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SUPREME COURT DOCKET REPORT

Mayer Brown's Supreme Court and Appellate Practice Group distributes a Docket Report whenever the Supreme Court grants certiorari in a case of interest to the business community. We also email the Docket Report to our subscribed members and if you don't already subscribe to the Docket Report and would like to, please click here.

October Term 2012 - June 24, 2013

June 24, 2013

Today the Supreme Court granted certiorari in six cases of interest to the business community:


Constitutionality of Recess Appointments

The Recess Appointments Clause of the Constitution gives “[t]he President . . . Power to fill up all Vacancies that may happen during the Recess of the Senate, by granting Commissions which shall expire at the End of [Congress's] next Session.” Art. II, § 2, Cl. 3. Today, the Supreme Court granted certiorari in National Labor Relations Board v. Noel Canning, No. 12-1281, to decide: (1) whether the President’s recess-appointment power may be exercised during a recess that occurs within a Senate session, or is instead limited to recesses that occur between enumerated sessions of the Senate; (2) whether the President’s recess-appointment power may be exercised to fill any vacancies that exist during a recess, or is instead limited to vacancies that first arose during that recess; and (3) whether the President’s recess-appointment power may be exercised when the Senate is convening every three days in pro forma sessions.

On January 4, 2012, President Obama invoked the Recess Appointments Clause and appointed three individuals to fill vacant seats on the National Labor Relations Board. This date fell after the Second Session of the 112th Congress began, during an intra-session adjournment in which the Senate convened every three days for short sessions without conducting any substantive business. All three NLRB vacancies had arisen before the conclusion of the First Session of the 112th Congress.

Shortly after these recess appointments, a three-member panel of the NLRB affirmed a decision by an administrative-law judge holding that Respondent Noel Canning had committed an unfair labor practice. Noel Canning filed a petition for review of the NLRB order in the D.C. Circuit. In addition to contesting the order on the merits, Noel Canning contended that the President’s appointments were invalid because the Senate was not in recess within the meaning of the Recess Appointments Clause when the NLRB appointments were made. Noel Canning claimed that the NLRB’s order was invalid because the Board lacked the three-member quorum necessary to issue decisions.

The D.C. Circuit granted Noel Canning’s petition and vacated the NLRB’s order. The court of appeals held that the constitutional authority to fill a vacancy can be used only between enumerated sessions of the Senate, and not during any other mid-session breaks. This part of the ruling was unanimous. A two-judge majority further ruled that the vacancy-filling power applies only to vacancies that open up during a formal recess between enumerated sessions, and not to any vacancies that exist during a recess. More recently, the Third Circuit reached the same conclusion.

Although the D.C. Circuit did not rule on the question whether the Senate’s pro forma sessions prevented a break from qualifying as a “recess” for purposes of the Recess Appointments Clause, Noel Canning asked the Supreme Court to grant certiorari on this question in addition to those raised in the NLRB’s petition for certiorari. The Supreme Court’s order directed the parties to brief and argue this question in addition to the two questions presented by the government’s petition.

This case is of great public importance, as demonstrated by the fact that all the parties to the case—and all the amici curiae—agreed that the Court should grant review. The D.C. Circuit’s decision called into question not only every final decision by the NLRB since January 4, 2012, but also prior decisions by the NLRB with recess-appointed members, as well as decisions by other federal agencies—notably the Consumer Financial Protection Bureau, whose Director was given a recess appointment by the President at the same time and under the same circumstances as the NLRB members. In addition to its implications for a wide array of prior decisions, the case has significant forward-looking implications for the President’s ability to fill vacancies using the recess-appointment power. (Mayer Brown’s decision alert discussing the implications of the D.C. Circuit's ruling is available here.)

Absent extensions, which are likely, amicus briefs in support of the petitioner will be due on August 15, 2013, and amicus briefs in support of the respondent will be due on September 16, 2013. Any questions about the case should be directed to Andrew J. Pincus (+1 202 263 3220) in our Washington office.


