Supreme Court – Page 17

Solicitor general files invitation briefs

June 5, 2019 by admin Leave a Comment

U.S. Solicitor General Noel Francisco recently filed a bevy of briefs in response to the Supreme Court’s “invitations” to provide the justices with the federal government’s views on cases in which a petition for certiorari has been filed. If – as they overwhelmingly do – the justices follow the government’s recommendations, these petitions may not lead to many new cases for the court’s merits docket next term, because the government has recommended that review on the merits be granted in only two cases.

The government recommended a grant in Thole v. U.S. Bank, a case in which the justices have been asked to decide whether a participant in a pension fund can sue the fund managers when he has not actually suffered any financial injury. The plan participants in this case have thus far received all of their pension payments, but in 2014 they filed a lawsuit in which they alleged that the managers of the pension plan had pursued a too-risky investment strategy that led to $ 748 million in losses; the sponsors of the fund then made a large contribution to the plan, leaving it overfunded.

The district court dismissed the case. It ruled that there was no longer a live controversy because the plan was now overfunded. The U.S. Court of Appeals for the 8th Circuit upheld the lower court’s dismissal of the case. It ruled that the federal laws governing pension plans don’t allow participants to bring a lawsuit alleging that managers have violated their duties when the plan is in fact overfunded. It reasoned that plan participants are not, in such a scenario, the kind of plaintiffs whom Congress intended to allow to sue.

The plan participants went to the Supreme Court, which last fall asked the federal government to weigh in. The government’s brief urged the justices to grant review, describing the question presented by the case as an “important” one “that arises with some frequency.” And if review is granted, the government continued, the justices should also ask the plan participants and the defendants (a bank and its officials) to address whether the court of appeals should have decided whether the participants have a legal right to sue under Article III of the Constitution, which requires a “concrete” injury. The petition has been distributed for consideration at the justices’ June 20 conference.

The solicitor general recommended that review be granted – at least in part – in Opati v. Sudan, a case that stems from the 1998 attacks by al Qaeda on the U.S. embassies in Kenya and Tanzania, which killed over 200 people and injured over 1,000 more.

The Foreign Sovereign Immunities Act generally bars lawsuits against foreign countries in U.S. courts unless one of a few narrow exceptions applies. One of those exceptions, known as the “terrorism exception,” was originally enacted in 1996 and allows lawsuits against countries designated as state sponsors of terrorism. After the U.S. Court of Appeals for the District of Columbia Circuit ruled in 2004 that the exception only waived a foreign country’s immunity from suit, and did not provide the basis for a lawsuit, Congress in 2008 enacted a new terrorism exception, which specifically created a cause of action. Although the FSIA normally prohibits punitive damages, the 2008 amendments specifically allowed them; the 2008 amendments also indicated that any cases brought under the earlier version of the exception that were still pending should be treated as if they had been filed under the new version.

The case before the Supreme Court was filed by victims of the 1998 attacks and their family members against Sudan, which was designated a state sponsor of terrorism in 1993. A federal court awarded them over $ 10 billion in damages, including approximately $ 4 billion in punitive damages. On appeal, the D.C. Circuit vacated the punitive damages award, explaining that the current version of the terrorism exception does not allow punitive damages for conduct that occurred before this version was enacted.

Last year the plaintiffs asked the Supreme Court to review the D.C. Circuit’s decision vacating the punitive damages award; the justices then asked the federal government to weigh in. In a brief filed late last month, the federal government recommended that the justices grant review to decide whether the current version of the terrorism exception allows punitive damages for pre-enactment conduct. The government explained that the D.C. Circuit’s decision to the contrary was wrong and that the issue is an important one that “affects, in these cases alone, billions of dollars in punitive damages awarded to approximately 150 U.S. government employees and contractors murdered or injured in the line of duty who were targeted because of their service to the United States.”

However, the government recommended that the court decline to review another issue presented by the plaintiffs’ petition, involving whether the D.C. Circuit should have taken up the question at all when it was not an issue on which the court’s jurisdiction hinged.

The government also recommended a denial in Sudan v. Opati, a cross-petition in which the Sudanese government had asked the justices to take up a variety of questions decided against it in the lower court, including whether – for purposes of the terrorism exception – the term “extrajudicial killing” is limited to summary executions by state actors and whether the terrorism exception withdraws immunity for emotional-distress claims brought by victims’ family members.

