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01 July 2014

A few thoughts on Hobby Lobby and for-profit corporations

One of the most interesting distinctions, and perhaps the most crucial distinction, in the Obamacare contraceptive mandate cases is not whether corporations can "practice" religion, but the differences between a non-profit corporation and a for-profit corporation.* Many opponents of the decision have argued that a corporation cannot practice religion. But this ignores a long-standing understanding of the Religious Freedom Restoration Act. Under RFRA, no one (not even the dissenters on the Supreme Court) questions that a non-profit corporation like a church can practice religion. Non-profit corporations are unambiguously covered by RFRA and the Free Exercise Clause. For if RFRA does not cover a church, then what is it good for?

(Nor is RFRA part of some ridiculous notion of a "war on women" by Republicans: The Religious Freedom Restoration Act was introduced in the House by then-Representative Chuck Schumer (D-NY) and 169 other co-sponsors, and passed by a voice vote. It passed the Senate by 97-3. President Clinton signed it into law. It was backed by the New York Times. It was primarily designed to protect Native American religions from the federal government.)

Rather, you must be able to make a principled distinction as to why a non-profit corporation like a church can practice religion, but that a for-profit corporation like Hobby Lobby or Conestoga Wood Specialties or Mardel cannot. In my opinion, the dissent tries but fails to do this in a convincing way. The Dictionary Act, a federal law codified at 1 U.S.C. § 1, states that

In determining the meaning of any Act of Congress, unless the context indicates otherwise—

...

the words “person” and “whoever” include corporations, companies, associations, firms, partnerships, societies, and joint stock companies, as well as individuals....

(Yes, you read that right: since 1947, federal law says that anytime another law refers to "person" it includes corporations).

The dissent argues that "the context indicates otherwise," but this is not convincing. The only defining difference is profit, but "that dog don't hunt." Making profit is not mutually exclusive with practicing religion. It is not, as the dissent suggests, that "religious exemptions had never been extended to any entity operating in 'the commercial, profit-making world,'" but rather that RFRA, when combined with the Dictionary Act, makes no such distinction. The dissent, in my opinion, must do better than this.

Good and smart people can disagree about the scope of RFRA, as evidenced by the 5-4 vote in this case. But when you try to argue that corporations cannot practice religion, without understanding that non-profit corporations are already unambiguously protected in this regard, you start to look foolish. To start to convince me, find a principled distinction between a non-profit corporation and a for-profit corporation that goes beyond the profit motive.

* A reminder: It is important to note the distinction that the holding in this case does not apply to all corporations, just those that are defined as closely-held. The IRS defines a closely-held corporation as one in which more than 50% of the value of its outstanding stock owned (directly or indirectly) by 5 or fewer individuals at any time during the last half of the tax year; and is not a personal service corporation.

Law in Plain English: McCullen v. Coakley

Planned Parenthood's clinic in Boston, MA. The
yellow line on the sidewalk and street marks the
35-feet buffer zone. Image from Google Street View.

SCOTUSblog: McCullen v. Coakley

Argument: Jan 15 2014 (Aud.)

Discussion: The Massachusetts legislature passed a law that created fixed and floating buffer zones around abortion clinics. In 2007, the legislature amended the statute to create a fixed thirty-five-foot buffer zone around the entrances, exits, and driveways of abortion clinics. McCullen and other plaintiffs regularly engage in "sidewalk counseling" at abortion clinics, but argue that the buffer zones prevent close personal contact with their intended audience and, thus, impede their ability to communicate effectively. The District Court ruled that the statute is a content-neutral, narrowly tailored time-place-manner regulation that protects the rights of prospective patients and clinic employees without offending the First Amendment rights of others; and the First Circuit affirmed.

Planned Parenthood's Springfield, MA clinic has
white arcs painted on the street to represent the
buffer zone. Image from Google Street View.

Issue: The questions before the Court are (1) whether the First Circuit erred in upholding Massachusetts’s selective exclusion law – which makes it a crime for speakers other than clinic “employees or agents...acting within the scope of their employment” to “enter or remain on a public way or sidewalk” within thirty-five feet of an entrance, exit, or driveway of “a reproductive health care facility” – under the First and Fourteenth Amendments, on its face and as applied to petitioners; (2) whether, if Hill v. Colorado permits enforcement of this law, Hill should be limited or overruled.

Holding: In a 9-0 decision, the Supreme Court ruled that the Massachusetts law which makes it a crime to stand on a public road or sidewalk within thirty-five feet of a reproductive health care facility violates the First Amendment.

Planned Parenthood's Worcester, MA clinic has
white arcs painted on the street to represent the
buffer zone. Image from Google Street View.

