Supreme Court Update: Americold Realty Trust v. Conagra Foods (14-1382), V.L. v. E.L. (15-648), Wearry v. Cain (14-10008) and Order List

March 29, 2016 Supreme Court Update

Greetings, Court Fans!

More fun with an even number of Justices! The Court issued two orders today reflecting in different ways on the difficulties of deciding cases with a vacant seat.

This morning, the Court released its much anticipated decision in Friedrichs v. California Teachers Ass'n (14-915), the case in which the Court appeared primed to rule that unions representing government employees cannot constitutionally charge "agency fees" to employees who opt out of membership, which some commentators have said would create free-rider incentives that would spell the end of public-sector unions. However, with the death of Justice Scalia, the Court was divided 4-4 on this question, and therefore affirmed without opinion a Ninth Circuit decision permitting the practice. (Every circuit court to consider the question has upheld the practice pursuant to the Supreme Court's decision in Abood v. Detroit Bd. of Ed. (1977), a case that was called into question, but not reversed, by the conservative majority two years ago in Harris v. Quinn (2014).) There will be no shortage of additional test cases to be brought before a nine-member Court, so, if and when Judge Garland or another nominee actually gets a confirmation hearing, you can expect a whole lot of questions brushed aside with a well-rehearsed, "It would not be appropriate for me to comment on a matter that could come before the Court."

And, this afternoon, the Court took action in another potential blockbuster that could instead fizzle in a 4-4 split . . . or perhaps result in a white-knight 8-0 compromise. Just a week after the contentious hearing in Zubik v. Burwell (14-1418), the contraceptive-mandate case, the Court issued an order directing the parties to file briefs "addressing whether and how contraceptive coverage may be obtained by petitioners' employees through petitioners' insurance companies, but in a way that does not require any involvement of petitioners beyond their own decision to provide health insurance without contraceptive coverage to their employees." Currently, religious employers who are not exempt from the contraceptive mandate can opt out of coverage if they submit a form either to their insurer or to HHS stating that they object on religious grounds to providing contraceptive coverage. The petitioners claim that even filing that form makes them complicit in sin and thus poses a substantial burden on their religious rights. The Court's two-page order appears to accept that the current opt-out procedure imposes a substantial burden, as it requests briefing on ways that contraceptive coverage can be seamlessly provided to women who want it without requiring any action on the part of religious objectors. But the fact that the Court itself proposes a potential alternative (whereby religious employers tell insurers at the outset that they don't want their plans to include contraceptive coverage, and those insurers notify employees that contraception will be separately provided by the plan) suggests that the Court does not believe that the current procedure is the "least restrictive means" of fulfilling the Government's interest in providing contraceptive coverage, as would be required for the procedure to survive RFRA's strict scrutiny. On the other hand, if the petitioners object even to the Court's proposed workaround (which isn't really all that different from the current procedure), then the Court might conclude that there are no less restrictive alternatives. Then again, it may simply be that the Court has split 4-4 on the merits but wishes to avoid a deadlock because (unlike the situation with respect to public unions) there is a circuit split on this issue that needs resolution and a compromise decision is the best bet for bringing about uniformity. In any event, this is a remarkably direct intervention into a pending case. We'll keep you posted on the outcome of this gambit. As of now, no additional hearing appears to be contemplated.

While the Court had no precedential decisions for us today, we do have a few stragglers from the last few weeks to catch up on in this Update, as well as two recent cert grants.

First, though, a notable cert denial. Yesterday, the Court denied certiorari in Konowaloff v. Yale University (15-921), a case in which fellow Wiggin appellateers Jonathan Freiman and Ben Daniels defended Yale's title to Van Gogh's The Night Café, which, thanks to their efforts, will continue to hang in the Yale Art Gallery, a free museum on Chapel Street in New Haven. Congrats, Jonathan and Ben!

