New IRS Procedures: Section 501(c)(4) nonprofit organization filing requirements
On July 8, 2016, the Internal Revenue Service and Treasury Department issued new Treasury Regulation 1.506-1T and Revenue Procedure 2016-41, providing guidance to nonprofit organizations intending to operate as social welfare organizations described in IRC section 501(c)(4). The new guidance implements new section 506 which was enacted as part of the PATH Act, effective December 18, 2015. All section 501(c)(4) organizations formed after December 18, 2015, are now required to notify the IRS of their intent to operate within 60 days of the date of formation, or September 6, 2016, whichever is later. Unless the organization can show reasonable cause, a failure to file the notification is subject to a penalty of up to $5,000. The notification is filed online via Form 8976 at www.irs.gov. The person or entity filing this form will need to register on the web-site, provide the name, address, and taxpayer identification number for the new entity, the state of formation and the purpose of the organization. The filing fee is $50.
Any section 501(c)(4) organization formed prior to December 18, 2015, that has not yet filed a Form 1024 or a Form 990, is also subject to these rules and must file a Form 8976 before September 6, 2016, or be subject to penalty.
Any organizations wishing to comment on these new procedures may submit comments and a request for a public hearing to the IRS within 90 days of July 12, 2016.
Please contact Nancy Ortmeyer Kuhn (email@example.com) with any questions.
On June 27, 2016, the Court issued the last opinions from its October 2015 Term. The Court will next convene on October 3, 2016 for the next term.
Court Strikes Down Texas Abortion Statutes As Unduly Burdensome
In 2013 the Texas legislature enacted two new laws governing abortion: one required that any doctor performing an abortion must have admitting privileges at a hospital not further than 30 miles from where the abortion was performed, and the other requiring that abortion facilities adhere to the same standards as surgical centers. Texas argued that both provisions served to protect the health of women seeking abortions, but opponents argued that the result would be restricted access to abortion. Shortly thereafter, a group of abortion providers filed suit arguing that the admitting-privileges law was facially unconstitutional, and lost before the Fifth Circuit. The providers chose then not to appeal to the Supreme Court, but instead filed a new suit making the same constitutionality argument, now also challenging the surgical-center law, and providing evidence that the laws greatly reduced the number of abortion clinics in the state. The Fifth Circuit again found that the laws were constitutional, and the Court, in an opinion by Justice Breyer, reversed. First, the Court held that the prior lawsuit did not preclude the instant suit because the former was litigated prior to enforcement, while the current suit was litigated after its enforcement, when there was evidence of the laws’ effects. Therefore, the claims were not the same. The Court also reasoned that it was not precluded from awarding facial relief to as-applied claims, and that the petitioners were not precluded from raising the surgical-center law now. On the merits, the Court then ruled that both laws created an undue burden on women seeking abortions by forcing abortion providers to close without providing substantial health benefits to women. Justice Ginsburg filed a concurrence to cite evidence that complications from abortions are too low to warrant the need for either law. Justice Thomas, in dissent, argued that the majority’s opinion showed how the “law is now so riddled with special exceptions for special rights that our decisions deliver neither predictability nor the promise of a judiciary bound by the rule of law,” such as the “oddity” that abortion providers could be allowed to file suit to vindicate the rights of their patients. Justice Alito, joined by Chief Justice Roberts and Justice Thomas, also dissented, arguing that the majority bent the standards for issue preclusion and undue burden, and that it went too far in striking the laws without accounting for their severability clauses. A link to the opinion in Whole Women’s Health v. Hellerstedt is here.
Former Virginia Governor’s Corruption Convictions Vacated
The Court, in a unanimous opinion by Chief Justice Roberts, vacated former Virginia Governor Robert McDonnell’s convictions for bribery, related to his acceptance of $175,000 from businessman Jonnie Williams while he was in office. Key to the convictions was the determination of what constituted an “official act” that, when given in return for the gift in a quid pro quo, violated the law. The acts McDonnell was convicted of involved arranging meetings between Williams and government officials, hosting events for Williams’s company at the governor’s mansion, and contacting other government officials about studies of a product that Williams’s company produced. The Fourth Circuit affirmed those convictions. The Court, however, refused to adopt the prosecution’s broad view of an “official act,” and instead held that to qualify as an “official act,” there must be some kind of “decision or action” taken involving a formal exercise of government power, or that such a decision or action is promised—merely setting up meetings was not sufficient. The Court further noted that a broader interpretation of the term would “cast a pall of potential prosecution” over every meeting a public official arranges with constituents, which is supposed to be a routine occurrence. However, the Court declined to dismiss the charges entirely—the case was sent back to the district court to be retried under the proper interpretation of “official acts.” A link to the opinion in McDonnell v. United States is here.
Reckless Domestic Assaults Qualify To Sever Firearms Rights
Federal law prohibits anyone convicted of a misdemeanor crime of domestic violence from possessing a firearm. In Voisine v. United States, two men were convicted under that law for having been previously convicted of “intentionally, knowingly or recklessly causing bodily injury” in domestic assaults under Maine law. The men argued that their convictions should not qualify under the federal law because it was possible they were convicted for reckless activity, as opposed to intentional or knowing activity. The First Circuit affirmed the convictions, and the Court, in an opinion by Justice Kagan, affirmed. The majority noted that the definition of domestic violence as the “use . . . of physical force” necessarily encapsulated reckless force as well as intentional force. Justice Thomas, joined in part by Justice Sotomayor, dissented, arguing that “use of physical force” required intentional conduct aimed at the victim, as opposed to reckless force against an object (like slamming a door) which incidentally causes harm to a person. For himself, Justice Thomas also argued that it was proper to read the statute narrowly to avoid impugning Second Amendment rights. A link to the opinion is here.
