Recent Court Rulings
In Heffernan v. City of Paterson, New Jersey the Supreme Court held 6-2 that a public employer violates the First Amendment when it acts on a mistaken belief that an employee engaged in First Amendment protected political activity. The State and Local Legal Center (SLLC) filed an amicus brief taking the opposite position.
The Court assumed the following facts in this case: Police officer Jeffery Heffernan worked in the office of the police chief. The mayor was running for reelection against a friend of Heffernan’s, Lawrence Spagnola. Heffernan was demoted after another member of the police force saw Heffernan picking up a Spagnola yard sign and talking to the Spagnola campaign manager and staff. Heffernan was picking up the sign for his bedridden mother.
The First Amendment generally prohibits government employers from discharging or demoting employees because they support a particular political candidate. Heffernan sued claiming he was demoted based on the police chief’s mistaken view that he engaged in First Amendment protected speech.
The Supreme Court agreed that Heffernan has a First Amendment claim even though he engaged in no political activity protected by the First Amendment. Justice Breyer, writing for the majority, concluded that the question in this case is whether the First Amendment right focuses upon the employee’s activity or the supervisor’s motive.
In Waters v. Churchill (1994) what mattered was the employer made a factual mistake. The employer mistakenly believed the employee engaged in personal gossip rather than protected speech on a matter of public concern. The Court upheld the employee’s dismissal focusing on the employer’s motive. “In Waters, the employer reasonably but mistakenly thought that the employee had not engaged in protected speech. Here the employer mistakenly thought that the employee had engaged in protected speech. If the employer’s motive (and in particular the facts as the employer reasonably understood them) is what mattered in Waters, why is the same not true here?”
Dissenting Justices Thomas and Alito opined that public employees have no remedy against public employers who attempt but fail to violate employees’ constitutional rights. “Demoting a dutiful son who aids his elderly, bedridden mother may be callous, but it is not unconstitutional.”
The SLLC amicus brief argued the Court need not find a constitutional claim exists when an employer misperceives that an employee has engaged in political speech. Collective bargaining statutes, “just cause” protections, civil service statutes, and statutes protecting against interference or attempts to interfere with any individual’s civil rights would prevent a state or local government employer from lawfully taking an adverse employment action in such circumstances.
The SLLC amicus brief also argued that if the Court were to hold that the First Amendment covers perceived First Amendment violations, it should clarify that the First Amendment does not protect political speech made by employees in sensitive and confidential positions, such as Heffernan. Related to this point, the Court noted that some evidence in the record suggests that Heffernan was dismissed pursuant to a “different and neutral policy prohibiting police officers from overt involvement in any political campaigns.” The Court instructed the lower court to sort out whether such a policy existed, whether Heffernan’s supervisor followed it, and whether it is constitutional.
Collin O’Connor Udell and Anne Selinger, Jackson Lewis, wrote the SLLC brief which was joined by the National Conference of State Legislatures, the National Association of Counties, the National League of Cities, the United States Conference of Mayors, the International City/County Management Association, the International Municipal Lawyers Association, the International Public Management Association for Human Resources, and theNational Public Employer Labor Relations Association.
In Franchise Tax Board of California v. Hyatt the Supreme Court held 6-2 that the Constitution’s Full Faith and Credit Clause requires state courts to apply a damages cap, which applies to the state, to foreign states and local governments sued in its court.
The State and Local Legal Center filed an amicus brief in this case asking the Court to reach this result. State and local governments are frequently sued out-of-state and will benefit if other states’ immunities apply to them.
Gilbert Hyatt says that he moved to Nevada in September 1991. But the California’s Franchise Tax Board (CFTB) claimed that Hyatt moved to Nevada in April 1992 and therefore owed California more than $10 million in taxes, penalties, and interest. Hyatt sued CFTB in Nevada state court alleging invasion of privacy, fraud, and intentional infliction of emotional distress, among other claims, related to what he described as abusive audit and investigation practices.
In 2003 in Franchise Tax Board of California v. Hyatt the Supreme Court held that the Full Faith and Credit Clause does not require Nevada to offer CFTB the full immunity that California law provides.
A Nevada jury ultimately awarded Hyatt nearly $500 million in damages and fees. The Nevada Supreme Court refused to apply Nevada’s $50,000 statutory cap, which applies to Nevada state and local governments, to damages related to Hyatt’s fraud claim. CFTB claimed this refusal violates the Full Faith and Credit Clause.
