Nate Kaczmarek: Welcome to Teleforum, a podcast of The Federalist Society’s Practice Groups. I’m Nate Kaczmarek, Vice President and Director of Practice Groups at The Federalist Society. For exclusive access to live recordings of Practice Group Teleforum Programs, become a Federalist Society member today at FedSoc.org.
Good afternoon. Welcome to “A Seat at the Sitting.” Today we will preview the October Supreme Court docket in 90 minutes or less. I’m Nate Kaczmarek, Vice President and Director of Practice Groups. As always, please note that all opinions expressed today belong to our guests and not The Federalist Society. We are delighted to have Amanda Salz moderate today’s discussion. Amanda, how are you?
Amanda Salz: Doing well, Nate. How are you?
Nate Kaczmarek: Very well. I can’t believe that the fall is here and we’re ready for another Supreme Court sitting. But very delighted to have you with us, and also excited to hear from the great panel of legal experts we’ve gathered to go over the cases. But let me introduce our moderator quickly. Amanda Salz is an Associate with Morgan Lewis. She previously clerked for Judge Andrew Oldham on the Fifth Circuit, and Judge Reed O’Conner on the U.S. District Court for the Northern District of Texas. Her law degree is from the University of Texas School of Law and her undergrad was at Pepperdine University. Full bios for Amanda and our entire panel are available on our website FedSoc.org.
In a moment, I will hand it over to Amanda. Once the group has reviewed the upcoming cases, we’ll go to audience Q&A. So please think of the difficult questions you’d like answered by our panel. Questions can be submitted via the Zoom Q&A function. We will endeavor to answer as many of the questions submitted as we can. With that, welcome to you all. Amanda, the floor is yours.
Amanda Salz: Thanks, Nate. It’s a pleasure to be here moderating our discussion today, and I’m looking forward to getting into the first six cases to be heard during Supreme Court OT 2023 term. But first, I’d like to introduce each of our distinguished panelists, starting with Vikrant Reddy. Vikrant is a Senior Research Fellow at the Charles Koch Institute where he focuses on state and federal corrections policy and on counterproductive regulation via overcriminalization.
Before joining the Koch Institute, Vikrant served as a Senior Policy Analyst at the Texas Public Policy Foundation where he managed the launch of TPPF’s national Right on Crime Initiative in 2010. He also worked as a research assistant at the Cato Institute, as a law clerk to the Honorable Gina M. Benavides, and as an attorney in private practice. Vikrant is an appointee to the U.S. Mission on Civil Rights Texas State Advisory Committee and is a member of The Federalist Society’s Executive Committee on Criminal Law. Vikrant graduated from the Southern Methodist University School of Law and the University of Texas at Austin. Hook 'em.
Next, we have Brian Johnson. Last year, Brian joined Patomak Global Partners, where he serves as the consulting firm’s Managing Director at the Banking Supervision and Regulation Group. Prior to joining Patomak, Brian was a partner in Alston and Bird’s financial services and products group and its consumer financial services team. Before transitioning to the private sector, Brian had various positions in federal government. Most recently he served as Deputy Director of the Consumer Financial Protection Bureau.
While serving as the CFPB’s Deputy Director, Brian was responsible for policy development, strategic planning, and executive execution of the CFPB’s statutory, supervision, examination, enforcement, rulemaking, and research activities. He also conceived and led the creation of many of the CFPB’s high-profile agency initiatives. Brian received both his JD and his bachelor's in economics from the University of Virginia.
And, finally, we have Karen Harned. Karen is president of Harned Strategies LLC. Before starting her own practice, Karen served as the executive director of the National Federation of Independent Business Small Business Legal Center. While with the NFIB, Karen commented regularly on small business cases before federal and state courts, including the U.S. Supreme Court. She’s appeared on news networks across the country, and she’s written numerous editorials and articles regarding healthcare, lawsuit abuse, regulation and other issues that are important to the small business community.
Prior to joining the Legal Center, Karen was an attorney in private practice, where she specialized in food and drug law and represented several small and large businesses and their respective trade associations before Congress and federal agencies. Karen is a graduate of the George Washington University Law School and the University of Oklahoma. So, we’ve obviously got a great lineup for today’s discussion. So let’s jump right in. Vikrant, would you please start us off with an overview of the very first case of the term, Pulsifer v. United States?
Vikrant P. Reddy: I will. And I will start the overview with kind of a weird hypothetical. Let us assume that I’m setting up a dating profile. And, in case my wife is listening, I want to be clear that I’m not setting up a dating profile. It’s just the best hypothetical I could come up with here. Now, let’s assume that I set up some restrictions on the dating profile. I say, "You cannot date me if you’ve ever committed murder. You can’t date me if you’ve ever committed robbery. And you can’t date me if you’ve ever committed fraud."
Let’s suppose somebody comes along and says, “I’m in your eligible dating pool, because I have committed murder, and I have committed robbery, but I’ve never committed fraud. So, I’m a prospect." I might say, and a lot of people listening to that argument might say, "That’s crazy. I know that I said, 'Murder, robbery, and fraud,' but, in context, 'and' means 'or.' Murderers, robbers, or fraudsters are simply not eligible." Now, the prospect might say, “Look, the word 'and' means 'and.' I’m a textualist. You said that somebody had to have done all three of these things, not just one of those things. I am a reasonable prospect."
