Carey v. Musladin (05-785), BP America Production Co. v. Burton (05-669), Lopez v. Gonzalez (05-547) and order list

December 13, 2006 Supreme Court Update

Greetings, Court fans!

We've got a lot of news to report. The Court issued two opinions Monday and one other since our last Update, as well as a summary order and a number of cert grants.

In Carey v. Musladin (05-785), the Court addressed the standard for granting a habeas petition under the Antiterrorism and Effective Death Penalty Act ("AEDPA"), which requires that a state court decision be "contrary to" or involve an "unreasonable applicable of" federal law as determined by the Supreme Court before habeas relief may be granted. Musladin claimed that his trial was tainted because members of the victim's family appeared in court wearing large buttons bearing the victim's photograph. The trial court denied defendant's request to require the spectators to remove the buttons, and the California appellate courts rejected his claim that the buttons deprived him of a fair trial. The Ninth Circuit granted Musladin's habeas petition, finding that the state courts' decisions involved an unreasonable application of federal law as established by Holbrook v. Flynn, 475 U.S. 560 (1986) and Estelle v. Williams, 425 U.S. 501 (1976), which held that trial practices that "create an unacceptable risk of inappropriate factors coming into play" violate a defendant's right to a fair trial. Both of those cases involved actions by the state, not spectators. (In Williams, the defendant was required to stand trial clad in prison clothes, while in Flynn multiple state troopers were seated directly behind defendant during the trial.) In reversing the Ninth Circuit's grant of habeas relief, Justice Thomas, writing for the majority, found that federal law was not clearly established regarding how courts should review actions by spectators (as opposed to the state) that might affect a defendant's trial. Therefore, the California courts' decisions could not involve an unreasonable application of federal law, and habeas relief was inappropriate. Thomas also stated (ironically in dictum not necessary to the Court's decision) that only the Supreme Court's holdings – and not dicta in its decisions – can create federal law for AEDPA purposes. Thus, through its holding (which seems to require that a state court be faced with a nearly identical situation to one already decided by the Supreme Court before habeas relief will be available) and through its statement about dicta, this decision is likely to reduce significantly the cases in which habeas relief can be granted.

And that is what sparked three separate concurrences in the judgment by Justices Stevens, Kennedy and Souter. Stevens wrote separately because he believed that the Court's explanatory reasoning (which might be perceived as dicta), as well as its holdings create the federal law that states must apply. He and Souter, however, could not say that the risk posed by the buttons necessarily rose to an "unacceptable" level. Kennedy also wrote separately to emphasize that "AEDPA does not require state and federal courts to wait for a nearly identical factual pattern until a legal rule must be applied." If the Supreme Court chooses to create a rule using general terms, state courts must apply that rule reasonably or habeas relief should be available.

The Court's second decision yesterday, in BP America Production Co. v. Burton (05-669), answered the scintillating question of whether administrative payment orders issued by the Department of the Interior's Mineral Management Services ("MMS") for royalty underpayments on gas and oil leases are subject to 28 U.S.C. § 2415's six year statute of limitations for government contract actions. The unanimous answer (for all but the Chief and Breyer who did not participate in the decision): No. And for most of us, that's probably all we want to hear. But the Court's decision has broader implication as it effectively holds that the six-year limitation period does not apply to administrative actions, only to court suits by the government.

By way of background, the Mineral Leasing Act of 1920 ("MLA") allowed the government to lease public lands to private parties for the production of oil and gas, and required the lessees to pay a 12.5 royalty on gas and oil extracted. Concerned that not all royalty payments were being made, Congress enacted the Federal Oil and Gas Royalty Management Act ("FOGRMA") in 1982, requiring the Secretary of the Interior (who delegated the task to the MMS) to audit present and past royalty payments and to collect any underpayments. If the MMS determined that there had been a royalty underpayment, it would issue an order requiring repayment and the lessee was subject to stiff penalties (up to $10,000 per day) for failing to adhere to the order. The orders could be appealed through an administrative process. The MMS determined that BP had underpaid its royalties from 1989 to 1996 and issued a repayment order in 1996. BP appealed, challenging the calculation of royalties and also claiming that some were barred by § 2415's six year limitation period, which applies to government "actions" for money damages on a "contract." The D.C. Circuit found that MMS administrative orders were not "actions" and therefore were not subject to the limitations period and the Supreme Court affirmed, in an opinion by Justice Alito. (The junior Justices get all the fun ones!) The Court found that the ordinary meaning of the term "action" referred to a lawsuit in court – not an administrative action. Further, § 2415 refers to the filing of a complaint, and the order bears little or no resemblance to one.

