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Recent Court Rulings

Bank of America v. City of Miami

In Bank of America v. Miami the Supreme Court held 5-3 that local governments have “standing” to bring Fair Housing Act (FHA) lawsuits against banks alleging discriminatory lending practices. But to win these claims local governments must show that their injuries were more than merely foreseeable. The State and Local Legal Center (SLLC) filed an amicus brief in this case on the side of the City of Miami.    

Miami claims that Bank of America and Wells Fargo intentionally issued riskier mortgages on less favorable terms to African-American and Latino customers than similarly situated white customers in violation of the FHA. Miami further claims these discriminatory practices caused foreclosures and vacancies which harmed the city by decreasing property values, reducing property tax revenue, and increasing costs to the city.  

The banks argue Miami lacks “standing” to sue under the FHA and that the banks did not “proximately-cause” harm to the city. Regarding standing, the FHA allows “aggrieved person[s]” to sue. The banks argue that Miami’s claimed harms do not “arguably” fall within the “zone of interests” the FHA seeks to protect—so Miami isn’t an “aggrieved person.” Regarding causation, the banks argue “the distance between [the bank’s alleged discriminatory lending practices] and the harms the City claims to have suffered is simply too great to entitle the City to collect damages.”     

The Court, in an opinion written by Justice Breyer, concluded, based on precedent, that Miami’s claims of financial injury are sufficient to meet the FHA’s standing requirement. Specifically, in Gladstone, Realtors v. Village of Bellwood (1979) the Court allowed the Village of Bellwood to sue real estate brokerage firms who were steering prospective black home buyers away from predominately white neighborhoods under the FHA for similar economic injuries.  

Regarding causation, the lower court concluded that the banks’ alleged discriminatory lending practices proximately caused the city’s economic injuries because they were the foreseeable result of the banks’ misconduct. The Supreme Court concluded foreseeability isn’t enough to prove causation. Instead, proving proximate-cause under the FHA requires “some direct relation between the injury asserted and the injurious conduct alleged.”

The Court refused to “draw the precise boundaries of proximate cause under the FHA and to determine on which side of the line the City’s financial injuries fall,” leaving it to the lower court to rule on causation.  

At least 12 other cities and counties have brought similar lawsuits against banks. All eyes will be on the Eleventh Circuit’s ruling on causation in this case.

The SLLC’s amicus brief discussed at length the nature and significance of the economic injuries cities and counties face as a result of foreclosed and vacant properties.

Deepak Gupta, Rachel Bloomekatz, and Matthew Spurlock of Gupta Wessler, wrote the SLLC brief, which was joined by the National Association of Counties, National League of CitiesUnited States Conference of MayorsInternational City/County Management Association, and the International Municipal Lawyers Association.

Coventry Health Care of Missouri v. Nevils

In Coventry Health Care of Missouri v. Nevils the State and Local Legal Center (SLLC) asked the Supreme Court in its amicus brief to rule that Chevron deference does not apply when an agency is construing the scope of a statute’s preemption provision, absent Congress’s assent. The Court didn’t rule on (or even discuss) this issue in its brief, unanimous opinion.

The Court held that the Federal Employees Health Benefits Act (FEHBA) preemption clause overrides state laws prohibiting subrogation and reimbursement and that the preemption clause is consistent with the Supremacy Clause.    

FEHBA allows the federal government to contract with private insurance carriers for federal employees’ health insurance. FEHBA preempts state law related to the “nature, provision, and extent of coverage of benefits.” The Missouri Supreme Court ruled that FEHBA’s preemption clause does not clearly preempt Missouri reimbursement and subrogation laws that prohibit insurance companies from collecting monetary settlements from federal employees who sue those who have injured them. In response, the agency that administers FEHBA promulgated a rule saying FEHBA’s preemption clause preempts state reimbursement and subrogation laws. The Missouri Supreme Court, refusing to apply Chevron deference to the agency’s rule interpreting FEHBA’s preemption clause, again ruled that FEBHA doesn’t preempt Missouri law.