That question, whether or not “and” means “and” or “and” means “or,” is really what’s at the center of the Pulsifer case. What happened in Pulsifer is that a guy named Pulsifer in Iowa sold meth. And he was convicted. And under a federal mandatory minimum statute, he was subject to 15 years in prison. Now, there is a safety valve. This is Section 3553 (f)(1). Under the safety valve, a federal judge can look at your circumstances and consider some mitigating factors and say, “This person’s not necessarily subject to the mandatory minimum. I can give them a different kind of relief in their sentencing.”
But you’re ineligible for the safety valve if you’ve done — well, this is the question, right? —A, B, and C. We won’t get into what A, B, and C are. They’re a little technical. They get into elements of points under the federal sentencing guidelines under different kinds of offenses. Let’s think about this algebraically. If you’ve done A, B, and C, you are ineligible. And everybody agrees that, in his background, he’s got A and B. And everybody agrees, both him and the government, that in his criminal background, he does not have C. So, Mr. Pulsifer’s position is, “Look, I don't have all three of those things. For that reason, I’m not ineligible for the safety valve. You should consider mitigating circumstances in my case."
And, for what it’s worth, his position, which could basically be said as "and" means "and", is a position that the Eighth Circuit agrees with. It's a position that the Fourth Circuit agrees with, that the Ninth Circuit agrees with, and that the 11th [inaudible 00:08:07] is let's just use a little bit of common sense when we're reading this statute here. In context, "and" actually means "or." And the government's position is one that the Fifth Circuit agrees with, the Sixth Circuit agrees with, and the Seventh Circuit agrees with. So, this is a legitimate circuit split.
It is the kind of case that affects about 10,000 federal defendants and inmates, by the way. And it's precisely the kind of case that the Court is supposed to take in order to resolve the circuit split. It's also the kind of case that the Court just loves to take. This is one of these things where the Court really gets to parse language in an ultra-detailed way. I think Justice Barrett was basically put on the earth to write opinions like this. It's incredibly fun for lawyers. Perhaps people who are not lawyers find this kind of tedious, and exactly the reason to dislike lawyers.
But I love the case. And I think it's really interesting to speculate on how it will ultimately resolve itself. I think Mr. Pulsifer is going to win. What I can't quite figure out is how he's going to win. I think about it this way. First of all, I'm pretty sure that he's got Justice Sotomayor and Justice Jackson on his side, and probably Justice Kagan, although she can be a little unpredictable in some of these language matters. The reason that I think he's probably got Jackson and Sotomayor on his side is that they are much more comfortable thinking about legislative history and legislative intent whenever they're interpreting statutes. And here, the intent is pretty clear.
The language that we're talking about comes out of the First Step Act, which was passed by Congress in 2018 and signed into law by the president. That was Donald Trump, at the time. And those of you who were following this at the time will remember all of these debates about criminal justice reform. And the intent of what was obviously trying to be achieved through the First Step Act was finding some way to alleviate the very harsh sentencing that comes down on some federal offenders, in particular, non-violent drug offenders, precisely the kind of person that Mr. Pulsifer is.
Just looking at legislative intent in history, you can make a really strong, really an airtight case that Mr. Pulsifer's "and" means "and" argument is the way you're supposed to read the statute. Having said that, this is a Federalist Society webinar. I think the people who are on this panel and who are listening to this webinar understand the difficulties and the limitations of using legislative history and legislative intent when interpreting statutes. And I suspect the other six justices, the more conservative justices, are going to have those concerns too. And they probably won't analyze the statute that way. What are they going to do?
Some of them, I think, will say, agreeing with Mr. Pulsifer, "and" does mean "and." The word is the word. Let's just be textualists here and not overthink it. That's the kind of argument that I could maybe imagine Justice Thomas making. He's probably the strictest textualist among the nine justices on the Court. On the other hand, I could imagine somebody on the Court arguing that, "Yeah, this is legitimately ambiguous. It is a little bit difficult. 'And' does mean 'and.' On the other hand, there's a perfectly plausible argument here that 'and' could be read as 'or.' There are all sorts of instances in which you read a list like this and 'and' is understood to mean 'or.'" And so, it can go either way.
In a situation like that, you resolve the difficulty by relying on what's called the rule of lenity. The rule of lenity, most people will know, is this canon of construction that says that when a criminal statute is ambiguous and it could either go in favor of the defendant or in favor of the government, you need to find in favor of the defendant because that is the way to incentivize the government to write clear statutes and to make sure that we have clear notice of what the criminal statutes are. That is the kind of argument that I could imagine, say, Justice Gorsuch making.
And, in fact, in an opinion last year called Wooten or Wooden -- I forget whether that was a T or a D in that word, but, in any event, Justice Gorsuch did, in fact, write a concurrence in which he said, "This Court needs to be using the rule of lenity more often, not less often." I think there are a lot of different ways you could get to Mr. Pulsifer winning the case. There will probably be one or two justices who see it the other way. Again, I find it a little bit difficult to predict who exactly is going to say what. But I do think that he's probably on his way to winning this thing. I just don't know how, exactly.
It's a case that's being followed very closely by people in the world of criminal law and criminal justice. There are a lot of criminal defense lawyers out there who have got clients who are affected by the First Step Act. And, like I said, there are some estimates there could be anywhere up to 10,000 people for whom this question of whether "and" means "and" in the safety valve, or "and" means "or" in the safety valve really, really matters. It's going to be an interesting and lively oral argument. I can already imagine that the justices and their clerks are working on funny hypotheticals, like the dating one. And they're going to throw them into the opinions. They're going to throw them into the oral arguments. And it seems like a small, trivial, technical case, but I suspect it will be one of the most fun and interesting ones of the term.
