Missouri v. Yellen

39 F.4th 1063

State of MISSOURI, Plaintiff - Appellant

v.Janet L. YELLEN, in her official capacity as Secretary of the Treasury ; Richard Delmar, in his official capacity as acting inspector general of the Department of the Treasury ; U.S. Department of the Treasury, Defendants - Appellees

National Taxpayers Union Foundation, Amicus on Behalf of Appellant(s)

State of Arizona; State of Alabama ; State of Alaska; State of Arkansas; State of Idaho; State of Kansas; State of Kentucky; State of Louisiana; State of Mississippi; State of Montana; State of Nebraska; State of North Dakota; State of Ohio; State of Oklahoma; State of South Carolina; State of Tennessee; State of Texas; State of Utah; State of West Virginia; Chamber of Commerce of the United States of America ; National Federation of Independent Business Small Business Legal Center, Amici Curiae

No. 21-2118

United States Court of Appeals, Eighth Circuit.

Submitted: February 15, 2022

Filed: July 14, 2022

Dean John Sauer, Justin D. Smith, Attorney General's Office, Jefferson City, MO, Michael E. Talent, Deputy Solicitor, Attorney General's Office, Saint Louis, MO, for Plaintiff-Appellant.

Stephen Ehrlich, U.S. Department of Justice, Federal Programs, Washington, DC, Alisa Beth Klein, Brian David Netter, Mark B. Stern, Daniel Winik, U.S. Department of Justice, Appellate Section, Washington, DC, for Defendants-Appellees.

Joseph Henchman, National Taxpayers Union Foundation, Washington, DC, for Amicus on Behalf of Appellant(s) National Taxpayers Union Foundation.

Drew C. Ensign, Senior Litigation Counsel, Attorney General's Office, Phoenix, AZ, for Amici Curiae State of Arizona, State of Alabama, State of Alaska, State of Arkansas, State of Idaho, State of Kansas, State of Kentucky, State of Louisiana, State of Mississippi, State of Montana, State of Nebraska, State of North Dakota, State of Ohio, State of Oklahoma, State of South Carolina, State of Tennessee, State of Texas, State of Utah, State of West Virginia.

Paul D. Clement, Erin Murphy, Clement & Murphy, Alexandria, VA, Elizabeth Hedges, Kasdin Miller Mitchell, Laura Wolk, Kirkland & Ellis, Washington, DC, Daryl L. Joseffer, Paul Lettow, U.S. Chamber of Commerce, Washington, DC, for Amicus Curiae Chamber of Commerce of the United States of America.

Paul D. Clement, Erin Murphy, Clement & Murphy, Alexandria, VA, Elizabeth Hedges, Kasdin Miller Mitchell, Laura Wolk, Kirkland & Ellis, Washington, DC, Karen R. Harned, Rob Smith, National Federation of Independent Business Small Business Legal Center, Washington, DC, for Amicus Curiae National Federation of Independent Business Small Business Legal Center.

Before SMITH, Chief Judge, BENTON and KELLY, Circuit Judges.

KELLY, Circuit Judge.

Missouri challenges the Secretary of the Treasury's implementation of the American Rescue Plan Act of 2021 (ARPA), Pub. L. No. 117-2, 135 Stat. 4. Missouri argues that the Secretary's "erroneously broad interpretation" of a provision in ARPA—the "Offset Restriction"—is unconstitutional. The district court¹ dismissed the case, finding that Missouri lacked standing and that Missouri's claims were not ripe for adjudication. Having jurisdiction under 28 U.S.C. § 1291, we affirm.

I.

ARPA, which was enacted in March 2021, appropriates over $200 billion to states, territories, and tribal governments to "mitigate the fiscal effects" of the COVID-19 pandemic. 42 U.S.C. § 802(a). Before an entity can receive funds, it must certify to the Secretary that it will comply with ARPA's provisions. Id. § 802(d)(1). ARPA funds must be used:

(A) to respond to the public health emergency with respect to the Coronavirus Disease 2019 (COVID-19) or its negative economic impacts, including assistance to households, small businesses, and nonprofits, or aid to impacted industries such as tourism, travel, and hospitality;

(B) to respond to workers performing essential work during the COVID-19 public health emergency by providing premium pay to eligible workers of the State, territory, or Tribal government that are performing such essential work, or by providing grants to eligible employers that have eligible workers who perform essential work;

(C) for the provision of government services to the extent of the reduction in revenue of such State, territory, or Tribal government due to the COVID-19 public health emergency relative to revenues collected in the most recent full fiscal year of the State, territory, or Tribal government prior to the emergency; or

(D) to make necessary investments in water, sewer, or broadband infrastructure.

Id. § 802(c)(1).

