Supreme Court Update: SCA Hygiene Products v. First Quality Baby Products (15-927), NLRB v. Southwest General (15-1251) and Manuel v. City of Joliet (14-9496)

March 24, 2017 Supreme Court Update

Greetings, Court Fans!

This week, while a potential ninth justice lectured the Senate Judiciary Committee on everything from fly fishing to "mutton busting" (but not on the age-old question of whether one horse-sized duck or 100 duck-sized horses would win in a fight), The Eight churned out six opinions lecturing readers on everything from adult diapers to cheerleading uniforms (but not the age-old question of whether you can state a malicious-prosecution claim under the Fourth Amendment). This Update will get you halfway up to speed on a busy week at the Court, with summaries of SCA Hygiene Products v. First Quality Baby Products (No. 15-927), on the availability of laches as a defense to patent-infringement claims (and adult incontinence), NLRB v. Southwest General (No. 15-1251), on the Federal Vacancies Reform Act (and the President's ability to sidestep advice and consent by naming "acting" department heads), and Manuel v. City of Joliet (No. 14-9496), on whether the Fourth Amendment applies to pretrial detainees after their initial court appearances (but not on whether you can state a malicious prosecution claim under the Fourth Amendment). The cheerleading uniforms (at issue in Star Athletica v. Varsity Brands (No. 15-866)) will unfortunately have to wait…

First up, in SCA Hygiene Products v. First Quality Baby Products (No. 15-927), the generalist Supreme Court of the United States delivered a familiar rebuke to the specialist Federal Circuit: patent law isn't all that special. The issue in the case was whether the equitable doctrine of laches could be used as a defense against a damages claim brought within the Patent Act's six-year statute of limitations. If that sounds familiar, it's because the Court considered an almost identical question with respect to the Copyright Act's statute of limitations three years ago in Petrella v. Metro-Goldwyn-Mayer (2014). In that case, Paula Petrella, who owned the copyright to the screenplay behind Raging Bull waited 18 years to sue MGM for copyright infringement because she didn't want to sue until the 1980 film started making money again. The suit was timely filed under the Copyright Act's statute of limitations (because each new violation of a copyright triggers a new three-year limitations period and Petrella was only seeking three years' worth of damages), but the Ninth Circuit held that the claim was barred by laches. The Supreme Court reversed, holding that laches cannot defeat a damages claim brought within the period prescribed by the Copyright Act's statute of limitations.

While the Petrella case was working its way to One First Street, another lawsuit was pending in the Federal Circuit. Back in 2003, SCA Hygiene Products, a purveyor of adult incontinence products, accused First Quality Baby Products of infringing its rights under, well, a diaper patent. First Quality responded that, in fact, one of its patents antedated SCA's patent and revealed "the same diaper construction," making SCA's patent invalid. Without notifying First Quality, SCA went to the Patent and Trademark Office in 2004 and, in 2007, got a letter confirming the validity of its patent. It then waited another three years before filing suit against First Quality in August 2010. First Quality sought summary judgment based on laches and equitable estoppel, and the District Court granted the motion. But, while the appeal was pending in the Federal Circuit, the Supreme Court issued its decision in Petrella. Nevertheless, the Federal Circuit affirmed the laches dismissal, concluding that the Patent Act had "codified a laches defense" that "barred recovery of legal remedies."

Not so fast, said the Supreme Court, in a 7-1 opinion authored by Justice Alito. The reasoning of Petrella was based both on separation of powers principles and the traditional rule of laches in equity. In broad terms, the Court held (in Petrella and reiterated here) that "[t]he enactment of a statute of limitations necessarily reflects a congressional decision that the timeliness of covered claims is better judged on the basis of a generally hard and fast rule rather than the sort of case-specific judicial determination that occurs when a laches defense is asserted." Courts "are not at liberty to jettison Congress' judgment on the timeliness of suit." Justice Alito rejected out of hand First Quality's contention that the Patent Act is somehow different because it is not a "true" statute of limitations since it runs backward from the time of suit, rather than forward from the date a cause of action accrues. As Alito explained, while the Patent Act's statute of limitations is expressly framed in backward-looking terms, many statutes of limitations (and the Copyright Act's in particular) function that way, as a bar to damages that predate the limitations period. The majority also rejected the Federal Circuit's argument that § 282 of the Patent Act, which recognizes "unenforceability" as a defense to patent infringement, amounts to a codification of a laches defense that works hand in glove with the statute of limitations. Even assuming that § 282 codified a laches defense of some dimension, it does not follow that the defense can be invoked to bar a claim for damages incurred within § 286's limitations period. And, while there were numerous cases antedating the Patent Act's 1952 enactment that permitted laches to be asserted against patent-infringement claims, the Court found that they did not amount to a "broad and unambiguous consensus of lower court decisions" that would be necessary to show that Congress intended to codify a patent-specific rule permitting laches as a defense to damages incurred within a legislatively set limitations period.

