Congressional Court Watcher: Recent Appellate Decisions of Interest to Lawmakers (August 29–September 4, 2022)
Legal Sidebari
Congressional Court Watcher: Recent
Appellate Decisions of Interest to Lawmakers
(August 29–September 4, 2022)
September 6, 2022
The federal courts issue hundreds of decisions every week in cases involving diverse legal disputes. This
Sidebar series selects decisions from the past week that may be of particular interest to federal lawmakers,
focusing on orders and decisions of the Supreme Court and precedential decisions of the courts of appeals
for the thirteen federal circuits. Selected cases typically involve the interpretation or validity of federal
statutes and regulations, or constitutional issues relevant to Congress’s lawmaking and oversight
functions.
Some cases identified in this Sidebar, or the legal questions they address, are examined in other CRS
general distribution products. Members of Congress and congressional staff may click here to subscribe to
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Decisions of the Supreme Court
The Supreme Court did not issue any opinions or grants of certiorari this week. The Supreme Court’s next
term begins October 3, 2022.
Decisions of the U.S. Courts of Appeals
Topic headings marked with an asterisk (*) indicate cases in which the appellate court’s controlling
opinion recognizes a split among the federal appellate courts on a key legal issue resolved in the opinion,
contributing to a non-uniform application of the law among the circuits.
Bankruptcy: A divided Ninth Circuit held that a solvent company that declared
bankruptcy to proactively address potential liabilities must pay interest to its unimpaired
creditors at the contractual rate rather than a lower rate in the restructuring plan. The
bankruptcy court and the district court decided that Ninth Circuit precedent and the
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Bankruptcy Code limited the creditors to recover interest at a lower federal judgment
rate, 28 U.S.C. § 1961(a), pursuant to the plan. The Ninth Circuit reversed, holding that
the Bankruptcy Code did not abrogate the common law solvent debtor exception, and a
solvent debtor must honor its contractual obligations to its unimpaired creditors by
paying the previously agreed upon interest rates before the debtor’s shareholders could
reap a surplus from the bankruptcy estate (In re PG&E Corp.).
Bankruptcy: The Eleventh Circuit ruled that debt held by a produce buyer acting as a
trustee under the Perishable Agricultural Commodities Act (PACA) may be discharged in
bankruptcy proceedings. Although 11 U.S.C. § 523(a)(4) provides that discharge is
unavailable for a debtor who engages in “fraud ... while acting in a fiduciary capacity,”
the circuit court held that a PACA trustee’s duties are not sufficiently fiduciary for §
523(a)(4) to apply. The court noted that PACA does not require a trustee to segregate trust
assets and refrain from using those assets for a non-trust purpose, which the court
recognized as necessary for a trust to operate in a “fiduciary capacity” under § 523(a)(4)
(In re Forrest).
*Commerce: A divided Fifth Circuit held that a Texas law restricting the building,
owning, or operating of electricity transmission lines to owners of existing utility
facilities unconstitutionally discriminated against out-of-state businesses in violation of
the “dormant” Commerce Clause. An out-of-state company challenged the law, which
was enacted after it had been awarded the right to build new transmission lines in an area
of Texas that is part of an interstate grid. The court reversed the district court’s dismissals
of the company’s dormant Commerce Clause claims and instructed the lower court on
remand to consider whether the state had no other means to advance a legitimate local
purpose. In reaching this conclusion, the court added to a circuit split by joining the
Eleventh and First Circuits and holding that a law can discriminate against interstate
commerce even when most of the incumbent businesses that would benefit from the law
are headquartered outside of the state (NextEra Energy Cap. Holdings, Inc. v. Lake).
Commerce: The Eight Circuit held that a Minnesota law that regulates bullion
transactions violates the dormant Commerce Clause by having the practical effect on
commerce take place wholly outside the state. Here, the Minnesota law requires bullion
dealers to register with the state in order to engage in covered transactions and maintain a
surety bond with respect to those transactions. The court construed covered transactions
to cover any bullion transaction that involved a Minnesota resident, regardless of whether
those transactions took place entirely out of state. The court decided that the state’s
interest in requiring dealers to register and provide a surety bond before doing business in
Minnesota did not justify the law’s application to wholly out-of-state commerce
(Styczinski v. Arnold).
Consumer Protection: The Seventh Circuit upheld a Food and Drug Administration
(FDA) order denying approval to a tobacco company to market an e-cigarette product.
The Family Smoking Prevention and Tobacco Control Act requires manufacturers to
receive approval from FDA before marketing new tobacco products by showing that the
product would be appropriate for protecting the public health. Pursuant to regulations,
FDA determines whether a new product is appropriate for protecting the public health by
evaluating the risks and benefits to the population, including the likelihood that existing
tobacco users will quit and the likelihood that those who do not currently use tobacco
products will start. The Seventh Circuit held that FDA issued a reasoned marketing denial
order consistent with the Act. (Gripum, LLC v. FDA).
