May 6, 2024 | Volume 31, Issue 10
This Report summarizes opinions issued on April 12, 16, and 17, 2024 (Part I).
Opinions
DeVillier v. Texas, 22-913.
The Court had granted certiorari to resolve whether the Takings Clause creates by its own force a cause of action authorizing suits for just compensation, but held unanimously that it need not decide that question because here “Texas law provides a cause of action that allows property owners to vindicate their rights under the Takings Clause.” Petitioner Richard DeVillier and 120 others owned property north of U.S. Interstate Highway 10 between Houston and Beaumont, Texas. Texas used a portion of that highway as a flood-evacuation route by installing a three-foot-tall barrier along the highway median to act as a dam to prevent stormwater from covering the south side of the road. During two significant storms in 2017 and 2019, the median functioned as designed, keeping the south side of the highway open. But it also led to flooding on petitioners’ land, resulting in the displacement of residents from their homes, damage to businesses, destruction of crops, and loss of livestock and family heirlooms. The median barrier is expected to continue causing flooding on petitioners’ land during future storms. DeVillier filed suit in state court arguing that he was entitled to just compensation under both the United States and Texas Constitutions because Texas had effected a taking of his property by building the median barrier and using his property to store stormwater. Other property owners filed similar suits. Texas removed the cases to federal court and moved to dismiss, claiming (among other things) that the Takings Clause does not give rise to a cause of action. The district court denied Texas’s motion, but the Fifth Circuit disagreed and held that the Takings Clause “does not provide a right of action for takings claims against a State.” In an opinion by Justice Thomas, the Court vacated and remanded.
The Court explained that “a property owner acquires an irrevocable right to just compensation immediately upon a taking [b]ecause of the self-executing character of the Takings Clause with respect to compensation. Knick [v. Township of Scott, 588 U.S. 180, 192 (2019)] (quoting First English Evangelical Lutheran Church of Glendale v. County of Los Angeles, 482 U.S. 304, 315 (1987))” (internal quotation marks omitted.) Thus, the only question before it was the “procedural vehicle by which a property owner may seek to vindicate that right.” The Court then noted that “[c]onstitutional rights do not typically come with a built-in cause of action to allow for private enforcement in courts. Instead, constitutional rights are generally invoked defensively in cases arising under other sources of law, or asserted offensively pursuant to an independent cause of action designed for that purpose, see, e.g., 42 U.S.C. §1983.” (Citations omitted.) Petitioners argued that the Takings Clause is an exception based on First English and other takings cases that did not rely on §1983. The Court found, however, that First English relied on a state-law cause of action, and the property owners in the other takings cases sought injunctions. The Court reasoned that “the mere fact the Takings Clause provided the substantive rule of decision for equitable claims in those cases does not establish that it creates a cause of action for damages.”
While acknowledging that the lack of cases relying on the Takings Clause for a cause of action did not prove there is no cause of action, the Court concluded that this case did not require it to resolve the question of “what would happen if a property owner had no cause of action to vindicate his rights under the Takings Clause.” That is because “Texas state law provides a cause of action by which property owners may seek just compensation against the State.” Thus, this case did not “present the circumstances in which a property owner has no cause of action to seek just compensation.”
Sheetz v. County of El Dorado, 22-1074.
The Court unanimously held that the Takings Clause does not distinguish between legislative and administrative permit conditions. Petitioner George Sheetz owned property in El Dorado County, California and sought a permit to build a prefabricated home on his residential parcel of land. To deal with the new demand for public services due to recent, significant population growth, the county’s Board of Supervisors, a legislative body, adopted a planning document called the General Plan. Concerning traffic congestion, the General Plan requires developers to pay a traffic impact fee as a condition of receiving a building permit. The fee is based on a rate schedule that considers the type of development and its location within the county. The traffic impact fee for Sheetz to receive his permit to build was $23,420. He paid the fee under protest and sought relief in state court, claiming that conditioning the building permit on paying a traffic impact fee constituted an unlawful “exaction” of money in violation of the Takings Clause. The California Court of Appeal declined to assess Sheetz County’s traffic impact under the essential nexus and rough proportionality test from Nollan v. California Coastal Comm’n, 483 U.S. 825 (1987), and Dolan v. City of Tigard, 512 U.S. 374 (1994), based on its view that the test did not apply to “legislatively prescribed monetary fees.” In an opinion by Justice Barrett, the Court vacated and remanded.
