Friday, February 23, 2007
Supreme Court Wrap-Up by Aaron Streett
Greetings, sportsfans! Apologies for the delay in reporting, but I’ve been busy responding to irrational, screamed demands at all hours of the day and night. It’s no commentary on law-firm practice—I’ve just been helping to care for my newly arrived daughter. So if you think my presence at work here today is an indication that writing a semi-humorous and largely factual Supreme Court newsletter beats changing dirty diapers, you’re right. Barely.
The Court roared back from its monthlong opinion-writing recess with 5 merits decisions, 2 cert grants, and 1 CVSG. People bent on trumpeting the unity of the Roberts Court should avert their gaze now: three of the decisions split 5-4, with AMK joining the cons on 1 and the libs on 1. The third 5-4 case—a landmark punitive damages decision—features a lineup and holding that simply boggle the mind. Oh yeah, and one unanimous reversal, too, but no points for guessing which Circuit that was. Let’s dive right in!
Philip Morris USA v. Williams, 05-1256
The Court’s decision in Philip Morris accomplished more tort reform in one day (and in a breezy 10 pages) than the Republican Congress did in 12 years, and left a dissenting Justice Stevens pleading (without intended irony) for “judicial restraint.” Justice Breyer’s majority opinion (joined by a motley crew of JGR, AMK, DHS, and SAA) squarely held that the Due Process Clause does not permit a jury to award punitive damages for harm caused to individuals other than the plaintiff. Without this rule, the Court held, defendants would be subjected to a “standardless” damages determination, without fair notice of the punishment to be imposed, and without the opportunity to fully refute the alleged harm to nonparties. To reach this result, the Court had to back away from language in BMW v. Gore (1996) that seemed to allow punishment for harm to others. Clouding the issue, however, the Court held that a jury could consider harm to others in determining the “reprehensibility” of the defendants’ conduct, which is a factor in setting the appropriate relationship between punitive damages and actual damages. The Court drew a hazy distinction between using nonparty harm in assessing reprehensibility (allowed) and “punish(ing) a defendant directly on account of harms it is alleged to have visited on nonparties” (not allowed). The Due Process Clause “requires States to provide assurance that juries are not asking the wrong question, i.e., seeking not simply to determine reprehensibility, but also to punish for harm caused strangers.” The type of procedures the Court has in mind are also less than pellucid: “State courts cannot authorize procedures that create an unreasonable and unnecessary risk of any such confusion occurring.” While reading his bench statement, Justice Breyer did his best to clarify the holding through interpretive dance, but some thought his hasty resort to “jazz hands” only muddled the doctrine further.
It sounds like courts will have to grant a jury instruction on this issue and, at the very least, avoid giving instructions that allow punishment for nonparty harm. That holding alone will likely invalidate dozens of state statutes and standard jury instructions. While the Court cast this as a procedural due process decision, the Court’s opinion makes clear that a jury may not impose punishment for nonparty harms regardless of the procedures in place, so the holding smells quite substantive to me (and the dissenters). Perhaps SGB had to draft the opinion this way to hold the votes of the Chief and Justice Alito, who might have been reluctant to sign onto something bearing the substantive-due-process label. In any event, we can look forward to years of litigation and circuit splits trying to sort out what the Court hath wrought.
RBG dissented, joined by her Apprendi soulmates, Justices Scalia and Thomas. She would have held that the Oregon Supreme Court had faithfully applied Gore and State Farm v. Campbell (2003), and properly allowed the jury to consider nonparty harm only in assessing reprehensibility. RBG also noted that Philip Morris failed to preserve any objection to the jury instructions they now complained of.
Justice Stevens dissented, accusing the Court of fouling up his fine opinion in Gore. He now knows how Justice Kennedy feels about City of Boerne. Stevens sees no problem with punishment for harm to others; after all, the purpose of punitives is deterrence and retribution, not compensation. JPS also found the reprehensibility/direct punishment distinction to be specious. Either way, the jury gets to consider nonparty harm in setting punitive damages, and JPS would simply be more upfront in allowing it.