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Criminal Law & Procedure: The Second Circuit rejected a constitutional challenge to
the inclusion of marijuana in Schedule I of the Controlled Substances Act (CSA). The
CSA sets forth statutory criteria for classifying Schedule I substances, including requiring
a finding that a substance has no accepted medical use. Congress legislatively placed
marijuana in Schedule I when it enacted the CSA, subjecting the substance to the most
stringent CSA controls. The defendants in this case were charged under the CSA for
distributing marijuana, and they argued that the classification of marijuana under
Schedule I violates their Fifth Amendment due process and equal protection rights
because there is no rational basis for finding that marijuana has no accepted medical use.
The Second Circuit’s rational basis review did not consider whether Congress’s
placement of marijuana in Schedule I properly applied the statutory scheduling factors,
but instead asked whether there was any conceivable basis for Congress to include
marijuana in the schedule. The court rejected defendants’ arguments, holding that, even if
marijuana’s Schedule I classification might not survive an administrative petition for
rescheduling because it fails to meet the CSA’s enumerated criteria, there were numerous
public health and safety grounds that could conceivably support Congress’s decision to
place marijuana in the strictest schedule (United States v. Green).
*Criminal Law & Procedure: The Third Circuit held, when deciding whether a state
offense qualifies as a predicate offense under the Armed Career Criminal Act (ACCA),
that a court must look at the federal law in effect at the time of commission of the
defendant’s federal offense to determine whether a state crime qualifies as a “serious drug
offense” under 18 U.S.C. § 924(e)(1). A state crime may not qualify as a “serious drug
offense” and thus may not serve as an ACCA predicate if the state law governing a
particular offense criminalizes more conduct than its federal counterpart. Adding to a
circuit split, the Third Circuit rejected the position that the federal law in effect when the
defendant was sentenced is the relevant authority in determining whether a crime
qualifies as an ACCA predicate offense (United States v. Brown).
Criminal Law & Procedure: Sitting en banc, a divided Eighth Circuit held that
Missouri’s parole process for juvenile offenders sentenced to life imprisonment does not
violate the Eighth Amendment’s proscription on cruel and unusual punishment. In
response to the Supreme Court’s decision in Miller v. Alabama that the Constitution
forbids states from imposing life sentences without parole for juvenile offenders, the
Missouri legislature created a process for individuals who had been sentenced to
mandatory life imprisonment as juveniles to petition for parole. Rejecting Eighth and
Fourteenth Amendment challenges to Missouri’s parole process, the court held the
requirement that the state allow some meaningful opportunity for release for juvenile
offenders was satisfied, reversed the judgment of the district court, and invalidated an
injunction requiring Missouri to implement a remedial plan (Brown v. Precythe).
Criminal Law & Procedure: The Eighth Circuit reversed a criminal defendant’s
conviction for cyberstalking under 18 U.S.C. § 2261A(2)(B) for sending a series of
emails to a state political candidate. The court concluded that the statute’s mens rea
element, requiring that a defendant act with the intent to “harass” or “intimidate,” should
be construed narrowly so as not to apply to speech protected by the First Amendment.
The court determined that such acts would cover criminal harassment involving a true
threat where the speaker intends to place the victim in fear of bodily harm or death;
speech integral to proscribable criminal conduct; or other speech unprotected by the First
Amendment (e.g., defamatory speech or obscenity). The panel concluded that the
evidence did not demonstrate that the defendant’s conduct fell under any of these
categories (United States v. Sryniawski).
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Election Law: A divided Eighth Circuit reversed a lower court judgment that granted a
preliminary injunction against a provision of the Nebraska constitution setting forth
signature requirements for ballot initiatives. The state constitution requires specified
percentages of registered voters, distributed among two-fifths of the state’s counties, to
sign a ballot petition in order for a proposed statute or constitutional amendment to be
placed on the ballot. The majority held that the lower court erred in deciding that
plaintiffs were likely to succeed in their argument that this distribution requirement
violated the Equal Protection Clause by devaluing the signature of voters from more
populous counties relative to the signatures of less populous counties. The majority
determined that because the state law did not draw a suspect classification or restrict a
fundamental right, rational basis review applies. Here, the court concluded that the state
government identified a number of legitimate interests served by the signature
distribution requirement, including to weed out initiatives with a small but concerted
support base. The majority also found the balance of equities favored lifting the
injunction while litigation in the case continued (Eggers v. Evnen).
False Claims Act: The D.C. Circuit held that a company settling a claim brought by the
United States for defrauding the government under the False Claims Act (FCA) receives
a pro tanto, or dollar for dollar, credit against its liability equal to previous settlements by
joint tortfeasors. When a joint tortfeasor settles, the settlement generally counts as a credit
against a non-settling party’s potential liability. The FCA, however, does not provide a
settlement offset rule for calculating a settlement credit. Establishing a common law rule,
the D.C. Circuit rejected a proportionate share approach to calculating settlement credits
under the FCA and held that a company should receive a pro tanto credit instead (United
States v. Honeywell Int’l Inc.).
