author: DYK, Circuit Judge.

text:
    TYCO FIRE PRODUCTS, LIMITED PARTNERSHIP, Plaintiff-Appellant v. UNITED STATES, Defendant-Appellee
    2015-1968
    2015-1969
    United States Court of Appeals, Federal Circuit.
    Decided: November 18, 2016

      Miohael Edwaed Roll, Pisani & Roll PLLC, Los Angeles, CA, argued for appellant.
    AMY Rubin, International .Trade Field Office, Commercial Litigation Branch, Civil Division, United States Department of Justice, New York, NY, argued for appel-lee. Also represented by Benjamin C. Mizer, Jeanne E. Davidson; Chi S. Choy, Office of Assistant Chief Counsel, United States Customs and Border Protection, United States Department of Homeland Security, New York, NY.
    Before PROST, Chief Judge, DYK, and STOLL, Circuit Judges.
   DYK, Circuit Judge.

Tyco Fire Products L.P. (“Tyco”) appeals a decision of the U.S. Court of International Trade (“CIT”), which granted the government’s motion for summary judgment. The CIT held that Tyco’s imported goods were properly classified under subheading 7020.00.60 of the Harmonized Tariff' Schedule of the United States (“HTSUS”). Tyco Fire Prods. L.P. v. United States, 82 F.Supp.3d 1340, 1350 (Ct. Int’l Trade 2015) (“Summary Judgment Op.”). We affirm.

Baceground

The issue in this case is the proper classification of certain liquid-filled glass bulbs according to the HTSUS. Each bulb consists of a sealed, hollow glass tube that is filled with colored liquid and an air bubble. A bulb of.this type is .commonly used as a temperature-dependent trigger component of fire sprinkler heads. Used in this context, the bulb is installed into a sprinkler head, which acts as a valve, such that the bulb is positioned to hold the valve closed and prevent water from being released. When the sprinkler head is exposed to fire, the bulb is heated and the liquid inside the bulb expands until the bulb ultimately shatters. When the bulb breaks, the valve of the sprinkler system opens and releases a shower of water intended to extinguish the fire.

Tyco’s bulbs can also be used in water heaters. As used in that context, the bulb is positioned to hold open a door to a water heater combustion chamber, which allows air to flow into the chamber. When the temperature rises to a particular threshold, the bulb shatters, forcing the door shut and thereby cutting off the air supply to the combustion chamber, extinguishing the flame.

Tyco purchased the bulbs from two German manufacturers, Job GmbH (“Job”) and Geissler Glasinstrumente GmbH (“Geissler”). Between 2004 and 2006, Tyco imported 42 different models of bulbs into the United States. Of these models, Tyco used 39 in fire sprinkler systems. Tyco used the other 3 models as thermal release devices in water heaters.

The temperature threshold, or activation temperature, at which the bulb breaks corresponds to the temperature rating for that model of bulb. Different models of bulbs are designed to break at different temperatures, and the temperature rating of each bulb is indicated by a colored dye in the liquid. The liquid inside the Geissler bulbs is triethylene glycol. The composition of the liquid inside the Job bulbs is proprietary to Job. Other relevant qualities of the bulb models include their response time index, which relates to the amount of time required for the bulb to reach its activation temperature; structural strength; and compatibility with environmental conditions.

U.S. Customs and Border Protection (“Customs”) classified the bulbs as “other articles of glass” under HTSUS subheading 7020.00.60 (“Heading 7020”), which has a 5% rate of duty. Tyco protested Customs’ ruling and requested further review, asserting that the bulbs are more properly classified under subheading 8424.90.90, which includes “Other” “Parts” of goods classified under heading 8424 and is duty-free. Customs denied Tyco’s protest, and Tyco appealed to the CIT.

On summary judgment, the CIT agreed with Customs and held that the bulbs are properly classified as articles of glass under Heading 7020. The court recognized that Chapter Note 1(c) to Chapter 84 excludes from that chapter “other articles for technical uses or parts thereof, of glass (heading 7019 or 7020).” Consulting the Explanatory Notes (“EN”) to Chapter 84 of the Harmonized Commodity Description and Coding System (“HS”), of which the HTSUS is an embodiment, see Pima W., Inc. v. United States, 915 F.Supp. 399, 402 (Ct. Int’l Trade 1996), the court determined that the bulbs are “of glass” within the meaning of the exclusion and, therefore, they are not classifiable under that chapter.

The court rejected Tyco’s assertion that the bulbs fall within exceptions to the exclusion as set forth in the EN to Chapter 84. Specifically, the EN provides:

[T]he following are, as a rule, to be taken to have lost the character ... of glass:
(i) Combinations of ... glass components with a high proportion of components of other materials (e.g., of metal); also articles consisting of a high proportion of ... glass components incorporad ed or permanently mounted in frames, cases or the like, of other materials.
(ii) Combinations of static components of ... glass with mechanical components such as motors, pumps, etc., of other materials (e.g., of metal).

EN Ch. 84 at 1393 (EN/AS 5, Feb. 2004). The court determined that the bulbs do not contain a “high proportion” of non-glass material and that the bulbs do not comprise both a static and a mechanical component. The court also consulted the ENs to Chapter 70 and Heading 7020 and determined that the bulbs have the essential character of glass, and therefore they are properly classified under Heading 7020. Tyco appeals. We have jurisdiction pursuant to 28 U.S.C. § 1295(a)(5).

Disoussion

We review the CIT’s grant of summary judgment in a customs classification case de novo. Ruble’s Costume Co. v. United States, 337 F.3d 1350, 1354 (Fed. Cir. 2003). The classification of an item under the headings of the HTSUS involves a two-step process. Alcan Food Packaging (Shelbyville) v. United States, 771 F.3d 1364, 1366 (Fed. Cir. 2014). First, the court determines the meaning of the heading terms, and we review this issue of 1 gw without deference. Id. Second, the court determines whether the item falls within the scope of the heading terms, and we review this finding of fact for clear error. Id.

“The HTSUS General Rules of Interpretation (GRI) and the Additional U.S. Rules of Interpretation (U.S. GRI) govern the proper classification of all merchandise and are applied in numerical order.” Carl Zeiss, Inc. v. United States, 195 F.3d 1375, 1379 (Fed. Cir. 1999). According to GRI 1, “a court first construes the language of the heading, and any section or chapter notes in question, to determine whether the product at issue is classifiable under the heading.” Orlando Food Corp. v. United States, 140 F.3d 1437, 1440 (Fed. Cir. 1998). Chapter Notes are legally binding. Arko Foods Int'l, Inc. v. United States, 654 F.3d 1361, 1364 (Fed. Cir. 2011). “Absent contrary legislative intent, HTSUS terms are to be construed according to their common and commercial meanings, which are presumed to be the same. A court may rely upon its own understanding of the terms used and may consult lexicographic and scientific authorities, dictionaries, and other reliable information sources.” Carl Zeiss, 195 F.3d at 1379.

I

Tyco first asserts that the CIT erred in holding that Chapter Note 1(c) excludes the bulbs from Chapter 84. Note 1(c) to Chapter 84 provides: “1. This chapter does not cover: ... (c) Laboratory glassware (heading 7017); machinery, appliances or other articles for technical uses or parts thereof, of glass (heading 7019 or 7020);....” HTSUS, 84-1 (2004).

As an initial matter, we agree with the CIT that the bulbs are “of glass” for purposes of Note 1(c). As we discuss below, the bulbs have the essential character of glass and are properly classifiable under Heading 7020. This determination is sufficient to establish that each bulb has the “the character of an article ... of glass” for purposes of Note 1(c) unless the bulb has “lost the character ... of glass” by virtue of one of the exceptions described in the EN. EN Ch. 84 at 1393 (EN/AS 5, Feb. 2004). While the ENs are not controlling, “they do offer guidance in interpreting [HTSUS] subheadings.” Lonza, Inc. v. United States, 46 F.3d 1098, 1109 (Fed. Cir. 1995). Both parties agree that we should look to the ENs in this case. Tyco and the government focus their dispute regarding Note 1(c) on whether the bulbs are encompassed by either the “high proportion” or the static and mechanical component exceptions identified in the EN. Tyco argues that the bulbs fall within the EN exceptions because the bulbs include a high proportion of non-glass material and are each a combination of static and mechanical components. Tyco argues that they are, therefore, outside the exclusion for “articles of technical uses; or parts thereof, of glass” and are classifiable under Chapter 84.

A

As the CIT held, the bulbs do not fall under the EN exception to Chapter 84 Note 1(c) for “[combinations of static components of ... glass with mechanical components” because they do not contain any mechanical components within the meaning of the EN. EN Ch. 84 at 1393. Tyco asserts that the liquid inside the bulbs performs a physically mechanical function when the liquid expands in response to heat and exerts pressure on the glass, causing the glass to shatter. Tyco cites to the online Oxford Dictionary, https://en. oxforddictionaries.com/definition/us/ mechanical, for the proposition that “mechanical” means “[r]elating to physical forces or motion.” However, this source also defines the term to mean “[w]orking or produced by machines or machinery” and “[r]elating to' machines or machinery.” M; see also Webster’s Third New International Dictionary (Unabridged) 1400 (1981) (“1 a : of, relating to, or concerned with machinery or tools”).

Importantly, Tyco’s interpretation of “mechanical” is inconsistent with the examples of mechanical components listed in the EN, “such as motors, pumps, etc., of other materials (e.g., of metal),” EN Ch. 84 at 1393, which, by the interpretive canon of ejusdem generis, indicate that “mechanical components” means machinery. See Archer Daniels Midland Co. v. United States, 561 F.3d 1308, 1313 (Fed. Cir. 2009) (“[I]t is well settled that when a list of items is followed by a general word or phrase, the rule of ejusdem generis is used to determine the scope of the general word or phrase.” (citation omitted)).

B

The other exception is for articles of glass that have “a high proportion of components of other materials” relative to the glass component. EN Ch. 84 at 1393. The parties both address “high proportion” in terms of relative weight. It is undisputed that, depending on the bulb model, the liquid component comprises 16-31% of the total weight of the bulb, with the glass component comprising the remainder, Accordingly, we must determine the meaning of the term, “high proportion.”

