Argument analysis: Justices search for clear path to assessing responsibility for asbestos-dependent equipment on ships at sea

Read more of this story here from SCOTUSblog by Ronald Mann.

Argument analysis: Justices search for clear path to assessing responsibility for asbestos-dependent equipment on ships at sea

Wednesday morning the justices got a rare opportunity to ponder basic principles of tort law, as they closed the October session with the argument in Air and Liquid Systems v. DeVries. The case involves equipment sold by various manufacturers (including petitioner Air and Liquid Systems) that was installed many years ago on Navy ships. The equipment depended on asbestos insulation, which was installed shortly after the equipment reached the ships, to regulate its temperature. There also were asbestos gaskets between the parts, which on some occasions came with the original equipment, but were frequently replaced during the use of the equipment. The plaintiffs are a group of sailors (including respondent John DeVries) injured by the asbestos used with the equipment. This particular dispute is limited to injuries that cannot be attributed to any asbestos that the manufacturers supplied; all the relevant asbestos was applied to the equipment by third parties after the Navy acquired it.

Because the injuries in question occurred at sea, the liability of the manufacturers cannot be determined under the law of any particular state. Rather, it arises under the general “maritime” law, judge-made federal law for which the Supreme Court is the final authority. The case comes to the justices after the lower court found that the manufacturers could be liable because the injuries were foreseeable. Arguing on behalf of the manufacturers, Shay Dvoretsky contended that the justices should adopt a bright-line “bare-metal” rule, absolving the manufacturers from liability for any asbestos that they did not themselves make, sell or distribute.

Dvoretsky’s time was dominated by a group of justices pressing the idea that the manufacturers should be held responsible, at least if the sailors can prove that the manufacturers directed or required the use of asbestos with the equipment that they sold. Several justices seemed to think that the facts of the case made liability almost straightforward. For example, almost immediately after Dvoretsky began his presentation, Justice Ruth Bader Ginsburg interrupted him to ask whether it “make[s] a difference” that the manufacturers were “making a product that is useless unless the asbestos is added.”

In the same vein, Justice Sonia Sotomayor interjected her view that under “normal” principles of “tort law, if you create a car that has a spark in the tank, and the gasoline … explodes, the consumer is not going to sue the gasoline company. It’s going to sue you because you, the car manufacturer, produced a defective product that caused an injury that the gasoline would otherwise not cause. Why are you any different than the bare-metal car seller?”

Chief Justice John Roberts seemed to share Sotomayor’s perspective, saying: “Normally, you run a car with gasoline and it’s normally perfectly safe. Here, you normally run your product with asbestos and it’s not perfectly safe.”

Offering his own hypothetical, Justice Stephen Breyer commented that for him, the case is just “not that complicated.” Explaining with his usual expansiveness, he continued:

It’s the case in the Restatement. Judy loans her car for the evening to Grant, whom she knows is a very dangerous driver. The least-cost avoider, of course, is Grant. But, nonetheless, Judy is negligent. And the negligence that they’re claiming here is taking a thing, a physical thing which the manufacturer knows is dangerous and unreasonably putting it out into interstate commerce. And that’s why if you tell the user he’s got to use asbestos, knowing all the relevant things, that’s a negligent act.

Taking a somewhat different tack, Justices Elena Kagan and Neil Gorsuch spent a considerable portion of Dvoretsky’s time debating the problem as a matter of basic tort theory. Kagan started the discussion by interrupting Dvoretsky to ask: “When you say that even when this manufacturer is … direct[ing the buyers] to use asbestos, you are not liable, are you making a fairness argument? Are you making an efficiency argument? What kind of argument is that?” She offered Dvoretsky an “opportunity to tell me what sense would it make to say, even though you direct the use of asbestos, you can’t be liable for its harms.”

Dvoretsky repeatedly offered his position that a bright-line rule exempting the manufacturers was sensible, but Roberts seemed to share Kagan’s concerns, as he evinced skepticism about the breadth of the rule necessary for Dvoretsky to prevail:

What if you are the only one who knows about it? I mean, the asbestos manufacturer – their scientists haven’t discovered yet that it’s going to kill you, but you have, and … you still don’t have a duty to warn? … I know it’s not this case. But your position is even if you … are telling people to use asbestos with your product, [and] they don’t know that it’s harmful but you do, you have no duty to warn?

At that point, Gorsuch weighed in, explicitly aligning himself with the desire of “Justice Kagan [to address this] as a matter of doctrine and policy.” For Gorsuch, the key problem seemed to be the difficulty of defining any reason why we should be worried about obligating the manufacturers to warn their customers: “Besides the costs of having an additional warning, do you see any other downsides to expanding the scope of the duty to warn in this way?” He acknowledged that “[w]e normally do, you’re right, put the duty to warn with the lowest cost avoider.” But he added that “sometimes it’s expanded” and went on to agree with the sailors that “it has been expanded in this area,” which prompted him to “wonde[r] what are the negatives associated with that? Why is that bad?” Justice Brett Kavanaugh joined in on that point as well, asking at the very close of Dvoretsky’s presentation: “Why are too many warnings bad? … Explain that to me.”

The presentation of Thomas Goldstein on behalf of the sailors had quite a different texture, as the justices allowed him to talk without interruption for an extended period at the beginning of his presentation, which hinged on the contention that it was appropriate to hold the manufacturers responsible for the foreseeable consequences of the use of asbestos at their direction. As time went on, however, it became clear that several of the justices were concerned about defining the boundaries of a rule favoring the sailors. The discussion revolved around a series of hypotheticals, each of which involved the manufacturer of a product that foreseeably would be used in connection with another product that might be dangerous. The principal hypotheticals involved the manufacturers of ashtrays – presumptively not responsible for the harms to tobacco users; flashlights – presumptively not responsible for the harms from leaking batteries; and aircraft – presumptively not responsible for the harms from exploding engines.

Goldstein offered two principal responses. One was that the equipment here was necessarily integrated with the asbestos – it could not be used without it.  That seemed to work well as an answer for the ashtray hypothetical (at least in theory you could use an ashtray for something other than a tobacco receptacle). It did not go over nearly so well for the flashlight hypothetical – as it led Gorsuch to quip “I haven’t used a flashlight without a battery very often.”

Goldstein’s second answer was that the equipment itself contributed to the injury from the asbestos, something less likely to be true in the listed hypotheticals. Sotomayor was particularly receptive to this idea, as she had asked early on in the argument “[h]ow is [the asbestos] not the cause of the injury? The asbestos as sold is perfectly safe. It’s integrated. It’s whole. It doesn’t release molecules. What causes it to degrade is [the equipment, which] heats up to such an extreme degree that it degenerates the asbestos.” It was less clear, though, that the other justices accepted that response from Goldstein.

