SUMMARY OF BUSINESS-RELATED CASES FROM wbr THE SUPREM

SUMMARY OF BUSINESS-RELATED CASES FROM THE SUPREME COURT OCTOBER TERM 2005 TABLE OF CONTENTS IBP, Inc. v. Alvarez ......................................................................................................................1 Tum v. Barber Foods, Inc. .............................................................................................................1 Lincoln Property Co., et al. v. Roche, et ux. ...................................................................................3 Martin, et ux v. Franklin Capital Corp. .......................................................................................5 Volvo Trucks North America, Inc. v. Reeder-Simco GMC, Inc. ...................................................7 Wachovia Bank, N.A. v. Schmidt.................................................................................................9 Wisconsin Right to Life, Inc. v. Federal Election Commission ......................................................11 Buckeye Check Cashing, Inc. v. Cardegna, et al. ..........................................................................13 Ash, et al. v. Tyson Foods, Inc.....................................................................................................15 Domino’s Pizza v. McDonald .....................................................................................................16 Arbaugh v. Y & H Corp., dba The Moonlight Cafe...................................................................18 Texaco, Inc. v. Dagher .................................................................................................................20 Shell Oil Co. v. Dagher ...............................................................................................................20 Illinois Tool Works, Inc. v. Independent Ink, Inc. ........................................................................22 Merrill Lynch, Pierce, Fenner & Smith, Inc. v. Dabit .................................................................24 DaimlerChrysler Corp., et al. v. Cuno..........................................................................................26 Wilkins, Tax Commissioner for State of Ohio, et al. v. Cuno et al...............................................26 Sereboff, et ux. v. Mid Atlantic Medical Services, Inc...................................................................28 S.D. Warren Co. v. Maine Bd. Of Env. Protection .....................................................................30 eBay v. MercExchange, L.L.C. ...................................................................................................32 Anza, et al. v. Ideal Steel Supply Corp. .......................................................................................34 Mohawk Industries, Inc. v. Williams, et al...................................................................................36 Kircher, et al v. Putnam Funds Trust, et al. .................................................................................37 Howard Delivery Service, Inc. v. Zurich American Insurance Co..................................................39 Empire Healthchoice Assurance, Inc. v. McVeigh........................................................................41 Rapanos v. United States.............................................................................................................43 Carabell v. United States Army Corps of Engineers.....................................................................43 ii IBP, Inc. v. Alvarez Tum v. Barber Foods, Inc. FAIR LABOR STANDARDS ACT Nos. 03-1238 & 04-66. Argued October 3, 2005; Decided November 8, 2005. Carter G. Phillips for IBP, Inc.; Thomas C. Goldstein for Tum Does walking that occurs between compensable clothes-changing time and time employees arrive at or depart from their actual work stations constitute non-compensable “walking ... to and from the actual place of performance of the principal activity” within meaning of Section 4(a)? [IBP, Inc. v. Alvarez] (1) Is time employees must spend walking to and from stations where required safety equipment is distributed compensable under the Fair Labor Standards Act, as amended by Portal-to-Portal Act, 29 U.S.C. §§ 216(b), 254(a)? (2) Do employees have right to compensation for time they must spend waiting at required safety equipment distribution stations? [Tum v. Barber Foods, Inc.] • IBP, Inc., a meatpacker with a plant in the state of Washington, employs a number of production workers who are required to wear protective gear when they use knives. This protective gear is stored in company locker rooms, which are located away from the production floor. IBP, Inc. compensated its employees from the cutting of the first piece of meat to the bagging of the last piece of meat. IBP, Inc. did not compensate them for the time the employees took to travel to and from the changing room and for the time the employees spent putting on, and taking off, the protective gear. Employees of IBP, Inc. filed a class action seeking backpay for time spent “donning and doffing” protective gear and for time walking between the changing rooms and the production floor. Finding that the donning and doffing of protective gear was “integral and indispensable” to the work of the employees, the district court awarded backpay and the Ninth Circuit affirmed. Barber Foods, Inc. operates a poultry processing plant in the state of Maine and likewise denied its workers compensation for time spent changing into, and out of, protective gear and for time spent walking between the changing room and the production floor. Employees of Barber Foods, Inc. sought backpay for similar activities as the IBP plaintiffs but also sought backpay for time spent waiting to put on and remove the protective gear. Both the district court and the court of appeals agreed with Barber and found that none of the activities were compensable. • • • • Time spent walking between changing and production areas is compensable under the Fair Labor Standards Act. Time spent waiting to change out of work gear is also compensable. However, time spent waiting to change into protective gear at the start of the workday is not compensable. Stevens, J. delivered the opinion for a unanimous Court. 1 • • “Neither ‘work’ nor ‘workweek’ is defined in the” Fair Labor Standards Act. “Our early cases defined these terms broadly.” However, Congress, in 1947, enacted the Portal-to-Portal Act which “narrowed the coverage of the FLSA by excepting two activities that had been treated as compensable under our cases: walking on the employer’s premises to and from the actual place of performance of the principal activity of the employee, and activities that are ‘preliminary’ or ‘postliminary’ to that principal activity.” In Steiner v. Mitchell, the Court held “that the term ‘principal activity or activities’ in Section 4 of the Portal-to-Portal Act embraces all activities which are an integral and indispensable part of the principal activities[.]” [citations and internal quotation marks omitted] “IBP, Inc. has not asked us to overrule Steiner. Considerations of stare decisis are particularly forceful in the area of statutory construction, especially when a unanimous interpretation of a statute has been accepted as settled law for several decades.” “[W]e conclude that the locker rooms where the special safety gear is donned and doffed are the relevant ‘place of performance’ of the principal activity that the employee was employed to perform within the meaning of the [Portal-to-Portal Act]. Walking to that place before starting work is excluded from FLSA coverage, but the statutory text does not exclude walking from that place to another area within the plant immediately after the workday has commenced.” “[W]e …do not agree … that the predonning waiting time at issue in [Tum v. Barber Foods, Inc.] is a ‘principle activity’ under” the Portal-to-Portal Act. “[T]he fact that certain preshift activities are necessary for employees to engage in their principal activities does not mean that those preshift activities are ‘integral and indispensable’ to a ‘principal activity’ under Steiner.” • • • • AMICI CURIAE National Chicken Council, et al. United States AFL-CIO National Employment Lawyers Association, et al. Chamber of Commerce of the United States of America, et al. American Meat Institute 2 Lincoln Property Co., et al. v. Roche, et ux. No 04-712. Argued October 11, 2005; Decided November 29, 2005. DIVERSITY JURISDICTION David C. Frederick for Lincoln Property Co.; Gregory P. Joseph for Christophe Roche. (1) Can entity not named or joined as defendant in lawsuit nonetheless be deemed “real party in interest” to destroy complete diversity of citizenship in case removed from state court under 28 U.S.C. § 1441(b)? (2) Is limited partnership's citizenship for diversity jurisdiction purposes determined not by citizenship of its partners but by whether its business activities establish “very close nexus” with state? • • • • • Complaining about the presence of toxic mold in their apartment, Plaintiffs, Christophe and Juanita Roche filed two complaints (similar in relevant respects) in Virginia state court. The Roches named Lincoln Property Company, the developer and manager of their apartment complex, and two other businesses Lincoln, a Texas corporation, removed the case to federal court because there was complete diversity of citizenship between the Roches and the named defendants. After the district court rejected Roches’ effort to remand the case to state court, the Fourth Circuit reversed and ordered remand. The Fourth Circuit pointed out that an unnamed Virginia subsidiary was likely “the real and substantial party in interest” and that “Lincoln … had not demonstrated the nonexistence of the Virginia subpartnership[.]” (internal quotation marks omitted) Defendants may remove an action on the basis of diversity of citizenship if there is complete diversity between all named plaintiffs and all named defendants, and no defendant is a citizen of the forum state. It is not incumbent on the named defendants to negate the existence of a potential defendant whose presence in the action would destroy diversity. Ginsburg, J., delivered the opinion for a unanimous Court. • • “[T]he existence of complete diversity between the Roches and Lincoln is not in doubt.” Id. at 6. “The Court of Appeals correctly identified Lincoln as a proper party to the action, but it erred in insisting that some other entity affiliated with Lincoln should have been joined as a codefendant, and that it was Lincoln’s obligation to name that entity and show that its joinder would not enjoin diversity.” “Congress surely has not directed that a corporation, for diversity-of-citizenship purposes, shall be deemed to have acquired the citizenship of all or any of its affiliates.” • 3 AMICI CURIAE Real Estate Roundtable, et al. Washington Legal Foundation 4 Martin, et ux v. Franklin Capital Corp. REMOVAL AND ATTORNEYS’ FEES No. 04-1140. Argued November 8, 2005; Decided