Amanda Salz: Yeah, of course. Thank you, Vikrant, for starting us off. It was a great overview, and really interesting insight into what the justices may do, how they may look at this interpretive issue. Let's turn now to the second case, CFPB v. Community Financial Services Association of America. Brian, would you please give us an overview of this case?
Brian Johnson: Happy to do it. Thanks, Amanda. And thanks to everybody for tuning in. So, to understand this case, I think you have to go back to, really, the financial crisis. And after the financial crisis in 2010, Congress got together and passed what's called the Dodd-Frank Act and created a new agency called the CFPB, Consumer Financial Protection Bureau, and gave it authority to write rules to enforce 18 statutes against bank and non-bank financial institutions. And so, the Bureau stood itself up in 2011 and started issuing a series of rules.
Come summer of 2016, the CFPB issued a proposed rule that dealt with payday loans and, in particular, it sought to create a new rule which would create mandatory underwriting requirements for the issuance of those loans, and also some payments requirements governing how frequently lenders could try and collect on the payday loans that were issued. So, that was an election year. And, surprising to some, or maybe many, or most, Donald Trump won the election. And so, the agency went through, for the first time in its history, a political transition of power.
And when Mick Mulvany was named the acting director of the CFPB, he announced that the agency would undertake a review of the rule, which subsequently turned into a proposal, and then a final rule in 2020 that repealed the underwriting portion of the rule but left the payments provisions in place. At the same time, a couple of trade associations had filed suit in Texas District Court to challenge the original payday rule. And then, a couple of consumer groups filed suit to challenge the repeal of the portion of the 2017 payday rule. The consumer group challenge failed for the lack of standing.
But the trade association's — namely CFSA, for purposes of this discussion — suit went through. And the district court judge put the case on hold, pending the outcome of the CFPB's rulemaking effort to revise and then to rescind that portion of the rule. But in 2020, the case went live again. And the parties filed cross motions for summary judgment. The district court judge found for the CFPB and against the plaintiff trade association in the case but put his decision on hold and stayed the enforcement of the rule pending the outcome of CFSA's appeal to the Fifth Circuit.
The Fifth Circuit took the case, and CFSA argued, really, four things: that the rule violated the APA because it was arbitrary and capricious; the rule was promulgated by the director when he was unconstitutionally insulated from presidential removal, which, recall was the substantive portion of the Seila Law decision that came out from the Supreme Court in 2020; also argued that the Bureau's rulemaking authority violated the non-delegation doctrine; and, importantly for the oral argument occurring next week, that the Bureaus' funding mechanism violated the Appropriations Clause of the Constitution.
Now, the Fifth Circuit judges, Willett, Engelhardt and Wilson, issued their panel decision on October 19 of last year, and basically found for the CFPB on the merits in all respects regarding the sufficiency of the rulemaking itself but found for CFSA on this issue of the constitutionality of the CFPB's funding structure. And the argument is the Bureau has to use funds to promulgate a rule, and the funds in question were derived from an unconstitutional source. And so, the panel reversed the judgment of the district court, in part, rendered judgment in favor of CFSA and vacated what was then the remainder of the Bureau's original 2017 payday lending rule.
CFPB, not surprisingly, along with the solicitor general's office, filed a petition for cert in November of last year, and sought, in addition to cert, expedited briefing of the case in the prior term. The court, in February of this year, ultimately granted cert but declined expedited briefing, which is why the case falls into this term, as opposed to last term. So, the question presented for the Court is whether or not the Fifth Circuit erred in holding that the statute that provides funding for the CFPB violates the appropriations clause, and whether the Fifth Circuit erred in vacating the 2017 payday rule.
So, just to level-set for the argumentation, the Appropriations Clause is Article I, Section 9, Clause 7 of the Constitution. It provides that "no money shall be drawn from the Treasury but in consequence of appropriations made by law." So, the CFPB's funding structure is set out in Section 1017 of the Dodd-Frank Act. And it basically says the CFPB isn't subject to what is commonly known as regular appropriations, a biannual appropriations process. Nor is it funded through assessments from industry, which some other independent agencies are funded through that mechanism. Instead, it draws quarterly from the combined earnings of the Federal Reserve System.
And, by law set out in Section 2017, the funds that the Bureau receives are not to be construed to be "government funds" or "appropriated monies," and are not, therefore, subject to apportionment. So, the CFPB makes a general argument in its merits brief on the basis of the text of the Appropriations Clause. And it says that the Appropriations Clause requires nothing more than that Congress enact a statute that authorizes the use of a specified amount of funds from a specified source for specified purposes. And it argues that Section 1017 of the Dodd-Frank Act meets that low bar to constitute an appropriation and, therefore, the CFPB's funding structure and the funds derived from the Fed on a quarterly basis do not violate the appropriations clause. Therefore, the payday lending rule was appropriately promulgated.
CFSA, for its part, also makes a textual argument. And it says that it has to be a sum appropriated by law. And it says that 1017 doesn't specify a sum appropriated by law. The sum, which is the minimum requirement for an appropriation, is determined on an annual basis by the director, based off of the director's discretion, not by Congress. And so, because Congress is not specifying the sum, the CFPB's funding is not an appropriation and, therefore, the funding structure falls.
