Archives for June 4, 2019

Government responds in census citizenship case

June 4, 2019 by admin Leave a Comment

Last week the challengers in the dispute over the decision to include a question about citizenship on the 2020 census notified the Supreme Court about new evidence. The new evidence, the challengers argued, indicated that a Republican redistricting strategist played a key role in the decision, which was intended to create an advantage for whites and Republicans in future elections. Yesterday the Trump administration pushed back, calling the challengers’ accusations “meritless” and an “eleventh-hour” effort to “derail the Supreme Court’s resolution of this case.”

The government’s contentions came in its response to the challengers’ motion, made in a federal district court in New York, suggesting that the government should be sanctioned because the new evidence contradicts testimony and representations by government officials in the case. The response was attached to a letter sent to the Supreme Court yesterday by Noel Francisco, the U.S. solicitor general.

In the five-page, single-spaced response, the government dismisses as “false” the challengers’ claim that a senior Department of Justice official, John Gore, relied on a 2015 study by the Republican strategist, Thomas Hofeller, when Gore drafted a 2017 letter asking the Department of Commerce to include the citizenship question. “There is no smoking gun here,” the government stresses; “only smoke and mirrors.”

If the 2017 letter resembles anything, the government suggests, it is “friend of the court” briefs filed in a 2016 case in which the Supreme Court had been asked to decide whether total population or the number of eligible voters should be used to determine whether state legislative districts have equal populations. (Nathaniel Persily, the Stanford law professor who was the author of one of the briefs cited by the government, described himself as “outraged” that his work was “being misrepresented” by the government.)

The challengers’ accusations, the government continues, “are not only false, but legally irrelevant.” Among other things, the government argues, the evidence from Hofeller’s files likely could not be admitted in court. Moreover, the government adds, the key issue in the case is whether Ross had a rational basis for his decision to reinstate the citizenship question: “Nothing in the private files of a deceased political operative can affect that issue.”

The district court is scheduled to hold a hearing on the challengers’ motion for sanctions tomorrow. The Supreme Court is expected to issue its decision before the end of June, so that the government can finalize the census questionnaire and begin printing it.

This post was originally published at Howe on the Court.

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Opinion analysis: Administrative exhaustion is not jurisdictional for employment-discrimination plaintiffs

June 4, 2019 by admin Leave a Comment

Issued just six weeks after oral argument, the unanimous decision in Fort Bend County v. Davis resolves an important question in employment-discrimination law by holding that the requirement that plaintiffs begin their claims before the Equal Employment Opportunity Commission is not jurisdictional. The decision means that plaintiff Lois Davis may attempt to prove in court that her employer discriminated against her based on her religion, even if she did not first raise that claim before the agency.

Title VII of the Civil Rights Act of 1964 creates a multi-step process that employment-discrimination plaintiffs must follow before they may file suit. That process requires employees to begin by filing a charge with the EEOC or an analogue state agency. The EEOC then investigates the charge, and attempts to resolve it informally if it finds reasonable cause to believe the charge is true. If informal resolution fails, the EEOC may file a lawsuit, but it is not empowered to resolve the case itself. Alternatively, if the EEOC’s investigation does not yield reasonable cause for the agency to proceed, the plaintiff may file suit on their own.

Justice Ginsburg with opinion in Fort Bend County, Texas v. Davis (Art Lien)

A plaintiff’s failure to complete this process before filing suit is a ground to dismiss their case. That is what Fort Bend County asserted should have happened in this case – except that instead of raising its failure-to-exhaust defense right away, it waited more than five years, during which time Davis’ case wound its way from the district court, to the U.S. Court of Appeals for the 5th Circuit, and back again. The 5th Circuit decided that by waiting so long, Fort Bend had waived its right to raise its failure-to-exhaust argument.

Fort Bend’s response was that Title VII’s exhaustion requirement was jurisdictional – that is, that federal courts lack the authority to hear unexhausted Title VII claims without exception, and failure-to-exhaust arguments cannot be waived. But Justice Ruth Bader Ginsburg’s unanimous opinion rejected that argument, concluding instead that the exhaustion requirement was a “claim-processing” rule that could be waived under exceptional circumstances.