Justice Breyer penned a colorful dissent. In his view, the fact that "for more than a century courts with virtual unanimity have applied laches in patent damages cases" was more than sufficient to show that Congress intended to codify that judicial practice to "fill a gap" that remained, notwithstanding the Patent Act's statute of limitations. Indeed, the statute of limitations created the gap because it permits a patentee to sue at any time after an infringement takes place, limiting only the damages to those caused within the preceding six years. As Breyer observed, "[t]hat means a patentee, after learning of a possible infringement in year 1, might wait until year 10 or year 15 or year 20 to bring a lawsuit," waiting for the infringer (who might not even know he's infringing) to invest and make the infringing product successful, thereby driving up the amount of damages that can be collected from the six years preceding suit. In Breyer's view, the possibility of this type of outcome "reveals a ‘gap'" and "[l]aches works to fill the gap by barring recovery when the patentee unreasonably and prejudicially delays suit." And there is ample evidence that Congress intended to retain that gap-filling equitable defense when it passed the Patent Act, which was intended to codify existing law. Breyer listed "dozens" of pre-Patent Act cases, in every federal appeals court, uniformly holding that laches is an available defense to patent-infringement claims. While Justice Alito had pooh-poohed these cases for various reasons, Breyer retorted that Alito had failed to cite a single case coming to the contrary conclusion. As for the majority's attempt to minimize the import of these cases by dividing them into subgroups (pre-merger law, pre-merger equity, post-merger but pre-Patent Act), Breyer compared it to "a Phillies fan who announces that a 9-0 loss to the Red Sox was a ‘close one'" because "the Phillies lost each inning by only one run." (True Court fans will understand why that Breyer-to-Alito burn was particularly scalding.) While Justice Breyer acknowledged that "[t]he majority's strongest argument is Petrella," a case he dissented from, he felt there were important distinctions between the Patent Act and the Copyright Act that warranted a patent-specific rule. But more importantly, Justice Breyer concluded: "Two wrongs don't make a right."

Breyer and Alito were buddies again in our next case, NLRB v. Southwest General (15-1251), where they joined the Chief's 6-2 opinion holding that the Federal Vacancies Reform Act (FVRA) prevents a person who has been nominated to fill a vacant office requiring Senate approval from performing the duties of that office in an acting capacity while the nomination is pending.

The case required the Court to untangle a thicket of statutory default rules, exceptions, and exceptions to the exceptions. The general rule, of course, is that the President may appoint "Officers of the United States" only with the advice and consent of the Senate. (Positions that require Presidential appointment and Senate confirmation are known as PAS positions.) But Congress has recognized an exception to that rule, permitting individuals to serve in these offices in an acting capacity for a limited amount of time without Senate confirmation. Section 3345(a)(1) of the FVRA lays out the default exception: If a person serving in a PAS office dies or resigns, the first assistant to that office "shall perform" the functions and duties of the office "temporarily in an acting capacity." Subsections (a)(2) and (a)(3), however, identify alternatives to that general rule. Under (a)(2), the President "may direct a person" who already serves in a different PAS office to serve in the vacant office in an acting capacity. And (a)(3) permits the President to direct a person to perform acting duties if the person served in a senior position in the relevant agency for at least 90 days during the year preceding the vacancy. Things get even more complicated when we get to § 3345(b), which makes certain individuals ineligible for service. Most significantly, subsection (b)(1) states: "Notwithstanding subsection (a)(1), a person may not serve as an acting officer for an office under this section" if the President nominates him for the vacant PAS office and, during the one-year period immediately preceding the vacancy, the individual "did not serve in the position of first assistant" to that office or served as first assistant for less than 90 days. The question in Southwest General was whether that prohibition in (b)(1) applied to all types of acting officials or only those who assumed an acting role under (a)(1).

