Tag: SCOTUS

Hirst Spot Print Turned into Spots by MSCHF, Courtroom Artists Face New Challenge, Banksy Pays Homage to Hospital Workers

Still No LOVE in Robert Indiana’s Estate Battle

In the ongoing suit over the rights to Robert Indiana’s artworks, defendant Michael McKenzie, the founder of American Image Art, filed new counterclaims against the Morgan Art Foundation alleging that Morgan orchestrated “one of the most massive art frauds in history.” McKenzie argues that intellectual property rights were abandoned by Indiana decades ago and that the artist’s famous LOVE artwork is in the public domain. McKenzie further alleges that Morgan “fraudulently affixed” copyright to more than 1,000 sculptures worth more than $100 million and an additional million items valued at least $50 million in retail sales – Indiana did not affix a copyright symbol to his work when it was first published. McKenzie also seeks to invalidate two federal trademarks that Morgan registered for the design and reproduction of LOVE. Notably, several other counterclaims made by McKenzie and Indiana’s estate were dismissed in 2019. Morgan maintains that it has the rights to all images and sculptures that Indiana produced between 1960 and 2004, as well as the exclusive right to fabricate and sell certain sculptures, including LOVE, pursuant to agreements dating back to 1999. Morgan’s direct claim against McKenzie is over the sale of works it alleges were falsely attributed to Indiana.

As SCOTUS Moves Oral Arguments Online, Courtroom Artists Forced to Use Their Ears – and Imaginations – for Illustrations of Oral Arguments

The U.S. Supreme Court’s justices and their staffs are not the only people in the courtroom having to adapt. Court-appointed artists still capture the oral arguments, but must now rely on their ears and imaginations rather than their eyes to create the illustrations. The inability to be inside the courtroom during the arguments not only makes it difficult to paint a picture but also leaves lawyers in the dark as to the justices’ reactions to their arguments.

The Most Expensive Game of (Dis)Connect the Dots: A $30,000 Hirst Print Sold Off Spot by Spot

Damien Hirst created a spot print titled L-Isoleucine T-Butyl Ester. Now, MSCHF, a Brooklyn-based art collective, cut out each of the print’s 88 spots as part of the project called Severed Spots, created in protest against the practice of fractionizing the ownership of artworks. MSCHF sold off each of the spots for $480, generating a profit of about $12,000 over the $30,000 purchase price; in yet another example of an artwork’s value apparently growing as a result of its destruction (think Banksy’s Love Is in the Bin), they stand to gain even more as bidders line up to purchase leftover white paper. Our readers will remember MSCHF for auctioning off The Persistence of Chaos, a computer with the world’s most malicious viruses last year, among other news-making stunts/artworks. MSCHF also sold Jesus Shoes, custom Nike Air Max 97s with holy water from the River Jordan in the soles. Damien Hirst’s studio has not yet responded to this latest stunt by the collective.

Founder of Napster Involved in Suit Over Ownership of an Old Master Painting

Auction house Christie’s recent court filings to enforce an arbitration award reveal that art collector Sean Parker, founder of Napster and first president of Facebook, was embroiled in a dispute over a sale of Peter Paul Rubens’s A Satyr Holding a Basket of Grapes and Quinces with a Nymph (1620). In 2018, Parker acquired the artwork at a Christie’s auction for his foundation, after which the consignor of the artwork inexplicably sought to cancel the sale, despite making more than $1 million in profit. The consignor claimed that she tried to withdraw the painting before the auction took place. When the parties were unable to amicably resolve the dispute, it was submitted to arbitration. The arbitrator ruled that Christie’s complied with its contractual obligations and that Parker lawfully acquired the painting. The case highlights the legal and financial responsibilities of the parties involved in consigning an artwork to an auction house.

Former Paddle8 CEO Sued for Alleged Misappropriation of Funds

A group of creditors brought suit in the Southern District of New York, accusing former Paddle8 CEO Valentine Uhovski of engaging in acts of gross mismanagement and disloyalty, including alleged misappropriation of funds from the auctions to pay the company’s operating expenses. Uhovski has denied the allegations. Paddle8 filed for bankruptcy in March, following a separate suit by a nonprofit cinema group that alleged misappropriation of funds from a charity auction.

Mail Art Experiencing Revitalization

In recent months, Mail Art – a 1950s art movement centered around sending small-scale artworks via the postal service – has regained popularity. Artists have been reaching out via social media for submissions, and to date, hundreds of individuals have answered the call. The original idea was to create a form of artistic production that bypasses the traditional channels of art dissemination. The reborn interest in Mail Art is “creating a sense of connectivity” while allowing for people stuck in their homes to take a break from their screens.

EUROPE

INTERPOL Recovers 19,000+ Artifacts in a Massive Operation Spanning 103 Countries

More than 300 INTERPOL investigations coordinated between 103 countries resulted in recovery of more than 19,000 artifacts. Recalling the work of the Monuments Men – unlikely World War II heroes who saved many of Europe’s art treasures – the investigations were focused on criminal networks that deal in artworks looted from war-torn countries as well as artifacts stolen from archeological excavations and museums. The success of the mission highlights the need for global cooperation in fighting the trafficking of cultural goods.

MoMA Voices Concerns Over Norway’s Handling of Picasso Murals

The Norwegian government is in the process of demolishing a government building in Oslo that features Pablo Picasso’s murals sandblasted onto the concrete walls. While plans have been made to relocate the artworks, many are concerned that once moved, the murals will crack. The MoMA letter, published in the Norwegian press, expresses grave concerns over the preservation of the murals and emphasizes their significance to the art community. In addition, the petition to preserve the building holding the murals has garnered more than 47,000 signatures.

Van Eyck Exhibition Organizers Argue Coronavirus Triggers Cancellation Policy

Organizers of the largest exhibition ever dedicated to the Flemish Old Master Jan Van Eyck will distribute refunds to 144,000 ticket holders who were unable to attend due to early closure following the coronavirus outbreak. The organizers are seeking coverage from their cancellation insurer for the refunds of more than €3.5 million.

Counterfeit Artwork Seized at Heathrow Airport Part of a Larger Problem

The British Museum’s inspection revealed that hundreds of what looked to be Middle Eastern artifacts intercepted last July by an officer at Heathrow Airport were fakes. While the items were discovered to be counterfeit, they had the potential to be sold for thousands of dollars to unsuspecting buyers.

Croatia Rushes to Save Valuable Pieces of Art

While the world deals with the ongoing coronavirus pandemic, Croatia experienced a 5.4 magnitude earthquake in its capital, Zagreb. The earthquake damaged some 26,000 buildings, palaces, university buildings and hospitals. The Museum of Decorative Arts, which planned on celebrating its 140th anniversary, suffered a roof collapse during the earthquake. While the building has been classified as unsafe for use, the Museum has been expeditiously removing many fragile objects, even while the aftershocks continued. Many other pre–20th century buildings also sustained damage.

Banksy Pays Homage to Hospital Workers

As a tribute to the National Health Service and health care workers during this pandemic, renowned street artist Banksy created an artwork titled Game Changer (2020), which he donated to England’s Southampton General Hospital. The piece came with a note to the health care workers that read: “Thanks for all you’re doing. I hope this brightens the place up a bit, even if it’s only black and white.” Just days after the artwork was installed, an opportunistic thief wearing a hazmat suit and armed with a drill was caught attempting to steal it.

ASIA

Archaeologists Uncover Further Evidence of Vital Role of Women in Ancient Mongolian Society

Archaeologists discovered 1,500-year-old skeletons of women warriors in northern Mongolia, near China – recalling the story of Hua Mulan, originally described in the Ballad (Ode) of Mulan composed in the fifth or sixth century CE, and appearing as the main character in the 1998 animated Disney film. A study of the skeletons revealed the two women to be skilled in archery and horseback riding. The skeletons were found in a cemetery at the Airagiin Gozgor archeological site. Disney has been planning to release a live-action adaptation of Mulan, currently scheduled for July 24, social distancing guidelines permitting.

