Jim Bopp politely destroys the 6th Circuit’s FATCA suit dismissal



First, some basics: Saying someone lacks “standing” to bring a lawsuit has a key benefit for the courts. If someone isn’t an actually harmed by a law, the case gets kicked out and the courts don’t have to waste time and resources analyzing prospective harms.


Now, if I were a cynic, I would say the law is generally used as intellectual backfill to support predetermined outcomes. If I were a cynic, I would also say the courts enjoy raising the roadblock of standing so they don't have to engage in the exercise of having to create that intellectual backfill. Deciding something, truly on its merits, requires one to stick their neck out. Were courage not in such short supply, such exposure would not be avoided at all costs.


Which brings us to the 6th Circuit.


When we were at the Unintended Consequences of FATCA hearing, there was not one person there that claimed US persons weren't being harmed by FATCA. Both those supporting FATCA, and those looking to salvage FATCA through a same country exemption recognized that Americans were actually damaged by FATCA. Even the claimed architect of FATCA recognized the serious harm caused to US persons!


Yet, here we are. The 6th Circuit kicked out Crawford et al, because it claimed there was no standing. Because, despite what is obvious to everyone else in the world, the 6th Circuit could find no actual harm caused that FATCA caused. So how did the 6th Circuit do this?


According to Attorneys Bopp and Coleson, they did this by creating a novel definition of standing. The 6th Circuit overturned the Supreme Court precedent of Susan B. Anthony List v. Driehaus, 134 S.Ct. 2334 (2014) by adding a heightened requirement for standing. No longer does a harm need just to be credible to give rise to standing. It needs to be credible and certain.


I won’t go too much into this. I’ll just note that if a threat is certain, it isn’t really a threat. It is an action. I’ll further note that if threats are no longer actionable at law, but only actions are, then entire areas of law need to be discarded.


Second, the 6th Circuit guts Roe v. Wade 410 US 113 (1973), by claiming a law is not coercive if a person has more than two ways of responding to the law. This seems a non-sequitur at best, or a red herring, as Attorneys Bopp and Coleson conclude.


The two follow up with a truer analogy to Roe. “[I]f instead of banning most abortions, Texas had imposed on doctors such draconian burdens of monitoring and reporting on women seeking abortion that doctors were turning women seeking abortion away because of the compliance burdens coupled with severe penalties for failure to fully comply, women would have had the standing to challenge those laws too.”


The point is this. The 6th Circuit is comprised of Kentucky, Michigan, Ohio, and Tennessee. If say, Kentucky passed a law that didn’t prohibit all abortions, but merely required doctors and abortion providers to impose the draconian regulatory burdens described above that led to women being turned away from abortions, the 6th Circuit, if it were to be consistent, would have to kick out any such claim as those plaintiffs would lack standing.


So if you notice what happened, the 6th Circuit essentially rewrote the standing requirements of Roe v. Wade, perhaps the most important court case for liberal jurists.


Do you want to know which justice grants Cert. to the Supreme Court for the 6th Circuit? Elena Kagan, noted liberal jurist. It will be interesting to see if Justice Kagan will allow Roe to be infringed upon.  


UPDATE: We hope the Supreme Court is not necessary. Below is a picture of Solomon Yue of Republicans Overseas presenting his Territorial Taxation for Individuals resolution to the RNC Resolutions Committee. The resolution passed unanimously and is expected to be adopted by the full RNC at theAugust 25, 2017 General Session. We would expect this to be a part of any tax reform package. If it is part of the package, FATCA becomes rather superfluous. 


The full memo of Attorneys Bopp and Coleson follows.


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To: Whom It May Concern
From: James Bopp, Jr. & Richard E. Coleson
Date: August 22, 2017
Re: Sixth Circuit Decision in Crawford v. Department of Treasury

On August 18, 2017, the U.S. Court of Appeals for the Sixth Circuit released its
Opinion (docket no. 48)1 in Crawford v. Department of Treasury (Case No. 16-3539).
The Opinion (“Op.”) held that no plaintiff has standing2 in this case. This memo
briefly explains what we believe are two key errors in the court’s analysis.
Preliminarily, note that the Sixth Circuit has been employing a very restrictive
view of standing, and continues that approach here. But recently, the U.S. Supreme
Court rejected the Sixth Circuit’s approach in Susan B. Anthony List v. Driehaus,
134 S.Ct. 2334 (2014) (“SBA”). We believe that the Sixth Circuit’s holding in
Crawford continues the restrictive approach the Supreme Court rejected in SBA.


