October 16, 2021

Volume XI, Number 289

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October 14, 2021

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Supreme Court Update: TransUnion v. Ramirez (No. 20-297), PennEast Pipeline Co. v. New Jersey (No. 19-1039)

We trust you enjoyed a festive Fourth, but we all know summer can’t truly begin until the Supreme Court term comes to an end. The Nine closed up shop on Friday after their “clean-up conference,” granting cert in 10 new cases, including Carson v. Makin (No. 20-1088), a sort of sequel to Espinoza v. Montana Department of Revenue (2020), which asks whether it violates the First Amendment’s religion clauses or the Equal Protection Clause for a state to prohibit students participating in an otherwise generally available student-aid program from using their aid to attend schools providing religious instruction. Just a guess: Yes. That said, the Court declined another opportunity to bolster religious rights, denying cert in Arlene’s Flowers Inc. v. Washington (No. 19-333), which would have required the Court to decide the question it punted on in Masterpiece Cakeshop v. Colorado Civil Rights Commission (2018): whether a state public-accommodations law violates an artist’s First Amendment rights when it requires her to create custom art celebrating a same-sex wedding.

But enough about October Term 2021’s calendar. Let’s finish out OT20, with summaries of the two decisions you’ve been waiting for: TransUnion v. Ramirez (No. 20-297) and PennEast Pipeline Co. v. New Jersey (No. 19-1039), two decisions that broke 5-4 with slightly unusual combinations of Justices.

“No concrete harm, no standing.” For the majority in TransUnion v. Ramirez (No. 20-297), it was that simple. The case involved a key class action issue: whether members of a class who may have been subjected to the same violation of law but who suffered no concrete injury could properly take part in a class-action lawsuit. The Ninth Circuit held that they could, but, in a 5-4 decision penned by Justice Kavanaugh, the Court disagreed.

In the wake of the September 11th attacks, TransUnion developed a new and more expensive type of credit report that flagged whether an individual’s name matched a name on a list of “Specially Designated Nationals,” prepared by the U.S. Department of Treasury Department’s Office of Foreign Assets Control (the OFAC list). The OFAC list included terrorists, drug-traffickers, and other serious criminals. In general, U.S. businesses are prohibited from doing business with those on the list, which obviously would create issues for anyone falsely designated as being on the list. TransUnion’s product was not terribly sophisticated, as it merely matched first and last names and did not look at other data (such as birthdate) that may have revealed that the person was not, in fact, a match. Unsurprisingly, this blunt approach led to many law-abiding individuals being labeled as a “potential match” to a name on the OFAC list. Ramirez was one such individual. When he went to purchase a car, the dealer declined, indicated that his credit report showed he was on the “terrorist list.” After requesting his credit report, he received the report in the mail and a summary of rights . . . but the credit report he got did not include the OFAC information. He then received a second mailing that indicated he was on the OFAC list and directing him to the Treasury Department if he wished to address this, but that second mailing did not indicate that the OFAC information was on his credit report or give him a summary of rights as required by the Fair Credit Reporting Act (FCRA).

Ramirez sued TransUnion on behalf of himself and a putative class of 8,185 individuals. He alleged that TransUnion violated the FCRA by (1) failing to follow reasonable procedures to ensure the maximum accuracy of the information in his credit file; (2) failing to provide his complete credit file by withholding the true version of his credit report; and (3) failing to provide the required notice of rights when it sent him the second “courtesy letter” with the OFAC information. The class included all individuals who received the same mailings as Ramirez during a specified time period. However, during that time period, TransUnion had only shared the inaccurate credit reports of 1,853 members of this class. Nevertheless, the class was certified, the case went to trial (with only Ramirez testifying as a class member), and the jury found in favor of the class on each claim, awarding an equal amount in damages to each class member. The district court affirmed, though it reduced the punitive damage award, thus reducing the total judgment to approximately $40 million. On appeal, TransUnion argued that those class members whose credit reports were not shared lacked standing to pursue the “reasonable procedures” claim and that no one, aside from Ramirez, had demonstrated any harm from the alleged notice and disclosure obligations. A divided Ninth Circuit rejected these arguments.

A five Justice majority (the Chief and Justices Alito, Barrett, Gorsuch, and Kavanaugh), however, sided with TransUnion. Expanding on its holding in Spokeo, Inc. v. Robbins (2016), the Court made clear that a statutory violation and an injury sufficient to confer Article III standing are not one and the same. Congress may not “simply enact an injury into existence.” Thus, in order to access the federal courts, a plaintiff must allege a “concrete” injury to himself. Applying that rule here, the Court concluded that a class member whose faulty credit information was not shared demonstrated no such injury. The Court also rejected the argument that risk of future harm was sufficient, explaining that this may be adequate to obtain injunctive relief, but not damages. (The Court distinguished situations where the risk of future harm might cause independent concrete injury—such as in a medical monitoring case.) On the other hand the Court easily concluded that the 1,853 individuals whose reports were shared with third parties could sue without establishing specific damage flowing from that sharing. The Court analogized the situation to defamation, where reputational damage is generally presumed. Given the link between these individuals’ claims and a type of harm recognized at common law, the Court concluded this was sufficient to establish standing. With respect to the claims regarding the format of the notices received by the class, however, the Court held no one, besides Ramirez, had demonstrated any standing to sue as a result of these forms. No other class member testified. Thus, there was no evidence that the mailings were even opened, let alone led to confusion and an inability to correct the information by other class members.

