Tag: SCOTUS

Reactions to the U.S. Supreme Court’s Rulings in Trump v. Vance & Trump v. Mazars

In Trump v. Vance and Trump v. Mazars the Supreme Court issued opinions in two cases concerning the release of President Trump’s financial records.  Reactions to the July 9th rulings have varied, with opinions differing on whether or not Trump’s reputation and presidency will be significantly impacted by what his financial records may reveal.

Below, we outline the details of each case and the reactions to the Supreme Court’s decisions.

Background Trump v. Vance

In Trump v. Vance, the court stated that Trump had no absolute right to block the Manhattan District attorney’s access to Trump’s financial records for the purposes of a grand jury investigation. The court held in a 7-2 decision that “Article II and the Supremacy Clause do not categorically preclude, or require a heightened standard for, the issuance of a state criminal subpoena to a sitting President.” The court’s opinion was written by Chief Justice John Roberts for the majority including Justices Ginsburg, Breyer, Sotomayor and Kagan with Justice Kavanaugh filing a concurring opinion joined by Justice Gorsuch, and Justice Thomas and Justice Alito writing separate dissenting opinions.

Trump v. Vance involves a state criminal grand jury subpoena not served on President Trump, but on two banks and an accounting firm that were custodians of the records. The subpoenaed records are for eight years of Trump’s personal and business tax returns and other banking documents in the years leading up to the 2016 election served on behalf of New York District Attorney Cyrus Vance., Jr. Vance’s investigation centered around payments made to two women — Karen McDougal and Stormy Daniels — who alleged they had affairs with Trump before he entered office.

The Supreme Court considered state criminal subpoenas could threaten “the independence and effectiveness” of the president as well as undermining the president’s leadership and reputation, weighing Trump’s circumstances against those in Clinton v. Jones, the 1997 case where President Bill Clinton sought to have a civil suit filed against him by Paula Corbin Jones dismissed on the grounds of presidential immunity, and that the case would be a distraction to his presidency.

Trump argued that the burden state criminal subpoenas would put on his presidency would be even greater than in Clinton because “criminal litigation poses unique burdens on the President’s time and will generate a considerable if not overwhelming degree of mental preoccupation” and would make him a target for harassment.

The Court addressed Trump’s argument, stating that they “rejected a nearly identical argument in Clinton, concluding that the risk posed by harassing civil litigation was not ‘serious’ because federal courts have the tools to deter and dismiss vexatious lawsuits. Harassing state criminal subpoenas could, under certain circumstances, threaten the independence or effectiveness of the Executive. But here again the law already seeks to protect against such abuse … Grand juries are prohibited from engaging in ‘arbitrary fishing expeditions’ or initiating investigations ‘out of malice or an intent to harass.’”

The Court also considered that Vance is a case addressing state law issues where Clinton was a case addressing federal law issues. Trump argued that the Supremacy Clause gives a sitting president absolute immunity from state criminal proceedings because compliance with subpoenas would impair his performance of his Article II functions. Arguing on behalf of the United States, the Solicitor General claimed state grand jury subpoenas should fulfill a higher need standard.  In response, the Court ruled, “A state grand jury subpoena seeking a President’s private papers need not satisfy a heightened need standard … there has been no showing here that heightened protection against state subpoenas is necessary for the Executive to fulfill his Article II functions.”

Notably, the Supreme Court decision does not allow for public access to Trump’s tax returns; they will be part of a Grand Jury investigation, which is confidential.  However, many took away the message that the majority’s decision–bolstered by Gorsuch and Kavanaugh, Trump appointees, who concurred–that the law applies to everyone.

Reactions to SCOTUS Decision from Jay Sekulow and Cyrus Vance, Jr.

Both Vance and Trump’s attorney Jay Sekulow expressed they were content with the Court’s ruling, albeit for different reasons.

“We are pleased that in the decisions issued today, the Supreme Court has temporarily blocked both Congress and New York prosecutors from obtaining the President’s financial records. We will now proceed to raise additional Constitutional and legal issues in the lower courts,” Sekulow tweeted.

“This is a tremendous victory for our nation’s system of justice and its founding principle that no one – not even a president – is above the law. Our investigation, which was delayed for almost a year by this lawsuit, will resume, guided as always by the grand jury’s solemn obligation to follow the law and the facts, wherever they may lead,” Vance said in a statement.

Other Reactions to the Supreme Court’s Trump v. Vance Ruling

Following the Supreme Court’s arguments in Vance, lawyers and legal scholars commented about what the decision could mean for the presidency.

In a C-SPAN interview with National Constitution Center President and CEO Jeffrey Rosen, Columbia Law School Professor Gillian Metzger spoke about the issue of burden on the president in Vance, “A lot of what is being shown in these cases is who bears the burden when. Clinton v. Jones said that first, you have to show the burden on the presidency…already the Solicitor General is trying to move us beyond where we had been in Clinton vs. Jones. Among the justices on the court, my sense is that they are really trying to figure out what the standards should be…I didn’t get the sense of a stark ideological divide on this.”

In agreement with seeing the ruling as a victory for the rule of law, David Cole, the ACLU National Legal Director said: “The Supreme Court today confirmed that the president is not above the law. The court ruled that President Trump must follow the law, like the rest of us. And that includes responding to subpoenas for his tax records.”

Harvard Law professor Laurence Tribe, a frequent Trump critic, highlighted the victory on Twitter, saying: “No absolute immunity from state and local grand jury subpoenas for Trump’s financial records to investigate his crimes as a private citizen. Being president doesn’t confer the kind of categorical shield Trump claimed.”

Of a practical matter, though, Mark Zaid, the Washington attorney who represented the whistleblower who set the stage for Trump’s impeachment proceedings, tweeted:

 

“Even if Trump’s tax returns reveal fraud, I find it doubtful that this fact would finally be straw that broke his supporters’ back on election day.  But importance of ruling is that criminal investigation continues & will exist past expiration of Trump’s presidential immunity.” (Should we embed the tweet?)

