion to dismiss on the ground
Mt nenjustictabality.
L
Plaintiffs rst count alleges that. contrary *o law.
(RS as granted tax-exempt status under { 501l:c) 3
2§ the Code to organizations that do not meet che statu-
‘ory requirements for suc&@ exemptions because of the
arge amounts of income they receive each year from their
cruvei programs.
Seenen Wie: 3 exempts from income ‘taxation or-
cyamizacions formed and operated
exciusiveiy for religrous, charitable. scientific. 7est-
mg tor pubiie safety. literary. or educational pur-
% U.S.C. § 7422.
3B S.C. § 21.
ee a
13a
poses, or for the prevention of cruelty to children
or animals.
Plaintiffs contend that since travel is not included as
an exempted purpose, any organization which conducts
travel programs for its members is ipso facto excluded
from tax-exempt status under § 501 .¢)(3). Plaintiffs
admit that some travel activity is permissible for tax-
exempt organizations. They state that they do not ob-
ject to weekend camp-outs by the Girl Scouts. But they
do object to the 392 foreign tours sponsored in 1974-75
by the American Jewish Congress, a tax-exempt charity.
Apparently it is the size of the travel program offered by
an organization which plaintiffs believe should be the key
in determining whether that organization qualifies for
tax-exempt status.
Defendants respond that according to the Code it is
not the size of a travel program but the purpose of the
organization offering the travel program which is the key
to determining its tax status. Section 501(c) (3), supra,
specifically states that tax-exempt status is to be deter-
mined on the basis of an organization’s “purposes.” Fur-
thermore, sections 511-513 of the Code levy a tax on the
“unrelated business taxable income” of an otherwise tax-
exempt organization. This unrelated business tax demon-
strates that commercial activity in and of itself does not
destroy the tax-exempt status of an organization if that
organization’s purpose qualifies it for exemption. Ac-
cording to these sections of the Code, only if a tax-exempt
organization’s commercial activity (“trade or business”)
is not “substantially related . . . to the exercise or per-
formance by such organization of its charitable, educa-
tional, or other purpose or function constituting the basis
for its exemption . . .” is the ineome derived by the
organization from that activity taxable.
Plaintiffs reply that an organization’s travel program
can be so extensive that it becomes the raison d’etre of
14a
the organization. They cite Contracting Plumbers Co-
operative Restoration Corporation v. United States, 488
F.2d 684, 686 (2d Cir. 1974), cert. denied 419 U.S. 827,
for the proposition that “the presence of a single sub-
stantial non-exempt purpose precludes exempt status re-
gardless of the number or importance of exempt pur-
poses.”
But even conceding that such a metamorphosis can
occur in 2 given organization’s purpose, the determina-
tion of whether it has occurred can be made only upon
careful consideration of the particular facts and circum-
stances of each case. Passaic United Hebrew Burial
Association v. United States, 216 F. Supp. 500 (D.N.J.
1963); Samuel Friedland Foundation v. United States,
144 F. Supp. 74 (D.N.J. 1956). The Code will not per-
mit a Court to issue an Order based on the premise that
travel programs—even massive travel programs—are per
se unrelated to an organization’s tax-exempt purpose.
Plaintiffs’ first count fails to state a claim upon which
relief can be granted.
II.
Plaintiffs’ second count alleges that, contrary to law,
IRS has refused to enforce, assess, and levy the unre-
lated business income tax imposed by sections 511-513
of the Code on tax-exempt organizations engaged in travel
enterprises for their members. As an example plaintiffs
point to IRS’s treatment of the American Jewish Con-
gress (hereinafter “AJC”). IRS has determined that
AJC tours are “substantially related” to its educational
and religious purposes and therefore not subject to the
tax on unrelated business income.*
Plaintiffs seek a Court order to cause IRS to with-
draw its rulings which concern the unrelated business
8 IRS Advice Memorandum, submitted with Defendants’ Motion to
Dismiss, at 2.
15a
tax on travel income received by tax-exempt organiza-
tions. But according to the Code, these rulings turn on
whether the tax-exempt organization’s travel activity is
“substantially related” to its tax-exempt purpose(s).
Plaintiffs are in effect asking the Court to substitute
its discretion for that of IRS in determining which travel
programs of tax-exempt organizations qualify for tax-
exemption.