The solicitor general made the same recommendation in Sudan v. Owens. In this petition, the Sudanese government had asked the justices to review the D.C. Circuit’s rulings on whether the plaintiffs had shown that federal courts had the power to hear the case under the terrorism exception, as well as the lower court’s holding on when injuries are caused by a defendant’s actions for purposes of the terrorism exception. The federal government urged the Supreme Court to deny review, telling the justices that there is no conflict between the D.C. Circuit’s decision and the rulings of either the Supreme Court or other courts of appeals; moreover, the government added, the D.C. Circuit’s analysis “does not warrant review based on foreign-relations concerns.”

The government’s recommendation in Poarch Band of Creek Indians v. Wilkes, involving tribal immunity, was more nuanced. The case arises from a 2015 car accident: Barbie Spraggins, an employee of an Alabama casino owned by the Poarch Band, was driving a casino pick-up truck when she hit a car driven by Casey Wilkes. Both Wilkes and Alexander Russell, a passenger in the car, were seriously injured; Wilkes suffered a traumatic brain injury. When Wilkes and Russell sued the tribe and the casino in state court, the Alabama Supreme Court allowed the lawsuit to go forward, holding that nonmembers can sue tribes for their injuries.

The tribe asked the Supreme Court to review the state court’s decision, and last fall the justices asked the U.S. solicitor general to weigh in. In a brief filed at the end of May, the government acknowledged that what it described as the Alabama Supreme Court’s “novel holding” was “flatly inconsistent” with the U.S. Supreme Court’s tribal-immunity cases.

However, the government added, the justices should not grant review at this time. First, it suggested, the tribe’s case is not the right one in which to consider whether the Supreme Court should continue to adhere to its prior rulings on tribal sovereign immunity. But more importantly, the government continued, the tribe is considering a change to its tribal code that would waive the tribe’s immunity for lawsuits like Wilkes and Russell’s. If that change is adopted, the government explained, “which could occur as early as June 6, 2019, the Court should grant the petition,” vacate the Alabama Supreme Court’s judgment, and send the case back to the state courts for further proceedings in light of the change to the law. But if the change is not made, the government argued, the justices should simply deny review, because even if the Alabama Supreme Court’s decision is wrong, it is an “outlier.”

The solicitor general also recommended that review be denied in several more cases:

In Airline Service Providers Associations v. Los Angeles World Airports, the justices have been asked to decide whether the “market participant” exception to federal pre-emption allows state or local governments to impose a rule that would otherwise be pre-empted on private companies even when the government is not buying anything directly from those companies. The case arose because companies that provide services at Los Angeles International Airport argue that a labor-peace provision in the agreement that they are required to sign to operate at LAX – which is owned and operated by the city of Los Angeles and Los Angeles World Airports, a component of the city – is pre-empted by federal law. In his brief, the solicitor general recommended that review be denied. The solicitor general explained that the U.S. Court of Appeals for the 9th Circuit had correctly ruled that the market-participant exception is not limited to the purchase of goods and services, but it had not articulated the right test for the exception – and, the solicitor general added, it isn’t clear that the city and the airport are acting as market participants under the correct test. However, the government continued, because it is also not clear whether the service providers are challenging the 9th Circuit’s decision more broadly, or instead just its “failure to impose a procuring-goods-or-services limitation on the market-participant exception,” review should be denied. The petition has been distributed for the justices’ June 20 conference.
In the patent case Ariosa Diagnostics v. Illumina, the solicitor general recommended that review be denied. The question on which the justices have been asked to weigh in involves when unpublished disclosures made in a published patent application and an earlier application on which it relies enter the public domain. The parties to the case agree that the case hinges on the proper interpretation of a particular provision of federal patent law, but the government disagrees. Because the U.S. Court of Appeals for the Federal Circuit did not address this question, and because the case involves the pre-2011 versions of the relevant Patent Act provisions, the government concluded, the justices should deny Ariosa’s petition. The petition has been distributed for the justices’ June 20 conference.
The government also recommended denial in Alabama Department of Revenue v. CSX Transportation and in CSX Transportation v. Alabama Department of Revenue, the most recent chapter in a long-running battle over taxes that the state levies on diesel fuel for railroads, but not for barges. The U.S. Court of Appeals for the 11th Circuit ruled against the state, which filed a petition for review last fall; the Supreme Court asked the federal government for its views earlier this year. The U.S. solicitor general told the justices that review is not warranted for either the state’s petition or a cross-petition filed by CSX Transportation: the 11th Circuit’s decision is correct, the solicitor general wrote, and it does not conflict with the rulings of other courts of appeals.
YPF v. Petersen Energia Inversora and Argentine Republic v. Petersen Energia Inversora center on the “commercial activity” exception to the FSIA, which applies when a foreign government acts as a private player in the market, and whether the exception applies to a lawsuit challenging action that is “inextricably intertwined” with another activity – such as expropriation – that is a sovereign act. The court called for the views of the U.S. solicitor general in January; the government recommended denial in a brief filed at the end of May. The government told the justices that the ruling by the U.S. Court of Appeals for the 2d Circuit – holding that the exception does apply and allowing the lawsuit to go forward – is correct and does not conflict with decisions by any other court of appeals. The government acknowledged that the “scope of the commercial-activity exception is an important issue,” but it emphasized that this case is not a good one in which to consider that question, because it “raises case-specific issues such as the interpretation of Argentine law and” one company’s corporate bylaws. The petitions have been distributed for consideration at the justices’ June 20 conference.
Under federal patent law, a patent is infringed when someone “offers to sell” a patented invention “within the United States.” In Texas Advanced Optoelectronic Solutions v. Renesas Electronics America, the justices have been asked to decide whether someone can be liable when he makes an offer in the United States for the sale of a patented invention outside the United States. The U.S. Court of Appeals for the Federal Circuit said that he cannot, and TAOS asked the Supreme Court to review that ruling. After being asked earlier this year to provide the government’s views, the solicitor general recommended a denial. In the government’s view, a patent is infringed only when both the offer and the sale are made in the United States. Although the Federal Circuit’s interpretation is not correct in other contexts – because it would hold someone liable for an overseas offer for a sale in the United States – the government explained that the Federal Circuit’s judgment was correct in this case, and therefore review is not warranted. The petition has been distributed for the June 20 conference.
First Solar v. Mineworkers’ Pension Scheme is a securities-fraud case. The petition for review was filed by First Solar, Inc., an Arizona-based company that produces solar-panel modules. Investors sued the company in 2012, alleging that the company had failed to disclose, and then misrepresented the effect of, defects in the solar panels. Under the Supreme Court’s cases, a plaintiff in a securities-fraud case must show that the defendant’s fraud caused him to lose money. First Solar has asked the court to decide whether the investors can make this showing when the event or disclosure that caused stock prices to go down did not itself reveal any fraud. The government’s brief told the justices that the ruling by the U.S. Court of Appeals for the 9th Circuit, allowing the case to go forward, both is correct and does not conflict with the decisions of any other courts of appeals. The petition has been distributed for the June 20 conference.
In Toshiba Corp. v. Automotive Industries Pension Trust Fund, the justices have been asked to weigh in on the reach of federal securities laws when a securities-fraud claim is based on a transaction in the United States, but otherwise generally involves foreign conduct. After the Supreme Court asked for its views earlier this year, the government recommended that the petition be denied: It told the justices that the lower court’s decision – which left open the possibility that the case could go forward – was correct, and it added that there has not yet been a final judgment in the case, which means that there may ultimately not be a need for the Supreme Court to weigh in. The petition has been distributed for the justices’ June 20 conference.
In RPX Corp. v. ChanBond LLC, the question before the justices is whether a party that asks for review of a patent has the legal right to appeal the U.S. Patent and Trademark Office’s final ruling on that review to the U.S. Court of Appeals for the Federal Circuit when the party has not been injured by the existence of the patent. In a brief filed in early May, the government urged the Supreme Court to deny review, telling the justices that the Federal Circuit’s ruling is correct and does not conflict with decisions of either the Supreme Court or any other court of appeals. The petition has been distributed for consideration at the justices’ June 13 conference.
In Atlantic Richfield Co. v. Christian, the justices have been asked to review the Montana Supreme Court’s ruling that landowners can bring claims under state law to require companies to pay for the cleanup of hazardous-waste sites even when the companies are already working with the federal government to remediate the sites. The U.S. Supreme Court asked the federal government for its views last fall. In a brief filed in late April, the government told the justices that they should deny review: Although the Montana Supreme Court’s analysis was wrong, the government explained, it is unclear whether the U.S. Supreme Court would have the power to review the case, which has not yet gone to trial. And even if U.S. Supreme Court does have the power, the government continued, ARCO could win at trial, which would eliminate the need to take up the case at all. Despite the government’s recommendation, the case has been redistributed for the justices to consider for a second time at their conference on Thursday, which suggests that they are at least looking at it closely.

