Monday, December 23, 2013

Ohio Federal Judge Issues Permanent Injunction in Ohio Same-Sex Marriage Case

In an opinion today in Obergefell v. Kasich, federal Judge Timothy Black (pictured) Timothy_Black_District_Judgeof the Southern District of Ohio issued a permanent injunction against a particular enforcement of Ohio's limitation of marriage to opposite sex couples.

Recall that in July, less than a month after the United States Supreme Court's decision in United States v. Windsor declaring DOMA unconstitutional, Judge Black enjoined Ohio's DOMA-type provisions (both statutory and in the state constitution) involving the recognition of a marriage that occurred out of state in an especially sympathetic situation involving a dying person.

In today's opinion, Judge Black - - - as he did in his previous opinion and as Judge Robert Shelby did in his opinion declaring Utah's ban on same-sex marriage unconstitutional - - - used Justice Scalia's dissent in Windsor as support:

In a vigorous dissent to the Windsor ruling, Justice Scalia predicted that the question whether states could refuse to recognize other states’ same-sex marriages would come quickly, and that the majority’s opinion spelled defeat for any state’s refusal to recognize same-sex marriages authorized by a co-equal state. As Justice Scalia predicted: “no one should be fooled [by this decision] ... the majority arms well any challenger to a state law restricting marriage to its traditional definition ... it’s just a matter of listening and waiting for the other shoe [to drop].” Windsor, 133 S. Ct. at 2710 (Scalia, J., dissenting).

The challenge before Judge Black is an as-applied-one relating to a specific couple, a death certificate, and an out of state marriage.

On the due process challenge, Judge Black concluded that "Ohio’s refusal to recognize same-sex marriages performed in other states violates the substantive due process rights of the parties to those marriages because it deprives them of their significant liberty interest in remaining married absent a sufficient articulated state interest for doing so or any due process procedural protection whatsoever."

On the equal protection challenge, Judge Black used a Carolene-type analysis to conclude that sexual orientation classifications merited heightened scrutiny.  However, he also decided that the Ohio marriage ban failed to satisfy even rational basis, both because animus was not a legitimate interest and because the non-animus legitimate interests asserted had no rational connection to Ohio's marriage recognition ban of same-sex couples. 

Although the final injunction is limited to this particular couple and relates to the death of one of the partners, its reasoning could undoubtedly apply in a facial challenge.

 

December 23, 2013 in Courts and Judging, Due Process (Substantive), Equal Protection, Federalism, Opinion Analysis, Sexual Orientation, Supreme Court (US) | Permalink | Comments (0) | TrackBack (0)

Saturday, December 14, 2013

Federal District Judge Finds Portions of Utah's Criminalization of Polygamy Unconstitutional

In a 91 page  opinion  in Brown v. Buhman,  federal district judge Clark Waddoups has concluded that Utah's anti-bigamy statute is partially unconstitutional. 

Sister wivesThe statute, Utah Code Ann. § 76-7-101, provides:

  •             (1) A person is guilty of bigamy when, knowing he has a husband or wife or knowing the other person has a husband or wife, the person purports to marry another person or cohabits with another person.
  •             (2) Bigamy is a felony of the third degree.
  •             (3) It shall be a defense to bigamy that the accused reasonably believed he and the other person were legally eligible to remarry.

The challengers to the statute, the Browns, are famous from the reality program Sister Wives and the accompanying book ) and are represented by Professor  Jonathan Turley,  who blogs about the case here.


The judge's scholarly opinion includes a discussion of Edward Said's groundbreaking book Orientalism as a critique of the well-known passage in the United States Supreme Court’s 1879 decision in Reynolds v. United States upholding the criminalization of polygamy by reasoning, in part, that "Polygamy has always been odious among the northern and western nations of Europe, and, until the establishment of the Mormon Church, was almost exclusively a feature of the life of Asiatic and of African people."

Judge Waddoups considers both the due process challenge (applying Washington v. Glucksberg) and the free exercise challenge (applying Church of the Lukumi Babalu Aye, Inc. v. City of Hialeah). 

In the due process analysis, the judge specifically found

 there is no “fundamental right” to polygamy under Glucksberg. To phrase it with a “careful description” of the asserted right [citations omitted],  no “fundamental right” exists to have official State recognition or legitimation of individuals’ “purported” polygamous marriages—relationships entered into knowing that one of the parties to such a plural marriage is already legally married in the eyes of the State. The fundamental right or liberty interest that was under consideration in Glucksberg is instructive for the analysis of whether the asserted right to polygamy is “deeply rooted in this Nation’s history and tradition, and implicit in the concept of ordered liberty, such that neither liberty nor justice would exist if they were sacrificed.”

The judge also found that the criminalization of what it called the "religious cohabitation" portion of the statute did not rise to the level of a fundamental right, extensively discussing Lawrence v. Texas and the Tenth Circuit's limiting interpretation of Lawrence. 

However, the judge did find that "the cohabitation prong does not survive rational basis review under the substantive due process analysis."  This analysis implicitly imported a type of equal protection analysis, with the judge concluding:

Adultery, including adulterous cohabitation, is not prosecuted. Religious cohabitation, however, is subject to prosecution at the limitless discretion of local and State prosecutors, despite a general policy not to prosecute religiously motivated polygamy. The court finds no rational basis to distinguish between the two, not least with regard to the State interest in protecting the institution of marriage.

Complementing this conclusion regarding discriminatory enforcement, the judge's free exercise of religion analysis concludes that while the Utah statute may be facially neutral, the cohabitation prong is not "operationally neutral" and not of general applicability.  The judge therefore applied strict scrutiny to the cohabitation prong and easily concluded the statute failed.

As an alternative free exercise analysis, the judge reasoned that the cohabitation prong also merited strict scrutiny because it involved a "hybrid rights" analysis under Employment Division, Department of Human Resources of Oregon v. Smith (1990), given the claims of due process, but also claims that the judge did not extensively analyzes such as free association, free speech, establishment, and equal protection.  

Thus, the judge concluded the cohabitation prong of the statute is "unconstitutional on numerous grounds."  However, the court explicitly narrowed the constructions of  “marry” and “purports to marry" in the statute, so that the Utah statute continues to "remain in force as prohibiting bigamy in the literal sense—the fraudulent or otherwise impermissible possession of two purportedly valid marriage licenses for the purpose of entering into more than one purportedly legal marriage."  Not surprisingly then, the judge's opinion does not cite the Supreme Court's opinion last term in United States v. Windsor involving DOMA and same-sex marriage, in which Justice Scalia, dissenting, invoked the effect the decision would have on polygamy. [I've previously discussed the similarities of same-sex marriage and polygamy claims here].

Given the district judge's narrowing construction and the clear constitutional issues with the Utah statute's breadth, it might be possible that the state does not appeal.

 

[video via]

December 14, 2013 in Books, Equal Protection, Establishment Clause, Family, Federalism, First Amendment, Fourteenth Amendment, Free Exercise Clause, Fundamental Rights, Gender, Opinion Analysis, Speech | Permalink | Comments (0) | TrackBack (0)

Tuesday, December 3, 2013

The New Generation of Challenges to Obamacare

Opponents of the Affordable Care Act, or Obamacare, have set off a new wave of challenges to the Act, according to today's NYT.  Among these: the religious challenges to the contraception mandate; cases challenging President Obama's extension of the employer mandate deadline; and challenges to the IRS rule providing a subsidy to purchasers of health insurance on the federal exchange.

As to that last one: plaintiffs in a spate of cases argue that Section 1401(a) of the ACA provides that purchasers of health insurance on a state exchange, but not the federal exchange, get a federal subsidy; yet the IRS issued a rule that extends the federal subsidy (in the form of a tax credit) to purchasers on the federal exchange.  This, they say, violates the Administrative Procedures Act and the Tenth Amendment.

Why the Tenth Amendment?  Opponents say that under the ACA an employer who declines to extend coverage has to pay a penalty if and when the federal government gives the employer's employees a subsidy for purchasing health insurance on a state exchange.  Opponents say that the IRS rule extends this federal subsidy, and also the employer penalty, when the employer's employees purchase health insurance on the federal exchange.  According to opponents, that undermines the state's policy decision not to open a state exchange in the first place.  Or, as Indiana put it in paragraph 10 of its complaint in State of Indiana v. IRS:

[The IRS rule] contravenes the text of the ACA, thwarts Indiana's ability to execute State policy sparing employers from Employer Mandate penalties, induces Plaintiffs to reduce the hours of certain employees, including part-time and intermittent employees, to avoid having to provide all such employees with minimum essential coverage, and requires Plaintiffs to file onerous reports with the IRS detailing insurance coverage decisions.  It thereby violates both the Administrative Procedure Act and the Tenth Amendment, and the Court should permanently enjoin Defendants from putting it into effect.

Later, in paragraph 17, it says:

In light of the IRS Rule, the State will be forced to reduce the hours of several part-time or intermittent employees in order to avoid the "assessable payment" or employer penalty of the ACA.

According to the Notice of Final Rulemaking, the IRS considered and rejected claims that the ACA itself limits subsidies to purchasers on state exchanges when it took comments on the proposed rule.  The IRS said:

The statutory language of section 36B and other provisions of the Affordable Care Act support the interpretation that credits are available to taxpayers who obtain coverage through a State Exchange, regional Exchange, subsidiary Exchange, and the Federally-facilitated Exchange.  Moreover, the relevant legislative history does not demonstrate that Congress intended to limit the premium tax credit to State Exchanges.

December 3, 2013 in Cases and Case Materials, Congressional Authority, Executive Authority, Federalism, News, Tenth Amendment | Permalink | Comments (0) | TrackBack (0)

Is an Implied Covenant Part of the Contract?

The Supreme Court heard arguments today in Northwest, Inc. v. Ginsberg, the case testing whether the Airline Deregulation Act preempts a state-law claim for breach of implied covenant of good faith and fair dealing arising out of an airline's termination of a customer's membership in its frequent flyer program.  Our argument preview is here.

