Supreme Court Update: Federal Trade Commission v. Phoebe Putney Health System, Inc. (11-1160), Florida v. Harris (11-817), Chafin v. Chafin (11-1347) and Order List

February 20, 2013 Supreme Court Update

Greetings, Court fans!

The Court is on a tear this week, issuing four decisions Tuesday and another five today! This Update will tackle three of yesterday's decisions, which addressed topics ranging from state-action immunity from antitrust laws, to the interplay of mootness doctrine with an international convention addressing child abductions, to when man's best friend may be considered a sufficiently skilled sniffer to establish probable cause to search based on a bark alone. The only thing binding these three disparate cases together is the fact that they generated unanimous decisions.

First up, in Federal Trade Commission v. Phoebe Putney Health System, Inc. (11-1160), the Court addressed whether the Hospital Authority of Albany-Dougherty County ("Authority"), a public entity, could be subject to antitrust liability where it effectively sought to consolidate two formerly independent hospitals that were less than two miles apart, substantially reducing competition in the market for acute-care hospital services in the relevant geographic area. The district court dismissed the FTC's action, finding the Authority immune from suit under the state action doctrine. The Eleventh Circuit affirmed, reasoning that the Authority was a local government entity and that the Authority's anticompetitive conduct was a "foreseeable result" of Georgia's laws, which provided the Authority broad powers, including the power to make acquisitions. The Eleventh Circuit concluded that the state legislature must have "reasonably anticipated" that these powers could be used to consolidate ownership, thereby eliminating competition.

Led by Justice Sotomayor, the Court reversed, finding the Eleventh Circuit's "foreseeable results" test too loose a basis for state-action immunity. The Court first pointed out that because the Authority was not itself a state entity, it was not entitled to blanket state-action immunity. Rather, as a "substate governmental entity," the Authority was only entitled to immunity to the extent that it was acting "pursuant to a state policy to displace competition." Here, Georgia's law merely authorized municipalities to create hospital authorities and provided those authorities with the same types of powers routinely conferred by state law on private corporations, as well as a few unique powers. These powers can, and likely will, be used primarily to engage in conduct completely consistent with the antitrust laws. Accordingly, Georgia law does not "clearly articulate and affirmatively express a state policy" endorsing anticompetitive conduct.

The Court also rejected respondents' arguments that other aspects of Georgia law placed the Authority in a unique position that warranted state-action immunity. First, respondents pointed to the fact that Georgia law conferred on the Authority unique powers and responsibilities, such as the power of eminent domain, the requirement that the Authority act with the objective of providing access to adequate and affordable health and hospital care to all residents, and the requirement that the Authority operate on a non-profit basis. Rejecting that argument, the Court explained that while hospital authorities may differ substantially from private corporations, nothing in these provisions "articulates a state policy to allow authorities to exercise their general corporate powers . . . without regard to their negative effects on competition." Certainly, Georgia's goal of providing affordable care "does not logically suggest that the State intended that hospital authorities pursue that end through mergers that create monopolies." Second, respondents pointed to the fact that Georgia regulates the health care market heavily via its certificate of need process, which effectively controls entry into the market. To this argument, the Court responded that Georgia's decision to regulate market entry (an admittedly anticompetitive policy) does not express a "policy favoring the consolidation of existing hospitals that are engaged in active competition." To sum up, there was simply nothing in Georgia law that specifically endorsed the Authority's anticompetitive conduct here.

On the heels of last week's Westminster Kennel Club festivities, the Justices engaged in some dog judging of their own in Florida v. Harris (11-817), a case involving a hard-working police dog with a nose for controversy. Liberty County, Florida K-9 Officer William Wheetley pulled over Clayton Harris because of an expired license plate. Seeing that Harris was visibly nervous and had an open can of beer in his truck, Wheetley strolled his partner Aldo, a German shepherd, around the vehicle for a "free air sniff." Aldo, who had been trained to detect certain drugs, signaled to Wheetley that he smelled drugs at the driver's-side door handle. This, in Wheetley's view, gave him probable cause to search. The search didn't turn up any of the drugs the dog was trained to detect. It did, however, reveal a trove of pills and other materials needed to make methamphetamine. Wheetley arrested Harris, who admitted he regularly both cooked and used meth. Harris was charged with possessing pseudoephedrine for use in making meth. While out on bail, Harris had the misfortune of another run-in with Wheetley and Aldo, this time over a broken brake light. Wheetley again walked Aldo around Harris's car. Once again Aldo signaled at the door handle. And once again the resulting search revealed none of the drugs that Aldo was trained to detect (and this time no meth ingredients either).