As the CIT noted, neither the-EN nor the HTSUS defines “high proportion.” The CIT looked for guidance in the Explanatory Notes to the Brussels Tariff Nomenclature (“BTN”), and the government urges that we do so as well. The BTN was an international tariff classification system that preceded the HS. The CIT pointed out that Chapter 84 to the BTN had an exclusionary Note 1(c), excluding “machinery and appliances and parts thereof, of glass,” that was similar to the current Note 1(c) of Chapter 84 of the. HTSUS. J.A. 758; see Summary Judgment Op. at 1347. In 1970, the Nomenclature Committee amended the Explanatory Note to BTN Chapter 84 to include language that is, in relevant part, identical to the language of the current EN to Chapter 84 as reproduced above. It appears that a motivation for the 1970 amendment was to provide that “the distinguishing criteria laid down in [BTN] Explanatory Note 90.25 should also apply to the machines and appliances of’ BTN Chapter 84. J.A. 764. The Explanatory Note to BTN Chapter 90.25, in turn, provided that “instruments normally cease to have the essential character of glassware when they consist partly of glass..but are mainly of other materials.” J.A. 777. :. ■

The CIT concluded from this “history behind the EN” that the “high proportion” language of the current EN to Chapter 84 should be interpreted to. mean “mainly.” Summary Judgment Op. at 1347. The court held that Tyco’s bulbs, which consist of up to 31% of liquid by weight, did not consist “mainly of .liquid rather than of glass,” and therefore, they did not have a high proportion of liquid. Id.

The government urges that this analysis is correct, but provides no explanation as to why the BTN Explanatory Notes—and any amendments thereto—should be treated as a form of legislative history to the current HTSUS. Certainly, prior to 1989, when the Tariff Schedules of the United States (“TSUS”) was in effect, see Omnibus Trade and Competitiveness Act of 1988, Pub L. No. 100-418, 102 Stat. 1107, 1148, 1163 (1988), the BTN was viewed as a source of legislative history to aid in interpreting the TSUS. See, e.g., W. Bend Co. v. United States, 892 F.2d 69, 71-72 (Fed. Cir. 1989) (“[T]he Brussels Nomenclature .., may be treated as legislative history to the [TSUS] provisions where the language of the tariff provision and a Brussels section is very similar.”). But the TSUS is no longer in effect, and therefore, the extent to which the BTN remains a relevant source of interpretive guidance is not clear. Shortly after the HTSUS was implemented, in 1989, the U.S. Customs Service issued a “Guidance for Interpretation of Harmonized System,” (“Guidance”) which set forth its views on the weight’ to be afforded the Explanatory Notes of the BTN. 54 Fed. Reg. 35,127 (Aug. 23, 1989). The Guidance, to which the government did not call to our attention, explained that the HS replaced the Customs Cooperation Council Nomenclature (“CCCN”), which was “first known as the” BTN. Id. at 35,128. The Guidance stated that “[t]he CCCN ENs have no value in interpreting the HS. They are the ENs to a different system; one which is now virtually nonexistent since most nations have adopted the HS.” Id. The Guidance further explained,

[w]hen the HS was drafted it was decided to prepare an entirely new convention to implement it. It was the intention of the [Harmonized System Committee] to start anew; to have a new convention unencumbered by the many years of action by the Nomenclature Committee. Although the HS is primarily based on the CCCN, it is a new and different nomenclature with a convention that provides for substantial difference in its voting membership.

Id. at 35,129.

We need not decide, however, whether the BTN provides relevant guidance as to the meaning of the HTSUS, for we conclude that a different—and governing—interpretative methodology ultimately leads to the same result. Dictionary definitions of the word “proportion,” previous to 1989 when the HTSUS was adopted, generally defined that term to mean “ratio.” See McGraw-Hill Dictionary of Scientific and Technical Terms 1507 (4th ed. 1989) (“The proportion of two quantities is their ratio.”); Webster’s New World Dictionary: Third College Edition 1079 (1988) (“proportion 1 the comparative relation between parts, things, or elements with respect to size, amount, degree, etc.; ratio”); 2 Webster’s Third New International Dictionary 1819 (1986) (“proportion: la: the relation of one part to another or to the whole with respect to magnitude, quantity, or degree : relative size : ratio”). These definitions suggest that, absent clarifying context, a “high proportion” of one component of a greater whole means that there exists a high ratio of that component compared to the other components. Where, as here, there are only two components, (ie., the liquid component and the glass component), a high proportion or ratio of one component generally means that the component accounts for more than 50% of the whole.

We do not suggest that “high proportion” means greater than 50% in all situations. This would not be the case where there are more than two components. There are also situations where comparison to past or common practice would support an interpretation of “high proportion” meaning something less than 50% for a two-component whole. For instance, Tyco points to the EN to heading 4017, where the EN to that heading provides that “[h]ard rubber ... is obtained by vulcanising rubber with a high proportion (more than 15 parts per hundred parts of rubber) of combined sulfur.” EN Heading 4017 at 775 (EN/AS 2, Aug. 2002). This appears to be a situation in which in practice the proportion of sulfur is always less than the proportion of rubber and “high proportion” is used apparently to refer to the high end of what is normal. But this case is not a situation where there is additional context suggesting that we should ascribe a different meaning to “high proportion.” Here, 31% by weight of the liquid component does not constitute a “high proportion” as set forth in the EN to Chapter 84.

Accordingly, because the bulbs are “of glass” within the meaning of Chapter Note 1(c) and they do not fall within either exception identified in the EN, they are not properly classifiable under Chapter 84.

II

Having concluded that the bulbs are not classifiable under Chapter 84, we now determine whether Customs properly classified the bulbs under Heading 7020. The EN to Heading 7020 explains, “[t]his heading covers glass articles (including glass parts of articles) not covered by other headings of this Chapter or of other Chapters of the Nomenclature. These articles remain here even if combined with materials other than glass, provided they retain the essential character of glass articles.” EN Heading 7020 at 1178 (2002) (italicization added). Because the bulbs each have a glass component that is combined with a liquid component, we must determine whether the glass component or the liquid component imparts the bulbs’ essential character. We agree with the CIT that the bulbs have the essential character of glass.

The parties agree that the essential character test set forth in the EN to Heading 7020 is analogous to the essential character test typically performed pursuant to GRI 3(b). Although “essential character” is not defined in the GRIs, the EN to GRI 3(b) provides, “[t]he factor which determines essential character will vary as between different kinds of goods. It may, for example, be determined by the nature of the material or component, its bulk, quantity, weight or value, or by the role of a constituent material in relation to the use of the goods.” EN GRI at 4 (2002); see also Home Depot, U.S.A., Inc. v. United States, 427 F.Supp.2d 1278, 1293 (Ct. Int’l Trade 2006) (identifying “other possible considerations” such as “ordinary common sense” and the article’s recognized names, invoice and catalogue descriptions, size, primary function, and uses), aff'd, 491 F.3d 1334 (Fed. Cir. 2007). One component can.impart the article’s essential character even if two components are both indispensable to the use of the article. See Alcan, 771 F.3d at 1367.

While we recognize Tyco’s engineer’s testimony that the liquid component is “the brains behind the operation” of the triggers, Tyco Br. at 8 (internal quotation marks omitted), we agree with the CIT’s determination that both the glass and the liquid components “play critical roles in the proper functioning of the filled bulb,” in view of “primary considerations ... including] 1) the response time required, 2) the load the filled bulb will have to bear, 3) the environmental conditions the bulb will be placed into, and 4) the temperature rating.” Summary Judgment Op. at 1349. Turning to other factors for determining essential character, the evidence shows that for each bulb model the glass weighs more than the liquid. Tyco concedes that the relative weight factor favors the government. The glass is also the more expensive component in all of the imported bulbs except the smallest models and the water heater models. Furthermore, as Tyco admits, the bulbs are sometimes referred to as “glass bulbs,” and much of the packaging and marketing materials in the record use similar terminology. See La Crosse Tech., Ltd. v. United States, 723 F.3d 1353, 1361 (Fed. Cir. 2013) (considering the name of the devices in determining their essential character); United China & Glass Co. v. United States, 293 F.Supp. 734, 737 (Cust. Ct. 1968) (“[I]t is not uncommon that an article is called by the name denoted by its essential character... .”). Finally, as the CIT noted, Congress amended the HTSUS in 2006 to create a temporary duty-free subheading specifically encompassing the types of bulbs at issue. See Tax Relief and Health Care Act of 2006, Pub. L. No. 109-432, § 1331, 120 Stat. 2922, 3124. The temporary subheading also referred to the items as “[ljiquid-filled glass bulbs.” See id. (“9902.24.26: Liquid-filled glass bulbs designed for sprinkler systems and other release devices (provided for in subheading 7020.00.60)”).

In light of this evidence, we see no error in the CIT’s conclusion that the bulbs have the essential character of glass and are properly classified under Heading 7020.

Conclusion

For the foregoing reasons, we conclude that the bulbs are excluded from Chapter 84 and are properly classifiable under Heading 7020 of the HTSUS.

AFFIRMED

Costs

Costs to the United States.

      . Heading 8424 includes “[m]echanical appliances ... for projecting, dispersing or spraying liquids or powders; fire extinguishers, whether or not charged; spray guns and similar appliances; ,.. parts thereof.” HTSUS, 84-30 (2004).

      . At the CIT and on appeal, Tyco asserts that the three bulb models used in water heaters should be classified under a different subheading of HTSUS Chapter 84, subheading 8419.90.10, as ‘‘|p]arts: [o]f instantaneous or storage water heaters.” HTSUS, 84-24 (2004). Because we affirm CIT’s holding that all of the bulbs are properly excluded from Chapter 84 and have the essential character of glass, our analysis is the same with respect to both of Tyco’s proposed subheadings.

      . To the extent that Tyco also argues that the liquid component plays a critical role in the function of the bulbs, we see no basis for such a qualitative analysis in determining whether the bulbs contain a high proportion of liquid.

      . The Nomenclature Committee originally intended that the new language would be inserted in the Explanatory Notes to BTN Section XVI, which encompassed Chapter 84, see J.A. 764, but ultimately decided to insert the language into the Explanatory Note to Chapter 84 specifically, see J.A, 765-70,

      . We appropriately may take notice of dictionary definitions when construing terms of the HTSUS and its notes. See Warner-Lambert Co. v. United States, 407 F.3d 1207, 1209 (Fed. Cir. 2005).

      . GRI 3 provides:
      When .., goods are, prima facie, classifiable under two or more headings, classification shall be effected as follows: ... (b) Mixtures, composite goods consisting of different materials or made up of different components ... shall be classified as if they consisted of the material or component which gives them their essential character, insofar as this criterion is applicable.
      HTSUS, GN-1 (2004) (emphasis added).

      . The subheading, which was later increased to a 0,9% rate of duty, expired entirely in 2012. See United States Manufacturing Enhancement Act of 2010, Pub. L, No. 111-227, § 3001(b)(10), 124 Stat. 2409, 2476.


source: Caselaw Access Project

author: DYK, Circuit Judge. PLAGER, Circuit Judge,

license: Public Domain

text:
    FEDERAL EDUCATION ASSOCIATION-STATESIDE REGION, Karen Graviss, Petitioners v. DEPARTMENT OF DEFENSE, Domestic Dependents Elementary and Secondary School, Respondent
    2015-3173
    United States Court of Appeals, Federal Circuit.
    Decided: November 18, 2016
    Dorothy Louise Lee, Federal Education Association Stateside Region, Dublin, OH, argued for petitioners.
    TáRA K. Hogan, Commercial Litigation Branch, Civil Division, United States Department of Justice, Washington, DC, argued for respondent. Also represented by Benjamin C. Mizer, Robert E. Kirschman, Jr„ Claudia Burke.
    Before DYK, PLAGER, and REYNA, Circuit Judges,
   Dissenting opinion filed by Circuit Judge PLAGER.

