MAYER, BROWN & PLATT
SUPREME COURT DOCKET REPORT
2000 Term, Number 1 / September 26, 2000
Today the Supreme
Court granted certiorari in twelve cases, five of which are of potential
interest to the business community. Amicus briefs in support of the petitioners
are due on Monday, November 13, 2000, and amicus briefs in support of the
respondent are due on Wednesday, December 13, 2000. Any questions about these
cases should be directed to Donald Falk (202-263-3245), Eileen Penner
(202-263-3242), or Miriam Nemetz (202-263-3253) in our Washington office.
Seventh Amendment — Appellate Review of New Trial Order. The Seventh
Amendment prohibits federal courts from re-examining any "fact tried by a jury"
except to the extent permitted by "the rules of the common law." In Gasperini v.
Center for Humanities, Inc., 518
U.S. 415 (1996), the Supreme Court rejected a Seventh Amendment challenge to
the application in a diversity case of a state-law substantive standard
permitting the grant of a new trial where damages were excessive. The Court made
clear, however, that "the review standard" must be "applied by the federal trial
court judge, with appellate control of the trial court's ruling limited to
review for ‘abuse of discretion.'" Id. at 419 (emphasis added). The Supreme
Court granted certiorari in District of Columbia v. Tri-County Industries, Inc.,
No. 99-1953, to decide whether the Seventh Amendment right to a jury trial
requires closer appellate scrutiny of orders granting new trials than of orders
obtained a building permit from the District of Columbia to convert an empty
warehouse into a soil decontamination facility. The District's Department of
Consumer and Regulatory Affairs ("DCRA") summarily suspended the permit in
response to public opposition to the project. Two days later, an inspector
issued a stop work order based on unlawful storage of soil in the building. The
DCRA separately suspended the permit when Tri-County did not respond to the
notice of violation. Rather than pursuing an administrative appeal of the
suspensions, Tri-County abandoned the project because it believed political
forces would keep it from receiving a fair hearing before the DCRA.
Tri-County then sued
the District under 42 U.S.C. § 1983, alleging that the summary suspension had
violated Tri-County's Fifth Amendment right to procedural due process and had
caused Tri-County to lose profits. The district court granted summary judgment
to the District, but the D.C. Circuit reversed, ordering summary judgment for
Tri-County on liability and remanding for a trial limited to the issue of
damages. See 104 F.3d
455 (1997). A jury then awarded $5 million to Tri-County. On the District's
motion for a new trial, the district court found fault with some of its
evidentiary rulings, rulings that it believed contributed to a damages verdict
that was grossly excessive, speculative, and further unjustified in light of
Tri-County's failure to mitigate its damages by administratively challenging
either suspension. The district court ordered a new trial unless Tri-County
agreed to a remittitur to $1 million. Tri-County refused the remittitur, and the
jury at the second trial awarded Tri-County only $100.
The D.C. Circuit
reversed the new trial order and reinstated the original $5 million verdict. 200
F.3d 836 (2000). Although the court of appeals stated that it "review[ed]
the district court's grant of a new trial for abuse of discretion," it relied on
pre-Gasperini precedent mandating "[a] more searching inquiry * * * if the new
trial is granted than if denied * * * because of the concern that a judge's
nullification of the jury's verdict may encroach on the jury's important
fact-finding function." Id. at 840 (internal quotation marks omitted). Using
this standard, the D.C. Circuit held that (1) Tri-County's evidence created a
jury issue regarding its alleged failure to mitigate (id. at 840-841); (2) the
award was neither remote nor speculative in light of the "largely unchallenged"
evidence of damages presented by Tri-County (id. at 841-842); and (3) the award
was not grossly excessive because it was "less than half of the future profits
estimate" (id. at 842). The court of appeals also disagreed with the district
court's conclusion that it had abused its discretion in making evidentiary
rulings at trial. Ibid. Rather, the D.C. Circuit concluded that "the district
court, in granting a new trial based on a revised view of its original rulings,
did abuse its discretion." Ibid.
