Argument analysis: The court dives into Water Splash

Argument analysis: The court dives into <em>Water Splash</em>On Wednesday, the court heard oral argument in Water Splash v. Menon, a case about the meaning of the Hague Service Convention. In particular, the dispute concerns Article 10 of the Convention, which has three parts. First, Article 10(a) preserves individuals’ “freedom to send” judicial documents abroad by “postal channels” when the receiving country does […]

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Argument analysis: The court dives into <em>Water Splash</em>

On Wednesday, the court heard oral argument in Water Splash v. Menon, a case about the meaning of the Hague Service Convention. In particular, the dispute concerns Article 10 of the Convention, which has three parts. First, Article 10(a) preserves individuals’ “freedom to send” judicial documents abroad by “postal channels” when the receiving country does not object. In contrast, Articles 10(b) and 10(c) reference freedom to “effect service” across borders via judicial officers. The case turns on whether the freedom to “send” judicial documents encompasses service of a complaint by mail, or if – as Menon argued successfully in the Texas 14th Court of Appeals – that provision refers only to sending documents for other purposes. If Article 10(a) does encompass service by mail, then Water Splash’s complaint against Menon was likely properly served; if it doesn’t, then Menon was within her rights to ignore the complaint, as she did.

Representing Water Splash, Jeremy Gaston began by arguing that Article 10’s language is at least ambiguous, and that therefore the court should look to a virtual mountain of extrinsic evidence suggesting that the Convention’s drafters intended Article 10(a) to encompass service of process. As Gaston acknowledged, this required him to overcome the presumption that different words used in the same statutory scheme mean different things – which would suggest that, because Articles 10(b) and 10(c) use the phrase “effect service,” Article 10(a)’s use of “send” must refer to something other than service.

Attempting to clear that hurdle, Gaston asserted that the presumption is not “irrebuttable,” and that the text and structure of the Convention suggest that “send” means “serve” for several reasons. First, the Convention’s drafting process involved translating a prior agreement from French into English, and the French word “addresser” – translated as to “send” in Article 10(a) – encompassed service. Second, “it would be very odd” for a treaty on service to also contain “some provision … to allow states to object to the use of their mails for unofficial purposes,” particularly when countries did not prohibit service by mail before the treaty. Third, countries’ practices reflected that they understood 10(a) to include service by mail.

The U.S. solicitor general, represented by Elaine Goldenberg, argued in support of Water Splash. Nonetheless, Goldenberg began by asking the court to recognize a limit on the use of service by mail under the Convention. She began by observing that, at least where the state of destination does not object, Article 10(a) “is not interfering with freedom” to “send judicial documents by postal channels to persons abroad.” But that is different, she continued, from providing “affirmative authorization” for service by mail. And if the Convention does not authorize service by mail, authorization – if it exists – must come from “the law of the forum state.” Beyond that, Goldenberg buttressed Gaston’s arguments regarding practices of Convention signatories and the text and structure of the Convention, noting that “affirming the court below would take us out of step with the rest of the world,” and make service more difficult for United States plaintiffs.

Representing Menon, Timothy Hootman readily acknowledged that the Convention’s drafters intended “send” to mean “effect service,” suggesting that the choice of “send” was a scrivener’s error. Nonetheless, he argued that the plain meaning of the Convention was “crystal clear”: Because Article 10(a), in contrast to 10(b) and 10(c), does not use the phrase “effect service,” it does not apply to service of process. Justice Ruth Bader Ginsburg, however, questioned whether Hootman’s reliance on a distinction between service of process and service of other legal documents made sense in the context of civil law countries that “don’t have the notion of … having a process server tag the defendant.”

A significant portion of Hootman’s argument sought to convince the justices that, assuming they agree with his view of the plain meaning of the text of Article 10(a), they are then constitutionally prohibited from deviating from it because of separation of powers principles. In support of that claim, Hootman argued that the senators who voted to approve the Convention would not have expected that it included a possibility of service by mail. That is in part because the chair of the United States delegation to the Hague Conference told the Senate that the Convention tracked an existing federal law on international service, which, Hootman added, “doesn’t have anything in it about mail.” Elaborating on the unlikelihood that the Senate understood Article 10(a) to permit service by mail in some circumstances, Hootman did allow that the Senate record included a law review article that referred to service by mail. However, he added that the reference was “a little bitty snippet” in an article that was otherwise “a little bit mind-numbing.”

That argument prompted an extended and somewhat confused exchange. Justice Sonia Sotomayor asked Hootman whether, in his view, the Convention “constrict[ed] the rights of states” to permit service by mail. Hootman responded that Texas did not permit service by mail, which would mean that under the solicitor general’s reading of the Convention, Menon should prevail. Hootman’s assertion about Texas law was based on the decision under review: “Well, Texas doesn’t [allow service by mail] according to the majority opinion in this case, because all four of my points were sustained in the … lower court. And one of those points was specifically whether or not Texas authorizes service by mail.”

This statement prompted two responses. First, Ginsburg returned to Sotomayor’s larger point, asking whether the Convention eliminated the possibility of international service by mail in jurisdictions where it was otherwise permitted. Hootman appeared agnostic on this question, returning to his argument that he would win regardless of the answer because Texas did not permit service by mail. Second, Sotomayor, later echoed by Gaston, argued that Texas does appear to permit service by mail: Texas Rule of Civil Procedure 108(a), on service of process in foreign countries, allows service by certified mail, return receipt requested, or by other means ordered by the court. Gaston added on rebuttal that the 14th Court of Appeals’ apparent conclusion to the contrary, on which Hootman relied, was based on its reading of the Convention, not on Texas civil procedure. In response to Sotomayor, Hootman returned to his argument about the importance of the Texas court sustaining each of his points.

Hootman plainly faced an uphill climb. When Justice Elena Kagan asked if Hootman thought it was a problem “that no other court in the world has construed the treaty” as he advocated, he responded “That’s clearly a problem. That’s why I focused so hard on the text.” However, the justices seemed to be converging on the rule advocated by the solicitor general that the Convention does not prevent international service by mail where it is otherwise allowed by the forum state. If the court adopts that rule, then Hootman’s case would appear to hinge on whether Texas civil procedure authorized service by mail of Water Splash’s complaint.

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Opinion analysis: Court’s decision rejecting low bar for students with disabilities, under the spotlight

Opinion analysis: Court’s decision rejecting low bar for students with disabilities, under the spotlightIt’s not often that a unanimous Supreme Court decision on special education makes national headlines. But that’s exactly what happened yesterday, when the justices issued their ruling in Endrew F. v. Douglas County School District. The issue in the case is undoubtedly important to many American families: What kind of “educational benefit” does the Individuals […]

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Opinion analysis: Court’s decision rejecting low bar for students with disabilities, under the spotlight

It’s not often that a unanimous Supreme Court decision on special education makes national headlines. But that’s exactly what happened yesterday, when the justices issued their ruling in Endrew F. v. Douglas County School District. The issue in the case is undoubtedly important to many American families: What kind of “educational benefit” does the Individuals with Disabilities Education Act require public schools to provide to students with disabilities? The Supreme Court unanimously rejected the lower court’s ruling that schools only need to provide a non-trivial benefit.

That’s not why the case drew so much attention, however. When the Supreme Court handed down its ruling yesterday, shortly after 10 a.m., the question presented by Endrew’s case had already been a hot topic of discussion just down the street from the court, at the confirmation hearing for Judge Neil Gorsuch, President Donald Trump’s nominee to fill the vacancy created by the death of Justice Antonin Scalia last year. In 2008, Gorsuch had ruled against the family of an autistic child, explaining that the IDEA requires educational benefits that are “merely … ‘more than de minimis.’”

While the Gorsuch hearing was still going on, the justices soundly rejected that reasoning in Endrew F. – a case also out of the 10th Circuit, albeit one in which Gorsuch did not participate. Like the child in the 2008 case, Endrew had been diagnosed with autism. His parents had enrolled him in the local public schools, where teachers reported that he had a “sweet disposition” but nonetheless had some behavioral challenges: He would “scream in class, climb over furniture and other students, and occasionally run away from school.”

