Yesterday’s Supreme Court Citations

May 21, 2013

Arlington v. FCC

Docket Nos. 11–1545 and 11–1547

2013 WL 2149789


The Communications Act of 1934, as amended, requires state or local governments to act on siting applications for wireless facilities “within a reasonable period of time after the request is duly filed.” Relying on its broad authority to implement the Communications Act, the Federal Communications Commission issued a Declaratory Ruling concluding that the phrase “reasonable period of time” is presumptively (but rebuttably) 90 days to process an application to place a new antenna on an existing tower and 150 days to process all other applications. The cities of Arlington and San Antonio, Texas, sought review of the Declaratory Ruling in the Fifth Circuit, arguing that the Commission lacked authority to interpret these time limitations. The Court of Appeals applied the deferential standard of review set forth in Chevron, 467 U.S. 837, relying on Circuit precedent holding that Chevron applies to an agency’s interpretation of its own statutory jurisdiction. Finding the statute ambiguous, it upheld as a permissible construction of the statute the FCC’s view that the Act’s broad grant of regulatory authority empowered it to interpret the provision.


The Supreme Court affirmed, holding that courts must apply the Chevron framework to an agency’s interpretation of a statutory ambiguity that concerns the scope of the agency’s statutory authority (i.e., its jurisdiction).


Under Chevron, a reviewing court must first ask whether Congress has directly spoken to the precise question at issue; if so, the court must give effect to Congress’ unambiguously expressed intent. However, if “the statute is silent or ambiguous,” the court must defer to the administering agency’s construction of the statute so long as it is permissible.  When a court reviews an agency’s interpretation of a statute it administers, the question is always, simply, whether the agency has stayed within the bounds of its statutory authority. There is no distinction between an agency’s “jurisdictional” and “nonjurisdictional” interpretations. For agencies charged with administering congressional statutes, both their power to act and how they are to act is authoritatively prescribed by Congress, so that when they act improperly, no less than when they act beyond their jurisdiction, what they do is ultra vires. Because the question is always whether the agency has gone beyond what Congress has permitted it to do, there is no principled basis for carving out an arbitrary subset of “jurisdictional” questions from the Chevron framework.


The Court also found meritless the contention that Chevron deference is not appropriate here because the FCC asserted jurisdiction over matters of traditional state and local concern. The statute explicitly supplants state authority, so the question is simply whether a federal agency or federal courts will draw the lines to which the States must hew.


For Chevron deference to apply, the agency must have received congressional authority to determine the particular matter at issue in the particular manner adopted. A general conferral of rulemaking authority validates rules for all the matters the agency is charged with administering. Here the preconditions to deference under Chevron are satisfied because Congress has unambiguously vested the FCC with general authority to administer the Communications Act through rulemaking and adjudication, and the agency interpretation at issue was promulgated in the exercise of that authority.


Justice Scalia delivered the opinion of the Court, in which Justices Thomas, Ginsburg, Sotomayor, and Kagan, joined. Justice Breyer filed an opinion concurring in part and concurring in the judgment. Chief Justice Roberts filed a dissenting opinion, in which Justices Kennedy and Alito joined.



Sebelius v. Cloer

Docket No. 12–236

2013 WL 2149791


The National Childhood Vaccine Injury Act of 1986 (NCVIA) established a no-fault compensation system to stabilize the vaccine market and expedite compensation to injured parties. Under the Act, a proceeding for compensation is initiated by service upon the Secretary of Health and Human Services and the filing of a petition containing specified documentation with the clerk of the Court of Federal Claims, who then immediately forwards the petition for assignment to a special master. An attorney may not charge a fee for services in connection with such a petition, but a court may award attorney’s fees and costs incurred on an unsuccessful petition, if that petition was brought in good faith and there was a reasonable basis for the claim for which the petition was brought.


In 1997, shortly after receiving her third Hepatitis-B vaccine, respondent Cloer began to experience symptoms that eventually led to a multiple sclerosis (MS) diagnosis in 2003. In 2004, she learned of a link between MS and the Hepatitis-B vaccine, and in 2005, she filed a claim for compensation under the NCVIA, alleging that the vaccine caused or exacerbated her MS. After reviewing the petition and its supporting documentation, the Chief Special Master concluded that Cloer’s claim was untimely because the Act’s 36-month limitations period began to run when she had her first MS symptoms in 1997. The Federal Circuit ultimately agreed that Cloer’s petition was untimely. Cloer then sought attorney’s fees and costs. The en banc Federal Circuit found that she was entitled to recover fees on her untimely petition.


The Supreme Court affirmed, holding that an untimely NCVIA petition may qualify for an award of attorney’s fees if it is filed in good faith and there is a reasonable basis for its claim.


As in any statutory construction case, this Court proceeds from the understanding that unless otherwise defined, statutory terms are generally interpreted in accordance with their ordinary meaning. Nothing in either the NCVIA’s attorney’s fees provision suggests that the reason for the subsequent dismissal of a petition, such as its untimeliness, nullifies the initial filing. So long as the petition was brought in good faith and with a reasonable basis, it is eligible for an award of attorney’s fees, even if it is ultimately unsuccessful. Had Congress intended otherwise, it could have easily limited fee awards to timely petitions.  The Court found the attorney fee provision to be clear and unambiguous.


Justice Sotomayor delivered the opinion of the Court, in which Chief Justice Roberts and Justices Kennedy, Ginsburg, Breyer, Alito, and Kagan joined, and in which Justices Scalia and Thomas joined as to all but Part II–B.



