Supreme Court Update: Murr v. Wisconsin (15-214), Microsoft v. Baker (15-457), Lee v. United States (16-327), and Perry v. Merit Systems Protection Board (16-399)

June 27, 2017 Supreme Court Update

Greetings, Court Fans!

Though OT16 was gaveled to a close yesterday, the work of the clerk's office continued this morning with the issuance of additional orders from yesterday's "clean up conference," including five new cases accepted for argument next Term. Our work continues, too, as we make our way through the long list of decisions handed down in the last few days of this Term. In this Update, we'll cover Murr v. Wisconsin (No. 15-214), an important takings case; Microsoft v. Baker (No. 15-457), a consequential class-action decision; Lee v. United States (No. 16-327), another of the term's "crimmigration" cases, underscoring the increasing need for criminal defense lawyers to be as familiar with Title 8 as Title 18; and Perry v. Merit Systems Protection Board (No. 16-399), a somewhat pedestrian civil service case made memorable as the occasion of Justice Gorsuch's first dissent.

First up, in Murr v. Wisconsin (No. 15-214), the Court grappled with the ever-elusive concept of regulatory takings of real property based on governmental restrictions on use of property rather than physical condemnation or occupation of property. The particular complication in Murr was how to determine the unit of property (the "parcel as a whole") against which to assess the effect of the challenged governmental action. Murr upheld a Wisconsin court's treatment of two contiguous lots in common ownership as a single unit for takings purposes, thereby minimizing the impact of a local regulation restricting development on the "parcel as a whole."

Wisconsin law limits development along the Lower Saint Croix River, forming part of the Wisconsin-Minnesota border, to protect its scenic qualities. The law prohibits development of undersized lots, although a grandfather clause permits development of lots separately owned from abutting lots before the law was enacted. However, if those adjacent lots ever come into common ownership, the ability to sell or develop an undersized lot is lost, effectively treating the two lots as if they had merged. That's what happened in the case of the Murr family. Grandma and Grandpa Murr purchased two adjacent lots—E and F—separately in the 1960s and maintained them under separate ownership (their plumbing company technically owned one of the lots) until they transferred the lots to their adult children, the petitioners, in the 1990s. Lot F had a small cabin on it and, sometime around 2005, the petitioners sought to move the cabin to a different spot on Lot F, and to fund the project by selling Lot E. By that time, however, the lots had been deemed merged, preventing their separate sale. After being denied variances, the petitioners brought an action in state court, alleging that the state and county regulations worked a regulatory taking by depriving them of all, or practically all of the use of Lot E. The Wisconsin courts ruled against them, concluding that when measured against the "property as a whole"—that is, both Lots E and F together—the effect of the regulations was minimal. Petitioners could still move the cabin (or tear it down and build a new residence) anywhere on the combined property, even spanning the two lots. And, while it was true that Lot E alone had little value (assuming, counterfactually, that it could be separately sold as an unimprovable lot), the value of the combined lots as regulated was not much less than the value of the two lots as distinct buildable properties.

The Supreme Court affirmed the denial of compensation, 5-3. Justice Kennedy, joined by Justices Ginsburg, Breyer, Sotomayor, and Kagan, began by emphasizing that regulatory takings jurisprudence requires a holistic, flexible approach, "designed to allow careful examination and weighing of all the relevant circumstances" to reconcile an individual's right to retain interests and exercise the freedoms at the core of private property ownership with the government's power to "adjust rights for the public good." That flexibility informed the Court's answer to the core question in the case, i.e., what is the proper unit against which to assess the effect of a challenged regulation? The majority rejected the requests—from both the State and the petitioners—to adopt a formalistic rule to guide the "parcel inquiry." Wisconsin's approach of tying the definition of a parcel to state law "simply assumes the answer to the question: May the State define the relevant parcel in a way that permits it to escape its responsibility to justify regulation in light of legitimate property expectations." But petitioners' approach—presuming that lot lines define the relevant parcel in every instances—was equally flawed, inasmuch as lot lines are themselves creatures of state law, which can be overridden by the State in the reasonable exercise of power. Instead, Justice Kennedy set forth a number of factors courts should consider in making the "denominator determination," including the "treatment of the land under state and local law; the physical characteristics of the land; and the prospective value of the regulated land." Courts should also bear in mind "whether reasonable expectations about property ownership would lead a landowner to anticipate that his holdings would be treated as one parcel, or, instead, as separate tracts." Applying this approach, and considering the long history of local regulations treating substandard contiguous lots as merged when coming into common ownership, the Court held that the Wisconsin courts were correct to analyze petitioners' property as a single unit for purposes of establishing the effect of the challenged regulations on the parcel as a whole. And, "[c]onsidering petitioners' property as a whole, the state court was correct to conclude that petitioners cannot establish a compensable taking in these circumstances" because they "have not been deprived of all economically beneficial use of their property."