 

© 2020 Wilson Elser

TransUnion to Seek Supreme Court Review After Ninth Circuit Finds Class Members Had Standing and Partially Upholds Punitive Damages Award

A hotly contested ruling in a Fair Credit Reporting Act (“FCRA”) class action case will soon be appealed to the Supreme Court of the United States.  The Ninth Circuit in Ramirez v. TransUnion LLC, Case No. 17-17244, recently granted the parties’ Joint Motion to Stay the Mandate, seeking to stay the Ninth Circuit’s mandate pending TransUnion’s filing of a petition for writ of certiorari in the Supreme Court.  The Motion to Stay comes soon after the court denied TransUnion’s Petition for Rehearing or Rehearing En Banc regarding the Ninth Circuit’s decision in Ramirez v. TransUnion LLC, 951 F.3d 1008 (9th Cir. 2020).

In Ramirez, the Ninth Circuit held for the first time that every class member in a class action lawsuit needs “standing” to recover damages at the final judgment stage.  The 8,185 member class alleged that TransUnion, knowing that its practice was unlawful, violated the FCRA by incorrectly placing terrorist alerts on the front page of consumers’ credit reports and later sending the consumers misleading and incomplete disclosures about the alerts and how to remove them.  The court held that each class member was required to, and did, have standing, even though the credit reports of over 75% of the class were not actually disclosed to a third party because TransUnion’s alleged violation of the consumers’ statutory rights under the FCRA, by itself, constituted a concrete injury.  The Ninth Circuit also found that the jury’s punitive damages award of 6.45 times the statutory damages award was unconstitutional, and reduced it to 4 times the statutory damages award.  The Ramirez decision is discussed in more detail here.

In its Petition for Rehearing, TransUnion claimed that the dissent had the correct view, and the majority’s decision “not only conflicts with Supreme Court teachings, but puts the Ninth Circuit on the wrong side of a lopsided circuit split.”  TransUnion argued that the class of consumers did not have standing for their FCRA claims unless their credit reports were disclosed to a third party.  TransUnion further alleged that the class should have been decertified because Ramirez, the named plaintiff, “was radically atypical of the class he purported to represent” since there was no evidence that any other class member’s credit report was disseminated.  Finally, TransUnion disputed the court’s punitive damages award because a reduction to 4 times the statutory damages award was not enough.  According to TransUnion, the Supreme Court requires, at a maximum, a punitive damages award “equal to compensatory damages . . . when compensatory damages are substantial.”

TransUnion concluded its Petition for Rehearing by stating:

It is no exaggeration to say that, for many class members, the first indication that they were injured at all will be when they receive a $4,925.10 check in the mail. That absurd result is the product of ignoring basic requirements of Article III, Rule 23, and due process.

As of the date this article is published, TransUnion has not yet filed its petition for writ of certiorari in the Supreme Court, but we will continue to monitor the case for updates.

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

For more on the Fair Credit Reporting Act, see the National Law Review Financial Institutions & Banking law page.

Supreme Court Rules That Certain, But Not All, Discharges to Groundwater May Require Permitting Under the Clean Water Act

In a 6-3 decision on Thursday, the United States Supreme Court vacated and remanded the opinion of the Ninth Circuit Court of Appeals and found that the Clean Water Act (“CWA”) regulated discharges from point sources “if the addition of the pollutants through groundwater is the functional equivalent of a direct discharge from the point source into navigable waters.” The Supreme Court distinguishes its opinion from the Ninth Circuit by determining that the “fairly traceable” test established by the lower courts was too broad to require a permit under the CWA.

The case concerned the city of Maui’s Lahaina Wastewater Reclamation Facility, which treats millions of gallons of sewage each day and injects the treated waste into wells deep underground. A study ordered by the United States Environmental Protection Agency demonstrated that the waste could be traced from the facility to the ocean.  As a result of the study, environmentalists argued that a permit under the CWA was required.

Prior to the Supreme Court ruling, both the federal district court and the court of appeals sided with environmental groups, and established a standard to require a permit under the CWA when pollutants are “fairly traceable” from the pipe to navigable waters, despite the fact that the discharge initially entered groundwater before entering a navigable water.

The Supreme Court found that the “fairly traceable” standard was too broad, citing the “power of modern science” to detect pollutants years after their release in minute quantities. Justice Stephen Breyer, writing for the majority, stated that a permit is required only when the indirect pollution in navigable waters via groundwater is the “functional equivalent of a direct discharge.”

“If the pipe ends 50 miles from navigable waters and the pipe emits pollutants that travel with groundwater, mix with much other material, and end up in navigable waters only many years later, the permitting requirements likely do not apply,” he wrote.

In dissenting opinions, Justices Thomas, Gorsuch and Alito stated that the CWA mandated a permit only for direct discharges of pollutants into navigable waters and that the majority opinion was unworkable and incomprehensible.

“Instead of concocting our own rule, I would interpret the words of the statute, and in my view, the better of the two possible interpretations is that a permit is required when a pollutant is discharged directly from a point source to navigable waters,” Alito wrote.

The case is County of Maui v. Hawaii Wildlife Fund, No. 18-260.

© Steptoe & Johnson PLLC. All Rights Reserved.

For more on SCOTUS’s Clean Water Act decision, see the National Law Review Environmental, Energy & Resources law page.

Supreme Court Preserves Availability of Profits Award for Both “Willful” and “Innocent” Trademark Infringement

On April 23, 2020, the U.S. Supreme Court unanimously held in Romag Fasteners, Inc. v. Fossil Group, Inc., 590 U.S. ___ (2020), that the Lanham Act does not impose a “willfulness” prerequisite for awarding profits in trademark infringement actions.

Disgorgement of a defendant’s profits has long been a critical remedy available to brand owners seeking remediation for the infringement of its trademarks.  A profits award can be a proxy for the actual damages suffered by the trademark owner, as actual damages are often very difficult to prove in trademark cases.  Profits awards also serve to deprive infringers of their unjust gains, and can be an important deterrent against infringing activities.  Some federal courts have considered an infringer’s intent as a factor, but not a prerequisite, to awarding a defendant’s profits to the prevailing plaintiff.  Other courts have required proof that the defendant’s infringement was willful before awarding damages measured by its profits, complicating the availability of this important trademark infringement remedy in certain jurisdictions.

The U.S. Supreme Court has resolved this split, finding that a categorical rule requiring a showing of willfulness cannot be reconciled with the statute’s plain language.  Accordingly, prevailing trademark owners do not have to prove willfulness to be awarded the infringer’s profits.

Background

The parties had an agreement allowing Fossil to use Romag’s fasteners in Fossil’s handbags and other products. Romag discovered that the factories Fossil hired in China to make its products were using counterfeit Romag fasteners. Unable to resolve its concerns amicably, Romag sued, alleging that Fossil had infringed its trademark and falsely represented that its fasteners came from Romag.

The U.S. District Court for the District of Connecticut found Fossil liable, and the jury awarded Romag $6.7 million of Fossil’s profits to “deter future trademark infringement.”  The trial court overturned the jury’s damages award because the jury found Fossil acted “callously,” rather than “willfully,” as required by the controlling Second Circuit precedent for a profits award. The U.S. Court of Appeals for the Federal Circuit affirmed the district court’s decision, and the U.S. Supreme Court vacated that judgment and remanded for further proceedings consistent with its opinion.

Overview of Court’s Opinion

Section 15 U.S.C. §1117(a) of the Lanham Act, which governs remedies for trademark violations, states:

When a violation of any right of the registrant of a mark registered in the Patent and Trademark Office, a violation under section 1125(a) or (d) of this title, or a willful violation under section 1125(c) of this title, shall have been established . . . , the plaintiff shall be entitled, subject to the provisions of sections 1111 and 1114 of this title, and subject to the principles of equity, to recover (1) defendant’s profits, (2) any damages sustained by the plaintiff, and (3) the costs of the action. (Underlined emphases added).

Although acknowledging that a defendant’s mental state is a highly important consideration in determining whether a profits award is appropriate, the Court rejected the categorical rule applied in certain lower courts (including controlling Second Circuit precedent) that a plaintiff can win a profits award only after proving that the defendant willfully infringed its trademark.  The Court relied on the plain language in 15 U.S.C. §1117(a) to find that Congress intended to limit such willfulness precondition to a profits award in a suit under Section 1125(c) for trademark dilution. It rejected Fossil’s position that the phrase “subject to the principles of equity” in Section 1117(a) should be read as imposing a willfulness requirement, especially given that Congress prescribed a “willfulness” requirement elsewhere in the very same statutory provision. In no uncertain terms, the Court noted that “the statutory language has never required a showing of willfulness to win a defendant’s profits” in claims under Section 1125(a) for false or misleading use of trademarks (i.e., trademark infringement).