Per the Constitution, “Full Faith and Credit” must be “given in each State to the public Acts . . . of every other State.” The Court concluded that the Full Faith and Credit Clause requires Nevada state courts to apply the damages cap that it would apply to Nevada to CFTB. The Full Faith and Credit Clause prohibits a state from adopting a “policy of hostility to the public Acts” of another state. According to Justice Breyer, writing for the majority, Nevada’s rule allowing damages awards of over $50,000 against foreign states and local governments is “not only ‘opposed’ to California law [which provides total immunity], it is also inconsistent with the general principles of Nevada immunity law” [which grants the state immunity over $50,000].
The Nevada Supreme Court explained it didn’t apply the damages cap to CFTB because California’s agencies “‘operat[e] outside’” the systems of “‘legislative control, administrative oversight, and public accountability’” that Nevada applies to its own agencies. The Court was not persuaded by this argument. “Such an explanation, which amounts to little more than a conclusory statement disparaging California’s own legislative, judicial, and administrative controls, cannot justify the application of a special and discriminatory rule. Rather, viewed through a full faith and credit lens, a State that disregards its own ordinary legal principles on this ground is hostile to another State.”
Interestingly, the Court was divided 4-4 over the question of whether to overrule Nevada v. Hall (1979), holding that a state may be sued in another state’s courts without consent. So that case remains the law of the land. Had the Court overruled Nevada v. Hall the issue it decided in this case would have been moot. The SLLC amicus brief took no position on Nevada v. Hall.
Quin Sorenson and Spencer Driscoll, Sidley Austin, Washington D.C. wrote the SLLC amicus brief which was joined by the Council of State Governments, the National Association of Counties, the National League of Cities, the United States Conference of Mayors, the International City/County Management Association, and the International Municipal Lawyers Association.
In a unanimous opinion in Hughes v. Talen Energy Marketing the Supreme Court held that Maryland’s program which guarantees a power plant generator a contractual rate rather than the “clearing price” wholesale rate set at a federally-approved capacity auction is preempted by the Federal Power Act (FPA).
The State and Local Legal Center filed an amicus brief arguing that Maryland’s program should not be preempted. At least one other state, New Jersey, has implemented a similar program.
Per the FPA, the Federal Energy Regulatory Commission (FERC) has the authority to regulate interstate wholesale rates.
Throughout the electricity grid, through Regional Transmission Organizations (RTOs), FERC administers capacity auctions. Owners of capacity bid to sell their capacity on the auction for the next three years. The RTO accepts all bids, beginning with the lowest, until capacity is satisfied. All accepted capacity sellers receive the highest accepted bid rate, called the “clearing price.” The purpose of the capacity auction is to identify the need for new electric generation. A high clearing price encourages new generation.
Maryland electricity regulators were concerned that the capacity auction wasn’t encouraging sufficient development of new in-state generation. So it offered the successful bidder, CPV, a 20-year contract where it would receive a set contract price rather than the “clearing price.”
Discussing the relevant preemption principles in just one short paragraph the Court concluded that Maryland’s program amounts to wholesale rate setting and is preempted by the FPA. “Exercising [its] authority [over wholesale rates], FERC has approved the . . . capacity auction as the sole ratesetting mechanism for sales of capacity . . . and has deemed the clearing price per se just and reasonable. Doubting FERC’s judgment, Maryland . . . requires CPV to participate in the . . . capacity auction, but guarantees CPV a rate distinct from the clearing price. By adjusting an interstate wholesale rate, Maryland’s program invades FERC’s regulatory turf.”
The Court, likely recognizing the difficulty of encouraging the building of nearly billion dollar power plants, emphasized that its opinion was narrow and did not address the permissibility of the various other measures states use to encourage development of power plants.
Bill Stein, Scott Christensen, Eric Parnes, and Elizabeth Solander, Hughes Hubbard & Reed wrote the SLLC amicus brief which the National Governors Association, National Conference of State Legislatures, and Council of State Governments joined.
In a 6-2 decision the Supreme Court ruled that the Sixth Amendment right to counsel includes allowing a criminal defendant to use untainted substitute assets to hire an attorney, rather than freezing them for forfeiture to the government after conviction.