Chief Justice Roberts dissented, joined by Justices Thomas and Alito. The Chief stated that he was not troubled by the "bottom-line conclusion" in the case—i.e. that the state and local regulations prohibiting petitioners from selling Lot E do not effect a taking that requires just compensation. After all, there is a "fair case that the Murrs can still make good use of both lots, and the ordinance is a commonplace tool to preserve scenic areas." But Roberts objected to the majority's creation of an "elaborate test" for defining the "private property" at issue in the case, when traditionally the Supreme Court's Takings Clause decisions have focused on "private property rights as state law creates and defines them." "State laws define the boundaries of distinct units of land, and those boundaries should, in all but the most exceptional circumstances, determine the parcel at issue." In the Chief's view, the Wisconsin courts (and the majority) were wrong to apply a takings-specific definition of the property at issue, rather than simply applying ordinary principles of state law to identify the relevant property. He would have remanded for the state courts to undertake that analysis, and then determining whether the challenged ordinance amounts to a taking. The Chief noted that many of the factors that the majority considered important in deciding the proper denominator might in fact be relevant to the second step of the inquiry, which analyzes whether there remains a beneficial use of the property. But the first step of the inquiry—defining the relevant parcel—should be a simple matter of applying state law.

Justice Thomas joined the Chief's dissent but wrote separately to express the hope that one day the Court would re-examine the original intent of the Constitution and whether regulatory takings even fit within the Fifth Amendment's Takings Clause or whether, instead, they should be evaluated under the Fourteenth Amendment's Privileges or Immunities Clause.

Next up, in Microsoft v. Baker (15-457), the Court resolved a circuit split over whether the named plaintiff in a putative class action lawsuit can voluntarily dismiss his suit in order to obtain immediate appellate review of an order denying class certification. The answer was easy for the Court, which ruled 8-0 that he cannot. But the majority and concurring Justices followed different paths to that result.

The majority, led by Justice Ginsburg, ruled on statutory interpretation grounds. Title 28, section 1291, she explained, only permits appeals of right from final judgments and not interlocutory orders (i.e., the myriad decisions a court makes along the way to that final judgment). And the Court had long ago rejected the notion that an order denying class certification could amount to a final judgment merely because, practically speaking, it marks the "death knell" of the case, causing the plaintiff to drop his claim given the small amount at stake rather than litigating to conclusion. While the Court recognized that the denial of class certification may sometimes spell the end of a class action suit, permitting piecemeal appeals of class certification decisions would come at a heavy cost to section 1291's finality requirement. In addition, the Court noted, the grant of class certification can spell the opposite result—extraction of a substantial settlement from the defendant – but the so-called "death knell doctrine" only provides relief to plaintiffs. In 1998, after studying the issue, the Court promulgated Rule 23(f), which permits parties—both defendants and plaintiffs—to seek permissive appellate review of adverse class certification decisions. Here, the named plaintiffs (aggrieved owners of Microsoft's Xbox 360) did just that, but the Ninth Circuit denied their Rule 23(f) request. In response, the plaintiffs dismissed their own claims with prejudice in order to immediately appeal the denial, though they purported to reserve a right to "reinstate" them if the appeal was successful.

The Court rejected this gamesmanship and concluded that federal courts of appeals (including the Court) lack jurisdiction under § 1291 to review orders denying class certification (or striking class allegations) after the named plaintiffs have voluntarily dismissed their claims, even if they purport to dismiss them "with prejudice." The plaintiffs, the Court explained, were not challenging the order ending the case (i.e., the dismissal, which they invited) but instead only the interlocutory class certification order. As such, they could not appeal as of right under § 1291. This interpretation of § 1291 was reinforced by the fact that the Court had provided a permissive route to appellate review of interlocutory class certification orders via Rule 23(f). Allowing plaintiffs to gain immediate appellate review by dismissing their own claims would damage the thoughtful balance struck in Rule 23(f).

Justice Thomas (joined by the Chief and Alito) concurred in the judgment but on different grounds. In Thomas's view, there was a final judgment for purposes of § 1291 because the lower court had (at plaintiffs' request) dismissed their claims with prejudice. However, given that the dismissal was voluntary and unchallenged in this appeal, there was no adversity and therefore no Article III case or controversy between the named plaintiffs (who are the only plaintiffs at this point in the case) and the defendants. In the dissenters' view, once the plaintiffs dismissed their claims with prejudice, that was the end of the case.

