U.S. Supreme Court Update: July 2010
Business Law News
As an avid follower of the United States Supreme Court, I am honored to have the opportunity to bring you this quarterly update on the latest developments and news from the Court. I hope these quarterly updates will be a quick and convenient way for you to stay abreast of recent developments in the law. In addition to the quarterly update here in Stare Decisis, please look for summaries of and links to opinions and news from the Court on the Primerus and Primerus YLG Facebook and LinkedIn pages immediately following their pronouncement.
The Court has been busy this quarter, releasing 49 opinions covering a wide range of practice areas, including important constitutional decisions and matters of first impression. Below are brief summaries of each decision rendered this quarter with links to the full opinions for your convenience. The summaries are arranged by topic.
In other Supreme Court news, Justice John Paul Stevens announced on April 9, 2010, that he will retire at the end of this Term after more than 34 years of distinguished service. To succeed him, on May 9, 2010, President Obama nominated Solicitor General Elena Kagan, who served as Associate White House Counsel during Clintons administration and as Dean of Harvard Law School from 2003 to 2009. General Kagans Senate confirmation hearings began June 28, 2010.
Now without further ado, here is the latest from the Court:
First Amendment
In United States v. Stevens, the Court ruled 8-1 that a federal law providing for criminal penalties for video depictions of animal cruelty was unconstitutional. The government defended the law by arguing that portrayals of animal cruelty are not constitutionally protected speech. The Chief Justice, writing for the majority, rejected this argument and stated, The First Amendment itself reflects a judgment by the American people that the benefits of its restrictions on the Government outweigh the costs. Our Constitution forecloses any attempt to revise that judgment simply on the basis that some speech is not worth it.
The Court recalled its precedent that removed child pornography from the scope of First Amendment protections because of its necessary link to actual abuse of children in the course of its production. Nevertheless, the majority saw no similar basis to remove depictions of crushing cats, dogs, and other small animals from the shield of First Amendment protection.
In dissent, Justice Alito argued that such crush videos should not be shielded by the First Amendment because of their inextricable link with violent criminal conduct. He noted that compelling evidence demonstrated that the only way to effectively prevent the crime of animal cruelty was to target the sale of crush videos. To substantiate this notion, Justice Alito pointed out that since the passage of the federal law in 1999, the crush video industry had been destroyed, only to resurface when the Third Circuit first declared the law unconstitutional.
Perhaps in recognition of that reality, the majority explicitly declared that the Court was not deciding the constitutionality of a law that bans only crush videos or other depictions of extreme animal cruelty, seemingly telegraphing to Congress that a more narrowly tailored prohibition might be acceptable and, indeed, welcome.
On April 28, 2010, the Court released six (somewhat anticlimactic) opinions, none of which represented a majority, in Salazar v. Buono, one of the most highly publicized cases of the Term. At issue was a Christian cross atop Sunrise Rock in the Mojave National Preserve in California. Five Justices agreed, although based on two different rationales, that the court below had erred in barring a congressionally ordered transfer of the public land upon which the cross stands to a private owner. On the media-grabbing issue of whether religious symbols on public property are constitutionally allowed the Court made no ruling. Justice Kennedy, in the lead opinion, stated the outcome succinctly: To date, this Courts jurisprudence in this area has refrained from making sweeping pronouncements, and this case is ill suited for announcing categorical rules. By a vote of 4-4, the case was remanded for further consideration of Congresss order to transfer the public land to a private owner.
In Doe v. Reed, another highly publicized First Amendment case, the Court determined 8-1 that, in general, disclosure of the information on petitions for ballot referenda does not violate the First Amendment. The Court, therefore, affirmed the Ninth Circuits conclusion that the plaintiffs were not entitled to injunctive relief on their broad First Amendment challenge to the disclosure of the information. The Court expressly noted that its decision did not foreclose success on the plaintiffs narrower challenge to the constitutionality of the disclosure in this case on the basis that they will be subjected to threats, harassment, and reprisals once the information is disclosed.
