May 16, 2013
Federal Complaint for Unconstitutional Sex Assignment Surgery on Infant
The Constitutional Court of Colombia issued a series of opinions beginning in 1995, analyzed in a 2004 law review article by Kate Haas, Who Will Make Room for the Intersexed?, that recognize a constitutional right of children, albeit limited, with regard to the surgery. A ground-breaking symposium issue of Cardozo Journal of Law & Gender in 2005 engages with many of the legal issues and proposed solutions, often recognizing the limits of constitutional remedies in the United States given that the surgeries are usually the result of private action.
But a complaint filed this week, M.C. v. Aaronson, by the Southern Poverty Center claims a violation of both substantive and procedural due process under the Fourteenth Amendment by South Carolina doctors who performed genital surgery on a child in state custody (foster care). M.C., now 8 years old, brings the case through his adoptive parents.
The substantive due process claim is a relatively obvious one, building on established United States Supreme Court cases finding a right to be free of coerced medical procedures including Cruzan v. Director, Missouri Department of Health (1990). The right is a bit muddled, however, given that the highly discredited 1927 case of Buck v. Bell has never been actually overruled; the declaration that castration was as unconstitutional penalty for a crime in Skinner v. Oklahoma rested on equal protection grounds.
The procedural due process claim is more novel, contending that the minor was entitled to a pre-deprivation hearing before the surgery. Such a hearing would presumably be of the type that Erin Lloyd recommended for all minors (whether in state custody or not) in her article From the Hospital to the Courtroom: A Statutory Proposal for Recognizing and Protecting the Legal Rights of Intersex Children in the Cardozo Journal of Gender and Law Symposium issue.
An accompanying lawsuit filed in state court alleges medical malpractice and failure to obtain informed consent, raising the same underlying facts and many of the same issues, but under state law.
Southern Poverty Center has produced a video featuring the parents and outlining the facts of the case:
This is definitely a case to watch.
May 16, 2013 in Cases and Case Materials, Comparative Constitutionalism, Due Process (Substantive), Fourteenth Amendment, Gender, Medical Decisions, Procedural Due Process, Sexuality, Supreme Court (US) | Permalink | Comments (0) | TrackBack
May 13, 2013
Court Says Plaintiff Can Bring State Suit for Illegal Sale of His Car
The Supreme Court ruled today in Dan's City Used Cars, Inc. v. Pelkey that federal law does not preempt a plaintiff's state law claim against a towing company for the illegal sale of his car. The ruling affirms the New Hampshire Supreme Court's ruling in favor of the plaintiff and settles a split among state high courts on the question. Otherwise, the ruling doesn't break any new ground, and it's not a particular surprise.
The case arose when Dan's City towed Pelkey's car from his landlord's parking lot and later traded it away without compensating Pelkey. (Pelkey was suffering with a serious medical condition for which he was later hospitalized, and thus left his car in the parking lot during a snow--a towing offense under the landlord's rules.) Pelkey sued for wrongful sale (but not wrongful towing) under state law. The lower state court said that the Federal Aviation Administration Authorization Act, FAAAA, preempted Pelkey's suit and dismissed the case. (The FAAAA applies to motor carriers.) The New Hampshire Supreme Court reversed, and this appeal followed.
The FAAAA preemption clause says,
[A] State . . . may not enact or enforce a law, regulation, or other provision having the force and effect of law related to a price, route, or service of any motor carrier . . . with respect to the transportation of property.
In an opinion by Justice Ginsburg, the unanimous Supreme Court held that Pelkey's suit wasn't "with respect to the transportation of property," because it was based on the allegedly wrongful sale of his car after it was transported--that is, post-towing. The Court said that this result is consistent with congressional purposes is enacting the FAAAA preemption clause.
May 08, 2013
D.C. Circuit Strikes NLRB Notice-of-Rights Rule
A three-judge panel of the D.C. Circuit struck the enforcement mechanisms for the NLRB rule requiring employers to post a notice of employee rights. The ruling yesterday in National Association of Manufacturers v. NLRB means that the NLRB rule is invalid.
The case strikes a blow at the NLRB effort to educate employees on their workplace rights, in an era where union membership is way down (7.3% of the private workforce) and where more and more workers enter the workplace without knowledge of their rights.
The case arose after the NLRB promulgated a rule that required employers to post a notice of employee rights in the workplace. Violation of the rule came with an unfair labor practice under Section 8(a)(1) of the NLRA. (It also came with a suspension of the running of the six-month period for filing any unfair labor practice charge, and it constituted evidence of unlawful motive in a case in which motive is an issue.)
The rule says,
[a]ll employers subject to the NLRA must post notices to employees, in conspicuous places, informing them of their NLRA rights, together with Board contact information and information concerning basic enforcement procedures . . . .
29 C.F.R. Sec. 104.202(a). (Here's the single-page version of the notice poster.) But the plaintiffs argued that this violated the NLRA and free speech. The court agreed, concluding that the rule violated Section 8(a), which says:
The expressing of any views, arguments, or opinion, or the dissemination thereof, whether in written, printed, graphic, or visual form, shall not constitute or be evidence of an unfair labor practice under any of the provisions of this [Act], if such expression contains no threat of reprisal or force or promise of benefit.
The court said that "[a]lthough Section 8(a) precludes the Board from finding noncoercive employer speech to be an unfair labor practice, or evidence of an unfair labor practice, the Board's rule does both."
The court rejected the NLRB's argument that the required post is the Board's speech, not the employer's speech. Comparing Section 8(a) to First Amendment law, the court said that it didn't matter: dissemination of messages gets the same free speech treatment as creation of messages.
The court also rejected the NLRB's argument based on UAW-Labor Employment & Training Corp. v. Chao, (D.C. Cir. 2003), which upheld President Bush's executive order requiring government contractors to post notice at their workplaces informing employees of their rights not to be forced to join a union or to pay union dues for nonrepresentational activities. (The plaintiffs in that case argued only that President Bush's EO was preempted by the NLRA; they lodged no First Amendment claim.) The difference, according to the court: there was no prospect in UAW of a contractor's being charged with an unfair labor practice for failing to post the required notice.
(Two members of the panel, Judges Henderson and Brown, would have gone farther and ruled that the NLRB lacked authority to pomulgate the posting rule.)
The court addressed the preliminary issue whether the NLRB had a quorum when it promulgated the rule, in light of its recent ruling in Noel Canning v. NLRB that President Obama's recess appointments were invalid. But the court held that the NLRB had a quorum when the rule was filed with the Office of the Federal Register (the relevant time), even if it didn't have a quorum when the rule was published.