Given that the Court has ruled in Wolens that the ADA does not preempt an ordinary breach-of-contract claim, arguments today turned on whether the claim for breach of implied covenant of good faith and fair dealing is simply an incorporated contract requirement or a rule of contract interpretation (so that it's actually part of the contract, and thus not preempted), or whether it's an additional state-imposed obligation on top of the plain terms of the contract (and thus preempted).  This question is informed by the deregulatory purpose of the ADA.  Justice Breyer framed the issue this way:

I absolutely agree wtih you that--that a free market in price is at the heart of the Deregulation Act.  Given.

I also think frequent flyer programs are simply price discounts.  Given.

I also think that if you don't have contracts, you can't have free markets.  Given.

But I also think the State cannot, under the guise of contract law, regulate the prices of airlines.  If you allow that, you're going to have worse than we ever had.  It'll be 50 different systems, all right?

Justice Kagan framed it this way, suggesting a solution that would preserve the implied covenant claim:

I guess what I'm suggesting is that the implied covenant here, it's just an interpretive tool.  It says that there are certain kinds of provisions that are written very broadly or very vaguely, and an implied covenant comes in to help us interpret those kinds of provisions.  And viewed in that way, it's just a contractual device that in light of Wolens ought to be permitted.

Justice Sotomayor said it this way, and proposed a standard for distinguishing between ordinary breach-of-contract claims and implied covenant claims:

My simpler standard comes from quoting Hennepin: "Does the implied covenant claim extend to actions beyond the scope of the underlying contract, or can it override the express terms of the agreement?  If the answer is no, it's not preempted."

The question is complicated by the fact that the frequent flyer program in this case gave Northwest the "sole discretion" to terminate.  So: Is an implied covenant part of that contract, or is it an additional state-law requirement?  And what's the standard for sorting that out?

As an initial matter, any standard may not answer the preemption question categorically.  That's because different states interpret their implied covenant laws differently.  This gave the Court another problem: Does it have to sort out the particular state law on implied covenants in order to determine whether a claim in a particular state is preempted?  And might the answer change depending on the state, leading to inconsistent results and undermining the deregulatory purpose of the ADA?  Justice Scalia put this point on it:

Wow, somebody's really been given a raw deal.  You know, that's still going to be possible even if we rule for [Ginsberg] here.  It depends on what State he's from, right?

Complicating things yet more, the answer may turn on the implied covenant's waivability.  Justice Kagan made this point:

But if it can't be waived, it sure seems as though it is operating independently of the parties' reasonable expectations.

It may also turn on the fact that frequent flyer programs work for airline miles, but also for other goods and services--and thus state regulation of them may not amount to a regulation of airline price, in violation of the ADA.  Justice Alito put it this way:

I don't want to take up your rebuttal time, but if the facts were that under a particular program 90 percent of the miles were earned by purchasing things other than flying and 90 percent of the miles were spent on things other than flying, wouldn't that be very different?

This could give the Court a way out of the problem, by ruling that state implied-covenant claims based on frequent flyer programs aren't preempted because they don't regulate the price of airline tickets.  This seems unlikely, though: even if frequent flyer programs work for other goods and services, they still also work for airline tickets.

Finally, there's the presumption against preemption--and whether it has any bearing on this case.  Chief Justice Roberts seemed to think so:

I do agree, it seems pretty inconsistent with the normal presumption against preemption that we apply out of respect for the State legal regimes to say we're going to adopt a broad prophylactic rule.

But Justice Scalia thought not:

But the whole purpose of the ADA was to preempt State laws.  I mean, I can understand applying that presumption to other statutes which say nothing about preemption.  The whole purpose of the ADA was to deregulate airlines, was to say there was going to be no Federal regulation.  Let the free market handle it and there will be no State regulation.  

On the one hand, a narrow ruling in this case--one that address Ginsberg's particular claim, under Minnesota law, recognizing that this particular program gave the airline "sole discretion" to terminate--seems both likely and appropriate, especially given the particularities of this case.  But on the other hand, as at least some on the Court suggested, an overly narrow ruling, without a broader standard, leaves open the possibility (or even probability) that this very same issue, or one like it, could give the lower courts a headache in the 49 other states (where implied covenant claims might work differently).  

If Ginsberg loses, and his claim is preempted, the U.S. Department of Transportation can still investigate Northwest's frequent flyer program.  But that remedy doesn't do anything for Ginsberg.

December 3, 2013 in Cases and Case Materials, Congressional Authority, Federalism, News, Oral Argument Analysis, Preemption | Permalink | Comments (1) | TrackBack (0)

Does Federal Airline Deregulation Act Preempt State Implied Covenant Claim?

The Supreme Court hears oral arguments today in Northwest, Inc. v. Ginsberg, the case testing wether the federal Airline Deregulation Act preempts a state-law claim for breach of implied covenant of good faith and fair dealing arising out of an airline's termination of a customer's membership in its frequent flyer program.  Here's my preview of the oral argument from the ABA Preview of United States Supreme Court cases, with permission:

FACTS

S. Binyomin Ginsberg was an active member of WorldPerks, the Northwest Airline’s frequent flyer program, since 1999. Ginsberg, an expert in education and administration, travelled frequently on Northwest to give lectures, conduct seminars and workshops, and advise other educators and administrators. In 2005, Ginsberg earned Platinum Elite Status in the WorkPerks program, the highest level of benefits available.

But in June 2008, Northwest revoked Ginsberg’s WorldPerks membership. A Northwest representative explained by phone that Northwest was revoking his membership because he had abused the program by complaining too many times and strategically booking himself on full flights in order to get bumped. A Northwest Customer Care Coordinator later sent Ginsberg an e-mail citing Paragraph 7 of the WorldPerks General Terms and Conditions and saying that “[a]buse of the WorldPerks program . . . may result in cancellation of the member’s account and future disqualification from program participation, forfeiture of all mileage accrued and cancellation of previously issued but unused awards.” The e-mail also said that Northwest may determine “in its sole judgment” whether a passenger has abused the program. The e-mail did not give any specific information about how Ginsberg had abused the program.

Ginsberg filed suit on January 8, 2009, asserting four causes of action: (1) breach of contract; (2) breach of the implied covenant of good faith and fair dealing; (3) negligent misrepresentation; and (4) intentional misrepresentation. The district court dismissed the case, ruling that Ginsberg failed to show sufficient facts to support his breach-of-contract claim, and that the federal Airline Deregulation Act preempted Ginsberg’s other three claims.

Ginsberg appealed, but only as to his claim for breach of the implied covenant of good faith and fair dealing. The United States Court of Appeals for the Ninth Circuit reversed, and this appeal followed.

CASE ANALYSIS

Congress enacted the Airline Deregulation Act (ADA) in 1978, concluding that “maximum reliance on competitive market forces” would best further “efficiency, innovation, and low prices” as well as “variety [and] quality . . . of air transportation services.” As part of the Act, and in order to ensure that states would not frustrate deregulation by enacting their own regulations, Congress included a preemption provision barring any state from “enact[ing] or enforce[ing] a law, regulation, or other provision having the force and effect of law related to a price, route, or service of an air carrier.” At the same time, Congress retained the Act’s already-existing “savings clause,” which preserved common law and statutory remedies.

The Supreme Court addressed the ADA’s preemption clause in two important cases. In the first case, Morales v. Trans World Airlines, Inc., 504 U.S. 374 (1992), the Court ruled that the ADA preempted state regulation of airlines’ fare advertisements. The Court held that the preemption clause’s phrase “related to” was quite broad, and that the ADA sought to preempt any state enforcement actions “having a connection with or reference to airline ‘rates, routes, or services’ . . . .” The Court had little trouble concluding that state regulation of airlines’ fare advertisements fell comfortably within that definition.

In the second case, American Airlines, Inc. v. Wolens, 513 U.S. 219 (1995), a case very similar to Ginsberg’s, the Court ruled that the ADA preempted state enforcement suits against an airline arising under state-imposed obligations (as in a state law regulating an airline), but not under an airline’s breach of its own, self-imposed obligations (as in the airline’s own contract with its customers). According to the Court, “[a] remedy confined to a contract’s terms simply holds parties to their agreement,” and does not impose additional obligations related to a price, route, or service. Wolens sued American Airlines for making retroactive changes to the terms and conditions of its frequent flyer program. The Court held that the ADA preempted Wolens’s claim under the state Consumer Fraud Act, but that it did not preempt Wolens’s claim for routine breach of contract.

Considering the broad reading of the preemption clause in Morales, the parties here argue whether Ginsberg’s claim for breach of the implied covenant of good faith and fair dealing looks like more a state-imposed obligation or whether it looks more like an airline-imposed obligation under Wolens.

Northwest argues first that the plain language of the ADA preempts Ginsberg’s claim. It says that Ginsberg’s suit, which seeks reinstatement of program membership and renewed access to the reduced prices and enhanced services that come with it, is plainly “related to” Northwest’s prices, routes, and services, especially given the Court’s broad approach to the ADA’s preemption provision. Moreover, Northwest contends that Ginsberg’s claim seeks to enlarge the program’s General Terms and Conditions, a voluntary agreement between the parties, by invoking state law that is external to the agreement. In other words, Northwest says that Ginsberg’s implied covenant of good faith and fair dealing claim is no ordinary breach-of-contract claim, designed simply to enforce the terms of the agreement between the parties. Instead, it says that Ginsberg’s claim goes above-and-beyond simple enforcement of the agreement and, if allowed, would enforce state policies outside the four corners of the agreement, external to the contract. Northwest argues that this violates the Court’s rule in Wolens.