The Court, in an opinion written by Justice Ginsburg, focused on the plain language of FEHBA to conclude it preempts state reimbursement and subrogation laws. “Contractual provisions for subrogation and reimbursement ‘relate to . . . payments with respect to benefits’ because subrogation and reimbursement rights yield just such payments. When a carrier exercises its right to either reimbursement or subrogation, it receives from either the beneficiary or a third party ‘payment’ respecting the benefits the carrier had previously paid. The carrier’s very provision of benefits triggers the right to payment.”

The Court also rejected the argument that FEHBA violates the Supremacy Clause, which states that federal laws are the supreme law of the land, “by assigning preemptive effect to the terms of a contract, not to the laws of the United States.” According to the Court it is the statute and not a contract that “strips state law of its force.”

In Chevron v. NRDC (1983) the Supreme Court held that courts should defer to reasonable agency interpretations of ambiguous statutes. States and local governments generally prefer that courts not defer to federal agency regulations because this deference gives federal agencies a lot of power. 

The SLLC amicus brief agreed with the Missouri Supreme Court that regulations interpreting preemption clauses should not receive Chevron deference unless Congress has “directly and unequivocally” authorized the agency to determine the scope of a preemption clause. The Court did not reach the question of whether it should defer to the agency’s interpretation of FEHBA’s preemption clause because it completely ignored the agency’s interpretation instead deciding the meaning of the statute looking only at its “text, context, and purpose.”  

All of the “Big Seven” (the National Governors Association, the National Conference of State Legislatures, the Council of State Governments, the National Association of Counties, the National League of Cities, the United States Conference of Mayors, and the International City/County Management Association) joined the brief which was written by William SteinScott ChristensenSam CowinEleanor Erney, and Stephen Halpin of Hughes Hubbard & Reed

Expressions Hair Design v. Schneiderman

In Expressions Hair Design v. Schneiderman the Supreme Court held unanimously that a New York statute prohibiting vendors from advertising a single price and a statement that credit card customers must pay more regulates speech under the First Amendment. The State and Local Legal Center (SLLC) filed an amicus brief in this case arguing this law doesn’t violate the First Amendment because it regulates conduct rather than speech.

When customers pay with a credit card merchants must pay a transaction fee to the credit card company. Some merchants want to pass this fee along to credit card customers. But a New York statute states that “[n]o seller in any sales transaction may impose a surcharge on a [credit card] holder who elects to use a credit card in lieu of payment by cash, check, or similar means.” Twelve states have adopted credit-card surcharge bans.  

The Supreme Court agreed that this statute prohibits Expressions Hair Design from posting a single price—for example “Haircuts $10 (3% or 30 cent surcharge added if you pay by credit card).” The sticker price is the regular price so sellers may not charge credit card customers an amount above the sticker price that is not also charged to cash customers.    

According to Chief Justice Roberts, writing for the Court, this statute regulates speech and isn’t a typical price/conduct regulation, which would receive less protection under the First Amendment. “What the law does regulate is how sellers may communicate their prices. A merchant who wants to charge $10 for cash and $10.30 for credit may not convey that price any way he pleases. He is not free to say “$10, with a 3% credit card surcharge” or “$10, plus $0.30 for credit” because both of those displays identify a single sticker price—$10—that is less than the amount credit card users will be charged. Instead, if the merchant wishes to post a single sticker price, he must display $10.30 as his sticker price.”

The Supreme Court left it to the lower court to decide whether this statute actually violates the First Amendment and whether the statute allows merchants to use a two-sticker pricing scheme (Haircut $10 cash; $10.30 credit card).  

Agreeing with the lower court, the SLLC amicus brief argued that no-surcharge laws regulate prices and not speech. The SLLC brief also argued that the Supreme Court’s decision in Reed v. Town of Gilbert, Arizona (2015) should not impact how the Court views speech versus conduct. In Reed the Court struck down the Town of Gilbert’s sign code because it disfavored temporary event signs over political and ideological signs. The Court didn’t cite to Reed in its opinion in this case. 