Labor-Management Relations Act—Effect of Anti-Bribery Statute on Voluntary-Recognition Agreements

Section 302 of the Labor-Management Relations Act, 29 U.S.C. § 186(a)(2), makes it criminal for an employer “to pay, lend, or deliver, any money or other thing of value” to a labor union that seeks to represent its employees or to any officer or employee of such a union; the Act also prohibits the labor union from receiving the same.

Today, the Supreme Court granted certiorari in Unite Here Local 355 v. Mullhall, No. 12-99, to determine whether (and under what circumstances) the “access” and “neutrality” provisions in a voluntary-recognition agreement between an employer and a union may constitute a “thing of value” that can give rise to liability under Section 302.

The petitioner, United Here Local 355, is a labor union that sought to represent the employees of a gaming company. The union and the employer entered into a “card-check agreement,” in which the employer agreed to recognize the union as the collective-bargaining representative of its employees if the majority of the employees signed cards supporting the union. The employer further agreed to provide the union with access to the employer’s premises and with lists of employee names and addresses and to remain neutral during the union’s organizing campaign. In return, the union agreed not to strike, picket, or engage in “other economic activity” at the employer’s facilities. 

An employee filed suit in federal court under Section 302, seeking to prevent enforcement of the agreement. The district court dismissed the complaint for failure to state a claim, holding that “the assistance promised in the [agreement] does not constitute a thing of value” for purposes of Section 302. In reaching this conclusion, the court relied on decisions by the Third and Fourth Circuits, which had both held that compliance with access and neutrality provisions in a voluntary-recognition agreement is not a “thing of value” under Section 302.

The Eleventh Circuit reversed. It agreed with the Third and Fourth Circuits that “[e]mployers and unions may set ground rules for an organizing campaign, even if the employer and union benefit from the agreement.” But the Eleventh Circuit stated that it would be “too broad” to hold “that all neutrality and cooperation agreements are exempt” from Section 302, explaining that “innocuous ground rules can become illegal payments if used as valuable consideration in a scheme to corrupt a union or to extort a benefit from an employer.” The Eleventh Circuit remanded the case for the district court to consider “the reason why” the union and employer had entered into the agreement.

The Supreme Court granted certiorari today to resolve the split between the Third and Fourth Circuits and the Eleventh Circuit, and to decide the effect of Section 302 on card-check, access, and neutrality agreements. The Court’s decision will be important to all employee-representative organizations, all employers with unionized workforces, and any parties considering entering into a voluntary-recognition agreement.  

Absent extensions, which are likely, amicus briefs in support of the petitioner will be due on August 15, 2013, and amicus briefs in support of the respondent will be due on September 16, 2013. Any questions about the case should be directed to Andrew S. Rosenman (+1 312 701 8744) in our Chicago office.


Shareholder-Derivative Actions—Pre-Suit Demands for Corrective Action

Today, the Supreme Court granted certiorari in UBS Financial Services Inc. of Puerto Rico, et al. v. Union de Empleados de Muelles de Puerto Rico PRSSA Welfare Plan, No. 12-1208, to resolve a circuit split over the standard of appellate review that applies to a district court’s dismissal of a shareholder-derivative action for failure to adequately plead that a pre-suit demand on the corporation’s board of directors was futile.

Federal Rule of Civil Procedure 23.1 requires plaintiffs in shareholder-derivative actions to state with particularity in the complaint either that a demand to take corrective action was made but the corporation declined to protect its own interests, or that such a demand would have been futile.

In UBS, the district court dismissed a shareholder-derivative suit on the ground that the plaintiffs had not fulfilled either pleading requirement. The First Circuit vacated that dismissal, applying a de novo standard of review.  The court reasoned that rulings concerning the legal sufficiency of pleadings are generally reviewed de novo, and found no justification for treating the pleadings in a shareholder-derivative action any differently. Other courts of appeals apply a more deferential abuse-of-discretion standard of review because demand futility is an individualized, fact-based judgment that turns on the specific allegations in each case.

The Supreme Court’s decision in this case will be of great interest to the business community because the pre-suit demand gives the corporation advance notice of an impending shareholder-derivative suit and gives the corporate directors the opportunity to determine, in the first instance, what action the corporation should take with respect to the claims. In addition, the Court may elaborate further on the standards for appellate review of actions dismissed at the pleading stage.

