WILLIAM THOMAS, et al., Plaintiffs, v. NETWORK SOLUTIONS, INC.and CIVIL ACTION NO NATIONAL SCIENCE FOUNDATION 1:97CV02412 (TFH) Defendants.
William H. Bode (113308)
James M. Ludwig (427884)
Daniel E. Cohen (414985)
BODE & BECKMAN, L.L.P.
1150 Connecticut Avenue, N.W.
Washington, D.C. 20036
Ralph C. Nash, Jr. (000023249)
1140 23rd Street, N.W.
Washington, D.C. 20037-1439
Dated: June 1, 1998
In the latest of its continuing efforts to flout the Registrants' Constitutional rights, Defendant National Science Foundation (NSF) has filed a Motion to Vacate Preliminary Injunction, Motion For Expedited Briefing Scheduled Thereon, and Motion to Dismiss Under Fed. R. Civ. P. 12(h) As Moot. 1/ NSF bases its motion to dismiss the Registrant's action on the recent passage of H.R. 3579, section 8003, entitled "Ratification of Internet Intellectual Infrastructure Fee" ("section 8003") which, according to NSF, legitimates the preservation tax which this Court ruled to be unconstitutional in Thomas v. Network Solutions Inc. and National Science Foundation, No. CIV. 97-2412 (TFH), 1998 WL 191205 (D.D.C. April 6, 1998) ("April 6 Order"). As demonstrated in the Registrants' opposition to NSF's motions however, NSF's contention that section 8003 has any effect on the unconstitutional tax at issue is meritless and altogether unsustainable. 2/ NSF's motions must accordingly be denied. In addition, the Registrants respectfully request that the Court award them the following further relief in order to achieve the expeditious and proper termination of this controversy:
(1) that the Court award the Registrants judgment as a matter of law on the purportedly "new" record which NSF claims has been created by the recent legislation;
(2) that the Court enter declaratory judgment decreeing that the unconstitutional tax cannot be ratified by retroactive delegation;
1/ NSF's reliance on Fed. R. Civ. P. 12(h)(3) as the procedural basis for its motion nonsensical. Rule 12(h)(3) deals with subject matter jurisdiction -- but NSF cannot credibly contend that the Court lacks subject matter jurisdiction over constitutional questions. Rather, NSF's motion is quite obviously nothing more than a renewed motion for summary judgment on a purportedly different factual record.
2/ The Registrants incorporate by reference the points and authorities in their June 1, 1998 Opposition as though fully set forth herein.
(4) that the Court schedule a trial date for the determination of damages as promptly as practicable.
Congress simply is not empowered under the Constitution to authorize this tax, either by prospective legislation or by retroactive "ratification." This conclusion flows inexorably from the bedrock principle of constitutional law that Congress cannot ratify conduct which it was not empowered to delegate in the first instance. While Congress may delegate to agencies (such as the IRS) the authority to collect taxes or enforce tax laws, it may never delegate the power to legislate, to enact tax laws. It can do so neither directly nor indirectly; neither by prospective legislation nor, as here, by retroactive "ratification" legislation. It is beyond dispute that Congress could not today authorize NSF and NSI to arbitrarily invent, impose, and collect $50 million in Internet taxes without any pre-existing intelligible standards. And, just as Congress is not empowered to delegate to Defendants the raw power to make tax laws today, it clearly has no greater power to "ratify" the self-governing taxing regime Defendants implemented yesterday.
Moreover, to the extent Congress may delegate the power to collect taxes, it must -- in order to properly do so without running afoul of the Constitution -- restrain any such delegation by intelligible standards. Because Congress never provided NSF with any standards or guidelines of any kind governing NSF's levying of the tax in question, the unconstitutionality of NSF's conduct is doubly apparent. As a matter of law (and common sense), section 8003 cannot
be construed to accomplish a "retroactive delegation" of such standards, which were required to be in place at the time NSF acted.
Even assuming, arguendo, that this unconstitutional tax could be legitimized through any form of ratification, the language in section 8003 is wholly ineffectual to satisfy the extraordinarily-demanding standards required to prove ratification of unconstitutional conduct. Most fundamentally, section 8003 makes no mention of any tax, much less an unconstitutional tax; it merely references a "fee" that was "unauthorized." This was no mere oversight. The preparers of this language knew full well that the 105th Congress -- which is in the business of lowering, not raising, taxes -- would not, under any circumstances, knowingly vote to ratify the first-ever tax on the Internet. But the preparers were too clever by half. As a straightforward issue of statutory construction, section 8003 says what it means and means what it says: it "ratifies and legalizes" a user "fee," and only a user fee. Congress, of course, is well aware of the distinction between a "fee" and a "tax," which has historically been clearly demarcated not only in dictionaries, but also in legislation and in a legion of Supreme Court decisions. Having approved ratification of (at most) a user fee, and having been given no opportunity even to consider approval or ratification of anything beyond a user fee, Congress has done nothing to cure or ratify the infirmity inherent in what this Court properly found to be an unconstitutional tax.
Third, and finally, NSF's assumption that section 8003 is a legitimate tax provision cannot be sustained under the Origination Clause of the Constitution, which requires that all such revenue-raising measures originate in the House of Representatives -- quite unlike section 8003, which was covertly hatched in conference, unbeknownst to the Congress at large.
On January 1, 1993, NSF entered a "Cooperative Agreement" with NSI under which NSI was to administer Domain Name Registration services on behalf of the government for a five- year period ending March 31, 1998, with provision for a six-month ramp-down period through September 1998. Under the original agreement, NSI was to be paid on a cost plus basis in an amount not to exceed approximately $5 million. In 1995 however, NSF and NSI entered into so- called "Amendment 4" which eliminated the cost-plus-fixed-fee basis for NSI's compensation and instead set forth a "revenue sharing concept" pursuant to NSI's proposal as follows:
Network Solutions proposes, as an alternative to the current cost-plus-fixed-fee basis of reimbursement a revenue sharing concept. Specifically, we propose that, of the revenue generated by the imposition of fees for registration services, Network Solutions pay 30 percent of the amount collected directly to the National Science Foundation and retain 70 percent.
See 5-5-95 letter (Ex.1). 3/ Without any public notice or opportunity for comment, NSF accepted NSI's "revenue sharing" scheme in September 1995 through Amendment 4, in particular, its proposal to impose a 30% tax on every Internet domain name Registrants. 4/ To date, Defendants have collected approximately $60 million in Internet taxes. (Ex. 2).
3/ In a later presentation from NSI to NSF, it was acknowledged that the 30% was a tax ("Domain Name Registrants Who Have Paid The Fee Might Complain About Being Taxed"). (Ex. 2).
4/ Plaintiffs previously demonstrated that NSI and NSF secretly agreed to the "revenue sharing" plan specifically to avoid public scrutiny of their back-room Internet tax kickback deal. As the Court observed in addressing "the secretive nature in which Amendment 4 emerged," "plaintiffs present substantial allegations that defendants' hands are dirtied by illegal dealings." Id * 16, n.
B. The Court's Ruling That the Tax was Unconstitutional
By Memorandum Opinion dated April 6, 1998, ("April 6 Order") this Court ruled that the
tax, having been created by an executive agency (NSF) and its contractor (NSI), rather than
Congress, "is illegal under Article I, Sec. 8 of the Constitution," reasoning:
It is clear that only Congress has the power to levy taxes. U.S. Const., Art. I, Sec. 8 [Citations omitted]. It is undisputed that Congress did not itself impose the Preservation Assessment-NSF and NSI devised it in Amendment 4 to the Cooperative Agreement.
The Preservation Assessment is clearly a tax . . .There is no dispute that the assessment is involuntary -- it is automatically charged to every domain registration, and registrants cannot opt out of the charge. Further, NSI collects the assessment for the government's use on public goals, and not in any way to defray regulatory cost.>
Therefore, the Court finds that the Preservation Assessment is not program income. It bears all the marks of a tax, and none of program income. The fact that NSI collects the assessment on behalf of NSF collecting it directly, does not serve to launder the funds; it is still a tax, collected without Congressional approval. As such, it is illegal under Article I, §8 of the Constitution.
April 6 Order at *8. 5/
C. The Alleged Ratification of the Unconstitutional Tax
On March 27, 1998, H.R. 3579 -- "A bill making emergency supplemental appropriations for the fiscal year ending September 30, 1998, and for other purposes." – was
5/ The Court further rejected NSF's strenuous attempts to portray the tax as "program income," immune from Constitutional scrutiny under the Federal Grant and Cooperative Agreement Act, 31 U.S.C. §§ 6301et seq. and/or OMB Circular A-110. The Court of course concluded in its April 6, 1998 ruling that the tax was not authorized "program income," but was an unconstitutional tax.
introduced in the House Appropriations Committee. The bill prominently addressed emergency aid to Bosnia, along with other appropriations issues. More notably however, the bill, in no way, shape, or form addressed the Intellectual Infrastructure Fund. See Ex. 4 (History of H.R. 3579) 6/ On March 31, 1998, H.R. 3579 was reported from the House Appropriations Committee and passed by the House of Representatives. When the House voted on H.R. 3579, it was wholly devoid of any language mentioning or relating to the Intellectual Infrastructure Fund. On the same day, the Senate passed S. 1768. Like H.R. 3579, S. 1768 contained no language referring or relating to the subject of the Intellectual Infrastructure Fund.
