Supreme Court Update: Teva Pharmaceuticals USA v. Sandoz (13-584); Department of Homeland Security v. MacLean (13-894); Holt v. Hobbs (13-6827); M&G Polymers v. Tackett (13-1010) and Order List

January 29, 2015 Supreme Court Update

Greetings, Court fans!

While we in New Haven were more-or-less spared having to dig out from "Winter Storm Juno" (aka "snowbigdeal"), it's taken us a while to dig out from the Court's recent pile of opinions. With this Update, though, we should have you up to speed. Read on for summaries of Teva Pharmaceuticals USA v. Sandoz (13-584), on the appellate review standard for patent claim construction (with an assist from, and tip of the cap to, our colleagues in Wiggin and Dana's Intellectual Property group); Department of Homeland Security v. MacLean (13-894), on whistle-blower protection for those disclosing violations of federal law; Holt v. Hobbs (13-6827), on religious freedom and beards behind bars, and M&G Polymers v. Tackett (13-1010), on the interpretation of collective bargaining agreements. We've also got the latest cert grants for you. All that adds up to one massive missive, so sit back and prepare to be updated.

In Teva Pharmaceuticals USA v. Sandoz (18-854), the Court took yet another opportunity to remind the Federal Circuit that it's not that special. (Last year, the Federal Circuit had the dubious distinction of getting unanimously reversed five times in a row, with the Supremes rejecting time and again the lower court's habit of crafting "patent only" legal doctrines.) This time, the Court (7-2) rejected the Federal Circuit's practice of applying a de novo standard of review to district court claim construction decisions and held instead that claims construction often involves factual findings, which, as in all other areas of law, may only be reversed if they are clearly erroneous. For more on this case and its impact on patent law, we invite you to peruse this analysis provided by the eggheads in Wiggin and Dana's Intellectual Property Litigation Group.

The Federal Circuit rebounded in a non-patent case, Department of Homeland Security v. MacLean (13-894), where the Court considered whether Robert MacLean, a federal air marshal who told the press that the TSA was eliminating air marshals from certain long-distance flights as a cost-cutting measure notwithstanding reports of planned hijackings, was protected from retaliatory discharge where his disclosure was prohibited by TSA regulations. Federal law protects whistleblowers who disclose information revealing, among other things, "any violation of any law, rule or regulation" or "a substantial and specific danger to public health or safety," but not if the disclosure is "specifically prohibited by law" or "Executive order." The Homeland Security Act required the TSA to "prescribe regulations prohibiting the disclosure of information … if the Under Secretary decides that disclosing the information would ... be detrimental to the security of transportation." 49. U.S.C. § 114(r)(1)(C). Pursuant to that Act, the TSA promulgated regulations prohibiting the disclosure of "specific details of aviation security measures . . . [such as] information concerning specific numbers of Federal Air Marshals, deployments or missions, and the methods of operations." MacLean, who was fired for his disclosure, didn't dispute that it was barred by the TSA's regulation, but argued that the TSA's regulation was not "law" for the purposes of the "prohibited by law" exception to whistleblower protection. The Federal Circuit sided with MacLean, as did the Court.

The Chief led the Court with a succinct analysis of the two issues presented: (1) whether the TSA's regulation was "law" for purposes of the "specifically prohibited by law" exception and, if not, (2) whether the Homeland Security Act's provision requiring the TSA to issue regulations could itself constitute the relevant "law." "No" and "no," answered the Court. The whistleblower law requires protection for employees disclosing violations of "law, rule or regulation," but only exempts from protection those disclosures that are prohibited by "law." Given the statute's use of "law, rule or regulation" in close proximity to "law," standing alone, it would make no sense to read "law" to encompass regulations. This reading is reinforced by the fact that the whistleblower law also exempts from protection disclosures of information "required by Executive order to be kept secret in the interest of national defense or the conduct of foreign affairs." It would be odd for the first exception to encompass mere agency regulations while the second exception requires action by the President himself. Finally, this interpretation is sensible because Congress passed the whistleblower protection "precisely because it didn't trust agencies to regulate whistleblowers within their ranks." Turning to the second issue, the Court easily concluded that the Homeland Security Act's authorizing provision also didn't constitute the necessary "law," because while it required the TSA to promulgate regulations prohibiting some disclosures, it did not determine which disclosures should be covered, permitting the TSA substantial discretion. Thus, it was not the Act, but the regulations themselves, that rendered MacLean's disclosures improper. MacLean was therefore entitled to whistleblower protection and could not be fired for his disclosures.

Justice Sotomayor, joined by Justice Kennedy dissented. While they agreed that the TSA's regulations – standing alone – didn't qualify as "law," Section 114(r)(1) directs the TSA to promulgate the regulations and "describes what those regulations must accomplish." In the dissent's view, this was enough to bring MacLean's conduct into the exemption for disclosures "specifically prohibited by law."

