A Seat at the Sitting - December 2023

The December Docket in 90 Minutes or Less

Event Video

Listen & Download

Each month, a panel of constitutional experts convenes to discuss the Court’s upcoming docket sitting by sitting. The cases covered in this preview are listed below.

  • Brown v. United States  (November 27) - Criminal Law; Whether the definition of “serious drug offense” in the Armed Career Criminal Act incorporates the federal drug schedules that were in effect when the individual committed the firearm offense, or instead the schedules that were in effect at the time of the state drug offense.
  • McElrath v. Georgia (November 28) - Criminal Law, Double Jeopardy; A challenge by a Georgia man who was found not guilty by reason of insanity on one charge arising from the stabbing death of his mother and guilty but mentally ill on another charge to the state’s ability to try him again on the charge on which he was acquitted.
  • Wilkinson v. Garland (November 28) - Immigration; Whether federal courts have the power to review an agency’s determination that a noncitizen did not meet the “exceptional and extremely unusual” hardship requirement to cancel deportation.
  • Securities and Exchange Comm’n v. Jarkesy (November 29) - Administrative Law, Financial Services; A challenge to the SEC’s use of in-house judges.
  • Harrington v. Purdue Pharma, L.P (December 4) - Whether the Bankruptcy Code gives a court the power to approve a release that extinguishes claims against third parties, without the consent of the individuals or entities holding the claims.
  • Moore v. United States (December 5) Federalism & Separation of Powers - Whether a federal “mandatory repatriation tax” violates the 16th Amendment.
  • Muldrow v. City of St. Louis, Missouri (December 6) - What protections does Title VII of the Civil Rights Act of 1964 provide to employees who contend they were the victim of a discriminatory transfer?

Featuring: 

  • Justin Aimonetti, Attorney, Dechert LLP
  • Adi Dynar, Attorney, Pacific Legal Foundation
  • Prof. Jennifer Jenkins, Associate Professor of Law, Ave Maria School of Law
  • Prof. Lindsey Simon, Associate Professor of Law, Emory University Law School
  • Moderator: Stephanie Maloney, Chief of Staff and Associate Chief Counsel, U.S. Chamber Litigation Center

*******

As always, the Federalist Society takes no position on particular legal or public policy issues; all expressions of opinion are those of the speaker.

Event Transcript

[Music]

 

Nate Kaczmarek:  Hello, and welcome to "A Seat at the Sitting." Today, our great panel of legal experts will preview the December Supreme Court docket in 90 minutes or less. I'm Nate Kaczmarek, vice president and director of the practice groups for The Federalist Society. As always, please note that all opinions expressed on this program belong to our guests and not the Society. We are delighted to welcome Stephanie Maloney to the program as our moderator. Stephanie, I take it you survived Thanksgiving unscathed. How are you?

 

Stephanie Maloney:  Good, Nate, how are you?

 

Nate Kaczmarek:  Very well, thank you. Delighted to have you with us. Stephanie is the Chief of Staff and Associate Chief Counsel for the U. S. Chamber Litigation Center, which is the litigation arm of the U. S. Chamber of commerce. Prior to her work at the litigation center, she served as Chief of Staff and Counsel in the Environment and Natural Resources Division of the Department of Justice. Prior to that, she was an associate in the Appellate and Critical Motions practice group at Winston and Strawn. She clerked for Judge Edith Brown Clement of the U. S. Court of Appeals for the Fifth Circuit and Judge Stephen J. Murphy III of the U. S. District Court for the Eastern District of Michigan. Stephanie's law degree is from Notre Dame and her undergraduate is from Loyola University Maryland. A more complete bio for Stephanie and the impressive backgrounds of all our guests are available for you review on our website, fedsoc.org. Once our panel has reviewed and discussed all the upcoming cases for December, we'll go to audience Q&A. So please do think about the questions you'd like to ask them. Questions can be submitted via the Zoom Q&A function and we will do our best to answer as many of the questions as we can. With that, Stephanie, thank you again very much. The floor is yours.

 

Stephanie Maloney:  Thank you, Nate. I think of all the backgrounds, yours is quite impressive. So I'm glad to see the holiday didn't disrupt your carefully placed books on your shelf. It's really a pleasure to be with you all this afternoon moderating the December edition of A Seat at the Sitting. The Supreme Court is closing out 2023 with seven cases calendared for argument between this week and next. And the Justices really haven't let themselves off easy for this holiday season. There are a few big arguments teed up for this session, including what could be really landmark tax, bankruptcy, and admin law cases, along with cases that concern criminal law, immigration, and Title VII. And we're really privileged to have a great panel of experts with us to break it all down.

 

So, in alphabetical order, I'll just briefly introduce each of our panelists, starting with Justin Aimonetti. Justin is an associate in Dechert's Trials, Investigations, and Securities Group. Before joining Dechert, he served as a law clerk to Judge Nichols on the U. S. District Court for the District of Columbia and to Chief Judge Sutton on the Sixth Circuit. Justin is a graduate of the University of Virginia Law School.

 

Next, we're joined by Adi Dynar. Adi is an attorney with the Pacific Legal Foundation, where he focuses on separation of powers issues. He litigates regularly constitutional law cases in federal and state courts across the country. And Adi earned his law degree from the University of Toledo College of Law.

 

In addition to our very capable practitioners, we're rounding out today's panel with two academics. First is Jennifer Jenkins. Jennifer is an associate professor of law at Ave Maria School of Law. She previously served as an army intelligence officer in Afghanistan and Iraq. Before graduating from Harvard Law School, Jennifer clerked for Judge Winter on the Second Circuit and served as a Supreme Court fellow. Her scholarship focuses on criminal law and military law, with an emphasis on sentencing.

 

And finally, we're joined by Lindsey Simon. Lindsey is an Associate Professor of law at Emory University Law School, where she focuses her research on the bankruptcy system. Before joining the Emory faculty, Professor Simon served as the Robert Cotton Alston Associate Chair in Corporate Law at the University of Georgia School of Law. And she served as a law clerk to Judge Martin on the Eleventh Circuit. Lindsey earned her law degree from Northwestern.

