Greetings, Court Fans!

The Court has issued three opinions this week, including the first by the new Chief Justice.

On Tuesday, in Wagnon v. Prairie Band Potowatomi Nation (04-631), the Court upheld a Kansas fuel tax against a tribal sovereignty challenge. Kansas imposes a tax on fuel distributors at the time they receive fuel from suppliers, but allows distributors to pass on the cost of the tax to retail stations, including the Nation’s on-reservation station. The Nation, which imposes its own gas tax on the station to support reservation infrastructure, argued that the Kansas tax crowded out its tax by making it impossible to levy the Nation’s tax and still sell at a competitive price. Applying the interest-balancing test from the Court’s 1980 decision in White Mountain Apache Tribe v. Bracker, the Tenth Circuit held that the Kansas tax could not apply to fuel sold to the Nation because the Nation’s taxing interest outweighed the state’s. The Court reversed, in an opinion by Justice Thomas. It quickly dispensed with the Nation’s argument that the tax was categorically barred as a tax on on-reservation tribal activities, because the tax was levied on fuel distributors who were not required to pass on the cost to the Nation’s station. The Court then held that the tax also was not subject to the Bracker test, which applies only to state regulation of non-tribal members’ activities on a reservation in light of the “significant geographical component” of tribal sovereignty. Since the tax is imposed upon the distributors’ receipt of fuel off the reservation, it falls outside Bracker’s scope. Finally, the Kansas tax did not really crowd out the Nation’s tax because the Nation owns the station and gets to keep all revenues in excess of costs, regardless of whether these are labeled “profits” or “tax proceeds.” For the Court, this is not a fight about competing tax regimes but just an attempt by the Nation to obtain cheaper wholesale fuel (this comes at the end of the opinion, but it clearly motivated much of the Court’s analysis). Justice Ginsburg dissented, joined by Justice Kennedy. Ginsburg accepted the profits/tax distinction and that the Nation’s tax could not coexist alongside the Kansas tax. She also believed that the Kansas tax sufficiently “engaged” the Nation because, accounting for all the statutory exemptions (e.g., for fuel sold to the government), Kansas ultimately taxed only fuel later sold to nonexempt retailers like the Nation’s station. She would have applied Bracker and held for the Nation: “Balancing tests have been criticized as rudderless, affording insufficient guidance to decisionmakers. Pointed as the criticism may be, one must ask, as in life’s choices generally, what is the alternative”?

Today, Chief Justice Roberts delivered his first opinion, a unanimous decision in Martin v. Franklin Capital Corp. (04-1140), in which the Court determined the standard districts courts should use for awarding attorney’s fees when remanding a case to state court after it has been wrongly removed to federal court (looks like the Chief will not be hoarding just the juicy cases). The Martins filed suit in New Mexico state court, and the defendants removed the case to federal court only to see it remanded for failure to meet the amount-in-controversy requirement. The district court declined to award the Martins fees under 28 U.S.C. 1447, however, and the Tenth Circuit affirmed. So did the Court. Section 1447 provides that fees “may” be awarded, so there is no automatic right to fees for the party opposing removal, but there also is no language in the statute indicating a presumption either for or against fee awards. To avoid undermining a defendant’s right to remove while still deterring frivolous or abusive removals, the Court held that, absent unusual circumstances (left within a court’s discretion), a court should award fees only where the removing party lacked an objectively reasonable basis for seeking removal. Because the Martins did not challenge the reasonableness of the defendants’ removal arguments (they had sought a per se entitlement to fees, or at least a strong presumption in their favor), they were not entitled to fees.

We also learned today that you really, really can’t avoid paying those federal student loans. In Lockhart v. United States (04-881), the Court, led by Justice O’Connor, unanimously held that the United States may offset Social Security benefits in order to collect a student loan debt even where that debt has been outstanding for over ten years. (This case resolves a split between the Eight and Ninth Circuits – and the Ninth Circuit comes out on top. It’s about time!) The case deals with the intersection of several laws. The Debt Collection Act of 1982 permitted the collection of debts owed to the government through administrative offsets after certain other collection methods were exhausted, but it did not permit the collection of debts over ten years old. Further, the Social Security Act (SSA) prohibited the attachment or offset of Social Security benefits absent a legislative act that specifically provided for such attachment by express reference to the SSA. So, if the law had not evolved further, Lockhart could have argued successfully that the government could not offset his Social Security benefits to collect on his student loans that were delinquent for more than a decade. Unfortunately for Lockhart, the law did evolve: In 1991, the Higher Education Technical Amendments (HETA) eliminated the ten-year time-limit with respect to the collection of certain educational loans, and the 1996 Debt Collection Improvement Act permitted Social Security offsets. Lockhart argued that the elimination of the ten-year limitations period in HETA could not have been intended to apply to Social Security offsets, which were only allowed five years later. The Court disagreed, however, based on the plain meaning of HETA. Justice Scalia concurred separately to voice his opinion that a prior legislature cannot tie the hands of future legislatures by including express reference requirements, as the SSA did here. Congress can repeal prior laws, and where it does so clearly, as it did here, that intent will be honored, whether or not it comports with any traps for the unwary laid by former lawmakers.

The Court granted also granted cert in two cases in this week’s order list:

In Burlington Northern & Santa Fe Railway Co. v. White (05-259), the Court will review an en banc decision of the Sixth Circuit. The grant of cert is limited the following question: May an employer be held liable for retaliatory discrimination under Title VII of the 1964 Civil Rights Act for any “materially adverse change in the terms of employment” (including temporary suspension rescinded by the employer with full back pay or inconvenient reassignment, as the court below held), for any adverse treatment that was “reasonably likely to deter” plaintiff from engaging in protected activity (as Ninth Circuit holds), or only for an “ultimate employment decision” (as two other courts of appeal have held)?

Clark v. Arizona (05-5966), will address the extent to which states may constitutionally limit the ability of a defendant to put on an insanity defense. Specifically, the case asks whether states are required to allow a criminal defendant to claim that, because of a mental defect, he could not know the nature and quality of the crime he is accused of committing, and whether states may eliminate or greatly restrict a defendant’s ability to submit evidence of mental defect or illness to rebut the state’s evidence of intent.

Finally, the Court invited the SG to weigh in on two cases: Davis v. United Automobile, Aerospace & Agricultural Implement Workers of America (05-107), which presents issues relating to appellate review of orders remanding a case to state court; and Burke v. Wachovia Bank NA (05-431), which asks whether an Office of Comptroller of Currency (OCC) interpretation as to preemption of state law by the National Bank Act is entitled to judicial deference and whether OCC regulations preempt state law licensing and regulatory authority over state-chartered operating subsidiaries of national banks.

That’s (almost certainly) all for this week. Until next week, thanks for reading!

Ken & Kim

From the Appellate Practice Group at Wiggin and Dana. For more information, contact Kim Rinehart, Ken Heath, Aaron Bayer, or Jeff Babbin at 203-498-4400