By contrast with the
D.C. Circuit, the Seventh Circuit has overruled pre-Gasperini precedent
requiring especially close appellate scrutiny of orders granting new trials. See
Medcom Holding Co. v. Baxter Travenol Laboratories, Inc., 106 F.3d 1388,
1397 (7th Cir. 1997). Several other courts of appeals have cited Gasperini in
applying traditional review for abuse of discretion. Still other circuits, like
the D.C. Circuit, have adhered to pre-Gasperini precedent requiring heightened
scrutiny of new trial orders. See, e.g., Wilburn v. Maritrans GP, Inc., 139 F.3d
350, 363 (3d Cir. 1998).
In an era of runaway
jury verdicts, this case is of substantial importance to all businesses.
Corporate defendants are frequently subjected to extravagant awards of damages.
As a consequence, businesses have much to lose if the Supreme Court approves
severe limitations on the power of a district court to grant a new trial where
thin or questionable evidence supports a verdict or where the trial court
reconsiders its own discretionary rulings.
Attorney's Fees — "Catalyst Theory" in Civil Rights Cases. Most
federal civil rights statutes, and many other federal statutes that create
private rights of action, authorize a court to award reasonable attorney's fees
and costs to a "prevailing party," e.g., 42 U.S.C. § 3613(c)(2); id. §122205;
id. § 1988(b), id. § 1365(d). Before 1992, it was "settled law * * * that relief
need not be judicially decreed in order to justify a fee award under [these
provisions]. A lawsuit sometimes produces voluntary action by the defendant that
affords the plaintiff all or some of the relief he sought through a judgment —
e.g., * * * a change in conduct that addresses the plaintiff's grievances. When
that occurs, the plaintiff is deemed to have prevailed despite the absence of a
formal judgment in his favor." Hewitt v. Helms, 482
U.S. 755, 760-61 (1986). The Supreme Court's opinion in Farrar v. Hobby, 506
U.S. 103 (1992), however, cast doubt on this "catalyst theory" of attorney's
fees: "to qualify as a prevailing party, a civil rights plaintiff * * * must
obtain an enforceable judgment against the defendant from whom fees are sought,
or comparable relief through a consent decree or settlement." Id. at 111. The
Court granted certiorari in Buckhannon Board & Care Home, Inc. v. West
Virginia Department of Health & Human Resources, No. 99-1848, to decide
whether plaintiffs may continue to recover attorney's fees in civil rights cases
under the "catalyst theory."
Residential board and
care homes are senior living facilities that aim to provide a more "home-like"
setting to residents who do not require the constant assistance afforded by
institutional care. West Virginia regulations that were in effect in 1996
required all residents of residential board and care homes to be capable of
"self-preservation" in the event of a fire — that is, to be able to evacuate the
premises without assistance. A board and care home, a trade association, and a
home resident brought suit challenging those regulations under the Fair Housing
Amendments Act of 1988 ("FHAA"), 42 U.S.C. §§ 3601 et seq., and the Americans
with Disabilities Act of 1990 ("ADA"), 42 U.S.C. §§ 12132 et seq.
While the litigation
was pending, the legislature repealed the self-preservation regulations, mooting
the case. Petitioners then moved for attorney's fees under the FHAA and the ADA,
both of which provide that a "prevailing party" may recover reasonable
attorney's fee from the opposing party. 42 U.S.C. §§ 3613(c)(2), 12205. Invoking
the catalyst theory, petitioners argued that the chronology of events strongly
indicated that the legislature had repealed the regulations in response to the
lawsuit, and that they therefore should be considered to have prevailed within
the meaning of the attorney's fees provisions.
The district court
denied fees in an unpublished decision, relying on Fourth Circuit precedent
holding that the catalyst theory did not survive Farrar. See S-1 and S-2 v.
