Publications

Greetings, Court Fans!

The Court was busy this week, with four new decisions to go along with one from last Friday. No wonder it extended the temporary “administrative stay” placed on the hot-potato mifepristone appeals from Wednesday evening to midnight tonight. As of press time, the Court has not issued a decision, so we’ll keep our focus on the cases that have been decided in the last week:

• In Axon Enterprise, Inc. v. Federal Trade Commission (No. 21-86), the Court unanimously held that federal district courts have jurisdiction to hear suits alleging that a federal agency’s structure violates the Constitution;

• In Turkiye Halk Bankasi, A.S. v. United States (No. 21-1450), the Court unanimously held that the Foreign Sovereign Immunities Act did not make a bank owned by the Republic of Turkey immune from criminal prosecution in U.S. court (with some disagreement about why);

• MOAC Mall Holdings, LLC v. Transform Holdco LLC (No. 21-1270) unanimously held that a provision in the bankruptcy code addressing appeals of certain decisions to district courts is not “jurisdictional”;

• In New York v. New Jersey (No. 156, Orig.), a unanimous Court held that New Jersey could unilaterally withdraw from an interstate contract with New York regulating activities at the Port of New York and Jew Jersey;

• And in Reed v. Goertz (No. 21-442), a 6-3 Court held that a Section 1983 suit brought by a Texas prisoner on death row seeking to obtain DNA testing of certain crime-scene evidence was timely.

Read on for summaries of these five decisions. But before you do, don’t forget to register for our term-in-review program next week, with Quinnipiac Law Professor Stephen Gilles. We’ll be discussing the slow pace of decisions so far this term and previewing the big decisions still to come. Plus: CLE credits and an open bar!

We’ll start with Axon, a sort of coda to the recent line of cases addressing the constitutionality of provisions governing the appointment or removal of personnel at federal administrative agencies. Axon addresses a related question: Can parties aggrieved by agency action challenge the agency’s structure through a direct lawsuit, or must they raise their challenges before the agency itself and then seek judicial review? In a 9-0 decision, the Court held that parties need not wait, because federal district courts have jurisdiction to hear direct constitutional challenges to the structure of (at least some) administrative agencies.

The Court’s decision resolved two cases that followed similar paths. The first involved an FTC enforcement action against Axon, a producer and seller of policing equipment; the second involved an SEC enforcement action against an accountant. Both respondents sued the respective Commissions in district courts, asserting that the Commissions’ administrative law judges (ALJs) were unconstitutionally insulated from presidential supervision. The district courts dismissed both suits for lack of jurisdiction. The Ninth Circuit affirmed the decision involving Axon, holding that the FTC Act’s statutory review scheme guaranteed “meaningful judicial review” by way of federal appellate review of FTC decisions, which precluded Axon’s direct suit. But the Fifth Circuit (sitting en banc) reversed the dismissal of the accountant’s suit against the SEC, holding that Congress did not intend to funnel removal-power claims through the Securities Exchange Act’s statutory review scheme. The Court granted certiorari to revolve this circuit split.

Writing for a unanimous Court, Justice Kagan sided with the Fifth Circuit. She first acknowledged that, while district courts ordinarily have jurisdiction to hear challenges to federal agency action under 28 U.S.C. 1331, Congress may explicitly or implicitly preclude district courts from exercising that jurisdiction. Although Congress clearly divested district courts of much of their ordinary jurisdiction with the statutory review schemes applicable to the FTC and the SEC, that divestiture did not necessarily extend to the respondents’ specific claims: their constitutional challenges to the structure of the agencies. To determine whether Congress intended to preclude district courts from hearing those sorts of claims, Kagan turned to the factors identified in Thunder Basin Coal Co. v. Reich (1994): (1) whether “meaningful judicial review” would be foreclosed by precluding district court jurisdiction; (2) whether the claims were “wholly collateral to [the] statute’s review provisions”; and (3) whether the claim was “outside the agency’s expertise.”