The Court found that nothing in constitutional text, history, or precedent supports exempting legislatures from ordinary takings rules. First, the Court pointed out that the Constitution’s text does not limit the Takings Clause to a particular branch of government; nor does the Fourteenth Amendment, which incorporates the Takings Clause against the states. Thus, so “far as the Constitution’s text is concerned, permit conditions imposed by the legislature and other branches stand on equal footing.” Next, the Court found that history supports the same conclusion. The Court explained that for colonial governments before, during, and after the Revolution, “legislation was the conventional way that governments exercised their eminent domain power.”
Finally, the Court emphasized that precedent also did not provide for a legislative exception to the Nollan/Dolan test. Looking at both physical and regulatory takings cases, the Court stated that the “branch of government that authorized the appropriation did not matter to the analysis.” Thus, the Court held that “there is no basis for affording property rights less protection in the hands of legislators than administrators,” and the Takings Clause “applies equally to both—which means that it prohibits legislatures and agencies alike from imposing unconstitutional conditions on land-use permits.” The Court did not address the validity of the traffic impact fee or answer “whether the condition imposed on a class of properties must be tailored with the same degree of specificity as a permit condition that targets a particular development.” Rather, the Court stated whether “the parties’ other arguments are preserved and how they bear on Sheetz’s legal challenge are for the state courts to consider in the first instance.”
There were three separate concurrences filed. Justice Sotomayor’s concurrence, which Justice Jackson joined, focused on the threshold question for the application of Nollan/Dolan scrutiny, which is “whether the permit condition would be a compensable taking if imposed outside the permitting context.” She noted that the question presented in this case did not include that preliminary question “whether the traffic impact fee would be a compensable taking if imposed outside the permitting context.” But Justice Sotomayor noted that the Court is not resolving that question because the California Court of Appeal did not consider it.
Justice Gorsuch’s concurrence highlighted that the Court’s decision did not address whether the Nollan/Dolan test operates differently when an alleged taking affects a class of properties rather than a particular development. Justice Gorsuch maintained that nothing “about that test depends on whether the government imposes the challenged condition on a large class of properties or a single tract or something in between.” Thus, he said that “whether the government owes just compensation for taking your property cannot depend on whether it has taken your neighbor’s’ property too.” Finally, Justice Kavanaugh, with whom Justices Kagan and Jackson joined, concurred. He noted that the Court has never decided and explicitly declined to decide in this case whether a permit condition imposed on a class of properties must be tailored with the same degree of specificity as a permit condition that targets a particular development. The Court’s decision, therefore, “does not address or prohibit the common government practice of imposing permit conditions, such as impact fees, on new developments through reasonable formulas or schedules that assess the impact of classes of development rather than the impact of specific parcels of property.”
Bissonnette v. LePage Bakeries Park St., LLC, 23-51.
The Court unanimously held that a transportation employee does not need to work in the transportation industry to fall within the exemption set forth in §1 of the Federal Arbitration Act (FAA). “The FAA provides generally that arbitration agreements are ‘valid, irrevocable, and enforceable’” except where grounds “exist at law or in equity for the revocation of any contract”’ 9 U.S.C. §2. Section 1 of the Act provides an exception to that rule, however, specifying that nothing contained within the Act applies to the employment contracts of seamen, railroad employees or “‘any other class of workers engaged in foreign or interstate commerce.’” In prior jurisprudence, the Court had interpreted this residual clause to apply only to transportation workers.