Law in Plain English: National Labor Relations Board v. Noel Canning

This is one in a series of posts designed to describe court decisions in plain English. For more detail and background on the legal issues, see the link to the case below. For similar posts, click here.

SCOTUSblog: National Labor Relations Board v. Noel Canning

Photo from
Noel Corporation.

Argument: Jan 13 2014 (Aud.)

Background: The National Labor Relations Board (NLRB or Board) found that Noel Canning violated section 8(a)(1) and (5) of the National Labor Relations Act (NLRA) by refusing to reduce to writing and execute a collective bargaining agreement reached with Teamsters Local 760 (the Union). Noel Canning appealed, alleging that the Board lacked authority to act for want of a quorum, as three members of the five-member Board were never validly appointed because they took office under recess appointments which were made when the Senate was not in recess. Second, it asserts that the vacancies these three members purportedly filled did not "happen during the Recess of the Senate," as required for recess appointments by the Constitution. The D.C. Circuit ruled that the Board issuing the findings and order could not lawfully act, as it did not have a quorum.

Issue: The questions before the Court are (1) whether the President’s recess-appointment power may be exercised during a recess that occurs within a session of the Senate, or is instead limited to recesses that occur between enumerated sessions of the Senate, and (2) whether the President’s recess-appointment power may be exercised to fill vacancies that exist during a recess, or is instead limited to vacancies that first arose during that recess.

Holding: In a 9-0 decision, the Supreme Court ruled that the Recess Appointments Clause authorizes the president to fill any existing vacancy during any recess – whether occurring during or between sessions of Congress – of sufficient length. For purposes of the clause, the Senate is in session whenever it indicates that it is, as long as – under its own rules – it retains the capacity to transact Senate business.

30 June 2014

Law in Plain English: Harris v. Quinn

Argument: Jan 21 2014 (Aud.)

Background: Pamela Harris and others provide in-home care to disabled individuals through Medicaid-waiver programs run by the Illinois Department of Human Services. Some are part of the Home Services Program administered by the Division of Rehabilitation Services ("Rehabilitation Program"). The others are part of the Home Based Support Services Program administered by the Division of Developmental Disabilities ("Disabilities Program").

In 2003, a majority of the approximately 20,000 Rehabilitation Program personal assistants voted to designate SEIU Healthcare Illinois & Indiana as their collective bargaining representative with the State. The Union and the State negotiated a collective bargaining agreement, including a "fair share" provision requires "all Personal Assistants who are not members of the Union...to pay their proportionate share of the costs of the collective bargaining process, contract administration and pursuing matters affecting wages, hours and other conditions of employment." Harris and the others allege that a collective bargaining agreement that requires Medicaid home-care personal assistants to pay a fee to a union representative violates the First Amendment. The Seventh Circuit held that that personal assistants in the Illinois home-care Medicaid waiver program were State employees that may be compelled to support legitimate, non-ideological, union activities germane to collective-bargaining representation.

The Disabilities Program plaintiffs successfully rejected unionization and were not subject to fair share fees, but feared that may change at any time. The Seventh Circuit dismissed the Disabilities Program plaintiffs' claims for lack of jurisdiction because they were not ripe for adjudication.

Issue: The questions before the Court are (1) whether a state may, consistent with the First and Fourteenth Amendments to the United States Constitution, compel personal care providers to accept and financially support a private organization as their exclusive representative to petition the state for greater reimbursements from its Medicaid programs; and (2) whether the lower court erred in holding that the claims of providers in the Home Based Support Services Program are not ripe for judicial review.

Holding: In a 5-4 decision, the Supreme Court ruled that the First Amendment prohibits the collection of an agency fee from Rehabilitation Program PAs who do not want to join or support the union.

Law in Plain English: Obamacare contraceptive mandate cases

Argument: Mar 25 2014 (Aud.)

Discussion: Hobby Lobby and Mardel (a craft store chain and a Christian bookstore chain, respectively) and Conestoga Wood Specialties (a manufacturer of wood cabinets) brought actions challenging an Affordable Care Act regulation that requires them to provide certain contraceptive services as a part of their employer-sponsored health care plan. Among these services are drugs and devices that the employers believe to be abortifacients, the use of which is contrary to their faith. The employers grounded their claims in the Free Exercise Clause of the First Amendment, and the Religious Freedom Restoration Act (RFRA), a federal law aimed at preventing laws that substantially burden a person's free exercise of their religion. The Tenth Circuit ruled that Hobby Lobby and Mardel were "Persons Exercising Religion" Under RFRA, and thus entitled to bring their claims. On the other hand, the Third Circuit ruled that for-profit, secular corporations like Conestoga Wood Specialties could not engage in religious exercise, and as a result, were not entitled to protection under the Free Exercise Clause of the First Amendment and the RFRA.