May 06, 2013
Daily Read: New Book "The Price of Justice" Discusses the Caperton Case
The 2009 sharply divided Supreme Court opinion in Caperton v. Massey Coal is the centerpiece of the new book, The Price of Justice: A True Story of Greed and Corruption by Laurence Leamer. Recall that the Court in Caperton ruled that due process required judicial recusal of a West Virginia Supreme Court of Appeals judge, Justice Brent Benjamin, in a case involving Massey Coal because of the contributions by Massey Coal to Justice Benjamin's campaign.
The starred review from Publisher's Weekly describes the book as
the riveting and compulsively readable tale of the epic battle between Don Blankenship, the man who essentially ran the West Virginia coal industry through his company Massey Energy, and two seemingly ordinary attorneys: Bruce Stanley and David Fawcett. The centerpiece of the story is a West Virginia mine owner whom Blankenship purposefully bankrupted, and on whose behalf Stanley and Fawcett won (in 2002) a $50 million dollar verdict that is still unpaid. In hopes of having the ruling overturned by the West Virginia Supreme Court, Blankenship sought to “buy” a seat on the court by contributing over $3 million to the successful campaign of a conservative judicial candidate. However, the U.S. Supreme Court eventually found that Blankenship’s contributions were too much to allow the new West Virginia justice to hear the case. Leamer has produced a Shakespearean tale of greed, corporate irresponsibility, and personal hubris on the one hand, and idealism, commitment to justice, and personal sacrifice on the other. Blankenship is a villain for all time, and Stanley and Fawcett are lawyers who bring honor to their profession.
A good addition to that summer reading list for anyone interested in constitutional law and anyone who might like a reminder that lawyers can, indeed, be heroic.
April 29, 2013
States Can Restrict FOIA Laws to Own Citizens, Court Says
A unanimous Supreme Court ruled today in McBurney v. Young that a state can restrict its own freedom of information law to its own citizens without violating the Privileges and Immunities Clause or the dormant Commerce Clause. We covered oral arguments here.
The ruling puts an exclamation point behind the idea that there's no fundamental right to public records. If there were any doubt going into the case, this ruling settled the matter: Our Constitution doesn't require freedom of information. If you want it, take it up with your legislature.
The case arose out of two out-of-state claimants' efforts to get Virginia state records through the state FOIA. One of those claimants, McBurney, sought records related to the state's 9-month delay in enforcing a child support order that he had against his ex-spouse, a Virginia resident. The other, Hurlbert, sought state real estate tax records on half of his clients. The state didn't provide the requested records pursuant to its FOIA, however, because its FOIA extends only to state citizens. (It did provide most of the records through other means.) Both McBurney and Hurlbert sued, arguing that the FOIA violated the Article 4 Privileges and Immunities Clause and the dormant Commerce Clause.
The Court disagreed. In an opinion by Justice Alito, the Court said that the FOIA doesn't interfere with a fundamental right in violation of the Privileges and Immunities Clause. It said that the FOIA doesn't violate the opportunity to pursue a common calling, because the law wasn't designed to provide a competitive advatage for Virginia citizens. It doesn't violate the right to own or transfer property in Virginia, because Virginia makes the necessary records available through the clerks of its circuit courts (even if not through its FOIA). The FOIA doesn't violate the right to gain equal access to Virginia courts, because its citizens-only application leaves open "reasoanble and adequate" access to the courts (because state procedure allows discovery and subpoenas, which would provide noncitizens with any relevant and nonprivileged information, and state law allows equal access to judicial records). And it doesn't violate a claimed right to gain access to public information on equal terms, because, well, there is no such right.
The Court also rejected Hurlbert's dormant Commerce Clause claim, ruling that Virginia's FOIA neither regulates nor burdens interstate commerce. "[R]ather, it merely provides a service to local citizens that would not otherwise be available at all." Op. at 13.
Justice Thomas joined the opinion but wrote separately to remind us of his view that "[t]he negative Commerce Clause has no basis in the text of the Constitution."
April 29, 2013 in Cases and Case Materials, Dormant Commerce Clause, Federalism, Fundamental Rights, News, Opinion Analysis, Privileges and Immunities: Article IV | Permalink | Comments (1) | TrackBack
April 26, 2013
Government Seeks Supreme Court Review of Recess Appointment Power
The Obama Administration filed its Petition for Writ of Certiorari yesterday in NLRB v. Noel Canning, the case testing whether President Obama's recess appointments of three NLRB members satisfied the Recess Appointments Clause.
Recall that the D.C. Circuit ruled that they didn't. (Here's our coverage of the lower court ruling, with links to resources.) That court held that the Recess Appointments Clause permits a recess appointment only during an inter-session recess of Congress (i.e., a recess that occurs between one enumerated session of Congress and the beginning of the next), not an intra-session recess (i.e., a recess that occurs during the course of a session), and that it permits a recess appointment only for vacancies that arise during an inter-session recess. The court said that because President Obama made the appointments during an intra-session recess of Congress, and because the vacancies did not arise during an inter-session recess of Congress, the appointments were invalid.
The government seeks review of both issues--whether the President can exercise the recess-appointment power during an intra-session recess, and whether the President can fill a vacancy that existed (even if not arose) during a recess.
It's a good bet the Court will take this. There's a circuit split, and the stakes are high. As the government explains:
[The decision below] would deem invalid hundreds of recess appointments made by Presidents since early in the Nation's history. It potentially calls into question every order issued by the National Labor Relations Board since January 4, 2012, and similar reasoning could threaten past and future decisions of other federal agencies.
Petition at 11-12.
April 24, 2013
Utility Group Lacks Standing to Intervene to Stop EPA Clean Water Rulemaking
A three-judge panel of the D.C. Circuit ruled this week in Defenders of Wildlife v. Perciasepe that a utility industry group lacked Article III standing to intervene in a case brought by Defenders against EPA in which the parties entered into a consent decree establishing a schedule for EPA to initiate notice-and-comment rulemaking on certain effluent limitations and effluent limitations guidelines.
The ruling means that the EPA will move forward with notice-and-comment rulemaking pursuant to the consent decree, and that the utility group's challenge is dismissed.
The case arose when Defenders and the Sierra Club reached an agreement with the EPA to establish a schedule for notice-and-comment rulemaking to review and possibly rewrite Steam Electric effluent limitations and effluent limitations guidelines under the Clean Water Act. Defenders filed suit and simultaneously filed a consent decree. Eight days later, the Utility Water Act Group, or UWAG, an association of energy companies, moved to intervene (in opposition to the consent decree). The district court denied the motion, and UWAG appealed.
The D.C. Circuit ruled that UWAG lacked standing, a requirement for intervention. The court first held that UWAG didn't assert a procedural injury. In particular, UWAG didn't have any claim that it should be "subject to such rulemaking only to the extent the statute commands it or authorizes EPA, in its informed discretion, to undertake it," because UWAG didn't identify a statutory procedure that the consent decree required EPA to violate. Moreover, UWAG didn't have a procedural injury flowing from the consent decree's short notice-and-comment schedule: UWAG couldn't cite any authority that the 13-month schedule was too short.