 

Next, Northwest argues that preemption of Ginsberg’s claim is consistent with the policies underlying the ADA. Northwest contends that Ginsberg’s implied covenant claim is amorphous and subject to different interpretations, and, if enforced here and elsewhere, would lead to a patchwork of state regulations over agreements like this. (In contrast, Northwest says that simple breach-of-contract claims are uniform enough across jurisdictions to avoid a patchwork result.) Moreover, Northwest argues that Ginsberg’s claim, if recognized, would create a risk of state interference with competition and commercial activity in the airline industry by substituting state law for market forces. Northwest claims that the patchwork result and state interference are both inconsistent with the goals of the ADA, to further “efficiency, innovation, and low prices” in the airline industry through “maximum reliance on competitive market forces.” (Northwest also notes that the U.S. Department of Transportation (DOT) has authority to investigate unfair practices in frequent flyer programs, so that Ginsberg and others like him may seek federal administrative relief.)

The federal government weighed in to support Northwest. Like Northwest, the government argues that the ADA preempts Ginsberg’s claim, because Ginsberg’s claim is external to his contract with Northwest. The government contends that because the district court rejected Ginsberg’s breach-of-written-contract claim on the basis that it gave Northwest complete discretion to determine Ginsberg’s status in the program, and because Ginsberg did not appeal that portion of the ruling, Ginsberg’s implied-covenant claim necessarily seeks to impose an additional, non-contractual obligation on Northwest. The government says that under Wolens this claim is preempted. But unlike Northwest the government does not argue for a categorical rule that all implied-covenant claims are preempted by the ADA, because, it says, some implied-covenant claims may require only adjudication of routine breach-of-contract claims, consistent with Wolens. The government says that only those implied-covenant claims that seek to enforce policies outside the contract, like Ginsberg’s, are preempted.

Ginsberg argues first that his implied covenant of good faith claim is not preempted under Wolens. Ginsberg says that his claim does not look outside the contract; instead, it stays within the contract. According to Ginsberg, that’s because a contract includes both express and implied terms, and his claim simply seeks to put an implied-obligation-of-good-faith gloss on the contract language that gives Northwest “sole judgment” to determine whether he abused the program. Ginsberg claims that this gloss is no extra-contractual obligation; rather, it is part-and-parcel of the contract itself. He says that courts read in an implied covenant of good faith to a contract in order to protect the contract’s express terms, and not to add an additional or external obligation or policy. Moreover, Ginsburg contends that his decision not to appeal the dismissal of his claim for a breach of the written contract does not transform his implied covenant of good faith claim into one based on extra-contractual policies, as argued by the federal government. Again, he says that the contract includes both express and implied terms, and his implied claim simply seeks to enforce the contract itself. Ginsberg says that holding Northwest to implied terms furthers the aims of the ADA, because enforcement in good faith increases the stability of contracts and reduces the costs of entering into them. Ginsberg claims that DOT enforcement does not replace the role of the courts in resolving contract disputes, whether they involve express or implied terms of a contract.

Ginsberg argues next that his claim is not preempted because it does not seek to “enact or enforce a law, regulation, or other provision.” Ginsberg says that the Court unanimously held that a statutory provision in the Federal Boat Safety Act that preempts enforcement of “a law or regulation” does not preempt common-law claims. For the same reasons that that provision did not preempt, Ginsberg contends that the ADA should not preempt. He also says that the word “provision” does not extend to common-law duties. As a result, Ginsberg contends that the ADA’s preemption clause does not apply, even aside from his Wolens argument.

Finally, Ginsberg argues that his claim is not preempted because it does not relate to airline prices, routes, or services. He says that his claim, unlike the claim in Wolens, does not challenge access to flights and upgrades or the number of miles needed to obtain a ticket. Instead, Ginsberg argues that his claim goes only to the termination of his WorldPerks membership. He says that this claim does not reference, does not seek to regulate, and will not affect the price, route, or service of air transportation. (Ginsberg argues that the WorldPerks program is not a “service” within the meaning of the ADA.) Ginsberg underscores this point by noting that frequent flyer miles can be earned and spent on many things other than air transportation, and that consumers can participate in a frequent flyer program without buying a single airline ticket. Finally, Ginsberg says that the DOT advises consumers to “consider legal action through the appropriate civil court” if they are unhappy with the way a frequent flyer program is administered. He says that is exactly what he did here.

SIGNIFICANCE

On one level, this case simply addresses a claim that falls between the cracks of the sharp distinction between contract-based claims and extra-contractual claims that the Court drew in Wolens. By this reckoning, the case is only another opportunity for the Court to round out its analysis of ADA preemption and to give guidance to lower courts and litigants for the next round of claims against the airlines. The case is significant, but only insofar as it deals with ADA preemption of a particular kind of claim. The parties do not argue that the Court should overturn Wolens, and they do not argue that the ADA does not preempt an ordinary breach-of-contract claim. Thus, whatever the Court likely rules in this case, Ginsberg and plaintiffs like him will continue to be able to assert an ordinary breach-of-contract claim against an airline, even if they cannot assert more. (The fact that Ginsberg appealed his implied covenant claim, but not his breach-of-contract claim, says that the implied covenant claim sweeps more broadly, and could be easier to prove, than the breach-of-contract claim. If so, a ruling favoring preemption could mean that plaintiffs would lose a broader class of claims (implied covenant claims), even if they would retain a basic breach-of-contract claim.)

On another level, the case, like many preemption cases, pits significant considerations of federal-state relations against an individual plaintiff’s ability to seek redress for injuries under state law against a corporation. In this way, the case is significant for how it balances federalism against state law remedies against corporations. To put a finer point on it, this case, like some other recent federalism cases, is likely to be seen in pro-corporation or pro-plaintiff terms, depending on the outcome. 

These cases involving federalism and individual state-law remedies sometimes come down with surprising alliances among the justices. In Wolens, for example, Justice Ginsberg wrote the Court’s opinion; it was joined by Chief Justice Rehnquist and Justices Kennedy, Souter, and Breyer. But the composition of the Court has changed in critical ways since Wolens, making predictions here even more difficult than usual. Look to Chief Justice Roberts and Justice Kennedy as the likely pivotal votes.

December 3, 2013 in Cases and Case Materials, Congressional Authority, Federalism, News, Preemption | Permalink | Comments (0) | TrackBack (0)

Monday, December 2, 2013

Can a State Sue a Tribe for Off-Reservation Gambling?

That's the question before the Supreme Court today in Michigan v. Bay Mills Indian Community.  More particularly, the case asks whether the federal courts have jurisdiction to hear a state's claim that a Native American tribe's off-reservation casino violates the Indian Gaming Regulatory Act, and whether the tribe enjoys immunity from such a suit.

With the rapid proliferation of tribal gaming, including off-reservation gaming, the case could make an important statement about the regulatory authority of the tribe, the state, and the federal government over off-reservation gaming.  It could also make an important statement about federal court jurisdiction over a state's claim that a tribe's off-reservation gaming violates federal law, and about tribal immunity for such gaming.

Here's my oral argument preview of the case, republished, with permission, from the ABA Preview of U.S. Supreme Court Cases:

FACTS

Congress enacted the Indian Gaming Regulatory Act of 1988 (IGRA) in order to regulate gaming activities on “Indian lands.” The IGRA divides gaming into three separate classes and specifies how each class is regulated. Class I gaming includes social games and traditional tribal games; it is under the exclusive jurisdiction of the tribe. Class II gaming includes bingo and certain card games like poker; it is primarily within the jurisdiction of the tribe but subject to federal oversight.

Class III gaming, the class at issue here, includes everything else, such as slot machines and casino-style games. Class III gaming is not regulated by a uniform structure. Instead, an Indian tribe wishing to conduct Class III gaming has to adopt a gaming ordinance that is approved by the National Indian Gaming Commission (NIGC), a federal agency. The tribe also has to negotiate with the state where it is located and enter into a compact that will govern the gambling.

The Bay Mills Indian Community, a federally-recognized Indian tribe with a reservation in Michigan’s northern peninsula, entered into a compact with Michigan in 1993. Soon after the compact was finalized, the NIGC approved Bay Mills’s gaming ordinance. Bay Mills then proceeded to establish its own Gaming Commission. Bay Mills has continuously operated one or more gaming facilities on its reservation ever since.

In 1997, Congress passed the Michigan Indian Land Claims Settlement Act. The Act appropriated funds to Bay Mills and other Michigan Indian tribes to satisfy judgments that the Indian Claims Commission had entered in favor of the tribes. The Settlement Act directed that 20 percent of the funds awarded to Bay Mills be deposited in a “Land Trust” and required that earnings from the Trust “be used exclusively for improvements on tribal land or the consolidation and enhancement of tribal landholdings through purchase and exchange.” It also said that “[a]ny land acquired with funds from the Land Trust shall be held as Indian lands are held.”

In August 2010, Bay Mills used the funds from the Settlement Act land trust to purchase approximately 40 acres of land in Vanderbilt, Michigan, about 100 miles from the Tribe’s reservation. Bay Mills constructed a small casino on the property (initially with 38 electronic gaming machines, but later expanded to 84 machines) and began operating it on November 3, 2010. The U.S. Department of the Interior and the NIGC later issued letters concluding that the Vanderbilt casino was not located on “Indian lands” as defined by the IGRA, that it was therefore not eligible for gaming under the IGRA, and that the NIGC had no jurisdiction over it.

The state filed suit against Bay Mills in federal court. The state’s counts I and II alleged that the Vanderbilt land did not constitute “Indian lands” under the IGRA, and that Bay Mills therefore violated the compact. The state’s count III alleged that Bay Mills violated the IGRA by conducting gaming outside of Indian lands and that even if the Vanderbilt land constituted “Indian lands,” Bay Mills violated 25 U.S.C. § 2719 (and therefore the compact’s requirement that gaming comply with federal law) by operating a gaming facility on land acquired after October 17, 1988, that does not satisfy any statutory exception. The Little Traverse Bay Bands of Odawa Indians, which operated a competing casino about 40 miles away, filed a separate suit with similar claims the next day.

The district court consolidated the cases and entered a preliminary injunction halting the Bay Mills casino. Bay Mills appealed and moved for a stay of the injunction; the district court and the United States Court of Appeals for the Sixth Circuit both denied a stay.

