6th Circuit: MSC got it wrong, DIBC is not a ‘federal instrumentality’

The procedural wrangling is impressive, the arguments are exhaustive but the bottom line is this: The Detroit International Bridge Co. (DIBC) is not a “federal instrumentality,” according to the 6th U.S. Circuit Court of Appeals in Commodities Export Co. v. Detroit Int’l Bridge Co.

In so ruling, the federal appeals court said a contrary holding by a unanimous Michigan Supreme Court, City of Detroit v. Ambassador Bridge Co., 748 N.W.2d 221, 223 (Mich. 2008), is owed “no deference.”

The ruling has its genesis in the mid-1990s, when DIBC and the Michigan Department of Transportation began working on a project to make the Ambassador Bridge easier to get to from the interstate freeways (MDOT’s job) and to beef up the bridge’s infrastructure (DIBC’s job).

DIBC received federal approval to build new toll plazas, a duty-free gas station and a weight station for trucks. But the city of Detroit balked at granting DIBC the necessary zoning variances. DIBC plowed ahead with construction. Detroit sued. The case made it to the MSC, which ruled in Ambassador Bridge Co. that DIBC was a “a federal instrumentality for the limited purpose of facilitating traffic over the Ambassador Bridge,” and thus immune from Detroit’s zoning ordinances.

Commodities Export Co. sued the federal government and Detroit about a year later, complaining that DIBC, flexing its federal instrumentality muscle, unilaterally condemned and closed the only road providing access to Commodities Export’s property. Commodities Export said Detroit failed to protect Commodities from DIBC’s actions and that the federal government failed to rein in its federal instrumentality, DIBC.

DIBC intervened in the suit. The federal government then filed a cross-claim against DIBC, alleging that contrary to DIBC’s representations and the MSC’s decision in Ambassador Bridge Co., DIBC “’is not a federal instrumentality, of any kind, or any other type of arm, appendage, servant, or agent whatsoever of the United States,’ and thus its ‘representations that it is any kind of federal instrumentality are contrary to federal law.’”

The federal government argued that as a result, it could not be held liable for any claim by Commodities’ Export for an unlawful, uncompensated taking of its property.

The federal district court sided with the federal government. The 6th Circuit affirmed.

The 6th Circuit cut through a thicket of jurisdictional arguments, abstention claims, and assertions that the MSC’s decision had preclusive effect. The federal appeals court determined there were no barriers to declaring that Ambassador Bridge Co. “is at most non-binding, persuasive authority, which we are free to follow or to reject[.]”

The 6th Circuit chose “reject.”

“[T]he Bridge Company bears none of the hallmarks of a federal instrumentality. It is a private, for-profit corporation, created by private individuals, not by the United States. … The government, moreover, does not control the Bridge Company’s day-to-day operations. … Nor does it even have a significant financial stake in the Bridge Company’s success.”

The 6th Circuit continued, “The Bridge Company, moreover, is a frequent adversary of the United States in litigation, and the Supreme Court has twice held that the Bridge Company is not immune from state taxation, which, of course, it would be if it were a federal instrumentality.”

The DIBC is viewed as all sorts of things, depending on who is doing the looking. But after today’s 6th Circuit decision, DIBC can’t be seen as an extension of the federal government.

In their opinions: What did you think would happen?

Having worked hard to appear suspicious in an armed-and-loaded visit to the park, Embody cannot cry foul after park rangers, to say nothing of passers-by, took the bait.

– Sixth Circuit Judge Jeffery Sutton, in Embody v. Ward.

Leonard Embody went for a leisurely Sunday afternoon stroll in a nature area. He was outfitted with a camouflage suit and a Draco AK-47 pistol slung across his chest, all loaded up with a 30-round clip, all perfectly legal under Tennessee law, which allows handguns in public places such as nature areas.

He had a permit for the pistol. The pistol was barely legal: if the barrel had been a half-inch longer, it wouldn’t have qualified as a handgun. One other thing, the tip of the barrel was painted orange, typically done to indicate a weapon is actually a toy.

