Winter 1999, Vol 24 No2

Supreme Court News

As this issue of the News goes to press, there have been few Supreme Court decisions issued. The first decision of the 1998 Term, however, was a labor relations case, in which the primary jurisdiction of the National Labor Relations Board was an issue. In Marquez v. Screen Actors Guild, Inc., 119 S.Ct. 292, Ms. Marquez sued the Guild alleging that it had breached its duty of fair representation under the National Labor Relations Act in its negotiation and enforcement of the A union security clause.@ Actions involving breach of a duty of fair representation may be brought initially in federal courts rather than before the NLRB. The NLRA by its terms authorizes agreements to require that all employees of the employer must be a member of the union, but Supreme Court decisions have interpreted that provision so that an employee may satisfy her Amembership@ requirement merely by paying an amount equal to that portion of union fees and dues that pay for collective bargaining, grievance adjustment, and contract administration. In this case, the union agreement parroted the union security clause provision of the NLRA; it did not mention the minimalist nature of the required membership. Moreover, the agreement required employees to become members of the union after 30 days of their first employment, while the NLRA provision only requires employees to become members 30 days after their employment. Ms. Marquez was a part-time actress who had worked in the industry for over 30 days without joining the union in the past, but now she was denied a part in a television show because she was not currently a member. She maintained that the NLRA required that she should have 30 days from this employment before she had to become a member.

The Court held that it was not a breach of the duty of fair representation to negotiate an agreement which quoted the NLRA=s union security provision without including additional language regarding the Supreme Court=s interpretation of that provision, resolving a circuit split on the issue, but it made clear that it was not deciding whether there had been a breach of the duty of fair representation in this case by a failure to inform Ms. Marquez of her right to Aminimal@ membership. As to whether the 30-day grace period language in the agreement was consistent with the language of the NLRA, the Court held that the district court did not have jurisdiction to hear the claim. This claim, the Court said, was not properly a claim for breach of the duty of fair representation, but a claim within the primary jurisdiction of the NLRB. AWhen a plaintiff=s only claim is that the union violated the NLRA, the plaintiff cannot avoid the jurisdiction of the NLRB by characterizing this alleged statutory violation as a breach of the duty of fair representation.@ In order to support a claim that a union breaches a duty of fair representation, a plaintiff=s claim must be based upon the union=s arbitrary, discriminatory, or bad faith actions, not just the simple violation of law. An important purpose of the primary jurisdiction of the NLRB, the Court otherwise explained, is Ato promote the uniform interpretation of the NLRA,@ and this purpose would be thwarted if simple disputes over the meaning of the NLRA could be fashioned into duty-of-fair-representation cases to be brought in federal district court. The Court stressed, however, that this did not mean federal courts were disabled from ruling on the meaning of the NLRA in Areal@ duty-of-fair-representation cases, where those statutory issues were really collateral to the duty-of-fair-representation issues.

A potentially major land use regulation Takings Clause case was argued in the first week of the Term. Monterey, Cal. v. Del Monte Dunes at Monterey, Ltd., 95 F.3d 1422 (9^th Cir. 1996), raises a number of issues, including an application of the Dolan v. City of Tigard proportionality test to a permit denial and the extent to which the judge and jury in an inverse condemnation action make determinations as to the reasonableness of the government action. The case involves a rather egregious example of a local government repeatedly denying permit applications for a development, in each case specifying the how the application could be changed so as to obtain approval but then denying the new application with new restrictions.

The second week of argument included the series of cases raising major challenges to the Telecommunications Act of 1996. See AT&T Corp. v. Iowa Utilities Board, decided below in two cases, Iowa Utilities Board v. FCC, 120 F.3d 753 (8^th Cir. 1997), and California v. FCC, 124 F.3d 934 (8^th Cir. 1997). The Eighth Circuit held that the FCC had exceeded its jurisdiction when it attempted to regulate certain prices charged by local exchange carriers under the Act and when it promulgated rules requiring LECs to provide certain services to competing carriers. At the same time, the Eighth Circuit upheld a number of FCC interpretations of the Act contained in its regulations requiring LECs to offer interconnection, unbundled access to elements of their networks, and resale services to new competitors. The issue of the appropriate deference to the FCC=s interpretation of the law is central to these highly complex regulatory cases.