Turning from one chapter of the (unabridged) civ-pro hornbook to another, in Perry v. Merit Systems Protection Board (No. 16-399), the Court addressed the proper venue for judicial review of certain decisions of the Merit Systems Protection Board ("MSPB" or "Board"). It's a case that might otherwise be forgotten but for the fact that it served as a vehicle for junior Justice Neil Gorsuch's first dissent.

The MSPB has jurisdiction to review certain serious adverse employment actions against federal employees. Where an employee asserts claims based solely on the Civil Service Reform Act ("CSRA"), the employee can seek judicial review exclusively in the Court of Appeals for the Federal Circuit, which will apply deferential review to the Board's decision. But if the employee asserts that an adverse action otherwise appealable to the Board was based on discrimination prohibited by federal laws like Title VII or the ADEA, the employee can pursue this type of "mixed" claim before the MSPB and then seek review in federal district court, which applies de novo review. (You can guess which route employees generally prefer.) In Kloeckner v. Solis (2012), the Court held that this rule applies even if the Board's decision in a mixed case is not on the merits but is based on a procedural default. The issue in Perry was whether Kloeckner also applies if the Board's decision in a mixed case disposes of a complaint for lack of agency jurisdiction.

Perry was fired by the Census Bureau for spotty attendance. He filed a discrimination claim with the EEOC, but later entered into a settlement agreement under which he accepted a suspension and early retirement in exchange for withdrawing his discrimination claims. Apparently having regrets, Perry complained to the MSPB that the settlement was coerced and that his suspension and forced retirement were themselves discriminatory. The Board found that it lacked jurisdiction over the complaint, concluding that there was inadequate proof of coercion and that a voluntary retirement did not amount to a serious adverse employment action. Perry sought review neither in the Federal Circuit nor a district court, but in the D.C. Circuit (which everyone later agreed was wrong). The D.C. Circuit transferred the action to the Federal Circuit, holding that Kloeckner does not extend to dismissals of mixed cases on jurisdictional grounds, but before the Federal Circuit assumed jurisdiction, the Court granted cert to consider whether Kloeckner extends to mixed cases that are dismissed for lack of agency jurisdiction.

The Court held that Kloeckner does extend to this scenario, meaning that the venue for judicial review in mixed cases dismissed by the Board for lack of jurisdiction is federal district court. Justice Ginsburg, joined by everyone but Justices Gorsuch and Thomas, rejected the Government's argument that aggrieved employees must split their mixed claims, seeking review of the jurisdictional determination in the Federal Circuit and separately turning to the district court to review their discrimination claims. Kloeckner announced a "clear rule" that "mixed cases shall be filed in district court." There was no reason, in the majority's view, to treat cases that "mix" merits and procedural questions differently from those mixing merits and jurisdictional questions, especially given the often "slippery" distinctions between jurisdictional and procedural questions. And, practically speaking, distinguishing between jurisdictional rulings by the Board and procedural or substantive rulings for purposes of determining the proper venue for review is unworkable. The Board often addresses complaints encompassing multiple claims—dismissing some for want of jurisdiction, others on procedural or substantive grounds—and sometimes dismisses individual claims on alternate grounds, one jurisdictional and the other either procedural or substantive. Figuring out which court (or both) should review such decisions is more than should be required of employees, who are often pro se. A more "sensible" reading of the statute dictates that the Federal Circuit is the proper review forum only when the Board dismisses complaints arising solely under the CSRA, and the district court is the proper forum in all mixed cases, whether dismissed on substantive, procedural, or jurisdictional grounds.

Justice Gorsuch (joined by Thomas) rejected the majority's reading of the statute, however sensible or efficient it might be, because "the business of enacting statutory fixes [is] one that belongs to Congress and not this Court." He would decline the invitation to "tweak" the statute "and would instead just follow the words of the statute as written." Congress enacted the CSRA to provide a general rule—requiring that appeals of MSPB decisions "shall be filed in . . . the Federal Circuit"—and an exception—if the complaint involves discrimination claims, review of the dismissal of those claims shall be in the district court. "Putting these directions together, the statutory scheme is plain. Disputes arising under the civil service law head to the Federal Circuit for deferential [APA-style] review; discrimination cases go to the district court for de novo review." Here, Perry pursued civil service law claims before the Board, but the Board dismissed his claims because he hadn't suffered an adverse employment action sufficient to trigger its jurisdiction. The scope of the Board's jurisdiction is undoubtedly a question of civil-service law (since the Board was created by the CSRA), so review of that aspect of the decision should be in the Federal Circuit. Though contesting Board rulings and discrimination issues in different courts may be "a hassle," that's what the relevant statutes require, and the Court has no business rewriting those statutes in the interests of efficiency. Articulating a theme that we suspect he will return to often, Justice Gorsuch insisted that "[i]f a statute needs repair, there's a constitutionally prescribed way to do it. It's called legislation." And while the "demands of bicameralism and presentment are real," the difficulty of making new laws "isn't some bug in the constitutional design: it's the point of the design, to better preserve liberty." Accordingly, he would decline the invitation to bend the statute to the demands of practicality (even if Kloeckner had already started down that road) and leave it to Congress to determine whether the statute needs adjusting.

