2001-2002 Supreme Court Year In Review

The Supreme Court Year in Review 2001-2002 Term Compiled and Edited by S.M. Oliva

July 2002

© Copyright 2002 The Center for the Moral Defense of Capitalism. All Rights Reserved. No part of this publication may be reproduced, stored in a retrieval system, or transmitted, in any form or by any means, electronic, mechanical, photocopying, recording, or otherwise, without the express written consent of CMDC.

CMDC: The Supreme Court Year in Review, 2001-2002

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Contents 4/ Introduction 5/ Executive Summary 6/ Overview of the U.S. Judiciary 8/ Economic Freedom Rankings 12/ Index of Cases Presented 13/ Best & Worst Cases of 2001-2002 14/ Major Decisions 20/ Other Decisions 26/ Preview of the 2002-2003 Term 29/ Conclusion 30/ About CMDC

“If one wishes to advocate a free society (that is, capitalism) one must recognize that its indispensable foundation is the principle of individual rights.” - Ayn Rand, “Man’s Rights”

CMDC: The Supreme Court Year in Review, 2001-2002

Introduction “Without justice being fully, freely, and impartially administered, neither our persons, nor our rights, nor our property, can be protected. Call the form of government whatever you may, if justice cannot be equally obtained by all the citizens, high and low, rich and poor, it is a mere despotism.” - Justice Joeseph Story

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By Nicholas Provenzo Chairman, The Center for the Moral Defense of Capitalism

A proper government defines and protects the individual rights of its citizens. Under such a government, the courts play a crucial role; it is through the courts that men are able to settle disputes peaceably according to predetermined legal rules. It is these legal rules that guide the judiciary—both substantively and procedurally—in achieving justice in the thousands of trial verdicts and appellate opinions that are issued each day in a functioning society. It is also to these legal rules that citizens look to find their rights substantively defined, as well as to find the determinative, logical procedures that they must follow in order to secure these rights in times of conflict. At the pinnacle of a proper judicial system is a supreme court—as it is in the American republic. The United States Supreme Court represents the final arbiter for disputes, whether they are between individuals, corporations, or governments. It is charged with the mission of not only interpreting and applying statutes, but it also has the solemn responsibility of interpreting the enumerated powers granted to the U.S. government under the Constitution. It is the Supreme Court’s fundamental task to ensure for all Americans that the government’s exercise of its powers remains wedded solely to the principle that animates the Constitution—the doctrine of individual rights. Yet without a consistent understanding of the principle of individual rights, the Supreme Court (and the lower courts) are rudderless in their interpretation of the Constitution. In the Center’s review of the opinions issued during the Supreme Court’s October 2001 term , we expose a conflicted and inconsistent Court. The Court itself ruled in favor of individual rights in only 55% of the cases in the past term; the rest of its cases were adjudicated along lines that restricted rights and unjustifiably expanded the power of government. In Tahoe Preservation Council v. Tahoe Planning Agency, for example, the Court equated property development with the victimization of nature, promoting specious environmentalist claims and expanding the scope of arbitrary government power against property owners. In United States v. Fior D’Italia, Inc., the Court allowed the Internal Revenue Service to continue using the “aggregate estimation” method for taxing tip wages, although the results of this method were proven to be grossly inaccurate in determining an individual’s tax liability. In Ashcroft v. American Civil Liberties Union, the Court upheld the “community standards” test for determining the legality of pornographic websites, providing lower courts with a subjective, unworkable standard that squelches the right to free speech. The practical result is that merchants are left with no guidance on how to avoid sanctions under the law. Although often portrayed as the great champions of the Constitution, the best individual justices, Clarence Thomas and Antonin Scalia, voted in favor of individual rights only 75% of the time. In Board of Education v. Earls, Justice Thomas held that random drug testing of public school students who participate in extracurricular activities did not trigger Fourth Amendment protections against unreasonable searches. Thomas justified the policy on the ground that it was “a reasonable means of furthering the School District’s important interest in preventing and deterring drug use among its school children.” And in City of Los Angeles v. Almeda Books, Inc., Justice Scalia concurred with the Court’s decision permitting city governments to use zoning ordinances to prohibit businessmen from operating commercial enterprises offering adult entertainment. Scalia believed that empirical studies finding a statistical correlation between crime rates in certain urban areas and types of businesses empowered local governments to violate the rights of individuals to speak their views, to create businesses, and to engage in freely chosen transactions. Sanctioning government coercion to eradicate drug use or control (indirectly) adult entertainment businesses—at the cost of the rights of personal liberty, property, free contract, and free speech—are hardly pro-individual rights positions. Clearly there is a disconnect between the principle of individual rights and the Court’s voting record. The Center considers this problem to be philosophic, reflecting the larger conflict in American culture between the Founders’ view of individualism and freedom versus the modern (and now dominant) belief in collectivism and state paternalism. As evidence of this sea change in American culture, in slightly less than half the cases in which state paternalism conflicted with the rights of individuals, state paternalism won. The Center does not expect the Court to change the legal landscape in a single case or in a single term, but it does expect the Court to lead this country in the right direction—a task it has yet to achieve. Thus, the need for a focused assessment of the Court’s jurisprudence, appraising how the Court and individual Justices perform according to the fundamental moral standard of each individual’s right to life, liberty and property. In the end, the Center hopes that the analyses it provides in these annual reports will aid in understanding both the principle of individual rights and how these rights are applied and protected under the Constitution.

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Executive Summary The Center for the Moral Defense of Capitalism (CMDC) is pleased to present its first annual “Supreme Court Year in Review” and Economic Freedom Rankings of the justices of the Supreme Court. Following the end of the Court’s October 2001 Term in June 2002, we compiled a list of the Court’s most relevant decisions from the past year as they relate to economic and individual freedom. From a final list of 29 opinions, we analyzed each decision, determined whether the Court’s position was consistent with the principles of individualism and capitalism, and assigned each justice a rating based on how often they voted how CMDC would have decided the cases. This survey includes summaries of the rulings included in our “Economic Freedom Ranking,” as well as information on other key decisions of the Court’s Term and summaries of the issues the justices have already decided to hear in the October 2002 Term. Among the major decisions included in our rankings are: * Thompson v. Western States Medical Center, where the Court expanded the First Amendment’s protection for “commercial” speech against government attempts to keep customers ignorant of products. * Tahoe Preservation Council v. Tahoe Planing Agency, where the justices ignored the property rights of owners and held that a six-year “moratoria” banning individuals from using their property did not require compensation from the government under the Fifth Amendment. * Zelman v. Simmons-Harris, where the justices, by a 5-4 vote, upheld the constitutionality of a limited school voucher program in Cleveland, Ohio, from a First Amendment challenge. * Board of Education v. Earls, where the Court found the Fourth Amendment could be ignored if public school districts declared the existence of a “drug problem,” thereby permitting warrantless drug testing of students. * Three cases where the Court further restricted the legislative leviathan of the Americans with Disabilities Act, defending the prerogatives of employers to manage their companies free from government interference. Associate Justice Clarence Thomas was ranked first among the justices for his commitment to upholding the economic freedoms of Americans, even though he did author two “major opinions” which substantially deviate from his general commitment to individual rights. He was followed in our rankings by Justice Antonin Scalia, Justice Sandra Day O’Connor and Justice Anthony Kennedy. Justice Stephen Breyer, an appointee of former President Clinton, scored our lowest rating, agreeing with CMDC just 35% of the time. By contrast, justice Thomas and Scalia agreed with our position in 75% of the cases analyzed from this Term.

“We must never forget that it is a constitution that we are expounding.” - Chief Justice John Marshall

CMDC: The Supreme Court Year in Review, 2001-2002

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Overview of the Supreme Court & Federal Judiciary “Justice, sir, is the great interest of man on earth.” - Sen. Daniel Webster

Article III of the U.S. Constitution states, “The judicial Power of the United States, shall be vested in one Supreme Court, and in such inferior Courts as the Congress may from time to time ordain and establish.” Congress has the authority to determine the number of justices which constitute the Supreme Court as well as the scope of the Court’s appellate jurisdiction. The original Supreme Court, created in 1789, had six justices, which was expanded to nine in the mid-19th Century. Supreme Court justices, like all federal judges appointed under Article III, hold their positions on “good behavior,” a constitutional phrase meaning life tenure. A federal judge may only be forcibly removed through the impeachment process of indictment by the House of Representatives and trial and conviction by a two-thirds vote of the Senate. Under the current judicial organizational scheme approved by Congress, there are two levels of “inferior Courts” to the Supreme Court. At the lowest level are the U.S. District Courts, which actually conduct trials of law and fact. For purposes of these courts, the nation is divided into 94 judicial districts, each of which contains a District Court with a varying number of judges. Every state has at least one district court, and larger states are divided into two or more districts. New York, for example, is divided into four districts: Eastern, Southern, Western and Northern. District Courts conduct jury and bench trials in both criminal and civil cases. Each judicial district also has a separate Bankruptcy Court to handle proceedings under federal bankruptcy law, a power reserved exclusively to the federal government under Article I of the Constitution. Parties who lose at trial in a District Court may have the court’s decision reviewed in a United States Court of Appeals. Once again, the U.S. is divided into geographic districts, called “circuits” in this case, and each circuit has a court of appeals. The fifty states and five U.S. territories are each assigned to one of eleven circuit couts, numbered First through Elev-

enth. The U.S. Court of Appeals for the Fourth Circuit, for example, handles appeals from the District Courts in Maryland, Virginia, North Carolina and South Carolina. The Court itself is based in Richmond, Virginia, though it generally may hear cases in any part of the circuit. Two additional U.S. Courts of Appeal handle special jurisdictions. The U.S. Court of Appeals for the District of Columbia Circuit handle appeals from the D.C. District Court, which includes a number of appeals of federal regulatory agency decisions, which are generally heard in the D.C. District Court. The U.S. Court of Appeals for the Federal Circuit hears appeals from anywhere in the nation which relate to certain subject matters assigned by Congress, such as patents. This court is located in Washington, D.C. In this document, a court of appeals will be referred to by circuit, i.e. “First Circuit,” “Tenth Circuit,” “Federal Circuit.” There are other federal courts, such as the Court of Military Appeals, but they are not relevant to the scope of this review. The Supreme Court has both original (trial) and appellate jurisdiction. In either case, it is the court of last resort, from which no further appeal is possible. The Court’s trial jurisdiction is limited by the Constitution to cases affecting ambassadors and “public ministers,” and, more commonly, cases where one state sues another. These cases in recent times tend to involve border disputes, and are usually heard before a “special master” appointed by the Supreme Court. The special master gathers evidence and issues a report to the Court, which can then adopt, amend or reject his findings before delivering a final ruling. In most cases, however, the Cout acts pursuant to its appellate jurisdiction. In a limited number of cases the Court hears direct appeals from the district courts. This occurs when Congress passes a law which provides for such direct appeal without having to go through a U.S. Court of Appeals. In the 2001 Term, the case of Utah v. Evans came on direct appeal from the