Embody had an audio recording device with him, apparently expecting that he’d draw some attention.

Mission accomplished. One person saw Embody and put his hands in the air without any prompting. Two others found a park ranger and expressed concern about Embody. An elderly couple told a ranger that they saw a man walking around with an assault rifle.

A ranger stopped Embody. Embody produced his permit. The ranger was unable to tell if the weapon was legal. The police were consulted. A ranger ordered Embody to the ground at gunpoint and disarmed him. After a couple hours, having determined that Embody’s weapon was legal, the authorities gave it back to him and sent him on his way.

Embody celebrated his release by suing the ranger that took him down at gunpoint. The weapon was legal, Embody said. That’s all that matters to make a case under the Fourth and Second Amendments.

The federal district court made short work of the case by granting the ranger summary judgment. Embody fared no better on appeal.

“[T]he constitutional question is whether the officers had reasonable suspicion of a crime, not whether a crime occurred. Otherwise, all failed investigatory stops would lead to successful § 1983 actions,” said Sutton, disposing of Embody’s Fourth Amendment claim.

As for the claimed Second Amendment violation, § 1983 provides remedies for federal law violations. Even if the ranger violated state law, Embody didn’t explain how that would rise to a federal constitutional offense, Sutton said.

Applying the legal principles in this case was like … well, it was like a walk in a park.

Word of the day: Dubitante

Many thousands of court opinions have crossed my desk in the nearly 26 years I’ve been with Michigan Lawyers Weekly.

Unanimous opinions. Concurring opinions. Dissenting opinions. Opinions that concur in part and dissent in part. En banc opinions. Memorandum opinions. Plurality opinions.

But until this morning, I never saw an opinion bearing the title “Dubitante.”

Dubitante. I reached for my Black’s Law Dictionary, the Thick-Coating-Of-Dust Edition. Here’s the entry: “Term is affixed to the name of a judge, in the reports, to signify that he doubted the decision rendered.”

Well, then it should be a concurrence, I thought, the sort of concurrence that begins, “I reluctantly concur with the majority.”

But a dubitante opinion, according to law professor Jason J. Czarnezki, is a fairly rare thing, and has a different shade of meaning.

“In the United States,” as of June 30, 2005, says Czarneki, “the term has been used in only 626 written opinions.”

Clearly, concurrences, not dubitante opinions, are the norm when expressing reservations, but deciding to vote with the court’s majority. However, the term is most frequently used to express doubt in general, not to define a judge’s disposition in a given case.

Czarnezki, “The Dubitante Opinion,” March 30, 2006.

Czarnezki says that only a handful of judges have styled an opinion as “dubitante.”

The latest member of the club is Judge Jeffrey S. Sutton of the Sixth Circuit.

Of interest, Sutton’s dubitante opinion follows his unanimous opinion in United States v. Jeffries. In other words, Sutton wrote the opinion, was joined by two other circuit judges, and then wrote a separate, dubitante opinion expressing some general doubt about his majority opinion.

What caused Sutton’s reservations?

Franklin Delano Jeffries was convicted of violating 18 U.S.C. § 875(c), which, in part, prohibits transmitting in interstate commerce “any threat to … injure the person of another.”

Jeffries’ threats came in a song he performed and then posted on YouTube and Facebook a few days before a custody hearing. In his majority opinion, Sutton described the performance.

The song contains sweet passages about relationships between fathers and daughters and the importance of spending time together. The rest boils into an assortment of the banal (complaints about his ex-wife), the ranting (gripes about lawyers and the legal system) and the menacing (threats to kill the judge if he doesn’t “do the right thing” at an upcoming custody hearing). Jeffries set the words to music and created a video of himself performing the song on a guitar painted with an American flag on it. The style is part country, part rap, sometimes on key, and surely therapeutic.

And also illegal under 18 U.S.C. § 875(c), a federal prosecutor decided. A jury agreed.

On appeal, Jeffries argued that the jury should have been instructed that to convict, the jury had to find that he subjectively intended to threaten the judge. Not so, according to Sutton’s majority opinion.

