Christian Legal Society v. Hastings College of The Law (08-1371), Morrison v. National Australia Bank Ltd. (08-1191), Granite Rock Co. v. International Brotherhood of Teamsters (08-1214) and Magwood v. Patterson (09-158)

July 2, 2010 Supreme Court Update

Greetings, Court fans!

As we continue to work our way through the Court's final decisions of the Term, this Update will cover Christian Legal Society v. Hastings College of The Law (08-1371), finding that a law school's failure to recognize a Christian student group that excluded gay students did not violate the First Amendment in light of the school's policy requiring all student groups to be open to all comers, Morrison v. National Australia Bank Ltd. (08-1191), on the foreign reach of § 10(b) of the Securities Exchange Act, Granite Rock Co. v. International Brotherhood of Teamsters (08-1214), concluding that the determination of when a collective bargaining agreement was formed was a question for the court to decide (at least in this case), absent a specific provision in the collective bargaining agreement dictating otherwise, and Magwood v. Patterson (09-158), holding that a habeas corpus petition filed after a resentencing (prompted by a prior partially successful habeas corpus petition), but raising claims that could have been made in the prior petition, was not barred as a second or successive petition under 28 U.S.C. § 2254.

In a 5-4 decision, the Court in Christian Legal Society v. Hastings College of The Law, held that a law school did not violate the First Amendment by withholding official school recognition from a Christian student organization that excluded gay students based on its religious beliefs. What most divided the Court was the Justices' reading of the factual record in the case.

Justice Ginsburg, writing for the majority, said the case turned on the school's "all-comers" policy – which required any student organization seeking the benefits of official recognition to allow any student to become a member. The majority emphasized that the parties had entered a joint stipulation acknowledging the school's "all-comers" policy, which undercut the argument by Christian Legal Society ("CLS") that the law school had effectively singled out religious organizations. The Court applied a "limited public forum" analysis, and upheld the all-comers policy as reasonable and viewpoint neutral. Acknowledging that courts should defer to universities on matters of educational policy, the majority found that the law school's policy reasonably advanced opportunities for all students and fostered tolerance, learning and interaction among students with diverse backgrounds. Justice Kennedy wrote separately to drive home this point, noting that "a vibrant dialogue is not possible if students wall themselves off from opposing points of view." As to content-neutrality, the majority found it "hard to imagine a more viewpoint-neutral policy than one requiring all student groups to accept all comers," and distinguished previous cases in which universities had singled out organizations for disfavored treatment based on their point of view. Justice Stevens concurred to add that, even if the law school's decision was based on its non-discrimination policy, as the dissent argued, that policy was also viewpoint neutral in its application here. He noted that the constitution requires our society to tolerate groups that exclude people based on race, gender and religion, but it "need not subsidize them . . . or grant them equal access to law school facilities."

Justice Alito, in dissent, appeared to be reviewing a different factual record altogether. He acknowledged the joint stipulation, but found that the parties had stipulated only that the all-comers policy existed, not that it was the basis for denying CLS recognition or that it was reasonable and content neutral. Noting that the school had never even referenced an "all-comers" policy until the discovery stage of the litigation, the dissent concluded that the law school had actually relied on its non-discrimination policy in denying CLS recognition. The law school did so, according to Justice Alito, based on CLS's religious viewpoint, because it allowed other, non-religious groups to exclude members who disagreed with the group's mission. He therefore characterized the school's all-comers policy as a "some-comers" policy, and noted that CLS was the only student organization ever denied recognition. In his view, the "all-comers" policy was merely a pretext for viewpoint discrimination. On the last point alone, the majority yielded slightly, stating that the Ninth Circuit on remand could consider the claim of pretext "if, and to the extent, it is preserved." But the dissent doubted even that concession, questioning how the Ninth Circuit could consider the issue given that the Supreme Court had now affirmed the entry of summary judgment.

