PREVIEW OF UNITED STATES SUPREME COURT CASES. Previewing the Court s Entire January Calendar of Cases, including.

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1 PREVIEW OF UNITED STATES SUPREME COURT CASES Issue No. 4 Volume 37 January 11, 2010 Previewing the Court s Entire January Calendar of Cases, including American Needle, Inc. v. National Football League et al. For twenty years, American Needle, Inc., held a license from the National Football League Properties LLC (NFLP) to produce and sell headwear adorned with the logos and trademarks of teams within the National Football League. In 2001, NFLP granted an exclusive license to Reebok International Ltd. to produce NFL headwear for ten years, effectively ending American Needle s license. American Needle responded by bringing this antitrust suit against the NFL, NFLP, each of the NFL teams, and Reebok. The Supreme Court is now asked to determine whether the NFL is a single entity and therefore exempt from antitrust liability. Briscoe et al. v. Virginia Petitioners Mark Briscoe and Sheldon Cypress were convicted of drug offenses in Virginia state court. In each trial, the state introduced a certificate of drug analysis detailing the nature and amount of the alleged drugs. The state did not call the analyst as a witness in either case. Instead, it invoked a statute that permitted the petitioners to call the analysts as adverse witnesses. The petitioners argue that this procedure violated the Sixth Amendment s Confrontation Clause.

2 U.S. SUPREME COURT January 2010 CALENDAR MONDAY JANUARY 11 Alabama et al. v. North Carolina Briscoe et al. v. Virginia TUESDAY JANUARY 12 United States v. Comstock et al. Abbott v. Abbott WEDNESDAY JANUARY 13 American Needle, Inc. v. National Football League et al. Jerman v. Carlisle, McNellie, Rini, Kramer & Ulrich LPA et al. JANUARY 18 Legal Holiday JANUARY 19 Mac s Shell Service, Inc., et al. v. Shell Oil Products Company LLC et al. and Shell Oil Products Company LLC et al. v. Mac s Shell Service, Inc., et al. Granite Rock Company v. International Brotherhood of Teamsters et al. JANUARY 20 Berghuis v. Smith Conkright et al. v. Frommert et al. STANDING COMMITTEE ON PUBLIC EDUCATION CHAIR Eduardo Roberto Rodriguez Brownsville, TX Chair, Law Day Allan J. Tanenbaum Atlanta, GA Chair, Gavel Awards Sheila S. Hollis Washington, DC H. William (Bill) Allen Little Rock, AR Cory M. Amron Washington, DC Lee Arbetman Silver Spring, MD Anne Bryant Alexandria, VA AnnMaura Connolly Washington, DC Marilyn R. Cover Portland, OR Linda Greenhouse New Haven, CT Valerie Hans Ithaca, NY Steven C. Edds Jackson, MS Karen Marie B. Edwards Memphis, TN Roger L. Gregory Richmond, VA Alamdar S. Hamdani Ft. Mitchell, KY Gary T. Johnson Chicago, IL Allen W. Kimbrough Phoenix, AZ ADVISORY COMMISSION ON PUBLIC EDUCATION Mary Hubbard Birmingham, AL Marguerite Kondracke Washington, DC Thomas McGowan Lincoln, NE John Milewski Washington, DC Harriet S. Mosatche, Ph.D. New Rochelle, NY Robert M. Paolini Montpelier, VT Jill S. Miller Rockwell Charlottesville, VA Harry Truman Moore Paragould, AR Gary Slaiman Washington, DC William J. Woodward Jr. Philadelphia, PA Gordon Silverstein Berkeley, CA Christopher L. Tomlins Irvine, CA Young Lawyers Division Liaison Renata Biernat, Esq. Chicago, IL Law Student Liaison Roderica L. Ross Houston, TX

3 CONTENTS Issue No. 4 Volume 37 January 11, 2010 PREVIEW STAFF Mabel C. McKinney-Browning Director Division for Public Education Charles F. Williams Editor Catherine Hawke Associate Editor Colleen Danz Publication Manager May Nash Production Coordinator 2010 American Bar Association ISSN A one-year subscription to PREVIEW of United States Supreme Court Cases consists of seven issues, mailed September through April, that concisely and clearly analyze all cases given plenary review by the Court during the present term, as well as briefly summarize decisions as they are reached. A special eighth issue offers a perspective on the newly complete term. Antitrust American Needle, Inc. v. National Football League et al. 177 Compact Clause Alabama et al. v. North Carolina 181 confrontation clause Briscoe et al. v. Virginia 165 congressional authority United States v. Comstock et al. 156 Erisa Conkright et al. v. Frommert et al. 169 Fair Debt Practices Act Jerman v. Carlisle, McNellie, Rini, Kramer & Ulrich LPA et al. 184 international Law Abbott v. Abbott 173 Juries Berghuis v. Smith 193 LABor Law Granite Rock Company v. International Brotherhood 160 of Teamsters et al. oil and gas Mac s Shell Service, Inc., et al. v. Shell Oil Products Company LLC et al. and Shell Oil Products Company LLC et al. v. Mac s Shell Service, Inc., et al. 190 A subscription to PREVIEW costs $68 for law students; $120 for ABA members; $130 for nonmembers; and $175 for organizations. For subscription and back-issue information, contact the American Bar Association/Division for Public Education, 321 N. Clark Street, Chicago, IL ; or ; FAX , ATTN.: Colleen Danz, danzc@staff.abanet. org FOR CUSTOMER SERVICE, CALL All rights reserved. Printed in the United States of America. The American Bar Association is a not-for-profit corporation. This month the PREVIEW Web site, will feature: The merits and amicus briefs for the February session cases, including McDonald v. City of Chicago and Samantar v. Yousuf. An interview with the John Marshall Law School s Steve Schwinn analyzing the oral arguments in Free Enterprise Fund v. Public Co. Oversight Bd. An interview with the Freedom Forum s David Hudson Jr. analyzing the oral arguments in Milavetz, Gallop & Milavetz v. United States/United States v. Milavetz, Gallop & Milavetz. An interview with Gonzaga University School of Law s Brooks Holland following the January oral arguments in Briscoe et al. v. Virginia.

4 congressional authority Does Congress Have the Power to Authorize the Civil Commitment of Sexually Dangerous Persons by the Federal Government? CASE AT A GLANCE Congress authorized the civil commitment of any sexually dangerous prisoner in the custody of the Bureau of Prisons, even after that prisoner completed his sentence, under the Adam Walsh Child Protection and Safety Act of Using this provision, the government certified several sex offenders as sexually dangerous in the waning days of their sentences, thus subjecting them to further detention, beyond their original sentences. The offenders, respondents here, protested, arguing that their civil commitments were unconstitutional, because Congress exceeded its authority in enacting the provision. United States v. Comstock et al. Docket No Argument Date: January 12, 2010 From: The Fourth Circuit by Steven D. Schwinn John Marshall Law School The Adam Walsh Child Protection and Safety Act of 2006 authorizes the civil commitment of federal prisoners who are certified as sexually dangerous by the attorney general and the courts. Under the act, federal prisoners might be detained long after they served their original sentence. Respondents here four of whom were in fact detained as sexually dangerous long after they served their original sentence challenged Congress s authority to enact the provision. ISSUES Does Congress have the power under Article I of the Constitution to authorize court-ordered civil commitment by the federal government of (1) sexually dangerous federal prisoners who are at or near the end of their original sentence and (2) sexually dangerous persons who are in federal custody because they are mentally incompetent to stand trial? FACTS Congress in 2006 enacted the Adam Walsh Child Protection and Safety Act with the goal of protect[ing] children from sexual exploitation and violent crime. The act creates a National Sex Offender Registry, increases punishment for a variety of federal crimes against children, and strengthens existing child pornography prohibitions, among other measures. One part of the act, codified at 18 U.S.C ( 4248), authorizes the federal government to detain by civil commitment any sexually dangerous person in the custody of the Bureau of Prisons. Importantly, 4248 permits the federal government to detain a sexually dangerous person even after he served his prison sentence for his underlying crime. 156 The attorney general may initiate a civil commitment against a federal prisoner simply by certifying him as sexually dangerous. The attorney general files this certification in federal district court in the district where the prisoner is held, and the court conducts an evidentiary hearing to determine whether the prisoner is in fact sexually dangerous. (The act defines sexually dangerous person, but the definition is not particularly important here.) If the court finds the person to be sexually dangerous by clear and convincing evidence, 4248 directs the attorney general to make all reasonable efforts to transfer the person to the appropriate state authority. If a state is unwilling to assume responsibility for the person, 4248 authorizes the federal government to detain him for as long as he remains sexually dangerous. The upshot is that the federal government can detain a sexually dangerous federal prisoner as long as he remains sexually dangerous even beyond his original sentence. And that is exactly what happened in this case. The government designated four federal prisoners, including the named respondent Graydon Earl Comstock Jr., as sexually dangerous, thus certifying each for federal civil commitment less than one month from the end of their original sentences. (The government certified one of these prisoners on the very same day that he completed his 96-month sentence.) The move virtually ensured that these four would remain under civil commitment beyond their sentence, and in fact they all remain in federal custody now more than two years after the expiration of their terms. The government certified a fifth person, Shane Catron, as sexually dangerous while he was in federal custody, but before he went to trial on sex crimes charges. The government originally held him PREVIEW of United States Supreme Court Cases

5 because he was mentally incompetent to stand trial. But after Congress enacted 4248, the government certified him as sexually dangerous. When their civil commitment cases went to court, all five moved to dismiss, arguing that 4248 violated several constitutional provisions. The district court granted their motions and ruled that 4248 exceeded Congress s authority under Article I of the constitution and intruded on a power reserved to the states. The Fourth Circuit affirmed. The court the first circuit court to address the issue ruled that Congress lacked authority under Article I to enact The court ruled that civil commitment is traditionally an area for the states, not Congress, and that neither the Commerce Clause nor the Necessary and Proper Clause (nor the two together) provided sufficient authority for The court rejected the government s arguments that 4248 was merely an adjunct to its federal criminal justice and penal system, and that civil commitment under 4248 fit nicely within the constellation of similar adjunct practices long exercised by the federal government. On both points, the court held that while the government had broad authority over prisoners during their sentences, it lacked this kind of authority over former prisoners after their sentences. In short, Congress simply lacked the power to authorize the civil commitment of sexually dangerous persons beyond their original sentence. The government filed a writ of certiorari with the Supreme Court on April 3, While the writ was pending, the Eighth Circuit upheld 4248 in United States v. Tom, creating a circuit split. The Supreme Court agreed to hear the case on June 22, CASE ANALYSIS The federal government is one of limited, enumerated powers, not generalized police powers. As a result, the federal government must find an authority in the Constitution for everything it does. Congress s powers are set out in Article I, Section 8 of the Constitution and include most notably the authority to regulate interstate commerce under the Commerce Clause. The Supreme Court has interpreted the Commerce Clause differently over time, and congressional authority under the Commerce Clause has thus ebbed and flowed in different epochs and with different Courts. Before 1937, for example, the Supreme Court reined Congress in by restricting its Commerce Clause authority. The Court applied strict, formalistic rules that limited the activities that Congress could regulate. Then between 1937 and 1995, the Court opened up the Commerce Clause and seemed to allow Congress to regulate anything even loosely related to interstate commerce. Most recently, in a pair of decisions in 1995 and 2000, the Court again identified some limits on the Commerce Clause authority and expressed concerns related to federalism and preserving the traditional roles of the states. Under these decisions, United States v. Lopez and United States v. Morrison, respectively, Congress can regulate activities that have a substantial effect upon interstate commerce, but Congress cannot regulate noncommercial activities that are only loosely related to interstate commerce. The Court in these cases seems acutely sensitive to potential congressional encroachment upon areas where states have traditionally been sovereign. In addition to the Commerce Clause, Congress also has a kind of catch-all supplemental authority in the Necessary and Proper Clause. This clause allows Congress to enact all Laws which shall be necessary and proper for carrying into Execution the foregoing Powers, such as the power to regulate interstate commerce. Necessary and proper here mean something like appropriate (and not required ). As the Supreme Court wrote in 1819 in the seminal case McCulloch v. Maryland: Let the [government s] end be legitimate, let it be within the scope of the constitution, and all means which are appropriate, which are plainly adapted to that end, which are not prohibited, but consist with the letter and spirit of the constitution, are constitutional. McCulloch v. Maryland, 17 U.S. 316, 421 (1819). The Necessary and Proper Clause thus complements and gives substantial breadth to Congress s other enumerated powers, but the clause cannot authorize congressional action by itself. These principles about the scope of congressional power are at the core of Comstock. More particularly, the case is principally about the breadth of the Necessary and Proper Clause: whether congressional action under that clause must advance only an enumerated power (the respondents position), or whether it might also advance federal programs that themselves are authorized by enumerated powers, such as the Commerce Clause (the government s position). Under the former position, the Necessary and Proper Clause acts only with enumerated powers, like the Commerce Clause; it cannot serve an end other than an enumerated power. Under this approach, 4248 itself must fit within an enumerated power as complemented by the Necessary and Proper Clause: the government program must be directly authorized by enumerated powers. Civil commitment under 4248 cannot be authorized merely as an adjunct to a government program (which itself must fit within an enumerated power along with the Necessary and Proper Clause). Under the latter position, the Necessary and Proper Clause may support congressional action that itself is not an enumerated power, but is rather supported by an enumerated power, thus connecting the government program to an enumerated power through two or more links. The government program may be indirectly authorized by enumerated powers. Under this approach, 4248 is authorized as part of government s broader criminal justice and penal system (which itself is authorized by enumerated powers along with the Necessary and Proper Clause). This latter position gives the clause a much more sweeping reach. The government argues for this broader reach. It argues that Congress has authority to enact 4248 under the Necessary and Proper Clause in support of its criminal justice and penal system a system that is not itself an enumerated power but rather is authorized by enumerated powers like the Commerce Clause. The government argues that this kind of chain, linking a congressional action with enumerated powers through several links, has support in the Court s jurisprudence. For example, in Greenwood v. United States, the government s leading case, the Court upheld a different civil commitment provision, 18 U.S.C. 4246, which authorizes civil commitment of a person indicted on federal charges but incompetent to stand trial. Greenwood and its progeny show that Congress can authorize civil commitment in support of its criminal justice and penal system that PREVIEW of United States Supreme Court Cases 157

6 it can enact legislation designed to further another government program that itself is not an enumerated power but is authorized by enumerated powers. Moreover, 4248 draws on a history and tradition of civil commitment powers in support of various other federal powers. Thus, the government has exercised civil commitment in aid of the government s responsibility to protect those individuals with whom it has a special relationship and, more generally, the public. Here the government offers the example of St. Elizabeth s hospital in Washington, D.C., which Congress designed to house insane members of the military on orders from the government. Similarly, other statutes provided for federal custody and treatment of U.S. citizens adjudged insane overseas. The civil commitment authority in 4248 fits squarely within this line of practices. Finally, the government argues that Congress can authorize civil commitments under 4248 without intruding on a traditional area of state sovereignty. The government distinguishes Lopez and Morrison, the relatively recent Commerce Clause cases that raise this federalism concern, by arguing that those cases involved individuals without a direct relationship to the government. (Lopez involved an individual charged with violating the federal Gun Free School Zone Act; Morrison involved an individual subject to civil damages in federal court under the Violence Against Women Act. Neither individual had a direct relationship with the government prior to their cases.) Here, in contrast, the prisoners have a direct relationship with the federal government it is holding them, after all and the federal government can therefore regulate them without running into areas traditionally under state control. The respondents argue for the narrower interpretation of the Necessary and Proper Clause. They argue that the Clause authorizes Congress to enact legislation appropriate only to an enumerated power, not to a government program that is merely authorized by another power (and is not itself an enumerated power). The government s chain between civil commitment and enumerated powers, they argue, simply contains too many links. As a result, the government must rely exclusively on the Necessary and Proper Clause to support 4248, but the Necessary and Proper Clause alone cannot support congressional action. The respondents distinguish Greenwood and civil commitment under They argue that Greenwood upheld 4246 only insofar as 4246 authorized civil commitment of an individual deemed incompetent to stand trial. (Section 4246 also authorizes civil commitment for individuals whose sentence is about to expire, but the Court in Greenwood did not rule on this component of the statute.) That Greenwood style of civil commitment is designed to preserve the government s power to prosecute that individual a power that is part and parcel of the government s criminal justice and penal system and is thus authorized by an enumerated power. But 4248, in contrast, provides for civil commitment of an individual after he served his full sentence. This 4248 style of civil commitment is not directly connected to the government s criminal justice and penal system, and it is not independently authorized by an enumerated power. (This is as close as respondents get to arguing that the government had authority to commit one respondent, Catron. Respondents argue that the government waived its argument on Catron, however, and in any event the government lacks authority to detain him to simply prevent him from committing violations of state laws, rather than to preserve its ability to prosecute him.) The respondents also distinguish the government s history and practices. Respondents argue that congressional authority under the Necessary and Proper Clause does not turn on special relationships, as the government would seem to have it in its argument on the history. Instead, congressional authority under the Necessary and Proper Clause depends upon Congress s ability to link its action to an enumerated power. Again, the Necessary and Proper Clause alone cannot support congressional action. Finally, the respondents argue that 4248 unconstitutionally encroaches on areas of traditional state sovereignty. Civil commitment is, and has always been, within the realm of traditional state police and parens patriae powers. It is not an appropriate area of federal regulation. SIGNIFICANCE The case offers the Court a rare opportunity to explore the precise contours and power of the Necessary and Proper Clause, and it gives the Roberts Court an opportunity to put its own stamp on federalism. Developments in either area the Necessary and Proper Clause or federalism could make Comstock a significant case on congressional authority. If Lopez and Morrison represent the Rehnquist Court s stamp on congressional authority and federalism by way of the Commerce Clause, Comstock could represent the Roberts Court s stamp on congressional authority and federalism by way of the Necessary and Proper Clause. First, Comstock gives the Court a unique, even singular, opportunity to define the dimensions of the Necessary and Proper Clause, because the case so squarely places the clause at its center. In contrast to other cases involving the clause, which invariably involve some other enumerated power as the principal power and focus in the case, Comstock forces the Court at least to answer the question whether the Necessary and Proper Clause can support congressional action targeted to a government program, and not targeted just to an enumerated power. The answer to this question one way or the other could be a strong statement from the Roberts Court on the scope of congressional power. Comstock also gives the Roberts Court a chance to put its own stamp on the role of Congress in relation to the states. At issue is congressional authority to enact legislation that encroaches on a traditional role of the states. Lopez and Morrison suggest that Congress is restricted in some areas traditionally reserved to the states family law, for example but they also leave much to say. Comstock gives the Roberts Court an opportunity to define the boundary more precisely and thus to either solidify or shift the power between Congress and the states. But Comstock is not a likely case in which the Roberts Court might say something new about the Commerce Clause. The parties all but ignored the Commerce Clause in briefing, and Comstock is therefore not a particularly attractive case in which to explore it. 158 PREVIEW of United States Supreme Court Cases

7 Steven D. Schwinn is associate professor of law at the John Marshall Law School in Chicago and editor of the Constitutional Law Prof Blog. He can be reached at or PREVIEW of United States Supreme Court Cases, pages American Bar Association. ATTORNEYS FOR THE PARTIES For Petitioner United States of America (Elena Kagan, Solicitor General, ) For Respondent Graydon Earl Comstock Jr. (Jane E. Pearce, ) AMICUS BRIEFS In Support of Petitioner United States of America Kansas et al. (Stephen R. McAllister, ) In Support of Respondent Graydon Earl Comstock Jr. Cato Institute and Professor Randy E. Barnett (C. Allen Foster, ) National Association of Criminal Defense Lawyers et al. (Jeffrey T. Green, ) PREVIEW of United States Supreme Court Cases 159

8 LABor Law Who Can Decide Issues of Collective Bargaining Agreement Formation? Who Can Be Sued Under the LMRA for Tortious Interference? CASE AT A GLANCE At issue in this case are two points of contention that can arise between unions and management. One point concerns who possesses jurisdiction over the issue of collective bargaining agreement formation: courts or arbitrators? The other dispute concerns whether the Labor Management Relations Act authorizes employers to bring claims against a nonsignatory to a collective bargaining agreement who has been accused of engendering contractual breaches. Granite Rock Company v. International Brotherhood of Teamsters et al. Docket No Argument Date: January 19, 2010 From: The Ninth Circuit by Kerri Stone Florida International University College of Law In this case, the Ninth Circuit Court of Appeals affirmed the dismissal of the claim of employer Granite Rock Company against the International Brotherhood of Teamsters (IBT) under 301(a) of the Labor Management Relations Act (LMRA) for tortious interference with the collective bargaining agreement between Granite Rock and Teamsters Local 287 (Local 287). The Ninth Circuit also reversed the district court s denial of Local 287 s motion to compel arbitration on the issue of whether a contract had been formed, and remanded the case with instructions to compel arbitration on the entire dispute between Granite Rock and Local 287. Section 301 of the LMRA, 29 U.S.C. 185(a), provides that: Suits for violation of contracts between an employer and a labor organization representing employees in an industry affecting commerce, or between any such labor organizations, may be brought in any district court of the United States having jurisdiction of the parties, without respect to the amount in controversy or without regard to the citizenship of the parties. Here, an employer is attempting to assert a cause of action under the LMRA against an international union that, while not a direct signatory to a collective bargaining agreement, is alleged to have both displaced the signatory local union and to have impelled a strike that caused a breach of the collective bargaining agreement between the employer and the signatory local union. ISSUES Does a federal court have jurisdiction to determine whether a collective bargaining agreement was formed when it is disputed whether any binding contract exists, but no party makes an independent challenge to the arbitration clause apart from claiming it is inoperative before the contract is established? Does 30l (a) of the Labor-Management Relations Act provide a cause of action against an international union that is not a direct signatory to the collective bargaining agreement, but which is alleged to have effectively displaced its signatory local union and to have caused a strike breaching a collective bargaining agreement for its own benefit? FACTS The petitioner Granite Rock is a California company in the business of providing ready-mixed concrete for commercial use. Local 287 represents certain employees at Granite Rock s San Jose facility. Following the expiration of the collective bargaining agreement between Granite Rock and Local 287 that had been in effect from March 1, 1999, through April 30, 2004, Local 287 members went on strike on June 9, Upon the resumption of negotiations, however, the two parties came to a tentative agreement as to a successor collective bargaining agreement on July 2, During the negotiations that preceded this agreement, IBT is alleged by Granite Rock to have guided the Union s actions by furnishing the Union with information and advice. Specifically, Rome Aloise, whom Granite Rock identifies as the administrative assistant to the general president of IBT, is alleged to have advised Local 287 as to the inadequacy of some of the provisions contained in the collective bargaining agreement during the negotiations and to have represented IBT s interests, as well as those of other local unions affiliated with IBT. In the tentative agreement was a no-strike clause, as well as a broad arbitration clause that mandated that the 160 PREVIEW of United States Supreme Court Cases