Issue: The question before the Court in Hobby Lobby is whether the Religious Freedom Restoration Act of 1993 (RFRA), 42 U.S.C. §§ 2000bb et seq., which provides that the government “shall not substantially burden a person’s exercise of religion” unless that burden is the least restrictive means to further a compelling governmental interest, allows a for-profit corporation to deny its employees the health coverage of contraceptives to which the employees are otherwise entitled by federal law, based on the religious objections of the corporation’s owners.

The question before the Court in Conestoga Wood Specialties is whether the religious owners of a family business, or their closely held, for-profit corporation, have free exercise rights that are violated by the application of the contraceptive-coverage mandate of the Affordable Care Act.

Holding: In a 5-4 decision, the Supreme Court ruled that, as applied to closely held corporations, the HHS regulations implementing the contraception mandate violate the RFRA. It is important to note the distinction that the holding in this case does not apply to all corporations, just those that are defined as closely-held. The IRS defines a closely-held corporation as one in which more than 50% of the value of its outstanding stock owned (directly or indirectly) by 5 or fewer individuals at any time during the last half of the tax year; and is not a personal service corporation.

25 June 2014

Law in Plain English: United States v. Wurie

Argument: Apr 29 2014 (Aud.)

Background: Following surveillance of a suspected drug deal, Wurie (who had just parked the car) was arrested by police. At the station, two cells phones (as well as keys and money) were taken from him. After he arrived but before he was booked, one Wurie's cell phones was repeatedly receiving calls from a number identified as "my house" on the external caller ID screen on the front of the phone. The officers were able to see the caller ID screen, and the "my house" label, in plain view. After about five more minutes, the officers opened the phone to look at Wurie's call log. Immediately upon opening the phone, the officers saw a photograph of a young black woman holding a baby, which was set as the phone's "wallpaper." The officers then pressed one button on the phone, which allowed them to access the phone's call log. The call log showed the incoming calls from "my house." The officers pressed one more button to determine the phone number associated with the "my house" caller ID reference. One of the officers typed that phone number into an online white pages directory, which revealed that the address associated with the number was on Silver Street in South Boston, not far from where Wurie had parked his car just before he was arrested. Suspecting that Wurie was a drug dealer, that he was lying about his address, and that he might have drugs hidden at his house, police took Wurie's keys and, with other officers, went to the Silver Street address associated with the "my house" number. One of the mailboxes at that address listed the names Wurie and Cristal. Through the first-floor apartment window, the officers saw a black woman who looked like the woman whose picture appeared on Wurie's cell phone wallpaper and a sleeping child who looked like the child in the picture on Wurie's phone. After obtaining the warrant, the officers seized from the apartment crack cocaine, a firearm, ammunition, marijuana, drug paraphernalia, in cash. Wurie was charged with possessing with intent to distribute and distributing cocaine base and with being a felon in possession of a firearm and ammunition. He filed a motion to suppress the evidence obtained as a result of the warrantless search of his cell phone. The district court denied Wurie's motion to suppress; but the First Circuit reversed the denial of Wurie's motion to suppress and vacated his conviction.

Issue: The question before the Court is whether the Fourth Amendment permits the police, without obtaining a warrant, to review the call log of a cellphone found on a person who has been lawfully arrested.

Holding: In a 9-0 decision, the Supreme Court ruled that police generally may not, without a warrant, search digital information on a cell phone seized from an individual who has been arrested.

Law in Plain English: ABC, Inc. v. Aereo, Inc.

Argument: Apr 22, 2014 (Aud.)

Aereo's array of dime-sized antennas.

Discussion: Aereo uses thousands of individual antennas to receive broadcast television channels, and Aereo assigns an individual antenna to each of its subscribers. Aereo transmits to its subscribers broadcast television programs over the internet for a monthly subscription fee, but it does not have any license from copyright holders to record or transmit their programs. The 1976 Copyright Act gives copyright owners an exclusive right "in the case of literary, musical, dramatic, and choreographic works, pantomimes, and motion pictures and other audiovisual works, to perform the copyrighted work publicly." 17 U.S.C. § 106(4). ABC and other holders of copyrights in programs broadcast on network television moved for a preliminary injunction barring Aereo from transmitting programs to its subscribers while the programs are still airing, claiming that those transmissions infringe their exclusive right to publicly perform their works, as defined by 17 U.S.C. § 101. The District Court denied the motion. It concluded that, although the Plaintiffs had demonstrated a likelihood that they would suffer irreparable harm in the absence of a preliminary injunction,an injunction would severely harm Aereo, likely ending its business. The balance of hardships did not tip "decidedly" in favor of the Plaintiffs and an injunction "would not disserve the public interest." The Second Circuit affirmed, finding that Aereo's transmissions of unique copies of broadcast television programs created at its users' requests and transmitted while the programs are still airing on broadcast television are not "public performances" of the Plaintiffs' copyrighted works.