There's also argumentation about what is the appropriate remedy in this case. So, there are two potential outcomes. Either the Court affirms the Fifth Circuit or reverses the Fifth Circuit. If it reverses the Fifth Circuit, CFPB survives, lives another day, goes about its business, and everything returns to normal. But if the Court affirms the Fifth Circuit panel opinion, there's a question of what's the appropriate remedy. And the parties disagree, not surprisingly, on the issue of severability, whether or not the Court erred in not undertaking a severability analysis, with respect to section 1017, whether vacatur of the rule was the appropriate remedy.
And CFPB also pretty prominently says that if the Court upholds the Fifth Circuit opinion that there's going to be major economic disruption with respect to the fact that all of its existing rules now may be up for challenge, that its enforcement action may be difficult to undertake because the defendants would have an affirmative defense with respect to the use of funds to engage in enforcement activity.
The Bureau also argues that its funding is similar to the funding that Congress has created, the funding structure for similar agencies like the OCC or the Fed, or the FDIC, which receive either insurance funding to fund the insurance funds or assessments of industry for purposes of supervision. CFSA also argues that there are ways to distinguish the CFPB structure from those other agencies. So, potentially broad implications from the decision, depending on which way the Court ultimately goes.
At issue, I think, really, in sum, is, what is the meaning of the Appropriations Clause? Is it, fundamentally, a restriction on the executive branch? Or does it also imply a restriction on Congress? And can Congress willingly give away its power of the purse? Or can it not? And so, that's the fundamental question here. And then, a lot of back and forth, particularly among the amicus briefs, about remedies and the potential disruption that might result for other agencies in similar challenges that might be brought after the Court's decision. But lots to discuss. I'll hang it up there, Amanda, and turn it back to you. Thanks.
Amanda Salz: Great. Thanks Brian. Definitely a lot to discuss there, like you said. It sounds like it could have ramifications well beyond the CFPB. But, obviously, some big impacts on the agency. So, [inaudible 00:24:18] case on next week's calendar is Acheson Hotels LLC v. Laufer. Karen, would you please tell us about this case, as well as a bit about a case the Court will hear the following week: Great Lakes Insurance SE v. Raiders Retreat Realty Co.
Karen Harned: Thanks, Amanda. And thanks, everyone, for joining us. So, Acheson Hotels v. Laufer is actually a case that some of us have thought is long overdue for the Court to hear. As a way of background, the Americans with Disabilities Act is a 30-year-old statute. And Title III of that provides that no individual shall be discriminated against on the basis of disability in the full equal enjoyment of the goods, services, facilities, privileges, advantages, or accommodations of any place of public accommodation. So that's why when you go to your local drycleaner or wherever, you're going to find certain wheelchair ramps, parking spaces, things like that.
But, over the last decade or more since we now have the internet and everything is online, the question has become what do websites need to do to be accessible? And both when you're talking about buildings and, in this case, when we're talking about websites, there's a provision in the ADA that allows for private right of action so that not just the government can enforce against businesses that don't provide equal access, but citizens, themselves, can bring these cases and receive monetary rewards if found to be true, if they find an actual violation.
And what we've seen over the last 20 years, at least, is in the physical space we have a lot of what are called drive-by plaintiffs that will go into a restaurant or a business that, if their guardrail is a quarter inch off, they'll file a lawsuit. And so, in this instance, we have a plaintiff that's called a tester plaintiff. So that's really what the last person that I just talked about, the drive-bys, are. They're out there, as advocates, to ensure that disability laws are enforced. And Miss Laufer is one of those tester plaintiffs.
She is very open about this. It's very much a matter of public record. And she is disabled. She's got mobility issues, requires a wheelchair, and has vision issues, as well. But she has made it a point in her life to ensure that businesses comply with Title III. And she's spent a lot of time making sure that website accessibility is available, particularly when it comes to hotels and lodging. And that gets into the next part of the law, which is a regulation that says that discrimination under the ADA Title III includes failure to make reasonable modifications in policies, practices, or procedures, when those modifications are needed to make those accommodations accessible to individuals with disabilities. That's also part of the statute.
The regulation is what's been known to be called the reservation rule. And that regulation requires these public accommodations like hotels and lodging places to identify and describe on their website what their accessibility features are that they offer at that place, and allow you to reserve a handicapped-accessible or disabled-accessible room. And so, in this instance, Miss Laufer lives in Florida, and she was surfing the web and came upon the Coastal Inn and Cottages, which is located in Maine.
And she observed that they did not have that required information on their website, that they did not give any information regarding accessibility. And they also didn't allow for reserving handicap-accessible rooms online. And she filed a lawsuit. What's interesting is, as a self-proclaimed tester, she admits, it's very much part of the record, she never had any intention of going to this inn. She filed this suit knowing that she was never going to go, and she never intended to go. And so, that's where we come to the question in the case, which is, do tester plaintiffs like Miss Laufer have standing to sue under Article III because, it's asserted, does she sustain an injury?
And that really is the question. Did she sustain an injury because she went to the website and saw that it did not have what was required under the ADA? And so, Acheson says, "No, she doesn't have standing. She wasn't injured. There was no real-world harm that was personal to her. It wasn't particularized or concrete. Acheson cites TransUnion, just a couple of terms ago, and says an informational injury can only justify Article III standing when the plaintiff demonstrates that she experienced adverse effects from not receiving the legally required information.
