I. Cases Granted Review

Transcription

1 This Report summarizes cases granted review on June 28, 2018 (Part I). I. Cases Granted Review VOLUME 25, ISSUE 18 JULY 10, 2018 Franchise Tax Board of California v. Hyatt, The petition asks the Court to overrule Nevada v. Hall, 440 U.S. 410 (1979), which held that a sovereign state may be haled into another state s courts without its consent. Respondent Gilbert Hyatt was a California resident who earned millions of dollars in licensing fees on technology patents he developed and owned. In 1992, he filed a California tax return stating that he ceased being a California resident, and became a Nevada resident, on October 1, California tax authorities suspected that he actually moved to Nevada many months later and therefore owed California additional taxes. It conducted an audit, which determined that he owed the state another $1.8 million in unpaid income taxes and another $6 million in taxes, interest, and penalties. In 1998, Hyatt sued the Franchise Tax Board in Nevada state court alleging that the Board committed a variety of tortious acts against him in the course of its audit. He sought compensatory and punitive damages. The Board moved for summary judgment, arguing that the Full Faith and Credit Clause required Nevada courts to grant the Board the immunity to which it is entitled under California law. The case made it to the U.S. Supreme Court, which rejected the Board s contention. Franchise Tax Board of California v. Hyatt, 538 U.S. 488 (2003) (Hyatt I). Following discovery and trial, a jury found for Hyatt on all claims and awarded him more than $300 million in compensatory and punitive damages (to which the court added another $102 million in prejudgment interest). The Nevada Supreme Court affirmed in part and reversed in part, affirming the Board s liability for fraud and intentional infliction of emotional distress, but holding that some of Hyatt s claims failed as a matter of law and that the Board was immune from punitive damages. The U.S. Supreme Court again granted review and held that the Full Faith and Credit Clause requires Nevada courts to apply to the Board the same $50,000 statutory damages cap that Nevada law applies to Nevada agencies. Franchise Tax Board of California v. Hyatt, 136 S. Ct (2016) (Hyatt II). The Court divided 4-4, however, on whether Nevada v. Hall should be overruled. On remand, the Nevada Supreme Court held that Hyatt was entitled to a damages award of $100,000 the $50,000 statutory cap multiplied by the two torts for which it affirmed liability. 407 P.3d 717. The Board now asks the Court to resolve the issue upon which it divided 4-4 in Hyatt II and hold that states possess sovereign immunity from suit in the courts of sister states. The Board s petition argues that Hall conflicts with the Founding-era understanding of state sovereign immunity and with numerous better reasoned precedents of this Court, which have recognized that the principle of state sovereign immunity is inherent in the federal structure of the Union and is intended to protect the dignity interests of the States and the right of the people of the several States to govern themselves. The Board notes that, [b]efore the adoption of the Constitution, it was widely accepted that the States enjoyed sovereign immunity from suit in each other s courts ; that the Framers enacted the Constitution against that background assumption; and that [t]he Eleventh Amendment was intended to restore to the States their full immunity from private suits. Alden v. Maine, 527 U.S. 706, 724 (1999). Hyatt responds by invoking stare decisis and by arguing that before the founding of the United States (as now), sovereign nations could not assert immunity as of right in the courts of other nations, but enjoyed immunity only with the consent of the host nation.... [N]othing in the 2018, NAAG, 1850 M Street, NW 12 th Floor Washington, DC (202)

2 Constitution or formation of the Union altered that balance among the still-sovereign states, giving priority to the rights of visiting states at the expense of host states. Gamble v. United States, The petition asks the Court to overrule the dual sovereign exception to the Double Jeopardy Clause, which allows a person to be prosecuted for the same criminal conduct if the prosecutions are brought by two separate sovereigns. In 2008, petitioner Terance Gamble was convicted of second-degree robbery in Alabama, a felony offense. Both federal and Alabama law therefore barred him from possessing a firearm. In 2015, police searched Gamble s car and discovered marijuana and a handgun. Alabama prosecuted him both for marijuana possession and for being a felon in possession of a firearm in violation of Ala. Code 13A-11-72(a). While that prosecution was ongoing, the federal government charged Gamble for being a felon in possession of a firearm in violation of 18 U.S.C. 922(g)(1). Gamble objected to the federal prosecution on the ground that it violated his Fifth Amendment [right] against being placed twice in jeopardy for the same crime. The district court dismissed his motion, holding that it must fail under the dual-sovereign (or separate-sovereigns) exception. Gamble