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Greetings, Court fans!

Proving that the Court can be merciful, it released five very reasonably sized decisions last Thursday, leaving only ten more to bring you this week. We’re still, however, very grateful to Tahlia Townsend for helping us cover all the opinions.

Perhaps the most newsworthy decision came in Indiana v. Edwards (07-208), where the Court held 7-2 that the Sixth Amendment right to self-representation may be abridged where the trial judge deems that a defendant, though competent to stand trial, is not competent to conduct trial proceedings. Writing for all but Justices Scalia and Thomas, Justice Breyer reasoned that, where a defendant’s inability to present her case coherently threatens “the most basic of the Constitution’s criminal law objectives, providing a fair trial,” the state’s interest in ensuring that proceedings are and appear to be fair trumps the individual’s interest in self-representation. The Court declined to announce a specific measure of a defendant’s ability to conduct a trial, expressing confidence that trial judges can make “fine-tuned mental capacity decisions, tailored to the individualized circumstances of a particular defendant.” Scalia and Thomas, in dissent, chided the majority for allowing “a State, because of its view of what is fair, to deny a constitutional protection,” and for “singling out mentally ill defendants for this treatment.” In their view, “the Sixth Amendment protect[s] the defendant’s right to conduct a defense to his disadvantage,” consistent with “the supreme human dignity of being master of one’s fate rather than a ward of the State.”

The remaining four decisions centered on the workplace. In Chamber of Commerce v. Brown (06-939), the Court found that a California law (“AB 1889”) that prohibits employers receiving state funds from using the funds to “assist, promote, or deter union organizing,” was preempted by the National Labor Relations Act (“NLRA”). As Justice Stevens explained for the seven-justice majority, Machinists preemption precludes states from regulating labor conduct that Congress “intended be unregulated because left to be controlled by the free play of economic forces.” Section 8(c) of the NLRA specifically permits non-coercive speech by both unions and employers regarding the benefits and downsides of union participation, manifesting a “‘congressional intent to encourage free debate on issues dividing labor and management.'” AB 1889 threatened this unregulated sphere by encouraging employers to be silent. This was particularly true given the law’s compliance costs and litigation risks – it requires employers to keep records proving that no state funds have been expended on prohibited activities (including overhead and salary expenses – not an easy task) and assumes state funds were used if there is any commingling. The law also provides for stiff penalties, including treble damages, attorneys’ fees and costs. Thus, even though the law purports to regulate only how state funds are used, it effectively makes union-related advocacy prohibitively expensive for recipients of state funds. In addition, while AB 1889 appears facially neutral at first blush, the law is really pro-union in that state funds may be used to allow union access to an employer’s facilities and for negotiating voluntary union recognition.

Justice Breyer, joined by Justice Ginsburg, dissented. In their view, AB 1889 does not regulate any conduct – it merely prohibits employers from engaging in certain activities “on [California’s] dime.” Employers are free to spend their own money on union-related activities and the record did not show that AB 1889 has affected non-state-funded speech. (They would remand to allow the lower courts to consider this issue, which could provide a basis for preemption.) Further, the fact that Congress has passed other laws with nearly identical restrictions on union-related spending suggests that it did not seek to preempt states from doing so. (But, as the majority replied, “[u]nlike the states, Congress has the authority to carve out tailored exceptions to otherwise applicable federal policies.”)

Next, in Meacham v. Knolls Atomic Powers Laboratory, Inc. (06-1505), the Court held that an exemption in the Age Discrimination in Employment Act (“ADEA”) for “otherwise prohibited” employer actions that are “based on reasonable factors other than age” is an affirmative defense as to which the employer bears both the burden of production and persuasion. The vote on allocation of the burden was 8-0 (Justice Breyer did not participate in the opinion), although Justice Scalia’s vote was based on deference to the Equal Employment Opportunity Commission’s position (which he admonished the majority for not showing). Writing for the Court, Justice Souter also concluded that the reasonableness test completely replaces any inquiry into the “business necessity” for the employer’s actions in disparate-impact cases, and that disparate-impact plaintiffs have no obligation to “negate business necessity in order to show that an employer’s actions were ‘otherwise prohibited.'” In addition to Scalia’s concurrence, Justice Thomas wrote a partial dissent reiterating his view that this result, and the ADEA generally, should be limited to discriminatory treatment (as opposed to the disparate-impact claims presented by Meacham and his colleagues).

In Kentucky Retirement Systems v. EEOC (06-1037), a more divided Court held that Kentucky pension plan provisions designed to help workers who become disabled before reaching retirement age do not violate the ADEA. Under Kentucky’s plan, certain “hazardous” workers (police, firemen, etc.) can retire after twenty years of service or, if they are 55 or older, after five years of service. Their pensions are calculated as a fraction of their final pay that increases with their years of service. Recognizing that these workers might become disabled before reaching retirement eligibility, Kentucky also had a “disability retirement” provision whereby these workers would automatically become retirement-eligible. Here’s the complicated part: their years of service for pension purposes would be increased by the number of years, if healthy, they would have had to keep working before retiring, up to a cap of their actual years of service. Examples might help: A disabled 50-year old cop with eight years of service could retire with credit for thirteen years of service, because otherwise he would have had to keep working until age 55. A 42-year-old disabled cop with eight years of service, by contrast, would get credit for sixteen years of service, because his extra imputed years were capped at his eight years of actual service. Finally – and here’s the problem – a disabled 55-year old cop with eight years of service gets no credit for extra years on his pension, because he is already retirement-eligible. An older disabled employee challenged the system, arguing that if he had become disabled before age 55 he would gotten a bigger pension, and the EEOC sued on his behalf. The district court held for Kentucky, but the Sixth Circuit reversed.