Finally (for now), Lee v. United States (No. 16-327) concerned an immigrant whose defense attorney incorrectly assured him that pleading to a low-level drug offense would not result in his deportation. When it did, he filed an ineffective assistance of counsel claim. All sides—even that original attorney—agreed that Lee's representation was deficient, satisfying the first prong of Strickland v. Washington. Therefore, the issue before the Court was "whether Lee can show he was prejudiced by that erroneous advice." In a quick 6-2 decision, the Court's answer was yes: The operative issue for prejudice was whether Lee would have taken the plea—not whether he would have succeeded at trial—and "Lee has adequately demonstrated a reasonable probability that he would have rejected the plea had he known that it would lead to mandatory deportation."

A South Korean who came to the U.S. at age 13, Lee was a lawful permanent resident who operated two restaurants in the Memphis area. He was indicted in 2008 after police—tipped off by an informant ready and willing to testify—found 88 ecstasy pills in his house. As both Lee and his plea-stage counsel later testified, "deportation was the determinative issue in Lee's decision whether to accept the plea." Unfortunately, the attorney was wrong on that count, and Lee pled to an "aggravated felony" offense triggering mandatory deportation.

Writing for the Court, the Chief Justice noted that "Lee knew, correctly, that his prospects of acquittal at trial were grim, and his attorney's error had nothing to do with that." But in the plea context, the focus is on whether attorney error deprived a client of the right to trial in the first place, by causing him to accept a plea. Thus, as in Hill v. Lockhart (1985), Lee could show prejudice by demonstrating a "reasonable probability" that but for his counsel's error, he would have insisted on going to trial. It did not matter that the trial itself would "almost certainly" end in a conviction, and deportation. The majority refused to "adopt a per se rule that a defendant with no viable defense cannot show prejudice from the denial of his right to trial," because "that ‘almost' could make all the difference."

A per se rule is precisely what dissenters Thomas and Alito would have preferred. Before getting there, Thomas first reiterated (without Alito) his belief that there is no Sixth Amendment right to accurate advice on the immigration consequences of guilty pleas in the first place. But even accepting the Sixth Amendment's application, Thomas (now with Alito) maintained that "the proper inquiry requires a defendant to show both that he would have rejected his plea and gone to trial and that he would likely have obtained a more favorable result in the end." According to Thomas, the majority's misapplication of precedent creates a "low burden" for prejudice, undermining the finality of criminal adjudication and opening the floodgates to frivolous ineffective assistance claims.

That's enough for now, but we'll be back very shortly with summaries of the Court's recent Bivens decisions and the cases handed down yesterday. Before we sign off this missive, though, here's a peek at the new cases set for argument next Term, courtesy of today's order list:

Rubin v. Islamic Republic of Iran (No. 16-534), asks whether 28 U.S.C. § 1610(g) provides a freestanding attachment immunity exception that allows terror victim judgment creditors to attach and execute upon assets of foreign state sponsors of terrorism regardless of whether the assets are otherwise subject to execution under § 1610;

Christie v. NCAA (No. 16-476) and Nat'l Thoroughbred Horsemen's Association v. NCAA (No. 16-477), which are consolidated for oral argument, ask whether a federal statute that effectively prohibits states from modifying or repealing prohibitions on sports betting impermissibly commandeers the power of the States in violation of New York v. United States (1992);

Cyan v. Beaver Cty. Employees (No. 15-1439) asks whether the Securities Litigation Uniform Standards Act of 1988 deprives state courts of subject-matter jurisdiction over covered class actions that allege only claims under the Securities Act of 1933;

PEM Entities LLC v. Levin (No. 16-494), asks whether bankruptcy courts should apply a federal rule of decision or a state law rule of decision when deciding to recharacterize a debt claim in bankruptcy as a capital contribution; and

Marinello v. United States (No. 16-1144), asks whether a conviction under 26 U.S.C. § 7212(a) for corruptly endeavoring to obstruct or impede the due administration of the tax laws requires proof that the defendant acted with knowledge of a pending IRS action.

We'll be back before you miss us…