Endrew’s parents believed that he was not making any progress, as reflected by his “individualized education program” – the plan prepared for each child with a disability – which essentially used the exact same goals and objectives each year. When the school board gave the family an IEP for fifth grade that Endrew’s parents regarded as simply more of the same, they pulled Endrew from his public school, placed him in a private school, and sought reimbursement for the private school tuition from the school district. The lower courts ruled against the parents. The 10th Circuit reiterated that, under its longstanding case law, an IEP is adequate as long as it is intended to provide “merely more than de minimis” benefits – and Endrew’s IEP, in its view, did exactly that.

In an opinion by Chief Justice John Roberts, the justices yesterday sent the case back to the 10th Circuit for it to apply a tougher standard. The court’s past cases and the text of the IDEA, it ruled, require a school “to offer an IEP reasonably calculated to enable a child to make progress appropriate in light of the child’s circumstances.” Normally, Roberts explained, this will mean an educational program designed to allow the child to progress from grade to grade. But even if that is not possible, Roberts continued, schools must provide a program that is “appropriately ambitious in light of” the child’s circumstances. “The goals may differ,” Roberts stressed, “but every child should have the chance to meet challenging objectives.”

Roberts acknowledged that yesterday’s ruling outlined only “a general standard, not a formula.” “But whatever else can be said about it,” Roberts observed, “this standard is markedly more demanding than the ‘merely more than de minimis’ test applied by the Tenth Circuit.” “When all is said and done,” Roberts noted pointedly, that standard would barely provide “an education at all” to children with disabilities. For those children, “receiving an instruction that aims so low would be tantamount to ‘sitting idly . . . awaiting the time when they were old enough to “drop out.”’” The IDEA, Roberts concluded, “demands more.”

At the same time, yesterday’s ruling did not give Endrew F. and his family everything they had asked for. The justices declined the family’s invitation to establish a more stringent standard that would require public schools to give children with disabilities an opportunity to (among other things) “achieve academic success” and “attain self-sufficiency.” And they emphasized that, as a general rule, courts should not substitute their own judgment for that of school officials. But advocates for children with disabilities nonetheless hailed yesterday’s decision as a big step forward – a ruling that, in light of its role in the Gorsuch hearings, is also not likely to be forgotten anytime soon.

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Argument analysis: An unsatisfying argument regarding Fourth Amendment qualified immunity and proximate cause

Argument analysis: An unsatisfying argument regarding Fourth Amendment qualified immunity and proximate causeYesterday’s argument in County of Los Angeles v. Mendez was, in a word, unsatisfying. The question of governmental liability for a law enforcement shooting of innocent individuals is extremely fact-intensive, and the law in this area is unsettled enough that assembling a majority for general Fourth Amendment rules on this record presents quite a challenge. […]

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Argument analysis: An unsatisfying argument regarding Fourth Amendment qualified immunity and proximate cause

Yesterday’s argument in County of Los Angeles v. Mendez was, in a word, unsatisfying. The question of governmental liability for a law enforcement shooting of innocent individuals is extremely fact-intensive, and the law in this area is unsettled enough that assembling a majority for general Fourth Amendment rules on this record presents quite a challenge. It is possible to imagine some general statements that the court could agree on, but when it comes time to either affirm or reverse the specific award here, the justices might well split 4-4. Accurate tea-leaf reading seems impossible based on this argument transcript; the justices themselves seemed undecided. But in the end, at least four justices may view a tie as the fairest result on this record: The damages award for the sympathetic plaintiffs here would be left in place, without a divided Court issuing conflicting opinions on the law.

A Fourth Amendment violation, but a subsequent “reasonable” shooting

As previewed here, Angel Mendez and his wife present sympathetic facts, while the law enforcement officers start off with a Fourth Amendment violation. In brief:

Two Los Angeles County Sheriff’s deputies were sent into the backyard of a home, while other officers forced their way into the house itself without a warrant or consent. In the backyard, the deputies came upon a shack occupied by the Mendezes. Guns drawn, the deputies opened the door of the shack without a warrant and without knocking or announcing who they were. Mendez, not knowing who was barging into his home, picked up a BB gun (just moving it, not aiming it, as the district judge found) in order to get out of bed. Seeing this, the deputies opened fire, causing significant injuries. Mendez’s leg had to be amputated below the knee.

After a five-day bench trial of the Mendezes’ civil suit against the county and the deputies, the district judge settled many disputed facts and legal questions, and calculated damages for the Mendezes at roughly $4 million. The judge ruled that the deputies (at the house and at the shack) had violated the Fourth Amendment by conducting their entries without a warrant; no exceptions to the warrant requirement applied. The judge also ruled that the deputies had violated the Fourth Amendment’s “knock and announce” requirement. But the judge further ruled that at the moment they fired their guns, the deputies were acting “reasonably” because they thought someone was going to shoot them. However, after all was said and done, the judge concluded that the government was liable for the damages because the deputies had recklessly “provoked” the confrontation (by entering without a warrant and without announcing).

The U.S. Court of Appeals for the 9th Circuit affirmed the award on appeal. Although law enforcement officers are entitled to “official immunity” unless they violate “clearly established rights,” the court of appeals ruled that the Fourth Amendment’s warrant requirement was clearly established; thus the officers are not immune from damages for that violation. But the court also ruled that it was not clearly established that the deputies had to “knock and announce” in this specific context, because the officers at the house had already knocked and announced. So (as was assumed at the argument yesterday), because the deputies receive official immunity for the “knock and announce” violation, that violation cannot support an award of damages. Nevertheless, the 9th Circuit affirmed the award on two groundsfrom provocation, the deputies are liable “under basic notions of proximate cause.”

 Oral argument: four justices advocate relief, while four others see no proximate cause?

Yesterday’s argument addressed both of the 9th Circuit’s grounds, but focused almost entirely on the second one, proximate cause. (No justice mentioned the Mendezes’ briefed argument that the county’s cert petition had presented three questions but then reduced them to two somewhat different questions at the merits stage.)

Justice Sonia Sotomayor jumped in first, appearing to defend damages for police shooting victims “who had nothing to do with causing the loss.” Noting that homeowners have a “Second Amendment right … to possess firearms to protect themselves,” Sotomayor and (and later Justices Elena Kagan and Stephen Breyer) seemed to suggest that deputies should reasonably foresee a violent confrontation if they enter unlawfully.

But Josh Rosenkrantz, an experienced Supreme Court advocate who argued for the county, firmly and repeatedly reminded the court that the failure to knock and announce in this case is assumed not to violate clearly established law, so that damages cannot be based on that. Kagan then presented perhaps the best argument for the Mendezes: Shouldn’t this be viewed more generally as an “unauthorized entry” that violates the Fourth Amendment and can support damages?  Breyer similarly asked a bit later “why do you … break it down this way?” and if you “look at all the circumstances,” why isn’t there proximate cause?  Justice Ruth Bader Ginsburg also offered a couple of seemingly favorable remarks; that adds up to four justices possibly favoring the Mendezes.

Indeed, Leonard Feldman, about to argue for the Mendezes, must have been pleased when Justice Anthony Kennedy (a potential fifth vote) then got into a brief squabble with Rosenkrantz. Kennedy presented a hypothetical, and when Rosenkrantz gave a “no damages” response, Kennedy said, “then we simply have no way to enforce the warrant requirement, … you want us to write that in the law?” But as described below, any hope by the Mendezes for Kennedy’s vote appears to have been short-lived.

Nicole Saharsky then argued for the solicitor general in support of the county, and she focused her remarks more generally on the 9th Circuit’s provocation doctrine. Sotomayor asked “why does a police officer get a pass” if the officer creates the dangerous situation? But Chief Justice John Roberts intervened, asking “is the label what’s wrong?” and noting that “I don’t think of it as provocation that you should have gotten a warrant earlier in the day.” Saharsky stayed focused on her general critique of the provocation theory, calling it “incredibly ill-defined.” But Kennedy then shifted the argument back to one of proximate cause – “those are two different things, right?”