A § 875(c) prosecution … generally requires the government to establish that the defendant (1) made a knowing communication in interstate commerce that (2) a reasonable observer would construe as a true threat to another. Once the government makes this showing, we have held it matters not what the defendant meant by the communication, as opposed to how a reasonable observer would construe it.

Sutton cited precedent from the Sixth Circuit and other jurisdictions to affirm Jefferies’ conviction.

But why is there only an objective component to § 875(c), Sutton asked in his dubitante opinion.

Every relevant definition of the noun “threat” or the verb “threaten,” whether in existence when Congress passed the law (1932) or today, includes an intent component. …

Conspicuously missing from any of these dictionaries is an objective definition of a communicated “threat,” one that asks only how a reasonable observer would perceive the words. If words matter, I am hard pressed to understand why these definitions do not resolve today’s case. The definitions, all of them, show that subjective intent is part and parcel of the meaning of a communicated “threat” to injure another. …

Ever since the Watts decision in 1969, it has been clear as a matter of constitutional avoidance that threat prohibitions like this one cover only “real” threats, threats in other words that a reasonable observer would take as true and real. Watts v. United States, 394 U.S. 705, 708 (1969) (per curiam). That is all well and good, as it makes sense to interpose this objective requirement on the criminalization of speech. But that consideration offers no basis for alchemizing the normal meaning of threat into an objective-intent question alone. What should happen instead is this: The statute should require first what the words say (a subjectively intended threat) and second what constitutional avoidance principles demand (an objectively real threat). …

When some law-making bodies “get into grooves,” Judge Learned Hand used to say, “God save” the poor soul tasked with “get[ting] them out.” Hand, The Spirit of Liberty 241–42 (2d ed. 1954). That may be Franklin Delano Jeffries’ fate — and ours. The Department of Justice, defense lawyers and future courts may wish to confirm that the current, nearly uniform standard for applying § 875(c) is the correct one. I am inclined to think it is not.

The case is United States v. Jeffries.  “SUTTON, J., delivered the opinion of the court in which GRIFFIN, J., and DOWD, D. J., joined. SUTTON, J. (pp. 16–20), also delivered a separate dubitante opinion.”

$3.6 million award in Frankenmuth Wal-Mart deal reversed

A federal jury’s $3.6 million award to a Frankenmuth family that lost out on a deal to sell its land to Wal-Mart has been reversed by the 6th U.S. Circuit Court of Appeals.

As reported in Lawyers Weekly, the plaintiffs in May 2005 signed an agreement to sell 37 1/2 acres of their land to Wal-Mart for $4 million. But seven months later, the city passed an ordinance restricting the size of buildings inside the zoning area that their land sits on to 65,000 square feet. As a result, Wal-Mart backed out.

The 6th Circuit panel determined that there were problems with the jury verdict form, in that the jury was instructed it could find the city of Frankenmuth liable for the deal falling through under either the no-conceivable-basis or animus theory of liability:

But … only the no-conceivable-basis theory was properly submitted to the jury. Because nothing on the verdict form indicated which theory formed the basis for the jury’s decision, the question is whether we may presume that the jury found for the Loesels[] under the factually sufficient no-conceivable-basis theory or whether we must vacate the verdict and remand for a new trial.

In addition, the panel took issue with the damages awarded:

[It] strikes us as excessive, in large part because the verdict itself renders the zoning ordinance unconstitutional and unenforceable. Had the jury verdict been upheld, the Loesels would have retained their property unencumbered by the zoning ordinance and been awarded $3.6 million, which is 90% of the full purchase price from Wal-Mart. This outcome would have let the Loesels recover twice, an impermissible result. …

So, the panel said that, should the case go back to the trial court, the damages should have a specific formula: the amount the plaintiffs would have received from Wal-Mart had the ordinance never been enacted minus the property’s value unencumbered by the zoning ordinance:

Although the jury was instructed by the district court to “award [the Loesels] such a sum as you find by the preponderance of the evidence will fairly and justly compensate them for actual losses you find they have suffered as a direct result of the defendant’s conduct,” we believe that this instruction was overly vague.

