United States: Supreme Court Docket Report - 1999 Term, Number 15 / May 30, 2000

Today the Supreme Court granted certiorari in three cases, all of which are of potential interest to the business community. Amicus briefs in support of the petitioner are due on Friday, July 14, 2000, and amicus briefs in support of the respondents are due on Monday, August 14, 2000. The Court also invited the Solicitor General to express the views of the United States in a fourth case. Any questions about these cases should be directed to Donald Falk (202-263-3245) or Eileen Penner (202-263-3242) in our Washington office.

1. Administrative Law — Deference to Agency Determinations — Customs Service Tariff Classification Rulings. The Supreme Court granted certiorari in United States v. Mead Corp., No. 99-1434, to decide two questions: (1) whether courts reviewing the tariff classification of particular imported goods must defer to ordinary classification rulings of the United States Customs Service, and (2) whether the Customs Service correctly classified spiral-bound and ring-bound day planners as "diaries, notebooks, and address books, bound" under Subheading 4820.10.20 of the Harmonized Tariff Schedules of the United States ("HTSUS"), 19 U.S.C. § 1202.

Mead Corporation imports several models of day planners. Under Subheading 4820.10.20, "diaries, notebooks, and address books, bound; memorandum pads, letter pads and similar articles" are subject to a tariff, while items classified as "other" under HTSUS Subheading 4820.10.40 are tariff-free. The Customs Service classified five Mead day planners as bound diaries (and thus subject to tariff) under Subheading 4820.10.20.

Mead sought review in the Court of International Trade. Mead argued that the day planners were neither "diaries" nor "bound" for the purpose of HTSUS Subheading 4820.10.20, but the court granted summary judgment to the United States. 17 F. Supp. 2d 1004 (1998).

The Federal Circuit reversed. 185 F.3d 1304 (1999). The court of appeals held that ordinary classification rulings did not warrant the Chevron deference owed to Customs regulations that "fill[] a gap or define[] a term" of an ambiguous HTSUS provision. Id. at 1306 (quoting United States v. Haggar Apparel Co., 526 U.S. 380, 391 (1999)). In contrast to the formal regulations at issue in Haggar, "ordinary" classification rulings do not have the force of law (though they bind the parties) and are issued without procedural safeguards such as public notice and comment. Id. at 1307. Such rulings also need not be published, and may issue from any Customs Service port office (not only Customs headquarters). Id. at 1308. Applying its own interpretation to Subheading 4820.10.20 without any deference to the agency, id. at 1307, the court of appeals held that the Mead daily planners were "neither 'diaries' nor 'bound.'" Id. at 1311.

In seeking certiorari, the United States has asserted that the decision of the Federal Circuit departs from Haggar and other decisions that afford "some deference" to informal statutory interpretations by administrative agencies. Christensen v. Harris County, 120 S. Ct. 1655, 1662 (2000) (quoting Reno v. Koray, 515 U.S. 50, 61 (1995)). But see id. at 1663 (only "persuasive" interpretations are "entitled to respect"). The Federal Circuit, however, found a closer analogy between ordinary classification rulings and IRS Revenue Rulings, which in many courts receive no deference. See 185 F.3d at 1308 (citing Commissioner v. Schleier, 515 U.S. 323, 326 n.8 (1995) (distinguishing revenue rulings from regulations)).

This case is of obvious importance to businesses that import goods that may be subject to tariffs. A decision to accord deference to classification rulings might readily be extended to other Customs Service actions, such as rulings on valuation, origin, or markings. The case has broader importance to all businesses that may seek judicial review of agency statutory interpretations made without notice-and-comment procedures, especially IRS Revenue Rulings and similar determinations. In this case, the Court at last may squarely decide the degree of deference due to agency interpretive rules and similar expressions of opinion.

2. Administrative Law — Clean Air Act — Cost-Benefit Analysis. Section 109 of the Clean Air Act, 42 U.S.C. § 7409, authorizes the Environmental Protection Agency (EPA) to set primary National Ambient Air Quality Standards (NAAQS) at a concentration level "requisite to protect the public health" with "an adequate margin of safety," 42 U.S.C. § 7409(b). As we reported in the May 22 Docket Report, the Supreme Court granted certiorari in Browner v. American Trucking Associations, No. 99-1257, to decide several constitutional and statutory questions arising from the EPA's promulgation of revised NAAQS for ozone and particulate matter — most notably, whether the Clean Air Act, as the EPA interprets it, violates the nondelegation doctrine. Today, the Court granted a cross-petition for certiorari seeking review of the same decision, American Trucking Associations v. Browner, No. 99-1426, to decide whether Section 109 precludes the EPA from considering other factors such as cost and technological feasibility when setting NAAQS, even if consideration of those factors would allow the agency (and the courts) to avoid constitutional nondelegation issues.