Kagan continued to press the best argument for the Mendezes, seeking agreement that in general, “an unauthorized entry produces violence” or “might produce violence.”  The justices also demonstrated the special position that the solicitor general’s office occupies, permitting Saharsky to add “one more sentence” to her argument not once but three times after her time had expired.

Feldman – who also argued the Sheehan case two terms ago in which Justice Samuel Alito’s opinion for the court noted criticism of the provocation doctrine – then began by presenting a generalized “balancing” test that appeared to gain no traction with the court. (Justice Antonin Scalia would have blanched – balancing tests were his bane.) Kennedy drove the argument back once more to the specific question of proximate cause on this record – and then flatly said, “I just don’t see the proximate cause between failure to get the warrant and what happened here.” Alito (a longtime critic of the provocation doctrine) mildly challenged Feldman, and Roberts then focused firmly on the relationship between not getting a search warrant and the shooting: “Why did that make a difference? … [T]he failure to get a warrant did not cause the entry.” That too seems to add up to four votes, against the Mendezes, if one assumes that Justice Clarence Thomas (who asked no questions) is also likely to side with the county.

When Roberts repeated, “I don’t know why the failure to get a warrant matters,” Kagan immediately asked, “can I suggest why?,” and did. As she continued her explanation, Roberts, in his low-key way, offered perhaps the best line of the term: “Counsel [referring to Kagan], if I could interrupt you to ask a question.”

Conclusion: the real action is in conference, and the result seems uncertain 

As with all the court’s arguments, there is much more in the transcript than can be recounted here. But Kennedy summed it up at the end, quietly implying that the real action will happen during the justices’ private conference this week: “Based on” the arguments of counsel, “we [and I would emphasize the “we”] can have our discussion as to whether or not it was indeed proximate.”

Re-reading the transcript, I honestly am not sure what the justices will do. If the desire to end or limit the “provocation doctrine” is strong, perhaps some opinion (or opinions) will issue. On the other hand, it is not hard to imagine an even split here, with four justices firmly believing that the Mendezes’ innocent actions, coupled with the deputies’ unreasonable behavior, justify affirming the award. Yet there is little doubt that some justices would strongly dislike that outcome. In that case, I can also imagine seeing something I’ve never seen before (although Professor Dan Epps advised me late last night of one precedent from 1960): separate unhappy opinions accompanying a one-sentence “affirmed by an evenly divided court” judgment.

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Opinion analysis: Bankruptcy priority rules may not be evaded in Chapter 11 structured dismissals

Opinion analysis: Bankruptcy priority rules may not be evaded in Chapter 11 structured dismissalsCzyzewski v. Jevic Holding Corp. is the latest battleground in a 150-year struggle over whether senior creditors whose liens exhaust a bankruptcy estate, and junior creditors or equity holders with control over the bankruptcy proceeding, can combine to use bankruptcy processes to implement a division of value that skips over otherwise out-of-the-money intervening creditors over […]

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Opinion analysis: Bankruptcy priority rules may not be evaded in Chapter 11 structured dismissals

Czyzewski v. Jevic Holding Corp. is the latest battleground in a 150-year struggle over whether senior creditors whose liens exhaust a bankruptcy estate, and junior creditors or equity holders with control over the bankruptcy proceeding, can combine to use bankruptcy processes to implement a division of value that skips over otherwise out-of-the-money intervening creditors over their objection. In the landmark  case of Northern Pacific Railway Company v. Boyd, the court created the “absolute priority rule” to prevent just that eventuality in federal equity receiverships over 100 years ago, before any federal statutory reorganization procedure existed. Ever since and all along, bankruptcy practitioners struggling to make deals and solve practical problems have creatively fought, evaded, and sought to limit the scope of that prohibition. The most fashionable current step in this never-ending bankruptcy dance has been the “structured dismissal.” The court’s opinion in Jevic puts the brakes on this device by making clear that priority deviations implemented through non-consensual structured dismissals are not permitted.

The bankruptcy code provides three ways to end a Chapter 11 case: confirmation of a plan, conversion to a Chapter 7 liquidation, or dismissal. The code contemplates that dismissal will return the parties to their prebankruptcy positions, except to the extent the bankruptcy court orders otherwise. In a structured dismissal, however, the bankruptcy court’s dismissal order alters the rights and liabilities of the parties in ways that differ from the three options outlined in the code. Unlike a Chapter 11 plan, a structured dismissal does not require disclosure, voting by affected constituents and bankruptcy-court findings that the plan meets substantive and procedural legal standards, including compliance with the code’s priority rules. Unlike conversion to Chapter 7, a structured dismissal does not lead to a statutorily regulated liquidation consistent with established bankruptcy priorities. And unlike a straight dismissal, a structured dismissal does not simply return the parties to their prebankruptcy positions.

Jevic is a trucking company that filed under Chapter 11. During the bankruptcy proceeding, fraudulent-transfer claims against Jevic’s senior secured lenders were resolved by a $3.7-million settlement subject to a structured dismissal in which certain priority claims, based on employment-law violations under the Worker Adjustment and Retraining Notification Act, of truck drivers who worked for Jevic were skipped over. Had there been a settlement but no dismissal, and had the settlement proceeds been distributed under a plan or in a Chapter 7 liquidation, the workers’ priority claims would have entitled them to $1.7 million. Had there been no settlement but rather a straight dismissal or conversion, the fraudulent-transfer claims against the senior creditors would have revested in the workers or become an asset of the Chapter 7 bankruptcy estate, respectively. In the structured dismissal approved by the bankruptcy court over the workers’ objection, however, the workers received no proceeds, even as junior creditors received a distribution out of the settlement funds, and the fraudulent-transfer claims were extinguished.

The courts below approved this structured dismissal on the basis that no good alternative existed. No Chapter 11 plan could be confirmed given the estate’s inability to satisfy outstanding administrative and priority claims (i.e., the estate was “administratively insolvent”), and, in a Chapter 7 liquidation, no one other than the senior secured creditors would receive anything, because the fraudulent-transfer action would have to be abandoned for lack of resources to prosecute. In short, the lower courts concluded, the workers were no worse off in the structured dismissal, and other constituents were all measurably better off.

Justice Stephen Breyer wrote for the six-member majority (Chief Justice John Roberts and Justices Anthony Kennedy, Ruth Bader Ginsburg, Sonia Sotomayor and Elena Kagan, as well as Breyer himself). Jevic had raised a threshold objection, asserting that the truck drivers did not have standing to bring their claims. Breyer made short work of this argument, noting that it depended on two dubious propositions: that no bankruptcy settlement that included the workers was feasible, and that absent settlement the fraudulent transfer claims could not be prosecuted. The fact that the settling defendant asserted that it would not agree to a settlement that included workers who were separately suing it on WARN Act claims could well have been a bluff; in any event, the court noted, the settling defendant’s independent WARN Act liability had been subsequently resolved, removing that obstacle. Similarly, the bankruptcy court’s prediction that fraudulent-transfer claims with an apparent settlement value of $3.7 million were otherwise worthless was speculative. In short, the workers had standing to object to the structured settlement because a successful objection might result in value for them.

Passing to the merits, the court explained that the bankruptcy priority rules were “a basic underpinning of business bankruptcy law” that had long been considered “fundamental.” Given that statutory context, the absence of any express statutory authorization for structured or conditional dismissals involving non-consensual modifications of distributional priorities was fatal. The court acknowledged that the dismissal statute did expressly authorize a bankruptcy court to alter the status quo ante effect of a dismissal order for “cause.” But, the court reasoned, conditioning dismissal on a priority-deviating final distribution of estate assets was too much weight for “cause” to bear. The for-cause exception allowed the bankruptcy judge, upon dismissal, to protect reliance by third parties on intervening bankruptcy court orders or other intervening events; it was not to be employed as an end run around the code’s priority scheme. Finally, the court rejected the attempt of the U.S. Court of Appeals for the 3rd Circuit to identify “rare” circumstances justifying structured dismissal, expressing skepticism that any such exception could be appropriately defined and contained, and in any event finding no statutory warrant for it.