 

So now on to the discussion. The part you've all joined for. Each of our panelists will cover one of the cases in depth. We'll then have time for a discussion of the cases between the panelists before we open the floor to questions from the audience. As Nate said, please use the Q&A function to submit any questions that you may have for our speakers. And don't be shy about raising questions as we go. So, to kick off our conversation, Jennnifer will start and cover a pair of criminal law cases, Brown v. United States and McElrath v. Georgia, the first of which was actually argued this morning, and the latter of which is set for argument tomorrow. So, Jennifer.

 

Prof. Jennifer Jenkins:  Sure. So the first case, Brown v. United States, concerns the Armed Career Criminal Act, otherwise known as the ACCA. It's a recidivist statute that punishes people with a 15-year mandatory minimum sentence, people who commit a federal unlawful firearms offense, who have previously committed three violent felonies, serious drug offenses, or a combination of the two. And this case concerns the serious drug offenses. This is a significant mandatory minimum sentence because the federal unlawful weapons offense only provides a ten-year maximum penalty, while this is a 15-year mandatory minimum if the ACCA applies. And so this case concerns serious drug offenses, and the act defines serious drug offenses as offenses either under the Federal Controlled Substances Act or more often, they tend to be state offenses, state drug offenses that involve a substance that is listed in the Federal Schedule of Controlled Substances. And for both the federal offenses and the state offenses, the maximum penalty for the offense must be ten years or greater.

 

And so there's the question, since these federal schedules -- Congress is constantly taking drugs on and off and moving drugs around in the federal schedules -- the question is, at what moment in time does the Court compare the federal schedules and the substances on the federal schedule with the substances that the person is convicted under the state law? And so there's really three reasonable possibilities, three reasonable points in time where we might consider what the federal schedule provides. And so the government contends that the federal schedule should be compared to the state drug offense at the time when the state drug offense, when that previous state drug offense was committed. But here one defendant suggests that the Court should compare the state drug offense and the substance in the state drug offense with the federal schedule at the time of the federal unlawful weapons offense was committed -- the unlawful firearms offense was committed. And then another one of the defendants contends that the federal schedule should be the federal schedule at the time that the defendant is being sentenced under the ACCA.

 

So there's three reasonable possibilities. And all three of the parties, the two defendants and the government, suggest that the text indicates that the moment in time that they propose should be the moment in time where the federal schedule is compared. And the government makes the point that using the federal schedule at the time the previous state drug offense was committed serves the purpose of notice better for the defendants. Because then the defendant, when the defendant is pleading for a particular charge, he will be aware of that collateral consequence of potentially being subject to the ACCA, because he knows at that moment if his drug offense is on the federal schedule or not.

 

And so really, with any one of these possibilities, it can create disparate outcomes for defendants where one defendant could be subject to a 15-year mandatory minimum and another defendant who commits the offense the next day might not. And that all depends on at what point in time do we look at the federal schedule. So it's a pretty interesting issue. And ACCA has been litigated heavily through many aspects of the act, and so this is just one more for ACCA. And then so moving on to McElrath v. Georgia. So this case concerns the Double Jeopardy Clause of the Fifth Amendment, which provides, nor shall any person be subject for the same offense to be twice put in jeopardy of life or limb.

 

And the question that this case is addressing is, when does jeopardy terminate in the double jeopardy clause bar prosecution? Georgia law distinguishes between two situations where a not guilty verdict conflicts with a simultaneously rendered guilty verdict. Georgia courts call verdicts inconsistent when a jury renders seemingly incompatible verdicts of guilty on one charge and not guilty on another charge. But Georgia courts call verdicts repugnant when the jury makes affirmative findings shown on the record that cannot logically or legally exist at the same time.

 

So here, Georgia prosecuted the defendant for malice murder, felony murder, and aggravated assault, all based on a single incident in which the defendant killed his adoptive mother. The defendant asserted an insanity defense to all of the charges. The jury found the defendant not guilty of the malice murder charge, but guilty on the felony murder and aggravated assault charges. The Court found the verdicts repugnant because the acquittal on the malice murder charge rested on the affirmative finding that the defendant was insane at the time of the alleged acts, while the verdicts on the other charges were based on the affirmative finding that the defendant was not insane at the time of the acts.

 

The Court explained it's not legally possible for one to be both insane and not insane during a single criminal episode involving a single victim. And one reason that this makes a big difference is that a defendant may not challenge a conviction merely because it is inconsistent with an acquittal, but a defendant may challenge a conviction on the grounds that it is repugnant to an acquittal rendered at the same time. Georgia contends that jeopardy terminates, and so double jeopardy bars prosecution if the verdicts are merely inconsistent, but that a defendant may be retried if the verdicts are repugnant. Here, the defendant contends that repugnant is just another form of an inconsistent verdict, and so it should not be constitutionally significant.

 

And so defendant here should not be able to be retried on the offenses of which defendant contends he was acquitted with these verdicts that were repugnant. However, the government contends that it is up to states to determine when a verdict is valid or invalid and that jeopardy fails to terminate under repugnant verdicts because those verdicts are invalid. And it's really more akin to a situation where we have a mistrial or a hung jury. And so those are the two sides for that case as well, the double jeopardy case and the ACCA case. Thank you.

 

Stephanie Maloney:  Thank you, Professor. Were you able to listen to the Brown argument this morning? Did we get any indication of how that's going to come out?

 

Prof. Jennifer Jenkins:  I was not able to hear the Brown argument this morning.

 

Stephanie Maloney:  All right. So maybe some of our participants listened in and can give us an update. Otherwise, we'll have to listen for ourselves now that they're saving those. Okay. Up next, we have Adi Dynar, who's going to provide us an overview of, I think, one of the sort of big hot button cases for this court's term, which is the SEC v. Jarkesy case. Adi?

