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Preemption of consumer protection laws, bankruptcy claims, COVID mandates and … Chevron deference again?

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The Relist Watch column examines cert petitions that the Supreme Court has “relisted” for its upcoming conference. A short explanation of relists is available here.

After the big October 6 conference (239 petitions and applications pending), this Friday we have a much smaller conference, at which the justices will be considering just 81 petitions and applications.

Twelve of those cases were originally at the court’s end-of-summer “long conference” and are being considered a third time. From last week’s relists, Blankenship v. NBCUniversal was denied as anticipated, which drew a separate opinion from Justice Clarence Thomas noting that he would be inclined to reconsider New York Times v. Sullivan, which holds that public figures cannot recover for defamation consistent with the First Amendment unless they demonstrate the press acted recklessly or knowing their statements were false. The rest of those cases return to be considered again at this conference.

Five of this Friday’s cases were first considered at last Friday’s conference and will be given a second look on Friday.

 Preemption of consumer protection laws

The National Bank Act – as amended by the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 – provides that “State consumer financial laws are preempted” as applied to national banks “only if” the law, among other things, “prevents or significantly interferes with the exercise by the national bank of its powers,” “in accordance with the legal standard for preemption in … Barnett Bank of Marion County, N. A. v. Nelson,…517 U.S. 25 (1996).” Yes, the statute really does have a full cite to the opinion in it.

The California state law at issue in Flagstar Bank v. Kivett, and the New York state law in Cantero v. Bank of America, require banks to pay at least 2% interest annually on escrow accounts associated with residential mortgages. To ensure timely payment of property taxes and insurance premiums, many mortgage lenders require borrowers to deposit money into escrow accounts, which often carry a significant positive balance. To curb lenders’ perceived incentives to require excessive escrow deposits, 13 states have required lenders, including national banks, to pay a minimum interest rate on mortgage escrow balances. Respondents William Kivett and Bernard and Lisa Bravo filed a class action (which the district court later certified) against mortgage lender Flagstar for not paying interest on their escrow accounts. The U.S. Court of Appeals for the 9th Circuit held that the California law requiring escrow interest was not preempted by the National Bank Act. In New York, petitioner Alex Cantero and petitioners Saul Hymes and Ilana Harwayne-Gidansky separately filed two putative class actions raising the same claim against their lenders. Because Cantero’s mortgage pre-dated Dodd-Frank, the U.S. Court of Appeals for the 2nd Circuit applied general preemption principles to his case, and concluded that New York’s interest-on-escrow law was preempted because it “would exert control over banks’ exercise of th[e] power” to “create and fund escrow accounts.” It then concluded with respect to the Hymes/Harwayne-Gidansky suit that the Dodd-Frank language quoted above simply codified the pre-existing legal standard and held their claims preempted.

Back in March, the Supreme Court invited the solicitor general to file a brief expressing the views of the United States on these cases. She has now filed her brief. In short, she says neither court applied the right test, which should have focused on “a practical assessment of the degree to which the state law will impede the exercise of those powers”; the 2nd Circuit’s decision was “especially flawed because it logically implies that substantially all State consumer financial laws will be preempted,” in contravention of the Dodd-Frank Act. But she argues that the Court’s review is unwarranted at this time because both cases are flawed vehicles, though she says Flagstar is the better of the two. Specifically, she contended, the Second Circuit didn’t pay enough attention to Dodd-Frank because it mistakenly believed it did not apply to one plaintiff, and Flagstar has only been regulated as a National Bank since 2011. Moreover, it’s a “shallow conflict” and a third court of appeals is set to weigh in soon. We’ll see if the Supreme Court is persuaded.