About the only thing that can be said to summarize is that the justices as a group seemed far from settled by the end of the morning.

[Disclosure: Goldstein & Russell, P.C., whose attorneys contribute to this blog in various capacities, is among the counsel to the respondent in this case. The author of this post, however, is not affiliated with the firm.]

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Argument analysis: Justices dubious about enforcing arbitration agreements for transportation workers

Read more of this story here from SCOTUSblog by Ronald Mann.

Argument analysis: Justices dubious about enforcing arbitration agreements for transportation workers

The argument this morning in New Prime Inc. v. Oliveira displayed something that probably hasn’t been seen this century: a Supreme Court bench predominantly dubious about the enforceability of an arbitration agreement.

The issue in the case is a technical one, though it has considerable practical importance: whether the Federal Arbitration Act’s requirement that courts enforce arbitration agreements applies to independent contractors working in transportation industries (think truckers, workers on planes and boats, etc.). The Federal Arbitration Act has an exemption for the “contracts of employment” of those “workers.” Workers who have those “exempt” contracts are much more likely to avoid arbitration (and retain their right to challenge their conditions of employment in a court) than workers in other industries. The specific question before the Supreme Court is whether the exempt “contracts of employment” are limited to employer/employee relationships or whether they also include contracts with independent contractors. This matters because so many transportation workers operate as independent contractors rather than employees.

The basic strategy of Theodore Boutrous (representing the shipping company New Prime) was to argue that contracts of “employment” are limited to contracts with “employees”; contracts with an independent contractor are simply not “employment” contracts under the exemption. That strategy ran into stiff opposition from the earliest moments of the argument, as Justice Sonia Sotomayor interrupted Boutrous to emphasize Congress’ choice to refer to “workers” rather than “employees.” As Sotomayor noted, the statute:

said it shall apply to any other class of “workers,” not “employees.” It used a much broader term. … We’re trying to decide … what … “contract of employment” means. And if it meant only employees, Congress naturally … would have used the word “any other class of employees,” but instead it chose a much broader word, “workers.”

Things looked much worse for Boutrous when Chief Justice John Roberts promptly expressed his agreement with Sotomayor. Roberts noted how “quickly” Boutrous had tried to “shift the discussion from ‘contracts of employment’ to whether or not there’s an employee/employer relationship. And simply because someone would be considered or not considered an ‘employee’ doesn’t necessarily answer the question of whether it’s a contract of employment.” Turning as he so often does to his personal sense of ordinary speech patterns, Roberts suggested that “[p]eople think naturally of employing an independent contractor,” which for him, at least, suggests that the question for the court to resolve “is not employee/employer. It’s employment.”

Things got even worse for Boutrous when Justice Neil Gorsuch chimed in to offer an appreciative take on the argument presented in the brief for Dominic Oliveira (the worker). Interested as always in theories of interpretation, Gorsuch asked Boutrous “[w]hat do we do about the fact that … your colleague on the other side has documented that back in 1925, which is when the statute was enacted … [the law] didn’t necessarily distinguish between independent contractors and employees with the same degree of care that the law has subsequently come to use.” Notice Gorsuch’s phrasing – he didn’t just say that Oliveira argues that the understanding of “employees” was different in 1925; Gorsuch indicated that he himself was persuaded that it was different – because Oliveira’s counsel (Jennifer Bennett) had “documented” that point to Gorsuch’s satisfaction. Then, just to make sure that there was no doubt about where that left him, Gorsuch commented that “I think you’d agree that we have to interpret it as a reasonable reader would have at that time.”

Of course, if the distinction between “employee” and “independent contractor” was less refined in 1925 than it is now, then the link that Boutrous posits between “contracts of employment” and “employees” has to be even weaker. To make his doubts about Boutrous’ position even clearer, Gorsuch went on to offer a “gotcha” moment, noting that even “your own client doesn’t use” the distinction that Boutrous pressed. Specifically, Gorsuch (apparently relying directly on Bennett’s brief) described the New Prime website’s portrayal of the company as “employing” “independent contractors.”

From that point, the bench became relatively quiescent, with two topics dominating the remainder of the discussion. The first was what Justice Ruth Bader Ginsburg termed the “gateway” question – whether the coverage of the federal statute should be determined first by the court or by the arbitrator. Boutrous had argued in his brief that the court should leave the arbitrability question to the arbitrator, but several justices found that argument wholly unpersuasive. Ginsburg, for example, asked, “[I]f [the statute] puts an entire category … outside the arbitration act entirely, then how can you use the arbitration act?” Similarly, Gorsuch suggested that “[b]efore a court can … issue an order … compelling arbitration, I would have thought it would have had to satisfy itself that it had the power to issue such an order.” Even Roberts thought it would be “quite another thing to say that the arbitrator gets to decide whether a court can … compel arbitration at all.” Faced with a bench so strongly opposed, Boutrous more or less conceded the point, agreeing that “we’d be happy to have the federal district court interpret the contract or this Court could do it.”

For the most part, the justices allowed Bennett to argue without interruption. The principal topic they raised with her was how to handle the distinction between contracts with a company (like Federal Express), which would not be subject to the FAA, and contracts with an individual worker, which would be. Remarkably, she faced no substantial challenges to her central contention that contracts of “employment” include both employees and independent contractors.

There can’t be much doubt about the outcome in a case like this one, involving a dispute between a business and its workers in which Roberts and Gorsuch seem so strongly predisposed to side with the worker. So, notwithstanding the long line of cases reading the Federal Arbitration Act broadly, this one has all the indications of a victory for the worker seeking a day in court. Indeed, it could be a candidate for one of the earliest decisions of the term.

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Argument preview: Maritime dispute presents opportunity for justices to grapple with basic tort rules

Read more of this story here from SCOTUSblog by Ronald Mann.

Argument preview: Maritime dispute presents opportunity for justices to grapple with basic tort rules

Louis Brandeis famously proclaimed that “[t]here is no federal general common law.” Lacking a federal general common law, the law that the federal courts articulate typically involves the interpretation of federal statutes or the Constitution. The grand work of extending traditional judicial conceptions of responsibility and liability into the modern economy is thus left for the most part to the courts of the states. But then along comes a case like Air & Liquid Systems v DeVries, set for argument the last day of the October session.

The case involves a group of Navy sailors (led by respondent John DeVries) injured by exposure to asbestos. The defendants are a group of large companies (including petitioner Air & Liquid Systems) that manufactured equipment that the sailors used. The key fact in the case is that the equipment that the companies sold typically did not include asbestos insulation at the point of sale. For the most part, other companies (now bankrupt) applied the asbestos to the machinery after the Navy purchased it. And to the extent any of the companies sold equipment with asbestos, that asbestos was replaced before the relevant time period by asbestos installed by the same (now bankrupt) third parties. The companies designed their equipment for use with asbestos insulation; the equipment would not in the ordinary course have functioned safely without asbestos insulation.