On the afternoon of April 28, 1998, a joint conference committee met for the first time to address the bill. At approximately 6:30 p.m. on the following day -- the end of the day after which the committee completed most of its work -- a Senate staffer introduced the language of section 8003 for insertion into the Conference Report. (Section 8003 is attached as Exhibit 5 hereto). The Joint Explanatory Statement of the Committee of Conference explicitly notes that section 8003 was "new[ly]" included at the conference level, reciting as follows:
The conferees have included a new section under 'General Provisions' which would serve to ratify and confirm Congressional intent with respect to the collection and use of funds by the National Science Foundation (NSF). The explosive growth of the commercial segment of the Internet resulted in the collection of program fees in excess of the amount projected. These were in turn
6/ On March 30, 1998, the House Rules Committee passed a rule providing for one hour of general debate on H.R. 3579. The rule provided that the bill shall be considered as read. The rule also waived points of order against consideration of the bill for failure to comply with several House rules: (1) Clause 2(1)(6) of rule XI (requiring a three-day layover of the committee report); (2) Clause 7 of rule XXI (requiring the three-day availability of relevant printed hearings and reports on general appropriations bills); and (3) section 306 of the Budget Act of 1974 (prohibiting consideration of legislation within the jurisdiction of the Budget Committee unless reported by that committee).
held in an 'Intellectual Infrastructure Fund' until the Congress, as part of the fiscal year 1998 Appropriations Act, determined to use these funds for NSF's work on 'Next Generation Internet' activities. This action by the Congress has since been held up by proceedings in the federal court system, and the language included in this new section will statutorily correct the lack of authority perceived by the court. The conferees would not [sic] in this regard that the federal judge in this case literally invited this action by the Congress, which would do nothing more than permit the NSF to proceed with the use of these funds as intended by Public Law 105-65.
Ex. 6 (emphasis added). H.R. 3579, with its newly included eleventh hour section 8003, thus emerged from the committee reading, for the first time, as follows:
RATIFICATION OF INTERNET INTELLECTUAL INFRASTRUCTURE FEE. (a) The 30 percent portion of the fee charged by Network Solutions, Inc. betweenSeptember 14, 1995 and March 31, 1998 for registration or renewal of an Internet second-level domain name, which portion was to be expended for the preservation and enhancement of the intellectual infrastructure of the Internet under a cooperative agreement with the National Science Foundation, and which portion was held to have been collected without authority in William Thomas et al. v. Network Solutions. Inc. and National Science Foundation, Civ. No. 97-2412, is hereby legalized and ratified and confirmed as fully to all intents and purposes as if the same had, by prior Act of Congress, been specifically authorized and directed.
Ex. 4 (emphasis added).
On April 30, 1998 the House considered the revised H.R. 3579, and, following a short debate -- that did not reflect House awareness of section 8003 7/ -- the House passed H.R. 3579.
7/ The conference report was never read in the House, as the House Committee on Rules passed a procedural motion that resulted in the conference report being considered as read. In addition, the House Committee on Rules passed rules that effectively precluded any meaningful debate on the revised H.R. 3579. For example, one rule passed expressly stated that "All points of order against the conference report and against its consideration are waived." Thus, although Members of the House were allowed to speak about the revised H.R. 3579, all speech about the revised H.R. 3579 was "for purposes of debate only." Consequently, no Member of the House could move to delete section 8003.
On the same day, following a short debate, 8/ the Senate passed the revised H.R. 3579. On May 1, 1998, the President signed the revised H.R. 3579 as Public Law [Pub. L. No.105-174, 112 Stat. 58].
Before the ink on H.R. 3579 had even dried, NSF commenced a public announcement campaign claiming that Congress had ratified the unconstitutional preservation tax. See NSF May 2, 1998 Press Release (Ex. 3). Immediately upon learning about NSF's claim however, Representative Bill Archer (R-Tex), the Chairman of the House Committee On Ways and Means, sent a letter to Representative Robert Livingston (R-La) (the originator of the Bill) expressly discrediting the notion that Congress had passed any tax in Section 8003, much less ratified an unconstitutional tax. (See Ex. 7). Chairman Archer specifically pointed out that this Court, in its April 6, 1998 Opinion, "noted that Congress had not provided NSF with the authority to impose this tax and stated that if Congress intended to authorize these actions, it must pass legislation that 'clearly recognizes the unauthorized tax and specifically states that the tax is ratified."' Ex. 7 (quoting April 6 Order at 17 ) (emphasis added). The Chairman first took issue with the procedure by which section 8003 was covertly passed:
Section 8003 is an attempt to validate, retroactively, this unauthorized imposition and collection of a tax by a Federal agency. Such a provision was in neither the
8/ Senator Lott (R.-Miss.) asked for, and received, unanimous consent that (1) the reading of the conference report be waived; (2) that debate be limited to one hour; and (3) that the "Senate proceed to a vote on the adoption of the conference report, with no intervening action or debate." Senator Stevens then filed the conference report with the Senate. Thus, just as in the House, the conference report was never read in the Senate, no meaningful Senate debate took place on the revised H.R. 3579, and no motion to delete section 8003 could be made.
House bill nor Senate amendment. Thus, in addition to constituting legislating on an appropriations bill, the provision was outside the scope of conference. The inclusion of this attempted validation, with little debate and no consultation with the Committee on Ways and Means (which has exclusive jurisdiction over tax and tariff measures) is highly improper.
Id. (emphasis added). Chairman Archer then made clear that, had section 8003 even purported to validate a tax, he would not have supported it:
I am committed to reducing taxes. not imposing them. I am especially opposed to a retroactive imposition of a tax. Moreover, I am very troubled about the message that this sends to Federal agencies. Several Federal agencies are in the process of imposing or designing "fees" or "contribution" mechanisms that appear to be, in fact, taxes. Actions such as this can only embolden them.
Id. (emphasis added).
On May 14, 1998, Ways and Means Committee Member Jon Christensen (R-Neb.) likewise disabused any notion that section 8003 ratified an unconstitutional tax in a letter he wrote to Chairman Archer (Ex. 8 hereto). Rep. Christensen specifically confirmed that section 8003 did not, and could not, possibly ratify what this Court ruled to be an unconstitutional tax:
[The] Court held that the "Preservation Assessment" imposed by Network Solutions, Inc. was an unconstitutionally imposed tax. Section 8003 of H.R. 3579, making emergency supplemental appropriations for the fiscal year ending September 30, 1998 does not in any way. ratify such a tax on domain name registrations on the Internet. Section 8003 addresses only "fees" which are properly distinguished from "taxes" in the Court's decisions. Neither I nor the Ways and Means Committee knew of or considered this provision. I assume we were not advised of its consideration because the provision concerned the authorization of user fees not taxes.
(Emphasis added). Rep. Christensen added:
Any taxes, whether on the Internet or otherwise, must be subject to a carefully considered deliberative process through the Ways and Means and Senate Finance Committees. This is particularly so in the context of all issues impacting Internet and electronic commerce taxation. Because section 8003 of H.R. 3579 involves only a fee. not a tax, this Congressional process was not followed.
Id. (emphasis added).
The Internet Tax Freedom Act Is Contemporaneously Approved
At the same time section 8003 was secretly being inserted into the emergency appropriations bill in conference, the Internet Tax Freedom Act was already pending in Congress that proposed to ban the very kind of taxation -- namely, taxing of the Internet -- that section 8003 is purported to ratify. On May 14, 1998, the Internet Tax Freedom Act (H.R. 3849) was unanimously approved by the House Commerce Committee (by a 41-0 vote). 9/ This is clear confirmation that Congress would not have, and did not, knowingly vote to ratify any tax on the Internet when they voted on the emergency appropriations act in question.
It is well established that summary judgment is appropriate if there is no genuine issue of material fact and the moving party is entitled to judgment as a matter of law. See April 6 Order at *4 (citing Fed. R. Civ. P. 56); Celotex v. Catrett, 477 U.S. 317, 322 (1986). There is a genuine issue of fact only if there is such evidence that a reasonable jury could return a verdict for the non-moving party; a fact is material only if it might affect the outcome of the suit under applicable law. April 6 Order at *4 (citing Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 255 (1986)).
9/ The original Internet Tax Freedom Act (H.R. 1054) that gave rise to H.R. 3849 was originally introduced in the House by Congressman Cox (R-CA) on March 13, 1997. On July 11, 1997, the House Commerce Committee, Subcommittee on Telecommunications, Trade and Consumer Protection, held hearings on the bill. Subsequently, on October 9, 1997, this Subcommittee, by voice vote, reported this bill favorably to the full House. Shortly thereafter, on November 4, 1997, the Senate Commerce, Science and Transportation Committee, after holding hearings, passed the Senate version of this bill and reported it favorably to the full Senate.
The standards for declaratory judgment are equally well-known. Pursuant to 28 U.S.C. § 2201, the Court is empowered "to declare the rights and legal relations of any interested party seeking such a declaration, whether or not further relief is or could be sought." Id.; see also Fed. R. Civ. P 57, Advisory Committee Notes ("A declaratory judgment is appropriate when it will 'terminate the controversy' giving rise to the proceeding.").
As demonstrated below, the Registrants are entitled to summary judgment and/or declaratory judgment on the grounds that:
• Congress is not empowered to delegate the taxing power to NSF; nor can it retroactively confer such power through ratification.
• Even assuming, arguendo, that Congress had the power to ratify the unconstitutional ratification tax, the purported ratification legislation cited by NSF here fails to satisfy the extraordinarily heavy burden required to demonstrate such asserted ratification.
• The legislation is ineffectual in any event because it is violative of the Origination Clause of the U.S. Constitution.
