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  • Writer's pictureElizabeth Slattery

Keeping up with the Court: 2/20/24

After a brief lull in oral arguments, the Court is BACK! Though if you’re a judicial junkie, there has been plenty to occupy your time the past couple weeks.  


Also, if you missed it, Anastasia and I appeared on the Institute for Justice's Short Circuit podcast to talk about a couple rulings from the Fifth Circuit involving Humphrey’s Executor (where are my Article II aficionados at???) and Younger abstention. 


Turning our attention back to the Supreme Court, the justices are packing a lot (truckers, truck stops, hip hop, and more!) into just two days of oral arguments this week.


Tuesday


The first argument of the week is Corner Post, Inc v. Board of Governors of the Federal Reserve System, in which the justices will grapple with the timing of when someone challenging an agency’s action must bring a suit pursuant to the Administrative Procedure Act (APA). 


The APAaka the Constitution for agenciesauthorizes judicial review of an agency action that causes a regulated party to “suffer[ ] legal wrong . . . or [be] adversely affected or aggrieved.”  The APA includes a generous six-year statute of limitations “after the right of action first accrues” for suit to be filed. Agencies have argued (successfully in several lower courts) that the clock begins to run from the date an agency action becomes final. In other words, as the plaintiff in this case puts it, the “clock starts ticking for everyone the day the agency acts, no matter when that action first harms a particular plaintiff.” Challengers of agency action have maintained the clock begins to run when the action has actually harmed them.

Corner Post is a convenience store and truck stop in Watford City, North Dakota that opened in 2018. It sought to challenge a rule issued by the Board of Governors of the Federal Reserve (Board) in 2011 that imposes certain fees on merchants that accept debit card payments. In 2021 (ten years after the rule went into effect and three years after Corner Post opened its doors), Corner Post filed an APA suit challenging the rule in federal district court, arguing that it exceeded the authority Congress gave the Board. The government saidas I often tell my kids“Tough tacos!” because the statute of limitations had run out.


The district court and the U.S. Court of Appeals for the Eighth Circuit agreed with the government. While one circuit court has held that APA claims first accrue when the plaintiff is injured, the Eighth Circuit joined five other circuits in holding that the claim accrued “upon publication of the regulation.” The court also noted that Corner Post was not entitled to equitable tolling of the statute of limitations because it had not demonstrated it “diligently” pursued its rights (you know, when it didn't even exist). 


Now at the Supreme Court, Corner Post argues that aside from the APA’s plain text supporting its position, the Court has previously held that a statute of limitations begins to run when a plaintiff “has a complete and present cause of action,” which does not occur until a plaintiff “can file suit and obtain relief.” Corner Post further maintains the Court already has construed the APA’s six-year statute of limitations to follow this rule.   


The government says Corner Post offers “no sound basis” for its “challenger-by-challenger approach” and that the APA’s language governing who can challenge an agency’s action doesn’t “extend the deadline for when such challenges may be brought.” While Corner Post points out the unfairness of the statute of limitations running before it could even sue, the government responds that holding otherwise would “frustrate reliance interests … and would allow exactly the sorts of stale, decades-old claims that statutes of limitations are intended to prevent.”


Anastasia’s Cato Institute filed an amicus brief maintaining that a regulatory agency should not be allowed to evade judicial scrutiny when its actions impose new injuries. And my colleagues at Pacific Legal Foundation also filed an amicus brief pointing out that this is just one of the government’s many tricks to avoid scrutiny from courtsalong with standing, ripeness, and mootness as well as “insist[ing] their coercive conduct isn’t really [final] ‘agency action’ to begin with.”   


The justices have heard several cases implicating statutes of limitations in recent yearsin the context of copyrights, federal tort claims, Veterans Court appeals, and the federal quiet title act last term (which was ably litigated and won by my colleagues at Pacific Legal Foundation). And these cases have led to expanding Americans’ access to courts, rather than allowing the government to rely on cramped reading of statutes to shield its actions from judicial review. 


If you want an extended run-down of the oral argument, tune in Wednesday for this Federalist Society webinar featuring my PLF colleague Molly Nixon.  


The second argument of the day is Bissonnette v. LePage Bakeries Park St., LLC, which involves a class action alleging labor law violations by the company that manufactures Wonder Bread and many packaged baked goods including buns, rolls, and snack cakes


The Federal Arbitration Act (FAA) establishes a federal policy strongly favoring arbitration over litigation to resolve contract disputes. It carves out an exception to that preference for arbitration in employment contracts of seamen, railroad employees, and other “transportation workers” engaged in foreign or interstate commerce.


The Bissonnette plaintiffs are independent distributors that purchased the rights to sell and distribute packaged baked goods manufactured by Flowers Foods. They filed a putative class action against Flowers Foods and its subsidiary LePage Bakeries, alleging several violations of federal labor laws. They argued they are exempt from the FAA as transportation workers. (The parties disagree about whether the plaintiffs are “distributors” or “truck drivers.” I'm Switzerland on the matter, so I will refer to them as distributor/truckers.)