In the first round of Fisher v. University of Texas, the Court held that the university’s affirmative action program for admitting applicants needed to be reviewed under strict scrutiny. The Fifth Circuit upheld the program under that standard, and the Court affirmed by a 4-3 majority (Justice Kagan recused), with the opinion by Justice Kennedy—a dissenter in Grutter v. Bollinger , that upheld the Michigan Law School’s affirmative action program. The university’s program used the “Top Ten Percent Plan” to fill approximately 75 percent of its incoming class, in which students who theoretically finished in the top ten percent of their class (in practice, more like top seven or eight percent) were automatically accepted. The remaining 25 percent were admitted under a review process similar to that used in Grutter,. Although the majority acknowledged that there was practically no information in the record about how the Plan affected the racial balance of the student body, it treated the Plan as a “given” that was not subject to challenge. The majority then went on to reject Fisher’s arguments against the plan, while reminding all that future “refinement” of the admissions program was an “ongoing obligation” of the university. Justice Alito, in a lengthy dissent joined by Chief Justice Roberts and Justice Thomas, argued that the university “failed to do what our prior decision demanded” by not providing sufficient proof to satisfy strict scrutiny of its program. Justice Thomas filed a separate dissent to note his continuing belief that Grutter , should be overturned.
Warrantless Breath Tests For Drunk Drivers Permitted, But Not Blood Tests in Birchfield v. North Dakota
In order to combat drunk driving, some states had passed laws making it a crime for a motorist to refuse to submit to a breath or blood test after being arrested for driving under the influence. The Court, in an opinion by Justice Alito, held that the Fourth Amendment permitted breath tests as a search incident to arrest, given that breath tests do not significantly impact privacy interests while serving an important need for measuring blood-alcohol content. However, the majority also determined that blood tests were “significantly more intrusive,” and there was no compelling reason why breath tests could not be used instead, and therefore such tests violated the Fourth Amendment. Justice Sotomayor, joined by Justice Ginsburg, agreed that the Fourth Amendment precluded the mandatory use of blood tests, but argued that breath tests were equally prohibited because there was a “built-in window” before such breath tests can be taken in which a warrant could be sought. Justice Thomas, writing separately, argued that both kinds of tests pass muster under the Fourth Amendment’s exigent-circumstances exception to the warrant requirement.
Court Limits Application Of Broad State Felonies To Armed Career Criminal Act in Mathis v. United States
The Armed Career Criminal Act adds penalties on those federal defendants who have three prior convictions for a “violent felony,” including “burglary, arson, or extortion.” Burglary generically regards unlawful entry into a “building or other structure.” Richard Mathis was sentenced under the Act according to his prior convictions under Iowa’s burglary law, which applies to “any building, structure, [or] land, water, or air vehicle.” Mathis argued that this broader offense should not apply toward the Act’s required elements, and the Court, in an opinion by Justice Kagan, agreed. In essence, the Court held that a state conviction only applies under the Act if its elements are the same or narrower than the generic elements of the violent crimes set forth under the Act. The defendant’s actual conduct does not matter. Justice Kennedy concurred, noting only his reservation to the Court’s reliance on Apprendi v. New Jersey, which was incorrect in his view, and suggested that Congress should step in and amend the Act to cure the concerns created by the Court’s precedents. Justice Thomas also filed a concurrence, in which he argued that judge-found facts should play no part in the analysis of whether prior convictions apply under the Act. Justice Breyer, joined by Justice Ginsburg, dissented, argued that it should make no difference what the elements of the state law version of burglary are when the defendant was convicted for doing what was illegal under generic burglary. Justice Alito filed a separate dissent to argue that the Court’s harping on the elements of an offense has led it away from a “real-world approach” that would apply convictions based on the conduct of the defendant, as Congress surely intended.
Divided Court Leaves Tribal Court With Jurisdiction Over Non-Members Of The Tribe
In Dollar General Corporation v. Mississippi Band of Choctaw Indians, a 4-4 divided Court let stand the Fifth Circuit’s ruling that an Indian tribal court had jurisdiction over tort claims by tribal members against non-tribal members.
Divided Court Strikes A Blow To President Obama’s Immigration Policy
In another 4-4 deadlock, the Court let stand the decision of the Fifth Circuit to block the Obama administration’s immigration policy that would have allowed some undocumented immigrants to stay in the United States and work legally for three years. The states in United States v. Texas had argued that the administration lacked constitutional authority to issue the policy, and the administration argued that the states lacked standing to challenge it.
Virginia Supreme Court Opinion: Foreclosure Purchasers Face New Potential Hurdle In Virginia
Parrish v. FNMA (6-2) Defendant mortgagors raised a bona fide question of title in an unlawful detainer proceeding in general district court, thereby divesting that court of subject matter jurisdiction. In the de novo appeal, the circuit court likewise lacked subject matter jurisdiction, because its subject matter jurisdiction was derived from and limited to the subject matter jurisdiction of the court from which the appeal was taken. Its authority therefore was limited to dismissing the proceeding without prejudice, thereby enabling the foreclosure purchaser to pursue its choice of available remedies in the circuit court under that court’s original jurisdiction. The judgment of the circuit court is vacated, thereby restoring each of the parties to their status prior to the commencement of the unlawful detainer proceeding. Justice McCLanahan agreed that the circuit court was allowed to consider the pleadings filed in GDC, but argued that the “result-oriented approach” used by the majority failed to appreciate the difference between right of possession, which is needed for an unlawful detainer action and within the GDC’s subject matter jurisdiction, and “complete title,” which is not needed for UD. Justice Powell agreed that the GDC lacks jurisdiction to try title to real property, but argued that “there is a significant difference between an action that turns on the question of title and an action that tries title”—the former is an evidentiary question that is part of a UD proceeding properly heard by the GDC, while the latter “involves a conclusive determination of a party’s title.” Please click here to read the decision.
