Publications

Greetings, Court Fans!

Hope you all had a great holiday weekend. We’re back with summaries of Thursday’s three decisions:

• Tyler v. Hennepin County (No. 22-166), in which the Court unanimously held that a county government’s failure to return excess proceeds from a tax sale violated the Fifth Amendment’s Takings Clause;

• Sackett v. Environmental Protection Agency (No. 21-454), in which the Court (quasi-unanimously) narrowed the scope of the Clean Water Act’s protection of “wetlands”; and

• Dupree v. Younger (No. 22-210), in which the Court unanimously clarified that a post-trial motion under Rule 50 is not required to preserve for appellate review a purely legal issue resolved at summary judgment.

We’ll start with Tyler v. Hennepin County (No. 22-166), where the Court held that the surplus proceeds from a tax-foreclosure sale belong to the delinquent homeowner, and therefore implicate the Fifth Amendment’s Takings Clause. Chief Justice Roberts’ opening paragraph both situates the issue and makes pretty clear how it will be decided: “Hennepin County, Minnesota, sold Geraldine Tyler’s home for $40,000 to satisfy a $15,000 tax bill. Instead of returning the remaining $25,000, the County kept it for itself. The question presented is whether this constituted a taking of property without just compensation, in violation of the Fifth Amendment.”

Given how straight-forward the merits issue seemed, the County unsurprisingly led with a challenge to Tyler’s standing. It argued that Tyler had not clearly shown that she was injured by the County keeping the $25,000 proceeds because public records suggest that she owed more than that on her mortgage and in unpaid homeowners’ association fees. In other words, even if she was compensated for the taking, she still wouldn’t see the proceeds. But the Chief rejected the standing argument out of hand. At the pleadings stage, the facts alleged in the complaint are accepted as true, and Tyler had pleaded a “classic pocketbook injury.” Even if the Court were to consider her other debts, Tyler was still harmed by the alleged appropriation, as she could have paid down those debts with the proceeds from the sale.

On the merits, the Chief looked to state law, historical practices, and the Court’s precedents to determine whether Tyler’s interest in the excess value from the sale of her home constituted “property” under the Takings Clause. The Eighth Circuit had found that Minnesota law does not recognize a property interest in the surplus proceeds from a tax-foreclosure sale when there is adequate notice to the owner. But the Chief maintained that state law cannot be dispositive of the Takings inquiry. True, Minnesota law permitted the County to keep the excess value, but allowing states to define which interests are or are not sufficient to trigger Taking Clause protection is circular; it would allow a state to simply “disavow[] traditional property interests in assets it wishes to appropriate.” Indeed, Minnesota law recognizes a debtor’s interest in the excess value of seized property in other contexts. If a bank forecloses on a home, for instance, the homeowner is statutorily entitled to the surplus from foreclosure sale. Minnesota had simply carved out an exception for property taxes. This type of manipulation of property rights wasn’t entitled to much deference, in the Chief’s view.

Historical practices and the Supreme Court’s precedents favored Tyler’s position that, while a government may seize property to satisfy a debt, it must return any excess value to the owner. This principle dates back to at least the Magna Carta in 1215, was codified by Parliament in the 1600s, and became embedded in the common law along the way. Early state governments (and the United States) also overwhelmingly adopted similar rules. And today, thirty-six states and the federal government require the same thing. Supreme Court precedent followed suit. Two Civil-War era cases had expressly affirmed the principle that the government could seize property to satisfy a tax debt but had to return the surplus: “to withhold the surplus from the owner would be to violate the Fifth Amendment . . . and to . . . take his property for public use without just compensation.” Later, a third case permitted one state government to retain the surplus from seized property, but, crucially, that state provided a procedure for the owner to claw back the surplus. “Minnesota’s scheme,” by contrast, “provides no opportunity for the taxpayer to recover the excess value.”

Finally, the Chief rejected the County’s argument that Tyler had constructively abandoned her property by failing to pay property taxes, and thus, effectively disclaimed her interest in the “property.” Although the Court had accepted this line of reasoning before, it would not do so here, where Tyler had, for example, continued to live in the property. Rather, abandonment could only occur where the owner failed to make “any” use of the property “for a lengthy period of time.”