And she can't show that here, because she never intended to stay at the hotel in the first place. Acheson also argues that Laufer is not really trying to redress an injury personal to her, but rather is seeking to enforce the ADA more broadly, and, again, cites TransUnion for the proposition that under our constitutional structure, it's not the job of plaintiffs and their attorneys to make enforcement decisions relating to general laws on the books, but that's the job of the executive branch, which, unlike private citizens, is accountable to the people.
Laufer counters that, under Title III of the ADA, any person who is disabled and experiences an accessibility barrier has suffered discrimination under the law. And once she visited the website and experienced the lack of accessibility information, she was harmed. She was stigmatized because she felt like she was less than, because she did not have the access that she was legally entitled to. There is a case that's from 1982 that she uses to support her standing argument. It's called Havens Realty v. Coleman. And, in that case, there was another tester plaintiff.
This dealt with the Fair Housing Act. And there were two people: the black plaintiff who ultimately brought the suit, and also a white individual. They both go into this realty company and ask to rent an apartment. And it's important to note that Pullman, the black plaintiff, had no intention of renting an apartment, just as Laufer had no intention of visiting this inn. But the white plaintiff was given an apartment and Pullman was lied to and told -- and I think Pullman went in prior to the white plaintiff. She was lied to and told. "There's no room. We do not have anything."
And so, that, on its face, is considered discrimination under the Fair Housing Act, and, therefore, she had standing to sue. So that's really the case that Laufer puts all of her eggs into her basket. And Acheson thinks it's distinguishable because she, again, didn't really suffer a true injury here, since she, going on the website, knew she was never going to visit in the first place. And, really, there was no action on the part of the hotel that was discriminatory towards her. Whereas, in Havens, they did lie to that plaintiff and say that they didn't have room. But in this case, there was no such affirmative action. It was just a broad informational injury that any disabled person could claim. Under her theory it would open up so any disabled person could claim that, regardless of whether or not they had a desire to go there.
So that's really the case. One thing that I would note is there's a big question regarding mootness. Because at some point or another, both Acheson and Laufer have said, "Hey, this case is moot," because Acheson has since corrected the issues on its website. And Laufer actually filed for a dismissal of this lawsuit at the district court level. And so that was brought to the attention, through motions this summer, to the Supreme Court. And in an unsigned order, they said, "You know what, we're going to hear this case. We can take up these questions of mootness when we hear oral arguments next week."
So, there is a question as to whether or not they will even get to these Article III standing issues regarding whether or not these tester plaintiffs that arguably did not suffer real injury can have standing to sue. So, as I mentioned the drive-by lawsuits to set it up, a lot of amici came down on the business side, because we have seen, especially since the internet, an explosion of these kinds of lawsuits against banks, against hotels, against restaurants, for delivery, all of these things on website accessibility. Interestingly, there's not even a regulation on the books that deals with what it means to be ADA-complaint on your website.
There are some standards that have been privately proposed out there. But there is no regulation saying what that looks like, what an ADA-compliant website looks like. And so, there's been a lot of interest in the business community, especially those that represent small businesses, to get this issue resolved, because there have been a number of sanctions over the years, in California in particular, of vexatious litigants. In fact, Miss Laufer's attorney is even affiliated with a firm, I believe, that had been disciplined for bringing too many of these lawsuits. So that is the Acheson case. And then I will move over to Great Lakes Insurance v. Raiders Realty.
And that's an admiralty law case. It concerns a dispute that happened between Raiders Realty and Great Lakes Insurance. Raiders Realty had a yacht. It ran into ground in 2019 and it sustained $300,000 worth of damage. Great Lakes Insurance said, "You know what? We're not going to pay this because your yacht didn't have a fire extinguisher that had been inspected on time." And that was their claim for why they shouldn't pay, even though the damage wasn't even the result of a fire. It was because it ran aground. And so Great Lakes sued Raider, seeking the declaration that the insurance policy was invalid. Then Raider Realty, the ones that owned the yacht, filed five counterclaims.
And the question is regarding choice of law provisions. And under the insurance contract, the parties had agreed that New York should apply to any dispute arising between Great Lakes and Raider. And so, based on that, the district court dismissed Raider's, the yacht owner's, claims. But then it went up to the Third Circuit and they reversed and said that under federal admiralty law, a forum selection provision is unenforceable if enforcing it would contravene a strong public policy of the forum in which the suit was brought. And in this case, it was brought in Pennsylvania. The district court had not reviewed whether or not Pennsylvania law, rather than New York law, should apply. And so, therefore, they remanded it back.
So, the petitioner, which is the insurance company, says "Federal admiralty law governs the enforceability of choice of law clauses and maritime contracts, and that is well-established under maritime principles. The choice of law clause is presumptively enforceable." Raiders relies on a case, Wilburn Boat, that says that if there is a strong state public policy interest that can overturn these choice of law provisions. And so, that's really what's at stake here. And that case will be argued next week.
Amanda Salz: Great. Thanks so much Karen for covering both Acheson and Great Lakes. I know Acheson is a bit more in your wheelhouse and expertise. So, hopefully, we'll be able to get into that in the Q&A. And I just appreciate all of you framing this discussion. I'll just briefly mention the other two cases that the Supreme Court will hear mid-October. And then I'd love to get into any response that you three may have to each other, to anything I have to say, or just to the Supreme Court's term, in general, and thoughts you may have. Just a reminder for anyone who has questions: you can submit those in the Q&A feature rather than in the chat.