Absent extensions, which are likely, amicus briefs in support of the petitioner will be due on August 15, 2013, and amicus briefs in support of the respondent will be due on September 16, 2013. Any questions about the case should be directed to Joseph De Simone (+1 212 506 2559) in our New York office or Joshua D. Yount (+1 312 701 8423) in our Chicago office.


Bankruptcy—Powers of Bankruptcy Courts

In Stern v. Marshall, 131 S. Ct. 2594 (2011), the Supreme Court held that Congress could not bestow on bankruptcy courts—which Congress creates under authority from Article I of the Constitution—the power to make final decisions on issues traditionally within the purview of Article III courts. In a follow-up to Stern, the Court granted certiorari today in Executive Benefits Insurance Agency v. Arkison, No, 12-1200, to determine whether the parties themselves may bestow such power on a bankruptcy court by consent, whether consent can be implied, and whether a bankruptcy court may submit to a district court proposed findings of fact and conclusions of law in a “core” bankruptcy proceeding.

Because the Court’s ultimate decision will clarify the powers of bankruptcy courts, it should be of interest to all businesses and individuals who are or may be involved in a bankruptcy proceeding.

In 2006, Respondent Peter H. Arkison, the trustee for Chapter 7 debtor Bellingham Insurance Agency, Inc., brought claims as part of the bankruptcy proceeding against Petitioner Executive Benefits Insurance Agency. Arkison claimed, among other things, that EBIA received fraudulent conveyances from Bellingham. The bankruptcy court granted summary judgment in favor of Arkison, and the district court affirmed. After EBIA had filed its opening brief on appeal to the Ninth Circuit, the Supreme Court issued its opinion in Stern.

The Ninth Circuit then affirmed in EBIA. The court of appeals held that, although Stern applied to fraudulent-conveyance claims, the bankruptcy court nonetheless had the power to decide the claim because EBIA, through its litigation conduct (e.g., itsfailure to object to Arkison’s summary-judgment motion or to raise the issue in its opening brief) had impliedly consented to adjudication of the claim by the bankruptcy court. In so holding, the court of appeals concluded that the exercise of adjudicatory power by a bankruptcy court in such circumstances did not implicate separation-of-powers concerns because it did not involve “the encroachment or aggrandizement of one branch at the expense of the other.”

The Ninth Circuit further held that in “core” proceedings subject to Stern, a bankruptcy court may submit proposed findings of fact and conclusions of law to a district court in lieu of a final decision, even though the statute authorizing bankruptcy courts to issue proposed findings and conclusions—28 U.S.C. § 157(c)(1)—applies solely to non-core proceedings. In so holding, the court of appeals reasoned that even after Stern, Congress’s intent to grant bankruptcy courts adjudicatory power coextensive with constitutional limitations remained. Thus, the court of appeals concluded, the power granted bankruptcy courts by 28 U.S.C. § 157(b) to “hear and determine cases” in core proceedings, although no longer including the power to issue final decisions, encompassed the lesser power to propose findings of fact and conclusions of law.

The petition identifies a conflicting Sixth Circuit decision on the consent issue, and a conflicting Seventh Circuit decision on the proposed-findings-and-conclusions issue. See Waldman v. Stone, 698 F.3d 910 (6th Cir. 2012), cert. denied, 133 S. Ct. 1604 (2013); Ortiz v. Aurora Health Care (In re Ortiz), 665 F.3d 906, 915 (2011).

Absent extensions, which are likely, amicus briefs in support of the petitioner will be due on August 15, 2013, and amicus briefs in support of the respondent will be due on September 16, 2013. Any questions about the case should be directed to Joshua D. Yount (+1 312 701 8423) in our Chicago office.


