Supreme Court Update: Kentucky v. King (09-1272), Schindler Elevator Corp. v. United States ex rel. Kirk (10-188) and CIGNA Corp. v. Amara (09-804)

June 1, 2011 Supreme Court Update

Greetings, Court fans!

We're back with three cases with a little something for everyone: Kentucky v. King (09-1272), on the exigent circumstances exception to warrantless search; Schindler Elevator Corp. v. United States ex rel. Kirk (10-188), on the public disclosure bar of the False Claims Act; and CIGNA Corp. v. Amara (09-804), on remedies for misrepresentations surrounding a change in retirement plan benefits.

The respondent in Kentucky v. King (09-1272) was definitely doing the wrong thing, in the wrong place, at the wrong time – smoking pot, in the apartment next to a crack cocaine dealer's, right as the police were in pursuit of the dealer. The case began with an undercover buy from the dealer. As the officers moved in for an arrest, the dealer entered the breezeway of an apartment building. When the officers reached the breezeway, they saw two doors. They smelled marijuana coming from the door on the left, so they knocked on that door and announced their presence. When they heard what sounded like evidence being destroyed, they kicked in the door and discovered the respondent amongst various drugs and drug paraphernalia. A Kentucky appellate court upheld the respondent's conviction, reasoning that exigent circumstances justified the warrantless entry because the police reasonably believed that evidence would be destroyed. The Supreme Court of Kentucky reversed. That court held that the police could not rely on exigent circumstances where it was reasonably foreseeable that their investigative tactics would create the exigent circumstances; i.e., in this case, that knocking and announcing would prompt the occupants to destroy evidence.

The Court reversed, 8-1. The Court held that exigent circumstances may justify a warrantless search so long as the police do not create the exigency by engaging or threatening to engage in unconstitutional conduct. The most useful part of Justice Alito's opinion for the majority may be this piece of advice: If the police knock on your door without a warrant, you don't have to let them in. "Occupants who choose not to stand on their constitutional rights but instead elect to attempt to destroy evidence have only themselves to blame for the warrantless exigent-circumstances search that may ensue."

The Court rejected the Kentucky Supreme Court's reasonable foreseeability standard as unworkable for officers in the field and judges after the fact. When the police knock on the door of a drug suspect, there is always some possibility the person has drugs and will try to destroy them, but what percentage chance would make it reasonably foreseeable? What if there were no marijuana odor and the police randomly picked 1 of 2 doors? Or 1 of 3, 5, 10, or even 20? The Court also rejected several other proposed standards. The respondent's proposed standard, based on whether the officers' conduct would cause a reasonable person to believe that entry was "imminent and inevitable" was also unworkable. Officers are encouraged to knock and announce loudly. How would an officer – much less a judge – know when the officer had knocked too loudly? Another standard favored by the Kentucky Supreme Court, which looked to whether the officers created the exigent circumstances in bad faith, was inconsistent with the Court's Fourth Amendment jurisprudence, which looks to objective factors, rather than subjective intent. And the standard favored by Justice Ginsburg, the lone dissenter – whether there was probable cause and time to secure a warrant – unjustifiably interfered with legitimate law enforcement strategies. Here, assuming that exigent circumstances existed, and the officers acted consistently with the Fourth Amendment in their knocking and announcing, the officers were entitled to rely on the exigent circumstances exception. (And in case you were wondering, yes, the police did eventually enter the apartment on the right, where they found the suspected drug dealer.)

Justice Ginsburg dissented. In her view, when the police can "pause" to obtain a search warrant, they should do so. For the Court to hold otherwise was to arm the police with a way to routinely dishonor the Fourth Amendment in drug cases: just "knock, listen, then break the door down." Here, officers could have guarded the door while waiting for a warrant. Thus, their own conduct impermissibly created the exigent circumstances.