Background for the Supreme Court’s Ruling in Trump v. Mazars

The Supreme Court remanded back to the lower courts the second case, Trump v. Mazars in a 7-2 decision. The Mazars case involved three committees of the U. S. House of Representatives attempting to secure Trump’s financial documents, and the financial documents of his children and affiliated businesses for investigative purposes. Each of the committees sought overlapping sets of financial documents, supplying different justifications for the requests, explaining that the information would help guide legislative reform in areas ranging from money laundering and terrorism to foreign involvement in U. S. elections.

Additionally, the President in his personal capacity, along with his children and affiliated businesses—contested subpoenas issued by the House Financial Services and Intelligence Committees in the Southern District of New York.  Trump and the other petitioners argued in the United States Court of Appeals for the Second Circuit that the subpoenas violated separation of powers. The President did not, however, argue that any of the requested records were protected by executive privilege.  Justice Roberts wrote the majority opinion, with Thomas and Alito filing dissenting opinions.

In Mazars, the District Court for the District of Columbia upheld the Congressional subpoenas, indicating the investigations served a “legislative purpose” as they could provide insight on reforming presidential candidate’s financial disclosure requirements.  However, Roberts writes: “the courts below did not take adequate account of the significant separation of powers concerns implicated by congressional subpoenas for the President’s information.”

In the opinion, Roberts sets out a list of items the lower courts need to consider involving Congress’s powers of investigation and subpoena, noting that previously these disagreements had been settled via arbitration, and not litigation.  Additionally, Roberts summarizes the argument before the court, drawing on the Watergate era Senate Select Committee D. C. Circuit  made by the President and the Solicitor General, saying the House must demonstrate the information sought is “demonstrably critical” to its legislative purpose did not apply here.  Roberts, stated that this standard applies to Executive privilege, which, while crucial, does not extend to “nonprivileged, private information.”  He writes: “We decline to transplant that protection root and branch to cases involving nonprivileged, private information, which by definition does not implicate sensitive Executive Branch deliberations.”

However, Roberts detailed that earlier legal analysis ignored the “significant separation of powers issues raised by congressional subpoenas” and that congressional subpoenas “for the President’s information unavoidably pit the political branches against one another.” With these constraints in mind, Roberts charged the lower court to consider the following in regards to congressional investigations and subpoenas:

  1. Does the legislative purpose warrant the involvement of the President and his papers?
  2. Is the subpoena appropriately narrow to accomplish the congressional objective?
  3. Does the evidence requested by Congress in the subpoena further a valid legislative aim?
  4. Is the burden on the president justified?

Reactions to Trump v. Mazars

Nikolas Bowie, an assistant Harvard Law Professor, turning to Robert’s analysis in the opinion on Congressional investigations opinion discussing Congressional investigations indicated the decision “introduces new limits on Congress’s power to obtain the information that it needs to legislate effectively on behalf of the American people . . . the Supreme Court authorized federal courts to block future subpoenas using a balancing test that weighs ‘the asserted legislative purpose’ of the subpoenas against amorphous burdens they might impose on the President.”

Additionally, Bowie points out, “it seems unlikely that the American people will see the information Congress requested until after the November election.”

Writing for the nonprofit public policy organization, The Brookings Institution, Richard Lempert, Eric Stein Distinguished University Professor of Law and Sociology Emeritus at the University of Michigan, concurs with Bowie’s point, writing that the Mazars decision may set a new standard for Congressional subpoenas moving forward:

“The genius of Robert’s opinion in Mazars is that while endorsing the longstanding precedent that congressional subpoenas must have a legislative purpose and without repudiating the notion that courts should not render judgments based on motives they impute to Congress, the opinion lays down principles which form a more or less objective test for determining whether material Congress seeks from a president is essential to a legislative task Congress is engaged in … Congress should be able to spell out in a subpoena why it needs the documents it seeks.”

Looking Ahead to What’s Next

There is a lot of information in these decisions to unpack, especially in relation to Congressional investigations and subpoenas.  Additionally, questions remain on how the lower courts may interpret Roberts’ directive to examine “congressional legislative purpose and whether it rises to the step of involving the President’s documents” and how Congress will “assess the burdens imposed on the President by a subpoena.”

 

Copyright ©2020 National Law Forum, LLC

 

ARTICLE BY Rachel Popa, Eilene Spear and Jennifer Schaller at The National Law Review / The National Law Forum LLC.

Adding “.com” to Generic Term May Open Route to Trademark Protection According to Supreme Court

Generic terms—those words that actually name a product or service—are ineligible for trademark protection under current United States trademark law. The United States Patent and Trademark Office (USPTO) decided that adding “.com” to an otherwise generic term was not sufficient to allow trademark registration of the “generic.com” composition. In the matter at hand, the internet website Booking.com was refused trademark registration of its name based on this decision by the USPTO.

On June 30, 2020, however, the United States Supreme Court reversed this decision, holding that adding “.com” to an otherwise generic—and thus ineligible for registration—term may be registered. The Court said, a generic.com term is only generic if consumers and customers take the term, as a whole, as generic. The Court noted that, in the lower court proceedings, evidence had been presented that consumers do not view Booking.com as a generic website to book hotels and such, but rather associated it with a particular company.

The USPTO raised the concern that allowing such trademarks to be registered would be akin to allowing a business to add the word “Company” to a generic term and noted that this is not permitted. The Court, however, noted that, unlike business names, domain names are single use—only one “generic.com” domain name exists for each possible generic term. In addition, the Court said, the USPTO has other tools in its arsenal, such as insistence of a disclaimer of the generic term, to guard against a particular generic.com trademark holder from exerting undue control over other trademarks that include the generic term. This, the Court said, further shows that there is no basis to deny Booking.com the protection of a federally registered trademark.