CMDC: The Supreme Court Year in Review, 2001-2002 District of Utah, because it involved the apportionment of representatives, a matter which Congress has designated for direct appeal. Direct appeals are matters-of-right, which means the Supreme Court must hear them. The more common form of appeal, however, are the discretionary ones, where the Court must grant a writ of certiorari for the case to be heard. These writs, literally an order for the lower court to send up its record of the proceedings below, are issued to a U.S. Court of Appeals or to the highest appellate court of an individual state, such as the Supreme Court of Virginia or the Maryland Court of Appeals. The Court grants certiorari solely at its discretion. Under Court rules, four of the nine justices must vote in favor of granting certiorari for the appeal to be heard. Supreme Court Rule 10 establishes the general guidelines used by the justices in deciding whether to grant certiorari. First, the Court looks for whether a decision of one U.S. court of appeals on an “important matter” is in conflict with the decision of another court of appeals. For example, if the Seventh Circuit were to rule school prayer unconstitutional, but the Fourth Circuit were to uphold the practice, the Supreme Court would likely grant review to settle the “circuit conflict.” Second, the Court looks to whether a decision of a state supreme court on a “federal question”— one arising under the Constitution or a law enacted by Congress—conflicts with the decision of another state supreme court or a U.S. court of appeals. Third, the Court will likely review a question of federal law which has not previously been decided by the Supreme Court, “but should be,” or, alternatively, has been decided, but a lower court has then issued a ruling which conflicts with the Supreme Court’s decision. When certiorari is granted, the case is placed on the calendar for oral argument before the Court, and each party is instructed to prepare a written brief detailing their arguments. Non-parties to the case may be permitted to file supplemental briefs as amicus curiae, or a “friend of the Court.” If the case involves the constitutionality of a federal law, the United States will be asked by the Court to submit a brief and participate in oral argument, if the federal government was not a named party to

the suit. In all cases where the U.S. government appears before the Court, it is represented by the Solicitor General, an officer of the Department of Justice, or one of his deputies. Oral arguments take place between October and April in two-week blocks. Each case typically is allotted one hour for argument, equally divided between both sides. If the United States is participating as an amicus curiae they will usually divide oral argument time with the side they are supporting. The Court releases judgments and opinions at its discretion, but almost all cases argued in a Term are decided by June. The Court’s Term officially runs from the first Monday in October until the following October, although for practical purposes, the Court begins their new docket year on July 1. If the Chief Justice is in the majority on a case, he will assign himself or another justice to write the Court’s opinion. If the Chief Justice is in the dissent, then the senior justice in the majority assigns the Court’s opinion. The same procedure generally holds true for the dissent, although multiple dissenting and concurring opinions have become commonplace. In some cases, a majority of the Court will agree on the judgment of a case but less than five justices will sign on to the majority opinion. In these cases, the plurality opinion is announced as the principal statement from the Court, but it is not technically binding precedent on the lower courts, since a majority did not concur with its reasoning. A final note about the U.S. courts of appeal. Most cases heard before these courts are decided by three-judge panels, not by the full court of appeals. In rare cases, the entire court will hear the case on an important subject (except the Ninth Circuit, which has 23 judges; they hear such en banc appeals in 11 judge panels). Rulings by a court of appeals is only considered binding precedent in the states covered by that circuit. Other circuits are free to decide similar cases differently, and they often do, enabling the U.S. Supreme Court to get a good idea of what questions require their final judgment.

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“The complete independence of the courts of justice is peculiarly essential in a limited Constitution.” - Alexander Hamilton

CMDC: The Supreme Court Year in Review, 2001-2002

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Rating the Justices: In Support of Freedom “This hand, to tyrants ever sworn the foe, For Freedom only deals the deadly blow; Then sheathes in calm repose the vengeful blade, For gentle peace in Freedom’s hallowed shade.” - John Quincy Adams

In the October 2001 Term, the Supreme Court granted less than 100 writs of certiorari out of more than 8,000 petitions. From these writs, 84 written opinions were issued on behalf of the Court. CMDC has selected and analyzed 29 of these opinions, and has assigned each justice a ranking based on the percentage of cases in which their votes agreed with the position of CMDC. Cases were selected based on examining the legal question presented to the Court in the petition for certiorari. If the question dealt with a substantial right of an individual to voluntarily contract or associate with others, we generally included it in our survey. Some of the cases selected did not deal directly with business or economic matters, but the fact they addressed a substantive individual right made them worthy of inclusion here. Of the cases selected, 11 were designated by CMDC as “major opinions.” These cases will be analyzed in greater detail because of their overriding importance to the American public, and because they most clearly and concisely deal with individual freedoms. Criminal cases were excluded from our analysis. Although many of these cases dealt with important issues of public interest, we did not feel their inclusion here was appropriate, because our concern was examining how the Court dealt with the constitutional rights of individuals to engage in voluntary transactions among themselves. Criminal rights cases, by definition, deal with matters of due process within the confines of the criminal court system. We also excluded from consideration those civil appeals which dealt strictly with procedural or jurisdictional issues, unless these questions directly affected a substantive right or rights. For example, we excluded the case of Utah v. Evans, which was a constitutional challenge to the conduct of the 2000 U.S. Census; however, we included

JPMorgan Chase Bank v. Traffic Stream (BVI) Limited, because it dealt with a jurisdictional question that went to the integrity of contract law. After reviewing the case and deciding whether the Court’s decision supported CMDC’s view of the question presented,we scored each member of the Court on the basis of the percentage of times they voted as we would have. In one case we examined, US Airways v. Barnett, we agreed with two of the four dissenting justices, but not the other two dissenters or the majority decision. This was because although we supported the Court’s judgment in reversing the court of appeals, their reasoning was so excessively flawed as to render the impact of the judgment meaningless. On the following pages, we present the justices of the Court in the order which they were ranked based on our “economic freedom” scores. If the actual percentages produced a tie, we used a tiebreak consisting of the number of opinions authored by the justice that CMDC concurred with. Where a tie remained, we used the number of majority opinions agreed with. The 11 opinions we classified as “major” were given no greater weight in determining the justices’ score or rankings. The “major” classification was simply designed to highlight certain cases to you, the reader, in reviewing the work of the Term. Finally, the following is a breakdown of the 29 opinions by author: O’Connor Kennedy Thomas Stevens Rehnquist Breyer Souter Ginsburg Scalia

6 5 5 4 3 2 2 1 1

CMDC: The Supreme Court Year in Review, 2001-2002

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1. Justice Clarence Thomas Nominated July 1, 1991, by President Bush, confirmed by the Senate October 15, 1991, by a vote of 52-48. Succeeded Justice Thurgood Marshall. Previously served as a judge of the U.S. Court of Appeals for the District of Columbia Circuit.

Percentage: 75% (22 of 29 cases) Majority Opinions authored: *Barnhart v. Sigmon Coal Co. *J.E.M. Ag Supply v. Hi-Bred Pioneer *Rush Prudential HMO v. Moran Ashcroft v. ACLU Board of Education v. Earls

Principal Dissents authored: *EEOC v. Waffle House *United States v. Craft

2. Justice Antonin Scalia Nominated June 17, 1986, by President Reagan, confirmed by the Senate September 17, 1986, by a vote of 98-0. Succeeded Justice William Rehnquist. Previously served as a judge of the U.S. Court of Appeals for the District of Columbia Circuit.

Percentage: 75% (22 of 29 cases) Majority Opinions authored: *Minnesota Republican Party v. Kelly

Principal Dissents authored: *Columbus v. Ours Garage *U.S. Airways v. Barnett

3. Justice Sandra Day O’Connor Nominated July 7, 1981, by President Reagan, confirmed by the Senate September 28, 1981, by a vote of 99-0. Succeeded Justice Potter Stewart. Previously served as a judge of the Arizona Court of Appeals.

Percentage: 60% (17 of 28 cases) Majority Opinions authored: *BE&K Construction Co. v. NLRB Los Angeles v. Alameda Books *Thompson v. Western States Med. Ctr. *Toyota Manufacturing v. Williams United States v. Craft United States v. Fior D’Italia

Principal Dissents authored: *Chickasaw Nation v. United States Ragsdale v. Wolverine World Wide, Inc.

* Denotes opinions supported by CMDC

“With reasonable men, I will reason; with human men I will plead; but to tyrants I give no quarter, nor waste arguments where they will certainly be lost.” - William Lloyd Garrison

CMDC: The Supreme Court Year in Review, 2001-2002

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4. Justice Anthony Kennedy Nominated November 24, 1987, by President Reagan, confirmed by the Senate February 3, 1988, by a vote of 97-0. Succeeded Justice Lewis Powell. Previously served as a judge of the U.S. Court of Appeals for the Ninth Circuit.

“The enumeration in the Constitution, of certain rights, shall not be construed to deny or disparage others retained by the people.” - IX Amemdment

Rating: 58% (17 of 29 cases) Majority Opinions authored: *Festo v. SMC *Owasso School District v. Falvo *Ragsdale v. Wolverine World Wide *Ashcroft v. Free Speech Coalition NCTA v. Gulf Power Co.

5. Justice David Souter Nominated July 25, 1990, by President Bush, confirmed by the Senate October 2, 1990, by a vote of 90-9. Succeeded Justice William Brennan. Previously served as a judge of the U.S. Court of Appeals for the First Circuit.

Rating: 58% (17 of 29 cases) Majority Opinions authored: *JPMorgan Chase Bank v. Traffic Stream *Chevron USA v. Echzabal

Principal Dissents authored: *Los Angeles v. Alameda Books *United States v. Fior D’Italia, Inc. Zelman v. Simmons-Harris

6. Chief Justice William Rehnquist Nominated October 22, 1971, by President Nixon, confirmed by the Senate December 10, 1971, by a vote of 68-26. Succeeded Justice John Marshall Harlan. Elevated to Chief Justice by President Reagan on June 17, 1986, confirmed by the Senate September 17, 1986, by a vote of 65-33. Succeeded Chief Justice Warren Burger. Previously served as U.S. assistant attorney general. Rating: 58% (17 of 29 cases) Majority Opinions authored: *Gonzaga University v. Doe *HUD v. Rucker *Zelman v. Simmons-Harris

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7. Justice John Paul Stevens Nominated November 28, 1975, by President Ford, confirmed by the Senate December 17, 1975, by a vote of 98-0. Succeeded Justice William Douglas. Previously served as a judge of the U.S. Court of Appeals for the Seventh Circuit.

Percentage: 48% (14 of 29 cases) Majority Opinions authored: EEOC v. Waffle House New York v. FERC Tahoe Pres. Council v. Tahoe RPA *Watchtower Society v. Stratton

Principal Dissents authored: Barnhart v. Sigmon Coal Co. Gonzaga University v. Doe Minnesota Republican Party v. Kelly

8. Justice Ruth Bader Ginsburg Nominated June 14, 1993, by President Clinton, confirmed by the Senate August 3, 1993, by a vote of 96-3. Succeeded Justice Byron White. Previously served as a judge of the U.S. Court of Appeals for the District of Columbia Circuit.

Percentage: 44% (13 of 29 cases) Majority Opinions authored: Columbus v. Ours Garage

Principal Dissents authored: *Board of Education v. Earls Minnesota Republican Party v. Kelly

9. Justice Stephen Breyer Nominated May 13, 1994, by President Clinton, confirmed by the Senate July 29, 1994, by a vote of 87-9. Succeeded Justice Harry Blackmun. Previously served as a judge of the U.S. Court of Appeals for the First Circuit.

Percentage: 35% (10 of 29 cases) Majority Opinions authored: Chickasaw Nation v. United States US Airways v. Barnett

Principal Dissents authored: Thompson v. Western States Med. Ctr.

