Mayer Brown's



2000 Term, Number 11 / March  05, 2001

Today the Supreme Court granted certiorari in four cases, three of which are of potential interest to the business community. Amicus briefs in support of the petitioners are due on Thursday, April 19, 2001, and amicus briefs in support of the respondents are due on Monday, May 21, 2001. The Court also invited the Solicitor General to express the views of the United States in an additional case of interest to the business community. 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.

1. Fair Credit Reporting Act — Statute of Limitations — Discovery Rule. Section 618 of the Fair Credit Reporting Act ("FCRA") establishes a two-year limitations period for claims arising under that statute. See 15 U.S.C. § 1681p. The limitations period begins to run on the "date on which the liability arises." Ibid. Section 618 contains a single express exception to that rule: where a defendant has "willfully misrepresented any information required under [the FCRA] to be disclosed to an individual and the information so misrepresented is material to the establishment [of the claim]," the action may be brought "within two years after discovery by the individual of the misrepresentation." Ibid. The Supreme Court granted certiorari in TRW, Inc. v. Andrews, No. 00-1045, to decide whether Section 618 incorporates a general discovery rule that would permit a plaintiff to sue under the FCRA at any time within two years of her discovery of a claim even if the claim is not based on an alleged material and willful misrepresentation by the defendant.

Adelaide Andrews (Plaintiff) disclosed her social security number and certain other identifying information on an intake questionnaire with a new physician. A year later, a receptionist in the physician's office, whose name was Andrea Andrews, began applying for credit cards and other forms of credit using Plaintiff's social security number. Several of the credit providers requested credit reports from major credit reporting agencies, including TRW. After verifying that the last name matched Plaintiff's social security number, TRW issued the requested credit reports, and eventually the receptionist obtained a credit card linked to Plaintiff's social security number (and thus her credit record). The receptionist did not make payments on the new credit card. Plaintiff discovered the fraud when she sought to refinance her home.

More than two years after the last credit report was issued, but within two years of her discovery of the receptionist's fraud, Plaintiff sued TRW in federal district court, alleging violations of the FCRA and state law. The district court granted summary judgment to TRW on the claim that TRW negligently disclosed her credit report to lenders approached by the receptionist. The court found the claim time-barred because it was filed more than two years after the last disclosure. (TRW prevailed before a jury on other claims.)

The Ninth Circuit reversed. 225 F.3d 1063 (2000). The court of appeals observed that, in general, federal statutes of limitations begin to run when the plaintiff "knows or has reason to know that she was injured." Id. at 1066. The court did not believe that the limitations of the express discovery rule in Section 618 provided a reason not to apply a general discovery rule to all FCRA claims. Id. at 1066-1067. Because Plaintiff sued within two years of discovering that her credit record had been disclosed without her consent, the Ninth Circuit reinstated her FCRA claim and her related state-law claim for punitive damages based on the same alleged FCRA violation. Id. at 1068.

The Ninth Circuit recognized that its decision directly conflicts with decisions of the Third, Seventh, and Eleventh Circuits. See 225 F.3d at 1066 (citing Houghton v. Insurance Crime Prevention Inst., 795 F.2d 322 (3d Cir. 1986); Rylewicz v. Beaton Servs., Ltd., 888 F.2d 1175 (7th Cir. 1989); Clay v. Equifax, Inc., 762 F.2d 952 (11th Cir. 1985)). The other Circuits have held that the application of a general discovery rule would render the express exception superfluous, violating the fundamental principle that statutes should be construed to give effect to each of their provisions. See, e.g., Houghton, 795 F.2d at 325.

This case is of obvious interest to the financial industry. A broader array of businesses may wish to respond to the Ninth Circuit's suggestion that a broad discovery rule applies to all federal statutes of limitations, even where a limitations provision explicitly confines a discovery rule to a subset of actions.

2. Civil Rights — Availability of Damages Action Against Private Entity Acting under Color of Federal Law. In Bivens v. Six Unknown Named Agents of Federal Bureau of Narcotics, 403 U.S. 388 (1971), the Supreme Court recognized a private right of action against individual federal agents for damages caused by their violation of constitutionally protected rights. In FDIC v. Meyer, 510 U.S. 471 (1994), the Supreme Court unanimously refused to extend Bivens to allow suits for damages against federal agencies themselves. The Supreme Court granted certiorari in Correctional Services Corp. v. Malesko., No. 00-860, to decide whether to recognize a cause of action for damages against private corporations acting under color of federal law.

