MedImmune, Inc. v. Genentech, Inc. (05-608), Norfolk Southern Railway Co. v. Sorrell (05-746) and order list

January 11, 2007 Supreme Court Update

Greetings, Court Fans, and Happy New Year!
After being away for almost a month, the Court was busy this week, issuing four new opinions and granting cert in seven new cases. We'll cover the civil cases and the cert grants in this Update, and cover the other decisions separately.
The biggest decision this week – particularly for IP practitioners – was Tuesday's ruling in MedImmune, Inc. v. Genentech, Inc. (05-608). There, an 8-1 majority held that a patent licensee who wants to challenge the validity of the patent (and thus avoid his obligation to pay royalties to the patentholder) does not have to affirmatively breach the contract to create a justiciable "case or controversy." Instead, he can simply file a declaratory judgment action seeking a ruling on the patent's validity. MedImmune, a drug manufacturer, agreed to pay royalties for its use of certain Genentech processes covered by patents or ultimately successful patent applications (something about "chimeric antibodies" and "coexpression of immunoglobin chains" – feel free to peruse the opinion if you're interested). After one of Genentech's pending applications was granted, it demanded additional royalties. MedImmune believed the patent was invalid, but it paid the royalties under protest for fear that Genentech would sue for infringement, exposing MedImmune to treble damages or a crippling injunction on its drug sales. MedImmune then sought a declaratory judgment that Genentech's new patent was invalid, but the district court dismissed the case on the ground that there was no contract dispute to resolve because MedImmune was paying the royalties.
Justice Scalia led the majority, which reversed and reinstated the case. Under the Declaratory Judgment Act., the issue is whether a dispute is "definite," "concrete" and "substantial" enough to amount to a real case or controversy. MedImmune, by paying the royalties, faced no imminent threat of harm, but this was no obstacle to suit. Indeed, the whole point of the Declaratory Judgment Act was to provide an alternative to pursuing a potentially wrongful activity. For example, a citizen can challenge coercive government action – such as a ban on distributing handbills – without actually violating the law and risking prosecution. The Court found the same reasoning persuasive in the case of a strictly private contract – in fact, in the 1943 case of Altvater v. Freeman, the Court already had held that a licensee's payment of royalties did not render a patent dispute too "hypothetical" for a declaratory judgment action. Here, MedImmune effectively was forced to pay royalties due to the threat of treble damages and the loss of most of its business, so the coercion rationale applied and the dispute was hardly hypothetical. Justice Thomas was the lone dissenter. He would not extend the government-coercion declaratory judgment case law to disputes involving private contracts because he saw no limiting principle to allow for dismissing "hypothetical" disputes, and he thought that the majority badly misread Altvater. In turn, Scalia wrote that Thomas was quoting Altvater "wildly out of context" and ignoring the coercive nature of Genentech's threat to MedImmune, which was a limiting principle.
The second civil decision came down Wednesday in Norfolk Southern Railway Co. v. Sorrell (05-746), where the Court (led by the Chief) unanimously held that, under the Federal Employers' Liability Act, the same causation standard should apply to both an employer's negligence and any contributory negligence by a plaintiff employee – though the Court pointedly declined to say exactly what that standard should be. Sorrell was injured in a truck accident while working for Norfolk; he claimed Norfolk had created an unsafe working environment, while Norfolk claimed that the accident was his own darn fault. The Missouri trial court instructed the jury that Sorrell only had to prove that Norfolk's negligence caused his injuries "in whole or in part," while Norfolk had to prove that Sorrell's own negligence "directly contributed" to his injuries. After the Missouri courts upheld Sorrell's $1.5 million verdict, Norfolk sought cert on whether it was error to use different standards. There's a lesson here for future petitioners – be careful what you ask for, as the Chief leads what can be a very literal court. In briefing and at argument, Norfolk attempted to argue that the more exacting "directly contributed" causation standard should govern both claims, but the Court would have none of it. Norfolk's question presented at cert was whether the standards must be the same, not what the standard actually should be, and the Court would not allow Norfolk to "smuggle" a new issue in after cert had been granted. The Court, however, did agree with Norfolk that the standards should be the same: They were the same at common law, and there was nothing in the statute to indicate that Congress intended differently. In fact, Missouri's use of different standards appears to be "unique"; as the Chief wrote, "It is of course possible that everyone is out of step except Missouri, but we find no basis for concluding that Congress in FELA meant to allow different causation standards." There are, nevertheless, a variety of ways to give a jury the same causation instruction on both kinds of negligence, so the Court will leave it to Missouri and other states to formulate those instructions – at least until Norfolk or some other railway company asks the right question.
