Tag: Litigation

Ninth Circuit Rules Against Apache in Dispute Over Sacred “Oak Flat” Site

On March 1, the U.S. Court of Appeals for the Ninth Circuit sided with a lower court decision denying an Apache interest group’s motion for a preliminary injunction against the transfer of copper-rich federal land to private company Resolution Copper.

Oak Flat, a piece of land that the Ninth Circuit acknowledges is “a site of great spiritual value to the Western Apache Indians,” has been at the center of the dispute largely due to the significant copper ore deposits it sits on. Through the Land Transfer Act, Congress directed the federal government to transfer the land to Resolution Copper, which would then mine the ore. Apache Stronghold sued the government, seeking an injunction against the land transfer on the ground that the transfer would violate its members’ rights under the Free Exercise Clause of the First Amendment, the Religious Freedom Restoration Act (“RFRA”), and an 1852 treaty between the United States and the Apaches. The Ninth Circuit disagreed, holding that Apache Stronghold was unlikely to succeed on the merits on any of its three claims before the court.

First, the Ninth Circuit found that under the Supreme Court’s controlling decision in Lyng. There, the Supreme Court held that while the government’s actions with respect to “publicly owned land” would “interfere significantly with private persons’ ability to pursue spiritual fulfillment according to their religious beliefs,” it would also have no “tendency to coerce” them “into acting contrary to their religious beliefs.” The Ninth Circuit also found that the transfer of Oak Flat for mining operations did not discriminate against nor penalize Apache Stronghold’s members, nor deny them an “equal share of the rights, benefits, and privileges enjoyed by other citizens.”

Second, Apache Stronghold’s claim that the transfer of Oak Flat to Resolution Copper would violate RFRA failed for the same reasons because “what counts as ‘substantially burden[ing] a person’s exercise of religion’ must be understood as subsuming, rather than abrogating, the holding of Lyng.”

Finally, the court ruled that Apache Stronghold’s claim that the transfer of Oak Flat would violate an enforceable trust obligation created by the 1852 Treaty of Sante Fe because the government’s statutory obligation to transfer Oak Flat abrogated any treaty obligation.

The case demonstrates the difficulty Tribes have in stopping major development projects on federal land on religious grounds.

© 2024 Van Ness Feldman LLP
For more news on Tribal Litigation, visit the NLR Tribal Law / Indigenous Peoples section.

Fourth Circuit Reverses $1 Billion Award for Vicarious Liability Claim for More than 10,000 Works

On January 12, 2021, the U.S. District Court for the Eastern District of Virginia awarded a group of music recording companies (the plaintiffs) a $1 billion verdict against Cox Communications (Cox). The Virginia court’s ruling found that Cox, an internet service provider (ISP), was contributorily and vicariously liable for copyright infringement committed by certain subscribers on its networks. The plaintiffs alleged that the ISP allowed the unauthorized downloading and distribution of more than 10,000 copyrighted works by Cox subscribers who had already received three or more notices of infringement. The district court in Virginia established that the “takedown” notices sent by the plaintiffs provided Cox with the requisite knowledge of its subscribers’ repeated infringement to substantiate their claim that Cox was contributorily liable, suggesting that Cox had sufficient specific knowledge of infringement to have done something about it.

The plaintiffs’ notice to Cox identified the IP address of the subscriber, as well as the time of infringement and the identification of the infringed work, which the plaintiffs argued was sufficiently specific knowledge for Cox to be able to identify the subscriber and to exercise its policy by suspending or terminating the infringing subscriber. This case proceeded to trial on two theories of secondary liability – vicarious and contributory copyright infringement. The plaintiffs argued that Cox failed to act on these known repeat infringers, and the jury found Cox liable for willful contributory infringement and vicarious infringement, ordering Cox to pay more than $99,000 for each of the infringed-upon works. Cox appealed the jury verdict.

On appeal, before the U.S. Court of Appeals for the Fourth Circuit, Cox raised several questions of law concerning the secondary liability for copyright infringement, as well as what constitutes a derivative work in the Internet Age.

Vicarious Infringement
The Fourth Circuit’s analysis first considered whether the district court erred in denying plaintiffs’ vicarious infringement claim. “A defendant may be held vicariously liable for a third party’s copyright infringement [if the defendant] (1) profits directly from the infringement and (2) has a right and ability to supervise the direct infringer.” See Metro-Goldwyn-Mayer Studios, Inc. v. Grokster, Ltd., 545 U.S. 913, 930 n.9 (2005) (internal citations omitted). The Fourth Circuit found that the plaintiffs failed to establish the first element as a matter of law and thus found that the plaintiffs failed to establish that Cox was vicariously liable.

In reaching this decision, the Fourth Circuit turned to the landmark decision in Shapiro, Bernstein & Co., 316 F.2d 304 (2d Cir. 1963), a case on vicarious liability for infringing copyrighted music recordings. In Shapiro, a department store was sued for the selling of “bootleg” records by a concessionaire operating in its stores. The store had the right to supervise the concessionaire and employees, demonstrating its control over the infringement. There, the store received a certain percentage of every record sale, “whether ‘bootleg’ or legitimate,” giving it “a more definite financial interest” in the infringing sales.” Thus, the Shapiro court found that the financial gains were clearly spelled out from the bootleg sales and acts of infringement in Shapiro.

Next, the Fourth Circuit recognized that courts have found that a defendant may possess a financial interest in a third party’s infringement of copyrighted music, even absent a strict correlation between each act of infringement and an added penny of profits. See Fonovisa, Inc. v. Cherry Auction, Inc., 76 F.3d 259 (9th Cir. 1996). In Fonovisa, the operator of a swap meet allowed vendors to sell infringing goods, and the operator collected “admission fees, concession stand sales, and parking fees” but no sales commission “from customers who want[ed] to buy the counterfeit recordings at bargain-basement prices.” The Fonovisa court found that the plaintiffs adequately showed a financial benefit from the swap meet owner and the sales of pirated recordings at the swap meet, which was a draw for customers. Thus, the infringing sales “enhance[d] the attractiveness of the venue of the potential customers, finding the swap meet operator had a financial interest in the infringement sufficient to state a claim for vicarious liability.”

The Fourth Circuit established that Shapiro and Fonovisa provided the steppingstones of the principles of copyright infringement to the internet and cyberspace and that Congress agreed that “receiving a one-time setup fee and flat periodic payment for service” from infringing and non-infringing users alike ordinarily “would not constitute a financial benefit directly attributable to the infringing activity.” Ellison v. Robertson, 357 F. 3d 1072, 1079 (9th Cir. 2004) (internal citations omitted). The Court also reviewed other court precedents, including A&M Records v. Napster, Inc., 239 F.3d 1004 (9th Cir. 2001), to show that increased pirated music drew in users as a direct financial interest for vicarious liability., but also notes that courts have found no evidence of a direct financial benefit between subscribers of American Online (AOL) and the availability of infringing content.’’ Ellison, 357 F.3d at 1079.

Against this backdrop, the Fourth Circuit held that to prove Cox was vicariously liable, the plaintiffs had to demonstrate that Cox profited from its subscribers’ infringing download and distribution of the plaintiffs’ copyrighted songs, which – given the evidence at trial – it did not. While the district court found it was enough that Cox repeatedly declined to cancel an ISP subscriber’s monthly subscription fee, the Fourth Circuit found this evidence to be insufficient. Instead, the Fourth Circuit found that the continued monthly payment fees for internet service, even by repeat infringers, was not a financial benefit flowing directly from the copyright infringement. Cox established that subscribers paid a flat fee even if all of its subscribers stopped infringing. Recognizing that an internet provider would necessarily lose money if it canceled subscriptions only demonstrates that service providers have a direct financial interest in providing subscribers with access to the internet only. Thus, the Fourth Circuit held that vicarious liability demands proof that the defendant profits directly from the acts of infringement for which it is being held accountable.