Court Punts On Overtime Compensation Claim
For decades the Department of Labor treated service advisors the same as salesmen, both being exempt from the overtime compensation requirement in the Fair Labor Standards Act. In 2011 the Department abruptly reversed course with very little explanation. The Ninth Circuit held that the Department’s change in course was entitled to Chevron deference, and the Court, in an opinion by Justice Kennedy, reversed. Noting that an agency must give adequate reasons for its decisions, and that those decisions are arbitrary and capricious when the agency fails to provide “even a minimal level of analysis,” the Court held that the Department here failed to provide a reasoned explanation sufficient to sustain the new rule, especially given the “significant reliance interests involved” under the prior rule. The Court then remanded the case back to the Ninth Circuit “to interpret the statute in the first instance” without the deference granted to the Department’s rule. Justice Ginsburg, joined by Justice Sotomayor, filed a concurrence to “stress that nothing in today’s opinion disturbs well-established law.” Justice Thomas, joined by Justice Alito, dissented, arguing that since the Department’s rule was not entitled to Chevron deference, the Court should have held that service advisors are equivalent to salesmen under the Act, and decided the case on the merits instead of remanding for further analysis. A link to the opinion in Encino Motorcars, LLC v. Navarro is here.
Outstanding Warrant Permits Admission Of Evidence Incident To Arrest
In Utah v. Strieff, an officer investigating a home where suspected drug dealing was occurring detained Strieff, who visited that house, without probable cause and asked for his ID. A search on the ID revealed an outstanding arrest warrant. When the officer searched Strieff incident to arrest, he discovered methamphetamine and drug paraphernalia. Strieff moved to exclude that evidence, and the prosecution argued that while there was no reasonable suspicion for the stop, the existence of the valid arrest warrant attenuated the connection between the unlawful stop and the discovery of the drugs. The trial court admitted the evidence, the Utah Supreme Court reversed that ruling, and the Court, in an opinion by Justice Thomas, resolved disagreement between various courts and held that the evidence was admissible. Relying on the three factors set forth in Brown v. Illinois, 422 U.S. 590 (1975), the Court agreed that the temporal factor weighed in favor of suppression, but the other factors, especially including the discovery of the warrant, weighed more heavily in favor of admission. The Court also deemed it “unlikely” that the decision would result in the police doing “dragnet searches” to find similar warrants. Justice Sotomayor, joined in part by Justice Ginsburg, dissented, arguing that the ID search itself was part and parcel of the illegal stop, and wrote personally how such warrantless, suspicionless searches are “degrading” and “corrode all our civil liberties and threaten all our lives.” Justice Kagan, joined by Justice Ginsburg, filed a separate dissent arguing that the discovery of the warrant had no constitutional effect upon the validity of the stop and search. A link to the opinion is here.
Patent Office’s Inter Partes Review Of Patent Claims Not Appealable
The Leahy-Smith American Invents Act created an “inter partes review” process under which any third party can ask the U.S. Patent and Trademark Office to re-examine the claims in an already-issued patent and to cancel any claims deemed unpatentable. The Act declares that such determinations are “final and non-appealable.” The Patent Office subsequently issued regulations stating that it would review each such claim to “its broadest reasonable construction in light of the specification of the patent in which it appears.” In 2004, the Patent Office granted a patent to Guiseppe Cuozzo for a speedometer that would show whether you are driving over the speed limit. Garmin petitioned for inter partes review of that patent, arguing that some of the claims in that patent were obvious in light of prior patents. The Patent Office reviewed and cancelled those claims, and Cuozzo appealed, arguing in part that the Patent Office should have not read the claims more broadly than their ordinary meaning. The Federal Circuit rejected Cuozzo’s arguments, and the Court, in an opinion by Justice Breyer, affirmed. First, the Court held that the Act’s prohibition on appeals was effective to prevent court review of the Patent Office’s reviews, although “constitutional questions” can still be appealed. Second, the Court held that the “broad construction” regulation was entitled to Chevron deference. Justice Thomas filed a concurrence arguing that the Act expressly granted authority to the Patent Office to issue its rule, so Chevron deference was not needed, and suggested that Chevron’s “fiction” should be reconsidered. Justice Alito, joined by Justice Sotomayor, dissented on the issue of appealability, arguing that the “strong presumption favoring judicial review” mandated the ability of courts to review inter partes reviews. A link to the opinion in Cuozzo Speed Technologies, LLC v. Lee is here.
Robbing Drugs Or Drug Proceeds Automatically Qualifies For Prosecution Under Hobbs Act
Anthony Taylor was convicted under the Hobbs Act for affecting interstate commerce by robbery when he attempted to rob marijuana dealers of their drugs and proceeds. Resolving a split among the Circuits, the Court, in an opinion by Justice Alito, noted that “the language of the Hobbs Act is unmistakably broad,” and held that the sale of marijuana was “unquestionably an economic activity” that the federal government rightfully regulates under Gonzales v. Raich, 545 U.S. 1 (2005), which noted that such regulation was permitted under the Commerce Clause even though certain drug sales might only be intrastate. Thus, proof that Taylor robbed a drug dealer satisfied the interstate commerce component of the Act’s prohibition, and it was not necessary for the prosecution to prove that the drugs were intended for interstate sale or the drug dealer engaged in an interstate business. Justice Thomas dissented, arguing that a violation of the Act requires proof that the robbery actually affected interstate commerce, or would otherwise vest the federal government with a general police power it was never intended to have under the Constitution. A link to the decision in Taylor v. United States is here.
RICO Applies To Foreign Acts, But Only Permits Recovery Of Domestic Damages
The European Community sued RJR Nabisco claiming that RJR was serving as a money laundering service for drug traffickers who sold drugs in Europe, raising a private right of action under the Racketeer Influenced and Corrupt Organizations Act. RJR argued that RICO did not apply to extraterritorial activity, and could only be used to recover for domestic injuries. The Second Circuit allowed the Community’s claims to proceed, and the Court, in an opinion by Justice Alito that resolved conflicts among the Circuits on the extraterritorial issue, reversed. First, the Court resolved that RICO does apply to extraterritorial acts for which its predicates themselves apply extraterritorially, including some racketeering activities like RJR was accused of. The Court also reasoned that RICO does not exclude foreign entities from its ambit. However, the Court also held that RICO’s private right of action could only be used to recover for domestic injuries, not foreign injuries. Justice Ginsburg, joined by Justices Breyer and Kagan, agreed that RICO applied extraterritorially, but dissented on the issue of domestic injury, arguing that nothing in the test of the Act so limited its scope. Justice Breyer filed another dissent to separately disagree with the government’s amicus brief that argued that recovery for foreign injuries might cause “international friction.” Justice Sotomayor did not participate in the case, probably due to her being on the Second Circuit when the case first came up. A link to the opinion in RJR Nabisco, Inc. v. European Community is here.