When injuries that occur at sea – outside the territorial boundaries of any particular state – the appropriate tort rules are found in the general “maritime” law, a body of judge-made federal law for which the ultimate authority is the Supreme Court. And so, when the justices come to the bench next Wednesday they will not have any statutory or constitutional text to interpret. Rather, the most powerful authorities to guide their decisions are the prior decisions of the Supreme Court on maritime questions; the only functional constraint is their shared sense of the proper development of the law of torts.

The most direct consequence of that setting is that the case at bottom is remarkably simple. The companies ask whether they can be held responsible for injuries caused by asbestos that they did not make, sell or distribute. And the companies argue that their connection to the asbestos is so fortuitous that it just makes no sense to impose liability on them for asbestos sold and applied by other companies.

For their part, the sailors present a similarly straightforward argument: manufacturers have a duty to warn users of the known hazards arising from the expected and intended use of their products. The Supreme Court’s cases about maritime negligence traditionally turn on “foreseeability,” with businesses responsible for the foreseeable harms of their business activities. It is undisputed that the manufacturers knew (and intended) that their products would be used with asbestos; they could not practicably function without asbestos insulation. The sailors argue that harms from the asbestos therefore were easily foreseeable by the companies. At bottom, the sailors portray the companies’ position as a “bare-metal” exception to traditional principles of foreseeability: a bright-line rule that companies that sold bare-metal products should not be responsible for the foreseeable consequences of the use of their products with asbestos.

One common theme in the briefs that warrants mention is the role of the Navy – which employed DeVries and the other injured sailors. The Navy is categorically immune from liability for the conditions of the military vessels on which those sailors worked. Indeed, government contractors that supplied equipment to the specifications of the Navy also might be immune from liability under a so-called “government contractor” defense. But that issue is not before the court next week: The rule that the companies seek is not limited to Navy vessels, and the application of the government contractor defense remains for the lower courts.

As with so much of the court’s docket, the outcome here is likely to depend in large part on the framing of the question. If the justices start from the perspective that the companies are liable for the foreseeable consequences of their conduct and ask whether they’ve made the case for a “bare-metal” exception to traditional principles of foreseeability, the court is unlikely to rule for the companies. In the same way, if the justices start from the frame that the companies offer, they are much more likely to exempt them from liability.

[Disclosure: Goldstein & Russell, P.C., whose attorneys contribute to this blog in various capacities, is among the counsel to the respondent in this case. The author of this post is not affiliated with the firm.]

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Argument preview: Justices to consider enforceability of arbitration agreements for transportation workers

Read more of this story here from SCOTUSblog by Ronald Mann.

Argument preview: Justices to consider enforceability of arbitration agreements for transportation workers

All of this has happened before. All of this will happen again. A business signs contracts with its workers (or its customers, or suppliers, or anybody else for that matter), in which the workers agree that they will resolve any disputes before an arbitrator rather than a court. Employees often do not like arbitration, in part because they worry that the arbitrator will be more favorable to the employer than a court. The lower courts hold the agreements unenforceable (reflecting a longstanding judicial suspicion of a contract premised on the notion that employers prefer to limit judicial scrutiny of their behavior). The Supreme Court grants review and in a closely divided decision holds that the Federal Arbitration Act requires that the disputes be sent to arbitration. It would be easy to predict such a fate for New Prime Inc. v. Oliveira, on the argument calendar for the first Wednesday of the new term.

But I’m not at all sure this case will drop into that particular pigeonhole. The case involves an exception from the FAA for “contracts of employment of seamen, railroad employees, or any other class of workers engaged in foreign or interstate commerce.” These particular workers are long-haul truck drivers. For a variety of reasons, the arrangements between trucking companies (such as petitioner New Prime) and the individuals who drive the trucks carrying the goods consigned to the trucking companies often document the drivers as independent contractors rather than employees. In this case, for example, respondent Dominic Oliveira formed a limited liability company, which leased a truck from an affiliate of New Prime. That limited liability company then entered into an “Independent Contractor Operating Agreement,” in which the company undertook to use the truck to drive shipments for New Prime.

If you are a lawyer and you can remember anything from your first-year torts class, perhaps you hear bells going off reminding you that traditionally “independent contractors” are a group distinct from “employees.” If the drivers in question are “independent contractors,” as the documentation suggests, then they are not employees. In that event, perhaps the exception from the FAA for transportation employees does not apply. If that exception does not apply, then the drivers are back in the conventional domain of the FAA, in which their arbitration agreements are guaranteed enforcement as a matter of federal law. That, in sum, is the argument that New Prime presents as a basis for enforcing the arbitration agreements. And given the long line of Supreme Court decisions enforcing arbitration agreements – extending without interruption back beyond the turn of the century – New Prime has to feel pretty good about its chances.

But Oliveira presents some powerful arguments that should give pause. Most obviously, when you look to the actual text of the FAA, you will notice that it does not exempt all transportation “employees.” Rather, it exempts the “contracts of employment” of transportation employees, which is not quite the same thing. The difference might be significant because the term “contracts of employment” was commonly used at the time of the FAA’s adoption (the presidency of Calvin Coolidge) as a general term to describe both contracts with employees and contracts with independent contractors. And so, a textualist, applying the FAA in accordance with the common understanding of the text at the time of its adoption, might be persuaded that the exempted “contracts of employment” include all contracts with transportation workers whether the workers happen to be employees or independent contractors.

The case also includes an antecedent question – whether the applicability of the FAA is a question for the arbitrator or the judge. New Prime can point to several passages in the Supreme Court’s recent cases suggesting that the arbitrator’s authority includes not only resolving of the dispute but also determining the extent to which any particular dispute falls within the arbitrator’s authority. On the other hand, there would be something jarring about a disposition of the case in which the justices sent the case to the arbitrator even if they believed that this was a “contract of employment” exempt from the FAA. My strong sense is that any majority of justices that concludes that Oliveira’s activity is exempt from the FAA will decide that they have the authority to make that conclusion binding.

One point of import – Justice Anthony Kennedy was one of the five justices commonly in the majority when arbitration cases were decided by a 5-4 vote. If this case comes before a bench of eight justices – a reasonable likelihood as I write – then Oliveira’s chances of prevailing would be considerably enhanced. Specifically, because he prevailed below, he would only need four votes from a bench of eight to preserve that victory in the Supreme Court.

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Opinion analysis: Justices approve broad damage recovery for patent-infringing exports

Read more of this story here from SCOTUSblog by Ronald Mann.

