October 27, 2023
Volume 31, Issue 2
This Report summarizes cases granted review on October 13 and 20, 2023 (Part I).
Part I: Cases Granted Review
Murthy v. Missouri, 23-411. The Court stayed a district court injunction, as modified by the Fifth Circuit, that limited the ability of various federal officials and agencies to communicate with social-media companies about their content moderation policies. The Court further treated the federal government’s application for a stay as a petition for a writ of certiorari, which it granted on the questions presented in the application, which were: “(1) Whether respondents have Article III standing; (2) Whether the government’s challenged conduct transformed private social-media companies’ content-moderation decisions into state action and violated respondents’ First Amendment rights; and (3) Whether the terms and breadth of the preliminary injunction are proper.”
Respondents―the States of Missouri and Louisiana and five individual social-media users―filed suit in federal court alleging that various federal officials and agencies (petitioners) engaged in public pressure campaigns, private meetings, and other direct communications with social-media platforms to compel the platforms to suppress disfavored speech, content, and viewpoints, which turned the platforms into state actors and violated the First Amendment. The district court agreed and granted respondents’ motion for a preliminary injunction. It enjoined 67 federal officials and entities from engaging in ten different types of communications with social-media companies regarding content moderation. It excepted matters concerning criminal activity, national security threats, and the like. The Fifth Circuit affirmed in part, though it narrowed the scope of the injunction.
Initially, the Fifth Circuit found that the individual respondents had standing because the past moderation of their posts caused them to self-censor their social-media activity. It also found a substantial risk that their injuries would reoccur because petitioners were in regular contact with the platforms and continued to enforce a misinformation policy. For the states, the Fifth Circuit reasoned they had standing because state actors’ posts had been removed, and the states had a right to speak and listen to their citizens on social media. On the merits, the Fifth Circuit concluded that the platforms’ content-moderation decisions were transformed into state action subject to the First Amendment where the government had coerced the platforms to such a degree that their decisions were found to be that of the government. The court concluded that coercion may be found not only by threats of punishment but also by a weighing of four factors: “(1) word choice and tone”; “(2) the recipient’s perception”; “(3) the presence of authority”; and “(4) whether the speaker refers to adverse consequences.” The court also stated that “significant encouragement” means the government “exercise[d] active, meaningful control over the private party’s decision.” The court then held that such “control” could be established by “entanglement in a party’s independent decision-making.” Based on those rulings, the Fifth Circuit ordered that “Defendants, and their employees and agents, shall take no actions, formal or informal, directly or indirectly, to coerce or significantly encourage social-media companies to remove, delete, suppress, or reduce, including through altering their algorithms, posted social-media content containing protected free speech. . . .”
The enjoined federal officials and entities (the federal government) argue that the Fifth Circuit’s decision violates Article III standing principles, state action and First Amendment principles, and equity principles. First, the federal government argues that the individual respondents lack standing because most of the challenged content moderation occurred before the challenged conduct and thus cannot be traced to the government. Even if it could, the federal government argues that such past activity does not amount to a live case or controversy, particularly where any future harm would be self-inflicted. For the state respondents, the federal government argues that a handful of injuries could not justify injunctive relief without an identified immediate threat of repeated injury. And it asserts that the right-to-listen justification was equally without merit because such a theory was boundless and would allow anyone to sue.
On the merits, the federal government contends that it is axiomatic that the government has a right to provide public information and advocate for its policies. And, it says, there is a fundamental difference between such persuasion and coercion. The Fifth Circuit’s decision was flawed, the federal government urges, because it failed to observe that difference and lacked supporting evidence of any threatened adverse action. Finally, the federal government argues that equity principles bar the injunction because its terms—precluding all posts on all social-media platforms by any person on any topic—sweeps farther than is necessary to address any harm to respondents.
Relentless, Inc. v. Dep’t of Commerce, 22-1219. This case presents the same question as a consolidated case, Loper Bright Enterprises v. Raimondo, Sec’y of Commerce, 22-451 (cert granted on May 1, 2023). That question is whether the Court should overrule Chevron v. Natural Res. Def. Council, 467 U.S. 837 (1984), “or at least clarify that statutory silence concerning controversial powers expressly but narrowly granted elsewhere in the statute does not constitute an ambiguity requiring deference to the agency.”
This case concerns the same statute and regulation as Loper Bright Enterprises. The National Marine Fisheries Service adopted a regulation under which the owners of covered vessels fishing for Atlantic herring can be required to pay for the services of third-party monitors, whom the vessels must carry onboard for some fishing trips to collect data for fishery conservation and management. These costs were estimated to be as much as $710 per day. The vessel owners sued, arguing that the regulation exceeded the agency’s statutory authority by requiring vessel owners to pay for the monitoring. The district court applied Chevron, which asks whether the statute is ambiguous and if so, whether the agency has a “permissible construction of the statute.” The court upheld the regulation at step two as a reasonable agency interpretation of an ambiguous statute. The First Circuit affirmed. 62 F.4th 621.