December 7, 2005. Samuel H. Heldman for Gerald T. Martin; Jan T. Chilton for Franklin Capital Corp. What legal standard governs decision on whether to award fees and expenses under 28 U.S.C. § 1447(c) upon remanding removed case to state court? • • Plaintiffs Gerald and Juana Martin filed a putative class action complaint in state court against defendant Franklin Capital Corporation. Franklin removed the case to federal court, alleging complete diversity of citizenship and that the $75,000 amount-in-controversy requirement was satisfied, relying on the aggregation of punitive damages and attorneys’ fees sought. Martins sought to remand. District court denied remand and then later dismissed case. On appeal, Tenth Circuit indicated that punitive damages and attorneys’ fees could not be aggregated for the purposes of satisfying the amount-in-controversy requirement and ordered remand of the matter to state court. Martin moved for attorneys’ fees pursuant to 28 U.S.C. § 1447(c), which the district court rejected, because Franklin had reasonable grounds for removal. The Tenth Circuit affirmed. Section 1447(c) of Title 28 provides that “[a]n order remanding the case may require payment of just costs and any actual expenses, including attorney fees, incurred as a result of the removal.” Prior to the decision in this case, some circuits had provided for an automatic award of attorneys’ fees where removal was improper even if the defendant had reasonable grounds for removal. • • • • • Absent unusual circumstances, attorneys’ fees should not be awarded under § 1447(c) when the removing party has an objectively reasonable basis for removal. Roberts, C.J., delivered the opinion for a unanimous Court. • Unlike civil rights plaintiffs who are awarded attorneys’ fees when they prevail, absent exceptional circumstances, “plaintiffs do not serve as private attorneys general when they secure a remand to state court, nor is it reasonable to view the defendants as violators of federal law. To the contrary, the removal statute grants defendants a right to a federal forum.” “[T]here is no reason to suppose Congress meant to confer a right to remove, while at the same time discouraging its exercise [by imposing attorneys’ fees as a matter of course] in all but the obvious cases.” • 5 • “The appropriate test for awarding fees under § 1447(c) should recognize the desire to deter removals sought for the purpose of prolonging litigation and imposing costs on the opposing party, while not undermining Congress’ basic decision to afford defendants a right to remove as a general matter, when the statutory criteria are satisfied.” AMICI CURIAE United States Product Liability Advisory Council, Inc. 6 Volvo Trucks North America, Inc. v. Reeder-Simco GMC, Inc. No. 04-905. Argued October 31, 2005; Decided January 10, 2006. ROBINSON-PATMAN ACT Roy T. Englert for Volvo Trucks North America, Inc.; Joe D. Byars, Jr. for Reeder-Simco GMC, Inc. (1) May unaccepted offer that does not lead to purchase--so that there is not “discriminat[ion] ... between different purchasers” as statutory language contemplates--be basis for liability under Robinson-Patman Act? (2) Does Robinson-Patman Act permit recovery of damages by disfavored purchaser that does lose sales or profits to competitor that does not purchase from defendant, but does not lose sales or profits to any purchaser that “receives the benefit of” defendant's price discrimination? • Reeder-Simco GMC, Inc. is an authorized dealer of heavy-duty trucks manufactured by Volvo. As an authorized dealer, Reeder-Simco, from time to time, sought concessions off the wholesale price, which Volvo considered on a case-by-case basis. Reeder-Simco filed the instant lawsuit, claiming that Volvo engaged in price discrimination in violation of the Robinson-Patman Act because it generally granted more favorable price concessions to other authorized dealers. However, Reeder-Simco did not adduce evidence of an authorized dealer obtaining a more favorable concession as to a particular customer for which both dealers competed. A jury awarded damages, finding that the general price discrimination harmed Reeder-Simco and the Eighth Circuit affirmed. • • A manufacturer may not be held liable for secondary-line price discrimination under the Robinson-Patman Act in the absence of a showing that the manufacturer discriminated between dealers competing to resell its product to the same retail customer. Ginsburg, J. delivered the majority opinion. • “To establish [a violation of the Robinson-Patman Act where the defendant discriminates on the basis of price among its customers,] Reeder had to show that (1) the relevant Volvo truck sales were made in interstate commerce; (2) the trucks were of ‘like grade and quality’; (3) Volvo ‘discriminate[d] in price between’ Reeder and another purchaser of Volvo trucks; and (4) ‘the effect of such discrimination may be … to injure, destroy, or prevent competition’ to the advantage of a favored purchaser.” [citation omitted] “Absent actual competition with a favored Volvo dealer, however, Reeder cannot establish the competitive injury required under the Act.” “Both the purchase-to-purchase and the offer-to-purchase comparisons fall short, for in none of the discrete instances on which Reeder relied did Reeder compete with beneficiaries of the alleged discrimination for the same customer.” • • 7 • • “Nor did Reeder even attempt to show that the compared dealers were consistently favored vis-à-vis Reeder. “Reeder simply paired occasions on which it competed with non-Volvo dealers for a sale to Customer A with instances in which other Volvo dealers competed with non-Volvo dealers for a sale to Customer B.” “Interbrand competition, our opinions affirm, is the primary concern of antitrust law[.] The Robinson-Patman Act signals no large departure from that main concern. Even if the Act’s text could be construed in the manner urged by Reeder,[,] we would resist interpretation geared more to the protection of existing competitors than to the stimulation of competition.” [citation and internal quotation marks omitted] • Stevens, J. dissented, joined by Thomas, J. • “Today, … by adopting a novel, transaction-specific concept of competition, the Court eliminates that statutory protection in all but those rare situations which a prospective purchaser is negotiating with two Volvo dealers at the same time.” AMICI CURIAE Truck Manufacturers Association, et al. National Association of State Directors of Pupil Transportation Washington Legal Foundation National Electrical Manufacturers Association American Petroleum Institute National Automobile Dealers Association North American Equipment Dealers Association, et al. 8 Wachovia Bank, N.A. v. Schmidt DIVERSITY JURISDICTION No. 04-1186. Argued November 28, 2005; Decided January 17, 2006. Andrew L. Frey for Wachovia Bank; James R. Gilreath for Daniel Schmidt 1) For purposes of federal diversity jurisdiction, is national banking association “located” in, and thus deemed to be citizen of, every state in which association maintains branch, as held by court below, or instead has more limited citizenship, as held by three other courts of appeals? (2) Is word “located,” as used in 28 U.S.C. § 1348, ambiguous? • • Defendant Wachovia Bank is a national banking association with its main office in North Carolina and numerous branch offices across the county. Plaintiff Daniel G. Schmidt and others, South Carolina citizens, sued Wachovia in South Carolina state court, alleging that Wachovia fraudulently induced them to participate in an illegal tax shelter. Wachovia petitioned the federal district court to compel arbitration (as allegedly provided for under the relevant agreement). District court denied petition on the merits. Fourth Circuit determined that diversity jurisdiction was not present, as Wachovia operated branch offices within the state of South Carolina. Section 1348 of Title 28 controls whether the citizenship of national banking associations for diversity jurisdiction purposes and provides that “[a]ll national banking associations shall, for the purpose of all other actions by or against them, be deemed citizens of the States in which they are respectively located.” • • • A national bank, for diversity jurisdiction purposes, is a citizen of the State in which its main office, as set forth in its articles of association, is located. Ginsburg, J. delivered the opinion for a unanimous Court (sans Thomas, J.) • • “[L]ocated … is a chameleon word; its meaning depends on the context in and purpose for which it is used.” “Concerning access to the federal court system § 1348 deems national banks ‘citizens of the States in which they are respectively located.’ There is no reason to suppose Congress used those words to effect a radical departure from the norm. An individual who resides in more than one State is regarded for purposes of federal [diversity] jurisdiction, as a citizen of but one state. … Similarly, a corporation’s citizenship derives, for diversity jurisdiction purposes, from its State of incorporation and principal place of business. It is not deemed a citizen of every State in which it conducts business or is otherwise amenable to personal jurisdiction.” 9 • “The … Fourth Circuit decision rendered national banks singularly disfavored corporate bodies with regard to their access to federal courts. The language of § 1348 does not mandate that incongruous outcome, nor does this Court’s precedent.” AMICI CURIAE Clearing House Association LLC JP Morgan Chase Bank, NA American Bankers Association 10 Wisconsin Right to Life, Inc. v. Federal Election Commission GRASSROOTS LOBBYING AND THE FIRST AMENDMENT No. 04-1581. Argued January 17, 2006; Decided January 23, 2006. James Bopp, Jr. for Wisconsin Right to Life, Inc.; Paul D. Clement for Federal Election Commission (1) Are as-applied challenges permitted to prohibition on corporate disbursements for electioneering communications at 2 U.S.C. § 441b after McConnell v. FEC? (2) If so, is prohibition on electioneering communications unconstitutional as applied to facts of this case, and particularly (a) three particular grass-roots lobbying broadcast communications sponsored by Wisconsin Right to Life Inc., or (b) grass-roots lobbying communications generally, as carefully defined, with any communications to be funded either from general corporate account or, alternatively, from separate bank account to which only qualified individuals may donate, as defined in 2 U.S.C. § 434(f)(2)(E)? • In 2003, the Supreme Court in McConnell v. F.E.C. upheld as constitutional the electioneering communications restrictions in the Bipartisan Campaign Reform Act. These electioneering communications restrictions provided that no advertisements specifically identifying a federal candidate could be aired within thirty days of a primary election of sixty days of an election. In 2004, while Senator Russell Feingold was running for reelection in Wisconsin (though his counterpart Senator Herb Kohl was not), Wisconsin Right to Life sought to air ads