Opinion analysis: Justices approve broad damage recovery for patent-infringing exports

This morning’s opinion in WesternGeco v. Ion Geophysical Corp., holding that the Patent Act authorizes a damage award for patent-infringing exports, is far from what you would have expected from the argument. In April when the justices heard from counsel for the parties, the bench engaged in a heated and far-ranging debate that touched on extraterritorial application of the Patent Act as well as basic tort-theory concepts of proximate cause in the like. This morning, though, the justices disposed of the matter with a short and highly formalistic opinion from Justice Clarence Thomas, which barely alludes to those topics. With seven votes for Thomas’ opinion, the concerns of the oral argument and the briefing were relegated almost entirely to a dissent from Justice Neil Gorsuch, joined only by Justice Stephen Breyer.

The case involves Section 271 of the Patent Act, which defines the types of conduct that amount to infringement of a patent. In general, the section applies only to conduct that occurs in the United States. There is an exception, though, in Section 271(f), a provision adopted in response to (and overruling) a notorious Supreme Court case that exonerated a defendant who had manufactured the components of an invention in the United States but had shipped them abroad for assembly into an infringing device. Specifically, Section 271(f) includes within its definition of “infringement” the act of supplying the components of a patented device from the United States. In this case, for example, ION Geophysical manufactured in the United States components that it shipped to companies abroad; when assembled by ION’s customers, those components produced a system for surveying the seafloor that duplicated patented technology held by WesternGeco (perhaps better known by its earlier name Western Geophysical).

The question is what the proper remedy should be for ION’s infringement. The basic premise of the Patent Act (reflected in Section 284) is that the patent-holder should receive full compensation for infringement. Because WesternGeco as a matter of policy did not license its technology, it would have signed service agreements with the parties who bought the components from ION. The lower courts concluded that WesternGeco’s profit from those contracts would have been about $90 million, but they declined to award that amount as damages, reasoning that WesternGeco could not obtain damages for use of the patented device overseas.

Thomas sees it quite differently. He starts by reciting the well-known presumption that federal statutes “apply only within the territorial jurisdiction of the United States,” ornamenting it with his citation of a “medieval maxim” that is new to me: “Statua suo clauduntur territorio, nec ultra territorium disponunt.” (Loosely translated, that means something like “A statute is bound by its own territory and has not effect beyond that domain.”) The parties briefed and debated the question whether that presumption should “apply to statutes, such as § 284, that merely provide a general damages remedy for conduct that Congress has declared unlawful.” Thomas, however, declines to address that question, noting that it “could implicate many other statutes besides the Patent Act.”

Rather, he explains, application of the presumption of extraterritoriality depends on the statute’s “focus,” which he describes as “the object of its solicitude, … the conduct it seeks to regulate, as well as the parties and interests it seeks to protect or vindicate” (quotation cleaned up considerably). Here, Thomas explains, because Section 284 provides “damages adequate to compensate for the infringement,” the focus of this statute is “the infringement.” Because the act that constituted infringement under the relevant portion of Section 271 was the act of supplying components from the United States, Thomas reasons that the “focus” is a wholly domestic act. Thus, he concludes abruptly, “[t]he conduct in this case that is relevant to that focus clearly occurred in the United States,” as it was ION’s domestic act of supplying the components that infringed WesternGeco’s patents. Because Thomas sees the case as “a domestic application of Section 284,” the presumption against extraterritoriality is irrelevant.

Gorsuch’s dissent emphasizes that in every practical way the court’s opinion has validated an award of damages that compensates the patentholder for extraterritorial conduct and notes the disruption that could occur if foreign countries applied a rule of similar breadth to activity within our borders. Thomas dismisses those concerns out of hand, repeating his point that the focus of the statute is infringement and his view that the “infringement” was the act of supply, not the overseas use, and criticizing Gorsuch for “wrongly conflat[ing] legal injury with the damages arising from that injury.”

The only suggestion of a narrowing possibility in the opinion is a brief footnote at the end suggesting that the court “do[es] not address the extent to which other doctrines, such as proximate cause, could limit or preclude damages in particular cases,” a topic that Justice Elena Kagan discussed at oral argument. In context, though, that does not seem likely to provide much of a limiting effect, given the likelihood that the U.S. Court of Appeals for the Federal Circuit already recognizes proximate cause in its framework for the assessment of damages. What we have, then, is a rare reversal of the Federal Circuit for being unduly niggardly in its assessment of the rights of patentholders.

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Opinion analysis: Justices invalidate civil-service appointments of administrative law judges

Read more of this story here from SCOTUSblog by Ronald Mann.

Opinion analysis: Justices invalidate civil-service appointments of administrative law judges

It may be years before the implications of the Supreme Court’s opinion this morning in Lucia v. Securities and Exchange Commission are clear, but at first glance the opinion strikes a major blow at one of the centerpieces of the administrative state – the tradition of civil-service appointments of independent administrative law judges. Specifically, the court holds that the appointments of the administrative judges of the Securities and Exchange Commission violate the Constitution’s appointments clause because they were appointed by commission staff rather than the commission itself. Because the opinion contains no obvious narrowing limitations, it is entirely possible that it will extend to invalidate all existing appointments of ALJs.

Justice Kagan with opinion in Lucia v. SEC (Art Lien)

The clause in question (Article 2, Section 2, Clause 2 of the Constitution) requires that all “officers” of the United States be appointed by the president, by the “courts of law,” or by the “heads of departments.” Because these ALJs (like the ALJs in most executive departments) were appointed by civil-service procedures, it is plain that their appointments are invalid if they are “officers” of the United States. The biggest problem for the defenders of those positions is the 1991 decision in Freytag v. Commissioner, in which the Supreme Court held that “special trial judges” of the tax court were officers for purposes of the appointments clause. It seemed clear at the argument that the justices faced three options: Follow Freytag and invalidate the appointments; read Freytag with narrow disingenuity and preserve the appointments; or reject the Freytag decision as out of touch with modern administrative realities.

Justice Elena Kagan’s succinct opinion for a six-member majority takes the first of those approaches. Reasoning that the judges held to be officers in Freytag “are near-carbon copies of the Commission’s ALJs,” she finds that “Freytag says everything necessary to decide this case.” The first part of Freytag’s two-part test is whether the judges “hold a continuing office established by law,” a point that all parties concede given the career full-time appointments that the ALJs hold. Thus, the only question subject to debate is whether the commission’s ALJs have sufficient discretion over sufficiently important functions to warrant the same treatment as the Freytag judges. And Kagan does not think that is a hard question, because “[b]oth sets of officials have all the authority needed to ensure fair and orderly adversarial hearings—including nearly all the tools of federal trial judges.” Summarizing the ability of the judges to take testimony, conduct trials and enforce compliance with discovery orders, she concludes that “point for point – straight from Freytag – the Commission’s ALJs have equivalent duties and powers as [the Freytag judges] in conducting adversarial inquiries.” Indeed, the most important distinction that Kagan sees between the Freytag judges and the SEC’s ALJs gives the SEC officers even more authority than the Freytag judges had; the tax court was obligated to review all opinions issued by the Freytag judges, while opinions of SEC ALJs automatically become final if the SEC decides not to review them.