Flowers Foods filed a motion to compel arbitration, which the district court granted. On appeal, the U.S. Court of Appeals for the Second Circuit agreed, holding the plaintiffs are not “transportation workers” under the FAA because they are employed in the bakery industry, not a transportation industry. The court reasoned that an individual works in a transportation industry if the work “pegs its charges chiefly to the movement of goods or passengers” and the “predominant source of commercial revenue is generated by that movement.” A dissenting judge maintained that “[o]f course these truckers are transportation workers.”


The question presented to the Supreme Court is whether a class of workers that is actively engaged in interstate transportation must also be employed in the transportation industry to be exempt from the FAA.


The distributor/truckers argue that the categories Congress exempted from the FAA were defined by their work transporting goods, not by revenue or price structures or the employer’s work more generally. They claim the lower court’s requirement that workers must be in the transportation industry is unsupported by the FAA’s text or the Supreme Court’s precedents. They point to the most recent FAA case the Supreme Court decided, Saxon v. Southwest Airlines (2022), in which it explained that “any class of workers directly involved in the transporting of goods across state or international borders falls within [the FAA’s] exemption.” 


Flowers Foods maintains that Congress excluded seamen and railroad employees from the FAA so it would not “unsettle established or developing statutory dispute resolution schemes” to “ensure that the channels of national and international commerce remained stable and open.” By contrast, baked goods manufacturers and their distributors are not engaged in the transportation industry. Flowers Foods asserts the distributor/truckers’ reading of the FAA exemption is “so broad it makes the prior enumeration meaningless” and “leaves countless workers without any federal arbitration remedy.” It also charges the distributor/truckers with misreading Saxon, which considered whether “a particular class of workers within the transportation industry” (i.e. cargo loaders for Southwest Airlines) was exempt from the FAA. 


I don’t really have a dog in this fight but would note that the rise of the “gig” economy has posed questions about the scope of the FAA and drivers for Grubhub, Uber, Amazon, and more. Arbitration is supposed to offer contracting parties a quicker, cheaper, and less formal way to resolve disputes, but these benefits are undercut when the parties nevertheless end up in court arguing about whether to arbitrate their claims at all.


Swiss flag

Wednesday


The justices will start the day considering four consolidated applications for stays in Ohio v. EPA, Kinder Morgan, Inc. v. EPA, American Forest & Paper Association v. EPA, and U.S. Steel Corp. v. EPA. It's everyone against EPA day.


The Clean Air Act divides responsibility between the states and federal government, tasking EPA with setting minimum air quality standards and allowing states to come up with plans to meet those standards. These cases stem from EPA’s disapproval of nearly two dozen states’ plans to implement air-quality standards for ozone pollution set by the agency in 2015. EPA then imposed the Good Neighbor rule, requiring 23 states to follow a federal plan to reduce smog-forming emissions that affect downwind states' ability to meet mandated air quality standards.


Several industry groups and businesses, as well as Indiana, Ohio, and West Virginia filed petitions for review of the rule, arguing it is arbitrary and capricious agency action. The U.S. Court of Appeals for the D.C. Circuit denied requests to stay the Good Neighbor rule while it considers the merits of these petitions. The challengers sought emergency relief from the Supreme Court, asking the justices to stay the rule while the legal challenges proceed in the D.C. Circuit. The Supreme Court announced it would hear oral arguments on the stay applications. 


Several states also challenged EPA’s disapproval of their plans in other appellate courts (and obtained stays of the rule), but those are not at issue in the consolidated cases the Supreme Court will hear this week. 


State Farm man on phone at desk
Like a "Good Neighbor," EPA is there.

It’s a high bar to obtain an emergency stay from the Supreme Court. The justices consider three factors: (1) whether the applicants are likely to succeed on the merits, (2) whether the applicants will be “irreparably harmed” without the stay, and (3) whether the balance of equities and “the public interest” favor a stay. And it's not every day the justices hear arguments on a stay application; they often are decided by one member of the Court based only on the stay application and response (as part of the so-called "shadow docket.")


The challengers argue the Good Neighbor rule “simultaneously abrogated the rights of States to regulate air pollution within their borders” and forced regulated industries “into the immediate expenditure of hundreds of millions of dollars pending the lower court’s review, all while jeopardizing the reliability of the electric grid.” Further, the challengers contend that EPA’s decision to exempt more than half of the states that were originally subject to the rule undermines its claim that uniform application is necessary to achieve its goal. They also point out that since the rule has been stayed for some states, there is no harm in staying its implementation here while the D.C. Circuit cases are pending. 