challenging viewers to contact their Senators to urge them to oppose judicial filibusters. Contending that judicial filibusters were, at the time, a live legislative issue, Wisconsin Right to Life sought an injunction against the Federal Election Commission enforcing the BCRA’s electioneering communications restrictions. Wisconsin Right to Life argued that grassroots lobbying was a protected First Amendment right that could not be infringed by the government. Persuaded by the Federal Election Commission, the three-judge district court refused the sought injunction, finding that McConnell v. F.E.C. had resolved for all time the issue of BCRA’s constitutionality. • • • McConnell v. FEC did not resolve all constitutional challenges to the Bipartisan Campaign Reform Act of 2002. Per curiam decision • “We agree with [Wisconsin Right to Life] that the District Court misinterpreted the relevance of our [footnote] ‘uphold[ing] all applications of the primary definition’ of electioneering communications. … In upholding § 203 against a facial challenge, we did not purport to resolve future as-applied challenges.” “We …vacate the judgment and remand the case for the District Court to consider the merits of WRTL’s as-applied challenge in the first instance.” • 11 AMICI CURIAE American Civil Liberties Union Mitch McConnell Alliance for Justice Citizens United and Citizens United Foundation Chamber of Commerce of the United States of America Coalition of Public Charities AFL-CIO Center for Competitive Politics, et al. Norman Ornstein, Thomas Mann, Anthony Corrado Professor Francis R. Hill Douglas L. Bailey AARP, et al. John McCain, Christopher Shays, Martin Meehan 12 Buckeye Check Cashing, Inc. v. Cardegna, et al. No. 04-1264. Argued November 29, 2005; Decided February 21, 2006. ARBITRATION Christopher Landau for Buckeye Check Cashing, Inc; F. Paul Bland, Jr. for John Cardegna Did Florida Supreme Court err by holding, consistent with Alabama Supreme Court but in direct conflict with six federal courts of appeals, that Federal Arbitration Act allows party to avoid arbitration by claiming that underlying contract containing arbitration clause (but not arbitration clause itself) is void for illegality? • John Cardegna and Donna Reuter entered into a series of deferred payment agreements with Buckeye Check Cashing where Buckeye Check Cashing dispensed cash to Cardegna and Reuter in exchange for a personal check in the amount of the cash plus a finance charge. The signed agreements included a broad arbitration provision covering all disputes related to the transactions at issue. Cardegna and Reuter filed a putative class action in Florida state court, charging that Buckeye Check Cashing violated Florida’s usury laws. Buckeye Check Cashing moved to compel arbitration. The Florida trial court denied arbitration, finding that the plaintiffs challenged the contract as a whole as illegal, so the arbitration clause itself would also be without force. Relying on the U.S. Supreme Court’s decision in Prima Paint v. Flood & Conklin Mfg. Co., the intermediate appellate court reversed, finding that the challenge did not go specifically to the arbitration clause, so the dispute had to be resolved in the first instance by an arbitrator. The Florida Supreme Court reversed and ordered that the matter be resolved by a judge, distinguishing Prima Paint on the grounds that the contract in that case involved a so-called voidable contract rather than the assertedly void contract at issue in this case. A voidable contract is a contract which can be ratified by the parties and therefore made valid, while a void contract cannot be rendered valid through action by the parties. • • • Regardless of whether it is brought in federal or state court, a challenge to the validity of a contract as a whole, and not specifically to the arbitration clause within it, must go to the arbitrator, not the court. Scalia, J. delivered the majority opinion (sans Alito, J.) • “To overcome judicial resistance to arbitration, Congress enacted the Federal Arbitration Act[.] Section 2 embodies the national policy favoring arbitration and places arbitration agreement on equal footing with all other contracts[.]” “[A]s a matter of substantive federal arbitration law, an arbitration provision is severable from the remainder of the contract. [U]nless the challenge is to the arbitration clause itself, the issue of the contract’s validity is considered by the arbitrator in the first instance. [T]his arbitration law applies in state as well as federal courts.” 13 • • The Prima Paint Court was not concerned with the distinction between void and voidable contracts as it resolved the matter “without discussing whether the challenge at issue would have rendered the contract void or voidable.” “It is true … that the Prima Paint rule permits a court to enforce an arbitration agreement in a contract that the arbitrator later finds to be void. But it is equally true that respondents’ approach permits a court to deny effect to an arbitration provision in a contract that the court later finds to be perfectly enforceable. Prima Paint resolved this conundrum—and resolved it in favor of the separate enforceability of arbitration provisions.” • Thomas, J. dissented. • “I remain of the view that the Federal Arbitration Act does not apply to proceedings in state court.” AMICI CURIAE Chamber of Commerce of the United States of America, et al. Community Financial Services Association Florida Bankers Association & American Bankers Association Theis Research, Inc. Financial Services Centers of America, Inc., et al. Samuel Glazer National Association of Consumer Advocates, et al. AARP University of Wisconsin Law Professors Law Professors Robert W. Gordon, et al. Florida, et al. 14 Ash, et al. v. Tyson Foods, Inc. No. 05-379. Granted, Vacated & Remanded February 21, 2006. Eric Schnapper for Ash; Brian R. Bostick for Tyson Foods, Inc. • TITLE VII Anthony Ash and John Hithon, African-American employees of Tyson Foods, Inc., sued Tyson, alleging that it had discriminated on the basis of race in failing to promote them in lieu of two white males. In relevant part, the complaint relied on two pieces of evidence: (1) that the plant manager had used the term “boy” in reference to the plaintiffs; and (2) that the plaintiffs had superior qualifications to those of the promoted employees. A jury awarded Ash and Hithon damages but the district court entered judgment as a matter of law in favor of Tyson. The Eleventh Circuit affirmed the vacating of the jury’s verdict, but ordered a new trial for Hithon. The court indicated that use of the word “boy” without a racial identifier could not be the basis for a claim of discrimination. In addition, the Eleventh Circuit indicated that for qualifications evidence to be relevant, the disparity had to “jump off the page and slap you in the face.” • • The use of the term “boy” in referring to an employee need not have a specific racial identifier, such as “white” or “black”, to be evidence of discriminatory purpose. In addition, evidence of disparity of qualifications may suffice, at least in some circumstances, to show pretext. Per Curiam • “Although it is true that the … word [‘boy’] will not always be evidence of racial animus, it does not follow that the term, standing alone, is always benign. The speaker’s meaning may depend on various factors including context, inflection, tone of voice, local custom, and historical usage. Insofar as the Court of Appeals held that modifiers or qualifications are necessary in all instances to render the disputed term probative of bias, the court’s decision is erroneous.” “The visual image of words jumping off the page to slap you (presumably a court) in the face is unhelpful and imprecise as an elaboration of the standard for inferring pretext from superior qualifications.” After describing the circuit split on the proper standard, the court notes that “[t]his is not the occasion to define more precisely what standard should govern pretext claims based on superior qualifications. … It suffices to say here that some formulation other than the test the Court of Appeals articulated in this case would better ensure that trial courts reach consistent results.” • • 15 Domino’s Pizza v. McDonald No. 04-593. Argued December 6, 2005; Decided February 22, 2006. Maureen E. Mahoney for Domino’s Pizza; Allen Lichtenstein for John McDonald SECTION 1981 In absence of contractual relationship with defendant, are allegations of personal injuries alone sufficient to confer standing on plaintiff pursuant to 42 U.S.C. § 1981? • • John McDonald, an African-American, owned and operated JWM Investments, Inc., which entered into a number of contracts with Domino’s Pizza, Inc. Domino’s Pizza allegedly breached those contracts. An agent for Domino’s informed McDonald that she did not “like dealing with you people anyway[,]” without disclosing what “you people” meant. In the course of JWM’s ensuing bankruptcy, Domino’s and the bankruptcy trustee settled JWM’s breach of contract claim. McDonald filed a complaint pursuant to Section 1981 of the Civil Rights Act, arguing that Domino’s breached its contract with JWM because of his race. Section 1981 provides that “[a]ll persons within the jurisdiction of the United States” have the equal right to “make and enforce contracts,” regardless of race. The district court dismissed the complaint because McDonald was not a party to the contract. The Ninth Circuit reversed, permitting McDonald to press his suit. • • • • A plaintiff cannot state a § 1981 claim unless he has (or would have) rights under the existing (or proposed) contract that he wishes “to make and enforce.” Scalia, J., delivered the opinion of the Court (sans Alito, J.). • “The right to ‘make contracts’ guaranteed by the statute was not the insignificant right to act as an agent for someone else’s contracting—any more than it was the insignificant right to act as amanuensis in writing out the agreement, and thus to ‘make’ the contract in that sense. Rather, it was the right—denied in some States to blacks, as it was denied at common law to children—to give and receive contractual rights on one’s own behalf.” “Unless [McDonald’s] reading of the statute prevails, he warns, many discriminatory acts will go unpunished. … The most important response, however, is that nothing in the text of § 1981 suggests that it was meant to provide an omnibus remedy for all racial injustice. If so, it would have been limited to situations involving contracts. Trying to make it a cure-all not only goes beyond any expression of congressional intent but would produce satellite § 1981 litigation of immense scope.” • 16 AMICI CURIAE Pacific Legal Foundation Equal Employment Advisory Council & Chamber of Commerce of the United States of America, et al. Alabama, et al. New York, et al. Lawyers Committee for Civil Rights Under Law, et al. 17 Arbaugh v. Y & H Corp., dba The Moonlight Cafe No. 04-944. Argued January 11, 2006; Decided February 22, 2006. Jeffrey A. Schwartz for Arbaugh; Brett D. Prendergast for Y&H Corp. TITLE VII Does provision of Title VII of 1964 Civil Rights Act that bans employment discrimination only by employers that have 15 or more employees limit subject matter jurisdiction of federal courts, or does it only raise issue going to merits of Title VII claim? • • • Title VII’s proscription of discrimination applies to employers who have “fifteen or more employees.” 