RELIST WATCH

Six cases to look out for

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.

With just a few weeks left before the Supreme Court’s summer recess, we’re entering the busiest phase of the year for relists. The court granted review in two cases on Monday: one-time relist Facebook v. Amalgamated Bank, involving what disclosures are required under federal securities law, and two-time relist Advocate Christ Medical Center v. Becerra, involving the calculation of reimbursement rates under the Medicare Act. The rest of the relists are all returning for another week.

There are six newly relisted cases this week, so I’m going to be more summary than usual in describing them. This week’s relists are a real grab bag of issues.

Coverage of federal fraud statutes 

Porat v. United States and Kousisis v. United States both raise the question whether deception to induce a commercial exchange can constitute federal mail or wire fraud, even if the defendant does not intend to cause economic harm and the alleged victim receives the goods or services for which it paid. Moshe Porat was Dean of the Fox School of Business at Temple University. He falsified data to improve the school’s U.S. News and World Report ranking, such as by claiming that 100% of Fox’s online MBA students had taken the Graduate Management Admission Test, when the actual number was much lower. More students chose to attend Fox as the school did well in the rankings for several years, and Porat trumpeted the ratings to emphasize that students would benefit from their association with the school. After his scheme was discovered, the school’s ratings plummeted. Porat was convicted of fraud, and the U.S. Court of Appeals for the 3rd Circuit affirmed his conviction.

Similarly, to permit them to do public works projects in the Philadelphia area, Stamatios Kousisis and his company, Alpha Painting & Construction Co., Inc., used as a front a company that qualified as a “disadvantaged business enterprise,” though the DBE performed no actual work. Kousisis was convicted at trial. On appeal, he raised the same claim as Porat, arguing that the schemes did not constitute mail or wire fraud because they were not intended to cause economic harm, and he also argued that because the DBE’s involvement was intangible, Kousisis and Alpha did not actually defraud the government of any “property,” as federal law requires. The 3rd Circuit rejected his claims and affirmed his conviction.

In their petitions, both Porat and Kousisis renew their claims. The current Supreme Court is demonstrably skeptical of broad interpretations of federal fraud laws, so the justices are likely taking a very close look at both cases.

Standard of proof for Fair Labor exemptions

Congress enacted the Fair Labor Standards Act of 1938 to protect workers by establishing federal minimum-wage and overtime guarantees for any hours worked over 40 in a workweek. The FLSA exempts several categories of employees from its minimum-wage and overtime requirements.

E.M.D. Sales, Inc. v. Carrera involves what standard of proof applies to determining whether one of the many statutory exemptions from minimum-wage and overtime requirements applies. E.M.D. Sales is a distributor of food products in the DC area. Faustino Sanchez Carrera and two others are their sales representatives, who sued the company for failing to pay them overtime when they worked more than 40 hours per week. E.M.D. argued that the employees qualified for the “outside salesman” FLSA exemption. The district court held that E.M.D. had failed to prove the exemption applied by “clear and convincing evidence,” and the U.S. Court of Appeals for the 4th Circuit affirmed, concluding it was bound by circuit precedent.

E.M.D. petitioned for review, arguing that six other courts of appeals hold that exemptions only need to be established by a preponderance of the evidence. The court called for the views of the solicitor general, which has now weighed in — strongly in favor of E.M.D. The solicitor general argues for summary reversal of the 4th Circuit because “[t]he court of appeals’ adoption of the clear-and-convincing evidence standard … is unreasoned and inconsistent” with Supreme Court decisions that have “long recognized that such a heightened standard of proof should not be applied to ordinary civil cases seeking monetary remedies.” The government adds that plenary review and argument are not necessary “[i]n light of the obviousness of the error.” This case is one to watch.

Pleading under the PSLRA

Swedish investment management firm E. Öhman J:or Fonder AB and others sought to bring a class action on behalf of all persons or entities who purchased or otherwise acquired common stock of computer-maker NVIDIA Corporation, claiming that the company had intentionally understated its reliance on sales to cryptocurrency miners, which are considered volatile.

The district court dismissed the complaint with leave to amend on two grounds: First, the complaint failed to describe the assumptions that its outside experts employed and the analysis it performed of NVIDIA’s finances, purportedly to show that NVIDIA knew it wasn’t telling shareholders the truth; and, second, the complaint’s allegations of the company’s knowledge of wrongdoing depended on internal company documents that contradicted public statements, but the complaint’s allegations failed to describe those documents with specificity. The district court held that the allegations were inadequate under the heightened pleading standards of the Private Securities Litigation Reform Act, which Congress adopted to curb perceived abuses of securities litigation.