For bankruptcy insiders, the result in Jevic was not a surprise, particularly in light of the December 7 argument. Anticipated with more trepidation, however, were the scope of the decision and its implications for other sorts of bankruptcy court-approved priority deviations that had become common Chapter 11 practice.

Jevic places into serious doubt the continued viability of the already controversial practice of “gifting” — that is, implementing priority deviations out of collateral proceeds through Chapter 11 plans without intervening class consent, or, in Chapter 7 liquidations, by characterizing the distribution as  a ”gift” of the secured creditor’s collateral rather than a distribution of estate assets. Although the court’s opinion never refers to the practice of “gifting,” or to the lower court cases adopting or limiting gifting theories, Jevic’s reasoning, especially the primacy it places on the code’s distributional provisions, is in serious tension with that practice. On the other hand, the court’s embrace of the opinion of the U.S. Court of Appeals for the 2nd Circuit in In re Iridium Operating LLC, which approved an interim priority-deviating settlement on a gifting theory, may give gifting proponents heart.

More importantly, however, the court went out of its way to draw a sharp line between interim orders entered by the bankruptcy court in connection with its administration of an ongoing bankruptcy case and the structured dismissal at issue in Jevic. The common Chapter 11 practices of first-day wage orders, critical-vendor orders, roll-ups and interim settlements were all expressly distinguished from the objectionable structured dismissal in Jevic, which, the court expressly noted, involved a final distribution inconsistent with the code’s priority scheme as part of the case’s final disposition. The court’s implicit ratification of these established practices to the extent they serve other reorganization objectives undoubtedly will be embraced by the bankruptcy community.

The most interesting nuance in the court opinion is its brief discussion of Section 363 sales, which are a kind of in-between disposition. These sale orders are “interim,” and do not typically order final distributions except perhaps to secured parties, but they generally are case-dispositive and preordain the shape of the final distribution. The court cited with apparent approval the Braniff and Lionel cases, two 35-year old authorities that overturned Section 363 sale orders as evasions of Chapter 11’s procedural requirements, and threw in a “cf.” cite to the more recent Chrysler case, which controversially approved such a sale in an order that the Supreme Court subsequently vacated as moot. Moreover, the court prominently cited (on the structured dismissal issue) the wide-ranging and much-debated “2014 Report of the American Bankruptcy Institute Chapter 11 Study Commission,” which also proposed substantial reforms of existing Section 363 practices. It is possible that Jevic may signal discomfort with at least some aspects of existing case-dispositive Section 363 practice, as well as the comfort with interim critical-vendor orders, roll-ups and the like to the extent they serve a good faith reorganization purpose expressly noted above.

Finally, an academic point: The court naturally and properly relied on the history of senior-junior collusion in bankruptcy to bolster its holding prohibiting non-consensual skips, but it also claimed that settlements will be facilitated by enforcing priority regimes strictly, citing well-known law and economics work. Whatever law and economics theory might otherwise maintain, however, the history of bankruptcy law suggests that the 3rd Circuit was not wrong in thinking that some degree of flexibility, ambiguity and uncertainty, rather than pristine enforcement of crisply defined legal priorities, is what best facilitates pragmatic resolution of complex Chapter 11 cases.

Justice Clarence Thomas, in a dissent joined by Justice Samuel Alito, argued that the court had been the victim of bait-and-switch, because the employees had reframed the question presented in their merits briefing and because, as reframed, the question presented did not warrant the court’s review. Thomas suggested that the court should dismiss the case as improvidently granted. He noted that Jevic, relying on Rule 24.1(a), had declined to address the reframed question in its merits briefing, a tactical decision that may now be second-guessed.

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Opinion analysis: Court uses cheerleader uniform case to validate broad copyright in industrial designs

Opinion analysis: Court uses cheerleader uniform case to validate broad copyright in industrial designsIt’s the kind of case my colleagues who teach copyright law might spend an entire class session analyzing, pondering the pros and cons of copyright protection for industrial designs. In a rare moment for the Roberts Court, the opinion in Star Athletica v Varsity Brands addressed that question broadly and categorically, passing up every opportunity […]

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Opinion analysis: Court uses cheerleader uniform case to validate broad copyright in industrial designs

It’s the kind of case my colleagues who teach copyright law might spend an entire class session analyzing, pondering the pros and cons of copyright protection for industrial designs. In a rare moment for the Roberts Court, the opinion in Star Athletica v Varsity Brands addressed that question broadly and categorically, passing up every opportunity to narrow or confine its ruling.

The case involves cheerleader uniforms designed by Varsity Brands, the market leader, and copied by Star Athletica. The legal problem is whether copyright protection, which extends naturally not only to works of music and literature, but also to “pictorial, graphic, or sculptural” works, protects the particular combination of chevrons, zigzags and stripes that characterizes Varsity’s uniforms. Star Athletica argues, with considerable support from lower courts and commentators, that this kind of “industrial” design, largely influenced by utilitarian considerations, does not warrant copyright protection, which is best reserved for wholly aesthetic creations. The majority opinion of Justice Clarence Thomas, though, has nothing to say about concerns of competition policy. Rather, as you might expect from a Thomas opinion, the text addresses the topic wholly as a matter of statutory interpretation. Working in that vein, it reads the statute as giving remarkably broad protection to industrial designs.

The key language of the statute emphasizes that it does not protect useful articles as such. Instead, it protects only “the design of a useful article,” and it protects that only if the “design incorporates pictorial, graphic, or sculptural features that can be identified separately from, and are capable of existing independently of, the utilitarian aspects of the article.” The key doctrinal question, then is the question of “separability,” or when the expressive aspects of the design are sufficiently “separable” from the utilitarian design.

Quoting the Oxford English Dictionary’s definition of “capable,” the court’s opinion states that for copyright protection to reach the design, “[t]he decisionmaker must determine that the separately identified feature has the capacity to exist apart from the utilitarian aspects of the article,” explaining that “[i]f the feature is not capable of existing as a pictorial, graphic, or sculptural work once separated from the useful article, then it was not a pictorial, graphic, or sculptural feature of that article, but rather one of its utilitarian aspects.”

Pointing to the explicit protection for copyrighted works applied to useful objects, the court explains that the Copyright Act as a whole “makes clear that copyright protection extends to pictorial, graphic, and sculptural works regardless of whether they were created as free-standing art or as features of useful articles.” Thus, the court concludes, the ultimate question is whether a particular design “would have been eligible for copyright protection … had it originally been fixed in some tangible medium other than a useful article before being applied to a useful article.”

What the court does not state expressly in that part of its opinion is that the standard for determining whether a graphic work (for example) is copyrightable is minimal. Unlike patents, which require a notable step of inventiveness, the level of expressive spark necessary for copyright protection is quite low. So once the court has said that any design can gain copyright protection if it would be protectable if placed first on a piece of paper, it really has ensured that all but the subtlest graphic designs will be able to gain copyright protection.

The proof of the breadth of the court’s analysis comes a few pages later, when the court applies its test to the facts at hand to find that the designs were protectable. The sum of the court’s analysis is as follows:

Applying this test to the surface decorations on the cheerleading uniforms is straightforward. First, one can identify the decorations as features having pictorial, graphic, or sculptural qualities. Second, if the arrangement of colors, stripes, and chevrons … were separated from the uniform and applied in another medium – for example, on a painter’s canvas—they would qualify as “two-dimensional … works of … art.” And imaginatively removing the surface decorations from the uniform and applying them in another medium would not replicate the uniform itself.

To put it more bluntly, once we determine that the designs “hav[e] … graphic … qualities … [and could be] applied … on a painter’s canvas,” the test for copyrightability is met.

The remainder of the court’s opinion consists of a half-hearted dismissal of a variety of Star Athletica’s contrary arguments. At bottom, Star Athletica’s central contention is that copyright protection requires that the useful article “would remain equally useful” without the design features in question. Here, for example, the cheerleader’s uniform would be considerably less useful as a cheerleader’s uniform without the chevrons, stripes, and zigzags; what team dresses its cheerleaders in plain white tunics? That contention is fundamentally misguided, the court explains, because it rests on the assumption that copyright protection is limited to features that are “solely artistic.” Rather, the court explains, “[t]he focus of the separability inquiry is on the extracted features and not on any aspects of the useful article that remain after the imaginary extraction.” In the court’s view, the explicit extension of copyright protection to “applied art” necessarily contemplates copyright protection for expression that is at least in part utilitarian.