I. THE RETROACTIVE DELEGATION OF CONGRESS'
TAXING POWER TO NSF BY RATIFICATION IS
PROHIBITED BY THE UNITED STATES CONSTITUTION
It is a fundamental precept of Constitutional law that Congress can delegate authority only if that authority is in fact delegable. City of New York v. Clinton, 985 F. Supp. 168, 181 (D.D.C. 1998). It is a corollary principle that Congress cannot ratify conduct which it was not empowered to authorize in the first instance. Here, NSF seeks to subvert these fundamental constitutional canons by contending that Congress is empowered to authorize, through ratification legislation, Defendants' invention, imposition and collection of the preservation tax without any pre-existing statutory authorization or guidelines. NSF's proposition fails as a
matter of law. Congress simply does not have the authority to delegate the raw power to an agency to make tax laws. It cannot do so through prospective legislation, and it just as certainly cannot do so through retroactive "ratification" legislation. As demonstrated below, to the extent any taxing authority can be delegated, it must be accompanied by intelligible guidelines and restraints on the power so delegated. Thus, section 8003 is ineffectual as a matter of law, precisely because Congress cannot ratify either a nondelegable transfer of taxing power to NSF, nor can it ratify a delegation that was devoid of the required intelligible guidelines when the tax was devised by Defendants. In view of these inescapable principles of Constitutional law, NSF's unilateral and unfettered abuse of the taxing power is simply incurable by any form of ratification.
As this Court so recently confirmed: "Congress can delegate authority only if that authority is in fact delegable . . ." Clinton, 985 F. Supp. 168 at 181. The Court further re-confirmed the fundamental principle that "Congress may not . . . delegate its inherent lawmaking authority" to either of the other two branches of government. Id. at 179 (citing Loving v. United States, 517 U.S. 748 (1996) ("[t]he lawmaking function belongs to Congress . . . and may not be conveyed to another branch or entity"); and citing Field v. Clark, 143 U.S. 649, 692 (1892) ("That Congress cannot delegate legislative power to the president is a principle universally recognized as vital to the integrity and maintenance of the system of government ordained by the Constitution.")). 10/
10/ See also U.S. v. Best, 476 F. Supp. 34, 38 (D. Colo. 1979) ("there can't be delegation of the naked right to legislate"); Avoyelles Sportsmen's League. Inc. v. Marsh, 715 F.2d 897, 916 (5th Cir. 1983) ("Congress is not permitted to abdicate or transfer to others the
"The nondelegation doctrine is rooted in the principle of separation of powers that underlies our tripartite system of government."" Mistretta v. United States, 488 U.S. 361, 380 (1989). The doctrine is founded on the theory that Congress alone can exercise "[t]he essentials of the legislative function, [which] are the determination of legislative policy and its formulation and promulgation as a defined and binding rule of conduct." Yakus v. United States, 321 U.S. 414, 424 (1944). "Formulation of policy is a legislature's primary responsibility, entrusted to it by the electorate." United States v. Robel, 389 U.S. 258, 276 (1967). 12/
The courts have not shrunk from their duty to invalidate attempts by Congress to abdicate its inherent legislative powers. Most recently, in City of New York v. Clinton, 985 F.Supp. 168 (D.D.C. 1998), this Court struck down the Line Item Veto Act, reasoning:
The Line Item Veto Act impermissibly crosses the line between acceptable delegations of rulemaking authority and unauthorized surrender to the President of
essential legislative functions with which it is vested"); Star-Kist Foods. Inc. v. United States, 275 F.2d 472, 480 (C.C.P.A. 1959) ("Congress cannot abdicate its legislative function and confer carte blanche authority on the President . . .").
11/ In writing about the principle of separated powers, Madison stated, "No political truth is certainly of greater intrinsic value or is stamped with the authority of more enlightened patrons of liberty." The Federalist No.47, at 324 (J. Cooke ed. 1961). Madison later wrote, "But the great security against a gradual concentration of the several powers in the same department, consists in giving to those who administer each department, the necessary constitutional means, and personal motives to resist the encroachments of the others." The Federalist No. 51, at 349 (J. Cooke ed. 1961).
12/ The salutary purpose of separating and dividing the powers of government was to "diffuse power the better to secure liberty." Youngstown Sheet & Tube Co. v. Sawyer, 343 U.S. 579, 635 (1952). The Framers "regarded the checks and balances that they built into the tripartite Federal Government as a self executing safeguard against the encroachment or aggrandizement of one branch at the expense of the other." Buckley v. Valeo, 424 U.S. 1, 122 (1976).
an inherently legislative function. namely. the authority to permanently shape laws and package legislation.
at 181 (emphasis added). 13/
Similarly, in Panama Ref. Co. v. Ryan, 293 U.S. 388, 430 (1935), the Supreme Court struck down Congress' attempt to delegate to the president the power to prohibit interstate commerce of petroleum:
[T]here are limits of delegation which there is no constitutional authority to transcend. We think that Sec. 9 (c) goes beyond those limits. As to the transportation of oil production . . . the Congress has declared no policy, has established no standard, has laid down no rule. There is no requirement, no definition of circumstances and conditions in which the transportation is to be allowed or prohibited. If Sec 9 (c) were held valid, it would be idle to pretend that anything would be left of limitations upon the power of the Congress to delegate its lawmaking function. The reasoning of the many decisions we have reviewed would be made vacuous and their distinctions nugatory. Instead of performing its law-making function the Congress could at will and as to such subjects as it chooses transfer that function to the President or other officer or to an administrative body. The question is not of the intrinsic importance of the particular statute before us, but of the constitutional processes of legislation which are an essential part of our system of government.
Likewise, in Schechter Poultry Corp. v. United States, 295 U.S. 495(1935), the Supreme Court struck down Congress' attempt to delegate the broad authority under the National
13/ The courts are obligated to strike down such wholesale attempts by Congress to delegate its fundamental powers even where Congress has attempted to set forth intelligible guidelines supporting the delegation:
It is irrelevant whether the Line Item Veto Act provides intelligible principles in its delegation of authority to the President because, as discussed above, the Act impermissibly attempts to transfer non-delegable legislative authority to the Executive Branch.
Clinton, 985 F.Supp. at 181.
Industrial Recovery Act to approve "codes of fair competition" to govern all business subject to federal authority:
Congress cannot delegate legislative power to the President to make whatever laws he thinks may be needed or advisable for the rehabilitation and expansion of trade or industry *** Congress is not permitted to abdicate or to transfer to others the essential legislative functions with which it is thus vested *** [T]he code-making authority conferred is an unconstitutional delegation of legislative power."
295 U.S. at 537-38, 541-42 (emphasis added).
In view of the foregoing authorities, because Congress alone has the power to make tax laws, see April 6 Order at *4, 14/ Congress could never delegate to the defendants the raw power to devise, levy and collect an Internet tax as they see fit. 15/ And, just as certainly Congress could never have delegated the power to defendants "to permanently shape laws and package legislation" in the first instance; it cannot delegate such unfettered power today; either in the form of prospective legislation or through the expedient of "ratification" legislation.
Compounding the absurdity of NSF's position is the indisputable fact that it was actually NSI -- a private contractor -- that proposed the passage, and the amount, of the Internet tax in the first instance. See Ex. 1. Schechter soundly rejects the outlandish notion that agencies could sub-delegate legislative power to private entities:
14/ Citing National Cable Television Ass'n. Inc. v. United States, 415 U.S. 336, 340 (1974), "taxation is a legislative function" and Congress is the "sole organ for levying taxes." Bell Atlantic Tel. Cos. v. FCC, 24 F.3d 1441, 1445 (D.C. Cir. 1994), the Court of Appeals for the District of Columbia Circuit likewise observed that only Congress has the power to raise revenue.
15/ The constitutional proscription against delegation of Congress' taxing power resonates over perhaps any other because, as Chief Justice Marshall put it, "an unlimited power to tax involves, necessarily, a power to destroy." M'Culloch v. Maryland, 17 U.S. (4 Wheat.) 316, 327 (1819).
[W]ould it be seriously contended that Congress could delegate its legislative authority to trade or industrial associations or groups so as to empower them to enact the laws they deem to be wise and beneficent for the rehabilitation and expansion of their trade or industries? Could trade or industrial associations or groups be constituted legislative bodies for that purpose because such associations or groups are familiar with the problems of their enterprises? And could an effort of that sort be made valid by such a preface of generalities as to permissible aims as we find in section 1 of title I? The answer is obvious. Such a delegation of legislative power is unknown to our law. and is utterly inconsistent with the constitutional prerogatives and duties of Congress.
Schechter, supra. at 537 (emphasis added).
Intelligible Guidelines Or Standards
Although Congress may not delegate its inherent legislative powers, it is "recognized . . . that the separation-of- powers principle, and the non-delegation doctrine in particular, do not prevent Congress from obtaining the assistance of its coordinate branches." Mistretta v. United States, 488 U.S. 361, 372 (1989). 16/ In demarcating the line between permissible "assistance" and impermissible abdication of legislative power, the Supreme Court has stated:
The legislature cannot delegate its power to make the law, but it can make a law to delegate a power to determine some fact or state of things upon which the law makes, or intends to make, its own action depend.
Field v. Clark, 143 U.S. 649, 694 (1892) (emphasis added). As the Court of Appeals for the District of Columbia Circuit put it:
[Congress] may . . . lay down policies and establish standards, leaving to selected instrumentalities the making of the subordinate rules within prescribed limits, the filling up of the details, and the determination of the facts to which the policy as declared by the Legislature applies.