42 U.S.C. § 2000e(b) Jennifer Arbaugh sued Y & H Corp. alleging sexual harassment in violation of Title VII and obtained a jury verdict in her favor. After the judgment was entered, Y & H Corp moved to dismiss the case, contending that it employed less than fifteen employees and the failure to satisfy this requirement stripped the court of jurisdiction over the matter. The district court agreed and dismissed the case. Arbaugh appealed, contending that the fifteen employee requirement was not jurisdictional, but rather part of the substantive claim. Therefore, Y & H Corp.’s failure to raise the issue at the appropriate time constituted a waiver. The Fifth Circuit disagreed and affirmed. • Title VII’s numerical threshold does not circumscribe federal court subject-matter jurisdiction. Ginsburg, J., delivered the opinion of the Court (sans Alito, J.). • • “Jurisdiction, this Court has observed, is a word of many, too many meanings. This Court, no less than other courts, has sometimes been profligate in its use of the term.” “[S]ubject-matter jurisdiction, because it involves the court’s power to hear a case, can never be forfeited or waived. Moreover, courts, including this Court, have an independent obligation to determine whether subject-matter jurisdiction exists, even in the absence of a challenge from any party.” [citations and internal quotation marks omitted] “Given the unfairness and waste of judicial resources entailed in tying the employeenumerosity requirement to subject-matter jurisdiction, we think it the sounder course to refrain from constricting … jurisdictional provision[s] and to leave the ball in Congress’ court. If the Legislature clearly states that a threshold limitation on a statute’s scope shall count as jurisdictional, then courts and litigants will be duly instructed and will not be left to wrestle with the issue.” • AMICI CURIAE United States 18 International Municipal Lawyers Association Alabama, et al. Chamber of Commerce of the United States of America, et al. 19 Texaco, Inc. v. Dagher Shell Oil Co. v. Dagher Nos. 04-805 & 04-814. Argued January 10, 2006; Decided February 28, 2006. Glen F. Nager for Texaco & Shell; Joseph M. Alioto for Dagher ANTITRUST Is it per se illegal concerted action under Section 1 of Sherman Act for economically integrated joint venture to set selling price of its own products? • • • • Texaco and Shell entered into a joint venture, Equilon, which combined their efforts to refine and sell gasoline in the Western United States. Equilon set a single price for both Texaco and Shell gasoline, though separately branding them. Texaco and Shell service station owners sued Texaco and Shell, contending that the two companies had engaged in price-fixing in violation of the Sherman Antitrust Act. The antitrust laws generally apply two modes of inquiry to challenged conduct: (1) a per se rule which applies to the most odious anti-competitive conduct, such as price-fixing; or (2) rule of reason analysis which weighs the pro-competitive benefits against the anticompetitive costs in light of market power. The plaintiffs in this case argued that Texaco and Shell engaged in price fixing, so the per se rule applied and therefore no searching inquiry was necessary. The plaintiffs did not press a rule of reason claim. Relying on the joint venture nature of the conduct, the district court determined that a rule of reason analysis applied to this conduct and dismissed the case. The Ninth Circuit reversed, concluding that no exception to the per se rule against price fixing existed. • • It is not per se illegal under § 1 of the Sherman Act for a lawful, economically integrated joint venture to set the prices at which it sells its products. Thomas, J., delivered the opinion of the Court (sans Alito, J.) • “As a single entity, a joint venture, like any other firm, must have the discretion to determine the prices of the products that its sells, including the discretion to sell a product under two different brands at a single, unified price.” “If Equilon’s price unification policy is anticompetitive, then respondents should have challenged it pursuant to the rule of reason. But it would be inconsistent with this Court’s antitrust precedents to condemn the internal pricing decisions of a legitimate joint venture as per se unlawful. • 20 AMICI CURIAE Washington Legal Foundation, et al. Visa, U.S.A., Inc., et al. Antitrust Scholars Chamber of Commerce of the United States of America et al. United States American Bankers Association, et al. Parker Hannifin Corporation Northwest Ohio Physician Specialist Cooperative, LLC American Petroleum Institute Verizon Communications, Inc. Retail Industry Leaders Association & The Food Marketing Institute American Antitrust Institute 21 Illinois Tool Works, Inc. v. Independent Ink, Inc. No. 04-1329. Argued November 29, 2005; Decided March 1, 2006. PATENT/ANTITRUST Andrew J. Pincus for Illinois Tool Works, Inc., et al.; Kathleen M. Sullivan for Independent Ink, Inc. In action under Section 1 of Sherman Act, 15 U.S.C. § 1, alleging that defendant engaged in unlawful tying by conditioning patent license on licensee's purchase of non-patented good, must plaintiff prove as part of its affirmative case that defendant possessed market power in relevant market for tying product, or is market power instead presumed based solely on existence of patent on tying product? • Illinois Tools Works, Inc. sells printing systems which include a patented printhead. Purchasers of these printing systems must also purchase unpatented ink from Illinois Tool Works and agree not to refill their printheads with ink from any other seller of ink. Independent Ink, Inc. filed the instant lawsuit, contending that such an arrangement violated the Sherman Antitrust Act in that it tied a product in which Illinois Tool Works had market power (printheads) to a product in which it did not (ink). Independent Ink asserted that this use of market power was a violation of Section 2’s proscription against monopolization. As proof of market power over the printhead market, Independent Ink relied only on the patent itself and did not submit market analyses. The district court rejected this argument, finding that the fact of a patent does not itself prove market power. The Federal Circuit reversed, relying on a half-century old Supreme Court case, International Salt Co. v. United States to find that patents themselves conferred sufficient market power to invoke the tying doctrine. • • • Because a patent does not necessarily confer market power upon the patentee in all cases involving a tying arrangement, the plaintiff must prove that the defendant has market power in the tying product. Stevens, J., delivered the opinion for the Court (sans Alito, J.) • “Over the years, however, this Court’s strong disapproval of tying arrangements has substantially diminished. Rather than relying on assumptions, in its more recent opinions, the Court has required a showing of market power in the tying product.” “While some [tying] arrangements are still unlawful, such as those that are the product of a true monopoly or a marketwide conspiracy, that conclusion must be supported by proof of power in the relevant market rather than by a mere presumption thereof.” “[T]he vast majority of academic literature recognizes that a patent does not necessarily confer market power. Similarly, while price discrimination may provide evidence of market power, particularly if buttressed by evidence that the patentee has charged an above-market • • 22 price for the tied package, it is generally recognized that it also occurs in fully competitive markets[.]” • “Congress, the antitrust enforcement agencies, and most economists have all reached the conclusion that a patent does not necessarily confer market power upon the patentee. Today, we reach the same conclusion[.]” AMICI CURIAE American Bar Association Pfizer, Inc. Intellectual Property Owners Association Intellectual Property Law Association of Chicago United States Verizon Communications New York Intellectual Property Law Association Houston Intellectual Property Law Association Intellectual Property Owners Association American Intellectual Property Law Association Bar Association of the District of Columbia – Patent Trademark & Copyright Section Washington Legal Foundation Motion Picture Association of America, Inc. National Association of Theatre Owners and Video Software Dealers Association Barry Nalebuff, Ian Ayres, Lawrence Sullivan F.M. Scherer District of Columbia, et al. International Imaging Technology Council, et al. AARP, et al. American Antitrust Institute, et al. 23 Merrill Lynch, Pierce, Fenner & Smith, Inc. v. Dabit SECURITIES LITIGATION UNIFORM STANDARDS ACT No. 04-1371. Argued January 18, 2006; Decided March 21, 2006. Jay B. Kasner for Merrill Lynch, Pierce, Fenner & Smith, Inc.; David C. Frederick for Shadi Dabit Does SLUSA preempt state law class action claims based upon allegedly fraudulent statements or omissions brought solely on behalf of persons who were induced thereby to hold or retain (and not purchase or sell) securities? • Shadi Dabit, a former broker with Merrill Lynch, filed a private securities fraud action based on state law, which contended that Merrill Lynch fraudulently manipulated the prices of stocks, causing him to hold overvalued securities. Merrill Lynch sought to dismiss this claim, arguing that it was preempted by the Securities Litigation Uniform Standards Act (“SLUSA”), which preempted state law securities fraud claims in favor of claims based on federal law. The district court agreed and Dabit appealed. The Second Circuit reversed, finding that SLUSA merely preempted state law claims which were in connection with the “purchase or sale” of securities. Because the instant case involved the mere holding of overvalued securities, the Court concluded that the case could proceed. • • The background, text, and purpose of SLUSA’s pre-emption provision demonstrate that SLUSA pre-empts state-law holder class action claims of the kind Dabit alleges. Stevens, J., delivered the opinion of the Court (sans Alito, J.) • • “The magnitude of the federal interest in protecting the integrity and efficient operation of the market for nationally traded securities cannot be overstated.” “The presumption that Congress envisioned a broad construction follows not only from ordinary principles of statutory construction but also from the particular concerns that culminated in SLUSA’s enactment. A narrow reading of the statute would undercut the effectiveness of the 1995 Reform Act and thus run contrary to SLUSA’s stated purpose … ‘to prevent certain State private securities class action lawsuits