The court next said that the consent decree didn't require EPA to promulgate new rules. Instead, the decree simply required EPA to conduct a rulemaking and then decide whether to issue a new rule. The court held that this wasn't enough to meet the imminent harm requirement for standing.
Assuming no successful appeal, the next step is for EPA to start its notice-and-comment procedure pursuant to the consent decree.
April 20, 2013
Oral Arguments in Kebodeaux, the Sex Offender Registration Case
The Supreme Court heard oral arguments this week in United States v. Kebodeaux, the case testing whether Congress can require a federal sex offender to register, when the offender served out his full sentence before Congress enacted the Sex Offender Registration Act.
The arguments centered on just how far congressional authority extends under Congress's power to regulate the military (because Kebodeaux was convicted under the UCMJ) and the Necessary and Proper Clause (because he was required to register under SORNA only after he served out his full sentence). That latter point, the key here, in turn largely centered on the reach and understanding of United States v. Comstock, the OT 2009 case holding that Congress could authorize a federal judge to order the civil commitment of a "sexually dangerous" person in federal custody even beyond the term of his sentence.
Comstock was a 7-2 ruling, with Chief Justice Roberts joining Justice Breyer's majority opinion. Justices Kennedy and Alito concurred separately. Justices Scalia and Thomas dissented.
Chief Justice Roberts sent strong signals during arguments in Kebodeaux that he sees this application of SORNA as beyond the pale. Justices Kennedy and Alito were also critical of the government's position, but seemed slightly less firm in their positions, slightly more open. Justice Sotomayor, too, pressed for limits on government authority. If three of these switch from their positions in Comstock, Kebodeaux will go the other way.
My argument review at SCOTUSblog is here.
April 18, 2013
Bradley Manning's "Secret" Trial
In its sharply divided opinion in Center for Constitutional Rights v. United States, the United States Court of Appeals for the Armed Forces rejected a claim that of public access to the trial and documents regarding the Bradley Manning court martial.
In this case, the appellants - - Center for Constitutional Rights, Glenn Greenwald, “Salon.com,” Jeremy Scahill, “The Nation,” Amy Goodman, “Democracy Now!,” Chase Madar, Kevin Gosztola, Julian Assange, and Wikileaks - - - sought press access. The three-judge majority noted that the court "invited counsel for the accused to file a brief on the issues but they declined to do so." It concluded that the court did not have the "jurisdiction" to grant the relief requested.
The two dissenting opinions - - - each judge authoring an opinion that the other joined - - - reject the majority's disinclination to assert its own power.
A dissenting opinion, by Chief Judge Baker joined by Senior Judge Cox, begins by centering the First Amendment concerns:
The general public has a qualified constitutional right of access to criminal trials. Richmond Newspapers, Inc. v. Virginia , 448 U.S. 555 (1980) (plurality opinion). Public access to a criminal trial includes appropriate access to filings. Nixon v. Warner Commc’ns , Inc. , 435 U.S. 589 , 597 (1978) . “Congress intended that, to the extent ‘practicable,’ trial by court - martial should resemble a criminal trial in a federal district court.” United States v. Valigura , 54 M.J. 187, 191 (C.A.A.F . 2000). The right to a public trial is embedded in Rule for Court’s - Martial (R.C.M.) 806, which provides that “ [e]xcept as otherwise provided in this rule, courts - martial shall be open to the public.”
Judge Baker's opinion stops short of concluding that there should be press access to the proceedings and documents, but does conclude that the court should determine the specific contours of the First Amendment right.
Judge Cox's dissenting opinion, joined by Baker, emphasized the court's role to assist the military trial judge, noting that the military judges " are in a better position to do that than is a federal district judge to solve the issues presented."
Thus, it seems as if it will continue to be difficult to determine what is happening in the court martial of Bradley Manning.
Party's Non-Settlement Moots "Similarly Situated" Labor Case
A sharply divided Supreme Court (5-4, along conventional ideological lines) ruled on Tuesday that when a lone plaintiff sues under the Fair Labor Standard Act on behalf of herself and all others "similarly situated," but then declines to answer a defendant's settlement offer in the case, the case--the entire thing--becomes moot.
The ruling in Genesis Healthcare v. Symczyk deals a significant blow to the FLSA's provision that allows an employee to sue on behalf of all others "similarly situated." That's because the ruling allows a defendant to moot an entire case by offering complete settlement to a lone lead plaintiff--whether the plaintiff accepts it, rejects it, or ignores it. But if the dissent is right, this is a one-off that should never happen again.
Symczyk sued Genesis Healthcare under the FLSA for backpay after Genesis docked its employees' pay for a half-hour lunch each day, even when employees worked through lunch. She sued on behalf of herself and all others "similarly situated." (The FLSA specifically provides for this class-action-like mechanism.) Genesis offered to settle for the full amount of monetary damages, but put a deadline on its offer of 10 days. Symczyk didn't respond, and the trial court dismissed her case. The Third Circuit reversed, but only as to the collective action. The Third Circuit said that the settlement offer mooted Symczyk's individual claim, but that it didn't moot her collective claim on behalf of others "similarly situated."
The Supreme Court ruled the entire case moot. The majority, by Justice Thomas, joined by Chief Justice Roberts, and Justices Scalia, Kennedy, and Alito, assumed, but did not decide, that the Third Circuit was right about Symczyk's individual claim, but it reversed on her collective claim. The Court said that once it assumed that Symczyk's individual claim was moot, the ruling on the collective-action allegations turned on a "straightforward application of well-settled mootness principles." Basically: "the mere presence of collective-action allegations in the complaint cannot save the suit from mootness once the individual claim is satisfied." The Court distinguished the "relation back" cases under Rule 23 class-action doctrine, saying that here "[t]here is simply no certification decision to which resondent's claim could have related back." It also distinguished the "inherently transitory" cases under class-action doctrine, saying that unlike those cases, which were for injunctive relief challenging ongoing conduct, this case was about monetary damages for past conduct. And it said that its ruling wouldn't undermine the purpose of the FLSA's collective-action provision, because the purpose of that provision is different than the purpose of class actions (on which Symczyk relied): the FLSA works differently than class certification--FLSA "conditional certification" simply isn't class certification--and that difference matters.