16/ Thus, the Courts have commonly upheld delegations of authority to agencies to promulgate administrative rules such as, e.g., motor vehicle regulations. See, e.g., LaForest v. Board of Comm'rs., 92 F.2d 547 (D.C. Cir.) (delegation of power to prescribe traffic regulations upheld), cert. denied, 302 U.S. 760 (1937).
Franklin TP. v. Tugwell, 85 F.2d 208, 217 (D.C. Cir. 1936). 17/
In a particularly apposite decision, the court in Larabee Flour Mills Co. v. Nee, 12 F. Supp. 395 (W.D. Mo. 1935) declared certain rates established by the Secretary of Agriculture on agricultural commodities to be unconstitutional for want of appropriate congressional guidelines. The court succinctly provided a rationale demonstrating not only why NSF could not properly be authorized to levy taxes in the first instance, but also why any such purported delegation must fail for lack of intelligible standards:
What Congress cannot do is to delegate to an administrative official not only the power to fix a rate of taxation according to a standard. but also the power to prescribe the standard. Congress must prescribe the standard and it must be a real standard. an intelligible standard. a definite standard. It must be like a yardstick which is three feet long by whomsoever it is used, not one which in the hands of one man is three feet long, in the hands of another two feet long and in the hands of a third four feet long, elastic at the will of the individual applying it.
Id. at 403 (emphasis added). 18/
17/ Plainly, the power to enact a tax on domain name registrations cannot be passed off as a "filling up of the details" or "the making of subordinate rules."
18/ Similarly, in Franklin, 85 F.2d at 217, the Court of Appeals for the District of Columbia Circuit struck down the Emergency Relief Appropriation Act authorizing the President to spend money on housing projects:
[I]t appears that, insofar as this case is concerned, there is a clearly unconstitutional delegation of legislative power. *** There is nothing in the act directly prescribing the powers or duties of the President with respect to housing *** His discretion is "virtually unfettered." He is at liberty to set up agencies and to provide such rules of conduct and fix such standards as he may deem proper. *** Considering what is here attempted to be accomplished . . . we repeat the significant words of Mr. Justice Cardozo [concurring in Schechter Poultry Corp. v. United States, 295 U.S. 495, 553 (1935)] . . . "This is delegation running riot."
Id. at 219.
In the case at bar, NSF imposed the tax at issue in a delegation vacuum, wholly devoid of any standards, much less intelligible ones. Indeed, there is no evidence that Congress was ever even aware that defendants had legislated their own tax regime. Moreover, to date, defendants have not even attempted to provide any rational basis for the 30% tax they decided to impose. 19/ In sum, because Congress could not delegate taxing authority to NSF in the first place in the absence of guidelines, it has no greater power to rubber-stamp such an unguided tax regime after the fact. Indeed, taken to its logical conclusion, such a proposition would embolden executive agencies at large to begin their own autonomous tax regimes, turning the Constitution on its head.
D. Congress Cannot Ratify Taxes which it Could Not
Have Empowered NSF To Impose In The First Instance
Congress cannot "ratify" a delegation of power today which it could not constitutionally have delegated in the first instance yesterday. As this Court has pointedly observed: "Congress' 'indirect at tempt to accomplish what the Constitution prohibits . . . accomplishing directly cannot stand."' Clinton v. city of New York 985 F. Supp. 168, 179 (D.D.C. 1998) (quoting U.S. Term Limits. Inc. v. Thornton, 514 U.S. 779, 829 (1995) (Arkansas term limits Amendment
19/ In fact, because of their monopoly over domain name registration, the sky was the proverbial limit on the amount of fees and taxes Defendants could impose -- as this Court recognized in putting the following questions to NSF counsel:
Is there any restraint at all on this Cooperative Agreement ability to do this, NSF? Because they said this is a real great market, we want to charge a thousand dollars for registration, and you have got 500 million dollars in the bank at this point. Is there any restraint at all that they pay $10,000 for registration?***
March 17, 1998 Tr. at 28. NSF's counsel was constrained to admit that there were no limits at law on the assessments it decided to charge. Id.
struck down because it is unlawful "effort to dress eligibility [to run for Congress] to stand for Congress in ballot access clothing") (citation omitted); see also Harman v. Forssenius, 380 U.S. 528, 540 (1965) ("constitutional rights would be of little value if they could be . . . indirectly denied" (citation omitted)).
Not surprisingly, the courts have held that if Congress cannot constitutionally delegate to an agency the unbridled power to impose taxes in the first instance, Congress clearly has no separately endowed power to ratify such taxes after the fact. In Larabee Flour Mills Co. v. Nee, 12 F. Supp. 395 (W.D. Mo. 1935), the court ruled that Congress could not ratify certain rates implemented by the Secretary of Agriculture where, as here, such rates had been implemented in the absence of constitutionally-required guidelines or standards. Id. at 404-05. As here, Congress purported (after-the-fact) to ratify the tax. Id. Also as here, the government argued that the illegal taxes were legitimated by the ratification on the basis of the Supreme Court's ruling In United States v. Heinszen, 206 U.S. 370 (1907). The Court made quick work of this plainly counterintuitive argument, however:
Thus is presented the question whether Congress can 'legalize' the rates which the Secretary had fixed and which were not legal when and after they were fixed by him.
In United States v. Heinszen & Co . . . it was ruled by the Supreme Court that Congress would ratify and so legalize tariff duties for the Philippine Islands theretofore established by the President without authority. In the opinion in that case it was said: 'That where an agent, without precedent authority, has exercised, in the name of a principal, a power which the principal had the capacity to bestow, the principal may ratify and affirm the unauthorized act, and thus retroactively give it validity when rights of third persons have not intervened, is so elementary as to need but statement.'
Learned counsel for plaintiffs of course do not question the force of this decision, but they contend it is inapplicable. Congress had the power, they say, in the first
instance, to authorize the President to fix tariff duties for the Philippines, and therefore, under the principle stated by the Supreme Court, to ratify what he did. But Congress did not have the power they ague, to authorize the Secretary to fix processing tax rates and therefore cannot ratify the rates he fixed: the principal cannot ratify what in the first instance it could not have authorized.
The argument is sound. It cannot be answered. Congress lawfully could have delegated to the President the power to legislate as to tariff rates for the insular possession of the United States (and that was the ground upon which the decision in the Heinszen Case was based), but it could not lawfully delegate to the Secretary of Agriculture the power to legislate (including the power to fix taxing rates! for the United States. Therefore. since the power of ratification by Congress is governed by the law of agency. it cannot legalize taxing rates which. in the first instance. it could not have authorized the Secretary to fix.
Id. (emphasis added). The result necessarily obtains here as well. Congress did not have the power to authorize NSF and NSI to fix Internet taxes in the first place "and therefore cannot ratify the rates [they] fixed; the principal cannot ratify what in the first instance it could not have authorized." Id. at 404. "The argument is sound. It cannot be answered." Id. at 405.
NSF's "ratification" argument, when taken to its logical conclusion, implies that Congress could have passed legislation expressly granting NSF and its private contractor NSI the unfettered power to secretly devise, impose, and enforce whatever Internet tax they deemed fit - whether it be $30 or $500 or $5000 per registration, or $15 or $1500 per renewal. Because Congress manifestly could not have delegated that authority, it also could not ratify a purported delegation of that authority.
NSF is now in the wholly-untenable position of claiming that section 8003 accomplishes a "retroactive delegation" -- a patently disingenuous notion that not only defies common sense, but also concedes that no intelligible guidelines were in place when NSF acted. In Timberland
Paving & Constr. Co. v. United States, 8 Cl. Ct. 653,660 (1985), the Court of Claims made these very points in rejecting the contention that a contracting officer, who "had no authority to serve as contracting officer on plaintiff's contract" at the time when he acted on it, could somehow be provided that authority retroactively:
. . . Indeed, defendant seems tacitly to concede that Mr. Powers lacked actual authority, on April 23, 1980, to act as contracting officer on plaintiff's contract. It urges, rather, that a "retroactive delegation of authority," or a "ratification" of Mr. Powers' "assertion of authority," occurred, and that the termination for default should accordingly be upheld on one of these grounds. The notion is unsound.
Contracting officers are authorized to act within the limits of the authority delegated to them . . . They are not to be designated retroactively, and after the fact . . . The court cannot accept the government's retroactive delegation (or designation) argument.
The Court added, moreover, that "Defendant's assertion that it knows nothing that 'would prohibit a retroactive delegation of authority' turns the question on its head." Id. at 660. In sum, because Congress has no constitutional authority today to delegate to NSF the power to devise a preservation tax, it cannot constitutionally ratify NSF's "enactment" of this tax.
II. SECTION 8003 ITSELF CANNOT BE CONSTRUED TO RATIFY THIS TAX
As demonstrated above, Congress simply does not have the power to ratify or in any way rectify the unconstitutional tax at issue. But even if it did, the ratification purportedly effected by section 8003 would nevertheless be ineffectual as a matter of law. By its plain terms, section 8003 "legalizes and ratifies" a "fee," not a "tax." Thus, as a fundamental matter of statutory construction, the purported ratification touches on nothing more than the status of the Preservation Assessment as a fee. In short, its illegitimacy as an unconstitutional tax is in no way
addressed, much less expressly ratified, by section 8003. Indeed, NSF can offer nothing more than raw conjecture that Congress ratified, impliedly, something other than what the legislation says, expressly. But NSF's assumption that section 8003 impliedly addresses and legalizes an unconstitutional tax -- a tax that the legislation so studiously avoids mentioning by name -- is defeated by the fundamental principle that "it is generally assumed that Congress expresses its purposes through the ordinary meaning of the words it uses ...." Escondido Mut. Water Co. v. La Jolla Band of Mission Indians, 466 U.S. 765, 772 (1984). In view of this elementary rule of construction, NSF's contention that the word "fee" is synonymous with the word "tax" is manifestly untenable.