On to the cases. In Americold Realty Trust v. Conagra Foods (14-1382), the Court considered a question that arises frequently in federal litigation—how do you determine the citizenship of non-corporate legal entities?—in a context that's not likely to recur with any frequency: the fallout from an underground food-storage warehouse fire. As a result of such a fire in 1991, Conagra, a Delaware corporation with a principal place of business in Nebraska, sued Americold, a real estate investment trust ("REIT") created under Maryland law, in Kansas state court. Americold removed the case to federal court and the District Court ruled in its favor. While no party challenged jurisdiction, the Tenth Circuit raised the matter sua sponte and concluded that the federal courts lacked jurisdiction because the citizenship of a trust is determined by examining the citizenship of all of its members, and Americold had not shown that all of its members were completely diverse from the plaintiffs. The Supreme Court agreed, in a unanimous opinion authored by Justice Sotomayor.

In its brief opinion, the Court clarified that, for purposes of establishing diversity jurisdiction under 28 U.S.C. § 1332(a), an unincorporated legal entity shares the citizenship of its "members." While the record did not demonstrate who Americold's "members" are, or where they reside, Maryland law establishes that an REIT is an "unincorporated business trust or association" in which property is held and managed "for the benefit and profit of any person who may become a shareholder." Accordingly, the "members" of an REIT include its shareholders. Because Americold had not shown that all of its shareholders had diverse citizenship from the plaintiffs, it failed to establish federal jurisdiction under § 1332(a).

In so holding, the Court rejected Americold's argument that "anything called a ‘trust' possesses the citizenship of its trustees alone, not its shareholder beneficiaries as well." That is true in the case of traditional trusts, which are really relationships, not entities. Where "a trustee files a lawsuit, her jurisdictional citizenship is the State to which she belongs." But Americold is not a trust in the traditional sense, but rather a business association that happens to be called a "real estate investment trust" because that's what this type of association is called under Maryland law. The Court also rejected the argument that REITs and other legal entities should be treated like corporations, whose citizenship is determined by their state(s) of establishment and principal place of business, not the state(s) of their shareholders. Justice Sotomayor noted that the Court long ago carved out an exception to the general rule for corporations, which Congress incorporated into § 1332(a). But unless and until Congress sees fit to expand that exception to the special jurisdiction rule to other legal entities, the Court did not see fit to do so itself. Therefore, the decision has ramifications beyond warehouse-fire disputes involving real estate investment trusts. The citizenship of any unincorporated legal entity will be deemed to be that of its "members" (or owners) for purposes of diversity jurisdiction, meaning it will be difficult for some larger unincorporated entities to remove state actions to federal court.

Next up, in V.L. v. E.L. (15-648), the Court offered a reminder to state courts that they must accord "full faith and credit" to the judgments of other states' courts so long as the judgments appear facially to be rendered by a court of competent jurisdiction. V.L. and E.L. are two Alabama women who were in a relationship from 1995 to 2011. During this time E.L. gave birth to three children, whom the two women raised together as joint parents. They eventually decided to have V.L. formally adopt the three children. Because this was not possible in Alabama, they rented a house in Georgia, where V.L. petitioned for adoption and E.L. signed papers giving express consent to the adoption. A Georgia court issued a judgment of adoption. In 2011, however, the relationship fell apart. V.L. filed a petition in an Alabama family court requesting that the court recognize the Georgia adoption and grant her custody or visitation rights. The family court granted her visitation rights, but the Alabama Supreme Court reversed, holding that the original Georgia court lacked jurisdiction under Georgia law to enter the judgment of adoption and that, therefore, Alabama courts were not required to accord full faith and credit to the adoption judgment.

The Supreme Court unanimously, and summarily, reversed. The Court reiterated the baseline rule that "[a] State may not disregard the judgment of a sister State because it disagrees with the reasoning underlying the judgment or deems it to be wrong on the merits." While a state is not required to afford full faith and credit to a judgment rendered by a court that did not have subject-matter jurisdiction, that jurisdictional inquiry is meant to be extremely limited. "Where a judgment indicates on its face that it was rendered by a court of competent jurisdiction, such jurisdiction is to be presumed unless otherwise disproved." Here, there was no basis for rebutting the presumption of jurisdiction. The Alabama Supreme Court had relied on a Georgia statute that does not permit a third party to adopt a child unless every living parent or guardian has voluntarily and in writing surrendered his or her rights to the child, something that was not done here because E.L. did not surrender her parental rights. But the Court concluded that, whether or not the Georgia court correctly applied that statute, there is nothing on its face that suggests it is a jurisdictional statute, rather than one addressing the merits of an adoption proceeding. The Court acknowledged that it is sometimes difficult to tell if the words of a statute are directed to jurisdiction or to merits, but reminded state courts that, "[i]n such cases, especially where the Full Faith and Credit Clause is concerned, a court must be slow to read ambiguous words as meaning to leave the judgment open to dispute, or as intended to do more than fix the rule by which the court should decide." Because the issue of whether the Georgia court had jurisdiction was at most ambiguous, the Alabama Supreme Court erred in refusing to grant its adoption judgment full faith and credit.

