Smith v. City of Jackson, Mississippi (03-1160), Rhines v. Weber (03-9046) and Exxon Mobil Corp. v. Saudi Basic Industries Corp. (03-1696)

March 30, 2005 Supreme Court Update


Greetings, Court Fans!

The Court hit us with three more opinions today, in what has been a very big week for employment lawyers. Yesterday, the Court authorized retaliation actions for Title IX whistleblowers, and today it held that the Age Discrimination in Employment Act ("ADEA") authorizes disparate-impact claims . In Smith v. City of Jackson, Mississippi (03-1160), Smith and other senior police officers challenged pay scale revisions that gave junior (generally younger) officers higher percentage raises than senior (generally older) officers. This was probably not the strongest claim ever, since senior officers' raises were actually higher in absolute dollars, but we digress . . . . Smith argued, among other things, that even if the city had not intentionally discriminated against him, the Title VII disparate-impact theory from Griggs v. Duke Power Company was also available under the ADEA.. The district court and the Fifth Circuit rejected this claim.

In three separate opinions, the Court unanimously held for the city, but by a 5-3 vote (no Chief) it recognized ADEA disparate-impact claims. Justice Stevens announced the judgment, joined by Souter, Ginsburg, Breyer and (for the most part) Scalia. The Court noted that Congress enacted the ADEA hot on the heels (in legislative time) of Title VII and borrowed its language almost verbatim, making it unlawful "to limit, segregate, or classify . . . employees in any way which would deprive or tend to deprive any individual of employment opportunities or otherwise adversely affect his status as an employee, because of such individual's age."

Here's where Scalia drops out, leaving the following a plurality only. Griggs authorized disparate-impact claims on the ground that the purpose of Title VII encompassed both the motivations and the effects of employment actions, and subsequent cases made clear that disparate-impact claims also had a textual basis in Title VII. The close similarities between Title VII and the ADEA strongly suggested that a disparate-impact theory was also cognizable under the ADEA. Further, the ADEA's one textual distinction actually supported the viability of disparate-impact claims: unlike Title VII, the ADEA contains an "RFOA provision" that allows employers to take an "otherwise prohibited action" (i.e., an action with an age-related adverse effect) if it is based on "reasonable factors other than age discrimination." This precludes liability if the adverse effect results from a reasonable nonage factor, but it leaves open a challenge to effects caused by unreasonable factors (whatever those may be – the Court certainly did not say). Finally, the plurality read EEOC regulations as consistently interpreting the ADEA to authorize recovery under a disparate-impact theory. How does Scalia disagree with all this? He doesn't, really. He agrees with "all the Court's reasoning," but instead of making an independent determination on the disparate-impact question he would defer to the EEOC under the Chevron doctrine. For Scalia, this is "an absolutely classic case for deference to agency interpretation," because the ADEA authorized the EEOC regulations, which are reasonable.

With that, Scalia jumps back on board, creating a true majority again: ADEA disparate-impact claims are narrower than those under Title VII, because the RFOA provision obviously requires a claimant to show that the nonage factor was unreasonable, and the 1991 amendments expanding the scope of disparate-impact claims under Title VII did not amend the ADEA. For those reasons, Smith loses: he's merely pointed out that the city has been "relatively less generous to older workers" without identifying the specific factor in the pay scale responsible for the disparity, and the pay scale was a reasonable effort to make junior officer salaries more competitive in the marketplace.

Justice O'Connor, joined by Kennedy and Thomas, concurred in the judgment only, as these Justices would have disallowed disparate-impact claims altogether. They rejected the plurality's interpretation of the "adverse effect" provision of the statute, which they believe wrongly read "because of . . . age" to refer to the effect rather than (as it does elsewhere in the statute) to the employer's motive. In a point for the grammarians, they even chastised the plurality for ignoring "the comma separating the ‘because of . . . age' clause from the preceding language." These Justices read the RFOA provision as a carve-out, not a carve-in, for disparate impact expressing Congress' clear intention that employers cannot be liable for anything other than intentional discrimination. For them, the issue of reasonable vs. unreasonable nonage factors was not a distinction between two types of disparate-impact claims, but rather it was a codification in the ADEA of the "pretext" inquiry in the Title VII McDonnell Douglas analysis: the employee alleges discrimination, the employer proffers a nondiscriminatory reason for its action, and the employee can try to show that's simply not reasonable. The "dissenters" also gave no weight to EEOC regulations because they speak only to what employers should do to be sure they qualify for the RFOA safe harbor, and say nothing about disparate impact lawsuits – and even if they did, they would be unreasonable and not entitled to deference. The exchange between O'Connor and Scalia is quite harsh – too lengthy for e-mail, but worth reading.