In Holder v. Humanitarian Law Project, the Court affirmed in part and reversed in part the decision of the Ninth Circuit, holding that the government does not violate the Constitution when it blocks speech and other forms of advocacy supporting a foreign organization that has been officially labeled as a foreign terrorist organization, even if the aim is to support the groups peaceful or humanitarian actions. The Court observed that the statute banning such material support is narrowly tailored and is not vague, because it clearly provide[s] a person of ordinary intelligence fair notice of what is prohibited. The Court further explained that the prohibition was reasonable, because Congress enacted the statute after justifiably finding that foreign organizations that engage in terrorist activity are so tainted by their criminal conduct that any contribution to such an organization facilitates that conduct.
At issue in Christian Legal Society v. Martinez was a novel question regarding student activities at public universities: May a public law school condition its official recognition of a student group and the attendant use of school funds and facilities on the organizations agreement to open eligibility for membership and leadership to all students? Justice Ginsburg, writing for the 5-justice majority, evaluated the Christian Legal Societys constitutional challenges to the all comers policy under the limited public forum test. Under that rubric, the Court affirmed the Ninth Circuit and held that the all comers policy, at least as it exists at the Hastings College of Law, was a constitutionally reasonable, viewpoint-neutral limitation on access to official recognition by the school. Justice Alito filed a dissent joined by Chief Justice Roberts and Justices Scalia and Thomas.
Second Amendment Incorporation
In McDonald v. Chicago, the Court split 5-4 in holding that the Fourteenth Amendment incorporates the Second Amendment right to keep and bear arms. The majority further split regarding through which clause of the Fourteenth Amendment the right was incorporated. Regardless of the different approaches the outcome garnered a full majority the Second Amendment right to keep and bear arms applies to the states.
Justice Alito announced in the lead opinion that it is clear that the Framers and ratifiers of the Fourteenth Amendment counted the right to keep and bear arms among those fundamental rights necessary to our system of ordered liberty. Justice Alito referenced a host of historical events and prior decisions of the Court related to the application of the Bill of Rights guarantees to state and municipal governments under the Due Process Clause and concluded: Under our precedents, if a Bill of Rights guarantee is fundamental from an American perspective, then, unless stare decisis counsels otherwise, that guarantee is fully binding on the States and thus limits (but by no means eliminates) their ability to devise solutions to social problems that suit local needs and values.
Justice Thomas concurred but wrote that the right to keep and bear arms is a privilege of American citizenship that applies to the States through the Fourteenth Amendments Privileges or Immunities Clause, not the Due Process Clause, which speaks only to process.
Antitrust
In American Needle v. NFL, an apparel maker in Illinois challenged the collective decision of the 32 NFL teams to solicit bids for an exclusive license to use NFL trademarks on headgear. Reebok won the bid and obtained an exclusive license, which foreclosed American Needles ability to continue using NFL trademarks on headgear. American Needle alleged that the joint marketing activity of the 32 NFL teams was an illegal restraint of trade under the Sherman Act. The Seventh Circuit threw out the claim, but on May 24, 2010, the Supreme Court unanimously reversed. In an opinion authored by Justice Stevens, the Court expressly acknowledged that NFL teams share an interest in making the entire league successful and profitable, which may require a host of collective decisions that would be beyond antitrust challenge. Nevertheless, the Court rejected the argument that joint action is the only way to promote the brand of NFL football and concluded that the particular activity at issue was concerted activity of the type subject to challenge under section I of the Sherman Act.
Patents
After hearing oral argument in the case on November 9, 2009, the long-awaited decision in Bilski v. Kappos finally was announced on June 28, 2010. At issue was the patentability of a method of predicting business or economic cycles. Justice Kennedy wrote for the majority stating that the machine or transformation test may be a useful and important investigative tool, but that it is not the sole test for deciding whether an invention is a patent-eligible process under the Patent Act, 35 U.S.C. 101. The Court explained that while 273 appears to leave open the possibility of some business method patents, it does not suggest broad patentability of such claimed inventions. With the understanding that business methods could be patent-eligible if all other criteria for a patent are also satisfied, the Court considered the business method at issue in Bilski. Looking to its prior precedent on patentability, the Court concluded that the business method at issue was an attempt to patent well known, abstract ideas and techniques and was not, therefore, a patentable process.
