Supreme Court Update: Lewis v. Clarke (15-1500), Coventry Health Care v. Nevils (16-149), Nelson v. Colorado (15-1256), Manrique v. United States (15-7250), Dean v. United States (15-9260) and Order List

May 3, 2017 Supreme Court Update

Greetings, Court Fans!

The Nine wrapped up arguments for OT16 last week, so it's time to start playing catch-up. This Update will get us most of the way there, with summaries of: Lewis v. Clarke (No. 15-1500), a rare case from the Connecticut Supreme Court regarding whether lawsuits brought against tribal employees in their individual capacities implicate tribal sovereign immunity; Coventry Health Care v. Nevils (No. 16-149), holding that Missouri law limiting subrogation in health-insurance contracts is preempted by federal law for federal employees' health plans; Nelson v. Colorado (No. 15-1256), holding that Colorado can't require criminal defendants whose convictions have been vacated to prove their innocence by clear and convincing evidence in order to recover court costs, fees, and restitution already paid as a result of their convictions; Manrique v. United States (No. 15-7250), holding that criminal defendants must separately appeal from deferred restitution orders; and Dean v. United States (No. 15-9260), holding that a sentencing court may consider the additional mandatory minimum sentence required under 18 U.S.C. § 924(c) for possessing a firearm in the course of an underlying crime of violence when determining the sentence for the underlying crime.

Though Lewis v. Clarke (No. 15-1500) sounds like a History Channel prize fight (subtitle: The Corps of Bare-Knucklery), it's actually a rather minor personal injury lawsuit arising in our own back yard. Petitioners Brian and Michelle Lewis were driving on I-95 in Norwalk when they were hit from behind by a limousine driven by Respondent William Clarke. What might have been a simple accident case was complicated by the fact that Clarke was an employee of the Mohegan Tribal Gaming Authority, in the course of ferrying patrons of the Mohegan Sun Casino back to their homes. Because Indian tribes are generally entitled to sovereign immunity from suits in state courts, the Lewises sued Clark in his individual capacity only (possibly wise to the fact that the Mohegan Tribal Code provides that the Gaming Authority will indemnify employees for financial loss arising out of any suit alleging negligence in the course of their employment). Clarke moved to dismiss on the basis of tribal immunity. Even though he was sued in his individual capacity, Clarke argued that tribal immunity should apply because he was acting within the scope of his employment at the time of the accident. In addition, he maintained that the Tribe's immunity extended to him by virtue of the indemnification provision of the Tribal Code, which effectively put the Tribe on the hook for any damages the Lewises recovered in the suit against Clarke. The trial court disagreed, but the Connecticut Supremes unanimously reversed, holding that tribal sovereign immunity barred the suit because Clarke was acting within the scope of his employment. According to the CT Supremes, permitting the Lewises' case to proceed merely because they sued Clarke in his individual capacity would permit an end-run around tribal immunity.

The U.S. Supremes disagreed, and unanimously reversed right back. In a breezy opinion by Justice Sotomayor, the Court held that "in a suit brought against a tribal employee in his individual capacity, the employee, not the tribe, is the real party in interest and the tribe's sovereign immunity is not implicated." While individual defendants who are sued in their official capacity may assert sovereign immunity, an officer in an individual-capacity action may only assert personal immunity defenses (like qualified immunity) because any judgment is effective only against the individual officer and not the sovereign. It made no difference that tribal law provided that the Gaming Authority would indemnify Clarke for any damages and expenses he would have to pay as a result of the suit. Sovereign immunity is about protecting sovereigns from involuntary liability; the fact that the Tribe has voluntarily undertaken to indemnify its employees does not render it legally bound by an adverse judgment. Accordingly, the Court reversed the judgment of the CT Supreme Court and remanded the case for trial. Notably, the Court declined to reach any personal immunity defense that Clarke might raise on remand, including official immunity, because he did not raise any personal defense below.

Connecticut's wasn't the only state high court to get dinged recently. In Coventry Health Care v. Nevils (No. 16-149), Missouri's highest court struck out in trying to inject state law into the terms of health insurance benefits for federal employees. The federal Office of Personnel Management (OPM) obtains health insurance from private insurance carriers for federal employees, and the Federal Employees Health Benefits Act of 1959 (FEHBA) expressly provides that the terms of those insurance contracts preempt state laws relating to health insurance when those terms "relate to the nature, provision, or extent of coverage or benefits (including payments with respect to benefits)." Though OPM regulations require insurance plans to include subrogation provisions enabling the plans to recover payments made by third parties to plan beneficiaries (like the settlement payment received by the insured respondent here) Missouri state law prohibits that type of subrogation clause in health insurance policies. Despite that seeming conflict, the Missouri Supreme Court held that the state law was not preempted. But it was wrong.

In another unanimous opinion, this time authored by Justice Ginsburg, the Court easily concluded that the subrogation clause in the insurance contract related to "payments with respect to benefits," and therefore preempted conflicting state law. The Court has long given a broad construction to the term "related to" as used in statutory preemption clauses, and it is well known that the federal employee health insurance market has long been regulated by federal law. Given this, any "presumption against preemption" would be exceptionally weak. The Court also rejected the Missouri Supreme Court's alternative holding that the FEHBA's preemption provision exceeded Congress's power under the Supremacy Clause, holding that it is the statute (and not the contract terms themselves) that has preemptive force.

