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  • Writer's pictureElizabeth Slattery

Keeping up with the Court: 3/25/24

The Supreme Court kicks off another week of arguments before taking a brief break until its mid-April sitting. Catch up on last week’s arguments here; and if you’ve already wished Anastasia a (belated) happy birthday, then let’s get to it.


Monday


First up this week is Becerra v. San Carlos Apache Tribe & Becerra v. Northern Arapaho Tribe, a case concerning funding for Native American tribe members’ healthcare. In the 1970s, Congress enacted two laws aimed at improving healthcare for members of Indian tribes. The Indian Self-Determination and Education Assistance Act allows tribes to contract with the federal government for healthcare services that were previously provided by the Indian Health Service (a division of the U.S. Department of Health and Human Services). When tribes opt to contract with the government, they receive the appropriated funds the Indian Health Service would have spent administering these services.


Tribes also are reimbursed for “contract support services,” including administrative expensesaudits, certain taxes, state workers’ compensation insurance, etc.incurred by the tribe. The Indian Health Care Improvement Act authorized Indian Health Service facilities (operated by the government or contracting tribes) to collect “program income” from Medicare, Medicaid, and private insurers for services provided to Indian patients. Tribes use this income to expand and improve services. The question in these cases is whether the government must reimburse tribes for contract support services they incur in the course of collecting program income from third parties. 


When the Indian Health Service runs a tribal healthcare program, it farms out certain administrative functions to other governmental entities (and may avoid certain expenses entirely), but the tribes don’t have this luxury. They argue that denying reimbursement for contract support services penalizes them for entering into the government contract in the first place because they have to dip into the funds appropriated for healthcare services to cover any unreimbursed contract support services. The government claims that the statute only requires it to pay contract support costs for appropriation-funded activities. (The government, as always, is keeping its eye on the bottom line.) Both sides claim the text supports their view. While the tribes have a variety of amici supporting their position, the government is the proverbial cheese standing alone.


In the second argument of the day, the Court will hear Harrow v. Department of Defense, yet another case considering whether courts lack jurisdiction to hear claims that have been filed after a statutory filing deadline has passed. Just last term, in Wilkins v. United States (a Pacific Legal Foundation win!), the Court determined that the federal Quiet Title Act’s statute of limitation was not jurisdictional. Thus, a property owner’s suit over a government easement on his property could press on despite (allegedly) being filed after the limitation period had run. In recent years, the Court has ruled on similar jurisdictional questions in cases involving copyrights, federal tort claims, tax courts, and Veterans Court appeals. 


Now the Court turns its focus to the law governing appeals from the Merit Systems Protection Board (MSPB), an agency that handles federal employees’ disputes with the government. A Department of Defense employee challenging his furlough asked the U.S. Court of Appeals for the Federal Circuit to review an MSPB ruling against him. The only problem (well, one problem, considering the MSPB sat on Harrow’s appeal for five years because it lost its quorum), is that Harrow missed the 60-day deadline to appeal. He points to the Court’s reading of other statutes to support his position that Congress did not prohibit courts from tolling a statute of limitation for appeals of MSPB actions. And surprise, surprise, the government says Harrow is out of time and out of luck. My prediction is that the Court will continue its march through the U.S. code to clarify that missing a statutory filing deadline does not deprive a court of jurisdiction to hear a case.


Tuesday


The justices, perhaps wisely, only scheduled one argument for Tuesday. FDA v. Alliance for Hippocratic Medicine and Danco Laboratories LLC v. Alliance for Hippocratic Medicine are consolidated for one hour of argument, but considering the subject matter, be prepared for this one to go into overtime.  


Buckle up because I’m going to sprint through the background. 


The case concerns mifepristone, a drug approved by the U.S. Food and Drug Administration (FDA) in 2000 for terminating pregnancies up to the seventh week of gestation. FDA placed strict safety protocols on its prescription given the risk of complications that would require emergency surgical intervention. In 2016, the pharmaceutical company that distributes Mifeprex (mifepristone’s brand name) sought and FDA approved several changes to the safety protocols including increasing the maximum gestational age when a patient could take mifepristone from 49 to 70 days, eliminating the requirements that doctors conduct an in-person follow up appointment and report nonlethal adverse effects, and allowing non-doctors to prescribe the drug, among other changes. FDA approved a generic version of mifepristone in 2019 and announced in 2021 it would not enforce an in-person dispensing requirement in light of the COVID-19 pandemic, allowing doctors to prescribe remotely and ship drugs to patients to take at home. 


Medical organizations and individual doctors (including OB/GYNs, hospitalists, and emergency room doctors) challenged the 2000 approval, 2016 amendments, 2019 approval, and 2021 non-enforcement decision for violating the Administrative Procedure Act (APA), which requires a court to “hold unlawful and set aside agency action … found to be arbitrary, capricious, an abuse of discretion, or otherwise not in accordance with the law.” The district court granted their motion for a preliminary injunction, in part. It exercised authority under the APA to order “less dramatic relief” than suspending FDA’s approval of the drug, instead returning to the safety protocols in place before the 2016 amendments. The district court called this postponing the effective date under 5 U.S.C. § 705). After ping-ponging between the courts last spring, the Supreme Court halted the district court’s stay pending appeal. 


In August, the U.S. Court of Appeals for the Fifth Circuit held that: 


  1. The challengers have associational standing to challenge everything except the 2019 generic approval; 

  2. The claims challenging the 2000 approval were likely barred by the six-year statute of limitations for challenging federal administrative action; 

  3. The challengers were likely to succeed on the merits of their claim that the 2016 amendments were arbitrary and capricious because FDA did not consider the cumulative effect of those changes, instead relying on studies that examined changes individually; and

  4. The challengers were likely to succeed on the merits of their claim that the 2021 non-enforcement decision was arbitrary and capricious because FDA lacked sufficient data concerning adverse effects (conveniently, after no longer mandating doctors report that) and relied on literature that did not actually support its position.