It can hardly be disputed that the word "fee" has a well-settled meaning that is altogether distinct from that of the word "tax." The American Heritage Dictionary defines "fee" as "a charge fixed by an institution or by law," such as "a payment for professional or special service." American Heritage Dictionary, New College Edition (1979). "Tax," by contrast, is defined as "a contribution for the support of a government required of persons, groups or businesses within the domain of that government." To be sure, the Supreme Court has vigilantly maintained the bright-line distinction between these two terms. Thus, in the Court's recent decision in United States v. United States Shoe Corp., 118 S. Ct. 1290, 1295-96 (1998), the Court rejected the argument that the tax at issue in that case was a proper user "fee" instead of an unconstitutional export "tax," admonishing:
"[W]e are 'to guard against . . . the imposition of a [tax] under the pretext of fixing a fee."'
It is equally axiomatic that where the provision in controversy is hidden within an appropriations bill and where the intent of Congress to accomplish a particular result (here, the purported ratification of a tax) is unclear, the plain language of the statute must control. See West River Elec. Ass'n. Inc. v. Black Hills Power & Light Co., 918 F.2d 713, 719 (1990) (in appropriations bill, "indefinite congressional expressions cannot negate plain statutory language").
Here the "plain statutory language" of section 8003 addresses nothing beyond a fee, and has no effect on the tax at issue. In other words, while the Senate staffers responsible for preparing section 8003 succeeded in not setting off any congressional tax alarm-bells 21/ that would be triggered by the word "tax," they merely ensured by this deception that section 8003 could not do what they wanted it to do -- ratify the unconstitutional tax.
20/ Accord Federal Energy Administration v. Algonquin SNG. Inc., 426 U.S. 548, 560-61 (1976) (license fees held not "taxes"); National Cable Television Ass'n. Inc. v United States, 415 U.S. 336, 340 (1974) (tax, as distinguished from "fee," is a payment imposed for public purpose); San Juan Cellular Tel. Co. v. Public Serv. Comm'n, 967 F.2d 683, 687 (1st Cir. 1992) (periodic charge imposed upon firm providing cellular telephone service by Public Service Commission held "regulatory fee" rather than a tax).
21/ Obviously recognizing that the 105th Congress would not knowingly ratify the first-ever tax on the Internet, the congressional staffers who drafted section 8003 were careful not to use the politically-suicidal word "tax" in the bill. Not only would it have incited the immediate censure and aggressive involvement of the House Ways & Means and Senate Finance Committees (which have jurisdiction over tax issues), but it would also have instantly aroused the attention and robust debate by the entire Congress. In short, informing Congress openly that it would be considering ratification of a tax -- and an unconstitutional one, at that -- would certainly have doomed the ratification effort.
This Court's rulings have clarified, with exquisite precision, the pivotal difference between a "fee" and a "tax," and confirm that section 8003 fails to ratify the unconstitutional preservation tax. In describing the litigants' diametrically-different views, the Court observed: "Plaintiffs [Registrants] argue that the Preservation Assessment is a tax; Defendants argue that it is a fee, which may be collected without congressional action, or that it is 'program income' . . . Id. at *5. In the Court's April 6 Order, the Court held that "the Preservation Assessment is not a regulatory fee, but is instead a tax on registration." Id. (emphasis added). In fact, the pertinent portion of this Court's opinion is actually, and ironically, entitled "Tax or Fee." Id.
Based on this clear distinction, this Court observed that "[legislation can effect a ratification only if Congress clearly recognizes the unauthorized tax and specifically states that the tax is ratified." April 6 Order at *8 (emphasis added). Significantly, in rejecting NSF's contention that a prior appropriations measure had effected a ratification of the tax, the Court concluded that a ratification is ineffectual unless it meets two cardinal requirements -- first, the "clear recognition of the tax;" and second, "specific ratification language ...." While the drafters of section 8003 were careful to meet the second prong of the test by using boilerplate ratification language, they were equally careful not to meet the first and far more important prong of the test -- because they knew, quite obviously, that informing Congress that it would be voting on a tax would guarantee that section 8003 would not be passed. 22/
22/ The bill's sweeping "incorporation-by-reference" of the caption and docket number of the "Thomas" case in purporting to pinpoint the unconstitutional tax renders NSF's ratification argument all the more tenuous. As noted above, in at least one of the Court's decisions in "Thomas," the Court expressly clarified the distinction between a "tax" and a "fee" -- a distinction that section 8003 glibly disregards.
In this irregular and improper circumstance in which the purported ratification language was inserted into the bill in conference, Congress' awareness of what it was voting was necessarily limited to, and derived from, what the language of section 8003 says on its face. See Christensen Letter (Ex. 8) (expressing Ways and Means Committee Member's understanding that he was voting only to ratify a fee); Archer letter (Ex. 7) (strongly objecting to purported blessing of a "tax imposed . . . without any legislative authority.") NSF's indefensible position here boils down to the proposition that the general reference to this litigation in section 8003 justifies imputing to each Member of Congress, prior to voting on the bill, precise knowledge of the Registrants' allegations and all of this Court's rulings and decisions in this matter. NSF's assumption, in other words, is that all of Congress had sifted through this Court's orders, and divined that the April 6 Order was apparently the one being referenced in section 8003, and had read that April 6 Order -all of this in the matter of hours between section 8003's appearance in the conference report at 9:30 on April 30, and when the vote took place after 4 p.m. on the same date. Such an assumption is as fanciful as a matter of fact as it is unwarranted as a matter of law. See Conroy v. Aniskoff, 507 U.S. 511, 526 (1993) (Scalia, J., concurring) ("it is already an extension of the normal convention to assume that Congress was aware of the precise reasoning (as opposed to the holding) of earlier judicial opinions . . .").
Even accepting arguendo such an absurdity, imputing to Congress at large precise knowledge of this Court's April 6 Order, far from clarifying or resolving any ambiguity, merely serves to deepen it. This Court's April 6 Order expressly took note of the clear distinction between a tax and a fee that section 8003 now seeks to gloss over: "Plaintiffs [Registrants] argue that the Preservation Assessment is a tax; defendants argue that it is a fee, which may be
collected without Congressional action, or that it is 'program income' . . ." Id. at *5. Indeed, in the ensuing subsection of that opinion -- entitled "Tax or Fee" -- the court held that "the Preservation Assessment is not a regulatory fee, but is instead a tax on registration." Id (emphasis added). Thus, even assuming congressional knowledge of the April 6 Order, one is left to wonder what Congress' awareness actually could have been, given section 8003's adherence to the term "fee," after this Court had decided that it was actually a "tax." Again, the deception of the drafters of section 8003 backfires on them; nothing in section 8003 demonstrates the requisite "clear recognition of a tax" by Congress that this Court correctly recognized to be essential. 23/
Thus, simply as a matter of statutory construction, section 8003 straightforwardly fails to ratify or approve a tax that it was deliberately drafted to avoid mentioning, and instead approves, at most, merely the user "fee" that it addresses. See NLRB v. Amax Coal Co., 453 U.S. 322, 329 (1981) (when Congress uses statutory terms that have accumulated settled meanings under common law, court must infer, unless statute dictates otherwise, that Congress meant to incorporate established meaning of terms used).
Because section 8003 does not expressly address anything but a fee, any contention that it in any way affects or addresses a tax necessarily means that it does so only by implication. Any such "ratification by implication" that is inconsistent with plain statutory language is disfavored,
23/ As Rep. Christensen's letter confirms, the ratification encompasses, at most, merely a "user fee" -- thus addressing, and putting to rest, only the Registrants' subsidiary claims that, to the extent the Preservation Assessment could be considered to be a user fee, it violated the Independent Offices Appropriation Act. See Amended Complaint at paragraphs 64-76.
and particularly so when the bill in question is, as here, an appropriations bill. See St. Martin Evangelical Lutheran Church v. South Dakota, 451 U.S. 772, 778 (1981). Indeed, the ratification-by-implication that NSF assumes took place in the emergency appropriations bill at issue is closely analogous to many cases in which passage of an appropriations bill was alleged to have effected an implied ratification. As these cases consistently show, however, any such implied "ratification by appropriation" must fail where, as here, Congress was not aware specifically of what it was purporting to ratify.
In D.C. Fed'n v. Airis, 391 F.2d 478, 481-82 (D.C. Cir. 1968), the Court rejected the contention that appropriation of federal funds authorizing highway construction impliedly repealed Title 7 of the D.C. Code governing highways and streets. In specifically rejecting the "ratification by appropriation" argument, the Court pointedly observed that, as here, ratification must fail where Congress plainly had no knowledge of what it was purporting to ratify:
Obviously, Congress cannot intend to ratify illegal action of which it is unaware. Therefore, where the ratification by appropriation argument has been accepted, courts have been careful to demonstrate factors attesting to Congress' specific knowledge of the disputed administrative action. [Citations omitted.] In this case there is no evidence to suggest that the appropriations committee or Congress as a whole were aware of the intention of District officials to plan and construct the freeway projects in disregard of basic Title 7 procedures. General knowledge that the freeway projects were being planned or that there was a general intention to advance the freeway system as a whole is insufficient to support the ratification by appropriation argument.