PPL Corp. v. Commissioner

Docket No. 12–43

2013 WL 2149792


In 1997, the United Kingdom, newly under Labour Party rule, imposed a one-time “windfall tax” on 32 U.K. companies privatized between 1984 and 1996 by the Conservative government. The companies had been sold to private parties through an initial sale of shares, known as a flotation. Some of the companies were required to continue providing services for a fixed period at the same rates they had offered under government control. Many of those companies became dramatically more efficient and earned substantial profits in the process.


Petitioner PPL Corporation (PPL), part owner of a privatized U.K. company subject to the windfall tax, claimed a credit for its share of the bill in its 1997 federal income-tax return, relying on Internal Revenue Code §901(b)(1), which states that any “income, war profits, and excess profits taxes” paid overseas are creditable against U.S. income taxes. Treasury Regulation §1.901–2(a)(1) interprets this section to mean that a foreign tax is creditable if its “predominant character” “is that of an income tax in the U.S. sense.” The Commissioner of Internal Revenue rejected PPL’s claim, but the Tax Court held that the U.K. windfall tax was creditable for U.S. tax purposes under §901. The Third Circuit reversed.


The Supreme Court reversed, holding that the U.K. tax is creditable under §901.


Treasury Regulation §1.901–2 provides the relevant legal standard. First, a tax’s “predominant character,” or the normal manner in which a tax applies, is controlling. Thus, a foreign tax that operates as an income, war profits, or excess profits tax for most taxpayers is generally creditable. Second, foreign tax creditability depends not on the way a foreign government characterizes its tax but on whether the tax, if enacted in the U.S., would be an income, war profits, or excess profits tax. The regulation explains that a foreign tax’s predominant character is that of a U.S. income tax “[i]f . . . the foreign tax is likely to reach net gain in the normal circumstances in which it applies.” Three tests set forth in the regulations provide guidance in making this assessment and indicate that net gain consists of realized gross receipts reduced by significant costs and expenses attributable to such gross receipts, in combination known as net income. A foreign tax that reaches net income, or profits, is creditable.


The U.K. windfall tax’s predominant character is that of an excess profits tax, a category of income tax in the U.S. sense. The Labour government’s conception of “profit-making value” as a backward-looking analysis of historic profits is not a typical valuation method. Rather, it is a tax on realized net income disguised as a tax on the difference between two values, one of which is a fictitious value calculated using an imputed price-to-earnings ratio. The substance of the windfall tax confirms this conclusion. When rearranged, the U.K’s formula demonstrates that the windfall tax is economically equivalent to the difference between the profits each company actually earned and the amount the Labour government believed it should have earned given its flotation value. For most of the relevant companies, the U.K. formula’s substantive effect was to impose a 51.71 percent tax on all profits above a threshold, a classic excess profits tax. Under the principle that tax law deals in economic realities, not legal abstractions, the Court therefore recognizes that the windfall tax is nothing more than a tax on actual profits above a threshold.


Justice Thomas delivered the opinion for a unanimous Court. Justice Sotomayor filed a concurring opinion.



Metrish v. Lancaster

Docket No. 12–547

2013 WL 2149793
On April 23, 1993, respondent Burt Lancaster, a former police officer with a long history of severe mental-health problems, shot and killed his girlfriend. At his 1994 jury trial in Michigan state court, Lancaster asserted a defense of diminished capacity. Under then-prevailing Michigan Court of Appeals precedent, the diminished-capacity defense permitted a legally sane defendant to present evidence of mental illness to negate the specific intent required to commit a particular crime. Apparently unpersuaded by Lancaster’s defense, the jury convicted him of first-degree murder and a related firearm offense. Lancaster, however, later obtained federal habeas relief from these convictions.


By the time of Lancaster’s retrial, the Michigan Supreme Court had rejected the diminished-capacity defense in its 2001 decision in Carpenter, 464 Mich. 223. Although the murder with which Lancaster was charged occurred several years before Carpenter was decided, the judge at his second trial applied Carpenter and therefore disallowed renewal of his diminished-capacity defense. Lancaster was again convicted. Affirming, the Michigan Court of Appeals rejected Lancaster’s argument that the trial court’s retroactive application of Carpenter violated due process. Lancaster reasserted his due process claim in a federal habeas petition. The District Court denied the petition, but the Sixth Circuit reversed. Concluding that the Michigan Supreme Court’s 2001 rejection of the diminished-capacity defense was unforeseeable in April 1993, when Lancaster killed his girlfriend, the Sixth Circuit held that, by rejecting Lancaster’s due process claim, the Michigan Court of Appeals had unreasonably applied clearly established federal law.


The Supreme Court reversed, holding that Lancaster is not entitled to federal habeas relief.


Under the Antiterrorism and Effective Death Penalty Act of 1996 (AEDPA), Lancaster may obtain federal habeas relief only if the Michigan Court of Appeals, in rejecting his due process claim, unreasonably applied clearly established Federal law, as determined by the Supreme Court. This standard is difficult to meet: Lancaster must show that the Michigan Court of Appeals’ decision rested on an error well understood and comprehended in existing law beyond any possibility for fairminded disagreement. Here, the Michigan Court of Appeals’ rejection of Lancaster’s due process claim does not represent an unreasonable application of the law as previously declared by the Supreme Court.


In light of this Court’s precedent and the history of Michigan’s diminished-capacity defense, the Michigan Court of Appeals’ decision applying Carpenter retroactively is not an unreasonable application of clearly established federal law. In Carpenter the Michigan Supreme Court rejected a diminished-capacity defense that the court reasonably found to have no home in a comprehensive, on-point statute enacted by the Michigan Legislature. The Supreme Court has never found a due process violation where a state supreme court, squarely addressing a particular issue for the first time, rejected a consistent line of lower court decisions based on the supreme court’s reasonable interpretation of the language of a controlling statute. A state supreme court decision of that order is not unexpected and indefensible by reference to existing law.


Justice Ginsburg delivered the opinion for a unanimous Court.