Finally, Justice Thomas dissented, to reiterate his view that “the Constitution does not constrain the size of punitive damages awards.” Confounding the shrinking pool of people (rhymes with Neddie Lazarus) who think that the Court’s no-middle-initial Justices share a brain, Justice Scalia did not join CT in inveighing against substantive due process, suggesting that AS may have finally accepted Gore and State Farm as binding precedent. Confounding those who think of the Court’s conservatives as a monolithic bloc, the Chief and Justice Alito did not join Justice Thomas’s originalist viewpoint and instead wholeheartedly endorsed the majority opinion (thus perfectly duplicating the votes of their predecessors in State Farm). Confounding the easily confounded, this suggests that JGR and SAA are not hardcore originalists a la Scalia and Thomas, at least when the relevant precedent is well-established at the time they joined the Court. Whether this approach holds true as to Roe v. Wade is a different question, one into which we may gain some insight when the Court decides the partial-birth-abortion cases later this Term.
Weyerhauser Co. v. Ross-Simmons Hardwood Lumber Co., 05-381
Justice Thomas wrote the unanimous, scholarly opinion reversing the CA9’s latest misadventure into antitrust law. The case involved a “predatory bidding” claim under § 2 of the Sherman Act. Predatory bidding is the mirror image of its more glamorous cousin, predatory pricing. Predatory pricing is Wal-Mart driving those poor mom-and-pops out of business by offering “Always Low Prices!”, and then supposedly jacking up prices to supracompetitive levels once the competition is decimated. Predatory bidding involves a manufacturer allegedly bidding up the price for raw materials (here, Weyerhauser bidding up lumber prices) until its competitors are forced out of the raw-materials market, and then paying sub-competitive prices because the suppliers have no one else to sell to. In Brooke Group v. Brown & Williamson (1993), the Court observed that successful predatory pricing was almost impossible to pull off in a free market and was virtually impossible to distinguish from pro-competitive price-cutting behavior. This led the Court to establish a very high two-part test for a predatory-pricing claim under the Sherman Act. In Weyerhauser, the Court held that those same principles dictate a similarly high bar for predatory-bidding claims, and rejected the 9th Circuit’s attempt to make it easier to get those claims to a jury. Predatory bidding—like predatory pricing—involves conduct that is often indistinguishable from pro-competititive behavior: There are any number of reasons a manufacturer may bid up the price of raw materials, many of which may benefit consumers (e.g., expanding a factory). Thus, much as in Brooke Group, a predatory-bidding plaintiff must prove that: (1) the predatory bidding resulted in below-cost pricing of the predator’s outputs (i.e., the manufacturer was temporarily taking a loss due to high input costs); and (2) the predator has a dangerous probability of recouping the losses incurred through the exercise of market power in the raw-materials market. The Court seemed quite skeptical that this standard will frequently be met.
Lawrence v. Florida, 05-8820
While Lawrence v. Texas was a contentious case raising fundamental constitutional issues, this Lawrence v. [Red State] is yet another mind-numbing installment in the ongoing saga over AEDPA’s one-year statute of limitations for federal habeas petitions. The general rule for these cases under the Rehnquist Court was that habeas petitioners lose 5-4 and the Court adopts a restrictive reading of the limitations period. Lawrence tells us that the rule continues to hold true under the Roberts Court. The specific question presented by this case was whether the statute of limitations is tolled while a prisoner files a Supreme Court cert petition after the denial of state-court postconviction relief. AEDPA says that the limitations period is tolled while “an application for State postconviction review” is “pending.” 28 U.S.C. § 2244(d)(2). Justice Thomas (if you need to be told who joined his opinion, you need a new hobby) held that a cert petition is a separate federal proceeding, not part of the “state postconviction review” process, and therefore does not toll the timeclock. Justice Ginsburg (joined by JPS, DHS, SGB) penned a persuasive dissent. She contended that the state postconviction review process is still pending while the cert petition is under consideration, just as the Court has held that a state criminal conviction is not final until the Supreme Court denies cert.
