Volume 30, Issue 10
This Report summarizes opinions issued on May 11, 2023 (Part I).
The Supreme Court Report is published biweekly during the U.S. Supreme Court Term by the NAAG Center for Supreme Court Advocacy.
Part I: Opinions
National Pork Producers Council v. Ross, 21-468. The Court affirmed a Ninth Circuit ruling that challengers to California’s Proposition 12 failed to state a claim under the dormant Commerce Clause. In 2018, California voters adopted Proposition 12. Among other things, the proposition forbids the sale in the state of pork that was produced by pigs that had been “confined in a cruel manner.” Confinement is cruel “if it prevents a pig from lying down, standing up, fully extending [its] limbs, or turning around freely.” Petitioners, organizations of members who raise and process pigs, sued, alleging that Proposition 12 violated the dormant Commerce Clause by impermissibly burdening interstate commerce. According to their complaint, complying with the proposition would increase pork production costs by 9.2% and require substantial capital investments. Although both in- and out-of-state producers would have to comply, California imports most of its pork, so the initial cost would largely fall on out-of-state firms. The district court dismissed the case for failure to state a claim, and the Ninth Circuit affirmed. By a 5-4 vote, the Court affirmed.
After surveying the origins of the dormant Commerce Clause, the Court concluded that prohibiting discrimination against out-of-state actors’ forms “the core of this Court’s dormant Commerce Clause cases.” This put petitioners in a “tough spot” because they did not claim that Proposition 12 discriminated against out-of-state producers. Instead, they “invoke[d] what they call ‘extraterritoriality doctrine,’” arguing that prior cases established “an almost per se rule” that states could not pass laws that had the “practical effect of controlling commerce outside the State.” The majority rejected this reading of its precedents―Healy v. Beer Institute, 491 U.S. 324 (1989); Brown-Forman Distillers Corp. v. New York State Liquor Authority, 476 U.S. 573 (1986); and Baldwin v. G.A.F. Seelig, Inc., 294 U.S. 511 (1935)―finding that “each typifies the familiar concern with preventing purposeful discrimination against out-of-state economic interests.” The Court added that many traditional exercises of state police power, from income tax policy to inspection laws, have a “considerable influence on commerce outside their borders.” (Quotations marks omitted.) Thus, “Petitioners’ ‘almost per se’ rule against laws that have the ‘practical effect’ of ‘controlling’ extraterritorial commerce would cast a shadow over laws long understood to represent valid exercises of the States’ constitutionally reserved powers. It would provide neither courts nor litigants with meaningful guidance in how to resolve disputes over them. Instead, it would invite endless litigation and inconsistent results.” The Court added, though, that it did “not mean to trivialize the role territory and sovereign boundaries play in our federal system.”
The Court next rejected petitioners’ claim that, under Pike v. Bruce Church, Inc., 397 U.S. 137 (1970), Proposition 12 substantially burdened interstate commerce and that its costs were “clearly excessive in relation to the putative local benefits.” In the Court’s view, Pike did not depart from the dormant Commerce Clause’s focus on preventing discrimination; instead, it “serves as an important reminder that a law’s practical effects may also disclose the presence of a discriminatory purpose.” Because petitioners did not argue that the practical effects revealed an intent to discriminate against out-of-state producers, their claim fell “well outside Pike’s heartland.” The Court left open the possibility that a plaintiff could advance a Pike claim against a law that was “genuinely nondiscriminatory,” perhaps when it affected the instrumentalities of interstate transportation. But that was not at issue in this case because “[p]igs are not trucks or trains.”
Although five justices believed that petitioners’ claim failed under Pike, the remainder of the opinion fractured into several pluralities and partial concurrences. Justices Gorsuch, Thomas, and Barrett took exception to using Pike to strike down state laws regulating consumer goods “based on nothing more that [judges’] own assessment of the relevant law’s ‘costs’ and ‘benefits.’” They believed that the Commerce Clause did not authorize such an inquiry and that judges are ill-equipped to do so, especially when the proposed benefits (improving animal welfare) are so different from the alleged harms (increased costs for producers and consumers) that they are incommensurable. As Justice Kavanaugh noted in his partial concurrence and dissent, the reasoning of these justices would “essentially overrule the Pike balancing test.”