Writing for a 6-2 majority, Chief Justice Roberts concluded that the prohibition in subsection (b)(1) applies to anyone performing acting service under the FVRA, not merely those performing under subsection (a)(1). This conclusion was mandated by the simple text of the provision, which extends to any "person" who serves "as an acting officer . . . under this section," not just to "first assistants" serving under subsection (a)(1). "Had Congress intended subsection (b)(1) to apply only to first assistants acting under (a)(1), it could easily have chosen clear language. Replacing ‘person' with ‘first assistant' would have done the trick. So too would replacing ‘under this section' with ‘under subsection (a)(1)'." The fact that subsection (b)(1) specifically applies "notwithstanding subsection (a)(1)," and does not cross-reference (a)(2) or (a)(3) does not mean it doesn't apply to each subsection equally. Instead, Congress specifically mentioned subsection (a)(1) because that was the section most likely to conflict with subsection (b)(1). Subsection (a)(1) says that the first assistant "shall perform" acting duties upon a vacancy occurring; subsection (b)(1) says that "notwithstanding" this general rule, a first assistant cannot perform acting duties if she has been nominated to permanently fill the position. Because (a)(2) and (a)(3) lack the mandatory language of (a)(1), there was no need to extend the "notwithstanding clause" to them. Finding that the text of the statute was clear, the Chief found no need to entertain the NLRB's arguments based on legislative history and purpose, but found them to be "not compelling," all the same.

The context, history, and purpose of § 3345 drove much of Justice Sotomayor's dissenting opinion, which Justice Ginsburg joined. In the dissenters' view, the doctrine of expressio unius est exclusio alterius meant that Congress's choice to single out subsection (a)(1) in the "notwithstanding clause" of subsection (b)(1) "strongly suggests" that (b)(1)'s prohibition applies only to first assistants who assume an acting role under subsection (a)(1). That interpretation is supported, Justice Sotomayor maintained, by the "events leading up to and following the enactment of the FVRA." Congress enacted the FVRA in response to President Clinton's appointment of Bill Lann Lee to be Acting Assistant Attorney General for the Civil Rights Division after his nomination to serve officially in that capacity was rejected by the Senate. Subsection (b)(1) was intended, in the words of a Senate report, to "prevent manipulation of first assistants to include persons highly unlikely to be career officials" by prohibiting first assistants from serving under subsection (a)(1) unless they'd already served as first assistant for more than 90 days (read: weren't just appointed immediately before a vacancy opened in order to skirt regular confirmation procedures). In Sotomayor's view, the concerns that prompted passage of the FVRA, and subsection (b)(1) in particular, do not apply in the case of acting officials who assume office under subsections (a)(2) or (a)(3). Moreover, since the FVRA was enacted in 1998, presidents have routinely nominated individuals to PAS positions even though they were serving in an acting capacity under subsections (a)(2) or (a)(3), with no objection from the Senate. "Congressional silence in the face of a decade-plus practice of giving subsection (b)(1) a narrow reach casts serious doubt on the broader interpretation" adopted by the majority.

Justice Thomas, meanwhile, wrote separately to express his view that—irrespective of the FVRA imbroglio—the Appointments Clause likely prohibited Lafe Solomon's appointment to be acting general counsel of the NLRB. Under the Appointments Clause, the President may only appoint "Officers of the United States" with the advice and consent of the Senate. While the Appointments Clause permits Congress to authorize the President to appoint "inferior Officers" without consulting Congress, the FVRA goes further in permitting the President to appoint both inferior and principal officers without first obtaining the advice and consent of the Senate. Because Thomas joined the majority opinion concluding that the FVRA itself prohibited the particular appointment in this case, he concluded that the broader constitutional concerns could be left for another day. But make no mistake, he warned, "[c]ourts inevitably will be called upon to determine whether the Constitution permits the appointment of principal officers pursuant to the FVRA without Senate confirmation."