Justice Thomas led the dissent, joined by the Court’s three liberal justices: Justice Breyer, Sotomayor and Kagan. (The second time in the last few weeks we’ve seen this same unusual line-up.) According to Thomas, so long as the legislature created an individual right (here, a right to have an accurate credit report), rather than a right existing in the community at large (such as a right to clean air), then an individual has standing to sue for a violation of that right. Moreover, the right at issue was very similar to the right to be free from defamation at common law, and it was clearly within Congress’s province to enact a statute providing a right of action in such situation. Justice Thomas also warned that the upshot of the Court’s holding might be that state courts now get to decide class cases involving federal legal issues. Justice Kagan, joined by Justices Breyer and Sotomayor, penned a separate short dissent to clarify that, while she joined in Justice Thomas’s opinion, she believed that Article III required some real injury—even if not of the typical sort. Kagan, believed, however, that the difference between her approach and Justice Thomas’s would rarely yield a different outcome.

The power of the government to take property for public use without the consent of its owner, eminent domain, has been the subject of numerous often controversial Supreme Court decisions. In PennEast Pipeline Co. v. New Jersey (No. 19-1039), the Court delved into this area of the law again, addressing whether the federal government can constitutionally confer on private pipeline companies the authority to condemn necessary rights-of-way in which a state has an interest. Chief Justice Roberts, writing for an unusual five-justice majority (he was joined by Justices Breyer, Alito, Sotomayor, and Kavanaugh), held that it can. The Chief began his opinion with a concise summary of the reason: Ordinarily, states are immune from suit unless they agree to cede that immunity. But when it comes to eminent domain, the states surrendered their immunity when they ratified the Constitution. Moreover, the federal government may delegate its eminent domain power to private parties, something it did when it enacted the Natural Gas Act (NGA), which allows private parties to initiate condemnation proceedings pursuant to the eminent domain power. Accordingly, because the states are not immune from the federal eminent domain power, private parties empowered to initiate proceedings under the NGA may do so against state-owned property just as they can against other property.

Congress first enacted the NGA in 1938, and it entrusted the Federal Energy Regulatory Commission (FERC) with administering it. No interstate pipeline can be built without first obtaining a certificate of approval from FERC. Under its initial iteration, the NGA did not provide any mechanism for FERC certificate holders to actually secure the property rights necessary to build an approved pipeline. This left pipeline companies to the whims of the states, each of whom had different rules and regulations governing eminent domain. The result was that a certificate to build a pipeline from FERC didn’t actually amount to much in the real world. Recognizing this problem, Congress amended the NGA in 1947 to allow FERC-approved certificate holders to exercise the federal eminent domain power, giving them “the right of eminent domain in the district court of the United States for the district in which such property may be located, or in the State courts.”

In 2015, PennEast applied to FERC for a certificate to build a 116-mile pipeline from Pennsylvania to New Jersey. After several years it was granted the certificate and immediately began filing complaints to exercise the federal eminent domain power in New Jersey district court. Of particular relevance, it sought to condemn two pieces of property owned by New Jersey itself and another forty pieces of property in which New Jersey held non-ownership interests, such as conservation easements. New Jersey moved to dismiss on sovereign immunity grounds. The district court denied the motion, holding that New Jersey is not immune from the federal government’s eminent domain power. The Third Circuit disagreed, holding that, while the federal government can delegate its eminent domain power to private parties, it might not be able to delegate the exemption from state sovereign immunity. At minimum, the Third Circuit held, the NGA doesn’t evince an intent to do so.

The Chief disagreed with the Third Circuit. After quickly disposing of a threshold jurisdictional issue—holding that the Third Circuit did have jurisdiction, even though the NGA grants exclusive jurisdiction to affirm or modify a FERC order to the court of appeals that reviewed FERC’s initial decision to grant a certificate (here, the D.C. Circuit)—the Chief turned to the meat of the matter. True to his wont, he offered a lengthy history lesson on the evolution of federal eminent domain powers and its ability to delegate those powers to private parties (reaching back to “biblical times”). Although colorful, this history does not bear all that much on the substance of the legal issues. What mattered for the Chief is that there can be no doubt that the federal government has always been permitted to exercise its own eminent domain powers and has consistently delegated that power to private parties, with repeated and express approval from the Supreme Court over the centuries. The delegation under the NGA is an “unexceptional” example of that dynamic.