 

Adi Dynar:  Thank you, Stephanie. And thank you to the participants for joining us today. So The Securities and Exchange Commission v. Jarkesy case, as Stephanie said, is quite a blockbuster case at the Supreme Court. I mean, many times all of the cases are blockbuster if they reach the Supreme Court, but this is maybe more blockbuster than other cases. So this case arose when the Commission commenced a fraud prosecution against George Jarkesy and his investment advisor with a company called Patriot 28 LLC. At that point, and this was many years ago now, the Securities and Exchange Commission had the option of filing suit in federal court or filing a suit with its in-house administrative law judge, and the Commission in the Jarkesy case selected to go and commence prosecution with their own in-house tribunal.

 

Now, the procedural history of the case is somewhat complicated because there was one round of appeals that went to the D. C. Circuit and back. But essentially, the first administrative law judge had issued an order of civil penalties of something around quarter million dollars, a disgorgement award of something close to $700,000, and a lifetime ban on Jarkesy from practicing in the financial sector. So through the appeals, Jarkesy went to the D. C. Circuit in the first round. Meanwhile, the Supreme Court decided Lucia v. Securities and Exchange Commission. So the case got remanded back for the Commission to assign a new, properly appointed administrative law judge to the case. So this second administrative law judge, instead of sort of hearing the case anew, essentially adopted the decision of the first administrative law judge. Again, the same thing, civil penalties, discouragement, and a lifetime industry ban. So that on appeal, Jarkesy took that case to the Fifth Circuit. So in the Fifth Circuit, it was Judges Elrod, Davis, and Oldham. Judge Davis dissented.

 

And the issues in the Fifth Circuit were three issues. The first issue was whether it deprives private litigants of the right to a jury trial when administrative agencies bring them for litigation into their own in-house tribunals. The second issue at the Fifth Circuit was whether this sort of unfettered discretion that the Commission has to choose to file these suits either in federal court or with their in-house tribunals, whether that unfettered discretion is a delegation of legislative power to an agency without any guardrails, without any intelligible principles, such that it violates the nondelegation doctrine. The third issue was whether the multiple layers of removal protection that are given to administrative law judges in the Securities and Exchange Commission are one too many, and do they violate the Take Care Clause in Article II of the U. S. Constitution.

 

On all three questions, Judge Elrod wrote the majority opinion, Judge Davis dissented, and all three of the questions were decided in Jarkesy's favor. On the Seventh Amendment jury trial, Article III question, the Court said, "Look, fraud prosecutions are no different than common law fraud. Common law fraud has existed for centuries. You basically have to prove someone made a willful misrepresentation and bad consequences followed. And those cases, because they look no different than common law fraud cases, those are private rights cases, and they belong in actual courts, where the jury gets to decide all of the underlying facts of the dispute, and then the judge decides what conclusions of law to reach, and then it proceeds through the appeals as needed through the federal court system."

 

On the second question, the Fifth Circuit also decided in Jarkesy's favor. The Court said that this unfettered discretion given by Congress to the agency is legislative power. And it's legislative. How do we know that? Well, because Congress has selected categories of cases and assigned them either to administrative adjudication or to actual federal courts. So we see Congress time and time again making those decisions for itself. So it has all of the hallmarks of legislative authority when Congress, historically speaking, has made those decisions. So what happens when Congress assigns that sort of decision making to an administrative agency? That is a delegation of legislative power.

 

So then the Court looked at whether there was any intelligible principle in the statutes to guide the agency's exercise of that discretion, and finding none, the Fifth Circuit concluded that there was a violation of the non-delegation doctrine. On the third question, the Fifth Circuit again decided it in Jarkesy's favor. On the removal question, the issue is the administrative law judges are removable by the heads of the agency, meaning the Commissioners of the Securities and Exchange Commission, for cause. So you can't just at will fire an administrative law judge if you are an SEC Commissioner. You have to fire for certain specified reasons in the statute. But that's not the end of the matter. Once the commission makes that determination, the Merit System Protection Board, MSPB has to find good cause for that firing. And absent that good cause, the ALJ cannot be removed from office. Plus, the members of the Merit System Protection Board themselves are only removable for cause by the President of the United States.

 

So those are multiple layers, the Fifth Circuit concluded, that are protecting the administrative law judges from the chain of command in which they belong, the Executive Branch, and that is impermissible under the Take Care Clause and Article II of the Constitution. So the Securities and Exchange Commission, having lost on all three of those issues, the SEC, through the Solicitor General's Office, filed a petition for cert with the Supreme Court. And as many practitioners will tell you, if the SG files a cert petition, the chances of it being granted can be pretty high. And that's exactly what happened. The Court granted cert.

 

Now, the interesting thing was, there was sort of this like, issue number three and a half, I like to call it, where the Fifth Circuit had said, after deciding in Jarkesy's favor on all three of the questions, that the case should be remanded back to the Securities and Exchange Commission for further proceedings. So in response to the SEC's cert petition. Jarkesy filed a conditional cross cert petition saying that this remand question or this remedies question should also be also cert worthy, and the Court should also grant cert on that question. But the Supreme Court granted the SEC's cert petition and denied Jarkesy's conditional cross cert petition. And it's curious because the Securities and Exchange Commission, to win, has to win on all three of the issues. And the word on the street is, if SEC loses on any one of the issues, it essentially loses, because at stake is the constitutionality of administrative adjudication.

 

So at the Supreme Court, SEC is arguing, is sort of taking a historical look at the public rights versus private rights distinction and is recommending that the Court draw the line to exclude fraud prosecutions from the private rights side of the equation. Meaning, from SEC's perspective, if this is a matter of public right, then it was constitutionally permissible for Congress to assign adjudication of public rights cases in agency tribunals or in administrative tribunals. Jarkesy, predictably, argues that, no, these are private rights cases, and there's sort of an interesting and robust history of Supreme Court cases that have struggled with where to draw the line between private rights and public rights. So we'll see a lot of that play out in the oral arguments that are coming up this Wednesday, the 28th.