“Yesterday the greatest question was decided which ever was debated in America; and a greater perhaps never was, nor will be, decided among men. A resolution was passed without one dissenting colony, that these United Colonies are, and of right out to be, free and independent states.” - John Adams (July 3, 1776)

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“The Republican form of government is the highest form of government: but because of this it requires the highest type of human nature—a type nowhere at present existing.” - Herbert Spencer

Ashcroft v. American Civil Liberties Union Board of Education of Pottawatomie County v. Earls BE&K Construction Co. v. Nat’l Labor Relations Bd. Chase Manhattan Bank v. Traffic Stream (BVI) Ltd. Chevron USA, Inc. v. Echazabal Chickasaw Nation v. United States City of Columbus v. Ours Garage & Wrecker Service EEOC v. Waffle House, Inc. Festo Corp. v. Shoketsu Kinzou Kogyo Co. Gonzaga University v. Doe Barnhart v. Sigmon Coal Co. Dept. of Housing & Urban Development v. Rucker J.E.M. Ag Supply v. Pioneer Hi-Bred Int’l Los Angeles v. Alameda Books, Inc. National Cable Television Ass’n v. Gulf Power Co. New York v. Federal Energy Regulatory Comm’n Owasso Indep. School District v. Falvo Ragsdale v. Wolverine World Wide, Inc. Ashcroft v. Free Speech Coalition Republican Party of Minnesota v. Kelly Rush Prudential HMO, Inc. v. Moran Tahoe-Sierra Preservation v. Tahoe Regional Planning Thompson v. Western States Medical Center Toyota Motor Manufacturing v. Williams United States v. Craft United States v. Fior D’Italia US Airways, Inc. v. Barnett Watchtower Bible & Tract Society v. Stratton Zelman v. Simmons-Harris

Breyer

Ginsbu rg

Thoma s

Souter

Kenne dy

Scalia

O’Con nor

Steven s

Renqu ist

Index of Cases Presented

X X

X

X

X

X

X

X

X

X

X

X

X

X

X

X

X

X

X

X

X

X

X

X

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X

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X

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X

X

X

X X X X X

X

X

X

X

X

X

X

X

X

X

X

X

X

X

X

X

X

X

X

X

X

X

X

X

X

X

X

X

X

X

X

X X

X

X X

X

X

X

X

X

R

X

X

X

X

X

X

X

X

X

X

R

X

X

X

X X

X

X

X

X

X

X

X

X X

X

X

X

X

X

X

X

X

X

X

X

X

X

X

X

X

X

X

X

X

X

X

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X

X

X

X

X

X

X

X

X X X

X X

X

X

X

X

X

X

X

X X

X denotes a vote in favor of CMDC's position. R denotes the Justice recused themselves.

CMDC: The Supreme Court Year in Review, 2001-2002

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Best of the Term

Thompson v. Western States Medical Center Decided April 29, 2002, by a vote of 5-4. O’Connor for the Court, Thomas concurring, Breyer in dissent. This case involves “drug compounding,” a process whereby a pharmacist produces customized medication for a patient by combining or altering other drugs. In 1997, Congress federalized the regulation of drug compounding as part of a bill amending the powers of the Food and Drug Administration. Under this law, compounded drugs may be produced without having to gain regulatory approval by the FDA, but there are a number of restrictions placed on the distribution of such drugs. One such restriction is that compounded drugs must be produced “unsolicited,” meaning pharmacists are banned from advertising the compounding of a particular drug. A group of pharmarcists filed suit, claiming this was an unconstitutional restriction of speech protected under the First Amendment. Affirming the Ninth Circuit’s decision, the Supreme Court agreed with the pharmacists that the restriction on advertising was unconstitutional. Justice O’Connor, writing for the Court, said the FDA’s interest in preventing the large-scale marketing of unapproved compounded drugs did not outweigh the pharmacists right to engage in protected commercial speech, such as advertising. Justice O’Connor also rejected the contention of Justice Breyer, in his dissenting opinion, that the government had a legitimate fear of people asking their doctors to prescribe medically unnecessary compounded drugs, presumably as the result of advertising. Not only does the government not advance that argument in this case, but Justice O’Connor also notes that such a “paternalistic” view of the government’s role in regulation runs contrary to the Court’s own precedents on the issue of commercial speech. In addition, such an approach would permit the government, as it did here, to prevent even useful forms of speech involving com-

pounded drugs: “For example,” Justice O’Connor writes, “a pharmacist serving a children’s hospital where many patients are unable to swallow pills would be prevented from telling the children’s doctors about a new development in compounding that allowed a drug that was previously available only in pill form to be administered another way.” In a one paragraph concurring opinion, Justice Thomas said that while he agreed with the Court’s decision, he continued to believe that it is inappropriate to continue treating “commercial speech” as a separate entity from “political speech” which is entitled to greater amounts of government regulation. Justice Breyer, joined by the Chief Justice and justices Stevens and Ginsburg in dissent, says that the statute’s ban on advertising “directly advances” the government’s legitimate interest “in protecting the health and safety of the American public,” because to permit the advertising of compounded drugs would essentially allow “untested” medications (untested by the FDA, that is, not by the pharmacists) to enter the marketplace. Justice Breyer goes on to say that he can find no “less restrictive” way for the public to be protected from this problem other than a total ban on advertising. CMDC agrees with the Court’s decision and opinion here, and we reject the nonsensical reasons offered by the dissent in support of the advertising ban. We also support Justice Thomas’ viewpoint that the Court should abandon its overall framework for analyzing “commercial speech” cases—a framework that employs an arbitrary three-prong test to assess the ‘validity’ of a government’s interest in regulating private speech of a commercial nature —and instead treat all speech equally under the First Amendment. In the interim, however, the Court’s analysis in this case provides a useful continuation of the movement away from paternalistic attempts by the government to dictate policy outcomes by keeping the public ignorant.

“We have previously rejected the notion that the Government has an interest in preventing the dissemination of truthful commercial information in order to prevent members of the public from making bad decisions with the information.” - Justice Sandra Day O’Connor Thompson v. Western States

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Worst of the Term

Tahoe-Sierra Preservation Council, Inc. v. Tahoe Regional Planning Agency

“For over half a decade petitioners were prohibited from building homes, or any other structures, on their land. Because the Takings Clause [of the Fifth Amendment] requires the government to pay compensation when it deprives owners of all economically viable use of their land, and because a ban on all development lasting six years does not resemble any traditional land-use planning device, I dissent.” - Chief Justice William Rehnquist Tahoe-Sierra Preservation v. Tahoe Regional Planning (dissent)

Decided April 23, 2002, by a vote of 6-3. Stevens for the Court, Rehnquist and Thomas in dissent. In 1969, Congress created the Tahoe Regional Planning Agency (TRPA) to “halt increasing environmental damage to Lake Tahoe,” which covers parts of Nevada and California. In 1980, TRPA was given the authority to restrict development of private property in the Tahoe Region “until a new regional plan was developed.” Pursuant to this authority, TRPA prohibited development on certain parcels of land, and and imposed a temporary moratoria on other parcels. Various lawsuits were filed in response to the ultimate regional plan proposed in 1984, one by the State of California (seeking greater land-use controls) and another by property owners, who sought an injuction against TRPA, as well as monetary damages for violation of the Takings Clause of the Fifth Amendment, which reads, “nor shall private property be taken for public use, without just compensation.” The U.S. District Court for Nevada found for the property owners, and ordered TRPA to compensate the landholders for denying them the right to use and develop their land. On appeal, the U.S. Ninth Circuit in San Francisco reversed, saying that a “moratorium” like the one employed by TRPA did not violate the Takings Clause. Circuit Judge Stephen Reinhardt, writing for a unanimous threejudge panel, wrote: “Because the temporary development moratorium enacted by TRPA did not deprive the plaintiffs of all of the value or use of their property, we hold that it did not effect a categorical taking. In reaching this conclusion, we preserve the ability of local governments to do what they have done for many years — to engage in orderly, reasonable land-use planning through a considered and deliberative process. To do otherwise would turn the Takings Clause into a weapon to be used indiscriminately to penalize local communities for attempting to protect the public interest.” For Reinhardt, the protections provided by the Constitution are viewed as “weapons” to be squleched. The Supreme Court affirmed the Ninth Circuit, holding that the property owners were not entitled to any compensation under the

Fifth Amendment. Justice Stevens, writing for the Court, said that since the moratoria was only enacted to give local planners time to come up with a regional development policy, there was no government “taking” of land as defined by the Constitution. The Court said “fairness and justice” would not be served by “categorically” requiring that any government-imposed moratoria on private land use be accompanied by compensation to the affected owners. In dissent, Chief Justice Rehnquist argued that “a ban on all development lasting almost six years” could not be considered a legitmate tool of land-use planning, and that compensation was required by the Takings Clause. The Chief Justice said the majority miscalculated the relevant length of the moratoria, improperly accepting the Ninth Circuit’s determination that the effective ban on land use was only 32 months. In any event, the Chief Justice wrote, the Court’s own precedents “rejects any distinction between temporary and permanent takings when a landowner is deprived of all economically beneficial use of the land.” CMDC finds this case baffling, because we believe the Constitution is clear on these matters. Government (or “the public”) does not have a right to arbitrarily deny individuals the use and benefit of their private property. When the government has a legitimate need to appropriate private property (such as for reasons of national defense), it is required to compensate the owner for his loss. Justice Stevens’ opinion indicates that the main impetus for the violation of private property here is to prevent Lake Tahoe from turning green, a condition which he alternatively says will persist for “eternity” or maybe “700 years” at best. Regardless of how long the lake may be “green and opaque,” the only relevant question is whether this impending “disaster” gives the government special license to dispense with Fifth Amendment pleasantries. We believe that it does not, and consquently we disagree with the Court’s holding and opinion, and endorse the dissent authored by the Chief Justice and joined by Justice Scalia and Justice Thomas.

CMDC: The Supreme Court Year in Review, 2001-2002

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Major Decisions Ashcroft v. American Civil Liberties Union, Decided May 13, 2002, by a vote of 8-1. Thomas announced the judgment of the Court, and issued a partial majority opinion; O’Connor, Breyer and Kennedy concurring, Stevens in dissent. Following the Court’s invalidation of certain provisions of the 1996 Communications Decency Act, Congress enacted the Child Online Protection Act. COPAattempts to ban minors from being exposed to pornography via the Internet, by subjecting Internet sites to a so-called “community standards” test for decency. The ACLU filed suit seeking to declare COPA unconstitutional on its face for employing the “community standards” test. The Court declined to do so, vacating the Third Circuit’s judgment that held the test to be constitutionally invalid. The controlling portion of Justice Thomas’s opinion is limited, since a majority of the Court did not concur with it. This led to four separate opinions among the eight justices voting to reverse the Third Circuit. Justice Thomas rejected the ACLU’s claim that “community standards” would subject the entire Internet to the morality of the most puritanical elements of American society. He argued that the variation in decency standards from locality to locality was not sufficient enough to justify the ACLU’s concerns. Justice O’Connor took a more strident position, saying, “I would prefer that the Court resolve the issue before it by explicitly adopting a national standard for defining obscenity on the Internet.” Justice Breyer took the position that “I believe that Congress intended the statutory word ‘community’ to refer to the Nation’s adult community taken as a whole, not to geographically separate local areas.” Finally, Justice Kennedy, joined by justices Souter and Ginsburg, said the Court should have punted the issue back to the Court of Appeals, to allow them to “undertake a comprehensive analysis” of the true scope of COPA’s provisions. The lone dissenter in all this was Justice Stevens, who agreed with the ACLU (and CMDC), saying that “community standards” was a sign of impending doom for the Internet: “In the context of the Internet, however, community standards become a sword, rather than a shield. If a prurient appeal is offensive in a puritan village, it may be a crime to post it on the World Wide Web.” CMDC disagrees with the Court’s holding, and would concur with Justice Stevens’ dissenting opinion. We believe the “community standards” test to be an assignment of collective rights forbidden by the First Amendment.