9 parties arbitrate [a]ll disputes arising under this agreement. This contract, it was agreed, would only become binding upon employee ratification, and while a back to work agreement was discussed by the parties, one was never finalized. Local 287 agreed to present the tentative agreement to its members for ratification, but while Granite Rock alleges that the tentative agreement was ratified that same day; Local 287 denies that allegation. Granite Rock alleges that on July 5, 2004, Aloise and Local 287 members contacted workers and told them not to return to work the following day. Granite Rock also alleges that Aloise told a union agent, George Netto, that Local 287 must not honor the agreement unless Granite Rock consented to add a hold-harmless side-letter to it, essentially holding the local and international unions harmless for strike misconduct. According to Granite Rock, Local 287 threatened to strike, claiming that ratification had not occurred, and that it would not permit ratification unless the separate agreement was entered into. Granite Rock rejected this demand, contending that the employees had already ratified the agreement, which included a no-strike clause. Local 287 resumed its strike on July 6. Aloise is alleged by Granite Rock to have assumed a leadership role in the strike by working to garner support for the strike from other local Teamster unions. Meanwhile, Granite Rock alleges, IBT furnished strike benefits and financial support (a $1.2 million loan) to Local 287. Upon recommencement of the strike, Granite Rock invoked 301 of the LMRA and filed a breach of contract suit against Local 287; it subsequently moved for a temporary restraining order. In Granite Rock s Third Amended Complaint, it sued both IBT and Local 287 under 301(a), suing Local 287 for breach of contract and IBT for interference/inducement of breach of contract. IBT moved to dismiss the complaint pursuant to Rule 12(b)(6) of the Federal Rules of Civil Procedure; Local 287 moved to compel arbitration on the issue of whether the collective bargaining agreement had been ratified. The district court granted IBT s motion on the ground that Granite Rock failed to state a claim against IBT under 301(a), and it dismissed the issues of breach and damages, holding them to be outside its jurisdiction, but it asserted jurisdiction over the question of contract ratification. Granite Rock appealed. At a subsequent trial on the ratification issue, the jury found that the employees had, in fact, voted to accept the tentative agreement, which created a binding contract. In October 2008, the Ninth Circuit Court of Appeals reversed the district court s ruling that it possessed jurisdiction to decide whether or not the agreement existed as a predicate to arbitration. Instead, the Ninth Circuit held, unless the challenge is to the arbitration clause itself, the issue of the contract s validity is considered by the arbitrator in the first instance. Specifically, it held that [w]hen the parties have both consented to arbitration logic dictates that the most reliable way of honoring the parties expectations is to enforce that arbitration clause from the outset unless the other party shows it never agreed to arbitrate. The court of appeals affirmed the dismissal of Granite Rock s 301(a) claim against IBT, holding the tortious interference claim to fall outside of the LMRA s scope. The Ninth Circuit denied Granite Rock s requested en banc review of the case, and Granite Rock filed a petition for certiorari, which was subsequently granted. CASE ANALYSIS The Ninth Circuit held that the arbitration clause at issue was broad enough to cover the disputed contract formation question. It held that Granite Rock, having failed to challenge the arbitration clause and having alleged, and in fact, relied on the ratification and validity of the entire agreement at issue, had no basis for repudiating the entire agreement and would not be permitted to evade arbitration. Moreover, the court invoked the national policy favoring arbitration and a broad conception of its coverage to further buttress its construction of the law. The parties having both consented to arbitration Granite Rock by bringing suit and asserting that the agreement had been ratified, Local 287 commit[ing] itself to arbitration of the dispute by filing motions to compel its arbitration, the court reasoned, logic dictates that the most reliable way of honoring the parties expectations is to enforce that arbitration clause from the outset unless the other party shows it never agreed to arbitrate. Granite Rock, however, maintains that a federal court, and not an arbitrator, possesses the authority to decide whether a binding contract containing an arbitration provision had been formed. For its part, Local 287 counters that it never sought to have the district court require an arbitrator to determine the arbitrability of the dispute; it requested that the district court make that determination. It notes that if the present contract formation is going to be arbitrated it will be because this Court affirms the ruling of the Court of Appeals, and not because of a gateway ruling of an arbitrator. Granite Rock points to the irony of Local 287 on the one hand denying that an agreement had been formed at all and on the other hand moving to compel arbitration pursuant to a provision in that very agreement. Local 287 counters that Granite Rock s assertion of ratification should, under the Federal Arbitration Act and pursuant to the federal policy favoring arbitration of labor disputes, be seen as its having undertaken the obligation of compliance with all of the agreement s provisions, including the submission to arbitration. Moreover, it observes, by the time it moved to compel arbitration, the agreement was concededly in effect and Granite Rock does not and could not argue that it was not bound by the entire agreement when the matter came before the District Court. Granite Rock points to two Supreme Court decisions cited by the Ninth Circuit Buckeye Check Cashing, Inc. v. Cardegna, 546 U.S. 440 (2006), and Prima Paint Corp. v. Flood & Conklin Mfg. Co., 388 U.S. 395 (1967). According to Granite Rock, these cases stand for the proposition that absent a separate challenge to an arbitration provision, an arbitrator should decide [upon the validity of] defenses, such as fraud in the factum, that would render an established contract void or voidable rather than deciding upon threshold issues of contract formation and whether an ostensibly valid contract was ever made at all. Granite Rock specifically points to Buckeye, in which a party to a signed contract alleged the contract was void due to illegality and asked that the entire contract, including its arbitration provision, be deemed invalid. The Court in that case held that any challenge that did not go specifically to the arbitration clause contained within it, but rather to the validity of a contract as a whole, needed to be decided by the arbitrator, not a court. The Supreme Court noted that an arbitra- PREVIEW of United States Supreme Court Cases 161

10 tion provision is severable from the rest of the contract in which it appears, and that the question of the validity of a contract is one for the arbitrator to address in the first instance unless the challenge is to the arbitration clause itself. Thus, the Court found, the arbitration provision remained independently enforceable, and questions about the contract s legality were for the arbitrator to decide. The Court noted, however, that [t]he issue of the contract s validity is different from the issue [of] whether any agreement was ever concluded, and expressly declined to decide the latter question or to evaluate cases that have held that it is for courts to decide whether the alleged obligor ever signed the contract, whether the signer lacked authority to commit the alleged principal, and whether the signer lacked the mental capacity to assent. Because of this note, Granite Rock contends that Buckeye has no applicability to the present case. In the second case that Granite Rock invokes, Prima Paint, the Court held that absent evidence that the parties intended to keep an issue from arbitration, it is for an arbitrator to resolve a claim of fraud in the inducement of a contract when the contract in dispute contained an arbitration clause that called for any controversy or claim arising out of or relating to the agreement or breach of the agreement to go before an arbitrator. Granite Rock notes, however, that in that case, neither party disputed the fact that a contract containing an arbitration clause had been formed, and thus the Court was able to acknowledge that a fundamental difference exists between disputes over contractual defenses and disputes over whether a valid, binding contract was ever formed. Thus, according to Granite Rock, the authority to adjudicate disputes hinging on contract defenses found by the Court to be amply related to existing contracts was conferred upon arbitrators in Prima Paint and Buckeye. The present case, however, is different because it is the core contract formation that is at issue, and Supreme Court precedent supports having the issue of a contract s existence resolved by a court and not by an arbitrator. Thus, Granite Rock argues that its consent to arbitrate must not be loosely inferred, and it cites cases to support its contention that there can be no duty to arbitrate and no authority conferred upon an arbitrator unless there is clear and unmistakable evidence that the parties undertook to bind themselves to arbitrate or to enter into an agreement at all. Moreover, Granite Rock argues, it never clearly and unmistakably agreed to arbitrate the issue of whether a contract had been formed, noting that in light of the fact that the language in the arbitration provision pertains to disputes concerning the interpretation and Application of the Agreement itself, as opposed to the question of whether it was formed, the Agreement does not permit the arbitration of arbitrability. Thus, it concludes, the parties failed to clearly and unmistakably consent to arbitrate whether a contract was created. Finally, Granite Rock raises arguments about the public policy concerns implicated by the Ninth Circuit s opinion. The decision, Granite Rock contends, flies in the face of Supreme Court labor arbitration jurisprudence by divesting courts of jurisdiction over issues of contract formation. The petitioner forewarns of parties aversion to both arbitration provisions and tentative agreements if the safeguard of guaranteed impartial judicial determinations as to such matters is removed. Granite Rock also bemoans the unfair advantage bestowed by the Ninth Circuit upon unions who will now be in a position to flout a no-strike provision in a tentative agreement while at the same time compelling arbitration pursuant to that same agreement. 162 For its part, IBT first responds as a threshold matter that because Granite Rock decided not to pursue a breach of contract claim that it had available to it for the subsidiary of a parent union s violation of a collective bargaining agreement, it had waived any 301 claim that it might have had against IBT for breach of contract. The larger legal issue debated by the parties on this point is whether the Court should furnish a remedy for Granite Rock under 301 for the alleged act of IBT, a nonsignatory to the labor contract at issue, in instigating a strike violative of the contract. Both Granite Rock and IBT employ analyses of the relevant statutory language, legislative history, discernible congressional intent, case law, and public policy to support their arguments on this issue. Section 301 was enacted, as Granite Rock notes, to promote industrial peace through judicial enforcement of no-strike and no-lockout provisions. IBT argues that the issue correctly framed is whether 301 provides for tort claims against a nonparty to a CBA that has no obligations that are created by that contract. Granite Rock, however, argues that 301, which generally preempts state law causes of action that are otherwise available, should apply when (as it argues) a non-signatory international union has effectively displaced its affiliated local union and has acted to bring about a strike that violates the collective bargaining agreement at issue. The Ninth Circuit found that the statute s plain language appears to require at least that rights or obligations created by a labor agreement be in contest to support a section 301(a) challenge. Both parties look to the plain language of the provision to support their arguments. IBT argues that the statute addresses itself exclusively to lawsuits that allege there has been a breach of a contractual obligation, and that such a suit cannot exist when a nonparty to a contract is sued. Although IBT warns against what it terms the overexpansive reading of the statute urged by Granite Rock, the petitioner argues that a narrow reading of 301 is contraindicated; it asserts that all that is necessary for 301(a) subject matter jurisdiction is a suit that has been filed because a contract has been violated, and that the contract at issue has been struck between a labor organization and an employer. It notes that the word for contained within the phrase suits for violations of contracts was construed by the Supreme Court in 1998 as evincing congressional intent to confer upon the federal courts jurisdiction over any suits that claim a contract has been violated. Further, Granite Rock contends, the word between is properly read as modifying the word contracts, rather than the word suits, meaning that 301(a) jurisdiction is not properly confined to claims against or made by a signatory to a labor contract. IBT maintains that a suit brought against an entity that is not a party to the collective bargaining agreement at issue cannot be a suit for violation of contract, by the plain language of the provision. Granite Rock argues that prior Supreme Court decisions comport with the recognition of a 301 action against IBT. Specifically, it maintains, in Textile Workers v. Lincoln Mills, 353 U.S. 448 (1957), 301(a) was interpreted to confer upon federal courts jurisdiction over claims that necessitate the interpretation and application of labor contracts. Moreover, Granite Rock argues, Supreme Court precedent dictates that when a dispute involving a labor contract does not appear to have an explicit statutory sanction, it ought to be resolved by courts fashioning a remedy that will further the policy of labor legislation with only the nature of the problem constraining the range of judicial inventiveness. In furtherance of this mandate, Granite PREVIEW of United States Supreme Court Cases

11 Rock observes, the Supreme Court has recognized a range of federal common law causes of action. IBT, however, points out that nine circuits have correctly refused to construe Lincoln Mills as authorization to extend Section 301 beyond the enforcement of labor agreements to include claims for tortuous interference against nonparties that have no duties under the agreement. It also argues that while labor law enforcement generally has been left to the National Labor Relations Board, 301 represents Congress s crafting of a narrow jurisdiction for the federal courts adjudication of cases involving the alleged violation of contracts. Arguing that the LMRA s legislative history is consistent with the recognition of its 301 cause of action against IBT, Granite Rock points to the statute s General Provisions, which set forth the statute s goal of minimizing industrial strife and protect[ing] the rights of the public in connection with labor disputes affecting commerce. 29 U.S.C. 141(b). The petitioner also notes Congress s concern with increasing number and deleterious effects of strikes as a motivating factor for the legislation., and to the fact that while the 301(a) House Bill only authorized signatories to sue, the version passed by the Senate said that Suits for violation of contracts concluded as the result of collective bargaining between an employer and a labor organization may be brought in any district court. This, Granite Rock argues, suggests a conscious decision by the Senate to allow suits by and against nonsignatories to labor contracts. IBT counters by referencing Conference Report that reconciled the House and Senate bills and noting that there while there were several substantive changes made to the House bill, a deletion of the phrase brought by either party was not one of them. Granite Rock observes that the Senate, during its debates over this provision, noted the dearth of federal laws conferring upon an employer a right of action against a union for a contractual breach and concluded that statutory recognition of the collective bargaining agreement as a valid, binding, and enforceable contract is a logical and necessary step that would promote industrial peace. For its part, IBT argues that nothing in the legislative history indicates a congressional intent to have 301 further industrial peace by permitting federal court tort claims to be brought against nonsignatory parent unions. As IBT recites, the concern that impelled Congress to enact 301 was one about rendering collective bargaining agreements enforceable in court by and against the parties to them, a concern, it stresses, that is not implicated in this case. Moreover, IBT asserts, the congressional intent behind 301 was to enforce contractual rights between signatories to agreements. It asserts that Congress did not intend tort claims to proceed against nonsignatory third parties who lacked any duties under the agreements. IBT contends that other provisions in the LMRA that create tortlike claims in the labor context make it apparent that 301 was intended to be confined to the purview of contractual rights and obligations enforcement. Finally, IBT recites, Congress thought about, but discarded the idea of making IBT s alleged conduct the calling or assisting in any strike an unfair labor practice. Granite Rock alleges that, even prior to the so-called federalization of the action by 301, California law already allowed for lawsuits against labor organizations for tortious interference with contract, and that Congress s mention of California law in the course of 301 s enactment evinced an intention to federalize that labor law. IBT, however, maintains that this is overreaching and counters that Congress cited California simply because it was one of the jurisdictions that had abrogated the common law rule and permitted suits against labor unions. Whereas 301 gives courts broad discretion to fashion appropriate remedies, Granite Rock argues, the Ninth Circuit s rigid and categorical exclusion of IBT from the purview of suit contravenes the language and purpose of the provision and deprives Granite Rock of a core benefit of its collective bargaining agreement the no-strike provision. Other courts have ruled that Section 301 s reach extends beyond simple breach of contract actions, and now the Supreme Court should formally recognize this reach as well, Finally, according to Granite Rock, public policy concerns dictate that its 301 claim against IBT be recognized as viable, lest it be left without a remedy from IBT for the harm it sustained as a result of its actions. IBT, however, responds that Granite Rock s remedy can be found in a breach of contract claim against Local 287, to be adjudicated in arbitration, and in an unfair labor practice charge against Local 287 brought before the National Labor Relations Board. IBT also highlights the potential effect on the amount and complexity of litigation should Granite Rock prevail on the issue of its 301 claim s viability. SIGNIFICANCE At issue are two points of prime contention between unions and management in the course of the collective bargaining process and the litigation that surrounds it. One point concerns who possesses jurisdiction over the issue of collective bargaining agreement formation when the formation is contested but no independent attack has been levied on the agreement s arbitration provision. The other dispute concerns the scope of 301(a) of the LMRA and specifically whether Congress intended that section to authorize claims against nonsignatories to collective bargaining agreements who have been accused of engendering contractual breaches. The way in which the Supreme Court decides the issue of who decides whether the parties in this case consented to a contract containing an arbitration provision should have a substantial impact on arbitration agreements inside and outside of the labor context and on all of the parties who use them. The resolution of the core issue of whether a contract s very existence should be placed in the hands of an arbitrator versus a court will likely affect the way in which parties view and craft arbitration agreements. To the extent that the Court reinforces the broad reach of arbitrability, parties to tentative agreements will be on notice that fundamental questions of contract formation will very often be determined not by a court, but by an arbitrator. Granite Rock asserts that the Ninth Circuit s decision to place the arbitrability issue in this case in the hands of an arbitrator is dangerous, observing that it gives an arbitrator the power to determine his or her own jurisdiction which, in turn, could be manipulated to serve his or her own best interests. Local 287, however, observes that should the Ninth Circuit s holding be affirmed, it would be the Court placing the formation determination in the hands of the arbitrator, and not the arbitrator claiming it for him or herself. Granite Rock further argues that industrial peace would be threatened by permitting unions to successfully invoke an arbitration clause without giving contemporaneous effect to the no-strike provision, and that the Ninth Circuit s decision operates to divest unions and management of their reliance on tentative agreements. The company contends that parties could be deterred from entering into collective PREVIEW of United States Supreme Court Cases 163

12 bargaining agreements if they knew the party on the other side of the negotiating table could dispute the existence of the contract while at the same time taking advantage of arbitration clauses contained within it. The countervailing argument, however, is that the national policy on arbitration and the jurisprudence guided by that policy have rendered the Ninth Circuit s ruling wholly predictable and therefore no new deterrent effect will ensue from affirming that settled policy. As to the viability of bringing a 301 claim against a nonsignatory to a collective bargaining agreement, many parties to such agreements are likely anxiously awaiting the Supreme Court s identification of those nonsignatory entities who may and may not be sued under the LMRA. The Court s ruling on this issue will resolve a split in the various federal courts of appeals over the extent to which an employer may use the LMRA against organizations, like international unions, that the employer believes has tortuously interfered with the employer s labor contract even though the organization is not itself a signatory to the contract. Granite Rock argues that if the Court fails to recognize the federal common law action and remedy it seeks, it will cloak IBT with the very immunity it tried to coerce from Granite Rock when it allegedly instigated the strike. Moreover, Granite Rock argues, it will establish a blueprint for the industrial chaos Congress sought to avoid when it enacted 301. Specifically, according to Granite Rock, only through the Court s recognition of a cause of action, like its action against IBT, can parity between unions and employers be achieved. Whereas the nonsignatory parent company of a signatory employer can be sued, as per several circuits, due to the fact that unions are legally distinct unincorporated organizations that have no common control or ownership, Granite Rock argues, so should there be a way to impute liability to nonsignatory unions that engender contractual violations that confer harm on signatory employers. On the other hand, IBT contends that allowing a tort claim under 301 would cause courts dockets to be filled with new claims, and that liability would potentially be extended not only to parent unions, but to parent corporations, customers of employers, and a wide range of other strangers to the collective bargaining agreement. This IBT maintains, could overburden judges who would be called upon to resolve run-of-the-mill litigation issues that normally are resolved by arbitrators, and result in unnecessarily complicated and duplicative litigation. The Court s resolution of the two issues presented by this case will certainly be large even though its precise scope remains largely to be determined. Kerri Stone is an assistant professor of law at Florida International University College of Law in Miami Florida, where she teaches contracts, employment law, employment discrimination law, and labor law. She may be reached at kerri.stone@fiu.edu or PREVIEW of United States Supreme Court Cases, pages American Bar Association. ATTORNEYS FOR THE PARTIES For Petitioner Granite Rock Company (Garry George Mathiason, ) For Respondent International Brotherhood of Teamsters et al. (Peter David Nussbaum, ) For Respondent Teamsters Local 287 (Duane B. Beeson, ) AMICUS BRIEFS In Support of Petitioner Granite Rock Company Associated General Contractors of America, Inc. (David J. Bird, ) Center on National Labor Policy, Inc., et al. (Michael Ernest Avakian, ) Chamber of Commerce of the United States of America (Andrew J. Pincus, ) In Support of Respondent International Brotherhood of Teamsters et al. American Federation of Labor and Congress of Industrial Organizations (James B. Coppess, ) 164 PREVIEW of United States Supreme Court Cases

13 confrontation clause May the State Require the Defense to Produce a Prosecution Witness for Cross-Examination? CASE AT A GLANCE Petitioners Mark Briscoe and Sheldon Cypress were convicted of drug offenses in Virginia state court. In each trial, the state introduced a certificate of drug analysis detailing the nature and amount of the alleged drugs. The state did not call the analyst as a witness in either case. Instead, the state invoked a statute that permitted petitioners to call the analysts as an adverse witness. Petitioners argue that this procedure violated the Confrontation Clause of the Sixth Amendment to the U.S. Constitution. Briscoe et al. v. Virginia Docket No Argument Date: January 11, 2010 From: Supreme Court of Virginia by Brooks Holland and Michelle Trombley Gonzaga University School of Law Issue Did the state violate petitioners confrontation rights when it introduced certificates of drug analysis at trial without calling the analysts who prepared the certificates, when state law allowed petitioners to call the analysts as an adverse witness? Facts Petitioners Mark A. Briscoe and Sheldon Cypress both were prosecuted for drug offenses in Virginia state court. In Briscoe s case, police officers executed a search warrant at Briscoe s apartment, where the police found suspected drugs and drug paraphernalia. The police also found suspected drugs on Briscoe. Following Briscoe s arrest, the police submitted the suspected drugs for analysis to the Virginia Division of Forensic Science (DFS). A DFS analyst reported in two separate certificates of analysis that the seized substance was cocaine totaling grams. The certificates included the analyst s signature and attestation that she analyzed the drugs herself and that the certificates accurately reflected her test results. Cypress was a passenger in an automobile driven by his cousin when a Virginia state trooper stopped the vehicle for improperly tinted windows. The driver consented to a search of the vehicle, during which the trooper found suspected drugs. Cypress was arrested. Subsequent DFS analysis revealed that the seized substance was cocaine totaling 60.5 grams. The DFS analyst produced a certificate of analysis reporting these results and bearing her signature and attestation that she analyzed the drugs herself. Briscoe and Cypress both were indicted on drug charges. Prior to trial, the state filed the DFS analysts certificates of analysis. At trial, the state introduced the certificates without calling the analysts as a witness. A Virginia statute, Code , authorized the admission of a duly attested certificate of analysis as evidence of the facts therein stated and the results of the analysis or examination referred to therein. Briscoe and Cypress both objected, arguing that the certificates were testimonial evidence and therefore precluded by the Confrontation Clause unless the state called the analysts who prepared them. The trial court in each case disagreed. The judge in Cypress s case found the certificate nontestimonial. In Briscoe s case, the judge relied on another Virginia statute, Code , which provided: The accused in any hearing or trial in which a certificate of analysis is admitted into evidence pursuant to shall have the right to call the person performing such analysis or examination as a witness therein, and examine him in the same manner as if he had been called as an adverse witness. Such witness shall be summoned and appear at the cost of the Commonwealth. The trial court concluded that this law adequately protected Briscoe s confrontation rights. Neither Briscoe nor Cypress called the forensic analyst. Briscoe and Cypress both were convicted and sentenced to prison. In a consolidated appeal, the Virginia Supreme Court upheld admission of the certificates. The court ruled that even if the certificates did constitute testimonial evidence, Code satisfied the Confrontation Clause, because the defendants could have called the forensic analysts as witnesses, placed them under oath, and questioned them as adverse witnesses, meaning the defendants could have cross-examined them. The Confrontation Clause does not prevent states from requiring affirmative action by a defendant to assert the right, so long as the accused has an opportunity to cross-examine PREVIEW of United States Supreme Court Cases 165