Justice Thomas added a brief concurring note, expressing his concern about statutes conferring on agencies the power to enter into contracts that preempt state law if the statute does not sufficiently constrain the executive branch's contracting discretion, but Thomas stated that no party had raised the issue, leaving it for another day.

Joining Connecticut and Missouri in the corner, the Colorado Supreme Court also suffered a reversal in Nelson v. Colorado (15-1256), where the U.S. Supreme Court struck down, under the Due Process Clause, Colorado's requirement that a defendant who pays money in costs, fees, or restitution pursuant to a conviction that is later reversed or vacated must prove his innocence by clear and convincing evidence in order to get a refund.

Shannon Nelson was convicted by a Colorado jury of two felonies and four misdemeanors for allegedly abusing her four children. She was sentenced to 20 years to life and ordered to pay $8,192.50 in court costs, fees, and restitution. But her conviction was reversed on appeal and, on retrial, she was acquitted of all charges. Louis Alanzo Madden was similarly ordered to pay costs, fees, and restitution after he was convicted of patronizing a child prostitute. After his conviction was reversed on appeal, the State elected not to retry him. While both Nelson and Madden had their convictions invalidated, the State refused to return the funds that they had already paid toward costs, fees, and restitution. They sued, and the Colorado Supreme Court held that they were only entitled to a refund if they invoked the State's Exoneration Act, which required them to prove their innocence by clear and convincing evidence.

The Supreme Court reversed, holding that Exoneration Act's compensation scheme violates the Due Process Clause. Writing for the Court, Justice Sotomayor applied the familiar Mathews v. Eldridge test for due-process challenges, which balances the weight of an individual's private interest against the government's interest and the risk of an erroneous deprivation of the individual's interest through the procedures employed by the government. Here, Nelson and Madden had an obvious interest in regaining the money they'd paid to Colorado, especially inasmuch as the presumption of innocence had returned to them when their convictions were vacated. And Colorado's scheme (requiring individuals to prove their innocence by clear and convincing evidence) created an unacceptable risk of erroneous deprivation of Nelson and Madden's property. Because a defendant whose conviction is vacated is presumed innocent, he should not have to prove his innocence (let alone by clear and convincing evidence) in order to have his property returned. Against these interests, Justice Sotomayor found that the State had no interest in withholding money to which it has zero claim of right. Though the State vaguely alluded to "equitable considerations" that "may bear on whether a State may withhold funds from criminal defendants after their convictions are overturned," it did not actually identify any such considerations. Accordingly, Colorado's scheme flunked the Mathews due-process test. "To comport with due process, a State may not impose anything more than minimal procedures on the refund of exactions dependent upon a conviction subsequently invalidated."

Justice Alito agreed that the Colorado Supremes had it wrong, but he wasn't convinced the majority had it right. He penned a solo concurrence arguing that the case should be analyzed not under Mathews, but under the framework provided in Medina v. California (1992), which applies when the court is asked to "assess the validity of state procedural rules which are part of the criminal process." Under Medina, a state rule of criminal procedure not governed by a specific rule set out in the Bill of Rights violates the Due Process Clause only if it offends a "fundamental and deeply rooted principle of justice." Here, while Alito believed the majority applied too liberal a standard, he agreed that Colorado's scheme violated even Medina's more restrictive due-process standard.

Justice Thomas, meanwhile, felt that a procedural due process analysis was altogether inappropriate because the petitioners had "not demonstrated that defendants whose convictions have been reversed possess a substantive entitlement, under either state law or the Constitution, to recover money they paid to the State pursuant to their convictions." The money was lawfully exacted pursuant to a valid conviction and thereafter became public funds (or the victim's money) under Colorado law. And, under Colorado law, petitioners would only have a substantive right to the money already exacted if they could prove that they were actually innocent. Because the petitioners had no right to their money (unless and until they proved their innocence) and because the Due Process Clause itself does not give them a substantive possessory interest in the funds, Colorado was not required to provide any process at all for the return of the money. While the majority's conclusion that Colorado has no interest in money exacted pursuant to a later-vacated conviction has intuitive appeal, Justice Thomas charged that it had no real grounding in state or federal law.

Restitution was also at issue in Manrique v. United States (No. 15-7250), where the Court addressed a technical question of appellate jurisdiction in criminal cases involving deferred restitution hearings. Marcelo Manrique pleaded guilty to possessing child pornography on his computer, and he was sentenced to a term of imprisonment and supervised release. The Mandatory Victims Restitution Act of 1996 required the defendant to make restitution to his victims, but the trial court postponed the hearing to quantify the amount until a later date. Manrique filed a notice of appeal from the initial sentencing judgment, but did not file a new notice of appeal after the trial court issued an amended judgment after the hearing, which included the award of restitution. On appeal, Manrique challenged the restitution amount in his brief, but the Eleventh Circuit concluded that he had forfeited the right to challenge the restitution amount because he failed to file a separate notice of appeal.