Conclusion

The Court’s decision resolves a split amongst the lower courts and preserves a critical deterrent against trademark infringement by clarifying that Congress intended to allow a trademark owner to recover a defendant’s ill-gotten profits, regardless of whether such infringement was willful.

©2020 Pierce Atwood LLP. All rights reserved.

ARTICLE BY Jonathan M. Gelchinsky and Michael C. Hernandez of Pierce Atwood LLP.

 

For more Trademark Cases, see the National Law Review Intellectual Property Law section.

A Registered Copyright is the Only Way to Guard Against Infringement

The legal world and the media closely monitor every move the Supreme Court makes or considers. However, some rulings attract more attention than others. One that the general public might have overlooked was a 2019 ruling involving infringement claims. Trying to clean up some inconsistent decisions in the Circuit Courts, the high court ruled unanimously that copyright infringement claims are valid only when there is a copyright registered with the United States Copyright Office.

This is a significant shift

Before this ruling, the courts were often more open to protecting copyrightable property even if it was not officially registered with the Copyright Office. For example, the Fifth and Ninth Circuit ruled that protection comes as soon as the owner applies for the copyright and pays the registration fee. The Tenth and Eleventh Circuits, on the other hand, ruled that protection was only valid when the application was approved. In the past, it was sometimes enough to say “patent pending” to dissuade infringers even if the application was later rejected. This phrase is now irrelevant.

What does this mean for applicants?

The processing time can vary but takes several weeks, which means that applicants will are vulnerable during the application process, which can important in fast-moving businesses like technology. Moreover, some thought the application was too long or too expensive. This ruling makes it clear that the only protection is when the companies, inventors, entrepreneurs, or content creators register their idea.

© 2020 by Raymond Law Group LLC.

Business Owners Take Note as Enterprise Completes Its Mission: Supreme Court Holds No Common Law Partnership Was Formed with ETP

Logic is the beginning of wisdom, not the end.

— Dr. Spock, Star Trek, Starfleet Officer

The long running legal saga between Enterprise Products Partners (“Enterprise”) and Energy Transfer Partners (“ETP”) finally concluded on January 31, 2020, when the Texas Supreme Court unanimously decided that no partnership had ever arisen between the parties. (Read) This dispute between two of the major players in the energy industry focused on the legal standard for determining when a partnership is formed. ETP argued that the test should be based on the parties’ conduct, while Enterprise maintained that the parties had agreed that specific conditions in their contracts had to be established before a partnership was created, and those conditions were never met.

As the Supreme Court’s opinion brings to a close eight years of hard-fought litigation between Enterprise and ETP, we will share our third, and hopefully last, blog post about the case and also review some important lessons for business owners gleaned from this legal conflict. ¹

Predictable Legal Result

The staggering $535 million jury verdict that ETP secured against Enterprise in 2014 had always rested on tenuous legal ground because it conflicted with the terms of the parties’ written agreements. At trial, ETP claimed that Enterprise had breached its fiduciary duty as a partner when it ditched ETP to enter into a new pipeline deal with a competitor, Enbridge. The result at trial rested on the jury’s finding that the parties’ conduct had created a partnership between them, which gave rise to a duty of loyalty that was owed by Enterprise. The jury’s verdict, however, disregarded the parties’ written agreements, which set forth specific conditions precedent to the formation of a partnership, including approval by both companies’ boards. Enterprise therefore argued that it had become subject to a “partnership by ambush.”

The Texas Supreme Court has long championed the sanctity of contract. In numerous previous cases, the Court expressed the view that sophisticated business parties who enter into contracts must honor their bargain. Therefore, the Court’s decision on behalf of Enterprise was not surprising to Court watchers. In addition, a decision in ETP’s favor upholding its common law partnership claim would have created significant uncertainty in the business community as to when a partnership, and related partnership duties, would arise between contracting parties.

In its decision, the Court cited common law strongly favoring the freedom of contract, and held that parties can adopt conditions precedent that must be met before a partnership will be formed. The Court also cited language from a case it had decided more than a decade ago, and noted that: the Legislature did not “intend to spring surprise or accidental partnerships” on parties. While the Court acknowledged that the conditions precedent the parties agreed to could have been waived or modified, it held that ETP was required to either obtain a jury finding that the conditions had been waived or prove waiver conclusively at trial, and ETP had done neither. ²

Business Lessons Learned

While Enterprise ultimately prevailed in defeating ETP’s partnership claims, the legal battle required an enormous amount of time, caused considerable distraction and required each of the parties to incur millions of dollars in legal expense. Thus, the Court’s holding in ETP v. Enterprise provides some key take-aways for business owners. If the practices reviewed below are followed when parties are considering entering into a new business relationship, they may help to avoid future litigation. At a minimum, these practices will make it more likely that a court or an arbitration panel would grant a summary judgment dismissing before trial claims alleging that the parties entered formed a new partnership based on their conduct.

  • Get it clearly in writing — This is the clear guidance from the Supreme Court. If a party does not want to be saddled with partnership duties, it should confirm in writing that: (i) no partnership has been formed, and (ii) no partnership will be formed unless specifically stated conditions are met, e.g., the requirement that a written partnership agreement must be signed and approved by the company’s board and/or managers.
  • Address waiver — All agreements can be waived or modified, but the parties can expressly agree there will be no waiver or amending of any conditions to forming a partnership unless the waiver or amendment is signed and in writing;
  • Disclaim all fiduciary duties — In addition to making it clear that no partnership exists without specific conditions being met, the parties can also state that they do not owe each other any fiduciary duties unless and until they sign off on a binding written agreement between them;
  • Consider use of arbitration — The parties may require that all disputes arising between them will be decided by sophisticated business lawyers in an arbitration proceeding, and they can require that the arbitration hearing be held promptly, within 60 or 90 days;
  • Impose damage caps — The parties can agree to limit recoverable damages in a variety of days in any future dispute that arise between them, which can include their agreement to eliminate all claims for consequential damages, for lost profits and for punitive damages; and
  • Award fees to prevailing party — The parties can also award reasonable legal fees to the prevailing party, which will require the losing party to pay all of the legal fees that are incurred in the litigation or arbitration.

Conclusion

One man cannot summon the future. But one man can change the present!

Alternate Mr. Spock, “Mirror, Mirror”

The Supreme Court’s decision in the Enterprise case confirms the critical importance of securing written agreements that document the parties’ business relationship. Business owners who sign letters of intent, or enter into other preliminary documents before formally starting a new business relationship need to take care to ensure they are not forming a partnership or joint venture unless specific conditions are met. The failure to incorporate these conditions in a signed agreement may result in adverse consequences for the business owner, including being saddled with claims that a partnership was formed and that, as a result, they are now burdened with burdensome fiduciary duties.

¹ This post has a Star Trek reference based on the USS Enterprise, the name of the flagship in the show. As Star Trek fans know, the series was written in 1964, and first debuted on television in 1966. Perhaps it is a coincidence, but the first United States nuclear-powered aircraft carrier, the USS Enterprise, entered into service just a few years before, in 1962.

² In issuing its decision, the Supreme Court upheld the opinion of the Dallas Court of Appeals, which had overturned the trial court’s judgment. The appellate court had determined that ETP had not shown that it met the conditions precedent set forth in the parties’ agreements and, further, there was no jury finding these conditions had ever been waived or modified by the parties.

 

© 2020 Winstead PC.

ARTICLE BY Ladd Hirsch of Winstead.
For more on common-law partnerships see the National Law Review Corporate & Business Organizations Law section.

The Future of the CFPB: the Executive Branch and Separation of Powers

On October 18, 2019 the Supreme Court granted certiorari in Seila Law v. Consumer Financial Protection Bureau (CFPB). SCOTUS  will answer the question of “whether the substantial executive authority yielded by the CFPB, an independent agency led by a single director, violates the separation of powers,” and the Justices requested that the parties brief and argue an additional issue: “If the Consumer Financial Protection Bureau is found unconstitutional on the basis of the separation of powers, can 12 U.S.C. § 5491(c)(3) [the for-cause removal provision] be severed from the Dodd-Frank Act?”