Id. at 481-82 (citations omitted) (emphasis added); see also Thompson v. Clifford, 408 F.2d 154, 166 (D.C. Cir. 1968) ("ratification by appropriation, no less than ratification by acquiescence,
requires affirmative evidence that Congress actually knew of the administrative policy" (emphasis added)). 24/
The threshold congressional knowledge that must be shown for a "ratification-by-appropriation" to be effective converges with this Court's putting NSF on notice, in the April 6 Order, that any purported ratification of the Preservation Assessment must show "clear knowledge" on Congress' part that it was addressing, and ratifying, a tax. Here, there is no evidence whatsoever that Congress had any specific knowledge that section 8003 purported to ratify anything other than a user fee, and thus cannot be read to have legitimized or ratified the tax at issue.
2. Any Implied Ratification Of A Tax Must Fail Because
Section 8003 Was Designed To Mislead Congress
Chairman Archer's outrage that his vote for to ratify a fee could be construed as a vote to ratify a tax is the outrage of a Congressional leader who has been deliberately misled. Indeed, it is undisputed that the staffers pushing section 8003 deliberately bypassed not only Chairman
24/ See also Ramah Navajo Sch. Bd.. Inc. v. Bureau of Revenue of New Mexico, 458 U.S. 832, 842 n.6 (1982) (rejecting contention that "would have us impute congressional awareness and approval of the state gross receipts tax from appropriations bills which earmarked funds for the construction of these facilities," as "there is absolutely no indication that Congress was even made aware of the existence of these taxes when it appropriated funds for the construction of the Ramah Navajo school"); Geophysical Corp. v. Andrus, 453 F. Supp. 361, 368 (D. Alaska 1978) (recognizing that "doctrine of ratification by appropriation is not favored," and declining to apply it where "the facts do not show sufficient knowledge on the part of Congress" of the specific right purportedly being ratified); National Wildlife Fed'n v. Andrus, 440 F. Supp. 1245, 1250 (D.D.C. 1977) (rejecting contention that congressional appropriations ratified power plant, as "there appear to be no references to the power plant in discussions at hearings, and there is no specific mention of the power plant in the appropriations bills themselves" (emphasis added)).
Archer's Ways and Means Committee, but both Congressional committees with exclusive jurisdiction over tax legislation.
Where Congress has been misled into purportedly voting for one thing under the misimpression that it was actually voting for something else, however, no ratification premised on such misinformation can stand. In Libby Rod and Gun Club v. Poteat, 594 F.2d 742, 746 (9th Cir. 1979), the Court of Appeals for the Ninth Circuit rejected the Corps of Engineers' claim that Congressional appropriations for a "reregulating dam" constituted the Congressional authorization for such a project that was required by 33 U.S.C. § 401 (governing construction of a dam on a navigable river). Specifically, the Ninth Circuit found that there was "no evidence in the record . . . that Congress as a whole believed that the reregulating dam had been authorized." Id. In striking down the ratification, the Court specifically adverted to the "indication that Congress may have mistakenly relied upon assertions by the Corps that the . . . project had been specifically authorized when it appropriated funds for the project." Id. (emphasis added).
Here, even more clearly than in Libby, Congress was not merely "mistaken"; it was deliberately deceived. The Joint Explanatory Statement of the Committee of Conference stated that the ratification covered "the collection of program fees in excess of the amount projected," and went on to note that these "program fees" were "in turn held in an 'Intellectual Infrastructure Fund' until the Congress, as part of the fiscal year 1998 Appropriations Act, determined to use these funds for NSF's work on 'Next Generation Internet' activities." Significantly, this Court held in its April 6 Order not only that Preservation Assessment was a tax as opposed to a fee, but also that it could not be termed "program income." April 6 Order at *8. The Joint Explanatory Statement of the Committee of Conference is thus doubly disingenuous in referring to the
Preservation Assessment as a "program fee," thereby using both terms ('program' and 'fee') that this Court expressly found inapplicable to the tax in question. As if that were not enough, the Joint Statement further compounds the deception by suggesting that the swollen Intellectual Infrastructure Fund resulted not from NSF's imposition of this tax, but by innocuous commercial factors beyond anyone's control: "The explosive growth of the commercial segment of the Internet resulted in the collection of program fees in excess of the amount projected ...." See Ex. 6. Section 8003 itself then continued the deception by referring to the assessment as a "fee" and not a "tax."
Accordingly, just as in Libby, "there is no evidence in the record . . . that Congress as a whole believed" that it was authorizing anything but a user fee. Libby, 594 F.2d at 746. Because Congress cannot be held to have ratified "illegal action of which it was unaware," see Airis, 391 F.2d at 482, Sec. 8003 cannot properly be read to have ratified or approved the tax in question.
D. This Appropriations Measure Cannot Properly Be Construed To
Retroactively Change Substantive Tax Law
NSF's assumption that the emergency appropriations bill in question effectively creates new tax law is independently undermined by two convergent principles of construction. The first is that retroactive legislation such as section 8003 cannot properly be construed to effect a substantive change in legislative policy, but rather can address only administrative or technical legislative deficiencies -- and thus cannot possibly be read to effectively pass the first-ever tax on the Internet. See Van Emmerik v. Janklow, 454 U.S. 1131, 1133 (1982) (mem.) (White, J. and Blackmun, J. dissenting) (construing Heinszen decision relied on by NSF), appeal from State ex ref. Van Emmerik v. Janklow, 304 N.W.2d 700 (S.D. 1981). The second the "a very strong
presumption" that appropriations acts do not "substantively change existing law." Building & Constr. Trades Dep't. v. Martin, 961 F.2d 269, 273 (D.C. Cir.), cert. denied, 506 U.S. 915 (1992). These principles confirm beyond question that section 8003 cannot properly be read to create new tax law.
1. Section 8003 Does Not Enact A New Tax Policy
Retroactive legislation is properly limited to correcting technical or administrative defects, and thus cannot be construed to effectively create new substantive tax law as NSF tries to urge on the Court here. See Van Emmerik, 454 U.S. at 1133 (1982). In Van Emmerik, Justices White and Blackmun provided an illuminating analysis of the United States v. Heinszen decision, 206 U.S. 370 (1907), so heavily relied on by NSF in its motion (at 3 n. l).
Heinszen involved a tariff that was imposed by the President on the Philippines beginning in 1898 (when the Philippines came under the United States' military control). The Supreme Court struck down the continued imposition of the tariff during the 1899- 1902 period, on the ground that the end of the Spanish-American War in 1899 had divested the President of the power he formerly had to impose such a tariff. Id. at 380. Congress then passed legislation ratifying the President's imposition of the tariff curing the 1899-1902 period. Id. at 381. As Justices White and Blackmun correctly observed in Van Emmerik, "We held the [ratifying] legislation [in Heinszen] valid, reasoning that the legislature may "cure irregularities . . ." 454 U.S. at 1133. Accordingly, Justices White and Blackmun noted that:
Heinszen and Forbes 25/ appear to stand for the proposition that administrative procedural. and technical defects unrelated to the underlying policy may be
25/ Forbes Pioneer Boat Line Board v. Board of Comm'rs, 258 U.S. 338 (1922).
remedied by curative legislation, while legislative policy may not be changed retroactively.
454 U.S. at 1133 (emphasis added). While in Heinszen the President's continued imposition of the tariff after the Philippines were no longer a foreign entity was an "administrative, procedural [or] technical defect" that could thus be cured by ratification, the purported retroactive imposition of the first-ever tax on the Internet cannot remotely be construed as such an "irregularity." It is tax policy-making, pure and simple -- and thus irreconcilable not only with Heinszen itself, but also with the clear principle set forth by Justices White and Blackmun in Van Emmerik.
There has long been a "careful distinction [that] Congress has maintained between substantive legislation and appropriation bills." See Andrus v. Sierra Club, 442 U.S. 347, 364 (1979). This distinction is not merely a formalistic one; Congress has enacted rules in both Houses prohibiting the use of appropriations measures to change substantive law. See TVA v. Hill, 437 U.S. 153, 189-93 (1978) (rejecting, on grounds that it would violate such rules, contention that appropriations measures funding construction of a dam in violation of Endangered Species Act did not impliedly exempt project from coverage of the Act).
Courts have repeatedly refused to construe appropriations bills to impliedly change or create substantive law. In Hill, 437 U.S. at 190-91, the Supreme Court observed that while "both substantive enactments and appropriations measures are 'Acts of Congress,' . . . the latter have the limited and specific purpose of providing funds for authorized programs." The Court thus emphasized that:
When voting on appropriations measures, legislators are entitled to operate under the assumption that the funds will be devoted to purposes which are lawful and not for any purpose forbidden. Without such an assurance, every appropriations measure would be pregnant with prospects of altering substantive legislation, repealing by implication any prior statute which might prohibit the expenditure. Not only would this lead to the absurd result of requiring Members to review exhaustively the background of every authorization before voting on an appropriation, but it would flout the very rules the Congress carefully adopted to avoid this need.
Id. (emphasis added).
In Planned Parenthood Affiliates v. Rhodes, 477 F. Supp. 529, 538 (S.D. Ohio 1979), the court articulated why the implied repeal of substantive law by means of an appropriations rider is "strongly disfavored, and for good reason:"
Appropriations bills must be passed continuously, and it would be an onerous burden for the members of Congress to have to scour such otherwise perfunctory measures for subtle repeals. They should be able to rely on the language of such bills. when that language is clear. In addition, such silent amendments are disfavored due to the coercive nature of appropriations bills with regard to passage.
(Citation omitted; emphasis added). There is nothing here -- beyond NSF's unsupported assumption that section 8003 somehow ratifies a "tax" -- to overcome that very strong presumption that the emergency appropriations measure in question does not enact substantive new tax law.