Board of Education of Independent School District No. 92 of Pottawatomie County v. Earls, Decided June 27, 2002, by a vote of 5-4. Thomas for the Court, Breyer concurring, O’Connor and and Ginsburg in dissent. In this case, the Court further destroyed the constitutional rights of students in the context of the public school system. At issue here was an Oklahoma school district policy that required all middle and high school students to submit to drug testing (urinalysis) as a condition of participating in any extracirricular activity, such as the band or chess club. A number of students and parents challenged the policy as a violation of the students’ Fourth Amendment rights, and the Tenth Circuit in Denver agreed, reversing a trial court’s previous ruling in favor of the school district. The Supreme Court reversed, holding that the policy was “a reasonable means of furthering the School District’s important interest in preventing and deterring drug use among its school children.” Since it was “reasonable,” the consentless searches did not violate the Fourth Amendment, according to Justice Thomas. In a stinging dissent, Justice Ginsburg said the district’s drug tesing policy “is not reasonable, it is capricious, even perverse.” She noted that the policy takes aim at students who are least likely to be drug users, participants in after-school activities. Justice Ginsburg also noted that the school district had repeatedly violated many of the terms of its own policy, revealing confidential information about a student’s results to nonpriviliged persons without the consent of the student. Both the trial court and the Supreme Court majority ignored this fact, and improperly took the school district’s denial at face value. Concluding her dissent, Justice Ginsburg states “It is a sad irony that the petitioning School District seeks to justify its edict here by trumpeting ‘the schools’ custodial and tutelary responsibility for children...[but] schools’ tutelary obligations to their students require them to ‘teach by example’ by avoiding symbolic measures that diminish constitutional protections. [Citing a 1943 Court decision] ‘That (schools) are educating the young for citizenship is reason for scrupulous protection of Constitutional freedoms of the individual, if we are not to strangle the free mind at its source and teach youth to discount important principles of our government as mere platitudes.’ CMDC disagrees with the Court, and supports Justice Ginsburg’s position. The Fourth Amendment prohibits the state from conducting warrantless searches absent exigent circumstances.

“If a purient appeal is offensive in a puritan village, it may be a crime to post it on the World Wide Web.” - Justice John Paul Stevens Ashcroft v. ACLU (dissent)

CMDC: The Supreme Court Year in Review, 2001-2002

“If Typhoid Mary had come under the ADA, would a meat packer have been defenseless if Mary had sued after being turned away?” - Justice David Souter Chevron v. Echazabal

Chevron U.S.A., Inc. v. Echazabal, Decided June 10, 2002, by a vote of 9-0. Souter for the Court. This case was one of three major victories this Term for businesses in the decade-long struggle over the Americans with Disabilities Act. Mario Echazabal was rejected for a position at an oil refinery owned by Chevron because his required medical examination showed damage to his liver, the result of Hepatitis C. The company said working at a refinery would only exacberate Echzabal’s liver damage. Echazabal filed suit, claiming his rights were violated under the ADA. Although the trial judge granted summary judgment to Chevron, the Ninth Circuit in San Francisco reversed, saying that the text of the ADA only permitted a company to deny someone a job if his disability posed a danger to others, not to the disabled individual himself. The Court of Appeals also said that the “ability to perform a job without risk to one’s health or safety is not an ‘essential function’ of the job,” which would permit exclusion under the ADA. A unanimous Supreme Court reversed the Ninth Circuit, holding that although Congress did not specifically mention harm to oneself as a grounds for exclusion under the ADA, the Equal Employment Opportunity Commission was well within its statutory power to adopt such a policy by regulation, as it did here. The EEOC rules permit a company to deny a job if they believe the position poses a threat to a worker’s health or safety. CMDC agrees with the Court’s decision. Equal Employment Opportunity Commission v. Waffle House, Inc., Decided January 15, 2002, by a vote of 6-3. Stevens for the Court, Thomas in dissent. In this case, the Court found private contracts were no match for the coercive power of the Americans with Disabilities Act. Eric Baker was an employee of Waffle House, Inc., who, upon signing his application for employment, agreed that any dispute arising from his employment with the company would be settled by binding arbitration. Sixteen days after he was hired, Baker suffered a seizure while working as a grill operator, and was dismissed by Waffle House. Baker never filed for binding arbitration, per his agreement with the company, but instead filed a complaint with the EEOC, claiming discrimination under the ADA. The EEOC filed suit against Waffle House, requesting backpay, reinstatement and other relief be granted to Baker, even though he was not a party to the actual lawsuit. The Fourth Circuit in Richmond held that the EEOC had to at least give some consideration to Baker’s

16 arbitration agreement before seeking “victim specific relief” in his name. The Supreme Court ruled for the EEOC, saying that the private arbitration agreement was essentially meaningless, since the EEOC had statutory power under the ADA and the Civil Rights Act of 1964 to pursue individual relief on behalf of Baker. Writing for the majority, Justice Stevens said that the EEOC was not a party to the arbitration agreement, and therefore could not be bound by its terms in any way. Justice Thomas, in dissent, ridicules the Court’s reasoning, saying that it not only conflicts with a long history of case law on the issue of arbitration agreements, but that federal law specifically promotes the use of arbitration agreements as a way of avoiding litigation. Waffle House “gains nothing,” according to Justice Thomas, by utilizing arbitration agreements, and in fact could put itself at a disadvantage, since now an aggrieved employee gets “two bites at the apple”: First through the arbitration hearing, then through an EEOC action brought on his behalf. CMDC disagrees with the Court’s decision. The government has no right to interfere with private contractual relationships, unless there is fraud or coercion involved, which was not the case here. City of Los Angeles v. Alameda Books, Inc., Decided May 13, 2002, by a vote of 5-4. O’Connor announced the judgment and issued a plurality opinion; Scalia and Kennedy concurring, Souter in dissent. In 1977 the City of Los Angeles conducted a study to determine the correlation, if any, between the presence of “adult” business establishments and property values. Although no direct link was found between the two, there was some evidence that areas with high concentrations of adult businesses also had higher crime rates. Based on this, the city enacted a zoning ordinance which prohibited two adult businesses from being located within 1,000 feet of one another, or any such business from being within 500 feet of a school, public park or religious institution. Later, the city went further with the rule, preventing more than one type of adult business from operating within the same building. For example, an adult bookstore and adult movie theater could not occupy the same mall. Again, the city relied on its 1977 study to justify the regulation as an anti-crime measure. Alameda Books was cited by the city in 1995 for operating an adult bookstore and adult “arcade” in the same structure, in violation of the zoning regulations. The company sued to prevent enforcement of the ordinance,

CMDC: The Supreme Court Year in Review, 2001-2002 claiming it violated the First Amendment. The District Court granted summary judgment in Alameda’s favor, and the Ninth Circuit affirmed, although on different grounds. Both courts cited the lack of evidence supporting the city’s claim that the regulations were necessary to prevent an increase in criminal activity. The Supreme Court reversed, finding that the city’s regulation did not offend the First Amendment. Four justices, led by Justice O’Connor, said the city could “reasonably rely” on the 25-year-old study (which was limited in its scope and methodology) to justify the ban on multiple adult businesses. Justice Scalia, concurring with the plurality, put it more bluntly: “The Constitution does not prevent those communities that wish to do so from regulating, or indeed entirely suppressing, the business of pandering sex.” Justice Kennedy, joining the Court’s judgment but not Justice O’Connor’s opinion, wrote separately to say that the city has a right to use their zoning power to mitigate the “secondary effects” of adult businesses, but that such regulations should not be used to target the actual “speech” itself. He also said that the lack of evidence to support the city’s claims were irrelevant, since local governments needed “latitude to experiment” with desirable social policies irrespective of any evidentiary requirements. Justice Souter dissented, saying the city had failed to reasonably defend the need for the regulation: “[T]he government has not shown that bookstores containing viewing booths, isolated from other adult establishments, increase crime or produce other negative secondary effects in surrounding neighborhoods, and we are thus left without substantial justification for viewing the city’s First Amendment restriction as content correlated but not simply content based.” In other words, the 1977 study itself is insufficient to justify targeting businesses on the basis of what they are doing, since that constitutes a restriction on content, rather than on the time or place of a business, which is the usual subject of a zoning regulation (albeit an equally unjustifiable one). CMDC disagrees with the Court’s decision, and supports Justice Souter’s dissent. The city had no reasonable basis to enact its regulation, as it had no relation to the prevention of crime. We further disagree with Justice Kennedy’s opinion that the city had a right to enact the regulations pursuant to its zoning power. Toyota Motor Manufacturing, Kentucky, Inc. v. Williams, Decided January 8, 2002,

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by a vote of 9-0. O’Connor for the Court. This case involves an ADA claim brought by Ella Williams, who claimed Toyota refused to “reasonably” accomodate her medical condition, an impediment which prevented her from performing two of the four major tasks associated with her position as an assembly-line worker. The issue before the Court here was the standard by which Williams could be deemed “disabled” and thus entitled to protection under the ADA. The Sixth Circuit found that Williams was disabled because she could not perform most of the physical tasks associated with her job. A unanimous Supreme Court rebuked that standard, saying the proper test was whether Williams was “unable to perform the variety of tasks central to most people’s daily lives.” Since the kind of repetitive work endemic to factory workers is not central to most people’s daily lives, the Sixth Circuit erred in using that as evidence of an ADA-protected disability. CMDC agrees with the Court’s decision. United States v. Fior D’Italia, Inc., Decided June 17, 2002, by a vote of 6-3. Breyer for the Court, Souter in dissent. In this case, the Supreme Court sanctioned the Internal Revenue Service’s practice of simply guessing the incomes of people when they are unable to make a factual determination of said income. At issue here was the use of an IRS method known as “aggregate estimation,” whereby the government attempted to determine the amount of unreported tips earned by waitstaff at Fior D’Italia, a popular Italian restaurant in San Francisco, California. This case originated with an IRS “compliance check” of Fior’s accounts for 1991 and 1992, which reported tip incomes far below what the restaurant’s credit card receipts alone indicated. Since the IRS could not know how much in tips the employees received from customers who paid in cash, the agency used an aggregate estimation: The average percentage tip from the credit card receipts was calculated (just over 14.2% for both years), and this percentage was applied to the aggregate amount of cash sales. The IRS made no attempt to ascertain each individual employee’s actual tip income or tax liability. Both the District Court and the Ninth Circuit ruled in favor of Fior D’Italia, holding that the use of the “aggregate estimation” method exceeded the IRS’s statutory authority. On review, the Supreme Court reversed, holding that a tax assessment method used by the IRS is “entitled to a legal presumption of correctness” under the Internal Revenue Code. Essentially, the Court found that there was nothing in the

“[A]n individual’s carpal tunnel syndrome diagnosis, on its own, does not indicate whether the individual has a disability within the meaning of the ADA.” - Justice Sandra Day O’Connor Toyota v. Williams

CMDC: The Supreme Court Year in Review, 2001-2002

“[I]n ordinary English, ‘reasonable’ does not mean ‘effective’.” - Justice Stephen Breyer US Airways v. Barnett

law which specifically prohibited the use of the method, therefore the burden was on the restaurant to prove “that the IRS has acted illegally in this case” since “agency action cannot be found unreasonable in all cases simply because of a general possibility of abuse, which exists in respect to so many discretionary powers.” Justice Souter, in dissent, argued that reading the tax law “so broadly” in favor of IRS “saddles employers with a burden unintended by Congress.” He then exposes the fallacy of the majority opinion’s defense of the IRS’s policy, saying that the aggregate estimation method itself is incorrect. Justice Souter points out, quite articulately, that as a general trend in the restaurant industry, tips on credit card sales are not usually the same as tips on cash sales; the former is typically higher, which means that the IRS method tends to “overestimate liability.” Justice Souter says this places an unfair burden on employers to try and accurately gather information on how much their employees are being tipped, something which the tax code explicitly excuses them from having to do. Thus, the IRS is punishing employers for actually following the law as written. CMDC disagrees with the Court, and supports Justice Souter’s dissent. The IRS has no statutory power to “estimate” the income of restaurant employees using a method which is clearly designed to create errors in favor of the IRS. US Airways, Inc. v. Barnett, Decided April 29, 2002, by a 5-4 vote. Breyer for the Court, Stevens and O’Connor concurring, Scalia and Souter in dissent. In this case, the Court ruled the Americans with Disabilities Act does not trump all private contractual agreements within a corporation. Robert Barnett, a former cargo-handler for U.S. Airways, injured his back on the job in 1990, and as a result asked to be transferred to a less demanding mailroom position. However, two employees with more seniority had requested the position, and the company’s policy (under its union agreements) was to respect the seniority in awarding positions. Barnett lost his job, and subsequently filed suit under the ADA, saying the company failed to make a “reasonable accomodation” for his disability. The District Court granted summary judgment to U.S. Airways, saying the company’s seniority system was well established, and that accomodating Barnett’s disability “would impose an undue hardship” on the company. The Ninth Circuit, sitting en banc, reversed the trial court, saying the presence of the seniority system was only “a factor” in determining whether there was an undue hardship, but not a decisive one.