A divided panel of the U.S. Court of Appeals for the 9th Circuit reversed. The majority held that the description of the plaintiffs’ expert report was sufficiently particular to survive a motion to dismiss; it also held that the plaintiffs had adequately pleaded that NVIDIA’s CEO “would have” known about supposed internal documents and that those documents “would have” reflected the same data that the plaintiffs’ expert created through after-the-fact calculations.

In dissent, Judge Gabriel Sanchez criticized the majority’s approach for “significantly erod[ing] the heightened pleading requirements for alleging securities fraud under the PSLRA.”

In NVIDIA Corp. v. E. Ohman J:or Fonder AB, the company argues that the 9th Circuit decision deepened one split among the courts of appeals and created a second. It contends that only one court of appeals agrees with the 9th Circuit’s ruling on knowledge of wrongdoing, while five other circuits have held that plaintiffs seeking to plead such knowledge based on internal company documents must plead with particularity the actual contents of those documents.

It also alleges that the 9th Circuit created a split as the court diverged from opinions of two other courts of appeals holding that a plaintiff’s expert opinion could not substitute for particularized allegations of falsity. NVIDIA is supported by “friend of the court” briefs filed by a securities professor, former SEC officials, trade groups and think tanks.

The False Claims Act and the E-rate program

The Telecommunications Act of 1996 directs the FCC to promote universal access to telecommunications services. In response, the FCC established the Schools and Libraries Universal Service Support program, popularly known as the E-rate program, to provide discounted services to eligible schools and libraries. The program is administered by a private, nonprofit corporation and funded entirely by statutorily required contributions from private telecommunications carriers. After telecommunications carriers provide services to eligible schools and libraries, either the schools and libraries or the providers can submit reimbursement requests to the private corporation for the amount of the discount. In this way, the E-rate program distributes up to $4.5 billion each year.

Todd Heath sued Wisconsin Bell under the False Claims Act, alleging that the company charged schools and libraries impermissibly high prices under the E-rate program, thereby rendering each reimbursement request a false claim. Wisconsin Bell moved to dismiss on the ground that the alleged submissions were not actionable “claims” under the FCA because they didn’t involve government funds or requests to government agents.

The district court denied Wisconsin Bell’s motion to dismiss on that ground but then granted it on the grounds (not relevant here) that Heath failed to offer evidence of falsity or knowledge of wrongdoing. The U.S. Court of Appeals for the 7th Circuit reversed. In a brief discussion, the court declined to affirm on the alternative ground that the reimbursement requests were not paid “using funds provided by the federal government,” and therefore are not “claims” under the FCA. The court held that the jury should decide whether “government funds were involved in the payments.”

Wisconsin Bell asked the full 7th Circuit to hear the case, noting that a panel of the U.S. Court of Appeals for the 5th Circuit had held that false statements in the E-rate program would not support a False Claims Act action. The panel issued an amended opinion that reached the same result but analyzed the issue in more depth, offering three reasons the argument failed. First, the “United States Government provides [a] portion of the money or property which is requested or demanded” from the fund, because “collections of delinquent debts to the Fund, along with penalties and interest, as well as civil settlements and criminal restitution payments” temporarily passed through U.S. Treasury accounts on their way to the fund. Second, the private company that administered the funds is an “agent of the United States,” because it “act[s] on the government’s behalf.” Third, there was a “sufficiently close nexus” between the company and the federal government “that a loss to the former is effectively a loss to the latter.”

In Wisconsin Bell, Inc. v. United States ex rel. Heath, the telecom company renews its contention that reimbursement requests submitted to the E-rate program are not “claims” under the False Claims Act because they don’t implicate federal funding, and it argues that the decision conflicts with the law of the 5th Circuit.

Heath argues that the FCA applies to the E-rate program because a portion of the funding comes from the U.S. Treasury, and the organization acts as an agent of the United States in administering the funds. He also argues that many of the facts about how the program actually operates only came to light after the 5th Circuit’s ruling, and so there is not any actual conflict.

A Batson claim in a capital case 

That brings us to our last relist: Broadnax v. Texas. James Garfield Broadnax, who is Black, was convicted of murdering two people, both of whom were white, by a nearly all-white jury in Texas. The prosecution struck all seven Black prospective jurors, though the trial court then restored one to the jury panel. The trial court said it was troubled by the “disproportionate number of African-Americans who were struck,” but it was reluctant to grant Broadnax’s challenge to the strikes under Batson v. Kentucky because “it implies some sort of nefarious intent on the part of prosecutors.” Broadnax was convicted and sentenced to death.