Origins of the Consumer Financial Bureau and Previous Constitutional Challenges

The Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 (Dodd-Frank) established the CFPB as an independent bureau within the Federal Reserve System designed to protect consumers from abusive financial services practices.  The structure and constitutionality of the CFPB has been addressed before. In 2018, the D.C. Circuit held in PHH Corp. v. CFPB, No. 15-1177 (D.C. Cir. 2018) (PHH) that the current structure of the CFPB, which features a single director that cannot be removed by the president except for cause, “is consistent with Article II” of the Constitution.

The PHH opinion stated that Congress’ response to the consumer finance abuse that led up to the 2008 financial crisis purposely created the CFPB to be “a regulator attentive to individuals and families”  because the existing regulatory agencies were too concerned about the financial industry they were supposed to supervise. It was determined that the CFPB needed independence to do its job, and the CPFB structure was designed to confer that independence.   Neither PHH Corporation nor the CFPB filed a petition for certiorari to ask the Supreme Court to review the D.C. Circuit’s decision.

Background of the Seila Law Case

In Seila Law v. Consumer Financial Protection Bureau (CFPB) the Petitioner is a law firm that provides a variety of legal services to consumers, and as part of a CFPB investigation into whether Seila Law violated certain federal laws, the CFPB issued a civil investigative demand seeking information and documents. Seila Law objected to the demand on the ground that the CFPB was unconstitutionally structured and filed a petition to a federal district court for enforcement. The district court held that the structure of the CFPB did not violate the separation of powers and was constitutional, after which that district court decision was appealed. The Ninth Circuit affirmed, noting that the issues had been “thoroughly canvassed” in the DC Circuit it in PHH, and adopting the position of the PHH majority that the CFPB’s structure is constitutional. Seila Law filed a petition for a writ of certiorari with the U.S. Supreme Court seeking review of the Ninth Circuit’s ruling, and here we are.

An Experienced Federal Agency Litigator’s Perspective

Mr. Anthony E. DiResta, is co-chair of Holland & Knight’s Consumer Protection Defense and Compliance Team, and a former Director of the Federal Trade Commission’s (FTC) Southeast Regional office.  Mr. DiResta was kind enough to take some time with the National Law Review to discuss the upcoming Seila Law decision and its impact on the future of the CFPB.

_______________

NLR: Can you sum up the CFPB and separation of powers story to this point from your own viewpoint?

DiResta: The Supreme Court has decided to review this case because of the constitutionality of the CFPB’s structure, based on separation of powers. Any single leader in government who doesn’t serve at the pleasure of the President may simply have too much power, and people with certain jurisprudential philosophies about how government should be run find that an offensive situation. That’s the theory behind the certiorari decision and why SCOTUS is addressing the case – it’s really a question of constitutionality and the power of administrative agencies. Additionally, the Court will look at the severability of the CFPB in Dodd-Frank, whether it’s possible to just restructure the single leader structure, and then leave the Bureau intact to continue business as usual.

NLR: It seems many of these issues could’ve been avoided had the CFPB been structured more as a multi-member commission initially or if Congress had simply expanded FTC powers.  Why do you think it was structured differently?

DiResta: That’s a matter of speculation – but I think it might have gone something like this: After the Recession in the early 2000s, many people felt that government was asleep at the wheel, letting  devastating things in banking and finance and servicing to consumers run out of control, which led to serious blunders and mishaps. So it was decided that a new office was needed – and this was led by representatives in Congress like Elizabeth Warren.

Why they didn’t simply expand the power and resources of the FTC is also pure speculation – they could have merely expanded FTC’s jurisdiction and reach to achieve similar outcomes and intentions.

The Constitutionality of the CFPB

NLR: Do you think SCOTUS will rule in favor of the petitioner in Seila Law, and find the structure of the CFPB unconstitutional?

DiResta: I do. I suspect that SCOTUS will, in fact, find the structure unconstitutional on the basis of the separation of powers. But I also believe that an even more interesting part of that will be the discussion of the severability of the organization’s leadership, leaving the CFPB itself intact. If the structure is unconstitutional, how the Court recommends a remedy to correct that unconstitutionality could have far-reaching effects. This is so important – and we should all be excited that we get to watch this corrective process in action.

NLR: Is there a chance this would result in a complete restructure of CFPB, or even its possible dissolution?

DiResta: I really don’t think so – and the Court couldn’t do that anyway. The Court could recommend to Congress that a certain path for correction be followed, but it will be up to Congress to rearrange the CFPB (if that’s the result) in the best way. The legislative branch will just have to make sure it’s done, in a way that the Court recommends.

Some More Background on CFPB Constitutionality Litigation

Then-Judge, now Justice Kavanaugh was on the U.S Court of Appeals Court for the D.C. Circuit for the 2018 en banc ruling in the PHH Corp. v. CFPB case and on the 2016 three-judge decision. Judge Kavanaugh authored two opinions regarding PHH:  declaring a certain aspect of the CFPB to be unconstitutional and in 2018, the dissenting opinion from the en banc U.S. Court of Appeals for the D.C Circuit’s decision overruling the 2016 panel opinion.

The 2016 panel opinion determined that the structure of the CFPB is unconstitutional stating:  “The concentration of massive, unchecked power in a single Director marks a dramatic departure from settled historical practice and makes the CFPB unique among independent agencies.” And the 2016 panel also presented a view of the Constitution that vests with the president an extensive degree of unilateral authority over the executive branch’s enforcement of federal laws.

NLR:  Since Justice Kavanaugh was a judge involved in a similar case – PHH Corp. v. CFPB – why is he allowed to rule on this matter again?

DiResta: I’m not an expert on judicial ethics but there does not appear to be improper bias in Kavanaugh reviewing this decision. Rather, his views in PHH reflect a philosophical perspective on separation of powers and the role of administrative agencies.  In fact, I expect they’ll use his past ruling on PHH as part of their internal discussion.

Seila Law v CFPB and Election Politics

NLR: It’s difficult to ignore the political undertones of this case:  a watchdog organization created, in part, with input from some high-profile democrats (most notably Elizabeth Warren, who is currently running as a candidate for president) is being challenged and that challenge is being echoed in support by largely conservative elements.  In your view, is this case a litmus test for the Supreme Court delving into political issues, something it has largely tried not to do?

DiResta: No – I really don’t see this as political. Again, this is a purely constitutional question, a legal question, and it’s exactly the kind of case the SCOTUS should be deciding. If we’re honest, this is a perfect example of why we have SCOTUS in the first place: To examine how effective our public servants are behaving and performing their responsibilities under the constitutional structure revealed in the separation of powers doctrine.

Besides that, politically speaking, this could boomerang. Consider: if the Democrats win the White House in 2020, and the Court were to change the structure, that would offer any Democratic President the opportunity to appoint a new Director in 2021, and Kathleen Kraninger’s term isn’t up until 2023.

Informed Democracy at Work

While the situation with CFPB and its constitutionality is demonstrably important, DiResta touched on a few more salient – though no less important – points.

DiResta: Democracy isn’t supposed to be easy. Democracy is hard – it’s messy and complicated. It’s in its nature, and in the nature of different ideas.

In a free marketplace of ideas, people will clash when citizens are free to express themselves, and there will always be conflict – but it’s out of resolving those conflicts that democracy claims – and grows – its power and attraction. It’s so important that we – the people – see this and get to comment on it – to watch this happening.

NLR: Absolutely. In a world where the news cycle has compressed from days, to hours, to minutes – while attention spans have diminished in similar fashion – it’s increasingly important that these monumental workings in government are transparent, and that people see them.

DiResta: I couldn’t agree more. And – as a young lawyer, I  had the privilege to work with some very dedicated and highly professional journalists who understood journalism as a public service, not as entertainment.  These journalists saw themselves as educators, bringing light to the processes and prospects of government to citizens. And that’s how the media serves effectively as the Fourth Branch of government. A branch that presents a constant check to the power of government and its branches, and that gives the people the knowledge to make better decisions, and to vote for the best people and the best situations.

We sincerely appreciate Mr. DiResta for his thoughtful insights and for taking time out of his busy schedule to share them with the National Law Review.