18 The Supreme Court reversed the Ninth Circuit, taking a middle position that while the presence of a “bona fide” seniority system will trump the interests of a disabled worker seeking special treatment “in the run of cases,” there may be individual cases where a disabled worker is entitled to special treatment if he can demonstrate that the seniority system itself is followed inconsistently. In other words, if exceptions are regularly granted to the seniority system, it does not create an expectation of uniform treatment among all workers and the Court may ignore it in the context of the ADA’s requirements. At the heart of this case was the Court’s interpertation of the term “reasonable accomodation,” the centerpiece of the ADA’s legislative force. The majority, led by Justice Breyer, rejected Barnett’s argument that an accomodation was only “reasonable” if it was “effective” in meeting the disabled employee’s request. “For one thing,” Justice Breyer said, “in ordinary English, the word ‘reasonable’ does not mean ‘effective.’ It is the word ‘accomodation,’ not the word ‘reasonable’ that conveys the need for effectiveness.” Justice Breyer continued that while an ineffective accomodation would not meed a disabled worker’s needs, a demand for an effective accomodation “could prove unreasonable because of its impact, not on business operations, but on fellow employees say because it will lead to dismissals, relocations, or modification of employee benefits to which an employer...may be relatively indifferent.” Justice O’Connor filed a concurring opinion, where she expressed concern that U.S. Airways’ particular seniority system might not necessarily render accomodation of Barnett “unreasonable” under the ADA. She points out the text of the company’s employee manual, which says seniority does not automatically entitle an employee to hold a particular position, and that the company reserves the right to change the policy at any time. Justice Scalia and Justice Souter filed dissenting opinions, albeit for very different reasons. Justice Scalia (joined by Justice Thomas) felt that the majority should not have left any room for the courts to disregard a seniority system for ADA purposes. He said that the ADA does not subject all employer policies to the “reasonable accomodation” requirement, but that since the majority disagrees, the issue then becomes whether suspending a seniority system is unreasonable. Justice Scalia says it is unreasonable, but, he writes, “The Court is unwilling, however, to make that finding categorically, with respect to all seniority systems. Instead, it creates (and

CMDC: The Supreme Court Year in Review, 2001-2002 ‘creates’ is the appropriate word) a rebuttable presumption that exceptions to seniority rules are not ‘reasonable’ under the ADA, but leaves it free for the disabled employee to show that under the ‘special circumstances’ of his case, an exception would be ‘reasonable’....for example, if he showed that ‘one more departure’ from the seniority rules ‘will not likely make a difference’. “I have no idea what this means,” Justice Scalia continued. “When is it possible for a departure from the seniority rules to ‘not likely to make a difference’? Even when a bona fide seniority system has multiple exceptions, employees expect that these are the only exceptions. One more unannounced exception will invariably undermine the values that the Court cites as reasons for believing seniority systems so important that they merit a presumption of exemption.” Justice Scalia (correctly) concludes that the Court’s position gives disabled employees “a vague and unspecified power” to undercut legitimate seniority system policies, and indeed any employer policy where “special circumstances” might exist under the ADA. Justice Souter (joined by Justice Ginsburg) also dissents, not for the reasons Justice Scalia offered, but because “Nothing in the ADA insulates seniority rules from the ‘reasonable accomodation’ requirement.” In contrast to Justice Scalia’s belief that no seniority policy falls under the ADA, Justice Souter said that all employer policies may be overruled by the ADA in the name of “reasonable accomodation.” Although we agree with the Court’s decision to find in favor of U.S. Airways in this case, we disagree with the Court’s reasoning, and instead support Justice Scalia’s dissenting opinion. Under the Court’s decision, there is no objective standard of law for employers to follow in implementing a seniority system policy, and thus the majority’s reasoning is fatally flawed as a matter of law. Justice Scalia correctly states the fact that the ADA is not intended to trump all employer policies, and that in any event, the “rebuttable presumption” doctrine articulated by Justice Breyer fails to provide any useful guidance to business on how to avoid sanctions under the law. Zelman v. Simmons-Harris, Decided June 27, 2002, by a vote of 5-4. Rehnquist for the Court, O’Connor and Thomas concurring, Stevens, Souter and Breyer in dissent. The final opinion of the 2001 Term, Zelman upheld the constitutionality of Cleveland’s Pilot Project Scholarship Program, a limited voucher program that provided state-funded tuition aid to students who attended a participating public, prviate or parochial

school of their parent’s choosing. A group of Ohio taxpayers filed suit to have the program declared an unconstitutional violation of the First Amendment’s Establishment Clause, since religous schools were permitted to participate in the program and receive tuition grants from the State of Ohio. The Sixth Circuit sided with the aggrieved taxpayers, finding the voucher program had the “primary effect” of advancing religion. The Supreme Court disagreed and reversed, saying the program “was enacted for a valid secular purpose” and was appropriately neutral towards religion, since the parents were exercising individual choice. Justice Thomas offered a passionate concurring opinion, where he put the voucher issue in stark terms: “Fredrick Douglass once said that ‘education means emancipation. It means light and liberty. It means the uplifting of the soul of man into the glorious light of truth, the light by which men can only be made free.’ Today many of our inner-city public schools deny emancipation to urban minority students. Despite this Court’s observation nearly 50 years ago in Brown v. Board of Education, that ‘it is doubtful that any child may reasonably be expected to succeed in life if he is denied the opportunity of an education,’ urban children have been forced into a system that continually fails them.” In various dissents, Justices Stevens, Souter and Breyer said that any form of government sponsorship of religous education was unconstitutional. Justice Stevens said the fact that parents, not the state, dictated the choice of schools was “irrelevant.” He went on to cite “my understanding on the impact of religous strife on the decisions of our forbears to migrate to this continent, and on the decisions of neighbors in the Balkans, Northern Ireland, and the Middle East to mistrust one another,” as grounds for opposing the voucher program. While CMDC understands the dissenters’ concern over the co-mingling of church and state (something we firmly oppose), we do not agree that vouchers will “weaken the foundation of our democracy,” as Justice Stevens puts it. Indeed, we believe that it is the public school system which has weakened freedom and individual rights, and that while vouchers are not the ultimate solution to the problem, they are a useful intermediary step, and in any event, we do not see why giving money to religous schools at the parent’s direction is any less constitutional than forcing them to support the state’s education monopoly. For these reasons, we endorse the Court’s decision.

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“There would be a tragic irony in converting the Fourteenth Amendment’s guarantee of individual liberty into a prohibition of the exercise of educational choice.” - Justice Clarence Thomas Zelman v. Simmons-Harris (Concurring)

CMDC: The Supreme Court Year in Review, 2001-2002

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Other Decisions

“A patent holder should know what he owns, and the public should know what he does not.” - Justice Anthony Kennedy Festo v. SMC

BE&K Construction Co. v. National Labor Relations Board, Decided June 24, 2002, by a vote of 9-0. O’Connor for the Court, Scalia and Breyer concurring. BE&K is a non-union general contractor who was targeted for harassment by unions over the company’s contract to modernize a California steel mill. The unions used political lobbying, boycotts and court action to prevent BE&K from successfully completing its work, and as a conseuqence, the company filed federal suit against the unions, alleging among other things violation of the antitrust laws. After the company’s lawsuit ended (the claims were all withdrawn or dismissed by the trial court), the unions filed a grievance with the NLRB, saying BE&K’s actions was an attempt to interfere with legally protected union activities. The NLRB agreed with the unions, and imposed sanctions on BE&K, which were upheld on appeal to the U.S. Sixth Circuit. The Supreme Court reversed, holding that the NLRB used an invalid standard to impose liability. The Court said the Board had to show that the company had pursued an objectively baseless claim with the subjective intent to prevent lawful union activity. Since the underlying lawsuit had some objective merit, in the Court’s view, the fact that it was unsuccessful did not, in and of itself, justify the NLRB’s imposition of liability. CMDC agrees with the judgment of the Court, and we would also echo a point made by Justice Scalia, in his concurrence, that the courts are more than capable of sanctioning abuse of judicial process without the assistance of the NLRB. JP Morgan Chase Bank v. Traffic Stream (BVI) Infrastructure Ltd., Decided June 10, 2002, by a vote of 9-0. Souter for the Court. This case involved a contract dispute between Chase Manhattan Bank and Traffic Stream, a corporation organized in the British Virgin Islands (BVI). Under a financing agreement between the two companies, all disputes were to be litigated in the U.S. District Court for the Southern District of New York. After Chase won summary judgment in that court, Traffic Stream appealed, and the Second Circuit reversed, citing the District Court lacked proper jurisdiction under Article III of the Constitution and federal statute. The Court of Appeals said that since Traffic Stream was organized in the BVI, an “Overseas Territory” of the United Kingdom, it was not a “citizen

or subject of a foreign state” as required for federal diversity jurisdiction. The Supreme Court unanimously reversed, faulting the Second Circuit’s bizarre premise that a foreign citizen meant only those persons (or companies) residing in a sovereign nation directly recognized by the U.S. government. Although the BVI is not an independent nation, they are a recognized dependency of the British Crown, which is a sovereign power recognized by the U.S. Thus, the District Court was correct to assert jurisdiction over Traffic Stream as a “subject” of the BVI (and the British Crown). CMDC agrees with the Court’s decision, and includes it in our ratings analysis because of the importance of establishing clear and concise rules for private contractual relations. A company should not be permitted to undermine a voluntary obligation on the basis a nonsensical definition of “jurisdiction” like the one used by the Second Circuit here. Chickasaw Nation v. United States, Decided November 27, 2001, by a vote of 7-2. Breyer for the Court, O’Connor in dissent. This case involves an interpertation of the federal Indian Gaming Regulatory Act, specifically whether the Act exempts Indian tribes from paying certain federal excise taxes that the states are exempt from. An error in the Congressional drafting of the Act left the question of the Indians’ exemption ambigous. The majority, led by Justice Breyer, chose to resolve the conflict in favor of the United States; Justice O’Connor, in dissent, says the statute should be “construed liberally in favor of the Indians, with ambigous provisions interperted to their benefit,” a position the Court has taken in previous Indian-related cases. CMDC agrees with Justice O’Connor’s position. Festo Corp. v. Shoketsu Kinzoku Kogyo Kabushiki Co. Ltd. (SMC), Decided May 28, 2002, by a vote of 9-0. Kennedy for the Court. In patent law, there are two concepts that sometimes come into conflict with one another. The first is prosecution history estoppel, which allows competitors to rely on the history of a patent application proceeding to determine where they can modify an inventor’s patent without infringing upon it; in other words, an inventor cannot narrow a claim during a patent proceeding, then go back after the fact and claim a broader protection