Corrections Service Corporation ("CSC") operated a halfway house under a contract with the Federal Bureau of Prisons. John E. Malesko, an inmate in the halfway house, suffered a heart attack after a CSC official refused to allow him to take the elevator to his room on the fifth floor. Malesko filed a Bivens claim against CSC, claiming that CSC required him to walk up the stairs despite knowing that he had a heart condition and that climbing stairs would put him at medical risk. The district court dismissed the case, relying on Meyer.

The Second Circuit reversed. 229 F.3d 374 (2000). The court of appeals concluded that Meyer was not dispositive "because private entities acting on behalf of the federal government are not the equivalent of federal agencies." Id. at 380. The court concluded that imposing Bivens liability on private corporations would not have "the type of direct impact on federal fiscal policy that the Supreme Court in Meyer was concerned would result from imposing Bivens liability directly upon federal agencies." Ibid. The Second Circuit did not believe that the Supreme Court in Meyer had "implicitly overruled" a "long line" of court of appeals decisions extending Bivens liability to private corporations "without making reference to any of them." Id. at 381.

Two other Circuits have addressed the issue of extending Bivens liability to private corporations in light of Meyer. Like the Second Circuit, the Sixth Circuit has recognized a Bivens action against a private corporation. See Hammons v. Norfolk Southern Corp., 156 F.3d 701 (1998). By contrast, the D.C. Circuit overruled a pre-Meyer decision allowing such actions and held that Meyer precludes Bivens suits against private entities. See Kauffman v. Anglo-American School of Sofia, 28 F.3d 1223 (1994).

This case is of interest not only to corrections companies working under contract with the Federal Bureau of Prisons, but to all private entities that perform federal functions under government contracts.

3. Telecommunications — Eleventh Amendment — Federal District Court Jurisdiction to Review State Commission Determinations Under the Federal Telecommunications Act of 1996. The Telecommunications Act of 1996 ("1996 Act") provides for state regulatory commissions to make certain determinations relating to the rights and obligations of telecommunications carriers under the Act. Section 252(e)(6) of the 1996 Act provides in relevant part:

REVIEW OF STATE COMMISSION ACTIONS. — * * * In any case in which a State commission makes a determination under this section, any party aggrieved by such determination may bring an action in an appropriate Federal district court to determine whether the agreement * * * meets the requirements of section 251 and this section. 

Section 252(e)(4) of the 1996 Act adds that "[n]o state court shall have jurisdiction to review the action of a State commission in approving or rejecting an agreement under this section." The Supreme Court granted certiorari in Mathias v. WorldCom Technologies, Inc., No. 00-878, to resolve conflicts among the circuits on the following questions:

  1. Whether a state commission's action relating to the enforcement of a previously approved section 252 interconnection agreement is a "determination under [section 252]" and thus is reviewable in federal court under 47 U.S.C. § 252(e)(6).

  2. Whether a state commission's acceptance of Congress's invitation to participate in implementing a federal regulatory scheme that provides that state commission determinations are reviewable in federal court constitutes a waiver of Eleventh Amendment immunity.

  3. Whether an official capacity action seeking prospective relief against state public utility commissioners for alleged ongoing violations of federal law in performing federal regulatory functions under the federal Telecommunications Act of 1996 can be maintained under the Ex parte Young doctrine.

The 1996 Act fundamentally restructured local telecommunications markets and regulation in the United States. Before 1996, local telecommunications regulation was largely a matter under the control of the individual states. The 1996 Act created a new federal regime, pursuant to which the Federal Communications Commission and the federal courts have assumed new regulatory and oversight roles. In the five years since the 1996 Act was enacted, the federal district courts and courts of appeals have struggled with the scope of their jurisdiction under these provisions and with the question whether the Eleventh Amendment prohibits suits under those provisions against state regulators and state regulatory bodies. 

The Supreme Court's resolution of these statutory construction, federal jurisdiction, and constitutional issues will have a significant impact on all businesses affected by the 1996 Act. Mayer, Brown and Platt represents respondent Illinois Bell Telephone Company d/b/a Ameritech Illinois.

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The Supreme Court invited the Solicitor General to express the views of the United States in Chubb & Son Inc. v. Asiana Airlines, No. 00-720. The questions presented address whether and to what extent the Republic of Korea (South Korea), by signing the Hague Protocol, became a party to the Warsaw Convention governing the liability of international air carriers, and whether as a consequence the relationship between the United States and South Korea regarding the Warsaw Convention system supports federal subject matter jurisdiction based upon the treaty jurisdiction in 28 U.S.C. § 1331.

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 discussed herein.

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