Copyright ©2019 National Law Forum, LLC

DACA: Updates and Options for Dreamers

This November, the United States Supreme Court is set to hear oral arguments on the case that will decide the fate of the Deferred Action for Childhood Arrivals (DACA) program.[1] This program, established through executive action, has offered a temporary reprieve from removal (deportation) to nearly 800,000 students and young professionals raised in the United States.[2] While the program protects a generation categorically denied opportunity to gain legal status,[3] it is very limited in scope. Remarkably, DACA does not confer any immigration status itself nor offer a separate pathway to any other status including permanent residency.[4]

The idea that someone can be present in the United States without legal status while not unlawfully present is confusing – not only to the general public, but apparently to the Supreme Court. In oral argument for U.S. v. Texas, Chief Justice John Roberts wondered, “I’m sorry, that just so I get that right… Lawfully present does not mean that you’re legally present.”[5] Justice Samuel Alito also asked, “[H]ow can it be lawful to work here but not lawful to be here?”[6] If members of this nation’s highest court struggle with this concept, it is no wonder there is confusion surrounding DACA.

DACA: Benefits and Limitations

The DACA recipients, or “Dreamers,”[*] are in legal limbo: allowed to work in the United States, but with no legal status. DACA recipients are permitted to continue their education, and receive a social security number.[7] In some states, recipients can also apply for a driver’s license.[8] DACA also offers a reprieve from accruing “unlawful presence,” a legal term for time spent in the United States without status as an adult, which can lead to future bars to reentry to the US.[9] However, the deferred action program does not, on its own basis, allow its recipients to apply for a separate status.[10] DACA protections expire every two years, and require subsequent renewal applications.[11]

It is no wonder that Dreamers have been called “the best and brightest young people.”[12] The DACA protections only extend to a group of educated youth that have never been convicted of most categories of crimes.[13] To qualify, an applicant must have arrived to the country under the age of sixteen, attend school or have completed their education, and be under the age of thirty, among other requirements.[14] By the nature of the program, recipients arrived as children and therefore may not have a connection to their country of birth. As a result, many Dreamers are attending universities, building careers, and living their lives in the United States without a guarantee that they can obtain legal status to stay permanently.

DACA is Unique Only in its Limited Scope

Deferred action is a commonly used exercise of prosecutorial discretion.[15] As with many other government actions, officials set enforcement priorities to manage limited resources. In addition, the Department of Homeland Security can grant deferred action on an individual basis at any time.[16] The Dreamers’ immigration standing is also not unique, because, as Chief Justice Roberts and Justice Alito learned, many foreign nationals in the US can work legally but do not have legal status. This includes applicants for adjustment of status to permanent residence, and foreign nationals of countries granted Temporary Protected Status (TPS).[17] Applicants for political asylum are also permitted to work legally in the US after a certain time period while awaiting a final decision on their applications.[18]

The DACA program is part of a long history of executive actions related to immigration. In 1961, the Kennedy Administration established a program to give immigrant visas to Cuban refugees, as well as provide financial help, medical care, and other resettlement services.[19] The program benefitted around one million Cuban Americans.[20] Subsequently, when an influx of both Cubans and Haitians arrived on Florida shores in 1980, most were discretionarily admitted to the country.[21] Several years later, President Reagan announced that immigration standards for 200,000 undocumented Nicaraguans would be eased, and directed the immigration service to “encourage and expedite” their work authorizations.[22] After the 1986 immigration reform bill offered a pathway to residence to many undocumented families, around 100,000 children of those families were shielded from deportation by executive action.[23] In 1990, former President Bush expanded the program by creating an application process for undocumented individuals to stay in the United States and receive work permits.[24] Two consecutive administrations also expanded the TPS status of thousands of Salvadorans and Nicaraguans until they were offered a pathway to permanent residency by law.[25] Within this context, DACA is much less beneficial to eligible foreign nationals than other major executive actions on immigration, because it provides no pathway to any other immigration status and certainly not permanent residence.

The DACA program was designed as a solution to a problem created by more recent changes to immigration law, which were promoted by many of the same immigration restrictionists that now oppose DACA. For most of American history, migrants from Mexico and other countries travelled back and forth across the border for work in the United States, but maintained a primary residence in their home countries.[26] Migration consisted of seasonal flows from Mexico corresponding to the need for agricultural and railroad workers.[27] There was often no need to stay permanently, so workers returned home in the winter.[28] As a result, families often stayed in Central America instead of relocating to the U.S.[29]

During the second half of the 20th century, U.S. law made it difficult to legally migrate from Central America.[30] As a result, it became risky to travel across the border and entire families settled undocumented.[31] While DACA did not fix this legal status discrepancy, it allowed the children of these families to stay and continue their education and careers.

Recent Changes to the DACA Program

In 2017, the Trump Administration attempted to end the DACA program.[32] After several lawsuits were filed to challenge the termination of DACA, injunctions were issued to order the Department of Homeland Security to continue to process DACA renewals and employment authorizations, but the government could refuse new applications.[33] The pending litigation challenges whether the Trump administration acted with proper authority in attempting to end the program, and whether the Court has the authority to review the administration’s decision.[34]

Even if the Supreme Court upholds the Trump Administration’s decision to end the DACA program, there remains a chance that Congress will act to protect Dreamers. An amendment to immigration law would render the pending case moot and take precedence over any Department of Homeland Security administrative decision. Although at least ten iterations of the bill have been introduced, none have passed.[35] This year, the House passed the American Dream and Promise Act which would grant DACA recipients permanent, statutory protections.[36] However, the bill still has to pass the hurdle of a favorable Senate vote.[37]

The situation of Dreamers is that of legal purgatory – with the door shut to legal status and very few options to leave the United States and return with a visa. Legislative action has been stalled for decades and now a conservative Court is poised to hear the case in the coming weeks. Dreamers and activists alike hope the Court will see DACA as a rational response to protect 800,000 young people from the legal conundrum created by U.S. immigration law.

Options for the Future

With the future of the DACA program uncertain, many Dreamers and employers are assessing their options. The following section is an overview of considerations for DACA recipients, who are in a unique and challenging legal position. With each type of visa, there are exceptions and complicating factors, such as criminal convictions, that may affect eligibility. Although immigration law permits waivers of certain conditions, waivers are granted only in narrow circumstances. As a result, each individual should discuss their unique situation with an experienced immigration attorney.

Immigrant Visa Petitions.

There are several types of immigrant visas available for individuals wishing to become permanent residents, including primarily (1) immediate relative petitions, (2) family-based petitions, and (3) employment-based petitions.[38] The first category can be filed by a U.S. citizen spouse, parent, or an adult child (over the age of twenty-one).[39] The second two types of immigrant visas, based on family and employment, each have different subcategories and are subject to numerical annual limits.[40]

Even if a DACA recipient can qualify for an immigrant visa, there are unique issues that may prevent many from receiving the green card. There are two avenues to receive permanent residency: consular processing at a U.S. Consular Post abroad; and adjustment of status while present in the United States.

Adjustment of Status. Whether a DACA recipient can adjust their immigration status to permanent resident depends on the time spent in the United States without legal status, the manner of U.S. entry, and the type of immigration sponsor. As a general rule, Dreamers cannot adjust status with a family-based petition because it requires continuous lawful status.[41] Employment-based petitions are only available if the individual has less than 180 days of unlawful presence.[42] Thankfully, the immediate relative petition allows adjustment to those who have been undocumented for many years.[43] However, like all petitions, the immediate relative petition requires lawful entry to the United States with either a visa or a travel authorization document.[44] Dreamers who marry a U.S. citizen may have other options even without lawful entry, but will want to seek the advice of an immigration attorney.

Consular Processing. The alternative to adjustment of status is applying for an immigrant visa and interviewing at a U.S. embassy. Most DACA recipients will face challenges in this method, as well. Beginning at age eighteen, any person who has spent over 180 days without legal status faces a three year bar to reentry to the United States.[45] This bar increases to ten years after one year of unlawful presence.[46] Therefore, leaving the country for an interview at a U.S. embassy is a practical impossibility for many recipients who have accrued unlawful presence before approval under DACA.

Non-Immigrant Visa Petitions.

There are numerous types of temporary visas. The F-1 student visa, the O-1 extraordinary ability visa, H-1B work visa, and the B visas for tourism and business are all examples.[47] Most DACA recipients face one fundamental challenge to receiving any of these visas: a grant of a temporary status while living in the U.S. requires an existing, valid underlying status. DACA does not confer any non-immigrant status for this purpose.