While Bay Mills’s appeal was pending, the state amended its complaint to add three additional claims. Count IV alleged that Bay Mills violated federal common law by operating a casino that exceeds the scope of its authority. Count V alleged that Bay Mills failed to obtain a state license for a gaming facility in violation of Michigan law. Count VI alleged that the casino was a public nuisance under state law. The state also added several defendants—the Bay Mills Tribal Gaming Commission, the Commission’s members in their official capacities, and the members of the Bay Mills Executive Council in their official capacities.

On appeal, the Sixth Circuit reversed and vacated the preliminary injunction. The court held that the district court lacked jurisdiction as to counts I, II, and III. The court held that the district court had jurisdiction as to counts IV, V, and VI against Bay Mills, but that those counts were barred by tribal sovereign immunity. The court remanded the case to the district court to address the state’s counts IV-VI against the additional individual defendants.

The state brought this appeal. Little Traverse is not a party to it; neither are the individuals named in the state’s amended complaint.

CASE ANALYSIS

Federal courts are courts of limited jurisdiction. This means that their jurisdiction must be defined by statute. One common source of federal jurisdiction is found in 28 U.S.C. § 1331, which creates the so-called “federal question” jurisdiction. Under § 1331, federal district courts have original jurisdiction over “all civil actions arising under the Constitution, laws, or treaties of the United States.”

Another source of federal jurisdiction—one that goes particularly to gaming on Indian lands—is found in 25 U.S.C. § 2710(d)(7)(A)(ii), part of the NIGC. That provision says that federal district courts have jurisdiction over “any cause of action initiated by a State or Indian tribe to enjoin a class III gaming activity located on Indian lands and conducted in violation of any Tribal-State compact . . . .”

The parties here dispute whether the federal courts have jurisdiction over the state’s claims. In particular, they dispute whether the state’s claims arising out of the Bay Mills’s alleged violation of the compact fall under § 1331 (because these claims might amount to a violation of the IGRA, a federal statute), and whether the Vanderbilt casino is “a class III gaming activity located on Indian lands” under § 2710.

But even if a federal court has jurisdiction (under §§ 1331, 2710, or some other federal statute), certain parties, like Indian tribes, enjoy immunity from suit. The Supreme Court has recognized tribal sovereign immunity, and both parties agree that “the doctrine is now part of this Court’s settled precedent . . . .” But they disagree sharply over the extent of that immunity.

The state argues first that the district court has jurisdiction over its suit pursuant to § 2710. The state says that the Vanderbilt casino is “a class III gaming activity located on Indian lands,” because Bay Mills authorized, licensed, and operated the casino from its reservation. More particularly, it contends that § 2710 extends federal court jurisdiction to the gaming itself, but also to the gaming activity, which, the state argues, includes authorizing, licensing, and operating the casino. The state claims that its interpretation of the text is consistent with the congressional intent.

The state argues next that the district court has jurisdiction over its federal claims pursuant to § 1331. The state says that it alleged a violation of the IGRA, a federal statute, when it claimed that Bay Mills violated the compact (in counts I, II, and III). It also says that nothing in the IGRA limits the federal courts’ federal question jurisdiction under § 1331.

The state argues that tribal sovereign immunity does not bar its suit for two independent reasons. First, the state contends that the IGRA abrogated tribal sovereign immunity. The state says that the Court uses a “more holistic approach” in determining whether a federal statute abrogates tribal sovereign immunity, and that the IGRA viewed as a whole (and not just § 2710) makes clear that Congress intended that a state could enforce its gaming laws in federal court against an Indian tribe engaged in off-reservation gaming. The state claims that the opposite rule would lead to an absurd result—that the state could obtain a federal court injunction to stop illegal gaming on Indian lands, but not on its own sovereign state lands. The state says that Congress could not have intended this result.

Second, the state argues that even if the IGRA does not abrogate tribal sovereign immunity, the Court should decline to extend immunity here. The state says that the Court has never expressly extended tribal immunity to a tribe’s off-reservation commercial activities, and, especially given tribal immunity’s “dubious foundation,” the Court should decline to extend it to those activities in this case.

In response, Bay Mills first argues that the state cannot claim that the Vanderbilt casino is “on Indian lands,” as it does in its first point. Bay Mills says that that argument falls outside the questions presented, which speak solely to gaming activities “outside of Indian lands.” But even if this argument were properly before the Court, Bay Mills contends that the state is wrong: the IGRA itself says that a tribe’s decision to open a gaming facility is not a “class III gaming activity.”

Next, Bay Mills argues that it is immune from Michigan’s suit under § 1710. Bay Mills claims that § 1710 only abrogates tribal sovereign immunity “on Indian lands,” and that the whole premise of the state’s claim is that the Vanderbilt casino is off Indian lands. Bay Mills says that under the plain language of § 1710, “Michigan has simply pled itself out of court.”

To the extent that Michigan and its amici argue for a Court-created exception to tribal sovereign immunity, Bay Mills argues that the Court has already rejected the proposed exceptions. Bay Mills also says that the Court has rejected pleas to overrule its tribal sovereignty immunity precedents. Bay Mills contends that it is Congress’s prerogative, not the Court’s, to alter the scope of tribal sovereign immunity, and that Congress has only reaffirmed it. Bay Mills claims that tribal sovereign immunity “has deep roots in this country’s jurisprudence,” and that there is no reason for the Court to abrogate it now.

Finally, Bay Mills argues that the Ninth Circuit decision will not leave the state without a remedy, as the state argues. Bay Mills says that Michigan most obviously can invoke the dispute resolution procedure in the compact. Bay Mills claims that Michigan could also sue tribal officials for injunctive relief. Additionally, Bay Mills argues that the state could negotiate a waiver of sovereign immunity in the next round of compact negotiations, seek federal intervention in the dispute, or even outlaw gaming throughout the state.  

The federal government, as amicus in support of Bay Mills, also argues that the federal courts lack jurisdiction over Michigan’s claims. The federal government says that § 2710 does not extend jurisdiction of the state’s claims to the district court. Contrary to the state’s argument, the federal government says that numerous provisions in the IGRA demonstrate that the phrase “class III gaming activities” refers to the games themselves, and not to authorizing, licensing, and operating games. And because the games themselves are not located on Indian lands, § 2710 is not a basis for jurisdiction. Moreover, the federal government says that § 1331 does not extend jurisdiction, because the state’s federal claims (counts I, II, and III) do not fall within § 2710, and because the compact does not contain a provision agreeing to federal court review of the state’s other claims.

Next, the federal government argues that Bay Mills enjoys tribal sovereign immunity. The federal government says that § 2710 did not abrogate sovereign immunity, because the state alleged that the Vanderbilt casino is not on Indian lands. The federal government contends that 18 U.S.C. § 1166 also does not abrogate sovereign immunity, because that statute gives the federal government (not the states) enforcement authority in Indian lands for violations of assimilated state gambling laws. The federal government says that § 1166 does not give states authority to enforce state gambling laws outside Indian lands, and even less to sue the tribe itself. The government contends that tribal sovereign immunity already extends to a tribe’s commercial activities wherever they take place, and that the Court should leave it to Congress to balance the interests of the tribes and the states and to determine the scope of immunity.

Finally, the federal government argues that Michigan has other remedies. Like Bay Mills, the federal government says that the state could seek injunctive relief against an individual tribal official. The federal government claims that the state could also negotiate a waiver of sovereign immunity in the compact. Moreover, the federal government contends that the state could request approval from the NIGC of a site-specific gaming ordinance for the Vanderbilt casino, forcing the NIGC to determine whether the site is eligible for gaming, and appeal the decision in court. Finally, the federal government notes that the state can enforce its own gaming laws against individuals involved in gaming at the Vanderbilt casino. With all these options, the federal government argues that there is no need to diminish tribal sovereign immunity to create a remedy that would resolve this dispute.

SIGNIFICANCE

At its core, this case is about the allocation of power between states and Indian tribes over the operation of an activity, tribal-sponsored gambling, that has seen astonishing growth in recent decades and today is worth tens of billions of dollars nationwide. (The NIGC tracks this growth in Gaming Revenue Reports, available at http://www.nigc.gov/Gaming_Revenue_Reports.aspx.) Both Indian tribes and states use legalized gaming more and more for revenue, economic development, and economic activity and opportunity. Within this broader context, the regulation of tribal gaming, even at the margins, is itself a high-stakes game.

To be sure, this case deals with only a small part of this larger question, that is: off-reservation gambling. And it involves only special federal jurisdictional and immunity questions that come up in the particular case when an Indian tribe purchases land to build an off-reservation casino.

Still, in the rapidly growing sector of Indian gaming, the case already matters. As Michigan indicates, it “is already aware of at least three additional lawsuits where parties have cited the Sixth Circuit’s decision here in support of a tribe’s operation (or planned operation) of a casino in violation of IGRA or tribal-state gaming compacts.” The state notes that “[a]s tribes continue to look for better casino locations . . . or new ways to profit from the explosion of casino gaming, the friction between state authority and tribal immunity will inevitably increase.” That’s not to say that Michigan’s positions in the case are (necessarily) right, but only that the issues are already significant, and only likely to grow in importance.

Moreover, the issues are highly controversial. On the one hand, many favor expanding off-reservation gaming opportunities, because Indian tribes and states can use off-reservation gaming to generate more revenue and economic development in more attractive locations off the reservations (like closer to urban centers). On the other hand, many oppose off-reservation gaming, because it encroaches on local communities. The debate is playing out in communities across the country where Indian tribes are seeking permission to conduct off-reservation gaming. The debate is also playing out in Washington, where the Obama administration moved in 2011 to loosen requirements for some off-reservation gaming, and where some in Congress have introduced legislation to tighten them. Again, this case sits right at the center of these debates.