The plaintiffs said the city’s action violated their 14th Amendment equal protection rights by improperly rezoning land they owned (north of the downtown area), and that the city manager conspired to come up with justified ordinance options to prevent Wal-Mart from building a store in the city.

The city, meanwhile, said that its future-land-use master plan for its Commercial Local Planned Unit Development zone never called for large-format retailers to be built at the plaintiffs’ site. Also, because Wal-Mart never asked for injunctive relief or for the ordinance to be struck down upon its passing, the city said the retailer didn’t take the matter seriously enough to fight for it.

Class action act didn’t alter removal rule

A familiar story in troubled economic times has produced a new ruling concerning federal civil procedure from the Sixth Circuit.

A Kentucky couple bought a house with a loan issued by America’ Wholesale Lender, secured by a mortgage with Mortgage Electronic Registration Systems (MERS). Later, the couple defaulted on the mortgage. Countrywide Home Loans foreclosed in state court, claiming MERS assigned the mortgage.

The couple filed a counterclaim against Countrywide, arguing that MERS never had a valid mortgage. Countrywide said the counterclaim was deficient because MERS wasn’t joined as a necessary party.

The couple then filed a third-party class action complaint against MERS. MERS, said the couple, was nothing more than an electronic data base for keeping track of mortgages and did not hold a valid mortgage, having failed to follow Kentucky’s registration procedures.

Here’s where the fresh twist to things begins.

MERS, as a third-party defendant, removed the case to federal district court. Normally, third-party defendants can’t do that. First Nat’l Bank of Pulaski v. Curry, 301 F.3d 456, 461 (6th Cir. 2002).

The Kentucky couple, citing Pulaski and 28 U.S.C. § 1441(a), moved to remand their case to state court.

This time it’s different, MERS argued.

[MERS] sought removal of the action based on 28 U.S.C. § 1453(b). The [Class Action Fairness Act of 2005] provides that a district court has jurisdiction in a civil action where there is diversity of citizenship; the amount in controversy exceeds $5 million; and the proposed class includes at least one hundred members. …

[MERS argued] that under section 1453(b), a qualifying class action “may be removed by any defendant without the consent of all defendants.”

You’re reading the statute way too broadly, the Sixth Circuit ruled.

[MERS] attempts to distinguish Pulaski by arguing that section 1453(b), which includes the term “any defendant,” has expanded the right of removal in Class Action Fairness Act cases.

But that language is used in a specific context — it is part of a larger clause providing that an appropriate action “may be removed by any defendant without the consent of all defendants.” Contrary to [MERS’] position, the provision simply modifies the rule that all defendants must consent to the removal.

What the Class Action Fairness Act doesn’t do is extend removal opportunities to third-party defendants, the Sixth Circuit concluded.

The case is In re Mortgage Electronic Registration Systems.

In their opinions: All you ever wanted to know about bourbon

“Justice Hugo Black once wrote, ‘I was brought up to believe that Scotch whisky would need a tax preference to survive in competition with Kentucky bourbon.’ Dep’t of Revenue v. James B. Beam Distilling Co., 377 U.S. 341, 348-49 (1964) (Black, J., dissenting).

“While there may be some truth to Justice Black’s statement that paints Kentucky bourbon as such an economic force that its competitors need government protection or preference to compete with it, it does not mean a Kentucky bourbon distiller may not also avail itself of our laws to protect its assets.”

— 6th U.S. Circuit Court of Appeals Judge Boyce Martin Jr., writing in Maker’s Mark Distillery, Inc. v. Diageo North America. Inc., et al.

At the heart of this trademark case is not possible confusion between plaintiff’s bourbon and defendant’s tequila.

Only someone with an atrociously bad palate would mistake one for the other.

At issue is how the parties package their spirits.

Maker’s Mark bourbon features a distinctive drip of red sealing wax on the outside of its bourbon bottles. The distiller has been using that since 1958 and registered it as a trademark in 1985. Maker’s Mark marketing efforts focus heavily on the red wax seal.