Harris, defending against the possession charge, moved to suppress the evidence found during the first search on the ground that Aldo's alert was not sufficient to provide Wheetley probable cause to search. The state pointed to Aldo's hundreds of hours of drug training, his certifications, and his consistent satisfactory performance in routine training exercises. Harris cited Aldo's two inaccurate alerts at Harris's car and the lack of records detailing Aldo's performance in traffic stops and other field work. The trial court concluded that Wheetley had probable cause to search, but the Florida Supreme Court reversed, holding that the state had to produce not only evidence of a drug dog's training and certification, but also records of the dog's performance history and reliability. An officer like Wheetley who did not keep complete field performance records could never, under the Florida Supreme Court's view, rely on a dog's alert alone to establish probable cause to search.

In an opinion written by Justice Kagan, the Court sent the Florida Supreme Court to the dog house for flouting the long-standing practical, flexible, and fluid totality-of-the-circumstances approach to probable cause – an approach that rejects the sorts of rigid rules and mechanistic inquiries the Florida decision required. The Court was particularly dismissive of the Florida court's requirement of comprehensive documentation of a drug dog's "hits" and "misses" in the field, the absence of which would always preclude a finding of probable cause. Instead, the Court held that evidence of a dog's satisfactory performance in certification or training programs might provide sufficient grounds to rely on an alert, depending on the totality of the circumstances, as long as a defendant has an opportunity to challenge evidence of the dog's reliability. "The question – similar to every inquiry into probable cause – is whether all the facts surrounding a dog's alert, viewed through the lens of common sense, would make a reasonably prudent person think that a search would reveal contraband or evidence of a crime. A sniff is up to snuff when it meets that test." And here, the Court found, Aldo's sniff did: training records established Aldo's reliability and Harris (who raised several questions about that training only on appeal) failed to undermine the state's showing.

The Justices were also unanimous in Chafin v. Chafin (11-1347), an opinion penned by the Chief Justice that addressed whether a child's return to her country of residence in an international abduction case moots an appeal of the order requiring her return. The Hague Convention on the Civil Aspects of International Child Abduction aims to secure the return of children wrongfully removed to or retained in any of the 89 nations that are parties to the Convention. A removal or retention is "wrongful" if, among other things, it breaches the custody rights of someone in the country in which the child was "habitually resident" immediately before the removal or retention. If proceedings are brought within one year of a child's wrongful removal or retention, the Convention provides that the relevant authority is to order the child's return to her country of habitual residence. There are, however, several exceptions to this rule, e.g. if a parent seeking a child's return wasn't exercising custody rights at the time of removal, if there is a "grave risk" that return will cause harm, if a mature child objects to return, or if return would conflict with fundamental principles of freedom and human rights. Congress created procedures for implementing the Convention in the International Child Abduction Remedies Act ("ICARA"), 42 U.S.C. § 11601, et seq.

The Court addressed the case of Jeffrey Lee Chafin, a U.S. citizen and Army sergeant first class who married Lynne Hales Chafin, a citizen of the United Kingdom, in Germany in 2006. Eventually, the couple found their way to Alabama with their young daughter, E.C., in 2010. Following her arrest for domestic violence, authorities determined that Ms. Chafin had overstayed her visa and she was deported. E.C., who had lived in Scotland with her mother during Mr. Chafin's lengthy prior deployment in Afghanistan, remained with her father. Mrs. Chafin filed a petition in the Northern District of Alabama under the Convention and ICARA seeking an order to return E.C. to Scotland. Following a bench trial, the district court concluded that Scotland was E.C.'s country of habitual residence, granted the petition for return, and denied Mr. Chafin's request for a stay pending appeal. Ms. Chafin and E.C. left the United States immediately. The Eleventh Circuit dismissed Mr. Chafin's appeal as moot, holding that once E.C. had been returned to Scotland the court "became powerless" to grant relief. On remand, the district court dismissed the suit as moot and ordered Mr. Chafin to pay Ms. Chafin's court costs, attorney's fees, and travel expenses. The Alabama state courts also dismissed Mr. Chafin's child custody proceedings for lack of jurisdiction.