Whatever happens in this case, though, it cannot change the basic statutory framework under the IGRA: Indian tribes will still have to adopt a gaming ordinance and negotiate a compact with the state. The compact requirement ensures that both states and Indian tribes will have a significant hand in regulating casino-like tribal gaming. But the outcome of the case may affect how Indian tribes and states negotiate their compacts and the terms they include in them.

It is important to remember that the Department of the Interior and the NIGC issued opinions that the Vanderbilt casino was not on “Indian lands” and was therefore not eligible for gaming under the NGRA. The federal government does not disavow these opinions. Indeed, the federal government sets out an array of options for Michigan to regulate the Vanderbilt casino (and other future casinos), notwithstanding (as the federal government argues) the federal courts’ lack jurisdiction over the state’s claims and Bay Mills’s immunity from suit. In other words, the Sixth Circuit ruling does not mean that Bay Mills can operate its casino, or that other tribes could operate like casinos off reservation, without at least some state and federal oversight and permission.

Finally, the case is significant because it will resolve splits in the circuits. There is disagreement among the circuits on both questions presented—the scope of federal jurisdiction, and the scope of tribal sovereign immunity.

December 2, 2013 in Cases and Case Materials, Congressional Authority, Courts and Judging, Federalism, Jurisdiction of Federal Courts, News | Permalink | Comments (0) | TrackBack (0)

Tuesday, October 29, 2013

Catholic Media Corporation, Alabama Sue Over Contraception Mandate

The Eternal World Television Network, a Catholic media corporation, and the State of Alabama filed suit against the government yesterday, seeking to halt the contraception mandate in the Affordable Care Act. 

EWTN argues that the mandate violates the Religious Freedom Restoration Act and the religion clauses, among other claims.  Alabama says that the mandate intrudes on its "sovereign prerogative to regulate the insurance market in accordance with its own law and policy, without being contradicted by unlawful federal regulations."

The case is just the latest religious-based challenge against the contraception mandate.  We posted most recently just yesterday, on the Sixth Circuit's ruling in Eden Foods.  If Eden Foods seemed more political than religious-based--the plaintiff's "deeply held religious beliefs" "more resembled a laissez-faire, anti-government screed," according to the court--this case seems more political than religious-based for a different reason: EWTN is exempt under HHS regs, and if the mandate is valid Alabama simply has no claim.  In other words: the plaintiffs don't seem to have much to complain about.  We posted on the government's proposed regs exempting religious employers here; and we posted on the then-developing circuit split on the issue here.

EWTN says this about its accommodation under the regs:

This is a mere fig leaf.  It would still require EWTN to play a central role in the government's scheme by "designating" a fiduciary to pay for the objectionable services on EWTN's behalf.  This would do nothing to assuage EWTN's objections to the mandate.

The so-called "accommodation" also continues to treat EWTN as a second-class religious organization, not entitled to the same religious freedom rights as the Church it exists to serve.  It also creates administrative hurdles and other difficulties for EWTN, forcing it to seek out and contract with companies willing to provide the very drugs and services that EWTN speaks out against.

As to Alabama, the State apparently seeks to protect itself and its citizens from the "immediate and continuing burdens" of the mandate.  The State points out that its law expressly says that insurers do not have to provide contraception coverage in their plans.  The claim sounds in federalism, but the complaint doesn't say why or how the federal mandate violates federalism principles.  (Maybe that's because it doesn't.)

The plaintiffs also raise free speech, due process, and APA claims.

October 29, 2013 in Cases and Case Materials, Congressional Authority, Establishment Clause, Federalism, First Amendment, Free Exercise Clause, News, Religion | Permalink | Comments (0) | TrackBack (0)

Thursday, October 24, 2013

Medical Certificate of Public Need May Violate Dormant Commerce Clause

The Fourth Circuit ruled in Colon Health Centers of America v. Hazel that two out-of-state medical providers alleged a sufficient challenge to Virginia's "certificate of need" requirement to survive a motion to dismiss.  The court remanded the case for fact-finding on the dormant Commerce Clause question.

The court suggested that the requirement wouldn't ultimately survive.  The case, when it comes back to the Fourth Circuit after remand, may be significant, if, as the concurrence says, "in Virginia, and throughout much of the country, state certificate of need regimens continue to grow and now regulate an enormous segment of the national economy."  Op. at 27-28.

Virginia's certificate-of-need program requires medical providers that seek to launch a medical enterprise in the state to show a public need for the service that it seeks to offer.  (Judge Wilson puts a finer point on it in dissent: "Plaintiffs would like to render medical services in Virginia with equipment they cannot utilize without first proving to the Commonwealth that the competition they bring with them will not harm established local health care providers.")  The plaintiffs, two corporations that provide colon screening and treatment, alleged that the program violates the dormant Commerce Clause (among other constitutional claims, rejected by both the district court and the Fourth Circuit).

The court ruled that the plaintiffs alleged sufficient facts to survive a motion to dismiss and to trigger discovery and fact-investigation by the trial court.  The court gave unusually specific directions to the trial court to find facts on the program's discrimination against interstate commerce in purpose and effect, recognizing that this fact investigation would also spill over into the lower-level balancing test under the dormant Commerce Clause for state laws that create an undue burden on interstate commerce.

October 24, 2013 in Cases and Case Materials, Commerce Clause, Federalism, News, Opinion Analysis | Permalink | Comments (0) | TrackBack (0)

Friday, October 18, 2013

Arizona, Kansas to Use Two-Tier Voter Registration in Response to Inter Tribal Council

The states of Arizona and Kansas have announced that they will require voters to register separately for state and federal elections--using the standard federal form for federal elections, but using more stringent requirements for state registration.

The moves are a response to the Supreme Court's ruling this summer in Arizona v. Inter Tribal Council of Arizona.  That case held that the federal requirement under the National Voter Registration Act that states "accept and use" an approved and uniform federal form for registering voters preempted Arizona's requirement that voters present evidence of citizenship at registration.  (Under this system, state voters could register for federal and state elections all at once, using the same standardized federal form, with the same requirements.)  The result: the Court struck Arizona's proof-of-citizenship add-on to the standardized federal form. 

So the states sought a work-around, so that they could retain a proof-of-citizenship requirement for some voter registration.  And they came up with the only voter registration that they now seem to have control over: registration for state elections.

The states say that Inter Tribal applies only to federal elections, that they can design and use their own forms for state elections, and that voters who register using only the federal form are qualified only to vote in federal elections (and not state and local elections).  To the states, this all means that a two-tiered system makes sense.

Under the two-tiered system, voters in those states could register for federal elections using the NVRA standardized federal form.  But voters would have to show additional proof of citizenship--of the kind struck in Inter Tribal--in order to register to vote in state elections.

The moves harken back to practices in the Jim Crow South and stand as a barrier to voter registration.  Ari Berman argues over at The Nation:

In the Jim Crow South, citizens often had to register multiple times, with different clerks, to be able to vote in state and federal elections.  It was hard enough to register once in states like Mississippi, were only 6.7 percent of African-Americans were registered to vote before the passage of the Voting Rights Act of 1965.  And when the federal courts struck down a literacy test or a poll tax before 1965, states like Mississippi still retained them for state and local elections, thereby preventing African-American voters from replacing those officials most responsible for upholding voter disenfranchisement laws. . . .

Over 300,000 voters were prevented from registering in Arizona after its proof-of-citizenship law passed in 2004.  In Kansas, 17,000 voters have been blocked from registering this year, a third of all registered applicants, because the DMV doesn't transfer citizenship documents to election officials. 

At the very least, the two-tiered systems promise to complicate voter registration and maintenance of voter lists for the states.

Still: there's little or no evidence of voter fraud.

 

October 18, 2013 in Cases and Case Materials, Elections and Voting, Federalism, Fundamental Rights, News | Permalink | Comments (0) | TrackBack (0)

Tuesday, October 15, 2013

Federalism, State Constitution at Center of Detroit Bankruptcy Case

Federalism and state constitutionalism took center stage today, as Judge Steven Rhodes opened hearings on Detroit's eligibility for bankruptcy.  Detroit's filing, on July 18, is the largest municipal bankruptcy petition in U.S. history.

According to the Free Press, attorneys for the creditors objecting to bankruptcy argued that federal bankruptcy law "allows the U.S. government to infringe on state rights and gives 'political cover' to Detroit emergency manager Kevyn Orr to pursue pension cuts":

I'd ask your honor to come back with me to elementary and high school when we first talked about what the Constitution means.  By turning over Chapter 9 to the federal government and being able to hide behind the bankruptcy process, we lose that accountability that's a cornerstone of what our constitution requires of us.

Creditor attorneys also argued that bankruptcy violates the Michigan Constitution's protection of public pension benefits.  Article IX, Section 24 says,

The accrued financial benefits of each pension plan and retirement system of the state and its political subdivisions shall be a contractual obligation thereof which shall not be diminished or impaired thereby.

The hearing on eligibility is slated to go through Wednesday; Judge Rhodes will start an eligibility trial on October 23.  

October 15, 2013 in Comparative Constitutionalism, Federalism, News, Oral Argument Analysis, State Constitutional Law | Permalink | Comments (0) | TrackBack (0)

Tuesday, October 8, 2013

Ninth Circuit Holds Haboring and Transporting Provision of SB1070 Unconstitutional

800px-Immigration_Reform_Leaders_Arrested_4Passed in 2010, Arizona's SB 1070 has been controversial since the beginning.  Recall that some portions of Arizona's attempt to control immigration and immigrants in SB 1070 reached the United States Supreme Court in Arizona v. United States, with a majority holding major portions of the state law were preempted by the federal statutory immigration law and thus invalid under the Constitution's Supremacy Clause, Article VI.  The Court, however, upheld section 2(B), perhaps the most controversial aspect, often known as the "show me your papers" provision.  

But preemption was not the only constitutional attack on SB1070; and these challenges are slowly but surely making their way to the Ninth Circuit.  In March, a panel of the Ninth Circuit rendered its opinion in Valle Del Sol v. Whiting and upheld District Judge Susan Bolton's preliminary injunction against enforcement of the day labor regulations of SB 1070 as violative of  the First Amendment. 