Petitioners are franchisees for respondent Flower Foods, Inc., distributing the company’s baked goods in Connecticut. As part of their distribution contract with respondent, petitioners consented to arbitrate under the FAA “‘any claim, dispute, and/or controversy.’” Petitioners brought a class action suit against respondent, claiming that the company had violated state and federal wage laws. Respondent “moved to dismiss [the case] or to compel arbitration under the FAA,” consistent with the parties’ distribution agreement. Petitioners objected, arguing that they fell within the “transportation worker” exception in §1 of the FAA. “The District Court dismissed the case in favor of arbitration,” concluding that petitioners’ job responsibilities set forth in the distribution agreement contradicted the claim that they were “‘only or even principally truck drivers.’” A divided panel of the Second Circuit affirmed on the alternate ground that because petitioners worked in the bakery industry, rather than a transportation industry, §1 of the FAA did not apply. Thereafter, the Supreme Court decided Southwest Airlines Co. v. Saxon, 596 U.S. 450 (2022), in which the Court “held that a ‘class of workers’ is properly defined based on what a worker does for an employer, ‘not what [the employer] does generally.’” “The Second Circuit granted panel rehearing in light of Saxon but adhered to its prior decision,” articulating the test “that an individual works in a transportation industry and may therefore be exempt under §1 only ‘if the industry . . . pegs its charges chiefly to the movement of goods or passengers, and the industry’s predominant source of commercial revenue is generated by that movement.’” In an opinion by Chief Justice Roberts, the Court vacated and remanded.
The Court first discussed its decades-old jurisprudence in which it had concluded that because “the general phrase ‘class of workers engaged in . . . commerce’ is controlled and defined by reference to the specific categories ‘seamen’ and ‘railroad employees’ that precede it,” “§1 is limited to transportation workers.” This interpretation “of §1 harmonized the FAA with other statutes designed to protect the movement of goods in commerce.” Next, the Court noted that in Saxon it had “expressly declined to adopt an ‘industry-wide’ approach of the sort [respondent] advance[d]” in the present case, because §1’s “language focuses on the performance of work rather than the industry of the employer.” (Internal quotation marks omitted.)
The Court then explained that the Second Circuit’s test was unworkable because “it would often turn on arcane riddles about the nature of a company’s services” (“Does a pizza delivery company derive its revenue mainly from pizza or delivery?” “Do companies like Amazon and Walmart . . . derive their revenue mainly from retail or shipping” third-party products?), requiring “[e]xtensive discovery” and slow, expensive “[m]ini-trials on the transportation-industry issue . . . .” Finally, the Court rejected respondent’s argument that because some early twentieth century statutes regulated “certain seamen and railroad employees” then those “terms were limited to transportation-industry workers in 1925.” The Court explained that “those statutes only prove that where Congress wanted to regulate seamen or railroad employees in a particular industry, it said so explicitly.” “Unlike those industry-specific statutes, §1 refers to ‘seamen’ and ‘railroad employees’ without specifying any industry to which they must belong.” As a result, “[i]t would be strange to read the conspicuous absence of similar industry-specific language in §1 as a sign that Congress defined the exemption on an industrywide basis.” The Court therefore vacated the Second Circuit’s judgment and remanded it for further proceedings. The Court did not express an opinion “on any alternative grounds in favor of arbitration . . ., including that petitioners are not transportation workers and that petitioners are not ‘engaged in foreign or interstate commerce’ within the meaning of §1 because they deliver baked goods only in Connecticut.”
Muldrow v. City of St. Louis, 22-193.