State Board of Education, 21 F.3d 49 (4th Cir. 1994) (en banc). The court did
observe that, "[w]ere [the catalyst] argument viable, plaintiffs might well
prevail on this theory."
The Fourth Circuit
affirmed, also in an unpublished decision that followed S-1 and S-2..
courts of appeals have continued to recognize the catalyst theory after Farrar,
and many of those courts have expressly rejected the Fourth Circuit's reasoning
in S-1 and S-2. See, e.g., New Hampshire v. Adams, 159 F.3d
680, 685 (1st Cir. 1998); Marbley v. Bane, 57 F.3d 224,
234 (2d Cir. 1995); Baumgartner v. Harrisburg Housing Auth., 21 F.3d 541,
545-550 (3d Cir. 1991); Payne v. Board of Educ., 88 F.3d
392, 397 (6th Cir. 1996); Cady v. City of Chicago, 43 F.3d 326 (7th Cir.
1994); Little Rock Sch. Dist. v. Pulaski County Special Sch. Dist. 1, 17 F.3d
260, 262-263 (8th Cir. 1994); Kilgore v. City of Pasadena, 53
F.3d 1007, 1010 (9th Cir. 1995); Beard v. Teska, 31 F.3d 942, 951 (10th Cir.
1994); Morris v. City of West Palm Beach, 194 F.3d
1203, 1207 (11th Cir. 1999). Last Term, in Friends of the Earth, Inc. v.
Laidlaw Environmental Servs., Inc., 120
S. Ct. 693, 711 (2000), the Supreme Court noted this conflict among the
circuits, but explained that the case before it was not the appropriate vehicle
for resolving it.
This case is of significant interest to the business
community. The decision will control attorney's fee awards under federal civil
rights statutes, including Title VII and the Age Discrimination in Employment
Act, and may well affect other federal fee-shifting provisions that contain
similar language. Any business that faces discrimination lawsuits or suits under
federal laws that contain similar fee-shifting provisions thus has an interest
in the outcome of this case.
Federally Insured Depository Institutions — FIRREA — D'Oench, Duhme
Doctrine. In D'Oench, Duhme & Co., Inc. v. Federal Deposit Insurance
U.S. 447 (1942), the Supreme Court held, as a matter of federal common law,
that a private party cannot enforce a purported obligation of a federally
insured depository institution against the federal insurer unless the obligation
is in writing. The D'Oench, Duhme doctrine now bars a variety of claims and
defenses that rely on facts or agreements that are not memorialized in a bank's
official records. The Federal Deposit Insurance Act long ago codified the
D'Oench, Duhme doctrine in part, barring the assertion against the FDIC of any
agreement unless the agreement is written and meets other formal requirements.
However, the statutory bar applies only to the extent that the agreement "tends
to diminish or defeat the interest of the [FDIC] in any asset acquired by it * *
* as security for a loan or by purchase or as receiver of any insured depository
institution." 12 U.S.C. § 1823(e)(1). Congress amended this provision slightly
in the Financial Institutions Reform, Recovery, and Enforcement Act (FIRREA).
See ibid.; see also id. § 1821(d)(9). The Supreme Court granted certiorari in
Murphy v. Beck, No. 00-46, to determine whether the common law D'Oench, Duhme
doctrine survives the broadening of the federal regulatory scheme with the
enactment of FIRREA in 1989.