This post was originally published at Howe on the Court.

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Opinion analysis: Divided court holds that pretrial detention can toll a term of federal supervised release

June 5, 2019 by admin Leave a Comment

In yesterday’s decision in Mont v. United States, a sharply divided Supreme Court held that a period of pretrial detention tolls, or stays, a term of federal supervised release if a court decides to credit that period of pretrial detention toward a sentence for a new conviction. Justice Clarence Thomas wrote the majority opinion, which resolved a circuit split that featured competing textual claims about the meaning of 18 U.S.C. § 3624(e), the relevant tolling provision.

The 5-4 decision in this case did not divide neatly along conventional ideological lines. Justice Ruth Bader Ginsburg joined Thomas’ opinion, as did Chief Justice John Roberts and Justices Samuel Alito and Brett Kavanaugh. Justice Sonia Sotomayor filed the dissenting opinion, which was joined by Justice Neil Gorsuch, in addition to Justices Stephen Breyer and Elena Kagan.

Justice Thomas with opinion in Mont v. U.S. (Art Lien)

The case turned on a close reading of Section 3624(e), which provides that a “term of supervised release does not run during any period in which the person is imprisoned in connection with a conviction for a Federal, State, or local crime unless the imprisonment is for a period of less than 30 consecutive days.” The justices had to decide whether and under what circumstances a period of pretrial confinement qualifies as imprisonment “in connection with a conviction.” Jason Mont had spent 10 months in state pretrial custody, and he argued that the tolling provision was not triggered when the state court credited this 10-month period toward his sentence on a new state conviction.

In rejecting Mont’s argument, Thomas laid out three textual points. First, he noted that dictionary definitions of “imprisoned” encompass pretrial detention. Second, he highlighted the broad meaning of the phrase “in connection with” in order to emphasize that a period of pretrial detention is connected to a conviction when it is credited toward the sentence for that conviction. Third, Thomas brushed aside concerns that the retroactive crediting of pretrial detention would create uncertainty for defendants like Mont. Under his analysis, Section 3624(e) requires courts to retrospectively assess whether a period of pretrial detention tolls a term of supervised release. Because tolling only occurs if pretrial detention meets a 30-day threshold, there is no way for courts to know in advance (at the moment a defendant enters pretrial detention) whether or not tolling will occur. Congress built some measure of uncertainty into the statutory scheme.

Thomas also cited the “statutory context” in support of the court’s decision. Because supervised release is meant to facilitate a defendant’s transition to community life, the purposes of supervised release cannot be served by a period in prison. In addition, allowing a convicted defendant (like Mont) to satisfy a new sentence of imprisonment and an old sentence of supervised release with the same period of pretrial detention would be to grant the defendant a “windfall.”

In a vigorous dissent, Sotomayor criticized the majority for disregarding the present-tense nature of Section 3624(e). She argued that nobody “is imprisoned in connection with a conviction” before any conviction has occurred. In her view, the statute does not authorize tolling when the offender is in pretrial detention and a conviction “is no more than a possibility” in the future. By ignoring the present-tense character of the statute, the majority has improperly altered the statute’s frame of reference from real-time assessments of the nature of the detention (“what is”) to retroactive assessments (“what was or what has been”).

Sotomayor also rejected the notion that her reading of the statute would create a windfall for defendants. She stressed that pretrial confinement is not meant to punish a defendant for a crime, but instead to ensure that a defendant appears in court and is incapacitated if there is a danger to the community. Furthermore, she argued that the majority’s expansive interpretation of the tolling provision would create “a serious risk of unfairness” for defendants. Every person on supervised release would have to comply with the conditions of supervised release while in pretrial custody, but only some of those people would be credited for this compliance. Citing an article I wrote, Sotomayor emphasized that the burdens of compliance are substantial, given the breadth of the conditions of supervised release.

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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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