14 the witness. The court further held that to any extent this statute imposed an evidentiary burden on Briscoe and Cypress, this argument raises due process concerns that are not properly before us in these appeals. Therefore, the court concluded, by failing to call the analysts as permitted under Code , Briscoe and Cypress waived any confrontation objection to the certificates. Briscoe and Cypress petitioned for a writ of certiorari to the U.S. Supreme Court. The Court granted the petition on January 29, Case Analysis This case affords the Supreme Court another opportunity to clarify its seminal Confrontation Clause decision in Crawford v. Washington, 541 U.S. 36 (2004). The Confrontation Clause provides In all criminal prosecutions, the accused shall enjoy the right to be confronted with the witnesses against him. In Crawford, the Court held that the Confrontation Clause precludes testimonial statements of a witness who did not appear at trial unless he was unavailable to testify, and the defendant had a prior opportunity for cross-examination. The Court made clear, however, that when the declarant appears for cross-examination at trial, the Confrontation Clause places no constraints at all on the use of his [or her] testimonial statements. Crawford altered about 25 years of preexisting confrontation jurisprudence and spawned a new family of issues. The Supreme Court resolved one of these issues last term in Melendez-Diaz v. Massachusetts, 129 S.Ct (2009), when it held that a certificate of forensic drug analysis is a testimonial affidavit subject to Crawford. The Court s decision in Melendez-Diaz thus put Virginia s law squarely in the spotlight: how far may states go to economize the presentation of often routine and unchallenged forensic evidence consistent with the Confrontation Clause? The state of Virginia argues that by making the analysts who prepared the certificates available to the defense as witnesses, the Virginia law provided exactly what the Confrontation Clause requires: an opportunity to cross-examine the state s witnesses at trial. In the state s view, it did not deny Briscoe and Cypress the right to confront the analysts; Briscoe and Cypress simply elected not to exercise that right and thus waived it. Briscoe and Cypress argue that the Supreme Court definitively resolved this issue in Melendez-Diaz when the Court concluded: Respondent asserts that we should find no Confrontation Clause violation because petitioner had the ability to subpoena the analyst. But that power whether pursuant to state law or the Compulsory Process Clause is no substitute for the right of confrontation the Confrontation Clause imposes a burden of the prosecution to present its witnesses, not on the defendant to bring those adverse witnesses into court. Its value to the defendant is not replaced by a system in which the prosecution presents its evidence via ex parte affidavits and waits for the defendant to subpoena the affiants if he so chooses. Briscoe and Cypress contend that the Virginia law functions the same as the subpoena practice rejected in Melendez-Diaz. Briscoe and Cypress stress that the Virginia law divorces the admissibility of the certificate of analysis from the defendant s cross-examination of the analyst: the state may present its evidence by ex parte affidavit and wait for the defendant to summon the affiant. Briscoe and Cypress thus argue that [t]his case is very simple: Melendez-Diaz clearly demands that the decision of the Supreme Court of Virginia be reversed. This result also is required by constitutional text and principle, according to Briscoe and Cypress. Unlike the Compulsory Process Clause, which protects a defendant s right affirmatively to produce evidence, the Confrontation Clause s text is phrased in the passive voice. Briscoe and Cypress thus contend that an opportunity for confrontation should not depend on the defendant s initiation. Indeed, Briscoe and Cypress argue, by burdening the defendant with producing the state s witness for cross-examination, the Virginia law blurs the presumption of innocence and the prosecution s burden of proof. Briscoe and Cypress identify practical implications of the Virginia law that they assert confirm this view of the confrontation right. For example, under Briscoe and Cypress s reading of the Virginia law, the state can require that the defendant present a prosecution witness during the defense case as a condition to the defendant s right of cross-examination. This condition may deter some defendants from exercising that right rather than risk that the jury believe the state s evidence carries the defendant s imprimatur. Briscoe and Cypress further observe that if a defendant does choose to call the state s witness, the defendant bears the risk of an adverse witness no-show: if the witness fails or refuses to appear, the accused is out of luck; the certificate is admitted and the accused has no opportunity at all to examine the witness. Briscoe and Cypress emphasize that nothing would cabin the Virginia law s procedure to drug cases and certificates of drug analysis. On the contrary, States would be free to present the testimony of any witness by affidavit and leave it to the accused, if he was able and if he dared, to call the witness to trial himself. The state counters that the Virginia Supreme Court construed this law to avoid the problems identified in Melendez-Diaz: the defendants could have insured the physical presence of the forensic analysts at trial by issuing summons for their appearance at the Commonwealth s cost, or asking the trial court or Commonwealth to do so. Magruder v. Commonwealth, 657 S.E.2d 113, (Va. 2008). The state thus characterizes the law instead as a notice and demand statute, where the state notifies the defendant of its intent to introduce a witness s affidavit, and the defendant demands production of the witness by the state or waives any objection to admission of the affidavit. The state accepts that a defendant has the right under the Virginia law to exclude the certificate of analysis if, on a timely request, the state fails to produce the witness. The Supreme Court approved of some notice and demand statutes in Melendez-Diaz. The state accordingly reframes Briscoe and Cypress s main argument as an order-of-proof complaint: that the state cannot sequence the evidence at trial in a manner that tactically disfavors the defendant. The state observes, however, that states historically have been given latitude to set their own rules governing the order of evidence, so long as those rules do not impair basic rights such as the opportunity to cross-examine a witness at trial. Confrontation, the state argues, does not entitle a defendant to dictate when that cross-examination 166 PREVIEW of United States Supreme Court Cases

15 happens. To any extent a burden of witness production may prejudice a defendant, that rule would violate due process, not the Confrontation Clause. Briscoe and Cypress never raised a due process claim. The state adds that Briscoe and Cypress s core confrontation concerns remain speculative, because Briscoe and Cypress never demanded that the state call the analysts. Accordingly, the Court only can hypothesize whether the state could have admitted the certificates without calling the analysts, or whether Briscoe and Cypress would have been forced to call the analysts to cross-examine them. The state identifies tactical and practical reasons why, if Briscoe and Cypress had demanded that the analysts testify, the state likely would have called them during its case. The state counsels against an advisory opinion. Finally, the state, along with the United States and several other states as supporting amicus, details how Briscoe and Cypress s rule would harm the criminal justice system by taxing limited trial and investigative resources and encouraging defense gamesmanship, without substantially enhancing the reliability of the trial process. Indeed, going beyond the state of Virginia, the amicus brief filed by several states challenges Melendez-Diaz itself, arguing that the Supreme Court should overrule Melendez-Diaz just one term after issuing the decision. Briscoe and Cypress respond that in other states the prosecution calls analysts before admitting certificates of analysis without the sky falling. Commonly, the defense stipulates to admission of the certificate. States alternatively can permit pretrial depositions or hire more analysts. States also can adopt a true notice-and-demand statute. Several states have such laws, including now Virginia Briscoe and Cypress note that Virginia has amended the law that governed their trials to resemble the type of notice-and-demand statute of which the Supreme Court approved in Melendez-Diaz. Significance Briscoe has generated some interesting speculation because the Supreme Court does appear to have resolved this issue in Melendez- Diaz. Professor James Duane, for example, has characterized this case as The Extraordinary Mystery of Briscoe v. Virginia. See Crim- Prof Blog (Aug. 18, 2009). Professor Duane observed that if a majority of the Court believed Briscoe is controlled by the holding in Melendez- Diaz, the Court could order a summary disposition that would vacate and remand the decision of the lower court for reconsideration in light of Melendez-Diaz. Yet, the Court has not. At the same time, the Supreme Court has declined an alternative opportunity to rule by summary disposition, in a manner suggested by the state. The state contends that the Virginia Supreme Court construed the Virginia law to function as a notice-and-demand statute, of which the U.S. Supreme Court approved in Melendez-Diaz. Since the U.S. Supreme Court is bound by the Virginia Supreme Court s construction of a Virginia statute, the state argues that the U.S. Supreme Court has no substantial federal question to review. The state thus argues that the Court may wish to dismiss the case as improvidently granted. Yet, the Court has not. Because the Supreme Court has declined these opportunities for a narrow disposition in Briscoe, Court watchers have questioned whether the Supreme Court may have something significant in mind. The mystery becomes exactly what it might be. The Supreme Court may view Briscoe merely as an opportunity to clarify precisely what kinds of notice and demand statutes will pass constitutional muster. Briscoe and Cypress in their original petition presented evidence that the federal and state courts are sharply divided on the question. The Court also noted in Melendez-Diaz, We have no occasion today to pass on the constitutionality of every variety of statute commonly given the notice-and-demand label. It suffices to say that what we have referred to as the simplest form [of] notice-and-demand statutes is constitutional. If the Court restricts its ruling in Briscoe to this issue, the Court could place responsibility for presenting a prosecution witness with the state, although this duty may be limited constitutionally by procedural rules requiring pretrial demand of the witness by the defense. But some have wondered whether the Supreme Court instead may do something rather unusual: overrule the one-year-old holding of Melendez-Diaz itself and declare that certificates of analysis no longer constitute testimonial evidence. Justice Kennedy wrote a vigorous dissent in Melendez-Diaz for himself, Chief Justice Roberts, and Justices Breyer and Alito. Calling the decision a windfall for defendants that transforms the Confrontation Clause from a sensible procedural protection into a distortion of the criminal justice system, Justice Kennedy opined: The Court purchases its meddling with the Confrontation Clause at a dear price, a price not measured in taxpayer dollars alone. Guilty defendants will go free, on the most technical grounds, as a direct result of today s decision, adding nothing to the truth-finding process. The states of Massachusetts and Indiana, in an amicus brief joined by 24 other states and the District of Colombia, attempt to prove these dissenters correct by arguing that Melendez-Diaz is already proving unworkable. A one-term about-face from the Supreme Court might seem like wishful thinking. Virginia itself does not invite the Court to overrule Melendez-Diaz perhaps the Virginia legislature s decision to amend Virginia s law to conform to Melendez-Diaz handcuffed the state s litigation strategies. But the Melendez-Diaz majority included Justice Souter, who retired after Melendez-Diaz was decided. Justice Souter s replacement, Justice Sotomayor, is an ex-prosecutor. Some therefore have questioned whether she will prove more receptive to the state s law enforcement concerns. Cf. L. Denniston, Is Melendez-Diaz Already Endangered?, SCOTUSBlog (June 29, 2009); Duane, supra. If Justice Sotomayor does agree with the dissent in Melendez-Diaz, and if she also agrees with the states as amicus that principles of stare decisis would not be upended by an outright reversal, perhaps Briscoe will produce a dramatic decision. A more modest overruling, however, might leave Melendez-Diaz s core holding intact, but target that part of the decision condemning subpoena rules. States as a result would have much greater flexibility to admit a certificate of analysis without having to call the analyst, while giving defendants the right to subpoena and cross-examine the analyst during the defense case. PREVIEW of United States Supreme Court Cases 167

16 Briscoe does present a bit of a mystery, because on one level it could result in a very narrow ruling too narrow perhaps even for full argument and a merits decision. But at the same time, Briscoe offers the prospect of something big that could uncover important signs about the Supreme Court s direction in the area of criminal law following Justice Sotomayor s installation on the Court. Oral argument, scheduled for January 11, 2010, may reveal a lot about the potential for this decision. Brooks Holland is an assistant professor of law at Gonzaga University School of Law in Spokane, Washington. He can be reached at bholland@lawschool.gonzaga.edu or Michelle Trombley is a third-year student at Gonzaga University School of Law who has contributed as a research assistant. PREVIEW of United States Supreme Court Cases, pages American Bar Association. Attorneys for the Parties For Petitioners Mark A. Briscoe et al. (Richard D. Friedman, ) For Respondent Virginia (Stephen R. McCullough, ) Amicus Briefs In Support of Petitioners Mark A. Briscoe et al. Public Defender Service for the District of Columbia (Timothy P. O Toole, ) In Support of Respondent Virginia Indiana et al. (Thomas M. Fisher, ) United States (Elena Kagan, Solicitor General, ) 168 PREVIEW of United States Supreme Court Cases

17 erisa When Is a Plan Administrator No Longer Entitled to Deference Under ERISA? CASE AT A GLANCE Xerox employees who had terminated their employment, received a lump-sum distribution of retirement benefits, and then later returned as employees, filed suit against the plan administrator of their ERISA pension plan. The employees alleged that the administrator incorrectly calculated their benefits by offsetting not only the amount of the previous distribution but also the hypothetical earnings that the accrued benefit would have earned if it had remained in the plan. The Second Circuit held that the reduction in benefits violated ERISA. Conkright et al. v. Frommert et al. Docket No Argument Date: January 20, 2010 From: The Second Circuit by Jayne Zanglein and Matthew Lenihan Western Carolina University ISSUES Must a court defer to a plan administrator s interpretation of plan terms even if the administrator s original decision was a violation of the Employee Retirement Income Security Act (ERISA) and an abuse of discretion? Is a district court s choice of equitable remedy (either to remand to the administrator or to craft its own equitable remedy) reviewable for abuse of discretion? FACTS This suit has a tortured history that spans ten years, two appeals, two remands, and the deaths of several plaintiffs. Former Xerox employees retired and received a lump sum distribution from the Xerox Retirement Income Guarantee Plan. They returned to work at Xerox and later retired a second time. The employees filed suit in district court alleging that benefits payable to them upon their second retirement had been significantly reduced due to an improper and illegal offset. Specifically, the employees contended that the method of calculating those benefits had never been communicated to them properly, and that it was illegal under ERISA. After emerging from their first retirement, 104 employees were rehired by Xerox and became active participants in the plan, which had been revised in This version of the retirement plan, the 89 Plan, made only vague references regarding the method to be used in calculating the value of pension benefits for employees who had previously received distributions. The 89 Plan stated that the amount [employees] receive may also be reduced if [they had] previously left the Company and received a distribution at that time. The plan offered no explanation as to precisely how such a deduction based on prior distributions would be calculated. Furthermore, and in contrast to those terms, the accompanying summary plan description (SPD), which had been distributed to employees, provided that the pension benefit can never be less than that specified by the [plan] formula. Upon the employees second retirement, the plan administrator, applying a formula that had not been expressed in the 89 Plan, calculated their eligible benefits as the difference between the current value of their pension less the previous lump-sum distribution amount adjusted for hypothetical investment gains. The use of hypothetical investment gains, which became known as a so-called phantom account, effectively lowered the value of the employees second retirement benefit because it took into account not only the previous distribution, but also the amount of hypothetical gains the employees would have earned had they remained participants in the plan. In 1998, the plan was amended to expressly include the phantom account formula. Although the employees were never parties to the revised plan, the Xerox plan administrator nevertheless used the phantom account method to calculate the value of pension benefits due the employees at their second retirement. The employees then filed suit alleging that they had never been notified of such a method, and that the phantom account formula itself constituted a retroactive cut-back of retirement benefits in violation of ERISA. CASE ANALYSIS The district court initially granted summary judgment in favor of the plan. The plan administrator appealed. The Second Circuit held that the employees had not been properly notified of the newly amended phantom account provision of the plan in violation of ERISA 102(a), which states that a summary plan description of any employee benefit plan shall be furnished to participants and written in a manner calculated to be understood by the average plan participant, and shall be sufficiently accurate and PREVIEW of United States Supreme Court Cases 169

18 comprehensive to reasonably apprise such participants and beneficiaries of their rights and obligations under the plan. The phantom account provision had not been added to the plan until 1998, and the employees to the suit had been rehired prior to the effective date of the new amendment. The Second Circuit held that [t]he prolonged absence of any mention of the phantom account from Plan documents likely led plan participants to believe that it was not a component of the Plan. Rather, rehired employees likely believed that their past distributions would only be factored into their benefits calculations by taking into account the amounts they actually received. Frommert et al. v. Conkright et al., 433 F.3d 254, at 267 (2d Cir. 2006). In this regard the court relied on another Second Circuit case, Layaou v. Xerox Corporation, 238 F.3d 205 (2d Cir. 2001), that involved the same Xerox plan. In that case the court had found that Xerox s interpretation of Plan terms to allow for implementation of the phantom account offset was unreasonable due to non-disclosure. The Second Circuit remanded the case back to the district court with instructions to craft an equitable remedy. The district court invited the parties input on the proper remedy. The plan administrator urged the court to either remand the case to the administrator or to defer to administrator s suggested method of offset. Instead, the district court ruled in favor of the plaintiffs and instructed the administrator to pay the benefits without regard to the phantom account. The plan administrator appealed. In the second appeal, the Second Circuit concluded that the phantom account offset mechanism constituted a retroactive cut-back of anticipated pension benefits in violation of ERISA Section 204(g), which states that a defined benefit plan shall be treated as not satisfying the requirements of [ 204] if the participant s accrued benefit is reduced on account of any increase in his age or service. Xerox s use of the phantom account had also been rejected by both the Ninth Circuit in Miller v. Xerox Corp. Ret. Income Guarantee Plan, 464 F.3d 871 (9th Cir. 2006), and the Seventh Circuit in Berger v. Xerox Ret. Income Guarantee Plan, 338 F.3d 755 (7th Cir. 2003). In Berger, the Seventh Circuit held that the Xerox retirement plan administrator s use of the phantom account violated substantive benefit accrual and vesting requirements with respect to the way the Plan determined lump sum benefits payable. The Second Circuit further held that the district court had not exceeded its allowable discretion when it rejected the administrator s post hoc alternative methods of calculation and refused to remand the claim to the administrator. It based this holding on the plan administrator s failure to find any authority in support of the proposition that a district court must afford deference to the mere opinion of the plan administrator in a case, such as this, where the administrator had previously construed the same terms and [the Court] found such a construction to have violated ERISA. Frommert, 535 F.3d 111, at 119. The Second Circuit noted that in Miller v. United Welfare Fund, 72 F. 3d 1066, at 1071 (2d Cir. 1995), it had held that remand should be granted to a plan administrator when reasonable minds differ as to the outcome of the case. However, the court noted that in Miller, remand had been granted to the administrator to facilitate an extensive finding of facts, and that no such fact-finding was necessary in Frommert. The Second Circuit remanded the case to the district court. Due 170 to the ambiguity of the plan terms, and in light of the federal common law doctrine of contra proferentem that calls for ambiguous terms to be construed against the drafter and in favor of the beneficiary, Lifson v. INA Life Ins. Co. of N.Y., 333 F.3d 349, at 353 (2d. Cir. 2003), the Second Circuit suggested that the district court craft a remedy using equitable principles. On the second remand, the district court again faced difficulty in crafting a remedy due to the ambiguous terms of the 89 Plan, which was unclear as to how a determination of benefits would be calculated in situations is which employees had previously received a distribution. The district court opined that describing the procedure to be utilized prior to the 1998 amendments as ambiguous is generous. In fact, virtually nothing is set forth in either the Plan or the SPD as to the precise mechanism for taking into account a prior distribution in calculating an employee s present benefits after a rehire. Frommert v. Conkright, 472 F. Supp. 2d 452, at 457 (W.D.N.Y. 2007). Section 9.6 of the 89 Plan provided only that [i]n the event any part or all of a Member s accrued benefit is distributed to him prior to his Normal Retirement Date and such Member at any time thereafter recommences active participation in the Plan, the accrued benefit of such Member based on all Years of Participation shall be offset by the accrued benefit attributable to such distribution. The district court concluded that the appropriate remedy for employees hired before the 1998 amendment was to direct the plan administrator to pay each of these individuals a lump sum in the amount of the difference between the amount of benefits that [an employee] has received, and the amount of the recalculated benefit, without any consideration of a phantom account. In so doing, the district court recalculated the value of the pension benefits, interpreting the plan s accrued benefit term as meaning the nominal value of the lump-sum distribution the amount actually received despite the plan administrator s interpretation of that term as meaning the actual amount distributed plus hypothetical investment gains. This method used by the district court to calculate benefits without use of the phantom account is precisely how the Second Circuit awarded benefits in Layaou. On petition for writ of certiorari, the plan administrator argued for the first time that the district court did not have the authority to interpret the terms of the plan, and that it should have deferred to the plan administrator to interpret and apply the terms of its own plan. The plan administrator relied on the law of trusts, which generally allows courts to disregard a trustee s discretionary authority only where the trustee s conduct is marred by fraud, bad faith, or the like circumstances that no one contends are present here. The plan administrator noted that the U.S. Supreme Court has recognized that courts should not ordinarily control a trustee s discretion where there is no mala fides (i.e., bad faith). (quoting Colton v. Colton, 127 U.S. 300, (1888)). The administrator also stated that numerous other decisions likewise held that trustees who erroneously but in good faith interpret the terms of trust instruments may not be stripped of discretion. SIGNIFICANCE Frommert is destined to become the third case in a trilogy of ERISA standard-of-review cases the Firestone trilogy as future courts and scholars may call it. PREVIEW of United States Supreme Court Cases