Next up: prison beards. In Holt v. Hobbs (13-6827), the Court considered whether an Arkansas Department of Correction ("DOC") "grooming policy" that prohibits inmates from growing beards violates the Religious Land Use and Institutionalized Persons Act ("RLUIPA"). To the relief of religious-liberty enthusiasts and reverently hirsute prisoners, the Supreme Court held that it does, because the DOC failed to show that its grooming policy is the least restrictive means of furthering a compelling governmental interest. Although the grounds for the decision were similar to those cited in last year's controversial 5-4 Hobby Lobby decision, which dealt with similar questions under the Religious Freedom Restoration Act ("RFRA"), this time the Court was unanimous. (Justice Ginsburg, in a brief but notable concurrence, provided one explanation for the difference.)

Under RFRA and RLUIPA, the government may not burden an individual's exercise of religion—even by a neutral rule of general applicability—unless it satisfies a statutory version of the strict-scrutiny test: (1) the burden must further a compelling governmental interest; and (2) it must be the least restrictive means of furthering that compelling interest. Here, the DOC promulgated a grooming policy that prohibited inmates from having beards. The sole exemption allows prisoners with certain skin problems to wear a beard of no more than a quarter inch in length. Gregory Holt, aka Abdul Maalik Muhammad, did not have a skin condition, but he did have a sincerely held religious belief that he must wear a beard. While Holt believed his religion required him not to cut his beard at all, he proposed a compromise that would allow him to grow a half inch beard. The DOC refused, claiming that strict enforcement of the grooming policy was necessary to promote safety and security. The District Court and the Eighth Circuit deferred to the DOC's stated justifications for refusing an exemption.

The Supreme Court reversed, in a 9-0 decision authored by Justice Alito, who also wielded the pen in Hobby Lobby. As Alito explained, Holt easily satisfied his initial burden of showing that the grooming policy substantially burdened his religious beliefs. The DOC conceded the belief was sincere and, under RLUIPA (as opposed to the Free Exercise Clause), it's the burden on a particular form of religious exercise that matters, not whether the prisoner is able to practice his faith generally. The Court therefore rejected the DOC's argument (espoused by the lower courts) that Holt's religious rights were not substantially burdened because he was permitted to exercise his Muslim faith in other ways. RLUIPA also "contemplates a more focused inquiry" than that required by the Free Exercise Clause when it comes to evaluating the government's justifications for burdening religious rights, requiring the government to demonstrate a compelling interest in applying the challenged policy "to the particular claimant whose sincere exercise of religion is being substantially burdened." Under this standard, while the Court "readily agree[d] that the Department has a compelling interest in staunching the flow of contraband into and within its facilities," it concluded that "the argument that this interest would be seriously compromised by allowing an inmate to grow a ½-inch beard is hard to take seriously," especially since the DOC does not require inmates to sport crew cuts and acknowledges that inmates are more likely to secrete contraband in their scalp-hairs (or clothing) than in their chin-hairs. Similarly, while the Court acknowledged that the DOC had an interest in preventing prisoners from eluding detection by shaving their beards, it pointed out that they could easily avoid this problem by keeping before-and-after photos of prisoners sans and avec barbe. The Court also found that strictly enforcing the grooming policy was not the least restrictive means of advancing the DOC's purported interests. The photo solution was a less restrictive means of preventing evasion and simply searching bristles in the same manner that they already search thatch would be a less restrictive means of stemming the flow of contraband.

Overall, the Court emphasized that while some degree deference is required (a point underscored by Justice Sotomayor in a solo concurrence), RLUIPA does not permit "unquestioning deference" to prison officials. "And without a degree of deference that is tantamount to unquestioning acceptance, it is hard to swallow the argument that denying petitioner a ½-inch beard actually furthers the Department's interest[s]."

While all nine justices joined Alito's opinion this time, his similar opinion in Hobby Lobby attracted only the four other conservative votes. Justice Ginsburg filed a two-sentence concurrence providing one explanation for the disparity: "Unlike the exemption this Court approved in [Hobby Lobby], accommodating [Holt's] religious beliefs in this case would not detrimentally affect others who do not share [his] belief." Ginsburg's concurrence is notable less for how persuasive it is (agree or not, Alito did expend a fair number of words in Hobby Lobby arguing that the accommodation at issue there would not in fact detrimentally affect others), than in what it may signal for future religious-accommodation cases. By invoking the rights of others, Ginsburg (and Sotomayor, who joined the concurrence, as well as the entirety of Ginsburg's dissent in Hobby Lobby) may have signaled her sympathy for the argument—hotly debated among religion-clause scholars—that the Establishment Clause places limits on the extent to which government can accommodate religious beliefs. So, while it appears that no Justices were tearing their hair out over this decision, there remains plenty of fodder for disagreement in future religious-accommodation cases, particularly those that pit the free-exercise rights of some against the constitutional or statutory rights of others.