Clean Air Act—Validity of Cross-State Air Pollution Rule

Air pollution originating in one State can affect air quality in downwind States. The Clean Air Act addresses these cross-border externalities by requiring the Environmental Protection Agency to establish National Ambient Air Quality Standards (“NAAQS”). 42 U.S.C. §§ 7408, 7409. Pursuant to that responsibility, EPA promulgated the Cross-State Air Pollution Rule (commonly known as the Transport Rule), which defines emissions-reduction responsibilities for 28 upwind States based on those States’ contributions to downwind States’ air-quality problems. See 76 Fed. Reg. 48,208 (Aug. 8, 2011). The Clean Air Act also requires States to adopt state implementation plans that regulate air-pollutant emissions both in order to meet EPA’s air-quality standards within their own borders, and in order not to “contribute significantly” to downwind States’ efforts to attain or maintain compliance with those standards. See 42 U.S.C. § 7410(a)(2)(D)(i)(I). Separately, the Clean Air Act requires a plaintiff who wishes to challenge EPA action under the Act to file a petition for review within 60 days after the EPA’s action is published in the Federal Register. 42 U.S.C. § 7607(b). Today, in EPA v. EME Homer City Generation, L.P., No. 12-1182, and American Lung Association v. EME Homer City Generation, L.P., No. 12-1183, the Supreme Court granted certiorari to address the validity of the Transport Rule and the court of appeals’ original jurisdiction to hear the challenge in the first place.

Because the rule implementing the Clean Air Act may require some emissions sources to adopt pollution-control measures within certain cost limits, the decision in these consolidated cases could have significant implications for power generators’ obligations. And because a holding on the jurisdictional question is likely to define broadly when and under what circumstances regulatory challenges may be brought under the Clean Air Act, the decision will be important to all regulated entities.

The EPA has adopted a series of rules over the years to address the Clean Air Act’s requirements that States address the cross-border “transport” of air pollution. In promulgating the Transport Rule, the agency used a two-step methodology for determining States’ obligations not to contribute significantly to downwind States’ NAAQS compliance efforts: First, the EPA identified those upwind States that affected downwind States’ NAAQS compliance efforts in certain defined ways; and second, the EPA determined how much emissions could be reduced if sources such as power generators were required to implement pollution controls that were cheaper than a certain cost per ton of pollution reduced. The agency then weighed these models to determine what cost-per-ton threshold was most effective in reducing upwind emissions or downwind pollution, and set the States’ obligations accordingly.

A coalition of power generators, coal companies, labor unions, industry groups, and state and local governments subsequently petitioned for review of the Transport Rule, raising arguments that, if accepted, would (in EPA’s view) undermine the validity of a series of prior NAAQS rules that had been treated as valid for years. The D.C. Circuit invalidated the Transport Rule for two independent reasons. First, the court concluded that the rule exceeded the authority that the Clean Air Act gave to the EPA. Second, the court held that the rule failed because at the time when the EPA defined the States’ obligations, it did not give the States a reasonable period to implement those obligations in the first instance. Instead, it simultaneously issued federal plans for implementation under a provision that allows the agency to fill the gap when a State’s own implementation plan is deficient.

In its petition for certiorari in No. 11-1182, the EPA argued that the court of appeals should not have considered either argument because (a) the coalition challenging the rule had not preserved the statutory argument in administrative proceedings; and also (b) the arguments were, in substance, a request for out-of-time collateral invalidations of separate orders not before the court. On the merits, the EPA argued that the court of appeals should have deferred to the agency’s reasonable interpretation of the ambiguous term “significant.” In a parallel petition for certiorari in No. 11-1183, the American Lung Association and other intervenors supporting the agency before the court of appeals urged the Supreme Court to uphold the rule on similar grounds. The Court granted certiorari limited to the questions presented in the EPA’s petition.
 
Absent extensions, which are likely, amicus briefs in support of the petitioners will be due on August 15, 2013, and amicus briefs in support of the respondent will be due on September 16, 2013. Any questions about this case should be directed to Timothy S. Bishop (+1 312 701 7829) in our Chicago office.


Indian Gaming Regulatory Act—Jurisdiction

The Indian Gaming Regulatory Act grants United States district courts jurisdiction over “any cause of action initiated by a State or Indian tribe to enjoin a class III gaming activity located on Indian lands and conduced in violation of any Tribal-State compact entered into under” the Act. 25 U.S.C. § 2710(d)(7)(A)(ii). Today, the Supreme Court granted certiorari in Michigan v. Bay Mills Indian Community, No. 12-515, to decide two questions: (1) whether a federal court has jurisdiction to enjoin activity that otherwise violates the IGRA but takes place outside of Indian lands; and (2) whether the IGRA abrogates an Indian tribe’s sovereign immunity with respect to a State’s claim that the tribe is gaming illegally, where the State alleges that the gaming is not located on Indian lands.

