“Perez v. MBA”: Clashing Perspective on Administrative Law Meet at the Supreme Court

supreme courtThe contrasting perspectives of the stakes in Perez v. Mortgage Bankers Ass’n, an administrative law case that the U.S. Supreme Court will hear on Monday, December 1, could not be starker. Law professors are allegedly unanimous that the Court should reverse the U.S. Court of Appeals for the D.C. Circuit doctrine at issue, a doctrine that, in their view, severely hampers the ability of federal administrative agencies to respond to changing conditions. On the other hand, lawyers representing regulated entities have rallied to the defense of the D.C. Circuit’s doctrine; they view it as an essential check on arbitrary agency rulemaking. What explains these contrasting visions? The explanation could lie in the ongoing battle over how much deference courts should accord to agencies’ interpretations of their own rules. At time when courts are increasingly deferential to agencies, regulated entities will forcefully act to preserve other tools—such as the D.C. Circuit doctrine at issue in Perez—to keep federal agencies in check.

Perez concerns the scope of notice-and-comment rulemaking. The Administrative Procedure Act (APA) requires federal agencies, before they adopt a “substantive” or “legislative” rule, to provide notice of the proposed rule and a meaningful opportunity for members of the public to comment on the proposal. Exempted from the APA’s notice-and-comment requirement are “interpretive” rules. Agencies seek to avoid notice-and-comment requirements where possible; it is a burdensome process that can delay rulemaking for months and even years. Yet, despite nearly 70 years of APA litigation, the meaning of exempt “interpretive” rules has never been fully pinned down. Continue reading

Why “King v. Burwell” Obamacare Case Is Not “NFIB v. Sebelius” Redux

supreme courtThe Supreme Court’s decision to hear King v. Burwell means that the Court, for the second time in three years, will be deciding an issue that will have a major impact on the Obama Administration’s ability to implement the Affordable Care Act. The ACA’s requirement that individuals purchase health insurance or else pay a penalty barely survived a constitutional challenge in June 2012 when the Court voted 5-4 in NFIB v. Sebelius to uphold the mandate as a proper exercise of Congress’s power under the Taxing Clause. The claim raised in King—that individuals who purchase insurance on the federal government’s healthcare exchange are not entitled to the tax subsidies available to those purchasing on state exchanges—would, if accepted by the Court, have an impact on the ACA every bit as great as a decision striking down the individual mandate. That fact has caused some commentators to draw spurious parallels between the two cases. Many Obamacare partisans who dismissed the NFIB constitutional challenge as a “shameful” and hypocritical “solicitation of right-wing judicial activism,” are making the same accusation against the King challenge.

The accusations were inaccurate in NFIB; they are hopelessly wrong when applied to King. Before such unfounded criticism of King takes hold, it is important to emphasize major distinctions between the two cases. The petitioners in NFIB were asking the Court to take a decisive step: to strike down legislation adopted by Congress and signed by the President. Those petitioners, in my opinion, raised highly plausible (and indeed, partially successful) arguments in support of their constitutional claims. However, a majority of the justices—mindful of separation-of-powers concerns that arise whenever they are asked to override the will of Congress and the President—followed the Court’s long-held preference that, in the words of Chief Justice Roberts, “every reasonable construction must be resorted to, in order to save a statute from unconstitutionality.” Continue reading

After “Smelly Washer” Trial Win, Challenges Await Whirlpool in Related Cases

WhirlpoolWhirlpool Corp. had major reason to celebrate last week; a federal jury rejected class-action claims that “Duet” front-load washing machines sold in Ohio between 2001 and 2009 were defective because of their alleged tendency to develop a moldy smell. This “smelly washer” case has drawn significant media attention in recent years after it twice reached the U.S. Supreme Court on the issue of whether the case should be certified as a class action. The High Court in 2013 vacated a U.S. Court of Appeals for the Sixth Circuit decision certifying a class of more than 100,000 Ohio consumers; but after the Sixth Circuit reaffirmed its decision on remand, the Supreme Court denied review this past February—thus setting the stage for the three-week trial that just ended last Thursday. But if history is any guide, plaintiffs’ lawyers will not willingly accept that the verdict binds all the absent class members (only two class members actually participated in the trial).