To rebut this, the plaintiffs claimed that the jury could infer that subscribers paid monthly membership fees based on the high volume of infringing content. The Fourth Circuit rejected this argument and found that the evidence was insufficient to prove that customers were drawn to Cox’s internet service or that they continued the service because they were specifically drawn to the opportunity to infringe the plaintiffs’ copyrights. The plaintiffs further asserted that subscribers were willing to pay more for the opportunity to infringe based on Cox’s tiered structure for internet access – but the plaintiffs fell short in proving this claim because no reasonable inference could be drawn that Cox subscribers paid more for faster internet to infringe on the copyrighted works. Ultimately, the Court found that the plaintiffs could not establish a causal connection between subscribers’ copyright infringement and Cox’s revenue for monthly subscriptions. Thus, the Fourth Circuit held that Cox was not liable for its subscribers’ copyright infringement and reversed the district court’s ruling on this theory. The court vacated the $1 billion damages award and remanded the case for a new trial on damages, holding that the jury’s finding of vicarious liability could have influenced its assessment of statutory damages.

Contributory Infringement
The Fourth Circuit then examined the remaining issue of contributory infringement. Under this theory, “one who, with knowledge of the infringing activity, induces, causes or materially contributes to the infringing conduct of another is liable for the infringement, too.” Cox argued that the district court erred by taking away the factual determination from the jury that notices of past infringement established Cox’s knowledge that subscribers were substantially certain to infringe in the future. Cox had contracted with a third party to provide copyright violation notices to users and asserted that it used these notices as their safe harbor under the Digital Millennium Copyright Act to alert violators and to terminate access to users who were repeat infringers. Despite this, the Fourth Circuit ultimately agreed with the jury’s finding that Cox materially contributed to copyright infringement occurring on its network and that its conduct was culpable.

Therefore, a three-judge panel found that Cox was liable for willful copyright infringement but reversed the vicarious liability verdict and remanded a new trial on damages. The Fourth Circuit held that because Cox did not profit from its subscribers’ acts of infringement, a legal prerequisite for vicarious liability, Cox was not liable for damages under the vicarious liability theory.

The Impact
The Fourth Circuit’s decision recognizes a new dawn breaking in copyright law, one that requires a causal connection between profit and/or financial gain and a defendant’s acts of infringement to prove vicarious liability in a copyright infringement claim under the Copyright Act. The plaintiffs attempted to bridge the financial gap between acknowledging access to infringing content through a monthly internet subscription and high-volume infringing acts. However, the Fourth Circuit found that this leap in logic was a step too far and reversed the award for vicarious liability for lack of evidence to find this missing connection between Cox subscribers and infringing plaintiffs’ content.

While this may be one route the courts may consider to reduce music piracy damages, it remains to be seen whether other courts will take this approach to determining that profit is the key element supporting other vicarious liability claims in cyberspace.

© 2024 Wilson Elser
For more news on Copyright Litigation, visit the NLR Intellectual Property section.

The SEC Speaks–And Fails to Defend Mandatory Climate Disclosures

During the opening remarks of the two-day SEC Speaks Conference, Chairman Gensler failed to express any statement of support in connection with the SEC’s recently promulgated rule on mandatory climate disclosures. (Instead, his speech focused on a number of other topics, including clearinghouse rules and proposed regulations.) In contrast, Republican SEC Commissioner Uyeda devoted the entirety of his speech to offering critiques of the SEC’s newly enacted mandatory climate disclosure rule.

While most of Commissioner Uyeda’s criticisms had been previously voiced on other occasions, certain legal arguments achieved greater prominence in these remarks. In particular, Commissioner Uyeda emphasized the concept of materiality, noting that “[t]he significant changes in the final rule reflect a recognition that no disclosure rule that veers from materiality is likely to survive a court challenge,” and opining that “changes to selected portions of the rule text intended to mitigate legal risk do not necessarily convert a climate change activism rule to a material risk disclosure rule.” There was also a focus on procedural concerns, including a potential violation of the Administrative Procedure Act due to “the failure to repropose the rule” since “the changes were so significant,” and that “the fail[ure] to consider [the] rule’s economic consequences [renders] the adoption of the rule arbitrary and capricious.” Finally, Commissioner Uyeda compared the climate disclosure rule to the previously enacted conflict minerals rule (which was mandated by Congress), stating that “public companies and investors are stuck with a mandatory disclosure rule that deviates from financial materiality but fails to resolve the social purpose for which it was adopted.” Each of these arguments should be expected to feature in the upcoming litigation in the Eighth Circuit concerning the legality of the SEC’s climate disclosure rule.

Still, the failure by Chairman Gensler and his fellow Democratic Commissioners to offer a robust public defense of the climate disclosure rule may simply reflect a shifting of priorities now that the rule has been enacted. Notably, just a few days ago–on March 22, 2024–Chairman Gensler forcefully defended the SEC’s climate disclosure rule at a conference hosted by Columbia Law School, where his entire speech advocated the concept of mandatory disclosures and stated that the SEC’s climate disclosure rule “enhance[d] the consistency, comparability, and reliability of [climate-related] disclosures.” Moreover, it is altogether possible that a speech on the second day of the conference might offer a rejoinder to the varied critiques of the climate disclosure rule.

Unlike the conflict minerals rule, which was mandated by Congress, the Commission has acted on its own volition to adopt a climate disclosure rule that seeks to exert societal pressure on companies to change their behavior. It is the Commission that determined to delve into matters beyond its jurisdiction and expertise. In my view, this action deviates from the Commission’s mission and contravenes established law.

https://www.sec.gov/news/speech/uyeda-remarks-sec-speaks-040224

©1994-2024 Mintz, Levin, Cohn, Ferris, Glovsky and Popeo, P.C. All Rights Reserved.
For more on the SEC, visit the NLR Securities & SEC section.

AI Got It Wrong, Doesn’t Mean We Are Right: Practical Considerations for the Use of Generative AI for Commercial Litigators

Picture this: You’ve just been retained by a new client who has been named as a defendant in a complex commercial litigation. While the client has solid grounds to be dismissed from the case at an early stage via a dispositive motion, the client is also facing cost constraints. This forces you to get creative when crafting a budget for your client’s defense. You remember the shiny new toy that is generative Artificial Intelligence (“AI”). You plan to use AI to help save costs on the initial research, and even potentially assist with brief writing. It seems you’ve found a practical solution to resolve all your client’s problems. Not so fast.

Seemingly overnight, the use of AI platforms has become the hottest thing going, including (potentially) for commercial litigators. However, like most rapidly rising technological trends, the associated pitfalls don’t fully bubble to the surface until after the public has an opportunity (or several) to put the technology to the test. Indeed, the use of AI platforms to streamline legal research and writing has already begun to show its warts. Of course, just last year, prime examples of the danger of relying too heavily on AI were exposed in highly publicized cases venued in the Southern District of New York. See e.g. Benajmin Weiser, Michael D. Cohen’s Lawyer Cited Cases That May Not Exist, Judge Says, NY Times (December 12, 2023); Sara Merken, New York Lawyers Sanctioned For Using Fake Chat GPT Case In Legal Brief, Reuters (June 26, 2023).