Ginsburg’s opinion cautions against the “profligate” use of the term “jurisdictional,” which “is generally reserved for prescriptions delineating the classes of cases a court may entertain … and the persons over whom the court may exercise adjudicatory authority.” True jurisdictional requirements are generally to be found either in jurisdictional provisions of statutes, or in long lines of Supreme Court cases to which Congress has not responded with clarifying legislation. Outside of those narrow categories, mandatory claim-processing rules are nonjurisdictional, meaning that they can be waived when defendants do not raise them properly. (The court left for another day the question of whether these claim-processing rules are subject to other equitable exceptions.)

This means that Congress may impose jurisdictional requirements, but it must speak clearly in order to do so. And, the court continued, Title VII’s exhaustion requirement does not meet that standard. First, while Title VII contains a jurisdictional provision, the exhaustion requirement is located elsewhere in the statute. Second, Title VII differs from some other statutory schemes with jurisdictional exhaustion requirements because the EEOC lacks the authority to adjudicate discrimination charges – if an employer resists informal resolution, the EEOC’s recourse is to file a lawsuit. Finally, the court observed that plaintiffs have plenty of incentives to exhaust their administrative remedies even if that requirement is not jurisdictional, because most defendants will properly raise a failure-to-exhaust defense.

Ginsburg previously wrote another Title VII decision requiring that Congress speak clearly if it wants to impose a jurisdictional requirement, so neither the substance nor the authorship of this decision was surprising. Perhaps more unexpected, this is the second unanimous, pro-plaintiff case involving the interpretation of an employment-discrimination statute so far this term.

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Opinion analysis: Notice and comment under the Medicare Act, no big moves for the APA

June 4, 2019 by admin Leave a Comment

Administrative law folks looking for drama will be disappointed by yesterday’s 7-1 opinion in Azar v. Allina Health Services, a Medicare case that had potential wider implications for administrative law but in the end turned out to provide a bread-and-butter statutory interpretation analysis that said little about administrative law or even very much about Medicare.

The question was whether the Department of Health and Human Services was permitted to change, without notice and comment, an important reimbursement formula for hospitals that treat many low-income patients. Involving whether Medicare Part C patients should be counted along with Medicare Part A ones in the calculation, that question was worth more than $ 3 billion in this case alone, according to the government. Resolving the case also might have required the Supreme Court to opine on an extremely important and unresolved area of administrative law: where to draw the line between “interpretive rules,” which the Administrative Procedure Act exempts from notice and comment, and “substantive rules,” for which those procedures are normally required. HHS had claimed that the APA’s exception for interpretive rules applied to its payment change that included Part C patients in the formula. In opposition, the hospitals had argued that the APA’s substantive/interpretive divide had nothing to do with this case and that, instead, the Medicare Act’s distinctive language differs intentionally from the APA’s exemption.

Justice Gorsuch with opinion in Azar v. Allina Health Services (Art Lien)

The hospitals won, in an opinion by Justice Neil Gorsuch that largely echoes the textualist opinion written below by then-Judge Brett Kavanaugh, who was recused from the case. Only Justice Stephen Breyer dissented.

Determining that the “case hinges on the meaning of a single phrase in the notice-and-comment statute Congress drafted specially for Medicare in 1987,” Gorsuch focused on the language of Medicare Section 1395hh(a)(2). That section requires notice and comment for any “rule, requirement, or other statement of policy” that “establishes or changes a substantive legal standard governing … the payment for services.” The question was whether “substantive legal standard,” a phrase the Supreme Court found nowhere else in the U.S. Code, meant something different from a “substantive rule” under the APA. The hospitals had argued that a “substantive legal standard” under Medicare does not necessarily connote a “substantive rule” with the force of law, APA-style, but rather is merely a standard that “creates duties, rights and obligations,” as opposed to a “procedural” standard that sets out “how those duties, rights, and obligations should be enforced.”

Finding for the hospitals, the majority made quick work of the trickiest administrative law question in the case. Opining that “everyone agrees that a policy of counting Part C patients in the Medicare fraction is substantive in this sense, because it affects a hospital’s right to payment,” the court found no need to delve into the intricacies of what “substance” means for purposes of the APA.