The Court unanimously held that although an employee must show harm from a forced transfer to prevail in a Title VII suit, she need not show that the injury satisfies a significance test. Petitioner Sergeant Jatonya Calyborn Muldrow worked in the St. Louis Police Department’s specialized Intelligence Division from 2008 through 2017. In her role, “she investigated public corruption and human trafficking cases, oversaw the Gang Unit, and served as head of the Gun Crimes Unit.” She was also deputized as a Task Force Officer with the FBI, which provided her with an unmarked take-home car and the authority to pursue investigations outside St. Louis. In 2017, a new Intelligence Division commander had Muldrow transferred out of the unit to replace her with a male officer he believed would be better suited for the Division’s dangerous work. Muldrow’s rank and salary remained unchanged in her new role, but her responsibilities, perks, and schedule changed. Muldrow brought a Title VII suit against the city challenging her transfer from the Intelligence Division, claiming it was based on gender discrimination. She alleged that she had been moved from a “premier position” into a less “’prestigious’ and more ‘administrative’ uniformed role.” The district court granted the city summary judgment. Applying a heightened-injury standard, the court stated that Muldrow failed to prove that the transfer effected a significant change in working conditions that produced a material employment disadvantage. The Eighth Circuit affirmed, after agreeing that “Muldrow had to—but could not—show that the transfer caused a ‘materially significant disadvantage.’” In an opinion by Justice Kagan, the Court reversed and remanded.
The Court concluded that the text of Title VII does not impose a heightened-harm threshold when challenging an employment transfer. Title VII explicitly prohibits discrimination based on sex regarding the terms or conditions of employment. The Court noted that to “discriminate against” means to treat worse, as it requires a transferee to “show some harm respecting an identifiable term or condition of employment.” But the text does not require the transferee to show that the harm incurred was significant. The Court found that requiring an elevated threshold for harm adds words to the statute that Congress enacted “so that the law as applied demands something more of her than the law as written.” Rather, held the Court, the statutory language merely required Muldrow “to show that the transfer brought about some ‘disadvantageous’ change in an employment term or condition.” The Court observed that the “some” injury standard applied to the present circumstances would be easily met if appropriately preserved and substantiated. It emphasized the change in Muldrow’s employment from a “plainclothes job in a prestigious specialized division” to a “uniformed job . . . less involved in high-visibility matters and primarily performing administrative work” alongside the loss of a regular schedule and her take-home car.
Justice Thomas filed a concurring opinion noting that Title VII requires a plaintiff to show a harm that is more than trifling. He questioned the Court’s reading of the Eighth Circuit’s decision because he did not read the decision to have required a heightened-harm requirement, but instead required that “a plaintiff must have suffered an actual disadvantage as compared to minor changes.” He noted that that standard “aligns with the Court’s observation that a plaintiff must show ‘some disadvantageous change in an employment term or condition.’” He said there was a little practical difference between that and the Court’s holding.
Justice Alito filed a concurring opinion agreeing with the judgment, but criticizing what he called an “unhelpful opinion.” He found “little if any substantive difference between the terminology the Court approves and the terminology it doesn’t like” based on the definition of injury and harm incorporating some degree of significance. Justice Kavanaugh also filed a concurring opinion to note that even when a transfer does not change an employee’s compensation, it does change the terms, conditions, or privileges. Therefore, if made based on the employee’s race, color, religion, sex, or national origin, it violates Title VII. Thus, while agreeing with the Court in rejecting a significant-harm standard, he disagreed with a some-harm standard as the text of Title VII does not require a separate showing of some harm.
Rudisill v. McDonough, 22-888.