Indeed, the ongoing challenge Whirlpool faces underscores why plaintiff classes should rarely, if ever, be certified in consumer product defect cases. Federal Rule of Civil Procedure 23 states that suits seeking monetary damages are not appropriate for class action treatment unless common issues of fact and law “predominate” over individual issues of fact and law. As the Washington Legal Foundation explained in the brief it filed when this case was before the Supreme Court, individual issues (e.g., whether an individual plaintiff’s product was defective and whether that defect caused injury) will almost always overwhelm common issues of fact in the typical consumer product suit. Moreover, Rule 23 requires that the named plaintiffs demonstrate that they can adequately represent the interests of absent class members; if representation is inadequate (e.g., if their interests diverge from those of absent class members), due process case law dictates that absent class members are not bound by any judgment adverse to the class. Thus, the defendant in a certified consumer-product class action often faces a heads-you-win-tails-I lose dilemma: if a company goes to trial and loses to the class, it faces a massive liability award, but if it prevails at trial, absent class members are likely to resist any res judicata claim. Continue reading

High Court Should Not “DIG” Dart Cherokee Basin Case

supreme courtDart Cherokee Basin Operating Co. v. Owens, which raises right-of-removal issues under the Class Action Fairness Act (CAFA), is among the more important civil justice cases being heard by the Supreme Court this term. Legal commentators are virtually unanimous in concluding that the trial court adopted an overly restrictive standard governing removal of cases from state to federal court. Yet, as Columbia Law Professor Ronald Mann noted in a recent column for ScotusBlog, questioning during the October 7 oral argument revealed that the Court may be reluctant to decide the case at all. Every question posed to counsel for Petitioner focused on “vehicle” issues, not on the merits of his CAFA arguments. Several justices even suggested that the case might be dismissed as improvidently granted—which would be a terrible mistake.

On closer examination, the procedural posture issues that troubled the Court at oral argument turn out to be insubstantial; they should not dissuade the Court from addressing the Question Presented by the petition. Moreover, as explained in Washington Legal Foundation’s amicus brief, it is critical that the Court retain jurisdiction in this case to unwind the judicially created doctrine that motivated the mistake below in the first place. Dart Cherokee provides the Court an ideal opportunity to end the rule of construction whereby federal courts continue to narrowly construe federal removal statutes against the party seeking removal, contrary to Supreme Court precedent and despite the utter lack of any textual basis for doing so. Continue reading

Jurisdiction Still on Target for Supreme Court “Dart” Case

supreme courtAlthough the Supreme Court is scheduled to hear oral arguments on October 7 in a case addressing the scope of removal jurisdiction under the Class Action Fairness Act (CAFA)—Dart Cherokee Basin Operating Co. v. Owens—Public Citizen has urged the Court to dismiss the case as improvidently granted based on what it views as procedural roadblocks to reaching the merits. Last Friday, Columbia Law Professor Ronald Mann’s column for SCOTUSblog spotlighted Public Citizen’s amicus argument and stated, “[M]y sense is that the jurisdictional question [raised by Public Citizen] will seem a lot more contestable to the Justices than the issue on the merits,” adding that the Court might even consider dismissing the petition. Mann is probably correct that the Court is likely to be unimpressed by the lower courts’ merits decision—that a removal petition is deficient unless accompanied by documentary evidence supporting the petition’s allegations that the prerequisites for removal have been met. But the Court is likely to be equally unimpressed by Public Citizen’s “jurisdictional” argument, which has not been raised by the parties at any stage of these proceedings.

Public Citizen bases its argument on the fact that the Tenth Circuit did not directly address the district court’s decision to remand a case removed from state court by the Petitioners under CAFA. CAFA permits defendants in class actions to appeal remand decisions, but they first must petition the appeals court for an order accepting the appeal. In this case, the Tenth Circuit (by an equally divided 4-4 vote) denied the defendants’ petition for permission to appeal. Public Citizen contends that the only issue properly before the Supreme Court is whether the Tenth Circuit abused its discretion in denying permission for an appeal, not whether the district court erred in remanding the case.