This decision opens the door to a new category of potentially protectable trademarks: generic terms with “.com” added to the end. However, it is important to note that whether a generic.com trademark could be registered depends in large part on how that trademark is viewed by consumers. Booking.com is registerable because consumers attribute that trademark to a specific company; however, this may not be true in every case. Much of whether a generic.com brand name is going to be able to be trademarked is likely to depend on evidence showing how consumers view the name; such evidence could include consumer surveys, evidence of marketing efforts, and evidence of long-term use. Nevertheless, companies who wish to use their most basic and generic description of the goods and services they offer as a part of a trademark now have another avenue by which to seek protection. However, it will be important to consider and prepare for questions that will likely be raised by the USPTO, including why the particular generic.com trademark is not viewed by consumers as generic, in order to raise the likelihood of obtaining trademark protection.

© 2020 Davis|Kuelthau, s.c. All Rights Reserved

For more on the recent Booking.com decision, see the National Law Review Intellectual Property Law section.

Supreme Court Decides to Rule on FTC’s Disgorgement Authority

As previously blogged about here, the Supreme Court recently upheld the SEC’s disgorgement authority but imposed certain limits, including consideration of net profits.  FTC defense practitioners immediately began to consider how the ruling might potentially impact FTC investigations and enforcement actions, including how it might bear upon other judicial challenges to whether Section 13(b) of the FTC Act authorizes the FTC to obtain equitable monetary relief.

On July 9, 2020, the Supreme Court granted certiorari in the AMG Capital Management and Credit Bureau Center matters that should now decide the issues of whether Section 13(b) permits courts to award disgorgement.

In AMG v. FTC, the Ninth Circuit held that courts’ equitable powers include awarding equitable monetary relief, including disgorgement.  In contrast, the Seventh Circuit in FTC v. Credit Bureau Center recently disregard years of precedent when it held that the express terms of Section 13(b) illustrate that Congress only authorized injunctive relief, not equitable monetary relief or disgorgement.

The two matters have been consolidated and with a total of one hour allotted for oral argument.   The importance of these matters cannot be overstated as they conclusively resolve splits of authority relating to whether or in what circumstances FTC lawyers are entitled to seek equitable monetary relief in the form of disgorgement.

© 2020 Hinch Newman LLP

Consumer Perception is Key to Registration of Generic “.com” Marks

In an 8-1 decision, the Supreme Court held in U.S. Patent and Trademark Office v. Booking.com that “generic.com” marks may be registered trademarks or service marks when consumers do not perceive them as generic.

Booking.com is a travel company that provides hotel reservations and other services under the brand “Booking.com,” which is also the domain name of its website. Booking.com filed applications to register four marks in connection with travel-related services, each containing the term “Booking.com.”

A United States Patent and Trademark Office (USPTO) examining attorney and the USPTO’s Trademark Trial and Appeal Board (TTAB) both concluded that the term “Booking.com” is generic for the services at issue and is therefore unregistrable. According to the TTAB, “Booking” means making travel reservations and “.com” signifies a commercial website. The TTAB ruled that customers would understand the term “Booking.com” primarily to refer to an online reservation service for travel, tours, and lodging. Alternatively, the TTAB held that even if “Booking.com” is descriptive, it is unregistrable because it lacks secondary meaning.

Booking.com sought review in the US District Court for the Eastern District of Virginia. Relying in significant part on new evidence of consumer perception, the district court concluded that “Booking.com”—unlike “booking”—is not generic. The “consuming public,” the court found, “primarily understands that BOOKING.COM does not refer to a genus, rather it is descriptive of services involving ‘booking’ available at that domain name.” The Court of Appeals for the Fourth Circuit affirmed the district court’s judgment.

During oral argument at the Supreme Court, the USPTO argued that the combination of a generic word and a “.com” must also be generic. The Court rejected this per se theory, ruling that whether “Booking.com” is generic turns on whether that term, taken as a whole, signifies to consumers the class of online hotel reservation services. According to the Court, if “Booking.com” were generic, one might expect consumers to understand Travelocity—another such service—to be a “Booking.com.” Additionally, one might similarly expect that a consumer, searching for a trusted source of online hotel reservation services, could ask a frequent traveler to name her favorite “Booking.com” provider. However, as noted even by the USPTO and the dissent, only one entity can occupy a particular Internet domain name at a time, so a “consumer who is familiar with that aspect of the domain-name system can infer that BOOKING.COM refers to some specific entity.”

The Court further opined that the USPTO’s fears that trademark protection for “Booking.com” could exclude or inhibit competitors from using the term “booking” or adopting domain names like “ebooking.com” or “hotel-booking.com” are unfounded. According to the Court, this is an issue for any descriptive mark and comes down to a likelihood of confusion analysis.

Justice Sotomayor’s Concurrence

In a concurring opinion, Justice Sotomayor agreed that there is no per se rule against trademark protection for a “generic.com” mark. However, she cautioned the use of surveys as they can have limited probative value depending on the survey design.

Justice Breyer’s Sole Dissent

Justice Stephen Breyer, the sole dissenting justice, argued that the majority disregarded important trademark principles and sound trademark policy. According to Justice Breyer, “[t]erms that merely convey the nature of the producer’s business should remain free for all to use.” Thus, under the majority’s approach, many businesses could obtain a trademark by adding “.com” to the generic names of their products, which Justice Breyer claimed could have widespread anticompetitive effects, and the majority’s reliance on the need to prove confusion and the statutory descriptive use privilege to protect competitors, underestimates the threat of costly litigation.

Implications

The decision in Booking.com expands trademark protection for seemingly generic marks simply by adding “.com” to the mark. A registrant need only rely on the consumer’s perception of the mark, which can be shown by the use of surveys. Thus, even with Justice Sotomayor’s caution against the use of surveys, surveys are likely to become more important during the registration process and in any subsequent litigation.

Copyright © 2020, Hunton Andrews Kurth LLP. All Rights Reserved.