entered a conditional guilty plea. The Eleventh Circuit affirmed, stating that unless and until the Supreme Court overturns the dual-sovereign exception, Gamble s double jeopardy claim must fail. 694 F. App x 750. The Court has explained that, when the same act transgresses the laws of two sovereigns, it cannot be truly averred that the offender has been twice punished for the same offence; but only that by one act he has committed two offences. Heath v. Alabama, 474 U.S. 82, 88 (1985) (internal quotation marks omitted). Gamble contends that the exception is inconsistent with the plain text and original meaning of the Constitution, and outdated in light of incorporation and a vastly expanded system of federal criminal law. As to text, he says that [t]he Clause admits of no distinctions based on the identity of the prosecuting entity. To the contrary, it unambiguously protects each person from duplicative prosecutions regardless of their source. As to history, he says that the common law at the time of the Founding held that an acquittal or conviction in another country barred prosecution for the same offense in England. As to purpose, he insists that permitting consecutive prosecutions for the same offense whenever those prosecutions are initiated by different sovereigns implicates the very finality and fairness concerns the Clause was designed to address. Gamble also maintains that the Court adopted the exception at a time when duplicate state and federal convictions [were] exceedingly rare.... It would be an understatement to say that the game has changed. The United States counters that, [u]nder petitioner s interpretation of the Double Jeopardy Clause, one sovereign s efforts (successful or not) to enforce its own laws would vitiate the other sovereign s similar law-enforcement prerogatives. But that cannot be squared with the Constitution s bedrock structure of governance. States could hinder federal law enforcement by prosecuting offenses first; and if a federal prosecution could bar prosecution by a State, the result would be a significant interference with the States historical police powers. The exception, says the United States, thus finds weighty support in the historical understanding and political realities of the States role in the federal system and in the words of the Double Jeopardy Clause itself. Heath, 474 U.S. at 92. The United States also contends that the Court has already considered and rejected Gamble s textual and historical arguments. 2

3 Nieves v. Bartlett, In Hartman v. Moore, 547 U.S. 250 (2006), the Court held that the existence of probable cause defeats a claim of retaliatory prosecution in violation of the First Amendment. At issue here is whether the same rule applies to a retaliatory arrest claim where the plaintiff is challenging the conduct of a police officer. The Court expressly reserved that issue in Lozman v. City of Riviera Beach, FL, 585 U.S. (June 18, 2018). On the last day of the Arctic Man festival in the remote Hoodoo Mountains of interior Alaska, Troopers Luis Nieves and Bryce Weight were patrolling a large outdoor party where they encountered minors who appeared to be drinking alcohol. Trooper Nieves approached one of them, respondent Russell Bartlett, but Bartlett declined to talk. Bartlett then marched up to Trooper Weight, who was speaking to another minor. Weight, Bartlett, and the other minor exchanged words. Viewing Bartlett s escalating voice, his look of anger, [and] his body language as hostile pre-assault indicators, Weight pushed him back. Nieves ran over to assist Weight. Following a struggle, the two troopers subdued Bartlett and arrested him. Bartlett was charged with disorderly conduct and resisting arrest, but the prosecutor later dismissed the case for budgetary reasons. Bartlett then sued the two troopers under 1983, asserting a variety of claims including a First Amendment retaliatory-arrest claim. The district court granted summary judgment to the troopers on all the claims. As relevant here, the court held that the existence of probable cause to arrest Bartlett foreclosed the retaliatory-arrest claim. The Ninth Circuit affirmed on all claims except for retaliatory arrest. 712 Fed. App x 613. The court relied on circuit precedent holding that an individual has a right to be free from retaliatory police action, even if probable cause existed for that action. Ford v. City of Yakima, 706 F.3d 1188, (9th Cir. 2013) The parties here agreed that the Court should hold the Trooper s petition pending the disposition of Lozman. In Lozman, the Court described both side s arguments on whether Hartman v. Moore s rule should be extended to retaliatory arrests, but chose not to resolve the issue. As described in these pages (Vol. 25, No. 14 at 4), Lozman noted that police officers have to make splitsecond decisions; that suspects speech might affect whether an arrest is warranted; but that it can be difficult to discern whether an arrest was caused by the officer s legitimate or illegitimate consideration of speech. On the other hand, found the Court, there are substantial arguments that Hartman s framework is inapt in retaliatory arrest