As defendants point out, citing Langevin v. Chenango
Court, Inc., 447 F.2d 296 (2d Cir. 1971), Hahn v. Gott-
lieb, 430 F.2d 1248 (1st Cir. 1970), and Kletschka v.
Driver, 411 F.2d 486 (2d Cir. 1969), this is the kind
of review which courts have traditionally declined to un-
dertake. The Court’s jurisdiction may be invoked to
check a specific abuse of discretion by IRS. Eastern
Kentucky Welfare Rights Organization v. Simon, ——
U.S.App.D.C. ——, 506 F.2d 1278 (1974). But it may
not be invoked to undertake continuing supervision of
IRS’s administration of the Internal Revenue Code.
Plaintiffs’ second count fails to state a claim upon which
relief can be granted.
ORDER
In light of the foregoing, it is by the Court this 22nd
day of May, 1975,
ORDERED that defendants’ motion to dismiss be, and
it is hereby, granted.
/s/ Oliver Gasch
Judge
17a
APPENDIX C
Majority Opinion of the United States Court of Appeals
for the District of Columbia Circuit, Together with
Dissenting Opinion of Chief Judge Bazelon
UNITED STATES COURT OF APPEALS
FOR THE DISTRICT OF COLUMBIA CIRCUIT
No. 75-1782
AMERICAN SOCIETY OF TRAVEL AGENTS, INC., ET AL.,
Appellants
v.
MICHAEL BLUMENTHAL, SECRETARY OF TREASURY, ET AL.
Appeal from tie 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
Attorney, and Ann B. Durney, Attorney, Tax Division,
Department of Justice, were on the brief, for appellees.
18a
Before BAZELON, Chief Judge, MCGOWAN and Ross,
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 US.
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.
I
Appellants, the American Society of Travel Agents
(ASTA) and several individual travel agencies, complain
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 exemption under § 501(c)(3) of the Internal
*The dissenting opinion filed by Chief Judge Bazelon in this
case is also to be filed as a dissent to No. 75-1304, Tax Analysts and
Advocates Vv. Blumexuthal (D.C. Cir., June 15, 1977).
19a
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-
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-
* I.R.C. §501(c) (3) (as amended, 1976) contains the following
list of exempt organizations:
Corporation, and any community chest, fund, or foundation,
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 pre-
vention of cruelty to children or animals, no part of the net
earnings of which inures to the benefit of any private share-
holder 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 sub-
section (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.
vision of IRS’s administration of the Internal Revenue
Code.”
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 jurisdictional
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).
II
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
travei 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
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
2la
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 te establisi 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, 738 (1972): and
Flast v. Cohen, 392 U.S. 88, 99-101 (1968). Under Arti-
cle III of the Constitution, federal courts are limited to
the adjudication of cases and controversies. In order to
guarantee the adversarial litigation posture demanded by
this constitutional language, plaintiffs seeking to invoke
oe fog t ena have been required to demon-
ve suffered inj i
me nat vy ~ some actual injury attribu-
22a
llants claim to have been injured by ap-
dunt tana 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 AJ
or some other tax-exempt ype antl eo “
itimately be expected to do business wi
ea a 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
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-
23a
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 “[mlJore-
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
drain of an increase in the level of uncompensated
services.’
* Justice Powell’s opinion for the Court made clear that the finding
of a standing deficiency in Eastern Kentucky rested upon a consti-
tutional foundation.
[When a plaintiff's standing is brought into issue the relevant
inquiry is whether .. . the plaintiff has shown an injury to him-
24a
Id. at 42-43.
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-
self 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.
* - o a
The necessity that the plaintiff who seeks to invoke judicial
power stand to profit in some personal interest remains 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 requires
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, inquiries
relating to causation and redressability of an alleged injury are
characterized as “prudential limitations.” Tax Analysts and Advo-
cates 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 por-
trayed as being separate and apart from the “constitutional
threshold of injury-in-fact.” The implication of these statements is
that, although 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 signifi-
cance. Justice Powell’s words in Eastern Kentucky, especially the
passages quoted above, are at odds with this approach. Causation
and redressability, far from being prudential matters to be evalu-
ated seriatim only after constitutional standing has been estab-
lished, are part and parcel of the “injury in fact” requirement
arising from the “case or controversy” language in Article III.