Jose Cuervo distills a premium tequila. Beginning in 2001, Cuervo began selling the tequila in the United States, packaged in bottles that first bore dripping red sealing wax on the outside. After Maker’s Mark sued Cuervo for trademark infringement, Cuervo kept using red sealing wax but without the drips.

Martin eventually got to the legal meat-and-potatoes – the district court correctly issued a permanent injunction barring Cuervo from using red dripping sealing wax – but not before engaging in an extended discussion about whiskey in general and bourbon in particular.

Martin, who was born in Boston but settled in Kentucky, where the bulk of the world’s supply of bourbon is produced, used the case as an opportunity to do some extended research on “bourbon’s unique place in American culture and commerce.”

It’s a fascinating story, which includes such nuggets as the competing claims of who first distilled bourbon – some say it was a Baptist minister, others believe it was produced at the first European settlement in what is now Kentucky. Martin recounts the legal battles over what can be called bourbon, which eventually led to an act of Congress to settle the matter.

Martin obviously enjoyed the topic.

As you would expect, the opinion was silent on whether he enjoys the product.

No harm, no foul in Joe the Plumber’s First Amendment case

Samuel Joseph "Joe the Plumber" Wurzelbacher

What’s Samuel Joseph Wurzelbacher — you know him better as “Joe the Plumber” — been up to lately?

In the 2008 presidential campaign, John McCain, Sarah Palin and the media made Wurzelbacher the icon for Republican opposition to then-Senator and candidate Barack Obama’s economic policies.

Obama was campaigning in Wurzelbacher’s neighborhood. Wurzelbacher asked Obama about the potential tax consequences of opening a plumbing business. Obama’s reply included a statement that he wanted to “spread the wealth.”

The exchange was caught on video and soon after, McCain, during a presidential debate, dubbed Wurzelbacher as “Joe the Plumber.”

Wurzelbacher became a media darling, dispensing criticism of Democratic policies in general and Obama’s in particular.

He’s capitalized on that by running for Congress in Ohio’s 9th District. Earlier this month, he won the Republican primary and will face incumbent Democrat Rep. Marcy Kaptur in the November general election.

He’s also been watching a federal First Amendment and privacy rights lawsuit that he filed swirl right down the drain.

Wurzelbacher’s exchange with Obama drew more than just media attention.

According Wurzelbacher’s suit, several days after his Oct. 12, 2008, encounter with Obama, three high-ranking officials in the Ohio Department of Job and Family Services, all Obama supporters, huddled together. They decided to authorize searches related to Wurzelbacher on child-support enforcement, welfare and unemployment databases, which were at their disposal.

Did they uncover any dirt? We’ll never know because the search results were never made public. But what became known, after the Office of the Ohio Inspector General made inquiries, was that the searches took place.

Wurzelbacher’s suit alleged that all three officials were suspended, and when the dust settled, two had resigned and the third was fired.

He alleged First Amendment and privacy right violations, claiming his exchange with Obama motivated the searches.

The federal district court granted defendant officials judgment on the pleadings.

In the Sixth Circuit, Judge Richard Griffin noted:

In order to adequately plead a First Amendment retaliation claim, a plaintiff must allege:
(1) the plaintiff engaged in constitutionally protected conduct;
(2) an adverse action was taken against the plaintiff that would deter a person of ordinary firmness from continuing to engage in that conduct; and
(3) the adverse action was motivated at least in part by the plaintiff’s protected conduct.

Griffin, joined by Judges Julia Gibbons and Bernice Donald, agreed with the federal district court that Wurzelbacher came up short on pleading an “adverse action.”

He asserts that defendants, without his knowledge, performed several improper database searches under his name. However, the complaint contains no information regarding what, if any, information was discovered. Moreover, if any information was obtained, it was never publicly disclosed. …

Wurzelbacher did not suffer a threat to his economic livelihood … was not defamed … did not endure a search or seizure of property … and did not experience the public disclosure of intimate or embarrassing information … .

In addition, Wurzelbacher was not threatened with a continuing governmental investigation, and he does not allege that defendants’ actions in fact caused a “chill” of his First Amendment rights.

