Summary Of WLF's Program: High Court Halftime: The October 2009 Term At Midpoint

Monday, April 5, 2010 - 00:00

The Washington Legal Foundation recently sponsored a midterm briefing at its M.J. Murdock Center for Free Enterprise entitled High Court Halftime: The October 2009 Term at Midpoint. Moderator Dick Thornburgh introduced three panelists, Gregory Garre, a partner of Latham & Watkins, served as Solicitor General in the Bush administration and previously as a law clerk to Chief Justice Rehnquist and Anthony Scirica of the Third Circuit Court of Appeals; Patricia Millett, co-head of the Supreme Court practice at Akin Gump Strauss Hauer & Feld, served in the Solicitor General's office arguing some 25 cases before the Supreme Court and continues an active Supreme Court practice, and Noel Francisco, a partner in Jones Day, heads the Government Regulation practice, having previously served as a law clerk to Justice Scalia and Fourth Circuit Judge Michael Luttig. 1

Garre: I shall discuss Monsanto v. Geertson Seed case, a case which is pending before the court to be argued in April and then talk about the office of the Solicitor General one year into the new administration. Monsanto is a case which involves the latest effort of the Supreme Court to examine the limits on the entry of injunctive relief, more particularly the Ninth Circuit's entry of injunctive relief, in environmental cases. It involves a NEPA challenge to the USDA's approval of a genetically engineered crop of alfalfa called Round Up Ready Alfalfa. Round Up Ready Alfalfa is engineered so that it is resistant to one of the most effective and safest weed killers - one can spray Round Up Weed Killer on the field to kill weeds but not the Round Up Ready Alfalfa, a new product which is safe for humans and for animal feed and represents only one percent of all alfalfa in the U.S., having been on the market only 21 months.

A coalition of environmentalists argued that the agency's approval of Round Up Ready Alfalfa was in violation of the National Environmental Policy Act (NEPA), a procedural statute used in environmental cases that requires an agency to go through certain steps in considering the potential environmental impact of an agency action. If the agency concludes after an environmental assessment that there is not likely to be a significant effect on the environment, then it doesn't have to proceed with an Environmental Impact Statement (EIS), as was true in this case.

The plaintiffs argued that a full blow EIS was warranted and sought an injunction on the sale of Round Up Ready Alfalfa, arguing that allowing the sale and planting of the alfalfa in the environment could lead to the extinction of conventional or organic alfalfa due to cross pollination through natural processes. The District Court was convinced, finding a NEPA violation and entering a blanket nationwide injunction on the planting of Round Up Ready Alfalfa. The Ninth Circuit affirmed that injunction. The Supreme Court agreed to hear the case involving three principle issues, all of which are important for environmental cases generally and for determining the scope of federal courts' exercise of equitable authority and granting injunctions. The first question is whether the courts in this case were right to carve out a special category of NEPA cases for unique treatment in applying equitable factors. The District Court decided it did not need to consider whether the use of Round Up Ready Alfalfa would lead to irreparable harm because the agency would consider its potential harm as part of the environmental impact process. In effect the district court held that the EIS process was a substitute for the court's own equitable inquiry that it ordinarily would undertake in determining whether or not an injunction was warranted.

The second question is whether the courts adequately addressed, or the record supports, a finding of likely irreparable harm. This issue ties back into a case the Supreme Court decided last term called Winter v. NRDC which involved a challenge by environmental groups in California relating to the Navy's use of sonar in training exercises off the California coast. Plaintiffs challenged the agency approval under NEPA claiming that a full-blown EIS was needed. The District Court entered an injunction supported only by a possibility of irreparable harm. The Supreme Court made it clear that the Ninth Circuit's prior practice of allowing plaintiffs to show just a possibility of irreparable harm was inconsistent with the traditional equitable finding requiring plaintiffs to show a likelihood of irreparable harm.

The question in this case is whether or not the courts adequately considered whether that likelihood was present. The plaintiffs have a particularly difficult time making that likelihood showing because the record shows that there was no evidence of any gene flow from Round Up Ready Alfalfa to conventional alfalfa during the 21 months that Round Up Ready Alfalfa was being sold and used in the United States before the injunction; there was no evidence that any farmer had lost even a single sale of conventional or organic hay or seed because of any contamination with Round Up Ready Alfalfa; the plaintiffs' own experts in this case had conceded that isolation distances of several miles would be sufficient to protect against the cross-pollination of alfalfa.

The last question in the case is the extent to which a defendant is entitled to an evidentiary hearing on the question of irreparable harm where there are disputed facts as to the existence of irreparable harm. The District Court in this case concluded that no evidentiary hearing looking into irreparable harm was required because it concluded that the decision could be transferred to the agency.

Why is the case important? First, it is part of a series of cases in which we've seen this Supreme Court express an interest in injunctions, having repeatedly referred to injunctions as an "extraordinary and drastic form of relief."