Thus, Dreamers seeking a temporary visa are in a similar position as those hoping to receive a green card through consular processing. The process requires leaving the United States and reentering with a visa, a path complicated by three-year and ten-year statutory bars. If available, Dreamers may want to pursue a position abroad with their company. In addition, individuals who are eligible may want to consider whether they qualify for Temporary Protected Status (TPS), which would confer the ability to apply for other temporary statuses.

Humanitarian Petitions.

It is worth noting that there are a few pathways in immigration law for humanitarian-based relief, including the special immigrant juvenile visa, asylum, and visas available for survivors of crimes and domestic abuse.[48] These options may present a pathway to permanent residency for DACA recipients, but only for those that qualify and receive a favorable exercise of discretion.

In summary, individuals temporarily protected under DACA should consider alternatives in the coming months before the Supreme Court’s decision. Though the pathway to permanent residency is narrow, there may be a few options available to stay continuously or to work abroad and return after a few years. The most important step is to continue to renew DACA in the meantime. Finally, it is important to consult with an experienced immigration attorney to help navigate the available options.

[*] The name “Dreamers” originated from the name of the legislative act, the Development, Relief, and Education for Alien Minors (DREAM) Act, originally introduced in 2001.

[1] See DHS v. Regents of the Univ. of Calif., 139 S.Ct. 2779 (2019). The case was consolidated with two other lawsuits, Batalla Vidal v. Nielsen and NAACP v. Trump, with oral arguments set for November 12, 2019 and decision expected around June 2020. DACA Litigation Timeline, Nat’l Immigration Law Center, https://www.nilc.org/issues/daca/daca-litigation-timeline/ (Last updated Sep. 28, 2019).

[2] Gustavo Lopez & Jens Manuel Krogstad, Key Facts about Unauthorized Immigrants Enrolled in DACA, Pew Research Cent. (Sep. 25, 2017), https://www.pewresearch.org/fact-tank/2017/09/25/key-facts-about-unauthorized-immigrants-enrolled-in-daca/.

[3] See Dara Lind, Why Ending DACA is so Unprecedented, Vox (Sep. 5, 2017), https://www.vox.com/policy-and-politics/2017/9/5/16236116/daca-history (noting DACA protects individuals largely without legal pathways to permanent residency).

[4] See U.S. Department of Homeland Security, Exercising Prosecutorial Discretion with Respect to Individuals Who Came to the United States as Children 3 (2012), https://www.dhs.gov/xlibrary/assets/s1-exercising-prosecutorial-discretion-individuals-who-came-to-us-as-children.pdf; See also Frequently Asked Questions, Nat’l Immigration Law Center https://www.nilc.org/issues/daca/faqdeferredactionyouth/ (Last updated Dec. 16, 2016).

[5] Transcript of Oral Argument at 28, United States v. Texas, 136 S.Ct. 2271 (2016) (No. 15-674).

[6] Transcript of Oral Argument at 28, United States v. Texas, 136 S.Ct. 2271 (2016) (No. 15-674).

[7] DACA, Immigration Legal Resource Center, https://www.ilrc.org/daca, (Last visited Oct. 18, 2019).

[8] Immigration Legal Resource Center, Preparing for the Future 15 (2019), https://www.ilrc.org/preparing-future-understanding-rights-and-options-daca-recipients.

[9] Unlawful Presence and Bars to Admissibility, USCIS, https://www.uscis.gov/legal-resources/unlawful-presence-and-bars-admissi… (Last visited Oct. 18, 2019); Understanding Unlawful Presence Under INA § 212(a)(9)(B) and Waivers of Unlawful Presence, Immigrant Legal resource Center 3 (2019), https://www.ilrc.org/sites/default/files/resources/understanding_unlawful_presence_march_2019.pdf.

[10] See U.S. Department of Homeland Security, Exercising Prosecutorial Discretion with Respect to Individuals Who Came to the United States as Children 1 (2012), https://www.dhs.gov/xlibrary/assets/s1-exercising-prosecutorial-discretion-individuals-who-came-to-us-as-children.pdf (“This memorandum confers no substantive right, immigration status or pathway to citizenship.”).

[11] See Id.; The Dream Act, DACA, and Other Policies Designed to Protect Dreamers, American Immigration Council 3 (2019), https://www.americanimmigrationcouncil.org/sites/default/files/research/the_dream_act_daca_and_other_policies_designed_to_protect_dreamers.pdf.

[12] Get the Facts on the DREAM Act, The White House President Barack Obama (Dec. 1, 2010), https://obamawhitehouse.archives.gov/blog/2010/12/01/get-facts-dream-act; See also The Dreamers Are a Good Part of America’s Future, The Wall Street Journal (July 25, 2017), https://www.wsj.com/articles/the-dreamers-are-a-good-part-of-americas-future-1501002274; Power to the Doers and Dreamers, Unleashing the Best and Brightest, Int’l Business Times (Aug. 16, 2010), https://www.ibtimes.com/power-doers-dreamers-unleashing-best-brightest-193274; Gabrielle Levy, Obama: Trump’s DACA Decision ‘Cast a Shadow’ of Deportation Over ‘Best and Brightest’ U.S. News (Sep. 5, 2017), https://www.usnews.com/news/politics/articles/2017-09-05/obama-trumps-daca-decision-cast-a-shadow-of-deportation-over-best-and-brightest.

[13] U.S. Department of Homeland Security, Exercising Prosecutorial Discretion with Respect to Individuals Who Came to the United States as Children 1 (2012), https://www.dhs.gov/xlibrary/assets/s1-exercising-prosecutorial-discretion-individuals-who-came-to-us-as-children.pdf.

[14] Id.

[15] See Shoba S. Wadhia, The Role of Prosecutorial Discretion in Immigration Law, 9 Conn. Pub. L. J. 243, 246 (2010)

[16] Id.

[17]Employment Authorization Document, U.S. Citizenship and Immigration Services, https://www.uscis.gov/greencard/employment-authorization-document (Last updated Apr. 5, 2018).

[18] Id.

[19] See Larry Nackerud et al., The End of the Cuban Contradiction in U.S. Refugee Policy, 33 Int’l Migration Rev. 176, 177 (1999); See also Drew Desilver, Executive Actions on Immigration Have a Long History, Pew Research Center (Nov. 4, 2014), https://www.pewresearch.org/fact-tank/2014/11/21/executive-actions-on-immigration-have-long-history/.

[20] See Larry Nackerud et al., The End of the Cuban Contradiction in U.S. Refugee Policy, 33 Int’l Migration Rev. 176, 177 (1999)

[21] See Drew Desilver, Executive Actions on Immigration Have a Long History, Pew Research Center (Nov. 4, 2014), https://www.pewresearch.org/fact-tank/2014/11/21/executive-actions-on-immigration-have-long-history/; See also Julio Capo, The White House Used This Moment as Proof the U.S. Should Cut Immigration, It’s Real History is More Complicated, Time (Aug. 4, 2017), https://time.com/4888381/immigration-act-mariel-boatlift-history/.

[22] Immigration Rules Are Eased for Nicaraguan Exiles in the U.S., New York Times (July 9, 1987), https://www.nytimes.com/1987/07/09/world/immigration-rules-are-eased-for-nicaraguan-exiles-in-us.html.

[23] Am. Immigration Council, Reagan-Bush Family Fairness (Dec. 2014), https://www.americanimmigrationcouncil.org/sites/default/files/research/reagan_bush_family_fairness_final_0.pdf.

[24] Id.

[25] See Drew Desilver, Executive Actions on Immigration Have a Long History, Pew Research Center (Nov. 4, 2014), https://www.pewresearch.org/fact-tank/2014/11/21/executive-actions-on-immigration-have-long-history/; See also Nicaraguan Adjustment and Central American Relief Act, 8 C.F.R. § 240.60 (2014).

[26] See Dara Lind, Why Ending DACA is so Unprecedented, Vox (Sep. 5, 2017), https://www.vox.com/policy-and-politics/2017/9/5/16236116/daca-history (noting DACA protects individuals largely without legal pathways to permanent residency); See also Douglas Massey & Karen Pren, Unintended Consequences of US Immigration Policy 38 Population and Dev. Review 1-3 (2012), https://onlinelibrary.wiley.com/doi/pdf/10.1111/j.1728-4457.2012.00470.x.; Marc Rosenblum & Kate Brick, US Migration and Policy and Mexican/Central American Migration Flows 1-3 (2011)

[27] Marc Rosenblum & Kate Brick, US Migration and Policy and Mexican/Central American Migration Flows 3 (2011).