The respondent in our next case, Schindler Elevator Corp. v. United States ex rel. Kirk (10-188) might be described as doing the right thing, in the right place, but at the wrong time. Daniel Kirk was employed by Schindler Elevator and a predecessor company until 2003, when he resigned in response to what he saw as Schindler's efforts to force him out. Kirk, a Vietnam War veteran, suspected that Schindler was not in compliance with the Vietnam Era Veterans' Readjustment Assistance Act of 1972 ("VEVRAA"), which requires, among other things, contractors to report the number of VEVRAA "qualified covered veterans" they employ to the Department of Labor ("DOL") each year. Kirk's wife made three FOIA requests to the DOL, asking for all the reports filed by Schindler between 1998 through 2006. The DOL responded that there were no reports for 5 of those years, and provided copies of the reports it had. Kirk filed a False Claims Act ("FCA") action against Schindler, alleging that Schindler had failed to file required VEVRAA reports, included false information on reports it did file, and falsely certified its compliance with VEVRAA in hundreds of claims for payment. In support of his allegations, Kirk pointed to the FOIA responses.

At the time Kirk brought suit, the FCA provided, in relevant part, that "no court shall have jurisdiction over an action . . . based upon the public disclosure of allegations or transactions in a criminal, civil, or administrative hearing, in a congressional, administrative, or Government Accounting Office report, hearing, audit, or investigation, or from the news media, unless . . . the person bringing the action is an original source of the information." Schindler argued that Kirk's claims were barred because they were based on the DOL's responses to Mrs. Kirk's FOIA requests, which were "reports." The Second Circuit held that an agency's FOIA responses were not "reports" within the meaning of the FCA's public disclosure bar, but the Court reversed, in a 5-3, conservative-liberal split, with Justice Kagan sitting out.

(Kirk may have acted "at the wrong time" in that the FCA was amended in 2010 by the Affordable Care Act. The FCA still calls for the dismissal of actions based on allegations or transactions publicly disclosed in a government "report," but has expanded the definition of "original source" to include an individual who, inter alia, "has knowledge that is independent of and materially adds to the publicly disclosed allegations or transactions" – which Kirk might have had. But the FCA amendments are not applicable to pending cases.)

Justice Thomas wrote for the Court. Since the FCA does not define "report," the Court looked first to the word's ordinary meaning: broadly, a statement or account that gives information. The Court found that this broad definition of "report" was consistent with the public disclosure bar's broad scope. Notably, the bar encompassed "news media," and not just the disclosure of "allegations" but also "transactions." The Second Circuit had looked at the nearby terms "hearing, audit, or investigation" and "criminal, civil, or administrative hearing," and concluded that "report" must mean something narrower, akin to a "synthesis of information in an investigatory context." The Court criticized the Second Circuit for its blind spot toward the reference to "news media" – that term suggested a much broader scope. The Court then reviewed FOIA's disclosure requirements and the DOL's internal regulations governing FOIA disclosure, and readily found that the agency's response to Mrs. Kirk's FOIA requests were "reports" within the broad definition. A response to a FOIA request indicating that records were or were not found is a statement that gives information. And any records the agency produces along with that response are part of the response, just as if they had been reproduced in an appendix. Finally, the Court rejected the notion that its interpretation of "report" ran contrary to the drafting history of the public disclosure bar. The Court did not mince words: "the sort of case that Kirk has brought seems to us a classic example of the ‘opportunistic' litigation that the public disclosure bar is designed to discourage." In short, the Court feared that anyone could identify a few regulatory filings and certification requirements, submit FOIA requests until he discovered some federal contractor out of compliance, and reap a windfall under the FCA. But the Court left open on remand the question of whether Kirk's suit was "based upon" the information disclosed in the FOIA reports.