Standing to raise bankruptcy claims

 Truck Insurance Exchange v. Kaiser Gypsum Company, Inc. raises the issue of who may assert claims in bankruptcy court. The case involves an insurance company’s attempt to block its insured’s Chapter 11 reorganization plan, which establishes a trust for certain current and future asbestos personal-injury liabilities. But the plan treats holders of insured and uninsured asbestos personal-injury claims differently. Insured claims would essentially be brought against the insurance company subject to the insurer’s pre-existing rights, but uninsured claims would be submitted directly to the trust – and, here’s the rub, only the persons bringing uninsured claims would be required to provide disclosures to ensure the trust paid only valid, non-duplicative claims. For insured claims, the insurer would have to seek the same information in litigation on a case-by-case basis.  Petitioner Truck Insurance Exchange says it is a “party in interest” and is entitled to “raise” and “be heard on any issue” in a Chapter 11 proceeding, and should be permitted to intervene and argue that it is entitled to similar protections.

Truck Insurance Exchange was the sole objector to the plan. The bankruptcy court confirmed the plan, saying that the insurer was not a “party in interest” because the bankruptcy plan left its rights under its insurance contracts where it found them – in the parlance of the case law, it was “insurance neutral.”. The district court affirmed the plan and Truck appealed. The U.S. Court of Appeals for the 4th Circuit agreed with the bankruptcy court that Truck was not a “party in interest” because the plan did not alter Truck’s policy rights, and the rights Truck was asserting never existed under the policies.

Truck Insurance now seeks to revisit that conclusion. It’s assisted in that regard by the Fourth Circuit’s statement in a footnote that “[w]e recognize that courts are split on the interplay of Article III [standing] and” the Bankruptcy Code. We’ll know more soon.

COVID vaccination mandates and mootness

In 2021, President Joe Biden issued an executive order requiring federal executive branch employees to be vaccinated against COVID-19 as a condition of employment, subject to religious and medical exemptions. The en banc U.S. Court of Appeals for the 5th Circuit held that a group called “Feds for Medical Freedom” could challenge that requirement in federal district court, despite the provisions of the Civil Service Reform Act of 1978 channeling federal employees’ challenges to adverse personnel actions to the Merit Systems Protection Board, subject to review by the U.S. Court of Appeals for the Federal Circuit. The 5th Circuit also affirmed a preliminary injunction forbidding the government from enforcing the vaccination requirement against any federal employee nationwide. Two days earlier, the U.S. Court of Appeals for the District of Columbia Circuit concluded that the Civil Service Reform Act barred such a suit brought by Jason Payne, a civilian employee of the Department of the Navy. About six weeks later, the president revoked the executive order as part of a broader wind-down of COVID-19 emergency policies based on changed public-health conditions.

There are now two petitions before the court seeking the familiar remedy of so-called Munsingwear vacatur, under which parties that lost in the courts of appeals ask the Supreme Court to vacate the adverse judgment they were unable to appeal because an intervening circumstances made the controversy moot. There’s just one problem: In U.S. Bancorp Mortgage Co. v. Bonner Mall Partnership, the Supreme Court held that vacatur would not be ordered when the petitioner was substantially responsible for the mootness – there, because the case was mooted by settlement. The Supreme Court explained that vacatur due to intervening mootness is an equitable doctrine designed to rescue a losing party whose only opportunity to have an adverse judgment set aside has been frustrated by either the “unilateral action of the party who prevailed below” or the “vagaries of circumstance.” 

Here, the Biden administration agrees to Payne’s request for vacatur, although it opposes Payne’s additional request for further consideration in light of Axon Enterprise, Inc. v. FTC, in which the Supreme Court more recently held that a plaintiff’s structural constitutional claim was not preempted by the SEC’s administrative review scheme. In Feds for Medical Freedom, the Biden administration argues that Munsingwear vacatur fundamentally turns on equity, and “[n]o principle of equity would support requiring the President to maintain the vaccination requirement, despite his determination that it is now unnecessary, merely to preserve the opportunity to ask this Court to review the Fifth Circuit’s erroneous decision.” The solicitor general notes other instances where Munsingwear vacatur was permitted after the executive ceased certain contested policies for reasons “undertaken in good faith and for reasons unrelated to litigation.”  Feds for Medical Freedom argue the government should not be able to get rid of an adverse precedent by dropping its policy.

