Supreme Court Update: NASA v. Nelson (09-530), Chase Bank USA, N.A. v. McCoy (09-329) and Swarthout v. Cooke consolidated with Cate v. Clay (10-333) and Order List

February 2, 2011 Supreme Court Update

Greetings, Court fans!

We're back with the remaining decisions: NASA v. Nelson (09-530), finding that routine government back-ground checks on contract employees do not violate any constitutionally-protected privacy interest; Chase Bank USA, N.A. v. McCoy (09-329), interpreting Regulation Z regarding credit card disclosures; and Swarthout v. Cooke consolidated with Cate v. Clay (10-333), concerning federal habeas review of parole proceedings, as well as a handful of orders. With this Update, we're all caught up.

In NASA v. Nelson (09-530), 28 employees of NASA's Jet Propulsion Laboratory, operated out of California Institute of Technology and staffed entirely by contract employees, filed suit to enjoin the government from requiring them to comply with routine background checks. The government had performed such background checks on civil servants for over 50 years, but had only recently extended the checks to contract employees, even though those employees perform functionally equivalent jobs. The employees argued that these background checks, particularly questions relating to drug use and treatment as well as open-ended questions sent to employee references, violated their constitutional rights to information privacy. The district court denied the employees' request for preliminary injunction, but the Ninth Circuit reversed.

All of the Justices agreed that no constitutional violation occurred, but only six joined the majority opinion, authored by Justice Alito. The majority assumed, without deciding, that a constitutional right to information privacy existed, but found that it wasn't violated in this case. Key to the decision was that the information was collected by the government in its capacity as a proprietor or manager of its internal affairs. The government has a strong interest in ensuring the security of its facilities and the competence of its workforce, and these basic background checks furthered those purposes and the questions were reasonable (similar questions were pervasive among private-sector employers). The Court easily rejected the notion that the information sought had to be "necessary" or the "least restrictive means" of furthering the government's interests. And the fact that the employees were contractors as opposed to civil servants was irrelevant given that the work they performed was the same. Finally, the information gathered was subject to disclosure protections under the Privacy Act, allaying any privacy concerns that the collection of this information might raise.

The fact-specific holding in Nelson, however, was far less interesting than the debate about whether any constitutional right to information privacy exists at all, which Justices Scalia and Thomas took up in a concurrence in the judgment. In typical (and I must say, very quotable) Scalia fashion, he chastised the majority for assuming the existence of a constitutional right to informational privacy, but not deciding the issue, identifying the constitutional provision(s) from which the right springs, or enumerating the standard for a violation of this hypothetical right. Thomas and Scalia would simply find no such right and end the matter there. Thomas filed a separate concurrence in the judgment to note his disagreement with the Court's substantive due process jurisprudence generally: "the notion that the Due Process Clause of the Fifth Amendment is a wellspring of unenumerated rights against the Federal Government ‘strains credulity for even the most casual user of words.‘"

Next up, Chase Bank USA, N.A. v. McCoy (09-329) concerned the proper interpretation of the Federal Reserve Board's Regulation Z before it was amended in 2009. At the time McCoy brought suit, Regulation Z required credit card issuers to give cardholders an initial disclosure statement specifying "each periodic rate" associated with their accounts, and subsequent disclosures regarding changes to any term required to be disclosed in the initial disclosure statement. McCoy's cardholder agreement with Chase gave him a preferred interest rate so long as he met certain conditions, including making timely minimum payments. Chase reserved the right to impose a non-preferred rate, up to a maximum amount, if he did not meet all the conditions. McCoy argued that Chase violated Regulation Z by changing his rate without giving him prior notice after he failed to make timely payments. Chase responded that it did not "change" any terms, but simply implemented the non-preferred rate it had already disclosed.

A unanimous Court, led by Justice Sotomayor, sided with Chase. Finding the text of Regulation Z to be ambiguous, the Court deferred to the Federal Reserve Board's view, expressed in an amicus brief, that the version of Regulation Z in effect at the time did not require Chase to give McCoy notice of the interest rate increase. The Court's decision is unlikely to make a substantive impact on this area of law, as Regulation Z has since been amended to require these types of notices. But the decision is interesting for its robust defense of deferring to agency interpretations as expressed in amicus briefs, where the interpretation is "consistent with the regulatory text" and "there is no reason to believe that the interpretation . . . is a ‘post hoc rationalization' taken as a litigation position."