Court Rules That VA’s “Rule Of Two” Is Mandatory
Congress, in an effort to promote federal contracts with businesses owned by veterans, enacted a law providing that the Department of Veterans Affairs “shall award” contracts to such business when there is a “reasonable expectation” that two or more such businesses will bid for the contract at “a fair and reasonable price that offers best value to the United States”—otherwise known as the “Rule of Two.” One such veteran-owned business lost a bid for a contract with the Department and sued, arguing that the Department was required to use the Rule on all contract proposals. The Department argued that it was only required to use the Rule so long as its annual contracting goals were met, and a divided panel of the Federal Circuit agreed. The Court, in a unanimous opinion by Justice Thomas, reversed, holding that the plain language of the statute was mandatory, not discretionary, emphasizing Congress’s use of the word “shall.” The Court rejected the Federal Circuit’s reliance on the statute’s prefatory clause, as it cannot change the meaning of the operative clause. The Court also held that it had jurisdiction to hear the case even though the contract in question had already been completed, since the issue was likely to arise again. A link to the decision in Kingdomware Technologies, Inc. v. United States is here.
Court Clarifies Scope Of False Certification Claims Under The False Claims Act
In Universal Health Services, Inc. v. United States ex rel. Escobar, parents of a teenager who received counseling and prescription medication from a medical health facility, as paid for by Medicaid, learned after the teenager’s death that the facility had few employees licensed to provide those services or issue prescriptions. They filed a qui tam suit under the False Claims Act, claiming that the facility failed to disclose its lack of certifications when it requested payment for its services from Medicaid—in essence, that the facility defrauded Medicaid by seeking payment for services without disclosing that it was violating regulations related to staff qualifications and licensing requirements for such services. The Court, in another unanimous opinion by Justice Thomas, held that the false certification theory of liability “can attach when the defendant submits a claim for payment that makes specific representations about the goods or services provided, but knowingly fails to disclose the defendant’s noncompliance with a statutory, regulatory, or contractual requirement.” The Court further held that such liability can attach “even if they were not expressly designated as conditions of payment” so long as the requirement is “material” to the government’s decision to pay. That materiality requirement “is demanding,” and the Court declined to adopt the more expansive view espoused by the First Circuit. A link to the opinion is here.
Trial Courts Have Broader Discretion To Award Fees In Copyright Litigation
Supap Kirtsaeng discovered that John Wiley & Sons, Inc., an academic publishing company, was selling identical English-language textbooks in Thailand for a lot less than the price set in the United States. So Kirtsaeng had his family and friends buy up Wiley’s textbooks in Thailand and ship them to him in New York, where he sold them to college students for profit. Wiley sued under the Copyright Act for infringement, and Kirtsaeng invoked the “first-sale doctrine.” In 2013, resolving a circuit split, the Supreme Court ruled in favor of Kirtsaeng on that defense, and he returned to the district court requesting $2 million in fees under 17 U.S.C. sec. 505, under which the court “may . . . award a reasonable attorney’s fee to the prevailing party.” The district court, giving “substantial weight” to the “objective reasonableness” of Wiley’s infringement claim, declined to award fees, and the Second Circuit affirmed. There being yet another circuit split on how to interpret section 505, the Supreme Court, in a unanimous opinion by Justice Kagan, stepped in again and held that the district court should give substantial weight to the objective reasonableness of a claim in deciding to award fees, but also that this standard was not controlling. The district court “must take into account a range of considerations” before awarding fees, and allowed that “a court may award fees even though the losing party offered reasonable arguments (or, conversely, deny fees even though the losing party made unreasonable ones)” such as on the basis of misconduct by a party, or to deter repeated future infringement. A link to the opinion in Kirtsaeng v. John Wiley & Sons, Inc. is here.
Arthur D. Burger, chair of Jackson & Campbell’s Professional Responsibility Practice Group, had his article “Just Say ‘No’ (to Problematic Representations)”published in the June 15, 2016 edition of the American Bar Association/Bloomberg BNA Lawyers’ Manual on Professional Conduct. Click here to read the article.
Tribal Convictions Can Form Predicate For Federal Offense
To fight the tide of domestic violence against Native American women, the government enacted a federal law imposing penalties on a person who committed domestic assault and had two prior convictions already on their record, including convictions from an Indian tribal court. Tribal courts do not require that indigent defendants receive counsel when the sentence is a year or less, which would violate the Sixth Amendment if the same rule were used in federal courts. Michael Bryant, Jr. had multiple tribal court convictions for domestic assault, for which he was not appointed counsel, and those convictions were used to charge him with the federal crime. Prior U.S. Supreme Court precedent held that convictions obtained in violation of the Sixth Amendment could not be used in subsequent proceedings, and Bryant accordingly argued that was the case here. The Ninth Circuit agreed with Bryant, but in United States v. Bryant, the Court, in a unanimous decision authored by Justice Ginsburg, held that the tribal court convictions could be used as a predicate for the federal crime because those convictions were “valid when entered” under the Indian Civil Rights Act, and thus did not violate the Sixth Amendment. The Court also rejected Bryant’s argument that this approach violated the Fifth Amendment’s Due Process Clause. Justice Thomas filed a concurrence arguing that the Court should reexamine its decisions concerning the Indian tribes, else “our case law will remain bedeviled by amorphous and ahistorical assumptions about the scope of tribal sovereignty.” A link to the opinion is here.