CMDC: The Supreme Court Year in Review, 2001-2002 than his patent entitles him to. Second is the doctrine of equivalents, which protects a patent holder from infringement when a competitor makes “insubstantial changes” to an inventor’s work. In this case, Festo Corporation claims that SMC is selling a magnetic rodless cylinder which infringes upon two of Festo’s patents. While SMC’s devices do not meet the literal description of the Festo patents, they are similar enough for Festo to invoke the doctrine of equivalents. SMC replied by invoking prosecution history estoppel, saying that they had employed designs for their product based on an earlier version that Festo had submitted to the Patent Office, but which they subsequently narrowed in order to meet the requirements for obtaining the patent. By relying on the earlier version, SMC claims they did not infringe Festo’s actual patents. Here, the Supreme Court ruled the Court of Appeals for the Federal Circuit erred in forbiding Festo from asserting any infringement claims based on prosecution history. The Court said that whether Festo had actually rebutted the presumption that estoppel was applicable, however, was a question that needed to be further examined by the lower courts. CMDC agrees with the Court’s decision, because we agree that the Federal Circuit should not have automatically barred Festo’s infringement claims without first attempting to define the precise scope of the patents involved. Gonzaga University v. Doe, Decided June 20, 2002, by a vote of 7-2. Rehnquist for the Court, Breyer concurring, Stevens in dissent. “John Doe” was a student at Gonzaga University who, upon graduation, sought employment as a public schoolteacher in the State of Washington. As a prerequisite for employment, Doe was required to get an affidavit certifying his “good moral character” from his college dean. The Gonzaga dean here, Roberta League, had overheard two students discussing an alleged incident of sexual misconduct involving Doe. League investigated on her own and, without informing Doe of her actions, reported Doe to the state department of education, detailing the allegations against him. Doe was accordingly denied the affidavit of good character from League. Doe filed suit in state court, in part alleging a violation of his rights under the federal Family Educational Rights and Privacy Act (FERPA), which directs the U.S. secretary of education to deny government funds to schools which have a policy of releasing student “educational records” without their con-

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sent. Doe won at trial, and was awarded damages on his FERPA claim. The Washington Court of Appeals reversed the verdict, saying FERPA didn’t create an individual right that could be asserted in court; the Supreme Court of Washington reversed, saying FERPA “gives rise to a federal right” that can be enforced by the judiciary. The U.S. Supreme Court reversed, agreeing with the Washington Court of Appeals that FERPA was not intended to create an “individual right,” but rather it dictated the terms of federal appropriation of funds. The Chief Justice, writing for the Court, said “if Congress wants to create new rights...it must do so in clear and unambigous terms.” Justice Breyer, in his concurring opinion, notes that the term “educational record” is so vaguely defined by FERPA, that to allow private causes of action would create chaos by arguably restricting practices such as peer grading and letters of reccomendation. CMDC agrees with Justice Breyer, and we agree with the Court’s judgment and opinion. Department of Housing and Urban Development v. Rucker, Decided March 26, 2002, by a vote of 8-0. Rehnquist for the Court, Breyer not participating. In 1988, Congress passed the Anti-Drug Abuse Act which provides that every “public housing agency shall utilize leases which … provide that any criminal activity that threatens the health, safety, or right to peaceful enjoyment of the premises by other tenants or any drug-related criminal activity on or off such premises, engaged in by a public housing tenant, any member of the tenant’s household, or any guest or other person under the tenant’s control, shall be cause for termination of tenancy.” In 1997, the Oakland Housing Authority, which is bound by the Congressional Act, evicted four tenants because persons in their public housing units were caught using or dealing illegal narcotics. A federal District Court enjoined OHA from evicting the tenants, saying that since they were not aware of the illegal drug activity, they could not be held liable under their lease. The U.S. Ninth Circuit affirmed, and the Supreme Court unanimously reversed, saying that the “plain language” of the 1988 Act “unambigously” permits the evictions. While the Act does not require evictions, the Chief Justice wrote on behalf of the Court, it does grant the OHA an absolute right to enforce the lease. While CMDC does not support current federal antidrug policy or public housing, the issue in this case is whether tenants can be held to the terms of their lease. We believe they should

“[I]f Congress wants to create new rights...it must do so in clear and unambigous terms.” - Chief Justice William Rehnquist Gonzaga Univ. v. Doe

CMDC: The Supreme Court Year in Review, 2001-2002 be, and thus agree with the Court’s decision. (Note: Justice Breyer did not participate because his brother was the District Court judge in this case.)

“[E]ven if it were possible to select judges who did not have preconceived views on legal issues, it would hardly be desirable to do so.” - Justice Antonin Scalia Rep. Party of Minn. v. White

Rush Prudential HMO, Inc. v. Moran, Decided June 20, 2002, by a vote of 5-4. Souter for the Court, Thomas in dissent. Congress passed the Employee Retirement Income Security Act of 1974 (ERISA) in order to provide uniform federal procedures for handling employee benefit claims, such as those related to health insurance. ERISA was designed to overrule any conflicting state laws, since it was the intent of Congress to create incentives for employers to provide benefits by negating the patchwork of individual state requirements. Debra Moran sued her HMO, Rush Prudential, under an Illinois state law which requires HMOs to submit to a form of arbitration (review by an outside physician) when they deny coverage for a particular medical procedure against the advice of a patient’s principal physician. The Illinois law provides, in essence, a remedy that runs contrary to ERISA, which does not require the independent review. Rush claims that ERISA’s preemption authority prevents Moran from invoking the Illinois law. The Supreme Court disagreed, holding that the state law is an “insurance regulation,” which is not preempted by ERISA, and that enforcing the state law would not substantially harm the intent of the federal law. Justice Thomas, in dissent, disagreed, saying Illinois was creating a separate remedy outside the ERISA’s mandate, which in and of itself violates the intent of Congress. He went on to note that allowing the states to enforce these types of “independent review provisions” would negate the ultimate policy goal of Congress, by making healthcare benefits too expensive to maintain, since HMOs would be unable to effectively deny benefits they believe to be medically unnecessary. CMDC agrees with Justice Thomas as a matter of policy, and on the law. The Illinois statute directly conflicts with ERISA, and the Supremacy Clause of the Constitution requires the state to yield the right-of-way. We disagree with the Court’s decision. Republican Party of Minnesota v. White, Decided June 27, 2002, by a vote of 5-4. Scalia for the Court, O’Connor and Kennedy concurring, Stevens and Ginsburg in dissent. The Minnesota Constitution provides that all judges in the state shall be elected. In 1974, the Minnesota Supreme Court, pursuant to its

22 power to regulate judicial conduct, adopted a regulation prohibiting candidates for judicial office from announcing “his or her views on disputed legal or political issues.” Gregory Wersal, a candidate for the Minnesota Supreme Court, filed suit seeking a declaration that this rule was unconstitutional under the First Amendment. A federal District Court ruled against Wersal and his co-plaintiffs (including the state Republican Party), and the Eighth Circuit affirmed. The Supreme Court reversed, holding the “announce clause” violated the First Amendment. Justice Scalia, writing for the Court, said that the state offered no “compelling interest” which would justify the announce clause. Although the reason given was to preserve the “impartiality” of the state’s judiciary, Justice Scalia could find no satisfactory definition of the term in the state’s defense. The announce clause was directed at statements on issues, not for or against particular parties to a case, and while the state might have an interest in preventing the appearance that a judge has certain preconceived notions about the law, it would be nearly impossible to actually enforce such a rule, since it would be impossible and “hardly desirable” to find judges with absolutely no preconceptions. The concurring and dissenting opinions in this case focus less on the constitutionality of the law, and more on the inherent problems with electing judges, and why the practice should be disfavored. While these are policy issues worthy of debate, they do not justify the Minnesota ban on candidate speech. CMDC agrees with the Court’s decision. City of Columbus v. Ours Garage and Wrecker Service, Inc., Decided June 20, 2002, by a vote of 7-2. Ginsburg for the Court, Scalia in dissent. Under the federal Interstate Commerce Act, local regulation of “motor carriers” engaged in the “transportation of property” is preempted by the federal law, with certain exceptions. One of these exceptions says that the ICA shall not preempt “the authority of a State” to regulate motor vehicle safety. In this case, the City of Columbus appealed the Sixth Circuit’s ruling that their municipal tow truck regulations were invalid, because the ICA preemption only applied to acts of the State of Ohio, and not its cities. The Supreme Court reversed the Sixth Circuit, saying the statutory language was unclear, and that absent such clarity, “federal courts should resist attribution to Congress of a design to disturb a State’s decision on the division of authority between the State’s central and local units over safety on munici-

CMDC: The Supreme Court Year in Review, 2001-2002 pal streets and roads.” Justice Scalia dissented, saying the statutory language was clear, and that the Court’s federalism concerns were misplaced in this instance. He cited the construction of the statute, where the term “State or a political subdivision of a State” was used in two of the four ICC exceptions, but only “State” was used in the exception at issue here. Based on this, Justice Scalia would hold the city’s law invalid under the federal statute. CMDC agrees, because Congress was acting pursuant to its legitimate Article I authority, and because the law is manifestly clear in this instance. We disagree with the Court’s decision. National Cable & Telecommunications Association v. Gulf Power Co., Decided January 16, 2002, by a vote of 8-0. Kennedy for the Court, Thomas concurring in part and dissenting in part, O’Connor not participating. In 1978, Congress passed the Pole Attachments Act, which gives the Federal Communications Commission the power to “regulate the rates, terms and conditions for pole attachments to provide that such rates, terms and conditions are just and reasonable.” Pole attachments are wires carried on telephone and utility poles for other services, such as cable television. The Act was designed to prevent “monopoly pricing” by the pole owners against the cable operators. The question presented in this case was whether the Act gave the FCC jurisdiction to set conditions for wires carrying high speed Internet service as well as wireless services. The Supreme Court ruled that the FCC has jurisdiction in both instances. On the Internet issue, the Court found that the statute covers all attachments made by a cable television company, regardless of whether the attachment is for television or Internet service. Similarly, FCC regulation of wireless service is governed by the Act, since it covers attachments made by any telecommunications company. Justice Thomas wrote separately to say that the FCC “failed to engage in reasoned decisionmaking” before asserting its new authority, and although he did not question the Court’s ultimate judgment, he thought the FCC should be ordered to reconsider its regulations before implementing them. CMDC disagrees, since we believe that the Pole Attachments Act itself is constitutionally invalid on its face (as it regulates the price of private property), and thus we do not support the Court’s judgment in this case. Ragsdale v. Wolverine World Wide, Inc., Decided March 19, 2002, by a vote of 5-4.

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Kennedy for the Court, O’Connor in dissent. Under the Family and Medical Leave Act of 1993 (FMLA), employees of certain companies are to receive at least 12 weeks of unpaid leave yearly, although employers are encouraged to grant more leave if possible. Wolverine granted employee Tracy Ragsdale 30 weeks of unpaid leave while she was recovering from cancer. When she was denied additional leave, she was fired, whereupon she filed suit claiming her FMLA rights were violated. She claimed that under the Secretary of Labor’s regulations implementing FMLA, the company had to specifically designate any additional leave as counting against her FMLA allocation of 12 weeks. Wolverine conceded no formal notice was given, but said the fact they gave her more than twice the legally mandated leave should mean her FMLA benefits were provided for in accordance with the law. The District Court agreed, and granted summary judgment to Wolverine, and the Eighth Circuit affirmed. The Supreme Court also affirmed, saying the Secretary of Labor’s regulation was invalid because it acted contrary to the intent of the statute. The rule was too categorical in that it failed to take into account the reality of a given case, as was the situation here, where the failure to give technical notice was clearly outweighed by the company’s grant of additional leave. Justice O’Connor, in dissent, said that the Court should have deferred to the Secretary’s judgment on the regulation because the rule was not totally “unreasonable.” CMDC agrees with the majority’s interpertation, and we support the decision of the Court to invalidate the regulation. Ashcroft v. Free Speech Coalition, Decided April 16, 2002, by a vote of 7-2. Kennedy for the Court, Thomas and O’Connor concurring, Rehnquist in dissent. The Child Pornography Prevention Act of 1996 (CPPA) expanded the definition of illegal child pornography to include computer-generated images that “appears to be” minors engaging in sexually explicit conduct. A group of adult entertainment producers filed suit, claiming the law’s prohibition violated the First Amendment. The Supreme Court agreed, and invalidated the “virtual child pornography” ban as being “overbroad and unconstitutional.” Writing for the Court, Justice Kennedy said that the CPPA failed to take into account works as a whole, instead banning them on the basis of whether there was an explicit image alone. He said that such lack of context could cause many legitimate expresive works to be banned, such as Shakespeare’s Romeo and Juliet, which de-

“Shakespeare may not have written sexually explicit scenes for the Elizabethean audience, but were modern directors to adopt a less conventional approach, that fact alone would not compel the conclusion that the work was obscene.” - Justice Anthony Kennedy Ashcroft v. Free Speech Coalition

CMDC: The Supreme Court Year in Review, 2001-2002 picts teenage sex. The Chief Justice dissented, saying that Justice Kennedy’s concerns about the misapplication of the CPPA were unfounded, and that the law could be properly interperted to conform with the First Amendment. Justice O’Connor wrote separately to say she would strike down the ban on some forms of “virtual child pornography,” but not others. CMDC believes the majority was right to strike down the entire ban as a reach under the First Amendment, and thus we support the Court’s decision in full.