Civil Procedure
The Court unanimously reversed the Eleventh Circuit in Krupski v. Costa Crociere in what is undoubtedly one of the most important civil procedure cases of the Term. The Court held that a plaintiffs amendment to her complaint to name a defendant relates back to the date of the original complaint, even if the statute of limitations has run and even if the plaintiff knew of the proper defendants existence and delayed amending the complaint for a significant period of time. Such amendments, the Court explained, are governed by Federal Rule of Civil Procedure 15(c)(1)(C), which allows relation back as long as the new defendant (i) received such notice of the action that it will not be prejudiced in defending on the merits; and (ii) knew or should have known that the action would have been brought against it, but for the mistake concerning the proper partys identity.
The Eleventh Circuit had concluded that the plaintiff did not satisfy the requirements of Rule 15, because she knew the proper defendant existed and waited too long to make the amendment. Writing for the Court, Justice Sotomayor explained that both of those conclusions were inconsistent with the text of Rule 15, because the Rule lists no time constraints and because a plaintiff can know that a party exists without knowing that it is the proper defendant. The Court further explained that district courts have no discretion in determining whether to allow an amendment under Rule 15(c)(1)(C); if the plaintiff satisfies the criteria, the amendment automatically relates back.
Arbitration
In Rent-A-Center v. Jackson, the Court considered who should decide challenges to the validity of an arbitration agreement. The Courts answer it depends. If the party resisting arbitration does so on grounds rooted in the validity of the entire agreement, then the arbitrator should decide the issue. On the other hand, if the challenge is specific to the arbitration provision itself, then a court must decide the issue.
In Stolt-Nielsen v. AnimalFeeds, the Court reversed the Second Circuit and held that under the Federal Arbitration Act, which is premised in part on the idea that arbitration is a matter of consent, an arbitrator cannot compel a party to submit to class arbitration unless there is a contractual basis for concluding that the parties agreed to engage in class arbitration.
Attorney Fees
In a decision that split the Court 5-4, the Court decided in Perdue v. Kenny that the lodestar should be used to calculate attorney fees under 42 U.S.C. 1988. Justice Alito authored the majority opinion in which the Court also decided that the lodestar fee should be enhanced only in extraordinary circumstances. In an effort to curtail what the majority seemed to feel were arbitrary enhancements by district courts, the Court stated that a fee enhancement is justified only when specific evidence shows that the lodestar fee would not have been adequate to attract competent counsel.
In Astrue v. Ratliff, the Court unanimously reversed the Eighth Circuit and held that, under the Equal Access to Justice Act (EAJA), an award of attorneys fees is payable to the litigant rather than the litigants attorney. The Court, therefore, concluded that the federal government can use an award of attorneys fees to satisfy a debt owed by the litigant to the United States. In her first concurrence, which was joined by Justices Stevens and Ginsburg, Justice Sotomayor agreed with the holding of the Court but warned that the ruling inevitably would make it more difficult for persons of limited means to obtain legal representation, undermining the very purpose behind the EAJA.
Honest Services Fraud
In Skilling v. United States, the Court announced its much anticipated ruling on the scope of the honest services statute. The Court rejected the governments invitation to read 18 U.S.C. 1346 as proscribing undisclosed self-dealing by a public official or private employee in a broad range of corruption cases. Instead, the Court held that the honest services statute applied only to bribery and kickback schemes. The Court concluded that [a] prohibition on fraudulently depriving another of ones honest services by accepting bribes or kickbacks presents neither a fair-notice nor an arbitrary-prosecution problem. As a result of the holding in Skilling, the Court vacated and remanded two similar cases Black v. United States (stating that the opinion in Skilling limiting the scope of the honest services law rendered the jury instructions incorrect) and Weyrauch v. United States (vacating, in a one-paragraph per curiam opinion, based on the holding in Skilling).
Environmental
In Monsanto Co. v. Geertson Seed Farms, growers of conventional alfalfa filed suit and challenged the deregulation of genetically engineered alfalfa, which is presumed to be a plant pest and thus a regulated article under the Plant Protection Act, without the preparation of a full environmental impact statement pursuant to the National Environmental Policy Act (NEPA). The district court vacated the deregulation decision and enjoined the Animal and Plant Health Inspection Service from deregulating the genetically engineered alfalfa until a full environmental impact statement, and not merely an environmental assessment, was completed. The district court also entered a nationwide injunction to prohibit the planting of the genetically engineered alfalfa pending the completion of the environmental impact statement. The Ninth Circuit affirmed.