Beginning with the first factor, Kagan acknowledged that the respective Commissions’ decisions would be subject to federal appellate review, ostensibly affording “meaningful judicial review.” But she nevertheless concluded that federal appellate review is not meaningful where the harm—being subjected to unconstitutional proceedings—has already been felt before the federal review is available. On the second factor, Justice Kagan rejected the Government’s argument that any proceeding “directed at” a pending Commission proceeding cannot qualify as collateral to it, holding instead that the respondents’ claims have nothing to do with enforcement-related matters regularly adjudicated by the Commissions. Their separation-of-powers claims are concerned with the Commissions’ power, which is separate from how the Commissions used that power in particular cases or the evidentiary or procedural matters typically resolved by an agency. And on the expertise factor, Kagan quickly concluded that the Commissions lack special understanding of the separation of powers.

Having determined that each of the Thunder Basin factors weighs in favor of allowing district-court review of the respondents’ structural claims, the Court reversed the Ninth Circuit, affirmed the Fifth Circuit, and remanded for further proceedings. The practical result is that challenges to the structure of agencies with statutory review schemes like the FTC’s and the SEC’s may now be brought directly in district courts, forums that have less at stake in adjudicating such claims than the Commissions themselves.

Two concurring Justices would have gone even farther. Justice Thomas, joining the majority in full, wrote separately to assert that disputes concerning private rights (e.g., life, liberty, and property) likely require federal-court adjudication. In his view, Congress can only preclude judicial review where privileges or public rights are at stake. And Justice Gorsuch, joining in the judgment only, wrote separately to urge the Court to forgo further reliance on Thunder Basin. In his view, Section 1331 provides district courts with jurisdiction over all cases arising under federal law or the Constitution, not just some. Calling on the Court to eschew Thunder Basin’s “judge-made” test, Gorsuch accused the Court of “froth[ing] plain statutory text with factors of our own design” in order to deny access to the courts.

Next up, in Turkiye Halk Bankasi (Halkbank), the Court addressed the immunity of foreign sovereigns from criminal prosecutions in the United States. The U.S. Government indicted a Turkish bank, Halkbank, for conspiring to evade U.S. economic sanctions against Iran. But Halkbank is owned by the Republic of Turkey, so it is a sovereign state (or, at least arguably, an instrumentality of one) for purposes of foreign sovereign immunity. That lead to two questions on which there is surprisingly little law: Do foreign sovereign entities like Halkbank enjoy sovereign immunity from criminal prosecutions in U.S. court? And does the Foreign Sovereign Immunities Act (FSIA) play a role in criminal prosecutions of foreign sovereigns? Writing for a majority of seven, Justice Kavanaugh would answer these questions “maybe” and “no,” while two other justices would have answered them “yes” and “yes.” We’ll explain.

Halkbank is owned by a Turkish sovereign wealth fund, which is part of the Turkish state. At the behest of Turkish government officials, Halkbank participated in a scheme to launder billions of dollars of proceeds from Iranian oil and gas through the U.S. financial system, violating U.S. sanctions against Iran. When the U.S. Government got wind of this, it charged several Halkbank executives with making false statements to the U.S. Treasury Department to conceal the scheme. But the Government also charged Halkbank itself with federal crimes. The bank moved to dismiss the indictment, arguing it counted as a foreign state under the FSIA, making it immune from U.S. courts’ jurisdiction. The District Court denied the motion, reasoning that the FSIA only applies to civil proceedings, not criminal ones. When Halkbank took an immediate interlocutory appeal, the Second Circuit affirmed on the alternative rationale that even if the FSIA applied, Halkbank’s charged conduct fell within its exception for commercial activities.

The Court unanimously affirmed, but with a split as to why. Writing for a majority of seven (all but Justices Alito and Gorsuch), Justice Kavanaugh agreed with the District Court that the FSIA provides no immunity from criminal proceedings. He started with the catch-all criminal jurisdictional statute, 18 U.S.C. 3231. It gives district courts jurisdiction over “all offenses against the laws of the United States.” Nothing in that provision suggests that district courts lack jurisdiction over foreign sovereigns, so Kavanaugh declined to “graft an atextual limitation” onto the statute’s “broad jurisdictional grant.”