For more on the Booking.com case, see the National Law Review Intellectual Property Law section.

SCOTUS Favors Employers’ Religious Liberties Over Employee Rights

The Supreme Court of the United States (SCOTUS) issued two important decisions this week in cases reflecting the ongoing legal tensions between employers’ religious liberties and the right of employees to be free from discrimination; and in both cases, SCOTUS tipped the scales decidedly in favor of employers’ religious liberties.

First Amendment Supersedes Employment Discrimination Claims

The Supreme Court issued a decision in two similar cases – essentially dismissing the discrimination claims brought by two Catholic school teachers who were discharged from their instructional positions at two different Catholic schools in southern California. In Our Lady of Guadalupe School v. Morrissey-Berru (19-267), and St. James School v. Biel (19-348), the Supreme Court held by a 7-2 majority that the U.S. Constitution’s First Amendment Religion Clauses foreclose the teachers’ employment discrimination claims. In the OLG case, the former teacher sued for age discrimination; in the St. James case, the teacher was dismissed after she sought a leave of absence for cancer treatment. The teacher later passed away.

Relying on the “ministerial exception” outlined in the 2012 SCOTUS decision in Hosanna-Tabor Evangelical Lutheran Church v. EEOC, 565 U.S. 171 (2012), the majority opinion, authored by Justice Samuel Alito, noted that “religious education and formation of students is the very reason for the existence of most private religious schools, and therefore the selection and supervision of the teachers upon whom the schools rely to do this work lie at the core of their mission. Judicial review of the way in which religious schools discharge those responsibilities would undermine the independence of religious institutions in a way that the First Amendment does not tolerate.”

Justice Sonia Sotomayor, joined by Justice Ruth Bader Ginsburg in dissent, criticizes the majority for its distillation of the Hosanna-Tabor standard into “a single consideration: whether a church thinks its employees play an important religious role,” and observes that it “strips thousands of schoolteachers of their legal protections.”

Religious Exemptions From Birth Control Mandate Under the Affordable Care Act

In a similar but procedurally more complicated ruling, the Supreme Court upheld the federal government’s expansion of a federal rule that exempts employers with religious or moral objections from being required to provide employees with health insurance coverage for birth control under the Affordable Care Act (ACA).

In a 7-2 decision in Little Sisters of the Poor v. Pennsylvania (19-431), SCOTUS tackled the latest skirmish of the ACA’s birth-control mandate. The ACA mandate generally requires employers to provide female employees health insurance with access to contraception. Religious entities have repeatedly challenged the rules, as well as the opt-out accommodation process developed under the Obama administration for employers with religious or moral exemptions.  (The Trump administration had expanded those exemptions.)

With the majority opinion authored by Justice Clarence Thomas, SCOTUS held that the departments of Health and Human Services, Labor, and the Treasury had authority to issue rules for employers. In a concurring opinion, Justice Elena Kagan (joined by Justice Stephen Breyer) acknowledges the statutory authority of the federal agencies, but cautions, “that does not mean the Departments should prevail when these cases return to the lower courts. The States challenged the exemptions not only as outside the HRSA’s [Health Resources and Services Administration’s] statutory authority, but also as ‘arbitrary [and] capricious.’”

In her dissenting opinion, Justice Ginsburg (joined by Justice Sotomayor) notes, “Today, for the first time, the Court casts totally aside countervailing rights and interests in its zeal to secure religious rights to the nth degree.”

Takeaways for Discerning Employers

While these Supreme Court decisions, in tandem, may bolster employers’ confidence in their sincerely held beliefs and moral objections about certain employment-related decisions, it is also important to recognize its limitations.  Employers should strategize with their leadership and legal counsel to carefully weigh whether and to what extent these decisions should (or will) inform their own policies and practices, as well as any resulting reputational impact and workplace morale considerations.

© 2020 BARNES & THORNBURG LLP

For more recent SCOTUS employment decisions, see the National Law Review Labor & Employment law section.

Seila Law LLC v. Consumer Financial Protection Bureau: Has the Supreme Court Tamed or Empowered the CFPB?

On June 26, the Supreme Court issued its long-awaited opinion in Seila Law LLC v. Consumer Financial Protection Bureau,1 finally resolving the question that has dogged the new agency since its inception:  Is the leadership structure of the Consumer Financial Protection Bureau (CFPB) constitutional?  Writing for a 5-4 majority, Chief Justice John Roberts ruled that the CFPB structure—“an independent agency that wields significant executive power and is run by a single individual who cannot be removed by the President unless certain statutory criteria are met”—violates the Constitution’s separation of powers.2  

For financial services companies regulated by the CFPB, the most important aspect of Seila Law is not the headline constitutional defect, but the remedy.  Choosing “a scalpel rather than a bulldozer,”3 the Court did not invalidate the CFPB.  The Court held 7-2 that the Director’s constitutionally offensive removal protection could be severed from the CFPB’s other authorities, thus bringing the Director (and with her, the CFPB) under Presidential control, while leaving the CFPB’s other powers in place.4

While Seila Law  is an important case in the evolving doctrine of separation of powers as applied to independent agencies, the case has three immediate consequences for financial services companies.  First, the CFPB is here to stay, and its broad authorities and other controversial aspects (such as its insulation from Congressional appropriations) remain intact.  Second, the CFPB’s Director is now directly accountable to the President, significantly raising the stakes in the 2020 election for the agency’s regulatory and enforcement agenda.  Third, the Court left one important question unanswered:  it declined to address the effect of its ruling on prior CFPB rules and enforcement actions.  While we believe the agency will attempt to cure the constitutional defect, we expect continued litigation—and uncertainty—on this issue.