Today, the Ninth Circuit again rendered an opinion upholding Judge Bolton's preliminary injunction; and although the case is again styled Valle Del Sol v. Whiting, the provisions of SB 1070 at issue, codified as Arizona Revised Statutes §13-2929, are the ones that attempted to "criminalize the harboring and transporting of unauthorized aliens" within Arizona.

Authored for the panel by Judge Richard Paez, and joined by John T. Noonan, with a concurring opinion and minimal dissent by Judge Carlos Bea, the opinion devoted about 10 of its 45 pages to the issue of standing, concluding that there was both individual and organizational standing.

On the merits, the panel found a due process violation:

Section 13-2929 states that “[i]t is unlawful for a person who is in violation of a criminal offense” to knowingly or recklessly transport, conceal, harbor, or shield an unauthorized alien. We conclude that the phrase “in violation of a criminal offense” is unintelligible and therefore the statute is void for vagueness.

Interestingly, the footnote to this passage explains:

The plaintiffs did not originally raise this issue. But in order to address the plaintiffs’ preemption claim, we must first interpret the statute’s provisions. In attempting to do so, we are confronted with this incomprehensible element of § 13-2929. Thus, we resolve the vagueness issue because it is both “antecedent to . . . and ultimately dispositive of” the appeal before us.

The court stated that "Arizona makes no claim that 'in violation of a criminal offense' makes any sense as written." The panel rejected Arizona's arguments to "save" the statute's wording, stating that Arizona would have the court "replace a nonsensical statutory element with a different element" rather than engage in the more permissible approach of adopting a limiting construction.

The court then engaged with the preemption challenge, stating that even if it were to accept Arizona's proposed interpretation of the statute, the statute is also preempted by federal law, under the doctrines of field preemption and conflict preemption.  It was from this analysis that Judge Bea dissented, saying that because the case is "resolved  on other grounds, namely vagueness, I believe the court should not reach the preemption issue."

The mistake - - - carelessness? - - - in the drafting of this provision was a fatal flaw.  While the legislature could redraft legislation, as the court notes, perhaps the political will in Arizona for bills such as SB1070 has diminished.

October 8, 2013 in Due Process (Substantive), Federalism, Fourteenth Amendment, Interpretation, Preemption, Race, Standing | Permalink | Comments (0) | TrackBack (0)

Tuesday, October 1, 2013

First Circuit Upholds Bans on Tobacco Coupons, Flavored Tobacco

The First Circuit upheld bans in the City of Providence, Rhode Island, on accepting coupons or otherwise selling tobacco products at a discounted rate and on selling flavored tobacco products (other than cigarettes) against First Amendment and preemption challenges.  

The City imposed the "Price Ordinance" and "Flavor Ordinance" in order to reduce youth tobacco use.  Tobacco manufacturers and trade organizations sued, arguing that the Price Ordinance violated free speech and that both ordinances were preempted by federal and state law.  The First Circuit rejected the challenges and upheld the ordinances in Nat'l Ass'n of Tobacco Outlets v. City of Providence.

The court ruled that the Price Ordinance didn't violate free speech, because the ordinance "'only precludes licensed tobacco retailers from offering what the Ordinance explicitly forbids them to do,' and that offers to engage in banned activity may be 'freely regulated by the government.'"  Op. at 13-14 (quoting the district court).  

The court also held that the Price Ordinance wasn't preempted by the Federal Cigarette Advertising and Labeling Act.  The preemption provision of the Labeling Act says that "[n]o requirement or prohibition based on smoking and health shall be imposed under State law with respect to the advertising or promotion of any cigarettes[,] the packages of which are labeled in conformity with the provisions of this chapter."  But Congress enacted an exception in 2009 (in response to the Supreme Court's ruling in Lorrilard) that says that a state or locality "may enact statutes and promulgate regulations, based on smoking and health . . . imposing specific bans or restrictions on the time, place, and manner, but not content, of the advertising or promotion of any cigarettes."  

The court ruled that the Price Ordinance met the content-neutrality requirement in the exception, because "it merely regulates certain types of price discounting and offers to engage in such price discounting," not the content relating to health claims or warnings.  Moreover, the court held that the Price Ordinance met the time, place, manner requirement.  The court said that minimum price regulations met that standard (they were common when Congress enacted the exception, and the plaintiffs conceded that they met the standard), and that the Price Ordinance is wasn't materially different.

The court held that the Flavor Ordinance wasn't preempted by federal Family Smoking Prevention and Tobacco Control Act.  The preemption clause of that Act prohibits states and localities from regulating "tobacco product standards" and "good manufacturing standards."  The Act also includes a savings clause, however, which allows regulations "relating to" the sale of tobacco products.  The court said that the Flavor Ordinance fell within the savings clause, because it's not a blanket prohibition (which, the plaintiffs claimed, was more than merely "relating to") but instead allows the sale of flavored tobacco products in smoking bars.

Finally, the court ruled that the Price Ordinance wasn't field-preempted by Rhode Island law, because Rhode Island hasn't occupied the field.  The court also said that the ordinances didn't violate the state constitution, which prohibits local licensing measures, because the ordinances aren't licensing measures (and because the plaintiffs didn't challenge the City's licensing measure).

October 1, 2013 in Cases and Case Materials, Federalism, First Amendment, News, Opinion Analysis, Preemption, Speech | Permalink | Comments (0) | TrackBack (0)

Monday, September 30, 2013

Justice Department to Sue North Carolina Over Vote Restrictions

AG Eric Holder announced today that the U.S. Department of Justice would file suit against North Carolina in federal court to stop its new restrictions on voting.  We previously posted on the ACLU suit against the state here.

The complaint alleges that North Carolina HB 589 reduces early voting days, eliminates same-day voter registration during early voting, prohibits the counting of provisional ballots cast outside a voter's precinct, and imposes a voter ID requirement--all in violation of Section 2 of the Voting Rights Act.  DOJ argues that the changes have both a discriminatory purpose and a discriminatory effect.  The Department also seeks "bail-in" under Section 3(c) of the VRA.

DOJ most recently sued Texas to stop its voter ID law and redistricting plans.  The Department sought bail-in relief in those cases, too.

The cases come in the wake of the Court's ruling this summer in Shelby County v. Holder striking Section 4(b) of the VRA, the coverage formula for the preclearance requirement.  By striking Section 4(b), the Court rendered Section 5 preclearance a dead letter, unless and until Congress can rewrite it in a way that would pass muster with this Court--that is, likely never.  Section 3(c) bail-in works very much like Section 5 preclearance, though.  If acourt orders bail-in, it will retain jurisdiction over the state "for such period as it may deem appropriate and during such period no voting qualification or prerequisite to voting or standard, practice, or procedure with respect to voting different from that in force or effect at the time the proceeding was commenced shall be enforced unless and until the court finds that such qualification, prerequisite, standard, practice, or procedure does not have the purpose and will not have the effect of denying or abridging the right to vote on account of race or color . . . ."

The North Carolina and Texas cases are sure to raise two new fronts in the assault on the Voting Rights Act: challenges to congressional authority to enact Section 3(c) bail-in, and challenges to congressional authority under Section 2 to ban state laws that have a discriminatory effect (even if not a discriminatory purpose).

September 30, 2013 in Cases and Case Materials, Congressional Authority, Elections and Voting, Federalism, Fifteenth Amendment, Fourteenth Amendment, Fundamental Rights, News | Permalink | Comments (1) | TrackBack (0)

Friday, September 27, 2013

Eighth Circuit Upholds State Residency Requirement for Liquor Wholesalers

The Eighth Circuit this week in Southern Wine and Spirits of America, Inc. v. Division of Alcohol and Tobacco Control upheld Missouri's requirement that liquor wholesalers reside in Missouri against a dormant Commerce Clause challenge.  The ruling means that Missouri's law stays on the books, at least for now.

The case pitted the equal treatment requirement of the dormant Commerce Clause against the state's authority to regulate alcohol under the Twenty-first Amendment.  In the Supreme Court's last foray into that area, in Granholm v. Heald, the Court struck a state law allowing in-state wineries to ship their products directly to in-state consumers, but requiring out-of-state wineries to sell through wholesalers.  The law meant that in-state wineries could sell their wine at lower costs.  The Court said that "the Twenty-first Amendment does not supersede other provisions of the Constitution and, in particular, does not displace the [dormant Commerce Clause] rule that States may not give a discriminatory preference to their own producers."  

But the Supreme Court also noted that its holding didn't call into question the constitutionality of the three-tier distribution system set by the state--producers, wholesalers, and retailers.  In particular, it wrote (in dicta) that the three-tier distribution system is "unquestionably legitimate" and that the system includes the "licensed in-state wholesaler."  It also wrote that state policies that define the structure of the liquor distribution system--and that give equal treatment to in-state and out-of-state liquor products and producers--are "protected under the Twenty-first Amendment."

Missouri's law requires wholesalers to be "resident corporation[s]."  That means that the corporation has to be incorporated under Missouri law, all of its officers and directors must be residents of Missouri for at least three years, and resident stockholders must own at least 60 percent.  The law has a grandfather clause, exempting licensed wholesalers as of January 1, 1947.  (There is currently just one such wholesaler.)

The Eighth Circuit upheld the law against the dormant Commerce Clause challenge.  In particular, the court held that there was no evidence of protectionist intent.  And it said that under Granholm the law didn't discriminate against out-of-state products or producers, and that under Granholm states could require wholesalers to be "in-state."  

The court held that Missouri's law easily passed the "deferential scrutiny" that Granholm says applies to state policies defining the distribution system.  It said that the legislature could have believed that a wholesaler governed by Missouri residents might be more socially responsible and promote temperance, and that Missouri residents might be more likely to respond to concerns of the community.  The court also said that the legislature could have concluded that in-state residency promotes law enforcement.