Chevron deference?

At the risk of engaging in mission creep by expanding our area of discussion beyond relists, there’s one last case that hasn’t been relisted that I’d still like to discuss briefly.

The Supreme Court did something in Relentless, Inc. v. Department of Commerce that I’ve never seen done before: They took a case that had already been scheduled for consideration at a later conference under the court’s usual, published case distribution schedule (here, the October 27 conference), and rescheduled it to be considered at an earlier conference (here, this Friday’s conference). Before, rescheduling has always been used to delay a case’s consideration.

One possible reason for the change is apparent from the subject of the case: it raises the very same question as Loper Bright Enterprises v. Raimondo – whether the Supreme Court should reconsider Chevron deference – in the very same context (an administrative rule requiring herring fishing boats to pay for federal monitors). Ordinarily, such a similar case would simply be held for resolution based on the case the court had already granted. But here, there is a reason the court might want to grant Relentless in addition to, or instead of Loper Bright (though that strikes me as less likely).  The possible attraction is that while Justice Ketanji Brown Jackson is recused from Loper Bright because it was decided by the court she was then serving on, she could participate in Relentless. Participation by all nine justices increases the chance that the court will be able to have a majority vote for any disposition.

That’s all for this week. Stay safe!

New relists

Flagstar Bank v. Kivett, 22-349

Issue: Whether the National Bank Act preempts state laws that, like California Civil Code § 2954.8(a), attempt to set the terms on which federally chartered banks may offer mortgage escrow accounts authorized by federal law. CVSG: 8/30/2023
(relisted after the Oct. 6 conference)

Cantero v. Bank of America, N.A., 22-529
Issue: Whether the National Bank Act preempts the application of state escrow-interest laws to national banks. CVSG: 8/30/2023
(relisted after the Oct. 6 conference)

Truck Insurance Exchange v. Kaiser Gypsum Company, Inc., 22-1079
Issue: Whether an insurer with financial responsibility for a bankruptcy claim is a “party in interest” that may object to a plan of reorganization under Chapter 11 of the Bankruptcy Code.
(relisted after the Oct. 6 conference)

Payne v. Biden, 22-1225
Issues: (1) Whether the judgment below should be vacated and the case remanded for dismissal as moot under United States v. Munsingwear, Inc; and (2) alternatively, whether the judgment below should be vacated and the case remanded for further consideration in light of Axon Enterprise v. Federal Trade Commission.
(relisted after the Oct. 6 conference)

Biden v. Feds for Medical Freedom, 23-60
Issue: Whether, pursuant to United States v. Munsingwear, Inc., this court should vacate the court of appeals’ judgment and remand with instructions to direct the district court to vacate its order granting a preliminary injunction as moot.
(rescheduled before the Sept. 26 conference; relisted after the Oct. 6 conference)

Returning relists

Johnson v. Prentice, 22-693
Issue: Whether punitively depriving a prisoner in solitary confinement of virtually all exercise for three years notwithstanding the absence of a security justification violates the Eighth Amendment, or whether such a denial only violates the Eighth Amendment if it is imposed in response to an “utterly trivial infraction.”
(relisted after the Sept. 26 and Oct. 6 conferences)

King v. Brownback, 22-912
Issue: Whether the Federal Tort Claims Act’s judgment bar, which this court has repeatedly said functions in much the same way as the common-law doctrine of res judicata, nevertheless operates to bar claims brought together in the same action.
(relisted after the Sept. 26 and Oct. 6 conferences)

Tingley v. Ferguson, 22-942
Issues: (1) Whether a law that censors conversations between counselors and clients as “unprofessional conduct” violates the free speech clause of the First Amendment; and (2) whether a law that primarily burdens religious speech is neutral and generally applicable, and if so, whether the court should overrule Employment Division v. Smith.
(relisted after the Sept. 26 and Oct. 6 conferences)

