Engquist v. Oregon Department of Agriculture (07-474) and Bridge v. Phoenix Bond & Indemnity Co. (07-210)

June 18, 2008 Supreme Court Update

Greetings, Court fans!
This Update bring us up to date with the final decisions from last week – which, though they didn't grab the headlines like the Boumediene decision, will wind up being more significant for the day-to-day practice of most lawyers (particularly employment/civil rights attorneys and white-collar practitioners). Let's get to it!
Engquist v. Oregon Department of Agriculture (07-474) split the Court 6-3, with Justice Breyer joining his more conservative colleagues to hold that the so-called "class-of-one" equal protection theory does not apply in the public employment context. The Equal Protection Clause protects individuals from discrimination by state actors based on their membership in a protected class. In Village of Willowbrook v. Olech (2000), the Court also recognized a class-of-one equal protection claim where the government singles out an individual for differential treatment without a rational basis. (In Olech, a zoning board required Olech to provide a 33' easement to connect to a public water supply while allowing other similarly situated landowners to connect by providing only a 15' easement.) Since Olech, every circuit to consider the issue has concluded that the class-of-one theory also applies to public employees claiming differential treatment with no rational basis and with malice . . . until the maverick Ninth Circuit decided Engquist, reasoning that allowing such claims would interfere unduly in state employment practices and undermine the longstanding principle of at-will public employment. Led by the Chief, the Court affirmed. (Perhaps it is the Ninth Circuit's usually liberal holdings, and not its willingness to "Lone Ranger" it, that make for its very high reversal rate at the Court!)
For the majority, the key consideration was the unique nature of the government's role as an employer. As the Chief explained, "the government has significantly greater leeway in its dealings with citizen employees than it does when it brings its sovereign power to bear on citizens at large." As an employer, the government must provide services effectively and efficiently, which cautions against constitutionalizing routine employment decisions. Further, public employment traditionally is at will, allowing an individual to be terminated for any reason or no reason at all. Allowing a class-of-one claim where two allegedly similar individuals were treated differently would threaten the at-will relationship. Because employment decisions are discretionary, highly subjective and complex, "treating similarly situated individuals differently is . . . par for the course." And while most of the class-of-one claims brought against public employers have been dismissed prior to trial, the government should not have to expend resources defending these cases at all. Thus, while the Equal Protection Clause still bars public employers from discriminating based on group membership (the core concern of equal protection theory), there is no class-of-one equal protection claim in the public employment sphere.
Justice Stevens, joined by Justices Ginsburg and Souter, dissented. For them, the analysis was simple: (1) the Equal Protection Clause protects individuals, not groups (so the "core concern" argument made by the majority was a nonstarter); (2) the Clause has always been applied to government qua employer, not just to government qua sovereign; and (3) there was no support for the majority's conclusion that treating two like employees differently is all right if the decision is subjective. (Just because a decision is subjective and individualized does not mean that it does not have to have a rational basis. Here, the government provided no reason for its differential treatment of Engquist, specifically disclaiming any workplace or performance-based reason for its actions.) Finally, the majority's concern about burdening public employers with class-of-one claims was overstated. As long as there is any rational basis for the decision at issue, the case will be dismissed; however, where the government treats an employee differently simply out of malice, the Equal Protection Clause should provide protection.
Where Engquist narrowed the liability of public employers under the Equal Protection Clause, the Court's unanimous decision in Bridge v. Phoenix Bond & Indemnity Co. (07-210) expanded liability under the Racketeer Influenced and Corrupt Organizations Act ("RICO"). RICO provides a private right of action (for treble damages, no less) to "[a]ny person injured in his business or property by reason of a violation" of RICO's criminal prohibitions, including mail fraud. Here, Phoenix and others claimed that Bridge violated RICO when it engaged in fraudulent conduct that allowed it to purchase more than its fair share of tax liens from Cook County, Illinois. The County would auction its tax liens to "the lowest" bidder, awarding each lien to the bidder who would require the delinquent taxpayer to pay the smallest penalty over and above the amount of the actual lien. Because successful bidders could take the taxpayers' homes if they didn't pay up (which happened frequently), many bidders were willing to charge no penalty for the chance at obtaining these properties for the small price of the outstanding tax liens. To ensure that this tax lien bounty was equally spread among bidders, Cook County adopted a "single, simultaneous bidder rule," requiring each bidder to submit bids in its own name and prohibiting it from using agents, employees or other related parties to submit bids. The County then awarded liens to bidders on a proportionate basis.
Competitive bidders, including Phoenix, sued Bridge under RICO with mail fraud as the predicate act, claiming that Bridge obtained a disproportionate share of the County's tax liens by using related firms to submit bids, filing false affidavits that it had complied with the single, simultaneous bidder rule, and sending out false notices to property owners. The district court dismissed, finding that although the competitors were injured by Bridge's alleged conduct, they were not within the "zone of interest" protected by RICO since they were not the recipients of Bridge's misrepresentations and did not rely on them (i.e., the "mail fraud" wasn't directed at them, but at the County and at property owners). The Seventh Circuit reversed, holding that a party directly injured by mail fraud committed against another can recover under RICO so long as its injury is not derivative. The Court agreed, in a straightforward opinion by Justice Thomas. The plain language of the statute permits any person who is injured by mail fraud to recover, and it does not require reliance on the misrepresentations by the injured party. Of course, the plaintiff must establish that the mail fraud was the proximate cause of his injuries, so it must show "that someone relied on the defendant's misrepresentations." Here, it would be enough to show that the County relied on Bridge's misrepresentations, leading to Phoenix's injury; Phoenix need not show its own reliance.
And with that, we are caught up – just in time, probably, for the Court to release more opinions tomorrow. Thanks for reading!
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