Issue: The question before the Court is whether a company “publicly performs” a copyrighted television program when it retransmits a broadcast of that program to thousands of paid subscribers over the Internet.

Holding: In a 6-3 decision, the Supreme Court ruled that Aereo performs petitioners’ works publicly within the meaning of the Transmit Clause. The practical impact of this decision is that Aereo's business model is illegal.

Law in Plain English: Fifth Third Bancorp v. Dudenhoeffer

Argument: Apr 2 2014 (Aud.)

Background: TBD

Issue: The question before the Court is whether the Sixth Circuit erred by holding that respondents were not required to plausibly allege in their complaint that the fiduciaries of an employee stock ownership plan abused their discretion by remaining invested in employer stock, in order to overcome the presumption that their decision to invest in employer stock was reasonable, as required by the Employee Retirement Income Security Act of 1974, 29 U.S.C. §§ 1101 et seq. (“ERISA”), and every other circuit to address the issue.

Holding: In a unanimous decision, the Supreme Court ruled that ESOP fiduciaries are not entitled to any special presumption of prudence. Rather, they are subject to the same duty of prudence that applies to ERISA fiduciaries in general, §1104(a)(1)(B), except that they need not diversify the fund’s assets, §1104(a)(2).

23 June 2014

Law in Plain English: Halliburton Co. v. Erica P. John Fund, Inc.

Argument: Mar 5 2013

Discussion: The Erica P. John Fund, Inc. ("the Fund") represent a putative class of shareholders who allege that they suffered material losses as a result of fraudulent misrepresentations by Halliburton (see here for this case's first trip to the Supreme Court back in 2011). The Fund's claims are based upon the "fraud-on-the-market" theory, which suggests that that an efficient, well-organized market will reflect all of the information that there is about a given security. Under this theory, investors can be presumed to have relied upon the distortions made by Halliburton's allegedly fraudulent misrepresentations without specific proof that they had done so. The Court adopted this theory in Basic Inc. v. Levinson, although that decision was made in 1988; three of the justices (including Justices Kennedy and Scalia) recused themselves at the time, and three justices in last term's Amgen case said they the Court should perhaps review Basic's premise. Halliburton attempted to show evidence that its allegedly fraudulent mispresentations caused no market price impact, but the District Court ruled that Halliburton was not entitled to do so. The Fifth Circuit affirmed.

Issue: The questions before the Court are (1) whether this Court should overrule or substantially modify the holding of Basic Inc. v. Levinson, to the extent that it recognizes a presumption of classwide reliance derived from the fraud-on-the-market theory; and (2) whether, in a case where the plaintiff invokes the presumption of reliance to seek class certification, the defendant may rebut the presumption and prevent class certification by introducing evidence that the alleged misrepresentations did not distort the market price of its stock.

Holding: In a 9-0 decision, the Supreme Court ruled that Halliburton has not shown a special justification for overruling Basic’s presumption of reliance. For the same reasons the Court declines to overrule Basic’s presumption of reliance, it also declines to modify the prerequisites for invoking the presumption by requiring plaintiffs to prove “price impact” directly at the class certification stage. The Court agrees with Halliburton, however, that defendants must be afforded an opportunity to rebut the presumption of reliance before class certification with evidence of a lack of price impact.

Law in Plain English: Loughrin v. United States

Argument: Apr 1 2014 (Aud.)

Background: TBD

Issue: The question before the Court is whether the government must prove that the defendant intended to defraud a bank and expose it to risk of loss in every prosecution under 18 U.S.C. § 1344.

Holding: In a 9-0 decision, the Supreme Court ruled that the statute at issue here does not require the government to prove that a defendant intended to defraud a financial institution. The provision requires only that the defendant intended to obtain bank property and this is accomplished by a false statement.

19 June 2014

Law in Plain English: Alice Corporation Pty. Ltd. v. CLS Bank International

Argument: Mar 30 2014 (Aud.)