19 Discretionary Review v. De Novo Review In Firestone, the Supreme Court relied on trust law to adopt de novo review as the default standard of review absent the delegation of discretionary authority to the administrator. In the last few years, however, appellate courts have become increasingly willing to voice their frustration with trial judges who claim to review an administrator s decision de novo but, in reality, are applying an abuse of discretion standard of review. An example of this concern can be found in Niles v. American Airlines, Inc., 269 Fed. Appx. 827, 833 (10th Cir. 2008), in which the Tenth Circuit held that that language in the district court s opinion raises a troubling possibility that while ostensibly conducting de novo review, the district court may have improperly deferred to the [administrator s] decision. Part of this confusion stems from the Supreme Court s choice of words in Firestone. De novo review is a misnomer; it is an independent decision rather than an actual review. In Krolnik v. Prudential Ins. Co., 570 F.3d 841, 843 (7th Cir. 2009), Judge Easterbrook stated that [W]hat Firestone requires is not review of any kind; it is an independent decision rather than review that Firestone contemplates. De novo review is therefore less attractive to plan fiduciaries who want reviewing courts to uphold their administrator s decision. After the Supreme Court issued Firestone, trustees throughout the country amended their plans to grant discretion to the plan administrator so as to avoid this nondeferential standard of review. This grant of discretion triggers the deferential abuse of discretion standard, whereby the court only reviews the administrator s decision to determine if it was arbitrary or capricious. In Metropolitan Life v. Glenn, 128 S. Ct (2008), the second case in the Firestone trilogy, the Supreme Court had the opportunity to adopt de novo as the default standard of review to be used in conflict of interest cases. However, the Court refused to do so and instead adopted the combination of factors approach to a deferential standard of review under which a court takes the administrator s conflict into account as one of a combination of factors in determining whether the administrator abused its discretion. In a dissenting opinion, Justices Scalia and Thomas criticized this gestalt reasonableness standard as nothing but de novo review in sheep s clothing. Now in Frommert, the likely contender to complete the Firestone trilogy, the Supreme Court is once again asked to adopt de novo review, this time in the context of a plan administrator s decision that was flawed in two respects: the administrator abused its discretion in interpreting the plan, and the implementation of that decision also violated ERISA. In the Court s decision in Glenn, Justices Scalia and Thomas addressed this potential issue and would have relied on the Restatement (Second) of Trusts 187 to allow de novo review where the trustee had discretion but abused it. 128 S. Ct. at According to the 187 comments, an abuse of discretion occurs, among other reasons, when a trustee acts with an improper motive or unreasonably. An example of an improper motive would be when the trustee acts from a motive other than to serve the purposes of the trust or to further its own interest rather than the beneficiaries interests. A trustee acts unreasonably when his decision is substantively unreasonable either with regard to his exercise of a discretionary power or with regard to his assessment of whether the preconditions to that exercise have been met. As the Pension Rights Center points out in its amicus brief, corporate managers are in a position to influence the plan administrator who serves at the pleasure of corporate executives. In Frommert, the plan administrator, who interpreted the plan on remand so as to save Xerox $20 million, was an at-will Xerox employee. In Frommert, it appears that both types of abuse took place. The administrator acted to curtail Xerox s expenses, not to enhance the beneficiaries retirement security, and thus acted on an improper motive. In addition, the administrator acted unreasonably when as a precondition to its benefit determination, it interpreted the plan as requiring an offset of the phantom amount. A factor that a court might consider in determining whether the administrator acted unreasonably would be the definiteness of an independent standard by which to judge the reasonableness of the decision. In this case, the plan was either silent or ambiguous as to the calculation of the offset, leading the court to conclude that the administrator s decision was unreasonable. This comports with the majority of courts that have held that when reviewing a plan administrator s decision that constitutes a statutory violation, such as a breach of fiduciary duty or a violation of the anti-cutback rules, the court must apply a de novo standard of review. The logic underpinning these cases is that the existence of a statutory violation is a question of law to be reviewed de novo. In addition, some courts have held that flagrant procedural irregularities in the claims process or evidence of a serious breach of fiduciary duty to plan participants will trigger de novo review. A majority of courts have also held that where a plan administrator fails to make a decision, de novo review is appropriate. This conclusion is based on ERISA claims regulations that provide that if the administrator does not timely make a decision on a benefit claim, the claim is deemed denied. If the claim is deemed denied then there is no administrator s decision to which the court can defer. Deference or Mandatory Remand to the Plan Administrator? If the Supreme Court holds that a district court must continue to defer to a plan administrator s interpretation of the plan even when it is flawed and contradicts ERISA, many observers fear that administrators will be able to deny benefits with impunity. No incentive will exist for a plan administrator to get its decision right the first time. Xerox, however, argues that a run-of-the-mill mistake should not justify stripping the Plan Administrator of discretion to construe the remaining terms of the Plan on remand. Xerox argues that deferential review allows the administrator to ensure that benefits are paid to truly deserving beneficiaries implying that some beneficiaries (long-term loyal employees) are more deserving than others (disloyal employees who leave Xerox and return when convenient and try to get a windfall ). There is a similar concern that if the remedy for an abuse of discretion and breach of statutory duties were for the reviewing court to remand the case back to the same plan administrator who made the unreasonable decision, then the administrator again would have no incentive to act reasonably. In its amicus brief, the Pension Rights Centers states: It would be unprecedented for this Court to rule that a federal court is obligated to defer to a private party who violates statutory obligations and then proposes to remedy PREVIEW of United States Supreme Court Cases 171

20 those violations by filling in omitted or statutorily-invalid terms with rules that are financially advantageous to that party s employer, and here, very similar to the ones that caused the violations in the first place. The National Employment Lawyers Association (NELA) agrees, stating that judicial deference in this context would encourage plan administrators to take extreme or experimental positions during the claim process, confident that if these positions are ultimately found to be arbitrary and capricious, the court will be required to defer to a subsequent interpretation. Nor, it says, should a court be required to defer to a plan administrator s newly-minted determination reached outside the claim process. In the words of the respondents: Such rerun deference undermines benefit security and increases, rather than decreases, the cost of plan administration. In addition, serial deference runs counter to the federal common law doctrine of contra proferentem under which ambiguous contractual terms are construed against the drafter. If an administrator is given a potentially unlimited number of bites at the interpretation apple, then, the U.S. Solicitor General s amicus brief notes, there would be no incentive to write clear documents. Instead, the Xerox employees say, administrators would be encouraged to enter a race to the bottom. This case may also give the Supreme Court an opportunity to explain when remand to the plan administrator is appropriate. Typically, courts remand to the administrator when issues underlying the benefits determination are undecided. For example, remand is appropriate where the administrator needs to review new evidence, apply a new standard articulated by the court, adequately explain the grounds for its decision, or fix a faulty claims process. Where, however, the record is clear as to the amount of benefits owed to the participant or where the administrator s decision is an abuse of discretion, remand to the administrator may serve no purpose but to prolong the case. As NELA observes, remand to the administrator for a do-over on the interpretation issue will not yield any benefits for subsequent litigation. Economic Impact The Business Roundtable and the National Association of Manufacturers filed a joint amicus brief contending that the lower court s rulings eviscerate the ability of plan administrators to manage plans equitably and gut ERISA s goal of nationwide uniformity. This they say is especially true with respect to a national employer like Xerox. For example, in reviewing the terms of the same provisions in the same Xerox plan at issue in this case, the Ninth Circuit and the Seventh Circuit reached the opposite conclusion from that reached by the Second Circuit. According to the Ninth and Seventh Circuits, the administrator did not abuse its discretion in applying the offset. The Business Roundtable predicts that such irreconcilable results will discourage employers from providing retirement benefits especially since ERISA plans are going the way of the dinosaur. In contrast, Richard Capone, the former head of UBS AG in the Americas rejects the arguments made by the Business Roundtable. Capone contends that Xerox did not compete fairly in the marketplace when it lured former employees back to the company with the promise of excellent retirement benefits that they never intend to fulfill. If the Supreme Court were to reward a dishonest employer such as Xerox, Capone argues, the consequences to the American labor market would be disastrous. He cites as evidence the trend in state laws to ban discretionary clauses in some insurance plans. Instead, Capone argues, the Supreme Court only should reward employers who maintain well-written and transparent plans by deferring to the administrator s decision. As amici law professors state, the participants do not have the luxury to wait until the plan administrator finally gets it right, especially since some of the plaintiffs have died during this protracted litigation. Ten years is a long time to wait for retirement benefits, especially when the average life expectancy of a retiree averages fifteen years. Perhaps the Supreme Court will take this factor into consideration when deciding whether to defer to the plan administrator s decision. Jayne Zanglein teaches business law at Western Carolina University in Cullowhee, North Carolina, and is the co-author of ERISA Litigation, a treatise on employee benefits litigation. She can be reached at jzanglein@ .wcu.edu or Matthew Lenihan graduated is a business administration and law graduate of Western Carolina University. PREVIEW of United States Supreme Court Cases, pages American Bar Association. ATTORNEYS FOR THE PARTIES For Petitioners Sally L. Conkright et al. (Robert D. Wick, ) For Respondents Paul J. Frommert et al. (Peter K. Stris, ) AMICUS BRIEFS In Support of Petitioners Sally L. Conkright et al. Business Roundtable, et al. (Jeffrey A. Lamken, ) Chief Actuaries (Sri Srinivasan, ) ERISA Industry Committee and American Benefits Council (Christopher Landau, ) In Support of Respondents Paul J. Frommert et al. AARP (Mary Ellen Signorille, ) Janice C. Amara et al. (Stephen R. Bruce, ) Richard C. Capone (Rishi Bhandari, ) Law Professors (Paul M. Secunda, ) National Employment Lawyers Association (Jeffrey Greg Lewis, ) United States (Elena Kagan, Solicitor General, ) 172 PREVIEW of United States Supreme Court Cases

21 International Law Does an Order Not to Remove a Child from a Country Without Permission from the Noncustodial Parent Create a Right of Custody? CASE AT A GLANCE In this case a Chilean court order directed that a child not be allowed to leave Chile without the permission of the father or the court. The question is whether this order gives the father a right of custody allowing him to file a petition under the 1980 Hague Convention on the Civil Aspects of International Child Abduction. The Fifth Circuit held that it did not and the United States Supreme Court, at the urging of the State Department, has agreed to review the decision. Abbott v. Abbott Docket No Argument Date: January 12, 2010 From: The Fifth Circuit by Robert G. Spector University of Oklahoma Law Center Issue Whether a ne exeat clause (that is, a clause which prohibits one parent from removing a child from the country without the other parent s consent) confers a right of custody within the meaning of the Hague Convention on the Civil Aspects of International Child Abduction? FACTS Petitioner Timothy Mark Cameron Abbott, a British citizen, married respondent Jacquelyn Vaye Abbott, a United States citizen, in England in Mr. Abbott s work took the couple to Hawaii, where their son A.J.A. who is a citizen of both the United States and the United Kingdom was born in After a three-year stay in the Canary Islands, the family moved to Chile, where Mr. Abbott had accepted a new job. In March 2003, the couple separated and custody of the child was litigated in the Chilean courts. The Chilean family courts granted respondent, Ms. Abbott, daily care and control of A.J.A. and accorded petitioner, Mr. Abbott, direct and regular visitation rights, including a full month of summer vacation. The courts also entered, at respondent s request, a ne exeat order that prohibited either parent from removing A.J.A. from Chile without the other s consent. Due to visa restrictions in Chile, respondent was unable to work, or lease an apartment and did not receive timely support payments from the petitioner. In August 2005, respondent, Ms. Abbott, removed A.J.A. from Chile without petitioner s consent. At the time, petitioner was seeking to expand his rights with respect to A.J.A., and several motions were pending before the Chilean family court. Subsequently, petitioner hired a private investigator and located his son in Texas. Petitioner commenced an action in the District Court for the Western District of Texas in May 2006, seeking to have the child returned to Chile pursuant to the Hague Convention on the Civil Aspects of International Child Abduction and its implementing statute, the International Child Abduction Remedies Act. The district court denied relief. The court acknowledged that respondent s removal of A.J.A. without petitioner s consent violated and frustrated the Chilean court s order. The court concluded, however, that the removal was not wrongful within the meaning of the convention because petitioner s, Mr. Abbott s, ne exeat right did not constitute a right of custody under the convention. The court of appeals affirmed. It observed that the circuits are divided on the question of whether a ne exeat right constitutes a right of custody for purposes of the convention. The court of appeals noted that foreign courts also disagree regarding whether ne exeat rights are rights of custody within the meaning of the Hague Convention. Adopting the Second Circuit s analysis in Croll v. Croll, 229 F.2d 133 (2nd Cir. 2000), the court of appeals held that petitioner, Mr. Abbott, was not entitled to have the child returned to Chile, because the ne exeat right is only a partial power that gives him a veto over A.J.A. s country of residence, but not a right to determine where in Chile his child would live. The court also emphasized the Chilean courts grant of physical custody to respondent and determined that petitioner possessed only rights of access, not rights of custody. Under the convention, the court concluded, petitioner s access rights could not provide a basis for ordering the return of the child to Chile. One interesting aspect of this case is that Justice Sotomayor, when she sat on the Second Circuit, dissented in the Croll case. She will now have an opportunity to review the issue from the perspective of the Supreme Court. PREVIEW of United States Supreme Court Cases 173

22 Background The Hague Conference on Private International Law is a global, intergovernmental organization, whose mission as set forth in its statute, an international treaty, is to work for the progressive unification of the rules of private international law. Statute of the Hague Conference on Private International Law, (15 July 1955), Article 1, T.I.A.S. No. 5710, 2997 U.N.T.S. 123, text available at: The principal method used to achieve this consists of the negotiation and drafting of multilateral treaties or conventions in the different fields of private international law. One of these conventions is the Hague Convention of October 25, 1980, on the Civil Aspects of International Child Abduction which entered into force in December There are currently 81 states parties to the convention (referred to as states). T.I.A.S. No. 11,670 at 1, U.N.T.S. at 98,reprinted in 5 1 Fed. Reg. 10,493 (1986). The convention came into force (that is, took effect) for the United States in July 1988 when Congress enacted the International Child Abduction Remedies Act (ICARA), 42 U.S.C et seq. The purpose of the Convention is to protect children from abductions by requiring that the abducted-to country return the child to the abducted-from country if the requirements of the convention are met. The convention requires the return of children, who are under 16 years-old, to the state from where they were taken. The state then determines issues of custody and visitation. Either state or federal courts have jurisdiction to hear the return petition. In order to obtain a return order, the petitioner must prove that (1) the child was abducted from, or prevented from returning to, the state of the child s habitual residence; (2) the petitioner had a right of custody under the Convention; and (3) the petitioner was actually exercising those rights, or would have exercised those rights but for the abduction. There are a number of defenses to a return order. For example, the abducted-to state need not return the child if more than one year has elapsed between the abduction, or retention, and the filing of the petition for return and the child is settled in the child s new environment, or if the child objects to being returned and has attained an age and maturity where it is appropriate to take account of the child s views, or if the child would be subjected to a great risk of psychological or physical harm if returned. None of the defenses are at issue in this case. What is at issue in the case is whether the ne exeat order gave petitioner a right of custody under the convention. If it did, then the United States is obliged under the convention to return the child to Chile. If it did not, the child may remain in the United States with the child s mother. There is a conflict between the circuit courts on this issue. Prior to the Abbott decision, three courts concluded that a ne exeat right is not a custody right. See Fawcett v. McRoberts, 326 F.3d 491, 500 (4th Cir.), cert. denied, 540 U.S (2003); Gonzalez v. Gutierrez, 311 F.3d 942, (9th Cir. 2002); Croll v. Croll, 229 F.3d 133, (2d Cir. 2000), cert. denied, 534 U.S. 949 (2001). The Eleventh Circuit, has reached the opposite conclusion. Furnes v. Reeves, 362 F.3d 702, 720, cert. denied, 543 U.S. 978 (2004). The State Department and the Hague Conference on Private International Law submitted amicus briefs in support of the petitioner, Mr. Abbott. A number of other organizations, including some prevention of domestic violence organizations, filed on behalf of the respondent. CASE ANALYSIS Article 3 of the convention provides that [t]he removal or the retention of a child is to be considered wrongful, thereby triggering the automatic return remedy, when the removal or retention occurs in breach of rights of custody attributed to a person either jointly or alone. Article 5 defines rights of custody to include rights relating to the care of the person of the child, and in particular, the right to determine the place of the child s residence. Rights of access, or visitation, include the right to take the child for a limited period of time to a place other than the child s habitual residence. The petitioner argues that to construe a ne exeat clause as a right of custody is within the purpose of the convention. The convention, according to petitioner, is concerned with attempts to remove children to other countries, not with how parental rights operate within the borders of a single country. Thus, it was designed to provide a remedy not for whether a child may live in one place or another within a country, but for whether the parent should be able to take the child across international borders. Even if the term place of residence is construed more narrowly as a specific address or city, rather than as a country the parent holding the ne exeat right still has the power to determine the specific place where the child will live whenever the other parent seeks to live with the child outside the child s country of habitual residence. This is because the parent holding a ne exeat right enjoys the power not only to deny consent to the child s moving abroad, but also the power to grant consent subject to whatever conditions he chooses including the city or even the specific place outside of the country in which the child will live. Thus, argues petitioner, Mr. Abbott s ne exeat right gives him a significant say in the culture in which his child is raised, the languages that his child will speak, or the kinds of schools that he will attend. Respondent, Ms. Abbott, however, argues that the term rights of custody does not substantively expand what constitutes a right of custody under the law of the state of the child s habitual residence. Rather, argues respondent, the term describes rights of custody as generally known at the time of the drafting of the convention to distinguish it from rights of access or visitation. At the time of the drafting of the convention, the term custody had generally become to be understood as a complex of rights, duties, and powers with regard to the person of the child. This complex of rights included a variety of concrete rights including choosing the child s residence. Respondent argues that the phrase shall include cannot be read in isolation to depart from the normal meaning of the term custody. At best it gives the parent with access a veto over the removal of a child. A ne exeat clause, claims the respondent, therefore only protects the petitioner s right of access and therefore cannot be a right of custody. In addition, respondent points out that the third requirement for returning a child is that the left-behind parent actually exercises such rights prior to the removal or retention. Rights of custody are, therefore, those things that can actually be exercised by the parent who is charged with the care of the child. The requirement of actual exercise, according to the respondent, makes little sense in the context of a ne exeat order since a ne exeat clause cannot be exercised prior to the removal or retention of a child. Thus, respondent argues, a ne exeat right cannot be a right of custody since it cannot be exercised independently of the removal or retention. 174 PREVIEW of United States Supreme Court Cases

23 Since the text of the convention does not authoritatively answer whether a ne exeat clause confers a right of custody, both parties utilize sources beyond the four corners of the convention to support their arguments. Petitioner argues that the postconvention understanding of the parties illustrates that ne exeat clauses are to be considered rights of custody. Periodically the Hague Conference on Private International Law convenes a Special Commission to consider the working of a particular convention. Petitioner notes that the first Special Commission in 1989 cited with approval an Australian example finding that the right of custody protected by the convention included one parent having the right to be consulted and to give or refuse consent before the child was permanently removed from Australia. The 1993 Special Commission came to the same conclusion in rejecting a French trial court decision that ne exeat rights do not constitute a right of custody. Petitioner also argues that practically all of the states which have considered this issue in their judicial system find a ne exeat clause to be a right of custody. The petitioner points to cases in England, Israel, South Africa, Ireland, Austria, and Germany that have reached this conclusion. This argument is important because consistent interpretation of a convention is a goal for uniform implementation of the convention. The only country that appears to rule to the contrary is Canada. The petitioner dismisses the Canadian decisions because, according to petitioner, the statements concerning the ne exeat problems are only dicta. Finally, petitioner argues that the negotiating history (Travaux Préparatoires), of the convention indicates that the drafters intended to include a ne exeat clause as a right of custody. One of the earliest questionnaires sent to states participating in the negotiations identified the ne exeat problem as a potential issue to be covered in the convention. Petitioner points out that no state objected to treating the ne exeat issue any differently than other examples pointed out in the questionnaire, all of which constitute clear examples of child abduction. During the diplomatic session, the Canadian delegation sought to insert a provision specifically protecting ne exeat rights. The petitioner points to statements made by the Dutch delegation, as well as by the Commonwealth observer, in the discussion of the Canadian proposal, that such cases were already included under the convention, so there was no need to specifically mention them. There was also no objection to indicate that the comments of those delegations were in error. The respondent disagrees with all the arguments raised by the petitioner concerning the external-convention evidence. Respondent notes that not a single state in response the questionnaire identified a ne exeat order as a problem involving a right of custody. The respondent takes a quite different view of the Canadian proposal than petitioner. Respondent suggests that the defeat of the Canadian proposal, rather than indicating that ne exeat rights were already covered in the convention, clearly indicates that the drafters did not intend to include ne exeat rights as a right of custody. The opinion of the Commonwealth is dismissed as simply the views of an observer who did not even have the right to vote at the meeting. In addition, the respondent argues that the purpose of a ne exeat order is to protect the jurisdiction of a court that is deciding a custody case. Because such orders operate to protect the court s jurisdiction, they operate without regard to the relationship between the parties, or between the parties and the child. Thus recognizing ne exeat rights under the convention would turn the convention into one that would recognize the jurisdiction of the court issuing the ne exeat order. This, the respondent notes, was specifically rejected by the delegates that drafted the convention. In particular, the respondent notes that the State Department indicated, at the time, that ne exeat orders have only the purpose of preserving the jurisdiction of the state in the custody matter and protecting the visitation rights of one parent. Respondent argues that including ne exeat rights as rights of custody would subvert the purpose of the convention. The convention was designed to prevent parents who were not custodians from taking the child to a forum that would alter existing custodial right. It was not designed to prevent parents who hold custodial rights from moving from one country to another. If ne exeat rights are to be considered as a right of custody, respondent claims, the child would be returned to a person who does not have care of the child, since there is no guarantee that the leaving parent would be able to return to the country of origin. This disrupts the convention s purpose of maintaining existing custodial arrangements and frustrates the operation of the convention. Finally respondent argues that the State Department brief is entitled to no deference since it has taken different positions at different times on the effect of a ne exeat order. SIGNIFICANCE The case has great significance for our relationship with our treaty partners under the convention. In matters of treaty interpretation, it is important that the United States speak with one voice, rather than with a multiplicity of interpretations. Treaty partners are entitled to know the position of the United States on a particular issue, and not just the Eleventh Circuit s, or the Second Circuit s, position. In that sense, it is less important how the ne exeat issue is decided than it is that the issue simply be decided. From a substantive point of view, the resolution of the issue will primarily affect the disposition of return proceedings of children that have been brought into the United States from other countries. If the petitioner prevails, then more children brought into the United States will be returned. Unlike the United States, many countries have ne exeat clauses that are part of their statutory framework for custody cases. Therefore more children will be covered by such clauses thereby giving the left-behind parent the ability to bring a return action in the United States. This will have the benefit of allowing the merits of the child s move to be decided by the state with the greatest connections to the child and the parents. On the other hand, if the respondent prevails, then fewer children will be returned from the United States. This will allow greater freedom for the parent with primary care for the child to choose the county the parent believes is best for both the child and the primary custodial parent, a consideration which underlies many of the relocation cases in the United States. The case should have little impact on the problems of children that are taken from the United States to another country. To the extent the child is taken to one of the countries that recognizes a ne exeat clause PREVIEW of United States Supreme Court Cases 175

24 as constituting a right of custody under the convention, family law attorneys are well aware of those countries and will seek to include a ne exeat clause to protect the parent who does not have primary care for the child. If petitioner prevails, it is possible other countries, when faced with the issue, will decide it the same way. That might lead to an increase in the use of such clauses in the United States in the hope that it might lead to an increased return of children to this country. Robert G. Spector is the Glenn R. Watson Chair and Centennial Professor at the University of Oklahoma Law Center in Norman, Oklahoma. He consulted briefly with the petitioner in this case. He has been a member of the United States delegations to the Hague Conference on Private International Law for the family law treaties. Any views expressed here do not necessarily represent the view of the State Department or the United States government. He can be reached at rspector@ou.edu or PREVIEW of United States Supreme Court Cases, pages American Bar Association. Attorneys for the Parties For Petitioner Timothy Mark Cameron Abbott (Amy Howe, ) For Respondent Jaquelyn Vaye Abbott (Karl E. Hays, ) Amicus Briefs In Support of Petitioner Timothy Mark Cameron Abbott California (Edmund G. Brown Jr., ) Permanent Bureau of the Hague Conference on Private International Law (Stephen J. Cullen, ) United States (Elena Kagan, Solicitor General, ) In Support of Respondent Jaquelyn Vaye Abbott Delegates Lawrence H. Stotter et al. (E. Joshua Rosenkranz, ) Domestic Violence Legal Empowerment & Appeals Project et al. (Leonard O. Evans, ) Eleven Law Professors (Carol S. Bruch, ) University of Cincinnati College of Law Domestic Violence and Civil Protection Order Clinic (Margaret Bell Drew, ) In Support of Reversal National Center for Missing and Exploited Children (Benjamin S. Halasz, ) S&W International ChildFind Program et al. (Barry S. Pollack, ) In Support of Neither Party Reunite International Child Abduction Centre (Robert A. Long Jr., ) 176 PREVIEW of United States Supreme Court Cases