Causation and redressability thus represent not additional inde-
pendent 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.
25a
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.
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
8’ 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 circum-
stances 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 conven-
tional “injury in fact” prerequisite was simply not met by appellants
in the record before us.
26a
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.*
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.°
¢ Appellants also rely on their competitor status to establish that
they are within the “zone of interests to be protected or regulated
by” the relevant Internal Revenue Code provisions. 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 disposition of this case under the “injury in fact” rubric,
we need not address appellants’ “zone of interests” argument.
5 Two examples may be cited. The first involves the identity
of the parties who must be sued by a litigant alleging competitor
standing. In Data Processing, one of the respondents was American
27a
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
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 banks 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
National Bank & Trust Company, a national bank which was offer-
ing data processing services pursuant to the controverted ruling
by the Comptroller of the Currency. Justice Douglas’s opinion does
not disclose whether a successful claim of competitor standing
necessitates naming one or more specific competitors as party
opponents. Here, only the Secretary of the Treasury and the Com-
missioner 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 hospital 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 administrative
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.
28a
present litigation.* Since we are convinced that the East-
ern Kentucky analysis of standing is the one we are
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.
*In Tax Analysts, supra note 2, a panel of this court recently
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 wrongly, he characterized himself
as a competitor of the major oil companies producing and importing
oil from abroad. He claimed to have suffered economic harm be-
cause the IRS had acquiesced in the tax credit treatment of certain
sums paid by large oil companies to foreign governments. Appel-
lant in Tax 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 in-
jury in fact, the Tax Analysts panel then addressed the pru-
dential “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 addi-
tional prudential limitations relating to causation and redressability
of the grievance... .” Slip op. at 11-12 (footnote omitted); and
see note 2 supra.
7 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 injury.”
The word “constructs” is hardly an apt characterization 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 certainly 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 common law pleading,
and one that is incompatible with a rational determination of asses-
sibility to the federal courts. Although 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 undertaking it finds either necessary or con-
genial. As is usually the case in such circumstances, the differ-
entiations 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 cau-
sation and redressability, indicate that at least a majority of the
Court is no longer content with a constitutional concept of injury
in fact limited to an assurance that the interest asserted will guar-
antee an effective adversarial presentation. Causation and redress-
ability 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 nonjustici-
ability in certain classes of litigation, neither we nor the dissent
can say. In such circumstances it is surely the function of an inter-
mediate appellate court to be guided by standing requirements as
they are currently articulated by the Supreme Court in closely
comparable contexts.
30a.
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
volatile political combination; our jurisdiction in this area
1The 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 reminis-
cent of Justice Stewart’s observation, concurring in Simon Vv.
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 de-
clines 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 of the “zone of interests” test in the opinion seems
designed, “as a prudential matter,” id. at 26, to eliminate such chal-
lenges from a federal forum.
2? On the other hand, it must be recognized that the Code is a
statutory system designed delicately to balance the relationships
among economic entities. To permit tax liability to be challenged
only by the taxpayer himself is in effect to permit the IRS virtually
3la
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.
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
unfettered discretion in adjusting these economic 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.
8 26 U.S.C. § 7421(a), for example, provides that, except 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 person 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 fed-
eral 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 ques-
tion 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 collec-
tion 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 collection of
taxes we are authorized to provide declaratory relief.
32a
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. Vv. 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
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
526 U.S.C. §501(c)(3) exempts from taxation
{c]orporations and any community chest, fund, or foundation,
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 pre-
vention of cruelty to children or animals, no part of the net
earnings of which inures to the benefit of any private share-
holder 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 (in-
cluding the publishing or distributing of statements), any
political campaign on behalf of any candidate for public office.
* Complaint {{ 22, 23.
* Id. at J 24.
33a
commercial programs be taxed under 26 U.S.C. § 511
(a).* The majority holds that appellants fail to meet the
Article III requirement of injury in fact. Because I
believe that appellants have alleged ordinary competitive
injury sufficient to meet the standards set out in Asso-
ciation of Data Processing Service Organizations, Inc. Vv.
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.