DYK, Circuit Judge.

Ms. Karen Graviss petitions for review of an arbitrator’s decision denying the Federal Education Association-Stateside Region’s (“FEA”) grievance of her removal for “inappropriate physical contact with a student.” The arbitrator held that FEA failed to show that Ms. Graviss’s due process rights wére violated and that the Department of Defense and Domestic Dependent Elementary and Secondary Schools (“DDESS”) had proved by a preponderance of the evidence that the removal penalty both promoted the efficiency of the service and was reasonable. We hold that Ms. Graviss’s due process rights were violated by an improper ex parte communication between a supervisor and the deciding official. Accordingly, we reverse and remand. ,

BackgRound

Ms. Graviss has worked in. the education field since 1978, primarily serving as a teacher to young special needs children. Ms. Graviss started as a pre-school teacher for a rehabilitation center and eventually transitioned to work as a second-grade teaching assistant and regular education teacher. From 1994 to 2008, Ms. Graviss worked in the Fort Knox Educational Development Intervention Services Program at Ireland Army Hospital. In 2008, DDESS hired Ms. Graviss as a pre-school teacher for special needs children at King-solver Elementary, part of Fort Knox Schools, where she worked until her removal on June 16, 2010. At Kingsolver Elerhentary, Ms. Graviss taught three- and four-year-old children with disabilities such as autism.

The events precipitating Ms. Graviss’s removal are recounted in detail in the arbitrator’s decision. See J.A. 804-90. For purposes of this appeal, we provide only a brief summary. Special education teachers must make difficult judgment calls in determining how to handle the behavior of their special needs students. This case has its genesis in divergent approaches to that problem.

On January 22, 2010, Dr. Andrea McClain, Kingsolver Elementary’s principal and Ms. Graviss’s direct supervisor, issued Ms. Graviss a letter of reprimand based on an “inappropriate interaction with a student” and “failure to follow directives.” J.A. 691. Specifically, the letter stated that, on January 16, 2010, Ms. Gra-viss and her aide had physically carried— “under his arms” and “under his knees”— a misbehaving general education preschool student who “wouldn’t come to [the principal’s] office” on his own. Id, The letter also stated that Ms. Graviss had emailed concerns to Dennis Labriola, the director ■ of special education, when Dr. McClain had previously directed Ms. Gra-viss to “bring all issues directly to [her] attention as the building principal.” Id. FEA filed a grievance concerning the letter.

Thereafter, on March 22, 2010, one of Ms. Graviss’s students had an episode, which manifested in his repeatedly flailing his arms, kicking, and screaming. While the other students were out at recess, Ms. Graviss employed two, methods of physical restraint on the child in an attempt to subdue .him. First, Ms. Graviss sat the child in a bean bag chair next to a wall and rolled the chair over itself toward the wall with the student inside. Second, after another outburst approximately three hours later, Ms. Graviss sat the child in a chair, pressed into the back of the chair with her knee, and pulled on the child’s crossed arrns from behind. Ms. Graviss does not appear to materially dispute the factual record of the events described, but contends that such methods of restraint were not improper. Two of Ms. Graviss’s classroom aides who were present at the time later reported the incidents via email to Dr. McClain. Dr. McClain then conducted an interview with Ms. Graviss in the presence of an FEA representative. After the interview, Dr. McClain completed and submitted a Family Advocacy Program Department of Defense Education Activity (“DoDEA”) Serious Incident Report and Alleged Child Abuse Report to the Family Advocacy Program, which operates like Child Protective Services for the military and investigates institutional child abuse.

On March 26, 2010, Dr. McClain forwarded the Serious Incident Report via email to her direct supervisor, Community Superintendent John Todd Curkendall, who would later serve as the deciding official in Ms. Graviss’s removal proceedings, and his supervisor, District Superintendent Dr. Frank Calvano. In response to this email, District Superintendent Dr. Calvano replied to both Dr. McClain and Mr. Curkendall (“the March 26 email”), stating, “I think this is going to come back with a ruling of no fowl [sic]. Regardless, we need to try and terminate her for repeated use of corporeal [sic] punishment and for insubordination.... ” J.A. 630 (emphasis added). Dr. McClain quickly replied to both Dr. Calvano and Mr. Curken-dall, stating, “Luckily, we have the two witnesses. I strongly support termination. This would match the DoDEA 1435.1 reg for a second offense of insubordination and the one on causing bodily harm. The second offenses on those both say suspension or removal.” Id.

On April 12, 2010, Dr. McClain issued a notice of proposed removal for Ms. Gra-viss. J.A. 708-09. The notice alleged a single charge of “inappropriate physical contact with a student” based on the instances of physical restraint discussed above. The notice did not charge Ms. Graviss with either of the more serious charges of corporal punishment or insubordination' discussed by Dr. Calvano in the March 26 email. Id. The notice informed Ms. Graviss that she could reply both in writing and orally to Mr. Curkendall, who would serve as the deciding official. J.A. 709. Ms. Gra-viss, represented by FEA as her union representative, responded both in writing and orally to Mr. Curkendall. Neither Ms. Graviss nor FEA was informed at the time about the March 26 email correspondence between Dr. McClain, Dr. Calvano, and Mr. Curkendall.

On June 14, 2010, after considering Ms. Graviss’s submitted replies, Mr. Curken-dall issued a formal written decision concluding that “the proposed removal and the charge of inappropriate physical contact with a student are fully supported by a preponderance of the evidence.... [The removal] is reasonable and promotes the efficiency of the service.” J.A. 797. Ms. Graviss was removed from her position effective June 16,2010.

FEA filed a grievance challenging Ms. Graviss’s removal on September 9, 2010. DDESS denied the grievance, and FEA invoked arbitration. During discovery proceedings leading up to the arbitration, Ms. Graviss learned for the first time about the March 26 email when DDESS produced a copy in discovery. The arbitrator then held a hearing on October 22 and 23, 2014, at which he heard testimony from many witnesses, including Mr. Curkendall and Dr. Calvano. Mr. Curkendall testified that, although he considered “everything relative to this case” in making his decision, his direct supervisor Dr. Calvano “did not direct him how to rule in this matter” in the March 26 email. J.A. 826. Mr. Curkendall further testified that he had issued recent disciplinary decisions contrary to Dr. Cal-vano’s views—including, in this case, imposing lesser punishment than Dr. Calvano had suggested. See J.A. 861.

Dr. Calvano similarly testified that he “never issued a directive or an order on how Mr. Curkendall should rule on a case,” including with respect to Ms. Gra-viss. J.A. 827. Dr. Calvano further testified that “I’m responsible for everything and sometimes I make direct decisions and give direct orders and sometimes I opine on matters with respect to sharing my views with proposing officials or deciding officials.... ■ Sometimes folks agree with me and sometimes they don’t.” J.A. 861. Dr. Calvano explained that typically, when he does “opine on proposed discipline,” he communicates his opinion to Nancy Gilley, the labor relations specialist. J.A. 827-28. He testified that “I typically, if you will, am overridden by Nancy Gilley.... She and I oftentimes agree; sometimes we don’t.” J.A. 828. On cross-examination, it became apparent that Nancy Gilley, unlike Mr. Curkendall, does not report to Dr. Calvano. See J.A. 861-62.

In his final written decision, the arbitrator rejected Ms. Graviss’s first due process argument that the March 26 email should have been disclosed to her at an earlier stage of the proceedings. The arbitrator held that the argument “lacks logic” because even if the March 26 email had been disclosed at an earlier stage, the disclosure would not have eliminated the alleged bias. J.A. 868. The arbitrator also rejected Ms. Graviss’s due process argument that the March 26 email constituted an improper ex parte communication under Stone v. Federal Deposit Insurance Corp., 179 F.3d 1368 (Fed. Cir. 1999). The arbitrator explained, “[i]f Calvano’s email was intended to be influential on the proposing or deciding official it was wholly ineffective. Were those officials influenced by the email they would have had ample opportunity and ability to modify the charges, to rewrite the unwritten, as yet, Notice of Proposed Removal, which they did not do.” J.A. 863. The arbitrator then held, without any detailed analysis of the three Stone factors discussed below, that “unlike in Stone, the Calvano statement contains no ‘new and material information.’” Id. The arbitrator found that the evidence “do[es] not show Curkendall was not the decider in this matter. The full record shows Curkendall was the independent decider required under case law.” J.A. 864.

Ms. Graviss petitions for review in our court. We have jurisdiction under 28 U.S.C. § 1296(a)(9); see also 6 U.S.C. §§ 7121(b)(2)(B), 7703(b)(1). In reviewing the arbitration award, we apply the same standard that is applied to appeals from the Merit Systems Protection Board (“Board”). 5 U.S.C. § 7121(f); Young v. Dep’t of Hous. & Urban Dev., 706 F.3d 1372, 1375 (Fed. Cir. 2013). Under that standard, we must affirm the arbitrator’s decision unless it is (1) arbitrary, capricious, an abuse of discretion, or otherwise not in accordance with law; (2) obtained without procedures required by law, rule, or regulation having been followed; or (3) unsupported by substantial evidence. 5 U.S.C. § 7703(c); Young, 706 F.3d at 1375-76. “In addition, we must reverse an arbitrator’s decision if it is not in accordance with the requirements of the Due Process Clause of the Fifth Amendment or any other constitutional provision.” Young, 706 F.3d at 1376 (citing Ward v. U.S. Postal Serv., 634 F.3d 1274, 1278 (Fed. Cir. 2011)).

Discussion

Public employees like Ms. Graviss possess a constitutionally protected property right in their continued employment. See, e.g., Arnett v. Kennedy, 416 U.S. 134, 155, 94 S.Ct. 1633, 40 L.Ed.2d 15 (1974); Stone, 179 F.3d at 1374. In Cleveland Board of Education v. Loudermill, the Supreme Court held that pre-deprivation due process is required in public employee discharge cases, stating,

[w]e have described the root requirement of the Due Process Clause as being that an individual be given an opportunity for a hearing before he is deprived of any significant property interest. This principle requires some kind of a hearing prior to the discharge of an employee.