In order to ensure litigators are striking the appropriate balance between using technological assistance in producing legal work product, while continuing to adhere to the ethical duties and professional responsibility mandated by the legal profession, below are some immediate considerations any complex commercial litigator should abide by when venturing into the world of AI.

Confidentiality

As any experienced litigator will know, involving a third-party in the process of crafting of a client’s strategy and case theory—whether it be an expert, accountant, or investigator—inevitably raises the issue of protecting the client’s privileged, proprietary and confidential information. The same principle applies to the use of an AI platform. Indeed, when stripped of its bells and whistles, an AI platform could potentially be viewed as another consultant employed to provide work product that will assist in the overall representation of your client. Given this reality, it is imperative that any litigator who plans to use AI, also have a complete grasp of the security of that AI system to ensure the safety of their client’s privileged, proprietary and confidential information. A failure to do so may not only result in your client’s sensitive information being exposed to an unsecure, and potentially harmful, online network, but it can also result in a violation of the duty to make reasonable efforts to prevent the disclosure of or unauthorized access to your client’s sensitive information. Such a duty is routinely set forth in the applicable rules of professional conduct across the country.

Oversight

It goes without saying that a lawyer has a responsibility to ensure that he or she adheres to the duty of candor when making representations to the Court. As mentioned, violations of that duty have arisen based on statements that were included in legal briefs produced using AI platforms. While many lawyers would immediately rebuff the notion that they would fail to double-check the accuracy of a brief’s contents—even if generated using AI—before submitting it to the Court, this concept gets trickier when working on larger litigation teams. As a result, it is not only incumbent on those preparing the briefs to ensure that any information included in a submission that was created with the assistance of an AI platform is accurate, but also that the lawyers responsible for oversight of a litigation team are diligent in understanding when and to what extent AI is being used to aid the work of that lawyer’s subordinates. Similar to confidentiality considerations, many courts’ rules of professional conduct include rules related to senior lawyer responsibilities and oversight of subordinate lawyers. To appropriately abide by those rules, litigation team leaders should make it a point to discuss with their teams the appropriate use of AI at the outset of any matter, as well as to put in place any law firm, court, or client-specific safeguards or guidelines to avoid potential missteps.

Judicial Preferences

Finally, as the old saying goes: a good lawyer knows the law; a great lawyer knows the judge. Any savvy litigator knows that the first thing one should understand prior to litigating a case is whether the Court and the presiding Judge have put in place any standing orders or judicial preferences that may impact litigation strategy. As a result of the rise of use of AI in litigation, many Courts across the country have responded in turn by developing either standing orders, local rules, or related guidelines concerning the appropriate use of AI. See e.g., Standing Order Re: Artificial Intelligence (“AI”) in Cases Assigned to Judge Baylson (June 6, 2023 E.D.P.A.), Preliminary Guidelines on the Use of Artificial Intelligence by New Jersey Lawyers (January 25, 2024, N.J. Supreme Court). Litigators should follow suit and ensure they understand the full scope of how their Court, and more importantly, their assigned Judge, treat the issue of using AI to assist litigation strategy and development of work product.

© 2024 Proskauer Rose LLP

by: William T. Walsh Jr of Proskauer Rose LLP

For more news on Artificial Intelligence, visit the NLR Communications, Media & Internet section.

Clueless in the Cubicle

The Journal’s recent piece about managing employees with misperceptions about their employment self-worth reminds us once again why honest and timely performance feedback makes good business sense. I have written before about the benefit of candid performance reviews, even at the risk of hurt feelings. I have also defended performance evaluations as an important tool to mitigate potential liability for employment claims. The Journal’s piece states that nearly four in 10 employees who received the lowest grades from their managers last year rated themselves as highly valued by the organization based on almost two million assessments. If true, that represents an astounding disconnect between performance-related perception and reality.

Theory is one thing. Managers who are adept at giving feedback is another. While businesses are rightly focused on running the organization’s business, training managers how to deliver quality feedback is often assigned a low priority. Adding to that deficiency is the often unmet need for managers with the right EQ to deliver feedback. But despite those challenges, which exist even for employees who relish feedback, there are some important guidelines for managing employees with an inflated sense of employment worth. Here are a few suggestions for delivering feedback for performance-deniers, who clearly require a more exacting approach.

First, performance discussions (especially about the areas in which the employee is falling short) must be done regularly and ongoing, and especially promptly after an error or mistake is committed. Performance deniers will use a one-time annual review (even if negative) to point out the obvious: if they are falling so short, the manager would not have waited so long to deliver that message (and which, in their view, adds to the review’s inherent unreliability).

Second, managers should not shy away from a denier’s tendency to fight the feedback (they disagree with it, it is wrong, it is fake). Rather, managers should use the denier’s dispute to double down on feedback: the employee’s inability to accept criticism, consider it, and even hear it, are all key parts of an employee’s commitment to the organization to grow and do better. Growth requires introspection. The refusal to engage in that process is itself a performance deficiency.

Third, managers should not permit performance conversations to become a discussion about victimization, unfair treatment or perceived persecution (all of which may end up becoming a legal claim). Performance deniers are adept at deflecting: one key deflection is to blame others and make the discussion about things entirely outside performance parameters. Managers need to be empowered to insist on returning the feedback conversation back to the key and only focus: what is the employee doing well and how can (and must) the employee improve?

Finally, organizations need to assess the impact performance deniers have on employee morale. While not all employees will share the same perception, most people are aware when others aren’t pulling their weight – especially when they are tasked to pick up the pieces. Those on the downhill slope of these assignments – often the best performers because of the natural inclination to step up – may not stick around. The slippery slope here is clear and cluelessness at work is not a great look for the business or the employee.

©1994-2024 Mintz, Levin, Cohn, Ferris, Glovsky and Popeo, P.C. All Rights Reserved.
by: Jennifer B. Rubin of MintzFor more news on Employer Performance Reviews, visit the NLR Labor & Employment section.

740,000 Reasons to Think Twice Before Putting a Company in Bankruptcy

A recent decision from a bankruptcy court in Delaware provides a cautionary tale about the risks of involuntary bankruptcy.

In the Delaware case, the debtor managed a group of investment funds. The business was all but defunct when several investors, dissatisfied with the debtor’s management, filed an involuntary Chapter 7 petition.  They obtained an order for relief from the bankruptcy court, then removed the debtor as manager of the funds and inserted their hand-picked manager.  So far, so good.

The debtor, who was not properly served with the involuntary petition and did not give the petition the attention it required, struck back and convinced the bankruptcy court to set aside the order for relief. The debtor then went after the involuntary petitioners for damages.  After 8 years of litigation, the Delaware court awarded the debtor $740,000 in damages – all of it attributable to attorneys’ fees and costs.

If you file an involuntary petition and the bankruptcy court dismisses it, then a debtor can recover costs and reasonable attorneys’ fees.  The legal fees include the amount necessary to defeat the involuntary filing.  In addition, if the court finds that the petition was filed in bad faith, then the court also can enter judgment for all damages proximately caused by the filing and punitive damages.  The Delaware court awarded the debtor $75,000 for defeating the involuntary petition.