The Court unanimously reversed once again in M&G Polymers USA v. Tackett (13-1010), in which it called out the Sixth Circuit for a line of decisions on the interpretation of collective bargaining agreements that is "incompatible with ordinary principles of contract law." At issue in the case was the interpretation of a provision of a collective bargaining agreement dealing with retiree healthcare benefits. The owners of the Point Pleasant Polyester Plant (which, we assume, sells pickled peppers in addition to leisure suits) entered into an agreement with the union providing that certain retirees would "receive a full Company contribution towards the cost of [healthcare] benefits" and that such benefits would be provided "for the duration of [the Agreement]." The Agreement, however, was subject to renegotiation after three years, at which time the penny-pinching proprietors of the Point Pleasant Polyester Plant repudiated their promise to the poor pensioners (or so they perceived). Peeved, a class of retirees (and the union) sued, alleging that the initial "full Company contribution" promise had created a vested right to retiree benefits, which could not be later rescinded. Following two rounds in the District Court, the Sixth Circuit agreed, relying on a line of its decisions beginning with a 1980 case called Yard-Man, which held that in disputes over the interpretation of collective bargaining agreements, courts should be mindful of the context of labor-management negotiations and presume, absent clear evidence to the contrary, that rights are intended to be fully vested. Applying the Yard-Man inferences in this case, the Sixth Circuit held that it was fair to presume that the parties intended to vest lifetime contribution-free benefits to the class of retirees; otherwise, the initial promise would be "illusory."

The Court reversed, in a 9-0 decision authored by Justice Thomas. The Court began by reiterating that courts interpret collective-bargaining agreements—including those that establish pension and welfare plans governed by ERISA—according to ordinary principles of contract law. The Sixth Circuit's Yard-Man inferences are incompatible with these principles. They place a thumb on the scale in favor of vested retiree benefits and rely on speculation as to the parties' intent divorced from record evidence. They ignore general durational clauses (like the three-year period in this case), and thereby "conflict with the principle of contract law that the written agreement is presumed to encompass the whole agreement of the parties." They distort the illusory-promises doctrine and ignore the traditional principle that courts should not construe ambiguous writings to create lifetime promises. In short, the Court rejected any rule that would treat interpretation of collective-bargaining agreements differently than other contracts and—of general interest to contract construers—reiterated that courts cannot rely on mere supposition to determine the intent of parties to a contract: "Although a court may look to known customs or usages in a particular industry to determine the meaning of a contract, the parties must prove those customs or usages using affirmative evidentiary support in a given case."

Though the Court mowed down Yard-Man and its progeny, it declined to prejudge the instant dispute. Rather, it remanded the case so that the lower courts might "apply ordinary principles of contract law in the first instance." To this end, the retirees might draw some solace from Justice Ginsburg's concurring opinion (joined by Breyer, Sotomayor, and Kagan), which noted that, while the Yard-Man inferences are incompatible with general principles of contract law, there is some "affirmative evidentiary support" in this case for interpreting the Agreement to fully vest lifetime contribution-free benefits in the relevant class of retirees. And so the Point Pleasant prizefight proceeds to Round III.

We're not done yet! We have two new cert grants to report:

Obb Personenverkehr AG v. Sachs (13-1067) asks: (1) What principles control in determining when an entity is an "agent" of a "foreign state" under the first clause of the commercial-activity exception to the Foreign Sovereign Immunities Act; and (2) Whether, under the first clause of the commercial-activity exception, a tort claim for personal injuries suffered in connection with travel outside of the United States is ‘based upon' the allegedly tortious conduct occurring outside of the United States or the preceding sale of the ticket in the United States for travel entirely outside the United States.

Glossip v. Gross (14-7955) asks: (1) Whether it is constitutionally permissible for a state to carry out an execution using a three-drug protocol where (a) there is a well-established scientific consensus that the first drug has no pain relieving properties and cannot reliably produce deep, coma-like unconsciousness, and (b) it is undisputed that there is a substantial, constitutionally unacceptable risk of pain and suffering from the administration of the second and third drugs when a prisoner is conscious; (2) whether the Baze v. Rees plurality's stay standard applies when states are not using a protocol substantially similar to the one considered in Baze; and (3) whether a prisoner must establish the availability of an alternative drug formula even if the state's lethal-injection protocol, as properly administered, will violate the Eighth Amendment.

This case, which has gained widespread attention following Oklahoma's botched execution of Clayton Lockett last April, was previously captioned Warner v. Gloss, but Warner was executed on January 15, after the Court (5-4) rejected his application to stay his execution pending the Court's decision on the cert petition, which was then granted eight days later (presumably under the "rule of four"). The Court has now granted stays of execution for the other three inmates challenging the protocol (at the State's request), although it is possible that the State could proceed with their executions if it uses a different protocol, with a more effective sedative.

That's all for now! If you made it this far, you are a true Court fan. But now, like us, you can take a breather until the Court returns from its mid-winter recess later in February.

Until then,

Kim and Tadhg