cases, and that Mt. Healthy [City Bd. of Ed. v. Doyle, 429 U.S. 274 (1977)], should apply without a threshold inquiry into probable cause. The Court noted that the distinct causation problem present in Hartman is not present here. And there is a risk that some police officers may exploit the arrest power as a means of suppressing speech. Herrera v. Wyoming, The question presented is [w]hether Wyoming s admission to the Union or the establishment of the Bighorn National Forest abrogated the Crow Tribe of Indians 1868 federal treaty right to hunt on the unoccupied lands of the United States, thereby permitting the present-day criminal conviction of a Crow member who engaged in subsistence hunting for his family. In 1868, the United States and the Crow Tribe entered into a treaty under which the Tribe ceded to the federal government most of its aboriginal land but retained 8 million acres for the establishment of the Crow Indian Reservation in present-day southern Montana. Article IV of the treaty provided that the Tribe shall have the right to hunt on the unoccupied lands of the United States that the Tribe had ceded which include lands in present-day Wyoming so long as game may be 3

4 found thereon. In 1890, the Wyoming Territory became the State of Wyoming. The federal government did not, however, cede to the new state all of the land to which it had title within the state. Among the lands that remained federally owned after Wyoming s statehood were the lands that the Tribe had ceded in the 1868 treaty. In 1897 President Grover Cleveland established the Bighorn National Forest from some of that federal land. In 1995, the Tenth Circuit held that the Tribe s right to hunt reserved in the 1868 Treaty was repealed by the act admitting Wyoming into the Union and was abrogated by establishment of the Bighorn National Forest, which resulted in the occupation of the land. Crow Tribe of Indians v. Repsis, 73 F.3d 982 (10 th Cir. 1995). In the present case, a Wyoming district court relied on Repsis to affirm the conviction of petitioner an enrolled member of the Crow Tribe who lives on the reservation for taking an antlered big game animal during a closed-hunting season. The court rejected petitioner s argument that the 1868 Treaty afforded him immunity from criminal prosecution. The Wyoming Supreme Court denied review. Petitioner argues that Repsis relied on Ward v. Race Horse, 163 U.S. 504 (1896), but that the Court repudiated Race Horse in Minnesota v. Mille Lacs Band of Chippewa Indians, 526 U.S. 172 (1999). In Race Horse, the Court held that Wyoming s admission to the Union abrogated the Bannock Tribe of Indians right to hunt under a treaty provision identical to Article IV of the Crow Tribe s treaty. Race Horse reasoned that the equal footing doctrine endows new states with powers and attributes equal in scope to those enjoyed by the states already admitted, which includes the right to regulate hunting within their borders. The Court concluded that the Bannock Tribe s hunting right and the state s right to regulate hunting were in irreconcilable conflict, and held that the latter prevailed. The Court added that the Bannock treaty had reserved only a temporary and precarious right to hunt on federal lands that was not intended to survive statehood. In Mille Lacs, however, the Court held that Minnesota s admission into the Union in 1858 did not abrogate the Mille Lacs hunting rights under an 1837 treaty. Stating that Race Horse rested on a false premise that tribal hunting rights and state sovereignty are irreconcilable, the Court declared that statehood by itself is insufficient to extinguish Indian treaty rights to hunt, fish, and gather on land within state boundaries. The Court also held that the temporary and precarious language in Race Horse is too broad to be useful in distinguishing rights that survive statehood from those that do not. Petitioner argues that Mille Lacs squarely forecloses the proposition that Wyoming s admission to the Union terminated the Crow Tribe s treaty-protected right to hunt on unoccupied federal lands, including in the Bighorn National Forest. Petitioner also disputes Repsis alternative holding (relied on by the Wyoming district court) that the lands in question are now occupied through creation of the Bighorn National Forest. He contends that the Crow Tribe understood the Article IV phrase unoccupied lands of the United States to mean land undeveloped by white settlers. Only actual physical settlement of its aboriginal hunting grounds would make the land occupied. Wyoming counters that Mille Lacs expressly validated the alternative holding of Race Horse: that Congress did not intend the language the right to hunt on the unoccupied lands of the United States to survive Wyoming s statehood. That is, says the state, Mille Lacs clarified that the focus of the Race Horse inquiry is whether Congress intended the rights to survive statehood. Here, Repsis and the Wyoming district court correctly found that the Crow Tribe s hunting right was temporary and subject to expiration upon the happening of a clearly contemplated event. 4