The real question, then, is not whether Congress can delegate federal eminent domain power to private parties via the NGA. The question is really whether states’ sovereign immunity bars the exercise of that power against non-consenting states. On that question, the Chief again laid out the history of sovereign immunity, noting that suits against states are permitted only in limited circumstances. These include when the state consents, when Congress abrogates state sovereign immunity under the Fourteenth Amendment, or­—relevant to this case—when the state agreed to suit in the “plan of the Convention”, i.e., in “the structure of the original Constitution itself.” The Supreme Court has previously held that bankruptcy proceedings and suits by the federal government are two examples of sovereign immunity waivers by states that are embedded in the “original Constitution itself.”

The Chief recognized that congressional abrogation is not a ground for sovereign immunity wavier in this case because the NGA arises under Congress’s commerce power, and the Court has repeatedly held that “Article I cannot justify haling a State into federal court.” But, based on his lengthy recounting of the history of eminent domain, Chief Justice Roberts held that the states consented “in the plan of the Convention” to the exercise of federal eminent domain power, including by private delegatees. The states fully understood that they would have to yield their own powers to the federal government’s eminent domain power when they signed on to the Constitution, so they cannot be heard now to complain that they are immune from suits exercising that power. The fact that it is a private delegatee, rather than the federal government itself, that is exercising the power is irrelevant. And the fact that a private delegatee brings a condemnation suit in order to exercise that power doesn’t trigger sovereign immunity either. After all, the power of eminent domain and the right to bring suits to enforce that power are “inextricably intertwined.”

Justice Gorsuch, joined by Justice Thomas, dissented separately to argue that there are, in fact, two different types of state sovereign immunity. The first, “structural immunity” derives from the structure of the Constitution, and sounds in personal jurisdiction, such that the state can waive it by consent. The second, “Eleventh Amendment immunity,” derives from the Eleventh Amendment’s text, which, for Justice Gorsuch, comprehensively eliminates federal judicial power over suits filed against the States. This Eleventh Amendment immunity sounds in subject-matter jurisdiction, and as such cannot be waived. Because PennEast sued New Jersey, it triggered the Eleventh Amendment immunity. Thus, for Justice Gorsuch, although the Court did not address the issue because it was not briefed, the lower courts on remand should consider whether they have subject-matter jurisdiction over this dispute at all pursuant to the Eleventh Amendment.

Justice Barrett wrote the primary dissent, which was joined by Justices Thomas, Kagan, and Gorsuch. For Justice Barrett, the majority’s error is straightforward: It is undisputed that Congress cannot use the Commerce Clause to strip states of their sovereign immunity. The NGA was passed pursuant to the Commerce Clause, so there can be no non-consensual waiver of sovereign immunity by states to be sued by private delegatees under the NGA. Moreover, with respect to the states’ purported waiver of immunity by surrendering it in the plan of the Convention, Justice Barrett contended that there is “no textual, structural, or historical support” for the assertion. The absence of an “eminent domain” clause in the Constitution means the states could not have agreed to relinquish their immunity to such claims when they signed on to the document. The long history of Federal eminent domain use by one private party against another private party does not support use of the power by a private party against the states. For Justice Barrett, the fact that state sovereign immunity can hamper Congress’s goals is not a bug of our constitutional system, but a feature.

And with that, our coverage of the OT20 term comes to a close. We’d like to take this opportunity to thank the team of Wiggin attorneys operating behind the scenes to bring you these (occasionally) timely summaries of the Court’s decisions: Jeff Babbin, Aaron Bayer, Nikki Dwyer, Kim Rinehart, Michael Rondon, and Shai Silverman. Have a great summer!

© 1998-2021 Wiggin and Dana LLPNational Law Review, Volume XI, Number 187
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Tadhg Dooley Appelate Attorney Wiggin Dana New Haven, CT
Partner

Tadhg is a Partner in the firm’s Litigation Department, where his practice focuses on appellate and complex civil litigation. He has extensive experience handling appeals in state and federal courts throughout the country and has obtained favorable results for a diverse range of clients, from federal prisoners to foreign presidents, big companies to small towns. Among other recent successes, Tadhg helped a municipality overturn a $6.8 million verdict in the Connecticut Appellate Court, and helped a dental practice overturn a $3.7 million verdict in the Georgia Supreme Court. Tadhg has also...

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David Roth Litigation lawyer Wiggin Dana
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David is Counsel in Wiggin and Dana’s Litigation Department and a member of the firm’s Appellate, Art and Museum Law, and Intellectual Property Litigation practice groups. He has assisted insurers, universities, large companies, cultural institutions, and sovereign nations in a variety of complex civil litigation and appeals. Representative matters include trademark, copyright, and patent cases; insurance class-actions; art-ownership disputes; and high-stakes business litigation. David has also represented private individuals and companies in several criminal matters and...

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