In finding the Medicare Act’s exemptions from notice and comment distinct from those of the APA, the majority relied on one of the Roberts Court’s favorite textualist tools: the presumption that Congress uses words consistently across statutes and, so, when it doesn’t, the court should assume that any deviation is intentional. Here, the court noted that the Medicare Act uses the word “substantive” differently from the APA. For instance, whereas under the APA policy statements are expressly exempt from notice and comment, under the Medicare Act “statements of policy” are expressly included in the category of possible “substantive legal standards.” Moreover, whereas Congress has expressly cross-referenced or copied portions of the APA’s two exemptions from notice and comment in other statutes, in Medicare Congress expressly borrowed (through cross-reference) only one of those exemptions — the “good cause” exemption — and not also the exemption for interpretive rules. In other words, Congress has shown us it knows how to copy the APA when it wants to and, had it wished to do so here, it could have gone about it “in a much more straightforward way.”

The Supreme Court basically stopped there. It avoided making a broader ruling about how much of the lengthy Medicare operation manuals could be swept into its holding, and instead considered only the policy change before it. It likewise did not rule on two alternative arguments from the briefing: First, the court determined it had “no need to reach” the hospitals’ claim that under a different subsection of the Medicare Act “further opportunity for public comment” had to be provided because an earlier regulation on the same formula had been “struck down for not being a logical outgrowth” of the proposal. Second, the court did not even engage the government’s assertion that under 1947’s Securities and Exchange Commission v. Chenery Corp., HHS can ordinarily choose between rulemaking and adjudication for making policy decisions (and that here it had chosen the latter in posting revised payment calculations on its website).

Breyer’s dissent delved deep into the statutory history, including the extremely complicated legislative history of the Medicare language at issue — which, as he read it, pointed to Congress’ desire to copy the APA’s protections into the act. He also focused on the policy implications: “To imagine that Congress wanted the agency to use those procedures in respect to a large percentage of its Medicare guidance manuals is to believe that Congress intended to enact what could become a major roadblock to the implementation of the Medicare program.” Charging the majority with failure to “offer clarity” for Medicare’s future, Breyer argued that it still remains entirely unclear just how to determine what qualifies as a “substantive legal standard” under the act. He would have remanded the case for further proceedings on whether the change at issue was a substantive or interpretive rule under the APA.

The majority paid relatively little mind to the dissent’s concerns. It engaged the legislative history the dissent offered but found it “ambiguous at best.” It also concluded that policy concerns have little place when the statutory language is clear.

But the decision may offer two morsels of possible relevance for administrative law mavens searching for some kind of trail. Even as the majority strained to avoid jumping into the interpretive/substantive rule divide, the Supreme Court’s frustration with HHS’s form of notice here was pretty clear. With respect to the agency’s decision after the U.S. Court of Appeals for the District of Columbia Circuit had struck down its regulation that it “still wanted to count Part C patients” in determining its fiscal year 2012 payments and could not rely on a later prospective rule to do so, the Supreme Court wrote: “The agency’s solution? It posted on a website a spreadsheet announcing the 2012 Medicare fractions for 3,500 hospitals nationwide and noting that the fractions included Part C patients.” Even if prior notice and comment had not been required, the agency’s decision to use what the court called an “Internet posting” seems to have rankled the justices.

In addition, the Supreme Court briefly stepped into an open debate about the necessary length of the comment period under the APA in noting that the Medicare statute mandated “a 60-day comment period (twice the APA minimum of 30 days)” for agency actions like the one here. The APA’s text, however, requires 30 days only before most final rules can take effect. This could be a tiny, irrelevant error or the court could be wading into unresolved conflicts over whether shorter periods prevent “an opportunity to participate” under the APA.

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Opinion analysis: Justices reject subjective standard on sanctions for violating the bankruptcy discharge

June 4, 2019 by admin Leave a Comment

Yesterday’s decision in Taggart v. Lorenzen will not go down as one of the major decisions of the term, but it should provide some useful guidance in an area as to which the Supreme Court has not previously spoken: the standards for punishing creditors that violate the discharge that bankruptcy provides to debtors.