5 Merck Sharp & Dohme Corp. v. Albrecht, Under review is a Third Circuit decision rejecting a drug manufacturer s argument that a failure-to-warn claim is preempted because the Food and Drug Administration rejected the manufacturer s proposal to warn about the risk at issue. The FDA approved Merck s drug Fosamax in the 1990s to treat and prevent osteoporosis in post-menopausal women. Fosamax works by slowing down resorption (a process in which bone breaks down), but can also inhibit the natural repair of tiny fractures. In some cases, patients who have used Fosamax for years accumulate enough microcracks that the femur breaks in an atypical femoral fracture. Fosamax s label did not mention femur fractures from its approval in 1995 through In June 2008, the FDA informed Merck that it was aware of reports of users suffering atypical femoral fractures. Three months later, Merck submitted a request (known as a Prior Approval Supplement ) to add a warning to address the fractures in two ways. The FDA responded in May 2009 approving changes (subject to a few modifications) to the Adverse Reactions section of the label, but finding the proposed changes to the Warnings and Precautions section inadequate. In June, Merck updated the Adverse Reaction section of its Fosamax label using FDA s recommended modifications, but withdrew its proposed change to the Warnings and Precautions section. In September 2010, an outside task force identified an association between products such as Fosamax and atypical femoral fractures. The next month, the FDA announced that manufacturers must warn of the risk in their Warnings and Precautions sections. Fosamax has included such a warning since January More than 500 individuals who allegedly suffered from atypical femoral fractures caused by Fosamax usage before 2011 sued, asserting failure-to-warn claims and other claims. The cases were consolidated for pretrial proceedings. In 2013, the district court held the first bellwether trial. The jury ruled for Merck on the merits; the district court then issued a post-trial decision holding that plaintiffs failure-to-warn claims were preempted. The Third Circuit vacated and remanded. 852 F.3d 268. In Wyeth v. Levine, 555 U.S. 555 (2009), the Court held that if the FDA would not have approved the label demanded by state tort law, the manufacturer could invoke an impossibility preemption defense from failure-to-warn liability. The Third Circuit interpreted Wyeth as requiring the manufacturer to show it is highly probable that the FDA would not have approved a change to the drug s label. The court held that a reasonable jury could find that the FDA rejected Merck s proposed warning in the Warnings and Precautions section because it disapproved of the proposal s use of the term stress fractures, which doctors may view as less serious than atypical femoral fractures. Merck argues in its petition that [i]f a drug manufacturer candidly brings a risk to the FDA s attention and proposes an on-point warning, the FDA s rejection should suffice as a matter of law to preempt claims alleging failure to warn of that risk. By demanding more, courts have effectively eliminated impossibility preemption in this context: Even if manufacturers engage in good faith with the agency, propose a relevant warning, and follow the FDA s instructions, they remain on the hook based on a lay jury s psychoanalysis of why the agency had blocked compliance with state law. In particular, Merck faults the high evidentiary standard the Third Circuit adopted ( highly probable ); that a jury, not a judge, must apply the standard; that a case must go to a jury unless no reasonable jury could rule for the plaintiff; and for discarding evidence that the FDA would have rejected any additional warning about the connection between Fosamax and atypical femoral fractures before September Plaintiffs counter that (among other things) the FDA s May 2009 letter made clear that it rejected Merck s proposed language because of its conflation of stress fractures and atypical femoral fractures. 5

6 Obduskey v. McCarthy & Holthus LLP, The Court will resolve whether the Fair Debt Collection Practices Act applies to non-judicial foreclosure proceedings. In 2007, petitioner Dennis Obduskey obtained a $329,940 home loan from Magnus Financial Corporation. At some point, Wells Fargo Bank began servicing the loan. In 2009, Obduskey defaulted on his loan, and Wells Fargo initiated non-judicial foreclosure proceedings. For whatever reason, Wells Fargo failed to complete its multiple foreclosure attempts, prompting it to retain respondent, a law firm, to pursue foreclosure. Respondent sent Obduskey a letter advising of its intent to seek non-judicial foreclosure and making a series of additional statements regarding his debt. Obduskey disputed the alleged amount of the debt and instituted the FDCPA s debt-validation procedures, which required respondent to confirm the validity of the debt and provide documentation before pursuing further collection activity. Respondent instead initiated a new foreclosure action. Obduskey filed suit in 2015 against respondent and Wells Fargo, asserting claims under the FDCPA and state law. The district court granted respondent s motion to dismiss, finding that the FDCPA does not apply to non-judicial foreclosures. The Tenth Circuit affirmed. 