from being used to frustrate the objectives’ of the 1995 Act.” “SLUSA does not actually pre-empt any state cause of action. It simply denies plaintiffs the right to use the class action device to vindicate certain claims. The Act does not deny any individual plaintiff, or indeed any group of fewer than 50 plaintiffs, the right to enforce any state-law cause of action that may exist.” “[This case] is brought by holders instead of purchasers or sellers. For purposes of SLUSA pre-emption, that distinction is irrelevant; the identity of the plaintiffs does not determine whether the complaint alleges fraud ‘in connection with the purchase or sale’ of securities. The misconduct of which [Dabit] complains here—fraudulent manipulation of stock 24 • • prices—unquestionably qualifies as fraud ‘in connection with the purchase or sale’ of securities as the phrase is defined” in the Court’s precedents.” AMICI CURIAE Securities Industry Association, et al. United States Chamber of Commerce of the United States of America Investment Company Institute Lord, Abbett & Co. & Vance Management Washington Legal Foundation Pacific Life Insurance Company National Association of Shareholders and Consumer Attorneys & AARP IJG Investments Limited Partnership & Iriys Guy Phillip Goldstein & Bulldog Investors New York, et al. 25 DaimlerChrysler Corp., et al. v. Cuno Wilkins, Tax Commissioner for State of Ohio, et al. v. Cuno et al No. 04-1704. Argued March 1, 2006; Decided May 15, 2006. INVESTMENT TAX CREDIT Douglas R. Cole for Tax Commissioner for the State of Ohio; Theodore B. Olson for DaimlerChrysler Corporation, et al.; Peter Enrich for Charlotte Cuno, et al. (1) Does Ohio's investment tax credit, Ohio Revised Code § 5733.33, which seeks to encourage economic development by providing credit to taxpayers who install new manufacturing machinery and equipment in state, violate commerce clause of U.S. Constitution? (2) Do respondents have standing to challenge Ohio's investment tax credit, Ohio Rev. Code Ann. § 5733.33? • Ohio permits a investment tax credit against the state franchise tax for any purchase of manufacturing machinery and equipment installed within the state. In addition, the state permits cities within the state to offer tax waivers to companies which invest in designated locations. DaimlerChrysler expanded an auto assembly plant in the City of Toledo, which waived the property tax. In installing new equipment, DaimlerChrysler was eligible for Ohio’s investment tax credit as well. Plaintiffs, Toledo taxpayers, sued the state of Ohio and DaimlerChrysler, alleging that these tax credits and waivers violated the Commerce Clause. In particular, plaintiffs contended that Ohio impermissibly discriminated against interstate commerce in offering special benefits to companies which located within Ohio. Plaintiffs alleged that these tax benefits reduced funds available to the city and the state and therefore placed a “disproportionate burden” on them. While the case was initially filed in state court, DaimlerChrysler removed it to federal court, which dismissed the case, finding that neither tax benefit violated the Commerce Clause. The Sixth Circuit reversed, finding that the investment tax credit did in fact violate the Commerce Clause in providing benefits to in-state companies which did not inhere to outof-state companies. • • • • • Plaintiffs have not established their standing to challenge the state franchise tax credit. Because they have no standing to challenge that credit, the lower courts erred by considering their claims on the merits. Roberts, C.J., delivered the majority opinion. • “No principle is more fundamental to the judiciary’s proper role in our system of government than the constitutional limitation of federal-court jurisdiction to actual cases or controversies.” [internal quotation marks omitted] 26 • “We have been asked to decide an important question of constitutional law concerning the Commerce Clause. But before we do so, we must find that the question is presented in a ‘case’ or “controversy’ that is, in James Madison’s words, ‘of a Judiciary nature.’” A taxpayer-plaintiff has no right to insist that the government dispose of any increased revenue it might experience as a result of his suit by decreasing his tax liability or bolstering programs that benefit him. “Indeed, because state budgets frequently contain an array of tax and spending provisions, any number of which may be challenged on a variety of bases, affording state taxpayers standing to press such challenges simply because their tax burden gives them an interest in the state treasury would interpose the federal courts as virtually continuing monitors of the wisdom and soundness of state fiscal administration, contrary to the more modest role Article III envisions for federal courts.” [internal quotation marks omitted] • • Ginsburg, J. concurred. • “One can accept, as I do, the nonjusticiability of … federal and state taxpayer suits in federal court without endorsing [other standing] limitations” articulated in the majority opinion. AMICI CURIAE Right Place, Inc. & City of Grand Rapids Tax Executives Institute, Inc. International Union, et al. Tax Foundation Ford Motor Company & General Motors Company Louisville Area Chamber of Commerce, et al. Council on State Taxation, et al Michigan Manufacturers Association Kentucky Chamber of Commerce Nissan of North America, Inc. Michigan Development Corporation Pacific Legal Foundation Ashbrook Center for Public Affairs DirectTV, Inc., et al. Washington Legal Foundation AlphaGenics, Inc., et al. City of Elyria, Ohio, et al. Chamber of Commerce of the United States of America, et al. City of New York Wayne County, Michigan Center on Budget and Policy Priorities Economics and Public Policy Professors Randy Albelda, et al. Fiscal Policy Institute 27 Sereboff, et ux. v. Mid Atlantic Medical Services, Inc. No. 05-260. Argued March 28, 2006; Decided May 15, 2006. ERISA Peter K. Stris for Joel Sereboff, et ux.; Gregory S. Coleman for Mid Atlantic Medical Services, Inc. Can plan fiduciary bring civil action against plan participant to obtain “appropriate equitable relief” under Section 502(a)(3) of ERISA when term of plan requires participant to reimburse medical expenses advanced by plan if participant recovers money from third-party tortfeasor and possesses such payments in identifiable fund? • Marlene and Joel Sereboff are beneficiaries under a health insurance plan sponsored by Marlene Sereboff’s employer and administered by Mid Atlantic Medical Services, Inc. The plan is covered under ERISA. The plan contains an Act of Third Parties provision which “applies when [a beneficiary is] sick or injured as a result of an act or omission of another person or party.” The provision requires the beneficiary to reimburse Mid Atlantic for medical expenses paid with any proceeds recovered from liable parties. Sereboffs were involved in an automobile accident, for which Mid Atlantic paid medical expenses totaling $75,000. Sereboffs recovered $750,000 from third parties which caused the accident. Mid Atlantic commenced this suit to recover its $75,000. Pursuant to ERISA, the district court awarded Mid Atlantic $75,000 less its share of relevant attorneys’ fees. The Fourth Circuit affirmed. • • • Pursuant to the Employee Retirement Income Security Act and where provided for in the contractual agreement, a health insurance plan administrator may sue in federal court for reimbursement of medical expenses where the beneficiary has recovered those medical expenses from third parties. Roberts, C.J., delivered the opinion for a unanimous Court. • “A fiduciary may bring a civil action under § 502(a)(3) of ERISA … to obtain … appropriate equitable relief … to …enforce … the terms of the plan. … The only question [in this case] is whether the relief Mid Atlantic requested from the District Court was ‘equitable’ under” ERISA. “[T]he Acts of Third Parties provision in the Sereboffs’ plan specifically identified a particular fund, distinct from the Sereboffs’ general assets—‘[a]ll recoveries from a third party (whether by lawsuit, settlement, or otherwise)’—and a particular share of that fund to which Mid Atlantic was entitled—”[t]hat portion of the total recovery which is due [Mid Atlantic] for benefits paid.’” [internal quotation marks omitted] “[T]herefore, Mid Atlantic could rely on the familiar rule of equity to collect for the medical bills it paid on the Sereboffs’ behalf. This rule allowed them to follow a portion of the 28 • • recovery into the Sereboffs’ hands as soon as the settlement fund was identified, and impose on that portion a constructive trust or equitable lien.” [citations and internal quotation marks omitted] AMICI CURIAE Association of Trial Lawyers of America Central States, Southeast and Southwest Areas Health and Welfare Fund United States National Association of Subrogation Professionals Southwest Carpenters Health & Welfare Trust National Coordinating Committee for Multiemployer Plans Blue Cross Blue Shield Association Self-Insurance Institute of America, Inc. Society for Human Resources Management & Chamber of Commerce of the United States of America America’s Health Insurance Plans, Inc., et al. 29 S.D. Warren Co. v. Maine Bd. Of Env. Protection No. 04-1527. Argued February 21, 2006; Decided May 15, 2006. CLEAN WATER ACT William J. Kayatta for S.D. Warren Company; G. Steven Rowe for Maine Board of Environmental Protection Does mere flow of water through existing dam constitute “discharge” under Section 401 of CWA, 33 U.S.C. § 1341, despite this court's holding in South Fla. Water Mgmt. Dist. v. Miccosukee Tribe of Indians, 541 U.S. 95, 72 U.S.L.W. 4247 (2004), that discharge requires addition of water from distinct body of water? • In seeking to renew federal licenses with the Federal Energy Regulatory Commission for five dams it maintains on a river in Maine, S. D. Warren Co. applied, under protest, for a water quality certification from the Maine Board of Environmental Protection. S.D. Warren contended that such a certification was unnecessary because each of the dams does not change the content of the water but merely passes the water through turbines and return the unchanged water to the river. Under § 401 of the Clean Water Act, a certification is necessary whenever an activity “may result in any discharge into … navigable waters[.]” S. D. Warren filed suit in state court, contending that no discharge had occurred. Both the trial court and state supreme court disagreed. • • • Because a dam raises a potential for a discharge, § 401 is triggered and state certification is required. Stevens, J., delivered opinion for the Court (except for the legislative history section, from which Scalia, J., excepted himself) • “The dispute turns on the meaning of the word ‘discharge,’ the key to the state certification requirement under § 401. The Act has no definition of the term[. S]ince it is neither defined in the statute nor a term of art, we are left to construe it in accordance with its ordinary or natural meaning.” [internal quotation marks omitted] “When it applies to water, ‘discharge’ commonly means a ‘flowing or issuing out,’ and this ordinary sense has consistently been the meaning intended when this Court has used the term in prior water cases.” [citations omitted] “The alteration of water quality … is a risk inherent in limiting river flow and releasing water through turbines. Warren itself admits that its dams ‘can cause changes in the movement, flow, and circulation of a river … caus[ing] a river to absorb less oxygen and to be less passable by boaters and fish.’ … Changes in the river like these fall within a State’s legitimate legislative business, and the Clean Water Act provides for a system that respects the States’ concerns.” 30 • • AMICI CURIAE New England Legal Foundation Salt River Project Agricultural Improvement and Power District Augusta. Georgia Western Urban Water Coalition National Association of Home Builders, et al. Edison Electric Institute, et al. Hoope Valley Tribe, et al. United States Friends of the Everglades James M. Jeffords Former Assistant Administrators of the United States Environmental Protection Agency Micosukee Tribe of Indians of Florida New York, et al. Water Quality and Riverine Scientists Trout Unlimited, et al. National Wildlife Federation, et al. 31 eBay v. MercExchange, L.L.C. No. 05-130. Argued March 29, 2006; Decided May 15, 2006. PATENT INJUNCTIONS Carter G. Phillips for eBay, Inc., et al.; Seth P. Waxman for MercExchange, L.L.C. (1) Did Federal Circuit err in setting forth general rule in patent cases that district court must, absent exceptional circumstances, issue permanent injunction after finding of infringement? (2) Should Supreme Court reconsider its precedents, including Continental Paper Bag Co. v. Eastern Paper Bag Co., 210 U.S. 405 (1908), on when it is appropriate to grant injunction against patent infringer? The traditional four-factor test applied by courts of equity when considering whether to award permanent injunctive relief to a prevailing plaintiff applies to disputes arising under the Patent Act. • MercExchange, L.L.C. sued eBay for infringing on a business method patent “for an electronic market designed to facilitate the sale of goods between private individuals by establishing a central authority to promote trust among participants.” Awarding damages, the jury found the patent valid and that it had been infringed by eBay. Relying on the “plaintiff’s willingness to license its patents” and “its lack of commercial activity in practicing the patents[,]” the district court ostensibly applied the traditional fourfactor test and denied injunctive relief. The Federal Circuit reversed, concluding that in the area of patents, the traditional fourfactor test was inapplicable and that barring exceptional circumstances, “a permanent injunction will issue once infringement and validity have been adjudged.” • • • Thomas, J., delivered the opinion for a unanimous Court. • “According to well-established principles of equity, a plaintiff seeking a permanent injunction must satisfy a four-factor test before a court may grant such relief. A plaintiff must demonstrate: (1) that it has suffered an irreparable injury; (2) that remedies available at law, such as monetary damages, are inadequate to compensate for that injury; (3) that, considering the balance of hardships between the plaintiff and defendant, a remedy in equity is warranted; and (4) that the public interest would not be disserved by a permanent injunction. … These familiar principles apply with equal force to disputes arising under the Patent Act.” “[S]ome patent holders, such as university researchers or self-made inventors, might reasonably prefer to license their patents, rather than undertake efforts to secure the financing necessary to bring their works to market themselves.” • Roberts, C.J., concurred (joined by Scalia and Ginsburg, JJ.) • “From at least the early 19th century, courts have granted injunctive relief upon a finding of infringement in the vast majority of patent cases.” 32 • “When it comes to discerning and applying th[e Court’s] standards, a page of history is worth a volume of logic.” [internal quotation marks omitted] Kennedy, C.J., concurred (joined by Stevens, Souter, and Breyer, JJ.) • “To the extent earlier cases establish a pattern of granting an injunction against patent infringers almost as a matter of course, this pattern simply illustrates the result of the fourfactor test in the contexts then prevalent.” “An industry has developed in which firms use patents not as a basis for producing and selling goods but, instead, primarily for obtaining licensing fees. For these firms, an injunction, and the potentially serious sanctions arising from its violation, can be employed as a bargaining tool to charge exorbitant fees to companies that seek to buy licenses to practice the patent.” “When the patented invention is but a small component of the product the companies seek to produce and the threat of an injunction is employed simply for undue leverage in negotiations, legal damages may well be sufficient to compensate for the infringement and an injunction may not serve the public interest.” “The equitable discretion over injunctions, granted by the Patent Act, is well suited to allow courts to adapt to the rapid technological and legal developments in the patent system.” • • • AMICI CURIAE America Online, Inc., et al. Qualcom Inc., et al. Business Software Alliance, et al. 35 Intellectual Property Professors Computer & Communications Industry Association Electronic Frontier Foundation American Intellectual Property Law Association & Federal Circuit Bar Association Law Professors Malla Pollack and Other Legal Scholars, et al. Bar Association of the District of Columbia – Patent Trademark & Copyright Section Teva Pharmaceuticals USA, Inc. Yahoo! Inc. American Innovators’ Alliance International Business Machines Corporation Association of the Bar of the City of New York Research in Motion, Ltd. 52 Intellectual Property Professors Securities Industry Association, et al. Time Warner, Inc., et al. Nokia Corporation General Electric Corporation, et al. United States Biotechnology Industry Organization Various Law & Economics Professors Martin Cooper, et al. Steven M. Hoffberg Technology Patents & Licensing, Inc., et al. Association of American Universities, et al. American Bar Association Rembrandt IP Management, LLC Wisconsin Alumni Research Foundation, et al. Pharmaceutical Research and Manufacturers of America 33 Anza, et al. v. Ideal Steel Supply Corp. No. 04-433. Argued March 27, 2006; Decided June 5, 2006. David Frederick for Joseph Anza, et al.; Kevin P. Roddy for Ideal Steel Supply Corp. RICO Is competitor “injured in his business or property by reason of a violation” of RICO when alleged predicate acts of racketeering activity were mail fraud but competitor was not party defrauded and did not rely on alleged fraudulent behavior? • Ideal Steel Supply Corporation, a seller of steel mill products, operates two store locations in New York City. National Steel Supply, Inc., owned by Joseph and Vincent Anza, competes with Ideal Steel with stores in the same locations. Ideal Steel sued the Anzas and National Steel Supply, contending that National did not charge New York state sales tax to its customers, which permitted National to undercut Ideal Steel on price. Ideal Steel argued that National’s tax fraud was an unlawful racketeering scheme in violation of the Racketeering Influenced and Corrupt Organizations Act. The district court dismissed the case, because it determined that Ideal Steel had not itself relied on National’s alleged tax fraud. The Second Circuit reversed, finding that, while Ideal Steel did not so rely, the state of New York had, and that this third-party reliance was sufficient to support a RICO fraud claim. • • • Proximate cause, for RICO purposes, requires some direct relation between the injury asserted and the injurious conduct alleged. The direct victim of the alleged RICO violation is the state of New York, not Ideal. Kennedy, J. delivered the opinion of the Court • “Our analysis begins—and, as will become evident, largely ends—with Holmes [v. Securities Investor Protection Corporation]. … The decision relied on a careful interpretation of § 1964(c) which provides a civil cause of action to persons injured ‘by reason of’ a defendant’s RICO violation. … The Holmes Court [read in this language a] ‘demand for some direct relation between the injury asserted and the injurious conduct alleged.’” [citation omitted] “National … could have lowered its prices for any number of reasons unconnected to the asserted pattern of fraud. … Ideal’s lost sales could have resulted from factors other than petitioner’s alleged acts of fraud. … The attenuated connection between Ideal’s injury and the Anza’s injurious conduct thus implicates fundamental concerns expressed in Holmes.” “The requirement of a direct causal connection is especially warranted where the immediate victims of an alleged RICO violation can be expected to vindicate the laws by pursuing their own claims. … If the allegations are true, the State [of New York] can be expected to pursue appropriate remedies.” • • 34 Scalia, J. concurred (having joined the majority opinion) • “[I]t is inconceivable that the injury alleged … is within the zone of interests protected by the RICO cause of action for fraud perpetrated upon New York State.” Thomas J., concurred in part and dissented in part • “The Court today limits the lawsuits that may be brought under the civil enforcement provision of [RICO], by adopting a theory of proximate causation that is supported by neither the Act nor by [Holmes].” Breyer, J., concurred in part and dissented in part • RICO’s “civil damages remedy … does not cover claims of injury by one competitor where the legitimate pro-competitive activity of another competitor immediately causes that injury.” “National … in effect cut the price of the item by the amount of the sales tax and then kept the money instead of passing it on to the State. They funded the price cut from the savings, but the source of the savings is, in my view, beside the point as long as the price cut itself is legitimate.” • AMICI CURIAE Chamber of Commerce of the United States of America National Association of Securities and Consumer Attorneys 35 Mohawk Industries, Inc. v. Williams, et al. No. 05-465. Argued April 26, 2006; Decided June 5, 2006. Carter G. Phillips for Mohawk Industries, Inc.; Howard W. Foster for Shirley Williams RICO Can defendant corporation and its agents constitute “enterprise” under RICO in light of settled rule that RICO defendant must “conduct” or “participate in” affairs of some larger enterprise and not just its own affairs? • Current and former employees of Mohawk Industries, Inc., a leading manufacturer of carpets and rugs, filed the instant RICO class action, claiming that Mohawk employed and harbored large numbers of undocumented workers and thereby depressed their wages. Arguing that RICO required the presence of a separate “enterprise” which was not present in this case, Mohawk moved to dismiss the claim, which the district court declined to do, but it did certify an interlocutory appeal to the Eleventh Circuit. The Eleventh Circuit affirmed, finding that Mohawk and third-party recruiters constituted a “loose or informal association of distinct entities[,]” an “association-in-fact” enterprise within the meaning of RICO. While not specifically raising this argument in its petition for a writ of certiorari, Mohawk argued in its opening merits brief that “association-in-fact” enterprises could not be comprised of corporations and other entities, but rather only of individuals. Corporations are not individuals. This straightforward statutory interpretation argument intrigued the Court at oral argument but concerned some Members because it may not have been properly raised. • • • The court dismissed the question presented as to whether a corporation and its agents can form an enterprise within the meaning of RICO as improvidently granted, but granted certiorari and remanded to the Eleventh Circuit to reconsider the case in light of Anza v. Ideal Steel Supply Corp. AMICI CURIAE National Association of Manufacturers, et al. Chamber of Commerce of the United States of America, et al. Immigration Political Action Committee, U.S., Inc., et al. National Association of Shareholder and Consumer Attorneys United States 36 Kircher, et al v. Putnam Funds Trust, et al. SECURITIES LITIGATION UNIFORM STANDARDS ACT No. 05-409. Argued April 24, 2006; Decided June 15, 2006. David C. Frederick for Carl Kircher; Mark A. Perry for Putnam Funds Trust. Did court of appeals have jurisdiction, contrary to holdings of three other circuits, to review district court order remanding for lack of subject matter jurisdiction suit removed under SLUSA, notwithstanding 28 U.S.C. § 1447(d)'s bar on appellate review of remand orders based on lack of subject matter jurisdiction and district courts' conclusion that petitioners' claims are not preempted by and thus not removable under SLUSA? • Claiming that their stock holding were devalued, plaintiffs, eight groups of investors, filed separate state-law based securities fraud claims in state court against Putnam Funds Trust, other mutual funds and investment advisors. Pursuant to the Securities Litigation Uniform Standards Act, which preempts state law claims of securities fraud, the defendants removed the case to federal district court. The district court concluded that the claims at issue were not preempted because they were in connection with the mere holding of a security, rather than in connection with “the purchase or a sale” of a security. The district court therefore remanded the case to state court. The Seventh Circuit reversed, first determining that it could review the matter even though remand orders are generally not appealable. In making this determination, the court of appeals relied on SLUSA’s strong disapproval of state-law based securities fraud claims and on the fact that the funds would not be able to challenge the district court’s finding of no preemption when the case returned to state court. By reading the statutory language “in connection with” in concert with relevant Supreme Court precedents, the Seventh Circuit then decided that the claim at issue was in fact preempted even though no purchase or sale had taken place. While this case was pending before the Supreme Court, the Supreme Court separately decided Merrill Lynch, Pierce, Fenner & Smith v. Dabit, which confirmed the Seventh Circuit’s view. • • • • Orders remanding for want of preclusion under the Securities Litigation Uniform Standards Act are subject to § 1447(d) and its general rule of nonappealability. Souter, J. delivered the Court’s opinion • “The policy of Congress opposes interruption of the litigation of the merits of a removed cause by prolonged litigation of questions of jurisdiction of the district court to which the cause is removed[.]” [internal quotation marks omitted] 37 • “For over a century now, statutes have accordingly limited the power of federal appellate courts to review orders remanding cases removed by defendants from state to federal court[.]” “We hold that the Act does not exempt remand orders from [this] general rule of nonappealability.” “[A] district court does not have the last word on preclusion under the Act, for nothing in the Act gives the federal courts exclusive jurisdiction over preclusion decisions. … [W]hat a state court could do in the first place it may also do on remand; in this case, the funds can presently argue the significance of Dabit and ask for dismissal on grounds of preclusion when they return to the state court.” • • Scalia, J. joined relevant parts of the Court’s opinion, but separately concurred. • The Court “concludes that ‘the District Court was correct in understanding its remand order to be dictated by a finding that it lacked removal jurisdiction.’ It seems to me no more within our authority to declare the District Court’s views correct than it was within the Court of Appeals’ authority to reject them. Either decision is an exercise of [impermissible] appellate review[.]” AMICI CURIAE Law Professors Arthur R. Miller, E. Farish Percy, Michael E. Solimine, and Jill E. Fisch Washington Legal Foundation Securities Industry Association and the Bond Market Association Chamber of Commerce of the United States of America 38 Howard Delivery Service, Inc. v. Zurich American Insurance Co. No. 05-128. Argued March 21, 2006; Decided June 15, 2006. BANKRUPTCY Paul F. Strain for Howard Delivery Service, Inc.; Donald B. Verilli, Jr. for Zurich American Insurance Co. In bankruptcy case, is unsecured claim for unpaid premiums owing for debtor's statutory workers' compensation liability insurance policy entitled to priority under Section 507(a)(4) of Bankruptcy Code as “contribution to an employee benefit plan arising from services rendered,” as held by Fourth and Ninth Circuits, or is such claim not entitled to Section 507(a)(4) priority, as held by Sixth, Eighth, and Tenth Circuits? • In 2002, Howard Delivery Services, Inc. filed for bankruptcy. In the course of the bankruptcy proceedings, Zurich American Insurance Co. filed a claim for $400,000 of unpaid workers’ compensation premiums. Zurich claimed a priority in the proceeding because it contended that workers’ compensation was an employee benefit within the meaning of the Bankruptcy Code. Both the Bankruptcy Court and the District Court concluded that workers’ compensation is not an employee benefit within the meaning of the Bankruptcy Code. The Fourth Circuit reversed, finding that the Congress intended to give workers’ compensation claims priority status in bankruptcy. • Insurance carriers’ claims for unpaid workers’ compensation premiums owed by an employer fall outside the priority allowed by § 507(a)(5) of the Bankruptcy Code. Ginsburg, J., delivered the opinion of the Court. • The Bankruptcy Code accords a priority, among unsecured creditors’ claims, for unpaid ‘wages, salaries, or commissions,’ 11 U. S. C. A. §507(a)(4)(A) (Supp. 2006), and for unpaid contributions to “an employee benefit plan,” §507(a)(5).1 It is uncontested here that §507(a)(5) covers fringe benefits that complete a pay package—typically pension plans, and group health, life, and disability insurance—whether unilaterally provided by an employer or the result of collective bargaining. This case presents the question whether the §507(a)(5) priority also encompasses claims for unpaid premiums on a policy purchased by an employer to cover its workers’ compensation liability.” “Workers’ compensation laws assure that workers will be compensated for work-related injuries whether or not negligence of the employer contributed to the injury. To that extent, arrangements for the payment of compensation awards might be typed ‘employee benefit plan[s].’ On the other hand, statutorily prescribed workers’ compensation regimes do not run exclusively to the employees’ benefit. In this regard, they differ from privately ordered, employer-funded pension and welfare plans that, together with wages, remunerate employees for services rendered. Employers, too, gain from workers’ compensation prescriptions. In exchange for no-fault liability, employers gain immunity from tort actions • 39 that might yield damages many times higher than awards payable under workers’ compensation schedules.” • “Although the question is close, we conclude that premiums paid for workers’ compensation insurance are more appropriately bracketed with premiums paid for other liability insurance, e.g., motor vehicle, fire, or theft insurance, than with contributions made to secure employee retirement, health, and disability benefits.” Kennedy, J., dissented, joined by Souter and Alito, JJ. • “The text of the statute does not refer to whether the plan benefits employers, nor would it make sense to do so. Since the goal of the priority is to protect the benefits of employees, there is little reason to suppose that employees should lose that protection based on the additional fact that employers may gain something as well. Employers rarely make large payments to employee funds out of altruism, and surely the Court should not hold that employee benefits provide no benefit to the employer. … Workers’ compensation cannot be distinguished on this basis from pension, health, or disability plans, all of which the Court recognizes as covered by the priority.” AMICI CURIAE National Coordinating Committee for Multiemployer Plans American Home Assurance Company, et al. 40 Empire Healthchoice Assurance, Inc. v. McVeigh No. 05-200. Argued April 25, 2006; Decided June 15, 2006. FEDERAL EMPLOYEES HEALTH BENEFITS ACT Anthony F. Shelley for Empire HealthChoice Assurance, Inc.; Thomas J. Stock for Denise F. McVeigh Does federal question jurisdiction exist over suit by federal government contractor to enforce, on behalf of United States, provision in health benefits plan for federal employees that is part of government contract established pursuant to Federal Employees Health Benefits Act? • • • • • • Empire Healthchoice Assurance, Inc. administers the Blue Cross Blue Shield plan (pursuant to the Federal Employees Health Benefits Act) for federal employees in New York state. Joseph E. McVeigh, deceased spouse of defendant Denise F. McVeigh, received payments of $157,309 from Empire to pay for medical expenses suffered from an accident. Denise McVeigh sued in tort against parties she alleged to have caused her husband’s accident and settled for over three million dollars. Upon learning of the settlement, Empire notified Denise McVeigh that it intended to recover, pursuant to provisions in the plan, the medical expenses it had already paid. Empire filed suit in federal court, claiming that McVeigh, by failing to reimburse the full amount, had breached the reimbursement provision in the plan. McVeigh moved to dismiss, contending that there was no basis for federal court jurisdiction. Both the district court and court of appeals agreed and ordered dismissal. A federal government contractor administering a health plan for federal employees may not seek reimbursement in federal court for health expenses paid to federal employees (where the employee has obtained recovery from a third party) but must instead file the action in state court. Ginsburg, J. delivered the opinion for the Court • “The Federal Employees Health Benefits Act of 1959 (FEHBA), establishes a comprehensive program of health insurance for federal employees. The Act authorizes the Office of Personnel Management (OPM) to contract with private carriers to offer federal employees an array of health-care plans. Largest of the plans for which OPM has contracted, annually since 1960, is the Blue Cross Blue Shield Service Benefit Plan (Plan), administered by local Blue Cross Blue Shield companies.” [citations omitted] “This case concerns the proper forum for reimbursement claims when a plan beneficiary, injured in an accident, whose medical bills have been paid by the plan administrator, recovers damages (unaided by the carrier-administrator) in a state-court tort action against a third party alleged to have caused the accident.” 