 

On the second issue, the parties aren't really spending a lot of time on the non-delegation question. But again, predictably, the commission is arguing that this is an executive agency's exercise of executive power. So the SEC is characterizing this or categorizing this discretion to choose between in house versus federal court as its exercise of prosecutorial discretion. Jarkesy is arguing that there is a difference between a decision of whether to commence an action and where to commence an action. That's the distinction that the Fifth Circuit also relied on. And essentially, the distinction is here we aren't dealing with a statute that, let's say, a venue selection statute that says you could file a case in Northern District of Georgia or in the Central District of California, depending on if the party can be sued there for personal jurisdiction purposes.

 

So it's not just selecting between one federal court and another federal court. It's selecting between an Article III tribunal and a non-Article III tribunal. So that's qualitatively a very different type of venue selection than what occurs within the federal system, within the federal court system. So that's the second question. The third question, removal. The commission is arguing that there aren't multiple layers of removal protection. There is essentially only one. The commission gets to decide if there is cause to fire an administrative law judge. And if the commission decides that that's the only layer of removal protection there is, the Merit System Protection Board simply confirms that there is good cause for the commission's decision to fire an inferior officer within their chain of command. Jarkesy argues that, no, there is multiple layers. There's at least three. And from past Supreme Court precedent, we know that two layers are one too many. So this is clearly, as a result of existing precedent, this is an Article II violation. So we expect the arguments to be quite robust.

 

Given the recent trend of Justice Thomas asking the first volley of questions to arguing counsel, it would be interesting to see what Justice Thomas thinks is the most sort of problematic question he needs answered. One of these three questions, the jury trial question, the non-delegation question, or the removal question. And then there's that three and a half, the argument about remedies or remand. On the removal question, the commission is arguing that qualitatively an Appointments Clause violation means that the officer who was improperly appointed could not have taken that official action to begin with. So it's sort of like a void ab initio type of a remedy that fits an Appointments Clause violation. But the commission argues that a narrower remedy applies to a removal violation because the officer that took action on behalf of the agency was at least cloaked with proper appointment when that action was taken. The removal sort of just comes on the back end. So we'll see what the Supreme Court does with that argument.

 

I hate to predict, but I think the Court has the option of remanding back to the Fifth Circuit for the Fifth Circuit to, in the first instance, decide the remand question. And again, because the Court had the option of granting the conditional cross cert petition, but it did not, that sort of gives us some writing on the wall as to how the Court will deal with the remedies question here. So that's the gist of the case that's up for argument. I think it's a blockbuster case, and I'm sure many practitioners are looking at it. At Pacific Legal Foundation, we have many cases, Jarkesy style cases that we are litigating. So the implications for agency adjudication and the continued validity of agency adjudication is quite fascinating to observe. Thank you. And back to you, Stephanie.

 

Stephanie Maloney:  Thank you. Adi. Next up, we have Professor Simon, who is going to provide update and overview of Harrington v. Purdue Pharma. Professor.

 

Prof. Lindsey Simon:  Excellent. Thank you so much for having me. And thanks to all of you for coming and listening to a bit about these cases. I'd say this case is also pretty blockbuster. It does relate with bankruptcy, which many people may not have encountered. But at core, this is a case about how our legal systems deal with mass torts. And so we have the opioid crisis that I don't think you could escape knowing about over the last few years. Purdue Pharma, manufacturer of oxy, was wrapped up in the opioid scandal and faced litigation from individuals, states, municipalities, cities. And so, years ago, they turned to bankruptcy because they were seeing these cases go forward. And as with many companies facing lots of litigation, they didn't know what to do. So they filed for bankruptcy.

 

Like many other Chapter Eleven cases involving mass torts, the process moved along with various mediations, lots of different representations of different claimant groups trying to get the best deal out of the case. Ultimately, bankruptcy is about helping a debtor resolve its affairs and getting a fresh start. So companies facing trouble try to reorganize their affairs, try to deal with all the different claims. And the Bankruptcy Code, which Congress drafted, gives the bankruptcy courts power to help finally resolve those claims in a deal. And so the most common way to resolve a bankruptcy is through a plan of reorganization. Purdue Pharma, through extended negotiation, put together a plan of reorganization and put it before the bankruptcy court. This is all very common in Chapter Eleven cases.

 

One thing that is not common in every Chapter Eleven case or at least doesn't get as much attention as it does here is the fact that this Chapter Eleven plan involves non debtors. So Purdue Pharma was run for a long time by members of the Sackler family. And there are many claims that the Sackler family improperly or members of the family improperly conducted the affairs of Purdue Pharma, took actions that violated various laws, took money out of the company. All of these allegations are the stuff of the lawsuits against them. So when Purdue Pharma filed for bankruptcy, it didn't have a huge pot of money to pay back its claimants, its victims. But the Sackler family did.

 

And so part of this negotiation deal is that in exchange for what we'll get to, which is the Supreme Court's decision -- in exchange for what's called non debtor releases, the Sackler family contributed billions of dollars into this global settlement. Now in a bankruptcy case, after a plan of reorganization is confirmed, the debtor, the company or individual that files for bankruptcy gets the benefit of discharging their liability. So no longer can the vast majority of claimants sue them once the bankruptcy's ended. This gives that fresh start, this gives finality. That's how bankruptcy works. Well, in the Purdue Pharma case and in many other bankruptcies, non-debtors like the Sacklers are getting a similar type of benefit. So in the future, if this plan, if this deal were approved, you could no longer sue the Sacklers individually. You would have to go and have your claims channeled into this structure of trusts and that's where all that money would go.

 

So basically, the Sackler family was contributing money in exchange for global peace, basically release of all the opioid claims that the company would have against them, which were some very valuable claims, probably the company's most valuable asset, but also the claims of individual claimants against the Sacklers. Now this is the controversial part. You see, the Bankruptcy Code gives the Court authority to discharge liability against the debtor. It doesn't so expressly do that when the claims are against non-debtors like the Sacklers. And so the Supreme Court is hearing arguments in this case to decide whether the Bankruptcy Court had authority to confirm a bankruptcy plan that includes these non-debtor releases. They are very common in mass tort cases, especially in instances where there are multiple affiliates. Not all of them may need to file or want to file bankruptcy, or when there are individuals, directors, officers, other involved parties that are connected with the case that may want to get releases but don't really want to file for bankruptcy for any number of reasons. So the plan of reorganization was confirmed by the bankruptcy judge, the district court overturned it, saying that this authority is nowhere to be found in the Bankruptcy Code.