I am sure that my colleagues who study intellectual property will write at length for years to come about the doctrinal nuances of the court’s discussion of the separability requirement, which seems to me a marked shift from most of the prior treatments. What is most interesting on the face of the opinion, though, is the marked lack of concern for the problem Justice Sonia Sotomayor noted at the argument –  allowing copyright law to decimate the “knockoff” industry. The bulk of the briefing in and attention to this case emphasized the industrial policy questions affected by applying copyright law to industrial designs. For the justices, though, those concerns surface only in the dissenting opinion of Justice Stephen Breyer (joined by Justice Anthony Kennedy).

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Opinion analysis: Court limits “acting” appointments to fill vacancies

Opinion analysis: Court limits “acting” appointments to fill vacanciesShortly after his inauguration, President Donald Trump named Washington lawyer Noel Francisco as the principal deputy solicitor general – the only deputy solicitor general who is a political appointee, rather than a career lawyer. Because Trump had not yet nominated (nor had the Senate confirmed) a solicitor general, Francisco soon began to serve as the […]

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Opinion analysis: Court limits “acting” appointments to fill vacancies

Shortly after his inauguration, President Donald Trump named Washington lawyer Noel Francisco as the principal deputy solicitor general – the only deputy solicitor general who is a political appointee, rather than a career lawyer. Because Trump had not yet nominated (nor had the Senate confirmed) a solicitor general, Francisco soon began to serve as the acting solicitor general. Earlier this month, Trump announced that he was nominating Francisco to serve as the solicitor general on a permanent basis. Francisco then moved to another job in the Department of Justice; Jeffrey Wall – the new principal deputy solicitor general – now serves as the acting solicitor general. Yesterday’s decision in National Labor Relations Board v. SW General helps to explain why.

The case before the court centered on the interpretation of the Federal Vacancies Reform Act of 1998, which was a response to then-President Bill Clinton’s decision to make Bill Lann Lee the first assistant to the assistant attorney general in charge of the Department of Justice’s civil rights division and then name him the acting assistant attorney general after the Senate declined to confirm Lee in that job. Like the assistant attorney general for civil rights, many other federal government positions also require Senate confirmation. Under subsection 3345(a)(1) of the FVRA, if one of these positions becomes vacant, its duties are generally performed by the first assistant to the post, serving in an acting capacity. But the president can also decide to designate someone else to serve in the acting role – either someone who has been confirmed to another position in the executive branch, pursuant to subsection 3345(a)(2) of the act, or someone who is serving as a senior official in the same government agency, pursuant to subsection 3345(a)(3).

The catch is that another provision of the FVRA, subsection 3345(b)(1), indicates that, “notwithstanding” subsection 3345(a)(1), someone who is nominated to fill a vacant position requiring Senate confirmation “may not perform the office’s functions and duties in an acting capacity unless the person served as first assistant to the vacant office for at least 90 days in the year preceding the vacancy.” Does this apply only applies to first assistants who serve in an acting capacity under subsection 3345(a)(1), as the federal government argues, or does it also apply to all acting officials named pursuant to subsection 3345(a), as the U.S. Court of Appeals for the District of Columbia Circuit ruled? Yesterday the Supreme Court, by a vote of 6-2, rejected the government’s interpretation and agreed with the D.C. Circuit.

In a decision that was joined by Justices Anthony Kennedy, Clarence Thomas, Stephen Breyer, Samuel Alito and Elena Kagan, Chief Justice John Roberts explained that the court’s conclusion flows directly from the text. The FVRA makes clear that subsection 3345(b)(1) “applies to all acting officers” under section 3345, no matter how they were appointed. If Congress had wanted it to apply only to first assistants, Roberts noted, it “could easily have chosen clearer language.”

Roberts added that the text of the FVRA is sufficiently clear that the court does not need to look at the history of the act or how it has been implemented in practice. But even if it did, Roberts continued, the evidence “is not compelling.” In the court’s view, the text of the FVRA reflects a compromise: “The legislation as passed did expand the pool of individuals the President could appoint as acting officers.” But, Roberts stressed, “it also expanded the scope of the limitation on acting service in (b)(1), by dropping the language making (b)(1) applicable only to first assistants.” And Roberts declined the federal government’s suggestion that the court should give “significant weight” to three presidents’ “historical practice” of nominating people who were serving in an acting capacity pursuant to (a)(2) or (a)(3). Roberts observed that those 112 nominations “make up less than two percent of the thousands of nominations” since the FVRA was enacted in 1998. This practice, Roberts added, bears little resemblance to the “voluminous historical record” that influenced the court’s decision a few years ago in a challenge to the president’s recess appointment powers.

Justice Sonia Sotomayor dissented, in an opinion that was joined by Justice Ruth Bader Ginsburg. Sotomayor complained that the majority had interpreted subsection 3345(b)(1) too broadly. Because subsection (b)(1) refers specifically only to subsection (a)(1), she contended, it trumps only that subsection – not (a)(2) or (a)(3). Such an interpretation is consistent with the chain of events that led Congress to enact the FVRA in the first place – that is, Clinton’s decision to make Bill Lann Lee the acting assistant attorney general for civil rights after his nomination to serve in the role permanently had failed. And Sotomayor would give more weight to the executive branch’s consistent practice, without any objection from the Senate, of making nominations in the face of “would-be violations.”

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Argument analysis: Justices skeptical of categorical “exhaustion” of patent rights

Argument analysis: Justices skeptical of categorical “exhaustion” of patent rightsFor a court that has heard so many crucial intellectual property cases over the last several years, October Term 2016 is remarkable in that it was not until this morning that the court heard an intellectual property case that has the potential to be a “major” decision. But they faced a case of potentially momentous […]

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Argument analysis: Justices skeptical of categorical “exhaustion” of patent rights

For a court that has heard so many crucial intellectual property cases over the last several years, October Term 2016 is remarkable in that it was not until this morning that the court heard an intellectual property case that has the potential to be a “major” decision. But they faced a case of potentially momentous importance for modern commerce when they heard argument in Impression Products, Inc. v Lexmark Int’l, Inc.  Unfortunately, I don’t think many people left the courtroom knowing much more about the case than they did when they entered. Perhaps the justices wore themselves out with so much incisive questioning in the morning’s first argument (Microsoft v. Baker), but this argument was much more like the Monday argument in Howell v. Howell on which Amy Howe reported here: a cold bench largely leaving the advocates to their own devices.

The case involves the doctrine of “exhaustion,” under which a patentholder’s rights to enforce its patent ordinarily are “exhausted” with regard to any particular object at the moment the patentholder sells the object. As applied to this case, for example, Lexmark’s rights to control the use of its patented refillable print cartridges would be “exhausted” when it sells those cartridges to retail buyers, even if Lexmark conditions the sale on the promise that the buyer will not refill the cartridge. That, at any rate, is the argument of Impression Products, which makes a business out of refilling Lexmark cartridges in violation of those agreements. Lexmark’s argument, by contrast, is that modern commerce requires that innovators have the flexibility to devise contracting structures that segment the market into separate sectors, each of which gets a different price commensurate with the uses to which products will be put in that sector.

The terrain of the case is complex. There is a recent case (Kirtsaeng v John Wiley & Sons, Inc.,) in which the justices adopted a broad rule of exhaustion under copyright law, but that case affords little guidance because the Copyright Act, unlike the Patent Act, codifies the exhaustion doctrine. Justice Anthony Kennedy seized on that distinction early, asking Andrew Pincus, counsel for the defendant Impression Products, “[w]hy hasn’t this been codified? …. Too busy or what? …. Did the failure to codify mean we should be somewhat cautious in extending … or in interpreting [it]?”