Swarthout v. Cooke and Cate v. Clay (10-333) arose out of two California parole board proceedings. California law provides that the parole board shall set a release date unless "consideration of the public safety" requires a lengthier period of incarceration. Inmates denied parole can seek state habeas relief; the standard of review under California law is whether "some evidence" supports the conclusion that the inmate "currently is dangerous." In the first proceeding, the board denied Cooke parole based on the "especially cruel and callous manner" of his commitment offense, failure to participate in rehabilitative programs, failure to develop marketable skills, and three incidents of misconduct while in prison. In the second proceeding, the board granted Clay parole, but the Governor exercised his authority to override that decision, citing the gravity of Clay's crime, his extensive criminal history, failure to participate in self-help programs, and unrealistic plans for employment and housing upon release. The California courts denied state habeas relief in both cases.

On federal habeas review, the Ninth Circuit found that the petitions should be granted because the state courts had unreasonably applied California's "some evidence" rule. The Court reversed in a per curiam decision, continuing the Ninth Circuit's losing streak on habeas (and other) cases. The Court posited that the Ninth Circuit had either erred in assuming that relief was available for errors of state law, or that the federal Due Process Clause required the state to apply its "some evidence" standard correctly. On the first point, the Court reiterated that federal habeas relief is available only for violations of the Constitution or federal law. On the second point, the Court found no support for converting California's "some evidence" rule into a substantive federal requirement. The Due Process Clause only requires constitutionally adequate procedures, which are minimal in the parole context: an opportunity to be heard and a statement of reasons are sufficient. As the petitioners here received that process, they had no grounds for federal habeas relief.

Justice Ginsburg authored a short concurrence, which suggested that a different result might have been in order if California law entitled prisoners to parole upon satisfaction of specified criteria.

The Court also agreed to hear three more cases, and asked for the SG's views on a fourth.

The Medicaid Act at 42 U.S.C. § 1396a(a)(30)(A) requires states accepting federal Medicaid funds to adopt a plan containing methods and procedures to "safeguard against unnecessary utilization" of services and to "assure that payments are consistent with efficiency, economy, and quality of care and are sufficient to enlist enough providers so that care and services are available." The Court granted cert in three related cases, Maxwell-Jolly v. Independent Living Center of Southern California (09-958), Maxwell-Jolly v. CA Pharmacists Ass'n (09-1158), and Maxwell-Jolly v. Santa Rosa Memorial Hospital (10-283), on the question: "Whether Medicaid recipients and providers may maintain a cause of action under the Supremacy Clause to enforce § 1396a(a)(30)(A) by asserting that the provision preempts a state law that reduces reimbursement rates?" This will be a major case for hospitals and other health care providers.

The Sex Offender Registration and Notification Act ("SORNA") gave the Attorney General authority to issue rules applying the Act's registration requirements retroactively. The Attorney General later issued an interim rule applying SORNA "to all sex offenders, including sex offenders convicted of the offense for which registration is required prior to the enactment of [the] Act." Reynolds v. United States (10-6549) presents the question, whether a defendant who registered as a sex offender under state law, but failed to keep his registration current under SORNA when he moved to a new state, has standing under SORNA to raise claims concerning the attorney general's interim rule.

The Court has also agreed to hear Howes v. Fields (10-680), which ask whether the Court's "clearly established precedent under 28 U.S.C. § 2254 holds that a prisoner is always ‘in custody' for purposes of Miranda any time that prisoner is isolated from the general prison population and questioned about conduct occurring outside the prison regardless of the surrounding circumstances."

Finally, the Court asked the SG for his views on the cert petition in Miccosukee Tribe of Indians v. Kraus-Anderson Constr. Co. (10-717), which would present this question: "whether an action to obtain recognition of a tribal court judgment presents a federal question under 28 U.S.C. § 1331, based on the common law and the federal character of Indian law."

We don't expect additional opinions to be released until the end of this month, but we will continue to keep you updated with any orders (or surprise opinions) that may be released.

Kim & 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