September 27, 2013 in Cases and Case Materials, Commerce Clause, Federalism, News, Opinion Analysis | Permalink | Comments (0) | TrackBack (0)

Tuesday, September 24, 2013

Sixth Circuit Divides on Clear-Statement Application to Civil RICO

The en banc Sixth Circuit divided sharply today over whether Michigan workers could sue their employer, claims manager, and employer's doctor under federal civil RICO for engaging in a fraudulent scheme involving the mail to deny the workers state workers' compensation benefits.

The case, Jackson v. Sedgwick Claims Management Services, Inc., arose when employees of Coca-Cola applied for, and were denied, workers' compensation benefits under Michigan law.  The employees sued  Coca-Cola, Coke's claims management service, and a cooperating doctor under federal civil RICO for colluding to deny them their benefits.  The defendants moved to dismiss, arguing that the claim wasn't cognizable.

The en banc Sixth Circuit agreed.  The court held that the plaintiffs failed to allege that they were "injured in [their] business or property" as required by RICO for civil damages.

But then the court went on to say that this conclusion "is confirmed by" the clear-statement principle in Gregory v. Ashcroft.  The majority said that under the clear-statement principle Congress must make clear when it intends federal law to displace state law in an area traditionally regulated by the states.  Here, the majority held that RICO doesn't have a sufficiently clear statement of intent to displace state workers' compensation law, and so the clear-statement principle confirms the court's conclusion that the plaintiffs can't use federal civil RICO to attack the state workers' compensation scheme.

Judge Moore dissented, joined by four other judges.  Judge Moore argued that "the majority makes the erroneous assumption that the clear-statement rule would even apply in this context."  She argued that the majority's approach is inconsistent with the Supreme Court's clear instruction to read RICO broadly.

September 24, 2013 in Cases and Case Materials, Congressional Authority, Federalism, News, Opinion Analysis, Preemption | Permalink | Comments (0) | TrackBack (0)

Friday, September 20, 2013

Groups Sue to Stop Texas Voter ID

The Brennan Center filed suit this week in federal court on behalf the Texas State Conference of the NAACP and the Mexican American Legislative Caucus of the Texas House of Representatives challenging SB 14, Texas's strict voter ID law.  The Brennan Center's resource page on the case is here.

The suit this week comes soon after the United States Department of Justice filed its own suit against Texas to stop SB 14.

Recall that the Texas AG announced that the state would move to enforce SB 14 soon after the Supreme Court struck the coverage formula for the preclearance requirement in the Voting Rights Act this summer in Shelby County v. Holder.

The suit filed this week, like the DOJ suit before it, also seeks "bail-in" under Section 3(c) of the Voting Rights Act--that is, an order by the federal court for continued monitoring of the state that would operate very much like preclearance under Section 5 would have operated against a covered state like Texas (until the Court struck the coverage formula, leaving Section 5 a dead letter, in Shelby County).  

Section 3(c) bail-in may be the next litigation target (after opponents succeeded in challenging the coverage formula for preclearance in Shelby County) for states like Texas facing VRA suits.  Texas's responses to these suits will tell.

September 20, 2013 in Cases and Case Materials, Congressional Authority, Elections and Voting, Equal Protection, Federalism, Fifteenth Amendment, Fourteenth Amendment, News, Reconstruction Era Amendments | Permalink | Comments (0) | TrackBack (0)

Thursday, September 19, 2013

Third Circuit Upholds Federal Prohibition on State-Licensed Gambling

The Third Circuit panel this week in NCAA v. Governor of New Jersey upheld the federal law prohibiting states from licensing sports gambling against a challenge that it exceeded congressional authority under the Commerce Clause, impermissibly commandeered the states, and violated the principle of equal sovereignty among the states. 

The case was a significant test of congressional authority after NFIB v. Sebelius (upholding the ACA's individual mandate under congressional taxing authority, but ruling that it exceeded congressional Commerce Clause authority) and a significant test of the principle of equal sovereignty among the states after Shelby County v. Holder (ruling that the preclearance formula in the Voting Rights Act violated the principle of equal sovereignty among the states and exceeded congressional authority under the Fifteenth Amendment).

The Third Circuit panel rejected both arguments--and the commandeering argument, too--and upheld the federal prohibition.  (The court also ruled that the plaintiffs, sports leagues, had standing to challenge the New Jersey law--in part because the law was directed at them (even if indirectly) and because they would have suffered a reputational injury by association with gambling.)

In 1992, Congress enacted the Professional and Amateur Sports Protection Act, or PASPA, to prohibit sports gambling conducted by, or authorized under the law of, any state or governmental entity and to stop the spread of state-sponsored sports gambling.  PASPA's key provision says that neither states nor persons may
sponsor, operate, advertise, or promote . . . a lottery, sweepstakes, or other betting, gambling, or wagering scheme based directly or indirectly (through the use of geographical references or otherwise), on one or more competitive games in which amateur or professional athletes participate, or are intended to participate, or on one or more performances of such athletes in such games.
28 U.S.C. Sec. 3702.  The PASPA also prohibits states from licensing or authorizing "by law or compact" any such gambling activities.  28 U.S.C. Sec. 3702(1), 3701.
The PASPA contains three relevant exceptions--a clause that exempts Nevada, a clause that permitted New Jersey to license sports wagering in Atlantic City had it chosen to do so within one year of PASPA's enactment, and a provision that allows states like Delaware and Oregon to continue the limited "sports lotteries" that they had previously conducted.  
New Jersey did not take advantage of its exemption under the PASPA, but New Jersey voters later passed a referendum to amend the state constitution to permit the state legislature to "authorize by law wagering . . . on the results of any professional, college, or amateur sport or athletic event."  N.J. Const. Art. IV, Sec. VII, Para. 2(D), (F).  The legislature then enacted the "Sports Wagering Law," which permits state authorities to license sports gambling in casinos and racetracks and to license casinos to operate "sports pools."
The plaintiffs, sports leagues, sued, arguing that the New Jersey law was preempted by PASPA.  New Jersey argued that PASPA exceeded congressional authority and violated the anti-commandeering rule and equal state sovereignty principle.
The court held that "it is self-evident that the activity PASPA targets, state-licensed wagering on sports, may be regulated consisted with the Commerce Clause."  The court said that wagering and national sports are both economic activities, and that professional and amateur sports, and wagering on them, substantially affect interstate commerce.  The court rejected the argument that the PASPA improperly reaches purely intrastate activity--a friendly bet between family members, for example--because the PASPA doesn't reach that activity, and even if it did, under Wickard v. Filburn and Gonzales v. Raich, Congress could have concluded that in the aggregate they have a substantial effect on interstate commerce.
The court also held that the PASPA doesn't impermissibly commandeer the states.  Instead, it said, the PASPA is a proper exercise of congressional authority and properly preempts state licensing laws under the Supremacy Clause.  The said that New Jersey's argument amounted to saying that impermissible anti-commandeering may occur even when all a federal law does is supercede state law via the Supremacy Clause--a position that the Supreme Court has never accepted.  The court distinguished New York and Printz by saying that the PASPA doesn't require the states to do anything or coerce the states at all; instead, it validly prohibits them from licensing gambling.
Finally, the court held that PASPA doesn't violate the principle of equal sovereignty of the states.  The court distinguished Shelby County and said that the equal sovereignty principle operates differently when Congress regulates "in an area 'the Framers of the Constitution intended the States to keep for themselves . . . the power to regulate elections.'"  Op. at 96-97 (quoting Shelby County).  The court also said that PASPA was designed to stop the spread of state-sanctioned sports gambling, and so regulating states in which sports gambling already existed would have been irrational.  And in any event the remedy for an equal sovereignty violation should be to strike the provisions in PASPA that exempt certain states, not to strike PASPA's principal provision.
The court also held that the plaintiffs in the case, sports leagues, had standing.
Judge Vanaskie dissented from the court's holding on commandeering, arguing that "PASPA prohibits states from authorizing sports gambling and thereby directs how states must treat such activity.  Indeed . . . PASPA essentially gives states the choice of allowing totally unregulated betting on sporting events or prohibiting all such gambling. . . . [T]his congressional directive violates the principles of federalism [in New York and Printz]."  Dissent at 1.

September 19, 2013 in Cases and Case Materials, Commerce Clause, Congressional Authority, Federalism, News, Opinion Analysis | Permalink | Comments (0) | TrackBack (0)

Saturday, September 7, 2013

CFP: LBJ's Great Society at 50, MAPOC Legal Scholarship Conference

From an announcement:

19th Annual Mid-Atlantic People of Color
Legal Scholarship Conference 2014
Hosted by the University of Baltimore School of Law
Baltimore, MD
January 23-25, 2014

–      Conference Theme & Call for Papers –

President Lyndon B. Johnson’s Great Society and Beyond:
The Historical and Contemporary Implications of Progressive Action and Human Fulfillment
Honoring and Critiquing the 50th Anniversary of Johnson’s Vision



496px-LBJ_National_Portrait_GalleryIn May 1964, President Lyndon Baines Johnson unveiled his revolutionary plans for the Great Society.  As he explained it, Americans “have the opportunity to move not only toward the rich society and the powerful society, but upward to the Great Society. . . .  The Great Society rests on abundance and liberty for all. It demands an end to poverty and racial injustice.”

According to Doris Kearns Goodwin, who wrote Lyndon Johnson and the American Dream, Johnson’s Great Society would be based on “progressive action” and the “possibilities for human fulfillment.”  This action and fulfillment meant that regaining control of our society required us to end policies that threatened and degraded humanity.