It says something about the ill-defined nature of the problems before the court that the parties can’t even agree on the basis for the exhaustion doctrine. For his part, Pincus argued that the exhaustion doctrine rests on common-law rules that are hostile to restraints on alienation. Conversely, Malcolm Stewart, appearing on behalf of the U.S. solicitor general in support of Impression Products, argued that the doctrine was an interpretation of the exclusive rights granted to inventors by the Patent Act, a view shared by Constantine Trela, who argued on behalf of the patentholder, Lexmark.

Although counsel spent a great deal of the argument in largely uninterrupted presentations about the best way to read a large group of old cases examining contractual restraints in the patent area – no surprise that both sides believe the cases support them – most of the justices’ relatively sparse interjections involved more practical problems. Justice Sonia Sotomayor, for example, seemed impressed by what Pincus had to say about the cases, but moments before the end of his argument, stopped him to comment that “there are serious issues about this rule and its consequences,” and to ask him “[h]ow do you address all the negative consequences that your rule appears to be creating?” In the same vein, Justice Samuel Alito commented to Pincus: “The Federal Circuit’s rule on this is 25 years old. Has it caused a lot of problems?”

Chief Justice John Roberts and Justice Stephen Breyer also probed repeatedly as to why the patentholders like Lexmark cannot rely solely on contract law, but instead need patent law to enforce these restrictions. Roberts, for example, asked “Why is normal contract law and normal State law inadequate, for your purposes?” After listening to a few minutes of Trela’s response , Breyer asked “[w]hy can’t you enforce the contract downstream?” And when Trela explained that Lexmark (and other licensors) would lack privity with downstream purchasers, Breyer pressed yet again: “Then why don’t you require the person who sells it to just resell it with the requirement that they promise [to comply].”

In my judgment, the argument had only three significant revealing moments. In one of them, Breyer displayed an apparently visceral perspective that the kinds of provisions that Lexmark wants to impose should be routinely condemnable:

[A]ny monopolist, including a patent monopolist, would love to be able to go to each buyer separately and extract from each buyer and user the maximum amount he would pay for that particular item. …. But by and large, that’s forbidden under many laws, even though it does mean slightly restricted output, and it also means a lower profit for the monopolist.

That is not the comment of somebody predisposed to accept the idea that the realities of 21st-century commerce require updating of traditional restrictions on commercial contracting.

The other two moments involved the international aspect of the case: whether an overseas sale exhausts rights under the United States patent. On that topic, Alito and Breyer were deeply skeptical of Pincus’ argument. Alito was the more forceful:

[I]t’s somewhat surprising to me that none of the briefs in this case talk about our cases regarding extraterritoriality. In recent years, we’ve … said … that a statute does not apply outside the United States unless it says that it applies outside the United States. I don’t see why that shouldn’t be the same for a common-law rule like the rule here. And if what’s involved here is the application of U.S. patent law abroad, where is the clear statement that the exhaustion rule applies outside of the borders of the United States? I … don’t see where that can be found.

Alito hardly does the briefs justice; amicus briefs for IBM and Qualcomm, for example, included extended sections emphasizing the court’s precedents counseling against extraterritorial application of domestic statutes.

Breyer took a different tack, but reached a similar point, as he discussed the consequences of a hypothetical sale in Germany by an American holder of multiple patents on a single invention:

[T]hey have received money for that first sale under, let’s say, a German patent, and they have not received any money on this American patent. So they say, well, how could you be subjecting us to a rule that that first sale exhausted our right to money under the American patent when we never received any money under the American patent?”

My take on this is that the justices are well aware of the major implications here and don’t see any obvious way to avoid doing something that will have real economic consequences. None of the parties suggested any obvious narrowing strategy that would allow the justices to limit their decision. Rather, it seems, they are going to have to decide if these kinds of restrictions will, or will not, remain a product of 21st-century innovation policy. About the most to be gleaned from the argument is that Impression Products might have a harder time on the international point than it will on the domestic one. I would not count on hearing anything more about this case until June.

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Argument analysis: Justices dubious about free review of decisions denying class certification

Argument analysis: Justices dubious about free review of decisions denying class certificationThis morning’s long-delayed oral argument in Microsoft v. Baker finally gave Microsoft its “day in court,” more than two years after the U.S. Court of Appeals for the 9th Circuit decision under review, and almost four-and-a-half years after the district court decision. Although it is a big patent day at the Supreme Court – with […]

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Argument analysis: Justices dubious about free review of decisions denying class certification

This morning’s long-delayed oral argument in Microsoft v. Baker finally gave Microsoft its “day in court,” more than two years after the U.S. Court of Appeals for the 9th Circuit decision under review, and almost four-and-a-half years after the district court decision. Although it is a big patent day at the Supreme Court – with the decision in SCA Hygiene and the argument in Impression Products v. Lexmark – the Microsoft matter is a civil procedure case, examining the options available for plaintiffs when a district court determines that a case is not suited for adjudication as a class action.

Traditionally, the authority of the federal courts of appeal is limited to reviewing “final” decisions of a district court. Because the claims of individual plaintiffs survive even when a district court refuses to certify a case for adjudication as a class, the decision denying certification ordinarily does not produce a final order suitable for immediate review on appeal. The problem that plaintiffs face, though, is that adjudication of the individual claims often makes no sense without class relief; the costs and fees associated with a trial typically dwarf the possible recovery from any particular individual’s claim. Accordingly, plaintiffs often want to appeal immediately when a district court rejects the availability of class relief.

A common strategy in recent years for plaintiffs facing that problem has been for the named plaintiffs to voluntarily dismiss their individual claims. Although the dismissal is only conditional (the plaintiffs expect to press those claims again if they can persuade the court of appeals that class-based relief is appropriate), the 9th Circuit has concluded that the tactic produces the final decision that plaintiffs need in order to obtain immediate appellate review. This case puts that strategy squarely before the court and the justices seemed deeply skeptical.

You knew things were going well for Microsoft when the justices gave Jeff Fisher, representing the company, free rein to lay out his rejection of the plaintiffs’ position with a simple “damned if they do, damned if they don’t” argument. If the decision is final, then the plaintiffs have no remaining claims and thus there is no Article III “case” for further adjudication. Conversely, if the courts take seriously the idea that the plaintiffs can revive a claim that they have voluntarily dismissed, then the decision is not really final, and so it does not yet qualify for appellate review.

To the extent they addressed it, most of the justices seemed to take the first approach. The general sentiment was that the 9th Circuit made a serious misstep when it adopted the underlying doctrine, as the justices could not see any reason why a plaintiff should be able to appeal a district court judgment that he or she asked the district court to enter. Early on, for example, Justice Sonia Sotomayor, remembering her days on the district court bench, commented that “I haven’t been able to imagine a situation in which a case is dismissed with prejudice, but where there may be some issues that should survive.”

The questioning grew particularly heated when Peter Stris, arguing for the plaintiffs, came to the podium in defense of the tactic. Justice Elena Kagan, for example, asked with incredulity whether “this [is] a procedure that’s used in the Ninth Circuit? … Why did people think that this was the governing law?” Similarly, Chief Justice John Roberts exclaimed: “It’s one thing … if you’ve got a judgment against you and you have arguments why it shouldn’t have been. But you told the district court to enter a judgment against you, so you can’t argue that it shouldn’t have done that.”

Another major problem Stris faced is the history leading up to Federal Rule of Civil Procedure 23(f). In the 1960’s a practice had developed under which plaintiffs had a relatively free hand to appeal decisions denying class certification, on the theory that though not technically final, those decisions were effectively the “death knell” of the class litigation. The Supreme Court’s 1978 decision in Coopers & Lybrand v. Livesay rejected that idea, ushering in an era when plaintiffs had no avenue for immediate appeal of an adverse certification decision.

After deliberation, though, the rules committee amended rule 23, adding a new paragraph 23(f), which permits those appeals, but only with the permission of the court of appeals. (The plaintiffs tried that process in this case, but the court of appeals refused to grant permission.) Justice Ruth Bader Ginsburg seemed particularly dubious about the tension between the plaintiffs’ strategy and rule 23(f): “The rule makers went through a lot of work to figure out what to do with an interlocutory ruling on class action status.  And it came up with 23(f). And this device seems to be just a way to get around 23(f).” As she commented at one point, under the plaintiff’s strategy “23(f) is out the window.”