In a separate section of the lead opinion, Justices Gorsuch, Thomas, Sotomayor, and Kagan concluded that petitioners failed to make the threshold showing under Pike that Proposition 12 substantially burdened interstate commerce. Drawing on Exxon Corp. v. Governor of Maryland, 437 U.S. 117 (1978), these justices viewed Proposition 12 not as burdening out-of-state businesses, but as affecting certain business practices. That is, “the pleadings allow for the [] possibility [] that California market share previously enjoyed by one group of profit-seeking, out-of-state businesses (farmers who stringently confine pigs and processors who decline to segregate their products) will be replaced by another (those who raise and trace Proposition 12-compliant pork).” Yet the dormant Commerce Clause “does not protect a particular structure or metho[d] of operation.” Further, noted these justices, the complaint conceded that producers would pass on at least “some” of their costs to consumers, which would mainly be borne by the Californians who voted for Proposition 12. In short, although the complaint alleged harm to a method of operation, “[a] substantial harm to interstate commerce remains nothing more than a speculative possibility.”
Justices Sotomayor and Kagan concurred in part. In light of the “fractured” nature of the decision, they wrote separately to emphasize that petitioners failed to allege a substantial burden on interstate commerce under Pike and disavowed any “fundamental reworking of that doctrine.” They noted that a plaintiff could allege a prima facie claim under Pike even if the challenged law did not discriminate against interstate commerce or affect the instrumentalities of commerce. They also pointed out that a majority of the Court had not accepted the claim that judges are incapable of comparing the harms and benefits of legislation.
Justice Barrett concurred in part, stating that courts are not equipped to weigh the benefits of Proposition 12 against its burdens because they are incommensurable; questioning whether it was more important to protect pigs or to minimize economic costs would require judges to second-guess legislative policy judgments. She believed, however, that petitioners satisfied their initial burden to plausibly allege a substantial burden on interstate commerce under Pike.
Chief Justice Roberts, joined by Justices Alito, Kavanaugh, and Jackson, concurred in part and dissented in part. Although these justices agreed with the majority’s rejection of petitioners’ extraterritoriality theory, they believed that petitioners plausibly alleged a substantial burden on interstate commerce. They would therefore have remanded for the Ninth Circuit to determine whether the pleadings satisfied Pike’s balancing test. These justices (hereafter the dissenting justices) noted that a majority of the Court agreed that Pike applies to more cases than just those involving interstate discrimination or regulation of the instrumentalities of commerce. And they sought to justify that conclusion, finding that although it may be difficult to balance some costs and benefits, in other areas courts have been able to do so.
The dissenting justices then argued that petitioners alleged a substantial burden on interstate commerce. Below, the Ninth Circuit held that petitioners’ claim failed because they merely alleged increased costs of regulatory compliance. In the dissent’s view, however, the complaint plausibly alleged that Proposition 12 will have consequential harms beyond simple compliance costs. Because the interstate pork market is so interconnected, petitioners alleged that “all or most” producers will have to comply, even if they do not sell in California. Petitioners also alleged that doing so would disrupt industry practice and threaten animal welfare. The dissenting justices believed that these broader impacts on the national pork market and production process should have been enough at the 12(b)(6) stage to warrant further inquiry under Pike.