The second reason for the case's importance is that it concerns the scope of NEPA, which is a procedural statute, any violation of which may be greeted by an injunction. But the injunctive process itself begins to transform the case into one involving a more substantive statute, giving NEPA a broader effect.

In reviewing the activities of the office of the Solicitor General one year into the new administration, not much has changed - one of the reasons why it has credibility before the Court is that it tends to maintain its positions over the course of time and from one administration to the next. The only changes from positions taken by the prior administration are with a few business cases, particularly the amicus briefs.

Millett: I'm going to talk about three cases pending before the court that are to be argued this spring. The first one is Morrison v. National Australia Bank, involving a very important, though technically simple, question. In a securities fraud case, where a fair amount of the relevant activity occurred overseas, can you bring a securities fraud action under U.S. law in U.S. courts? The factual situation involves the purchase by an Australian bank of a U.S. company with a seemingly attractive mortgage portfolio. The portfolio was vastly overinflated, causing substantial write-downs. Two Australian stockholders of the Australian bank sued on the basis that the U.S. company had committed securities fraud in transferring false information to the Australian bank.

The law in this area is a multi-layered mess: is it a question of the courts' jurisdiction over this dispute if it is a jurisdictional issue? is it a question of extraterritoriality of the securities fraud law? or is it about whether you're stating a claim under the securities fraud laws? There's also the fight about whether extraterritoriality is a jurisdictional or a non-jurisdictional issue. The Supreme Court has been trying to clear up the line between jurisdictional and substantive problems of law, and this is going to be another opportunity. There was a case some years ago where the Court at least suggested that extraterritoriality was a jurisdictional question, but they've since backed off from this position. I think it may be the time for the Court to say that extraterritoriality is not a jurisdictional issue. There is sufficient allegation that the case amounts to a securities fraud within the federal securities laws. Three of the circuits have disagreed on how much of a nexus there must be between actions in the U.S. to fall within the ambit of U.S. securities laws. It is a question not only of how much of the transaction was conducted in the U.S., or if not conducted, how much of the fraud and economic effect occurred within the U.S.? The same problem exists with securities law cases as with antitrust and RICO cases.

So this is a very important issue even though, technically, it's about a securities fraud claim since it will inform us as to how courts will deal with other international economic business disputes. I believe the Solicitor General has it right in stating this is not a jurisdictional problem but about whether in each particular case the plaintiffs have shown enough of a claim of activity occurring in the U.S. that an action can be brought under the U.S securities laws. There is legislation pending before Congress on this issue, so this is one of the situations where there is potential for a dialogue between the Supreme Court and Congress.

Next, I'm going to talk about Rent-a-Center v. Jackson, part of the Supreme Court's annual foray into arbitration law. In this case, Mr. Jackson filed a lawsuit against his employer, claiming race discrimination. His contract had an arbitration provision which said that all issues would go to arbitration, including those that question the legitimacy of the arbitration provision and the meaning of the arbitration provision. Mr. Jackson claimed it was unconscionable and unenforceable. The first question is whether that unconscionability question goes to the courts or to the arbitrator? The arbitration clause says it goes to the arbitrator. The questions then become what our starting point is; on what parties have agreed to, and who is best situated to decide these very fundamental questions. What does this mean as a matter of contract and who should decide this issue? How the Supreme Court finds will be of great interest.

Another case is City of Ontario v. Quon . In this case Mr. Quon, a city police sergeant, was provided a pager by the city and was told that it was for official business only . The problem is that he had a supervisor who said he could use it for personal business if Sgt. Quon paid for that usage. It turns out that Sergeant Quon was using his pager to send text messages to his wife and to his girlfriend.

Ironically, the police department decided to monitor their officers' use of their pagers to determine if their excess use was personal activity. During that review, they monitored Sgt. Quon's pager and found his messages. The question before the court is actually a Fourth Amendment question. Did this review and ultimate punishment for these messages violate the Fourth Amendment? Did Sergeant Quon have a privacy interest that arose out of the conflicting instructions, and if so, to what extent? The Ninth Circuit Court of Appeals said that there were other ways for an employer to have done what was needed without intruding into the content of private messages. Hence, such intrusion violates the Fourth Amendment.

The Solicitor General has weighed in and strongly agreed with what is essentially a least restrictive means approach to the Fourth Amendment, and I'm quite confident the Supreme Court will disagree with that position, based on prior decisions. But now the problem is, if there is a privacy interest, how is that factored into the Fourth Amendment ability of employers to do searches? Remember this wasn't a law enforcement search. What is the standard by which employers can do searches? How intrusive can they be? How are those interests balanced under the Fourth Amendment?

If an employee uses an employer's equipment, the employee doesn't have the same sort of protected constitutional interest that is going to result in an adverse decision overturning the Ninth Circuit for the employees in this situation. So, while there are technical Fourth Amendment issues, this case will have a larger importance as the Court steps into that very, very important area of how it approaches the balance between employees and employers on these issues.