After disposing of the merits so easily, the only remaining question is the proper remedy. That question is complicated by the decision of the SEC, after the Supreme Court decided to review Lucia, to ratify the appointments of the judges, so that the judge who heard Lucia’s case now holds an appointment from the commission itself. The court does not address the validity of those post-hoc appointments, but does go out of its way to hold that Raymond Lucia is entitled to another hearing before a new judge; Kagan explains that a second hearing before the same judge would not provide an appropriate remedy for the constitutional violation because that judge “cannot be expected to consider the matter as though he had not adjudicated it before.”

Kagan’s opinion garners the votes of six of the nine justices. On one side, Justices Clarence Thomas and Neil Gorsuch join her opinion, but argue that in future cases the Supreme Court should apply an historical standard that would treat as officers “all federal civil officials that perform an ongoing, statutory duty—no matter how important or significant the duty.” On the other side, Justice Stephen Breyer agrees that the appointments are invalid, although he relies on a narrow argument under the Administrative Procedure Act rather than the constitutional argument. He dissents from Kagan’s remedy, though, arguing that a second hearing before a now-duly-appointed judge should be enough for Lucia. The only dissent on the merits comes from Justice Sonia Sotomayor, joined by Justice Ruth Bader Ginsburg; emphasizing the importance of independent ALJs, she argues that Freytag should be narrowed to exclude the SEC ALJs from officer status.

Kagan’s opinion offers not a word to assess or mitigate the consequences of the Supreme Court’s holding for ALJs elsewhere in the executive branch. It is plain from the briefing that the great majority of those judges are in the Social Security Administration, though a substantial number of ALJs are scattered throughout other departments. Given the relatively fact-specific nature of the assessment in Kagan’s opinion, it is entirely possible that the authority granted to some of those judges could be distinguished from the authority granted to the ALJs of the SEC. Having said that, the briefing does not suggest that there is anything particularly unusual about the role that ALJs play in the SEC. Thus, although it is fair to expect future litigation on the point, it would not be at all surprising if Lucia ended up invalidating all of the existing systems for appointments of ALJs.

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Opinion analysis: Justices limit tolling of statutes of limitations that permits “stacked” class actions

Read more of this story here from SCOTUSblog by Ronald Mann.

Opinion analysis: Justices limit tolling of statutes of limitations that permits “stacked” class actions

Let’s try a free-association game about recent topics in Supreme Court civil procedure cases. If the first topic is “equitable tolling of statutes of limitation,” your answer should be something like “don’t bet on it.” If the second topic is “class actions,” your answer should be something like “good luck with that.” So if I tell you that the question in China Agritech Inc. v. Resh is whether equitable tolling should extend the statutory deadline for filing a class action, you wouldn’t be surprised to hear that Justice Ruth Bader Ginsburg’s opinion for a unanimous bench this morning holds that equitable tolling — a judge-made doctrine that extends the deadlines that otherwise would bar an action as untimely — is not available to validate the putative class action filed in China Agritech.

This particular case involves a tolling doctrine established in 1974 in American Pipe and Construction Co. v. Utah. That case (and the 1983 decision in Crown Cork & Seal Company Inc. v Parker) considered the effect of a failed class action on later filings by the individuals who would have been members of a class if the class action had succeeded. Together, those cases concluded that these individuals should be able to bring their own actions after the class action fails, even if the statute of limitations has expired in the meantime. The question in this case is whether that rule extends to permit not only later individual actions but also later class actions. Despite a reasonably sympathetic reception to the plaintiffs’ position during the oral argument, we now learn that the correct answer is a resounding “no.”

Ginsburg presents the question solely as one of relative judicial efficiency. Application of American Pipe to permit tolling of individual claims, she explains, makes sense “because economy of litigation favors delaying those claims until after a class-certification denial. If certification is granted, the claims will proceed as a class and there would be no need for the assertion of any claim individually.” That rationale does not apply to later class filings, she reasons, because there is an affirmative value in having all the class filings as soon as possible. Where early filing of the individual claims would simply clog dockets to no purpose in the event the court certifies a class, “early assertion of competing class representative claims” is beneficial because it allows “the district court [to] select the best plaintiff with knowledge of the full array of potential class representatives and class counsel.”

She points out that this is particularly true in actions (like this one) brought under the Private Securities Litigation Reform Act, which requires the early class filer to send notice of commencement of the class action to all potential plaintiffs. “With notice and the opportunity to participate in the first … round of class litigation, there is little reason to allow plaintiffs who passed up those opportunities to enter the fray several years after class proceedings first commenced.”

Citing an opinion written by then-Judge Samuel Alito, Ginsburg also makes a point that Chief Justice John Roberts and Justice Neil Gorsuch emphasized at the argument – that application of American Pipe has the potential to extend the statute of limitations repeatedly. “The time to file individual actions [under American Pipe] once a class action ends is finite, extended only by the time the class suit was pending; the time for filing successive class suits, if tolling were allowed, could be limitless.” The action in China Agritech, for example, is the third putative class action filed arising out of the same fact pattern. This “further distinction between the individual-claim tolling established by American Pipe and tolling for successive class actions” cuts strongly against extending American Pipe because “[e]ndless tolling of a statute of limitations is not a result envisioned by American Pipe.”

Finally, Ginsburg is unpersuaded that “declining to toll the limitation period for successive class suits will lead to a ‘needless multiplicity’ of protective class-action filings.” For one thing, the U.S. Courts of Appeals for the 2nd and 5th Circuits (which include New York and Texas) “declined to entertain out-of-time class actions in the 1980s” but seem not to “have experienced a disproportionate number of duplicative, protective class-action filings.” Empirical evidence aside, though, Ginsburg’s central response to that possibility is to repeat her earlier point, that “a multiplicity of class-action filings is not necessarily ‘needless,’” because they “may aid a district court in determining, early on, whether class treatment is warranted, and if so, which of the contenders would be the best representative.”

Perhaps the most interesting thing about the opinion is the unremittingly functional nature of the justifications that Ginsburg offers to support the result. As I mentioned in my argument preview, the justices over the last several years have been cutting back on the role of judicially crafted exceptions to statutory limitations periods, voicing the sentiment that federal courts intrude on the legislative power when they permit (or bar) actions based on equitable adjustments to a deadline set by Congress. The last decision in that line of cases came last year in CalPERS v. ANZ Securities, which held that American Pipe tolling applies only to statutes of limitations, not statutes of repose. One likely explanation for the absence of any such reasoning from this opinion is that Ginsburg dissented from the 5-4 decision in CalPERS. Perhaps if this case had been argued earlier in the term we would have seen a concurrence emphasizing the broader criticisms of equitable tolling made by the majority in CalPERS. But as it is, the only concurrence in China Agritech comes from Justice Sonia Sotomayor (who joined Ginsburg’s dissent in CalPERS), and she writes not to offer broader reasons for rejecting tolling but rather to suggest a narrowing justification for the decision – which she would limit to PSLRA cases in which potential class representatives receive notice of the initial class filing.