§ 901(b).“ Appellants allege that these taxes are in fact
either royalties or “excise, severance, or similar taxes
not creditable under Section 901(b).” ”
*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 substantially
related . . . to the exercise or performance by such organiza-
tion of its charitable, educational, or other purpose or function
constituting the basis for its exemption under section 501... .
*See Revenue Ruling 55-296, 1955-1 Cum. Bull. 386; Revenue
Ruling 68-552, 1968-2 Cum. Bull. 306.
10 See Amended complaint § 10, Joint Appendix (JA) at 41.
1226 U.S.C. §901(b) permits a U.S. citizen or domestic corpo-
ration 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... .”
12 Amended Complaint § 14, JA at 42.
34a
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.
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
18 Amended Complaint at { 14, 20, 21, JA at 42, 44.
1* Amended Complaint at { 18, JA at 43-44.
15 Appellant Field pays a royalty of one-eighth of the proceeds
of all oil produced from his well to the owners of the land on which
the well is located. These royalties are expected 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).
16 Amended Complaint § 19, JA at 44.
17 The majority affirms the District Court’s finding of no injury
in fact and adopts its reasoning at 390 F. Supp. 932-38. Maj. op.
at 4n.10.
35a
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.”
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
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 sustain 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.
%® United States v. Richardson, 418 U.S. 166, 176-77 (1974).
2°T 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. Nevertheless, the Supreme Court
has held that as a prudential matter, a grievance “shared in sub-
stantially 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. /d.
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.
21 Maj. op. at 12.
36a
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 Art. 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 US. 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 US.
83, 101 (1968). Thus federal courts cannot, consistent
with Article III, issue advisory opinions. /d. at 96-97.
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 Vv.
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
22 See United States v. Evans, 213 U.S. 297 (1909).
37a
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
Pennsylvania 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.
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
28 Like the majority in Travel Agents, I disagree with the obser-
vation in Taz Analysts that “causation” and “redressability” are
merely “prudential limitations” on standing. See Tax Anaylsts at
11-12; Travel Agents at 8 n.2.
24 Schlesinger v. Reservists Committee to Stop the War, 418 U.S.
208, 223 (1974) ; Sierra Club v. Morton, 405 U.S. 727, 736-37 & u.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).
25 Maj. op. at 12.
26 390 F. Supp. at 929.
38a
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
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
27 Wright and Miller object to the term “notice pleading” and
suggest instead “modern pleading” or “simplified pleading.” WRIGHT
& MILLER, FEDERAL PRACTICE AND PROCEDURE: CIVIL § 1202 (1969).
28 See id.; 2A MOORE’S FEDERAL PRACTICE {ff 8.12-8.13 (1975);
CLARK, CODE PLEADING § 38 (1947); Skinner, Pre-Trial and Dis-
covery Under the Alabama Rules of Civil Procedure, 9 ALA. L. REV.
202, 203-05 (1957).
29 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.
39a
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
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.”
31 Jd. at 6.
82 Jd. at 9.
83 Jd.
84 Complaint {| 24.
40a
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; 7.¢., 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
patterns, would be to exalt form over substance and to
take a long, unfortunate step backwards into what Pro-
fessor 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.
352A 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 ‘con-
clusions’ or ‘facts’ as long as fair notice is given... .” ZJd.
86 See Arnold Tours, Inc. v. Camp, 400 U.S. 45 (1970); Associa-
tion 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 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 commercial travel agency
had its prices been competitive would constitute the height of specu-
lation. See American Trucking Ass’ns, Inc. v. United States, 364
U.S. 1 (1960), in which the Court concluded that trucking compa-
nies 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 transporta-
tion services for appellee General Motors Corporation, despite GM’s
statement 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
4la
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
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-
cannot deprive appellants of standing. The interests of these inde-
pendents 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 believe 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.” Jd. at 17-18.
42a
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
suflicient 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 very possibility of ever satisfactorily alleging a com-
petitive injury. As the majority’s opinion demonstrates,
one might conjecture an indefinite number of such anoma-
**? Complaint 18. Investment Co. Institute v. Camp was a con-
solidation 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.
«ust 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 specific customers who had been
lost. This court not only accepted plaintiffs’ standing, but also up-
held the district court injunction because it was necessary to pro-
tect these plaintiffs from “further economic and competitive in-
jury.” Independent Bankers Ass’n v. Smith, 534 F.2d 991, 952 (D.C.