EPA maintains that the challengers are seeking “extraordinary relief” that should be granted “sparingly and only in the most critical and exigent circumstances.” In the agency's view, the states and industry groups have not satisfied the demanding standard for injunctive relief. It asserts that delaying implementation of the rule would “impose negative health consequences and additional regulatory burdens on downwind States and their citizens.” It urges the Court not to consider the appellate stays of the rule because “the validity of [EPA’s disapproval of state plans] is not the subject of this suit and has not been finally determined by any court.”


While these legal challenges have been pending, EPA has been hard at work and proposed a rule in January that would subject five more states to the Good Neighbor rule. The Solicitor General sent a letter to the Court explaining, “To the extent that this Court’s forthcoming decision on the pending applications affects the validity of the proposed rule, EPA will of course take that into account before finalizing the rule.”


The second argument of the day is Warner Chappell Music, Inc. v. Nealy, and the statute of limitations fun continues! This case has something for everyonecopyright law, backstabbing, hip hop, and so much more. Let’s dig in. 


The Copyright Act allows a copyright owner to bring an action for infringement within “three years after the claim accrued.” The law does not define when a claim accrues, so most courts follow the discovery rule (holding that claims accrue when the copyright owner knows or reasonably should have known about the infringement) instead of the injury rule (holding that claims accrue on the date of the infringement). This case concerns whether a copyright owner may recover damages for acts that occurred more than three years before the suit was filed. 


In the early 1980s, two men in FloridaSherman Nealy and Tony Butlercreated Music Specialist, Inc. (MSI) and recorded several singles that were registered with the Copyright Office. Butler wrote or cowrote most of MSI's songs, with Nealy serving as a producer. MSI was Miami bass music (aka booty bass), a subgenre of hip hop. In a tale as old as time, MSI broke up, Nealy landed in prison for dealing cocaine, and Butler started 321 Music LLC. At some point while Nealy was in prison, Butler licensed the rights to MSI works to other artists. One arrangement allowed Flo Rida to “interpolate” (which is different from sampling) MSI’s 1984 “Jam the Box” in the 2008 song “In the Ayer.”  


Later that year, Butler entered an agreement with Warner Chappell Music, Inc. and Artist Publishing Group, giving them administrator rights over MSI’s catalog. Nealy got out of prison and learned that yet another person (Robert Crane) was distributing songs from the MSI catalog. Nealy and a lawyer met with Crane about this potential infringement, but there was no resolution before Nealy landed back in prison from 2012 to 2015. There was ongoing litigation between Crane and Butler, Warner, and Artist over the MSI’s catalog, but Nealy was not involved in that litigation or aware of it, he claims. After he was released from prison, Nealy says that in 2016 he learned about Butler’s deal with Warner and Artist. He commenced this copyright infringement action against Warner and Artist in 2018.


The case ping-ponged between the district and appellate court, with the district court certifying to the appeals court the question of whether damages are limited to a three-year “lookback period” from the date the complaint was filed. Warner and Artist argued to the U.S. Court of Appeals for the Eleventh Circuit that the Supreme Court had already settled the matter when, in Petrella v. Metro-Goldwyn-Mayer, Inc. (2014), it held that a copyright owner may “gain retrospective relief only three years back from the time of suit.”


The Eleventh Circuit disagreed, holding that a copyright owner may recover retrospective damages if the claim was timely under the discovery rule. It reasoned that Petrella involved claim accrual under the injury rule, so its discussion of retrospective relief is inapplicable in a case using the discovery rule. The court also noted that the text of the Copyright Act does not mention a three-year limit on remedies for an otherwise timely claim.


As an aside, Petrella is a fascinating copyright dispute over Raging Bull, the 1980 Martin Scorsese film about real-life boxer Jake LaMotta. MGM renewed its copyright of the film in 1991, and Paula Petrella, the daughter of a then-deceased man who collaborated on three works that formed the basis for the film’s screenplay, threatened to sue MGM for copyright infringement. She didn’t commence her suit until 2009. It eventually reached the Supreme Court, which allowed her suit to go forward while limiting the period of relief to the three years prior to her filing of the complaint. Petrella and MGM ultimately settled for an undisclosed amount


Now at the Supreme Court, Warner and Artist renew their arguments about Petrella governing. They also contend the broad discovery rule, as applied by some circuits, is inconsistent with the Copyright Act and the Court’s precedents. The discovery rule should be limited to discovery “delayed by fraud, latent disease, or medical malpractice.”


Nealy urges the Court to adopt the majority rule allowing damages for “all timely claims” instead of limiting them to three years before the complaint was filed. He also says the fate of the discovery rule is not properly before the Court in this case. Indeed, the Court reframed the question presented by Warner and Artist to avoid taking on the discovery vs. injury rules, but the justices are “Supreme” so (though unlikely) they could change their minds and reach that issue.


That’s all for now! Check back later this week for highlights from these arguments. 


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