Bruce Murphy invested
in a real estate development partnership that defaulted on approximately $50
million in loans from Southeast Bank. After foreclosing on the property, the
bank became insolvent and was placed into FDIC receivership.
s-1Murphy sued the
FDIC as receiver for the bank, claiming that the bank had been a joint venturer
with the partnership and that the bank's wrongful actions in that capacity had
caused the partnership to default. There was no written agreement in the bank's
records memorializing the asserted joint venture. The district court granted
summary judgment to the FDIC, finding that D'Oench, Duhme barred Murphy's
claims. The D.C. Circuit reversed. Murphy v. FDIC, 61 F.3d 34 (1995). The court
of appeals observed (id. at 39) that the Supreme Court had held that the
"extensive framework of FIRREA" foreclosed the application of federal common law
to matters within the scope of the statute. O'Melveny & Myers v. FDIC, 512
U.S. 79, 87 (1994). Accordingly, the D.C. Circuit held that the D'Oench, Duhme
doctrine had "disappeared" with the enactment of FIRREA in 1989. 61 F.3d at 40.
Because the FDIC had not shown that a specific asset would be diminished if
Murphy prevailed, the D.C. Circuit held that Section 1823(e) also did not bar
On remand, the FDIC
moved to dismiss the complaint for failure to state a claim. The district court
transferred the case, sua sponte, to the Southern District of Florida, where the
original transactions occurred. The Florida court substituted Jeffrey Beck for
the FDIC in his capacity as successor agent for Southeast Bank, and granted the
motion to dismiss in reliance on Eleventh Circuit decisions rejecting the D.C.
Circuit's holding in Murphy v. FDIC.
The Eleventh Circuit
affirmed. 208 F.3d 959 (2000). The Eleventh Circuit observed that Section
1823(e) originally had been enacted in 1950, and adhered to its view that FIRREA
was not intended to displace "the harmonious, forty-year coexistence of the
statute and the D'Oench doctrine." Id. at 964 (quoting Motorcity of
Jacksonville, Ltd. v. Southeast Bank, 120 F.3d 1140, 1144 (11th Cir. 1997) (en
The conflict among the
circuits is unusually plain: the Eleventh Circuit rejected the D.C. Circuit's
resolution of the same issue in the same case. The Fourth Circuit, like the
Eleventh Circuit, has held that the D'Oench, Duhme doctrine remains valid. See
Young v. FDIC, 103 F.3d 1180, 1187 (4th Cir. 1997). The Third, Eighth, and Ninth
Circuits have agreed with the D.C. Circuit. See FDIC v. Deglau, 207 F.3d 153,
171 (3rd Cir. 2000); DiVall Insured Income Fund Ltd. Partnership v. Boatmen's
First Nat'l Bank, 69 F.3d 1398, 1402 (8th Cir. 1995); Lido Financial Corp. v.
Summers, 122 F.3d 825, 828-829 (9th Cir. 1997). In addition, a non-binding FDIC
policy statement asserts that the FDIC generally will not invoke D'Oench, Duhme
as to transactions postdating the enactment of FIRREA. See 62 Fed. Reg. 5984
(1997). This case is of substantial importance to businesses that deal with
banks and federally insured depository institutions, particularly if the
relationships may undergo changes based on oral agreements. Moreover, because
private successors-in-interest to the FDIC have successfully asserted the
D'Oench, Duhme doctrine — as Beck did here — the bar may operate long after the
FDIC has ceased to be the receiver for an institution.
National Labor Relations Act — Definition of "Supervisors. "The
National Labor Relations Act excludes from its protections "any individual
employed as a supervisor." 29 U.S.C. § 152(3). The Act defines "supervisors" as
persons who, "in the interest of the employer," exercise over other employees
authority that "is not merely of a routine or clerical nature, but requires the
use of independent judgment." Id. § 152(11). In National Labor Relations Board
v. Health Care & Retirement Corp., 511 U.S. 571 (1994), the Supreme Court
ruled that the NLRB, in holding that a nurse who directed less-skilled employees
in connection with the treatment of patients was not exercising authority "in
the interest of the employer," had strayed from the plain language of the Act in
improperly creating a special test of supervisory status for the health care
industry. The Court granted certiorari in National Labor Relations Board v.