Justice Kagan wrote an animated dissent for herself and Justices Ginsburg, Breyer, and Sotomayor. She took aim at the majority's assumption that the settlement mooted Symczyk's claim and wrote that if the lower courts could get that right (that is, that Symczyk's claim wouldn't go moot just because she ignored a settlement offer) this case should never happen again. Here's just one among many gems in her dissent:
So a friendly suggestion to the Third Circuit: Rethink your mootness-by-unaccepted-offer theory. And a note to all other courts of appeals: Don't try this at home.
If the lower courts, which are currently split on the question, can work this out as Justice Kagan did, this case will, indeed, never happen again. But in the meantime, the Court's ruling deals a significant blow to FLSA plaintiffs who bring collective action claims in those circuits where a settlement offer moots an individual claim. Even more generally, it's yet another blow to access to justice.
April 17, 2013
Argument Review: Does a Port's Enforcement Have the Force and Effect of Law?
The Supreme Court heard oral arguments yesterday in American Trucking Association v. City of Los Angeles, the case asking whether federal law preempts the Port of Los Angeles's "concession agreement" that it requires of all drayage truck operators. Our argument preview is here.
Two points got the Court's attention. First, the justices tested whether the Port was acting in a proprietary way in enforcing the concession agreement, thus triggering the market participant exception. This question turns on whether the Port's enforcement of the agreement had "the force and effect of law"--language from the preemption clauses in the Federal Aviation Administration Authorization Act that means that enforcement by a state as state is preempted, but enforcement by a state as market actor is not. Here, the Port's concession agreements are contracts with drayage truck operators (making the Port look like a market actors), but they are ultimately backed by criminal penalties, even if not for breach of the contract, and the whole operation relates to regulation of public land (making the Port look like the state). Take a look at this exchange with the attorney for the Port:
JUSTICE KENNEDY: You are saying that you can do by contract what you cannot do by regulation. And I don't understand that argument when there are criminal penalties that attach to the breach of the contract.
MR. ROSENTHAL: But, Justice Kennedy, let me say again, there are no criminal penalties that attach to the breach of the contract. It is purely a contract. The remedies are purely civil. Even our other side in their argument has conceded there are no criminal penalties to the breach of the concession agreement.
JUSTICE SCALIA: I'm not sure that's crucial. You think a state can say nobody's going to come on our highways until it signs a contract? Okay? These highways belong to us, they are State land, and anybody who wants to ride on the highways, you have to enter a contract with the State. And that's going to get around this Federal statute?
Others, too, asked about the criminal penalties and the scope of the Port's regulatory authority--all to the end of determining whether the Port looks more like the state, or more like a market actor, when it enforces its concession agreement.
Next, the Court pressed on the scope of Castle, the case overturning Illinois's punishment of a carrier's repeated violations of the state's freight-weight restriction by completely suspending the carrier's right to use Illinois state highways for certain periods. Here, the arguments turned on whether the Port's enforcement mechanism was a punishment for prior violations (as in Castle), or whether it simply operated to ensure that only currently compliant trucks had access to the Port. There's also an issue about the continued vitality of Castle, given that the federal regulatory scheme that governed at the time has since been superceded.
The Port seemed to have the tougher time at arguments, but that's no (necessary) bellweather. There were plenty of open questions to suggest that there are no easy answers here. As a practical matter, if the Court rules against the Port, it would undo years of litigation and negotiation between the Port and the surrounding community related to environmental and health concerns and send those paties back to the drawing table. That, in turn, could impact both community health and the environment, and the Port's plans for even more expansion.
April 15, 2013
Oral Argument Preview: Does Federal Law Preempt LA Port's Drayage Agreement?
The Supreme Court will hear oral arguments tomorrow in American Trucking Association v. Los Angeles, testing whether the Federal Aviation Administration Authorization Act preempts certain provisions of the "concession agreement" that the Port of Los Angeles requires of all Port drayage service providers, as part of the Port's efforts to reduce drayage truck emissions.
Here's my ABA Preview of United States Supreme Court Cases article on the case, reprinted here with permission:
The Port of Los Angeles (POLA, or the Port) is an independent division of the City of Los Angeles. That is, it raises and manages its own revenue, independent of the City, by leasing its terminal facilities to shipping lines and stevedoring companies, which load and unload cargo from docking ships.
Drayage trucks are an integral part of the operations at the Port. They transport cargo from the Port’s marine terminals directly to customers, or to off-Port long-distance trucks or railroads for further transport. But POLA does not contract for any drayage services. Instead, cargo owners, ocean carriers, railroads, and other transportation providers arrange for drayage services through Licensed Motor Carriers (LMCs). Most LMCs, in turn, contract with independent truck owners and operators to provide drayage services.
In 2008, the Port adopted a “concession agreement” system for drayage service providers. The system was part of an earlier-adopted “Clean Action Plan” designed to address community opposition to Port expansion and to reduce air pollution produced by Port activities. Under the system, the Port requires any drayage service provider seeking access to the Port’s premises to enter into a standard-form “concession agreement” with the Port. That agreement grants the concessionaire “a non-exclusive license to access [the] Port property for the purpose of transporting containers and/or other cargo to and from marine terminals.” In exchange, the concessionaire agrees to comply with several requirements. In particular, the concessionaire must (1) submit an off-street parking plan for all of its permitted trucks, (2) display placards on its trucks that provide a phone number for reporting environmental or safety concerns, (3) demonstrate that it has sufficient financial resources to perform its obligations under the agreement, and (4) ensure that vehicle maintenance is conducted in accordance with the manufacturer’s instructions.
The standard-form agreement also lists penalties for failure to comply with these requirements. The penalties for a default, if not timely cured, include suspension or revocation of the concession agreement and the right of the concessionaire to use the Port’s facilities. In other words, the Port could altogether exclude a drayage service provider for significant noncompliance with the agreement—what the agreement calls a “Major Default.”
Moreover, violation of the agreement can result in criminal penalties. This is because the Port incorporates the concession agreement system into the preexisting tariff that governed Port operations. A violation of the tariff constitutes a misdemeanor subjecting the violator to a $500 fine and imprisonment up to six months.
American Trucking Associations, Inc. (the ATA), a trucking-industry trade group, sued the City and the Port in federal court, arguing that certain concession agreement requirements were preempted by the Federal Aviation Administration Authorization Act (FAAA). The district court found none of the requirements preempted. A divided panel of the Ninth Circuit largely affirmed, reversing the district court only as to a requirement that is not relevant here. This appeal followed. The federal government petitioned to participate as amicus in support of reversal.
This case raises two distinct issues of federal preemption of state law. The first issue, an express preemption issue, involves two sections of the FAAA. The first section, 49 U.S.C. § 14501(c)(1), covers general state regulation of motor carriers, like the concession agreement’s off-street parking requirement. It provides that:
a State, political subdivision of a State, or political authority of 2 or more States may not enact or enforce a law, regulation, or other provision having the force and effect of law related to a price, route, or service of any motor carrier.