The debtor also sought a judgment for attorneys’ fees in pursuit of damages for violating the automatic stay.  The involuntary petitioners had replaced the debtor as manager without first obtaining leave from the court to do so.  The investment fund was barely operating and had little income to support a claim for actual damages.  Nevertheless, the Delaware court awarded $665,000 in attorneys’ fees related to litigating the automatic stay violation.

Because the debtor had no “actual” damages from the stay violation, the involuntary petitioners contended that the debtor was not entitled to recovery of attorneys’ fees.  The Delaware court pointed out that “actual” damages (e.g., loss of business income) are not a prerequisite to the recovery of attorneys’ fees, much to the chagrin of the defendants.  The court held that attorneys’ fees and costs are always “actual damages” in the context of a willful violation of the automatic stay.

The Delaware court also rejected defendants’ argument that the fee amount was “unreasonable” since there was no monetary injury to the business.  In other words, the debtor should not have spent so much money on legal fees because it lost on its claim.  The court held that defendants’ argument was made “with the benefit of hindsight” – at the end of litigation when the court had ruled, after an evidentiary trial, that debtor suffered no actual injury.  The court pointed out that the debtor sought millions in damages for the loss of management’s fees, and even though the court rejected the claim after trial, it was not an unreasonable argument for the debtor to make.  The court concluded that “the reasonableness of one’s conduct must be assessed at the time of the conduct and based on the information that was known or knowable at the time.”

The involuntary petitioners likely had sound reasons to want the debtor removed as fund manager.  But by pursuing involuntary bankruptcy and losing, they ended up having to stroke a check to the debtor for over $700,000.  Talk about adding insult to injury.  The upshot is that involuntary bankruptcy is an extreme and risky action that should be a last-resort option undertaken with extreme caution.

© 2024 Ward and Smith, P.A.. All Rights Reserved.

by: Lance P. Martin of Ward and Smith, P.A.

For more news on Bankruptcy Litigation, visit the National Law Review’s Bankruptcy & Restructuring section.

Nevada Reaffirms Inquiry Notice Standards for Medical Malpractice Statutes of Limitations

Igtiben v. Eighth Jud. Dist. Ct., 140 Nev. Adv. Op. 9 (App. Feb. 22, 2024), concerned a prisoner who was transported to a hospital for medical treatment and died in the hospital after treatment began. At the time, the applicable statute of limitations contained in NRS 41A.097(2) was “1 year after the plaintiff discovers or through the use of reasonable diligence should have discovered the injury….” This also is known as inquiry notice.

Applied here, the prisoner’s mother obtained his complete hospital medical chart six weeks after the death. Approximately fourteen months after the death, a forensic pathologist the family hired concluded professional negligence contributed to the death. The family filed their lawsuit eight months after receiving the forensic pathologist’s report. The hospital and physician moved to dismiss, arguing the family’s one-year statute of limitations had expired. The district court denied the motion, concluding a genuine issue of material fact was present because the family filed suit within eight months of the pathologist’s report.

Nevada’s Court of Appeals reversed and directed the district court to dismiss the complaint. In Nevada, inquiry notice for potential medical malpractice begins when the plaintiff or the plaintiff’s representative receives “all relevant medical records.” Applied here, the only relevant medical records were the hospital records. Thus, the family had the information necessary to investigate the care and treatment and trigger inquiry notice just six weeks after the death. The date that the forensic pathologist provided his report was irrelevant.

Igtiben might provide greater certainty to providers and patients as they evaluate potential professional negligence claims. However, it underscores the importance of careful responses to requests for medical records because if other “relevant” records existed but were not provided, inquiry notice might not be triggered.

© 2024 Wilson Elser
For more news on Medical Malpractice Statutes of Limitations in Nevada, visit the NLR Professional / Malpractice section.

2024 Litigation Look Ahead Series: Challenges to Administrative Law Judges, Judicial Review Process Could Limit Executive Power

B&D is pleased to present the third installment of our 2024 Litigation Look Ahead series. (Read part two on the increased application of the major questions doctrine here.) In this section of the compilation, our litigation team highlights two pending Supreme Court cases examining the constitutionality of appointed administrative law judges and the judicial review process under the Administrative Procedure Act. The outcome of these cases could have significant ramifications on the enforcement power of the executive branch and the deadline for challenging final agency actions.

Securities and Exchange Commission v. Jarkesy, No. 22-859

CASE SUMMARY

The Securities and Exchange Commission (SEC) brought a civil enforcement action against George Jarkesy and an investment advisor, alleging securities fraud. SEC utilized the agency’s in-house administrative adjudication procedures to pursue the matter. SEC’s administrative law judge (ALJ) found Jarkesy and his co-defendants liable and ordered various remedies. The defendants pursued administrative appeals, unsuccessfully, and then sought review in the U.S. Court of Appeals for the Fifth Circuit. In May 2022, the Fifth Circuit held that the SEC’s use of ALJs to enforce civil securities laws violates the accused’s Seventh Amendment right to a jury trial. The Fifth Circuit further found the SEC’s administrative courts unconstitutional because the appointed judges are protected from removal, in violation of Article II of the Constitution, and Congress improperly granted the SEC legislative power by allowing the agency to decide whether to sue in administrative or federal court. The SEC petitioned the U.S. Supreme Court for certiorari, which it granted, and oral arguments took place on November 29, 2023.

IMPLICATIONS

The case challenges the constitutionality of appointed ALJs to resolve disputes. While Jarkesy only pertains to the SEC’s use of ALJs to enforce securities laws, EPA and many other federal agencies rely on in-house civil administrative proceedings to enforce laws, in lieu of civil actions in court. If the Supreme Court affirms the Fifth Circuit’s decision, the ruling could have broader impacts by eliminating or restricting the ability of other agencies to use ALJs. Such a result would channel more enforcement cases to the courts, a more time-consuming, resource-intensive, and costly process. Limiting the enforcement power of the executive branch would greatly impact how agencies enforce statutes and their regulations. A ruling in favor of the petitioners could also call into question the past decisions of ALJs. To minimize the enormous consequences of such a decision, the Supreme Court may find a middle ground, focusing on limitations on the Seventh Amendment right to a jury trial in the context of agency enforcement actions.

Corner Post, Inc. v. Board of Governors of the Federal Reserve System, No. 22-1008

CASE SUMMARY

The U.S. Supreme Court is considering a circuit split regarding the six-year statute of limitations for Administrative Procedure Act (APA) challenges, a cornerstone of environmental litigation. Under the APA, any person who claims to have been injured by an agency’s action has the right to go to court to challenge the action, but they must file their action within six years after the “right of action first accrues.”

In this case, Corner Post, Inc., the operator of a convenience store and truck stop, challenged the Federal Reserve’s debit card interchange rules, known as Regulation II, which set the range of fees larger card-issuing banks can charge merchants for processing debit card payments, asserting the rules were promulgated in violation of the APA. The rules were adopted in 2011. Corner Post, which opened for business seven years later in 2018, argued that the statute of limitations does not begin to run until a plaintiff suffers a “legal wrong” or becomes “adversely affected or aggrieved,” as required by 5 U.S.C. § 702. Consequently, the statute of limitations did not apply to bar its claim because the “adverse affect” of the challenged rule did not occur until 2018.

A North Dakota federal district court dismissed the case as untimely because the six-year statute of limitations expired in 2017. The U.S. Court of Appeals for the Eighth Circuit affirmed, holding that the six-year statute of limitations for facial challenges to regulations brought under the APA accrues upon publication of the final rule. In this ruling, the Eighth Circuit followed the majority position that the APA claims first accrued upon publication of the final agency action. Corner Post, Inc. filed a petition for certiorari, which was granted, and the case is now before the Supreme Court.