[28] Id.

[29] See Dara Lind, Why Ending DACA is so Unprecedented, Vox (Sep. 5, 2017), https://www.vox.com/policy-and-politics/2017/9/5/16236116/daca-history

[30] See Douglas Massey & Karen Pren, Unintended Consequences of US Immigration Policy 38 Population & Dev. Rev. 1-3 (2012), https://onlinelibrary.wiley.com/doi/pdf/10.1111/j.1728-4457.2012.00470.x; Marc Rosenblum & Kate Brick, US Migration and Policy and Mexican/Central American Migration Flows 1-3 (2011).

[31] See Dara Lind, Why Ending DACA is so Unprecedented, Vox (Sep. 5, 2017), https://www.vox.com/policy-and-politics/2017/9/5/16236116/daca-history.

[32] Michael Shear & Julie Davis, Trump Moves to End DACA and Calls on Congress to Act, New York Times (Sep. 5, 2017), https://www.nytimes.com/2017/09/05/us/politics/trump-daca-dreamers-immigration.html.

[33] See DACA Litigation Timeline, Nat’l Immigrant Justice Cent., https://www.nilc.org/issues/daca/daca-litigation-timeline/ (Last Updated Sep. 28, 2019); See also Regents of the Univ. of Cal. v. DHS, 908 F.3d 476 (9th Cir. 2018).

[34] Regents of the Univ. of Cal. v. DHS, 908 F.3d 476 (9th Cir. 2018).

[35] Id.

[36] American Dream and Promise Act of 2019, 116th Congress, H.R.6 https://www.congress.gov/bill/116th-congress/house-bill/6.

[37] See Alan Gomez and Ledyard King, House Passes Bill to Protect ‘Dreamers’, but Faces Long Odds in Republican-led Senate, U.S.A. Today (Jun. 4, 2019), https://www.usatoday.com/story/news/politics/2019/06/04/house-passes-bill-dreamers-tps-but-senate-unlikely/1337753001/; Natalie Andrews & Andrew Duehren, House Passes Bill Aimed at Protecting Immigrants Brought Illegally to the U.S. as Children, Wall Street Journal (Jun. 4, 2019), https://www.wsj.com/articles/house-passes-bill-aimed-at-protecting-immigrants-brought-illegally-to-u-s-as-children-11559689659.

[38] See 8. U.S.C. § 1151 (2018).

[39] See 8. U.S.C. § 1151(b)(2)(A)(i) (2018).

[40] See 8. U.S.C. § 1151 (2018).

[41] See 8 C.F.R. §245.1(b)(6) (2018).

[42] Applicability of Section 245(k) to Certain Employment-Based Adjustment of Status Applications, U.S. Citizenship and Immigration Services (July 14, 2008), https://www.uscis.gov/sites/default/files/USCIS/Laws/Memoranda/Static_Files_Memoranda/Archives%201998-2008/2008/245%28k%29_14jul08.pdf.

[43] See 8 C.F.R. §245.1(b)(6) (2018).

[44] See 8 C.F.R. §245.1(b)(3) (2018).

[45] See 8 U.S.C. § 1182(a)(9)(b) (2018).

[46] See 8 U.S.C. § 1182(a)(9)(b) (2018).

[47] See 8 U.S.C. § 1101(a)(15) (2018).

[48] See Humanitarian, U.S. Citizenship and Immigration Services https://www.uscis.gov/humanitarian (Last visited Nov. 1, 2019). For additional resources, see Humanitarian Protection, Am. Immigration Council https://www.americanimmigrationcouncil.org/topics/humanitarian-protection (Last visited Nov. 1, 2019).

©1994-2019 Mintz, Levin, Cohn, Ferris, Glovsky and Popeo, P.C. All Rights Reserved.

ARTICLE BY Lauren Watford & the Immigration Practice at Mintz Levin.
For more on DACA/Dreamers, see the National Law Review Immigration law page.

Can an Employee be Fired for Being Gay or Transgender?

HR Professionals will soon know the answer to this question.

The United States Supreme Court is preparing to settle a contentious debate on employee protections under federal employment discrimination laws.  On October 7th, the Court returned from its summer break to start the new term.  The Court did not have to wait long before it tackled a complex case because on October 8th, the Court heard two major oral arguments with potentially far-reaching implications for both employers and employees.  Both cases focus on the prohibitions in employment discrimination under Title VII of the 1964 Civil Rights Act (“Title VII”).  Under Title VII, Congress made it illegal for employers to discriminate against employees on the basis of “race, color, religion, sex, and national origin.”  The question that the Court will address is whether employment discrimination based on sexual orientation or gender identity is prohibited employment discrimination “because of sex.”

The first case the Court heard was a consolidated matter involving cases from the Second Circuit Court of Appeals (Altitude Express Inc. v. Zarda) and the Eleventh Circuit Court of Appeals (Bostock v. Clayton County, Georgia), both of which involve men who claim they were fired from their jobs because of their sexual orientation.

Second Circuit: “Sex” is Necessarily a Factor in Sexual Orientation

The plaintiff in Zarda, Donald Zarda, was a skydiving instructor, who died in 2014.  Prior to his death, a female client complained that Zarda inappropriately touched her during a jump.  At some point, Zarda communicated to the client that he was a homosexual and “had an ex-husband,” a practice that Zarda stated he often did with female clients to put them at ease.  Altitude Express terminated Zarda in connection with the complaint; however, Zarda insisted he was fired solely because of his reference to his sexual orientation.

A federal district court granted summary judgment against Zarda, reasoning that his claim was not cognizable under Title VII.  However, the Second Circuit reversed, with a majority of the court believing that sexual orientation discrimination is motivated by sex and, therefore, a “subset of sex discrimination.”  Thus, the Second Circuit concluded that federal law prohibits the firing of an employee on the basis of sexual orientation.  Notably, the court reached this conclusion by taking a broad interpretation of the meaning of the text “because of sex.”  Specifically, the court reasoned that Title VII must protect sexual orientation “because sex is necessarily a factor in sexual orientation.”

Eleventh Circuit: Discharge for Homosexuality Not Prohibited by Title VII

The Eleventh Circuit reached the opposite conclusion in Bostock v. Clayton County, Georgia.  The plaintiff in Bostock, Gerald Bostock, was a Child Welfare Services Coordinator in Clayton County for over ten years.  Although Bostock had received good performance reviews for his work, an internal audit was conducted on his program’s funds.  Bostock, who is gay, claimed the audit was a “pretext for discrimination against him because of his sexual orientation.”  During an advisory meeting, where Bostock’s supervisor was present, at least one person criticized Bostock’s sexual orientation and his participation in a gay softball league.

After his complaint was dismissed at the district court level, Bostock appealed to the Eleventh Circuit.  Referring back to a 1979 decision, the Eleventh Circuit reasoned that it had already held that “[d]ischarge for homosexuality is not prohibited by Title VII.”  While hinting that this earlier ruling may have been wrong, the court held that it had no choice but to follow precedent and affirm the dismissal of Bostock’s claim.

Sixth Circuit: Discrimination on the Basis of Transgender and Transitioning Status is Necessarily Discrimination on the Basis of Sex

The second case, Harris Funeral Homes v. EEOC, presents a similar question to Zarda and Bostock.  That is, whether employees can be fired based on their status as transgender.

The case involves Aimee Stephens, who was a funeral director and embalmer for R.G. & G.R. Harris Funeral Homes.  While working in this position for six years, Stephens dressed and presented herself as a man without issue.  However, once Stephens communicated that she wanted to live and work as a woman before having sex-reassignment surgery, she was terminated.  The owner of the funeral home, a devout Christian, admitted that Stephens was fired because she “was no longer going to represent himself as a man.  He wanted to dress as a woman.”  The owner believed this change would violate “God’s commands.”

After Stephens filed a discrimination charge, the Equal Employment Opportunity Commission (“EEOC”) pursued a complaint on her behalf against the funeral home.  In ruling in favor of the employer, the district court reasoned that transgender status is not a protected trait under Title VII and that the Religious Freedom Restoration Act (“RFRA”) precludes the EEOC from enforcing Title VII in this instance as doing so would substantially burden the employer’s religious exercise.  The Sixth Circuit reversed, holding that “discrimination on the basis of transgender and transitioning status is necessarily discrimination on the basis of sex.”  The court further ruled that the RFRA did not apply to protect the funeral home’s actions because the funeral home was not a “religious institution,” and Stephens was not a “ministerial employee” excluded from Title VII’s protections.

