Gravel2Gavel Construction & Real Estate Law Blog
As usual, the last month of the Supreme Court’s term generated significant rulings on all manner of cases, possibly presaging the new directions the Court will be taking in administrative and regulatory law. Here’s a brief roundup:
An Offshore Dispute, Resolve – Parker Drilling Management v. Newton
On June 10, 2019, the Court held, in a unanimous ruling, that, under federal law, California wage and hour laws do not apply to offshore operations conducted on the Outer Continental Shelf (OCS). Newton, the plaintiff, worked on drilling platforms off the coast of California, and alleged that he was not paid for his “standby time” which is contrary to California law if not federal law. He filed a class action in state court, which was removed to federal court, where it was dismissed on the basis of a 1969 decision of the U.S. Court of Appeals for the Fifth Circuit, which held that state law applies on the OCS only to the extent that it is necessary to use state law to fill a significant gap or void in federal law, and this is not the case here. On appeal to the Ninth Circuit, that court disagreed with the Fifth Circuit, and ruled that state law is applicable on the OCS whenever it applies to the matter at hand. The Supreme Court, in an opinion written by Justice Thomas, conceded that “this is a close question of statutory interpretation,” but in the end the Court agreed with the argument that if there was not a gap to fill, that ended the dispute over which law applies on the Outer continental Shelf. This ruling, recognizing the preeminent role that federal law plays on the OCS, may affect the resolution of other offshore disputes affecting other federal statutes.
Preemption Prevention – Virginia Uranium, Inc. v. Warren. et al.
On June 17, 2019 the Court decided important cases involving federal preemption and First Amendment issues. In a 6-to-3 decision, the Court held that the Atomic Energy Act does not preempt a Virginia law that “flatly prohibits uranium mining in Virginia”—or more precisely—mining on non-federal land in Virginia. Virginia Uranium planned to mine raw uranium from a site near Coles, Virginia, but acknowledging that Virginia law forbade such an operation, challenged the state law on federal preemption grounds, arguing that the Atomic Energy Act, as implemented by the Nuclear Regulatory Commission, preempts the ability of the state to regulate this activity. However, the majority, in an opinion written by Justice Gorsuch, notes that the “best reading of the AEA does not require us to hold the state law before us preempted,” and that the1983 precedent that Virginia Uranium cites, Pacific Gas & Electric Company v. State Energy Resources Conservation and Development Commission, can easily be distinguished. Justice Gorsuch rejected arguments that the intent of the Virginia legislators in passing the state law should be consulted, that the Court’s ruling should normally be governed by the exact text of the statute at hand. However, both the concurring and dissenting opinions suggest that the what the legislators intended to do is important in a preemption context.
Unrestrained by the First Amendment – Manhattan Community Access Corp. et al. v. Halleck, et al.
The Court also decided a First Amendment case, albeit in a regulatory context. In Manhattan Community Access Corp. et al. v. Halleck, et al., the Court reversed the Second Circuit and held that the nonprofit operator of public access channels on Time Warner’s New York City cable system was not a “state actor” subject to the restraints and confines of the First Amendment. Two filmmakers produced a film critical of the operator, which then aired the film on the channel which led to their suspension, triggering this litigation. This case was decided on a 5-4 vote, meaning that the public access operator’s “abridgement” of this speech was not actionable under the First Amendment, and it could exercise some editorial discretion over its channels. The 1984 Cable Communications Act authorized state and local governments to set aside channels on their systems for public access, and this decision clarifies the legal rights and responsibilities of cable systems and those who provide public access programming services. Justice Sotomayor dissented, noting that “it is crucial that the Court does not continue to ignore the reality, fully recognized by our precedents, that private actors who have been delegated constitutional responsibilities like this one should be accountable to the Constitution’s demands.”