In a 7-2 decision, the Court held that servicemembers who accrue educational benefits under separate GI bills by virtue of separate periods of service may use either entitlement, in any order, up to the 48-month aggregate-benefits cap set forth in 38 U.S.C. §3695(a). Since World War II, the federal government has enacted numerous GI bills to offer educational assistance to the country’s servicemembers. This case involves “the overlap between two recent GI bills,” namely, the Montgomery GI Bill Act of 1984 and the Post-9/11 Veterans Educational Assistance Act of 2008. The Montgomery GI Bill provides servicemembers who enter active duty between 1985 and 2030 with a “limited stipend” that typically “does not pay the full costs of a veteran’s education.” Meanwhile, the Post-9/11 GI Bill, covering service that began on or after September 11, 2001, provides “enhanced” educational benefits, such as the “net cost of in-state tuition,” partial coverage at private institutions, and a housing stipend. Each bill is subject to “a detailed series of statutory provisions that include” entitlement and durational limits. Of note, a qualifying servicemember is entitled to 36 months of benefits under the Montgomery Bill (38 U.S.C. §3013) and 36 months of benefits under the Post-9/11 GI Bill (38 U.S.C. §3312). Each entitlement is “subject to a 48-month aggregate-benefits cap,” pursuant to §3695. Moreover, to address the fact that eligibility for benefits under the aforementioned bills overlap, the “Post-9/11 GI Bill includes a provision, set forth in §3322, entitled “Bar to duplication of educational assistance benefits.” Pursuant to §3322, “servicemembers who are eligible for educational benefits under either the Montgomery . . . or Post-9/11 . . . [bills]―from a period of service that could qualify for either program―can opt to credit that service toward one educational benefits program or the other. If servicemembers serve for long enough, they may be entitled to both. But such servicemembers cannot receive disbursements from both entitlement programs at the same time, nor may they receive any combination of benefits for longer than 48 months.” Otherwise, if servicemembers’ service entitles them to certain earned benefits, then the “the VA ‘shall pay’ them these benefits.” Finally, to address the approximately eight-year gap between the Post-9/11 Bill’s entitlement and effective dates, Congress devised a statutory fix to allow “servicemembers who were entitled to Post-9/11 benefits but had been funneled through the Montgomery program until the Post-9/11 GI Bill went into effect . . . a way to access the more generous Post-9/11 benefits program.” Specifically, §3322 instructs servicemembers that the coordination of their educational assistance benefits between the Montgomery and Post-9/11 Bills is governed by §3327. “[U]nder §3327, an individual who meets the criteria for Montgomery benefits and Post-9/11 benefits based on the same (overlapping) period of service can elect to exchange the Montgomery benefits he has received for the Post-9/11 benefits that he wants.” This “election” statute clarifies that, if a servicemember has already used some Montgomery benefits before making an irrevocable §3327-election, his entitlement is limited by his unused months of benefits under the Montgomery Bill, “not a full 36 months of Post-9/11 benefits.”
In 2000, petitioner James Rudisill enlisted in the U.S. Army and, over the next 10 years, he reenlisted twice. All told, he served eight years of active duty over three separate terms of military service. Rudisill’s first period of service entitled him to 36 months of benefits under the Montgomery GI Bill; his subsequent periods of service entitled him to 36 months of benefits under the Post-9/11 GI Bill. Both were subject to the 48-month aggregate-benefits cap. Rudisill “used 25 months and 14 days of his Montgomery benefits” in connection with his undergraduate degree. After his third period of military service, Rudisill sought to use his Post-9/11 benefits for a graduate degree. Rudisill believed that, consistent with §3695’s 48-month cap, he was entitled to 22 months and 16 days of Post-9/11 benefits. The VA disagreed, asserting that, pursuant to §3327, “by requesting Post-9/11 benefits before exhausting all of his Montgomery benefits, Rudisill could receive only 36 months of benefits in total, not the 48 months to which he would otherwise be entitled.” “The Board of Veteran’s Appeals affirmed the VA’s decision, but the Court of Appeals for Veterans Claims reversed.” The en banc Federal Circuit reversed, holding that, when Rudisill “sought to use his Post-9/11 benefits, he had made an ‘election’ under §3327(a)(1), making his benefits subject to §3327(d)(2)’s [36-month] limit.” In an opinion by Justice Jackson, the Court reversed and remanded.