The low point of the argument for Stris came when Justice Stephen Breyer repeated the bifurcated syllogism from Fisher’s argument in its entirety: “So you’re in a dilemma.  If you say I condition my dismissal upon my later appealing, you run into our case … which says then the judgment isn’t final. But if you don’t reserve something, you’re in the box you’re in right now and the case is over.” For him, as for Ginsburg, the “conditional voluntary dismissal” strategy seemed at best a feeble effort to avoid the obvious import of rule 23(f).

This is one of those arguments in which the justices leave little doubt about the ultimate outcome. Even in the absence of Justice Antonin Scalia, this is a bench with several jurists deeply worried about the excesses of class-action litigation. And on that bench it is fair to say that Breyer, Ginsburg, Kagan and Sotomayor are the least hostile to class actions. It is hard to imagine, after hearing such harsh criticism of the plaintiffs’ position from those four justices, that the class action plaintiffs have any realistic hope of prevailing. In the end, then, a prompt and all-but-unanimous reversal of the 9th Circuit is the likely outcome here.

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Opinion analysis: The Fourth Amendment governs unlawful pretrial detention claims even after legal process begins; everything else is remanded

Opinion analysis: The Fourth Amendment governs unlawful pretrial detention claims even after legal process begins; everything else is remandedIn the year since Justice Antonin Scalia died, the eight-justice court has repeatedly decided only issues that they can agree on, and has frequently remanded more difficult questions for future resolution. Unsurprisingly (see my post-argument analysis), that pattern held true in today’s decision in Manuel v. City of Joliet. A 6-2 majority ruled that the […]

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Opinion analysis: The Fourth Amendment governs unlawful pretrial detention claims even after legal process begins; everything else is remanded

In the year since Justice Antonin Scalia died, the eight-justice court has repeatedly decided only issues that they can agree on, and has frequently remanded more difficult questions for future resolution. Unsurprisingly (see my post-argument analysis), that pattern held true in today’s decision in Manuel v. City of Joliet. A 6-2 majority ruled that the Fourth Amendment is the proper basis on which to challenge a post-arrest detention that was continued for seven weeks, allegedly without probable cause. Beyond that, Justice Elena Kagan’s opinion “le[ft] all other issues” for remand, over Justice Samuel Alito’s and Clarence Thomas’ dissents.

Taking the complaint as true

Elijah Manuel alleged that an officer pulled him from a car, beat him, called him racial slurs, and then arrested him for drugs even though a field test on pills Manuel was carrying came back negative. He further alleged that an evidence technician at the police station conducted another test on the pills that also came back negative, but that the technician falsely stated that the test was positive. Another officer then swore out a complaint against Manuel; based on all these false statements, a county judge ordered Manuel to be detained. Manuel was not released until seven weeks later, after a state police lab reported that the pills contained no controlled substances and “for unknown reasons,” the state prosecutor waited a month to move for dismissal. Two years later, Manuel sued the City of Joliet and its officers for violation of his civil rights under 42 U.S.C. §1983, alleging two Fourth Amendment violations: his false arrest and his prolonged unlawful post-arrest detention.

The district court dismissed Manuel’s challenge to his arrest under the applicable two-year statute of limitations, because Manuel’s lawsuit had been filed more than two years after the date of his arrest (although within two years of his release from detention). As for the detention, the district court relied on circuit precedent to rule that a detention occurring after “lawful process” is instituted (here, the county judge’s detention order) could be challenged only under the due process clause, not the Fourth Amendment. The U.S. Court of Appeals for the 7th Circuit affirmed.

The Fourth Amendment question answered by the court

Today’s holding is clear: An unlawful “pretrial detention can violate the Fourth Amendment not only when it precedes, but also when it follows, the start of legal process in a criminal case.” Despite stray suggestions by lone justices in some prior cases, such a pretrial detention claim “fits the Fourth Amendment … as hand in glove.” When some formal “legal process” has gone forward based on, as was alleged here, false law enforcement statements, that process “has done nothing to satisfy the Fourth Amendment’s probable cause requirement.” The Fourth Amendment, and not the due process clause, “provides the appropriate lens through which to view [such] a claim.”

Remaining questions not answered

Justice Kagan’s crisp opinion acknowledges that it “addresses only the threshold inquiry,” and notes that determinations of “the elements of, and rules associated with, an action seeking damages” for an unlawful-pretrial-detention action still must be made. Specifically here, the question whether the Fourth Amendment action “accrues” on the day the detention started, or does not accrue until the detention ends, remains (although the majority does provide an end-point, saying in a footnote that for an unlawful pre-trial detention claim, “once a trial has occurred, the Fourth Amendment drops out”). After offering “brief comments” regarding the general relationship of state common law rules and remedies to federal civil rights actions, the court remanded on any remaining issues, repeating a familiar point: “[w]e are a court of review, not of first view.”

Here is the court’s general guidance: Federal courts reviewing claims under Section 1983, when not bound by federal law, should “look first to the common law of torts.” But such common law is “meant to guide, rather than to control,” federal actions, “more as a source of inspired examples than of prefabricated components” (quoting Hartman, 2006).  Federal courts can apply, select among, or adjust common-law approaches, and “must closely attend to the values and purposes of the constitutional right at issue.”

Justices Alito and Thomas dissent, but not from the narrow holding

Justice Samuel Alito’s dissent, joined by Justice Clarence Thomas, begins: “I agree with the Court’s holding …: The protection provided by the Fourth Amendment continues to apply after ‘the start of legal process.’” That much, then, is unanimous. Alito disagrees, however, with any further suggestion that “new Fourth Amendment claims continue to accrue as long as pretrial detention lasts.”  He says this would “stretch[] the concept of a seizure much too far.” Similarly, Manuel should not receive the benefit of a “favorable termination” accrual rule, because that rule applies only to common-law “malicious prosecution” claims, and those sorts of claims are not Fourth Amendment claims in Alito’s view.

Alito argues instead that a Fourth Amendment violation is “fully accomplished … when an impermissible seizure [first] occurs” – so that the two-year limitations period would have run in this case. (On this narrow point Thomas filed a separate two-paragraph dissent, saying that although he agrees generally with Alito, he would leave the precise moment of accrual open for a case in which it actually matters.) Alito’s “first seized” accrual theory would conflict with a contrary “continuing violation” theory that has previously been advanced by Justice Ginsburg — a disagreement that the majority today assiduously avoids resolving.

Finally, Alito criticizes the majority for not considering every issue included in the “Question Presented” that Manuel asked the court to review. Kagan responds in footnote 10 that “we have resolved” the primary issue presented, and the fact that “Manuel jumped the gun” on further issues “provides no warrant” for “our doing so too.”

Conclusion

Although Alito also claims that the court’s opinion “inject[s] much confusion” and will “dramatically expand[] Fourth Amendment liability,” the Fourth Amendment ruling that the majority does announce – that the Fourth Amendment, and not the due process clause, governs a claim of unlawful pretrial detention – was the same answer given previously by ten other federal appellate courts. It seems narrow enough to give lower courts guidance while not unnecessarily resolving further points that were not well-presented, or well-argued, here.

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Argument analysis: Justices search for a common denominator in takings case

At yesterday’s oral argument in Murr v. Wisconsin, the justices discussed a longstanding dilemma in the field of regulatory takings. As I described in my earlier post, the Fifth Amendment’s prohibition on uncompensated government takings of private property includes instances when, in Justice Holmes’ famously vague formulation, a regulation “goes too far.” But to assess […]

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At yesterday’s oral argument in Murr v. Wisconsin, the justices discussed a longstanding dilemma in the field of regulatory takings. As I described in my earlier post, the Fifth Amendment’s prohibition on uncompensated government takings of private property includes instances when, in Justice Holmes’ famously vague formulation, a regulation “goes too far.” But to assess a regulation’s impact on a property, a court must first answer the threshold question of what property is at issue. The Supreme Court has said the property at issue must be the “parcel as a whole,” but the lower courts have struggled to determine what that means. This is what courts and scholars have termed the “denominator problem.” (For those who are not takings clause devotees, similar comparative issues—think of them as framing problems—arise all the time. My March Madness bracket looks great if you count only first-round games, but not so great once you add in second-round games.)