The First Circuit held that the regulation is a permissible exercise of the agency’s authority under the Magnuson-Stevens Act in line with the D.C. Circuit’s decision in Loper Bright Enterprises. The court held that the agency’s interpretation was “certainly reasonable” at the very least and found it unnecessary to specify whether it was at Chevron step one or two. The court found “clear textual support” for the agency’s interpretation in two provisions of the Act. These provisions authorized the agency to require observers on board vessels to collect data and to impose sanctions on vessel owners who failed to pay for observer services contracted by the owner. The court also inferred that Congress would expect vessel owners to pay for observers based on the “default norm” that regulated parties generally bear the cost of regulatory compliance.
Petitioners, the fishing vessel owners, argue that the Court should overrule or limit Chevron primarily because it violates judicial independence and due process. They contend that Chevron abdicates the judicial responsibility to say what the law is by forcing federal courts to let agencies interpret the law. They also contend that it is “patently unfair for a court to defer to an agency’s interpretation, especially when the agency itself is a litigant, before that same court, in the actual case at hand.” In addition, petitioners point out that Chevron is difficult to apply as seen by circuits split over the meaning of statutory silence—some circuits find silence ambiguous and grant deference and others conclude silence is a rejection of an agency interpretation. In terms of the First Circuit’s decision here, petitioners take issue with the court’s failure to commit to a Chevron step, its “presumption that regulated parties pay for all government costs of regulation,” and its “blithe disregard of the costs of regulation.” Petitioners also point to statutory provisions that authorize the agency to collect fees to fund observer programs, arguing that these provisions would be superfluous if Congress had granted the agency more general authority to require vessel owners to pay for third-party monitors.
The government is likely to respond to these contentions as it did in Loper Bright Enterprises. There, the government argued that petitioners failed to carry their heavy burden to overrule longstanding precedent. And the government explained that because Chevron is a tool of statutory construction, it does not surrender the judiciary’s power to the executive, nor does its application demonstrate judicial bias in violation of due process. The government also disputed petitioners’ claims about the workability of the framework and the court’s application of the doctrine to the fisheries regulation.
Cantero v. Bank of America, N.A., 22-529. At issue is whether the National Bank Act preempts the application of state escrow-interest laws to national banks. New York, like 12 other states, enacted a law requiring mortgage lenders to pay a minimal (2%) interest rate to borrowers on funds advanced by them to pay their property taxes and insurance premiums. These funds are held by the banks in mortgage escrow accounts. In the 2010 Dodd-Frank Act, Congress expressly required compliance with these laws and codified the preemption standard outlined by the Supreme Court in Barnett Bank of Mario Cnty., N.A., v. Nelson, 517 U.S. 25 (1996).
Petitioner Alex Cantero and two other New York Bank of America mortgage borrowers sued Bank of America for breach of contract after it declined to pay the interest rate on their mortgage loans despite agreeing to be bound by New York law in the mortgage contract. Bank of America filed a motion to dismiss, arguing that the National Bank Act preempted application of New York’s escrow-interest law. The district court denied the motion to dismiss, but certified the preemption question for interlocutory review. The Second Circuit reversed, holding that the National Bank Act preempted New York’s escrow-interest law when applied to national banks. 49 F.4th 121. Its inquiry did not turn on “how much a state law impacts a national bank, but whether it purports to ‘control’ the exercise of its powers.” The Second Circuit reasoned that New York’s law impermissibly exerted control over the bank’s exercise of its power to create and fund escrow accounts.
Petitioners argue that the Second Circuit’s opinion undermines the stability of the financial system because it has the potential to allow banks to reinstate a preemption regime that precipitated the 2008 financial crisis, where abusive mortgage lending could persist without state enforcement of consumer protection laws. Petitioners also argue that the Second Circuit’s opinion conflicts with Barnett Bank, which held that states have “the power to regulate national banks,” including a “bank’s exercise of its powers,” so long as “doing so does not prevent or significantly interfere with the national bank’s exercise of its powers.” New York’s law satisfies this standard, petitioners contend, because it does not bar creation of escrow accounts or limit the terms of their use.
Gonzalez v. Trevino, 22-1025. In Nieves v. Bartlett, 139 S. Ct. 1715 (2019), the Court held that having probable cause to make an arrest bars a claim against a police officer alleging that the arrest was to retaliate for speech protected under the First Amendment unless the plaintiff can show “that he was arrested when similarly situated individuals not engaged in the same sort of protected speech had not been.” In this case, the questions presented are (1) whether the Nieves exception permitting a retaliatory arrest claim despite the existence of probable cause “can be satisfied by objective evidence other than specific examples of arrests that never happened”; and (2) whether the Nieves rule requiring a lack of probable cause “is limited to individual claims against arresting officers for split-second arrests.”