[Disclosure: Goldstein & Russell, P.C., whose attorneys contribute to this blog in various capacities, is among the counsel on an amicus brief in support of the respondents in this case. The author of this post is not affiliated with the firm.]

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Opinion analysis: Justices reject state-court justification for limiting tribal immunity from state-court actions to adjudicate title to land

Read more of this story here from SCOTUSblog by Ronald Mann.

Opinion analysis: Justices reject state-court justification for limiting tribal immunity from state-court actions to adjudicate title to land

Rarely have I read a set of opinions that so closely tracked the discussion at oral argument as the opinions this morning in Upper Skagit Indian Tribe v Lundgren. The case involves a narrow and technical question of sovereign immunity: whether the immunity of a federally recognized Indian tribe protects it from a suit in state court to adjudicate the tribe’s claim to land located outside the tribe’s reservation. The Washington Supreme Court rejected the tribe’s plea of immunity, reasoning that tribal immunity never applies to suits that are brought “in rem” (against the land), as opposed to “in personam” (against the tribe itself). The Supreme Court’s decision this morning rejected the state court’s analysis for the time being, though the various opinions leave little reason to think that the tribe ultimately will prevail.

To give a little context, the case involves a 40-acre piece of land adjacent to the reservation of the Upper Skagit tribe in northwestern Washington, which the tribe purchased in 2013. When it undertook to survey the land, the tribe discovered a barbed-wire fence running for about 1,300 feet a few feet inside the boundary of the parcel. About one acre of the parcel was on the far side of the fence, adjacent to land owned by the respondent Lundgrens. When the tribe threatened to tear down the fence and build a fence on the parcel’s boundary, the Lundgrens claimed that they  own the land outside the fence under rules for “adverse possession,” because they have continuously exercised control over the land for more than half a century, with the acquiescence of the parcel’s prior owner.

The problem the Lundgrens faced in the Supreme Court is that there is almost no support for the distinction between “in rem” and “in personam” actions that the Washington Supreme Court offered to allow the Lundgrens’ suit to proceed. By the time of the oral argument, even the Lundgrens admitted that the only basis for that distinction was the Supreme Court’s 1992 decision in County of Yakima v Confederated Tribes and Bands of Yakima Nation, and the justices who discussed the question at the argument seemed to think Yakima could not support such a broad intrusion on sovereign immunity. Justice Neil Gorsuch’s brief opinion for the court bluntly dismissed the state court’s reliance on Yakima as “error,” explaining that “Yakima did not address the scope of tribal sovereign immunity.” Rather, he explained, “it involved only a much more prosaic question of statutory interpretation concerning the Indian General Allotment Act of 1887.” Thus, Yakima “resolved nothing about the law of sovereign immunity,” as the Lundgrens “[c]ommendably … acknowledged … at oral argument.”

If this were the only thing going on in the opinions, the tribe would win the case easily. The problem for the tribe, though, is that the reason the Lundgrens abandoned Yakima as a justification for the decision below is that they found a much stronger basis for rejecting the tribe’s sovereign immunity: the idea that a sovereign has no immunity for actions involving “immovable property” located in the territory of another sovereign.  As Gorsuch acknowledged, that doctrine has been recognized by the Supreme Court for more than 200 years. If the doctrine were adopted as an attribute of tribal sovereign immunity, the tribe would have no immunity from the Lundgrens’ action, because the Lundgren parcel is outside the Upper Skagit reservation. The majority of the justices, though, declined to resolve that question, “leav[ing] it to the Washington Supreme Court to address these arguments in the first instance.” The court noted that “[d]etermining the limits on the sovereign immunity held by Indian tribes is a grave question; … and the alternative argument for affirmance did not emerge until late in this case, … only when the United States filed an amicus brief.” Closing his opinion, Gorsuch suggested that “[t]he source of confusion in the lower courts that led to our review was the one about Yakima … , and we have dispelled it.  That is work enough for the day.”

To make matters worse for the tribe, the two separate opinions that accompanied Gorsuch’s opinion for the majority underscored that the justices are unlikely to welcome a decision by the Washington Supreme Court granting the tribe immunity on remand.  First, Chief Justice John Roberts (joined by Justice Anthony Kennedy) wrote briefly to suggest that it would be “intolerable” if a grant of immunity left the Lundgrens without any legal remedy to protect the land they have occupied since World War II. As his comments at the argument suggested, Roberts was particularly incensed by the suggestion of the solicitor general that the Lundgrens were free to “[g]o onto the disputed property and chop down some trees … or otherwise attempt” to force the tribe to come into court against them. Roberts found himself “skeptical that the law requires private individuals – who had no prior dealings with the Tribe – to pick a fight in order to vindicate their interests.”

Even more pointedly, Justice Clarence Thomas (joined by Justice Samuel Alito) filed a sharp dissent, almost twice as long as Gorsuch’s opinion for the majority, arguing that the “immovable property” exception to sovereign immunity is so well settled that the justices should have reached out to decide the question in this case rather than leaving it for the Washington Supreme Court. Thomas offered a tour de force of historical arguments, citing among other things four treatises that predated adoption of the Constitution, numerous decisions of the Supreme Court addressing the problem in the context of foreign sovereigns, and even longstanding guidance from the State Department on the question. For Thomas, the idea that a sovereign would be immune from litigation over land it held in the territory of another sovereign is so ridiculous that it was absurd for the court to leave the question unresolved. As Thomas put it, it is “difficult to justify” subjecting the Lundgrens to yet another round of litigation over the tribe’s claim of “a sweeping and absolute immunity that no other sovereign has ever enjoyed—not a State, not a foreign nation, and not even the United States.”

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Opinion analysis: Justices reject Patent and Trademark Office’s rules for partial consideration of petitions for inter partes review

Read more of this story here from SCOTUSblog by Ronald Mann.

Opinion analysis: Justices reject Patent and Trademark Office’s rules for partial consideration of petitions for inter partes review

The second of yesterday’s two patent decisions was SAS Institute v. Iancu. As I explained in my post about Oil States Energy Services v. Greene’s Energy Group, both cases involve the process for “inter partes review” that Congress added to the Patent Act in 2012, a process under which a competitor (or, for that matter, anyone at all) can ask the director of the Patent and Trademark Office to reconsider a previously issued patent. If the director agrees to reconsider the patent, the Patent Trial and Appeal Board then conducts a trial-like proceeding adjudicating the validity of the patent. The Supreme Court held yesterday in Oil States that Article III permits Congress to allocate that responsibility to an executive agency rather than an Article III court. This decision, though, invalidates a major part of the administrative rules under which the board has been conducting those reviews.