Cir.), cert. denied sub nom. Bloom v. Independent Bankers Ass’n, 429
U.S. 862 (1976) ; Complaint § 31.
88 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 substantially lower
prices than other customers.” Hanson v. Pittsburgh 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 in-
jury. This is precisely the chain of economic reasoning relied upon
by appellants in Travel Agents.
rte ve
48a
lies, some more plausible than others. For every anomaly
invented, the plaintiffs’ claim can be made to appear more
“speculative.” 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 Vv. 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 dona-
tions that they would perform whatever services were
necessary to qualify for § 501(c) (3) status. That pre-
mise, as a logical or economic prediction, was clearly false:
there was no way of knowing in advance whether the in-
creased income from charitable contributions would exceed
the increased costs of providing additional services. The
result, as the Supreme Court observed, would “vary from
hospital 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
particular hospitals that had refused to admit the plain-
tiffs.
Eastern Kentucky applies to fundamentally different
circumstances than those presented in T’ravel Agents. The
injury alleged by ASTA and the other appellant travel
agencies does not depend upon the discreet decisions of
8° 426 U.S. at 42.
44a
particular institutions or specific customers. Appellants
allege a competitive injury, 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 necessarily 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-
cism would altogether eliminate competitive injury as a
grounds for standing.“ That would in fact be contrary
*# Article III, 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 Glastonbury, 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 unsuc-
cessful bidder for a government contract has standing to challenge
the validity of the awarding of the contract, ever <hough the plain-
tiff has “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).
*'] share, of course, the majority’s concern “to follow as faith-
fully 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 “causation,” “redressability,” and
“speculation,” without, in my view, adequate appreciation of the
malleableness—not to say vagueness—of these ideas. They are the
45a
to the teaching of Eastern Kentucky, since the decision ex-
plicitiy 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 traceabie to the action of the defendant fed-
«al official, for it complained of injurious competition
th :t would have been illegal without that action.” 426
U.S. at 45 n.25.
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
kind of standards that acquire meaningful content only in applica-
tion to particular 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 re-
quired by that case. If this area of the law, confused because “un-
dergoing 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 appellate court.” Id.
#2 Maj. op. at 12. The majority offers two additional 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.” Th: majority states, for example, that it is
unclear whether “a successful claim of competitor standing necessi-
tates naming one or more specific competitors as party opponents.”
Id. 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,
46a
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. 75-1304, 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.
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 concludes that he must fail the zone test because he
is not arguably within the zone of interests protected or
regulated 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
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 elaboration 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.
*3 See note 11 supra.
** Maj. op. at 13.
4Ta
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 ma-
jority reach an incorrect conclusion in the instant case,
but its analysis only further confuses an already unfor-
tunately 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
“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 organi-
zations 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. 2319,
81st Cong., 2d Sess. 36 (1950); S. REP. No. 2375, 81st
45 See, e.g., K.C. DAViS, ADMINISTRATIVE LAW TREATISE (Supp.
1970) §22.00-3; Scott, Standing in the Supreme Court—A Func-
tional Analysis, 86 Harv. L. Rev. 645, 664 n.88 (1973).
© Maj. op. at 16.
4 Jd. at 15.
* See notes 5 and 8 supra.
48a
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
authoritative source of such rules. These decisions indi-
cate that congressional intent must be construed to include
within the zone of interests to be protected or regulated
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 “[wjhen
4° 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 ... .” 26 C.F.R.
§ 1.513-1(b).
49a
national banks begin to provide travel services for their
customers, they compete with travel agents... .” 400
US. 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 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 minmium 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
* The Court even appeared to concede this point. 401 U.S. at
634. See Scott, supra note 45, at 665-66.
51 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 States, 507 F.2d 1363, 1366-
67 (7th Cir. 1975) (per Stevens, J.).
5? Maj. op. at 25.
50a
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 to a 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
is flatly contradictory to the guidance of the Supreme
Court.
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
“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
58 Jd. at 26.
54 Jd. at 16.
55 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 see 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 separa-
tion of power problems related to improper judicial interference
in areas committed to other branches of the Federal Government.”
5la
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
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 unprobiematic 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
5t 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).
58 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).