Thornell v. Jones, 22-982
Issue: Whether the U.S. Court of Appeals for the 9th Circuit violated this court’s precedents by employing a flawed methodology for assessing prejudice under Strickland v. Washington when it disregarded the district court’s factual and credibility findings and excluded evidence in aggravation and the state’s rebuttal when it reversed the district court and granted habeas relief.
(relisted after the Sept. 26 and Oct. 6 conferences)

Gonzalez v. Trevino, 22-1025
Issues: (1) Whether the probable-cause exception in Nieves v. Bartlett can be satisfied by objective evidence other than specific examples of arrests that never happened; and (2) whether Nieves is limited to individual claims against arresting officers for split-second arrests.
(relisted after the Sept. 26 and Oct. 6 conferences)

74 Pinehurst LLC v. New York, 22-1130
Issues: (1) Whether a law that prohibits owners from terminating a tenancy at the end of a fixed lease term, except on grounds outside the owner’s control, constitutes a physical taking; and (2) whether allegations that such a law conscripts private property for use as public housing stock, and thereby substantially reduces its value, state a regulatory takings claim.
(relisted after the Sept. 26 and Oct. 6 conferences)

North Carolina Farm Bureau Federation v. People for the Ethical Treatment of Animals, Inc., 22-1148
Issue: Whether a worker planted in a business to collect information for their true employer, and who does so in nonpublic areas of the business, is immunized by the First Amendment from an action for trespass and breach of loyalty created by a content-neutral statute of general applicability.
(relisted after the Sept. 26 and Oct. 6 conferences)

Stein v. People for the Ethical Treatment of Animals, Inc., 22-1150
Issue: Whether the First Amendment prohibits applying state tort law against double-agent employees who gather information, including by secretly recording, in the nonpublic areas of an employer’s property and who use that information to breach their duty of loyalty to the employer.
(relisted after the Sept. 26 and Oct. 6 conferences)

335-7 LLC v. City of New York, NY, 22-1170
Issues: (1) Whether New York’s Rent-Stabilization Laws and accompanying regulations effect a per se physical taking by expropriating petitioners’ right to exclude; (2) whether the laws effect a confiscatory taking by depriving petitioners of a just and reasonable return; and (3) whether the laws effect a regulatory taking as an unconstitutional use restriction of petitioners’ property.
(relisted after the Sept. 26 and Oct. 6 conferences)

Glossip v. Oklahoma, 22-6500
Issues: (1) Whether a court may require a defendant to demonstrate by clear and convincing evidence that no reasonable fact finder would have returned a guilty verdict to obtain relief for a violation of Brady v. Maryland; and (2) whether suppressed impeachment evidence of the state’s key witness is per se non-material under Brady because that witness’ credibility had been otherwise impeached at trial.
(rescheduled before the Mar. 17, Mar. 24, Mar. 31, Apr. 14, Apr. 21, Apr. 28, and May 11 conferences; relisted after the Sept. 26 and Oct. 6 conferences)

Glossip v. Oklahoma, 22-7466
Issues: (1) Whether the state’s suppression of the key prosecution witness’ admission that he was under the care of a psychiatrist and failure to correct that witness’ false testimony about that care and related diagnosis violate the due process of law under Brady v. Maryland and Napue v. Illinois; (2) whether the entirety of the suppressed evidence must be considered when assessing the materiality of Brady and Napue claims; and (3) whether due process of law requires reversal where a capital conviction is so infected with errors that the state no longer seeks to defend it.
(relisted after the Sept. 26 and Oct. 6 conferences)

E.I. du Pont de Nemours & Co. v. Abbott, 23-13
Issue: Whether nonmutual offensive collateral estoppel can be applied to make the results of a handful of unrepresentative bellwether trials binding on the defendant in all pending and future cases in a multi-district litigation.
(relisted after the Sept. 26 and Oct. 6 conferences)

Recommended Citation: John Elwood, Preemption of consumer protection laws, bankruptcy claims, COVID mandates and … Chevron deference again?, SCOTUSblog (Oct. 11, 2023, 2:17 PM),