Argued on December 1, Department of Army v. Blue Fox, Inc., 121 F.3d 1357 (9^th Cir. 1998), involves an attempt by a subcontractor of an Army contractor to establish and enforce an equitable lien under the Administrative Procedure Act against the Army for the contractor=s failure to pay for construction work performed. In an ordinary construction case, an unpaid subcontractor can proceed against the owner of the property on a lien theory, obtaining an equitable lien on either the property itself or on funds held by the owner due to the prime contractor. When the government is the property owner, however, sovereign immunity raises its ugly head. Because the subcontractor did not have a contract with the government, it cannot make use of the waiver of sovereign immunity in the Tucker Act. The APA, however, has its own waiver of sovereign immunity, so long as the relief is Aother than money damages.@ The Supreme Court has held that monetary relief is not necessarily Amonetary damages,@ where, for example, specific relief would include payment of money. Blue Fox maintains that its equitable lien is such specific relief, not compensatory damages. The Ninth Circuit, with one judge dissenting, agreed.

Also argued in December was Your Home Visiting Nurse Services, Inc. v. Shalala, 132 F.3d 1135 (6^th Cir. 1997). The plaintiff health care provider tried to get its fiscal intermediary to reopen cost reports for the year 1989. The fiscal intermediary refused and the plaintiff appealed to the Provider Reimbursement Review Board, but the Board, relying on the Provider Reimbursement Manual, held it had no jurisdiction to consider the refusal. The plaintiff then filed suit in federal court arguing, on the one hand, that the Manual=s provision is not a proper interpretation of the statute and regulations and, on the other hand, that the federal district court can directly review the fiscal intermediary=s decision. The Sixth Circuit was not persuaded on either hand.

In January the Court is scheduled to hear argument in two administrative law cases. One, United States v. Haggar Apparel Co., 127 F.3d 1460 (Fed. Cir. 1997), involves an interpretation of the tariff laws to determine if certain goods qualify for a partial duty allowance because they are U.S. goods being returned to the U.S. after Aoperations incidental to the assembly process.@ The Customs Service has regulations interpreting the statute in question, but the Federal Circuit has long rejected Chevron, U.S.A., Inc. v. NRDC, Inc. and its deference rule in the context of tariff cases. Rather, the Federal Circuit holds that the Court of International Trade (the court of first impression hearing the tariff cases) is to Areach the correct decision@ without regard to the interpretation of the Customs Service, and that the Federal Circuit reviews the findings of that court for Aclear error@ and determines questions of law de novo.

The other January case is California Dental Ass=n v. FTC, 128 F.3d 720 (9^th Cir. 1997), in which the issue is whether the FTC has jurisdiction over the nonprofit association. Under the FTC Act, the FTC has jurisdiction extends to any association Aorganized to carry on business for its own profit or that of its members.@ The FTC has long asserted jurisdiction over nonprofit associations a substantial part of whose activities are for the pecuniary benefit of their members. The circuits have split on the issue and the Supreme Court itself split 4-4 in In re American Medical Ass=n, 455 U.S. 676 (1982).

The Supreme Court has granted certiorari in Lehman v. Zurko 142 F.3d 1447 (Fed. Cir. 1998), described in the Summer issue of the News. The issue in the case, which has been highly debated in Section Council meetings over the past year, is whether the standard of judicial review of Patent and Trademark Office decisions as to patentability should be governed by the APA or by a standard of review unique to PTO decisions. The government argues that the PTO is an agency and the PTO decisions as to patentability are final agency actions, so the terms of APA apply. Accordingly, judicial review should proceed under Section 706's arbitrary and capricious standard or its substantial evidence standard. The patent bar=s position is that historically the standard of review of the PTO=s decisions was stricter than the APA=s standard, and today that standard is best characterized as a Aclearly erroneous@ standard of review. This historical standard of review survived the passage of the APA, the argument goes, because 5 U.S.C. ' 559 preserved Aadditional requirements . . . otherwise recognized by law.@ The most salient fact in the case is the half century of practice in which the APA standard of review has not been applied. It is interesting to note that with this case and the Haggar case described above, the Court has an opportunity to bring the Federal Circuit into the same world of judicial review of administrative action in which other courts must exist or to allow it to continue to play its unique role.

The case of Alden v. Maine, 715 A.2d 172 (Me. 1998), is a potentially major expansion of Seminole Tribe v. Florida, 116 S.Ct. 1114 (1996), in which the Court held that the Commerce Clause does not authorize Congress to overcome the Eleventh Amendment=s protection of state sovereign immunity, overruling Pennsylvania v. Union Gas Co., 491 U.S. 1 (1989). Alden involves a state invoking sovereign immunity in a state court against a claim for overtime pay due a state employee under the Fair Labor Standards Act. The Maine Supreme Court held that the state could not be sued. In the past, the Tenth Amendment has been used to try to avoid FLSA burdens on states, but Garcia v. SAMTA, 469 U.S. 528 (1985), seemed to end that quest. If, however, the legal duty to pay cannot be enforced in court, have states found an alternative route around the FLSA?

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