So, Smith lost his battle, but it looks like employment lawyers have a whole new war on their hands.

The Court also released two unanimous opinions. In Rhines v. Weber (03-9046), the Court (O'Connor, J.) held that the "stay and abeyance" procedure, whereby "mixed" habeas corpus petitions containing exhausted and unexhausted claims are stayed while the petitioner attempts to exhaust the remaining claims in state court, is appropriate where: (1) the petitioner has good cause for failing to exhaust; (2) the unexhausted claims are potentially meritorious; and (3) the petitioner has not been dilatory. If the unexhausted claims are "plainly meritless," the district court should reject them on the merits and dispose of the entire petition (a very pragmatic approach). Where the district court determines that stay and abeyance is inappropriate, the court "should allow the petitioner to delete the unexhausted claims and to proceed with the exhausted claims if dismissal of the entire petition would unreasonably impair petitioner's rights to obtain federal relief."

While this procedural ruling may seem obscure, it is of great import to those who work in this area and may close a trap for the unwary (generally pro se) habeas petitioner. The stay and abeyance practice came about in response to two rules that collided to create a host of procedural problems. In Rose v. Lundy, the Court held that federal courts could not adjudicate habeas petitions containing both exhausted and unexhausted claims: these "mixed" petitions had to be dismissed to be refiled once all claims were properly exhausted. Lundy, however, was decided prior to the enactment of the AEDPA, which requires petitioners to file their habeas petitions within one year of final judgment. The pendency of state habeas proceedings tolls this period, but federal habeas proceedings do not. So, if a district court took 16 months to dismiss a state prisoner's petition because it had some unexhausted claims, the petitioner was essentially out of luck: if and when he attempted to refile, he would be time-barred as to all claims – even those that were properly exhausted in the original petition. In Rhines, the Court attempted to balance the interests of petitioners in having their potentially meritorious claims adjudicated against AEDPA's interest in the finality of criminal judgments. Thus, if a court finds stay and abeyance to be proper in a given case, the stay should not be "indefinite" lest capital prisoners attempt to game the system to avoid execution – prisoners should be required to pursue their state remedies in a timely fashion, normally within 30 days, and must return to federal court promptly once state court review is complete.

Stevens (joined by Ginsburg and Breyer) filed a concurrence merely to emphasize that "good cause" should not be read to "impose the sort of strict and inflexible requirement that would ‘trap the unwary pro se prisoner.'" The same three Justices (this time led by Souter) also concurred to say that they would prefer not conditioning stay and abeyance on a showing of good cause for "fear that threshold enquiries into good cause will give district courts too much trouble to be worth the time." Instead, these Justices would permit use of stay and abeyance unless the petitioner was being intentionally dilatory.

In the third case of the day, Exxon Mobil Corp. v. Saudi Basic Industries Corp. (03-1696), the Court (Ginsburg, J.) illuminated the confines of the Rooker-Feldman doctrine – a real treat for federal jurisdiction junkies. In fact, should you feel compelled to write an article on the topic, the Court took pains to cite every single case in which the Court ever referenced the doctrine! The holding is simple: Rooker-Feldman is as narrow as the two cases that created it. The doctrine requires a federal district court to dismiss only where the plaintiff is complaining of injuries caused by a state court judgment that preceded the filing of the federal action and is essentially appealling that judgment to the district court. Those were the facts in both the Rooker and Feldman – the only two cases where the Court ever applied the doctrine (as the Court took pains to point out). The lower courts, however, had expanded the doctrine much further, as in this case, where a dispute arose between Saudi Basic Industries Corp. ("SABIC") and Exxon regarding certain royalty payments. SABIC filed a preemptive state court claim for declaratory relief, and a few weeks later Exxon filed in federal court seeking damages. The state court case went to judgment ($400M for Exxon) while the federal courts were still determining whether they had jurisdiction. During an appeal on the jurisdictional issue, the Third Circuit sua sponte held that the Rooker-Feldman doctrine required dismissal since the state case had proceeded to judgment, because otherwise "we would be encouraging parties to maintain federal actions as ‘insurance policies' while their state court claims are pending.'" The Supreme Court rejected this expansion of Rooker-Feldman, as there was no question that the federal district court had jurisdiction over the matter when it was filed, and the district court was not suddenly divested of jurisdiction merely because the state court case had later been resolved. This does not mean that comity and abstention doctrines all go out the window – so don't forget (if you haven't already) about Colorado River, Younger, Burford and Pullman! And, of course, disposition of a federal action, once a parallel state-court adjudication is complete, is governed by the normal principles of preclusion law.

That's all for now (and most likely until April 18th, when the Court comes back from recess). As always, thanks for reading!

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