ARPA also identifies two specific restrictions on the use of allocated funds. At issue in this case,² the Act's "Offset Restriction" provides:

A State or territory shall not use the funds provided under this section ... to either directly or indirectly offset a reduction in the net tax revenue of such State or territory resulting from a change in law, regulation, or administrative interpretation during the covered period that reduces any tax ... or delays the imposition of any tax or tax increase.

Id. § 802(c)(2)(A) (emphasis added). If a state violates the Offset Restriction, it "shall be required to repay the Secretary" an amount equal to the lesser of (1) "the amount of the applicable reduction to net tax revenue attributable to such violation," and (2) the amount of ARPA funds received by the state. Id. § 802(e).

On May 17, 2021, the Department of the Treasury issued an Interim Rule implementing the Offset Restriction, 86 Fed. Reg. 26,786 (May 17, 2021), and on January 27, 2022, it issued a Final Rule, which went into effect on April 1, 2022,³ 87 Fed. Reg. 4338 (Jan. 27, 2022) ( 31 C.F.R. § 35.1 et seq. ). The Final Rule states that Treasury will consider a recipient to have impermissibly used ARPA funds to offset a reduction in net tax revenue if it fails to offset that reduction through means unrelated to the ARPA funds. More specifically, the Offset Restriction is violated if: (1) the recipient implements a change in law or regulation that the recipient assesses has had or predicts to have the effect of reducing tax revenue; (2) the reduction caused by the change is more than de minimis, meaning it exceeds one percent of the recipient's baseline tax revenue for 2019, adjusted for inflation; (3) the recipient reports a reduction in net tax revenue; and (4) the aggregate reduction is greater than the sum of other changes. 31 C.F.R. § 35.8(b). The "other changes" considered under the fourth element include increases in tax revenue, spending cuts in departments that do not utilize ARPA funds, and—in departments that do use ARPA funds—spending cuts that are greater than the ARPA funds used. Id.

II.

Missouri filed suit on March 29, 2021, shortly after ARPA was enacted and before Treasury issued the Interim Rule implementing the Offset Restriction. In its complaint, Missouri describes two potential interpretations of the Offset Restriction. Under one, which it deems the "narrow" and "correct" interpretation, the Offset Restriction "merely prohibits the States from taking COVID-19 relief funds and deliberately applying them to offset a specific tax reduction of a similar amount." Under a second, "broad" interpretation, the Offset Restriction "would prohibit a State from enacting any tax-reduction policy that would result in a net reduction of revenue through 2024 or risk forfeiting its COVID-19 relief funds." Missouri alleges that several states contacted the Secretary for clarification about which interpretation Treasury would adopt. According to Missouri, the Secretary declined to endorse the narrow interpretation, and her response and subsequent public comments "generate[d] uncertainty, confusion, and doubt for state legislatures that are currently considering and debating tax-reduction policies."

Shortly after filing its complaint, Missouri moved for a preliminary injunction, asking the district court to enjoin any interpretation of the Offset Restriction "that is broader than prohibiting the deliberate and express use of the Act's relief funds to offset revenue losses from a specific tax cut" or, alternatively, to enjoin enforcement of the Offset Restriction as unconstitutional under the Spending Clause and the Tenth Amendment because it is an unclear condition on a congressional appropriation. The district court held a hearing on Missouri's motion on May 4, 2021. A week later, the district court dismissed the case, concluding that Missouri lacked standing and that the case was not ripe for adjudication because Missouri's alleged harm was too speculative, abstract, and remote. Missouri has since been allocated approximately $2.7 billion through ARPA and has received at least some of that funding.

III.

We review de novo a district court's dismissal of a case on standing or ripeness grounds. City of Kennett v. EPA, 887 F.3d 424, 430 (8th Cir. 2018).

We begin with standing. "Federal court jurisdiction is restricted to ‘cases and controversies.’ " Wieland v. U.S. Dep't of Health & Human Servs., 793 F.3d 949, 954 (8th Cir. 2015) (quoting Flast v. Cohen, 392 U.S. 83, 94, 88 S.Ct. 1942, 20 L.Ed.2d 947 (1968) ). "The law of Article III standing, which is built on separation-of-powers principles, serves to prevent the judicial process from being used to usurp the powers of the political branches." Clapper v. Amnesty Int'l USA, 568 U.S. 398, 408, 133 S.Ct. 1138, 185 L.Ed.2d 264 (2013). In keeping with this purpose, the "standing inquiry has been especially rigorous when reaching the merits of the dispute would force [a court] to decide whether an action taken by one of the other two branches of the Federal Government was unconstitutional." Id. (quoting Raines v. Byrd, 521 U.S. 811, 819–20, 117 S.Ct. 2312, 138 L.Ed.2d 849 (1997) ).

" ‘The irreducible constitutional minimum of standing’ requires: (1) an injury in fact; (2) a causal connection between the injury and the challenged conduct; and (3) a likelihood that a favorable decision...