This first section exempts “the safety regulatory authority of a State with respect to motor vehicles.” 49 U.S.C. § 14501(c)(2)(A).
The second section, 49 U.S.C. § 14506(a), specifically addresses vehicle identification requirements, like the concession agreement’s placard requirement. It provides that:
[n]o State, political subdivision of a State, interstate agency, or other political agency of two or more States may enact or enforce any law, rule, regulation standard, or other provision having the force and effect of law that requires a motor carrier . . . to display any form of identification on or in a commercial motor vehicle . . ., other than forms of identification required by the Secretary of Transportation.
The first issue asks whether the concession agreement’s off-street parking and placard requirements “hav[e] the force and effect of law” under these sections so that the requirements are preempted by the sections. That question, in turn, depends on whether the concession agreement looks more like a state regulation or more like an ordinary commercial contract. If the concession agreement looks more like a state regulation, it is covered by these sections, and it is preempted. On the other hand, if it looks more like an ordinary commercial contract, it is not covered by these sections, and it is not preempted.
A related question is whether the market participant doctrine applies. The market participant doctrine says that the FAAA preempts only state regulation, not actions a state takes as a market participant. The parties and the federal government disagree about whether the market participant doctrine applies in this case—in particular, whether it applies when the FAAA does not contain an explicit market participant exception.
The second issue involves the application of a 1954 Supreme Court case on preemption, Castle v. Hayes Freight Lines, Inc. In Castle, the Court considered an Illinois statute that limited the weight of freight that could be carried in commercial trucks registered under the federal Motor Carrier Act. The Illinois law punished a carrier’s repeated violations by suspending the carrier’s right to use Illinois state highways for periods of ninety days and one year. The Court said that the Motor Carrier Act left regulation of the size and weights of trucks to the states. But it also held that Illinois’s law forbidding an offending carrier from using all of the state’s highways was “equivalent to a partial suspension of [the carrier’s] federally granted certificate” and was therefore preempted.
The parties and the federal government disagree about the meaning, the scope, and even the continued vitality of Castle. For example, they disagree about whether Castle prohibits the Port from punishing drayage service providers by banning them merely from the Port, even if not from the entire state highway system (as in Castle). The parties also disagree about which concession agreement requirements might be covered by Castle. Finally, they disagree about whether Castle remains good law. The government, for its part, is unsure whether the Port will punish only past, cured violations (as in Castle), and thus whether the punishment even falls under Castle.
The ATA argues first that the plain language of the FAAA expressly preempts the off-street parking and placard provisions of the concession agreement. It says that the parking provision regulates drayage trucks’ “price, route, or service” in violation of § 14501(c)(1), and that the placard provision requires drayage trucks “to display any form of identification . . . other than forms . . . required by the Secretary of Transportation” in violation of § 14506(a). Moreover, it claims that the concession agreement amounts to a “comprehensive licensing scheme” that is “penally enforceable” through the tariff and thus have “the force and effect of law.”
The ATA argues that the market participant exception does not apply. It says that because Congress enacted the FAAA, and because it does not contain a market participant exception, there is no market participant exception to the Act’s provisions. But the ATA claims that even if the FAAA contains an implicit market participant exception, it does not apply here. According to the ATA, that is because the parking and placard requirements are not aimed at the efficient procurement of goods and services or at the use of state-allocated funds, the purposes of the exception; instead, the provisions are aimed at a traditional regulatory goal, to reduce air pollution. Moreover, the ATA contends that the Port is not even a direct participant in the drayage market; instead, it is a regulator of drayage services.
Next, the ATA argues that Castle bars the Port from enforcing even non-preempted regulations on drayage service providers by suspending or revoking their access to the Port. The ATA says that the concession agreement permits the Port to deny a drayage service provider “any and all access” to the Port for certain defaults of the concession agreement, and that this penalty is directly at odds with the Court’s holding in Castle. It claims that Castle forbids even a partial suspension of a drayage operator’s federally licensed activities, even though a denial of access to the Port may not rise to the level of the comprehensive ban at issue in Castle. Finally, the ATA contends that Castle is still good law, and that Congress has only reaffirmed the federal government’s exclusive authority to issue interstate-commerce permits, and to revoke them.
The federal government supports the ATA, but takes a more nuanced tack. It says that the FAAA does not naturally preempt all arms-length commercial agreements between the government and motor carriers. But it says that the Port’s concession agreement looks more like a regulatory scheme than an arms-length commercial agreement between market participants. In particular, the government points to four features of the Port’s agreement and its operations that together suggest that the agreement is really a regulation (and not a commercial agreement): the criminal sanctions that back the agreement; the public ownership of the Port; the generally regulatory character of the agreement’s provisions; and the fact that the government generally does not contract with drayage service providers. For these reasons, the government claims that the FAAA preempts the off-street parking and placard requirements.
Next, the federal government says that it is unclear whether the concession agreement provisions at issue here would contravene Castle. The government argues that Castle prevents the Port from barring a motor carrier’s access to the Port only for a past, cured infraction, and not for the carrier’s current failure to comply with otherwise non-preempted state safety regulations. In other words, it says that nothing in Castle prevents the Port from prohibiting a carrier’s truck from operating at Port facilities until it complies with non-preempted regulations. Given that we do not know whether the Port might punish past, cured violations of the agreements by barring Port access, the government urges the Court to remand the case for a determination on that question.
The Port argues first that the market participant exception shields the off-street parking and placard provisions from preemption. It claims that the Court’s precedents and related acts suggest that the market participant exception applies to the FAAA, even with its express preemption clauses. Moreover, the Port claims that its adoption of the concession agreements fall within the market participant exception. In particular, the Port claims that the concession agreements do not have the “force and effect of law,” because they are contractual in nature, not regulatory in nature. (It claims that under the terms of the tariff and the concession agreement, the criminal sanctions under the tariff do not apply to LMCs.)
Next, the Port claims that Castle does not bar the concession agreements’ safety-based restrictions on access to the Port. The Port says that Castle only prohibits a ban on using all of a state’s freeways, not a ban on a single Port, as here. But even aside from the Ninth Circuit’s approach, the Port claims that the ATA’s argument that Castle prevents the Port from suspending or revoking a motor carrier’s access for safety-related violations would improperly read the safety exception out of § 14501(c)(2)(A). Finally, the Port contends that Castle is no longer good law with respect to the concession contract requirement. That is because Castle arose under an earlier, and superseded, regulatory regime.
The Port of Los Angeles is the largest container port in the United States in terms of both shipping container volume and cargo volume. In 2007, it was the thirteenth busiest port in the world, and the fifth busiest in the world when combined with the cargo volume at the adjacent Port of Long Beach. In both 2007 and 2008, the Port handled more than $240 billion in cargo. The Port’s activities are connected with over 900,000 jobs in the greater Los Angeles region. As big as it is, however, the Port projects that increased global trade and larger ships will double the demand for its cargo handling capacity over the next decade. To meet demand and stay competitive, the Port seeks to expand.