IMPLICATIONS

The Supreme Court heard oral arguments in the case on February 20, 2024. The precise question before the Court is whether a facial challenge to a regulation, brought under the APA, accrues when the regulation is first published or when the plaintiff first suffers a related “legal wrong” or an “adverse affect.” At oral arguments, the Justices questioned Corner Post’s position. In particular, Justice Ketanji Brown Jackson seemed concerned that a ruling favoring Corner Post would put every agency rule in effect in question, subject to facial challenges whenever a regulated entity claims to have first suffered a related harm.

The outcome of this case could have major impacts on the ability of regulated entities to assert facial challenges to regulations under the APA. If the Supreme Court reverses and holds that the statute of limitations accrues when a party is first injured, plaintiffs will be permitted to challenge a regulation—no matter the promulgation date—so long as they commence the cause of action within six years of the initial harm. Such a holding could open floodgates within the judicial system, creating a pathway for parties to challenge long-settled regulations, leading to perennial regulatory instability.

In Conclusion

The decisions in both Jarkesy and Corner Post could significantly affect the executive branch’s ability to enforce statutes and regulations as well as litigants’ options for bringing judicial challenges. In either case, Supreme Court decisions in favor of the petitioners would magnify the effect of other decisions that may alter how courts approach administrative law questions, such as the pending decisions regarding Chevron deference.

A ruling in favor of the petitioner in Jarkesy could unravel a complex system of administrative adjudication and expedite a litigant’s access to the crowded federal courts. A ruling in favor of the petitioner in Corner Post could change how courts apply the statute of limitations for APA challenges to agency actions and open the door to such claims years, or even decades, after regulations are published. Such rulings would eliminate long-standing obstacles in the path to federal court.

Furthermore, if the Supreme Court strikes down or limits Chevron deference, vastly different criteria would apply when federal courts review agency actions. This combined impact of the three cases could potentially mark a revolution in administrative law litigation, with the landscape fundamentally altered to provide regulated entities more opportunities to challenge agency action in federal court, freed, to some extent, from the agency-favorable doctrine of Chevron deference, allowing the judiciary more opportunity to shape agency action.

Coming Soon in our Litigation Look Ahead Series…

In our 2024 Litigation Look Ahead series, we highlight cases – environmental and otherwise – that could have notable impacts on the regulated community or lead to changed regulatory approaches. Upcoming installments of the series will examine Fifth Amendment takings, the Commerce Clause, the Comprehensive Environmental Response, Compensation, and Liability Act (CERCLA), and natural resource law. In case you missed it, read part two of the series covering the increased application of the major questions doctrine.

© 2024 Beveridge & Diamond PC
For more news on 2024 Litigation Expectations, visit the NLR Litigation / Trial Practice section.

Striking a Balance: The Supreme Court and the Future of Chevron Deference

In its frequent attempts to enforce the separation of powers that the Constitution’s framers devised as a system of checks and balances among the executive, legislative, and judicial branches of the federal government, it is often the so-called “Fourth Branch”—that includes the varied administrative agencies—that is at the heart of things.[1]

These agencies possess a level of technical and scientific expertise that the federal courts generally lack. And, without reference to expertise, Congress often leaves it to agencies and the courts to interpret and apply statutes left intentionally vague or ambiguous as the product of the legislative compromise required to gain passage. This phenomenon begs the question of the extent to which the federal courts may defer to administrative agencies in interpreting such statutes, or whether such deference abnegates the judicial prerogative of saying what the law is. Having passed on several opportunities to revisit this question, the Supreme Court of the United States has finally done so.

In what potentially will lead to a decision that might substantially change the face of federal administrative law generally while voiding an untold number of agency regulations, the Supreme Court, on January 17, 2024, heard oral argument in a pair of appeals, Loper Bright Enterprises, et al., v. Raimondo, No. 22-451, and Relentless, Inc., et al. v. Department of Commerce, No. 22-1219, focusing on whether the Court should overrule or limit its seminal decision in Chevron U.S.A., Inc. v. Natural Resources Defense Council, Inc., 467 U.S. 837 (1984).

Almost 40 years ago, the Chevron decision articulated the doctrine commonly known as “Chevron deference,” which involves a two-part test for determining when a judicial determination must be deferential to the interpretation of a statute. The first element requires determining what Congress has spoken directly to the specific issue in question, and the second is “whether the agency’s answer is based on a permissible construction of the statute.”

Among the most cited Supreme Court cases, Chevron has become increasingly controversial, especially within the conservative wing of the Court, with several Justices having suggested that the doctrine has led to the usurpation of the essential function of the judiciary.

Chevron deference affects a wide range of federal regulations, and the Court’s ruling, whether or not Chevron is retained in some form, is likely to result in significant changes to how agencies may implement statutes and how parties affected by regulations may seek relief from the impact of those regulations. Interestingly, commentators on the recent oral argument in the case are widely divided in their predictions as to the outcome—some suggesting that the conservative majority of the Court will overrule Chevron outright, others suggesting that the Court has no intention at all to do so.

Based on remarks made during the oral arguments by Justice Gorsuch, and by Justices Amy Coney Barrett and Elena Kagan, as well as Justice Kagan’s fashioning of a majority that clarified a related interpretive rule in an earlier case focusing on agencies’ authority to interpret their own regulations, we suggest that there is a substantial possibility that the Court will take a moderate path by strengthening judicial scrutiny at the “Step One” level while recognizing that there are technical and scientific matters as to which courts have no expertise. At the same time, the Court may make it clear that, essentially, legal issues are within its prerogatives and are not subject to agency interpretation.

We examine how the Court might find a path to a better balancing of agency and judicial functions that is consistent with and builds upon other recent rulings involving the review of actions taken by administrative agencies. Whatever the outcome, the Court’s ruling in these cases will have a profound impact on individuals and entities that are regulated by federal agencies or that depend on participation in government programs, such as Medicare and Social Security.

A Chevron Refresher

Most law students and lawyers have some familiarity with the touchstone for judicial review of agency rules that was articulated in Chevron, a case that dealt with regulations published by the Environmental Protection Agency to implement a part of the Clean Air Act.[2] The Supreme Court explained that judicial review of an agency’s final rule should be based on the two-part inquiry that we mentioned earlier. First, the reviewing court should determine whether Congress made its intent unambiguously clear in the text of the statute; if so, the inquiry ends, and both the agency and the reviewing court must give effect to Congress’s intent. This has become known by the shorthand phrase “Step One.”

If Congress’s intent is not clear, either because it did not address a specific point or used ambiguous language, then the court should defer to the agency’s construction if it is based on a permissible reading of the underlying statute. This has become known as “Step Two.”