Kavanaugh then turned to the FSIA itself. It works by creating a presumption that foreign states are immune from suit but then carving out several exceptions to the statutory grant of immunity. When one of those exceptions applies, district courts have jurisdiction over “any nonjury civil action against a foreign state.” But that provision says nothing at all about criminal proceedings. And other provisions of the FSIA (like its venue rules) address only civil suits, saying nothing about how criminal prosecutions of foreign sovereigns work. Given the statute’s relentlessly “civil” focus, Kavanaugh declined to read the FSIA as implicitly covering criminal proceedings.

This is not to say, however, that Halkbank has no possible claim for immunity. In other contexts where the Court has found the FSIA to be silent, such as immunity for foreign state officials, the Court has held that common-law principles of immunity continue to apply. Halkbank briefly argued that even if the FSIA did not make it immune, those common-law rules did. The Government (unsurprisingly) disagreed. But because the Second Circuit did not consider these arguments, the majority remanded the case back to the Second Circuit to address whether any common-law immunity doctrine barred the Government’s prosecution.

Justice Gorsuch, joined by Justice Alito, would have affirmed via the Second Circuit’s stated rationale. He focused on another provision of the FSIA, providing that foreign states “shall be immune from the jurisdiction of the courts of the United States” unless a statutory immunity exception applied. In his view, that immunity from jurisdiction applied equally to civil as to criminal cases. But turning then to the FSIA’s exceptions, Gorsuch had no trouble finding that Halkbank’s conduct fell squarely within the FSIA’s exception for a foreign sovereign’s commercial activities in the United States. Gorsuch concluded with a discussion of why this difference in rationale makes a difference: Because, in his view, the FSIA does address foreign sovereigns’ immunity from criminal prosecution, it leaves no room for the common-law immunity Halkbank asserted (and that the Second Circuit was tasked with investigating on remand). Gorsuch argued that both the existence and scope of any common-law criminal immunity was “thorny,” and that courts should not lightly start down that road. His rationale for affirmance would thus have resulted in the case simply proceeding to the merits, with no possible claim for immunity. 

We’ll turn next to MOAC Mall Holdings, where the Court once again signaled its reluctance to read statutory requirements as jurisdictional without a clear statement from Congress. As the Court explained, this categorization exercise has far-reaching consequences because of the inherent power of jurisdictional defenses, which can be raised at any time by any party (or the court itself) and generally result in automatic dismissal of a case regardless of other doctrines like waiver, forfeiture, or judicial estoppel. A few weeks ago, the Court declined to read a statutory limitations period as jurisdictional; this time, the Court withheld the jurisdictional label from a provision of the Bankruptcy Code that limits the relief available when an appellate court disagrees with a trial-court order authorizing the sale of a bankrupt party’s assets.

The procedural history of the case is complex but helps to illustrate the Court’s concern. Sears, Roebuck and Co. filed for Chapter 11 bankruptcy in 2018 and, as part of the administration of the bankruptcy estate, assigned the rights to some of its leases to the respondent, Transform Holdco LLC. One of those leases was with the petitioner, MOAC Mall Holdings LLC, which operates the Minnesota Mall of America in Minnesota. MOAC opposed the lease transfer, but the Bankruptcy Court nevertheless entered an “Assignment Order” approving the assignment from Sears to Transform. MOAC then wanted to appeal the Assignment Order to the District Court, but it feared that the scope of its appeal would be constrained by Section 363(m) of the Bankruptcy Code, which states that “[t]he reversal or modification on appeal of an authorization . . . of a . . . leave of property does not affect the validity of . . . a lease under such authorization to an entity that purchased or leased such property in good faith, . . . unless such authorization and such . . . lease were stayed pending appeal.” MOAC therefore sought a stay of the Assignment Order pending its appeal, but the Bankruptcy Court denied its request based on Transform’s affirmative representation that it would not invoke Section 363(m) as a bar to the appeal. You’ll never guess what happened next. MOAC took the appeal and Transform went back on its word and argued that, because there was no stay, the District Court lacked jurisdiction to hear the appeal. Though the District Court was “appalled” by Transform’s tactics, it felt bound to dismiss the appeal based on its view that the requirement of a stay is jurisdictional.  The Second Circuit affirmed and, noting a circuit split, the Supreme Court granted cert.