At the same time, Port activities produce pollution that significantly affects the air quality of the surrounding area and the health of local residents. Community and environmental groups tied up Port expansion plans in court for years because of these concerns. (They continue to oppose expansion efforts, for example, by protesting the Port’s plan to develop a new rail yard, approved just last month.) The Port’s Clean Action Plan, including the concession agreements, was designed to address these kinds of environmental concerns.
In this way, the case is a classic conflict between economic growth and environmental justice. If the Court reverses the Ninth Circuit and holds that the FAAA preempts some or all of the Port’s concession agreement requirements, the ruling will frustrate the Port’s efforts to reduce pollution in order to address the concerns of community and environmental groups. This could lead community and environmental groups to redouble their efforts to halt expansion and thus deal a significant set-back to Port expansion efforts. The Los Angeles Chamber of Commerce, as amicus in support of affirming the Ninth Circuit, put it this way: “If the Port is not permitted to take such modest and reasonable steps as those represented by the off-street and placard provisions, its ability to adopt limited measures tailored to specific, local issues arising from Port activity will be compromised, which may result in additional litigation and delays.”
On the other hand, if the Court affirms the Ninth Circuit and holds that the FAAA does not preempt the concession agreement requirements, the Port’s efforts will stay on the books. This may be a victory for community and environmental groups, and for the Port itself. But given the issues that have come to a head just recently with the rail yard project, it is safe to say that this case will certainly not resolve all the problems or in any way mark the end of this ongoing dispute.
April 09, 2013
School May Ban Rubber Fetus Dolls
A three-judge panel of the Tenth Circuit ruled yesterday in Taylor v. Roswell Independent School District that a school can ban students' distribution of rubber fetus dolls without violating free speech, free exercise, or equal protection.
The case arose when members of a student group, Relentless, distributed rubber fetus dolls to fellow students at two schools, without required administration permission. The dolls were said to have the weight and size of a 12-week-old fetus. Relentless members apparently distributed them to educate fellow students and to protest abortion. But that message only backfired:
Both schools experienced doll-related disruptions that day. Many students pulled the dolls apart, tearing the heads off and using them as rubber balls or sticking them on pencil tops. Others threw dolls and doll parts at the "popcorn" ceilings so they became stuck. Dolls were used to plug toilets.
Op. at 7-8. And on and on.
The administration stepped in and stopped the distribution, even though it allowed students to distribute other non-school-related items (like Valentine's Day items), and even though it previously permitted Relentless to distribute other things like McDonald's sandwiches to teachers. (Maybe not surprisingly, those things didn't cause the same kinds of disruptions.)
So Relentless members sued, arguing that the administration violated free speech, the Free Exercise Clause, and equal protection.
The Tenth Circuit rejected each of these claims. As to free speech, it said that the case did not involve content-based discrimination, and that nobody contested the administration's ability to confiscate dolls that were used to harm school property or for lewd or obscene expressions of their own. Instead, the case involved private, non-school-related speech, and "[a]pplying Tinker, we hold that the District did not violate Plaintiffs' free speech rights because it reasonably forecasted that distribution of the rubber dolls would lead to a substantial disruption." Op. at 16. The court also held that the pre-approval policy looked like a licensing scheme, but with plenty of procedural safeguards (inluding two appeals) and substantive constraints on official discretion--and in the special environment of a school, where the First Amendment doesn't give students the same free speech rights that they may have, say, in the public square. Finally, the court held that the pre-approval policy wasn't unconstitutionally vague, because a student of ordinary intelligence would know when he or she needs to get a license, and how. The court said that the plaintiffs failed to show any arbitrary enforcement.
As to the Free Exercise Clause, the court held that there was no evidence of discriminatory purpose on the part of the administrators--that the ban on fetal doll distribution was neutral--that therefore rational basis review applied, and that the administrators had a rational reason for banning the doll distribution--that is, stopping the "doll-related disruptions." As to equal protection, the court said that the plaintiffs couldn't show that they were treated differently than anyone else seeking to distribute items at school and so couldn't show a violation of equal protection.
President Nominates Three to NLRB
President Obama today sent three nominations for full terms at the NLRB to the Senate--a renomination of Board chair Mark Pearce, a Democrat, and nominations of two Republicans. The President nominated two Democrats to full terms in February.
The nominations come just months after the D.C. Circuit ruled in Canning v. NLRB that the President's recess appointments to the Board were invalid. According to TPM, the administration plans to appeal that decision, but in the meantime it "has prompted more than 100 businesses to claim the board lacks authority to take action against them becuase two of its members are not there legitimately."
April 05, 2013
No Right to Possess Gun for Drug Trafficking
A three-judge panel of the Second Circuit ruled this week in United States v. Bryant that the Second Amendment does not protect a right to possess a gun for drug trafficking. With the ruling, the Second Circuit joins the Seventh and Ninth Circuits in rejecting Second Amendment challenges to 18 U.S.C. Sec. 924(c), providing criminal sanctions for using or carrying a firearm during and in relation to a drug trafficking crime.
The Second Circuit seized on language in D.C. v. Heller that says that the Second Amendment protects "the right of law-abiding, responsible citizens to use arms in defense of hearth and home," and that "the Second Amendment protects a personal right to keep and bear arms for lawful purposes, most notably for self-defense within the home." (Emphasis added, both times.) The court ruled that possession of a gun for a drug trafficking crime is (obviously) not possession for a lawful purpose, and therefore federal law can punish such possession without running afoul of the Second Amendment. The court explained:
Here, Bryant may have purchased and possessed the Remington shotgun for the "core lawful purpose" of self-defense but his right to continue in that possession is not absolute. The jury determined there was sufficient evidence to convict Bryant of drug trafficking and also to convict him of possessing a firearm in connection with that drug trafficking. . . . Thus, once Bryant engaged in "an illegal home business," he was no longer a law-abiding citizen using the firearm for a lawful purpose, and his conviction for possession of a firearm under these circumstances does not burden his Second Amendment right to bear arms.
April 01, 2013
Indiana Can't Have its Own Immigration Policy, Either
The United States District Court for the Southern District of Indiana last week ruled in Buquer v. City of Indianapolis that two provisions of Indiana's immigration law, SEA 590, were preempted by federal law. The ruling on one of the provisions, Section 20, followed the Supreme Court's ruling last summer in Arizona v. United States. (H/t Indianalawblog.com)
The ruling permanently enjoins Sections 18 and 20 of SEA 590.