Finally, in Wearry v. Cain (14-10008), the Court issued a rare (or was it?) summary reversal of a murder conviction on the ground that the prosecution violated its disclosure obligations under Brady v. Maryland (1963). What made the decision all the more notable was that it arose on appeal of the state post-conviction court's denial of relief, before the petitioner had even filed a federal habeas petition.

That petitioner is Michael Wearry, who was convicted of capital murder and sentenced to death largely on the testimony of two witnesses—Scott and Brown—who claimed to have been with or around him on the night Eric Walber was brutally killed. After trial, Wearry's post-conviction counsel learned that the prosecution had failed to turn over three categories of evidence that might have assisted in his defense: (1) statements from two of Scott's fellow inmates that cast doubt on his credibility and suggested a motive to falsely implicate Wearry; (2) the fact that, contrary to what prosecutors told the jury, Brown had twice sought a reduction in sentence in exchange for his testimony; and (3) medical records showing that Scott's description of the actions of an alleged accomplice were not physically possible in light of the fact that the accomplice had had serious knee surgery just days before the murder. (Wearry's new counsel also conducted an investigation into his alibi and found numerous witnesses who would have testified in his defense had they ever been approached by trial counsel.) Based on this, Wearry alleged violations of his due-process rights under Brady and his Sixth Amendment right to effective assistance of counsel. The post-conviction court acknowledged that the State "probably ought to have" disclosed the withheld evidence and that Wearry's counsel provided "perhaps not the best defense that could have been rendered," but nevertheless denied relief, finding that Wearry had not suffered any prejudice.

The Supreme Court disagreed, and reversed in a 6-2 per curiam decision. The majority opinion contained little analysis except to point out that, where the prosecution's case turned entirely on shaky witness testimony, any evidence that would have further undermined that testimony is plainly material and its withholding is almost per se prejudicial. According to the Court, the state post-conviction courts had erred by evaluating the effect of each piece of withheld evidence in isolation, rather than cumulatively. Taken together, the Court had no difficultly concluding that Wearry's Brady rights were violated and he was therefore entitled to relief.

Justice Alito, joined by Thomas, strenuously disagreed. Though he agreed that the evidence should have been disclosed, he argued that it was not unreasonable to conclude that it would not have made a difference to the outcome even if it had been. But even Alito acknowledged that there was a good case for relief. He was far more irked that the majority had granted that relief summarily without full briefing and argument. The issues in the case are intensely factual, Alito argued, and the Court had before it only Wearry's cert petition and the State's brief in opposition. "[T]he State had ample reason to believe when it submitted that brief that the question on the table was whether the Court should hear the case, not whether the petitioner's conviction should be reversed." The State had even less reason to believe the conviction would be reversed in this case, where no federal habeas petition had yet been filed. The majority countered with citations to other instances in which it had summarily reversed criminal convictions where state courts had "egregiously misapplied settled law." In the end, while Alito and Thomas may have had justifiable concerns about rushing the case along, the majority appeared to conclude that Mr. Wearry should not have to wait another several years in prison for his federal habeas petition to win him the same relief he seemed so likely entitled to now.

That takes care of our delinquent updates. We're expecting additional decisions tomorrow. In the meantime, here are two new cases granted cert for next term:

Bravo-Fernandez v. United States (15-537), which asks whether, under Ashe v. Swenson and Yeager v. United States, a vacated, unconstitutional conviction can cancel out the preclusive effect of an acquittal under the collateral estoppel prong of the Double Jeopardy Clause; and

Samsung Electronics v. Apple (15-777), which asks whether, where a design patent is applied to only a component of a product, an award of infringers' profits should be limited to those profits attributable to the component.