On Tuesday, October 10, the Court will hear argument in Murray, v. UBS Securities LLC. Murray involves the Sarbanes Oxley Act of 2022, which prohibits employers from discriminating against employees who engage in protected whistleblower activity. Under the act's burden-shifting framework, an employee alleging discrimination must show that the protected activity was a contributing factor in an employer's adverse employment action against him. If the employee can make that showing, the burden then shifts to the employer to show that it would have taken the same action in the absence of the protected activity.
The question presented in Murray is whether, under the Sarbanes-Oxley burden-shifting framework, a whistleblower employee must prove that his employer acted with a retaliatory intent as part of his case in chief, or whether the lack of retaliatory intent is instead part of an affirmative defense on which the employer bears the burden. Petitioner Trevor Murray worked as a research strategist for respondent UBS Strategies. And, although the Securities and Exchange Commission requires research strategists to certify that their reports are both independently created and that they reflect the researchers own views, Murray alleges that two of his colleagues pressured him to skew his reports in order to support the company's business strategies.
Murray complained to his supervisors and was subsequently fired. Murray sued UBS in the U.S. District Court for the Southern District of New York, alleging that he was fired for that protected whistleblower activity. And, at a jury trial, the district court did not require Murray to prove that UBS acted with retaliatory intent. And the jury found in Murray's favor. The Second Circuit then vacated and remanded, holding that employees bear the burden of retaliatory intent under the Sarbanes-Oxley Act. So Murray now asks the Supreme Court to reverse the Second Circuit and to hold that retaliatory intent is actually part of an affirmative defense to discrimination under the act, and that the employer therefore bears the burden of proving that it did not have retaliatory intent.
Finally, on Wednesday, October 11, the Court will hear argument in Alexander v. South Carolina State Conference of the NAACP. Alexander involves the constitutionality of South Carolina's most recent redistricting plan. Under the Fourteenth Amendment, a state may not racially gerrymander, or intentionally dilute votes based on race when redistricting. A plaintiff can prove a racial gerrymandering claim by establishing that race was the predominant factor in moving a substantial number of voters either inside or outside the district, even if the goal of the racial sorting is to achieve a partisan end. And a plaintiff may prove an intentional vote dilution claim by showing both a racially diluted intent and a racially diluted effect.
The principal question presented in Alexander is whether the district court erred in finding that race was the predominant factor in the state's drawing of South Carolina Congressional District 1. But there's also a significant question regarding whether the South Carolina plan racially dilutes votes. When South Carolina made substantial changes to the population of District 1 yet retained the same racial percentages as the prior plan, the South Carolina State Conference of the NAACP and a single black voter challenged the plan in U.S. District Court for the District of South Carolina.
Following a bench trial, the three-judge panel of the district court found that race was the predominant factor in the state's drawing of District 1. The panel found that the legislature set a racial target in an attempt to ensure a Republican majority, and implemented the target by dividing Charleston County based on race. The panel also found that the state intentionally discriminated against black voters. So it permanently enjoined the state from conducting elections in District 1 until a new plan is approved.
Because redistricting opinions are heard by three-judge panels in the district courts and are therefore directly appealable to the Supreme Court, the case went straight up. South Carolina now asked the Court to reverse the district court for six reasons. And its broad arguments are that the state was predominantly driven by politics rather than race in constructing its plan, that the district court made several flawed evidentiary rulings, and that there is no evidence the district plan was adopted with a racially discriminatory purpose or resulted in a racially discriminatory effect.
So, now that we've previewed each of the first six cases, I would like to remind everyone that we're going to open it up to Q&A soon. But we have a few questions already trickling in. So, this would be a good time to send any in or to start thinking about that if you have questions. And if your question is directed to a specific panelist, please just note that in the Q&A as well. But before we get into any questions from our listeners, I want to give you three, our panelists, the chance to offer any responses to your fellow panelists' initial presentations, or just thoughts on the term more broadly. So, Vikrant, I'll start with you. Responses, or thoughts on the term, anything you'd like to add?
Vikrant P. Reddy: Sorry, I was taking myself off mute. No, nothing to add. I can't wait to jump into Q&A.
Amanda Salz: Sounds good. Great. Brian, did you have anything to add?
Brian Johnson: No, but kudos to the fellow panelists. I was not up to speed on those cases, but now feel as if I have a good understanding of the issues involved and what the Court's going to grapple with. Thanks.
Amanda Salz: I agree. Karen, did you have anything to add?
Karen Harned: No, not really. I'm good. Thank you.
Amanda Salz: Okay, great. Well, then, we will go ahead and get into some questions. The first one is, I believe, for Vikrant. It's, "does anyone seriously argue that the authors," of the First Step Act, I'm assuming, "really meant 'and' rather than 'or'?"
Vikrant P. Reddy: Yeah, I saw that question. The answer is "sure." There are four amicus briefs submitted in the case. And three of the amicus briefs make that argument, that it is "and." One of them is submitted by FAMM, Families Against Mandatory Minimums, I think, joined with a few other advocacy groups like the ACLU. I forget who else. One is submitted by an advocacy group for criminal defense lawyers. One is submitted by Americans for Prosperity. This is a group that I actually work closely with. It's part of the broader Stand Together Network.