Discussion: Alice, an Australian company, owns several patents which relate to a computerized trading platform used for conducting financial transactions in which a third party settles obligations between a first and a second party so as to eliminate "counterparty" or "settlement" risk. Settlement risk refers to the risk to each party in an exchange that only one of the two parties will actually pay its obligation, leaving the paying party without its principal or the benefit of the counterparty's performance. Alice's patents address that risk by relying on a trusted third party to ensure the exchange of either both parties' obligations or neither obligation. CLS Bank filed suit against Alice seeking a declaratory judgment of noninfringement, invalidity, and unenforceability as to the patents. Alice answered and counterclaimed, alleging infringement. the district court granted summary judgment in favor of CLS, holding each of the asserted claims of Alice's patents invalid under 35 U.S.C. § 101. A panel of the Federal Circuit reversed, holding that the claims at issue, including claims drawn to methods, computer-readable media, and systems, were all patent eligible under § 101. Upon consideration en banc, a majority of the Federal Circuit affirmed the district court's holding that the asserted method and computer-readable media claims are not directed to eligible subject matter under § 101.

Issue: The question before the Court is whether claims to computer-implemented inventions – including claims to systems and machines, processes, and items of manufacture – are directed to patent-eligible subject matter within the meaning of 35 U.S.C. § 101 as interpreted by this Court.

Holding: In a unanimous decision, the Supreme Court ruled that because the claims are drawn to a patent-ineligible abstract idea, they are not eligible for a patent under Section 101.

Law in Plain English: Lane v. Franks

Argument: Apr 28 2014 (Aud.)

Background: In September 2006, Edward Lane accepted a probationary position as Director of Central Alabama Community College (CACC)'s Community Intensive Training for Youth Program ("CITY"), a program for at-risk youth. Soon after assuming his duties, Lane audited CITY's finances and discovered that then-state representative Suzanne Schmitz was listed on CITY's payroll but was not reporting for work and had not otherwise performed tangible work for the program. Soon thereafter, Lane terminated Schmitz's employment with CITY after Schmitz refused to report to work. Soon after Schmitz's job termination, the FBI began investigating Schmitz and contacted Lane for information. Lane testified before a federal grand jury and — pursuant to a subpoena — testified at Schmitz's August 2008 federal criminal trial for mail fraud and fraud involving a program receiving federal funds. In late 2008 — due to substantial budget cuts — Lane's employment was terminated by Steve Franks, CACC's President. Lane filed a civil action against Franks — in both his official and individual capacity — alleging that Franks terminated Lane in retaliation for testifying against Schmitz, in violation of the First Amendment. The district court granted Franks's motion for summary judgment. Although the district court couched its decision in terms of qualified immunity, it determined that Lane's speech was made pursuant to his official duties as CITY's Director, not as a citizen on a matter of public concern. The Eleventh Circuit affirmed, finding that the record failed to establish that Lane testified as a citizen on a matter of public concern: as a matter of law, he could not state a claim for retaliation under the First Amendment.

Issue: The questions before the Court are (1) whether the government is categorically free under the First Amendment to retaliate against a public employee for truthful sworn testimony that was compelled by subpoena and was not a part of the employee’s ordinary job responsibilities; and (2) whether qualified immunity precludes a claim for damages in such an action.

Holding: In a unanimous decision, the Supreme Court ruled that Lane's sworn testimony outside the scope of his ordinary job duties is entitled to First Amendment protection. His testimony was speech as a citizen on a matter of public concern. However, the Court also found that Franks possessed qualified immunity for the termination of Franks because the existence of First Amendment protection was not “beyond debate.”

Law in Plain English: United States v. Clarke

Argument: Apr 23 2014 (Aud.)

Background: The Internal Revenue Service (IRS) issued five administrative summonses, pursuant to 26 U.S.C. § 7602, during an investigation into the tax liabilities of Dynamo Holdings Limited Partnership (Dynamo) and Michael Clarke, in his capacity as Dynamo's CFO. To obtain enforcement of a summons, the IRS must make a four-part prima facie showing that (1) "the investigation will be conducted pursuant to a legitimate purpose," (2) "the inquiry may be relevant to the purpose," (3) "the information sought is not already within the Commissioner's possession," and (4) "the administrative steps required by the Code have been followed." Once the IRS makes its prima facie showing, the burden shifts to the party opposing the summons to either (1) disprove one of the four elements of the IRS's prima facie case, or (2) "convince the court that enforcement of the summons would constitute an abuse of the court's process." A party opposing a summons is entitled to an adversary hearing before enforcement is ordered, and that, at the hearing, the opponent may challenge the summons on any appropriate ground. Under Fifth Circuit precedent, an allegation of improper purpose is sufficient to trigger a limited adversary hearing where the taxpayer may question IRS officials concerning the Service's reasons for issuing the summons. Nonetheless, the district court ordered enforcement of the summons. Clarke appealed, and the Fifth Circuit vacated the order and remanded the case to the district court, ruling that Clarke was entitled to a hearing to explore his allegation of an improper purpose.