Justice Kavanaugh wrote a separate concurrence in part and dissent in part. He emphasized that a majority of the Court retained Pike. He agreed with the other dissenters that petitioners plausibly alleged a substantial burden on interstate commerce. In his view, California “is forcing massive changes to pig-farming and pork-production practices throughout the United States,” and has “aggressively propounded a ‘California knows best’ economic philosophy.” He forecast that states could use Proposition 21 as a model to regulate other types of economic activity in other states. Stated Justice Kavanaugh: “As the amici brief of 26 States points out, what if a state law prohibits the sale of fruit picked by noncitizens who are unlawfully in the country? Brief for Indiana et al. as Amici Curiae 33. What if a state law prohibits the sale of goods produced by workers paid less than $20 per hour? Or as those States suggest, what if a state law prohibits ‘the retail sale of goods from producers that do not pay for employees’ birth control or abortions’ (or alternatively, that do pay for employees’ birth control or abortions)?” Justice Kavanaugh highlighted other constitutional provisions under which future challengers to similar legislation might bring their claims: the Import-Export Clause, the Privileges and Immunities Clause, and the Full Faith and Credit Clause.
Financial Oversight and Management Board for Puerto Rico v. Centro de Periodismo Investigativo, Inc., 22-96. In an 8-1 decision, the Court held that Congress did not abrogate the sovereign immunity of the Financial Oversight and Management Board for Puerto Rico. In 2016, Congress enacted the Puerto Rico Oversight, Management, and Economic Stability Act (PROMESA) to address the commonwealth’s fiscal crisis. PROMESA, among other measures, created a Financial Oversight and Management Board within the commonwealth’s government. The Act incorporated portions of the Bankruptcy Code, which expressly abrogates territorial sovereign immunity, but only for claims arising under the Code. Other portions of PROMESA contemplated other types of suits against the Board without mentioning sovereign immunity. For example, the Act provides that any suit against the Board must be brought in the District of Puerto Rico and shields the Board and its members from certain types of liability. Respondent Centro de Periodismo Investigativo (CPI), a news organization, requested documents from the Board and sued it under the Puerto Rican Constitution when it did not comply. The Board moved to dismiss, arguing that it was immune from suit as an arm of the Puerto Rican government. The district court ruled that Congress abrogated the Board’s immunity with PROMESA, and a split panel of the First Circuit affirmed. In an opinion by Justice Kagan, the Court reversed and remanded.
The Court assumed without deciding that (1) Puerto Rico has sovereign immunity, and (2) its immunity extends to the Board. So the Court considered only whether PROMESA abrogated the Board’s assumed immunity. To abrogate sovereign immunity, Congress must make its intent to do so “unmistakably clear in the language of the statute.” The Court has found such intent only in two types of statutes. In the first type, Congress expressly abrogates immunity. In the other, Congress creates a cause of action and “authorizes suits against a government on that claim.” The Court ruled that PROMESA does not fit in either category.
Besides the incorporated provision of the Bankruptcy Code, PROMESA did not expressly abrogate the Board’s immunity and did not create a cause of action against the Board. And, found the Court, the portions of PROMESA that contemplate suits against the Board could serve a meaningful purpose without being read to abrogate immunity. For example, the jurisdictional provision would require plaintiffs to sue the Board in the District of Puerto Rico under statutes that had abrogated sovereign immunity, like Title VII of the Civil Rights Act of 1964. Because “nothing in PROMESA makes Congress’ intent to abrogate the Board’s sovereign immunity unmistakably clear,” the Court reversed the First Circuit.
Justice Thomas dissented. He would have held that the Board did not have sovereign immunity in the first place. He believed that CPI had adequately preserved its claim that the Board did not have any immunity to begin with and that resolving the issue was a “logical antecedent question” to the one presented in the petition. Below, Puerto Rico argued that it had “state sovereign immunity.” Justice Thomas believed that this claim was wrong because Puerto Rico is not a state. Because the Board failed to carry its burden to demonstrate that it was immune from suit, he would have affirmed the First Circuit.