 

The Second Circuit on appeal, reversed the district court and basically set out a test. Now there's a circuit split around the country about whether these non-debtor releases are permissible. A number of circuits say no, not allowed without consent, meaning the individual claimants have to agree to waive their claims against these non-debtors going forward. The Second Circuit joined the number of circuits that say, yes, this is permissible. And they created a multifactor test for when these sort of releases are appropriate. And it's not an easy test to get through, right. It's a bit of a gauntlet. And the Second Circuit made clear that's for good reason, because again, this is an extraordinary remedy and it really should be when it's the only way to get this sort of deal satisfied. Importantly, in between all of the appellate process, the amount that the Sackler family is going to pay in exchange for these releases went up significantly. Now it's somewhere near $6 billion. And so the Supreme Court is facing an interesting legal question, but also a bigger question behind the scenes, which is what to do with these deals when there's really no better option.

 

So legally, the question is, if the Code is silent, does the number of provisions in the Bankruptcy Code that the courts have strung together supporting this, does that give the Bankruptcy Court authority to issue this sort of relief? And that's a question that comes up in many contexts. We've been dealing with the Bankruptcy Court's authority over decades and I think it's one they'll continue to deal with. The argument before the Supreme Court is actually brought by the United States Trustee. So the United States Trustee is technically an arm of the Department of Justice, is designed as a watchdog of the process. And so basically, they are not objecting as a creditor, they're objecting as basically an overseer of the process that has power to do so, that this is just not allowed.

 

Notably, just about everybody has settled and has agreed to this deal. So again, it was a very complicated extracted negotiation. But ultimately the various states, municipalities, groups of claimants, individuals all around the country agreed that this is the deal that they wanted because it gave them the best chance of some recovery and getting something in some reasonable time. You see, the claims against the Sacklers were subject to defenses like any claims might be. And even if the parties were successful in getting judgments, a concern is that much of this money that was allegedly taken out of Purdue Pharma and given to the various members of the family is not recoverable. So it would be very difficult and costly to try and do so. And that's a big challenge. And so anyway, the vast majority, really everyone that supported or originally objected to this is now supporting it. And it's the United States Trustee, on the basis of the legal principle, arguing before the Supreme Court, this should not happen. So that's generally what it is. It's a question of does the Court have this authority? Do the code provisions that the parties look to -- does it allow this?

 

The one additional wrinkle I'll point out is that the Bankruptcy Code isn't completely silent on this. There is a provision, section 524G, which deals with mass tort cases and giving this sort of non-debtor relief. Congress drafted it in response to a number of cases before any of this was really in vogue, asbestos cases filed for bankruptcy. Because you might imagine, in hindsight, there were not a lot of redeeming business qualities for using asbestos. And so these companies faced massive liability and didn't really have much else to do. And so courts dealing with these cases created the remedy that Congress later incorporated into 524G. The challenge with this Code provision is that it's expressly limited to asbestos cases. And here Purdue Pharma relates to the opioid crisis. So that's the backdrop. Happy to answer more in the Q&A as needed, but it will really change how companies facing liability look at bankruptcy as a potential avenue to deal with their claims.

 

Stephanie Maloney:  Thank you, Professor. You managed to make bankruptcy interesting and accessible. So well done. Well done. Now the pressure is on for Justin to do the same for a tax case that the Court is hearing. Justin will cover Moore v. United States. Justin.

 

Justin Aimonetti:  Thanks, Stephanie. Good morning, everyone. As you can see, I'm in sunny California. It's lovely here. So before jumping into the background of the case, I think we need to do a little bit of level setting. So in our global economy, corporations and individuals use overseas subsidiaries to engage in commerce and earn revenue. This is especially true for multinational corporations. Up until 2017, these subsidiaries revenue went untaxed by the IRS until those subsidiaries distributed the gains back to the United States. That changed in 2017.

 

In 2017, Congress enacted the Tax Cuts and Job Act and with that, the so-called mandatory repatriation tax, the MRT for short. The MRT was passed to achieve a one-time windfall in tax revenue from earnings that had been accumulated by foreign subsidiaries. The MRT specifically deemed subsidiaries accumulated earnings to be income of whoever happened to own a requisite number of shares of the foreign subsidiary. So with that background, we can now pivot to the case at hand, Moore.

 

In Moore, Charles and Kathleen Moore were hit with MRT liability because they owned shares of a foreign corporation based in India that basically provided rural farmers with equipment. And the Moores were using the revenue from this foreign corporation and they were rolling it over into the company. They were never distributing any of the earnings back to the United States. So the IRS, with the passage of the MRT, deemed them liable for, I think it was $130,000 or so in tax liability. The Moores challenged the MRT in District Court on the grounds that the tax conflicted with the Sixteenth Amendment because the earnings that the foreign subsidiary kept within it and kept reinvesting was not income within the meaning of the Sixteenth Amendment.

 

The District Court disagreed and the Moores appealed to the Ninth Circuit which also ruled against them. And I quote the Ninth Circuit held that "Realization of income is not a constitutional requirement for Congress to avail itself of the Sixteenth Amendment's exemption from the apportionment requirement for taxes on income." The Moores obviously petitioned to the Supreme Court. And the Supreme Court grant it. The Supreme Court in the matter is going to have to decide whether income within the meaning of the Sixteenth Amendment requires realization. That determination will likely hinge on a close analysis of a corpus of information and material. For instance, the Court is going to be looking at contemporary dictionary definitions, legal authorities from the time the Sixteenth Amendment was passed, the text of the Sixteenth Amendment itself, pre ratification case law, mostly from the states, contemporary state statutes, federal law that implemented the initial federal income tax regime, and early Supreme Court case law.