The Court also weighed in on an important immigration issue in Lopez v. Gonzalez (05-547), holding that conduct that is punishable as a felony under state law, but a misdemeanor under the Controlled Substances Act ("CSA"), is not "a felony punishable under the Controlled Substances Act" for Immigration and Nationality Act ("INA") purposes. Lopez, a legal permanent resident, pled guilty to aiding and abetting another person's possession of cocaine, a felony under South Dakota law but not federal law. After Lopez completed his sentence, the INS began removal proceedings on the ground that his state conviction was both a controlled substance violation and an aggravated felony. Lopez conceded the controlled substance violation, but contested the classification of his crime as an aggravated felony. The nature of the violation was critical to Lopez because if found to have committed an aggravated felony, Lopez would not be eligible for discretionary cancellation of removal. The immigration judge found that Lopez's conviction constituted an aggravated felony, and the Board of Immigration Appeals affirmed as did the Eighth Circuit.

The Court reversed in an opinion by Justice Souter (for all but Justice Thomas). Under the INA, "illicit trafficking in a controlled substance," which includes "a drug trafficking crime" constitutes an aggravated felony – requiring removal. "Drug trafficking crime" is defined as "any felony punishable under the [CSA]." Possession of drugs is treated as a misdemeanor under the CSA, but the government argued that since Lopez's conduct was a felony (under South Dakota law) and was punishable under the CSA (albeit as a misdemeanor), Lopez committed a "felony punishable under the CSA" and therefore a "drug trafficking crime" that constitutes an aggravated felony under the INA. Rejecting this interpretation, the Court again emphasized the plain meaning of the statute. The INA refers to illicit "trafficking" and this term must be kept in mind when following the latter chain of definitions. Lopez's aiding and abetting another person's possession of cocaine hardly constitutes "trafficking," which we ordinarily understand to involve the commercial sale of drugs. Further, the most reasonable interpretation of "felony punishable under the CSA," is a crime that is punishable as a felony under the CSA – not a crime that is punishable under the CSA (but not as a felony) and that is a felony under state law (but as a misdemeanor under the CSA). Finally, the Court found it unlikely that Congress would leave it to the states to determine how a crime should be viewed for immigration purposes, particularly where Congress specifically decided to treat possession offenses as misdemeanors while treating offenses involving distribution and sale ("trafficking) as felony offenses. For all these reasons, Lopez's conviction should not have been treated as an aggravated felony and Lopez should have been eligible for discretionary non-removal.

Having decided Lopez v. Gonzalez, on December 11th, the Court granted cert and vacated and remanded numerous other cases presenting the same issue and dismissed as improvidently granted the writ in Toledo-Flores v. United States (05-7664).

The Court also issued a summary order in Metropolitan Life Insurance Co. v. Hawkins-Dean (05-1424), an ERISA case involving the burden of proof and level of deference due a decision by a plan administrator. After employee Hawkins-Dean provided some evidence that the plan administrator had a conflict of interest, the Ninth Circuit placed the burden on the plan administrator to prove that the conflict did not taint its decision-making process and reviewed the administrator's decision de novo. The Supreme Court vacated and remanded the case for reconsideration by the Ninth Circuit in light of its subsequent en banc decision in Abatie v. Alta Health & Life Insurance Co., 458 F.3d 955 (9th Cir. 2006), which applied a less employee-friendly standard of review of the administrator's decision.