25 antitrust Is the NFL a Single Entity and Therefore Exempt from Antitrust Liability? CASE AT A GLANCE For twenty years, American Needle, Inc., held a license from the National Football League Properties LLC (NFLP) to produce and sell headwear adorned with the logos and trademarks of teams within the National Football League (NFL). In 2001, NFLP granted an exclusive license to Reebok International Ltd. to produce NFL headwear for ten years, effectively ending American Needle s license. American Needle responded by bringing an antitrust suit against the NFL, NFLP, each of the NFL teams, and Reebok. American Needle, Inc. v. National Football League et al. Docket No Argument Date: January 13, 2010 From: The Seventh Circuit by Jeffrey Standen Willamette University College of Law ISSUES Are the NFL and its member teams a single entity that is exempt from the rule of reason claims under Section 1 of the Sherman Act? Do the NFL member clubs function as a single entity in collectively licensing and marketing their identifying trademarks? FACTS The NFL is an unincorporated association of independently owned football teams. Although the number of teams has fluctuated over the past eight decades, the NFL is currently made up of thirty-two teams. Each of these teams together produce a series of games (called a season) that totals more than 250 football contests. The season ends with a playoff tournament and the Super Bowl, the league championship game. All these contests are produced through coordinated activity of the member teams. The contests cannot take place without a significant measure of cooperation between the teams. As a result, the success of each of the individual teams is necessarily tied to the success of the league as a whole. Teams share costs and revenue, while contributing funds to help provide stadiums for each of the teams. Although the NFL consists of independently owned teams, the NFL makes decisions regarding production and promotion of the league and the games themselves. The NFL also determines the schedule, establishes the game rules, administers the code of conduct for players and team officials, and regulates the sale and location of franchises. Although the member teams own the rights to their intellectual property, the league controls the teams colors and mascots and must approve any changes. For over forty years the NFL member clubs have promoted their product jointly. In 1963, the NFL teams formed NFLP, a separate corporate entity. NFLP was given the responsibility of developing, licensing, and marketing the intellectual properties of each team, including the teams logos and trademarks. NFLP was also responsible for creating and promoting advertisement campaigns on behalf of the NFL and its member teams. To further accomplish this goal, the NFL teams granted to NFLP the authorization to grant licenses to vendors so that the vendors could manufacture and sell products bearing the teams trademarks and logos, including shirts, jerseys, and headwear. Initially, NFLP granted licenses to numerous vendors, allowing the vendors to produce merchandise sporting the teams trademarks and logos. One of these vendors was American Needle. It held a license to produce NFL headwear for more than twenty years. In 1982, the NFL teams created the NFL Trust, which was granted near-exclusive rights to license the NFL teams intellectual property. The trust was to extend until 2004, though two teams refused to enter into the trust. However, in 2000, the NFL teams together gave authorization to NFLP to solicit bids for an exclusive license in headwear that would be granted to a single manufacturer. After receiving bids, NFLP awarded the exclusive ten-year license to Reebok. As a result, American Needle s license was not renewed. American Needle responded to NFLP s failure to renew its license by filing an antitrust action against the NFL, NFLP, each of the individual NFL teams, and Reebok. It claimed that the exclusive license granted by NFLP to Reebok violated Section 1 of the Sherman Act, which forbids the creation of any contract, combination or conspiracy, in restraint of trade. 15 U.S.C. 1. The crux of its claim was that, because each of the individually owned NFL teams held the rights to their own trademarks and logos, their collective agreement to allow NFL properties to grant an exclusive license to Reebok constituted a conspiracy to prevent other vendors from accessing licenses to produce products bearing the trademarks and logos of any of the NFL teams. American Needle further contended that through the authori- PREVIEW of United States Supreme Court Cases 177

26 zation by the NFL teams to allow NFLP to grant the exclusive license to Reebok, the teams monopolized the licensing of the NFL teams and the wholesale markets of their products, in violation of Section 2 of the Sherman Act. The NFL responded by filing a motion for summary judgment on the Section 1 claim. The NFL claimed that under the Supreme Court s decision in Copperweld Corp. v. Independence Tube Corp., 467 U.S. 752 (1984), and the cases that followed it, the NFL is immune from any liability under Section 1. The Supreme Court had held in Copperweld that a parent corporation and its wholly owned subsidiary are immune from liability under Section 1 because they are a single entity for antitrust purposes. American Needle responded to the motion for summary judgment by filing a Rule 56(f) motion for a continuance and asking for discovery. After protesting the scope of the discovery request, the NFL and other defendants produced the relevant discovery. American Needle again responded with a Rule 56(f) motion stating that defendants still possessed information it needed in order to respond to the motion for summary judgment. The district court took this motion under advisement and ordered American Needle to respond to the merits of the motion for summary judgment. The district court then denied American Needle s Rule 56(f) motion and granted summary judgment to defendants regarding its Section 1 claim. The district court determined that the NFL teams together constitute a single entity in the licensing of their intellectual property. It held that the purpose of the exclusive licensing agreement was to promote the NFL as a whole. Through the promotion of the NFL, the teams act as a unit and should be seen as a single entity. Thus, the defendants were immune from an antitrust claim under Section 1. The district court also granted summary judgment for defendants on the Section 2 claim, stating that its previous determination that the NFL is a single entity necessarily precluded an antitrust claim under Section 2. As a single entity, the NFL and its teams could grant an exclusive license without violating any antitrust laws. American Needle appealed to the U.S. Court of Appeals for the Seventh Circuit. A three-judge panel affirmed the decision of the district court. On the discovery dispute, the circuit court held that American Needle had failed to show that the district court was wrong in denying additional discovery. The permissible scope of discovery at that point in the case was limited to the Section 1 claim. The district court had, according to the appellate court, all the facts it needed to make a decision on the motion for summary judgment. As to the single entity ruling, American Needle argued that the district court misapplied Copperweld by concluding that the teams acted together in concert, when the question should have been whether or not the teams could compete against each other in licensing their intellectual property and whether or not their joint licensing agreement deprives the economic market of independent entities. The Seventh Circuit held that though the teams could compete against each other in an open marketplace, this fact alone cannot prevent them from being a single entity for antitrust purposes. The circuit court reasoned that the NFL teams are a single entity in the promotion of NFL football because no single team can produce an NFL football game without working jointly with another team. Each team, thus, has an important economic interest in promoting the league as a whole. The circuit court found most persuasive that, since 1963, the NFL teams have worked jointly under the auspices of NFLP to conduct the licensing of intellectual 178 properties of the teams. As a result, Section 1 does not prohibit NFL teams from cooperating so that the NFL as a whole can compete with other types of entertainment. The Seventh Circuit also agreed with the district court s conclusion that, by holding that the NFL respondents made up a single entity under Section 1, American Needle was precluded from asserting a successful claim under Section 2. As a single entity, the NFL respondents were free to grant an exclusive license to their intellectual property. American Needle petitioned the Supreme Court for a writ of certiorari, which was granted on June 29, CASE ANALYSIS Numerous briefs have been filed in this case for both sides. The NFL Coaches Association and the NFL Players Association have sided with American Needle. Amicus briefs were filed on behalf of the NFL by a variety of professional and collegiate sports leagues, along with other businesses with an interest in the matter. The crux of the disagreement is whether or not the NFL teams, as individually owned entities with independent income-producing capabilities, are part of a single entity known as the NFL. If they are, then the NFL s decision to grant Reebok an exclusive license is effectively immune from antitrust scrutiny. If they are not, then the NFL s decision is subject to the rule of reason analysis under Section 1 of the Sherman Act. American Needle argues that the NFL teams are each separate entities and thus not a single entity for antitrust purposes. Section 1 of the Sherman Act terms illegal [e]very contract, combination, in the form of trust or otherwise, or conspiracy, in restraint of trade. 15 U.S.C. 1. The Supreme Court held in Copperweld Corp. v. Independence Tube Corp., 467 U.S. 752 (1984), that a parent corporation and its wholly owned subsidiary could not conspire with each other to restrain trade as they are subject to the same source of control and no agreement between them could have an effect on commerce that would not otherwise exist. American Needle s position is that Copperweld is inapplicable. Each NFL team is individually owned and operated and makes profits individually. Each team is a separate entity capable of conspiring to violate Section 1 of the Sherman Act. Furthermore, these teams are capable of competing against each other economically, making the exclusive licensing agreement NFL properties made with Reebok a restraint of trade in violation of Section 1. American Needle cites Radovich v. NFL, 352 U.S. 445 (1957), where the Supreme Court held that the NFL was subject to antitrust law for its actions regarding an employment dispute with a player. American Needle also cites NCAA v. Board of Regents, 468 U.S. 85 (1984), where the Supreme Court applied Section 1 to an agreement between separately owned and operated college teams in a single league. The NFL argues that courts have stated that the applicability of antitrust law should not be determined simply by the organizational structure that a corporation or entity happens to adopt. Corporations are free to structure themselves in a manner best fit to promote their businesses, as the Court has indicated in Sunkist Growers, Inc. v. Winckler & Smith Citrus Products Co., 370 U.S. 19 (1962), among other cases. In Sunkist, the Court found an organization made up of three independently owned subparts to be a single entity. The NFL terms the decisions in Radovich and NCAA inapplicable because PREVIEW of United States Supreme Court Cases

27 those cases involved agreements between multiple leagues, and not within a single league such as the NFL. The NFL argues that its member teams are not separate entities capable of independent economic activity. The nature of football requires each team to work together to create a football game. All economic viability of each team s intellectual property is derived directly from these jointly produced ventures and in turn enhances the value of the game itself. NFLP has been the distributor of licenses of the teams intellectual property for fifty years and does so for the benefit of the league as a whole, not the individual teams themselves. Further, revenue from the sale of products carrying the intellectual property of the teams is shared among the teams and the league. American Needle points to a number of judicial decisions in which courts have allowed antitrust actions to proceed against entities that have, like the NFL, chosen to create cooperative ventures rather than to compete individually. These cases suggest that the NFL member teams could compete against each other in a competitive market, pitting their intellectual property and licensed merchandise against that of other teams. American Needle claims that courts uniformly apply Section 1 to agreements made by independently owned entities in this situation. The NFL responds, however, that its member teams lack the kind of economic independence that the Supreme Court relied upon when it assessed antitrust claims in the cases cited by American Needle. Unlike separate organizations that have joined together and formed an agreement not to compete, the NFL argues that its member teams are inherently linked and cooperation is essential to their ability to make profits. American Needle also argues that the purpose of Copperweld was to shield agreements between smaller components of a larger firm and the larger firm. It was not to immunize agreements between individually owned entities such as the NFL teams. In the petitioner s view, Copperweld protects an entity that creates agreements with smaller subsets of itself. American Needle contends that circuit courts after Copperweld have held Section 1 applicable to separately owned entities. Among the examples it cites are Rothery Storage & Van Co. V. Atlas Van Lines, Inc., 792 F.2d 210 (D.C. Cir. 1986), and Freeman v. San Diego Ass n of Realtors, 322 F.3d 1133 (9th Cir. 2003). American Needle also argues that federal legislative actions suggest that NFL teams are subject to antitrust actions. Congress has rejected numerous requests by the NFL and other sports leagues for antitrust immunity. Instead, it has enacted several pieces of legislation that suggest, implicitly, that Section 1 of the Sherman Act does apply to sports leagues, including the Sports Broadcasting Act, 15 U.S.C. 1291, the Curt Flood Act, 15 U.S.C. 26b(a). Congress has also denied extending antitrust protection to the Raiders NFL franchise during two different location changes. The NFL s position on this argument from implicit congressional understanding is to claim that these two statutes were narrowly drawn and did not apply to the licensing of products. Finally, American Needle argues that, even if Copperweld applies, the Seventh Circuit s decision in that case was erroneous. NFL member teams are not identical to wholly owned subsidiaries. The NFL does not exert full control over teams; moreover, member teams are not obligated to act in the best interests of the NFL at all times. The NFL counters that all competition among teams is on the playing field only. Teams have no incentive to compete against each other off the field. Promotion of the league is tantamount to promotion of individual teams. The league and its teams share in any gains in popularity. American Needle also asserts that the Seventh Circuit was wrong in concluding that a league is necessary for the teams to produce football games. Although the teams must cooperate to play each individual game, the teams do not need to be a part of a larger organization. Many college football teams do not belong to a particular league and most NASCAR teams are seen as individual entities though they compete against each other on a regular basis. The petitioner also differs with the appellate court s application of Copperweld because the NFL, according to American Needle, does not constitute a single source of economic power. The teams have profits and losses separate from those of the league, thus making their economic interests separate from those of the league. The fact that teams are individual businesses also makes them potential competitors in the marketplace. Teams could compete for fans, and they could compete for purchasers of products containing intellectual property. The United States in its amicus brief proposes a test to determine whether Section 1 of the Sherman Act should apply to sports leagues. It suggests that a grouping of sports teams should be treated as a single entity only when (1) the teams and the league have effectively merged the relevant aspect of their operations, thereby eliminating actual and potential competition among the teams and between the teams and the league in that operational sphere and (2) the restraint being challenged does not significantly affect actual or potential competition among the teams or between the teams and the league outside their merged operations. The NFL, however, contends that the government s proposed test is at odds with Copperweld, which did not look to see if a parent and its subsidiary were effectively merged but instead asked whether they were independent sources of economic power previously pursuing separate interests. 467 U.S. at 771. Further, the second prong of the government s test would lead to confusion and scrutiny of unintentional competitive consequences of league decisions. The NFL argues that the government s proposed test would lead to Section 1 scrutiny of nearly every decision made by a sports league, creating a heavy burden on sports leagues as a whole. Reebok adds to the NFL s position by contending in its brief that the manner in which NFLP solicited bids enhanced competition instead of stifling it. Section 1 was not designed to protect an organization that lost out on a bid. American Needle had an opportunity to offer a winning bid for the exclusive license of the NFL teams intellectual property, but it failed to do so. According to Reebok, American Needle s failure should not give rise to Section 1 review. SIGNIFICANCE Single entity status has long been the NFL s holy grail. Section 1 of the Sherman Act explicitly requires an agreement, and an agreement requires more than one entity. As a matter of law, a single entity cannot violate Section 1. Antitrust law has been a thorn in the NFL s side throughout its existence. If the Supreme Court affirms the decision of the Seventh Circuit, then the NFL will be effectively immune from antitrust liability. Courts have often been asked to review NFL policies under antitrust law, including restrictions on player movement, the entry draft, and various devices designed to maintain competitive balance. The NFL has been able to implement these restraints, PREVIEW of United States Supreme Court Cases 179

28 despite antitrust concerns, through collective bargaining with the National Football League Players Association. (Federal law exempts the results of collective bargaining from antitrust law through the nonstatutory labor exemption insofar as the bargain primarily affects mandatory subjects of bargaining, such as players wages, hours, and other conditions of employment.) If the Court rules in the NFL s favor, the league could adopt potentially anti-competitive policies without the need to engage in collective bargaining and without the threat of Section 1 liability. A decision against the NFL would also be significant, but not as important as a decision in its favor. Should the Court reverse the lower court opinion, the case will be returned to the trial court for application of the Sherman Act s rule of reason analysis. It is quite possible that the NFL would win that fight on the factual grounds that this particular restraint of trade does not harm consumer welfare. Nonetheless, the NFL will be from a legal standpoint no better off than it is now. Section 1 liability will continue to cast a shadow over all NFL collective decision making, rendering the league subject to suit whenever it acts as a single entity. Should the NFL lose, then for all practical purposes the single entity defense will be put to pasture, and the NFL will continue to have to navigate the uncertainties of collective bargaining and antitrust liability as it tries to combine the two competing features of modern professional sports: individual team ownership and competitive balance. Even if the NFL wins its desired grant of immunity, that grant will not be unlimited. The NFL surely would enjoy its special status only for functions that are essential or at the core of its football operations and promotions. Should the NFL one day venture out into unrelated business markets, it could not shield itself from all antitrust scrutiny merely because the unrelated business was launched under the auspices of the NFL. At one level, this case is about definitions: exactly what business is a core function of professional football? Both parties implicitly agree that the NFL may legally cooperate in organizing a football season, including scheduling, game rules, and a championship tournament. The parties differ as to whether or not the exploitation of team trademarks through merchandise sales should be included in these core, cooperative functions. The NFL contends that the sale of headwear is an extension of game cooperation; American Needle and its amici argue that this business is one in which NFL teams may compete against each other in an open market. In any event, it is doubtful that the Supreme Court would grant the NFL an unmitigated, blanket exception from antitrust law. Not even the Seventh Circuit decision did that. Instead, even if the NFL is deemed a single entity for the limited purpose of collectively granting an exclusive license for use of its trademarks on merchandise, it would not necessarily constitute a single entity for its other controversial business arrangements, including broadcast rights, video game reproduction rights, and wage restrictions. Each of these would have to be litigated. With a decision in its favor, the NFL could litigate the legality of these arrangements on a legal question of whether or not the NFL constitutes a single entity in that particular market. The NFL would not have to undertake the more expensive and involved factual litigation typical of the rule of reason analysis under Section 1 of the Sherman Act. Jeffrey Standen is a professor of sports law at the Willamette University College of Law in Salem, Oregon. He is the author of the popular blog The Sports Law Professor. He can be reached at jstanden@willamette.edu or PREVIEW of United States Supreme Court Cases, pages American Bar Association. ATTORNEYS FOR THE PARTIES For Petitioner American Needle, Inc. (Glen D. Nager, ) For Respondent National Football League et al. (Gregg H. Levy, ) For Respondent Reebok International, Ltd. (Timothy B. Hardwicke, ) AMICUS BRIEFS In Support of Petitioner American Needle, Inc. American Antitrust Institute and Consumer Federation of America (Richard M. Brunell, ) Economists (Craig C. Corbitt, ) Merchant Trade Associations (W. Joseph Bruckner, ) National Football League Coaches Association (Roy I. Liebman, ) National Football League Players Association, the Major League Baseball Players Association, the National Basketball Players Association, and the National Hockey League Players Association (Jeffrey L. Kessler, ) United States (Elena Kagan, Solicitor General, ) In Support of Respondents National Football League et al. ATP Tour, Inc., et al. (Bradley I. Ruskin, ) Electronic Arts, Inc. (Stephen M. Nickelsburg, ) MasterCard Worldwide, and Visa Inc. (Ryan A. Shores, ) National Basketball Association and NBA Properties (Jeffrey A. Mishkin, ) National Collegiate Athletic Association (Gregory L. Curtner, ) National Hockey League (Shepard Goldfein, ) VF Imagewear, Inc. (Mark E. Solomons, ) 180 PREVIEW of United States Supreme Court Cases

29 compact C L A U S E Does Eleventh Amendment Immunity Prevent a Compact Commission from Joining Its Member States in Suing a State? CASE AT A GLANCE Congress encouraged states to enter interstate compacts to establish regional low-level radioactive waste disposal facilities. In this case, North Carolina, a former member of the Compact for the Southeast, is being sued in the Supreme Court by the remaining compact states seeking reimbursement of approximately $80 million dollars provided to North Carolina by the compact commission that was intended to facilitate the construction of a regional facility in North Carolina. The facility was not established and North Carolina subsequently withdrew from the compact. Alabama et al. v. North Carolina Docket No. 132, Orig. Argument Date: January 11, 2010 From: Original Jurisdiction by Robert Abrams Florida A&M University College of Law and Anne Finken Beveridge & Diamond PC ISSUES Do sovereign immunity principles require the dismissal of the Southeast Low-Level Radioactive Waste Management Commission (commission) as a plaintiff in this original action brought jointly by the commission and four states against the State of North Carolina? Does the Southeast Low-Level Radioactive Waste Management Compact (compact) authorize the commission to impose monetary sanctions against North Carolina in response to North Carolina s alleged breach of its obligations under the compact? FACTS Low-level radioactive waste, as described by the Nuclear Regulatory Commission, includes items that have become contaminated with radioactive material or have become radioactive through exposure to neutron radiation. This waste typically consists of contaminated protective clothing or cleaning equipment, reactor water treatment residues, and medical and research wastes. The radioactivity levels of these wastes vary considerably, from just above natural background levels to highly radioactive, such as the levels associated with parts from inside the reactor vessel in a nuclear power plant. Historically, low-level radioactive waste was stored on-site by its generators, or disposed of as ordinary trash, a situation that was fraught with risks to public health and the environment. The preferred alternative to dispersed storage of these wastes was the establishment of a small number of carefully regulated regional facilities. Efforts to site large regional facilities were, in almost all cases, thwarted by the NIMBY phenomenon ( Not in my backyard ) and the reluctance of possible host states to take on the perceived risk of not only in-state waste, but also wastes shipped in from around the nation. Owing to the operation of the so-called Dormant Commerce Clause, it is unconstitutional for a state to bar the disposal of out-ofstate waste in in-state facilities. See, e.g., Philadelphia v. New Jersey, 437 U.S. 617 (1978). To overcome the stalemate in which no state wanted to become the burial ground for other states low-level radioactive wastes, Congress in 1980 passed the Low-Level Radioactive Waste Policy Act. The act sought to encourage the siting of multistate regional facilities by offering, as an inducement, express exemption from the Dormant Commerce Clause invalidation. This quid pro quo operated at a regional level, benefitting states that entered into a multistate regional compact that established a facility, the use of which could be restricted to wastes generated in the compacting states. The current case emerges from a compact formed in response to the 1980 federal statute. In 1986, with the consent of Congress, the states of Alabama, Florida, Georgia, Mississippi, North Carolina, South Carolina, Tennessee, and Virginia entered into the Southeast Interstate Low-Level Radioactive Waste Management Compact, Pub. L. No , Tit. II, 99 Stat. 1871, as amended by the Southeast Interstate Low-Level Radioactive Waste Compact Amendments Consent Act of 1989, Pub. L. No , 2, 103 Stat The purpose of the compact was to provide facilities for the disposal of the region s low-level radioactive waste. The compact created the Southeast Interstate Low-Level Radioactive Waste Management Commission, consisting of two voting members from each state, to administer the compact. PREVIEW of United States Supreme Court Cases 181