“It is offensive—not only to the values protected by the First Amendment, but to the very notion of a free society—that in the context of everyday public discourse a citizen must first inform the government of her desire to speak to her neighbors and then obtain a permit to do so.” - Justice John Paul Stevens Watchtower Bible v. Stratton

Watchtower Bible & Tract Society of New York v. Village of Stratton, Decided June 17, 2002, by a vote of 8-1. Stevens for the Court, Breyer and Scalia concurring, Rehnquist in dissent. The village of Stratton, Ohio, enacted and enforced an ordinance which prevented individuals from going door-to-door to promote any “cause” without first obtaining a permit from the mayor’s office. A Jehovah’s Witness group filed suit, claiming the regulation was an unconstitutional infringement of their religous freedom under the First Amendment. The Supreme Court agreed, reversing the Sixth Circuit’s decision to uphold the ordinance. Justice Stevens, writing for the Court, said that “hand distribution of religous tracts is ages old” and is an intrinsic part of the freedom or religion guaranteed by the First Amendment. While the village has a legitimate interest in preventing fraud and crime (which they claimed as a reason for enacting the ordinance), it does not justify such a broad regulation of legitimate religous and communicative interests. The Chief Justice disagreed, saying the “crime prevention” motive was sufficient to uphold the regulation. CMDC agrees with the Court’s decision. New York v. Federal Energy Regulatory Commission, Decided March 4, 2002, by a vote of 9-0. Stevens for the Court, Thomas concurring in part and dissenting in part. In 1992, Congress gave the Federal Energy Regulatory Commission (FERC) the power to order public utilities to open up their transmission lines to outside power producers on a case-by-case basis. Rejecting this piecemeal mandate of the 1992 law, FERC instead issued an order in 1996 ordering all public utilities to open their lines to competitors. The order said utilities had to offer access at comparable rates to what their existing generating partners received. Two separate suits commenced, one by energy producers who felt the order did not go far enough, and another by several states who felt FERC lacked the ju-

24 risdiction to govern power lines within their states. The District of Columbia Circuit affirmed the FERC order in substantial part, and the consolidated appeals were brought to the Supreme Court on review. The Court affirmed the D.C. Circuit, holding that FERC did not exceed its jurisdiction in regulating the transmission lines, and that the Commission’s actions was a “statutorily permitted policy choice.” Justice Thomas, writing separately, found that while FERC did not overstep its jurisdiction, they failed to engage in “reasoned decisionmaking” with respect to some of their policy choices. Thus, he would order FERC to reconsider the policy. CMDC disagrees, believing that FERC has no constitutional authority to regulate state utilities in this manner whatsoever. We therefore disagree with the opinion of the Court. J.E.M. Ag Supply, Inc. v. Pioneer Hi-Bred International, Inc., Decided December 10, 2001, by a vote of 7-2. Thomas for the Court, Scalia concurring, Breyer in dissent, O’Connor not participating. The Plant Variety Protection Act of 1970 (PVPA) generally prohibits individuals from obtaining patents on plants, since they are “products of nature.” Nevertheless, the Patent and Trademark Office regularly issues “utility patents” to plants which are created through genetic engineering and related processes. This case involves an alleged conflict between the Patent Office’s policy and the PVPA. J.E.M. Ag Supply, doing business under the name Farm Advantage, Inc., allegedly resold bags of hybrid corn in violation of an agreement with Pioneer, which held the applicable patents on the corn. In court, Farm Advantage claimed the patents were invalid under the PVPA. The trial court and the Court of Appeals for the Federal Circuit ruled in favor of Pioneer, saying plants could be patented under the regular patent law. The Supreme Court affirmed, saying that the PVPA did not restrict the scope of the general patent law, and that since Congress had taken no action in the 16 years since the PTO began granting plant patents to stop the practice, there was no clear legislative intent that the PVPA superseded the PTO’s general authority. CMDC supports the Court’s conclusion in this case. Barnhart v. Sigmon Coal Co., Decided February 19, 2002, by a vote of 6-3. Thomas for the Court, Stevens in dissent. In 1992, Congress directed the Social Security Commissioner to “assign” health benefits for retired coal miners to their former employer, or, if the employer was no longer in business, to

CMDC: The Supreme Court Year in Review, 2001-2002 “related persons.” The Commissioner assigned $237,000 in benefits to eighty-six former miners for Shackelford Mining. Shackelford was purchased in 1973 by Jericol Mining, Inc., now an affiliate of Sigmon Coal Co. Although none of the 86 workers had ever worked for Jericol, the Commissioner ordered the company to pay the benefits under the 1992 act of Congress. Jericol filed suit, claiming they were not a “related person” under the statute. The Supreme Court ruled that the 1992 law does not permit the Commissioner to assign the retired miners’ benefits to Sigmon, since the “plain language” of the law does not define Sigmon as a “related person.” Justice Stevens, in dissent, argues that the Court should look beyond a literal reading of the law, and instead carry out the “congressional intent” in ensuring retired coal miners receive benefits. The problem, however, is that Sigmon was not a signatory to the original agreement creating the benefits, nor was it considered liable for said benefits prior to the Commissioner’s decision under the 1992 law. Therefore, CMDC believes the Court was correct in ruling against the Commissioner. Owasso Independent School District v. Falvo, Decided February 19, 2002, by a vote of 9-0. Kennedy for the Court, Scalia concurring. The issue in this case was whether an Oklahoma school district violated the Family Educational Rights Privacy Act of 1974 (FERPA) by allowing teachers in an elementary school to ask students to grade each other’s papers in-class. Kristja Falvo, the mother of three children in the Owasso schools, said the “peer grading” policy caused embarassment to her children, and after the school system refused to abandon the practice, she filed federal suit claiming a violation of FERPA. The U.S. Tenth Circuit in Denver supported her position, saying that “grades marked by students on each other’s work” constituted a priviliged “educational record” under FERPA. The Supreme Court unanimously reversed, saying that FERPA does not prohibit “educational techniques” such as peer grading. In the Court’s view, a student grader is not an agent of the school system under FERPA’s definition, and the grade itself is not considered a priviliged “educational record” until it is actually recorded by the teacher in her grade book. The Court did not address the issue of whether Mrs. Falvo could bring a private cause of action under FERPA, although the Court ruled later in the Term that it could not be (See Gonzaga University v. Doe). As CMDC agreed with the Gonzaga decision, we

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also agree with the Court’s holding here. United States v. Craft, Decided April 17, 2002, by a vote of 6-3. O’Connor for the Court, Scalia and Thomas in dissent. The issue here is whether the Internal Revenue Service’s needs take precedence over a state’s right to define the terms of property ownership. In this case, Sandra Craft and her late husband owned their home as “tenants by the entirety,” which under Michigan law meant they owned the property as a marital unit, not as separate individuals. When Don Craft failed to pay his fedreal income taxes, the IRS obtained a lien against his property, including the home owned in tenancy. $60,000 in proceeds from the house’s sale was placed in escrow by the IRS. After Mr. Craft’s death, the IRS refused to release the escrowed funds to Mrs. Craft, saying that the agency was entitled to its proceeds. Legal action commenced, and the U.S. Sixth Circiut found for Mrs. Craft, saying that Michigan law did not recognize an individual property interest for Mr. Craft in the entireties estate, and thus the IRS could not attach the lien. The U.S. Supreme Court reversed and found for the IRS. Justice O’Connor, writing for the Court, saying that the lien provision of the federal tax code is “meant to reach every property interest that a taxpayer might have,” and that to permit properties held in tenancy to escape the lien would “facilitate abuse of the federal tax system” by allowing married couples to shield their property from individual liens. The problem, as Justice Scalia and Thomas point out in their dissents, is that this was preceisely what had been permitted for more than 50 years in states where marital property can be held in tenancy. In fact, the Supreme Court’s own precedent supported Mrs. Craft’s position. Writes Justice Thomas, “Just as I am unwilling to overturn this Court’s longstanding precedent that States define and create property rights and forms of ownership, I am equally unwilling to redefine or dismiss as fictional forms of property ownership that the State has recognized in favor of an amorphous federal common-law definition of property.” Justice Scalia wrote separately to emphasize that the Court’s finding that the tenancy ownership was a “fictional” form of property rights is absurd, since corporations are also a legal fiction in that regard, yet their legitimacy is unquestioned. We agree with Justice Scalia and Justice Thomas, and believe the Court wrongly decided this case.

“At argument, counsel for respondent seemed to agree that if a teacher in any of the thousands of covered classrooms in the Nation puts a happy face, a gold star, or a disapproving remark on a class assignment, federal law does not allow other students to see it...We doubt Congress meant to intervene in this drastic fashion with traditional state functions.” - Justice Anthony Kennedy Owasso Public Schools v. Falvo

CMDC: The Supreme Court Year in Review, 2001-2002

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2002-2003 Preview

“ I do not distinguish by the eye, but by the mind, which is the proper judge of man.” - Seneca

As of June 27, 2002, the Supreme Court has granted writs of certiorari in 38 cases and held them over for argument in their next term, which opens Monday, October 7, 2002. Below are brief summaries of cases that CMDC will be following in the coming year. Kentucky Association of Health Plans, Inc. v. Miller, Decided September 7, 2000, by a 2-1 vote of the Sixth Circuit. The Court will decide whether a state law which compels HMOs to cover services provided by any doctor in the HMO’s geographic region is preempted by the federal Employee Retirement Income Security Act. This involves a similar issue to the one decided this Term by the Court in Rush Prudential HMO v. Moran, where the Court ruled in favor of the state law. CMDC disagreed with that decision. Pharmaceutical Research & Manufacturers of America v. Concannon, Decided May 16, 2001, by a 3-0 vote of the First Circuit. The Court will decide whether a Maine law designed to force drug companies into selling medications to Medicaid patients at lower prices is unconstitutional under the Commerce Clause, as well as the federal Medicaid statute. The trial court ruled the law invalid, but the First Circuit reversed. Eldred v. Ashcroft, Decided February 26, 2001, by a 2-1 vote of the District of Columbia Circuit. This case involves a challenger to the Copyright Terms Extension Act (CTEA) of 1998, where Congress extended all existing U.S. copyrights for an additional term of 20 years. A group of public domain publishers filed suit, claiming the CTEA violates the Copyright Clause of the Constitution, which says copyrights are to be secured for “limited times.” They also claimed the extenstion violated their First Amendment rights to reproduce legitimate public domain works. The D.C. Circuit dismissed both arguments. Nevada Department of Human Resources v. Hibbs, Decided December 11, 2001, by a 3-0 vote of the Ninth Circuit. This is an Eleventh Amendment challenge to the Family and Medical Leave Act of 1993. The State of Nevada is asking the Court to decide whether FMLA was constitutionally enacted pursuant to Congress’s Fourteenth Amendment powers, thereby abrogating the states’ immunity

from being sued in federal court under the Eleventh Amendment. The United States has intervened to oppose Nevada’s position. Scheidler v. NOW, Inc. and Operation Rescue v. NOW, Inc., Decided October 2, 2001, by a 3-0 vote of the Seventh Circuit. This case originated in 1986, when the National Organization for Women filed a lawsuit against a number of anti-abortion groups, claiming their protests activities amounted to extortion under the federal Rackateer Influenced and Corrupt Organizations Act (RICO). In 1994, the Supreme Court ruled the lawsuit could proceed regardless of First Amendment concerns. At trial, a jury awarded NOW and their co-plaintiffs injuctive and monetary relief. The subject of this appeal is whether injuctive relief is permitted in a private RICO action. Additionally, the Court will decide whether a related law, the Hobbs Act, can define political protesting activities as a form of criminal extortion. Virginia v. Black, Decided November 2, 2001, by a 4-3 vote of the Supreme Court of Virginia. This case involves a Virginia law which states, “It shall be unlawful for any person or persons, with the intent of intimidating any person or group of persons, to burn, or cause to be burned, a cross on the property of another, a highway or other public place.” On appeal, the Virginia Supreme Court reversed several convictions under this law, holding the general ban on cross burning violated the First Amendment. Moseley v. V Secret Catalogue, Inc., Decided July 30, 2001, by a 3-0 vote of the Sixth Circuit. This is a trademark infringement case involving Victoria’s Secret, a national company, and a Kentucky merchant operating under the name “Victor’s Secret,” later “Victor’s Little Secret.” Victoria’s Secret filed suit, claiming Victor’s, owned by Victor and Cathy Moselet was violating their trademark. The legal question was whether the Moseleys’ actions caused “dilution” of Victoria’s Secret’s brand name, even though the company could show no direct economic damage had been caused by the Moseleys’ store, which was not, in their view, a direct competitor. The trial court and the Sixth Circuit ruled for Victoria’s Secret, concluding the law was intended to “catch dilution” before actual economic harm occurred.