Years later, after Broadnax’s initial state post-conviction proceedings had concluded, the prosecution disclosed a spreadsheet prosecutors had used during jury selection that marked all Black prospective jurors in bold text, and included an annotation that a particular Black prospective juror “seems okay,” and that the prosecutor’s “only concern” was the “juror’s age and race.”

Broadnax raised a Batson claim that the prosecution had impermissibly excluded jurors based on race. But the Texas Court of Criminal Appeals summarily dismissed Broadnax’s application for failing to satisfy the threshold requirements of Texas Criminal Procedure Code article 11.071 § 5(a)(1), apparently meaning he had not shown that he could not have raised the claim earlier. In his petition, Broadnax challenges that conclusion. The Supreme Court has already requested the record in this case and rescheduled the case five times, so obviously, at least one of the justices is looking closely at the case.

We’ll know more soon. Until next time!

New Relists

E.M.D. Sales, Inc. v. Carrera, 23-217
Issue: Whether the burden of proof that employers must satisfy to demonstrate the applicability of a Fair Labor Standards Act exemption is a mere preponderance of the evidence or clear and convincing evidence. CVSG: 5/7/2024
(rescheduled before the Dec. 1 conference; relisted after the June 6 conference) 

Broadnax v. Texas, 23-248
Issue: Whether the Texas Court of Criminal Appeals’ decision that James Broadnax failed to establish a prima facie equal protection claim conflicts with this court’s decision in Batson v. Kentucky.
(rescheduled before the Jan. 5, May 9, May 16, May 23 and May 30 conferences; relisted after the June 6 conference)

Porat v. United States, 23-832
Issue: Whether deception to induce a commercial exchange can constitute mail or wire fraud under 18 U.S.C. §§ 1341 and 1343, even if the defendant does not intend to cause economic harm and the alleged victim receives the goods or services for which it paid.
(rescheduled before the April 12 and May 30 conferences; relisted after the June 6 conference)

Kousisis v. United States, 23-909
Issues: (1) Whether deception to induce a commercial exchange can constitute mail or wire fraud, even if inflicting economic harm on the alleged victim was not the object of the scheme; (2) whether a sovereign’s statutory, regulatory, or policy interest is a property interest when compliance is a material term of payment for goods or services; and (3) whether all contract rights are “property.”
(rescheduled before the May 30 conference; relisted after the June 6 conference)

NVIDIA Corp. v. E. Ohman J:or Fonder AB, 23-970
Issues: (1) Whether plaintiffs seeking to allege scienter under the Private Securities Litigation Reform Act based on allegations about internal company documents must plead with particularity the contents of those documents; and (2) whether plaintiffs can satisfy the Act’s falsity requirement by relying on an expert opinion to substitute for particularized allegations of fact.
(relisted after the June 6 conference)

Wisconsin Bell, Inc. v. United States ex rel. Heath, 23-1127
Issue: Whether reimbursement requests submitted to the Federal Communications Commission’s E-rate program are “claims” under the False Claims Act.
(relisted after the June 6 conference)

Returning Relists

Hamm v. Smith, 23-167
 Issues: (1) Whether Hall v. Florida and Moore v. Texas mandate that courts deem the standard of “significantly subaverage intellectual functioning” for determining intellectual disability in Atkins v. Virginia satisfied when an offender’s lowest IQ score, decreased by one standard error of measurement, is 70 or below; and (2) whether the court should overrule Hall and Moore, or at least clarify that they permit courts to consider multiple IQ scores and the probability that an offender’s IQ does not fall at the bottom of the lowest IQ score’s error range.
(relisted after the Jan. 5, Jan. 12, Jan. 19, Feb. 16, Feb. 23, Mar. 1, Mar. 15, Mar. 22, Mar. 28, Apr. 12, Apr. 19, Apr. 26, May 9, May 16, May 23, May 30 and June 6 conferences)

L.W. v. Skrmetti, 23-466
Issues: (1) Whether Tennessee’s Senate Bill 1, which categorically bans gender-affirming healthcare for transgender adolescents, triggers heightened scrutiny and likely violates the 14th Amendment’s equal protection clause; and (2) whether Senate Bill 1 likely violates the fundamental right of parents to make decisions concerning the medical care of their children guaranteed by the 14th Amendment’s due process clause.
(rescheduled before the Mar. 15, Mar. 22, Mar. 28, Apr. 12, Apr. 19, Apr. 26 and May 9 conferences; relisted after the May 16, May 23, May 30 and June 6 conferences)