The dissent closed by stating that "today's decision is a serious setback for freedom of expression in this country," an ominous remark that Justice Stevens took issue with. Recalling the underlying gay rights issue in the case, Stevens shot back that the dissent "is willing to see pernicious antireligious motives and implications where there are none," but is untroubled "by the fact that religious sects, unfortunately, are not the only social groups who have been persecuted throughout history simply for being who they are."

Morrison v. National Australia Bank Ltd., described as the "foreign cubed" case, asked whether foreign plaintiffs could sue foreign and domestic defendants under § 10(b) of the Securities Exchange Act for misconduct in connection with securities traded on a foreign exchange. The Court answered, no, in a 5-1-2 decision (Justice Sotomayor did not participate). Plaintiffs were Australian citizens who purchased shares in National Australia Bank listed - need I say it? - on the Australian Stock Exchange. There was a U.S. connection, however. The plaintiffs alleged that a Florida-based mortgage servicing company owned by the Bank had engaged in financial misconduct and caused the Bank to misrepresent its financial condition. The district court found this U.S. connection to be insufficient and dismissed the case for lack of subject matter jurisdiction. The Second Circuit affirmed.

The Court also affirmed, but on the slightly different ground that because § 10(b) did not have extraterritorial application, plaintiffs failed to state a claim upon which relief could be granted. The Court began with the principle that, unless a contrary intent appears, acts of Congress are meant to apply only within the territorial jurisdiction of the United States. The Court criticized the Second Circuit's long history of developing tests to determine whether § 10(b) applied extraterritorially, based on where the "conduct" occurred and/or where the "effects" were felt. Nothing on the face of § 10(b) suggested that it applied abroad. The section's use of the term "interstate commerce," defined elsewhere to include "foreign" commerce, was not enough to defeat the presumption against extraterritoriality. By contrast, § 30 of the same Act included clear statements of limited extraterritorial effect. If the much broader § 10(b) applied extraterritorially, there would have been no need for the limited statements in § 30. The Solicitor General, appearing as amicus, had suggested that § 10(b) should apply to "transnational securities fraud" involving "significant conduct in the United States that is material to the fraud's success." The Court rejected that standard, reasoning that the Exchange Act focuses on securities purchased or sold in the U.S., not on where the deception allegedly originated. Extending § 10(b) to transactions in foreign countries on foreign exchanges would only lead to conflicts with foreign laws. The Court dismissed any concerns that its ruling would turn the United States into a "Barbary Coast" for people perpetrating frauds on foreign securities markets; to the contrary, the ruling would address growing fears that the United States had become a "Shangri-La" of class action litigation for lawyers representing those allegedly cheated in foreign securities markets.

Justice Breyer concurred in part and concurred in the judgment. Breyer agreed with the Court's analysis on § 10(b), but wrote to express his belief that state law or other federal fraud statutes could apply to misconduct in the U.S. similar to what was alleged in this case. Justice Stevens, joined by Justice Ginsburg, concurred in the judgment only. Justice Stevens criticized Justice Scalia's text-only rule for determining extraterritorial application: the Court said in previous cases that it would consider "all available evidence" when determining extraterritorial application, and "[c]ontrary to Justice Scalia's personal view of statutory interpretation, that evidence legitimately encompasses more than the enacted statute." Justice Stevens would have adopted the Second Circuit's approach to § 10(b), which had been developed over several decades and applied by other Circuits with the tacit approval of Congress and the SEC. Justice Stevens agreed with the Second Circuit and the majority that § 10(b) did not apply in this case, which "ha[d] Australia written all over it." But the Second Circuit's flexible approach would best protect the public interest and the interests of investors by allowing § 10(b) to reach other cases with greater links to, or effects on, the United States.