Background

In response to the 2008 financial crisis, Congress passed the Dodd-Frank Wall Street Reform and Consumer Protection Act (the “Dodd-Frank Act”), creating the CFPB as an independent financial regulator within the Federal Reserve System.5  The CFPB has expansive authority to “implement and, where applicable, enforce Federal consumer financial law,” which includes 19 enumerated federal consumer-protection statutes and the Dodd-Frank Act’s broad prohibition on unfair, deceptive, and abusive acts and practices.6  The CFPB’s authority over consumer financial products and services includes rulemaking authority with respect to the enumerated statutes, the ability to issue orders, including orders prohibiting products and services which it concludes are “abusive” or substantively unfair, as well as the power to impose significant financial penalties on financial services companies.  The CFPB is funded through the Federal Reserve System, and thus is not subject to Congressional constraint through the appropriations process.  Although technically housed within the Federal Reserve System, the CFPB also is not subject to oversight or control by the Board of Governors of the Federal Reserve System.  As a result, the CFPB was created to be an independent agency, largely unconstrained by Congress or the Federal Reserve System.  The CFPB is headed by a single Director appointed by the President, by and with the advice and consent of the Senate, for a five-year term.7  The Director may be removed by the President only for “inefficiency, neglect of duty, or malfeasance in office.”8  

In 2017, the CFPB issued a civil investigative demand to Seila Law LLC, a California-based law firm that provides debt-related legal services to consumers.  Seila Law refused to comply, objecting that concentrating the CFPB’s authority in a single Director with for-cause removal protection violated the separation of powers doctrine.  The CFPB filed a petition to enforce its demand in federal district court.  The district court rejected Seila Law’s constitutional objection and ordered the law firm to comply with the demand.  The Court of Appeals for the Ninth Circuit affirmed.9

Case Analysis: Seila Law

The Supreme Court granted certiorari to address the constitutionality of the CFPB’s single-Director structure.  That decision was telling in and of itself, given that the Ninth Circuit’s ruling was in accord with PHH Corporation v. CFPB, the D.C. Circuit’s en banc opinion upholding the Director’s removal protection.10  As many had expected, the Supreme Court reversed the Ninth Circuit and held that Congress’s restriction on the President’s power to remove the CFPB’s Director violated the separation of powers doctrine. 

The Court began its analysis from the premise that Article II of the Constitution gives the entire executive power to the President alone, “who must ‘take care that the Laws be faithfully executed.’”11  Lesser officers who aid the President in his or her duties “must remain accountable to the President, whose authority they wield.”12  The President’s power to remove these lesser officers at will is foundational to the President’s executive function and “has long been confirmed by history and precedent.”13  The Court held that “[w]hile we have previously upheld limits on the President’s removal authority in certain contexts, we decline to do so when it comes to principal officers who, acting alone, wield significant executive power.”14  The Court found that the CFPB’s Director fit that bill.  In creating the CFPB, Congress “vest[ed] significant governmental power in the hands of a single individual accountable to no one.”15  Such an agency “has no basis in history and no place in our constitutional structure.”16 

Next, the Court turned to the remedy.  Seila Law argued that the Director’s unconstitutional removal protection rendered the “entire agency … unconstitutional and powerless to act.”17  The Court disagreed.  Relying on the Dodd-Frank Act’s severability clause, the Court’s severability precedent, and the proposition that “Congress would have preferred a dependent CFPB to no agency at all,” the Court ruled that the Director’s removal protection is severable from the CFPB’s other statutory authorities.18  “The agency may therefore continue to operate, but its Director, in light of our decision, must be removable by the President at will.”19  

Finally, the Court expressly declined to address how its holding affects prior CFPB regulatory and enforcement actions.  The government had argued that the Court need not reach the constitutional question because the CFPB’s demand to Seila Law had since been ratified by an Acting Director accountable to the President.20  The Court remanded the question of ratification to the lower courts, noting that it “turns on case-specific factual and legal questions not addressed below and not briefed here.”21

Implications

Seila Law is an important case for the canons of administrative law and the separation of powers doctrine.  But for financial services companies regulated by the CFPB, it has meaningful (and immediate) practical consequences.

First, the CFPB has escaped Supreme Court review with its authorities basically untouched.  Absent Congressional action, the CFPB will (i) continue to be run by a single Director, (ii) continue to wield expansive rulemaking, supervisory, and enforcement authority over the multi-trillion dollar market for consumer financial products and services, and (iii) continue to be insulated from Congressional control via the appropriations process.

Second, the CFPB’s Director is now directly accountable to the President—whoever that person may be.  Typically, financial regulators have a measure of insulation from the political process to provide consistency and certainty to financial markets.  With this decision, the election of the next President—and the prospect of a Democratic administration—could result in significant and immediate changes to the CFPB’s regulatory and enforcement agenda.

Third, while Seila Law secured the CFPB’s future, the Court left in place significant uncertainty as to its past.  This past includes major enforcement actions and rulemakings that have reshaped the market for consumer financial products and services over the last nine years.  Of course, it remains to be seen what appetite financial services companies have to challenge the CFPB’s prior rules and enforcement orders.  And, we expect the CFPB will attempt to remedy the constitutional defect by ratifying the agency’s past actions or perhaps invoking the de facto officer doctrine.22  Yet, the availability of either remedy is an open question.  Ratification in particular is a live dispute in both Seila Law and a pending en banc appeal before the Fifth Circuit, Consumer Financial Protection Bureau v. All American Check Cashing.23  Ratification of prior agency actions was also left unresolved in another thread of the Supreme Court’s recent separation of powers jurisprudence.  In Lucia v. SEC, the Court found that the SEC hired administrative law judges (ALJs) in violation of the Appointments Clause, but offered limited remedial guidance aside from instructions that Lucia was entitled to a “new hearing before a properly appointed” ALJ.24  While litigating Lucia’s challenge, the SEC issued an order purporting to ratify its past ALJ appointments by approval of the Commission itself.  The Court acknowledged that order, but declined to address its validity.25

1   Seila Law v. Consumer Financial Protection Bureau, 591 U.S. ____ (2020) (June 26, 2020).

2   Id., Slip Op. at 2–3.

3   Id., at 35.

4   Id.,  at 3. 

5   Title X of the Dodd-Frank Act, 12 U.S.C. § 5301 et seq., created the CFPB and defines its authorities. 

6   12 U.S.C. § 5511 (defining CFPB’s purpose); 12 U.S.C. § 5481(14) (defining “Federal consumer financial law”). 