Section 20 says that an Indiana officer "may arrest a person when the officer has . . . a removal order issued for the person by an immigration court; a detainer or notice of action for the person issued by the United States Department of Homeland Security; or probable cause to believe that the person has been indicted for or convicted of one (1) or more aggravated felonies (as defined in 8 U.S.C. Sec. 1101(a)(43)). The court ruled that Section 20 was preempted for the same reason that a similar provision in SB 1070 was preempted in Arizona v. United States:
Similarly, in the case before us there is no indication that state or local law enforcement officers would be required to consult federal immigration officers before effecting an arrest . . . . [W]here the federal government has exercised it discretion to release an individual who has had a removal order issued, the subsequent arrest of that person by Indiana law enforcement officers would directly conflict with the federal decision, obviously and seriously interfering with the federal government's authority in the field of immigration enforcement.
Op. at 19-20. The court said that "it is even more apparent with [the section's] authorization of the arrest of individuals who have been issued a notice of action." That's because such notices are inherently non-criminal. The court also ruled that Section 20 violates the Fourth Amendment, because it allows a warrantless arrest for a non-criminal action.
Section 18 outlaws the use of a consular identification document, or CID--an identification issued by the government of a foreign state for the purpose of providing consular services in the United States to a national of the foreign state. The court said that Section 18 "directly interferes wtih the rights bestowed on foreign nations by treaty by virtually nullifying the issuance of one of the tools used by foreign nations to exercise those rights." Op. at 29. "It is also clear that such a sweeping prohibition has the potential to directly interfere with executive discretion in the field of foreign affairs." Id.
The same court earlier rejected three state senators' effort to intervene in the case. The senators argued that because they voted for SEA 590, they had a sufficient interest in the case. But the court held that they did not satisfy standing requirements under Coleman v. Miller, because the law actually passed. "We find that the three legislators here have not alleged a vote nullifcation injury sufficient to bestow standing in this case." Op. at 7.
March 28, 2013
How to Tax an Internet Retailer Even Without Physical Presence, New York Style
The New York Court of Appeals today upheld a state statutory presumption that internet retailer "associates" operating within the state provide a sufficient nexus for the state to collect sales tax on the retailer's state sales. The ruling approves New York's end-run around the dormant Commerce Clause rule that a state can impose a sales tax on an out-of-state retailer only if the retailer has a physical presence--including economic activities by the retailer's employees, but not mere advertising.
With the rapid growth of internet sales across state lines, and with the last Supreme Court ruling on anything like this coming as far back as 1992 (on mail-order sales, of all things), this case may be a good candidate for high court review.
But on the other hand, the precise ruling in the case is rather limited. That's because the plaintiffs in the case pressed only their facial challenge at the Court of Appeals, not an as applied challenge. The problem here is that the statutory presumption can be rebutted, and an out-of-state retailer that can rebut it will also be exempt from it. This gives the presumption some wiggle room in certain cases and may be enough to protect out-of-state retailers against state sales taxes when they don't have sufficient business activity to constitute presence. The Court's ruling only says that the statutory presumption is not unconstitutional on its face. That's a far cry from saying that it's constitutional in every application.
The case, Overstock.com v. New York State Department of Taxation and Finance, tests New York's statutory presumption that an out-of-state internet retailer's in-state "associate" is soliciting business for the retailer:
a person making sales of tangible personal property or services taxable under this article ("seller") shall be presumed to be soliciting business through an independent contractor or other representative if the seller enters into an agreement with a resident of this state under which the resident, for a commission or other consideration, directly or indirectly refers potential customers, whether by a link on an internet website or otherwise, to the seller . . . .
New York Tax Law Sec. 1101(b)(8)(vi). The provision exactly describes Amazon's and Overstock.com's "associates"--local web-sites that include links to Amazon.com or Overstock.com and that receive a commission on each purchase through that link.
But neither Amazon nor Overstock.com has a physical presence in New York. And according to the Supreme Court in Quill Corp. v. North Dakota (1992), an out-of-state retailer like Amazon or Overstock.com has to have a physical presence in order for New York to impose a tax. (Quill Corp. involved an out-of-state mail order retailer. If you don't know what that is (!), click here.) Physical presence includes engaging in economic activities (like selling goods), but not advertising alone.
Enter the statutory presumption. The presumption says that Amazon's and Overstock.com's "associates"--those New York-based web-sites that contain a link to Amazon or Overstock.com, and receive a commission on each sale--establish a sufficient nexus between the out-of-state retailers and the state so that New York can impose its tax.
And the New York Court of Appeals OK'd it. The Court said that the retailers' associates were engaged in sufficient economic activity on behalf of the out-of-state retailers--business solicitation, and not mere advertising--to allow the state to tax.
Judge Smith dissented. He thought that the associates' links looked more like mere advertising, not business solicitation, and therefore weren't enough to establish a nexus between the retailers and the state.
The Court also rejected the retailers' due process claims, because the presumption is rational. The Court explained:
It is plainly rational to presume that, given the direct correlation between referrals and compensation, it is likely that residents will seek to increase their referrals by soliciting customers. More specifically, it is not unreasonable to presume that affiliated website owners residing in New York State will reach out to their New York friends, relatives, and other local individuals in order to accomplish this purpose.
March 22, 2013
Judge Rules Ban on Felon Gun Possession Unconstitutional Under New Amendment
A state judge ruled that a Lousiana statute that criminalizes gun possession by felons violated the state's new and enanced right to bear arms, according to the Times-Picayune. The judge ruled the criminal ban unconstitutional and dismissed the felon possession charge against the defendant in the case. The ruling will go directly to the state supreme court.
Louisiana voters last year overwhelmingly passed a proposed state constitutional amendment, Proposed Amendment 2, that made "the right to keep and bear arms . . . fundamental" and explicitly provided for strict scrutiny review of any restriction of that right. The amendment also did away with previous language that permitted the state to prohibit the carrying of a concealed weapon. Here's the Lousiana SOS backgrounder; here are the ballot measures.
Under the new amendment, courts faced with a restriction on "the right to keep and bear arms" must apply strict scrutiny review. According to Judge Darryl Derbigny, Louisiana's statute criminalizing felon possession of guns just didn't cut it.
March 21, 2013
Court Hears Arguments on Generic Drug Manufacturer's Liability for State Design Defect
The Supreme Court heard oral arguments earlier this week in Mutual Pharmaceutical v. Bartlett, a case testing whether the federal Food, Drug, and Cosmetic Act (and in particular the Hatch-Waxman Act) preempts a state design-defect claim against a generic drug manufacturer.