Percoco v. United States, 21-1158. The Court addressed “whether a private citizen with influence over government decision-making can be convicted for wire fraud on the theory that he or she deprived the public of its ‘intangible right of honest services.’ 18 U.S.C. §§1343, 1346.” Without dissent, the Court reversed the conviction of such a private citizen where the jury instructions required the jury to determine whether he had a “special relationship” with the government and had “dominated and controlled” government business. Petitioner Joseph Percoco was a “longtime political associate of former New York Governor Andrew Cuomo.” For most of the period between 2011 and 2016, he held a formal position, Executive Deputy Secretary, in the Cuomo administration. For much of 2014, however, he did not hold a state government position because he was managing the governor’s reelection campaign. During this period, a real estate developer paid petitioner to intervene on its behalf in a state regulatory matter. Although petitioner was officially a private citizen (until he rejoined the administration three days later), the state agency complied with his request and gave the developer what it wanted. The federal government charged petitioner with, among other crimes, conspiring to commit honest-services wire fraud.
The district court instructed the jury that, to convict petitioner on the honest-services fraud counts, it had to find that he had a duty to provide honest services to the public when he was not serving as a public official. To find that he had such a duty, the jury had to conclude that (1) petitioner “dominated and controlled any governmental business,” and (2) “people working in the government actually relied on him because of a special relationship he had with the government.” The jury convicted petitioner of honest-services fraud. The Second Circuit affirmed, holding that the two elements of the jury instruction accurately reflected circuit precedent, United States v. Margiotta, 688 F.2d 108 (1982). In an opinion by Justice Alito, the Court reversed and remanded.
The Court began with a history of honest-services fraud. The federal wire fraud statute, 18 U.S.C. §1343, criminalizes the use of certain instrumentalities of interstate commerce to, among other things, defraud a victim of money or property. Before 1987, the federal circuit courts agreed that §1343 also encompassed “honest-services” fraud. Under that theory, public employees who engaged in certain dishonest conduct (accepting bribes, kickbacks, etc.) could be convicted of fraud even if their employer did not suffer a quantifiable monetary loss under the view that their actions deprived the public of the right to receive honest services. In Margiotta, the Second Circuit broadened this theory to apply to individuals who did not hold public office but nonetheless exercised a substantial control over public employees. Five years later, in McNally v. United States, 483 U.S. 350 (1987), the Court held that the honest-services theory was not actionable under the related mail fraud statute. Congress quickly passed a new law to recognize it as both mail and wire fraud. In Skilling v. United States, 561 U.S. 358 (2010), the Court rejected a void-for-vagueness challenge to the resuscitated honest-services theory. It believed that Congress had preserved the “core” of pre-1987 honest-services fraud jurisprudence (bribes and kickbacks), but rejected the idea that it codified “all intangible rights of honest services whatever they might be thought to be.”
A majority of seven justices rejected petitioner’s argument that a private individual can never commit honest-services fraud. The Court stated that a private individual may under certain circumstances become an agent of a government entity or exercise delegated powers without being employed. The same majority held, however, that the two-element jury instructions based on Margiotta were too vague. Finding that “Skilling’s approach informs our decision in this case,” the Court ruled that the Margiotta standard swept too broadly and unclearly. In particular, “Margiotta acknowledged that ‘the public has no right to disinterested service’ from lobbyists and political party officials, but the rule it developed—which was embodied in the jury instructions given in this case—implies that the public does hold such a right whenever such persons’ clout exceeds some ill-defined threshold.” Because they lacked sufficient guidance as to when the public’s right to honest services attaches, the instructions were improperly vague.
A majority of six justices (the same majority as above, minus Justice Jackson) rejected the government’s claims that the vague instructions were harmless. Instead of defending the instructions, the government claimed that a private individual owes a duty of honest services “(1) when the person has been selected to work for the government in the future and (2) when the person exercises the functions of a government position with the acquiescence of relevant government personnel.” (Quotation marks omitted.) Although the Court conceded “some merit” in the government’s first argument, it “is far from clear that the erroneous jury instructions would be harmless” in this case because, to convict, the jury did not have to find that petitioner had been so selected. The Court rejected the government’s second argument as essentially restating the flawed Margiotta standard, and also noted that the jury did not have to find that government personnel “acquiesce[d]” in petitioner’s exercise of a government function.