In holding that Rudisill was entitled to use his separately accrued benefits, in any order, up the statutory 48-month aggregate-benefits cap, the Court relied on the plain text of the relevant provisions. Specifically, the Court explained that “[§]3327(a)’s limit applies only to an individual who makes a §3327(a) election. But Rudisill never made an election under §3327(a), nor must he have done so, because §3327 is triggered only if a servicemember is ‘coordinat[ing]’ an entitlement per §3322(d). Someone in Rudisill’s situation―who just uses one of his two entitlements―is not coordinating anything.” The Court’s view was further reinforced by its reading of §3327(a). That provision’s “election mechanism is an optional means of trading an existing benefits entitlement for Post-9/11 benefits.” Rudisill “does not forfeit his entitlements” simply “by declining to make a §3327(a) election.” In other words, in this case, based on his periods of service, Rudisill was “separately entitled to each of two educational benefits” (the Montgomery and Post-9/11 Bills). “Neither §3322(d) nor §3327 restrict[s] veterans with two separate entitlements who simply seek to use either one.” As a result, the “VA [was] statutorily obligated to pay him 48 months of benefits . . . .” In closing, the Court added that, because the statute in this case was clear, it “resolve[d] this case based on statutory text alone.” If, however, the relevant statute was ambiguous, the pro-veteran canon would have favored Rudisill.
Justice Kavanaugh, joined by Justice Barrett, filed a concurring opinion to express concern with the Court’s reflexive repetition, in this case and its prior jurisprudence, of the existence of a veterans canon of statutory interpretation, which construes veterans benefits statutes in favor of veterans. Justice Kavanaugh explained that, rather than resting on background constitutional principles, this canon derives from “a loose judicial assumption . . . that Congress intends for courts to read ambiguous veterans-benefits statutes more broadly than the courts otherwise would reach such statutes.” Moreover, he asserted that “any canon that construes benefits statutes in favor of a particular group―rather than just construing the statutes as written―appears to be inconsistent both with actual congressional practice on spending laws and with the Judiciary’s proper constitutional role in the federal spending process.” Although it was unnecessary to do so here, Justice Kavanaugh advised that “it may be important in a future case for this Court to address the justification for any benefits-related canon that favors one group over others.”
Justice Thomas, joined by Justice Alito, dissented. Although Justice Thomas agreed with the majority that the relevant statutory text was unambiguous, he concluded that the majority’s approach conflicts with the plain text of §3327. In Justice Thomas’s view, because Rudisill could not use his sets of his earned GI Bill benefits concurrently, §3322(d) “required that Rudisill coordinate his entitlements, and that such coordination would be governed by §3327.” Rudisill accomplished this by using §3327’s election mechanism “to switch to Post-9/11 benefits after he had used some, but not all, of his Montgomery benefits.” This coordination of benefits was further demonstrated by Rudisill’s completion of the VA form in which he elected “to receive Post-9/11 benefits ‘in lieu of’ Montgomery benefits and acknowledged that his months of entitlement would be limited to those months remaining under his Montgomery benefits.” As a result of this election, Justice Thomas maintained, Rudisill was subject to §3327’s statutory limit on his benefits entitlement, which, in this case, was the remaining time period from his Montgomery benefits. As an aside, Justice Thomas, like the concurring justices, expressed his concern regarding the foundation and development of the veterans canon, and he “question[ed] whether this purported canon should ever have a role in [the Court’s] interpretation.”
Macquarie Infrastructure Corp. v. Moab Partners, L.P., 22-1165.
In a unanimous decision, the Court held that “[p]ure omissions are not actionable under [Securities and Exchange Commission] Rule 10b-5(b).” Section 10(b) of the Security Exchange Act and its implementing regulation, SEC Rule 10b-5, “make[ ] it unlawful to omit material facts in connection with buying or selling securities when that omission renders ‘statements made misleading’” and provide for a private cause of action for such violations. A separate rule, Item 303 of SEC Regulation S-K, requires companies to disclose “‘any known trends or uncertainties that have had or that are reasonably likely” to have a material impact―favorable or not―on a company’s “net sales or revenue or income.”