After finding that all parties had standing, the Supreme Court reversed and held that the district court had abused its discretion by improperly applying the standard for injunctive relief and by fashioning injunctive relief that was overly broad. In so ruling, the Court explained that the traditional four-part test applies when a plaintiff seeks a permanent injunction to remedy a NEPA violation. The Court observed that both the district court and the Ninth Circuit appeared to presume that an injunction is the proper remedy for a NEPA violation except in unusual circumstances. The Court cautioned that [n]o such thumb on the scales is warranted.
Admiralty
In Kawasaki Kisen Kaisha Ltd. v. Regal-Beloit Corp., the Court reversed the Ninth Circuit and held that the Carmack Amendment does not apply to the inland portion of a shipment originating overseas under a single through bill of lading that incorporates and is governed by the Carriage of Goods by Sea Act (COGSA).
Bankruptcy
In Hamilton v. Lanning, the Court affirmed the Tenth Circuit and held that, in Chapter 13 bankruptcy proceedings, a debtors projected disposable income should be determined by using the more flexible forward-looking approach. This approach defaults to the more mechanical calculation multiplying the average of the debtors disposable income for the previous six months by the number of months in the debtors payoff plan but also provides bankruptcy courts with discretion to make appropriate adjustments where significant changes in a debtors financial circumstances are known or virtually known.
In Schwab v. Reilly, the Court reversed and held that an interested party need not object to an exemption claimed in the debtors schedule of exempt property to preserve the estates ability to recover value in the asset beyond the dollar value the debtor expressly declared exempt.
ERISA
In Conkright v. Frommert, the Court reversed the Second Circuit and held that a plan administrators interpretation of a retirement plan is entitled to deference, even when the administrator has previously offered an erroneous reading.
In Hardt v. Reliance, the Court unanimously reversed the Fourth Circuit and held that a party seeking to recover attorneys fees in an ERISA case need not be a prevailing party; instead, a court may award fees and costs under ERISA if the claimant has achieved some degree of success on the merits.
Statute of Limitations
In Merck v. Reynolds, the Court unanimously affirmed the Third Circuit and held that the limitations period under 28 U.S.C. 1658(b), which provides the limitations periods for private rights of action that involve fraud in violation of the Securities Exchange Act, begins to run once the plaintiff actually discovers, or when a reasonably diligent plaintiff would have discovered, the facts constituting the violation, whichever comes first.
FTCA
In Hui v. Castaneda, the Court considered whether 42 U.S.C. 233(a), which governs the Public Health Service (PHS), establishes the Federal Tort Claims Act (FTCA) as the exclusive remedy for claims arising out of medical services provided by PHS personnel. In a short, unanimous decision authored by Justice Sotomayor, the Court answered that question in the affirmative. In other words, the Court held that PHS personnel are absolutely immune from Bivens actions, and an injured plaintiffs sole remedy is through a suit against the United States under the FTCA.
Fourth Amendment
In City of Ontario v. Quon, the Court unanimously held that the search of a police officers text messages on his employer-issued pager to his colleagues and to a woman with whom he was having an affair was reasonable and, therefore, not a violation of the officers Fourth Amendment rights.
Takings Clause
In Stop the Beach Renourishment v. Floirda Department of Environmental Protection, the Court held that the Florida Supreme Court had not taken property without just compensation in its ruling governing the restoration of beachfront land. A unanimous Court determined that no constitutional violation had occurred, because the property owners had not shown, and could not show, that they had any rights to future accretions and to contact with the water superior to the States right to fill in its submerged land. The Court split 4-4 on the (perhaps more important) question of judicial takings. Four Justices supported the proposition that whether property is taken by a legislature or a court, it can constitute a taking within the meaning of the Constitution. Four other Justices believed the Court did not need to reach that issue in this case.
Labor & Employment
In Lewis v. Chicago, the Court unanimously reversed the Seventh Circuit and held that, while a claimant must bring a charge to the EEOC within 300 days of a violation, the term violation does not mean only the date on which a discriminatory policy was adopted; a violation occurs when any use of a discriminatory employment practice takes place.