The specific topic before the court in SAS is the board’s practice of instituting a “partial” inter partes review, agreeing to review some but not all of the challenged claims of a patent. Commonly (as in this case), challengers file petitions that allege defects with all or substantially all of the claims in an issued patent. Seeking to allocate its adjudicative resources more efficiently, the board routinely agrees only to review the claims it finds substantial. At about the same time as it rejected constitutional challenges to the entire process, the U.S. Court of Appeals for the Federal Circuit approved the process for “partial” inter partes review. The justices, though, reject that process as wholly inconsistent with the statutory design. Notably, Justice Neil Gorsuch (who dissented sternly in Oil States) writes for a narrow 5-4 majority, over dissenting votes by Justices Ruth Bader Ginsburg, Stephen Breyer, Sonia Sotomayor and Elena Kagan (all of whom joined the majority in Oil States).

Gorsuch’s majority opinion does two things. The first is the less interesting – a workmanlike explanation of the reasons that persuade the majority that the partial-review process is not consistent with the best reading of the statute. To that end, Gorsuch starts by emphasizing the statute’s command that the board “shall issue a final written decision with respect to the patentability of any patent claim challenged by the petitioner.” Liberally sprinkling citations that I can omit here, he explains: “This directive is both mandatory and comprehensive. The word ‘shall’ generally imposes a nondiscretionary duty. And the word ‘any’ naturally carries ‘an expansive meaning.’ … So when [the statute] says the Board’s written decision ‘shall’ resolve the patentability of ‘any patent claim challenged by the petitioner,’ it means the Board must address every claim the petitioner has challenged.”

Gorsuch buttresses that reading of the provision with a discussion of the statute’s structure, which contemplates a proceeding guided by the petitioner rather than the director:

This language doesn’t authorize the Director to start proceedings on his own initiative. … Instead, the statute envisions that a petitioner will seek an inter partes review … guided by a petitioner describing “each claim challenged.” … From the outset, we see that Congress chose to structure a process in which it’s the petitioner, not the Director, who gets to define the contours of the proceeding.

Similarly, the statute only authorizes the director to decide “whether to institute … review … pursuant to a petition.” For Gorsuch, the “language indicates a binary choice – either institute review or don’t. And by using the term ‘pursuant to,’ Congress told the Director what he must say yes or not to: an inter partes review that proceeds “'[i]n accordance with’ or ‘in conformance to’ the petition” (quoting definitions of “pursuant to” from the Oxford English Dictionary). Again, Gorsuch suggests that it would make no sense for the statute to require the patentholder to respond “to the petition” filed by the challenger if Congress expected the director to decide the scope of the proceeding; the statute would call for a response to the director’s institution notice.

Gorsuch is similarly unpersuaded by the director’s “attempts [at] a policy argument … that partial institution is efficient because it permits the Board to focus on the most promising challenges and avoid spending time and resources on others.” Gorsuch notes the competing arguments about institutional design from the challenger and briskly washes his hands of the matter: “Each side offers plausible reasons why its approach might make for the more efficient policy. But who should win that debate isn’t our call to make. Policy arguments are properly addressed to Congress, not this Court.”

The second thing the opinion does is far more interesting: It explains why the statute is not sufficiently ambiguous to warrant deference under Chevron U.S.A. Inc. v. Natural Resources Defense Council, Inc., which requires courts to defer to reasonable agency interpretations of ambiguous statutes. Remarkably, Gorsuch starts by noting SAS Institute’s bold suggestion that the Supreme Court abandon Chevron entirely. What Gorsuch does not do is dismiss the suggestion out of hand; indeed, he goes so far as to offer a citation to a well-regarded pre-Chevron opinion of Judge Henry Friendly explaining that “the meaning of a statutory term” is more suited for “judicial [rather than] administrative judgment.” Gorsuch then suggests that “whether Chevron should remain is a question we may leave for another day.” Falling back on the statutory analysis summarized above, Gorsuch can close by asserting that “[t]he statutory provisions before us deliver unmistakable commands,” leaving “no room in this scheme for a wholly unmentioned ‘partial institution’ power that lets the Director select only some challenged claims for decision.”

On the credibility of that discussion, suffice it to say that Breyer’s dissent (joined by Ginsburg, Sotomayor and Kagan) reads the ambiguity question quite differently. For the dissenters, the majority amends the statute to require adjudication of “‘any patent claim challenged by the petitioner’ in the petitioner’s original petition,” when the agency reasonably read the statute to require adjudication of “‘any patent claim challenged by the petitioner’ … ‘in the inter partes review proceeding.’”

If Sessions v. Dimaya, decided last week, and Oil States had not persuaded us, Gorsuch’s opinion here stakes out his position as the court’s leading skeptic of the administrative state. As I suggested in my post on Oil States yesterday, we can expect more on that front during the remaining weeks of the term.

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Opinion analysis: Justices rebuff constitutional attack on administrative re-examination of patents

Read more of this story here from SCOTUSblog by Ronald Mann.

Opinion analysis: Justices rebuff constitutional attack on administrative re-examination of patents

This morning brought decisions in both of the patent cases argued in November, with the government prevailing on the constitutional question raised in Oil States Energy Services v. Greene’s Energy Group, but losing on the statutory question presented in SAS Institute v. Iancu. Both cases involve the process of inter partes review added to the Patent Act in 2012 as part of the Leahy-Smith America Invents Act. That process authorizes a petition for inter partes review by any competitor that believes that the Patent and Trademark Office erred in issuing a patent on an invention that already existed in prior art. If the PTO determines (in its sole discretion) that the petition has merit, it institutes a trial-like review process that can result, if successful, in amendment or invalidation of the patent, subject to review in the U. S. Court of Appeals for the Federal Circuit.

The question before the justices is whether the adjudication of those petitions by an administrative body (the Patent Trial and Appeal Board) is an exercise of the “judicial power” that under Article III of the Constitution can be exercised only by the federal courts. If it seems fanciful to suppose at this late date that the Constitution could invalidate such a seemingly innocuous administrative process, consider the example of the Bankruptcy Code, provisions of which have been invalidated for intrusions on Article III twice since its initial adoption in 1978.