A councilwoman, petitioner Sylvia Gonzalez, sued city officials, claiming they engineered her arrest in retaliation for criticizing and opposing the city manager. Her arrest was for tampering with or concealing a government record. The record in question was a citizen’s petition seeking to replace the city manager, which the councilwoman had inadvertently and briefly misplaced in her meeting binder. Although probable cause supported the arrest, the councilwoman alleged that the true motive was retaliation. She pointed to explicit and wholly unnecessary references to her protected activities in the arrest affidavit, to the fact that the tampering statute had never been used to arrest someone engaged in remotely similar conduct, and that she was jailed for a day inconsistent with the usual practice for those charged with nonviolent misdemeanors. The district court held that this evidence overcame the existence of probable cause and permitted her suit to proceed. A divided panel of the Fifth Circuit reversed. 42 F.4th 487.
The panel majority held that the councilwoman failed to present sufficient evidence to satisfy the Nieves exception. The plain language of the exception, it explained, “requires comparative evidence, because it required ‘objective evidence’ of ‘otherwise similarly situated individuals’ who engaged in the ‘same’ criminal conduct but were not arrested.” The court decided that Gonzalez’s claim came up short because she offered evidence that virtually everyone prosecuted under the tampering statute was for conduct different than hers, rather than pointing to a person who misplaced a document without engaging in protected speech and who was not arrested under the tampering statute. Judge Oldham dissented, concluding that the councilwoman met her burden and expressing skepticism that the absence of probable cause was necessary to bring a claim like hers. In Judge Oldham’s view, the Nieves probable-cause bar was meant to disentangle retaliatory and legitimate motives for warrantless arrests made in rapidly evolving, chaotic situations―in contrast to the councilwoman’s premediated arrest.
Gonzalez argues that her evidence satisfied the Nieves exception and in the alternative that the rule that probable cause defeats a retaliatory arrest claim should not apply to her case. She contends that reading the Nieves exception as the Fifth Circuit did blinds courts to other types of objective evidence of retaliatory intent like the evidence supporting her claim. Gonzalez also argues that Nieves is inapplicable because her arrest was based on a premediated plan, not an arresting officer’s quick judgment. She explains that probable cause acts as a proxy to address thorny causation issues when officers make on-the-spot warrantless arrests. In Nieves, the officer acted in the moment to arrest a drunken man for disorderly conduct after he repeatedly challenged the officer’s authority and urged others not to follow officer instructions. Gonzalez argues that her circumstances are unlike Nieves such that she need not show the lack of probable cause. Her situation “involve[d] desk-bound bureaucrats scheming for months to find an excuse to obtain a warrant and cause their critic to be jailed,” rather than “brave police officers making warrantless arrests in situations that are dangerous and chaotic.”
Truck Insurance Exchange v. Kaiser Gypsum, Co., 22-1079. Section 1109(b) of the Bankruptcy Code provides that any “party in interest” in a Chapter 11 bankruptcy proceeding, including the debtor and a creditor, “may appear and be heard on any issue.” The question presented is “[w]hether an insurer with financial responsibility for a bankruptcy claim is a ‘party in interest’ that may object to a Chapter 11 plan of reorganization.” Petitioner Truck Insurance Exchange insures Kaiser Gypsum Company and a cement company, and is responsible for defending the 14,000 asbestos claims made against those companies related to their asbestos-containing construction products. Kaiser negotiated a bankruptcy reorganization that initially omitted fraud protection measures, which were designed by the bankruptcy court in another case to help combat fraudulent, duplicative asbestos claims. Truck Insurance objected to the omission, and Kaiser went back to the drawing board. The revised reorganization plan included fraud protection measures, but only for uninsured claims. Truck Insurance unsuccessfully objected to the plan in bankruptcy court and in district court, both of which found that it lacked standing under §1109(b). The Fourth Circuit agreed with the lower courts. 60 F.4th 73.
The Fourth Circuit found that the plan was insurance neutral because it did not alter Truck Insurance’s policy rights or coverage obligations. Accordingly, held the court, Truck Insurance was not a party in interest in its capacity as an insurer because its rights were not sufficiently affected. The Fourth Circuit also found that Truck Insurance lacked standing as a creditor despite the inclusion of creditor in §1109(b). It reasoned that Truck Insurance objected only to sections of the plan that implicated third parties, not to its status as a “creditor,” and thus it failed to satisfy Article III standing requirements.
Truck Insurance argues that the Third Circuit takes a different approach and holds that the standing provisions in Article III and §1109(b) are coextensive. That court permits a debtor’s insurers to object to a plan’s confirmation because they are the funding source for the debtor’s liabilities, giving them an injury-in-fact. The Seventh and Fourth Circuit have rejected that view, and the Ninth Circuit has a foot in both camps. Truck Insurance urges the Supreme Court to adopt the Third Circuit’s view. Truck Insurance argues it is a party in interest because it has near-exclusive financial responsibility for claims against Kaiser under the plan, which also satisfies Article III. Lastly, Truck Insurance asserts that the Fourth Circuit erred because its insurance neutrality barrier conflicts with the plain language of §1109(b) and Supreme Court precedent.
NAAG Center for Supreme Court Advocacy Staff
- Dan Schweitzer, Director and Chief Counsel, (202) 326-6010
- Todd Grabarsky, Supreme Court Fellow
- Van Snow, Supreme Court Fellow
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