Wallace v. Kato, 05-1240
All the good Kato jokes have already been taken. The plaintiff brought a § 1983 claim against local police officers for false arrest in violation of the Fourth Amendment. He had been convicted and sentenced pursuant to the unlawful arrest, but his conviction was overturned on appeal. The question was when his § 1983 cause of action accrued. Analogizing to the common law tort of false arrest, Justice Scalia (joined by JGR, AMK, CT, SAA) held that plaintiff’s claim accrued when he was detained pursuant to legal process (i.e., when he was bound over to the magistrate before trial), and was therefore untimely. Justice Scalia rejected plaintiff’s argument that Heck v. Humphrey (1994) meant that the claim did not accrue until the conviction was overturned on appeal. (Heck holds that a § 1983 claim that would imply the invalidity of a criminal conviction does not accrue until the conviction is reversed or vitiated through habeas.) AS reasoned that at the time the § 1983 claim accrued, there was no extant criminal conviction, so Heck did not apply. Thus, the clock starts ticking when a false-arrest plaintiff is detained pursuant to criminal process and the plaintiff must file his § 1983 suit within the statute of limitations. If the plaintiff is later criminally tried, the court should stay the civil suit until the resolution of the criminal case, in order to determine whether Heck applies.
Justice Stevens (+ DHS) concurred in the judgment. He would have simply held that Heck does not apply to Fourth Amendment claims because such claims are not cognizable in habeas under Stone v. Powell (1976), and therefore the § 1983 claim accrued as soon as plaintiff was falsely arrested.
Justice Breyer (+ RBG) dissented. He would have held that equitable tolling applied during the pendency of plaintiff’s criminal proceedings, so that plaintiff would have an opportunity to learn, before filing, whether Heck would bar his § 1983 claim.
Marrama v. Citizens Bank of Massachusetts, 05-996
Justice Stevens won “the battle for the soul of Justice Kennedy” on this one (apologies to Jan Crawford Greenburg). The issue was whether a debtor has an absolute right to convert a Chapter 7 bankruptcy proceeding into a Chapter 13 proceeding. Justice Stevens (+AMK, DHS, RBG, SGB) held that the bankruptcy court may deny a conversion attempt if the debtor has acted in bad faith, for example, by concealing assets. Justice Stevens had to ignore some pretty clear statutory language and legislative history to reach that result, however. Section 706(a) of the Bankruptcy Code states that a debtor “may convert” a Chapter 7 proceeding to a proceeding under Chapter 13, unless he is ineligible to be a debtor under Chapter 13. Seizing on the exception, JPS noted that a court may re-convert a Chapter 13 proceeding under § 1307(c) if the debtor acted in bad faith, and held that this means a bad faith debtor is ineligible to convert in the first place. He also relied on some heartwarming dicta to the effect that the Bankruptcy Code is supposed to protect only the “honest but unfortunate debtor.”
Justice Alito (+ JGR, AS, CT) called Justice Stevens on his statutory legerdemain. Just because a bad-faith debtor is subject to discretionary re-conversion by the court does not mean he is ineligible to be a debtor under Chapter 13 in the first place. Therefore, the court should simply have read the statute as it was written. A fraudulent debtor would not ultimately benefit because the Code expressly permits a court to deny the discharge of debts on the basis of bad faith.
Grants, CVSG, and Notable Denial
The Court granted cert in Logan v. United States, 06-6911, which concerns what type of state-law misdemeanors count as predicate crimes under the Armed Career Criminal Act. And the Court granted New York Board of Elections v. Torres, in which the Second Circuit held that New York’s system for electing trial judges violated the First Amendment rights of voters and candidates by greatly restricting the field of candidates. These cases are the first grants that will be heard in OT 2007. The Court CVSG’d in Selig v. Pediatric Specialty Care Inc., 06-415, a potentially important case about whether the Medicaid Act confers private rights of action on recipients and medical providers. Finally, the Court denied cert in Skoros v. New York, 06-271, after relisting it for several months. This was the nativity-scene case I have discussed in these pages. It’s a mystery what caused the Court to relist it 8 times only to deny it without comment.
Until next time, that’s today’s baseball.
Aaron M. Streett is an associate in the Houston office of Baker Botts LLP, and a member of the firm’s Appellate and Supreme Court Practice. The statements, opinions, and subtle emotions expressed herein do not necessarily represent those of Baker Botts LLP; to the extent they are correct, insightful, and not offensive, they most definitely represent the views of the author. Not liable for harm to third parties, no matter how reprehensible.
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The week in review: USSCT Update: PHILLIP MORRIS USA v. WILLIAMS The Court held that the Due Process Clause forbids a jury from partially basing a punitive-damages award upon its desire to punish the defendant for harming persons who are [Read More]
Tracked on Feb 23, 2007 9:37:46 AM