470 U.S. 582, 542, 105 S.Ct. 1487, 84 L.Ed.2d 494 (1985) (internal quotation marks, footnote, and citations omitted). “[W]here a serious procedural curtailment mars an adverse personnel action which deprives the employee of pay, ... the defect divests the removal ... of legality.... In that situation, the merits of the adverse action are wholly disregarded.” Sullivan v. Dep’t of Navy, 720 F.2d 1266, 1274 (Fed. Cir. 1983) (quoting Ryder v. United States, 585 F.2d 482, 487-88 (Ct. Cl. 1978)).

Our decision in Stone v. Federal Deposit Insurance Corp. sets forth the constitutional due process requirements that apply to cases such as this involving ex parte communications to the deciding official. 179 F.3d at 1376. In fact, Stone involved nearly identical circumstances to those of this case, as the government largely concedes. Mr. Stone was removed from his federal position, and he appealed to the Board. Id. at 1372. During the discovery process, Mr,. Stone learned for the first time that the deciding official had received an ex parte memorandum from the proposing official and another ex parte memorandum from a third government employee, both urging that Mr. Stone be removed. Id. at 1372-73. In an affidavit, the deciding official stated that he would have concluded that Mr. Stone should be removed “whether or not he had seen” the ex parte memorandum from the proposing official. Id. at 1373. The Board denied Mr. Stone’s appeal, and he petitioned for review in our court. Id.

We held that “[t]he introduction of new and material information by means of ex parte communications to the deciding official undermines the public employee’s constitutional due process guarantee of notice (both of the charges and of the employer’s evidence) and the opportunity to respond.” Id. at 1376. Accordingly, it is “constitutionally impermissible to allow a deciding official to receive additional material information that may undermine the objectivity required to protect the fairness of the process.” Id. We went on to explain, however, that “not every ex parte communication is a procedural defect so substantial and so likely to cause prejudice that it undermines the due process guarantee and entitles the claimant to an entirely new administrative proceeding.” Id. at 1376-77. Rather, only ex parte communications that “introduce new and material information to the deciding official” contravene due process. Id. at 1377. The key, therefore, is determining whether the ex parte communication contained “new and material information.”

We articulated three relevant factors: whether (1) “the ex parte communication merely introduces ‘cumulative’ information or new information”; (2) “the employee knew of the error and had a chance to respond to it”; and (3) the communications were “of the type likely to result in undue pressure upon the deciding official to rule in a particular manner.” Id. Ultimately, the inquiry is “whether the ex parte communication is so' substantial and so likely to cause prejudice that no employee can fairly be required to be subjected to a deprivation of property under such circumstances.” Id. Finally, we made clear that, if new and material information has been conveyed by the ex parte communication, “then a due process violation has occurred and the former employee is entitled to a new constitutionally correct removal procedure. ... [W]hen a procedural due process violation has occurred because of ex parte communications, such a violation is not subject to the harmless error test.” Id. at 1377. Accordingly, we reversed and remanded for the Board to consider the above factors and make a determination as to whether the ex parte communications introduced new and material information such that Mr. Stone’s due process rights had been violated. Id.. Similarly, in Sullivan we held that “improper ex parte communications were not only unfair, but also denied petitioner his rights under the due process clause of the Constitution” and “further that they tainted the investigation, voided the entire proceeding, and rendered [the] removal decision a nullity.” 720 F.2d at 1274.

Before the arbitrator here, Ms. Graviss argued that Stone required a finding that her due process rights had been violated. See J.A. 940, The arbitrator did not undertake any detailed analysis of the Stone factors, but instead summarily concluded that, “unlike in Stone, the Calvano statement contains no ‘new and material information,’ ” J.A. 863. Substantial evidence, therefore, does not support the arbitrator’s decision in this respect. Even a brief examination of the Stone factors reveals that Ms. Graviss’s due process rights were violated by the March 26 email.

The government first argues that the Stone factors do not apply at all here because the communication' occurred before removal proceedings had been brought against Ms. Graviss. The government contends that improper ex parte communications can only occur once the removal proceeding had actually begun— in this case, when the notice of proposed removal had been issued. To be sure, as we discuss below, not all ex parte communications before the initiation of a proceeding will violate due process. But we see no basis for a distinction between pre- and post-initiation communications when the ex parte communication occurred at a time, as is the case here, when an adjudicatory proceeding was contemplated. The risk of creating undue pressure in such circumstances is just as great when ex parte contact occurs before the proceeding begins as when it occurs after the proceeding begins.

Here, it is clear that a proceeding was contemplated; indeed, that was the very purpose of the email, and it does not matter for the purposes of constitutional due process whether the ex parte communication occurred before or after formal proceedings had been initiated. Notably, under the Administrative Procedure Act, ex parte communications in the formal adjudication context are prohibited when “the person responsible for the communication has knowledge [the proceeding] will be noticed.” 5 U.S.C. § 557(d)(1)(E). The Board itself follows this rule. See 5 C.F.R. § 1201.102 (prohibiting ex parte communications “from the time the persons. involved know that the Board may consider the matter until the time the Board has issued a final decision”). Accordingly, we proceed to consider the Stone factors.

The first Stone factor is whether the ex parte communication “introduces ‘cumulative’ information or new information.” Stone, 179 F.3d at 1377. While the government echoes the arbitrator’s conclusion that “the email ... was not ‘new and material evidence,’ ” it does not argue that the March 26 email was merely “ ‘cumulative’ information” under the first factor. Br. of Appellee at 24. Nor could it. The March 26 email clearly introduced new information to Mr. Curkendall, the deciding official, because it informed him for the first time that his supervisor, Dr. Calvano, wanted Ms. Graviss to be removed for “insubordination” and “repeated use of corpor[a]l punishment.” J.A. 630. That information, along with Dr. McClain’s ready agreement, was not “cumulative” of any other information received by Mr. Curkendall. The first Stone factor was satisfied.

As to the second factor, whether “the employee knew of the error and had a chance to respond to it,” Stone, 179 F.3d at 1377, the government does not dispute that Ms. Graviss only learned about the March 26 email during discovery leading up to arbitration, long after her opportunity to respond to the proposed termination had closed, the termination decision was made, and she was removed from her position. Accordingly, the second Stone factor was satisfied.

The dissent concedes that “[undoubtedly, it would have been preferable had the issue been fully aired at the initial stages of the administrative review, for whatever relevance to the merits' it may have had.” Dissent at 1374. But the dissent suggests that any unfairness resulting from Ms. Graviss’s lack of knowledge of the March 26 email prior to her termination was mitigated later when she was given the opportunity to address the email during arbitration. See id. .That opportunity to address the email occurred four years after her termination when the email was finally disclosed.

It is true that, as the Supreme Court recognized in Loudermill, there are “some situations in which a post-deprivation hearing will satisfy due process requirements.” 470 U.S. at 542 n.7,105 S.Ct. 1487 (emphasis added): But this does not mean that an employee enjoys no due process before removal. Our recognition of the importance of pretermination due process dates back at least to our holding in Stone. See 179 F.3d at 1376 (“An employee is entitled to a certain amount of due process rights at each stage and, when these rights are undermined, the employee is entitled to relief regardless of the stage of the proceedings.”); see also Ward, 634 F.3d at 1282 (“If the Board finds that the communications did introduce new and material information in violation of [Petitioner’s] due process rights, [Petitioner] must be afforded a constitutionally correct removal procedure.” (internal quotation marks omitted)). Recently, this court has squarely rejected the idea that an adequate post-termination review can cure a procedurally deficient termination proceeding. See Young, 706 F.3d at 1377 (“[Petitioner] was entitled to procedural fairness at each stage of the removal proceedings, not just upon review of the termination decision.” (internal quotation marks omitted)).

As to the third factor, whether the communications were “of the type likely to result in undue pressure upon the deciding official to rule in a particular manner,” id. Ms. Graviss argues that the March 26 email from a supervisor to a subordinate deciding official is a paradigmatic example of “the type” of communication “likely to result in undue pressure.” The government disagrees on this point, contending that “Dr. Calvano’s informal opinions are just that: informal opinions. They do not direct, officially recommend, or even pressure an outcome.” Br. of Appellees at 29-30. The government emphasizes the arbitrator’s finding that the decision-maker here was subjectively independent, arguing that such subjective independence forecloses any due process violation.

It is true, as the government contends, that the arbitrator concluded that the “full record shows Curkendall was the independent decider required under case ■ law,” J.A. 864, based on the testimony from Mr. Curkendall and Dr. Calvano that no undue influence had been intended or perceived. And it is true that no such finding had been made in Stone, where we remanded to the MSPB for a consideration of the three factors in the first instance. Stone, 179 F.3d at 1377. But whether or not the decisionmaker was subjectively independent is not the question. Rather, the fundamental issue is whether there was a substantial potential for undue pressure using the objective standard of Stone. .

The third Stone factor, whether the communications were “of the type likely to result in undue pressure upon the deciding official to rule in a particular manner,” Stone, 179 F.3d at 1377 (emphasis added), specifically directs the inquiry to the “type” of communication involved, and does not require proof that the ex parte communication actually resulted in undue pressure upon the deciding official to rule in a particular , manner. Indeed, we held in Stone that “[ultimately, the inquiry .... is whether the ex parte communication is so substantial and so likely to cause prejudice that no employee can fairly be required to be subjected to a deprivation of property under such circumstances.” Id. (emphasis added). While proof of subjective undue influence from an undisclosed communication may support a conclusion that there has been a due process violation, the absence of subjective influence does not foreclose the possibility of a violation. See Ward, 634 F.3d at 1280 n.2. Accordingly, the arbitrator’s finding that Mr. Curken-dall in fact believed that he was not unduly influenced by the March 26 email does not preclude a due process violation. We con-elude that a petitioner need not prove actual subjective influence in order to demonstrate a violation of due process under Stone. See also Camero v. United States, 376 F.2d 777, 780 (Ct. Cl. 1967) (invalidating removal despite concluding that the deciding official “made up his own mind when he decided to sustain plaintiffs removal” because “decisions were made, at least in part, on the basis of the ex parte communication”).

Here, the March 26 email was certainly the “type” of communication “likely to result in undue pressure on the deciding official to rule in a particular manner” under the objective framework of the third Stone factor. Stone, 179 F.3d at 1377 (emphasis added). A supervisor issued what can only most generously be deemed a “suggestion” to a subordinate decision-maker. The nature of this communication, particularly in light of the strong language used, “we need to try and terminate her ...,” and the specificity of the suggested rationale, “for repeated use of corporeal [sic] punishment and for insubordination,” J.A. 630 (emphasis added), creates a high risk that a subordinate decision-maker would have been unduly pressured to terminate the employee. Because the undisclosed March 26 email was of the type likely to result in undue pressure, the third Stone factor was satisfied.