Johnson’s Great Society reforms, included the Voting Rights Act of 1965, Medicare, Medicaid, Equal Opportunity Act, Elementary and Secondary Education Act, Social Security expansion, the Earned Income Tax Credit, the Higher Education Act, Head Start, the Civil Rights Act of 1964, the Housing and Urban Development Act of 1965, and the Open Housing Act of 1968.  These laws extended and expanded the Bill of Rights and continued and expanded the programs initiated in Roosevelt’s New Deal of the 1930s and Truman’s Fair Deal in the late 1940s and early 1050s.  As a result of LBJ’s programs, America’s official poverty rate declined throughout the 1960s, reaching a low of 11.2 percent in 1974, down from 19 percent in 1964, and most recently settling at 15.1 percent in 2010.  According to Dylan Matthews, who wrote Poverty in the 50 Years Since ‘The Other America,’ in Five Charts, Johnson’s Great Society programs, which included the War on Poverty, “made a real and lasting difference.”  Moreover, according to Demos, an estimated 40 million Americans avoided official poverty due to such programs as food stamps and Medicaid.

Unfortunately, what is also true is that the Vietnam War, which Johnson escalated and only at the end of his administration moved to end, crippled his domestic economic policies and undermined his goals for true racial equality.   Despite the War on Poverty and dramatic changes in Civil Rights, racially concentrated poverty remains with us.  Since the Johnson years, America has weathered the recessions of the 1980s and early 1990s, the late ‘90s dot com bubble, our current recession, the national security encroachment on civil liberties, the rise and fall of the Occupy Movement, the waning of the Arab Spring, and two middle east wars since 9-11.

It is clear that Johnson’s Great Society programs have saved millions of Americans from the depth of official poverty.  It also true that Johnson’s vision, to which he was truly committed, staggered and failed when the civil rights movement dovetailed with political marginalization, economic inequality, pervasive racial discrimination, and imperialist policies.  The Moynihan Report, the Watts Riots and urban unrests, and the emotional and financial suck of Vietnam prevented Johnson from deeply redressing America’s lingering poverty.

At MAPOC 2014, we intend to explore the furthest implications of President Johnson’s domestic and foreign policies, especially the impact of these policies on progressive action and human fulfillment, as we collectively explore and analyze the contemporary implications of Johnson’s Great Society.  From these implications, the conference planning committee is seeking papers and panel proposals on the following substantive but not exhaustive subjects:

-- A Hand Up:  The Meaningful Tension Between Formal Equality and Substantive Outcomes under the Civil Rights Act of 1964
-- Beyond Legislative Bogs and Dangerous Political Animals:  President Obama’s Legislative Agenda and the Limits of Second-Term Progressivism
--  Endangered Citizens?: Rights and Remedies after State v. Zimmerman
-- Equality, Choice, and Happiness:  the Rise and Fall of DOMA
-- Guns or Butter:  Social Welfare Programs, Modern Problems of Central Banks, Debt Slavery, and Foreign Policies
-- Medicare, Healthcare, and Welfare:  the Poor, the Elderly, and the Needy
-- Moynihan and the Contemporary (In)Stability of the Black Family
-- Racial (Dis)Harmony Then and Today
-- Voting Rights:  Shelby County v. Holder and the Promise of One Citizen, One Vote

Paper submissions must include a working title, bios, abstract, and contact information.
Panel proposals must also include the foregoing information for each of the panel’s participants, and the organizer’s contact information, all of which must be submitted together only by the organizer.
Submit Papers and Panel Proposals by September 30, 2013 to: Reginald Leamon Robinson, Howard University, Conference Chair and Founder, MAPOC 2014: [email protected]

[image: LBJ, National Portrait Gallery, via]

September 7, 2013 in Conferences, Elections and Voting, Equal Protection, Family, Federalism, Fundamental Rights, Gender, Race, Recent Cases, Scholarship, Theory | Permalink | Comments (0) | TrackBack (0)

Friday, August 30, 2013

Groups Challenge North Carolina Voter Restrictions

The ACLU filed suit earlier this month in the Middle District of North Carolina challenging the state's new restrictions on voting under the Fourteenth Amendment and the Voting Rights Act.  Recall that North Carolina, a previously partially covered jurisdiction under the Voting Rights Act, moved quickly after the Supreme Court struck the preclearance coverage formula in Shelby County v. Holder to introduce certain restrictions on the vote, knowing that the full state was free of the preclearance requirement.  The ACLU's suit, League of Women Voters of North Carolina v. North Carolina, challenges certain provisions in the state's  Voter Information Verification Act, or VIVA

In particular, the case challenges restrictions on early voting in the state, restrictions on same-day registration, and restrictions on out-of-precinct voting in the state.

The plaintiffs seek declaratory and injunctive relief, and bail-in under Section 3 of the VRA.  Bail-in allows a federal court to order continued monitoring of a state's proposed changes to its election laws upon a showing that the state's violations of the Fourteenth and Fifteenth Amendments justify such monitoring--much like Section 5 preclearance, except that the coverage formula isn't fixed.  

After Shelby County struck the coverage formula in Section 4(b), and thus rendered Section 5 preclearance a dead letter, Section 3(c) bail-in is the only way that the VRA might authorize continuing federal preclearance of a state's proposed changes to its election laws.  The ACLU sought Section 3(c) relief here, and the Department of Justice sought Section 3(c) relief in its recently filed case against Texas.

If the Texas AG's press release is any indication of a litigation position, Section 3(c) is the next likely provision in the VRA to go on the chopping block under a challenge that it exceeds congressional authority under the Fourteenth Amendment.

August 30, 2013 in Cases and Case Materials, Congressional Authority, Elections and Voting, Federalism, Fourteenth Amendment, News | Permalink | Comments (0) | TrackBack (0)

Wednesday, August 28, 2013

District Court Strikes Chicago's Vacant Building Ordinance

Judge Thomas Durkin (N.D. Ill.) ruled last week in Federal Housing Finance Agency v. City of Chicago that a Chicago ordinance that requires mortgagees of vacant buildings in the city to register with the city, pay a registration fee, and maintain the building under certain standards cannot apply to the FHFA or to Fannie Mae or Freddie Mac.  The court held that the Chicago ordinance was preempted by federal law and constituted an impermissible tax against the federal government.

The ruling means that Chicago cannot apply its vacant-building requirements to the FHFA or Fannie Mae and Freddie Mac, but the city can still apply the ordinance to private mortgagees of vacant (that is, abandoned or foreclosed) properties.

The ruling is significant, because Fannie and Freddie together hold about 258,000 loans secured by properties in the city.  The ruling means that the city cannot compel the FHFA to include Fannie- and Freddie-backed properties in its vacant-property registry, cannot collect a registration fee from the FHFA (or its servicers), and cannot fine the FHFA (or its servicers) for violation of the city's maintenance standards.  On the other hand, Fannie and Freddie have their own standards for continuing maintenance of vacant properties.  So for Fannie- and Freddie-backed properties, federal standards, not the city's, apply.

The ruling is also significant, because it telegraphs a federalism concern to the thousand or so local governments around the country that have adopted similar vacant-property ordinances.  While the ruling doesn't directly touch ordinances outside the City of Chicago, other local governments will do well to revisit their ordinances in light of the ruling.

The FHFA challenged the city's ordinance as running up against the federal Housing and Economic Recovery Act of 2008, or HERA.  HERA gives the FHFA authority to place Fannie and Freddie into conservatorship "for the purpose of reorganizing, rehabilitating, or winding up [their] affairs."  It also empowers the FHFA to "preserve and conserve the assets and properties of [Fannie and Freddie]."  

The FHFA directed Fannie and Freddie  to implement consistent mortgage loan servicing and delinquency management requirements and authorized them to contract with servicers who perform activities related to loan defaults, consistent with those requirements.  HERA includes a preemption clause that says that the FHFA "shall not be subject to the direction or supervision of any other agency of the United States or any State in the exercise of the rights, powers, and privileges of [the FHFA]."

The FHFA sued the city, arguing that HERA preempted the city's vacant-property ordinance and seeking a declaration and injunction prohibiting the city from enforcing the ordinance against it, or Fannie or Freddie.  The court agreed with the FHFA that HERA preempted the city's ordinance and awarded the requested relief.

The court held that Chicago's Ordinance was field- and conflict- preempted by federal law.  As to field preemption, Judge Durkin ruled that HERA's charge to the director of the FHFA to take care of Fannie's and Freddie's assets occupies the field, even if HERA's express preemption provision doesn't mention municipal ordinances:

Here, in contrast, it is evident that the Ordinance encroaches on an area of regulation that Congress reserved exclusively for FHFA.  As applied to FHFA as conservator and mortgagee, the Ordinance regulates how FHFA manages its collateral, including specifically how this collateral--which FHFA does not actually own--should be preserved.  For instance, when FHFA issues guidelines and instructions to servicers regarding the nature and frequency of inspections of vacant and abandoned properties, it is taking those steps it believes necessary to preserve and conserve Fannie and Freddie's assets and property.

HERA expressly prohibits other federal agencies and states from interfering with actions taken by FHFA as conservator.  Although HERA's preemption provision . . . does not expressly include laws enacted by municipalities . . . Congress enacted an extensive federal statutory scheme which specifically requires the Director of FHFA to "establish risk-based capital requirements for [Fannie and Freddie] to ensure that [they] operate in a safe and sound manner, maintaining sufficient capital and reserves to support the risks that arise in the operations and management of [Fannie and Freddie]."  HERA sets forth various grounds for the Director of FHFA to exercise his discretion to appoint FHFA as conservator of Fannie and Freddie.  Once placed in conservatorship, Congress intended for FHFA to be the sole entity responsible for operating Fannie and Freddie's nationwide business of purchasing and securitizing mortgages.

Op. at 24-25.

As to conflict preemption, Judge Durkin held that Chicago's Ordinance "obstructs Congress's intent to have one conservator take control of Fannie Mae and Freddie Mac, and take action as may be 'appropriate to carry on [their business] and preserve and conserve [their] assets and property' without being 'subject to the direction or supervision of any other agency of the United States or any States . . . ."  Op. at 29.

Finally, Judge Durkin ruled that Chicago's registration fee was an impermissible tax on the federal government, in violation of McCulloch v. Maryland.

August 28, 2013 in Cases and Case Materials, Federalism, News, Opinion Analysis, Preemption | Permalink | Comments (0) | TrackBack (0)