Justices Gorsuch and Thomas concurred in the judgment. They agreed that the jury instructions were unsatisfactory, but would have gone further and rejected the whole theory of honest-services fraud as too vague until Congress provides more guidance. They noted that vagueness concerns had led the Court to strike the theory down in McNally. Although Congress quickly undid that decision by expressly recognizing an honest-services theory, it did not provide a statutory definition or further guidance. Stated the dissent, although the majority had clarified when “a duty of honest services does not arise . . . we still have no idea when it does.”
Ciminelli v. United States, 21-1170. The Court unanimously held that the federal wire fraud statute does not encompass a “right to control” theory of liability, under which a defendant is guilty of wire fraud if he schemes to deprive the victim of “potentially valuable economic information” “necessary to make discretionary economic decisions.” Former Governor of New York Andrew Cuomo launched the Buffalo Billion Initiative, which aimed to invest $1 billion in upstate development projects. A nonprofit, Fort Schuyler Management Corporation, administered the program. Petitioner Louis Ciminelli colluded with one of the corporation’s board members and a lobbyist close to the Cuomo administration to steer contracts to his construction company. The government indicted and convicted petitioner of, among other crimes, wire fraud and conspiracy to commit wire fraud. It proceeded under a “right to control” theory by alleging that petitioner deprived Fort Schuyler of “potentially valuable economic information necessary to make discretionary economic decisions.” The Second Circuit affirmed, holding that “rigging the RFPs” to favor petitioner’s company was actionable under its right-to-control precedents. In an opinion by Justice Thomas, the Court reversed and remanded.
The Court began with the text of the wire fraud statute, 18 U.S.C. §1343, which requires proof that the defendant fraudulently deprived the victim of “money or property.” The Court ruled that this language, along with the concern that an expansive reading would give the federal government the authority to “enforce (its view of) integrity in broad swaths of state and local policymaking,” limits the wire fraud statute to “protec[t] property rights only.” Despite this, lower courts had allowed the government to apply federal fraud statutes to intangible interests, such as the public’s right to “honest services” and the right to privacy. In McNally v. United States, 483 U.S. 350 (1987), the Court held that the related mail fraud statute protects only tangible property rights. Congress responded by codifying only the “honest services” theory of intangible property for both the wire and mail fraud statutes. The Court concluded here that “[t]he right-to-control theory cannot be squared with the text of the federal fraud statutes, which are ‘limited in scope to the protection of property rights.’ McNally, 483 U.S., at 360.”
The Court explained that the right to intelligently control property “is not an interest that had long been recognized as property”―indeed, the Second Circuit recognized it only in 1991. Further, reasoned the Court, that Congress chose to revive only one theory of federal fraud liability based on intangible interests supported the inference that it did not intend to resurrect others. Even the government acknowledged that harming a victim’s right to intelligently control property, “without more, . . . would risk expanding the federal fraud statutes beyond property fraud as defined at common law and as Congress would have understood it.” Finally, the Court noted that the theory could encompass “almost any deceptive act,” which would “make a federal crime of an almost limitless variety of deceptive actions traditionally left to state contract and tort law.” The Court summarily rejected the government’s claim that it could affirm petitioner’s conviction on alternate grounds, stating that doing so would require it “to assume not only the function of a court of first view, but also of a jury.”
Justice Alito concurred. He joined the Court’s opinion on the understanding that it did not address what lower courts could do on remand, holding open the possibility that the government could retry petitioner under a traditional property fraud theory.