Justice Gorsuch concurred, joined by his new partner in combating government overreach . . . Justice Jackson. While the majority opinion addressed only the Takings Clause, Gorsuch and Jackson hastened to add that, in their view, the County’s conduct also violated the Eighth Amendment’s Excessive Fines Clause. The Eighth Circuit had accepted the argument that Minnesota’s tax collection scheme was not punitive because its “primary purpose” was remedial. But that, according to Gorsuch, was not the appropriate test. Instead, the Excessive Fines Clause should apply even if a scheme serves only “in part” to punish. Similarly, it should not matter that Minnesota’s scheme might actually benefit some owners (for example, because the owner’s debt is extinguished by the taking, he or she might actually obtain a windfall if the property is sold for less than the outstanding obligation). Because the scheme could be punitive for some owners, like Tyler, it could not avoid constitutional scrutiny. Finally, the fact that Minnesota’s scheme didn’t turn on the owner’s “culpability” wasn’t determinative of the Excessive Fines question. A financial penalty meant simply to deter future violations could be a “fine,” just as much as one meant to punish a culpable debtor.

Next up, Sackett v. EPA (No. 21-454), where the Court returned to the difficult question of defining just what “waters” the Clean Water Act (CWA) regulates. While all nine Justices agreed that the Ninth Circuit’s definition was too expansive, the Court divided 5-4 as to the proper test: The majority concluded that a wetland is subject to the CWA only if it has a “continuous surface connection” to lakes, rivers, or other bodies of water that qualify as “waters of the United States.” But Justice Kavanaugh and the three liberal Justices would read the CWA more broadly, extending also to wetlands in physical proximity to waters of the United States.  

The 1972 CWA prohibits “the discharge of any pollutant” into “navigable waters,” defining the latter as “the waters of the United States, including the territorial seas.” The statute tasks the Environmental Protection Agency (EPA) and Army Corp of Engineers with enforcing that provision through permits and penalties. The Sacketts, two property owners in Idaho, ran afoul of those agencies in 2004, when the EPA cited them for backfilling part of their property. At the time, the EPA’s regulations defined “waters of the United States” to include all water that “could affect interstate or foreign commerce,” as well as any wetlands “adjacent” to those waters. The EPA deemed that definition met for the Sacketts’ activities, because their lot was adjacent to an unnamed tributary that fed into a non-navigable creek, which then flowed into a navigable lake. The Sacketts contested that finding under the APA, leading to nearly a decade of litigation (including a prior trip to the Supreme Court on a procedural question). Ultimately, the Ninth Circuit affirmed the EPA’s determination, concluding that the CWA applies to wetlands with a “significant nexus” to traditional navigable waters, a definition that was satisfied here because the Sacketts’ backfilling ultimately affected the nearby navigable lake.

The Supreme Court unanimously reversed. Writing for the Chief and Justices Thomas, Gorsuch, and Barrett, Justice Alito began his majority decision by walking through the EPA’s and the courts’ decades of attempts to define with clarity what exactly the “waters of the United States” are. Among those efforts was Rapanos v. United States (2006), where a plurality concluded that “waters of the United States” meant either relatively permanent bodies of water connected to interstate navigable waters (lakes, rivers, etc.) or wetlands “with such a close connection to those waters” that they were practically “indistinguishable” from them. But that test could not command a majority in 2006, so it did not have the force of law. More recently, the EPA tried to fill the gap by promulgating a more-expansive definition, one that makes wetlands subject to the CWA if they have a “significant nexus” to a navigable waterway.

Alito rejected the EPA’s approach, concluding essentially that the Rapanos plurality was right. He got there first by focusing on the term “waters,” which suggests that Congress was focused on semi-permanent bodies of water, not temporary things like wetlands. That reasoning, though, suggests that the CWA shouldn’t apply to any wetlands, even those that are in some way connected to traditional navigable waterways. Alito wouldn’t go that far because of the statutory provision that is ultimately at the core of the case (and on which the Court ultimately divided).

You see, in 1977, Congress amended the CWA to allow states to administer programs to issue certain permits to dredge or fill materials into some bodies of water. While that provision is a bit complicated, the gist is that it authorizes such state permitting programs for discharges into any waters of the United States, except for traditional navigable waters, “including wetlands adjacent thereto.” Thus, wetlands “adjacent” to waters of the United States are already implicitly included in that term’s statutory definition.

How then to interpret “adjacent”? Alito and the majority concluded that the best definition was something like “adjoining,” so the CWA extends only to those wetlands that are effectively “part of” more traditional waters of the United States. In doing so, the majority rejected the EPA’s more expansive interpretation of “adjacent”—meaning “neighboring”—because that would result in a substantial expansion of the CWA’s scope. While Congress could extend the CWA to any body of water nearby traditional navigable waterways, the majority insisted that Congress must provide a “clear statement” of its intent to do so. Finding that clarity absent from the text and subsequent congressional activity, the majority would hew to the Rapanos plurality’s narrower reading, which makes few true wetlands subject to the CWA.