Immigration: The Ninth Circuit joined the Eighth Circuit in holding that a burden-
shifting framework used in immigration proceedings to determine an alien’s eligibility
for withholding of removal conflicted with governing statute. Under 8 U.S.C. §
1231(b)(3)(B)(iii), an alien is ineligible for withholding of removal to a country where his
or her life or freedom would be threatened if “there are serious reasons to believe that the
alien committed a serious nonpolitical crime outside the United States.” The Ninth
Circuit held that to apply this bar, there must be evidence supporting a finding of
probable cause that a covered crime was committed. The court further held that the Board
of Immigration Appeals violated this standard when it applied the burden-shifting
framework of 8 C.F.R. § 1240.8(d) to the petitioner’s claim for relief, under which the
government needed only proffer “some evidence” that an excludable crime was
committed, at which point the burden shifts and petitioner bears the burden of proving by
a preponderance of evidence that it did not (Gonzalez-Castillo v. Garland).
Labor & Employment: A divided Fourth Circuit upheld a district court’s ruling that it
lacked jurisdiction over a federal employee’s “mixed case” against his employer, in
which the employee alleged he was involuntarily transferred and wrongfully denied
promotion because of his whistleblowing activities and on account of his race and gender.
The majority held that because the plaintiff’s whistleblower claim was not directly
appealable to the Merit Systems Protection Board, and first needed to undergo an agency
review process, the plaintiff did not satisfy the statutory criteria set forth in provisions of
the Civil Service Reform Act to bundle his whistleblower and discrimination claims
together. Because the plaintiff was not entitled to this streamlined process, the majority
held that he would need to pursue his whistleblower and discrimination claims through
the separate processes available for each (Zachariasiewicz v. Dep’t of Justice).
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Labor & Employment: The Eighth Circuit, joining other circuits, held that the
Employee Retirement Income Security Act (ERISA) does not prevent an estate
representative from suing a recipient, who the deceased had intended to remove as a
beneficiary, for benefits from a retirement account after the distribution of funds has
taken place. The Eighth Circuit agreed with the district court that ERISA does not
preempt the post-distribution claims against the recipient, noting that every circuit to
address the question reached the same conclusion. The court also ruled in favor of the
representative on breach of contract and unjust enrichment claims and reversed the
district court’s grant of summary judgment on these grounds (Gelschus v. Hogen).
National Security: The D.C. Circuit held it lacked jurisdiction to hear a Guantanamo
detainee’s petition for a writ of mandamus requesting the court bar the use of statements
obtained by torture in the detainee’s prosecution before a military commission. Here, the
government had already withdrawn statements obtained through the use of torture from
consideration by the military commission, and had pledged to the D.C. Circuit it would
not use such statements in later proceedings. In light of the government’s actions, the
court dismissed the petition on mootness, ripeness, and standing grounds, and also
decided that the detainee failed to allege a claim for which mandamus could be granted
(In re Al-Nashiri).
Religion: A divided Ninth Circuit held that a school district violated the First
Amendment when it selectively enforced its non-discrimination policy by revoking a
religious group’s status as an official student club. The group required its student leaders
to take a pledge stating, among other things, that “marriage is exclusively the union of
one man and one woman.” The school district decided that the requirement violated its
policies that district programs be free from discrimination based on sexual orientation,
and stripped the club of its official approval and the accompanying organizational
benefits. The court held that the school district violated the Free Exercise Clause when it
enforced its anti-discrimination policies against the religious group but not against other
student groups with facially discriminatory membership criteria. The court reversed the
lower court’s denial of a preliminary injunction to reinstate the club’s approval status
(Fellowship of Christian Athletes v. San Jose Unified Sch. Dist. Bd. of Educ.).
Torts: The Ninth Circuit held that the district court erred in dismissing a federal
employee plaintiff’s malicious prosecution claim against the United States and individual
officials under the Federal Tort Claims Act. The circuit court held that the plaintiffs’
claims did not fall under the umbrella of 28 U.S.C. § 2680(a), which provides that the
United States does not waive its sovereign immunity for claims related to discretionary
functions performed by federal agencies and employees. Courts have recognized that to
fall under this exception, an action must be both discretionary and grounded in social,
economic, or political policy. Applying this framework, the Ninth Circuit held that the
discretionary function exception does not apply where, as here, the plaintiff alleges that
an investigative or law enforcement official fabricated evidence, tampered with
witnesses, lied under oath, or offered false testimony (Myles v. United States).
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Author Information
Michael John Garcia
Jimmy Balser
Deputy Assistant Director/ALD
Legislative Attorney
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