Trying the fill its argument calendar for the coming months, the Court has also issued a number of cert grants, two of which will be of great interest to antitrust practitioners. Leegin Creative Leather Products v. PSKS, Inc. (06-480) will answer the question "[w]hether vertical minimum resale price maintenance agreements should be deemed per se illegal under Section 1 of the Sherman Act or whether they should instead by evaluated under the rule of reason." The second case, Credit Suisse First Boston Ltd. v. Billing (05-1157), asks "[w]hether, in a private damages action under the antitrust laws challenging conduct that occurs in a highly regulated securities offering, the standard for implying antitrust immunity is the potential for conflict with the securities laws or, as the Second Circuit held, a specific expression of Congressional intent to immunize such conduct and a showing that the SEC has power to compel the specific practices at issue."

Grace v. Freedom from Religion Foundation, Inc. (06-157), deals with an attack on the Bush administration's faith-based initiatives, and presents the following question: "Whether taxpayers have standing under Article III of the Constitution to challenge on Establishment Clause grounds the actions of Executive Branch officials acting pursuant to Executive Order, where the plaintiffs challenge no act of Congress, the Executive Branch actions at issue are financed only indirectly though general appropriations, and no funds are disbursed to any entities or individuals outside the government."

Wilkie v. Robbins (06-219), arises from a damages lawsuit filed against Bureau of Land Management employees in their individual capacities for regulatory actions taken by them to obtain a reciprocal right-of-way across mingled private/public land. The case presents three questions: "(1) Whether government officials acting in their regulatory capacity can be found guilty under RICO for the predicate act of extortion under color of official right when the property is taken solely for the benefit of the government, and, if so, whether that statutory prohibition was clearly established? (2) Whether plaintiff's Bivens claim is barred by the availability of judicial review of the government's actions under the APA or other statutes? and (3) Whether the Fifth Amendment protects against retaliation for exercising a right to exclude the government from one's property outside the eminent domain process, and, if so, whether that Fifth Amendment right was clearly established?"

Morse v. Frederick (06-278) asks: "(1) Whether the First Amendment allows public schools to prohibit students from displaying messages promoting the use of illegal substances at school-sponsored faculty-supervised events? (2) Whether the Ninth Circuit departed from established standards of qualified immunity in holding that a public high school principal was liable in a damages lawsuit under 42 U.S.C. § 1983 when, pursuant to the school district's policy against displaying messages promoting illegal substances, she disciplined a student for displaying a large banner with a slang marijuana reference at a school-sponsored, faculty-supervised event?"

Roper v. Weaver (06-313) follows on the heels of the Court's decision in Musladin by asking the following AEDPA question: "Since this Court has neither held a prosecutor's penalty phase closing argument to violate due process, nor articulated, in response to a penalty phase claim, what the standard of error and prejudice would be, does a court of appeals exceed its authority under 28 U.S.C. § 2254(d)(1) by overturning a capital sentence on the ground that the prosecutor's penalty phase closing argument was ‘unfairly inflammatory?'"

The Court limited its grant of cert to question three in Fry v. Pliler (06-5247), which asks: "If constitutional error in a state trial is not recognized by the judiciary until the case ends up in federal court under 28 U.S.C. § 2254, is the prejudicial impact of the error assessed under the standard set forth in Chapman v. California, 386 U.S. 19 (1967), or that annunciated in Brecht v. Abrahamson, 507 U.S. 619 (1993)? Does it matter which harmless error standard is employed? And, if the Brecht standard is employed, does the petitioner or the state bear the burden of persuasion on the question of prejudice?" (And yes, despite the number of question marks, this is really labeled as a single question presented!)

Finally, Bowles v.Russell (06-5306) presents the following procedural issue: "Whether an appellate court may sua sponte dismiss an appeal which has been filed within the time limitations authorized by the district court after granting a motion to reopen the appeal time under Rule 4(a)(6) of the Federal Rules of Appellate Procedure?"

That's all for now . . . and likely until after the Court returns from recess in January. Until then, we wish you great cheer this holiday season and we look forward to returning to your inbox in 2007.

Kim & Ken

From the Appellate Practice Group at Wiggin and Dana. For more information, contact Kim Rinehart, Ken Heath, Aaron Bayer, or Jeff Babbin at 203-498-4400