There is a fourth amicus brief which was submitted by some linguists, actually. That one's really kind of interesting to read. And they've kind of done survey research on this incredibly technical question where they go around asking people how you interpret this language. And they actually say that it comes out kind of ambiguously. And that's interesting too. But, yeah, I think that "and' is a perfectly plausible reading. Just to put my cards on the table, I think "or" is also a plausible reading. And if I were on the Court, I would resolve this using the rule of lenity. But, yeah, there are plenty of people who do argue that "and" means "and" and that's what was intended.
Amanda Salz: Very interesting. Thank you. So, the next question is on Acheson. It's a bit of a longer question. I'll give you the lead up. "Over the past two decades, there appears to have been a trend shifting in the opposite direction that is more of a stringent standard for citizen plaintiffs to achieve standing. But here, the Supreme Court seems to be going out its way to hear the case. So can you speak to the general implications for other kinds of borderline standing cases, if the justices ultimately find in favor of Laufer? Or does this seem like a candidate for being more narrowly tailored as a one-and-done, considering that it deals with an explicitly protected class?" [inaudible 00:47:30]
Karen Harned: Yeah, that's a good question. Honestly, they were given the chance to just get rid of this case over the summer and moot it out. So I feel like they really want to get an answer here. And I should have mentioned there is a big circuit split on this question of tester plaintiff standing. Another issue that's in this is, to your point on how broadly this will be read, Laufer, she's really hanging her hat on this stigmatic injury that she says she experienced by going to the website and seeing that it did not have the required information. And Acheson's obviously going to be arguing that's just not enough. And if you do, that's really opening the courthouse doors.
Meanwhile, as I indicated in my remarks, you've got industry groups that really want a decision here, because these cases have been coming along now for at least ten years, if not more, not just in the lodging space, but also with regards to restaurants and other businesses that have online platforms. So I, personally, as somebody that represents small businesses, hope they answer this question and get to whether or not these plaintiffs have Article III standing.
But, to your point, I think they may get really into what is a stigmatic injury, too. That might be something that they feel like if they ruled in favor of Laufer, I think they're going to have to put meat on those bones, because otherwise you really could be opening the courthouse doors to anybody. I personally think that Acheson's case is stronger. But that may also be because of my experience with this over the last 20 years.
Amanda Salz: Okay, thank you. Brian, I had a question for you about broader implications of the CFPB case, specifically. You mentioned this could have wider-reaching effects on other agencies. I'm wondering if that's specific to appropriations, or if that's even broader?
Brian Johnson: Particularly in the financial services space, there are a number of independent regulatory agencies. I mentioned some, like the FDIC, OCC, NCUA, the Fed, the alphabet soup of independent agencies. And Congress typically appropriates mainline departments and agencies. But there's this smallish subcategory of so-called independent agencies that historically have been funded by alternate means and, principally, through assessments of the industry that they enforce against, that they supervise, et cetera. So, the OCC, for instance, assesses national banks to cover the costs of its activities.
And one of the points of contention is, okay, the court here is examining the structure of the CFPB's funding source, etc. And is there anything to distinguish the CFPB at all from other agencies that are also outside of the "regular" appropriations process? And if not, what might the Court's judgment and opinion, or the strength of the reasoning within the opinion mean for potential challenges to the structure of other agencies? You can imagine that the FDIC would bring an enforcement action against a community bank. And the community bank could say, "Well, you weren't funded through Congressional appropriations. See the Supreme Court opinion. And so, you lack the funds to take any action and, therefore, you lack the authority to bring this enforcement action against us."
So, there's argumentation, of course, on both sides. And the amicus briefs kind of bear out some of this argumentation. The CFPB, for its part, says there's no meaningful distinction between the CFPB's funding mechanism and that of the other independent regulatory agencies. Of course, it's in the CFPB's interest to make that argument. And, similarly, the CFSA argues, along with the reasoning in the Fifth Circuit opinion, that there are meaningful distinctions. The Fifth Circuit seized on the fact that the CFPB derives its funding from the Fed, and the Fed also does not derive its funding from Congressional appropriations. Rather, it funds itself through open market operations, principally.
And so, the Fifth Circuit said that the double insulation of the CFPB's funding from Congress was unique, and wherever the Court wishes to draw the line on the statutory structure for funding of agencies, that double insulation is so unique and unprecedented that it falls beyond what would be acceptable bounds. There's other argumentation about the nature of the funding. And CFSA makes the case that there is at least some limiting principle on the amounts that agencies that fund themselves through assessments can draw, because they issue charters.
And if they are too aggressive or if their regulations are too onerous or if the funds drawn through assessments are too high, institutions subject to their jurisdiction have an incentive, potentially, to switch charters to relieve themselves of oversight of those agencies. And so, there's a limiting principle there that applies in the context of many of those agencies that doesn't apply in the context of the CFPB, because it doesn’t fund itself through assessments, but rather fed transfers.
There's no ability to kind of escape the CFPB to the extent that it overruns its bounds or is otherwise detrimental to operating within the financial markets. So, it's a live issue that the Court's going to have to grapple with. And the answer, really, to that kind of secondary question will, I think, go towards what the follow-on implications might be for other agencies as well.
Amanda Salz: Very interesting. Thank you so much for the extra context. We have another question on Acheson. "Do you see standing requirements based on actual articulable harm potentially being applied to other 'bounty hunter' statutes, such as California's Proposition 65, which expressly empowers private plaintiffs to identify violations and bring suits against companies they allege are not compliant?"