To be clear, we are not suggesting .that the standards of impartiality applicable to the judiciary and to Board adjudication also apply in the context of an agency decision to remove an employee or other adverse action. Inevitably, due to the nature of the workplace, a deciding official in the employment context likely is familiar with the employee and has knowledge of the employee’s prior performance and conduct. Contrary to the dissent’s suggestion, we recognize that the. existence of such knowledge by officials involved with the removal process (including the deciding official) creates no due process issue, as we held in Norris v. SEC, 675 F.3d 1349 (Fed. Cir. 2012). In Norris, we affirmed an arbitrator’s finding that an alleged ex parte communication was not new and material where the alleged ex parte communication was merely the deciding, official’s awareness of a prior incident of the employee’s misconduct at the time of her removal decision. See id. at 1353-54. As we explained, “a deciding official’s mere knowledge of prior misconduct by the employee obtained before the commencement of disciplinary proceedings does not constitute an improper ex parte communication.” Id.

But unlike Norris, this case does not involve routine communications and knowledge acquired about an employee’s job performance before a decision to commence removal proceedings. Rather, the communication in this case was directed to the conduct of the removal proceedings and is indistinguishable from the type of communication that this court recognized violated due process in Stone. All three of the Stone factors are satisfied. First, the communication was made in contemplation of removal proceedings and provided the new information that the official’s supervisor wanted Ms. Graviss to be terminated. Second, Ms. Graviss was unaware of this communication and, therefore, she had no opportunity to respond to it. Third, the recommendation of termination by the deciding official’s supervisor was “of the type likely to result in undue pressure upon the deciding official to rule in a particular manner,” in this case, to terminate Ms. Graviss. Stone, 179 F.3d at 1377.

We conclude that Ms. Graviss’s due process. rights were violated, and that substantial evidence does not support the arbitrator’s conclusion to the contrary. We need not consider Ms. Graviss’s other arguments regarding the merits of her removal. We reverse and remand for further proceedings consistent with this opinion.

REVERSED AND REMANDED

Costs

Costs to petitioners.

PLAGER, Circuit Judge,

dissenting.

I respectfully dissent from the majority’s conclusion that, as a matter of law, Ms. Graviss was denied her constitutional rights during her removal from federal service. Not only does the majority reach the wrong conclusion with regard to her due process rights, but the opinion has the potential to chill important discussions regarding personnel matters among responsible supervisors, discussions that are essential to well-functioning agency administration.

The relevant facts are clear. Ms. Graviss was employed as a preschool teacher for special-needs children in a school operated under the Department of Defense. Her immediate supervisor was Dr. Andrea McClain, principal of the school. The school and its principal were under the immediate supervision of John Curkendall, Community Superintendent. In turn, Mr. Curkendall reported to Dr. Frank Calvano, District Superintendent. That was the agency chain of command at the time of the events that led to Ms. Graviss’ removal.

From the viewpoint of the agency, Ms. Graviss had not performed well. She had been disciplined previously in a formal letter of reprimand from Dr. McClain for “inappropriate interaction with a student” and “failure to follow directives.” J.A. 691. That interaction apparently involved physical restraint of a misbehaving student in a manner contrary to the school’s .standing instructions.

The particular event that precipitated Ms. Graviss’ removal involved her again having physically handled a child. The event was witnessed by two classroom aides who were sufficiently concerned that they reported the event to Principal McClain. After' an investigation,' Dr. McClain forwarded a Serious Incident Report to Mr. Curkendall, her immediate supervisor, and Dr. Calvano, at the next supervisory level. Dr. Calvano obviously was aware of the problem with the teacher’s physical handling of children, as he responded to that report with an email, to both Mr, Curkendall and Dr. McClain. In that email, the District Superintendent said that “we need to try and terminate her for. repeated use of corporeal punishment and for insubordination.” J.A. 680. That email is the subject of this appeal.

The following month, Dr. McClain issued a notice of proposed removal based on “inappropriate physical contact with a student,” the event arising from that particular incident. J.A. 708. The notice did not include either of the concerns that Dr. Calvano identified, corporal punishment or insubordination.

The Community Superintendent, Mr. Curkendall, subsequently was designated the deciding official in the case, pursuant to the agency’s procedures. In due course, after hearing and consideration of Ms. Graviss’ responses to the charge, he issued a formal decision removing her.

During her appeal from the agency’s decision of removal, which she elected to take to an arbitrator rather than the Merit Systems Protection Board (“MSPB”), the existence of the Calvano email was disclosed. The arbitrator upheld the removal by the agency, and appeal was taken here.

The issue presented is, does the existence of that email sufficiently taint the agency’s removal process so as to deprive Ms. Graviss of the constitutional due process under the Fifth Amendment to which she is entitled?

1. Loudermill

The Supreme Court in 1985 set out the basic parameters of proper process for removing employees from public service, at least as far as constitutional due process requires. Cleveland Bd. of Educ. v. Loudermill, 470 U.S. 532, 105 S.Ct. 1487, 84 L.Ed.2d 494 (1985). In the combined cases generally known as Loudermill, the employees were summarily dismissed without a hearing. The issue before the Court was what rights, if any, does a public employee have to notice and opportunity to be heard before the decision to remove is made (the pre-decision right), when post-decision procedures are in place. The Court announced that, under the Constitution’s due process clause, “the tenured public employee is entitled to oral or written notice of the charges against him, an explanation of the employer’s evidence, and an opportunity to present his side of the story. To require more than this prior to termination would intrude to an unwarranted extent on the government’s interest in quickly removing an unsatisfactory employee.” Id. at 546, 105 S.Ct. 1487 (citations omitted). In LoudermMl, there was no issue of a prior communication among those in the agency chain of command regarding the particular matter. (We refer here to such prior communication as ex parte communication, the general term ex parte simply meaning without the knowledge or involvement of all parties).

2. Stone

The issue of ex parte communication was before this court fourteen years later in Stone v. Federal Deposit Insurance Corp., 179 F.3d 1368 (Fed. Cir. 1999). Mr. Stone was removed from federal employment following a full hearing and opportunity to respond to the charges. However, subsequently, during his appeal of the agency decision to the MSPB, Mr. Stone learned that a previously undisclosed memo on the matter from the official recommending Stone’s removal had been sent to the deciding official, and that a second such memo had been sent to the deciding official by another agency official urging Mr. Stone’s removal. The MSPB nevertheless affirmed the removal, and he appealed here.

The majority in the case now before us turned to Stone for its analysis of the applicable law. In Stone, this court said that “not every ex parte communication is a procedural defect so substantial and so likely to cause prejudice” that it constitutes a due process violation. Id. at 1376-77. “Only ex parte communications that introduce new and material information to the deciding official will violate the due process guarantee of notice. In deciding whether new and material information has been introduced by means of ex parte contacts, the Board should consider the facts and circumstances of each particular case.” Id. at 1377. The court then laid out several factors to be considered: “whether the ex parte communication merely introduces ‘cumulative’ information or new information; whether the employee knew of the error and had a chance to respond to it; and whether the ex parte communication were of the type likely to result in undue pressure upon the deciding official to rule in a particular manner.” Id.

The Stone court declined to express any opinion about whether the ex parte communications in that case constituted new and material information; indeed, the court’s opinion does not elaborate on exactly what was said in either of the communications involved. The matter was returned to the MSPB for further consideration pursuant to the court’s newly-articulated criteria. (On remand, the MSPB disposed of the case by a single word, “Dismissed.” 84 M.S.P.R. 623 (Oct. 15, 1999)).

a. The first Stone factor

The majority here finds the email from Dr. Calvano constitutes a communication of new and material information in violation of the first Stone factor. I disagree. First, the mere fact of a prior communication, that is, some earlier communication from an official in the chain of command to the eventual deciding official regarding the existence of a personnel problem, cannot constitute by itself the proscribed ex parte communication. If it did, the rule would be simply that any communication by a supervisory officer regarding an existing personnel issue to a lower administrative officer who then becomes the deciding official in the particular case violates due process.

This would mean that in any well-functioning administrative agency, in which lower administrative officers regularly confer with and seek the advice of their responsible superiors, especially about personnel problems, no subsequent process within the administrative chain of command regarding such matters could be conducted. Every disciplinary case would have to be referred to an outside entity for initial review and decision. That is contrary to good administrative practice, and certainly not the process that Congress and the agencies have in place. As a general proposition, courts regularly require that employees exhaust their administrative remedies before they can seek relief in the courts.

What the first Stone factor addresses, when it invokes the concept of a relevant ex parte communication, is a communication that contains new and material information about the fads and circumstances of the event at issue. And even then, as the Stone court notes, a comment on the facts may not be relevant if it is just “cumulative” information. In the case before us, Dr. Calvano’s email did not contain any new information whatsoever about the specifics of the incident described in the Serious Incident Report, on which the charges against Ms. Graviss were based

It could be argued that the email did provide Mr. Curkendall new information— that is, the fact that Dr. Calvano, his superior, was concerned about this employee and wanted something done. Given the content of the email, however, it seems unlikely that this was the first inkling that Mr. Curkendall had regarding his supervisor’s concerns; Dr. Calvano obviously had been advised previously that Ms. Graviss’ behavior with the children was viewed as a problem by the school principal.

In any event, even if the fact of Dr. Calvano’s concerns were new information, they did not prove to be material, as I shall explain in the discussion of Stone factor three, below. Accordingly, the circumstances of this case do not disclose a relevant ex parte communication containing new and material information.

b. The second Stone factor

Even if it could be argued that the email from Dr. Calvano constituted new and material information, the second Stone factor asks whether the employee knew of the communication and had a chance to respond to it. There is no argument that the existence of the Calvano email was not disclosed to the employee at the time she had her hearing before the administrative deciding official; the existence of the email came out during the appeal proceedings before the arbitrator. At that point, the arbitrator gave Ms. Graviss full opportunity to respond to the implications of that communication; it became a major issue in the record before the arbitrator.

In terms of due process, it is important that the employee be given a full and fair hearing at which an ex parte communication such as this is considered and evaluated. In this case, that full and fair hearing was held before the arbitrator, the review route chosen by Ms. Graviss. The record before the arbitrator reveals a full discussion and consideration of the email’s existence and possible consequences. Ultimately the arbitrator found that the email did not affect the propriety of the administrar tion’s removal decision.

In Loudermill, the Supreme Court made special note of the state’s -statutory mechanisms for review of administrative personnel decisions. The existence of such review mechanisms was part of the Court’s explanation for why it established a fairly basic notice and hearing requirement in order'to comply with due process. Loudermill, 470 U.S. at 546, 105 S.Ct. 1487 (noting that the Court’s decision “rests in part on the provision in Ohio law for a full post-termination hearing”); see also Id. at 542 n.7, 105 S.Ct. 1487 (noting that “[tjhere are, of course, some situations in which a post-deprivation hearing will satisfy due process requirements”).