 

As Stephanie mentioned, I'm a litigation associate at Decher and we filed an amicus brief both at the cert stage and at the merit stage. And one of our principal arguments is that the original meaning of the word income in the Sixteenth Amendment requires realization. And in essence, income has two elements to it. It has a gain and then that gain has to be realized. So a real-world example might help illustrate the two elements. Say that you purchase Apple stock on January 1 for $100 a share, and then you go to sell that Apple stock on December 31 and that Apple stock is now worth $120. You have gained $20. And that sale on December 31 is a realization of that $20. And obviously the IRS could tax you for that $20 of realized gain. So that is a basic understanding of what we think income means within the Sixteenth Amendment.

 

In terms of what you should be looking out for, for interesting components of what the Court could do, one, I think would be if the Court dives deep into how states addressed the meaning of income at the time the Sixteenth Amendment was passed. Wisconsin, in particular, was one of the first states to enact a comprehensive income tax regime. And there's some interesting dialogue about the meaning of income between Wisconsin state legislatures. Another thing to be on the lookout for is whether the theory of liquidation gets any play at the Court. It's been understood by the general public since the passage of the Sixteenth Amendment that income requires realization. And it will be interesting to see whether the Court says that that generally understood meaning has been liquidated with time.

 

Another thing to be on the lookout for is stare decisis. There's some Supreme Court cases from the 1920s where it seems pretty clear that the Court held that income requires realization. There's a lot of debate in the briefs about whether that, in fact, is a holding. But it's possible that the Court just leans on these early cases and says that this case is decided by stare decisis.

And then the other two things to keep in mind is just what is the possible effects of the Court's decision in this case assuming that they do reverse the Ninth Circuit?

 

One will be what other tax provisions are on the chopping block because the IRS is going after unrealized gains. I'm not a tax expert, so I can't really speak to precisely what provisions might be at hand, but I know there are some. And then the other big one is just how the Court words its decision. Because if you're following the news at all, there's a lot of discussion in Congress about possible wealth taxes. And it's possible that if the Court uses particular language in the opinion that's rather broad, it could put an end to any potential -- it could kill a potential wealth tax in the cradle. So those are kind of the things I'd be on the lookout for. But I'm happy to answer any questions, and thanks again for hearing me in the presentation.

 

Stephanie Maloney:  Thanks, Justin. I think there are two more cases that the Court is hearing this sitting, so I'll just briefly cover those before I open it up for discussion amongst the panelists and our audience. As a reminder, if you have questions, please submit those using the Q&A feature. I see a couple questions already submitted, so please keep those coming in. So just briefly, two more cases to cover for this sitting tomorrow. In addition to McElrath, which Professor Jenkins covered, the Court is also going to hear argument in an immigration case, Wilkinson v. Garland.

 

Just briefly, under the Immigration and Nationality Act, the Attorney General has discretion to cancel removal of a non-permanent resident if the non-permanent resident meets four eligibility criteria. One of those criteria is that the removal would result in, quote, "Exceptional and extremely unusual hardship to the applicant's immediate family member who is a U. S. citizen or lawful permanent resident." The INA also specifies that federal courts can review questions of law that arise in removal proceedings, but otherwise strips federal courts of jurisdiction to review decisions about whether to cancel deportation. In 2020, the Supreme Court held that the term "questions of law" includes mixed questions of law and fact, such as the application of a legal standard to undisputed facts. So here in Wilkinson, the Justices will weigh in on the interaction between these two provisions and decide whether the agency's determination that a given set of facts does not meet that statutory standard of exceptional and extremely unusual hardship is a mixed question of law, in fact, that is reviewable in federal court. So really a statutory interpretation question about how the INA provisions interact with one another.

 

And then next week, on December 6, the Court will hear argument in Muldrow v. City of St. Louis which asks whether Title VII of the Civil Rights Act, which prohibits employment discrimination whether Title VII bars discrimination in decisions about transfers without a separate determination by a court that the transfer decision caused a significant disadvantage to the employee. So this case involves a St. Louis police sergeant's claim that her involuntary transfer out of the Police Intelligence Unit was the result of gender discrimination. And the Eighth Circuit held that the transfer alone did not constitute an adverse employment action and that Muldrow then had no actionable claim because she offered no proof of harm. So for example, her rank, her pay, her responsibilities had effectively remained the same. So now the Court will consider and clarify the types of employer decisions that constitute adverse employment actions for purposes of Title VII claims.

 

So those are the cases for the upcoming sitting the next two weeks. And I think we have some questions for our panelists. But before I get to those, I wanted to invite the panelists to respond to each other if they have any thoughts or comments on the cases that we've covered and what each of them has said. So invite folks to come off mute and jump in if they'd like to comment or provide a question on what the panelists have covered. Justin, do you want to say anything about the Jarkesy brief that you handled for the chamber?

 

Justin Aimonetti:  Sure. At Decher we wrote an amicus brief on behalf of the Chamber of Commerce in the Jarkesy matter and I think it's going to be interesting to see how the Court goes about resolving the case because, as mentioned, there's three big issues in the matter. If I had my druthers, I would guess that they're going to probably resolve it on the Seventh Amendment grounds and then avoid upsetting the entire administrative state, especially with regards to the SEC ALJs. But with that said, then that begs the question, how do you go about doing that and what parameters do you put on the Seventh Amendment jury trial rights?

 

There's also an interesting question about incorporation. The Seventh Amendment has never been incorporated, so you could get these weird instances where you have state administrative tribunals going after people, or very similar things that the federal government's going after people, but one of them requires a jury trial and the other doesn't. So I just think the ramifications of how the Seventh Amendment holding affects the law at large will be really interesting and just the case law at the Court on the Seventh Amendment, there's a dearth of it. There's not a lot out there. There hasn't been a ton of originalist work on the question. So I look forward to seeing what the Court or at least a couple of the Justices do on the jury trial right question.