CMDC: The Supreme Court Year in Review, 2001-2002

Norfolk & Western Rail Co. v. Ayers, Decided by the Circuit Court of West Virginia for Kanawha County. Six retired railworkers sued their former employer, claiming that exposure to asbestos while on the job contributed to various lung problems. While none of the plaintiffs actually contracted lung cancer, they claimed “fear” of developing cancer due to asbestos exposure justified damages. The trial judge instructed the jury not to consider any factors besides asbestos exposure (such as the the plaintiffs’ chain smoking) which might have contributed to the “fear” of cancer. The jury awarded a combined $5.8 million in damages, even though some of the plaintiffs never had any lung problems at all. The Supreme Court of West Virginia decided not to hear the appeal, but the U.S. Supreme Court took the unusual step of granting a writ of certiorari to a state trial court, because of concerns over application of the Federal Employer’s Liability Act in this case. FELA allows employees of a railroad to sue in any state where the railroad operates, and West Virginia is considered a popular forum for such suits, because juries there tend to grant large damage awards and there are limited options for appeal. State Farm Mutual Automobile Insurance Co. v. Campbell, Decided October 19, 2001, by a 4-1 vote of the Supreme Court of Utah. This case stems from a 1981 traffic accident, which resulted first in litigation between the accident victim and State Farm insurance, and then a second suit where the victim sued State Farm for fraud, bad faith and infliction of emotional distress. At trial the plaintiff won $2.6 million in compensatory damages and $145 million in punitive damages. The trial court permitted evidence of State Farm’s national business practices to be considered, even though that appeared to conflict with a contrary holding of the U.S. Supreme Court. The Court will now decide whether the punitive damage award violates due process. Sprietsma v. Mercury Marine, Decided August 16, 2001, by a 5-1 vote of the Supreme Court of Illinois. This case involves a wrongful death suit brought by a widow who claimed Mercury Marine manufactured a defective boat motor. The plaintiff claimed that the motor should have con-

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tained a propeller guard, an item the U.S. Coast Guard had considered requiring pursuant to its authority under the Federal Boat Safety Act (FBSA). By deciding not to require the propeller guards, the Illinois Supreme Court held that the plaintiff in this case was preempted from pursuing her claim against Mercury Marine under FBSA. Justice Rita Garman, writing for the Illinois majority, said that allowing the plaintiff to recover damages here “would in effect, create a propeller guard requirement, thus frustrating the objectives of Congress in promulgating the FBSA.” The U.S. Supreme Court will review this decision, to determine whether the federal law should preempt the Illinois suit. FCC v. Next Wave Communications, Decided June 22, 2001, by a 3-0 vote of the District of Columbia Circuit. In 1997, Next Wave successfully bid $47.4 billion for 63 broadband PCS licenses at an auction conducted by the Federal Communications Commission. The company was allowed, under an FCC regulation, to pay for the licenses in installments, with the understanding that failure to make any payment on time would result in immediate cancellation of the licenses. In 1998, Next Wave filed for Chapter 11 protection under the Bankruptcy Code. Chapter 11 stays any debts owed, including those owed to the government. A judge of the U.S. Bankruptcy Court for the Southern District of New York found that Next Wave could keep its licenses even after nonpayment, because Section 525 of the Bankruptcy Code prohibits the government from revoking a license from a debtor for nonpayment of fees. The judge also reduced the amount Next Wave owed on the liceneses themselves, saying they were originally auctioned off at a price above market value. The Second Circuit in New York overturned the Bankruptcy Court’s decision, saying that the FCC had the regulatory right to revoke the licenses, and that this matter was outside the Bankruptcy Code’s jurisdiction. Next Wave then filed an appeal with the District of Columbia Circuit, which has jurisdiction over FCC regulatory decisions. That court held that the Bankruptcy Code trumped the FCC’s regulatory power, so Next Wave’s licenses stand. The U.S. Supreme Court will hear the appeal of the D.C. Circuit’s decision next Term.

“A conservative government is an organized hypocrisy.” - Benjamin Disraeli

CMDC: The Supreme Court Year in Review, 2001-2002

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Other Highlights

“The people’s government, made for the people, made by the people, and answerable to the people.” - Sen. Daniel Webster

Among the other highlights of the 2001 Term not included in our analysis were a number of cases dealing with other issues of constitutional law and interpertation. On the criminal side of the ledger, a 6-3 Court found that executing the “mentally retarded” (a group vaguely defined as adults with an IQ below 60) was a categorical violation of the Eighth Amendment’s ban on “cruel and unusual punishment.” Justice Stevens, writing for the Court in Atkins v. Virginia, said that a “national consensus” had emerged against executing the retarded, and that justified invalidating such executions in the states that had not already prohibited the practice. The Chief Justice and Justice Scalia, in separate dissents, ridiculed the Court’s reasoning, saying that there was no basis in law for declaring any “national consensus” existed on the subject. The Court also clarified (well, attempted to clarify) its position on what questions must be submitted to a jury at trial in criminal cases. Following up their holding two years ago in Apprendi v. New Jersey, the Court issued two rulings on the role of jurys. In Ring v. Arizona, seven justices voted to invalidate the capital sentencing procedures of five states, holding that any factor which might increase the maximum sentence to death must be determined by a unanimous jury. Arizona law had directed judges to decide “aggravating factors” in capital cases seprate from the jury’s finding of guilt. However, in Harris v. United States, the Court held that a jury need not decide factors which only increase the minimum sentence. William Harris was convicted of illegally distributing narcotics, and was likely facing a six-month jail sentence, except that he was in possession of a firearm at the time of his arrest, requiring the judge to give him a minimum sentence of seven years under law. Five justices found that it was constitutional to leave this question to the judge, since it did not increase the maximum penalty, only the minimum. The Court also ruled on a case stemming from the 2000 Census, Utah v. Evans. The State of Utah had sued to get

an additional seat in the House of Representatives, which they claim was apportioned to North Carolina on the basis of a faulty method used by the government to count people who didn’t actually respond to the Census. Justice Breyer, writing for the Court, said that it was permissible for the Census to use “hot-deck imputation” to extrapolate data from non-responding households. Since this method does not involve a statistical estimate of a wide population, just specific households, Justice Breyer said it did not violate the census law (which prohibits statistical sampling) or the Constitution, which requires an “actual enumeration” of the population for apportionment purposes. On the continuing issue of the Eleventh Amendment immunity of states from suit in federal courts, the justices extended that protection to cases involving administrative agencies. A 5-4 majority held in Federal Maritime Commission v. South Carolina Ports Authority that adjudicative proceedings before an executive branch agency should be treated the same in terms of “sovereign immunity” standards. Of particular note in Justice Thomas’s majority opinion was his contention that the Founders would not have conceived of the notion of ‘administrative agencies’ that would exercise quasi-judicial powers. The immense growth in the scope of the federal government, however, should not justify erosion of a state’s legitimate sovereign “dignity,” as Justice Thomas puts it. Finally, the Court issued a pair of decisions involving the ongoing “deregulation” of the telecommunications industry under a 1996 Congressional act. In the key decision, Verizon Communications v. FCC, actually a consolidation of five cases, the Court held that the law gave the federal government broad power to dictate the terms by which local telephone companies would be compelled to provide competitiors with access to their systems. The Court, led by Justice Souter, said the FCC could exercise its power even if it meant trampling on a state’s prerogative to regulate intrastate utility rates.

CMDC: The Supreme Court Year in Review, 2001-2002

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Conclusion Based on the Court’s 2001-2002 decisions, CMDC has identified four key areas where continued debate and expanded activism will be critical. While the Court’s rulings did not only impact these areas, we believe they are the ones most critical to ensuring America’s continued protection of economic freedom and individual rights: Property rights. The Court’s ruling in the Tahoe case will likely embolden local governments and environmental groups to continue pursuing multi-year “moratoria” as a means of negating an individual’s right to use his land as he chooses. It is imperative that new zoning laws, such as “anti-sprawl” measures, be stopped at the city, town and state levels before they are challenged in the courts, since the Fifth Amendment’s guarantee of compensation for lost property is no longer considered sacrosanct by a majority of the Court. Commercial speech. Although Western States was an important victory for the protection of “commercial” speech from government regulation, there is still a ways to go before the First Amendment distinction from “political” speech is eliminated. Justice Thomas has proven a valuable ally in thwarting federal and state attempts to restrict businessmen from speaking to promote their products and defend their interests. And as a result of the Western States ruling, the U.S. Food and Drug Administration is now actively soliciting public comment on how their policies affect the First Amendment rights of drug companies and pharmacists. Business regulation. The Americans with Disabilities Act remains the single greatest regulatory burden on the majority of American employers, virtually destroying their ability to dismiss and manage employees without fear of federal litigation. While the Court offered a number of decisions favorable to employers with regard to the ADA this year, more needs to be done. Education. On the final day of the 2001 Term, the Court issued conflicting rulings on public education. On the one hand, the declared vouchers used in religous and private schools are constitutional, while on the other hand they gave public school officials free rein to randomly drug test essentially any student without their parent’s permission. Neither of these decisions will likely settle the underlying constitutional and policy issues, however, and continued monitoring and activism will be required to bring about an end to the public education monopoly. CMDC will continue to monitor the activitied of the entire federal court system throughout the summer, and into the Supreme Court’s October 2002 Term, where the issues of economic rights and individual liberty will continue to be decided in the “highest court in the land.”

“Reason is the life of the law; nay, the common law itself is nothing else but reason...The law, which is perfection of reason.” - Sir Edward Coke

About CMDC The Center for the Moral Defense of Capitalism was founded in 1998 to advance the social welfare of the nation by presenting a moral foundation for individualism and economic freedom to the public, policymakers and the judiciary. CMDC provides analysis of human affairs through the application of Ayn Rand’s philosophy of Objectivism. At the center of CMDC’s mission is our argument that all human action may be voluntary, free of coercion, and that the initiation of physical force must be banished from all human relationships. We believe in a just government that acts as an agent of its citizens, charged with the sole mission of employing retaliatory physical force against the initiation of physical force. CMDC’s recent activities include a series of comment letters to the Federal Trade Commission in support of the rights of physicians, a brief to the U.S. Court of Appeals in support of Microsoft Corporation, advocacy in defense of industry and technology against environmentalism, and a lobbying effort in support of private cloning research.

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