In this case, the hearing before the arbitrator, though it occurred post-deprivation, provided the employee with a full opportunity before a disinterested decision-maker to explore the existence and ramifications of the now-disclosed ex parte communication, including opportunity to confront the key witness, the administrator who made the decision to remove her. Undoubtedly, it would have been preferable had the issue been fully aired at the initial stages of the administrative review, for whatever relevance to the merits it may have had. But it would not be appropriate for us in this case to impose a higher due process standard than that called for by the Loud-ermill ruling, thus creating an indeterminate higher standard that would have the potential for chilling the communication needed among responsible administrative officers.

c. The third Stone factor

Finally, the third Stone factor asks whether the ex parte communication was of the type likely to result in undue pressure upon the deciding official to rule in a particular manner. That question is one of fact—whether this particular communication is the type likely to result in undue pressure upon the deciding official in this case. Each case will be different—different content to the communication, different source from which the communication emanated, different recipient of the communication, and different defendant’s conduct. That is why, as the Stone court put it, the outcome turns on “the facts and circumstances of each particular case.” 179 F.3d at 1877.

In this case, the arbitrator heard the witnesses, including the agency’s deciding official. The question of whether Mr. Curk-endall, the deciding official, was pressured at all, much less unduly pressured, was explored at length. He denied feeling any pressure to decide the case one way or the other, explaining that he understood and felt free to make the decision regarding removal based on the facts before him. The arbitrator, after hearing the testimony of the witnesses, concluded that the deciding official acted according to his best judgment on the facts before him, and without regard to the earlier ex parte communication.

That factual conclusion is reviewed by us under the deferential standard prescribed by statute—is there substantial evidence in the record supporting it? While there are many cases that delve into the meaning of “substantial evidence,” sometimes with different terminology, they all come down to this—it is not whether a reviewing judge would have' so concluded, rather it is whether the evidence is such that a reasonable person could have arrived at this conclusion. An even more deferential standard applies to the fact-finder’s determinations about the credibility of the witnesses.

In this case, the facts in the record establish that a senior administrator was concerned about a new incident involving this teacher, to the point of expressing that concern, and before any formal charges were brought. The actual charges brought did not reflect the concerned administrator’s particular views of what charges could be brought. The deciding official testified that he had not been directed by the particular views of his superior in the case, and provided examples of occasions when he disagreed with such suggestions, in the past.

The deciding official convinced the arbitrator that he did not feel any pressure regarding how to decide the case, one way or the other. This conclusion must be understood in the context of administrative agency processes. In Loudermill, the Court commented that “the pretermination hearing need not definitively resolve the propriety of the discharge. It should be an initial check against mistaken decisions— essentially," a determination of whether there are reasonable grounds to believe that the charges against the employee are true and support the proposed action.” Loudermill, 470 U.S. at 545-46, 105 S.Ct. 1487.

This recognizes that, by virtue of their position as part of the agency, administrative officers when hearing a case such as this are not expected to be in the same position of impartiality as a judge or other independent decision-maker. Compare Marshall v. Jerrico, Inc., 446 U.S. 238, 242, 100 S.Ct. 1610, 64 L.Ed.2d 182 (1980) (“The Due Process Clause entitles a person to an impartial and disinterested tribunal in both civil and criminal cases.”), with Walker v. City of Berkeley, 951 F.2d 182, 183-84 (9th Cir. 1991) (holding that pre-deprivation due process under Loudermill does not require “an impartial decision-maker at the pretermination stage ... so long as the decisionmaker at the post-termination hearing is impartial”).

An understanding of the administrative context reflected in the record before us, coupled with the arbitrator’s personal assessment of the veracity of the witnesses, makes the arbitrator’s factual conclusions unassailable under our standard of review. The majority's effort to transpose this factual conclusion into something else, something subject to the unlimited discretion of reviewing judges, is, in my view, inconsistent with controlling law.

3.

As the Stone court stated, “[ujltimately, the inquiry ... is whether the ex parte communication is so substantial and so likely to cause prejudice that no employee can fairly be required to be subjected to a deprivation of property under such circumstances.” 179 F.3d at 1377. That is far from this case.

For áll these reasons, the arbitrator’s decision should be affirmed. I respectfully dissent from the contrary decision reached by my colleagues in the majority.

      . By “no fo[u]l,” it appears that Dr. Calvano was referencing the Family Advocacy Program investigation, which was separate from Ms. Graviss’s removal proceedings and followed from Dr. McClain’s mandatory submission of Serious Incident and Child Abuse reports. See J.A. 366.

      . The arbitrator also concluded that "[e]ven if, arguably, [the March 26 email] was ‘material relied on in proposing removal’ the alleged failure to immediately provide to [Ms. Graviss] was harmless error as [Ms. Graviss] had the information at the hearing, and opportunity to challenge and address it and did so.” J.A. 889. As the government concedes, the arbitrator's invocation of a harmless error test here was erroneous. As discussed below, in Stone we held that “when a procedural due process violation has occurred because of ex parte communications, such a violation is not subject to the harmless error test.” 179 F.3d at 1377.

      . Id. § '557(d)(1)(A), (E) (prohibiting "an ex parte communication relevant to the merits of the proceeding” and providing that “the prohibitions of this subsection shall apply beginning at such time as the agency may designate, but in no case shall they begin to apply later than the time, at which a proceeding is noticed for hearing unless the person responsible for the communication has knowledge that it will be noticed, in which case the prohibitions shall apply beginning at the time of his acquisition of such knowledge”).

      . Other circuits have rejected such arguments where an impartial decision maker presides over post-termination proceedings. See, e.g., McDaniels v. Flick, 59 F.3d 446, 459-60 (3d Cir. 1995) (collecting cases); Walker v. City of Berkeley, 951 F.2d 182, 184 (9th Cir. 1991); Duchesne v. Williams, 849 F.2d 1004, 1005, 1008 (6th Cir. 1988) (enbanc).

      . It is an open question whether Ms. Graviss’ union is a proper petitioner in this case; however, as that question was not raised by the Government, it need not be addressed here.

      . It is of course possible for statutes and regulations, as well as employment contract provisions, to impose more process than what is due under the Constitution.

      .Since Loudermill involved state employees, the due process clause was that of the. 14th Amendment; no one doubts that federal employees such as Ms. Graviss have at least the same basic rights under the due process clause of the 5th Amendment.

      . See, e.g., ex parte, Black’s Law Dictionary (10th ed. 2014).

      . This court also addressed the issue in other cases post-Loudermill. See, e.g., DeSarno v. Dep't of Commerce, 761 F.2d 657 (Fed. Cir. 1985).

      . The Administrative Procedure Act ("APA”) prohibits ex parte communications, but not between agency employees such as Dr. Calvano and Mr. Curkendall. See S. Rep. No. 354, 94th Cong., 1st Sess. 36 (1975); H.R. Rep. No. 880, 94th Cong., 2d Sess. 20 (1976) (“Communication solely between agency employees are excluded from the section's prohibition.").

      . See also the concurring position of our sister circuits. See, e.g., Senra v. Town of Smithfield, 715 F.3d 34, 39-40 (1st Cir. 2013); Coollick v. Hughes, 699 F.3d 211, 220-21 (2d Cir. 2012); McDaniels v. Flick, 59 F.3d 446, 456-60 (3d Cir. 1995); Dennison v. County of Frederick, Va., 921 F.2d 50, 55 (4th Cir. 1990); Caine v. Hardy, 943 F.2d 1406, 1412 (5th Cir. 1991); Kuhn v. Washtenaw County, 709 F.3d 612, 621-23 (6th Cir. 2013); Schacht v. Wisconsin Dep't of Corrections, 175 F.3d 497, 503 (7th Cir. 1999), receded from on other grounds in Higgins v. Miss., 217 F.3d 951 (7th Cir. 2000); Krentz v. Robertson Fire Prot. Dist., 228 F.3d 897, 902 (8th Cir. 2000); Association for L.A. Deputy Sheriffs v. County of L.A., 648 F.3d 986, 991-92 (9th Cir. 2011); Saavedra v. City of Albuquerque, 73 F.3d 1525, 1533 (10th Cir. 1996); McKinney v. Pate, 20 F.3d 1550, 1556-57 (11th Cir. 1994); Wash. Teachers’ Union Local No. 6, Am. Fed’n of Teachers, AFL-CIO v. Bd. of Educ. of the Dist. of Columbia, 109 F.3d 774, 781 (D.C. Cir. 1997).

      . See, e.g., Parker v. United States Postal Serv., 819 F.2d 1113, 1115 (Fed, Cir. 1987).

      . See, e.g., Hambsch v. Dep’t of the Treasury, 796 F.2d 430, 436 (Fed. Cir. 1986).


author: REYNA, Circuit Judge.

text:
    UNWIRED PLANET, LLC, Appellant v. GOOGLE INC., Appellee
    2015-1812
    United States Court of Appeals, Federal Circuit.
    Decided: November 21, 2016

      William M. Jay, Goodwin Procter LLP, Washington, DC, argued for appellant. Also represented by EleanoR M. Yost; Beett M. Schuman, David Zimmer, San Francisco, CA.
    Jon Wright, Sterne Kessler Goldstein & Fox, PLLC, Washington, DC, argued for appellee. Also represented by Miohael V. Messinger, Joseph E. Mutsohelknaus, Deirdre M. Wells; Peter Andrew Detre, Munger, Tolies & Olson, LLP, San Francisco, CA; Adam R. Lawton, Los Angeles, CA.
    Before REYNA, PLAGER, and HUGHES, Circuit Judges.
   REYNA, Circuit Judge.

Unwired Planet, LLC (“Unwired”) appeals from the final written decision of the Patent Trial and Appeal Board (“Board”) in Covered Business Method Patent Review No. 2014-00006. Google Inc. v. Unwired Planet, LLC, CBM2014-00006, 2015 WL 1570274 (P.T.A.B. Apr. 6, 2015) {“CBM Final Decision”). Because the Board relied on an incorrect definition of covered business method (“CBM”) patent in evaluating the challenged patent, U.S. Patent No. 7,203,752 (the “ '752 patent”), we vacate and remand.

Background

U.S. Patent No. 7,203,752

The '752 patent is entitled “Method and System for Managing Location Information for Wireless Communications Devices.” It describes a system and method for restricting access to a wireless device’s location information. The specification describes a system that allows users of wireless devices (e.g., cell phones) to set “privacy preferences” that determine whether “client applications” are allowed to access their device’s location information. '752 patent col. 1 11. 60-65. The privacy preferences used to determine whether client applications are granted access may include, for example, “the time of day of the request, [the device’s] current location at the time the request is made, the accuracy of the provided information and/or the party who is seeking such information.” Id. at col. 1 1. 65 to col. 2 1. 1. “In operation, a client application will submit a request over a data network to the system requesting location information for an identified wireless communications device.” Id. at col. 3 11. 30-33. The system then determines, based on the user’s privacy preferences, whether to provide the requested location information to a client application. Id. at col. 311. 38-50.