Two Important Administrative Law Cases – PDR Network, LLC, et al. v. Carlton & Harris Chiropractic, Inc. and Gundy v. United States
On June 20, 2019, the court quietly decided two important administrative law cases. In PDR Network, LLC, et al. v. Carlton & Harris Chiropractic, Inc., an unusual case involving the federal Telephone Consumer Protection Act of 1991, the Court vacated and remanded the Fourth Circuit’s ruling that the lower court had no jurisdiction to hear the plaintiff’s complaint that it received the defendant’s unsolicited fax advertisement because the Hobbs Act deprived it of jurisdiction. Without that jurisdiction, the lower court was not authorized to assess the validity of a Federal Communications Commission rule which the interpreted the Act (e.g., whether the Act covered goods “offered for free”). In any event, the Court is not able to review this case until some preliminary issues were decided by the lower courts. The concurring opinions by Justices Thomas and Kavanaugh are noteworthy because they indicate some unease with the Court’s current precedents on the scope of a federal agency’s authority to interpret the parameters of a statute it administers. Justice Thomas concluded by stating that “the decision below rested in the assumption that Congress can constitutionally require federal courts to treat agency orders as controlling law without regard to the text of the governing statute.” In Gundy v. United States, the Court narrowly affirmed the Second Circuit’s decision that the Attorney General’s authority, delegated to the Attorney General by the Sex Offender Registration and Notification Act (SORNA), to specify by rule that the Act’s registration requirements, apply in full to pre-Act offenders, is consistent with the nondelegation doctrine of the Court. The manifest consequences of the rule on “pre-Act” offenders is pretty significant, and the power vested in the Attorney General has caused concern with four Justices. Few cases have overturned an act of Congress on the basis of an unconstitutional delegation of legislative authority, but some Justices may now be looking for an appropriate case to revisit these arguments.
Takings Claim Rebuffed – Knick v. Township of Scott, Pennsylvania
On June 21, 2019, the Court decided a takings case, vacating in a 5-4 opinion the Third Circuit’s decision affirming the lower court’s ruling that the plaintiff’s takings claim must be dismissed in accordance with a 1985 Supreme Court ruling, Williamson County Planning Commission v. Hamilton Bank of Johnson City, 473 US 172 (1985). Scott Township passed an ordinance requiring that all cemeteries must be kept open and accessible to the public during daylight hours. The plaintiff. on whose land a small family cemetery is located, views this as an unconstitutional taking of her property, and sought injunctive relief (but not compensation) in the local courts. Relief was denied, and because of the Williamson County precedent, she was unable to obtain any relief in the federal courts because Williamson County requires that property owners must seek compensation under state law in state court before bringing a takings claim in federal court under 42 USC Section 1983. Indeed, if the state claim is unsuccessful, some federal court deny federal relief on full faith and credit grounds. In any event, many Justices believe relief for a Fifth Amendment claim is often elusive. The Court, in a decision written by the Chief Justice, overturned Williamson County, describing it as “not just wrong. Its reasoning was exceptionally ill founded and conflicted with much of our takings jurisprudence.” Justice Kagan, in her dissenting opinion, remarked that the court here was subverting the venerable considerations of stare decisis.
Viewpoint Discrimination – Iancu v. Brunetti
In a trademark case decided on June 24, 2019, the Court held in a 6-3 ruling that the Lanham’s Act broad proscription against the registration of trademarks “that consist of comprise … immoral or scandalous matter” (See 15 USC Section 1052(a)violates the First Amendment.) The Court majority holds that this bar is in effect “viewpoint discrimination” favoring society’s own sense of its decorum, rectitude or morality against the expression of offensive material. This decision follows in the wake of an earlier Lanham Act case (Matal v. Tam) which also held that the bar against “disparaging trademarks” was violative of the First Amendment. In his concurring opinion, Justice Alito suggested that Congress could adopt a more carefully focused statute that would preclude the registration of any mark consisting of vulgar terms that play no part in the expression of ideas.
The Rise of Exemption 4? – Food Marketing Institute v. Argus Leader Media, dba Argus Leader
On June 24, 2019, the Court analyzed the scope of Exemption 4 to the Freedom of Information Act (FOIA) which concerns the shielding from public disclosure information involving “trade secrets and commercial or financial information obtained from a person and privileged or confidential.” Here, the information related to the Department of Agriculture’s food stamp program (SNAP) and affected grocery stores’ annual SNAP redemption data for five years. Each store’s information was considered to be confidential, and Department of Agriculture agreed not to disclose this commercial data to the public. A local South Dakota newspaper, the Argus Leader, filed an FOIA request with the Department, which was denied. This lawsuit followed, and the U.S. Court of Appeals for the Eighth Circuit, affirming the lower court, held that this exemption did not apply unless disclosure would cause the retailer “substantial competitive harm,” a test devised by the DC Circuit several years ago (1974) but which is not mentioned in the Act itself. The Supreme Court reversed the Eighth Circuit, observing that the DC Circuit’s analysis of Exemption 4 was the product of a “casual disregard of the rules of statutory construction.” This case may assume larger significance since so many federal agencies acquire vast amounts of information that surely now could be considered protected by Exemption 4.