Next, in Granite Rock Co. v. International Brotherhood of Teamsters, the Court examined another variety of that familiar arbitration question: Who decides arbitrability? Granite Rock Company ("Granite Rock") employed members of the International Brotherhood of Teamsters, Local 287 ("Local 287"). When negotiations following the April 2004 expiration of their collective bargaining agreement ("CBA") stalled, Local 287 members initiated a strike on June 9 at the recommendation of their parent union ("IBT"). On July 2, Granite Rock and Local 287 agreed to a new CBA that contained no-strike and arbitration clauses. However, the CBA did not contain back-to-work or hold-harmless clauses protecting Local 287 members from liability for strike-related damages, and IBT instructed union members to continue striking until Granite Rock agreed to these protections. Despite the CBA's no strike provision, many union members followed IBT's recommendation, and the strike continued through September 2004. On July 9, Granite Rock filed suit under § 301 of the Labor Management Relations Act ("LMRA") against IBT and Local 287 for injunctive relief (rendered moot when the strike ended) and damages for breach of contract. Granite Rock later amended the complaint to include a federal common law tortious interference claim against IBT. In response, Local 287 argued that the CBA was not ratified on July 2, but on August 22. Since the July 2 was not valid, and the breach of contract charge should be dismissed. Both parties agreed that the court had jurisdiction to determine whether the formation dispute was arbitrable; but whereas Granite Rock thought the formation dispute should be decided by a court, Local 287 argued that it should be arbitrated.

The District Court denied Local 287's motion to send the formation dispute directly to arbitration. Thereafter, a unanimous jury found that the union ratified the CBA on July 2, 2004. The court then ordered arbitration to proceed on Granite Rock's breach of contract claim in accordance with the July 2nd CBA. On appeal, the Ninth Circuit found that the formation dispute should have been referred to the arbitrator because (1) the arbitration clause covered the related strike claims; (2) national policy favoring arbitration creates a presumption in favor of arbitrability in the face of an arbitration clause; and (3) Granite Rock had implicitly consented to arbitrate the formation dispute by suing under the contract. Both the District Court and the Ninth Circuit dismissed Granite Rock's federal law tortious interference claim, declining to recognize this new cause of action.

Justice Thomas, writing for the Court (which split 7-2, with Justices Breyer and Ginsburg joining the conservatives in the majority), held that the parties' dispute over the formation date of their CBA was a question for judicial resolution. Thomas emphasized that: "[A] court may order arbitration of a particular dispute only when satisfied that the parties agreed to arbitrate that dispute." "Arbitration is strictly ‘a matter of consent,' and thus ‘is a way to resolve those disputes – but only those disputes – that the parties have agreed to submit to arbitration.'" Noting that whether parties have agreed to arbitrate a disagreement is generally a question for the judiciary, Thomas distinguished this case from typical disputes because it was based on when – not whether – the new CBA was formed. He also provided some guidance on how to evaluate ambiguous CBAs: judges should study the scope and enforceability of arbitration clauses and both whether and when the CBA was formed. Judges should order arbitration "only where the court is satisfied that neither the formation of the parties' arbitration agreement nor . . . its enforceability or applicability to the dispute is in issue." While there is a presumption in favor of arbitration, the presumption applies only to existing and ambiguous CBAs. It was irrelevant to the analysis of a formation dispute. Thomas quickly dismissed the Ninth Circuit's reasoning that courts may privilege policy considerations over individuals' agreements and that Granite Rock's decision to sue established implicit agreement to arbitrate the dispute. Instead, Thomas determined, the formation dispute clearly required judicial resolution, because the date of formation was instrumental to the question of whether the parties agreed to arbitrate the breach of contract claim for the July strike, since if there was no valid CBA during that period, the dispute would not fall within the CBA's arbitration provision, which only covered issues that "arise under" the CBA, not those issues that preexisted it. Thomas therefore concluded that the arbitration clause did not apply to the formation dispute and that the question of "when" the CBA was formed was rightfully decided by a court.

Joined by the two dissenters to form a unanimous Court, Thomas then determined that it would be premature to recognize a new federal cause of action for tortious interference. His decision rested primarily on Granite Rock's failure to demonstrate the ineffectiveness of other avenues of relief. Thomas also noted that a new cause of action would require "a host of policy choices that could easily upset [the legislative] balance."