The Court reversed the Eleventh Circuit. After offering a refresher on mootness doctrine – a case is moot "when the issues presented are no longer ‘live' or the parties lack a legally cognizable interest in the outcome" – the Justices concluded that "[t]his dispute is still very much alive." Mr. Chafin continues to argue that the United States is E.C.'s county of habitual residence, and that, in any case, the Convention's defenses to return would apply. The parties also dispute custody, as well as the district court's award of costs and fees. The real question before the court, therefore, was not whether there remained an ongoing dispute, but whether an appellate court could grant Mr. Chafin any relief that would be effectual. Ms. Chafin argued that, even if the habitual residence ruling were reversed and the district court issued a re-return order, Scotland would simply ignore it. But even if that were true – and Ms. Chafin offered no authority for her assertion – the Court explained that the case would not be moot: regardless of any action by the Scottish authorities, U.S. courts continued to have personal jurisdiction over Ms. Chafin and could command her to take action outside the United States. Enforcement of a re-return order "may be uncertain if Ms. Chafin chooses to defy it, but such uncertainty does not typically render cases moot." Courts, the justices observed, often adjudicate disputes in which "the practical impact of decisions is not assured." "A re-return order may not result in the return of E.C. to the United States, just as an order that an insolvent defendant pay $100 million may not make the plaintiff rich. But it cannot be said that the parties here have no ‘concrete interest'" and thus the appeal is not moot.

The Court went on to acknowledge that both the Convention and ICARA stress prompt resolution in cases of wrongful removal or retention, and that the movement of children back and forth across borders could be harmful. But the Court concluded that "[t]here is no need to manipulate constitutional doctrine and hold these cases moot. Indeed, doing so may very well undermine the goals of the treaty and harm the children it is meant to protect," particularly as courts would likely begin to grant stays pending appeal as a matter of course to avoid mootness, even where an appeal has little chance of success. Routine stays could also increase the number of appeals, undermining the goal of promptly returning children who have been wrongfully removed. The Court stressed instead that courts should apply traditional stay factors when determining whether to stay a return order. "In every case under the Hague Convention, the well-being of a child is at stake; application of the traditional stay factors ensures that each case will receive the individualized treatment necessary for appropriate consideration of the child's best interests."

Justice Ginsburg concurred separately, with Justices Scalia and Breyer joining her, to stress the Convention's instruction to use "the most expeditious procedures available" to secure children's return. In her view, the Chafin case – already ongoing for nearly two years and with the renewed prospect, in light of the Court's ruling, for further litigation over the habitual residence issue as well as rival custody proceedings in Scotland and Alabama – "highlights the need for both speed and certainty in Convention decisionmaking," particularly at the appellate level, which Congress did not address in ICARA. She cited favorably the procedure followed in England and Wales, in which a party must seek leave to appeal a return order. Leave to appeal is not granted in these jurisdictions without a real prospect of success or some other compelling reason. The procedure effectively renders return orders final absent leave to appeal, while still providing recourse for appellants with potentially meritorious claims. Such a system, in the view of the concurring justices, would reduce the risk of rival custody proceedings and the harm done by prolonging uncertainty for children through protracted proceedings.

The Court also granted one cert petition yesterday, and asked for the SG's views on another.

In Sandifer v. United States Steel Corp. (12-417), the justices will consider what constitutes "changing clothes" within the meaning of section 203(o) of the Fair Labor Standards Act. The answer has implications for whether employers must pay employees for donning and doffing safety gear (including protective clothing) if "changing clothes" is expressly excluded from compensable time under an applicable collective bargaining agreement.

The Court is awaiting the SG's views on Madison County v. Oneida Indian Nation (12-604), which would ask: "Does the 300,000-acre ancient Oneida reservation in New York still exist, neither disestablished nor diminished, despite (1) the federal government's actions taken in furtherance of disestablishment (including, but not limited to, the 1838 Treaty of Buffalo Creek); (2) this Court's holding in City of Sherrill v. Oneida Indian Nation of New York [(2005)] that the Oneida Indian Nation of New York cannot exercise sovereignty over lands it purchases in the ancient reservation area; and (3) this Court's finding in that case that land in the ancient reservation area has not been treated as an Indian reservation by the federal, state or local governments for nearly two centuries?"

We'll be back in your inboxes soon with more decisions!

Kim, Jenny & Julie

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