Finally (for today), in Manuel v. City of Joliet (No. 14-9496), the Court clarified—for the benefit of pretrial detainees and bar-examinees—that a plaintiff may challenge his pretrial detention under the Fourth Amendment, even after the commencement of legal process. But the Court clarified little else, including the main issue it granted cert on—namely, whether a malicious prosecution claim can be brought under the Fourth Amendment. This prompted a spirited dissent from Justices Thomas and Alito, in what was otherwise a quite straightforward decision.

Elijah Manuel alleges that he spent 48 days in pretrial detention after he was falsely arrested by police officers who lied about the chemical content of pills that were seized from him during a traffic stop. The cops and an evidence technician falsely attested in a criminal complaint that the pills were ecstasy, when field tests and a preliminary lab test actually had come back negative. On the basis of this false testimony, a judge found probable cause for Manuel to be detained in a county jail pending trial on drug charges. Manuel was not released until a state police lab report confirmed that the pills contained no controlled substances. He later filed a § 1983 suit against the City alleging that his detention violated the Fourth Amendment. The District Court dismissed the claim, following binding Seventh Circuit precedent that the Due Process Clause, and not the Fourth Amendment, governed the scope of constitutional protection against pretrial detention. Similarly bound, the Seventh Circuit affirmed. The Supreme Court granted cert, to review the question "whether an individual's Fourth Amendment right to be free from unreasonable seizure continues beyond legal process so as to allow a malicious prosecution claim based upon the Fourth Amendment." It ended up answering only the first part of that compound question.

By the time of oral argument, even the City more or less conceded that the Fourth Amendment applies beyond legal process. As Justice Kagan wrote for the majority, applying "settled precedent," the Fourth Amendment establishes the "standards and procedures" governing pretrial detention and its protections apply even after the start of legal process in a criminal case (here, after the judge's determination of probable cause). Tracking two prior opinions that had touched on the issue, Kagan wrote that detention in the absence of probable cause happens not only when a person is held before a criminal proceeding, but "when legal process itself goes wrong," as it did for Manuel: "If the complaint is that a form of legal process resulted in pretrial detention unsupported by probable cause, then the right allegedly infringed lies in the Fourth Amendment," not the Due Process Clause. However, Kagan acknowledged that the Court's "holding—that the Fourth Amendment governs a claim for unlawful pretrial detention even beyond the start of legal process—does not exhaust the disputed legal issues in the case." Her opinion left it to lower courts to decide "the elements of, and rules associated with, an action seeking damages" for a Fourth Amendment violation in this context. Particularly relevant in this case (for statute-of-limitations purposes) is whether Manuel's cause of action could be construed as a malicious-prosecution claim, so that it accrued only upon the dismissal of his charges. However, as Justice Kagan observed, "[w]e are a court of review, not of first view."

Justice Alito dissented, joined by Thomas. They agreed with the Court's basic holding that the protection provided by the Fourth Amendment continues to apply after "the start of legal process," but disagreed with the notion that new Fourth Amendment claims might continue to accrue as long as pretrial detention lasts. In their view, the Fourth Amendment's emphasis on "seizure" means that its protections may endure through an initial court appearance, but are expunged by grand jury proceedings, a preliminary hearing, or other process. The dissenters' real frustration, however, was reserved for what the Court didn't decide. As noted above, the broader issue that the Court agreed to review in this case was whether a malicious prosecution claim can be raised under the Fourth Amendment at all. Evidently, a majority of the Court was unable to coalesce around an answer to that broader question, so Justice Kagan's opinion simply punts it to the lower courts. Alito and Thomas, however, would have decided it, and would have held that a malicious prosecution claim cannot be based on the Fourth Amendment.

That'll do it for now, but we'll be back as soon as we can with summaries of Star Athletica v. Varsity Brands (No. 15-866), concerning the requirements for design copyrights; Czezewski v. Jevic Holding Corp. (No. 15-659), concerning the priority rules surrounding structured bankruptcy dismissals; and Endrew F v. Douglas County Schools (No. 15-827), concerning the requirements for individualized education plans under the Individuals with Disabilities in Education Act. Stay tuned!