Writing for himself and Justice Gorsuch, Justice Thomas penned a lengthy concurrence. While the majority focused on the “waters” part of “waters of the United States,” he would focus on the terms “of the United States” and “navigable” (the statutory language that “waters of the United States” defines). In his view, these terms picked up traditional conceptions of Congress’s authority over waters that were or could be used in interstate or foreign commerce. Criticizing the New Deal era’s more expansive approach to the Commerce Clause at some length, Thomas and Gorsuch would limit that clause, the CWA, and perhaps environmental statutes more broadly to a much narrower scope.

Justice Kavanaugh wrote the principal concurrence/dissent, joined by Justices Sotomayor, Kagan, and Jackson. In terms of the result, it was a concurrence: They agreed with the majority that the “significant nexus” test endorsed by the Ninth Circuit went beyond the CWA’s text and that the Sacketts’ wetlands were not “adjacent” to the waters of the United States under any plausible definition. But in substance and tone, it was more of a dissent. Kavanaugh focused predominantly on the statutory provision we mentioned above, which indicates that wetlands “adjacent” to waters of the United States are themselves waters of the United States. While the majority read that term to mean basically just “adjoining,” Kavanaugh objected that “adjacent” and “adjoining” are notsynonyms; they have distinct meanings. In his view, then, the CWA applies not only to wetlands that are essentially part of waters that otherwise count as “waters of the United States” but alsoto wetlands that border on such waters, separated only by some kind of barrier like a dike or dune. That additional scope was important, because it lets the EPA regulate wetland areas that have a significant impact on water quality, flood control, etc. He concluded by worrying about the environmental consequences of paring back the EPA’s authority over such important waterways.

Finally, Justice Kagan, joined by Justices Sotomayor and Jackson wrote a short concurrence of their own. In ultimate substance, they agreed entirely with Kavanaugh. But they used this separate statement to criticize the majority’s “clear statement” rule, namely that if Congress wished to extend the CWA to “adjacent” wetlands as that term would ordinarily be understood, it had to be a bit more explicit about it. She saw no theoretical basis for requiring Congress to spoon feed the jurisdictional scope of environmental statutes to the courts. But even if there were one, this provision was pretty clear. She concluded with a lament that the Court’s clear-statement rule, both here and in other recent cases, effectively means that ties go to polluters rather than the agencies tasked with preventing environmental damage.

Finally, we turn to Dupree v. Younger (No. 22-210), an important if non-controversial clarification of the rules for appellate preservation.

Plaintiff Kevin Younger was a pretrial detainee in Maryland who alleged that he was assaulted by correctional officers at the direction of a former lieutenant, Neil Dupree. Dupree filed a motion for summary judgment arguing that the complaint should be dismissed because Younger had failed to exhaust administrative remedies as required under the Prison Litigation Reform Act. The district court held that, as a matter of law, Younger sufficiently exhausted his administrative remedies because there was no dispute that the Maryland prison system had in fact investigated the incident. The district court thus allowed the case to go to trial, where a jury awarded Younger $700,000 in damages. Dupree did not file any post-trial motions, but he did appeal—again raising the sole argument that Younger had failed to exhaust. The Fourth Circuit dismissed the appeal based on circuit precedent that a claim or defense raised at summary judgment must be renewed in a post-trial motion in order to be preserved for appellate review, even if it’s a purely legal issue. This cemented a circuit split over whether purely legal challenges resolved at summary judgment must be renewed post-trial in order to be preserved on appeal.

The Supreme Court resolved the conflict against the Fourth Circuit (and Younger). Writing for a unanimous Court, Justice Barrett began by addressing the Court’s decision in Ortiz v. Jordan (2011), which held that a defendant who challenges the sufficiency of a plaintiff’s evidence at the summary judgment stage must raise his sufficiency argument again after trial in order to preserve it for appeal. That rule makes sense in the context of factual arguments, like sufficiency of the evidence, because the factual record at the summary judgment stage is “ancient history” by the time a trial is completed.  What’s more, appellate courts generally defer to trial courts’ factual determinations, so it’s important to insist that the trial court gets a first shot at assessing the sufficiency of the evidence before an appellate court reviews. But, Barrett explained, these justifications don’t apply to purely legal questions. Unlike factual issues, a trial court’s legal decisions early in proceedings will continue to resonate for the remainder of the case. There is little benefit in forcing litigants to “copy and paste” their summary judgment motions simply to have the trial court give the same answer twice.

Therefore, the Court declined to extend the Ortiz rule and held that purely legal questions raised at summary judgment are adequately preserved for appeal even if they are not renewed in post-trial motions. Justice Barrett was not concerned that the legal/factual preservation distinction would be unworkable for litigants, particularly given that the majority of circuits had already adopted the distinction. Because the Court held that Dupree should have been allowed to raise his exhaustion argument before the Fourth Circuit, the case was remanded to the Fourth Circuit to consider the arguments on the merits.