 

Stephanie Maloney:  And I think we have been seeing the removal issues bubble up in other contexts. So, Adi, there's a question in the chat about the implications of an adverse decision to the SEC and Jarkesy and its impact on, for example, ALJs for the NLRB. I think there's been these removal questions in the context of other agencies too. So what's your take on if the Court decides to reach the removal protections issue of its implications beyond the SEC?

 

Adi Dynar:  Yeah. Stephanie, I think that's an important question, and I'll give a typical lawyer answer. It depends on how the Court writes the Jarkesy decision. Because if the Court is going to decide the case on the Seventh Amendment jury trial grounds, then essentially the question there is, suits at common law where the value and controversy is more than $20. So in Jarkesy's case, there is a quarter million civil penalties. And from previous Supreme Court cases we have heard, we know that the Supreme Court sees civil penalties or fraud type cases as common law cases and then $20 is the easy bar to cross.

 

With the National Labor Relations Board, most of the remedies, I would imagine, are more along the lines of equitable remedies. I mean, it's cease and desist. It's say, "I'm sorry," to the employees, hold a union election a certain way. So it would be interesting how the Court draws the line on the jury trial question, if it reaches that question, and how that affects these adjudications happening in other agencies like the National Labor Relations Board. On the removal question, if the Court decides that the MSPB protection is a meaningful layer that is protecting the ALJs at the SEC, then I think the Court will have to decide that there are too many layers of protection, removal protection.

 

And the question can get complicated very quickly, I think, on the removal question, because remember Chief Justice Roberts wrote the United States v. Arthrex majority opinion. It was a precarious majority because essentially in Arthrex, the Supreme Court said that ALJs are executive officers in the Executive Branch. So then the question becomes who has supervisory authority and who controls sort of the day-to-day functions of these administrative law judges? Now, the answer, according to Arthrex, is they are within the Executive Branch's chain of command. But in the Jarkesy case, the commission has conceded that the ALJs only ever perform judicial like functions. So again, Chief Justice Roberts would probably want to go back to his dissent in City of Arlington v. Federal Communications Commission where he dissented and three members of the Court joined him. So four members of the Court were sort of grappling with this idea of how come we have the Executive Branch and officers within that Executive Branch being Executive Branch officers? And what happens when they are not performing executive functions, they are performing judicial like functions?

 

So it would, I think, come down to whether Chief Justice Roberts is able to bring a majority with him on his views from City of Arlington, or will a majority of the Court go with sort of an Arthrex type analysis where the function that the officer performs doesn't really matter for the removal analysis? So again an answer to that would answer this question of what happens with NLRB administrative law judges because NLRB, if anything, hardly ever does any rulemaking, it only ever adjudicates cases. So it will be interesting to see the outcome in NLRB cases depending on that.

 

Stephanie Maloney:  Adi, I'm going to stick with you because we have another question for you on the distinction between private rights and public rights and why fraud cases are one or the other. So can you just speak to that a little bit more -- review that distinction on that issue?

 

Adi Dynar:  Sure. So I think the Supreme Court has grappled with the private rights versus public rights distinction in many cases. One of the most sort of earliest pronouncements on this point essentially drew a distinction between what we view as sort of like rights, private rights, meaning the Due Process Clause for example, protects the right to life, liberty, and property. So if the government is trying to deprive somebody of life, liberty, or property, then they have to do so by following the due process of law. So if that's the way that the Supreme Court views private rights, then the Supreme Court will have to look at the remedies that the SEC essentially awarded itself through its in-house tribunals, money, quarter of a million dollars in civil penalties, money, bank accounts, quintessential property. So if you're depriving Jarkesy of property, that's your answer that it's a private right with that conception.

 

But the Supreme Court has also sort of complicated the issue for itself because in the PTAB cases, for example, the Patent Trial and Appeals Board cases, I believe Justice Thomas wrote the majority or carried the majority of the Court in saying that "Well, patent rights are kind of special property, right?" So they aren't sort of like just government coming and depriving somebody of a private property. It's a private versus private dispute that go -- the patent cancellation disputes that go to PTAB. So there may be ways for the Court to draw or clarify the distinction between public and private rights. And this is the case where they have that opportunity. The other wrinkle there is what we consider sort of public rights cases can -- I mean one conception is sort of the entitlement cases.

 

So these aren't technically rights. These are things like Social Security benefits where somebody is asking the government for funds. Veterans benefit, same thing. Immigration, same thing. An applicant is asking for an immigration status, for example. So there might be ways to draw a line or clarify the public versus private rights distinction. But I think the narrowest holding there -- look fraud, the government is asking for money, quarter million dollars in civil penalties plus $700,000 in disgorgement. So it rings true that it's a private right without actually clarifying what the line between private and public rights is. So again, we'll see. And that would answer some of the questions as to the continued validity of agency remedies through agency adjudication in the future.

 

Stephanie Maloney:  Great. Professor Simon, you've gotten attendees very interested in bankruptcy too. A couple of questions for you. The first is on how a non-Article III court can affect the rights of non-debtor third parties without jurisdiction over a person, jurisdiction over the parties, or subject matter jurisdiction over the cause of action. So can you speak to that question?

 

Prof. Lindsey Simon:  Absolutely. So I alluded to broader discussions about bankruptcy court power. I think this is really focusing on the details of that. The Supreme Court at various points has opined on the authority, constitutional authority, given to bankruptcy courts. So for those of you that aren't familiar, bankruptcy courts are not Article III courts, they are Article I courts. However, every case they hear, they hear by reference from a district court. So yes, there are through cases like Stern v. Marshall, we know that there's a divide in what's sort of the core of bankruptcy claims which they can finally decide, and non-core which they cannot. It's an oversimplification but happy to discuss more if there will be more time.