The last thing I wish to discuss is in light of FEC v. Citizens United whether the Roberts court is ready to overrule precedent, even at a five to four vote. We need to be careful, particularly for the business area, in reading too much into one event. A lot of what regulates business decisions are statutory, not constitutional rulings, and the Roberts court thus far has been very hesitant to overrule precedent in the statutory area, leaving that up to Congress. This case shows that times will come when they're willing to do it, even when it's very controversial, if they think prior decision is wrong. However, I don't think it's going to unleash a fury of over-rulings.

Francisco: Every crisis or perceived crisis seems to lead to the same general pattern of events: a public outcry for action creates intense pressure on the Executive and the Legislative Branches to react - which they do, in ways that invariably test the absolute outer bounds of their power. Subsequently, the courts are called in to police those outer boundaries. Take the so-called Enron crisis, which led to a public demand for action, which in turn provoked an executive response (pin the blame on someone) and a legislative response (a vague amendment and a hastily empowered oversight board). And now, this term we are seeing two cases in which the Supreme Court is policing the reach of those responses.

Currently before the Court is an appeal of United States v. Skilling , the criminal prosecution and conviction of Jeff Skilling, former CEO of Enron. This is not the first time the Supreme Court has dealt with the fall-out of the executive branch's prosecution of alleged perpetrators in the Enron crisis. The first case of Andersen Consulting in 2005 essentially drove Andersen out of business while only a few years later the Supreme Court concluded that the very legal theory used to prosecute Andersen was invalid.2While not nearly as dramatic as Arthur Anderson , in Skilling the United States similarly seized upon tools available to it under federal law and pressed their limits in order to hold somebody accountable.

Skilling presents two very interesting issues, one of great import to Skilling personally but of less interest to the law, the other with much more general interest to the law - particularly with respect to the government's prosecutorial powers. The first has to do with jury bias. Skilling argued that the media in Houston was so saturated with publicity surrounding his trial that it was impossible for him to get a fair trial in the area, but he was not granted a change of venue. This is relatively unimportant to the law generally, because there are relatively few cases with enough media coverage that jury bias becomes an issue; that said, there may be impact beyond the Skilling case in this era of media speed and saturation.

The second issue has to do with the federal fraud laws which have been amended by Congress to extend to "the deprivation of another of the intangible right of honest services" and Skilling was convicted of, among other things, depriving his employer Enron of its intangible right to Skilling's honest services. But what on earth does it mean to deprive somebody of the intangible right of honest services? There is danger in having incredibly vague laws, exemplified I would argue, by the honest services fraud statute: when a crisis occurs and there's a public outcry to hold somebody accountable, vague laws make it easy for the government to find a scapegoat. Clearly the honest services fraud law is of keen interest to the Supreme Court because they have granted no fewer than three cases that address it.

Based on the arguments in the Conrad Black and the Bruce Wehyrauch cases (in the interest of full disclosure, my law firm represents Bruce Wehyrauch), the Supreme Court seems poised to do one of two things, either of which would be very favorable to the defendants. The Court will either strike the law down on its face as unconstitutionally vague, a position favored by Justice Scalia, who believes the courts should not be in the position of giving content (in a common law-like fashion) to such a broad notion as the deprivation of honest services. Or, the court will dramatically rein in the reach of honest services fraud law so that it only covers truly indisputably corrupt acts such as bribery and kickbacks. Such a narrow position would benefit Black and Wehyrauch and result in reversals of their convictions; it might also result in Skilling's re-conviction. However, the facts in Skilling 's case are sufficiently convoluted that the court might send it back. Nonetheless, I think that the type of law at issue in the Skilling case is quintessentially that type that ought to be reined in to prevent prosecutors in the executive branch from overreaching in response to political pressure.

The Supreme Court will hear another post-Enron case that involves the Sarbanes-Oxley Act, Public Company Accounting Oversight Board v. The Free Enterprise Fund. (Again, our firm is representing the plaintiffs.)

Inadequate regulation of the public accounting industry is perceived as one of the failures contributing to the Enron crisis. The legislative branch responded with the Sarbanes-Oxley Act, which included the creation of a federal agency (PCAOB) tasked solely with regulating the public accounting industry. The problem is that in its creation of PCAOB, Congress ignored fundamental notions of separation of powers, especially those that restrain Congress's ability to handicap the President's exercise of executive power. In an effort to insulate regulation from politics, Congress essentially severed the tie between the President and the Public Company Accounting Oversight Board. The President can neither appoint Public Company Accounting Oversight Board members nor remove them; that power is lodged instead in the SEC, an agency independent of the President. Congress went even further by giving the SEC very little control over the PCAOB members, who may be fired by the SEC only if they effectively engage in willful abuse of the law and of their authority.