Respondents, Macquarie Infrastructure Corporation and its corporate officers, own a subsidiary company that operates large storage terminals for, among other things, high-sulfur fuel oil. In 2016, the United Nations’ International Maritime Organization adopted a regulation capping “the sulfur content of fuel oil used in shipping” by 2020. The sulfur content of Macquarie’s stored fuel oil exceeded the UN’s 2020 cap. Between 2016 and 2018, Macquarie never discussed in its public offering documents the UN’s adopted regulation. In early 2018, however, Macquarie “announced that the amount of storage capacity contracted for use by its subsidiary’s customers had dropped in part because of the structural decline in” the high-sulfur fuel oil market, which caused Macquarie’s stock price to fall dramatically. A group of investors―Moab Partners, L.P.―sued respondents, arguing that the company and its officers had violated §10(b) and Rule 10b-5 through “false and misleading” public statements because they had “‘concealed from investors that [the subsidiary’s] single largest product’” was the high-sulfur fuel oil, the worldwide use of which would be impacted by the UN’s 2020 cap. Additionally, Moab asserted that respondents violated Item 303, and by extension, §10(b) and Rule 10b-5, by failing to disclose “‘the extent to which [its subsidiary’s] storage capacity was devoted to’” the high-sulfur fuel. The district court granted respondents’ motion to dismiss, “concluding in relevant part that Moab had not ‘actually plead[ed] an uncertainty that should have been disclosed’ or ‘in what SEC . . . filings [respondents] were supposed to disclose it.’” The Second Circuit reversed, concluding that, based on its binding precedent, respondents’ alleged “Item 303 violation alone could sustain Moab’s §10(b) and Rule 10b-5(b) claim.” In an opinion by Justice Sotomayor, the Court vacated and remanded.
To begin, the Court noted that Rule 10b-5 “accomplishes two things. It prohibits ‘any untrue statement of a material fact’―i.e., false statements or lies. . . . It also prohibits omitting a material fact necessary ‘to make the statements made . . . not misleading.’” Because the Court’s decision “turn[ed] on whether this second prohibition bars only half-truths or instead extends to pure omissions,” it explained the difference between the two. “A pure omission occurs when a speaker says nothing, in circumstances that do not give any particular meaning to that silence.” Conversely, “[h]alf-truths . . . are ‘representations that state the truth only so far as it goes, while omitting crucial qualifying information,’” like, for example, where a property seller asserts that “‘there may be two new roads’” near said property, “‘but fails to disclose that a third potential road might bisect the property.’”
The Court reasoned that Rule 10b-5(b) proscribes half-truths, rather than pure omissions, because the rule merely “requires disclosure of information necessary to ensure that statements already made are clear and complete.” As a matter of logic and “plain text, the Rule requires identifying affirmative assertions (i.e., ‘statements made’) before determining if other facts are needed to make those statements ‘not misleading.’” This conclusion, the Court stated, is supported by the fact that where Congress has intended to “impose[ ] liability for pure omissions” in the context of securities law, it has explicitly done so. Specifically, §11(a) of the Securities Act of 1933 “prohibits any registration statement that,” among other things, “‘omit[s] to state a material fact required to be stated therein.’” The absence of any language in §10(b) and Rule 10b-5(b) that mirrored §11(a)’s pure omission language was “telling.” As a result, “[p]ure omissions are not actionable under Rule 10b-5(b).”
McIntosh v. United States, 22-7386.
Federal Rule of Criminal Procedure 32.2(b)(2)(B) requires a federal district court to enter a preliminary order of criminal forfeiture “sufficiently in advance of sentencing to allow the parties to suggest revisions or modifications before the order becomes final as to the defendant.” The Court unanimously held that a district court’s failure to comply with Rule 32.2(b)(2)(B) “does not bar a judge from ordering forfeiture at sentencing subject to harmless-error principles on appellate review.”
