U.S. Court of Appeals for the

Fourth Circuit Rulings










Close on the heels of the D.C. Circuit’s opinion, the U.S. Court of Appeals for the Fourth Circuit today issued its opinion in King v. Burwell, unanimously (3-0) upholding the IRS’s application of tax credits to the federal exchanges. Judge Gregory’s opinion applied deference to the IRS’s interpretation under Chevron USA, Inc. v. Nat. Res. Def. Council, Inc., 467 U.S. 837 (1984), and held that while there “can be no question there is a certain sense to” the challengers’ plain language argument, the government’s argument that the federal exchanges effectively stepped into the shoes of the state exchanges was “slightly” stronger. Given the apparent ambiguity between the interpretations, the panel held that the IRS was entitled under Chevron to interpret the ambiguity in light of the “broad policy goals of the Act” to extend the tax credits to the federal exchanges. Senior Judge Davis filed a concurrence, stating his view that the plain language of Section 36B unambiguously permitted the IRS’s interpretation. A link to the opinion is here.


Under the federal removal statute, 28 U.S.C. sec. 1447(d), an order remanding a case back to state court cannot be reviewed—appellate or otherwise—except for lack of subject matter jurisdiction or defects in removal procedure. In Barlow v. Colgate Palmolive Company, the Fourth Circuit, in a 2-1 decision by Senior Judge Davis, held that the statute precluded review where the remand was the result of plaintiff’s misrepresentations. In effect, the Court could “discern no basis to infer that Congress intended to etch a litigation-integrity policing exception into its prohibition on the review of remand orders.” In a lengthy dissent, Judge Floyd agreed with the majority that the remand order itself could not be reviewed, but disagreed that the district court was thereby unable to consider or levy Rule 11 sanctions or award Rule 60(b)(3) relief, arguing that the majority had created a “circuit split” as a result. A link to the opinion is here.


A wireless service provider sought to erect two facilities—a silo tower and a church bell tower—in Loudoun County to cover dead areas in coverage, but both proposals were denied by the local Board of Supervisors. The district court overturned the Board’s determination on the silo tower because it relied on objections based on health concerns, which are not a permissible reason for denying a facility under the Telecommunications Act, but upheld the determination as to the church bell tower. Both sides appealed their respective losses, and on April 3, 2014, the U.S. Court of Appeals for the Fourth Circuit affirmed in T-Mobile Northeast, LLC v. The Loudoun County Board of Supervisors. Judges Niemeyer and Agee agreed that the Board as a whole based its denial of the silo tower application on impermissible health concerns when the Board voted 7-2 to include that as one of the reasons for the denial, even though the other reasons were otherwise permissible. Judge Wynn dissented from that portion of the opinion, concluding that while the health concerns may have tainted the Board’s denial of the special exemption permit, it did not so affect the denial of the commission permit that otherwise would have blocked the site. The panel then affirmed the Board’s denial of the church bell tower application on the basis that there was substantial evidence in the record to support its decision, and there were alternative sites available.


In Pliler v. Stearns, the U.S. Court of Appeals for the Fourth Circuit joined the Sixth, Eighth, Ninth, and Eleventh Circuits in holding that above-median-income debtors with negative disposable income are obligated to maintain Chapter 13 bankruptcy plans for a full five years under the temporal requirement in 11 U.S.C. sec. 1325(b), where the plan does not pay unsecured creditors in full. Judge Wynn, for the unanimous panel, held that an above-median-income debtor could not request early termination of a Chapter 13 plan unless all unsecured creditors were paid in full irrespective of the debtor’s projected disposable income. A link to the opinion is here.