 

In short, there is this open question and again, at various points the opinions touched on this idea that, wait a minute, if we're having all this discussion about what's in the Bankruptcy Code, boy, shouldn't we be looking at the bigger question of whether the Constitution even permits this court to decide this? The Second Circuit resolved this pretty sweepingly by saying, look, this is the sort of issue that has to be resolved. The Bankruptcy Court can issue findings affecting conclusions of law confirming a bankruptcy plan, but ultimately the district court has to be the one to finally decide it and that was the basis of their ruling. And again, so much of the jurisdictional stuff is really fascinating but can be resolved relatively swiftly by saying yes, but whatever the bankruptcy court did, treat it as findings of facts and conclusions of law that the district court has to review. So that Article III review would still be there.

 

I want to point out that the Justices -- and again, someone told me this. So don't quote me as being an expert on it, but someone told me that this is a very rare instance where the Justices actually drafted the question presented here. You see, in this case the parties actually requested a stay. They didn't really seek cert, it was in the alternative cert. But ultimately when the Justices decided to grant cert in response to granting that motion, they drafted the question presented and they were very careful -- I don't think they do anything without care -- to only address the authority issue under the bankruptcy code, not the constitutional issue. Now some of the parties briefing kind of touches into it, but it's really focused on the statute and what the statute allows. So I would be surprised if the Justices weighed into that area in part because there's been a lot on it and in part because what the code says is quite enough for one case. But those are just my instincts, the last part about what they will say.

 

Stephanie Maloney:  And then just a clarification question on the Sackler's personal liability. So why weren't the Sacklers shielded from personal liability by the corporate structure here?

 

Prof. Lindsey Simon:  So first of all, I will say I'm not an expert in various laws about consumer protection and fraud and all of that. But in short, a number of the claims are direct claims by the states and individuals against the Sacklers for their individual efforts in taking money, in misappropriation, consumer practices, defraud or fraud, excuse me, defrauding consumers. So all of those I believe, are not only -- they're not just derivative of claims against the estate, those are direct claims. So those causes of action have individual causes of action that they could face exposure for. I don't think they exclusively rely on, for instance, veil piercing theories. I think really it does have separate causes of action as to the individuals.

 

I looked at the question. I think it said "Well, are they just paying all this money for the PR rehabilitation?" And I would say I don't think so. I think that even if ultimately, they could win on the fact that some of these claims are strictly for the corporation and they're shielded by their role in the corporation, they're facing an onslaught of litigation around the country. So even if they ultimately prevail, settlement provides them peace in a way that they might not ever get if they continue to litigate these one by one. So I'm not sure they're winning the PR war anyway, but at least this way they can stop the litigation cost and deal more with whatever else is next.

 

Stephanie Maloney:  It's a lot of money for a PR strategy. So I tend to agree with you on that.

 

Prof. Lindsey Simon:  I've stopped opining on what a lot of money is to a lot of people. So it seems like this may not be enough if you talk to lots of people about this case.

 

Stephanie Maloney:  So then, speaking of not wanting to quote you, I'm going to ask you the question that no one likes to be asked, but do you have a prediction in terms of what the Court is going to do here?

 

Prof. Lindsey Simon:  So based on just the facts of the underlying case and really this idea of reigning in authority, kind of a theme of overstep by various adjudicatory bodies, my gut would be that they would overturn it and would say that they're not permitted. However, reading the briefing, I'll say that I find the debtors briefs very persuasive in how they framed the argument, the history behind it, the legal argument of where this source and authority comes from and how bankruptcy was for so long. So I think oral argument will tell us a lot. I would make my bet much more firm at that time.

 

Stephanie Maloney:  Okay. We'll follow up with you on that one. Question for Professor Jenkins. So you mentioned the sort of frequent appearance of the Armed Career Criminal Act at the Supreme Court. Is this the case that's going to solve that litigation forever, or are we going to sort of continue to see issues bubble up?

 

Prof. Jennifer Jenkins:  Oh, no, I don't think that it's possible that this case or really any one case, could resolve all of the issues with the Armed Career Criminal Act because there are so many. Actually, I think the problem, as a lot of other scholars have commented as well, I believe that the problem is with the act itself, and it's very difficult to interpret and in practice, it seems to not fulfill and achieve the goals that Congress had in mind and goals of uniformity. But we see in this case how the time when the person commits the prior offenses -- based on the time in which the person commits the prior offenses could change whether the person is subject to the 15-year mandatory minimum or not, a difference of just a day or two, a drug being taken off the schedule or not or added to the schedule. And at what time period do we look at the schedule?

 

And so people who have committed the same offenses, one might be subject to the Armed Career Criminal Act and another not. So I think that really the way to resolve these issues is to make a modification of the act itself, and in particular in this case, dealing with the drug offenses. It's my personal view that drug offenses should be eliminated from the Armed Career Criminal Act. And that's based on a study that I did with the Sentencing Commission comparing recidivism rates of people who had committed drug offenses who were sentenced under the ACCA compared to the recidivism rates for federal offenders as a whole. And the drug offenders actually had recidivism rates that were less than federal offenders at a whole. So it doesn't seem to me to make sense to punish these people more severely with a harsh mandatory minimum when they reoffend less than federal offenders in general.

 

And that's even considering that these drug offenders were -- generally their average age was lower than federal offenders as a whole, and in general, recidivism is greater for younger offenders. So it even went against that trend. And so that's why I think the answer is modifying the ACCA and that these concerns, particularly dealing with the categorical approach and all these different aspects and wording of ACCA are probably never going to go away unless Congress chooses to amend the ACCA. Thank you.

 

Stephanie Maloney:  Well, if it's a legislative solution that's going to fix the problem, I think we'll probably see the Court continue to have these issues bubble up. So I think those are the questions that we have from the attendees. Thank you so much to our panelists and to everyone who's joined us this afternoon. It's been a great conversation and I've enjoyed participating. I'll turn it back to Nate.

 

Nate Kaczmarek:  Was that a last-minute dig at the legislature? Very good. Our thanks to Stephanie, Jennifer, Adi, Lindsey, and Justin for just an excellent preview. Very well done. We look forward to these cases and to having you all join us again soon. We welcome audience feedback by email at info@fedsoc.org. Have a great day. We are adjourned.