30 Under the compact, a preexisting disposal facility in Barnwell, South Carolina, owned by that state, served as the initial disposal facility for the region until a new facility could be built. In September 1986, the commission selected North Carolina to be the second host state to construct and operate a new regional facility. Under the terms of the compact, the commission is not responsible for any costs associated with the creation of any facility. Compact, Art. 4(K). Nonetheless, the commission decided in 1988 to provide financial assistance to the second host state for preoperational costs associated with the construction of a new facility. The commission raised substantial revenue through various surcharges on waste brought to the Barnwell facility and used these funds to assist North Carolina s efforts to site and develop a new facility. The member states did not provide any funds directly to North Carolina. From 1988 through 1997, the commission provided North Carolina with close to $80 million in assistance. During the same period, North Carolina expended approximately $34 million of its own funds, but the state did not succeed in obtaining a license to construct a new facility. In late 1997, the commission ceased providing North Carolina with additional financial assistance, in part because South Carolina had withdrawn from the compact in 1995, thereby depriving the commission of further revenue from the Barnwell facility. North Carolina informed the commission that it could not continue the project without financial assistance and eventually withdrew from the compact in July In December 1999, the commission held a sanctions hearing, found that North Carolina had breached the compact, and ordered it to repay the close to $80 million that it had received from the commission along with an additional $10 million in sanctions and attorney s fees. North Carolina did not participate in this hearing and did not comply with the commission s order. The commission subsequently attempted to sue North Carolina in the original jurisdiction of the Supreme Court, but the Court denied the commission leave to file its complaint. See Southeast Interstate Low-Level Radioactive Waste Management Comm n v. North Carolina, 533 U.S. 926 (2001). The commission, joined by Alabama, Florida, Tennessee, and Virginia, filed a similar complaint, and the Supreme Court granted leave to file in After North Carolina filed a motion to dismiss the commission s claims on the grounds that they are barred by the Eleventh Amendment and principles of state sovereign immunity, the case was assigned to a special master, Bradford Clark of Washington, D.C. The plaintiffs subsequently sought summary enforcement of the commission s monetary sanctions order against North Carolina, and North Carolina moved to dismiss the complaint. The parties, and the United States as amicus curiae, subsequently appeared before the special master to argue these issues. The special master s preliminary report, distributed to the parties on June 19, 2006, recommended that North Carolina s motion to dismiss the commission s claims be denied based on the Supreme Court s precedents that suggest a nonstate party may join a state or the United States in suing a state in the Supreme Court s original jurisdiction so long as the nonstate party asserts the same claims and seeks the same relief as the other plaintiffs. See Arizona v. California, 460 U.S. 605 (1983); Maryland v. Louisiana, 451 U.S. 725 (1981). After analyzing the compact as a coherent whole, the special master concluded that the compact does not authorize the commission to impose monetary sanctions against party states. He denied the plaintiffs motion for summary judgment on Count I of the bill of complaint and recommended dismissal of that portion of the bill of complaint. Finally, the special master s preliminary report recommended that the motion to dismiss be denied to the extent that further proceedings were necessary to determine whether North Carolina in fact breached its obligations under the compact and to evaluate the merits of other claims that the plaintiffs made in the bill of complaint. The parties proceeded with further discovery and then jointly requested a schedule for the filing of dispositive motions based on partial discovery to that point. The plaintiffs filed a motion for summary judgment on Count II of their bill of complaint, which alleges that North Carolina breached the compact. North Carolina filed a motion for summary judgment on all of the plaintiffs claims. Following argument and supplemental briefing, the special master issued his second report. The special master recommended that the plaintiffs motion be denied because North Carolina did not breach the compact by ceasing licensing activities for nineteen months before its withdrawal from the compact and because North Carolina s withdrawal did not violate the implied covenant of good faith and fair dealing. For substantially the same reasons, the second report recommended that North Carolina s motion for summary judgment be granted with respect to Count II of the bill of complaint. Finally, the special master recommended that North Carolina s motion for summary judgment be denied with respect to Counts III V of the bill of complaint because resolution of these claims requires further briefing and argument, and possibly further discovery, particularly in light of the threshold question of whether the claims at issue in Counts III V belong to the commission, the plaintiff states, or both. The case is currently in an interlocutory position, meaning an immediate decision by the Court is being sought in order to materially advance the ultimate termination of the litigation by narrowing the scope of any future discovery and trial. Procedurally, the Court may accept or reject the recommendations contained in the special master s preliminary report or second report. A somewhat less likely possibility is for the Court to decline to rule on the case in this interlocutory posture and instead await the special master s decision on the merits. The parties, and the United States as amicus curiae, subsequently have filed briefs in support of their exceptions to the reports of the special master. CASE ANALYSIS The first issue is whether the commission is properly a plaintiff in the case. Plaintiffs and the United States as amicus curiae argue that Supreme Court precedents have squarely held that a state s immunity is not violated when a nonstate party joins in an original action brought by a state or the United States, so long as the nonstate party asserts the same claims and seeks the same relief as the other plaintiffs. The plaintiffs and the United States note that the Supreme Court has previously permitted several Indian tribes to intervene in an original action brought by Arizona against California to determine the parties rights to the waters of the Colorado River. Arizona v. California, 460 U.S. 605, 612 (1983). Additionally, the Court has allowed private parties to intervene as plaintiffs in an original action brought by several states and the United States against Louisiana. Maryland v. Louisiana, 451 U.S. 725, 745 n.21 (1981). Based on these precedents, plaintiffs and the United States maintain that the commission does 182 PREVIEW of United States Supreme Court Cases

31 not violate North Carolina s Eleventh Amendment rights so long as the commission does not assert any claims other than those that the plaintiff states are entitled to assert. North Carolina argues that the Eleventh Amendment and commonlaw sovereign immunity principles require the dismissal of the commission as the plaintiff in this original action against the state of North Carolina. North Carolina challenges the theory that once the Supreme Court s jurisdiction is already properly invoked by a party against whom the state cannot assert sovereign immunity, there is no impermissible enlargement of the Court s jurisdiction if other parties are allowed to piggy-back on the proper claims by asserting identical claims. North Carolina notes that the Supreme Court s precedents have recognized only two types of suits against which a state may not invoke constitutional immunity: a suit by the United States, see United States v. Texas, 143 U.S. 621 (1892), and a suit by a sister state, see South Dakota v. North Carolina, 192 U.S. 286 (1904). Because the commission is neither the United States nor a sister state, North Carolina argues it is immune from the commission s claims. North Carolina also asserts that because it has not consented to suit by the commission, it is immune from being sued by it in the Supreme Court. The second main issue raised by the parties concerns whether the compact authorizes the commission to impose monetary sanctions. The compact provides that Any party state which fails to comply with the provisions of this compact or to fulfill the obligations incurred by becoming a party state to this compact may be subject to sanctions by the commission, including suspension of its rights under this compact and revocation of its status as a party state. Art. 7(F). Plaintiffs argue that the commission properly and reasonably interpreted the compact as giving the commission the authority to impose a monetary sanction because the term sanctions includes monetary sanctions. Furthermore, plaintiffs assert that imposing a clear statement rule would run afoul of Article 9 of the Compact, which states that The provisions of this compact shall be liberally construed to give effect to the purposes thereof. The plaintiffs also maintain that there is no basis for comparing this compact s language to that of other compacts in other cases because each compact was negotiated independently and there is no evidence on the record that any compact negotiators were informed about either the negotiation or text of other compacts. Thus, the plaintiffs assert that the commission s sanction s order should be enforced. North Carolina and the United States as amicus curiae counter that the compact s terms, the compact s structure, and the reasonable expectations of Congress and the compacting parties demonstrate that the commission is not authorized to impose monetary sanctions. They assert that the compact s identification of two specific sanctions was intended to serve some purpose and that there is no indication throughout the remainder of the compact that the duties and power of the commission include the ability to compel a party state to pay a monetary sanction. North Carolina and the United States also argue that the compact was drafted against, and should be interpreted in light of, background assumptions about state sovereignty, and therefore a clear statement rule, which governs other laws of the United States, should be applied in order to determine whether the compact relinquished a state s immunity from monetary assessments. Finally, relying on Texas v. New Mexico, 462 U.S. 554 (1983), North Carolina and the United States argue that the compact s failure to make any mention of a power to impose monetary sanctions is particularly significant in light of the fact that other similar interstate compacts contemporaneously approved by Congress specifically grant such power. SIGNIFICANCE Due to the potential monetary consequences for the parties, something more than $80 million dollars, the case has practical significance, especially in this recessionary era when state and public institutional budgets are unusually tight. On a practical level in regard to siting a low-level radioactive waste facility in the Southeast, very little will change in the immediate aftermath of this decision. The remaining member states of the Southeast Interstate Low Level Radioactive Waste Management Compact will be no closer to establishing an operational facility to replace the Barnwell, South Carolina, facility that has ceased accepting wastes. In that regard, of course, a victory that awards the compact commission the money it seeks will provide it with immediate funds with which to facilitate its efforts to site a facility elsewhere. On a precedential level, this case is not likely to have great significance. Compact interpretation issues are notorious for being sui generis each one is unique. Meanwhile, the noncompact-related legal principles in issue, an arcane aspect of state immunity and the joinder of nonstate parties in suits against states arising under the Court s original jurisdiction, are not of general interest. Robert Abrams is a professor at Florida A&M University College of Law in Orlando, where he is an expert in both Water Law and Environmental Law. He is a contributing editor for the ABA s Preview of United States Supreme Court Cases and a life member of the American Law Institute. He can be reached at robert.abrams@famu.edu or Anne Finken is an attorney with Beveridge & Diamond s Washington, D.C., office and teaches Natural Resources Law as an adjunct at The George Washington University Law School. She can be reached at afinken@bdlaw.com or PREVIEW of United States Supreme Court Cases, pages American Bar Association. ATTORNEYS FOR THE PARTIES For Plaintiffs State of Alabama, State of Florida, State of Tennessee, Commonwealth of Virginia, and the Southeast Interstate Low-Level Radioactive Waste Management Commission (Carter G. Phillips, ) For Defendant State of North Carolina (Grayson G. Kelley, ) AMICUS BRIEFS In Support of Plaintiffs and Defendant United States (Elena Kagan, Solicitor General, ) PREVIEW of United States Supreme Court Cases 183

32 fair debt Practices act Does the Bona Fide Error Defense of the Fair Debt Collection Practices Act Include Mistakes of Law? CASE AT A GLANCE The Fair Debt Collections Practices Act requires a debt collector to send a validation notice to a debtor that provides an opportunity for the debtor to challenge the validity of the debt. In this case the debt collector served the debtor with a validation notice and required the debtor to challenge the validity of the debt in writing, albeit the FDCPA is silent on the means of challenge. Upon a finding of a violation of the FDCPA, the debt collector raised the FDCPA s bona fide error defense to the mistake of law. Jerman v. Carlisle, McNellie, Rini, Kramer & Ulrich LPA et al. Docket No Argument Date: January 13, 2010 From: The Sixth Circuit by Ralph C. Anzivino Marquette University Law School ISSUE Do a debt collector s legal errors qualify for the bona fide error defense under the Fair Debt Collection Practices Act (FDCPA)? FACTS Respondents are an Ohio law firm concentrating in real estate and foreclosure law and an associate attorney at the firm. They were retained by Countrywide Home Loans, which held the mortgage on petitioner Karen L. Jerman s home. In April 2006, they filed a complaint in state court to foreclose on the house. Three days later, respondents served Jerman with both the complaint and, as required by the FDCPA, a validation notice informing her of her legal rights. Under the act, the validation notice must include a statement that unless the consumer, within thirty days after receipt of the notice, disputes the validity of the debt, or any portion thereof, the debt will be assumed to be valid by the debt collector. 15 U.S.C. 1692g(a) (3). By its terms, the provision does not require that the dispute be made in writing. Nevertheless, respondents notice informed Jerman that her debt would be presumed valid unless disputed in writing. After receiving the notice, she hired an attorney, who wrote a letter disputing the debt. In response, Countrywide checked its records and discovered that Jerman had fully repaid her mortgage. Respondents then dismissed their state-court complaint. Jerman subsequently filed a suit in federal court, alleging a violation of 1692g(a)(3) of the FDCPA. Her amended complaint sought actual and statutory damages, injunctive and declaratory relief, and class certification. Respondents moved to dismiss on the basis that their notice complied with the act. The district court denied the motion, finding that the notice violated the FDCPA because it required Jerman to dispute the alleged debt in writing even though the act imposed no such restriction. 184 Under the FDCPA, debt collectors may avoid liability if they can establish either of two defenses. First, a safe harbor defense carves out an exemption for any act done or omitted in good faith in conformity with any advisory opinion of the Federal Trade Commission. Second, a bona fide error defense exempts debt collectors from liability if they prove that the violation was not intentional and resulted from a bona fide error notwithstanding the maintenance of procedures reasonably adapted to avoid any such error. Respondents moved for summary judgment asserting the bona fide error defense. They argued that although they fully intended to notify Jerman that she was required to dispute the debt in writing, the resulting FDCPA violation was not intentional within the meaning of the bona fide error defense because they honestly misunderstood what the act required. Moreover, they argued, their law firm maintained procedures reasonably adapted to avoid such legal errors, including among other things designating one of the firm s principals to take the lead in FDCPA compliance, sending him to continuing education classes on the act, and subscribing to relevant legal periodicals. The district court agreed and entered summary judgment for the law firm. On appeal, the Sixth Circuit affirmed. The court noted that Congress originally borrowed the language of the FDCPA s bona fide error defense from the Truth in Lending Act (TILA). Three years after the passage of the FDCPA, Congress amended TILA to expressly provide that an error of legal judgment with respect to a person s obligations under TILA is not a bona fide error. As a result, the Sixth Circuit concluded that the amendment indicated that, unlike TILA, Congress did not intend to limit the FDCPA s defense to clerical errors. On June 29, 2009, the Supreme Court granted certiorari. PREVIEW of United States Supreme Court Cases

33 CASE ANALYSIS Petitioner Jerman asserts that interpreting the FDCPA to provide a defense for mistakes of law is inconsistent with the text to the statute. In order to qualify for the bona fide error defense, the violation must not be intentional and the actor must have maintained procedures reasonably adapted to avoid any such error. Petitioner posits that to say that a violation of the law was not intentional could mean one of two things. It could mean that the defendant did not intend to commit the act that violated the statute. Alternatively, it could mean that a defendant knew exactly what she was doing but did not realize that her intentional act would violate the statute. Mistakes of law could find shelter in the bona fide error defense only under the second interpretation. In this case, for example, the respondents do not contest that they intended to include in their letter the language that violates the act. They argue only that their conduct, although intentional, did not constitute an intentional violation of the statute. Jerman argues that the language of the bona fide error defense must be understood in light of the familiar legal maxim that ignorance of the law will not excuse any person, either civilly or criminally. The general rule that ignorance of the law or a mistake of law is no defense to criminal prosecution is deeply rooted in the American legal system. Of course, Congress occasionally departs from this standard rule, but exceptions are rare. The most common examples are found in criminal statutes that limit punishment to those who violate the law knowing its requirements. But the bona fide error defense applies to civil not criminal claims, and it does not simply limit penalties and remedies. It provides a defense to any liability. It is exceedingly rare indeed, as far as petitioner can tell, completely unprecedented for Congress to make ignorance of the law a complete defense to all liability in the civil context. Statutory references to intentional conduct, or even intentional violations, are best understood to refer to defendants intentions with respect to their actions, not to their intention to disobey a known legal duty. At the very least, they establish that the phrase does not unambiguously demonstrate Congress s intent to make an exception to the venerable principle that ignorance of the law is no defense. She contends that had Congress intended to provide a defense for mistakes of law, it would have used different language in 1692k(c). When Congress intends to refer to defendants who know their conduct is unlawful, it generally uses the word willful rather than intentional. It is unlikely that in enacting the FDCPA, Congress used the work intentional intending for courts to give it the meaning traditionally reserved for the word willful. In fact, the origins of the bona fide error defense belie any such suggestions. The language of the defense originated in the Truth in Lending Act, which unlike the FDCPA, contains both a civil private right of action and criminal penalties. Under TILA, the bona fide error defense applies to those who do not violate the act intentionally, and the criminal provision applies only to those who willfully and knowingly fail to comply with the act. This distinction between intentional violations on the one hand and willful and knowing violations on the other is consistent with the ordinary legal use of those terms. Willful violations, being the most culpable because undertaken with knowledge of the act s requirements, are subject to the severe sanction of criminal penalties. On the other end of the spectrum, truly unintentional violations where the lender did not intend to commit the act that violates the statute qualify for a complete defense. It should come as no surprise, therefore, that by the time Congress enacted the FDCPA, every court of appeals to have considered the question had rejected the view that TILA s bona fide error defense excused mistakes of law. The inescapable conclusion is that under TILA a mistake of law was a defense to criminal charges but did not fall within the bona fide error defense to civil liability. Because Congress adopted the FDCPA s bona fide error defense verbatim from TILA, it is presumed to have intended the same limitation on the scope of the FDCPA s bona fide error defense as well. Jerman also maintains that in addition to requiring that the defendant s violation be unintentional, the act provides a defense only if the defendant has maintained, procedures reasonably adapted to avoid any such error. The Sixth Circuit acknowledged that it is more common to speak of procedures adapted to avoid clerical errors than to speak of procedures adapted to avoid mistakes of law. Indeed, the difficulty of applying the act s reasonable procedures requirement to legal errors provides a significant reason to conclude Congress did not intend courts to attempt it. There are any numbers of ways in which clerical and other nonlegal errors may lead to unintended violations of the statute. On the other hand, courts that have extended the defense to legal errors have struggled to define just what constitutes a procedure reasonably adapted to avoid misinterpreting the law. Moreover, applying the reasonable procedures requirement to legal errors is not only difficult, but it puts federal courts (or even lay juries) in the awkward position of having to establish standards for the professional conduct of attorneys, an area traditionally left to the states. Jerman reasons that the Supreme Court should not adopt a construction of the act that would alter the existing balance of federal and state powers absent a clear indication of Congress intent to do so. Petitioner further argues that allowing a mistake of law defense renders the advisory opinion process ineffective, and the safe harbor defense superfluous. Congress provided a safe harbor defense, under which debt collectors are immune from liability for any act done or omitted in good faith in conformity with any advisory opinion of the Commission. Recognizing a defense for mistakes of law conflicts with this provision in two ways. First, it is unlikely that Congress would have intended courts to force an awkward fit between legal errors and the bona fide error defense when it had already provided a more direct solution to the same problem. Second, the court of appeals decision renders the safe harbor defense superfluous. Under that decision, every application of the safe harbor defense is already covered by the bona fide error provision. The Supreme Court has long expressed a deep reluctance to interpret a statutory provision so as to render superfluous other provisions in the same enactment. Here, the bona fide error and safe harbor defenses may easily be harmonized, the former addressing nonlegal errors and the latter addressing errors of legal judgment. Jerman also asserts that excusing legal errors would undermine the FDCPA s deterrent effect. Congress was well aware that the debt collection market which generally compensates collectors by giving them a percentage of the money collected establishes an economic incentive for aggressive, misleading, and even abusive practices. Excusing mistakes of law conflicts with Congress s intent to ensure that those debt collectors who refrain from abusive debt collection PREVIEW of United States Supreme Court Cases 185

34 practices are not competitively disadvantaged. As between similarly situated debt collectors, all having procedures reasonably designed to avoid legal errors, the Sixth Circuit s decision provides a competitive advantage to the collectors who take the more aggressive, but incorrect, view of the law. That result is not only unfair to the law-abiding collectors, but creates a race to the bottom that will leave the field to collectors with the fewest scruples. This is exactly what Congress intended the FDCPA to prevent. Petitioner also maintains that debt collectors can be protected from unfair liability without excusing their mistakes of law. Congress has provided debt collectors with special protections in the form of a defense for violations based on nonlegal errors, and an easy and costeffective way to obtain expert advice on the meaning of the act that will shield them from liability so long as they follow it. Moreover, like all others expected to comply with the sometimes uncertain requirements of the law, debt collectors can mitigate the risk of liability through careful study of the law, reliance on forms and procedures developed by expert bodies, and by forgoing practices of questionable lawfulness. It does not seem unfair to require that one who deliberately goes perilously close to an area of proscribed conduct must assume the risk that he or she may cross the line. The statute already provides debt collectors with considerably more protection than other businesses subject to federal regulation enjoy. If more is required, it must be sought from Congress rather than this Court. Finally, petitioner argues that the Sixth Circuit misconstrued the intent and effect of the 1980 amendment to TILA. The Sixth Circuit placed significant weight on the fact that in 1980 Congress amended that law to declare expressly that legal mistakes do not qualify as bona fide errors under that statute s defense, but it made no such amendment to the FDCPA. The court concluded that the fact that the TILA s bona fide error provision expressly excludes legal errors while the analogous provision in the FDCPA does not have such limitation suggests that, unlike TILA, Congress did not intend to preclude legal mistakes from protection under the FDCPA. In Jerman s view, the court drew the wrong inference from the amendment. It assumed that the 1980 amendment was meant to change, rather than codify, existing law as it pertained to legal mistakes. But there is no basis for that assumption. Congress included its reference to legal errors not to change the law, but rather to make clear that although other portions of the 1980 amendment may have expanded the scope of the defense, Congress did not intend to go so far as to make ignorance of the law an excuse. In 1980, there was no need to change the meaning of the TILA to exclude legal mistakes at that time, every court of appeals to have construed the defense had already held that mistakes of law were not covered. Moreover, Congress would have had every reason to believe that those decisions were correct, and that as enacted, the statute already excluded mistakes of law. Accordingly, the more plausible inference is that Congress intended its reference to legal mistakes to codify the existing consensus. For their part, the respondents assert that the plain text of the FDCPA requires that legal errors be included in the bona fide error defense. A growing majority of federal courts have concluded that nothing in the FDCPA limits the reach of the defense to clerical errors only. In fact, respondents say they are unaware of a single decision that excludes legal errors from the bona fide error defense based on an analysis of the plain text of the statute. The Supreme Court has long recognized that the preeminent canon of statutory interpretation requires courts to presume that the legislature says in a statute what it means and means in a statute what it says. Thus, when interpreting language used by Congress in the absence of statutory definitions, courts construe words in accordance with their ordinary and natural meanings, in context, and with a view of their place in the overall statutory scheme. Consequently, it is well established that when the statute s language is plain, the sole function of the courts at least when the disposition required by the text is not absurd is to enforce it according to its terms. Section 1692k(c) is an affirmative defense requiring debt collectors to prove that their violation of the FDCPA was (1) not intentional and (2) resulted from a bona fide error (3) notwithstanding the maintenance of procedures reasonably adapted to avoid any such error. The debt collector must only show that the violation was unintentional, not that the communication itself was unintentional. As commonly used, violation means [t]he act or an instance of violating or the condition of being violated. Synonyms include breach, infraction, transgression, trespass, and infringement. Thus, the common meaning of violation encompasses not only the act constituting an infraction, but also the actual condition being violated, i.e., the infraction or violation itself. The respondents argue that when viewed in the context of the plain language of the FDCPA, the bona fide error defense does not restrict the phrase violation was not intentional to an act constituting the violation of the statute. A review of the FDCPA s safe harbor provision at 1692k(e) reveals that when Congress intended to limit application of a defense to an act, it specifically did so. Had Congress intended to limit the bona fide error defense to an unintentional act or omission, it could have used language consistent with 1692k(e). Congress did not use the term act in 1692k(c), but rather violation. Respondents posit that the plain language of the bona fide error defense does not exculpate debt collectors who are ignorant of the law. Jerman, on the other hand, argues that the statutory phrase violation was not intentional must be restricted to acts constituting an infraction of the law, based on the criminal law maxim that ignorance of the law is no defense. Petitioner, they say, relies on this argument in order to inject a meaning into the bona fide error defense that is otherwise not apparent from the actual text. Her reliance on this criminal law maxim is unpersuasive, the respondents contend, because it is predicted on a false premise that the respondents error in legal judgment was the result of ignorance of the law. They contend that this characterization of their legal violation is absurd. The conduct found to be in violation of the FDCPA (the issuance of a letter requiring a response in writing) was predicated upon a reasonable analysis of existing case law in an effort to comply with the statute. Importantly, the bona fide error defense is not an exception to the criminal law maxim that ignorance of the law is no defense. Although this affirmative defense includes legal errors, it excludes ignorance as a basis for establishing the defense. In ordinary English, ignorance means [t]he condition of being uneducated, unaware, or uninformed. While ignorance may be asserted to establish that a legal error was unintentional under the bona fide error defense, by its very definition, ignorance would prove that a debt collector did not 186 PREVIEW of United States Supreme Court Cases