5° See WRIGHT, MILLER & COOPER, FEDERAL PRACTICE AND PRoO-
CEDURE: 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 administrative 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 Labora-
tories, Inc. v. Shaffer, 424 F.2d 859, 874 (D.C. Cir. 1970).
52a
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.”
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
discern 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-
*1 There are very few decisions that find injury in fact but that
deny standing on the basis of the zone test. K. C. Davis, ADMINIS-
TRATIVE 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. Southern Maryland Medical
Center, 510 F.2d 1037 (4th Cir.), cert. demied, 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).
62 Maj. op. at 16.
63 Jd. at 17-18.
58a
tional canon of statutory interpretation is that laws are
to be read as a harmonious whole.“ “It is undoubtedly a
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.
** “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 law, and to its object and policy.’ ”
Richards v. United States, 369 U.S. 1, 11 (1962). “Emphasis should
be 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 U.S. 707,
713-14 (1975); Weinberger v. Hynson, Wescott & Dunning, Inc.,
412 U.S. 609, 631-32 (1973) ; United States v. Alpers, 338 U.S. 680,
684 (1950); Markham v. Cabell, 326 U.S. 404, 411 (1945).
65 NLRB v. Lion Oil Co., 352 U.S. 282, 288 (1957); FPC v. Pan-
handle Eastern Pipeline Co., 337 U.S. 498, 514 (1949); Clark v.
Uebersee Finanz-Korporation, 332 U.S. 480, 488 (1947).
%¢ See, e.g., Ellis v. Department of Housing and Urban Develop-
ment, 551 F.2d 13, 16 (3d 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 December 1976) ; Concerned Resi-
dents 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) ; Thompson v. Washington, 497 F.2d 626, 632 (D.C. Cir.
1973) ; Davis v. Romney, 490 F.2d 1360, 1365 & n.3 (3d Cir. 1974) ;
Constructores 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
54a
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
Constructores it was acceptable to examine both particular and gen-
eral provisions because those provisions shared an identity of pur-
pose.” Whether two provisions of a statute share a common pur-
pose 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 preamble to ensure that a grant of standing would not be i::con-
sistent with the statutory purpose.” But this reason, of course,
would justify examining the general provisions of a statute in every
case.
55a
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
is not a question that can be addressed in the abstract.
Yet this is just what the majority opinion, drawing on
theoretical analysis, purports to do. A fortiori the ma-
jority 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 convincing
than bald assertion.
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
*7 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.”
56a
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
a decision on the question of standing based on an assess-
ment of the strength or weakness of the claims being
¢° 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).
70 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. denied, 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. denied,
404 U.S. 1004 (1971).
71 I agree with the majority, however, that standing and the merits
are, and should remain, distinct issues.
57a
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
information relevant to both. I reject this assumption as
completely unfounded. We trust federal judges to suc-
cessfully perform such tasks all the time, as for example
when ruling on the admissibility of evidence in non-jury
trials. Standing and the merits require distinct inquiries,
and federal judges are perfectly capable of using legis-
lative history to answer the demands of each.
Second, legislative history may indeed be “unilluminat-
ing,” but it also may be helpful, and there is no way of
knowing until one looks. Legislative history can be and
often is an important instrument in the determination of
congressional intent.” The majority’s proscription of leg-
islative history in all cases simply because of its failure
in some, reminds me of the gourmet who, having once
tasted sour grapes, refused to eat anything.
Finally, there is simply no way to predict whether the
resort to legislative history will expand or contract the
the generosity of the zone test.“ The results will vary
from case to case. What is clear, however, is that if the
determination of congressional intent is relevant, the use
of legislative history may lead to more accurate applica-
tions of the test. The generosity of the test will be suffi-
ciently protected by the legal standard that resolves in
72 Maj. op. at 19-20.
78 F.g., Harrison v. Northern Trust Co., 317 U.S. 476, 479 (1943) ;
Commissioner of Internal Revenue v. Estate of Church, 335 U.S. 632,
687 (1949) (Frankfurter, J., dissenting, Appendix A).
™ There is something deeply ironic in the majority’s justifying its
exorcism of legislative history on the grounds of defending the
generosity of the zone test at the very same time as it deafens itself
to appellant’s arguments that, on the basis of legislative history, he
is arguably within the zone of interests to be protected. See note 68
supra.