Stakeholders: States, Federal Government, Employers, and Employees

The Supreme Court’s ruling in these cases, which is expected in the spring or summer of 2020, has the potential to be monumental because of the many stakeholders involved.  Currently, 21 states and the District of Columbia have barred sexual orientation and gender identity discrimination by statute or regulation, as have a number of counties and municipalities.  While a few other states provide protection from this type of discrimination either by agency interpretation or court ruling, the remaining states in the country offer no protection under their state laws.  This means that LGBTQ individuals who live in states such as Alabama, Florida, Georgia, Indiana, and even North Carolina (at least with respect to private employers) may have no remedy to this type of employment discrimination outside of Title VII.

Additionally, states who have passed laws in this area may face challenges in enforcing those laws if the Supreme Court decides that Title VII does not protect gay and transgender status.  Many of these states lean on the EEOC’s authority to investigate claims of discrimination against companies that operate in multiple jurisdictions, and the EEOC has been successful in partnering with states to investigate discrimination claims and enforce such actions.  However, states would lose EEOC assistance should the Court decide that Title VII’s scope does not extend to sexual orientation or gender identification.

Although the EEOC traditionally has been on the side of expanding Title VII protections, the federal government in the most recent litigation has aligned itself with the employers.  In particular, United States Solicitor General Noel Francisco argued that Title VII’s prohibition on discrimination “because of sex” does not apply to sexual orientation or gender identity.  Accepting this interpretation, Title VII is limited to barring employers from treating women different from men in the same or similar position, and vice-versa.

Equally important to the states’ and federal government’s interest is the interest of employers.  Companies have lined up on both sides of the debate with over 36 briefs filed in support of Bostock and Zarda, and over 24 briefs filed in support of Clayton County and Altitude Express.  For example, one brief filed in support of Bostock and Zarda includes 206 companies representing businesses such as Apple, Google, Facebook, Walt Disney, Coca-Cola, and Uber.  These businesses argued that interpreting Title VII to “exclude sexual orientation or gender identity from protections against sex discrimination would have wide-ranging, negative consequences for businesses, their employees, and the U.S. economy.”  In contrast, the C12 group that represents “the largest network of Christian CEOs, business owners, and executives in the United States” filed a separate brief in support of the employers arguing that interpreting “because of sex” in Title VII to include sexual orientation and gender identity ignores the natural meaning of the law, “thereby bypassing the political process, shutting down debate, preventing any accommodation of divergent views, and precluding any compromise.”

Makeup of the Court: The Deciding Vote

Prior to his retirement, Justice Anthony Kennedy was the deciding vote in several gay rights cases.  However, Justice Kennedy is no longer on the bench, and these cases present the first opportunity for the public to see how his successor, Justice Brett Kavanaugh, will vote on these issues.  Also, Justice Neil Gorsuch, successor to Justice Antonin Scalia, may play a key role in deciding these issues.  Similar to Scalia, it is believed that Justice Gorsuch is more inclined to rule that courts should naturally interpret statutes as they were meant when enacted.  Should Justice Gorsuch hold firm to this view, then there is some thought that he may conclude sexual orientation and gender identity were not meant to be included as discrimination “because of sex” under Title VII.  The perspectives of these new Justices are likely to dictate the Court’s ultimate decision – a decision which may directly impact the employment landscape for years to come.

© 2019 Ward and Smith, P.A. All Rights Reserved.

For more on Employment Protections, see the National Law Review Labor & Employment and Civil Rights law pages.

Supreme Court Will not Disturb Ruling that a False Rumor about “Sleeping Your Way to a Promotion” can be a Hostile Work Environment

The U.S. Supreme Court decided not to review an appellate court decision that held a false rumor about a woman “sleeping” her way to a promotion can give rise to a hostile work environment claim.  This means that the February 2019 decision by the U.S. Court of Appeals for the Fourth Circuit in Parker v. Reema Consulting Services, Inc. will stand.  In Parker, the Fourth Circuit held that, where an employer participates in circulating false rumors that a female employee slept with her male boss to obtain a promotion, this constitutes Title VII gender discrimination.

Parker’s Discrimination Claim

Evangeline Parker started worked for Reema Consulting Services, Inc., (“RCSI”) at its warehouse facility as a low-level clerk.  She was promoted six times, ultimately rising to Assistant Operations Manager.  About two weeks after she was promoted to a manager position, she learned that some male employees were circulating “an unfounded, sexually-explicit rumor about her” that “falsely and maliciously portrayed her as having [had] a sexual relationship” with a higher-ranking manager to obtain her management position.

The rumor originated with another RCSI employee who was jealous of Parker’s achievement, and the highest-ranking manager at the warehouse facility participated in spreading the rumor.  Parker’s complaint alleged that as the rumor spread, she “was treated with open resentment and disrespect” from many coworkers, including employees she was responsible for supervising.

At an all-staff meeting at which the rumor was discussed, the warehouse manager slammed the door in Parker’s face and excluded her from the meeting.  The following day, the warehouse manager screamed at Parker and blamed her for “bringing the situation to the workplace.” He also stated that “he could no longer recommend her for promotions or higher-level tasks because of the rumor” and that he “would not allow her to advance any further within the company.”  A few days later, the warehouse manager “lost his temper and began screaming” at Parker, and Parker then filed an internal sexual harassment complaint with RCSI Human Resources.  Shortly thereafter, RCSI gave Parker two warnings and terminated her employment.

Lawyer pointingParker brought a discrimination claim, alleging that she was subjected to a hostile work environment.  The district court dismissed her claim on the grounds that 1) the harassment was not based upon gender and instead based upon false allegations of conduct by her, and 2) the conduct was not sufficiently severe or pervasive to have altered the conditions of Parker’s employment because the rumor was circulated for just a few weeks.  Judge Titus found, “Clearly, this woman is entitled to the dignity of her merit-based promotion and not to have it sullied by somebody suggesting that it was because she had sexual relations with a supervisor who promoted her.”  However, he continued “that is not a harassment based upon gender.  It’s based upon false allegations of conduct by her.  And this same type of a rumor could be made in a variety of other context[s] involving people of the same gender or different genders alleged to have had some kind of sexual activity leading to a promotion.”  Ultimately, Judge Titus held that “the rumor and the spreading of that kind of a rumor is based upon conduct, not gender.

Gender-Based Rumors Can Constitute Sex Harassment

Taking into account all of the allegations of the complaint, including the sex-based nature of the rumor and its effects, the Fourth Circuit held that the rumor that Parker had sex with her male superior to obtain a promotion was gender-based in that it implied that she “used her womanhood, rather than her merit, to obtain from a man, so seduced, a promotion.”  The court found that the rumor invoked “a deeply rooted perception — one that unfortunately still persists — that generally women, not men, use sex to achieve success.”  This double standard precipitated by negative stereotypes regarding the relationship between the advancement of women in the workplace and their sexual behavior can cause superiors and coworkers to treat women in the workplace differently from men.  Thus, the rumor about Parker sleeping her way to a promotion constituted a form of sexual harassment.

The Fourth Circuit also held that Parker sufficiently alleged severe or pervasive harassment:

[T]he harassment was continuous, preoccupying not only Parker, but also management and the employees at the Sterling facility for the entire time of Parker’s employment after her final promotion.  The harassment began with the fabrication of the rumor by a jealous male workplace competitor and was then circulated by male employees.  Management too contributed to the continuing circulation of the rumor.  The highest-ranking manager asked another manager, who was rumored to be having the relationship with Parker, whether his wife was divorcing him because he was “f–king” Parker.  The same manager called an all-staff meeting, at which the rumor was discussed, and excluded Parker.  In another meeting, the manager blamed Parker for bringing the rumor into the workplace. And in yet another meeting, the manager harangued Parker about the rumor, stating he should have fired her when she began “huffing and puffing” about it.

Implications

Parker correctly recognizes that gender-based stereotypes can prevent women from advancing in the workplace and that Title VII bars employers from using negative gender stereotypes to harass employees.

© 2019 Zuckerman Law

ARTICLE BY Eric Bachman of Zuckerman Law.
More on workplace harassment via the National Law Review Labor & Employment law page.