Puerto Rico Cannot Create Its Own Bankruptcy Provisions
In order to protect certain public utilities that had issued bonds but were now facing a fiscal crisis, Puerto Rico enacted a law that modified portions of the federal Bankruptcy Code to allow those insolvent companies to declare bankruptcy and restructure their debt. Holders of those bonds challenged the law, arguing that the Bankruptcy Code pre-empted Puerto Rico’s modifications, and the First Circuit agreed. The Court, by a 5-2 margin (Justice Alito not participating), affirmed in an opinion by Justice Thomas. The Court noted that while the Bankruptcy Code pre-empts states from enacting their own changes, and Congress amended the Code to exclude Puerto Rico as a state “for the purpose of defining who may be a debtor under chapter 9,” that exclusion did not permit Puerto Rico to enact its own bankruptcy scheme, and was limited to the plain language of the exclusion. In other words, Puerto Rico was not permitted, as a state, to define who may be a debtor under Chapter 9, and thus could not define the utilities as potential debtors, nor could it enact other modifications. Justice Sotomayor, joined by Justice Ginsburg, dissented, arguing that the exclusion should have been read to exclude Puerto Rico from the entirety of Chapter 9 of the Bankruptcy Code, thereby allowing the public utilities to declare bankruptcy and avoid potentially crippling economic effects. A link to the decision in Puerto Rico v. Franklin Cal. Tax-Free Trust is here.
Court Relaxes Standard For Awarding Triple Damages In Patent Infringement Cases
Section 284 of the Patent Act permits courts to award triple damages in cases involving willful or bad-faith infringement of patents. The Federal Circuit, in In re Seagate Technology, LLC, 497 F.3d 1360 (Fed. Cir. 2007), created a three-part test for when such punitive damages could be awarded. The Court, in a unanimous opinion by Chief Justice Roberts in Halo Electronics, Inc. v. Pulse Electronics, Inc., struck down the test as “unduly rigid and . . . Impermissibly encumbers the statutory grant of discretion to the district courts,” such that it “insulat[es] some of the worst patent infringers from an liability for enhanced damages.” In particular, the Court rejected Seagate’s requirement of a finding of “objective recklessness” before triple damages could be awarded, as any defendant who could muster a reasonable defense could thereby escape the penalty. In other words, a patent pirate could avoid damages purely on “the strength of his attorney’s ingenuity,” which was not the standard under Section 284. Justice Breyer, joined by Justices Kennedy and Alito, concurred, offering his understanding of what limits exist to the discretion of district courts in levying such damages. A link to the opinion is here.
Puerto Rico Part Of Federal Government Under Double Jeopardy Clause
The U.S. Supreme Court held that the Commonwealth of Puerto Rico derives its prosecutorial powers through the U.S. Congress, and thus is barred under the Double Jeopardy Clause of the U.S. Constitution from prosecuting criminals that have already faced federal prosecution for the same acts. In Puerto Rico v. Valle, two men were arrested for gun trafficking. Both were charged under federal and Puerto Rico law. The men pled guilty to the federal charges, then moved to dismiss the Puerto Rico charges under the Double Jeopardy Clause. The Supreme Court of Puerto Rico affirmed the dismissal of those charges, and a six-member majority of the Court, in an opinion by Justice Kagan, also affirmed. While acknowledging that states and the federal government were “separate sovereigns” that could separately prosecute without violating the Clause, the Court found that Congress originally approved the right of the Puerto Rican people to create their own Constitution, and thus conferred to Puerto Rico the right to prosecute. As a result, it was not a separate sovereign from the federal government, and could not separately charge the men. Justice Ginsburg, joined by Justice Thomas, filed a concurrence to “flag a larger question that bears fresh examination”: whether the Clause should also bar separate state suits. Justice Thomas filed a separate concurrence noting his concern about how the Clause has been applied to Indian law. Justice Breyer, joined by Justice Sotomayor, dissented, arguing that the Puerto Rican Federal Relations Act established Puerto Rico as a separate sovereign.A link to the opinion is here.
Trial Court Can Recall A Jury If There Is An Error In The Verdict
The case of Dietz v. Bouldin began as a typical personal injury case involving a vehicle accident. The defendant had stipulated to the medical damages, so the only issue was whether the plaintiff was entitled to more. During deliberations, the jury asked whether those medical damages had been paid, and was told the answer was “not relevant.” The jury returned a verdict in favor of the plaintiff, but for $0. After discharging the jury, the judge quickly realized that the jury had erred, and called the jurors back. After questioning the jurors and being satisfied that none had discussed the case with anyone, the judge required that they resume deliberations with clarifying instructions. The jury then returned a verdict for the plaintiff for $15,000. The defendant challenged the recall, and the Ninth Circuit affirmed the verdict. The Court, in an opinion by Justice Sotomayor, affirmed as well, holding that the power to recall a jury was within the trial court’s limited inherent powers, and did not violate any rule or statute. However, the Court noted that such power should not be exercised whenever a juror has been tainted, which grows more likely the longer the court waits to recall. Justice Thomas, joined by Justice Kennedy, dissented, arguing that the common law rule barring the recall of a jury was the better rule, given the easy availability of information that would taint jurors. A link to the opinion is here.
State Court Justice Should Have Recused Himself From Case He Was Previously Involved In
As a district attorney, Ronald Castille approved a request by a fellow prosecutor to seek the death penalty against Terrance Williams. Williams was sentenced to death in 1986, and then unsuccessfully sought to undo the conviction for the next 26 years. Then he filed a petition based on newly acquired evidence in 2012, which made its way to the Pennsylvania Supreme Court, where Castille was now sitting as Chief Justice. Castille refused to recuse himself, and joined in the opinion denying Williams relief. He then retired two weeks later. The U.S. Supreme Court, with a five-member majority opinion authored by Justice Kennedy, vacated and remanded, holding that “neither the involvement of multiple actors in the case nor the passage of time relieves the former prosecutor of the duty to withdraw to ensure the neutrality of the judicial process in determining the consequences his or her own earlier, critical decisions may have set in motion.” The Court further held that the decision to seek the death penalty was such a “critical choice” that warranted recusal. The Court also noted that the error could not be harmless, even though the rest of the state appellate court justices also voted to deny Williams relief. Chief Justice Roberts, joined by Justice Alito, dissented, arguing that Castille should not have had to recuse himself since he had no knowledge of any of the facts in the 2012 petition. Justice Thomas also dissented, arguing that the posture of the case did not warrant recusal because the criminal case had ended—what Williams was petitioning for was civil relief, and thus Castille did not preside over same case. A link to the opinion in Williams v. Pennsylvania is here.