In a really-strange-bedfellows opinion written by Justice Breyer (and joined by the Chief and Justices Stevens, Souter, and Thomas), the Court reversed. For the majority, the key was that the ADEA bars disparate treatment that is “actually motivated” by age. The Kentucky system, however, bases decisions on pension status – which is tied to age but is a distinct concept that is not a proxy for age. The disability system treats disabled workers as though they became disabled after reaching retirement eligibility; age plays a role in that analysis only in that it is part of the retirement system, but that is permissible under the ADEA. While the system disadvantaged an older worker in this specific case, in other cases it might help older workers (who might get a bigger “boost” than some younger workers). Finally, Kentucky’s system was not based on any stereotypes about older workers that the ADEA was designed to combat.

Justice Kennedy, joined by Justices Scalia, Ginsburg, and Alito, dissented. They understood the Court’s unwillingness to undo a plan meant to help disabled workers, but they saw the plan as facially discriminatory. Age is the determining factor of pension eligibility for all over-55 workers with more than five but fewer than twenty years of service, and pension eligibility, in turn, determines eligibility for disability retirement. Kentucky’s benign motives did not make this facially discriminatory system lawful. (The dissent noted that the real problem was the early-retirement-at-55 option; do away with that, or with the extra-credit provision, and the discrimination goes away.)

Justice Breyer’s last opinion of the day (his clerks had a busy week!) came in an ERISA case, Metropolitan Life Insurance Co. v. Glenn (06-923). MetLife insured and administered Sears’s long-term disability plan, so it both reviewed an employee’s eligibility for benefits and paid the benefits on its own dime. Glenn had a heart disorder, and MetLife initially encouraged her to apply for Social Security disability benefits (which she received). When push came to shove, however, MetLife determined that Glenn could do sedentary work and denied her claim for plan benefits. She challenged that decision in district court and lost. The Sixth Circuit, however, held that MetLife had a conflict of interest because it was both reviewing and paying claims. Based on that conflict and a host of other circumstances (mostly evidentiary/factual), it set aside Glenn’s denial of benefits.

The Court affirmed. It first noted that its past decisions established that plan administrators are analogous to trustees with fiduciary obligations to plan beneficiaries. Benefits denials are thus subject to de novo review, unless (as here) the plan gives the administrator discretionary authority to determine eligibility. If so, the standard of review is abuse of discretion, but the existence of a conflict of interest is a factor in that analysis. The Court agreed with the Sixth Circuit that MetLife had a conflict of interest, in that it both funded Sears’s plan and evaluated claims: Its fiduciary interest might weigh in favor of a borderline claim, while its financial interest would lean the other way. That Sears must have foreseen (and implicitly approved) the conflict did not change the fact that a judge, reviewing subsequent benefits decisions, has to account for it. MetLife, as an insurance company, might have a separate incentive to provide accurate claims processing, but that does not eliminate the conflict (though it might lessen its significance). The Court, however, rejected application of a de novo review standard, holding instead that, despite the existence of a conflict, the standard of review remains the same – deferential, abuse of discretion review, in which there is no formula, the court considers many factors, and the significance of a conflict of interest hinges on the circumstances. Here, the Sixth Circuit considered the conflict alongside many other factors undercutting MetLife’s benefits denial, and the Court found nothing improper with that analysis.

The last part of the opinion – how to weigh a conflict – generated some conflict on the Court. The Chief wrote separately to concur in part and in the judgment. He agreed that MetLife had a conflict, but he would only allow courts to consider a conflict on review if there was evidence that it affected the administrator’s decision. There was no evidence of that here, but the Chief agreed that the many other factors cited by the Sixth Circuit warranted overturning MetLife’s decision. Justice Kennedy dissented in part. He would have remanded for the lower courts to give MetLife a chance to defend itself under the Court’s ruling – for example, by introducing evidence that it employed safeguards to mitigate the conflict (such as walling off claims officials from financial advisors, etc.). Justice Scalia dissented, joined by Justice Thomas. Scalia also thought there was a conflict, but he disagreed with the Court’s “totality of the circumstances” approach, which gives no guidance to plan administrators. He would have followed trust law, under which a conflicted fiduciary does not abuse its discretion unless the conflict actually and improperly motivates its decision. There was no evidence of that with MetLife, so he would have remanded for the Sixth Court to rule on the reasonableness of the benefits denial without regard to MetLife’s conflict.

With that, we’re ready to tackle this week’s opinions (three of which have just been released), so look for us in your inbox again shortly.

Kim & Ken

From the Appellate Practice Group at Wiggin and Dana
For more information, contact Kim Rinehart, Ken Heath, or any other member of the Practice Group at 203-498-4400