A central feature of the bankruptcy process for consumers is a “discharge” that excuses a debtor that completes a bankruptcy proceeding from paying debts incurred before the bankruptcy filing. The legal force of the discharge is the threat of contempt: A bankruptcy court will hold a creditor in contempt if the creditor attempts to collect a discharged debt.

Justice Breyer with opinion in Taggart v. Lorenzen (Art Lien)

One problem with that process arises when it is not clear that a creditor’s post-discharge interactions with a debtor violate the discharge. In some cases, for example, it may not be clear that the debt in question has been discharged. The Bankruptcy Code includes a large number of detailed exceptions that allow certain debts to survive the bankruptcy discharge. For example, the discharge does not extend to most student-loan debts, to fraudulently incurred debts, and to domestic-support obligations. In cases in which application of the discharge is ambiguous, creditors might be unsure about whether particular activities violate the discharge.

The question before the Supreme Court in Taggart is how to decide whether a court should sanction a creditor for collection activities that turn out to violate the discharge. In this case, the creditors in question (a business named Sherwood, its owners, and their former attorney, who is represented by the executor of his estate, respondent Shelley Lorenzen) were involved in post-bankruptcy litigation with the debtor (Bradley Taggart) over ownership of a business in which Taggart had invested before the bankruptcy. Because the litigation involved ownership of the business, the litigation itself did not violate the discharge. At the end of the litigation, though, the state court ordered Taggart to pay Sherwood’s attorney’s fees. That monetary judgment ordinarily would violate the discharge, but the state court concluded that it was permissible under a lower-court doctrine holding that the discharge no longer applies when a debtor “returns to the fray” of litigation against the creditor.

By the end of the litigation in the lower courts, it was settled that the judgment against Taggart violated the discharge, and that he could not be forced to pay the attorney’s fees. The U.S. Court of Appeals for the 9th Circuit concluded, however, that Sherwood could not be held in contempt so long as it had held a subjective belief, however unreasonable, that it was entitled to press Taggart to pay those fees. Justice Stephen Breyer’s opinion for a unanimous court squarely rejects that holding.

Breyer starts with Section 524 of the Bankruptcy Code, which provides that the bankruptcy court’s order of discharge “operates as an injunction against” post-bankruptcy collection of debts. Because that statute gives the discharge force by treating it as an injunction, Breyer reasons, enforcement of the discharge should follow traditional rules for enforcing injunctions. Quoting a law-review article by Justice Felix Frankfurter, Breyer explains: “When a statutory term is ‘obviously transplanted from another legal source,’ it ‘brings the old soil with it.’” In this case, the “old soil” is the “potent weapon” of sanctions for contempt. Traditionally, Breyer notes, courts faced with injunctions have understood that “basic fairness” requires that those sanctions do not apply in the face of a “fair ground of doubt” about the propriety of activity.

Coming closer to the dispute at hand, Breyer emphasizes that the “standard is generally an objective one,” which means “that a party’s subjective belief that [the party] was complying with an order ordinarily will not insulate [the party] from civil contempt if that belief was objectively unreasonable.” Breyer offers one qualification of that statement, noting that “subjective intent is [not] always irrelevant,” both because “sanctions may be warranted when a party acts in bad faith” and because “a party’s good faith, even where it does not bar civil contempt, may help to determine an appropriate sanction.” Breyer closes that discussion by offering a summary statement of a rule of decision: Sanctions are appropriate “when the creditor violates a discharge order based on an objectively unreasonable understanding of the discharge order or the statutes that govern its scope.”

With that “objectively unreasonable” standard in hand, Breyer readily disposes of the 9th Circuit’s view that even an unreasonable understanding of the discharge protects a creditor from contempt: “[T]his standard is inconsistent with traditional civil contempt principles, under which parties cannot be insulated from a finding of civil contempt based on their subjective good faith.” For Breyer the lower-court standard “relies too heavily on difficult-to-prove states of mind” and “may too often lead creditors who stand on shaky legal ground to collect discharged debts, forcing debtors back into litigation … to protect the discharge that it was the very purpose of the bankruptcy proceeding to provide.”