Issue: The question before the Court is whether an unsupported allegation that the Internal Revenue Service (IRS) issued a summons for an improper purpose entitles an opponent of the summons to an evidentiary hearing to question IRS officials about their reasons for issuing the summons.

Holding: In a unanimous decision, the Supreme Court ruled that a taxpayer has a right to conduct an examination of IRS officials regarding their reasons for issuing a summons when he points to specific facts or circumstances plausibly raising an inference of bad faith. It is not enough to simply allege that the agents had an improper purpose, without providing any credible evidence to support that allegation.

16 June 2014

Law in Plain English: Republic of Argentina v. NML Capital

Argument: Apr 21 2014 (Aud.)

Background: In December 2001, the Republic of Argentina defaulted on payment of its external debt. While most of Argentina's bondholders agreed to voluntary restructurings in 2005 and 2010, others, including Plaintiff-Appellee NML Capital, Ltd. ("NML"), did not. NML filed eleven actions in the Southern District of New York to collect on its defaulted Argentinian bonds. The district court has entered five money judgments in NML's favor totaling (with interest) approximately $1.6 billion; and summary judgment to NML in the remaining six actions, in which NML's claims total (with interest) more than $900 million. Argentina has not satisfied these judgments and NML has thus attempted to execute them against Argentina's property. NML sought discovery of all bank accounts maintained by or on behalf of Argentina without territorial limitation. The district court approved a subpoena indicating that extraterritorial asset discovery did not infringe on Argentina's sovereign immunity, but limited the subpoena to discovery that was reasonably calculated to lead to attachable property. Argentina appealed, arguing that the district court's discovery order, by compelling disclosure about Argentinian assets abroad, violated the Foreign Sovereign Immunities Act ("FSIA"). The Second Circuit affirmed, holding that because the discovery order involves discovery, not attachment of sovereign property, and because it is directed at third-party banks, not at Argentina itself, Argentina's sovereign immunity was not infringed.

Issue: The question before the Court is whether post-judgment discovery in aid of enforcing a judgment against a foreign state can be ordered with respect to all assets of a foreign state regardless of their location or use, as held by the Second Circuit, or is limited to assets located in the United States that are potentially subject to execution under the Foreign Sovereign Immunities Act of 1976 (“FSIA”), 28 U.S.C. § 1602 et seq., as held by the Seventh, Fifth, and Ninth Circuits.

Holding: In a 7-1 decision (with Justice Sotomayor recused), the Supreme Court ruled that no provision of the Foreign Sovereign Immunities Act immunizes a foreign sovereign debtor from post-judgment discovery of information concerning its extraterritorial assets.

Law in Plain English: Susan B. Anthony List v. Driehaus

Argument: Apr 22 2014 (Aud.)

Background: Shortly before the 2010 general election, then-Congressman Steven Driehaus filed a complaint with the Ohio Elections Commission against Susan B. Anthony List (SBA List), a pro-life advocacy organization that planned to run advertisements against him. SBA List then initiated a lawsuit seeking declaratory and injunctive relief against Driehaus, the Commission's members, and the Ohio Secretary of State. The Coalition Opposed to Additional Spending and Taxes (COAST), an anti-tax advocacy organization, filed a similar federal action, although no state proceedings had been brought against it. When Driehaus lost his bid for reelection, he filed a motion to withdraw his Commission complaint. SBA List consented to this and the Commission proceedings ceased. SBA List then amended its complaint to allege that the Commission proceedings following Driehaus's complaint chilled its speech and associational rights. This could happen again, SBA List alleged, if any complainant decided to hale the organization before the Commission. SBA List stated its intent to engage in "substantially similar activity in the future" and offered that Driehaus "may run for Congress again." COAST also filed suit against only the Commission. It claimed that it did not publish its own messages because its knowledge of the Commission proceedings against SBA List chilled its ability to speak. The district court granted the defendants' motions to dismiss on standing, ripeness, and mootness grounds. The Sixth Circuit affirmed, ruling that neither SBA List nor COAST's allegations were ripe.

Issue: The questions before the Court are (1) whether, to challenge a speech-suppressive law, a party whose speech is arguably proscribed must prove that authorities would certainly and successfully prosecute him, as the Sixth Circuit holds, or should the court presume that a credible threat of prosecution exists absent desuetude or a firm commitment by prosecutors not to enforce the law, as seven other Circuits hold; and (2) whether the Sixth Circuit erred by holding, in direct conflict with the Eighth Circuit, that state laws proscribing “false” political speech are not subject to pre-enforcement First Amendment review so long as the speaker maintains that its speech is true, even if others who enforce the law manifestly disagree.