Kentucky River Community Care, Inc., No. 99-1815, to decide whether the NLRB's
new approach to evaluating the supervisory status of nurses comports with the
statute. The Court also will decide whether the NLRB permissibly assigns
employers the burden of proving supervisory status.
River Community Care (KRCC) operates the Caney Creek Rehabilitation Center.
Caney Creek is staffed around the clock by registered nurses ("RNs") and
licensed practical nurses ("LPNs") who are responsible for implementing medical
treatment plans for the facility's residents. The RNs' duties include providing
medical care directly to residents, ensuring that the LPNs provide the correct
medication to residents, and working with rehabilitation assistants. In the
evenings, the RNs are the highest-ranking staff members at the Center; at those
times, they are designated as "building supervisors" and are in charge of the
facility and rehabilitation staff.
In 1997, a union
petitioned the NLRB for certification as the collective bargaining
representative for Caney Creek's 110 employees. KRCC objected to union
certification, claiming, among other things, that its registered nurses could
not be included in any proposed bargaining unit because those employees were
supervisors. The NLRB concluded that the RNs were not supervisors, and ordered
KRCC to bargain with the union. In so ruling, the NLRB cited its "well-settled
rule" that the party claiming that a particular position is supervisory, and
hence excluded from the Act, has the burden of proof.
The Sixth Circuit
reversed. See 193 F.3d 444 (1999). Under the NLRB's interpretation, a nurse's
direction of a less-skilled employee administering patient care does not involve
"independent judgment," but is instead "routine," because the nurses "have the
ability to direct patient care by virtue of their training and expertise, not
because of their connection to ‘management.'" Id. at 453. Rejecting that view,
the Sixth Circuit found that the Caney Creek RNs did exercise "independent
judgment" when they directed LPNs to perform patient care, arranged for staff
coverage, and acted as building supervisors. Id. Suggesting that the NLRB was
not applying its usual definition of "independent judgment" to nurses, the court
concluded that the NLRB's decision was not entitled to deference in this case
"because the rule announced differed from the NLRB's actual application of this
rule." Id. The court also chastised the NLRB for ignoring its "repeated
admonition that ‘[t]he [NLRB] has the burden of proving that employees are not
supervisors.'" Id. (quoting Grancare, Inc. v. NLRB, 137 F.3d 372, 375 (6th Cir.
1998)) (emphasis added).
The Third and Fourth
Circuits, like the Sixth Circuit, have rejected NLRB's interpretation of
"independent judgment" to exclude judgment exercised by health care providers.
NLRB v. Attelboro Assocs., 176 F.3d 154 (3d Cir. 1999); NLRB v. Grancare, Inc.,
170 F.3d 662 (7th Cir. 1999) (en banc); Beverly Enterprises, Virginia, Inc. v.
NLRB, 165 F.3d 290 (4th Cir. 1998). By contrast, the District of Columbia,
First, Seventh, Eighth, and Ninth Circuits have accepted the NLRB's
construction. Northern Montana Health Care Center v. N.L.R.B., 178 F.3d 1089
(9th Cir. 1999); NLRB v. Hilliard Devel. Corp., 187 F.3d 133 (1st Cir. 1999);
Beverly Enterprises, Minnesota, Inc. v. NLRB, 148 F.3d 1042 (8th Cir. 1998);
Beverly Enterprises-Pennsylvania, Inc. v. NLRB, 129 F.3d 1269 (D.C. Cir. 1997)
(per curiam). The Sixth Circuit's rejection of the NLRB's allocation of the
burden of proof conflicts with the decisions of several other circuits. See
Beverly Enterprises, Mass., Inc. v. NLRB, 165 F.3d 960 (D.C. Cir. 1999); New
York Univ. Med. Ctr. v. NLRB, 156 F.3d 405 (2d Cir. 1998); Schnuck Markets, Inc.
v. NLRB, 961 F.2d 703 (8th Cir. 1992); NLRB v. Bakers of Paris, Inc., 929 F.2d
1427 (9th Cir. 1991).