A Residential Requirement Expires – Tennessee Wine and Spirits Retailers Association v. Thomas
On June 26, 2019, the Court held in a 7-2 decision that Tennessee’s two-year residential requirement to be eligible for an initial state liquor retail license discriminated against out-of-state applicants in violation of the Commerce Clause. The Court affirmed the ruling of the U.S. Court of Appeals for the Sixth Circuit. This is another “dormant” Commerce Clause decision, and also held that the Twenty First Amendment, which repealed Prohibition yet provided the states with some flexibility in their administration of state liquor laws, did not preserve this residential requirement.
A Doctrine Revisited – Kisor v. Wilkie, Secretary of Veterans Affairs
In another important ruling handed down on June 26th, the Court issued its long-awaited decision in Kisor v. Wilkie, Secretary of Veterans Affairs. The Court has been asked to revisit its 1995 ruling in Auer v. Robbins, which involved the deference that the courts should extend to federal administrative agencies when they interpret their own, often ambiguous rules in deciding a wide variety of controversies involving those rules. In the Kisor case, the U.S. Court of Appeals for the Federal Circuit affirmed the decision of the Board of Veterans’ Appeals which held that Kisor, a Marine veteran of the Vietnam War, was not entitled to a retroactive award of certain veterans benefits based on the Board’s interpretation of a Veterans Administration regulation. The Federal Circuit applied the “Auer doctrine” to uphold the VA rule. The Court held, unanimously, that the Federal Circuit’s ruling should be vacated and the case remanded to the lower courts. However, a majority of the Court rejected any argument that the Auer case and its doctrine should simply be overturned, Instead, the majority, in an opinion written by Justice Kagan, held that Auer deference should not be afforded to an agency’s review of its own regulation unless the regulation at issue is genuinely ambiguous; the reviewing court is persuaded that the agency’s interpretation of its rule entitles it to controlling weight; the agency’s interpretation reflects the agency’s substantive expertise; and the agency’s reading of the rule reflected the agency’s fair and candid judgment. Overruling Auer and its antecedent would unwisely cast doubt on the settled construction of many agency rules that has developed over the past 75 years. Justice Gorsuch, in his concurring opinion, remarked that the Court has festooned Auer with so many limitations that it has been transformed into a “paper tiger.” It will be interesting to see how the lower courts and the counsel who practice in these courts, will now utilize the revised Auer doctrine.
The Census Case – Department of Commerce v. New York, et al.
Completing its term, the court issued its opinion on the “census case.” On June 27, 2019, the Court held in a 5-4 ruling that the decision of the Secretary of Commerce to reinstate the question on the census related to the citizenship of the recipient was reviewable under the provisions of the Administrative Procedure Act (APA) and that the current explanation for this action was inadequate as a matter of administrative law. The Court’s opinion, written by the Chief Justice, held that the Enumeration Clause of the Constitution does not provide a basis to set aside the Secretary’s decision, but that his decision may nevertheless be reviewed under the APA for compliance with various applicable provisions of the Census Act, which delegated to the Commerce Department’s the Congress’s authority to perform the census. (See Title 13 of the United States Code.) With respect to these issues, the Court held that the lower court erred in finding that the Secretary violated Sections 6 and 141 of the Census Act. However, the Secretary’s explanation for his action did not persuade the Court majority that the requirements of the APA for a reasoned explanation for the decision had been followed. Accordingly, while the Secretary’s legal position was largely affirmed by the Court, his failure to adhere to the requirements of the APA justified the lower court’s order seeking addition information. This particular holding elicited strong disagreement among four members of the Court, with Justice Thomas observing that “if taken seriously as a rule of decision, this holding would transform administrative law.”