Justice Sotomayor, joined by Justice Stevens, concurred in part (on the tortious interference ruling) and dissented in part. Sotomayor found it decisive that Granite Rock and Local 287 executed a CBA in December 2004 with a retroactive effective date of May 1, 2004 – which Thomas neglected to mention in his statement of facts. (Thomas found this argument waived because Local 287 did not raise it in the Court of Appeals or in its request for dismissal of certiorari. Sotomayor agreed that this mistake was "regrettable and inexcusable," but she then proceeded to excuse it.) Based on the plain language of the December 2004 CBA, Sotomayor determined that the formation dispute was moot and that the breach of contract dispute was intended to have been decided in arbitration. In addition to disagreeing with the CBA analysis, Sotomayor cautioned courts not to determine the merits of an arbitration case, implicitly rebuking the Court for overstepping its proscribed role.

Finally, in Magwood v. Patterson, the Court considered the prohibition in the Antiterrorism and Effective Death Penalty Act of 1996 ("AEDPA") on second or successive habeas corpus petitions in a unique factual context. Specifically, where a prisoner has previously filed a habeas petition that resulted in the imposition of a new sentence and judgment, is the prisoner's new habeas petition challenging that new sentence, but raising claims that were available at the time of the prisoner's prior habeas petition, barred as a second or successive petition?

While locked up in an Alabama jail, mentally-unstable petitioner Billy Joe Magwood convinced himself that a sheriff in the jail was to blame for his imprisonment, and vowed to get even. Shortly after his release, Magwood returned to the parking lot of the jail and shot and killed the sheriff. Magwood was indicted for capital murder, and tried in 1981. He pleaded not guilty by reason of insanity, but the jury found him guilty, and imposed a death sentence. For nearly three decades, Magwood's case went up, down and sideways through the state and federal court systems. The ruling that ultimately made all the difference was the District Court's partial grant of Magwood's first application for a writ of habeas corpus under 28 U.S.C. § 2254, filed only eight days before his originally-scheduled execution on July 22, 1983. The District Court affirmed Magwood's conviction, but vacated his sentence because the trial court failed to find statutory mitigating circumstances related to Magwood's mental state. The state court resentenced Magwood in 1986, imposing a death sentence once again. Magwood filed another federal habeas petition challenging the second death sentence, arguing, among other things, that his sentence was unconstitutional because he did not have fair warning that his offense could be punished by death – a claim that could have been raised in Magwood's original habeas petition, but was not. The District Court granted the petition, but the Eleventh Circuit reversed, drawing a distinction between new claims challenging the resentencing, which could form the basis for a new habeas petition that would not be barred as second or successive, and old claims that were or should have been presented in the first habeas petition, and thus were barred by the severe restrictions on second or successive habeas applications in § 2254(b).

Justice Thomas, joined by odd combination of Justices Stevens, Breyer, Sotomayor, and Scalia, reversed, concluding that Magwood's second habeas petition was not a second or successive petition under AEDPA, because the second death sentence was a new judgment, and the limitations on second or successive petitions found in § 2254(b) only apply to successive petitions attacking the same judgment. The Court reasoned that once Magwood was granted habeas relief, any errors in his resentencing would be new errors on a new judgment, which could be subject to a new habeas petition. Justice Kennedy, joined by the Chief, Ginsburg and Alito, disagreed. The dissent focused on whether the applicant had an opportunity to raise a claim in the prior petition since (in their view) the overarching goal of AEDPA was to reduce abuse of the writ of habeas corpus. If a petitioner had a fair opportunity to raise a claim in a prior application, he or she should be barred from raising that claim in a second or successive petition. But, if not (e.g., the claim was unripe, or the district court ignored the claim in ruling on the original petition) then there would be no abuse of the writ to allow the petitioner to raise the new claims in a second petition. The dissenters also worried that, because a criminal judgment is comprised of a conviction and a sentence, a grant of partial habeas relief on the sentence could resurrect future habeas claims based on either the conviction or the sentence. The majority made clear, however, that it was not yet deciding this issue since Magwood had not attempted to challenge his underlying conviction in his second habeas application.

Whew! That was quite a lot. But we're still not done. I'll be back soon to bring you more decisions.


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