Court Rejects “Special Circumstances” Exception To Administrative Remedy Exhaustion
After a prisoner was beaten by one of two guards (Officers Madigan and Ross) escorting him, and reported the incident to a senior corrections officer, the matter was referred to Maryland’s Internal Investigative Unit for investigation. That Unit thereafter held that Madigan was at fault, and he resigned. The prisoner then filed suit under 42 U.S.C. sec. 1983 against both guards, and Ross objected, arguing that the prisoner first had to exhaust his remedies under the Prison Litigation Reform Act of 1995. The district court agreed with Ross, but the Fourth Circuit reversed, holding that “special circumstances” here would have led the prisoner to think the Unit’s action did exhaust his remedies. The Court, unanimously, in an opinion by Justice Kagan, reversed, rejecting that “extra-textual” exception, and holding that the Act’s remedy regimes was “mandatory.” The Court then noted that the prisoner’s claims may yet survive, given that there were “questions” about whether the prisoner had available administrative remedies to exhaust, and remanded for further findings. Justice Thomas filed a concurrence, joining in the judgment except as it relied on documents filed by the prisoner that were outside the appellate record. Justice Breyer also lodged a concurrence to note that there could be certain “well-established exceptions to exhaustion” that apply to other cases. The opinion in Ross v. Blake is here.
Court Declines To Apply Federal Tort Claims Act’s Judgment Bar To Second Suit
This was another case involving a prisoner who was beaten, this time by a fellow inmate. The victimized prisoner filed a suit against the United States under the Federal Tort Claims Act alleging negligence by the prison guards, and then a second constitutional suit against the guards themselves. The first suit was dismissed for failing under the “discretionary function” exception to the Act. The defendant guards in the second suit argued for dismissal on the basis that the Act includes a judgment bar preventing further lawsuits against individual government employees once a judgment is obtained under the Act. The district court thought the judgment bar applied to preclude the second suit, the Sixth Circuit reversed, and the Court, in another unanimous opinion by Justice Sotomayor, affirmed the Sixth Circuit, holding that the “plain text” of the Act required that the Act’s judgment bar only apply against cases that did not fall under an exception to the Act. The Court noted that the “exceptions” chapter to the Act specifically stated that the other portions of the Act “shall not apply” to those exceptions, and thus it necessarily excluded application of the judgment bar. A link to the opinion in Simmons v. Himmelreich is here.
The U.S. Supreme Court issued three new opinions on May 23, 2016.
New Evidence Vindicates Death Penalty Convict’s Batson Claim
Timothy Foster admitted to sexually assaulting and killing Queen Madge White back in 1986. At trial, he argued that the prosecution’s decision to strike all four black prospective jurors violated the bar on racial strikes set in Batson v. Kentucky, 476 U.S. 79 (1986), which the trial court rejected based on neutral arguments provided by the prosecution, and was affirmed on appeal to the Georgia Supreme Court. Decades later, Foster obtained the prosecutor’s trial documents, including jury selection documents showing how the prosecution singled out black prospective jurors, and again raised his Batson challenge in a state habeas proceeding. The trial court again rejected the claim, based on res judicata and a failure to show purposeful discrimination under Batson. The Georgia Supreme Court denied his appeal for having no “arguable merit.” The U.S. Supreme Court, in an opinion by Chief Justice Roberts, reversed and remanded. First, the Court decided that it had subject matter jurisdiction over the case because the trial court’s basis to deny relief on res judicata grounds was not an adequate and independent state law ground from the Batson challenge, which relied on the new evidence to supersede res judicata. Second, the Court held that the new documents “plainly belie the State’s claim that it exercised its strikes in a ‘color-blind’ manner,” and thus it was erroneous to not grant habeas relief. Justice Alito concurred, stating that while he agreed that it appeared likely that the Georgia Supreme Court’s ruling was not entirely based on state res judicata law, there was a chance it was not, which was for Georgia courts to decide. Justice Thomas filed a dissent, arguing that the majority “should have sought clarification that the resolution of a federal question was implicated in the Georgia high court’s decision” before ruling, and that the new evidence “has limited probative value” that did not overcome the deferential review afforded under Batson. A link to the decision in Foster v. Chatman is here.
Court Upholds Virginia’s Redistricting Plan
A unanimous Court, in a short majority opinion by Justice Breyer, held that certain GOP congressmen lacked standing to appeal a determination that Virginia’s 2013 redistricting plan unconstitutionally gerrymandered a district that none of the congressmen represented. Noting that parties before the Court needed to demonstrate an “injury in fact” in order to press the appeal, the Court found that one congressman had no standing because he had decided to switch districts regardless of the outcome of the case, and two others presented no evidence that their prospects at re-election were in any way hindered by the plan. The result paves the way for the Commonwealth’s 2016 plan to go forward, which has already been approved by the district court. A link to the opinion in Wittman v. Personhuballah is here.
EEOC Limitations Period Runs From Date Of Resignation, Not Agreement
In Green v. Brennan, after Marvin Green accused the Postal Service of denying him a promotion because he was black, the Postal Service accused him of the crime of intentionally delaying the mail. The parties resolved their differences in a settlement agreement signed on December 16, 2009, which gave Green the choice to resign or relocate in exchange for the Service’s agreement not to pursue criminal charges. Green chose to resign on February 9, 2010. On March 22, 2010, he reported an unlawful constructive discharge to the EEOC, as a prerequisite to filing a civil rights claim in court. His court claim was dismissed, as 29 CFR sec. 1614.105(a)(1) requires that the EEOC report had to made within 45 days of the “matter alleged to be discriminatory,” and the agreement was deemed to be the triggering event, not his resignation—something the Circuits had split on. The Court, in an opinion by Justice Sotomayor, reversed, holding that the triggering date was Green’s resignation, and thus he satisfied the reporting requirement. Relying on the “standard rule” for limitations periods, the majority reasoned that the resignation marking the point where the employee had a “complete and present cause of action” since constructive discharge required that the employee actually resign or be discharged. Justice Alito, concurring, argued that the majority’s bright-line rule ignored precedent holding that an actual discriminatory act must trigger the limitations period, although here the evidence showed that the Service intended to force Green to resign, and thus his resignation qualified as such an act. Justice Thomas dissented, arguing that Green’s choice to resign was not a discriminatory “matter” under the plain language of the regulation. A link to the opinion is here. A link to the opinion is here.