As to that last point, it’s tough to imagine how he could have possibly done so.

The appeals panel also ruled that informational privacy rights are violated when released information may lead to bodily harm or concerns matters of a sexual, personal or humiliating nature.

Wurzelbacher pleaded none of this.

No harm, no foul.

The case is Wurzelbacher v. Jones-Kelley, et al.

Palin email hacker’s conviction upheld

When Sarah Palin was still governor of Alaska and running for vice president, college student David Kernell hacked her Yahoo! email account with ridiculous ease.

He entered Palin’s email address, culled from The New York Times, on Yahoo!’s home page. He clicked the “forgotten password” button. After entering her birthday, country of residence and ZIP code, courtesy of the Internet, he was presented with Palin’s “secret question,” which, if answered correctly, would provide the opportunity to create a new password.

After a couple of tries, Kernell guessed Palin’s answer to “Where did you meet your spouse?” And just like that, he created a new password, logged on to the account and began checking out her email.

Next, Kernell logged onto 4chan.org, a message board where anonymous posting and offensive material are the norm. He started a thread, in which he said he had hacked Palin’s account. He backed up his claim with screen shots of her inbox and a Palin family photo that was attached to one of her emails.

Reaction on the 4chan message board was mixed. Some anonymous users urged Kernell to share everything. Others claimed they contacted the FBI. When Kernell posted the new password he created for Palin’s account, 4chan site administrators took the thread down.

One 4chan user logged on to Palin’s account, changed the password to prevent any further access and told a Palin staffer what was going on.

Kernell wasn’t through. He logged back on to 4chan, took credit for the hack and explained how he did it. He also said he had wiped his computer clean because he was afraid of an investigation.

His fears were well-founded. His efforts to cover his electronic tracks fell short. A federal grand jury indicted him on several charges. A jury found Kernell guilty of obstructing justice under 18 U.S.C. § 1519 for deleting information on his computer relating to the Palin hack.

On appeal, the 6th U.S. Circuit Court of Appeals affirmed.

The court rejected Kernell’s argument that § 1519, which prohibits destruction of records “in contemplation of” an investigation, is unconstitutionally vague. Kernell argued the statute doesn’t spell out what he must have know or believed about an investigation.

The statute doesn’t need to, said the court.

Courts considering the question have consistently held that the belief that a federal investigation directed at the defendant’s conduct might begin at some point in the future satisfies the “in contemplation” prong. We articulated this principle clearly in United States v. Lanham, 617 F.3d 873 (6th Cir. 2010).

Kernell also argued there was insufficient evidence that he intended to obstruct an investigation when he deleted the Palin hack information from his computer.

Kernell essentially argues that nothing that is written on the internet can be taken seriously, so the entire content of the postings Kernell made should be discounted.

Kernell is correct that we should exercise caution when interpreting internet postings literally, given that they are often “jargon-heavy,” containing obscure references and inside jokes. However, in this case, Kernell’s … posting on 4chan does not require in-depth knowledge of internet culture to interpret.

Kernell expressly states that he deleted the information on his computer out of a fear that the FBI would find it, plainly showing that he took his actions with the intent to hinder an investigation.

Even with proper skepticism directed toward claims made on the internet, a self-incriminating statement such as Kernell’s provides sufficient evidence for a reasonable jury to conclude that he acted with obstructive intent.

The case is United States v. Kernell.

In their opinions

“We do not beat the Wolf for being gray, but for eating the sheep.” Sixth Circuit Judge Boyce F. Martin Jr., quoting Count Lev N. Tolstoy’s The Wolf and the Hunters.

Martin was illustrating why a federal district court correctly dismissed an age-discrimination plaintiff’s case.

The plaintiff claimed management made several inquiries of older workers about their retirement plans. Plaintiff alleged that at one point, a human resources manager said, “There are some elderly supervisors that we have to do something with within the next year.”

Martin ruled that even if plaintiff had established a prima facie case by either direct or circumstantial evidence, there was plenty of evidence to back up defendant’s reasons for letting plaintiff go — poor work performance reviews, written warnings about workplace behavior and failure to achieve goals in his personal performance plan.