The dispute in Bay Mills centers on a casino opened in Vanderbilt, Michigan, approximately 100 miles away from the Bay Mills Indian Community’s reservation. Michigan alleged that the casino is operating illegally and is outside Indian lands, raising claims under the IGRA, federal common law, and state law.

The Sixth Circuit held that there was no jurisdiction for claims under the IGRA. The IGRA defines Indian lands as “(A) all lands within the limits of any Indian reservation; and (B) any lands title to which is either held in trust by the United States . . . or held by any Indian tribe or individual subject to restriction by the United States against alienation and over which an Indian tribe exercises power.” 25 U.S.C. § 2703(4). The Sixth Circuit held that because the Vanderbilt casino is on neither the Bay Mills reservation nor land held in trust or otherwise subject to restriction by the United States against alienation, it is not on Indian lands for purposes of the IGRA. As a consequence, the Sixth Circuit concluded that Michigan’s suit did not meet the IGRA’s jurisdictional prerequisite that the gaming activity to be enjoined be “located on Indian lands.”

The Sixth Circuit also rejected Michigan’s federal common-law and state-law claims, holding that tribal sovereign immunity barred suit on those claims. In so doing, the Sixth Circuit held that § 2710, which abrogates tribal sovereign immunity with respect to gaming on Indian lands, does not abrogate tribal sovereign immunity with respect to gaming outside of Indian lands. This ruling and a similar one by the Eleventh Circuit conflict with decisions of the Seventh and Tenth Circuits about the extent to which § 2710 abrogates tribal sovereign immunity.

The Court’s decision could have a significant impact on tribal gaming businesses subject to the IGRA. This case will determine the extent to which states can enforce their gaming laws against tribal businesses operating on non-Indian lands.

Absent extensions, which are likely, amicus briefs in support of the petitioners will be due on August 15, 2013, and amicus briefs in support of the respondents will be due on September 16, 2013. Any questions about this case should be directed to Stephen J. Kane (+1 312 701 8857) in our Chicago office.


Today, the Supreme Court also invited the Solicitor General to file briefs expressing the views of the United States in two related cases of interest to the business community:

Limelight Networks, Inc. v. Akamai Technologies, Inc., No. 12-786, and Akamai Technologies, Inc. v. Limelight Networks, Inc., No. 12-960: The questions presented are (in No. 12-786) whether the Federal Circuit erred in holding that a defendant may be held liable for inducing patent infringement under 35 U.S.C. § 271(b) even though no one has committed direct infringement under § 271(a), and (in No. 12-960) whether a party may be liable for infringement under either of those statutory provisions where two or more entities join together to perform all the steps of a process claim.


Mayer Brown's Supreme Court & Appellate practice ordinarily distributes a Docket Report when the Supreme Court grants certiorari in a case of interest to the business community and a Docket Report-Decision Alert when the Court decides such a case. We hope that you find the Docket Reports and Decision Alerts useful, and welcome feedback on them (which should be addressed to Richard B. Katskee, their general editor, at rkatskee@mayerbrown.com or +1 202 263 3222).

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Mayer Brown's Supreme Court & Appellate practice distributes a Docket Report whenever the Supreme Court grants certiorari in a case of interest to the business community and distributes a Docket Report-Decision Alert whenever the Court decides such a case. We hope you find the Docket Reports and Decision Alerts useful, and welcome feedback on them (which should be addressed to Andrew Tauber, their general editor, at atauber@mayerbrown.com or +1 202 263 3324).

Mayer Brown Supreme Court Docket Reports provide information and comments on legal issues and developments of interest to our clients and friends. They are not a comprehensive treatment of the subject matter covered and are not intended to provide legal advice. Readers should seek specific legal advice before taking any action with respect to the matters discussed. 



 
 
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