Speedy Trial Right Does Not Apply Post-Conviction
After pleading guilty to jumping bail, Brandon Betterman sat in jail for 14 months before he was finally sentenced. He argued that this delay violated his Sixth Amendment right to a speedy trial. The Montana Supreme Court affirmed the conviction and sentence, reasoning that the right to a speedy trial did not apply to post-conviction, pre-sentencing delays, and the U.S. Supreme Court unanimously affirmed in an opinion by Justice Ginsburg. The Court held that the right to a speedy trial attaches upon arrest or formal accusation, and detaches upon conviction, when the “presumption of innocence” no longer applies. The Court also noted that due process may serve to protect against unreasonable post-conviction/pre-sentencing delays. Justice Sotomayor filed a concurrence arguing that a due process claim in these circumstances, had it been raised, should be analyzed under the test presented in Barker v. Wingo, 407 U.S. 514 (1972). Justice Thomas, joined by Justice Alito, filed a concurrence questioning the application of Barker in this context. A link to the opinion in Betterman v. Montana is here.
A Prevailing Party Seeking Fees Under Civil Rights Act Need Not Win On The Merits
Title VII of the Civil Rights Act permits a “prevailing party” to recover its attorneys’ fees. In CRST Van Expedited, Inc. v. EEOC, the EEOC brought suit against a trucking company for alleged sexual harassment of its female employees, identifying over 250 aggrieved women. Over time, the district court dismissed the claims as to all of these women, some as a discovery sanction, others for being beyond the statute of limitations, violations of statutory presuit requirements, and other reasons. On appeal, the Eighth Circuit reversed only as to two women. The EEOC dismissed the claims as to one, settled with the company over the other. The company then moved for fees, and was awarded over $4 million. On a second appeal, the Eighth Circuit held that fees could only be awarded where there had been a victory on the merits, as opposed to a dismissal for statute of limitations grounds or lack of jurisdiction. Resolving a split among the circuits on the issue, the U.S. Supreme Court, in a unanimous opinion by Justice Kennedy, reversed, holding that “common sense” compels the conclusion that a win is a win, regardless of whether it was on the merits or not, and nothing in the statute indicated otherwise. The Court also declined to decide whether some sort of preclusive judgment was necessary, as the EEOC failed to raise that argument before the lower court. Justice Thomas concurred, arguing that the Court’s ruling in Christiansburg Garment Co. v. EEOC, 434 U.S. 412 (1978), relied upon by the majority, was in error as it would award fees to plaintiffs on a different basis than defendants, and that he would decline to extend it any further. A link to the opinion is here.
Third-Degree Arson An “Aggravated Felony” For Deportation Purposes
Luna Torres pled guilty to third-degree arson under New York law, while he was a lawful permanent resident. When immigration officials learned of the conviction, they moved to remove him, and argued that he was not eligible for discretionary relief because he was convicted for an “aggravated felony” under 8 U.S.C. sec. 1101(a)(43), which lists the federal crime against arson that includes a requirement that the arson affect interstate or foreign commerce. The immigration courts affirmed Torres’s removal, and the U.S. Supreme Court, by a five-member majority opinion authored by Justice Kagan, affirmed. The majority held that if the state crime included the same elements as a federal crime listed under Section 1101(a)(43) but for the interstate/foreign commerce element, the offense was an “aggravated felony” for deportation purposes. The majority reasoned that the interstate/foreign commerce element was merely jurisdictional in nature, not substantive, and it was clear that the section meant to include serious state crimes as well as federal crimes. Justice Sotomayor, joined by Justices Thomas and Breyer, dissented, arguing that the interstate/foreign commerce element should not be so easily discarded, and that prior decisions have required the state law to match every element of the federal offense to be an “aggravated felony.” A link to the decision in Luna Torres v. Lynch is here.
Summary Denial for Habeas Writ a Decision “On the Merits” for AEDPA Review
When California changed its law to deny prison-gang members future “good time” credits, one of those members, Hinojosa, filed a state habeas petition, claiming the law violated the Constitution’s prohibition on ex post facto laws. The state trial court denied the petition without prejudice on the basis that it was brought in the wrong venue. He then sought an original habeas writ to the California Supreme Court, which, without opinion, summarily denied relief. Hinojosa next pressed his claim in the federal district court, which denied it under the Antiterrorism and Effective Death Penalty Act of 1996 (AEDPA) under the deferential standard the Act provides for state court decisions “on the merits.” The Ninth Circuit reversed, determining that the state courts’ actions were not “on the merits” and thus the district court used the wrong review standard. The U.S. Supreme Court, in a per curiam decision, reversed, holding that the California Supreme Court’s denial could not have been grounded on the same venue issue as the trial court, since it could entertain the original writ, and also noted that the appellate court’s language of dismissal was different. Therefore, the Act’s deferential review standard should have been applied by the Ninth Circuit. Justice Sotomayor, joined by Justice Ginsburg, dissented, arguing that it was possible that the California Supreme Court denied the petition because it was originally filed in the wrong venue, and the majority’s distinctions were too “flimsy” to warrant the Act’s deferential review. A link to the decision in Kernan v. Hinojosa is here:
False Consumer Report Does Not Automatically Grant Standing to Consumer to Sue
In Spokeo, Inc. v. Robins, Robins filed a class action against a consumer reporting agency when he discovered its report for him contained false information. In his complaint, he alleged that the agency’s inaccuracies violated the Fair Credit Reporting Act, which violated his statutory rights and that the harm was individualized. The district court dismissed the lawsuit as failing to have alleged an injury in fact, the Ninth Circuit reversed, and the Court, in a 6-justice majority opinion authored by Justice Alito, vacated and remanded, holding that the Ninth Circuit failed to address whether the alleged injury was sufficiently “concrete.” The mere fact that the Act was violated, and the Act authorized a private suit to vindicate it, did not automatically provide standing to sue. At a minimum, Robins needed to allege a sufficient risk of harm to have standing. Justice Thomas submitted a concurrence explaining how the requirements of common law courts informed the modern standing doctrine, and prevented Robins from suing to vindicate duties the reporting agency owed to the public without a showing of concrete and particular harm. Justice Ginsburg, joined by Justice Sotomayor, dissented, arguing that Robins had alleged a sufficiently concrete harm when the agency’s report portrayed him as being far more successful than he was, thus hindering his ability to get a job. A link to the opinion is here:
“Actual Fraud” In Bankruptcy Includes Fraudulent Conveyance
After a company racked up large amounts of debt, one of its directors then drained the company of its assets and sent those assets to other firms he controlled. One of its creditors sued, alleging that the transfers of assets were actual fraud. The company filed for Chapter 7 bankruptcy, and again the creditor argued that the transfers were fraudulent and “actual fraud” that was not dischargeable. The district court and the Fifth Circuit both held that there was no “actual fraud” because there were no misrepresentations made to the creditor. The U.S. Supreme Court, in an opinion by Justice Sotomayor, reversed, holding that the term “actual fraud” also included fraudulent conveyance schemes even where no misrepresentations were made. The majority reasoned that this interpretation comported with the historical meaning of fraud, and did not make other bankruptcy provisions duplicative. Justice Thomas dissented, arguing that the statute requires the debt be “obtained by” actual fraud, and that limitation precludes its application to fraudulent conveyances. A link to the decision in Husky International Electronics, Inc. v. Ritz is here:
Jurisdiction Under the Securities Exchange Act Same as Federal Question Jurisdiction
The Securities Exchange Act grants district courts exclusive jurisdiction over cases “brought to enforce any liability or duty created by [the Act] or the rules or regulations thereunder.” Seeking to avoid the federal courts, Manning, a stockholder in Escala Group, Inc., a publicly-traded company, brought only state law claims against certain financial institutions that devalued Escala’s stock through naked short sales of its stock. His complaint referenced the Act’s prohibition of such sales, but did not explicitly bring any claims thereunder. The financial institutions removed the case to federal court, and Manning moved to remand. The Third Circuit held that remand was required, and the U.S. Supreme Court, in a unanimous opinion by Justice Kagan, affirmed. The Court held that the jurisdictional language of the Act was commensurate with that of federal question jurisdiction granted in 28 U.S.C. sec. 1331. Thus, federal jurisdiction exists when a claim “arises under” the Act, either because the claim is brought explicitly under the Act, or a state law claim requires proof of a violation of the Act that is substantial, disputed, and capable of resolution by the federal court without disrupting the federal/state balance. Justice Thomas, joined by Justice Sotomayor, concurred, arguing that federal jurisdiction should exist any time a claim depends on breach of the Act’s requirements, and rejecting the application of Section 1331’s “arising under” test. A link to the opinion in Merrill Lynch, Pierce, Fenner & Smith Inc. v. Manning is here:
U.S. Supreme Court Asks Parties to Work Out Contraceptive Issue
The latest case involving the Affordable Care Act ended with a fizzle, perhaps due to an impending 4-4 split in opinion by the Justices. The issue in Zubik v. Burwell was whether the requirement that religious objectors to the contraceptive mandate submit a notice violated the exercise of religion under the Religious Freedom Restoration Act. The Court declined to decide the issue, however, and in a per curiam opinion vacated and remanded the collected cases to allow the parties an opportunity to work the issue out. In supplemental briefs filed after oral argument, at the Court’s invitation, the parties represented that an arrangement could be made that would permit religious objectors to avoid the notice requirement while permitting the government to seamlessly provide contraceptive coverage, and the Court took the parties up on the suggestion. Justice Sotomayor, joined by Justice Ginsburg, filed a concurrence reminding the lower courts that this was not a decision “on the merits” and should not be interpreted as such. A link to the opinion is here:
Special Counsel Use of Attorney General Letterhead Does Not Violate Fair Debt Collection Practices Act
In Ohio, debts owed to state agencies are collected through its Attorney General’s office, who in turn hires independent contractors as “special counsel” to recover those debts. Special counsel use the AG’s letterhead when communicating with debtors, two of whom sued under the Act, alleging that the communications were deceptive and misleading. The district court dismissed the claims on the basis that the special counsel were state actors entitled to the Act’s exemptions, but the Sixth Circuit reversed, holding that they were not state actors and that the use of the letterhead was misleading. In Sheriff v. Gillie, the U.S. Supreme Court, in a unanimous opinion by Justice Ginsburg, reversed. The Court assumed that special counsel were not state actors, but held that the use of the AG’s letterhead was not false or misleading since the AG’s office worked with the special counsel and specifically authorized the sending of the letters. A link to the opinion is here:
Hobbs Act Prohibits Bribery Between Co-Conspirators
The question in Ocasio v. United States was whether a conspiracy to obtain property “from another” included property obtained from co-conspirators. In this case, a police officer created a kickback scheme in which he would route vehicles involved in accidents to a repair shop in return for a payment from the shop owner. The officer argued that since he and the shop owners were in cahoots, they did not obtain property “from another” outside the conspiracy, and thus did not violate the Act. Justice Alito, for a 5-3 majority, affirmed the conviction, noting that basic principles of conspiracy law did not require each conspirator to meet all elements of the asserted crime—they only needed to work toward that goal. In this case, the officer worked toward the conspiracy of obtaining property “from another,” being the shop owner, and the shop owner aided in that offense. Justice Thomas dissented, arguing that Evans v. United States, which held that the Act’s prohibition of “extortion” included bribery, was wrongly decided, and the kickback scheme in this case should not have been covered by the Act. Justice Breyer filed a concurrence noting that he agreed with Justice Thomas’ sentiments, but voted with the majority since the officer had not argued to overturn Evans. Justice Sotomayor, joined by Chief Justice Roberts, separately dissented, arguing that “from another” should not have been interpreted to include co-conspirators. A link to the opinion is here.