The case is Lefevers v. GAF Fiberglass Corp.

Sixth Circuit nixes suit against bankruptcy trustees

It’s not often that the United States government, as a plaintiff, uses its sovereign immunity as a sword against lawsuit defendants, in this case the bankruptcy trustees of the Eastern District of Michigan.

More typically, the government raises sovereign immunity as a shield after being sued for transgressions, real and imagined.

And, if the government wields sovereign immunity as a sword, the thrust, as the 6th U.S. Circuit Court of Appeals explains in United States v. Carroll, et al., must be against the correct parties.

Our story: In 2008, the clearance rate for Eastern District Chapter 13 bankruptcy cases was among the lowest in the country — 79th out of 90 judicial districts.

Some of the Eastern District bankruptcy judges devised a plan to improve the situation. When a debtor was due a tax refund, the bankruptcy court would order the IRS to send the refund directly to the trustee overseeing the debtor’s case. That way, the trustees could directly disburse funds to Chapter 13 creditors while eliminating the debtor, who might find other uses for the money, as a middleman.

At first, the IRS went along with this, even though redirecting the refunds to the trustees required the IRS to hand-process the affected tax returns. But the number of affected returns grew from an initial 400 to almost 5,000. And, because Chapter 13 reorganizations typically last three to five years, the refund-redirect orders were creating a significant headache for the IRS.

So, the IRS asked the United States to sue the trustees, claiming that the redirect orders violated the government’s sovereign immunity.

The government’s argument was that the bankruptcy code abrogates sovereign immunity “to the extent set forth” in 11 U.S.C. § 106. Section 106 requires that debts owed to the bankruptcy estate must be paid to the trustee. But, according to the government, this language does not clearly waive sovereign immunity with respect to the refund-redirect orders.

The federal district court thought this was a pretty good argument. The court enjoined the trustees from enforcing existing redirect orders and issued a writ of mandamus to prohibit the bankruptcy court from issuing redirect orders in future Chapter 13 cases.

The trustees appealed to the Sixth Circuit. Judge Jeffrey S. Sutton set the stage:

Even though both sets of parties would prefer that we resolve this lawsuit on the merits, we lack the jurisdiction to do so. The government sued the wrong parties, depriving it of standing to bring this lawsuit.

Of the three “irreducible constitutional minimum[s]” of standing — injury in fact, causation and redressability, Lujan v. Defenders of Wildlife, 504 U.S. 555, 560 (1992) — the government satisfies just one of them. Given the administrative burden to the United States of complying with the bankruptcy court’s orders, to say nothing of the alleged violation of sovereign immunity underlying them, the government has suffered the requisite injury.

But, Sutton said, causation and “redressability” are much more problematic.

The government sued a group of bankruptcy trustees, but the harm it suffered — administrative costs associated with processing tax refunds — flows not from the trustees’ actions but from the bankruptcy court’s orders.

When an entity does not like a court order, the answer is not to sue the lawyer or party who recommended the order; it is to appeal the order or, if utterly necessary, to sue the court. Bankruptcy trustees do not control bankruptcy courts.

Redressability, too, is a problem. The question is whether the requested relief would fix the problem at hand … . Even if the trustees have a role in enforcing these orders, that does not mean a judgment against the trustees will eliminate the problem. Trustees are not the only parties to Chapter 13 bankruptcies. Other parties, including the debtor and creditors, have an interest in ensuring that tax refunds make their way to the trustees.

Nothing prevents these entities from asking the bankruptcy court to issue the same order. …

This lawsuit was apparently born of three good intentions: (1) a need to resolve the government’s sovereign-immunity defense to the redirection orders; (2) a timing exigency in view of the growing administrative burden of the orders; and (3) a desire not to sue federal judges — thank you — unless absolutely necessary.

Yet the government’s unusual vehicle for handling these concerns was not the only one available. The government could have filed a direct appeal from the entry of a redirection order in one (or more) of the cases in which the IRS is a party.

Good intentions, yes; good trial strategy, no