As it happens, though, inter partes review found a more sympathetic audience than some of Congress’ earlier innovations. Writing for seven of the justices (all but Chief Justice John Roberts and Justice Neil Gorsuch), Justice Clarence Thomas took a straight and simple route to upholding the statute. Sidestepping the longstanding dissatisfaction with the court’s distinction between “public rights” and “private rights,” Thomas set the dispute directly within that framework, which gives Congress “significant latitude to assign adjudication of public rights to entities other than Article III courts.” Quoting the two cases that invalidated provisions of the Bankruptcy Code, Thomas acknowledged that the “Court has not ‘definitively explained’ the distinction between public and private rights,” and that “its precedents applying the public-rights doctrine have ‘not been entirely consistent.’” Still, he says, the framework is adequate for this case because it so clearly involves a public right – “reconsideration of the Government’s decision to grant a public franchise.”

Thomas divides the problem into two steps, first explaining why “the decision to grant a patent is matter involving public rights.” Once he establishes that point, he can argue that, because “[i]nter partes review is simply a reconsideration of that grant, … Congress has permissibly reserved the PTO’s authority to conduct that reconsideration.”

Two key points support the view that patents are matters of purely “public right.” The first is the notion, illustrated by quotations from earlier cases, that the patent is a “creature of statute law” that “take[s] from the public rights of immense value, and bestow[s] them upon the patentee.” The second is that the Constitution explicitly allocates to Congress the power to “promote the Progress of Science and useful Arts” by granting patents; Congress’ decision to authorize the executive branch to grant patents is thus a constitutionally sanctioned delineation of “the executive power,” something which “need not be adjudicated in an Article III court.”

The bigger hurdle is the second step, explaining why the trial-like process in which one competitor persuades the PTO to invalidate a patent is similarly “executive.” On that point, Thomas explains that because its purpose is to ensure that “patent monopolies are kept within their legitimate scope, … inter partes review involves the same interests as the determination to grant a patent in the first instance.” Thomas analogizes the patent to a franchise “to erect a toll bridge” or “to build railroads or telegraph lines,” as to which it has long been held that Congress can “qualify the grant by reserving its authority to revoke or amend the franchise … through legislation or an administrative proceeding.”

Thomas acknowledges a set of 19th-century cases in which the Supreme Court explained not only that “[t]he only authority competent to set a patent aside, or to annul it … is vested in the courts of the United States, and not in the department which issued the patent,” but also that administrative invalidation would “deprive the applicant of his property without due process of law, and would be in fact an invasion of the judicial branch.” Although those quotations might sound pretty persuasive at first reading, Thomas dismisses them as irrelevant in the modern context, “best read as a description of the statutory scheme that existed at that time” and shedding no light on “Congress’ authority under the Constitution to establish a different scheme.”

Given his interest in historical arguments, it will surprise nobody that Thomas gives extended attention to the argument that adjudication of the validity of an issued patent is “judicial” because those disputes ordinarily were resolved by a suit at common law in the English courts of the 18th century. Acknowledging the routine nature of judicial attention to patent litigation, though, “does not establish that patent validity is a matter that, from its nature, must be decided by a court.” The key point for Thomas is that “there was another means of canceling a patent in 18th-century England, which more closely resembles inter partes review: a petition to the Privy Council to vacate a patent.” English patents were subject at the time of the framing to validation by the Privy Council – admittedly a branch of the executive. Thomas therefore argues that “it was well understood at the founding that a patent system could include a practice of granting patents subject to potential cancellation in the executive proceedings of the Privy Council.” Because “nothing in the text or history of the Patent Clause or Article III … suggest[s] that the Framers were not aware of this common practice,” Thomas concludes that the Privy Council practice is enough to validate inter partes review.

It is remarkable that Thomas managed to secure seven votes for his entire opinion. Sharp divisions marked previous cases in the area, several of which were decided without any single majority opinion. The strong majority here could go a long way to establishing the public-right/private-right distinction – however incoherent it seems to the outsider – as a firm boundary delineating areas plainly within congressional control.

Having said that, the opinions as a whole do display a considerable divergence of viewpoint among the justices. First, three of the justices (Justice Stephen Breyer, joined by Justices Ruth Bader Ginsburg and Sonia Sotomayor) suggest that they would go much further in tolerating administrative innovation, emphasizing that the Supreme Court’s opinion says nothing about procedures in which “private rights” are “adjudicated [outside] Article III courts … by agencies.” For that group, sympathetic to the efficiencies of the administrative state, the distinction between public rights and private rights is not a useful way to identify limits on congressional power, though they are happy to use it as a way to define plainly permissible processes.

The most notable writing, though, is on the other side of the matter — a powerful dissent from Gorsuch, joined by Roberts. For Gorsuch, the “efficient scheme” that Congress has designed, however “well intended,” is an unacceptable “retreat from the promise of judicial independence.” Although the opening paragraphs of his opinion mention in passing some of the administrative abuses that have plagued inter partes review (such as the decision by the director to “pack” panels with favorable judges), he rests the weight of his analysis on his reading of the English history.

For Gorsuch, the point of Privy Council review is that executive review was fading away by the time of the Constitution’s framing, with the last actual invalidation occurring in 1746. Gorsuch portrays a progression from the early understanding of patents as “feudal favors” involving “the exclusive right to do very ordinary things, like operate a toll bridge or run a tavern” to a modern understanding of “invention patents … as a procompetitive means to secure to individuals the fruits of their labors and ingenuity.” Offering a remarkable paean to the value of strong protections of intellectual property, Gorsuch argues that the shift toward patents as the earned fruit of “a contract between the crown and the patentee” brought with it a shift toward purely judicial adjudication, coinciding with the “dying gasp” of the Privy Council’s authority in this area.

Having drawn such a firm distinction between “invention patents” and the patronage-like grants of franchises, Gorsuch is particularly critical of the majority’s reliance on cases sanctioning administrative limitations on franchises. For him the better analogy is the land patent – creating a right in real estate that could not exist without the grant from the sovereign. As he points out, courts always have held that the invalidation of interests in land, even when granted by the sovereign, necessarily involves an exercise of the judicial power. He sees no reason to treat invention patents any differently, and thus would reject the scheme for inter partes review as an intolerable incursion on the judicial power. He closes with a characteristically rhetorical flair, ornamented by a quote from the Federalist Papers: “[T]he loss of the right to an independent judge is never a small thing. It’s for that reason Hamilton warned the judiciary to take ‘all possible care … to defend itself against’ intrusions by the other branches.”

Paired with his concurrence last week in Sessions v. Dimaya (to say nothing of his majority opinion in SAS also issued yesterday), Gorsuch’s dissent begins to reveal his deep-seated skepticism about the propriety and utility of the administrative state. Coming hard on the heels of Monday’s argument in Lucia v. Securities and Exchange Commission, these opinions suggest that Gorsuch will not be eager to uphold the appointment practices challenged there.

[Disclosure: Goldstein & Russell, P.C., whose attorneys contribute to this blog in various capacities, is among the counsel on an amicus brief in support of the petitioner in this case. The author of this post, however, is not affiliated with the firm.]

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