Holding: In a unanimous decision, the Supreme Court ruled that that petitioners have alleged a sufficiently imminent injury under Article III to enable them to challenge the constitutionality of the false statement law.

Law in Plain English: Abramski v. United States

Argument: Jan 22 2014 (Aud.)

Discussion: Abramski bought a handgun in Virginia for his uncle in Pennsylvania, but told the firearms dealer he was the "actual buyer." Subsequently, he was charged with being an illegal "straw purchaser" of the firearm. Abramski was convicted for two firearm offenses: (1) making a false statement that was material to the lawfulness of a firearm sale, in violation of 18 U.S.C. § 922(a)(6); and (2) making a false statement with respect to information required to be kept in the records of a licensed firearms dealer — that is, that he was the actual buyer of the firearm, when in fact he was buying it for someone else — in contravention of 18 U.S.C. § 924(a)(1)(A). Abramski appealed and argued that he and his uncle were legally entitled to purchase and own the handgun, and as a result, his conduct was outside the purview of § 922(a)(6) and 924(a)(1)(A). Nonetheless, the Fourth Circuit affirmed his conviction.

Issue: The questions before the Court are (1) whether a gun buyer’s intent to sell a firearm to another lawful buyer in the future a fact is “material to the lawfulness of the sale” of the firearm under 18 U.S.C. § 922(a)(6); and (2) whether a gun buyer’s intent to sell a firearm to another lawful buyer in the future is a piece of information “required...to be kept” by a federally licensed firearm dealer under Section 924(a)(1)(A).

Holding: In a 5-4 decision, the Supreme Court ruled that Abramski's misrepresentation is material under the federal statute for making a false statement with respect to the information to be kept in the gun dealer's records.

12 June 2014

Law in Plain English: Clark v. Rameker

Argument: Mar 24 2014 (Aud.)

Why did the Supreme Court take this case? In this case, the Seventh Circuit held that individual retirement account that a debtor has inherited are exempt from the debtor's bankruptcy estate. On the other hand, the Fifth Circuit ruled in an earlier case that such payments are subject to taxation. So-called "circuit splits" are perhaps the most common way cases make it to the Supreme Court.

Discussion: At her death, Ruth Heffron owned an IRA worth approximately $300,000. Ruth's daughter Heidi Heffron-Clark was the designated beneficiary. Ruth's account passed to Heidi. When Heidi and her husband Brandon initiated bankruptcy proceedings, they sought to protect the inherited IRA pursuant to 11 U.S.C. § 522(b)(3)(C) and (d)(12), which exempt retirement funds from creditors' claims in bankruptcy. The bankruptcy judge held that an inherited IRA does not represent "retirement funds" in the hands of the current owner and so is not exempt. The District Court reversed, adopting the view that any money representing "retirement funds" in the decedent's hands must be treated the same way in successors' hands. The Seventh Circuit reversed the District Court, finding that inherited IRAs represent an opportunity for current consumption, not a fund of retirement savings.

Issue: The question before the Court is whether an individual retirement account that a debtor has inherited is exempt from the debtor's bankruptcy estate under Section 522 of the Bankruptcy Code, 11 U.S.C. § 522, which exempts "retirement funds to the extent that those funds are in a fund or account that is exempt from taxation" under certain provisions of the Internal Revenue Code.

Holding: In a unanimous decision, the Supreme Court ruled that funds held in an inherited IRA account are not "retirement funds" within the meaning of the Bankruptcy Code.

09 June 2014

Law in Plain English: Scialabba v. Cuellar de Osorio

Argument: Dec 10 2013 (Aud.)

Discussion: The Child Status Protection Act (CSPA) provides rules for determining whether particular aliens qualify as “children” so that they can obtain visas or adjustments of their immigration status as derivative beneficiaries of sponsored family member immigrants (also known as “primary beneficiaries”). Cuellar de Osorio's citizen mother filed a petition for a visa (for a married daughter of a citizen) on her behalf in May 1998. Cuellar de Osorio's son, who was then 13, was listed on the petition as a derivative beneficiary. Cuellar de Osorio's visa was approved in June 1998, but her priority date did not become current until November 2005. By then, her son was 21 and as a result was ineligible for a derivative visa. The United States Citizen and Immigration Services (USCIS) denied the request for priority date retention under the CSPA. The District Court ruled in favor of USCIS, but the Ninth Circuit reversed, concluding that the plain language of the CSPA unambiguously grants automatic conversion and priority date retention to aged-out derivative beneficiaries.