7   Id. § 5491(b)(2), (c).

8   Id. § 5491(c)(3).  For a detailed discussion of the CFPB and its powers, see our Clients & Friends Memo, The Consumer Financial Protection Bureau: The New, Powerful Regulator of Financial Products and Services (March 06, 2012).

9   Seila Law, Slip Op. at 6–8 (discussing procedural history).

10 PHH Corp. v. CFPB, 881 F. 3d 75 (D.C. Cir. 2019) (en banc).  Tellingly, then-Judge Kavanaugh wrote the D.C. Circuit panel decision holding that the CFPB’s structure violated the separation of powers doctrine.  839 F.3d 1 (D.C. Cir. 2016). The en banc court vacated that decision, but now-Justice Kavanaugh joined the majority in Seila, reiterating his separation of powers analysis from the D.C. Circuit.    For further analysis of the PHH decision, see our Client & Friends Memo Federal Appeals Court Rules That CFPB Structure is Constitutional  (Jan. 31, 2018) (discussing the en banc decision); D.C. Circuit Brings CFPB under Presidential Control  (Oct. 13, 2016) (discussing the initial panel decision of the D.C. Circuit).

11 Seila Law, Slip Op. at 11 (quoting U.S. Const., Art. II, § 1).

12 Id. at 12.

13 Id.

14 Id. at 36.  Specifically, the Court wrote that it has recognized two limited exceptions to the President’s unrestricted removal power.  Seila Law, Slip Op. at 15–16.  First, in Humphrey’s Executor, 295 U.S. 602 (1935), the Court upheld removal restrictions for Commissioners of the Federal Trade Commission, which Roberts characterized as “a multimember body of experts, balanced along partisan lines, that performed legislative and judicial functions and was said not to exercise any executive power.”  Seila Law, Slip Op. at 15.  Second, in United States v. Perkins, 116 U.S. 483 (1886), and Morrison v. Olson, 487 U.S. 654 (1988), the Court permitted removal protections for certain inferior officers with narrow duties, such as an independent counsel appointed to investigate and prosecute specific crimes.

15 Seila Law, Slip Op. at 23.

16 Id. at 18.

17 Id. at 31.

18 Id. at 32–36 (emphasis in original).

19 Id. at 3.

20 Id. at 30.

21 Id. at 31. Justice Thomas viewed this theory as irrelevant, since the Acting Director could not have ratified the continuance of the action by Director Kraninger. Justice Kagan did not address this theory specifically.

22 See Ryder v. United States, 515 U.S. 177 (1995) (the de facto officer doctrine “confers validity upon acts performed by a person acting under the color of official title even though it is later discovered that the legality of that person’s appointment or election to office is deficient.”).

23 No. 18-60302 (5th Cir.).

24 Lucia v. S.E.C., 138 S. Ct. 2044, 2055 (2018).

25 Id. at 2055 n.6.

© Copyright 2020 Cadwalader, Wickersham & Taft LLP

ARTICLE BY Rachel Rodman and Scott A. Cammarn and Nihal S. Patel at Cadwalader, Wickersham & Taft LLP.

For more on the CPFB, see the National Law Review Consumer Protection law section.

U.S. Supreme Court Issues Landmark Ruling in Favor of LGBTQ Employees in the Workplace

Yesterday, in a much-anticipated opinion, the United States Supreme Court held that federal anti-discrimination laws protect LGBTQ employees in the workplace. This ruling provides much needed clarity for employers and resolves a court split in which some federal courts recognized that federal law prohibited LGBTQ discrimination, while others (including those covering Florida, Georgia, and Alabama) stated that LGBTQ discrimination was not unlawful.

This landmark ruling, in Bostock v. Clayton County, Georgia, arises out of three different appeals. In two of the cases, the employees were fired despite having long and successful careers after their employers learned that they were homosexual. In the third case, an employee who initially presented herself as a male announced several years later that she planned to transition to “living and working full-time as a woman.” The employer terminated her immediately.

The law at issue – Title VII of the Civil Rights Act of 1964 (“Title VII”) – prohibits discrimination in employment on the basis of race, color, religion, sex and national origin. However, the law makes no mention of sexual orientation.

Nevertheless, in a 6-3 decision, the Supreme Court held that all three terminations were illegal. In doing so, the Court noted that “[a]n employer who fires an individual for being homosexual or transgender fires that person for traits or actions it would not have questioned in members of a different sex. Sex plays a necessary and undisguisable role in the decision, exactly what Title VII forbids.”

Although several states and municipalities have passed laws and rules prohibiting all or at least some forms of LGBTQ discrimination, this ruling clarifies that both sexual orientation discrimination and gender identity/transgender discrimination are prohibited by federal law throughout the United States.

The federal agency responsible for enforcing Title VII provides the following examples of LGBTQ-related conduct that it considers to be unlawful:

  • Refusing to hire an applicant because she is a transgender woman.
  • Firing an employee because he is planning or has made a gender transition.
  • Denying an employee equal access to a common restroom corresponding to the employee’s gender identity.
  • Harassing a woman because she does not dress or talk in a feminine manner.
  • Harassing a man because he dresses in an effeminate manner or enjoys hobbies that are traditionally associated with women.
  • Harassing an employee because of a gender transition, such as by intentionally and persistently failing to use the name and gender pronoun that correspond to the gender identity with which the employee identifies, and which the employee has communicated to management and employees.
  • Denying an employee a promotion because he is gay or straight.
  • Paying a lower salary to an employee because of sexual orientation.
  • Denying spousal health insurance benefits to a female employee because her legal spouse is a woman, while providing spousal health insurance to a male employee whose legal spouse is a woman.
  • Harassing an employee because of his/her sexual orientation (e.g., derogatory terms, sexually oriented comments, or disparaging remarks for associating with a person of the same or opposite sex).
  • Discriminating against or harassing an employee because of his/her sexual orientation or gender identity, in combination with another unlawful reason, for example, on the basis of transgender status and race, or sexual orientation and disability.