35 act in good faith or maintain procedures reasonably adapted to avoid any such error. Thus the district court did not find that respondents were ignorant of the law. Rather, it found just the opposite that respondents had knowledge and awareness of existing case law. Stated differently, respondents contend that their violation of the statute was subjectively found to be unintentional because they relied on existing case law. In addition, their reliance was objectively found to be made in good faith while maintaining procedures reasonably adapted to avoid any such error. There is, they say, no factual basis to assert ignorance of the law is involved in this case. Respondents believe that a plain reading of the bona fide error defense does not render the FDCPA s safe harbor provision ineffective or superfluous. Petitioner Jerman broadly characterizes the safe harbor provision as a means for a debt collector to obtain clarification about the FDCPA s meaning and application, where legal uncertainty puts debt collectors at risk for liability. In the respondents view, however, her suggestion that an advisory opinion is available for all situations involving legal uncertainty is overstated. The practicability of obtaining an advisory opinion from the FTC is highly questionable, especially in situations in which a lawyer is engaged to initiate litigation and a delay in obtaining an opinion could impact a statute of limitations or otherwise adversely compromise a client s rights. Obtaining an advisory opinion would also be especially troublesome in situations such as foreclosures where time is of the essence and any delay in litigation could result in the value of collateral being substantial impaired. This practicability is also impacted by the FTC s internal rule that it issue advisory opinions only when there is no clear Commission or court precedent. Given this requirement, it is understandable that the FTC would be reluctant to issue an advisory opinion when there is existing case law. Finally, Jerman s characterization of the alleged broad remedy available under the safe harbor provision ignores the undeniable complexity of the meaning and application of the FDCPA. This legislation contains few definitions and is applied without the benefit of governing administrative rules and regulations. As a result, there has been litigation on virtually every aspect of the act. Common sense dictates that the bona fide error and safe harbor defenses are not incompatible and superfluous but rather can and should be construed to work hand-in-hand. Respondents believe that the bona fide error defense is consistent with the purpose of the FDCPA to balance the rights of ethical debt collectors and consumers. Notwithstanding the remedial purpose of the FDCPA, Congress was also sensitive to the rights of ethical debt collectors. Congress expressly acknowledged that an important purpose of the FDCPA was to eliminate abusive debt collection practices while not competitively disadvantaging ethical debt collectors. If Congress meant what it said that ethical debt collectors warrant protection it is the petitioner who is asking the Court to disrupt the balance struck in the FDCPA. Respondents conduct was responsible, conservatively based on case law, and unquestionably ethical. The bona fide error defense does not, as Jerman argues, undermine the statute s deterrent effect, nor will it create a race to the bottom that will leave the field to collectors with the fewest scruples. Petitioner s assertion that the Sixth Circuit s decision will embolden debt collectors to act unethically in a race to the bottom ignores the serious financial penalties contained in the FDCPA under the civil and administrative provisions. Indeed, her fear that the floodgates will be opened to unscrupulous debt collectors has not materialized. Since the Sixth Circuit s decision in this case, respondents have found twenty-one cases in which federal courts have considered the bona fide error defense as applied to legal errors. Seven courts denied the defense as a matter of law, eleven found issues of fact, and three granted summary judgment for the debt collector. Respondents argue that if legal errors are removed from the bona fide error defense, lawyers will face potential liability to nonclients for the exercise of their professional judgment. A lawyer s potential liability under the FDCPA will generally be a consequence of claimed legal error. Thus, Jerman s proposal to restrict the bona fide error defense to exclude legal errors essentially removes the conduct of lawyers from the ambit of the bona fide error defense leaving them with no protection from liability for even the most unintentional and good faith errors in professional judgment. This is tantamount to congressional control of attorney advocacy under the FDCPA, subjecting even the most ethical attorneys to lawsuits by nonclients for exercising professional judgment. Most states recognize a litigation privilege that generally shields an attorney from a third-party claim arising from litigation activities. Petitioner s attempt to remove the vast majority of attorney errors from the bona fide error defense would necessarily drive a wedge between debt collection lawyers and their clients. Respondents also argue that TILA does not warrant setting aside the plain meaning of the FDCPA. In this regard, they say, petitioner s analogy to the bona fide error defense in TILA is flawed. Jerman argues that 1692k(c) excludes legal errors because (1) Congress borrowed the language from TILA s then current bona fide error defense when it enacted the FDCPA and (2) Congress understood the allegedly settled interpretation of the pre-1980 TILA defense to exclude legal errors. The respondents contend there are a number of problems with this argument. First, it wrongly assumes that when Congress utilizes language from an existing statute in a new statute, there is a presumption that Congress intended to adopt the existing judicial interpretations of that language. On the contrary, the respondents say, the Supreme Court has recognized several factors that must be considered in determining whether Congress intended to adopt existing judicial interpretations. These include (1) whether the judicial interpretations are settled and (2) whether congressional intent has been expressed in the legislative history or stated purpose of the statute. Regarding the first factor, respondents argue, the judicial interpretation of TILA s bona fide error defense was unsettled: the Supreme Court had never reviewed the language petitioner claims was lifted from the pre-1980 version of TILA and inserted into the FDCPA, nor was there a consensus among the lower courts. As to the second factor, Congress did not express an intent in the FDCPA s legislative history to adopt any particular judicial interpretation of TILA s bona fide error defense. When enacting the FDCPA, Congress did not indicate that the bona fide error defense should be construed consistent with any interpretations of TILA. In fact, the legislative histories of TILA and the FDCPA are significantly different. The legislative history of TILA reflects PREVIEW of United States Supreme Court Cases 187

36 Congress s inclusion of the bona fide error defense in response to complaints from creditors that clerical errors would be inevitable due to the complexity of mathematical computations. Conversely, the legislative history of the FDCPA shows that Congress granted more expansive protection, stating that a debt collector has no liability if he violates the act in any manner, including with regard to the act s coverage, when such violation is unintentional and occurred despite procedures designed to avoid such violations. The fact that Congress chose not to amend the FDCPA to exclude legal errors despite having amended the statute several times defeats any attempt to draw parallels between the defenses now. The legislative history of the FDCPA does not evidence a restricted congressional intent to adopt TILA s bona fide error defense. Respondents further maintain that the express purpose of the FDCPA demonstrates that Congress did not intend to adopt TILA s more limited bona fide error defense. Finding that there has been a congressional adoption of judicial interpretation is only appropriate when analyzing statutes with the same or similar objectives. In this case, however, the purposes of TILA and the FDCPA are fundamentally different. The purpose of TILA is exclusively to protect consumers through a meaningful disclosure of credit terms. The FDCPA, on the other hand, was drafted to balance the purposes of (1) eliminating abusive debt collecting practices while (2) not competitively disadvantaging nonabusive debt collectors. These differing legislative purposes support the inclusion of legal errors within the FDCPA s bona fide error defense. While TILA provides creditors with several avenues to avoid liability for legal errors, the FDCPA does not. If legal mistakes are removed from the plain language of the FDCPA s bona fide error defense, ethical debt collectors will be left with only the safe harbor defense which, as already demonstrated, is often impracticable or unavailable. Therefore, to give effect to the FDCPA s express purposes of balancing the interests of both consumers and ethical debt collectors, legal errors cannot be removed from the plain language of the bona fide error defense. Finally, the respondents add that the 1980 TILA amendments do not support a restrictive interpretation of the FDCPA s bona fide error defense either. Congress amended TILA to remove legal errors concerning the act s coverage from protection. The FDCPA was not so amended despite Congress having had the opportunity to do so on numerous occasions. Petitioner s assertion that the 1980 amendments demonstrate a congressional intent to exclude legal errors from the FDCPA s bona fide error defense presumes that in all likelihood, the issue never occurred to Congress. Congress s failure to amend 1692k(c) since 1980, however, leads to the opposite conclusion. In 1986, Congress did amend the FDCPA to repeal the exemption for attorneys. In 1995, the Supreme Court highlighted the clerical versus legal error debate in Heintz v. Jenkins, 514 U.S. 291, when it held that lawyers are liable under the FDCPA as debt collectors. Since Heintz, the vast majority of circuit and district courts have determined that 1692k(c) is not limited to clerical errors. Nevertheless, Congress has remained silent on this issue. It is recognized that when Congress had abundant opportunity to give further expression of its will, the failure to do so amounts to legislative approval and ratification of the construction given the statutes by the courts. These principles of statutory construction are especially applicable when, as in this case, the statute has undergone amendments. Thus, the respondents contend, petitioner s assertion that Congress forgot to amend the FDCPA is unpersuasive. In their view, the fact that Congress did not amend the bona fide error defense in the FDCPA to exclude legal mistake on eight occasions since the 1980 TILA amendments signifies its ratification and approval of the construction placed upon 1692k(c) by a growing majority of courts. SIGNIFICANCE While both parties agree that the outcome of this case will have a major impact on debt collection law and practice, they disagree sharply as to what the effect will be. From petitioner Karen L. Jerman s perspective, extending the bona fide error defense to legal errors would undermine Congress s efforts to deter abusive collection practices. Allowing this defense to suit would encourage debt collectors to take an aggressive view of the law when its requirements are not clear, knowing that there will be no liability if they cross the line into illegal conduct. From the respondent law firm s point of view as debt collectors, however, requiring collectors to prove the three elements of the bona fide error defense by a preponderance of the evidence will protect consumers from unethical collectors, but failing to extend the defense to legal errors at all would undermined the congressional intent to equitably balance the valid interests of both consumers and ethical debt collectors. Ralph C. Anzivino is a professor of law at Marquette University in Milwaukee, Wisconsin. He can be reached at Ralph.Anzivino@marquette. edu or PREVIEW of United States Supreme Court Cases, pages American Bar Association. ATTORNEYS FOR THE PARTIES For Petitioner Karen L. Jerman (Kevin K. Russell, ) For Respondents Carlisle, McNellie, Rini, Kramer & Ulrich LPA et al. (George S. Coakley, ) AMICUS BRIEFS In Support of Petitioner Karen L. Jerman New York et al. (Barbara D. Underwood, ) Public Citizen, Inc., et al. (Deepak Gupta, ) United States (Elena Kagan, Solicitor General, ) In Support of Respondents Carlisle, McNellie, Rini, Kramer & Ulrich LPA et al. ACA International (Michael A. Klutho, ) American Legal and Financial Network (Andrew C. Morganstern, ) 188 PREVIEW of United States Supreme Court Cases

37 California Association of Collectors (Ronald A. Zumbrun, ) Commercial Law League of America and DBA International (Manuel H. Newburger, ) DRI - Voice of the Defense Bar (Linda T. Coberly, ) Mississippi Creditors Attorneys Association (Lester F. Smith, ) National Association of Retail Collection Attorneys (Seth P. Waxman, ) Ohio Creditor s Attorneys Association et al. (Michael D. Slodov, ) USFN - America s Mortgage Banking Attorneys (Rick D. DeBlasis, ) PREVIEW of United States Supreme Court Cases 189

38 oil and gas Does the PMPA Recognize Claims for Constructive Termination and Constructive Nonrenewal? CASE AT A GLANCE The Petroleum Marketing Practices Act regulates the relationship between franchisors and franchisees in the lucrative petroleum industries. It prohibits unlawful termination and nonrenewal actions by franchisors and their assignees. This case asks the Court to sanction claims for constructive termination and constructive nonrenewal when the franchisee objects to a new lease but signs it anyway under protest and continues operating as a franchisee. Mac s Shell Service, Inc., et al. v. Shell Oil Products Company LLC et al. and Shell Oil Products Company LLC et al. v. Mac s Shell Service, Inc., et al. Docket Nos and Argument Date: January 19, 2010 From: The First Circuit by David L. Hudson Jr. Vanderbilt University Law School ISSUES Does the Petroleum Marketing Practices Act encompass a claim for constructive nonrenewal of the franchise relationship? Can a service station operator that continues to operate its franchise using the same trademark, selling the same fuel, and occupying the same premises bring an action claiming that it was constructively terminated in violation of the act? FACTS Mac s Shell Station (Mac s) signed a franchising contract with Shell Oil Products and operated two gas stations in Massachusetts. The franchise agreements between Shell and its dealers (such as Mac s) specified a monthly contract rent for the stations. Shell offered a program called the subsidy program that reduced a dealer s rent based on the volume of gasoline sold. Shell had offered this subsidy program since Mac s contends that Shell promised to continue this subsidy unless there was a war or a major oil embargo. In 1998, Shell combined its business with Texaco and Star Enterprises. As part of this combination, Shell assigned its rights and obligations under its franchise agreements to Motiva Enterprises (Motiva). Motiva offered different terms to their franchisees than Shell had been offering to its franchisees, including Mac s. Motiva ended the subsidy program over a period of 16 months, ending in January 2000 and created a new rent system which was less favorable to Mac s and other franchisees. The net result was that Mac s and other franchisees paid much more rent. In June 2001, 63 Massachusetts-based service stations including Mac s sued Shell and Motiva. They claimed that Shell and Motiva concocted a secret plan to run the franchisees out of business and take over many of the stations for themselves. Mac s and the other stations claimed that the subsidy rent agreement was promised as a continuing feature of the franchise agreement. They further claimed that the ending of the subsidy was a breach of contract under state law. Mac s and the other stations further alleged that the change in rent calculation amounted to a termination under the Petroleum Marketing Practices Act (PMPA) and a violation of the nonrenewal provisions under the PMPA. The district court selected eight of the 63 plaintiffs to proceed to trial first. Those eight included Mac s Shell. While the suit was filed, Mac s Shell and others signed new agreements with Shell and Motiva. Mac s and the others claimed they signed the new lease agreements under protest. The district court allowed the termination claim under PMPA to proceed, reasoning that the elimination of the subsidy agreement could amount to a constructive termination. The district court also allowed the nonrenewal claim, reasoning that a jury could find a constructive nonrenewal claim if the rent increases and other new provisions were designed to prevent the dealers from renewing. The jury found in favor of Mac s Shell, awarding the plaintiffs damages of $3.3 million, including $1.3 million for constructive termination and $1.2 million for constructive nonrenewal. Shell and Motiva 190 PREVIEW of United States Supreme Court Cases

39 appealed to the First U.S. Circuit Court of Appeals, which affirmed the constructive termination claim but rejected the constructive nonrenewal claim. The First Circuit reasoned that the breach by Shell and Motiva need not result in complete deprivation of a statutory element of the franchise to support a constructive termination. The First Circuit s rejection of the concept of constructive nonrenewal was based on the reasoning that allowing such claims would frustrate the PMPA s notice and preliminary relief provisions. Both sides Mac s and Shell have appealed portions of the First Circuit s decision to the U.S. Supreme Court. Mac s contends that the PMPA recognized both a constructive termination and constructive nonrenewal claims; Shell counters that the PMPA does not recognize either claim. Case ANALYSIS The PMPA regulates franchise relationships in the petroleum industry. 15 U.S.C Congress enacted the PMPA to remedy the disparity in bargaining power between franchisors and franchisees. Section 2802 generally prohibits franchisors from terminating or failing to renew franchise agreements with franchisees. It also deals with franchisors terminating or failing to renew franchise agreements; Section 2805 provides that franchisees can pursue civil actions against franchisors for terminating or failing to renew such agreements. Section 2805(b)(1) states: (1) In any action under subsection (a) of this section, the court shall grant such equitable relief as the court determines is necessary to remedy the effects of any failure to comply with the requirements of section 2802, 2803 or 2807 of this title, including declaratory judgment, mandatory or prohibitive injunctive relief, and interim equitable relief. Mac s contends that the behavior of Shell and Motiva is the poster child for Congress s enactment of the PMPA years earlier. Mac s claims that Shell and Motiva engaged in a pattern of imposing unilateral, intolerable terms in a take-it-or-leave-it fashion that forced the objecting stations to sign unfair agreements in order to stay afloat. Mac s contends that the actions of Shell and Motiva violate the intent behind the PMPA. The PMPA s protections and remedies should not be so easily undermined by Shell and Motiva s clever strategy, Mac s writes. Mac s position is that Shell and Motiva failed to comply with the proper enumerated grounds articulated in 2082 for terminating and failing to renew an essential portion of the franchise relationship that had existed for many years the rent calculation. Shell and Motiva succinctly state their primary position: Terminate means terminate and fail to renew means fail to renew. They claim that a service station that continues as a franchisee and renews its contract even under protest cannot advance claims for termination and nonrenewal. The Court must determine whether the PMPA covers the actions of Shell and Motiva which did not lead to actual terminations or nonrenewals. Constructive Termination Claim While the PMPA does not mention the term constructive termination, the concept has developed in the lower courts. In Barnes v. Gulf Oil Corp., 795 F.2d 358 (4th Cir. 1986), the Fourth Circuit Court of Appeals determined: A franchisor cannot circumvent the protections the [PMPA] affords a franchisee by the simple expedient of assigning the franchisor s obligation to an assignee who increases the franchisee s burden. A few years later, the Sixth Circuit Court of Appeals adopted the following test for determining whether an assignee committed a constructive termination under the PMPA in May-Som Gulf, Inc. v. Chevron U.S.A., Inc., 869 F.2d 917 (6th Cir. 1989): To sustain a claim, under the PMPA, that a franchisor assigned and thereby constructively terminated a franchise agreement, the franchisee must prove either: (1) that by making the assignment, the franchisor breached one of the three statutory components of the franchise agreement, (the contract to use the refiner s trademark, the contract for the supply of motor fuel, or the lease of the premises), and thus, violated the PMPA; or (2) that the franchisor made the assignment in violation of state law and thus, the PMPA was invoked. The Court must determine whether the elimination of the longstanding rent agreement one of the three principal components of a franchise agreement was breached by Motiva s (an assignee) enactment of a new rent calculation. It must also determine whether an alleged material breach is recognized as a termination claim under the PMPA when the breach does not result in an actual termination. Shell and Motiva claim that a franchisee cannot sue for termination under PMPA if it continues to operate its business under the franchise agreement. A dealer [that] continues operating its franchise cannot avoid the statutory termination requirement by claiming constructive termination, they write, pointing out that Mac s and the other dealers continued to receive Shell trademark, premises, and fuel. While it does not fit neatly into the statutory language, the Fourth Circuit s decision in Barnes recognize such a cause of action. It remains to be seen whether the U.S. Supreme Court will take a similar path. Constructive Nonrenewal Claim Only one federal appeals court the Ninth Circuit in Pro Sales, Inc. v. Texaco, U.S.A., 792 F.2d 1394 (9th Cir. 1986) has recognized a constructive nonrenewal claim under the PMPA. The PMPA requires a franchisor to provide notice of nonrenewal. The act then provides a framework for the franchisee to seek preliminary relief after receiving notice of pending nonrenewal. Most of the lower courts, including the First Circuit below, reasoned that this notice and preliminary relief structure provides sufficient protection for franchisees and demonstrates Congress s intent to limit the remedial aspects of the PMPA to cases of actual nonrenewal not the elastic concept of constructive nonrenewal. We conclude that just as the PMPA requires a clear indication from franchisors that they seek nonrenewal of a franchise relationship, it likewise requires that franchisees faced with objectionable contract terms refrain from ratifying those terms by executing the contracts PREVIEW of United States Supreme Court Cases 191

40 (even under protest ) and operating under them, the First Circuit reasoned. Nevertheless, Mac s argues that refusing to recognize a claim for constructive nonrenewal presents franchisees with a Hobson s Choice sign the lease and waive any claims under the Act, or refuse to sign, wait for notice of termination [which] is no choice at all. Mac s also contends that the First Circuit erred in concluding that Mac s ratified Motiva s new rent contract terms by signing the new lease. Mac s points out that it initiated the lawsuit before signing the new lease and therefore the signing should not be viewed as a ratification. Significance The case is significant because it represents the first time that the U.S. Supreme Court will address the PMPA a statute that has led to much litigation and some confusion in the lower courts. On the constructive termination claim, it will be interesting to see if the justices draw parallels to the concepts of constructive discharge in employment law or constructive eviction in landlord-tenant law, which require the worker to leave the workplace and the tenant to leave the premises. The American Petroleum Institute in its amicus brief in support of Shell contends that recognizing a cause of action for constructive termination will lead to nonuniform results across the country: Under the court of appeals decision, determining whether a constructive termination occurred will often turn on the application of state law, as it did here. Although the Court s opinion will likely deal only with the provisions of the PMPA, the Court s opinion could have larger implications for statutory interpretation, legislative intent, and preemption. David L. Hudson Jr. teaches classes as an adjunct at Vanderbilt University Law School, Nashville School of Law, and Middle Tennessee State University. He is the author or coauthor of 25 books, including The Rehnquist Court: Understanding Its Impact and Legacy (Praeger, 2006) and The Handy Supreme Court Answer Book (Visible Ink Press, 2008). He can be reached at dhudson@freedomforum.org or PREVIEW of United States Supreme Court Cases, pages American Bar Association. ATTORNEYS FOR THE PARTIES For Mac s Shell Service, Inc., et al. (John F. Farraher Jr., ) For Shell Oil Products Company LLC et al. (Jeffrey A. Lampkin, ) AMICUS BRIEFS In Support of Shell Oil Products Company LLC et al. American Petroleum Institute (Robert A. Long Jr., ) United States (Elena Kagan, Solicitor General, ) 192 PREVIEW of United States Supreme Court Cases

41 Juries How Does a Court Decide When Jury Venire Selection Violates the Fair-Cross-Section Requirement? CASE AT A GLANCE After an all-white jury convicted Diapolis Smith of murder, state and federal courts disagreed on whether the venire represented a fair cross section of Smith s community. Now the Supreme Court must reevaluate the standards for deciding if African Americans were underrepresented and systematically excluded from Smith s jury pool. Berghuis v. Smith Docket No Argument Date: January 20, 2010 From: The Sixth Circuit by Michael Kaye Washburn University School of Law In 1968, in Duncan v. Louisiana, 391 U.S. 145 (1968), the United States Supreme Court first held that the Sixth Amendment right to a trial by an impartial jury was part of the due process guaranteed to defendants by the Fourteenth Amendment. The Sixth Amendment s requirement that jurors be drawn from a fair cross section of the community, previously applied only in federal cases, now would apply to the states. Justice White famously outlined the theory underlying the fair crosssection requirement in the case of Taylor v. Louisiana, 419 U.S. 522 (1975). The requirement, he wrote, guards against the exercise of arbitrary power by prosecutors and judges by summoning and using the commonsense judgment of the community. Community participation in the administration of the criminal law is part of our democratic tradition and is critical for maintaining public confidence in the criminal justice system. Concerning the exclusion of women, Justice White also wrote that the protection afforded by the jury is negated if the jury pool is made of only special segments of the populace at large, or if large, distinctive groups are excluded from the pool. In Duren v. Missouri, 439 U.S. 357 (1979), the Court established a test for proving a prima facie case of a fair-cross-section violation. A prima facie is a case that on first impression, or on its face, can succeed, and in this instance it requires showing (1) that the group alleged to be excluded from the jury is a distinctive group in the community; (2) that the representation of this group in the jury venires (the pools of potential jurors from which juries are selected) is not fair and reasonable in relation to the number of persons living in the community; and (3) that this underrepresentation is due to systematic exclusion of the group in the jury selection process. Since Duren, state and federal courts have differed as to what is included in the various terms under the Duren test, including: a distinctive group, a fair and reasonable representation of the community and the elements of proving systematic exclusion. Courts have also disagreed on the proper method for analyzing jury venire data in order to determine whether the means of selection of jurors comports with the requirements of Duren. In Berghuis v. Smith, the Court will have the opportunity to resolve some of these conflicts and to examine the application of the fair-cross-section requirement to a venire with small numbers of African American prospective jurors. ISSUES Did the U.S. Court of Appeals for the Sixth Circuit err in concluding that the underrepresentation of African Americans on a Michigan county s venire panels was a result of systematic exclusion that denied Smith an impartial trial under the Sixth and Fourteenth Amendments? Did the Sixth Circuit err in concluding that the Michigan Supreme Court failed to apply clearly established Supreme Court precedent in determining the fair-cross-section question under the Sixth Amendment? FACTS Diapolis Smith was involved in an early morning bar fight with another patron at So So s Bar in Grand Rapids, Michigan, in The fight escalated into a brawl joined by five other men. One of the men died after being struck with a bottle, pistol whipped, kicked, and shot in the chest. It was unclear who fired the fatal shot. Some witnesses testified that Smith displayed a handgun and fired five or six shots. Others testified that someone else fired the fatal shot. PREVIEW of United States Supreme Court Cases 193