The Court unanimously reversed, in an opinion by Justice Jackson. At the threshold, Justice Jackson batted away Transform’s argument that, right or wrong, the case was moot because the Bankruptcy Code provides “no legal vehicle” for a court to undue a lease assignment at this late stage. Understandably, Justice Jackson was unwilling to take Transform at its word, and at the same time disinclined to “plumb[] the Code’s complex depths in the first instance” to confirm that no relief was legally available. Instead, the Court kicked the ultimate question whether the lease assignment could be undone to the lower courts on remand.

With respect to the issue on which the Court granted cert, Justice Jackson concluded that Section 363(m) is not jurisdictional. Recalling other recent cases, Justice Jackson reiterated that, because jurisdictional defenses are so powerful, courts should only read a statutory requirement as jurisdictional if Congress “clearly states” as much. Other statutory directives (e.g., run-of-the mill statutes of limitations or exhaustion requirements) are merely “preconditions to relief,” which while “important and mandatory” do not divest a court of jurisdiction if not satisfied. Justice Jackson found no clear statement in Section 363(m) that Congress intended the stay requirement to be jurisdictional. Looking at the text, she noted that the limitations merely created a “caveated constraint” on the District Court’s appellate power, which was itself subject to exceptions (“the caveat is itself caveated”).  If Congress wanted to “clearly state[]” a jurisdictional requirement, the Court reasoned, it would not have offered so many ways around it. The broader context confirmed this reading, as Section 363(m) was not included among other jurisdictional provisions in the Code and lacked any “clear tie” to them.

And so, Transform’s initial bait-and-switch was foiled. But it remains to be seen on remand whether it’s a moot point. 

The Court addressed another “precondition to relief” in Reed v. Goertz, where it considered whether a Section 1983 suit seeking access to DNA testing records was timely filed.

In 1996, a Texas jury found Rodney Reed guilty of murder. Reed was sentenced to death, and his conviction and sentence were affirmed on direct appeal. After filing unsuccessful habeas petitions in state and federal court, Reed sought to avail himself of post-conviction DNA testing, which is available under Texas law, to identify a different perpetrator and clear his name. The state prosecutor, Bryan Goertz, agreed to test only a small portion of the evidence Reed requested. Reed moved to compel testing of the remaining evidence, but the trial court denied the motion and the Texas Criminal Court of Appeals affirmed, later denying a motion for rehearing. Reed then tried a different approach: He filed a Section 1983 action in a federal district court, arguing that the Texas post-conviction DNA testing law itself violated the Due Process Clause of the U.S. Constitution. His complaint was dismissed as untimely, and the Fifth Circuit affirmed, reasoning that the two-year statute of limitations applicable to his suit began to run when the Texas trial court denied Reed’s motion to compel testing.

The Supreme Court reversed, 6-3. In a breezy six-page decision, Justice Kavanaugh first concluded that Reed had standing because obtaining the relief he sought—a finding that the Texas DNA testing law denied him procedural due process—would significantly increase the likelihood of the state prosecutor granting him access to additional evidence for DNA testing. Sovereign immunity did not bar Reed’s suit either, in light of the longstanding exception under Ex parte Young permitting federal courts to grant declaratory relief against a state officer like Goetz acting in his official capacity. Finally, Reed’s suit was not barred by the Rooker-Feldman doctrine. Even though he had lost on his claim under Texas law in state court, he was not asking the federal courts to revisit that judgment; instead, he was challenging the constitutionality of the Texas law as construed by Texas courts.

Turning to the limitations period, Justice Kavanaugh concluded that Reed’s procedural due process claim accrued only after the Texas Court of Criminal Appeals denied his motion for rehearing on appeal. Until that point, Reed was still seeking appellate relief in the Texas courts. Therefore, his claim that Texas’s procedure for obtaining post-conviction DNA testing is fundamentally unfair could only be brought under Section 1983 once the state litigation under that procedure was complete. As Justice Kavanaugh noted, a contrary rule would require parallel federal litigation under Section 1983 during the pendency of a state appeal, which itself might cure the alleged procedural defect and moot the federal action. The Court therefore reversed for further proceedings on Reed’s due process claim.