Claim 25 is representative for the purposes of this appeal. It claims:

A method of controlling access to location information for wireless communications devices operating in a wireless communications network, the method comprising:
receiving a request from a client application for location information for a wireless device;
retrieving a subscriber profile from a memory, the subscriber profile including a list of authorized client applications and a permission set for each of the authorized client applications, wherein the permission set includes at least one of a spatial limitation on access to the location information or a temporal limitation on access to the location information;
querying the subscribe[r] profile to determine whether the client application is an authorized client application;
querying the subscriber profile to determine whether the permission set for the client application authorizes the client application to receive the location information for the wireless device;
determining that the client application is either not an authorized client application or not authorized to receive the location information; and
denying the client application access to the location information.

Id. at col. 16 11.18-40.

CBM 2014-00006

On October 9, 2013, Google Inc. (“Google”) petitioned for CBM review of claims 25-29 of the '752 patent. See Leahy-Smith America Invents Act (“AIA”), Pub. L. No. 112-29, § 18, 125 Stat. 284, 329-31 (2011). On April 8, 2014, the Board instituted CBM review of all the challenged claims. As a threshold matter, the Board reviewed whether the '752 patent is a CBM patent. See AIA § 18(d); 37 C.F.R. § 42.301. The Board based its review on “whether the patent claims activities that are financial in nature, incidental to a financial activity, or complementary to a financial activity.” Google Inc. v. Unwired Planet, LLC, CBM2014-00006, 2014 WL 1396978, at *7 (P.T.A.B. Apr. 8, 2014) (“CBM Institution Decision”) (citing Board decisions). After examining the '752 patent’s specification, the Board found the '752 patent to be a CBM patent, reasoning:

The '752 patent disclosure indicates the “client application” may be associated with a service provider or a goods provider, such as a hotel, restaurant, or store, that wants to know a wireless device is in its area so relevant advertising may be transmitted to the wireless device. See ['752 patent col. 1111.] 12-17. Thus, the subject matter recited in claim 25 of the '752 patent is incidental or complementary to the financial activity of service or product sales. Therefore, claim 25 is directed to a method for performing data processing or other operations used in the practice, administration, or management of a financial product or service.

Id. The Board instituted the CBM review on four grounds: (1) claims 25-29 for un-patentable subject matter under 35 U.S.C. § 101, (2) claim 26 for lack of written description under 35 U.S.C. § 112, (3) claim 25 for obviousness under 35 U.S.C. § 103 over two references, and (4) claim 25 for obviousness over a different combination of two references. CBM Institution Decision, 2014 WL 1396978, at *1, *4, *20-21.

The Board issued its final written decision on April 6, 2015. The Board upheld only the first ground, finding that the challenged claims were directed to unpatentable subject matter under section 101. CBM Final Decision, 2015 WL 1570274, at *18. Unwired appeals. Google does not cross-appeal. The only issues on appeal are whether the patents are CBM patents and whether the challenged claims are directed to patentable subject matter under section 101. We have jurisdiction under 28 U.S.C. § 1295(a)(4)(A) and 35 U.S.C. § 329. Our jurisdiction includes review of whether the '752 patent is a CBM patent. Versata Dev. Grp., Inc. v. SAP Am., Inc,, 793 F.3d 1306, 1323 (Fed. Cir. 2015).

Standard of Review

We review Board determinations under the standards provided in the Administrative Procedure Act (“APA”), 5 U.S.C. § 706. Pride Mobility Prods. Corp. v. Permobil, Inc., 818 F.3d 1307, 1313 (Fed. Cir. 2016); Power Integrations, Inc. v. Lee, 797 F.3d 1318, 1323 (Fed. Cir. 2015). “Under 5 U.S.C. § 706(2)(A), (E), the Board’s actions here are to be set aside if ‘arbitrary, capricious, an abuse of discretion, or otherwise not in accordance with law’ or ‘unsupported by substantial evidence.’ ” Pride Mobility, 818 F.3d at 1313. We review the Board’s statutory interpretation de novo. Belkin Int’l, Inc. v. Kappos, 696 F.3d 1379, 1381 (Fed. Cir. 2012).

DISCUSSION

Unwired argues that the. Board erred in applying a standard that is broader than the AIA contemplates to determine whether the '752 patent was a CBM patent. It notes that the challenged claims themselves do not disclose or- otherwise describe a financial product or service. In Unwired’s view, the Board’s reliance on the sections of the specification discussing ways to monetize the invention by selling advertising is improper speculation. Un-wired further argues that the Board erred by looking to whether the claims are “incidental” or “complementary” to financial activity because these -broad terms conflict with the AIA’s limits on covered patents.

Google responds that the Board applied the correct definition of CBM patents in light of the comments the United States Patent ' and Trademark Office (“PTO”) made during the regulatory process. Google argues that the “Board’s broad application of CBM review is well-known and has been recognized by this Court.” Google Br. 24 (citing Versata, 793 F.3d at 1324). Google further notes that the specification discusses using the claimed method to facilitate advertising, which would thereby facilitate financial activity. In Google’s view, proposed use of the claimed method in facilitating advertising is sufficient to support the Board’s determination that the '752 patent is a CBM patent. We disagree.

In accordance with the statute, a CBM review is available only for a “covered business method patent,” which the AIA defines as “a patent that claims a method or corresponding apparatus for performing data processing or other operations used in the practice, administration, or management of a financial product or service, except that the term does not include patents for technological inventions.” AIA § 18(d)(1).

The PTO adopted the statutory definition of CBM patents by regulation without alteration. Transitional Program for Covered Business Method Patents—Definitions of Covered Business Method Patent and Technological Invention, 77 Fed. Reg. 48,734 (Aug. 14, 2012) (“Transitional Program”). We have noted that the PTO has a “broad delegation of rulemaking authority in the establishment and implementation of’ CBM review. Versaba, 793 F.3d at 1325. “It might have been helpful if the [PTO] had used [its] authority to elaborate on its understanding of the definition [of CBM] provided in the statute.” Versata, 793 F.3d at 1325. But the PTO did not do so, instead adopting by regulation the statutory definition of a CBM patent. 37 C.F.R. § 42.301(a).

To reach its decision in this case, the Board did not apply the statutory definition. Instead, the Board stated that the proper inquiry “is whether the patent claims activities that are financial in nature, incidental to a financial activity, or complementary to a financial activity.” CBM Institution Decision, 2014 WL 1396978, at *7 (citing Board cases). The Board determined that the '752 patent was a CBM patent because the location service could involve an eventual sale of services. The Board noted that the specification provides that “client applications may be service or goods providers whose business is geographically oriented,” such as a “hotel, restaurant, and/or store.” '752 patent col. 1111. 12-13. These businesses may wish to know a wireless device and its user are nearby so that “relevant advertising may be transmitted to the wireless communications device.” Id. at 11. 13-17. The Board relied on this discussion to find that the '752 patent is a CBM patent because “the subject matter recited in claim 25 of the '752 patent is incidental or complementary to” potential sales resulting from advertising. CBM Institution Decision, 2014 WL 1396978, at *7. Indeed, the finding that sales could result from advertising related to the practice of the patent is the sole evidence the Board relied on to find that the '752 patent is a CBM patent. See id.; Google Br. 29-30.

It is not disputed that this “incidental” or “complementary” language is not found in the statute. The origin of this language is a statement from Senator Schumer that the PTO quoted in its response to public comments concerning its consideration of proposed interpretations of the statutory definition for a CBM patent. Transitional Program (response to comment 1) (quoting 157 Cong. Rec. S5432 (daily ed. Sept. 8, 2011) (statement of Sen. Schumer) (appearing in the permanent edition of the Congressional Record at 157 Cong. Rec. 13,190 (2011))). As part of this statement on general policy about how it will act “in administering the program,” the PTO response quotes a single floor comment during the Senate debate over the AIA as an example of the legislative history. Id. The PTO did not adopt the general policy statement through ruling making procedures.

General policy statements, however, are not legally binding and, without adopting a policy as a rule through rule-making, an “agency cannot apply or rely upon a general statement of policy as law.” Pac. Gas & Elec. Co. v. Fed. Power Comm’n, 506 F.2d 33, 38 (D.C. Cir. 1974); Chrysler Corp. v. Brown, 441 U.S. 281, 302 n.31, 99 S.Ct. 1705, 60 L.Ed.2d 208 (1979) (suggesting that general statements of policy “do not have the force and effect of law”); Hamlet v. United States, 63 F.3d 1097, 1105 n.6 (Fed. Cir. 1995) (noting that a “substantive rule” is “far more likely to be considered a binding regulation” than a general statement of policy). Likewise, the legislative history cannot supplant the statutory definition actually adopted. Ratzlaf v. United States, 510 U.S. 135, 147-48, 114 S.Ct. 655, 126 L.Ed.2d 615 (1994) (“[W]e do not resort to legislative history to cloud a statutory text that is clear”). To the extent the PTO’s response is viewed as reflecting the legislative history, “the views of a single legislator, even a bill’s sponsor, are not controlling.” Mims v. Arrow Fin. Servs., LLC, — U.S. -, 132 S.Ct. 740, 752, 181 L.Ed.2d 881 (2012) (citing Consumer Prod. Safety Comm’n v. GTE Sylvania, Inc., 447 U.S. 102, 118, 100 S.Ct. 2051, 64 L.Ed.2d 766 (1980)).

The legislative debate concerning the scope of a CBM review includes statements from more than a single senator. It includes inconsistent views, some of which speak more clearly and directly on the definition than does the single statement picked by the PTO. For example, various legislators offered divergent views on whether patents on check scanning methods and apparatuses are CBM patents. Senator Kyi urged that the CBM “section grew out of concerns” with patents on technology used to “clear checks electronically,” which he claimed should be covered as “products or services that are particular to or characteristic of financial institutions.” 157 Cong. Rec. 3432-33 (2011) (statement of Sen. Kyi). Senator Durbin expressed concerns that the section should not cover patents on “novel machinery to count, sort, and authenticate currency and paper instruments.” 157 Cong. Rec. 13,186 (2011) (statement of Sen. Durbin). In response to those views, Senator Schumer assured that “it is not the understanding of Congress that such patents would be reviewed and invalidated under Section, 18.” Id. (statement of Sen. Schumer). These views show clear conflict about whether methods and apparatuses used for counting money, sorting currency denominations, and authenticating financial instruments are within the definition of a CBM patent. Equally clear is that, under the Board’s current definition of the scope of CBM patents, such méthods and apparatuses would be, at minimum, incidental to financial activity. Certainly, an apparatus used to sort currency denominations, or a method directed to authenticating financial instruments, are more related to the statutory definition than the patent in-this case.