The case is important because of the large and increasing role that more affordable generics play in the prescription drug market. But as Justice Kagan pointed out early in the argument, the case may also affect branded drugs. That's because both branded and generics need to get FDA approval for new or changed formulas, and yet they both could be subject to state-law design-defect claims, as in this case. If so, depending on the nature of the state law claim, the state court ruling could set a different standard than the FDA standard--making it impossible for a manufacturer, branded or generic, to comply with both. But again: that depends on the nature of the state-law claim.
Recall that the Court just two years ago ruled in PLIVA v. Mensing that the FDCA did preempt a state failure-to-warn claim against a generic manufacturer. The reason: Under the FDA's process for generic approval (under Hatch-Waxman), a generic has to bear the same label as its branded counterpart. Under the federal FDCA, the generic has no control over the label, and so the Court said that it can't be held to a higher labeling requirement under state tort law. In other words, the requirement under federal law (to bear the same label as its branded counterpart) conflicted with duties set by the state tort suit (to include different warnings).
But that was a failure-to-warn claim. Bartlett involves a design-defect claim, going to the generic's design, not (or maybe not) its label.
Still, the label was one sticking point, maybe the most important sticking point, at argument this week. The justices struggled to figure out whether the plaintiff's design-defect claim turned at all on faulty labeling. (If it did, the case would more likely be governed by Mensing, and the claim more likely to be preempted.) The plaintiff argued that the trial court judge carefully distinguished between considering the label for its adequacy as opposed to its effectiveness. According to the plaintiff, the judge ruled out the former consideration, because the defendants waived a defense that would have turned on adequacy. Moreover, according to the plaintiff, the label's effectiveness goes to limiting the danger of an inherently dangerous drug--and is therefore not a consideration of labeling in its own right, but rather a consideration of labeling as related to a pure design-defect claim. It's not clear that the Court bought this distinction, however, and the defendant argued strenuously against it.
Another and related sticking point was the nature of the state design-defect claim. Was it a pure strict liability claim, in which the plaintiff simply received compensation for injuries resulting from an inherently dangerous drug? If so, the claim operated more like a drug compensation fund, and even the defendant said there was no preemption. That's because the defendant could comply with both the federal requirements for generics and the state duty to pay. Stated differently, the state tort suit wouldn't set a new standard of care; instead, it would simply require compensation. But if the label was relevant to the design-defect claim--and if, as the Court held in Mensing, the defendant had no control over the label--the state tort suit could be understood as setting a new standard (in the same way the failure-to-warn claim did in Mensing)--and the FDCA would preempt.
Yet another sticking point was the FDA approval process as opposed to the process of state-court juries. The FDA puts new drugs through a rigorous ringer to weigh the costs and benefits before approval. But state court juries grant damage awards based on the judgments of a handful of lay individuals. The question is: If the FDA approves a drug and thus its counterpart generic--based on thorough and expert cost-benefits analyses--why should a state court lay jury be able to second-guess and even overrule it?
The Court divided 5-4, along conventional ideological lines, in Mensing. That seems like a plausible, even likely, result here, too.
March 20, 2013
State Can't Automatically Collect Portion of Malpractice Settlement of Medicaid Recipient
The Supreme Court ruled today that a state can't automatically take a set portion of a Medicaid recipient's medical malpractice damage award in order to recoup medical expenses that it already paid. The ruling still allows states to recoup medical expenses from Medicaid recipients' malpractice damage awards, but they can't do it by setting an arbitrary fixed portion of a damage award; instead, they have to do it case-by-case, with more precision.
The ruling is a victory for Medicaid recipients who recieve malpractice awards. It means that states can't try to take more than their fair share of an award in an effort to achieve administrative efficiency (in determining the amount of actual medical expenses paid).
The case, Wos v. EMA, arose after the parents of minor EMA sued doctors and others for medical expenses, other expenses, and pain and suffering resulting from serious and permanent injuries that EMA suffered at birth. The parties settled for $2.8 million, but did not designate a portion of the settlement as reimbursement for medical expenses.
Because EMA received a portion of her medical care through North Carolina's Medicaid program, the state sought to recoup medical expenses it paid through Medicaid. North Carolina's statute says that up to one-third of any damages recovered by a beneficiary for a tortious injury be paid to the state to reimburse it for payments it made for medical treatment on account of the injury. The North Carolina Supreme Court ruled that the one-third portion was "a reasonable method for determining the State's medical reimbursements." This interpretation could allow the state to collect less than its past medical expenditures, if those expenditures exceeded one-third of the total recovery. But it also could allow the state to collect more than its past medical expenses, if, as here, those expenditures were less than one-third of the recovery.
The federal Medicaid Act allows, indeed requires, a state to recoup medical expenses from a Medicaid recipient's damage award. But the Act's anti-lien provision preempts a state's effort to take any portion of an award not "designated as payment for medical care."
The problem of determining reimbursable expenses is most acute when, as here, a settlement doesn't designate the portion attributable to medical expenses. In that case, as in this case, the state uses the one-third portion as a default--and recoups (at least potentially) more than its actual medical expenses. (Here the state court that approved the settlement set aside one-third of the settlement in escrow for payment to the state "until such time as the actual amount of the lien owed by [EMA] to [the state] is conclusively judicially determined." EMA's parents then sued in federal court. While the suit was pending, the North Carolina Supreme Court ruled that the one-third portion was "a reasonable method for determining the State's medical reimbursements.")
The Court ruled that the federal anti-lien provision preempted North Carolina's statute. Justice Kennedy wrote the opinion, joined by Justices Ginsburg, Breyer, Alito, Sotomayor, and Kagan. He said that North Carolina's one-third figure conflicted with the anti-lien provision, because it allowed the state to recoup more than its actual medical expenses, even when those expenses were designated as part of the award:
North Carolina's statute, however, operates to allow the State to take one-third of the total recovery, even if a proper stipulation or judgment attributes a smaller percentage to medical expenses.
Op. at 9-10.
Justice Kennedy said that North Carolina gave no limiting principle, and by its reckoning it could have set a much higher portion as its default--thus recouping much more than actual medical expenses paid.
Justice Breyer concurred, emphasizing that the Centers for Medicare & Medicaid reached the same conclusion as the Court--and that the Court owed some deference to the Centers' judgment. Justice Breyer also said that the Centers could change their position, and that the Court's "decision does not freeze the Court's present interpretation of the statute permanently into law."
Chief Justice Roberts dissented, joined by Justices Scalia and Thomas. Chief Justice Roberts said that the federal Medicaid Act doesn't specify how states must determine actual medical expenses, even though it requires them to recoup those expenses. In particular, he said that the Act doesn't specify a case-by-case, after-the-fact determination, as the majority does here; instead, it's flexible enough to allow states to adopt different approaches (like North Carolina's). Chief Justice Roberts would leave it up to the Centers and the states to experiment with different ways of determining actual medical expenses.