58a
plaintiff’s favor all “potential ambiguities in the legisla-
tive history” and in the face of the statute.”
C. The Application of the Zone Test to Appellant Field
The majority is aware of “the confusion surrounding
the meaning of which interests are relevant to the zone
test,” and it concludes that what must “fall within the
relevant zone” is “the particular interest the parties are
asserting in the litigation.”"* Yet the majority denies
Field standing because “the protective intent of the statu-
ory section extends to all those U.S. companies doing
business abroad and paying foreign income taxes” and
“appellant Field cannot be said to fall within the regula-
tory field of concern.” Therefore, the majority argues,
Field’s interests cannot arguably have been intended to
have been protected by §901(b). In other words, con-
trary to its own advice, the majority acts as if the zone
test requires the plaintiff himself to be within the statu-
tory zone.
The majority’s conclusion that a plaintiff’s interests
must fall within the relevant zone, however, is correct.
Arnold Tours and Investment Co. Institute make clear
that a plaintiff will satisfy the zone test if he asserts
interests upon which the applicable statute will have a
readily foreseeable impact.
Using this framework of analysis, the interests Field
asserts are arguably within the zone of interests to be
protected by §901(b). A primary purpose of that sec-
tion, as the majority clearly establishes, is to prevent the
double taxation of United States corporations operating
abroad. But this purpose is itself founded on the deeper
principle that, as one noted scholar of the foreign tax
75 Maj. op. at 21.
76 Jd. at 20 n. 76.
7 Id. at 23.
594
credit has put it, “taxpayers with an equal taxable
capacity should bear an equal United States tax burden.
. . . [T]he result of the operation of the credit is that
United States corporations . . . with the same amount of
income bear an equal total tax burden on income whether
or not they are subject to foreign income taxation.” ™
The section thus establishes an equation of rough equality
between United States corporations that must pay cer-
tain foreign taxes and those that have tax liability only
to the United States government. If the IRS were mis-
takenly to deny a valid application for a foreign tax
credit, one side of this equation would be violated. Simi-
larly, if the IRS were mistakenly to grant a foreign tax
credit, the equation would be violated on the other side.
This is essentially Field’s position. He claims that his
interests in tax parity with his competitors who import
foreign oil are implicit in the structure of §901(b) and
that his interests are therefore arguably within the zone
of interests to be protected by the section.
The legislative history of § 901(b) is silent about con-
gressional concern for those in Field’s circumstances. The
readily foreseeable consequences of the foreign tax credit
on Field’s competitive situation, however, is powerful
support for his claim. His position is indistinguishable
from that of the plaintiff travel agents in Arnold Tours
or that of the plaintiff investment companies in Invest-
ment Co. Institute. I would therefore grant standing to
appellant Field.
78 E. OWENS, THE FOREIGN Tax Crepir 3 (1961).
6la
APPENDIX D
Judgment of the United States Court of Appeals
for the District of Columbia Circuit
UNITED STATES COURT OF APPEALS
FOR THE DISTRICT OF COLUMBIA CIRCUIT
SEPTEMBER TERM, 1977
No. 75-1782
[Filed Sep. 15, 1977]
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
Before: BAZELON, Chief Judge, MCGOWAN and Ross,
Cireuit Judges
JUDGMENT
This cause came on to be heard on the record on appeal
from the United States District Court for the District of
Columbia, and was argued by counsel. On consideration
thereof, it is
ORDERED AND ADJUDGED by this Court that the
judgment of dismissal is affirmed, in accordance with the
opinion of this court filed herein this date.
Per Curiam
For the Court
/s/ George A. Fisher
GeorGE A. FISHER
Clerk
Date: September 15, 1977
Opinion for the Court filed by Circuit Judge McGowan
Dissenting opinion filed by Chief Judge Bazelon
63a
APPENDIX E
Order of the United States Court of Appeals
for the District of Columbia Circuit,
Denying Petitioners’ Petition for Rehearing
UNITED STATES COURT OF APPEALS
FOR THE DISTRICT OF COLUMBIA CIRCUIT
SEPTEMBER TERM, 1977
No. 75-1782
[Filed Nov. 1, 1977}
AMERICAN SOCIETY OF TRAVEL AGENTS, INC., et al.,
¥. Appellants
MICHAEL BLUMENTHAL, Secretary of Treasury, et al.