There were two other opinions, apparently written in response to each other. Justice Ginsburg concurred only in the judgment, writing that the Court previously had held that FELA enacted a relaxed causation standard along the lines of "in whole or in part" – indeed, "even the slightest part." She would dispense with giving any instructions to jurors that used the term "proximate cause," which she thought would only confuse them (a sentiment most trial lawyers would second). Justice Souter concurred, joined by Justices Scalia and Alito, to say that FELA should not be read to water down proximate cause requirements.
We'll cover the other two decisions in a separate Update, but there also were seven new cert grants in last Friday's order list. They are:
BCI Coca-Cola Bottling Co. v. EEOC (06-341): Employment lawyers will want to watch this case closely. It asks: Under what circumstances is an employer liable under federal anti-discrimination laws based on a subordinate's discriminatory animus, where the person(s) who actually made the adverse employment decision admittedly harbored no discriminatory motive toward the impacted employee?
Tennessee Secondary School Athletic Ass'n v. Brentwood Academy (06-427): This could be a very interesting case about a private school that voluntarily joined a public school athletic association but claimed a First Amendment right not to abide by its rules for recruiting athletes (in particular, a ban on "undue influence" – how'd you like to be the lawyer arguing for a constitutional right to exercise undue influence?). The question is: Whether the Sixth Circuit correctly held, in conflict with decisions of this Court and other courts of appeals, that TSSAA violated the First Amendment and Due Process rights of Brentwood Academy when it imposed contractual penalties for violations of the recruiting rule that Brentwood agreed to follow?
Panetti v. Quarterman (06-6407): This one also sounds interesting: Does the Eighth Amendment permit the execution of a death row inmate who has a factual awareness of the reason for his execution but who, because of severe mental illness, has a delusional belief as to why the state is executing him, and thus does not appreciate that his execution is intended to seek retribution for his capital crime?
National Ass'n of Home Builders v. Defenders of Wildlife (06-340) and EPA v. Defenders of Wildlife (06-549): These two cases ask similar questions about the interplay between the Endangered Species Act and the Clean Water Act with regard to an Arizona pollutant discharge elimination program. Here's the EPA question presented: Whether Section 7(a)(2) of the Endangered Species Act of 1973, 16 U.S.C. 1536(a)(2), which requires each federal agency to insure that its actions do not jeopardize the continued existence of a listed species or modify its critical habitat, overrides statutory mandates or constraints placed on an agency's discretion by other Acts of Congress. In addition, the Court has asked the parties to brief whether the EPA's decision to transfer pollution permitting authority to Arizona was arbitrary and capricious because it was based on inconsistent interpretations of the Endangered Species Act, and, if so, whether the Ninth Circuit should have remanded the case to the EPA to fix its interpretation first.
Tellabs, Inc. v. Makor Issues & Rights (06-484): Whether, and to what extent, a court must consider or weigh competing inferences in determining whether a complaint asserting a claim of securities fraud has alleged facts sufficient to establish a "strong inference" that the defendant acted with scienter, as required under the Private Securities Litigation Reform Act of 1995.
Long Island Care at Home v. Coke (06-593): Deference gurus rejoice, because this one's a two-fer: 1. Whether the Second Circuit erred in refusing to give [Chevron] deference . . . to a thirty-year-old Department of Labor regulation – a regulation that has twice been upheld by the Tenth Circuit – on the ground that, even though it was promulgated under express grants of legislative authority and after full notice-and-comment rulemaking, the regulation was contained in a subpart headed "Interpretations." 2. Whether, in holding that a longstanding Department of Labor regulation was not persuasive and thus undeserving of any [Skidmore] deference . . . , the Second Circuit erred by failing to address the governing provisions of the Fair Labor Standards Act and by declining to give any weight to the Department's interpretation of its own regulations.
And lastly, Altadis USA, Inc. v. Sea Star Line, LLC (06-606): Does the Carmack Amendment, 49 U.S.C. § 14706, apply to the inland leg of a multimodal shipment to a place in the United States from a place in a territory of the United States, as provided in 49 U.S.C. § 13501(1)(C), even if the inland carrier does not issue a separate bill of lading for the inland leg?
We'll cover the rest of this week's decisions and orders in the next Update. Until then, thanks for reading!
Ken & Kim
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