The first key error relates to the court’s failure to follow SBA in stating the
standing requirement. As the court recognized, SBA recognized standing where
there is “an intention to engage in a course of conduct arguably affected with a
constitutional interest and . . . there exists a credible threat of prosecution thereunder.”
Op. 18 (quotation marks omitted) (quoting SBA, 134 S.Ct. at 2342 (quoting
Babbitt v. United Farm Workers Nat’l Union, 442 U.S. 289, 298 (1979))). So a
“credible threat of prosecution” suffices, which, under SBA, exists where a statute
proscribes activity one has done or intends to do and there is no evidence the
statute is no longer enforced.


To Whom It May Concern
August 22, 2017
Page 2


Yet the Sixth Circuit combined SBA with an older case to change that standard.
It combined the older opinion in Clapper v. Amnesty Int’l USA, 133 S.Ct. 1138
(2013), with SBA to make this test: “there must be a certain threat of prosecution.”
Op. at 18 (emphasis in original). Now, Clapper did say that “‘certainly impending”
prosecution was required. Op. at 18 (emphasis in original) (quoting Clapper, 133
S.Ct. at 1147). But SBA came after the Clapper opinion and it cited the older
Babbitt standard as sufficient, i.e., “credible threat of prosecution.” So there was no
warrant for the Sixth Circuit to reject SBA and substitute for “credible threat” a
standard requiring “a certain threat,” Op. at 18 (emphasis in the original), in this
reformulation of the rule and in the Sixth Circuit’s application of standing rules.


In applying its standing requirement to Mr. Zell’s standing, the Sixth Circuit
recited the credible-threat standard (the test SBA used), Op. at 27, but plainly
relied on its certain-threat interpretation (from Clapper) of SBA’s test, having
already held that credible threat means certain threat, id. at 18.


So the Sixth Circuit held that even though Zell “‘is not currently complying
with’ the FBAR,” id. at 27 (citation omitted), that did not suffice for standing, i.e.,
there was no certain threat. The Sixth Circuit said “Zell has not alleged any facts
that would show a credible threat of enforcement against him.” Id. But under SBA’s
credible-threat standard, enforcement is credible if one violates a law (or intends
action that would be in violation of that law). SBA noted that enforcement proceedings
under the state law provision at issue there “are not rare” and that the
government “ha[d] not disavowed enforcement.” 134 S.Ct. at 2345. SBA for this
point quoted, and relied on, a case that held that “‘[t]he government has not argued
to this Court that plaintiffs will not be prosecuted if they do what they say they
wish to do.’” Id. (quoting Holder v. Humanitarian Law Project, 561 U.S. 1, 16
(2010)). So the government had the burden here to show that it has disavowed
enforcement or that Zell will not be prosecuted. And where the government has not
done so, the enforcement threat is real and suffices for a preenforcement challenge.


So it appears that the Sixth Circuit is resisting SBA and using overly restrictive
standing rules.


The second key error of the Sixth Circuit involves its interpretation of the sort
of harm recognized as sufficient for standing in Roe v. Wade, 410 U.S. 113 (1973).
Roe involved a Texas law banning abortion in most circumstances, but penalties for
violation only applied to abortionists, not women seeking abortion. Yet Jane Roe,
who was not an abortionist, had standing to challenge the law since doctors would
not perform an abortion she said she wanted because of the existence of the law.
She had standing because a “‘determinative or coercive effect’ upon a third party
(such as the injury of inability to obtain an abortion, produced by the determinative
effect of the challenged law in Roe upon abortionists) may suffice for standing . . . .’”
Op. at 21 (quoting Bennet v. Spear, 520 U.S. 154, 169 (1977)). Of course, the


To Whom It May Concern
August 22, 2017
Page 3


abortionists could have actually performed abortions and suffered the penalties if
they chose, so the abortion provision was coercive more than determinative. In the
present case—based on the experience of Plaintiffs and numerous others identified
in a Democrats Abroad study—foreign financial institutions (“FFIs”) are declining
to provide financial services to Americans abroad because of the burdens and
coercive effect of FATCA and the IGAs, which together impose burdensome requirements and a substantial penalty for noncompliance—unless FFIs comply by not
serving Americans. That is clearly coercive and should suffice for standing.
Yet the Sixth Circuit attempts to evade Roe by a curious analysis that tries to
evade the central concept, i.e., coercive effect gives standing, by substituting what
may be called an “options” analysis. It sets it up this way:


Plaintiffs argue that in Roe, the doctors had only two options (provide
abortions and thus break the law, or comply with the law by declining to
provide abortions); Plaintiffs argue that in this case, similarly, FFIs have only
two options: disregard FATCA and thus become subject to the 30% FFI
Penalty, or comply with FATCA by refusing to do business with certain United
States persons.