41 • • “FEHBA contains a preemption clause, §8902(m)(1), displacing state law on issues relating to ‘coverage or benefits’ afforded by health-care plans. The Act contains no provision addressing the subrogation or reimbursement rights of carriers. Successive annual contracts between OPM and the Blue Cross Blue Shield Association (BCBSA) have obligated the carrier to make “a reasonable effort” to recoup amounts paid for medical care. The statement of benefits distributed by the carrier alerts enrollees that all recoveries they receive ‘must be used to reimburse the Plan for benefits paid.’” [citations omitted] “The instant case originated when the administrator of a Plan beneficiary’s estate pursued tort litigation in state court against parties alleged to have caused the beneficiary’s injuries. The carrier had notice of the state-court action, but took no part in it. When the tort action terminated in a settlement, the carrier filed suit in federal court seeking reimbursement of the full amount it had paid for the beneficiary’s medical care.” “The question presented is whether 28 U. S. C. §1331 (authorizing jurisdiction over ‘civil actions arising under the . . . laws . . . of the United States’) encompasses the carrier’s action. We hold it does not. … FEHBA itself provides for federal-court jurisdiction only in actions against the United States. Congress could decide and provide that reimbursement claims of the kind here involved warrant the exercise of federal-court jurisdiction. But claims of this genre, seeking recovery from the proceeds of state-court litigation, are the sort ordinarily resolved in state courts. Federal courts should await a clear signal from Congress before treating such auxiliary claims as ‘arising under’ the laws of the United States.” • • Breyer, J. dissented, joined by Kennedy, Souter, and Alito, JJ. • “This case involves a dispute about the meaning of terms in a federal health insurance contract. The contract, between a federal agency and a private carrier, sets forth the details of a federal health insurance program created by federal statute and covering 8 million federal employees. In all this the Court cannot find a basis for federal jurisdiction. I believe I can.” AMICI CURIAE United States Julia Cruz, as Representative of Jose S. Cruz 42 Rapanos v. United States Carabell v. United States Army Corps of Engineers CLEAN WATER ACT Nos. 04-1034 & 04-1384. Argued February 21, 2006; Decided June 19, 2006. M. Reed Hopper for June Carabell: Timothy A. Stoepker for John Rapanos: Paul D. Clement for the United States & the United States Army Corps of Engineers (1) Does Clean Water Act prohibition on unpermitted discharges to “navigable waters” extend to non-navigable wetlands that do not even abut navigable water? (2) Does extension of Clean Water Act jurisdiction to every intrastate wetland with any sort of hydrological connection to navigable waters, no matter how tenuous or remote, exceed Congress’ constitutional power to regulate commerce among states? [Rapanos v. United States] (1) Does Clean Water Act extend to wetlands that are hydrologically isolated from any of “waters of the United States”? (2) Do limits on Congress's authority to regulate interstate commerce preclude interpretation of Clean Water Act that would extend federal authority to wetlands that are hydrologically isolated from any “waters of the United States”? [Carabell v. United States Army Corps of Engineers] • John Rapanos backfilled three parcels of Michigan land which were adjacent to ditches and man-made drains which eventually empty into the Hoppler Creek and then the Saginaw Bay. The United States brought a civil enforcement action against Rapanos, contending that Rapanos had violated the Clean Water Act by not seeking a permit to backfill a wetland which was hydrologically connected to traditional navigable waters. Both the district court and the court of appeals determined that there was in fact federal jurisdiction over the wetlands because water passed between the wetlands and navigable waters. In a separate action, the United States Army Corps of Engineers denied June Carabell a permit to develop a wetland located about one mile from Lake St. Clair. Draining eventually into the lake, a ditch runs along the wetland but it is impermeable to normal water flow from the wetland. Both the district court and the court of appeals found federal jurisdiction because the wetland was adjacent to navigable waters. • • • To constitute “navigable waters” under the Clean Water Act, a water or wetland must possess a “significant nexus” to waters that are or were navigable in fact or that could reasonably be so made. Scalia, J., authored the plurality opinion, joined by Roberts, C.J., Alito and Thomas, JJ. • “The burden of federal regulation on those who would deposit fill material in locations denominated ‘waters of the United States’ is not trivial. In deciding whether to grant or deny a permit, the U. S. Army Corps of Engineers (Corps) exercises the discretion of an 43 enlightened despot, relying on such factors as ‘economics,’ ‘aesthetics,’ ‘recreation,’ and ‘in general, the needs and welfare of the people[.]’ The average applicant for an individual permit spends 788 days and $271,596 in completing the process, and the average applicant for a nationwide permit spends 313 days and $28,915—not counting costs of mitigation or design changes.” [citations omitted] • “We need not decide the precise extent to which the qualifiers ‘navigable’ and “of the United States” restrict the coverage of the Act. Whatever the scope of these qualifiers, the CWA authorizes federal jurisdiction only over “waters.” The only natural definition of the term “waters,” our prior and subsequent judicial constructions of it, clear evidence from other pro-visions of the statute, and this Court’s canons of construction all confirm that ‘the waters of the United States’ in §1362(7) cannot bear the expansive meaning that the Corps would give it.” [citations omitted] “[O]n its only plausible interpretation, the phrase ‘the waters of the United States’ includes only those relatively permanent, standing or continuously flowing bodies of water ‘forming geographic features’ that are described in ordinary parlance as ‘streams[,] . . . oceans, rivers, [and] lakes.’ The phrase does not include channels through which water flows intermittently or ephemerally, or channels that periodically provide drainage for rainfall.” [citation omitted] • Kennedy, J., concurred in the judgment of remand. • “In Solid Waste Agency of Northern Cook Cty. v. Army Corps of Engineers, the Court held, under the circumstances presented there, that to constitute ‘navigable waters’ under the Act, a water or wetland must possess a ‘significant nexus’ to waters that are or were navigable in fact or that could reasonably be so made.” [citations omitted] “In the instant cases neither the plurality opinion nor the dissent … chooses to apply this test; and though the Court of Appeals recognized the test’s applicability, it did not consider all the factors necessary to determine whether the lands in question had, or did not have, the requisite nexus. In my view the cases ought to be remanded to the Court of Appeals for proper consideration of the nexus requirement.” “While the plurality reads nonexistent requirements into the Act, the dissent reads a central requirement out—namely, the requirement that the word ‘navigable’ in ‘navigable waters’ be given some importance.” • • Stevens, J., dissented, joined by Ginsburg, Breyer & Souter, JJ. • “Rejecting more than30 years of practice by the Army Corps, the plurality disregards the nature of the congressional delegation to the agency and the technical and complex character of the issues at stake. [Justice Kennedy] similarly fails to defer sufficiently to the Corps, though his approach is far more faithful to our precedents and to principles of statutory interpretation than is the plurality’s.” “The Army Corps has determined that wetlands adjacent to tributaries of traditionally navigable waters preserve the quality of our Nation’s waters by, among other things, 44 • providing habitat for aquatic animals, keeping excessive sediment and toxic pollutants out of adjacent waters, and reducing downstream flooding by absorbing water at times of high flow. The Corps’ resulting decision to treat these wetlands as encompassed within the term “waters of the United States” is a quintessential example of the Executive’s reasonable interpretation of a statutory provision.” AMICI CURIAE Washington Legal Foundation Cato Institute Donald Harkins National Association of Home Builders International Council of Shopping Centers, et al. American Petroleum Institute Croplife America, et al. National Federation of Independent Business Legal Foundation John J. Duncan, Jr. Charles R. Johnson & New England Legal Foundation American Farm Bureau Federation Western Coalition of Arid States Attainable Housing Alliance Pulte Homes, Inc., et al. Mackinac Center for Public Policy Alaska, et al. National Association of Waterfront Employers Claremont Institute Center for Constitutional Jurisprudence National Stone, Sand and Gravel Association, et al. Mountain States Legal Foundation Home Builders Association of Central Arizona Foundation for Environmental and Economic Progress & Chamber of Commerce of the United States of America, et al. Calvin H. Johnson Ducks Unlimited, Inc., et al. Jared M. Diamond, et al. City of New York, NY Chesapeake Bay Foundation Western Organization of Resource Councils, et al. Environmental Law Institute New York, et al. Carol M. Brower, et al. American Rivers, et al. American Planning Association John D. Dingell, et al. Association of State Wetland Mangers, et al. National Mitigation Banking Association. Association of State and Interstate Water Pollution Control Administrators Macomb County, MI Ecological Society of America, et al. 45