The major televisions stations, amidst a labyrinth of cameras and wires, staked out their positions on Monday morning right below the steps of the U.S. Supreme Court plaza. Inside the building, the pressroom buzzed with visiting reporters and interns. Was something big about to happen?
To the disappointment of many court watchers, the justices did not release decisions in the "big three" cases of the term: affirmative action, voting rights and same-sex marriage. But Thursday is another day and more decisions are expected.
The justices did resolve three of the outstanding 26 cases to be decided, ruling on issues as diverse as arbitration, sentencing and raisins — yes, raisins.
In the raisin case, the Obama Administration lost the second of three takings challenges before the justices this term, one with important implications for regulated parties challenging fines and other penalties for failing to comply with government mandates.
Horne v. Department of Agriculture involved a California raisin grower who charged that the Agricultural Marketing Agreement Act of 1937, which requires raisin handlers to turn over a percentage of their crop to the federal government, violated the Fifth Amendment’s takings clause. After the grower, who was found to be a handler, refused to hand over the required percentage of his crop, the Agriculture department began proceedings that resulted in more than $650,000 in fines and penalties. The grower sought review in federal district court.
The issue before the justices was whether the grower was required to bring the takings claim in the U.S. Court of Federal Claims—as held by the U.S. Court of Appeals for the Ninth Circuit—seeking just compensation after complying with the order to turn over a percentage of his crop. The justices unanimously disagreed with the Ninth Circuit which had ruled that it lacked jurisdiction to hear the claim.
Under the 1937 law, Justice Clarence Thomas wrote, raisin handlers may challenge the content, applicability and enforcement of marketing orders. "We have held that ‘any handler’ subject to a marketing order must raise any challenges to the order, including constitutional challenges, in administrative proceedings," he explained. "Once the secretary issues a ruling, the federal district court where the ‘handler is an inhabitant, or has his principal place of business’ is ‘vested with jurisdiction to review the ruling.’"
Karen Harned, executive director of the National Federation of Independent Business’ small business legal center, applauded the ruling, saying, "Obtaining compensation can be a costly and demoralizing process. There is no reason to multiply these burdens by forcing small-business owners to suffer through not one, but several rounds of litigation against the government before they can exercise their constitutional rights."
By a 5-4 vote, the court ruled in Peugh v. United States that the Constitution’s Ex Post Facto Clause requires federal criminal defendants to be sentenced under guidelines in effect when the crime occurred – not higher guidelines in place at the time of sentencing. Convicted in 2010 of bank fraud in Illinois, Marvin Peugh was sentenced to 70 months in prison under guidelines that had been increased in 2009. On appeal, Peugh asserted that because the crimes were committed in 1999 and 2000, he should have been sentenced under 1999 guidelines – which for him would have meant only 30 to 37 months in prison. The U.S. Court of Appeals for the 7th Circuit upheld the sentence on the ground that sentencing guidelines are only advisory and as such don’t have the effect of increasing punishment after the fact.
Writing for the majority, Justice Sonia Sotomayor rejected that argument, holding that even though the court in the 2005 ruling United States v. Booker made federal guidelines advisory, they are still the "lodestone of sentencing," and judges are required to use them as a starting point. As a result, she wrote, an increase in the sentencing guideline creates a "sufficient risk" of an increased sentence to trigger the Ex Post Facto Clause. Justice Clarence Thomas wrote a dissent, joined in part by Chief Justice John Roberts Jr. and justices Antonin Scalia and Samuel Alito Jr. Justice Anthony Kennedy voted with the majority except for one section in which Sotomayor reviewed the history of Ex Post Facto doctrine.
Monday’s ruling will affect "every federal sentencing" in which guidelines have increased sentences since the crime was committed – which includes sentences for certain fraud and sex offenses, according to Stephen Kinnaird, co-chair of the appellate practice at Paul Hastings in D.C. Kinnaird represented Peugh pro bono through his work with the University of Pennsylvania Law School’s Supreme Court Clinic, run by professor Stephanos Bibas. Kinnaird said Penn students gave him important help, developing statistics showing that actual sentences rise when guidelines rise.
In Oxford Health Plans v. Sutter, a unanimous court held that an arbitrator’s interpretation of whether a contract authorized class arbitration prevails, "however good, bad, or ugly," where the parties agreed the arbitrator should make that decision. The arbitrator does not exceed his powers in those circumstances, according to the court.
"All we say is that convincing a court of an arbitrator’s error—even his grave error—is not enough," wrote Justice Elena Kagan for the court. "So long as the arbitrator was ‘arguably construing’ the contract—which this one was—a court may not correct his mistakes [under the Federal Arbitration Act]. The potential for those mistakes is the price of agreeing to arbitration."
Oxford had sought in federal court to vacate an arbitrator’s decision that pediatrician John Sutter could bring a class action on behalf of himself and other New Jersey physicians alleging that Oxford had failed to make full and prompt payment to doctors who provide medical care to members of Oxford’s network.
The court left unanswered a key question in this area, according Thomas Linthorst, partner in the labor and employment practice at Morgan, Lewis & Bockius:
whether a contract authorizes class procedures is a "question of arbitrability" reserved for the courts, or a question for the arbitrator. "Until the ‘question of arbitrability’ issue is decided, this decision is likely to result in fewer defendants moving to compel class actions to arbitration where the arbitration agreement does not expressly preclude class actions," he said.
Archis Parasharami, co-chair of Mayer Brown’s consumer litigation and class action practice, called the decision an "extremely narrow" one. "Most arbitration clauses today do not suffer in silence—that is, they expressly preclude class arbitration—so businesses will not face the issue presented in Oxford," he explained. "Any business that does make use of arbitration clauses that do not address class arbitration should consider revising its provisions to do so to remove any doubts. But even for such ‘silent’ arbitration clauses, Oxford leaves a great deal of room for businesses to argue that class arbitration is forbidden."
Oxford was one of two class action arbitration cases on the docket this term. Still undecided: American Express Company v. Italian Colors Restaurant.
Marcia Coyle can be contacted at firstname.lastname@example.org. Tony Mauro can be contacted at email@example.com.