That contention is without merit. First, the issue raised by Public Citizen cannot even remotely be deemed “jurisdictional” in nature. The Supreme Court has appellate jurisdiction over any case that has come before a federal appeals court, whether “before or after rendition of judgment or decree.” 28 U.S.C. § 1254(1). Supreme Court jurisdiction does not depend on whether the appeals court has rendered a judgment on the merits of the trial court’s determination. Because this appeal came before the Tenth Circuit, the Supreme Court has jurisdiction to review it. Continue reading

Actions Speak Louder Than Words: Argentina Continues to Stiff its Creditors

ArgentinaEver since its final courtroom defeat earlier this summer in its long-running battle with holdout bondholders, Argentina has attempted to portray itself as a responsible debtor that wants to pay all legitimate obligations. The Kirschner regime claims that its July 2014 default on the nation’s bond repayment obligations was forced upon it involuntarily by U.S. District Judge Thomas Griesa. Argentina asserts that it wants to act responsibly by making interest payments on its external indebtedness and would do so but for the injunction issued by “crazy old Judge Griesa” at the request of holdout bondholders (or, as Argentina refers to them, “vulture funds”). But Argentina’s recent actions don’t match its rhetoric; it continues its well-established policy of refusing to pay obligations that it has no plausible basis for contesting. Argentina has expressed a desire to repair its tarnished reputation within financial markets, but nothing in its recent conduct suggests movement in that direction.

A good case in point is Republic of Argentina v. BG Group PLC, a case decided by the U.S. Supreme Court earlier this year. That case involved claims by BG Group, a British natural gas company, that Argentina had breached a contract by taking steps designed to drive BG Group out of business. In 2007, an international arbitration panel unanimously agreed and entered a $185 million judgment in favor of BG Group. Rather than paying the judgment, Argentina sought to appeal the arbitration award within the U.S. court system. After years of protracted litigation, the Supreme Court in March 2014 upheld the arbitration award. Continue reading

Noel Canning: A Triumph of Judicial Restraint Over Originalism

noelIn its late June decision in NLRB v. Noel Canning, the U.S. Supreme Court unanimously invalidated President Obama’s efforts to make three recess appointments to the National Labor Relations Board.  The Court was sharply divided, however, on the rationale for its decision.  Five justices joined Justice Breyer’s majority opinion, which rejected the most sweeping challenges to the recess appointments and ruled against the Administration on the much narrower ground that the Senate was not, in fact, in recess at the time that the appointments were made.  As a long-time advocate of judicial restraint, I applaud the narrow approach adopted by Justice Breyer.  Justice Scalia’s opinion concurring only in the judgment would have had the effect of preventing future Presidents from making recess appointments except in the rarest of circumstances.  To me, it illustrates the shortcomings of originalism as a means of ensuring judicial restraint.

Article II of the Constitution mandates that the President ordinarily must obtain “the Advice and Consent of the Senate” before appointing an officer of the United States.  The Recess Appointments Clause creates a limited exception to that requirement by authorizing the President, on a temporary basis, “to fill up all Vacancies that may happen during the Recess of the Senate.”  Noel Canning forced the Court to construe the meaning of two phrases contained in the clause.

First, what is meant by “the Recess of the Senate?”  Those challenging the NLRB appointments claimed that the phrase refers only to an inter-session recess, i.e., a break between formal sessions of Congress.  On the other hand, President Obama asserted (as have all recent Presidents) that the phrase also encompasses an intra-session recess, such as a summer recess in the midst of a session.  The NLRB appointments would have been improper under the challengers’ interpretation because the Senate indisputably was not on an inter-session recess at the time of the appointments.

Second, what is the scope of the phrase “Vacancies that may happen?”  The challengers asserted that the phrase refers only to vacancies that first come into existence during a recess.  President Obama (and his predecessors dating back for at least a century) urged a broader reading that would also encompass vacancies that arise prior to a recess but continue to exist during that recess.  The NLRB appointments would have been improper under the challengers’ interpretation because they were made to fill offices that first became vacant before the start of the recess in question.

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