United States v. Skrmetti, 23-477
Issue: Whether Tennessee Senate Bill 1, which prohibits all medical treatments intended to allow “a minor to identify with, or live as, a purported identity inconsistent with the minor’s sex” or to treat “purported discomfort or distress from a discordance between the minor’s sex and asserted identity,” violates the equal protection clause of the 14th Amendment.
(rescheduled before the Mar. 15, Mar. 22, Mar. 28, Apr. 12, Apr. 19, Apr. 26 and May 9 conferences; relisted after the May 16, May 23 and May 30 conferences)

Jane Doe 1 v. Kentucky ex rel. Coleman, Attorney General, 23-492
Issues: (1) Whether, under the 14th Amendment’s due process clause, Kentucky Revised Statutes Section 311.372(2), which bans medical treatments “for the purpose of attempting to alter the appearance of, or to validate a minor’s perception of, the minor’s sex, if that appearance or perception is inconsistent with the minor’s sex,” should be subjected to heightened scrutiny because it burdens parents’ right to direct the medical treatment of their children; (2) whether, under the 14th Amendment’s equal protection clause, § 311.372(2) should be subjected to heightened scrutiny because it classifies on the basis of sex and transgender status; and (3) whether petitioners are likely to show that § 311.372(2) does not satisfy heightened scrutiny.
(rescheduled before the Mar. 15, Mar. 22, Mar. 28, Apr. 12, Apr. 19, Apr. 26 and May 9 conferences; relisted after the May 16, May 23, May 30 and June 6 conferences)

Harrel v. Raoul, 23-877
Issues: (1) Whether the Constitution allows the government to prohibit law-abiding, responsible citizens from protecting themselves, their families, and their homes with semiautomatic firearms that are in common use for lawful purposes; (2) whether the Constitution allows the government to prohibit law-abiding, responsible citizens from protecting themselves, their families, and their homes with ammunition magazines that are in common use for lawful purposes; and (3) whether enforcement of Illinois’s semiautomatic firearm and ammunition magazine bans should be enjoined.
(relisted after the May 16, May 23, May 30 and June 6 conferences)

Herrera v. Raoul, 23-878
Issues: (1) Whether semiautomatic rifles and standard handgun and rifle magazines do not count as “Arms” within the ordinary meaning of the Second Amendment’s plain text; and (2) whether there is a broad historical tradition of states banning protected arms and standard magazines from law-abiding citizens’ homes.
(relisted after the May 16, May 23, May 30 and June 6 conferences)

Barnett v. Raoul, 23-879
Issue: Whether Illinois’ sweeping ban on common and long-lawful arms violates the Second Amendment.
(relisted after the May 16, May 23, May 30 and June 6 conferences)

National Association for Gun Rights v. City of Naperville, Illinois, 23-880
Issues: (1) Whether the state of Illinois’ ban of certain handguns is constitutional in light of the holding in District of Columbia v. Heller that handgun bans are categorically unconstitutional; (2) whether the “in common use” test announced in Heller is hopelessly circular and therefore unworkable; and (3) whether the government can ban the sale, purchase, and possession of certain semi-automatic firearms and firearm magazines that are possessed by millions of law-abiding Americans for lawful purposes when there is no analogous Founding-era regulation.
(relisted after the May 16, May 23, May 30 and June 6 conferences)

Langley v. Kelly, 23-944
Issues: (1) Whether the state of Illinois’ absolute ban of certain commonly owned semi-automatic handguns is constitutional in light of the holding in District of Columbia v. Heller that handgun bans are categorially unconstitutional; (2) whether the state of Illinois’ absolute ban of all commonly owned semi-automatic handgun magazines over 15 rounds is constitutional in light of the holding in Heller that handgun bans are categorially unconstitutional; and (3) whether the government can ban the sale, purchase, possession, and carriage of certain commonly owned semi-automatic rifles, pistols, shotguns, and standard-capacity firearm magazines, tens of millions of which are possessed by law-abiding Americans for lawful purposes, when there is no analogous historical ban as required by Heller and New York State Rifle & Pistol Ass’n, Inc. v. Bruen.
(relisted after the May 16, May 23, May 30 and June 6 conferences)

Gun Owners of America, Inc. v. Raoul, 23-1010
Issue: Whether Illinois’ categorical ban on millions of the most commonly owned firearms and ammunition magazines in the nation, including the AR-15 rifle, violates the Second Amendment.
(relisted after the May 16, May 23, May 30 and June 6 conferences)

Escobar v. Texas, 23-934
Issues: (1) 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; (2) whether the Texas Court of Criminal Appeals erred in holding there was no due process violation because there is “no reasonable likelihood” that the prosecution’s use of admittedly false, misleading, and unreliable DNA evidence to secure petitioner’s capital conviction could have affected any juror’s judgment.
(relisted after the May 30 conference)