With the passage of Sec. 8003 as NSF now reads it, the very concerns expressed by the Supreme Court and the D.C. Circuit Court of Appeals came vividly to life. Section 8003 was not even contained in the bill originally considered by either the House or the Senate, but rather was slipped into the conference report unbeknownst to virtually all Members of Congress. See Ex. 6. Moreover, Congressional staffers carefully and disingenuously omitted any use of the word
"tax," thus permitting the final bill to escape the attention (not to mention jurisdiction and approval) of the Congressional Committees charged with responsibility for tax legislation, the House Ways and Means Committee and the Senate Finance Committee. See, e.g., William L. Norton, Jr., Norton Bankruptcy Law & Practice § 346 (2d ed. 1997) (stating, "Legislative Jurisdiction in the House over Federal tax matters lies with the Ways and Means Committee and is husbanded by it jealously"); Senator Dennis DeConcini, The Federal Courts Improvement Act of 1982: A Legislative Overview, 14 Geo. Mason U. L. Rev. 529, 533 (1992) (noting "Senate Finance Committee . . . retains jurisdiction over tax matters"). As a result, very few Senators and Representatives had any idea that passage of H.R. 3579 contained the purported ratification of the first-ever tax on the Internet. Not surprisingly, as the attached letter from Ways and Means Chairman Bill Archer makes crystal clear, Congressional tax leaders were and are outraged to find that the Emergency Appropriations Bill had been improperly manipulated in this fashion. See Ex. 7.
III. THE PURPORTED IMPLIED RATIFICATION OF AN UNCONSTITUTIONAL TAX VIA MISLEADING LANGUAGE TACKED ONTO AN APPROPRIATIONS BILL IS ITSELF CONSTITUTIONALLY INVALID
As shown above, congressional unawareness that section 8003 purported to address anything beyond a user fee means, as a matter of law, that this provision did not and could not legalize or ratify the unconstitutional tax at issue. Having failed to meet the above-cited requirements for implied ratification that are applicable in the ordinary (nonconstitutional) case, section 8003 necessarily fails, a fortiori, to surmount the far-greater obstacles that must be overcome for implied ratification where constitutional issues are implicated.
NSF's brief proceeds from the misguided assumption that passage of an appropriations bill purporting to approve an "unauthorized fee" serves to cure this Court's condemnation of the assessment as an unconstitutional tax. See NSF Mem. at 2-3. As the Supreme Court and other courts have made clear, the reluctance of courts to find an implied "ratification by appropriation" in the ordinary case is greatly intensified where constitutional issues are involved. See St. Martin Evangelical Lutheran Church, 451 U.S. 772, 788 (1981) ("long-established canon of construction [that indefinite congressional expressions cannot negate plain statutory language or cause repeal by implication] carries special weight when an implied repeal or amendment might raise constitutional questions"); Ex Parte Endo, 323 U.S. 283, 299 (1944) (where constitutional issues implicated, "[w]e must assume, when asked to find implied powers in a grant of legislative or executive authority, that the law makers intended to place no greater restraint on the citizen than was clearly and unmistakably indicated by the language they used"); 26/ EEOC v. Martin Indus., Inc., 581 F. Supp. 1029, 1035-36 (N.D. Ala) (distinguishing between "improper and unauthorized" acts, which could be ratified by implication under certain circumstances, and acts
26/ In Endo, the Supreme Court confronted the question whether the appropriation of monies for the War Relocation Authority impliedly ratified the continuing detention of citizens of Japanese ancestry who were concededly loyal to the U.S. The Court held that it did not, and reasoned that "[n]either the Act [providing for Relocation] nor the [executive] orders use the language of detention," id. at 300, and that "the legislative history of the Act . . . is silent on detention." Significantly, the Court refused to construe as the "language of detention" the Act's provisions "that no one shall 'enter, remain in, leave, or commit any act' in . . . prescribed military areas." Id. Nor did the Court construe an Executive Order's providing for "relocation, maintenance, and supervision" of the evacuees as "language of detention." Id. at 301. Accordingly, because such language was held not to "plainly show" the "precise authority" to detain which the Government claimed, the petitioners writ of habeas corpus was granted.
implicating constitutional concerns, which could only be ratified by unequivocal Congressional action), appeal dismissed, 469 U.S. 806 (1984).
Martin highlights clearly the stringency of the standards for explicit legislative action where constitutional issues are implicated. Martin was an action brought by the Equal Employment Opportunity Commission against an employer for alleged violations of the Equal Pay Act. The employer argued that the Reorganization Act of 1977, which purported to transfer the authority to administer the Equal Pay Act from the Department of Labor to the EEOC, was invalid due to the "one-House legislative veto" provision it contained, thus depriving the Court of jurisdiction. Id. at 1030. The Court agreed, holding that the 1977 Reorganization Act and its successor, the 1978 Reorganization Act (which contained the provision allowing the EEOC to enforce the Equal Pay Act) were unconstitutional. Id. at 1037. The Court expressly held, moreover, that subsequent congressional appropriation of funds earmarked for EEOC's enforcement of the Equal Pay Act did not serve to ratify by implication the unconstitutional transfer of authority to enforce the Equal Pay Act. Id. In expressly distinguishing two Supreme Court cases involving merely "improper and unauthorized" acts which were held to have been ratified by implication, 27/ the Court pointedly observed that "neither case held that Congress could impliedly ratify unconstitutional executive actions." Id. at 1036 (emphasis added). Rather, the Court adverted with approval to the principle that "explicit action [is] required in areas of 'doubtful constitutionality," taken from Greene v. McElroy, 360 U.S. 474, 507 (1959). See Martin, 581 F. Supp. at 1035.
27/ Isbrandtsten-Moller Co. v. United States, 300 U.S. 139 (1937); Swayne & Hoyt v. United States, 300 U.S. 297 (1937).
Similarly, In EEOC v. CBS. Inc., 743 F.2d 969, 974 (2d Cir. 1984), the Second Circuit struck down as unconstitutional a purported ratification of a transfer of authority to the EEOC by means of an appropriations bill. The Court properly recognized that:
Since the substantive aspects of appropriations bills are subject to much less scrutiny than the substantive programs themselves, . . [citations omitted], an appropriations bill is a particularly unsuitable vehicle for an implied ratification of unauthorized actions funded therein. [citation omitted] This is especially true where, as here. the unauthorized action is an unconstitutional one, rather than merely a technically improper one.
743 F.2d at 974-75 (emphasis added). The Second Circuit thus held that references to the Age Discrimination in Employment Act "that are buried in lengthy and detailed appropriations acts [citations omitted], do not suffice under these principles to ratify a specific transfer of enforcement authority from the Secretary of Labor to the EEOC." Id. at 974. Here, the purported ratification was even more egregious than that struck down in CBS; not only was it tacked onto an Emergency Appropriations bill in conference (thus ensuring that virtually no Members would be aware of it), but it also avoided any mention of the fact that it purported to address, and bless, an unconstitutional tax. Moreover, the constitutionality of the Preservation Assessment is not merely "doubtful," which triggered the need for unequivocal ratification in Martin; the assessment is plainly an unconstitutional tax -- and ratification of a "fee" cannot impliedly correct that constitutional problem. After all, the gulf between "tax" and "fee" here is at least as great as the distinction in Endo between "detention," on the one hand, and the explicit powers to "relocate" evacuees, or to restrain them from entering or leaving certain military areas, on the other. In sum, as these decisions make resoundingly clear, the fact that the
Preservation Assessment is an unconstitutional tax means that, as a matter of law, it is entirely unaffected by Congress' approval of an unauthorized fee.
The Supreme Court's decision in Greene v. McElroy, 360 U.S. 474 (1959), articulates an additional requirement for ratification of a constitutional infirmity that was plainly not met here: the Congressional obligation to engage in "careful and purposeful consideration" of the constitutional issue in question. Where, as here, a bill does not even mention, much less alert Congress to, the unconstitutional nature of the conduct purportedly being ratified, Congress is deprived of any opportunity for meaningful consideration that constitutional issues particularly deserve and require. Indeed, this alone undermines the purported ratification as a matter of law.
In Greene, a government contractor's security clearance had been revoked in an administrative proceeding in which he was not afforded the safeguards of confrontation or cross-examination. 360 U.S. at 474. The loss of security clearance resulted in the contractor's losing his job. Id. at 508. The Court rejected the Secretary of Defense's argument that the security clearance procedures in question had been impliedly ratified by Congress' continued appropriation of funds to finance the program:
Before we are asked to judge whether, in the context of security clearance cases, a person may be deprived of the right to follow his chosen profession without full hearings where accusers may be confronted, it must be made clear that the President or Congress, within their respective constitutional powers, specifically has decided that the imposed procedures are necessary and warranted and has authorized their use. [Citations omitted.] Such decisions cannot be assumed by acquiescence or nonaction. [Citations omitted.] They must be made explicitly not only to assure that individuals are not deprived of cherished rights under procedures not actually authorized, [citation omitted], but also because explicit action, especially in areas of doubtful constitutionality requires careful and
purposeful consideration by those responsible for enacting and implementing our laws. Without explicit action by lawmakers, decisions of great constitutional import and effect would be relegated by default to administrators who, under our system of government, are not endowed with authority to decide them.
Id. at 507 (emphasis added). As another Court put it, an implied ratification is particularly ineffective where (as here) it is purports to bless conduct that is or may be unconstitutional. United States v. City of Yonkers, 592 F. Supp. 570, 579 (S.D.N.Y. 1984) (observing that ratification in Greene was ineffective "because the constitutional doubts to which Greene referred went to the very conduct for which the Department of Defense sought ratification" (emphasis added)).