This case is of
obvious importance to health care providers, but the assignment of the burden of
proof of an employee's supervisory status is significant to all businesses
subject to the National Labor Relations Act. In addition, the Court's
interpretation of the statutory phrase "independent judgment" may determine when
highly trained workers in other industries are classified as supervisors.
Americans with Disabilities Act — Accommodations in Professional Athletic
Competitions. The Supreme Court granted certiorari in PGA Tour, Inc. v.
Martin, No. 00-24, to decide, first, whether the "public accommodations"
provisions in Title III of the Americans with Disabilities Act ("ADA"), 42
U.S.C. §§ 12181 et seq., apply to the playing areas of professional athletic
competitions, and, if so, whether Title III requires the sponsors of those
competitions to grant selective waivers of their substantive rules to
accommodate disabled competitors.
The PGA Tour sponsors
professional golf competitions. Casey Martin is a disabled professional golfer.
Martin suffers from a congenital vascular condition that impedes circulation in
his right leg. Martin's condition limits his ability to walk, and causes him
pain. In 1997, Martin entered the PGA Tour's National Qualifying Tournament, and
requested a waiver of the rule requiring all competitors to walk the course
during the competition. The PGA Tour declined Martin's request on the grounds
that (i) walking the course injects stress and fatigue into the competition,
which the Tour contended are fundamental elements of championship-level golf,
and (ii) all competitors must compete under the same rules to ensure the
integrity of the competition.
Martin sued under the ADA to enjoin the PGA
Tour from enforcing the "walking rule." The district court granted the
injunction. 994 F. Supp. 1242 (D. Or. 1998).
The Ninth Circuit
affirmed. 204 F.3d 994 (2000). The court of appeals declined to compartmentalize
golf courses used in championship-level tournaments into (i) competition areas
that are off limits to the general public and (ii) spectator areas that are
places of public accommodation. Rather, the Ninth Circuit ruled that "golf
courses are public accommodations." Id. at 997. The court concluded that
allowing Martin to use a golf cart would not fundamentally alter the nature of
the competitions. Id. at 999-1002. The Ninth Circuit believed that, in light of
the level of stress and fatigue Martin experienced, "providing Martin with a
golf cart would not give him an unfair advantage." Id. at 1002.
The day after the
Ninth Circuit issued its decision in Martin, the Seventh Circuit reached the
opposite conclusion in a case that involved essentially the same facts. See
Olinger v. United States Golf Association, 205 F.3d 1001 (7th Cir. 2000), pet.
for cert. pending, No. 00-434 (filed Sept. 20, 2000). In Olinger, the court of
appeals rejected a disabled golfer's claim that Title III of the ADA required
the United States Golf Association (USGA) to allow him to use a golf cart in the
U.S. Open and its qualifying tournaments. The petition for certiorari in
Olinger, in which the USGA acquiesced, remains pending. Mayer, Brown and Platt
has represented the USGA at every stage of that case.
Martin is of
substantial interest to professional sports competitions and other businesses
that operate places of public accommodation within the meaning of Title III. The
Ninth Circuit's decision appears to extend Title III (relating to "Public
Accommodations") to encompass job requirements for persons engaged in producing
goods and services for the public (i.e., participants and workers). That
reasoning could import Title III standards into areas that Congress purposefully
excluded from Title I (relating to "Employment"), permitting workplace
discrimination suits by non-employees (like Martin and Olinger) who may not sue
under Title I, and by employees of small businesses that fall below the
threshold number of employees for coverage under Title I, but operate places of
public accommodation covered by Title III.
This Mayer, Brown, Rowe & Maw Supreme Court Docket Report provides information and
comments on legal issues and developments of interest to our clients and
friends. The foregoing is not a comprehensive treatment of the subject matter
covered and is not intended to provide legal advice. Readers should seek
specific legal advice before taking any action with respect to the matters