The State and Local Legal Center (SLLC) filed an amicus brief arguing for the opposite result in Luis v. United States. State and local governments—police departments in particular—receive criminal asset forfeitures. Any many state forfeiture statutes allow freezing of substitute assets.
Sila Luis was charges with fraudulently obtaining nearly $45 million in Medicare funds. Luis claims that she has a Sixth Amendment right to use the untainted portion of the $2 million in assets remaining in her possession to hire an attorney of her choice. A federal statute allows substitute assets to be frozen in cases of federal health care fraud.
The Supreme Court ruled in favor of Luis in a plurality opinion written by Justice Breyer. The Court distinguished two previous cases where the Court held that a post-conviction defendant (Caplin & Drysdale v. United States (1989)) and pre-trial defendant (United States v. Monsanto (1989)) could not use tainted assets to pay an attorney. “The distinction between [tainted and untainted assets] is…an important one, not a technicality. It is the difference between what is yours and what is mine.”
The Court then applied a balancing test weighing the defendant’s “fundamental” right to assistance of counsel with the government’s interest in punishment through criminal forfeiture and victims’ interest in restitution. The balance favored the interest of the accused because the interests in criminal forfeiture and restitution aren’t constitutionally protected. “Rather, despite their importance, compared to the right to counsel of choice, these interests would seem to lie somewhat further from the heart of a fair, effective criminal justice system.”
Justice Kennedy’s dissenting opinion articulates many of the concerns raised in the SLLC amicus brief. Specifically, he points out that the ruling rewards Luis’ decision to spend her own money rather than the money she is accused of stealing. And in Justice Kennedy’s words: “[t]he true winners today are sophisticated criminals who know how to make criminal proceeds look untainted.”
Justice Kennedy also notes that Court’s decision will frustrate states’ administration of their forfeiture schemes. “Where a defendant has put stolen money beyond a State’s reach, a State should not be precluded from freezing the assets the defendant has in hand. The obstacle that now stands in the States’ way is not found in the Constitution. It is of the Court’s making.”
Mary Massaron, Plunkett Cooney, wrote the SLLC brief, which was joined by the National Conference of State Legislatures, the Council of State Governments, the National Association of Counties, the National League of Cities, the United States Conference of Mayors, the International City/County Management Association, and the International Municipal Lawyers Association.
The Supreme Court held 6-2 in Gobeille v. Liberty Mutual Insurance Company that the Employee Retirement Income Security Act (ERISA) preempts Vermont’s all-payers claims database (APCD) law. Seventeen other states collect health care claims data. The State and Local Legal Center (SLLC) filed an amicus brief arguing against ERISA preemption, which Justice Ginsburg cited three times in her dissenting opinion.
ERISA applies to the majority of health insurance plans. Rather than guaranteeing substantive benefits, it mandates oversight over plans. ERISA preempts all state laws that “relate” to any employee benefits plan. Vermont’s APCD law requires health insurers to report to the state information related to health care costs, prices, quality, and utilization, among other things.
In an opinion written by Justice Kennedy the Court concluded ERISA preempts Vermont’s APCD law “to prevent States from imposing novel, inconsistent, and burdensome reporting requirements on plans.” Reporting, disclosure, and recordkeeping are central to ERISA which requires health insurance plans to submit an annual financial statement to the Department of Labor. “Vermont’s reporting regime, which compels plans to report detailed information about claims and plan members, both intrudes upon ‘a central matter of plan administration’ and ‘interferes with nationally uniform plan administration.’” The Secretary of Labor and not the states may require ERISA plans to report the data Vermont seeks.
Justice Ginsburg, joined by Justice Sotomayor, dissented. She cited the SLLC brief which, in her words, pointed out that APCD laws “serve compelling interests, including identification of reforms effective to drive down health care costs, evaluation of relative utility of different treatment options, and detection of instances of discrimination in the provision of care.” She concluded that APCD laws and ERISA serve different purposes and therefore ERISA should not preempt APCD laws. ERISA reporting requirements ensure that plans are providing covered benefits. APCD laws are designed to improve the quality and reduce the cost of health care.
The National Governors Association, National Conference of State Legislatures, Council of State Governments, National Association of Health Insurance Commissioner, and Association of State and Territorial Health Officials joined the SLLC amicus brief which was written by Jennifer McAdams of the National Association of Insurance Commissioners.