Justice Ginsburg wrote the dissent, joined by Breyer and Sotomayor. The dissenters would have affirmed the Second Circuit's "carefully developed, highly persuasive opinion" at each turn. The dissenters also came to the Second Circuit's defense for not considering the reference to "news media" – Schindler did not make the argument below, and, in any event, disclosures in the news media also involve uncovering and analyzing information in a way that rote FOIA responses do not. Most importantly, the dissenters believed that whistleblowers "attentive to the heightened pleading standards of Federal Rule of Procedure 9(b)" should not be penalized for seeking to corroborate their allegations through FOIA requests prior to filing. The dissenters called for Congress' attention to the matter.

While we sometimes poke fun at ERISA cases for, well, not being the most fun, CIGNA Corp. v. Amara (09-804) should be of interest to any company who might ever want to change its employee benefit plan, and to any employee who wants to preserve his or her benefits – i.e., a large part of the population. CIGNA terminated its old pension plan at the end of 1997 and implemented a new one in 1998. In brief, CIGNA substituted annuities based on salary and years of service with individual accounts which employees could cash out or use to buy an annuity upon retirement. Benefits earned prior to 1998 would be credited as an initial contribution to the individual accounts. The new plan provided a guarantee: upon retirement, an employee would receive the greater of (1) his pre-1998 benefits, or (2) the amount in his individual account. In various summary materials, CIGNA represented that the new plan would provide the same or better benefits. But in fact, the new plan did not give employees the full value of their pre-1998 benefits, and made them worse off in several ways (ways too complicated to set forth here). Suffice it to say, suit was brought on behalf of a class of employees. The District Court concluded as a matter of law that CIGNA's representations and omissions about the plan violated ERISA. As a remedy, the court reformed the new plan's guarantee: an employee should receive (1) his pre-1998 benefits, and (2) the amount in his individual account, excluding the initial contribution. The court believed it had authority to enter this relief under ERISA §502(a)(1)(B), which provides that a plan participant or beneficiary may bring an action "to recover benefits due to him under the terms of his plan." The court then determined that employee class members were entitled to relief without proof of individual injury, where the evidence raised a presumption of "likely harm" which CIGNA had failed to rebut. CIGNA challenged both the District Court's authority to enter the remedy, and the "likely harm" standard it applied.

Justice Breyer wrote for the majority (which included the often bench-warming Justice Kagan, but not Justice Sotomayor, who did not participate). As an initial matter, the Court held that §502(a)(1)(B) did not give courts the authority to alter the terms of a plan. The Court rejected the Solicitor General's argument for the employees that the District Court was merely enforcing the new plan because CIGNA's summary plan descriptions ("SPD") – representing that the new plan was the same or better – were terms of the new plan. ERISA §102(a) requires plan administrators to furnish an SPD advising participants of their rights and obligations "under the plan," which suggests that the SPD is not part of the plan itself. Treating the SPD as part of the plan would undermine the goals of providing basic information about the plan in simple, clear language. In place of §502(a)(1)(B), the Court suggested that ERISA §502(a)(3) might authorize the relief the District Court granted. That provision allows a participant, beneficiary, or fiduciary to "obtain other appropriate equitable relief" to redress violations of ERISA. The District Court had not relied upon §502(a)(3), expressing concern that the Court had narrowed the application of this provision in recent cases. The Court explained that there should be no cause for concern. While the Court has limited the provision to types of relief that "were typically available in equity," what the District Court did here might be regarded as contract reformation, estoppel, or imposing a surcharge for a trustee's breach, which were all typically available in equity. On remand, the District Court should consider whether and which equitable remedy may be imposed under §502(a)(3). The relevant standard of harm will then depend on the equitable theory the District Court chooses.

Justice Scalia, joined by Justice Thomas, concurred in the judgment only. They agreed with the Court's conclusion that §502(a)(1)(B) did not authorize relief for misrepresentations in a SPD. But they would have stopped there. The District Court did not reach §502(a)(3), and thus the Court's discussion of that provision was "purely dicta, binding upon neither us nor the District Court."

We'll be back again soon with additional decisions as the end of Term deluge continues.

Kim and Jenny

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