Issue: The questions before the Court are (1) whether Section 1153(h)(3) of the Immigration and Nationality Act–which provides rules for determining whether particular aliens qualify as “children” so that they can obtain visas or adjustments of their immigration status as derivative beneficiaries of sponsored family member immigrants–unambiguously grants relief to all aliens who qualify as “child” derivative beneficiaries at the time a visa petition is filed but age out of qualification by the time the visa becomes available to the primary beneficiary; and (2) whether the Board of Immigration Appeals (BIA) reasonably interpreted Section 1153(h)(3).

Holding: In a 5-4 decision, the Supreme Court ruled that BIA’s textually reasonable construction of § 1153(h)(3)’s ambiguous language was entitled to deference.

The Board of Immigration Appeals interpreted the Child Status Protection Act as providing relief to only those aged-out aliens who qualified or could have qualified as principal beneficiaries of a visa petition. In other words, the CSPA provision under review does not apply to derivative beneficiaries piggy-backing on a parent. The Supreme Court agreed that this was a permissible interpretation of the CSPA. In short, if you are principal beneficiary (the sponsored individual), you can keep your place in line. But if you are a derivative beneficiary (a spouse or children of the sponsored individual), you cannot.

Law in Plain English: Executive Benefits Insurance Agency v. Arkison

Argument: Jan 14 2013 (Aud.)

Discussion: Nicholas Paleveda and his wife, Marjorie Ewing, operated Aegis Retirement Income Services, Inc. ("ARIS") and the Bellingham Insurance Agency, Inc. ("BIA"). ARIS designed and administered defined-benefit pension plans, and BIA sold insurance and annuity products that funded those plans. BIA became insolvent, and Paleveda used BIA funds to incorporate the Executive Benefits Insurance Agency, Inc. ("EBIA"). In the meantime, BIA filed a voluntary Chapter 7 bankruptcy petition. The Trustee, Peter Arkison, filed a complaint against EBIA and ARIS to recover the commissions deposited into the EBIA/ARIS account, which the Trustee alleged to be property of the estate. The complaint alleged fraudulent transfer claims and a claim that EBIA was a successor corporation of BIA and therefore liable for its debts. The bankruptcy court granted summary judgment in favor of the Trustee, concluding that the deposits into the EBIA/ARIS account were fraudulent conveyances of BIA assets and that EBIA was a "mere successor" of BIA. The bankruptcy court entered a final judgment for $373,291.28. EBIA appealed to the federal district court, which affirmed the judgment. EBIA appealed again, and now for the first time claimed that the bankruptcy judge was constitutionally proscribed from entering final judgment on the Trustee's claims. The Ninth Circuit concluded Article III bars bankruptcy courts from entering final judgments in actions brought by a noncreditor absent the parties' consent, but that EBIA consented to the bankruptcy court's jurisdiction. As a result, that court's entry of summarj' judgment in favor of the Trustee was acceptable.

Issue: The questions before the Court are (1) whether Article III permits the exercise of the judicial power of the United States by bankruptcy courts on the basis of litigant consent, and, if so, whether "implied consent" based on a litigant’s conduct, where the statutory scheme provides the litigant no notice that its consent is required, is sufficient to satisfy Article III; and (2) whether a bankruptcy judge may submit proposed findings of fact and conclusions of law for de novo review by a district court in a “core” proceeding under 28 U.S.C. 157(b).

Holding: In a unanimous decision, the Supreme Court ruled that under Stern v. Marshall, a bankruptcy court may not enter final judgment but may issue findings of fact and conclusions of law to be reviewed de novo by a district court.

Law in Plain English: CTS Corp. v. Waldburger

Argument: Apr 23 2014 (Aud.)

CTS of Asheville Superfund site

Background: Waldburger and other landowners brought a nuisance action against CTS Corporation (CTS) when they discovered concentrated levels of trichloroethylene (TCE) and cis-1, 2-dichloroethane (DCE), both solvents that have carcinogenic effects, in their well water. The district court dismissed the suit, concluding that North Carolina's ten-year limitation on the accrual of real property claims was a statute of repose and thus barred the suit. The Fourth Circuit reversed, finding that Comprehensive Environmental Response, Compensation, and Liability Act (CERCLA)'s provision aimed at preempting state statute of limitations also was meant to preempt state statutes of repose.

Issue: The question before the Court is whether the Fourth Circuit correctly interpreted the preemption provision of the Comprehensive Environmental Response, Compensation, and Liability Act (CERCLA), 42 U.S.C. § 9658, to apply to state statutes of repose in addition to state statutes of limitations.

Holding: In a 7-2 decision, the Supreme Court ruled that § 9658 does not preempt state statutes of repose because the statute uses language consistent with statutes of limitations, but not statutes of repose. The majority concluded that Congress did not intend to preempt state statutes of repose. As a result, the original complaint would be dismissed consistent with the state's statute of repose.