Mayer Brown's



2001 Term, Number 2 / October 15, 2001

Today the Supreme Court granted certiorari in one case of potential interest to the business community. Amicus briefs in support of the petitioner are due on Thursday, November 29, 2001, and amicus briefs in support of the respondent are due on Monday, December 31, 2001. In addition, on October 9, 2001, the Court invited the Solicitor General to express the views of the United States in two cases of interest to the business community. Any questions about these cases should be directed to Eileen Penner (202-263-3240) in our Washington office.

Constitutional Law — Sovereign Immunity. The Supreme Court granted certiorari in Federal Maritime Commission v. South Carolina State Ports Authority, No. 01-46, to determine whether a state's sovereign immunity protects it from being brought before a federal administrative tribunal by a private party seeking specific relief and damages, where Congress has expressly authorized such proceedings.

South Carolina Maritime Services, Inc. ("Maritime Services") sought a berth in the port of Charleston for its cruise ship. The South Carolina State Ports Authority ("SCSPA") refused the request based upon its stated policy against granting berthing rights to any ship whose primary purpose is gambling. It was undisputed that passengers aboard the ship in question could gamble while in international waters. Maritime Services filed a complaint with the Federal Maritime Commission ("FMC") based on the Shipping Act of 1984, 46 U.S.C.A. app. § 1701 et seq. (1994), which prohibits discrimination by carriers and terminal operators and empowers the FMC to regulate any agreement involving oceanborne foreign commerce. Maritime Services alleged that the SCSPA's refusal to grant berthing rights was an unreasonable preference favoring competing cruise lines, and sought injunctive and monetary relief. In response, the SCSPA argued that South Carolina's sovereign immunity prohibits private parties such as Maritime Services from suing the SCSPA before a federal agency. An administrative law judge agreed with the SCSPA and dismissed the case. However, the FMC then reheard the case on its own motion, and held that sovereign immunity does not bar private suits against the states before federal agencies.

The U.S. Court of Appeals for the Fourth Circuit reversed. 243 F.3d 165 (2001). Invoking the Supreme Court's recent decisions in Seminole Tribe of Florida v. Florida, 517 U.S. 44 (1996) and Alden v. Maine, 527 U.S. 706 (1999), the Fourth Circuit held that the Constitution protects states from suit in a federal forum, regardless of the particular relief sought or the particular type of federal "proceeding" at issue. 243 F.3d at 169-172. Relying on Alden, the Fourth Circuit rejected the FMC's argument that, because the FMC is not a "court," sovereign immunity should not apply. Id. at 173. The court reasoned that "any proceeding where a federal officer adjudicates disputes between private parties and unconsenting states would not have passed muster at the time of the Constitution's passage nor after the ratification of the Eleventh Amendment," and is "equally as invalid" today "whether the forum be a state court, a federal court, or a federal administrative agency." Id. The appellate court also rejected the FMC's argument that the administrative proceeding in question was not a lawsuit, but rather a form of regulation. Examining the underlying procedures at issue, the court concluded: "[T]he proceeding * * * walks, talks, and squawks very much like a lawsuit." Id. at 174. Finally, the Fourth Circuit rejected the FMC's request to create an exception to sovereign immunity based upon a "federal interest in uniform regulation of maritime matters." Id. at 177, 178.

The Fourth Circuit's treatment of state sovereign immunity in the context of federal agencies' proceedings appears to conflict with decisions by the Sixth, Eighth, and Ninth Circuits. See Tennessee Dep't of Human Servs. v. United States Dep't of Educ., 979 F.2d 1162 (6th Cir. 1992); Ellis Fischel State Cancer Hosp. v. Marshall, 629 F.2d 563 (8th Cir. 1980); Premo v. Martin, 119 F.3d 764 (9th Cir. 1997).

This case is of importance to the business community. Its disposition will affect the ability of private businesses to seek redress through federal administrative proceedings when state entities act contrary to federal law.

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On October 9, the Court called for the views of the Solicitor General in two cases of interest to the business community: 

Pharmaceutical Res. & Mfrs. of Am. v. Concannon, No. 01-188: The questions presented are (1) whether the federal Medicaid statute allows a state to compel drug manufacturers to subsidize price discounts on prescription drugs for non-Medicaid populations; and 2) whether the commerce clause's prohibition against regulating or taxing wholly out-of-state transactions is implicated by a requirement that an out-of-state manufacturer, which sells its products to wholesalers outside of the state, pay the state each time one of its products is subsequently sold by a retailer within the state. Decision below: 249 F.3d 66 (1st Cir. 2001).

Yellow Freight System Inc. v. Michigan, No. 01-270: The question presented is whether a provision of the 1991 Intermodal Surface Transportation Efficiency Act, 49 U.S.C. § 11506(c)(2)(B)(iv)(III), prohibits a state from charging registration fees for interstate motor carriers in excess of those charged under certain reciprocity arrangements among the states entered prior to the date the provision became effective. Decision below: 464 Mich. 21, 627 N.W.2d 236 (Mich. 2001).

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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