Santos-Zacaria v. Garland, 21-1436. Under 8 U.S.C. §1252(d)(1), a noncitizen who seeks to challenge an order of removal in court must first exhaust certain administrative remedies. The Court held that (1) the administrative exhaustion requirement of §1252(d)(1) is not a jurisdictional bar, and (2) a noncitizen does not have to pursue discretionary administrative relief from the Board of Immigration Appeals, including reconsideration, in order to exhaust her remedies. Petitioner, a transgender woman, fled Guatemala because she suffered “physical harm and faced death threats.” She entered the United States in 2008, but immigration authorities caught and removed her. They apprehended her again when she returned to the United States in 2018. She sought protection against removal, claiming that she was likely to be persecuted in Guatemala. An immigration law judge denied her claim, and she sought review in the Board of Immigration Appeals. The Board agreed that she had been persecuted in Guatemala, but, reaching an issue the judge had not, found that other evidence rebutted the presumption that she would be persecuted in the future. She appealed that decision to the Fifth Circuit. A split panel dismissed her appeal sua sponte, finding that she had not exhausted her administrative remedies before appealing as required by §1252(d)(1) because she had not asked the Board to reconsider its decision. In an opinion by Justice Jackson, the Court vacated in part and remanded.
The Court observed that whether §1252(d)(1)’s requirement that a “court may review a final order of removal only if . . . the alien has exhausted all administrative remedies available to the alien as of right” is a jurisdictional bar or claim-processing rule has important consequences. A claim-processing rule is subject to waiver, estoppel, and (as was the case here) forfeiture, while a jurisdictional bar is not and may instead be raised by a court on its own at any point in proceedings. The Court then explained that, under the “clear-statement principle,” the Court will treat a rule as jurisdictional only if Congress “clearly states that it is.” The Court held that §1252(d)(1) failed the clear-statement principle for two reasons. First, it imposes an exhaustion requirement, “which is a quintessential claim-processing rule.” Second, Congress did not use the “plainly jurisdictional” language that it included in other provisions “that were enacted at the same time—and even in the same section—as §1252(d)(1).”
The Court rejected the government’s arguments to the contrary. Although §1252(d)(1) limits the circumstances under which a court may hear a case, this is not a unique property of jurisdictional bars, and the statute focuses on a claimant’s procedural obligations. And although a prior version of the statute used language that seemed jurisdictional, it is unclear whether it actually had such effect and Congress used different language when it enacted the current version. Finally, although §1252 gives federal courts jurisdiction to hear removal appeals, it does not follow that each of its components is a jurisdictional requirement.
The Court also held that petitioner did not have to ask the Board to reconsider its order to exhaust her administrative remedies. As noted, §1252 authorizes a court to “review a final order of removal only if . . . the alien has exhausted all administrative remedies available to the alien as of right.” (Emphasis added.) But, found the Court, reconsideration is a discretionary remedy, not one “available to the alien as of right.” The government argued that, although granting reconsideration is discretionary, a noncitizen has the right to request it. The Court rejected this reading as “unnatural” and because it would read “as of right” out of the statute. It also rejected the government’s proposed distinction between remedies made discretionary by statute and those, like reconsideration, made discretionary by regulation. The Court also noted that the government’s interpretation would require noncitizens to file for reconsideration in every case, which would not only “flood the Board with reconsideration motions that noncitizens otherwise would not file,” but would “flood the courts with pointless premature petitions . . . that the statutory scheme would provide for noncitizens to file, on the one hand, yet deem unexhausted, on the other.” Finally, it rejected the government’s fallback position that only those aliens who raise an issue not previously presented to the agency must file a motion to reconsider to exhaust. The Court concluded that Congress had not adopted such a distinction, it would not cure the “flood” problem, and it would be difficult to administer in practice.
Justice Alito, joined by Justice Thomas, concurred in the judgment. They would have held only that, “under the circumstances presented here,” petitioner did not have to request reconsideration to exhaust because that is a discretionary remedy. They would not have reached the question of whether §1252(d)(1) is jurisdictional.
NAAG Supreme Court Advocacy Center Staff
- Dan Schweitzer, Director and Chief Counsel, (202) 326-6010
- Todd Grabarsky, Supreme Court Fellow
- Van Snow, Supreme Court Fellow
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