The penalties for non-compliance can be significant, including potential for significant emotional distress and other compensatory damages, punitive damages, and attorney’s fees.

This ruling is particularly significant to employers in jurisdictions like Florida that did not recognize that LGBTQ discrimination was unlawful under federal law. In light of this decision, employers should immediately take the following proactive steps to prevent and prohibit LGBTQ discrimination in the workplace:

  • Review your handbooks and anti-discrimination policies to ensure that sexual orientation and other LGBTQ-related status are included in your list of legally protected categories.
  • Consider adopting policies and procedures protecting the rights of transgender employees. For example, a transgender woman must be allowed to use a common female restroom or locker room facility, and dress code policies should permit employees to follow the dress code matching their gender identity.
  • Update your discrimination and harassment training modules to ensure that LGBTQ-related discrimination and harassment is addressed. Such training should include specific examples of what types of conduct could constitute unlawful discrimination. Managers and human resources personnel in particular need to be made aware that LGBTQ discrimination is unlawful and will not be tolerated.

In addition, employers will need to closely follow EEOC guidance and case law that follows this ruling. For example, as Justice Alito mentioned in his dissenting opinion, it is unclear what impact this ruling will have on employees who want their employers to pay for sex reassignment surgery and treatment.

© 2007-2020 Hill Ward Henderson, All Rights Reserved

For more on SCOTUS’s recent decision, see the National Law Review Civil Rights law section.

Supreme Court of the United States Upholds DACA (Deferred Action for Childhood Arrivals)

In a 5-4 decision written by Chief Justice John Roberts on Department of Homeland Security et al vs. Regents of the University of California, the Supreme Court held that the DACA rescission was improper under the Administrative Procedures Act.

In the decision, Chief Justice Roberts concludes “that the acting secretary violated the [Administrative Procedure Act]” and thus the decision to end the DACA program must be vacated. Today, over 700,000 foreign nationals have availed themselves of the opportunities provided by DACA.

In his opinion, Chief Justice Roberts writes:

“We do not decide whether DACA or its rescission are sound policies. ‘The wisdom’ of those decisions ‘is none of our concern.’ Chenery II, 332 U. S., at 207. We address only whether the agency complied with the procedural requirement that it provide a reasoned explanation for its action. Here the agency failed to consider the conspicuous issues of whether to retain forbearance and what if anything to do about the hardship to DACA recipients. That dual failure raises doubts about whether the agency appreciated the scope of its discretion or exercised that discretion in a reasonable manner. The appropriate recourse is therefore to remand to DHS so that it may consider the problem anew.”

Chief Justice Roberts was joined in the majority by Justices Ruth Bader Ginsburg, Stephen Breyer, Elena Kagan and Sotomayor. Justices Clarence Thomas, Samuel Alito, Neil Gorsuch and Brett Kavanaugh filed opinions that concurred with parts of the dissent and majority.

On June 15, 2012, then-Secretary of Homeland Security Janet Napolitano issued a memorandum creating a non-congressionally authorized administration program that allowed certain individuals who entered the United States as children and met various other requirements, namely lacking current lawful immigration status, to request deferred action for an initial period of up to two years, with the ability to renew thereafter, and eligibility for work authorization. This program became known as DACA – Deferred Action for Childhood Arrivals.

The program has faced continuous constitutional scrutiny since its creation, including the Department of Homeland Security’s order that ended the program in 2017. Lower court rulings enabled the DACA program to continue, ultimately leading to suit being brought before the Supreme Court.

The Supreme Court’s decision is not a final resolution on DACA, but instead rules that the Trump Administration’s total recession of DACA was “arbitrary and capricious” and that the administration failed to give adequate justification for ending the program. This decision keeps the DACA program in place.

The full ruling on the case can be found here.

©2020 Greenberg Traurig, LLP. All rights reserved.

Supreme Court Rules Title VII Bars Discrimination on the Basis of Sexual Orientation and Gender Identity

Today, June 15, 2020, the Supreme Court of the United States issued a landmark decision in Bostock v. Clayton County, Georgia, holding that Title VII of the Civil Rights Act of 1964 (“Title VII”) protects lesbian, gay, bisexual, and transgender workers.  The Court held that employers who discriminate against employees based on sexual orientation or gender identity unlawfully intend to rely on sex in their decision-making. Justice Gorsuch, along with Chief Justice Roberts and the four liberal justices of the Court, wrote, in deciding the question of whether an employer can fire an individual for being homosexual or transgender: “the answer is clear.”  Specifically, “an employer who fires an individual for being homosexual or transgender fires that person for traits or actions it would not have questioned in members of a different sex.  Sex plays a necessary and undisguisable role in the decision, exactly what Title VII forbids.”  Ultimately, “an employer who fires an individual merely for being gay or transgender defies the law.”

Bostock v. Clayton County, Georgia consisted of three individual employment cases, all of which involved an employer terminating the employment of a long-time employee shortly after the employee revealed the he or she was homosexual or transgender.  Gerald Bostock worked as a child welfare advocate for Clayton County, Georgia for over ten years and was fired shortly after participating in a gay recreational softball league.  The reason given for his termination was an allegation of misspent funds and “conduct unbecoming of a county employee;” however, Bostock argued that was pretense and the real motivation for his termination was his sexual orientation.  Both the District Court and the Eleventh Circuit held that Title VII did not include protection against discrimination towards sexual orientation.