In applying Step Two, a reviewing court should determine if the gap left by Congress was explicit or implicit. If the ambiguity is explicit, then the agency’s regulations should be upheld unless they are arbitrary, capricious, or contrary to the statute.[3] If the ambiguity is implicit, then the “court may not substitute its own construction of a statutory provision for a reasonable interpretation made by the administrator of an agency.”[4]

Chevron deference is not a blank slate for courts to find ambiguity. It recognized that the judiciary “is the final authority on issues of statutory construction” and instructed that in applying Step One, judges are expected to apply the “traditional tools of statutory construction.”[5] It also recognized that any deference analysis should fit within the balance among the branches of government. The Supreme Court explained that while Congress sets an overall policy, it may not reach specific details in explaining how that policy is to be executed in particular contexts. In these situations, the executive branch may have the necessary technical expertise to fill in the details, as it is charged with administering the policy enacted into law. The Court noted that the judiciary was not the ideal entity to fill in any gaps left in legislation because “[j]udges are not experts in the field” and that courts are not political entities. As a result, agencies with expertise are better suited to carry out those policies. Moreover, even if agencies are not accountable to the public, they are part of the executive branch headed by the President, who (unlike judges with life tenure) is directly accountable to the electorate.[6]

Nevertheless, during the recent oral arguments, the Chief Justice stated that the Court had not in recent years employed Chevron itself in its analysis of agency action. The reason why the issue of whether Chevron unduly intrudes upon the judicial function, and whether it should be overruled or modified, relates to the fact that it is widely used in lower court review of administrative actions. Its reconsideration also relates to increasing jurisprudential conservatism on the Supreme Court and the application of originalism and, more widely, textualism.

The Chevron concept of deference to agency regulations exists alongside a line of cases in which courts have deferred to an agency’s interpretations of its own regulations. In both Bowles v. Seminole Rock & Sand Co.[7] and Auer v. Robbins,[8] the Supreme Court developed the principle that courts are not supposed to substitute their preference for how a regulation should be interpreted; instead, a court should give “controlling weight” to that interpretation unless it is “plainly erroneous or inconsistent with the regulation.”[9] Nevertheless, the Court has refused to extend that form of deference to subregulatory guidelines and manuals where there is little or no evidence of a formal process intended to implement Congress’s expressed intent.[10]

The Chevron framework has generated criticism, including statements by several current Justices. Their position relies on an argument that Chevron distorts the balance of authority in favor of the executive and strips courts of their proper role. In a recent dissent from a denial of certiorari, Justice Gorsuch complained that Chevron creates a bias in favor of the federal government and that instead of having a neutral judge determine rights and responsibilities, “we outsource our interpretive responsibilities. Rather than say what the law is, we tell those who come before us to go ask a bureaucrat.”[11] Justice Thomas has written that the Administrative Procedure Act does not require deference to agency determinations and raises constitutional concerns because it undercuts the “obligation to provide a judicial check on the other branches, and it subjects regulated parties to precisely the abuses that the Framers sought to prevent.”[12]

Chevron and the Herring Fishermen

The dispute that has brought Chevron deference to the Supreme Court in 2024 starts with the business of commercial fishing for herring. The National Marine Fisheries Service (NMFS) published a regulation in 2020 that requires operators of certain fishing vessels to pay the cost of observers who work on board those vessels to ensure compliance with that agency’s rules under the Magnuson-Stevens Fishery Conservation and Management Act of 1976 (“Act”). Several commercial fishing operators challenged the regulations, which led to two decisions by the U.S. Courts of Appeals for the District of Columbia Circuit and the First Circuit. Both courts upheld the regulations, but on slightly different grounds. In the first decision, Loper Bright Enterprises, Inc. v. Raimondo,[13] the District of Columbia Circuit followed the traditional Chevron analysis and concluded that the Act did not expressly address who would bear the cost of the monitors. The NMFS’s interpretation of the statute in the regulation was found to be reasonable under Step Two of Chevron based on the finding that the agency was acting within the scope of a broad delegation of authority to the agency to further the Act’s conservation and management goals, and on the established precedent concluding that the cost of compliance with a regulation is typically borne by the regulated party.

The second decision by the First Circuit, Relentless, Inc. v. United States Department of Commerce,[14] took a slightly different approach. That court focused on the text of the Act and concluded that the agency’s interpretation was permissible. It did not anchor its decision in a Chevron analysis and stated that “[w]e need not decide whether we classify this conclusion as a product of Chevron step one or step two.”[15] The First Circuit also emphasized that the operators’ arguments did not overcome the presumption that regulated entities must bear the cost of compliance with a relevant statute or regulation.

The parties have staked out starkly different views of Chevron’s legitimacy and whether it is compatible with the separation of powers in the U.S. Constitution. The fishermen petitioners argue that Chevron is not entitled to respect as precedent because the two-part test was only an interpretive methodology and not the holding construing the Clean Air Act. Their core argument is that Chevron improperly and unconstitutionally shifts power to the executive branch by giving more weight to the agencies in rulemaking and in resolving disputes where the agency is a party and shifts power away from the judiciary’s role under Article III to interpret laws and Congress’s legislative authority power under Article I. Taking this one step further, the petitioners argue that this shift violates the due process rights of regulated parties. They also argue that Chevron is unworkable in practice, citing instances where the Supreme Court itself has declined to apply the two-part test and the lack of a consensus as to when a statute is clear or ambiguous, making the application of Chevron inconsistent. Put another way, according to the petitioners, the problem with Chevron is that there is no clear rule spelling out how much ambiguity is needed to trigger deference to an agency’s rule. Next, they argue that Chevron cannot be applied when an underlying statute is silent because this allows agencies to legislate when there is a doubt as to whether Congress delegated that power to the agency at all and that it would run counter to accepted principles of construction that silence can be construed to be a grant of power to an agency. Finally, they contend that Chevron deference to agencies conflicts with Section 706 of the Administrative Procedure Act, where Congress authorized courts to “decide all relevant questions of law, interpret constitutional and statutory provisions, and determine the meaning or applicability of the terms of an agency action.”[16]

The Secretary of Commerce argues that there are multiple reasons to preserve Chevron deference. First, the Secretary argues that Chevron fits within the balance of power between the branches of the federal government. In the Secretary’s view, Chevron deference is consistent with the separation of powers doctrine, as it respects (1) Congress’s authority to legislate and to delegate authority to an administrative agency, (2) the agency’s application of its expertise in areas that may be complex, and (3) the judiciary’s authority to resolve disputed questions of law. Therefore, the Chevron framework avoids situations where courts may function like super-legislatures in deciding how a statute should be implemented or administered and second-guess policy decisions.

According to the Secretary, courts know how to apply the traditional tools of statutory interpretation, and if an ambiguity exists after that exercise is complete, it is appropriate to defer to an administrative agency that has technical or scientific experience with the subject matter being regulated. In addition, the Secretary contends that Chevron promotes consistency in the administration of statutes and avoids a patchwork of court rulings that may make it difficult or impossible to administer a nationwide program, such as Social Security or Medicare. Third, the Secretary notes that Chevron is a doctrine that has been workable for 40 years and that over those decades, Congress has not altered or overridden its holding, even as it has enacted thousands of statutes since 1984 that either require rulemaking or have gaps that have been filled by rulemaking. As a result, the Secretary argues that there are settled interpretations that agencies and regulated parties rely on, and overruling Chevron would lead to instability and relitigating settled cases. Finally, the Secretary argues that Chevron deference cannot be limited to interpretations of ambiguous language alone, as there are no accepted criteria for distinguishing ambiguous statutory language from statutory silence.

The Oral Argument

The Supreme Court heard arguments in both cases on January 17, 2024. Over more than three hours of argument, the Justices focused on several questions. Justices Kagan, Sotomayor, and Jackson expressed concerns that abandoning the Chevron framework would put courts in the position of making policy rather than just ruling on questions of law. In their view, courts lack the skills and expertise to craft policy and should not act as super-legislators. They also stressed that there are situations in which the tools of statutory construction do not yield a single answer or that Congress has not addressed the question either because it left some matters unresolved in the statute or through other subsequent changes not contemplated by Congress, such as the adoption of new technologies. In these cases, the Justices wanted to know why deference to an agency was not appropriate and did not see any clear indication that Congress intended that courts, not agencies, should make determinations when the statutory language is ambiguous or silent. They also questioned why the Supreme Court should overrule Chevron when Congress has been fully aware of the decision for 40 years and has not enacted legislation to eliminate the ability of a court to defer to an agency’s determinations.