Op. at 20-21.3 It then says that here there is a third option, Op. at 21, which is
irrelevant but to which we shall turn shortly.


But first we must stop and consider what the court is doing, which is erroneous.
The analysis of Roe doesn’t turn on how many options are available, nor does this
case, so it cannot be distinguished on that basis. Roe stands for the legal doctrine
that coercion against a third party gives a person affected by that coercion standing
to challenge the law causing the coercion even if the burdens and/or penalties of the
law don’t directly apply to the person asserting standing. So just as coercion against
abortionists gives standing to women denied abortion by those abortionists because
of the coercion, also coercion against FFIs gives standing to persons denied financial
services by those FFIs because of the coercion. That is a straightforward standing
doctrine that has nothing to do with how many options are available. The number of
options is a red herring unless it somehow mitigates this coercion, which is not the
case with the court’s argument.


The third option the court identifies is this: “FFIs may comply with FATCA and
do business with United States persons —without imposing additional requirements
on their clients beyond what FATCA and the IGAs themselves require.” Op.
at 21 (emphasis in original). The court says some of the harms identified were
3 Plaintiffs actually argued the parallel of coercive effect giving standing, not the
number of options. In actuality, abortionists had the third option of ignoring the
law, performing, abortions and hoping for non-enforcement. And if one wants to
speculate as to number of options, doctors could also choose to change professions,
country, state and so on, just as women seeking abortions could go to another state.


To Whom It May Concern
August 22, 2017
Page 4


“above and beyond FATCA and the IGAs.” Id. (emphasis in original). That is true,
e.g., FFIs began implementing IGAs even before they were officially in effect, but
even that was because of FATCA and the IGAs. If IGAs are coming into effect, an
FFI begins implementing the policies it will be required to implement as it phases
in the compliance because waiting until the last minute will yield non-compliance
and the dreaded penalties. And sweeping broadly to capture persons and accounts is
necessary to avoid those dreaded penalties. But even without the above-and-beyond
effects, fully traceable to FATCA and the IGAs, the burdens and penalties of
FATCA and the IGAs provide sufficient coercive effect to give standing to persons
denied services because of the burdens and dangers of complying with those
provisions. So the above-and-beyond argument doesn’t really work.


Moreover, there is a fundamental disconnect in two parts of the court’s analysis.
It’s premise is that FFIs can “do business with United States persons,” Op. at 21
(emphasis added), but it later says the FFI may “choos[e] not to do business with
certain individuals, whether to protect their own interest in FATCA compliance of
for some other reason,” id. (emphasis added) (citing Saxo Bank rejecting U.S.-
person accounts). So an FFI’s third option seems to be doing business . . . by
choosing not to do business, which the court identifies as an above-and-beyond
choice. But of course the FFIs are rejecting U.S. persons because of FATCA and the
IGAs, as experienced by numerous persons around the world.


Finally, in developing its third-option argument, the court said that the three
options for an FFI (“the account holder[]”) are “close your account, pay the penalty,
or keep your account open while filing the required paperwork to do so.” Op. 21 n.8.
But FFIs are closing accounts to avoid filing the paperwork (which is the result of
severe, imposed monitoring obligations, not just paper-shuffling) both to avoid the
burdens of compliance and the severe penalty for failure to achieve full compliance.


So this two-options versus three-options arguments fails to come to grip with the
real issue of coercions that gives standing. If instead of banning most abortions,
Texas had imposed on doctors such draconian burdens of monitoring and reporting
on women seeking abortion that doctors were turning women seeking abortion away
because of the compliance burdens, coupled with severe penalties for failure to fully
comply, women would have had standing to challenge those laws too.
In sum, we believe the Sixth Circuit erred on these two key points. And its
analysis conflicts with fundamental standing principles established in the controlling
Supreme Court cases of SBA and Roe.


1 The clerk previously released the Opinion as docket no. 39-2, which was
incorrect (as that number had already been assigned on the docket). On August 21,
the clerk circulated the Opinion (along with a letter and the Judgment) as docket
no. 48, which is the correct number.


2 Standing is a legal concept based on the constitutional requirement of a “case
or controversy” for federal courts to have jurisdiction. A plaintiff must show actual
harm, traceable to the government action at issue, and redressable by court action.