Charles Rothfeld, Andrew Pincus, Paul Hughes, and Michael Kimberly, Mayer Brown wrote the SLLC brief which the following organizations joined:  National Governors AssociationNational Association of Counties, National League of CitiesUnited States Conference of MayorsInternational City/County Management Association, and International Municipal Lawyers Association.

Manuel v. City of Joliet

In Manuel v. City of Joliet the Supreme Court held 6-2 that even after “legal process” (appearing before a judge) has occurred a person may bring a Fourth Amendment claim challenging pretrial detention. The State and Local Legal Center (SLLC) filed an amicus brief arguing that malicious prosecution claims cannot be brought under the Fourth Amendment. The Supreme Court didn’t address this issue in its decision.

Elijah Manuel was arrested and charged with possession of a controlled substance even though a field test and a lab test indicated his pills weren’t illegal drugs. A county court judge further detained Manuel based on a complaint inaccurately reporting the results of the field and lab tests. Forty-eight days later Manuel was released when another laboratory test cleared him.  

Manuel brought an unlawful detention case under the Fourth Amendment. The Seventh Circuit held that such a case had to be brought under the Due Process Clause which Manuel failed to do.

Justice Kagan explains why pretrial detention after legal process can be challenged under the Fourth Amendment:

The Fourth Amendment prohibits government officials from detaining a person in the absence of probable cause. That can happen when the police hold someone without any reason before the formal onset of a criminal proceeding. But it also can occur when legal process itself goes wrong—when, for example, a judge’s probable-cause determination is predicated solely on a police officer’s false statements. Then, too, a person is confined without constitutionally adequate justification. Legal process has gone forward, but it has done nothing to satisfy the Fourth Amendment’s probable-cause requirement. And for that reason, it cannot extinguish the detainee’s Fourth Amendment claim— or somehow, as the Seventh Circuit has held, convert that claim into one founded on the Due Process Clause.

The Supreme Court left it to the lower court to decide when the cause of action accrued in this case: when Manuel was arrested or when charges against him were dismissed. If it is when Manuel was arrested, his unlawful detention claim is time barred.  

The question the Supreme Court initially decided to answer in this case is whether “malicious prosecution” claims may be brought under the Fourth Amendment, which is why the SLLC amicus brief focused on this question. Justice Alito in his dissenting opinion chastised the majority for not deciding this question and concluded that malicious prosecution claims cannot be brought under the Fourth Amendment.

It is not unusual for the Court to say it is going to decide a particular issue and then decide another issue instead. 

Larry Rosenthal, Chapman University, Fowler School of Law, wrote the SLLC’s amicus brief which was joined by the National Association of Counties, National League of CitiesUnited States Conference of MayorsInternational City/County Management Association, and the International Municipal Lawyers Association

Direct Marketing Association v. Brohl (cert denied)

The SLLC filed an amicus brief encouraging the Supreme Court to not hear a case arguing that a Colorado law requiring remote sellers to inform Colorado purchasers annually of their purchases and send the same information to the Colorado Department of Revenue is unconstitutional.

In Quill Corp. v. North Dakotadecided in 1992, the Supreme Court held that states cannot require retailers with no in-state physical presence to collect sales tax. In 2010 the Colorado legislature passed the law described above to improve sales tax collection. The Direct Marketing Association sued Colorado claiming the law unconstitutionally discriminates against interstate commerce and is unconstitutional under Quill.   

In February 2016 in Direct Marketing Association v. Brohl, the Tenth Circuit concluded the Colorado law doesn’t discriminate against interstate commerce. DMA was unable to point to any evidence that the notice and reporting requirements imposed on out-of-state retailers are more burdensome than the sales tax collection and administration requirements imposed on in-state retailers. Quill does not apply to the law, the Tenth Circuit reasoned, because it “applies narrowly to sales and use tax collection.”