Now at the Supreme Court, the government (and Mifeprix manufacturer Danco) argue that the challengers lack standing because they have shown neither a cognizable injury nor that their injuries are fairly traceable to the government’s actions. The government maintains that FDA’s 2016 and 2021 actions were lawful and that the APA “does not require agencies to act based on perfect data” but instead that they act “reasonably based on the information available.” Finally, the government contends the district court’s “sweeping” choice of reliefpostponing the effective date of FDA’s actions that occurred years beforeis improper and “alter[s] a years-long status quo.” 


The challengers argue they have standing to challenge FDA’s actions, pointing to the substantial risk of concrete harms (such as being forced to violate their consciences by participating in elective abortions, diverted time and resources, and increased liability and insurance costs). They also maintain FDA’s decision to throw out safeguards that, as recently as 2020, it called “necessary” and “minimally burdensome” is “textbook” arbitrary and capricious agency action in violation of the APA. They urge the Court to affirm the preliminary injunction and not to remand for agency reconsideration since the APA bars “post hoc rationalization” and FDA has failed to provide a reasonable explanation for its actions during the course of this litigation. “Nothing suggests it could do so now.”   


The argument will feature an all-female lineup of advocates including Mrs. Josh Hawley, whom Politico dubbed the “work horse” to her husband’s show pony. Perhaps we should call him Mr. Erin Hawley instead. And while I haven’t taken the time to tally up amicus briefs that were filed in some of the other big cases of the term, I suspect this one may very well hold the record for this term, with 36 amici on the government’s side and 38 on the respondent’s side.


Wednesday 


The justices will kick off the day with Erlinger v. United States, an Armed Career Criminal Act, which is the gift that keeps on giving to the SCOTUS criminal defense bar as the Court seems to hear at least one ACCA case each term. This case concerns sentencing of Paul Erlinger (not to be confused with Herb Ertlinger) for illegally possessing a firearm. The district court imposed a 15-year mandatory minimum sentence based on Erlinger having three prior convictions for violent felonies (burglary convictions under Indiana law). Erlinger challenged his enhanced sentence, arguing that the three burglaries were not committed on different occasions, which ACCA requires, and in any event, the Sixth Amendment mandates a jurynot a judgedecide the question.  


The question presented is whether the Constitution requires a jury trial and proof beyond a reasonable doubt to find that a defendant’s prior convictions were “committed on occasions different from one another,” as is necessary to impose an enhanced sentence under ACCA. In an interesting turn of events, the federal government has declined to defend its win in the lower court. In this rare but not unprecedented situation, the justices usually ask a former law clerk to stand in for the government. The Court has tapped Nick Harper, an associate at Gibson Dunn and former clerk to then-Judge Kavanaugh on the D.C. Circuit, Justice Kennedy, and Justice Barrett, to defend the judgment below. It appears to be Mr. Harper’s SCOTUS debut, so here’s wishing him the best of luck! 


Closing out the week is a case involving death and taxes, Connelly v. United States. Brothers Michael and Thomas Connelly were the sole shareholders of Crown C Corporation, a building-materials company in St. Louis, Missouri. The company took out $3.5 million life insurance policies for each brother so it could redeem the shares if either brother died. Michael died in 2013, and the company used life insurance proceeds to redeem his shares for $3 million. Michael’s son and Thomas, serving as executor of the estate, agreed upon this figure as part of an agreement resolving several estate matters. 


The estate then filed a tax return reporting that Michael’s shares were worth $3 million. The IRS audited the return, finding that the shares were undervalued. It concluded that the $3 million in life insurance proceeds should have been included in Michael’s interest in Crown C. The IRS slapped the estate with $1 million in additional tax liability. The estate paid up and sued for a refund, which is what led to the case now before the Supreme Court. 


The question presented is whether the proceeds of a life insurance policy taken out by a closely held corporation to facilitate the redemption of the shareholder’s stock is a corporate asset when calculating the value of the shareholder’s shares for federal estate tax. 


The lower court agreed with the IRS’s view that a corporation’s fair market value includes life insurance proceeds that are intended for stock redemption. The proceeds were “simply an asset that increased shareholders’ equity” and not a liability, despite a contractual obligation to redeem the shares, the court concluded. 


At the Supreme Court, Thomas (represented by SCOTUS Gentleman profilee Kannon Shanmugam) maintains that the value of Michael’s stock for estate-tax purposes is based on the willing-buyer/willing-seller test that assumes knowledge of relevant facts, including any limitations that would affect the property’s value. He claims the lower court erred by holding that Michael’s stock value incorporates the life insurance proceeds but not the offsetting obligation to redeem the shares.  


The IRS contends that the obligation to redeem Michael’s shares did not diminish their value, and based on IRS regulations, the fair market value was $5.3 million. The IRS is concerned about the possibility that no one will pay capital-gains tax on the “$2.3 million windfall” Thomas enjoyed. 


Because you know I’ll jump at any opportunity to mention a separation-of-powers issue: The U.S. Chamber of Commerce and NFIB Small Business Legal Center filed an amicus brief supporting Thomas, pointing out that the IRS is not entitled to deference on the meaning of its relevant regulations because it has flip-flopped on its interpretation, thus “depriv[ing] business owners of fair notice.”   


That’s all for now. I’ll be back later this week with argument highlights and other interesting SCOTUS tidbits from the week. 

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