In New Process Steel v. National Labor Relations Board, the Court reversed the Seventh Circuit and held that section 3(b) of the National Labor Relations Act requires that a delegee group maintain a membership of three to exercise the delegated authority of the National Labor Relations Board.
In Granite Rock v. International Brotherhood of Teamsters, the Court held that the district court, not the arbitrator, must determine whether the parties ratified and formed an arbitration agreement in the new collective bargaining agreement.
Federalism
In Levin v. Commerce Energy, Inc., the Court unanimously reversed the Sixth Circuit and held that principles of comity prohibit federal courts from entertaining complaints of discriminatory state taxation, even when the relief sought is an increase in a competitors tax burden.
Separation of Powers
In Free Enterprise Fund v. Public Company Accounting Oversight Board, another 5-4 decision, the Court held that the dual for cause limitations on the removal of members of the Public Company Accounting Oversight Board contravened the Constitutions separation of powers provisions. The Board is composed of five members appointed by the Securities and Exchange Commission, and it has expansive powers to govern the accounting industry. While the SEC has oversight of the Board, it can only remove Board members for good cause shown. SEC Commissioners cannot be removed by the President except for inefficiency, neglect of duty, or malfeasance in office.
The Court explained that this arrangement is contrary to Article IIs vesting of executive power in the President, because it eliminates the Presidents ability to oversee and monitor the actions of the Board members. Writing for the majority, Chief Justice Roberts stated, By granting the Board executive power without the Executives oversight, this Act subverts the Presidents ability to ensure that the laws are faithfully executed as well as the publics ability to pass judgment on his efforts. The Acts restrictions are incompatible with the Constitutions separation of powers. Justice Breyer dissented, joined by Justices Stevens, Ginsburg, and Sotomayor, after considering the functional application of the dual for cause limitation and concluding that the limitation was constitutional.
FDCPA
In Jerman v. Carlisle, the Court held by a vote of 7-2 that a debt collectors legal errors do not fall within the scope of the bona fide error defense for violations of the Fair Debt Collection Practices Act. For further analysis regarding the implications of this decision on attorneys who collect debts for clients, see Richard Thayers article in the Member Articles section of this edition of Stare Decisis.
International Law
In Abbott v. Abbott, the Court reversed the Eighth Circuit and held that a parents ne exeat right confers upon that parent a right of custody under the Hague Convention on the Civil Aspects of International Child Abduction and that the remedy for a violation of that right is the return of the child, unless an exception to the Convention applies.
In Samantar v. Yousuf, the Court unanimously affirmed the Fourth Circuit and held that the Foreign Sovereign Immunities Act of 1976 does not provide immunity to lawsuits aimed at current or former officials of foreign nations.
In Morrison v. National Australia Bank, the Court held that section 10(b) of the Securities and Exchange Act does not provide a cause of action to foreigners who sue both foreign and American defendants for misconduct regarding securities trading on a foreign exchange.
Original Jurisdiction Interstate Compacts
In 1986, eight states including Alabama and North Carolina entered into an interstate compact for the development of disposal facilities for radioactive waste. After substantial investment of time and money, North Carolina decided to abandon a project to develop such a facility. As a result, the four remaining members of the compact and the umbrella commission created by the compact filed both legal and equitable claims against North Carolina. Special Master Bradford Clark issued a report and recommendations, to which all of the parties filed exceptions.
On June 1, 2010, the Supreme Court overruled all of the exceptions in Alabama v. North Carolina and adopted the recommendations of the Special Master to grant summary judgment to North Carolina on the plaintiffs legal claims. The plaintiffs equitable claims will proceed with further briefing, argument, and possibly discovery.
Criminal Law & Habeas Corpus
In Berghuis v. Thompkins, the Court reversed the Sixth Circuit and held that (1) if a suspect does not want to talk to police and wishes to invoke his right to silence he must clearly state that wish, because sitting silently is not enough, and (2) if the suspect does speak, the act of speaking by itself will be understood as a waiver of the right to silence and the statements made can be used as evidence.