During a two-year crime stint, petitioner Louis McIntosh committed, or attempted to commit, various violent robberies. During one such completed crime, McIntosh and his cohorts obtained at gunpoint $70,000 from a victim; just five days later, McIntosh purchased a BMW with cash and money orders. In 2011, McIntosh was indicted “on multiple counts of Hobbs Act robbery and firearm offenses.” In the indictment and a subsequent bill of particulars, the Government sought forfeiture of currency obtained from the charged crimes and the BMW, which it alleged was derived from offense proceeds. Eventually, a jury convicted McIntosh. “As part of the sentence, the District Court imposed a forfeiture of ‘$75,000 and the BMW’ as ‘fruits of the crime[s],’ and ordered the Government to ‘submit an order of forfeiture’” within a week for the court’s signature. The Government failed to do so. On appeal, the Second Circuit granted the Government’s unopposed motion for a remand to the district court to supplement the record with a formal forfeiture order and allow McIntosh to contest the timeliness of said order. The district court, over McIntosh’s objection, entered a restitution and forfeiture order based on its conclusions that, because “Rule 32.2(b)(2)(B) is a time-related directive,” it “retained the power to order forfeiture,” and the Government’s failure to comply with this directive did not prejudice McIntosh. The Second Circuit affirmed in relevant part on similar grounds. In an opinion by Justice Sotomayor, the Court affirmed.
As an initial matter, the Court noted that, of its three previously identified categories of time limits, this case involved only two: (1) mandatory claim-processing rules, and (2) time-related directives. On the one hand, McIntosh argued that Rule 32.2(b)(2)(B) is a mandatory claim-processing rule, which by its nature “‘regulate[s] the timing of [parties’] motions or claims brought before the court,’” is “subject to waiver and forfeiture by a litigant,” and noncompliance is presumptively prejudicial. Conversely, the Government asserted that the rule is a time-related directive, which generally encourages speedy decision-making by directing judges to act within a certain time and, as relevant to this case, is subject to harmless-error appellate review.
In agreeing with the Second Circuit and the Government that Rule 32.2(b)(2)(B) is a time-related directive, the Court first discussed its prior precedent in which it had recognized “that certain deadlines, if missed, do not deprive a public official of the power to take the action to which the deadline applies.” The common thread in those cases was “timing provisions that did not specify a consequence for the public officials’ noncompliance with the prescribed deadlines.” Without specified consequences, courts will not ordinarily “impose their own . . . coercive sanction . . . nor typically attribute ‘intent to limit an [official’s] power to get a mandatory job done merely from a specification to act by a certain time.’” Next, the Court listed Rule 32.2(b)(2)(B)’s features demonstrating that it was a time-related directive. First, the plain language of the rule provides an “impracticality exception” and a “sufficiently-in-advance” of sentencing condition, which show its contemplated “flexibility regarding the timing of a preliminary order’s entry.” Second, like the Court’s prior precedent noted above, Rule 32.2(b)(2)(B) “does not specify a consequence for noncompliance with its timing provisions.” (Quotation marks omitted.) Lastly, like other typical time-related directives, the rule here governs the district court’s conduct rather than that of the litigants.
In reaching this conclusion, the Court was not persuaded by McIntosh’s reliance on the rule’s inclusion of the word “must” as evidence of its mandatory nature. To the contrary, the Court recounted occasions in which it had held that a statute was a time-related directive despite its inclusion of a mandatory term such as “shall.” Finally, because McIntosh failed to raise it at the certiorari or briefing stages, the Court would not consider the correctness of the lower courts’ determination that he had failed to establish prejudice from the untimely preliminary order.
NAAG Center for Supreme Court Advocacy Staff
- Dan Schweitzer, Director and Chief Counsel
- Melissa Patterson, Supreme Court Fellow
- Amanda Schwartz, Supreme Court Fellow
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