DMA filed a petition for certiorari asking the Supreme Court to review the Tenth Circuit’s ruling that Colorado’s law discriminates against interstate commerce.

The SLLC amicus brief argues that the Tenth Circuit ruled correctly on the interstate commerce question and that the only “interesting and important” question lurking in this case is whether the Supreme Court should overrule Quill.

In March 2015 the Supreme Court held unanimously that the Tax Injunction Act did not bar the Tenth Circuit (instead of a state court) from deciding whether Colorado’s law was unconstitutional. Justice Kennedy wrote a concurring opinion, which appeared to rely on the SLLC’s amicus brief, stating that the “legal system should find an appropriate case for this Court to reexamine Quill.”

DMA’s cert petition doesn’t raise the question of whether Quill should be overturned. However, the SLLC amicusbrief points out that if the Court is interesting in taking on this question it will be before the Court in no time. “Three States have already taken affirmative steps to challenge Quill head on, passing carefully tailored legislation or administrative rules that precisely frame the question whether [Quill’s] ‘physical presence’ standard should be replaced with an ‘economic nexus’ rule under which sellers can be required to collect state sales tax if they transact a large amount of business in a given state.”

The SLLC urges the Supreme Court to wait and accept one of these cases when they are ready for Supreme Court review and overrule Quill.

Eric Citron, Goldstein & Russell and Ron Parsons, Johnson Janklow Abdallah Zeiter & Parsons wrote the SLLC brief which the following organizations joined: the National Governors Association, the National Conference of State Legislatures, the Council of State Governments, the National Association of Counties, the National League of Cities, the United States Conference of Mayors, the International City/County Management Association,the International Municipal Lawyers Association, and the Government Finance Officers Association.  

Ivy v. Morath (dismissed as moot)

In Ivy v. Morath the Supreme Court will decide when state and local governments are responsible for ensuring that a private actor complies with the Americans with Disabilities Act (ADA). The State and Local Legal Center (SLLC) argues they should be responsible when the private actor may fairly be said to be implementing a service, program, or activity of the public entity itself.

In Texas, state law requires most people under age 25 to attend a state-licensed private driver education school to obtain a driver’s license. None of the schools would accommodate deaf students. So a number of deaf students sued the Texas Education Agency (TEA) arguing it was required to bring the driver education schools into compliance with the ADA.  

The ADA states that no qualified individual with a disability may be excluded from participation in or be denied the benefits of public entity “services, programs, or activities” because of a disability. The Fifth Circuit concluded that the ADA does not apply to the TEA because it does not provide “services, programs, or activities.” “Here, the TEA itself does not teach driver education, contract with driver education schools, or issue driver education certificates to individual students.”

A dissenting judge concluded the TEA was responsible for enforcing the ADA in this case because “even though the driving schools perform the actual day-to-day instruction, instruction is but one component of the broader program of driver education that is continually overseen and regulated in discrete detail by TEA.”

The SLLC amicus brief was filed on the side of neither party. It argues that the test shouldn’t be whether the state or local government is providing the service but instead whether a private actor may fairly be said to be implementing a service, program, or activity of the public entity. Agreeing with the majority opinion (and disagreeing with the dissenting opinion) in this case, the SLLC brief also argues that no amount of regulation or licensing of a private actor requires a state or local government to enforce the ADA against a private actor.

Finally, the SLLC brief concedes that under its test the TEA would be required to ensure that the driver education schools comply with the ADA. But it notes that “the Texas driver education program at issue here presents a highly unusual, and perhaps unique, example of a situation where a public entity’s licensing requirements for private persons may fairly be said to represent implementation of the public entity’s services, programs or activities.”

Richard A. SimpsonTara Ward, and Emily HartWiley Rein, wrote the SLLC amicus brief which was joined by  the Council of State GovernmentsNational Association of Counties, National League of CitiesUnited States Conference of MayorsInternational City/County Management Association, and the International Municipal Lawyers Association.