Karen Harned: This is actually a really interesting issue. Acheson raised this issue in their briefing that separation of powers principles — I did indicate that in my remarks — require that, really, we don't need the citizens running around enforcing the laws. It's really a product of the executive branch. And an organization that I'm affiliated with, Center for Constitutional Responsibility, also filed a brief in this case, saying, "Look, that doesn't just apply in this case, to Article III. That should apply to Article II, looking, in fact, at issues like Prop 65 and other statutes that are on the books, both at the state and federal level, that allow for citizen enforcement of general welfare laws.
Do I think the Court's going to go there on this one? It would be wonderful. I think that's probably a reach. But I do think they are getting increasingly interested in this issue. A case they decided at the end of last term, Polanski, dealt with the False Claims Act, and the relators. And that's a situation where somebody can file as a relator, say, alleging government waste in Medicare payments, and they get a cut if they prevail. And, in that case, actually, the relator didn't want to dismiss it, but the government did, because they just didn't think the juice was worth the squeeze.
But it was clear why the relator wanted to keep it going, because they wanted to get a payout. And so, at the end of that, in the dissents, Thomas actually said, "Look, it's high time we look at this act, in light of Article II and the executive branch being the ones that really should be enforcing." And Kavanaugh and Barrett also said they'd be open to that kind of analysis. So, I definitely think this is one to watch, that hopefully there will eventually be a case that goes that far. I'm just not sure they're going to go there on this one.
Amanda Salz: Well, hopefully, the Supreme Court actually addresses these points, given that mootness issue I wasn't aware of. So, it will be very interesting to see. I'm going to give one more reminder about questions, if anyone has any last questions. And, in the meantime, I had just one question for all three of you, and that's whether there are any other cases this term that you may want to -- whether it's preview, or just give us the case name, that listeners may be interested in, if they're interested in cases like the ones you've reviewed today. And, fine, if not. I didn't prep anybody on this. I just figured I would ask.
Karen Harned: I'd just say, more broadly, I do think it's very interesting. You look at the CFPB, even just the issue I was raising right now. The Supreme Court seems very interested in separation of powers and the checks and balances of our constitutional structure. It seems to be taking more and more of those cases. Loper Bright, of course, is front and center with regards to Chevron deference. So, I just think it's interesting that they're looking a lot at our constitutional structure and how that plays out.
Vikrant P. Reddy: On my end, it is, so far, kind of a thin criminal law docket. But I would say that probably the most-watched criminal law case is Rahimi, which is a case that involves the Second Amendment, and it involves people with a background of sexual assault. What I would say, fundamentally, is that the case is about what kind of due process is required for a denial of Second Amendment rights. And I think that "what kind of due process" part is really left out of a lot of the public discussion about the case. But it's really important. And it's what the case is going to fundamentally be about.
Amanda Salz: Well, and, Vikrant, I think you gave a great overview of what you thought the justices may do in Pulsifer. But do you have any thoughts on Rahimi, like, where the justices might lean?
Vikrant P. Reddy: I haven't looked at it closely enough. I'm just not sure.
Brian Johnson: I guess I'll piggyback off of what Karen said. I do think it's interesting that the Court is, now with a conservative majority and close to supermajority, focused on separation of powers issues. The CFPB is now a frequent visitor to the Supreme Court. In just 2020, there was a separate challenge to the removal protections that the director enjoyed, established in the Dodd-Frank Act. And the Court threw out the removal protections, meaning that the director now serves at the pleasure of the president. And so, it does look like there's a drumbeat between that separation of powers case, this CFPB funding issue, and whether or not the Court also may find that there's a separation of powers issue there in interpreting the appropriations clause.
Recall also that West Virginia v. EPA just came out. And the Court solidified its major questions doctrine jurisprudence, which is already playing out with respect to CFPB rules. There was a recent decision at the district court level, tossing out changes that the CFPB made in a guidance manual for its examiners on the basis of major questions. And that can be seen, I think, as a side-step of Chevron. And the Court will be considering, I think, kind of front and center, whether or not Chevron remains good precedent. And so, it does appear to be a drumbeat of cases that are carefully considering the finer points of both separation of powers, but of the contours of administration law.
Amanda Salz: Thank you three for a bit of a preview there. It looks like we have one last question on Acheson. And then we'll go ahead and wrap up. But that question is, Karen, you mentioned a circuit split. Would you say more about where the lines are currently drawn, and, if possible, why they're drawn there?
Karen Harned: Okay, I've got to remember. There were, basically, I think it was two circuits, two versus three. And one set are just saying that there has to be more than just this stigmatized injury. And the others are saying that it's okay with the tester plaintiffs. I should say that, in Laufer's camp, if you will, there was a lot of discussion among amici about this law has been on the books for 30 years, and the Congress gave private citizens the right to enforce for a reason, and we need more Laufers in the world.
Amanda Salz: All right. Well, thank you. And thank you three. This has been a fantastic discussion, and we really appreciate you sharing your time and your expertise with us today. So, unless anyone has any final thoughts, we will wrap up here. All right. Well, thank you all. And I hope everyone has a great beginning of the term.
Nate Kaczmarek: Thank you for listening to this episode of Teleforum, a podcast of The Federalist Society's Practice Groups. For more information about The Federalist Society, the Practice Groups, and to become a Federalist Society member, please visit our website at fedsoc.org.