By a 6-2 vote, the Supreme Court affirmed. Justice Thomas wrote for the majority, joined by the Chief Justice and Justices Kennedy, Breyer, Alito, and Kagan. He parsed the relevant statutes and rules governing notices of appeal and read them as requiring a notice of appeal after the district court decides the issue challenged on appeal. The Court rejected the argument that there is but a single judgment, even if later amended by the district court, and refused to apply the appellate rule permitting premature appeals filed after a decision but before entry of judgment as there had not yet been a decision on the restitution amount when the notice of appeal was filed. The Court therefore insisted in deferred restitution cases that the defendant, if challenging the initial sentence and the restitution amount, file two notices of appeal, one after each event. Interestingly (at least for appellate lawyers), the Court declined to decide whether the second notice of appeal was essential for appellate jurisdiction, which would require the Court to dismiss the appellate issue even if the Government had not objected to it. The Court stated that, at minimum, the requirement of a second notice of appeal in the context of this case was a mandatory claims-processing rule that the Court would enforce because the Government did object.

Justice Ginsburg, joined by Justice Sotomayor, dissented, noting that the district court had failed to apprise Manrique of his right of appeal following the restitution order, but did transmit the amended judgment to the Eleventh Circuit, which in turn had issued a clerical order requesting the restitution hearing transcript from the district court. Under the circumstances, the dissenters would treat the transmission of the amended judgment to the appeals court as an adequate substitute for a second notice of appeal. The district court's failure to advise a criminal defendant of his right to appeal following the amended judgment may make this case somewhat of an anomaly, or so the Government assured the Court at oral argument.

The justices returned to unanimity in Dean v. United States (No. 15-9260), holding that 18 U.S.C. § 924(c), which imposes a mandatory minimum sentence on anyone convicted of using or carrying a firearm during and in relation to a crime of violence or drug trafficking crime, does not prevent a sentencing judge from considering the mandatory minimum when calculating an appropriate sentence for the predicate crime of violence or drug trafficking crime. Here, Levon Dean and his brother committed two robberies of drug dealers, each time using a semiautomatic rifle to threaten the victims. Dean was convicted of conspiracy to commit robbery, robbery, and two counts of aiding and abetting the possession of a firearm in furtherance of a crime of violence, in violation of § 924(c). Under the circumstances, the § 924(c) conviction resulted in a 30-year mandatory minimum sentence "in addition to the punishment provided for [the predicate] crime of violence or drug trafficking crime." Dean argued that the sentencing judge should take his lengthy mandatory minimum sentence in account when calculating the additional sentence for the predicate offenses. Though the district judge agreed that the mandatory 30-year sentence alone was more than sufficient, he believed that he was required to disregard the mandatory minimum when determining the appropriate sentence for Deans' other counts of conviction. Therefore, though the trial judges still granted a substantial variance, Dean ended up with a total sentence of 400 months (60 months beyond the mandatory minimum). The Eighth Circuit affirmed, citing Circuit precedent that a sentencing judge cannot vary from the Guidelines range based on the existence of a mandatory minimum sentence under § 924(c).

The Supreme Court reversed, in a unanimous opinion authored by the Chief Justice. As the Chief noted, sentencing courts have long enjoyed broad discretion in the sort of information they may consider when setting an appropriate sentence. "This durable tradition remains, even as federal laws have required sentencing courts to evaluate certain factors when exercising their discretion." Section 3553(a) specifies the factors courts are to consider when imposing a sentence, including the nature and circumstances of the offense, the history and the characteristics of the defendant, and the need to serve the four aims of sentencing—punishment, deterrence, protection of the public, and rehabilitation. Courts are required to consider these factors both in setting individual sentences and for setting an aggregate prison terms for multiple counts of conviction and they are generally permitted to consider the sentence imposed on one count when considering the proper sentence on another count. Nothing in § 924(c) requires a different approach. The fact that a mandatory minimum under § 924(c) must be imposed "in addition to" the punishment provided for the predicate crime says nothing about the length of the non-§924(c) sentence. And nothing in the requirement that §924(c) sentences run consecutively to predicate sentences prevents a district court from imposing a mandatory minimum sentence under § 924(c) to run consecutively to a one-day sentence for the predicate offense.

That's more than enough for today. We'll be back soon with summaries of the two cases handed down this week: Bank of America Corp. v. Miami (No. 15-1111), on the right of municipalities to bring suit under the Fair Housing Act; and Venezuela v. Helmerich & Payne Int'l (No. 15-423), on the scope of the Foreign Sovereign Immunities Act's expropriation exception. But before we leave you, the Court did add two new cases this week (the first cert grants voted on by Justice Gorsuch, who did not participate in the decisions discussed in this Update):

Patchak v. Zinke (No. 16-498) asks whether a statute directing the federal courts to "promptly dismiss" a pending lawsuit violates the Constitution's separation of powers principles; and

Merit Management Group v. FTI Consulting (No. 16-784) asks whether the safe harbor of Section 546(e) of the Bankruptcy Code prohibits avoidance of a transfer made by or to a financial institution without regard to whether the institution has a beneficial interest in the property transferred.