Justice Alito, joined by Justice Gorsuch, dissented. Even assuming that Reed’s Section 1983 claim did not accrue until the Texas Court of Criminal Appeals authoritatively construed the Texas post-conviction DNA testing statute, Justice Alito rejected the notion that Reed’s petition for rehearing further tolled the statute of limitations. In his view, the decision of the Texas Court of Criminal Appeals was final once issued, and rehearing was an unlikely event rather than a guaranteed procedure. Moreover, under well-established precedent, a Section 1983 claim may be brought without exhausting all available remedies, such as a petition for rehearing. Thus, Justice Alito would have treated the initial decision of the Texas Court of Criminal Appeals as the starting gun for the limitations period, rather than the denial of rehearing. And because Reed filed his Section 1983 action more than two years afterward when his execution date was set, his claim was untimely.

Justice Thomas also dissented. As is his custom, Thomas first described the horrific nature of Reed’s crime—he raped and murdered one victim and was only caught after attempting to rape and murder another (having previously raped four other victims). On the law, Justice Thomas contended that Reed’s claims were barred by Rooker-Feldman because what he was really seeking in federal court was the rehearing he had been denied by the Texas Court of Criminal Appeals. And in response to Reed’s argument (accepted by the majority) that he was instead challenging the constitutionality of the Texas statute at issue, Justice Thomas argued that Reed lacked Article III standing because he was in effect seeking an advisory opinion rather than any relief that would redress his alleged injury by, for example, ordering Goetz to test the remaining DNA evidence. While disappointed with the majority’s decision on these grounds, Justice Thomas took solace in the fact that the decision does not bar Texas from executing Reed even if his Section 1983 claim is not fully adjudicated.

And finally, an original-jurisdiction squabble brought by our Tristate neighbors. In New York v. New Jersey, the Court settled a disagreement over which state has the best pizza. Kidding! It doesn’t take a special master to know that designation belongs to Connecticut. Instead, the Court addressed a disagreement among the Tristate’s lower pizza tier over law enforcement and regulation of the Port of New York.

In 1953, New York and New Jersey entered an interstate compact—the Waterfront Commission Compact—pursuant to Article I Section 10 of the Constitution. Under that lesser-known provision, a State may enter “Agreement[s] or Compact[s] with another State” only with the consent of Congress. To address issues related to organized crime and corruption in employment around the Port of New York, which spans the New York-New Jersey border, the two States teamed up to create a bistate agency to regulate and enforce the laws around the Port, with each State agreeing to cede some of its sovereign authority to the agency. Congress approved the compact, and President Eisenhower signed it.

Fast-forward 55 years, and times have changed. New Jersey wants out, but the Compact doesn’t say how that can happen. It explains that Congress can alter the Compact and that the two States have to agree before amending it, but it does not address what to do if one State wants to leave unilaterally. Unperturbed, in 2018, New Jersey’s legislature decided to simply declare that they were done, and Governor Chris Christie agreed, withdrawing the state from the compact. The Commission itself initially sued New Jersey to stop them from backing out, but the Third Circuit held that the State was immune from suit. New York then stepped in, invoking the Supreme Court’s original jurisdiction to try to prevent New Jersey from leaving the compact.

In a unanimous opinion by Justice Kavanaugh, the Court sided with New Jersey, holding that either State could unilaterally withdraw from the Compact. The Court first analyzed the language of the Compact and determined that it did not explain how or whether either State could unilaterally withdraw. In the absence of guidance in the Compact itself, the Court applied general principles of contract interpretation. In 1953, when the States entered the Compact, the background rule was that if a contract provided for continued performance by both parties for an indefinite period, the presumption was that either party could leave the agreement at will. Accordingly, that presumption applied to the Compact as well, and New Jersey was free to go. The Court was careful to emphasize that its holding was limited to the very particular circumstance at issue here—where both States agreed to work together to do something but did not decide in advance how or when that partnership would terminate. If the Compact had other important features like dividing up water rights, for example, the result might be different.

In short, New Jersey (and its officials) are now 2-0 in cases arising out of Governor Christie’s meddling with the Port Authority. Almost makes up for its cut-rate ah-beetz…

With that, we bid you a good weekend. Hope to see some of you at the Lawn Club on April 26^th. Until then,

Tadhg and Dave