In Altitude Express Inc. v. Zarda, Donald Zara worked as a skydiving instructor for Altitude Express in New York.  Zarda worked for the company for several years and his employment was terminated shortly after mentioning to his employer that he was gay.  While the District Court ruled in favor of the employer, the Second Circuit ruled that Title VII protects employees from discrimination based on sexual orientation.

Lastly, in R.G. & G.R. Harris Funeral Homes Inc. v. Equal Employment Opportunity Commission, Aimee Stephens, a funeral home employee in Garden City, Michigan, who originally presented herself as a male upon hiring, revealed to her employer during her sixth year of employment that she would be transitioning and working and living full-time as a woman.  Shortly thereafter, she was dismissed from her job due to her transition.  Initially, the District Court found for the funeral home on two bases: (1) Title VII did not protect transgender persons nor gender identity, and (2) the Religious Freedom Restoration Act permitted the funeral home to make employment decisions based on faith.  The Sixth Circuit reversed this decision, ruling that Title VII’s “discrimination by sex” does include transgender persons and also that the funeral home had failed to show how Title VII interfered with its owner’s religious expression.

Given the split among the circuit courts, the Supreme Court took up this trio of cases to render a clear determination as to whether sexual orientation and gender identity are protected categories under Title VII.  This case of first impression signifies a key development in the interpretation and meaning of discrimination on the basis of “sex” under Title VII.  The opinion resolved the issue of whether those who drafted Title VII could have intended protection of these classes, with Justice Gorsuch explaining: “Those who adopted the Civil Rights Act might not have anticipated their work would lead to this particular result. Likely, they weren’t thinking about many of the Act’s con­sequences that have become apparent over the years, in­cluding its prohibition against discrimination on the basis of motherhood or its ban on the sexual harassment of male employees. But the limits of the drafters’ imagination sup­ply no reason to ignore the law’s demands. When the ex­press terms of a statute give us one answer and extratextual considerations suggest another, it’s no contest. Only the written word is the law, and all persons are entitled to its benefit.”

Employers must ensure that their policies, including their equal employment opportunity, harassment, and discrimination policies, reflect this opinion and prohibit discrimination on the basis of sexual orientation and gender identity.  In addition to these policy matters, employers should take actions to prevent discrimination on the basis of sexual orientation or gender identity and communicate the development in the law to employees and key decision makers in the company.

The full opinion can be found here.

© 2020 Bracewell LLP

For more on the SCOTUS Title VII decision, see the National Law Review Civil Rights law section.

BREAKING: US Supreme Court Rules Title VII Protects LGBTQ Employees

In a highly anticipated decision, the U.S. Supreme Court held Title VII of the federal Civil Rights Act protects LGBTQ employees from being fired because of their sexual orientation or gender identity.

The opinion, released on June 15, 2020, was a consolidation of three federal appellate court decisions—Bostock v. Clayton County; Altitude Express v. Zarda; and R.G. & G.R. Harris Funeral Homes v. Equal Employment Opportunity Commission. In each case, the employer terminated the plaintiff after learning that he or she was gay or transgender.

In Bostock, the 11th Circuit Court of Appeals held Title VII did not protect an employee against discrimination because of his or her sexual orientation, relying on circuit precedent. The 2nd Circuit came to the opposite conclusion in Zarda, concluding an employer discriminated on the basis of sex (including gender stereotypes) when it terminated a long-time employee. In R.G. & G.R., the 6th Circuit held Title VII protected against discrimination based on an employee’s transgender or transitioning status because such discrimination is grounded in an employee’s failure to conform to gender stereotypes.

Justice Neil Gorsuch, writing for the majority, analyzed whether discrimination because of sexual orientation or transgender status is fundamentally sex discrimination for failing to conform to gender stereotypes—an issue already determined to fall within Title VII’s scope.

In its analysis, the majority used the example of an employer who has a policy of firing any employee who is known to be gay. According to the Court, if a model employee brings a female spouse to an office holiday party and the employee is then fired due to also being female rather than male, the employer discriminated on the basis of sex, even if the intent was to discriminate on the basis of sexual orientation.

Similarly, the Court reasoned that an employer cannot discriminate against one of two otherwise identical female employees because she was identified as a male at birth. In doing so “the employer intentionally penalizes a person identified as male at birth for traits or actions that it tolerates in an employee identified as female at birth.” Accordingly, such discrimination is indistinguishable from sex discrimination.

Justice Samuel Alito, joined by Justice Clarence Thomas, authored one of two dissenting opinions. Justice Alito’s primary points of disagreement with the majority were: (1) the definition of “sex,” as understood by the legislators who authored Title VII, does not include sexual orientation or transgender status; and (2) Congress has had opportunities to amend Title VII to expressly include such protections but has failed to do so.

Justice Brett Kavanaugh’s dissent relied on his interpretation of the “ordinary meaning” of Title VII, which he concluded does not include protections for sexual orientation or transgender status. As such, Justice Kavanaugh reasoned it was not the Court’s role to expand the scope of Title VII. Despite his disagreement with the majority, Justice Kavanaugh’s dissent concluded with a congratulatory note to those he would deny Title VII’s protections, “Millions of gay and lesbian Americans have worked hard for many decades to achieve equal treatment in fact and law. They have exhibited extraordinary vision, tenacity, and grit—battling often steep odds in the legislative and judicial arenas, not to mention in their daily lives. They have advanced powerful policy arguments and can take pride in today’s result.”

The upshot of the Court’s Bostock decision is effectively an expansion of Title VII’s antidiscrimination protections to LGBTQ employees. While many employers already have policies prohibiting discrimination because of sexual orientation and/or transgender status, this decision presumably authorizes EEOC charges and Title VII claims for such discrimination.

© 2020 Dinsmore & Shohl LLP. All rights reserved.

For more on discrimination protections see the National Law Review Civil Rights law section.