The members of the more conservative wing of the Supreme Court questioned counsel about weaknesses in the Chevron framework. Justice Gorsuch returned to his earlier criticism of Chevron and asked the parties to define what constitutes enough ambiguity to allow a court to move from Step One to Step Two. He further questioned whether there was sufficient evidence that Congress ever intended to give the government the benefit of the doubt when an individual or regulated entity challenges agency action. Justice Gorsuch, along with Justices Thomas and Kavanaugh, asked whether Chevron actually resulted in greater instability and whether it was appropriate to abandon Chevron in favor of the lesser form of deference articulated in Skidmore v. Swift & Co., where deference is not a default outcome and a court is supposed to exercise its independent judgment to give weight to agency determinations based on factors including the thoroughness of the agency’s analysis, the consistency and validity of the agency’s position, and the agency’s “consistency with earlier and later pronouncements, and all those factors which give it power to persuade.”[17] The follow-up questions asked whether it was correct to accord deference to agency regulations when the agency’s policy can shift from administration to administration.

Where Is the Conservative Court Likely to Go?

The length of the argument and the alacrity of questioning do not mean that the Supreme Court is going to overrule the 40-year-old, highly influential Chevron doctrine. It is, however, quite likely that the doctrine will be narrowed and clarified. To say nothing of the recent oral argument, several recent decisions evidence a reluctance to abandon deference altogether. In a pair of decisions issued in 2022 involving Medicare reimbursement to hospitals, the Court resolved deference questions by relying on the statutory text alone.

Those decisions involved challenges to a Medicare regulation governing hospital reimbursement, and a published interpretation of a section of the Medicare statute governing reimbursement for outpatient drugs. Although the Court ruled in the government’s favor in the former case and against the government in the latter case, neither decision relies on Chevron—even though in one case, the petitioner’s counsel expressly asked the Court to overrule Chevron during the oral argument.[18] Yet, by relying on the text of each statute to resolve a regulatory dispute, the Court’s reasoning in both decisions is consistent with Step One of the Chevron test and demonstrates that it is workable in practice and need not result in a dilution of judicial review. In addition, the Court has developed another limit to agency action in its decisions, finding that when a regulatory issue presents a “major question,” deference is irrelevant unless the agency can show that Congress expressed a clear intent that the agency exercise its regulatory authority. This concept remains a work in progress because the Court has not defined criteria that make an issue a major question.[19]

These cases provide a useful background to an increasingly jurisprudentially conservative, textually oriented Court. Two cases that were specifically discussed during oral argument are particularly significant in plotting the Court’s landing place with regard to Chevron. Justice Gorsuch made multiple references to Skidmore, which sets forth the principle that a federal agency’s determination is entitled to judicial respect if the determination is authorized by statute and made based on the agency’s experience and informed judgment. Unlike the Chevron standard, the Skidmore standard considers an agency’s consistency in interpreting a law it administers.

The second, and more recent, precedent that is even more likely to guide the narrowing of Chevron is Kisor v. Wilkie.[20] There, a 5-4 divided Court adopted a multi-stage regime for reviewing an agency’s reliance upon arguably ambiguous regulations that is roughly analogous to Chevron’s two-stage analytical modality. In doing so, it modified, but did not overrule, Auer v. Robbins, 519 U.S. 452 (1997), and its doctrinal predecessor, Bowles v. Seminole Rock & Sand Co., 325 U.S. 410 (1945), which permit a court to defer to an agency’s interpretation of its own ambiguous regulation, so long as that interpretation is reasonable, even if the court believes another reasonable reading of the regulation is the better reading.

Kisor saw a mixed bag of Justices joining, or dissenting from, various parts of the Kagan opinion. What made the majority as to its operative section was the Chief Justice’s joining Justice Ginsburg, Breyer, and Sotomayor. With Justice Ginsburg having been succeeded by Justice Barrett, and Justice Breyer having been succeeded by Justice Jackson, one might hypothesize that there now would be a conservative 5-4 majority that would have overruled Auer. However, it was Justice Barrett who raised the possibility of “Kisorizing” Chevron, a suggestion quickly adopted by Justice Kagan. Justice Gorsuch, a longtime opponent of Chevron, is likely amenable to a Skidmore-oriented result.

The Kagan opinion cabins and arguably lowers the level of deference an agency’s interpretation of a rule should receive. Thus, with a strong nod to the Court’s jurisprudential drift to the right, Justice Kagan begins with the truism that whatever discretion an agency might claim, the Court’s analysis must proceed under the proposition that an unambiguous rule must be applied precisely as its text is written. It is not unlikely that, if the Court narrows Chevron (as we predict it shall), it also will begin with a more robust requirement to apply the statutory text in Step One and re-emphasize the need to exhaust all of the tools of statutory construction; in other words, there is no need for deference unless there is genuine ambiguity. If an agency’s determination is to become relevant, it only becomes so after ambiguity is established.[21]

In short, if the law gives a definitive answer on its face, there is nothing to which a court should defer, even if the agency argues that there is an interpretation that produces a better, more reasonable result. This is a textual determination that addresses the criticism of the so-called Administrative State’s acting as a quasi-legislature to which the Court yields its own power to say what the law is.

However, even a reasonable agency interpretation, the Kagan opinion notes, might not be dispositive. The opinion must be the agency’s official position, not one ginned up for litigation purposes, and it must reflect the agency’s particular expertise.

­Conclusion

In its 40-year life, Chevron deference has been at the heart of the application of federal administrative law. No case among all of the many governmental functions that the Supreme Court considers has been more widely cited, and no administrative law case has been more controversial, especially among jurisprudential conservatives. While asked by various parties to do so, the Court has declined, and the Chevron structure has been applied, often inconsistently, by federal courts. Perhaps reflecting the increasingly conservative direction of the Court, we have reached a point where the Court will consider retiring this long-standing precedent or, alternatively, refreshing it based on the experience of courts and agencies since 1984.

Justice Kagan’s analytic method in Kisor v. Wilkie could also apply to tightening Chevron. In her decisions, she has exhibited great fidelity to reading text literally, avoiding the perils of legislation from the bench. As she wrote in Kisor:

[B]efore concluding that a rule is genuinely ambiguous, a court must exhaust all the traditional tools of construction. . . . For again, only when that legal toolkit is empty and the interpretive question still has no single right answer can a judge conclude that it is more one of policy than of law. That means a court cannot wave the ambiguity flag just because it found the regulation impenetrable on first read. Agency regulations can sometimes make the eyes glaze over. But hard interpretive conundrums, even relating to complex rules, can often be solved. A regulation is not ambiguous merely because discerning the only possible interpretation requires a taxing inquiry. To make that effort, a court must carefully consider the text, structure, history, and purpose of a regulation, in all the ways it would if it had no agency to fall back on. . . . Doing so will resolve many seeming ambiguities out of the box, without resort to . . . deference” (citations and internal punctuation omitted).[22]

Text alone might not provide the answer in every case, as Justice Kagan recognizes as she outlines four additional steps that might lead to judicial deference to agency statutory interpretations. However, to the extent that a majority of the Court elects to retain Chevron, though narrowing it, her approach in the analogous setting reflected in Kisor would be effective in resolving the two cases now at bar—recognizing agency expertise in technical and scientific matters beyond the competency of the judiciary while preserving the function of the courts to determine what the legislature actually wrote, not to write it themselves.