The case of Trans Energy, Inc. v. EQT Production Company began as a quiet title action, in which the predecessor to Pennzoil transferred its gas rights to a parcel of land in Wetzel County, West Virginia to two different gas companies. Those agreements were never recorded among the land records. One gas company transferred its Wetzel County rights and interests (without mention of the Pennzoil grant) to a predecessor of EQT by recorded transfer. Pennzoil then transferred its gas rights to the entire parcel by recorded assignment to a predecessor of a subsidiary of Trans Energy, which then assigned a royalty interest to REV. When Trans Energy discovered EQT’s alleged interest, it, along with REV, filed suit in federal court to quiet title. EQT counterclaimed. Trans Energy ultimately prevailed on summary judgment, and EQT appealed. On appeal, EQT argued for the first time that the federal court lacked subject matter jurisdiction because some of REV’s members resided where EQT resided, thus destroying diversity.

The Fourth Circuit held that REV was not an indispensible party; that its interests were the same as its fellow plaintiffs, given that it simply received a royalty stream from another plaintiff; and that EQT’s counterclaim was not prejudiced by REV’s dismissal from the suit. Noting that “considerations of finality, efficiency, and economy become overwhelming” after a ruling on the merits, the Fourth Circuit simply dismissed REV from the suit with prejudice and affirmed the other rulings of the district court. The opinion is here.



On February 21, 2014, the Fourth Circuit clarified the standard a bankruptcy creditor must meet in proving that it received monies from a debtor in good faith, and thus does not have to return the money to the trustee. The trustee over the long-running Taneja bankruptcy sought to claw back allegedly fraudulent payments that one of Taneja’s businesses made to a bank. The bank asserted that it received the payments in good faith under 11 U.S.C. sec. 548(c). The Fourth Circuit held in In re Vijay K. Taneja, that the good-faith standard set forth in In re Nieves, 648 F.3d 232 (4th Cir. 2011), applied as the standard for any good faith defense raised under 548(c). In such cases, the court must consider “whether the transferee actually was aware or should have been aware, at the time of the transfers and in accordance with routine business practices, that the transferor-debtor intended to ‘hinder, delay, or defraud any entity to which the debtor was or became . . . indebted.’” Using that standard, the Fourth Circuit held that the bank’s evidence sufficed to prove the affirmative defense. Judge Winn lodged a dissent, arguing that the bank had not met its burden of proof. A link to the published decision is here.

On February 21, 2014, the Fourth Circuit turned away a challenge by a private landowner to a taking of its property for an infrastructure project. Under Virginia Code secs. 33.1-119 and 120, the City of Chesapeake took immediate title to land owned and operated by a car wash company, depositing $2.15 million in proffered compensation with the court to be resolved in subsequent condemnation proceedings. The land was to be used for a road-widening project in conjunction with the City, VDOT, and the U.S. Department of Transportation. The car wash sued, arguing, inter alia, that the taking violated the Uniform Relocation Assistance and Real Property Acquisition Policies Act of 1970, 42 U.S.C. secs. 4601-4655 (“URA”), which requires federal agencies to follow certain policies in taking land. The Fourth Circuit, in Clear Sky Car Wash, LLC v. City of Chesapeake, ruled that the URA does not create any individually enforceable rights, nor any rights that could be enforced by reference through 42 U.S.C. sec. 1983. The Court also ruled that the car wash could not compel the Department of Transportation to enforce the URA through the Administrative Procedure Act. A link to the unanimous, published decision is here.


On January 31, 2014, the U.S. Court of Appeals for the Fourth Circuit ruled that a debt collection communication to a debtor stating that the creditor would assume a debt to be valid unless disputed in writing within thirty days was not compliant with the Fair Debt Collection Practices Act, specifically 15 U.S.C. sec. 1692g(a)(3) of that Act, which by its terms allows for the debtor to dispute a debt orally as well as in writing. The published per curiam opinion of the Court in Clark v. Absolute Collection Service, Inc. is here.


A three-judge panel of the U.S. Court of Appeals for the Fourth Circuit today affirmed the district court’s judgment that federal law exempts Fannie Mae and Freddie Mac from state and local taxes imposed on the transfer of real property. The Court also held that a federal exemption from state taxation is subject only to rational basis review, not strict scrutiny as the state governments argued. The decision in Montgomery County, Maryland v. Federal National Mortgage Association is here.



For more information, please contact James N. Markels at 202-457-1610 or by email at jmarkels@jackscamp.com.



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