Here, of course, there was no "careful and purposeful consideration" by Congress of this serious constitutional issue; to the contrary, in light of the Bill's avoiding any mention of the word 'tax,' there is no indication that Members of Congress were even aware that their votes on this appropriations measure had anything to do with any tax, much less an unconstitutional one. See Demby v. Schweiker, 671 F.2d 507, 511 (D.C. Cir. 1981) ("[i]t is difficult to imagine that any member of Congress . . . would consider that he was voting for the repeal . . . in assenting to the reduction as it was presented in the conference report"). The result here, as Greene foreshadowed, is that a decision of "great constitutional import and effect"-- the decision whether to tax -- has effectively been "relegated by default" to NSF, which, entirely on its own, has devised, levied, and imposed (and arranged for collection of) a tax on all domain name registrants.
IV. SECTION 8003 VIOLATES THE ORIGINATION CLAUSE
The Origination Clause of the Constitution provides that:
All Bills for raising Revenue shall originate in the House of Representatives, but the Senate may propose or concur with Amendments as on other bills.
U.S. Constitution, Article I, Section 7, Cl. 1. "While the Origination Clause is perhaps a more obscure constitutional provision than those in the Bill of Rights, it nonetheless remains an important part of our constitutional scheme of government by checks and balances and separation of powers." Thomas L. Jipping, Comment. TEFRA and the Origination Clause: Taking The Oath Seriously, 35 Buff. L. Rev. 633, 636-37 (1986). "The dual purpose of the clause -- to balance the powers exercised by the Senate and to keep the power of extracting money from the people in the branch most responsive to them -- remains as important today as ever." Id. at 691. Because "an essential reason" for the Origination Clause is to prevent "taxation without representation," the consequences of evading its requirements are "enormous" for taxpayers, "not only because their representatives have violated the Constitution, . . . [but also] because they cannot directly challenge it in court." Id.
To the extent that section 8003 is considered to have tax implications at all (which it does not, as it merely addresses a fee), it is independently invalidated by the clear requirements of the Origination Clause of the Constitution. This Court has already established that the Preservation Assessment is not a fee, but a revenue-raising tax, thus bringing it squarely within the purview of the Origination Clause. See April 6 Order at 6; see also United States v. Munoz-Flores, 863 F.2d 654 (9th Cir. 1988), rev'd on other grounds, 495 U.S. 385 (1990) 28/ (confirming that a special
28/ The Supreme Court's reversal of Munoz-Flores was on other grounds, and thus leaves intact the above-cited reasoning of the Ninth Circuit. Specifically, the Supreme Court held that "a statute that creates a particular governmental program and that raises revenue to support that program, as opposed to a statute that raises revenue to support Government generally, is not a 'Bill for raising Revenue' within the meaning of the Origination Clause.’" United States v. . Munoz-Fores, 495 U . . 385,398 (1990) (emphasis added). Because the
assessment of $25 imposed upon federal misdemeanants by the Victims of Crime Act was a "revenue bill" violating Origination Clause); United States v. Moncini, 882 F.2d 401, 406 (9th Cir. 1989) ("We note that a $200 special assessment was imposed . . . under 18 U.S.C. § 3013. In United States v. Munoz-Flores . . . we held this statute to have been enacted unconstitutionally in violation of the origination clause. Accordingly, we vacate the assessment."); Shah v. United States, 878 F.2d 1156, 1163 (9th Cir. 1989) (same), cert. denied, 493 U.S. 869 (1989); United States v. Nolasco, 881 F.2d 678, 679 (9th Cir. 1989) (same), cert. denied, 502 U.S. 833 (1991); United States v. Gregory, 891 F.2d 732, 735 (9th Cir. 1989) (same); United States v. Anguiano, 873 F.2d 1314, 1321 (9th Cir.) (same), cert. denied, 493 U.S. 969 (1989)
It is beyond dispute, moreover, that section 8003 originated not in the House of Representatives, but in the Conference Committee. See Ex. 6. In United States v. Hagen, 711 F. Supp. 879, 882 (S.D. Tex. 1989), the Court struck down a tax on Origination Clause grounds under strikingly similar circumstances. The assessment in Hagen -- a so-called "crook tax" on a misdemeanant -- was first introduced in the Senate Judiciary Committee. Id. Thus, "[t]he House first considered the assessment when the conference committee reported the compromise bill containing it to both houses." Id. In holding that the tax violated the Origination Clause, the
government program in Munoz-Flores was established (as well as funded) by the statute in question, the Supreme Court held that the statute was not a revenue bill. See 495 U.S. at 398. Here, by obvious contrast, the Internet ostensibly funded by section 8003 can hardly be said to have been created by this legislation; the Internet has indisputably existed for approximately twenty-five years. Accordingly, the Supreme Court's reasoning is inapplicable here, and does not have any effect on section 8003's violation of the Origination Clause.
Court also ruled out application of the "origination clause's amendment exception," which permitted the Senate to generate tax amendments only in response to a "House-generated tax proposal." Id. In language that is remarkably apposite here, the Court observed that:
The House bill had nothing to do with a revenue raising mechanism, but only concerned other aspects of crime control; there was no revenue provision of the House resolution for the Senate to expand or contract by amendment. The Senate's addition of a revenue amendment to the House resolution was not a change to a House-generated tax proposal, and therefore, it was outside of the origination clause's amendment exception.
Here, similarly, the emergency appropriations bill that originated in the House "had nothing to do with a revenue raising mechanism;" it merely concerned "other aspects" of appropriations. Thus, just as the "amendment exception" to the Origination Clause was rejected in Hagen, it must be rejected-here. To the extent section 8003 is construed as a tax-ratification measure (and it should not be), under the Origination Clause there can be no justification for section 8003's origination in conference, as the bill that arrived in conference had no revenue- raising measures in it at all, and thus was not a "House-generated tax proposal" in the first instance.
29/ In explaining the underpinnings of the Origination Clause, the Court noted that "it gave the House a power particular to it to balance that given the Senate over treaties and appointments." Id. at 881 (citing Federalist No. 66 (A. Hamilton)). Quoting James Madison's observation that "[t]axation and representation are strongly associated in the minds of the people," the Court also noted that the House appeared to be more directly and immediately representative of the people. Id. at 881. The Court also recognized that "[t]he origination clause represents, at the very least, a procedural restraint on the exercise of legislative power," id., and added that "'[t]he history of liberty has largely been the history of procedural safeguards. "' Id. (quoting McNabb v. United States, 318 U.S. 332 (1943)).
Hagen also made clear, moreover, that the mere formalistic fact that H.R. 3579 itself originated in the House does not hold sway for purposes of the Origination Clause analysis. The court first noted that courts are fully empowered to look closely into the origination of legislation to determine "whether the legislative branch followed the Constitution." Id. "When [Congress] fails to heed the limits of its own power, . . . it must be checked, for there is no discretion in the legislature to suspend the Constitution ...." Id. Thus the court rejected the notion that an erroneous certificate by the House clerk claiming origination in the House would pass constitutional muster:
. . . that reduces a constitutional mandate to an obligatory acceptance of demonstrably erroneous paperwork. An alternative was to permit Congress to define for itself which bills that extract money from people are revenue bills under the Constitution. To permit Congress to define "revenue" to exclude deliberate taxes is not deference; it is abdication.
Id. This rationale demonstrates that, if the Origination Clause is to have any meaning and serve the purpose for which it is intended, courts should be vigilant in holding Congress to the requirement that revenue measures originate in the House, and only in the House. That did not happen here -- and thus section 8003 is independently invalid as a purported tax-ratifying measure on Origination Clause grounds alone. As the Hagen Court sagely added, "Courts do Congress no honor when they blink before its errors." Id. at 883.
Accordingly, to the extent section 8003 may be regarded as ratifying an unconstitutional tax (and it should not be), it would have been required, like all revenue-raising measures, to originate in the House of Representatives, the only congressional body constitutionally authorized to develop and introduce tax laws. Because it was covertly inserted into H.R. 3579 in conference, after both the House and the Senate had considered and voted on the bill, section
8003 -- as NSF construes it, to ratify a tax -- thus violated the Origination Clause, and cannot stand for that reason alone.
For the foregoing reasons, Plaintiffs' Motion for Summary Judgment and/or Declaratory Judgment should be granted.
(signed William Bode)
William H. Bode (113308)
James M. Ludwig (427884)
Daniel E. Cohen (414985) BODE & BECKMAN, L.L.P.
1150 Connecticut Avenue, N.W
Washington, D.C. 20036
Ralph C. Nash, Jr. (000023249)
1140 23rd Street, N.W.
Washington, D.C. 20037-1439.
Dated: June 1, 1998
I hereby certify that on this 1 st of June 1998 I have served upon the party listed below, by Federal Express (per agreement between counsel for Plaintiffs and NSF on this date), the foregoing Plaintiffs' Memorandum of Law In Support of Motion for Summary Judgment And/or for Declaratory Judgment.
Wilma A. Lewis, United States Attorney
Lisa S. Goldfluss, Assistant United States Attorney
Department of Justice
United States Attorney's Office
District of Columbia
555 Fourth Street, N.W.
Washington, DC 20001
Counsel for Defendant NSF
Gary D. Wilson
Wilmer, Cutler & Pickering
2445 M Street, N.W.
Washington, DC 20037 Counsel for Defendant NSI, Inc.