* * * *

ENDNOTES

[1] Besides the administrative bureaucracy, various jurists and commentators have, under this rubric, included the press, the people acting through grand juries, and interest or pressure groups. Those institutions represent the arguable influence of extra-governmental sources. We are focused here on the level of judicial deference afforded to federal administrative agencies.

[2] 467 U.S. at 842-43.

[3] 5 U.S.C. § 706(2)(A).

[4] Id. at 844.

[5] Id. at 843, fn.9.

[6] Id. at 865-66.

[7] 325 U.S. 410, 414 (1945).

[8] 519 U.S. 452, 461 (1997).

[9] Id.

[10] United States v. Mead Corp., 533 U.S. 218, 229 (2001); Christensen v. Harris County, 529 U.S. 576 (2000).

[11] Buffington v. McDonough, No. 21-972 (Gorsuch, J., dissenting at 9) (2022).

[12] Perez v. Mortgage Bankers Ass’n, 135 S.Ct. 1199,1213 (2015) (Thomas, J., concurring in the judgment).

[13] 45 F.4th 359 (D.C. Cir. 2022).

[14] 62 F.4th 621 (1st Cir. 2023).

[15] Id. at 634.

[16] 5 U.S.C. § 706.

[17] 323 U.S. 134, 140 (1944).

[18] Becerra v. Empire Health Foundation, 142 S.Ct. 2354 (2022), and American Hospital Ass’n v. Becerra, 142 S.Ct. 1896 (2022). The request to overrule Chevron appears in the transcript of the American Hospital Ass’n oral argument, at 30.

[19] West Virginia v. EPA, 142 S.Ct. 2587 (2022); Utility Air Regulatory Group v. EPA, 573 U.S. 302, 324 (2014).

[20] 139 S. Ct. 2400 (2019).

[21] Kisor predicated deference, if at all, upon five preliminary stages. First, as noted, the reviewing court should determine that a genuine ambiguity exists after applying all of the tools of statutory construction. This is consistent with Step One of Chevron, but Justice Kagan makes it clear that this is a heightened textual barrier. Second, the agency’s construction of the regulation must be “reasonable”; this is a restatement of Step Two of Chevron. The Court cautioned that an agency can fail at this step. Third, the agency’s construction must be “the agency’s ‘authoritative’ or ‘official position,’” which was explained as an interpretation that is authorized by the agency’s head or those in a position to formulate authoritative policy. Fourth, the regulatory interpretation must implicate the agency’s “substantive expertise.” Finally, the regulatory interpretation must reflect the agency’s “fair and considered judgment” and that a court should decline to defer to a merely “convenient litigating position” or “post hoc rationalizatio[n] advanced” to “defend past agency action against attack.”

[22] 139 S.Ct. at 2415.

©2024 Epstein Becker & Green, P.C. All rights reserved.
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Emojis in eDiscovery

Emojis Pose Challenges to Lawyers, Juries & Discovery Specialists

We have all used emojis.  Whether in our text messages or in our IMs, these wordless communications are commonplace.  In fact, by some estimates, more than 10 billion emojis are sent every day in various electronic messaging mediums. With the use of chat and mobile platforms only increasing, what do lawyers and eDiscovery professionals need to know about these marks and how they impact the discovery process and the courtroom?

What is an Emoji?

Emojis are small cartoon images that are interpreted and supported at the discretion of each application developer.  The predecessor to the emoji was the emoticon.

Why Are Emojis Complicated?

Anyone reading eDiscovery content knows that these tiny little carton pictures while often playful and cute, can be a challenge to identify, collect and process.  Part of the challenge is volume driven but part is platform driven.  Specifically, the Unicode Consortium, which is the standards body that allows software to recognize text characters and display them uniformly, acknowledges thousands of different emojis. But that number includes variables of the same image – for example different genders and skin tonality. And while much work has been done to standardize emojis, different systems support different emojis.  For example, while a slice of pizza is likely recognized universally, in reality a slice from the popular Domino’s® franchise looks different from a slice bought at the local brick oven pizza parlor.  Similarly, when dealing in emojis, a slice of pizza viewed on one device will look different than one viewed on a device by a different company.  For those of you who have ever shared a text among different phone operating system users, you have undoubtedly learned this lesson before now.  Indeed, if you ever received the question mark inside the rectangular shaped box – which appears when the recipient’s application does not support the sender’s application – the emoji image is indecipherable.   Complicating this phenomenon is that different instant messaging systems have proprietary emojis and additionally allow users to create their own emojis – none of which are acknowledged by Unicode.org. Add to that the fact that emojis often evolve.  For example, the “pistol” emoji was changed in 2016 by one operating system to a less dangerous version of itself (i.e., a “water pistol” or “toy gun”).  But, when received by a different platform, that water pistol or toy gun emoji might still appear to be a regular “gun” or “pistol” emoji.

Emojis in Litigation

Assuming you have been able to secure during discovery relevant emojis, use during litigation can be paved with surprises.  In fact, once a wordless communication (i.e., an emoji) is admitted into the record, courts and juries will look to the surrounding circumstances to interpret the communication.  And, while this analysis generally includes scrutiny of the accompanying text and whether the emoji alters the meaning of the message, how does one account for platform interpretation issues?  Meaning – what if the water gun I sent from my device is received by another device in a way that reflects a menacing weapon thereby manifesting a different intent to the recipient than what was intended by the sender.  At first glance, the emoji may seem innocuous, such as a simple smile to communicate happiness but taken in the context or community in which the communication is used, the meaning may be interpreted differently by the sender and/or recipient.  Indeed, emojis should not be considered a universal language having universal meaning and, like certain physical actions, the meaning of symbols can vary by community or culture.  Consider for example that the “thumbs up” emoji is considered vulgar in many countries in the Middle East yet typically considered a positive expression in most other countries.[1]

Because the complexities of interpreting the meaning and intent of the emoji in court is exacerbated by competing platforms, focused inquiry on the sender’s and recipient’s intent, surrounding circumstances and accompanying text may be critical. Unfortunately, 1 + 1 does not always equal 2 and things may not be as they may appear merely because of a certain electronically generated animated face.

[1] A few cases involving emojis include Ghanam v. Does (where the Michigan Court of Appeals had to analyze the circumstances surrounding the use of the emoji “sticking out its tongue” within a communication in a defamation case); Commonwealth v. Danzey, (smile face embedded in social media did not immunize claims defendant stalked and harassed victim where wording demonstrated criminal intent); Kryzac v. State, (Tennessee case where “frowning face” emoji used as evidence of relationship between defendant and victim); State v. Disabato, (defendant in Ohio was convicted of telecommunications harassment for sending unwanted text messages, some of which included “rodent” emojis); Commonwealth v. Foster (Pennsylvania defendant on probation for a drug-related conviction raised the suspicion of his probation officer when he posted photographs depicting guns and money along with three “pill” emoji).

©2023 Greenberg Traurig, LLP. All rights reserved.
Article by Kathryn C. Cole of Greenberg Traurig, LLP
For more articles on eDiscovery, visit the NLR Litigation section.