42 The bullet that pierced the victim s chest also struck So So s bouncer in the thigh as he tried to break up the fight. Smith was charged with second-degree murder, assault with intent to commit great bodily harm less than murder, and two counts of possession of a firearm during the commission of a felony. He went on trial in fall of Smith is African American. Before the jury was sworn, Smith challenged the racial composition of the jury panel and of the venire from which it was selected, alleging that African Americans had been improperly excluded. He argued the overall selection process of the venire panel violated his Sixth Amendment right to a jury drawn from a fair cross-section of the community. Out of an estimated total of 60 to 100 prospective jurors summoned for Smith s trial, three were African American. Thirty-seven jurors were actually questioned. None of these were African American. Smith requested additional peremptory challenges in order to increase the likelihood of seating some African American jurors. That request was denied and a fourteen person all-white jury was seated. Smith was found guilty of second-degree murder and felony-firearm possession. He was sentenced to life in prison. He appealed, challenging the jury selection process and alleging a violation under the Sixth Amendment of his right to an impartial jury. The Michigan Court of Appeals denied his request for a new trial, but, on its own motion, remanded the case for an evidentiary hearing on the allegations of improper jury selection. The jury pool in Kent County, Michigan, at the time of Smith s trial was drawn from a database provided by the Michigan secretary of state. The list contained the names of holders of Michigan drivers licenses and Michigan identification cards. No other identifying information was provided. The number of prospective juror names the Kent County court administrator requested was calculated by the number of jurors that the administrator estimated would be needed for upcoming trials. Next, all persons on the list were sent a qualifying questionnaire. Five percent of these questionnaires were returned as undeliverable. Fifteen to twenty percent of the questionnaires were not answered. The Chief Judge of the Kent Circuit Court sent members of this latter group letters advising them of the penalties for not answering the questionnaires and encouraging them to answer. Half of this group responded to the letters. No further efforts were made to obtain increased cooperation. Next, the court exempted some prospective jurors on the list for statutory reasons or, at the prospective juror s request, for nonstatutory reasons. No record was kept of the race of these exempted jurors. However, there was some evidence presented later that minorities were more likely to be exempted for statutory and nonstatutory reasons such as felony conviction and a lack of adequate child care or transportation to court. Prospective jurors were then summoned to the Kent County courts for jury duty. First, the 61st District Court in the city of Grand Rapids selected jurors it needed for trials in city court. All remaining prospective jurors, after district court selection, were available for circuit court juries (Smith was tried first at the circuit court level). Names 194 of those prospective jurors who were referred to the district court but who did not serve on a jury were not returned to the jury pool used for circuit court cases. According to the 1990 census, 8.1 percent of Kent County s population was African American. African American adults between the ages of 18 and 65 comprised 7.28 percent of the county s population. The city of Grand Rapids had an African American population of 18.5 percent. Moreover, the African American population of Grand Rapids comprised 85 percent of all African Americans living in Kent County. During the hearings on the composition of the Kent County Circuit Court jury pools at the time Smith s jury was chosen, an expert statistician testified that from April to October 1993, 929 prospective jurors were selected from the secretary of state lists and that, on the basis of 7.28 percent jury-eligible African American population in the county, 68 prospective trial jurors in the jury pool could be expected to be African American. However, only 56 African American jurors were selected. The trial judge accepted these figures as fact. The state circuit court, on remand, found that Smith had not been denied his right to an impartial jury drawn from a fair cross section of the community because he had not proven that African Americans were systematically excluded from the jury pool, and there was no proof that the initial district court juror assignments had exhausted the supply of minority jurors still available for jury service in circuit court. The circuit court left Smith s convictions in place and he appealed. In an unpublished per curiam decision, the Michigan Court of Appeals reversed. The Court of Appeals held that minority jurors were systematically excluded from the circuit court jury pools because the jury selection system drained the largest groups of African American prospective jurors from the master list by first selecting district court jurors. The state appealed. The Michigan Supreme Court reversed, concluding that Diapolis Smith was not denied his Sixth Amendment right to an impartial jury because he had not shown systematic exclusion leading to underrepresentation of African American prospective jurors from the jury pool. The Michigan Supreme Court recognized that although the U.S. Supreme Court used an absolute disparity test for determining whether the representation of a distinctive group is fair and reasonable under the Sixth Amendment, there are other tests for resolving that question. These include the comparative disparity test and the standard deviation test. The Michigan Supreme Court applied all three tests and concluded that the Kent County selection procedure appeared to fail all three. However, after working through each of the tests itself, the Michigan Supreme Court found the tests to be inadequate in this case. The absolute disparity test may be the most frequently employed test in Sixth Amendment cases. Under this test, fair and reasonable representation is decided by calculating the difference between the percentage of a certain distinctive population group eligible for jury duty and the percentage of that group actually appearing for jury duty. Ramseur v. Beyer, 983 F.2d 1215 (C.A ). PREVIEW of United States Supreme Court Cases

43 In Kent County, the jury-eligible members of the African American population were 7.28 percent. Fifty-six of 929 potential jurors or 6 percent available for Smith s trial were African American. The absolute disparity calculation, then, is 1.28 percent. The Michigan court observed that other courts have consistently held that absolute disparities of less than 11.5 percent do not constitute unfair or unreasonable underrepresentation. The court also applied another less frequently used comparative disparity test, which measures the diminished likelihood that an underrepresented group, when measured by the population as a whole, will be called for jury service. Finally it examined the even less-used standard deviation test, which looks at the disparity between the percentages of the distinct group in the entire relevant community and distinct group as reflected in the jury pool. This test determines the probability that any disparity is a result of random chance. After discussing all three analytical tests, the Michigan Supreme Court ultimately concluded that in cases such as this involving a small African American population, none of the methods are truly suitable and courts can glance ahead and analyze the defendant s evidence of systematic exclusion after giving him or her the benefit of the doubt on the question of underrepresentation. Looking at the question of systematic exclusion, the Michigan Supreme Court then rejected Smith s contention that assigning jurors to the district court siphoned off minority jurors. The state supreme court further found that the granting of statutory or nonstatutory exemptions from jury service was not evidence of systematic exclusion. This was in light of the fact that it might be social and economic circumstances, as well as personal preference regarding jury service resulted in fewer African American jurors. After this analysis, the court determined that there was no violation of Smith s Sixth Amendment rights and upheld his conviction. Smith sought habeas corpus review in U.S. district court. His petition was denied. On appeal, however, the Sixth Circuit reversed. It agreed with the state that, in light of the small size of the African American population in Kent County, and the uncertain application of all three of the analytical methods, the Michigan Supreme Court s application of federal law to the underrepresentation issue was not unreasonable. However, the Sixth Circuit concluded, the Michigan Supreme Court s decision that Kent County s jury selection process did not amount to systematic exclusion was an unreasonable application of federal law. Moreover, it was an unreasonable application of federal law for the state supreme court to hold that Smith had failed to establish a prima facie case of a violation of his right to a fair and reasonable cross section under Duren. Smith s evidence of persistent disparities in the month his jury was selected and over a period of months combined with evidence that the disparities were not random was sufficient to establish systematic exclusion within the meaning of Duren. Moreover, underrepresentation was inherent in the particular jury-selection process when jurors were first assigned to the district court jury pool. The Sixth Circuit further concluded that the granting of excuses from jury service in Kent County for hardship resulted in a disproportionate impact on African American prospective jurors living in Kent County. This was particularly true with respect to child care and transportation. In Kent County, 64 percent of African American households were headed by single parents while 19 percent of white households were headed by single parents. An expert testified at the state court hearing that allowing people to opt out or be removed for hardship reasons removed the randomness from the jury selection process. The expert asserted that this introduction of nonrandom factors can support an inference of systematic exclusion. The court also concluded, based on testimony of witnesses familiar with the jury selection process in Kent County, that underrepresentation was a consequence of factors inherent in the jury selection system. The witnesses testified specifically about jurors who did not serve after being siphoned off to the district court lists and the fact that Kent County revised the juror assignment policy after Smith s trial to avoid a process that was leaving circuit courts with jury venires that did not represent the entire county. This evidence, the court found, was sufficient to support an inference that the process used in Kent County resulted in underrepresentation of a distinctive group. The Sixth Circuit concluded by asserting that Smith had established a prima facie case of violation of the Sixth Amendment s fair-crosssection requirement. The court then balanced the fact that the state did have a significant interest in avoiding the imposition of undue burdens on people by allowing hardship excuses with the fact that the state had not shown a significant interest in assigning jurors to the district court before the circuit courts. Thus, the court held that Smith had successfully demonstrated a violation of his Sixth Amendment rights and an unreasonable application of the Duren standards. CASE ANALYSIS Petitioners, including the State of Michigan as represented by Mary Berghuis, warden, urge the Court to find that the Michigan Supreme Court s ruling was not unreasonable in its application of the second and third prongs of the Duren test. In Duren, the Court applied the absolute disparity test to determine whether the venire contained a fair cross section of the community. According to petitioner, an absolute disparity of 1.28, the disparity at issue here between the percentage of African Americans eligible for jury duty and the percentage of that group that actually appeared for jury duty, is negligible. The percentages are so much smaller in Smith s case than in Duren that there is no clear basis for showing that they established a prima facie case of underrepresentation. Calculating the percentage of disparity as the Sixth Circuit did, using the comparative disparity approach, exaggerates small disparities and is unworkable, claims the petitioner. Moreover, the Supreme Court has not required use of this test. Petitioner makes a distinction between this case and Taylor v. Louisiana, 419 U.S. 522 (1975), in which the Court stated that it is a violation of the fair-cross-section requirement to exclude large groups. In Taylor, the Supreme Court asserted that it is by including representation of large groups that arbitrary power can be limited. The state claims that this reasoning does not apply to small groups such as is the case here. Based on the standards used by other courts across the country, petitioner believes the Court should adopt a 10 percent threshold PREVIEW of United States Supreme Court Cases 195

44 disparity figure for showing a prima facie violation of the fair and reasonable cross-section requirement. The state further urges the Court to adopt the absolute disparity test as the standard for calculating the disparities for community representation. Lastly, the petitioner argues that the Sixth Circuit erred in concluding that there was systematic exclusion in this case based on the practice of assigning jurors to the district court before assigning jurors to circuit courts. There was no proof offered to show that this procedure resulted in fewer African American jurors being assigned to circuit court. There is also no precedent establishing that facially neutral rules such as those Kent County had for jury selection are improper. On the other hand, according to respondent Diapolis Smith, the issue in this case is simply whether the Sixth Circuit erred when it held that the Michigan Supreme Court unreasonably applied the Duren test by not finding persistent systematic underrepresentation of African Americans in the jury pool. Smith points to the jury venire selection process in Kent County and argues that the Michigan Supreme Court held that African Americans were indeed significantly underrepresented in the county jury venire. Moreover, Smith asserts that the state conceded as much at oral argument before the Sixth Circuit. This case, he says, should not become an occasion to review the validity and use of the absolute disparity and comparative disparity tests in determining jury venire underrepresentation. That, he argues, is simply not the issue. Analysis of appellate cases is sometimes heavily influenced by the nature of the facts found at trial, and Smith paints a picture of a weak prosecution case, flawed by faulty eyewitness identification. He further points the finger of suspicion at another person at the bar that night who might have committed the homicide. In Smith s painting of the picture, there were between 200 and 300 customers crowded into the So So s Bar on November 6, All were African American. Thirty-seven witnesses, including Diapolis Smith, testified to the night s events. Five of these witnesses testified that Smith was not the man who shot the victim. Two witnesses said that he was. The others made no identifications. One of the two witnesses who identified Smith as the shooter failed to identify him at a pretrial lineup. At the preliminary examination, this witness said she had seen him at the bar but had not seen him with a gun. At trial she testified she witnessed Smith shoot the deceased while holding onto his collar. However, the medical examiner testified that the shot was fired from at least four feet away. Another witness testified that she had seen the shooter fire while standing 30 to 35 feet away; she could not identity this person. Another state s witness testified he saw Smith shoot the victim but admitted he told police the shooter was shorter than the victim. Smith is five inches taller than the victim. Smith pursues his theory of mistaken identity by naming a person at the bar who strongly resembled him and was seen arguing with the deceased before the shooting. This man, Rod Fee, testified at trial that he took a cab to the So So s Bar, but did not enter. Another witness testified, however, that she had met Fee at the bar that night. As to the issues currently before the Court, Smith argues that during jury selection, 37 prospective jurors were called to the jury box; none were African American. The defense s request for peremptory challenges, a request that could be granted for good cause, was denied. Smith also points to the underrepresentation of African American prospective jurors during the month of Smith s trial (between 15 and 34.7 percent). In his brief to the Supreme Court, Smith now focuses his argument on the third prong of the Duren test: systematic underrepresentation. He claims the Michigan Supreme Court erred in concluding that the method of selecting the jury venires in Kent County had no significant effect on the underrepresentation of African Americans on the county s jury panels. As the Court noted in Glasser v. United States, 315 U.S. 60 (1942), the fair-cross-section requirement is critical to the proper functioning of the jury system and expresses important democratic values of inclusiveness. Smith points to the evils of systematic underrepresentation and argues that when a minority community has the experience of seeing nothing but white faces on the jury case after case, the community will lose faith in the justice system. Excluding African Americans from the jury pool deprives the juries of the life experience, both cultural and linguistic, of other community members who could provide insights in evaluating evidence at trial and thus avoid unjust results. Smith s trial counsel repeatedly questioned the jurors on the issue of racial bias; all disclaimed harboring feelings of racial prejudice against African Americans. Yet, in this case, respondent notes, the defendant is a large, muscular, threatening African American. Smith suggests that non-african Americans might have felt threatened by the defendant s appearance. The prejudicial effects of such reactions in a murder case, Smith says, could be reduced should even one juror be African American. Given these concerns, exclusion of smaller distinctive groups undermines the goals of the fair-cross-section requirement no less than the exclusion of larger distinct groups. Size limitation has not been a required characteristic of the concept of distinctive group, a term that derives its meaning from the core purposes of the fair-cross-section requirement to avoid bias, to assure criminal defendants the benefit of the commonsense judgment of the community, to avoid an appearance of unfairness, and to ensure against deprivation of historically disadvantaged groups of their right as citizens to serve on juries in criminal cases. Indeed, the respondent points out that in Taylor, the Court, defining the concept of a distinct group, stated that the members need not act or tend to act as a class, but by their absence flavor, a distinct quality is lost. This is an important point in Smith s argument, since petitioner has urged the Court to summarily reject fair-cross-section challenges whenever the excluded group is less than 10 percent of the eligible jury population. Smith replies that localities where minority populations are few are precisely those localities where the minority population is in need of constitutional protection. What good he asks, is a rule that allows defendants to complain in Detroit, where minorities have political power and thus no need 196 PREVIEW of United States Supreme Court Cases

45 to complain, but withholds the right to complain in Lansing, Jackson, and Grand Rapids? Smith argues that the state s proposed rule would have wholesale detrimental effects on the constitutional right to a fair trial and would validate the exclusion of small- and medium-sized minorities since by mathematical definition a small minority can never demonstrate a sufficiently large absolute disparity. Smith also claims that the record in this case shows proof of systematic underrepresentation. Fifteen out of seventeen times, the jury pool was shown to have a significant underrepresentation of African Americans, thus showing that on more than one particular occasion, members of a distinct group were eliminated or excused. But to be systematic, the exclusion of the distinct group must be the result neither of random selection nor from conditions other than the jurisdiction s selection criteria, so Smith further argues that persistent discrepancies such as these are sufficient under Duren to establish a prima facie case that the underrepresentation is systematic. Smith claims the Michigan Supreme Court erred in ignoring this element of the Duren test and adopting instead the Duren dissent s view that offering proof of repeated exclusion is not the same as showing systematic exclusion. In this case, moreover, additional concrete proof of systematic exclusion was impossible because unlike Missouri, which had a specific rule on jury service exemptions for women, no records were kept and no rules were published in the Michigan court concerning requests for exclusion from jury duty. The state argued that the alleged siphoning of jurors to district court did not have an impact because in the months following the abandonment of the district draft procedure, the disparity continued. However, according to Smith, a more careful analysis of the jury pool data indicates that the end of the district draft did affect the jury pool disparities, but not until several months after October During the six months after the district draft procedure ended, disparity measurement went to 13.9 percent (from 18 percent during the last six months when the procedure still was being used). Finally, Smith relies on evidence of systematic exclusion not addressed by the Sixth Circuit. This is the evidence of jury excuses and of Kent County s failure to follow up with potential jurors who did not respond to their jury summons. Hardship, Smith argues, is not necessarily a bar to relief for a fair-cross-section violation. The Michigan Supreme Court should have considered evidence that little was done to encourage reluctant or recalcitrant potential jurors from serving on juries. Evidence suggests that 25 percent of the eligible jury population either did not receive the jury service mailing request or did not respond to it. Kent County law enforcement played no role in enforcing jury-service summons procedures. Moreover, those who did receive the summons and did respond could still get out of jury duty without ever seeing a judge, merely, for example, by claiming they had no ride or could not find a babysitter. Potential jurors frequent use of excuses from jury duty created a shortage of trial jurors. The evidence suggests that efforts were made to call more people than were needed but that no effort was made to obtain sufficient numbers of African American jurors who were less likely to report for jury service than were prospective white jurors. Smith also points out that at a hearing on systematic exclusion the testimony was that based on statistics showing that African Americans were far more economically disadvantaged than whites in the area, African Americans were also more likely to be without a babysitter or a ride to court. Smith concludes that the use of these hardship excuses from jury services introduced a nonrandom element into the jury system. The state s practice of granting excuses to prospective jurors and its failure to keep records of those excused jurors, its use of jury lists that were a year old (so that addresses of many African Americans would change before the summonses were sent), and the failure of police to enforce summonses, were all systematic elements of the county s failure to secure a fair cross section of the community for jury service. Smith concludes that the underrepresentation of African Americans on the venires in Kent County was systematic and a violation of his constitutional rights. SIGNIFICANCE This case is important because a body of somewhat conflicting case law has developed concerning Duren s three pronged test for analyzing fair-cross-section questions. Since its 1979 decision the Court has not clearly enunciated standards for determining when there is an unconstitutional underrepresentation of a distinctive community group in a jury pool. Thus, this case may tell us what tests besides the absolute disparity test applied in Duren should be used to decide underrepresentation in the venire. The Court could decide to require multiple tests. Yet, this case also shows that current tests measure differently and their usefulness and validity are open to question. The Supreme Court s decision in this case also could give courts broader latitude in deciding how they will examine fair-cross-section questions and in what order they will address them. For example, the Court could approve the analytical technique employed by the Michigan Supreme Court and the Sixth Circuit of glancing ahead and giving the defendant the benefit of the doubt regarding the second Duren question of underrepresentation. Under this approach courts would next decide the third Duren issue of systematic exclusion of distinctive groups from the jury pool. The state urges the Court to adopt a clear line rule. This rule would require a court to find a 10 percent disparity before it could recognize a fair-cross-section underrepresentation claim. In districts with small minority populations, this requirement could reduce challenges and result in some fair-cross-section questions never moving forward since the disparity would not be unfair by definition. Some in turn may ask whether any evidence short of intentional violation would suffice for a successful challenge under such a framework. The sufficiency of the evidence on proof of fair-cross-section representation is also an issue. In proving a prima facie case, how certain must the evidence be to establish the cause of the alleged underrepresentation in the jury pool? In this case, there were no figures to show how many African American prospective jurors were supposedly siphoned off to the district court. The Sixth Circuit relied on testimony from the Kent County court administrator and from witnesses to the jury selection process. The state has referred to this evidence as anecdotal and, therefore, insufficient. The Supreme Court could establish a rule requiring defendants to produce evidence of the composition of past venires to show systematic exclusion. PREVIEW of United States Supreme Court Cases 197

46 Both the Sixth Circuit and the Michigan Supreme Court concluded that some factors that affected underrepresentation were extrinsic to the jury selection system: for example, the failure of some people to return their jury summons or to respond to court letters advising of the jury duty obligation. It is said, as the Michigan Supreme Court observed, that these failures to respond are voluntary and result from factors outside the court s control. But, the Supreme Court could point out that courts can r summonses, and county administrators can expand jury pool lists to reach people who may not vote. Creating residential lists are also a possibility if adequately funded. The Court thus may conclude that further efforts to obtain a fair cross section of jurors should be required. Finally, the Supreme Court will likely have to address the fair-crosssection question posed by distinctive groups that are small in number. How much of a difference does the representation of such small groups make in the jury decision-making process? If the quality of deliberations and the sense of confidence in the outcome matter, both to the accused and the public, seating members of a small distinctive group on the jury may be important. But the Court will have to consider the costs of assuring such a fair cross section in deciding whether Diapolis Smith s jury venire met Sixth Amendment standards. Kent County later changed it venire selection procedures by eliminating the initial referral of potential jurors to the district court and by avoiding underrepresentation of African American jurors in circuit court trials. There are other options that counties could consider. Some states have used census data to set quotas for various groups based on race, age, and gender and then used a computer to randomly select members of the jury pool within each group to consistently mirror the racial and gender composition of the county. See LaFave et al. 6 Criminal Procedure 3rd. Ed (c ) p.67 (2007). Court administrators also could send more jury summonses to zip codes or precincts with low returns to assure proportionate representation. However, this option hasn t always been successful: In re United States, 426 F.3d 1 (1st Cir. 2005), a judge was prohibited from ordering additional names to be drawn from zip codes where the original response rate had been low. It is against this diverse background of local innovation and disparate judicial analysis that the Court will reexamine the fair-cross-section issues in Berghuis v. Smith. Michael Kaye is a professor of law at Washburn University School of Law in Topeka, Kansas. He can be reached at michael.kaye@ washburn.edu or PREVIEW of United States Supreme Court Cases, pages American Bar Association. ATTORNEYS FOR THE PARTIES For Petitioner Mary Berghuis, Warden (B. Eric Restuccia, ) For Respondent Diapolis Smith (James Sterling Lawrence, ) AMICUS BRIEFS In Support of Petitioner Mary Berghuis, Warden Criminal Justice Legal Foundation (Kent S. Scheidegger, ) 198 PREVIEW of United States Supreme Court Cases

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