Neither the legislators’ views nor the PTO policy statement provides the operative legal standard. The authoritative statement of the Board’s authority to conduct a CBM review is the text of the statute. Exxon Mobil Corp. v. Allapattak Servs., Inc., 545 U.S. 546, 568, 125 S.Ct. 2611, 162 L.Ed.2d 502 (2005). The Board is only empowered to review “the. validity of covered business method patents.” AIA § 18(a)(1). To be sure, claims that satisfy the PTO’s policy statement may also fall within the narrow statutory definition. See, e.g., Blue Calypso, 815 F.3d at 1337, 1340 (CBM patent’s claim included “recognizing a subsidy” step to “financially induce” participant action) (emphasis in original). But patents that fall outside the definition of a CBM patent are outside the Board’s authority to review as a CBM patent. In any event, the PTO’s regulatory authority does not permit it to adopt regulations that expand its authority beyond that granted by Congress. “Indeed, it is the quintessential function -of the reviewing court to interpret legislative delegations of power and to strike down those agency actions that traverse the limits of statutory authority.” Office of Commc’n of United Church of Christ v. FCC, 707 F.2d 1413, 1423 (D.C. Cir. 1983).

The Board’s application of the “incidental to” and “complementary to” language from the PTO policy statement instead of the statutory definition renders superfluous the limits Congress placed on the definition of a CBM patent. CBM patents are limited to those with claims that are directed to methods and apparatuses of particular types and with particular uses “in the practice, administration, or management of a financial product or service.” AIA § 18(d). The patent for a novel light-bulb that is found to work particularly well in bank vaults does not become a CBM patent because of its incidental or complementary use in banks. Likewise, it cannot be the case that a patent covering a method and corresponding apparatuses becomes a CBM patent because its practice could involve a potential sale of a good or service. All patents, at some level, relate to potential sale of a good or service. See 35 U.S.C. § 101. Take, for example, a patent for an apparatus for digging ditches. Does the sale of the dirt that results from use of the ditch digger render the patent a CBM patent? No, because the claims of the ditch-digging method or apparatus are not directed to “performing data processing or other operations” or “used in the practice, administration, or management of a financial product or service,” as required by the statute. AIA § 18(d); 37 C.F.R. § 42.301(a). It is not enough that a sale has occurred or may occur, or even that the specification speculates such a potential sale might occur.

We hold that the Board’s reliance on whether the patent claims activities “incidental to” or “complementary to” a financial activity as the legal standard to determine whether a patent is a CBM patent was not in accordance with law. We do not reach the patentability of the challenged claims under section 101.

Conclusion

We vacate the Board’s final written decision and remand the case for a decision in the first instance, and in accordance with this opinion, whether the '752 patent is a CBM patent.

VACATED AND REMANDED

Costs

No costs.

      . Section 18 of the AIA, pertaining to CBM review, is not codified. References to AIA § 18 in this opinion are to the statutes at large.

      . When reviewing the Board’s decisions pursuant to the APA, we often use the terms “abuse of discretion” and "arbitrary and capricious” interchangeably, Japanese Found. for Cancer Research v. Lee, 773 F.3d 1300, 1304 n.3 (Fed. Cir. 2014).

      . Google also argues that the limitations of certain non-challenged claims should be considered. It did not raise these arguments to the Board, J.A. 81; and we decline.to consider them in the first instance. See Redline Detection, LLC v. Star Envirotech, Inc., 811 F.3d 435, 450 (Fed. Cir. 2015).

      .The parties do not dispute whether the '752 patent is a patent for a "technological invention.” See 37 C.F.R. § 42.301(b).

      . By contrast, we endorsed the "financial in nature” portion of the standard as consistent with the statutory definition of "covered business method patent” in Blue Calypso, LLC v. Groupon, Inc., 815 F.3d 1331, 1340 (Fed. Cir. 2016).

      . The full text of comment 1 and the response is:
      Comment 1: Several comments suggested that the Office interpret "financial product or service” broadly.
      Response: The definition set forth in § 42.301(a) for covered business method patent adopts the definition for covered business method patent provided in section 18(d)(1) of the AIA. In administering the program, the Office will consider the legislative intent and history behind the public law definition and the transitional program itself. For example, the legislative history explains that the definition of covered business method patent was drafted to encompass patents “claiming activities that are financial in nature, incidental to a financial activity or complementary to a financial activity.” 157 Cong. Rec. 13,190 (2011) (statement of Sen. Schumer). This remark tends to support the notion that "financial product or service” should be interpreted broadly.

      . Indeed, the fundamental incentive of obtaining a patent—the right to exclude—necessarily impacts the marketplace. See, e.g., C.R. Bard, Inc. v. M3 Sys., Inc., 157 F.3d 1340, 1367-68 (Fed. Cir. 1998) (discussing the relationship between a patent owner’s right to exclude and marketplace monopolies); Mallinckrodt, Inc. v. Medipart, Inc., 976 F.2d 700, 703-09 (Fed. Cir. 1992) (same).


author: HOWARD, Chief Judge.

text:
    UNITED STATES of America, Appellee, v. Pedro DE LA CRUZ-GARCÍA, a/k/a Boquita, a/k/a Pedro Aquiles-Cordones, a/k/a Pedro Aguiles-Cordones, Defendant, Appellant.
    No. 13-2249
    United States Court of Appeals, First Circuit.
    November 16, 2016
    Johnny Rivera-González for appellant.
    John A. Mathews II, Assistant United States Attorney, with whom Rosa Emilia Rodríguez-Vélez, United States Attorney, and Nelson Pérez-Sosa, Assistant United States Attorney, Chief, Appellate Division, were on brief, for appellee.
    Before HOWARD, Chief Judge, TORRUELLA and KAYATTA, Circuit Judges.
   HOWARD, Chief Judge.

Appellant Pedro De La Cruz-García pled guilty to illegally bringing aliens into the United States by boat in violation of 8 U.S.C. § 1324(a)(1)(A)(i). The district court sentenced De La Cruz to thirty-eight months in prison based, in part, on a ten-level enhancement for the death of a passenger who jumped from the boat. For the reasons discussed below, we affirm the sentence.

I.

On February 28, 2013, De La Cruz and two fellow citizens of the Dominican Republic crowded twenty-six passengers from Haiti onto their makeshift twenty-five-foot vessel named the “Don Tino.” The group set sail for United States soil via the Mona Passage. Ultimately, the journey proved unsuccessful. Law enforcement agents observed the vessel approaching Mona Island, Puerto Rico, and reported the illegal migrant landing to the Department of Homeland Security.

Upon being discovered by law enforcement, several passengers jumped from the Don Tino in a last-ditch effort to reach shore. The authorities apprehended all but one of the passengers. An unaccounted-for Haitian woman, however, remained in the water. After an unsuccessful rescue attempt, the missing passenger’s body, later identified as Gedette Benjamin, was recovered off the coast of Mona Island.

Once in custody, De La Cruz agreed to speak with authorities and described his plan to illegally enter the United States. The ensuing investigation revealed that the three Dominican Republic nationals, including De La Cruz, were responsible for navigating and operating the Don Tino. De La Cruz agreed to assist with the journey in return for free passage.

De La Cruz ultimately entered into an agreement with the government and pled guilty to one count of bringing or attempting to bring an alien into the United States at a place other than a designated port of entry. See 8 U.S.C. § 1324(a)(1)(A)(i). The plea agreement expressly reserved De La Cruz’s right to oppose the U.S.S.G. § 2L1.1(b)(7)(D) sentence enhancement, which applies “[i]f any person died” during the commission of the offense. Ultimately, the district court imposed the ten-level enhancement, resulting in a guideline range of forty-one to fifty-one months. The court varied below that range, sentencing De La Cruz to thirty-eight months in prison and a three-year term of supervised release. On appeal, De La Cruz challenges only the ten-level enhancement pursuant to § 2Ll.l(b)(7)(D).

II.

We review the district court’s fact-finding under the deferential “clear error” standard and its “resolution of legal questions” de novo. United States v. McCormick, 773 F.3d 357, 359 (1st Cir. 2014).

The parties disagree as to the appropriate causation standard under § 2L1.1(b)(7). The government urges us to adopt but-for causation, while De La Cruz suggests a foreseeability requirement. We have not previously considered this issue, and other circuits have reached divergent results. Compare United States v. Zaldivar, 615 F.3d 1346, 1350-51 (11th Cir. 2010) (“[I]t must be reasonably foreseeable to a defendant that his actions or the actions of any other member of the smuggling' operation could create the sort of dangerous circumstances that would be likely to result in serious injury or death.”), and United States v. Cardena-Garcia, 362 F.3d 663, 666 (10th Cir. 2004) (holding that “[a] sufficient nexus” exists where “the death . . . was reasonably foreseeable and Appellants’ conduct was a contributing factor”), with Ramos, 763 F.3d at 401 (requiring only “actual or but-for causation”).

Ultimately, we need not resolve this dispute. Applying De La Cruz’s preferred standard, the district court did not clearly err in finding, by a preponderance of the evidence, that the passenger’s death was a' reasonably foreseeable result of De La Cruz’s actions. In pleading guilty, De La Cruz admitted to using an unseaworthy and overcrowded vessel to transport passengers through dangerous waters. As the district court articulated, “many things can go wrong” in such a situation. For example, “[y]ou can sink_You can all drown. You can be caught.” We agree that, when De La Cruz set sail on an illegal alien smuggling operation, he could have reasonably foreseen the possibility that the vessel would be spotted by the authorities as it approached shore. He also could have foreseen the possibility that some passengers, desperate to avoid apprehension and reach United States soil, might leap into the sea. See Zaldivar, 615 F.3d at 1351 (finding it “reasonably foreseeable” that the defendant’s co-conspirator would “fle[e] at a high rate of speed once th[e] boat had been detected by the Coast Guard”). Indeed, Ms. Benjamin was not the only passenger to have taken this risk, as eleven other people followed her into the water. Finally, in light of De La Cruz’s concession that the rough sea conditions were foreseeable, it was hardly a stretch that passengers jumping overboard might drown. Ms. Benjamin’s tragic death was reasonably foreseeable in these circumstances.

III.

For the foregoing reasons, we AFFIRM De La Cruz’s sentence.

      . De La Cruz does not argue that the appropriate standard is proximate causation. See United States v. Ramos-Delgado, 763 F.3d 398, 401 (5th Cir. 2014) (noting circuit split on this issue), Accordingly, we decline to address whether proximate causation is the applicable standard or how, if at all, such a standard would differ from a requirement of reasonable foreseeability.