In Barber v. Thomas, the Court affirmed the Ninth Circuit and rejected a challenge by federal prisoners to the method used by the Bureau of Prisons to calculate good time sentence reductions under 18 U.S.C. 3624(b)(1). The Bureau interprets the statutory phrase term of imprisonment to refer to the length of the sentence actually served by the inmate rather than the entire length of the sentence imposed by the district judge. While acknowledging that it may be impossible to apply consistently, the Court viewed the Bureaus method as the most natural reading of the statute. In a strongly worded dissent joined by Justices Stevens and Ginsburg, Justice Kennedy explained that term of imprisonment ought to be interpreted as the span of time that a prisoner must account for in order to obtain release. Under this interpretation, the term would initially be set by the sentence imposed but could be satisfied by a combination of prison time and good time credits. In his opinion for the Court, Justice Breyer criticized the dissents approach as being equally unworkable in application.
In Graham v. Florida, the Court reversed the Florida appellate court and held that the Eighth Amendments ban on cruel and unusual punishment is violated by a life-without-parole sentence for a juvenile whose crime did not involve murder.
In United States v. OBrien, the Court unanimously affirmed the First Circuit and held that the machinegun provision of 18 U.S.C. 924(c)(1)(B)(ii), which imposes a thirty-year mandatory minimum sentence when the firearm used in certain crimes is a machinegun, is an element of the offense that must be proved to the jury beyond a reasonable doubt, rather than a sentencing factor to be proved to the judge at sentencing.
In Dillon v. United States, the Court affirmed the Third Circuit and held that Booker does not apply to proceedings under 18 U.S.C. 3582(c)(2), which allows a court to resentence a defendant who was previously sentenced to a term of imprisonment based on a sentencing range that has subsequently been lowered by the Sentencing Commission. Sentencing Guideline 1B1.10(b) instructs courts not to reduce a term of imprisonment on resentencing below the minimum of the amended sentencing range, except to the extent the original term was below the then-applicable range. Justice Sotomayor, writing for the majority, explained that a proceeding under section 3582(c)(2) is not a plenary resentencing proceeding, but merely an opportunity for the court to reduce an otherwise final sentence in circumstances specified by the [Sentencing] Commission. The Court, therefore, held that Bookers holding that the Sentencing Guidelines are advisory does not apply to proceedings under section 3582(c)(2).
In United States v. Comstock, the Court reversed the Fourth Circuit and held that Congress had the power under the Necessary and Proper Clause to enact 18 U.S.C. 4248, which authorizes federal district courts to order civil commitment of sexually dangerous federal prisoners under certain circumstances even after they have served their criminal sentences.
In Dolan v. United States, the Court affirmed the Tenth Circuit and held that, even when the 90-day deadline for doing so has passed, a sentencing court retains the power to order restitution at least where . . . the sentencing court made clear prior to the deadlines expiration that it would order restitution, leaving open . . . only the amount.
In Renico v. Lett, the Court reversed the Sixth Circuits grant of habeas relief and concluded that the state trial courts decision to declare sua sponte a mistrial, while maybe in error, was not an objectively unreasonable application of clearly established federal law under the Antiterrorism and Effective Death Penalty Act (AEDPA).
In Holland v. Florida, the Court reversed the Eleventh Circuit and held that section 2244(d) of the AEDPA, which requires state prisoners to file their federal habeas petitions within one year after their direct appeals become final, is subject to equitable tolling.
In Magwood v. Patterson, the Court held that a defendants habeas application challenging a judgment intervening between habeas applications is not a second or successive petition under 28 U.S.C. 2244(b), because it challenges the new judgment for the first time.
In United States v. Marcus, the Court held that the Second Circuits plain-error standard was inconsistent with the Courts four-part analysis for correcting an error not raised at trial.
In Carr v. United States, the Court reversed the Seventh Circuit and held that the Sex Offender Registration and Notification Act applies only to a sex offenders interstate travel that occurred after the enactment of that statute.
In Carachuri-Rosendo v. Holder, the Court unanimously reversed the Fifth Circuit and held that a second or subsequent conviction for possession of drugs is not an aggravated felony under the Immigration and Nationality Act when the state conviction is not based on the fact that there was a prior conviction.
Abbott Marie Jones is the Editor of Stare Decisis and Chair of the Primerus Young Lawyers Group Newsletter Committee. She is an associate with Christian & Small LLP in Birmingham, Alabama, where she is a member of the firms appellate, post-verdict, and briefing practice group.