Before: BAZELON, Chief Judge, MCGOWAN and Ross,
C.reuit Judges
ORDER
Upon consideration of the petition for rehearing filed
by appellants American Society of Travel Agents, Inc.,
et al, it is
ORDERED by the Court that appellants’ aforesaid
petition is denied.
Per Curiam
For the Court
/s3/ George A. Fisher
GEORGE A. FISHER
Clerk
65a
APPENDIX F
Order of the ''nited States Court of Appeals
for the District of Columbia Circuit,
Denying Petitioners’ Suggestion for Rehearing En Banc
UNITED STATES COURT OF APPEALS
FOR THE DISTRICT OF COLUMBIA CIRCUIT
SEPTEMBER TERM, 1977
No. 75-1782
[Filed Nov. 1, 1977]
AMERICAN SOCIETY OF TRAVEL AGENTS, INC., et al.,
Appellants
v.
MICHAEL BLUMENTHAL, Secretary of Treasury, et al.
Before: Bazelon, Chief Judge; Wright, McGowan,
Tamm, Leventhal, Robinson, MacKinnon,
Robb and Wilkey, Circuit Judges
ORDER
The suggestion for rehearing en banc filed by appel-
lants American Society of Travel Agents, Inc., et al, hav-
ing been transmitted to the full Court and no Judge
having requested a vote with respect thereto, it is
66a
ORDERED by the Court, en banc, that appellants’
aforesaid suggestion for rehearing en banc is denied.
Per Curiam
For the Court
/s/ George A. Fisher
GEORGE A. FISHER
Clerk
67a
APPENDIX G
Majority Opinion of the United States Court of Appeals
for the District of Columbia Circuit in Tax Analysts and
Advocates vy. Blumenthal, No. 75-1304 (D.C. Cir. June 15,
1977), petition for cert. filed, 46 U.S.L.W. 3338 (U.S. Nov. 14,
1977) (No. 77-681)
UNITED STATES COURT OF APPEALS
FOR THE DISTRICT OF COLUMBIA CIRCUIT
No. 75-1304
TAX ANALYSTS AND ADVOCATES, THOMAS F. FIELD,
Appellants
Vv.
MICHAEL BLUMENTHAL, Secretary of
Treasury 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.
68a
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 ruiings
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 Dis-
trict Judge for the Eastern District of Texas, the third member of
the panel, who was sitting by designation pursuant 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 (28 Feb. 1977).
Prior to the filing of this suit in the District Court, appellants
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 response was made to the
petition. Amended Complaint, ff] 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 or 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
capacity, and thus affirm the District Court on the ra-
* Amendment Complaint, J.A. at 45.
5 Id. at 45-46.
* Id. { 3, J.A. at 39.
° Id. { 4(a), J.A. at 39.
*Id. [ 4(b), J.A. at 39-40. The oil well is located in Venan
). go
County, Pennsylvania ; the oil produced at this location is not swb-
ject to price controls imposed by the federal government. Id.
* The defendants in this case are the Secretary of the Treasu
and the Commisioner 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 lield’s
acquisition of the entire working interest in a domestic oil well.
* 390 F. Supp. 927 (D.D.C. 1975).
70a
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 ste ding 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
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
10 As federal taxpayers, both appellants claim “a personal pecuni-
ary 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, ff 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
operating abroad in the area of oil extraction and production. Ap-
pellants 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 Complaint, 16, J.A. at 42. According to appel-
lants, 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 ap-
pellants have not satisfied this basic constitutional requirement of
injury in fact, there is no need to explore the other inquiries rele-
vant to prudential limitations 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).
12 28 U.S.C. § 901(b) (1).
Tla
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 Middie 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
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-
2 28 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 otherwise generally imposed
by any foreign country. .. .” Appellants 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.
18 Amended Complaint, 9, J.A. at 40.
14 1955-1 Cum. Bull. 386.
15 1968-2 Cum. Bull. 306.
%* Amended Complaint, {| 10, J.A. at 41; Brief for Appellees at 5.
72a
tion 901(b) of the Code. Rather, appellants assert that
these taxes are in substance either royalties 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
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