879 F.3d The FDCPA applies to debt collectors, which it defines as any person... who regularly collects or attempts to collect, directly or indirectly, debts owed or due... another. 15 U.S.C. 1692a(6). Debt is further defined as any obligation... to pay money. 1692a(5). The Tenth Circuit reasoned that [b]ecause enforcing a security interest is not an attempt to collect money from the debtor, and the consumer has no obligation... to pay money, non-judicial foreclosure is not covered under the FDCPA. Distinguishing judicial foreclosures, the court emphasized that the sale does not preserve to the trustee the right to collect any deficiency in the loan amount personally against the mortgagor. Obduskey agrees with the Sixth Circuit that every mortgage foreclosure, judicial or otherwise, is undertaken for the very purpose of obtaining payment on the underlying debt, either by persuasion (i.e., forcing a settlement) or compulsion (i.e., obtaining a judgment of foreclosure...). Obduskey also argues that the FDCPA s venue provision regulates venue for action[s] to enforce an interest in real property securing the consumer s obligation. 1692i(a)(1). Some courts read this language as necessarily confirming that debt collection includes foreclosure actions. Fourth Estate Public Benefit Corp. v. Wall-Street.com, LLC, Under 411(a) of the Copyright Act, no civil action for infringement of [a] copyright in any United States work shall be instituted until preregistration or registration of the copyright claim has been made in accordance with this title. The question presented is [w]hether registration of [a] copyright claim has been made within the meaning of 411(a) when the copyright holder delivers the required application, deposit, and fee to the Copyright Office... or only once the Copyright Office acts on that application[.] Petitioner Fourth Estate is an independent news organization that owns copyrights in its journalists work and licenses them to a cloud-based news organization called AHN Feed Syndicate, which in turn licenses them to others. One of AHN Feed Syndicate s licensees, Wall-Street.com, secured a license to put some of Fourth Estate s works on the internet. In March 2016, Fourth Estate sued Wall-Street, alleging that Wall-Street violated the license. Before Fourth Estate commenced its suit it filed its application for registration with the Copyright Office; the application remains pending. Wall-Street moved to dismiss, arguing that 411(a) bars Fourth Estate from suing until after the Register of Copyrights registers the copyright. The district court granted the motion, and the Eleventh Circuit affirmed. 856 F.3d

7 The Eleventh Circuit reasoned that 411(a) refers to registration, and the Act defines registration as a process that requires action by both the copyright owner and the Copyright Office. The court found that the use of the phrase after examination in 410(a), which describes the procedure the Register must follow in registering a claim, makes explicit that an application alone is insufficient for registration. It also noted that 410(b) authorizes the Register to refuse registration which means registration does not occur upon the application being filed. Fourth Estate responds that 411(a) also states that, [i]n any case [] where the deposit, application, and fee required for registration have been delivered to the Copyright Office in proper form and registration has been refused, the applicant is entitled to institute a civil action for infringement. In Fourth Estate s view, [t]he fact that a copyright holder is permitted to institute a civil action even though the Copyright Office refuses the application means that registration... has been made is most logically read to refer to the action of the copyright holder that is, applying for registration and not the action of the Copyright Office. It maintains that other parts of the Copyright Act use similar phrasing to refer to actions by the copyright holder. Fourth Estate also argues that [m]aking the Copyright Office the gatekeeper to enforcement of copyrights is inconsistent with the rest of the Copyright Act, which makes clear that a copyright owner s rights do not depend on any affirmative government grant. The Supreme Court Report is published biweekly during the U.S. Supreme Court Term by the NAAG Center for Supreme Court Advocacy. SUPREME COURT CENTER STAFF Dan Schweitzer Director and Chief Counsel NAAG Center for Supreme Court Advocacy (202) The views and opinions of authors expressed in this newsletter do not necessarily state or reflect those of the National Association of Attorneys General (NAAG). This newsletter does not provide any legal advice and is not a substitute for the procurement of such services from a legal professional. NAAG does not endorse or recommend any commercial products, processes, or services. Any use and/or copies of the publication in whole or part must include the customary bibliographic citation. NAAG retains copyright and all other intellectual property rights in the material presented in the publications. 7