The facts in this case illustrate the dilemma. In the 1990s, the Murr siblings received two adjacent parcels of waterfront property from their parents. One, Lot E, had been formally owned by their parents; the other, Lot F, by their parents’ plumbing company. Under zoning requirements that took effect in 1976, the lots were “substandard,” meaning they were too small to be built upon individually. The zoning law contained a grandfather clause allowing the lots to be developed separately as long as they were held by different owners. But it also contained a so-called “merger” provision, which excluded commonly owned adjacent lots from the grandfather clause. (Amicus briefs explain that this combination of lot-size requirements, grandfather clauses and merger provisions is common around the country.) The merger provision kicked in when the siblings became the owners of both lots, thus precluding them from selling Lot E by itself, as they had hoped to do. This is where the denominator problem emerges. If the parcel at issue is just Lot E, the Murrs have a stronger case that the merger provision effected a taking: They can’t develop or sell Lot E by itself. But if Lots E and F together constitute the denominator, it seems clear that no taking has occurred. The siblings can still develop or sell the two lots together, and the restriction has a minimal economic effect on them.

So which is it? The four attorneys who argued the case offered four different approaches to the denominator problem. Although phrased in starkly divergent terms, the arguments did eventually reveal some common ground—even beyond the advocates’ “agreement” that, as Wisconsin’s solicitor general put it, this “area of law is incredibly complicated.”

The first attorney to the lectern was John Groen of the Pacific Legal Foundation, representing the Murr siblings. In arguing that the parcel at issue is Lot E, he urged the court to adopt a presumption that the lot lines of the parcel alleged to be taken define the denominator. Lot lines, Groen stated at one point, inform how “people traditionally understand and use [property] in their daily lives” — a point Chief Justice Roberts seemed to accept. Justice Elena Kagan asked why the court shouldn’t look at all of state law, not just lot lines, in defining the denominator. Why exclude the merger provision? “If we’re looking to State law,” she suggested, “let’s look to State law, the whole ball of wax.” In a similar vein, Justice Stephen Breyer asked, why aren’t lot lines just one factor among many? Breyer was skeptical of applying a “mechanical test.”

John M. Groen for petitioners (Art Lien)

Notably, the questioning also drew out that Groen’s lot-line presumption is rebuttable. In response to questions from Justices Anthony Kennedy and Sonia Sotomayor, Groen explained that the presumption could be overcome with evidence of “unity of use”—that is, evidence that the parties were in fact treating the two lots as “an integrated economic unit,” or that other facts “show in fairness and justice that the individual should bear the burden.” This begins to sound a bit like the other side’s test. Indeed, Kennedy asked twice why the “unity of use” notion didn’t defeat the Murrs’ case here. After all, the family did use the parcels together to some extent; according to the briefing, Lot E contained a volleyball court and propane tank that were used in conjunction with Lot F’s cabin.

Misha Tseytlin, the solicitor general of Wisconsin, was next to the podium. He urged the court to adopt a test involving “one straightforward question: Is the land lot at issue completely separate from any other land under State law?” Here, because of the merger provision, he explained, the lots “have merged for all relevant purposes.” This position, too, drew skepticism, this time from Roberts and Kennedy. Kennedy stated, “[i]t seems to me that your position is as wooden and as vulnerable [to] criticism” as the Murrs’. Why elevate the merger provision over lot lines?

Justice Samuel Alito raised a different concern, one based on the court’s existing doctrines: He suggested that the state’s position — that the denominator must be the two parcels together because the siblings took title subject to the pre-existing merger rule — is “completely contrary to the reasoning in” Palazzolo v. Rhode Island. (Palazzolo indicated that a person can assert a regulatory taking even if the person took title to property knowing that the regulation was already on the books.) Tseytlin, echoing an interpretation offered earlier by Kagan, responded that Palazzolo applies only when an earlier and later owner would have the same takings claim. Here, the siblings, as common owners of both lots, have a different claim from their predecessor owners.

Justice Kagan described herself as “pretty sympathetic to the idea that pre-existing state law really does influence quite a bit your expectations about” property, but asked why the state needed a bright-line rule based only on state law. “[W]hat’s the harm,” she asked, in allowing a more “fluid” analysis, in which factors other than state law might sometimes matter? Tseytlin explained the state’s view that the denominator inquiry should be a simple, “straightforward” first step of the analysis. After identifying the parcel, the court should move on to the multi-factor analysis of whether a taking has occurred, following the test set out in a famous case called Penn Central. But to apply a multi-factor test at both steps, Tseytlin said, would amount to “Penn Central squared,” and would lead to an overly complex analysis.

Richard Lazarus of Harvard Law School argued next, on behalf of St. Croix County. Unlike the state, the county embraces a multi-factor test for the denominator. It looks at “three things”: the economic impact of the parcel (the court must “[d]efine the parcel in a way which actually evaluates the real impact”), people’s reasonable expectations based on state law, and “the physical and geographic characteristics of the parcel.” Those three considerations, Lazarus explained, will help guide the court in determining the right parcel — with the point being “to see what the real burden is that people are suffering in the case.” Roberts echoed Tseytlin’s concern about turning the analysis into “Penn Central squared,” and also echoed Groen’s point that lot lines are “the regular way” to “figure out … what the land interest is.” But Lazarus emphasized that, while “[t]here’s no question state law defines what you own,” the takings question — whether, for purposes of federal constitutional law, the economic impact on a property-owner is excessive — is different. Lazarus further noted that several earlier Supreme Court cases evaluated property interests together even though they were defined separately under state law. In response to a question from Breyer, Lazarus added that “this is really the easy case,” because the Murrs face little hardship — indeed, he pointed out, that is the rationale behind the merger provision. A single owner facing development restrictions on a substandard lot might face “a complete economic wipeout,” but the owners of two such lots, “like the Murrs, have development options.”

The final attorney to argue was Elizabeth Prelogar, an assistant to the U.S. solicitor general, appearing as an amicus in support of the state and county. She began by urging the court not to adopt “a presumption or bright line rule that focuses on lot lines in isolation,” arguing that such an approach would have both legal and practical problems. As a practical matter, “lot lines will frequently not be an accurate indicator” of how a person is affected by a regulation, and would exclude “relevant considerations about the on-the-ground economic realities.” In response to a question from Alito, Prelogar stated that her office is asking the court to look for “what in the interest of fairness and justice is an accurate way to measure economic impact.” And in this case, several factors — including the timing of the relevant transfers, the contiguous nature of the parcels and the “linked uses” of the property — show that “it’s proper to view these two parcels together as one integrated whole.”

Sometimes commentators doubt that oral arguments matter much. But this one seemed useful to the justices, as it helped them understand the metes and bounds (sorry) of the parties’ positions. In particular, the argument suggested that the parties may have some common ground. To be sure, each party emphasizes a different part of the denominator inquiry — the Murrs focus on lot lines, the state focuses on the merger provision, and the county and solicitor general stress the need not to apply any one factor too mechanically. But the argument underscored that the Murrs agree that fairness and factual inquiries, and not just lot lines, bear on the analysis. This seemed to pique the interest of Kennedy, likely the swing vote, who seemed resistant to a test that would focus so tightly on one feature of state law that it could miss the forest for the trees. Given that, it’s not hard to imagine a narrow win for the state and county that allows consideration of multiple factors. Such an opinion might speak of the need to look closely at both lot lines and other state law requirements, while eschewing a “wooden” or “mechanical” inquiry that ignores the traditional takings clause emphasis on fairness. Or the court could give the Murrs a narrow win, reversing the decision below and sending the case back to the Wisconsin courts to consider factors left out of their prior analysis. Either way, the case is poised to shed important light on a longstanding dilemma—but probably will not mark the end of debates about the takings denominator.

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