Finally, Breyer turns to the standard that Taggart proposes, a “strict-liability” standard under which actions that violate the discharge would be sanctioned unless the creditor precleared them with the bankruptcy court. For Breyer, that standard does not “provide a workable solution to the creditor’s potential dilemma.” From his perspective, because “there will often be at least some doubt as to the scope of such orders,” a preclearance requirement would “lead to frequent use of the advance determination procedure.” The statute suggests, though, that such a “procedure would be needed in only a small number of cases.” In contrast, Breyer explains, “widespread use of this procedure” would “mov[e]” a substantial body of “litigation out of state courts, who have concurrent jurisdiction over such questions, and into federal courts.” The “additional federal litigation, additional costs, and additional delays” of that proposal are enough to persuade Breyer to reject it.

Taggart is not an earth-shaking decision. It does, though, provide the first Supreme Court discussion of a topic that comes up with considerable frequency in the bankruptcy courts, so we can expect it to be widely used to provide the organizing principle for the trial-court opinions that resolve litigation in the area.

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Justices grant three new cases

June 4, 2019 by admin Leave a Comment

This morning the Supreme Court added three new cases to its merits docket for next term, on issues ranging from copyright law to criminal procedure and the Employee Income Retirement Security Act. Once again, however, the justices did not act on the case of an Oregon couple who declined to make a custom wedding cake for a same-sex couple.

In Allen v. Cooper, the justices will consider whether Congress had the power to repeal the states’ immunity from lawsuits for copyright infringement when it enacted the Copyright Remedy Clarification Act.

The case arises from the discovery of Blackbeard’s flagship, Queen Anne’s Revenge, off the North Carolina coast. Frederick Allen and his company, Nautilus Productions, filmed the shipwreck and registered copyrights for the videos and photos that they created; in 2015, they filed a lawsuit claiming that North Carolina had violated their copyrights. The state countered that it could not be sued in federal court, and the U.S. Court of Appeals for the 4th Circuit agreed. The 4th Circuit ruled that the CRCA had not validly repealed the immunity granted to the states by the 11th Amendment.

Allen asked the justices to weigh in, telling them that, unless the Supreme Court intervenes, the “creators of original expression will be left without remedy when States trample their federal copyrights.” Today the justices granted that request.

The justices also agreed to review the case of Gonzalo Holguin-Hernandez, who was arrested and sentenced on charges of possessing marijuana with the intent to distribute it. The U.S. Court of Appeals for the 5th Circuit rejected Holguin-Hernandez’s challenge to the length of his sentence, holding that because he had not objected to the sentence when it was imposed, the only question on appeal was whether the sentence was clearly incorrect – which, it ruled, it was not.

Holguin-Hernandez asked the Supreme Court to weigh in. The federal government agreed with Holguin-Hernandez that a criminal defendant does not need to formally challenge a sentence term when it is announced in order to be able to appeal it. It is enough, the government conceded, that he argued for a different sentence than the court imposed. But the government nonetheless urged the Supreme Court to deny review, telling the justices that Holguin-Hernandez’s sentence was reasonable even under the standard that the 5th Circuit used. Despite that recommendation, the justices today agreed to take up Holguin-Hernandez’s case.

Finally, the justices granted review in Retirement Plans Committee of IBM v. Jander, a lawsuit alleging that the fiduciaries of IBM’s stock-ownership plans violated their duty of prudence under ERISA by continuing to invest the plan’s funds in IBM’s stock even though they knew the stock’s market price was artificially inflated. Under the Supreme Court’s 2014 decision in Fifth Third Bancorp v. Dudenhoffer, a plaintiff bringing such a claim must allege that a fiduciary in the defendant’s position could not have concluded that taking a different action “would do more harm than good to the fund.” The justices agreed today to decide whether ERISA plaintiffs can survive a motion to dismiss when they make general allegations that the costs of undisclosed fraud grow over time.

The justices also asked the U.S. solicitor to weigh in on the final determination filed by the river master in a dispute between Texas and New Mexico over the water from the Pecos River. There is no deadline for the federal government to file its brief; the Supreme Court’s online docket indicates that Texas filed its complaint in the case in 1974.

The three cases granted today are likely to be argued in the fall. The justices will meet again for another private conference on Thursday, June 6.

This post was originally published at Howe on the Court.

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