When the Constitution was written and ratified there was no free-floating principle of sovereign immunity, but now the Supreme Court has recognized one.
Now that the Supreme Court is back in session, do you feel better? I do, a little. The docket for the 2015-2016 Term so far contains about 40 cases half the expected load for the Term. There is the usual smattering of Eighth and Fourteenth Amendment cases, which cannot end well. But there is also a gratifying number of cases (13 by my count) that (1) are about something real (money) and (2) pose difficult FedCourts-ish questions. Those cases may go right or wrong. But at least the justices will behave like lawyers, not oracles. Herewith three favorites, along with intrepid predictions.
Bank Markazi v. Peterson is the most interesting of three pending cases involving foreign (commercial) relations. It concerns nearly $2 billion in foreign currency reserves held in Europe by the Central Bank of Iran. The plaintiffs hold default judgments against Iran and tried to seize the assets. Under ordinary legal principles (the Foreign Sovereign Immunities Act, as well as various provisions of New York’s Uniform Commercial Code), the assets can’t be attached. The plaintiffs’ lawyers, however, persuaded Congress to enact the Iran Threat Reduction and Syria Human Rights Act of 2012 (pronounced “I-Thrash-Ra”) and my, was that a success.
Actually, it was. The statute’s sole purpose was to dictate a result in this one case: by its terms, it applies only to “the financial assets that are identified in and the subject of proceedings in the United States District Court for the Southern District of New York in Peterson et al. v. Islamic Republic of Iran et al., Case No. 10 Civ. 4518 (BSJ) (GWG).” The statute provides that the assets “shall be subject to execution” upon only two undisputed findings: that Bank Markazi has a beneficial interest in the assets, and that no one else does. The statute preempts any contrary provision of New York law, and it specifically provides that is applicable to no other case.
United States v. Klein (1872) holds that Congress may not prescribe a rule of decision to the courts. That seems clear, and fundamental to the separation of powers. However, it’s actually amazing how narrow the principle is: Congress may change the substantive law for pending cases. (They’ll be decided under the new law.) The Court distinguished Klein in Robertson v. Seattle Audubon Society, (1992), where Congress had enacted a statute to resolve—i.e., ding—two environmental suits by deeming certain forest management practices to satisfy applicable requirements.
What if, as here, the statute applies to, and changes substantive law for, only a single case? My own view is that if Klein means anything at all, it must govern here. Be that as it may, I’m looking forward to Justice Scalia’s opinion in this case. One of his best, most emphatic separation of powers opinions is Plaut v. Spendthrift Farms (1995), likewise involving the question what Congress can and can’t do to courts (although that’s about finality rather than directed outcomes).
Prediction: Justice Scalia will write in Bank Merkazi for the Court, or in dissent. Either way, it’ll be really good.
Spokeo v. Robins involves another Justice Scalia stand-by: constitutional standing. The Fair Credit Reporting Act (FCRA) imposes various requirements on certain firms that regularly compile and disseminate personal information about individual consumers. The FCRA provides those consumers with a cause of action to recover actual or statutory damages for violations of the Act. The plaintiff here (Mr. Robins) brought a putative class action, saying that Spokeo maintained and disseminated untruthful information about him. (Their data said the man was married and gainfully employed. Wrong.) He complains about trauma and the like but the real beef is Spokeo’s (alleged) bare violation of some statutory requirements. Can Robins sue? Sure he can (he already has); but do federal courts have jurisdiction?
Every 1-L can regurgitate the constitutional (Article III) requirements: there must be an “injury in fact” that’s caused by the defendant’s conduct and redressable by a decision in the plaintiff’s favor. If the statutory violation itself counts as an “injury in fact,” causation and redressability drop out and anybody within the statutorily identified class (“consumers,” “concerned citizens”) have constitutional standing.
That can’t be right, you’d think; and by my lights it isn’t. (Suppose Congress authorized all of us to complain about the IRS’s failure to audit our neighbors’ tax returns: constitutional? Cool?) But the case law makes it hard to explain why that is, and why it makes sense. While the Court has insisted that an “injury in fact” is an “irreducible (constitutional) minimum,” it has also said that Congress can create statutory “interests, the invasion of which constitutes standing.” So when Congress authorizes “any (concerned) citizen” to sue over violations of, say, the Clean Water Act, what does the Court do? Answer, it requires the actual plaintiffs—environmental organizations—to identify a member who occasionally paddles along an emitting power plant and claims to be really upset. So the “injury in fact” test separates professional membership organizations from you and me, unless we paddle hard and often. But what’s the point, separation-of-powers-wise?
It’s easy enough to decide this case by saying, there’s got to be some injury above and beyond the statutory violation itself. Maybe, though, some justice will have the guts to acknowledge and explain that an injury in fact is a lousy way to determine a legal entitlement, and federal jurisdiction, and separation-of-powers boundaries. My own view is that Congress actually can’t create “interests” unless they resemble a common law right, and the “right” to acquire the nation’s waterways through strenuous paddling isn’t among them. But what do I know?
Prediction: this case will be decided by Justice Kennedy alone. Whereupon we’ll know less about constitutional standing than we did before.
Franchise Tax Board v. Hyatt is a return appearance. California entrepreneur has had it with California and absconds to Nevada. The Sunshine State’s FTB trolls after him, saying that earnings he generated in Nevada, on patents submitted while still in California, are subject to California income tax. Hyatt sues them in Nevada courts on various state law claims, and the Nevada Supreme Court says: go right ahead. However, the FTB would be immune against those claims in its own courts, and it would have sovereign immunity even against federal claims. FTB seeks and gets cert. Surely, I predicted then, the Court would reverse. Nope. While the Full Faith and Credit Clause requires states to give, well, full faith and credit to sister-states’ law, the Court pronounced, “We decline to embark on the constitutional course.” (I’ve long thought that verbatim quote would make a fine replacement for “Equal Justice Under the Law” on the Supreme Court’s frieze.) The case is back for a number of reasons; inter alia, the FTB and its numerous amici now argue that Nevada v. Hall (1979), the precedent on which the earlier ruling purported to rest, should be overruled.
Here as in Bank Merkazi, I’m with the bad guys. I actually know Gil Hyatt: he’s a thoroughly good guy who has created many things of value. The FTB, on the other hand, went out to “get that Jew bastard” (record quote). Let’s not let them have any centrifuges, shall we? And if we could limit the FTB’s tax authority to the boundaries of a state that’s already too large for its own good or that of the rest of the country, that would be better yet.
Prediction: the Supremes will walk back the earlier decision. That’ll be easiest for justices who weren’t part of that travesty (the Chief, and Justice Alito). Look for one of them to write.
Highly technical cases, with huge implications: that may turn out to be the theme of this Term.