On petitions for review, a divided panel of the D.C. Circuit rejected EPA's revised NAAQS for ozone and particulate matter. 175 F.3d 1027, modified on rehearing, 195 F.3d 4 (1999). The court of appeals held that the EPA's interpretation of Section 109 was so open-ended that it violated the constitutional nondelegation doctrine, and remanded the case to the agency to formulate a statutory interpretation that contained an intelligible limiting principle. See 175 F.3d at 1034, 1038-40. The court acknowledged that circuit precedent (e.g., Lead Industries Association v. EPA, 647 F.2d 1130, 1148 (D.C. Cir. 1980)) made the EPA's task more difficult by precluding the agency from setting NAAQS with reference to "any factor other than health effects relating to pollutants in the air." 175 F.3d at 1038 (internal quotation marks omitted). Thus, it observed, "[c]ost-benefit analysis * * * is not available." Ibid. Indeed, in rejecting a challenge to the NAAQS based on the EPA's failure to take costs into account, the D.C. Circuit stated flatly that the EPA is "not permitted to consider the cost of implementing" the standards. Id. at 1040.

This case will be argued in tandem with the previously granted case presenting nondelegation and statutory issues arising from the same rulemaking. The additional issue is of obvious interest to all businesses that may face significant expense in complying with the Clean Air Act. Additionally, in deciding whether the EPA may weigh the costs of regulation against health benefits when setting air quality standards, the Court may determine more generally whether regulatory agencies may engage in cost-benefit analysis when a statute identifies other factors in authorizing regulatory standard-setting. Mayer, Brown & Platt represents one of the petitioners in this case.

3. Maritime Law — Limitation of Liability Act — Dissolution of Injunction Against Parallel Action. The Limitation of Liability Act, 46 U.S.C. app. §§ 181-196, permits a ship owner to consolidate all actions arising from a single maritime loss in a single federal district court and, if the loss occurred without the owner's "privity or knowledge," to limit its liability to the value of the vessel and its freight. Once the ship owner deposits security for that value (known as the "limitation fund"), a district court hearing an action under the Limitation Act must enjoin any other pending actions arising from the same incident. Id. § 185. The Supreme Court granted certiorari today in Lewis v. Lewis & Clark Marine, Inc., No. 99-1331, to determine when a district court may — or must — dissolve a Limitation Act injunction against state-court proceedings.

Federal district courts have exclusive admiralty jurisdiction over Limitation Act suits. See 28 U.S.C. § 1333. Nonetheless, the Act "sav[es] to suitors in all cases all other remedies to which they are entitled." Id. § 1333(1)(a).

Lewis, a crew member on a tug boat owned by Lewis & Clark Marine, Inc., alleged that he was injured on the boat's deck in March 1998. Asserting coverage under the Limitation Act, Lewis & Clark filed an action for exoneration or limitation of liability in the Eastern District of Missouri. Lewis then filed an action in Illinois state court and waived his right to a jury trial. After Lewis & Clark filed a surety bond for the amount of the limitation fund, the district court enjoined the state court proceeding. Lewis moved to dissolve the injunction under the "saving to suitors clause" of the Limitation of Liability Act, stipulating that his claim was less than the limitation fund and asserting that he was the only claimant seeking damages from the March 1998 incident. The district court dissolved the injunction and stayed the federal proceedings, finding that the stipulation removed the federal interest in limiting liability. 31 F. Supp. 2d 1164 (1998).

The Eighth Circuit reversed. 196 F.3d 900 (1999). The court of appeals held that the Limitation Act gave the ship owner a right to a federal determination of exoneration of liability as well as of limitation, a right that could not be mooted by a stipulation that damages did not exceed the amount of the limitation fund. See id. at 907-908. The dissolution of the restraining order deprived Lewis & Clark of its right to a federal-court determination of the exoneration claim. The court interpreted the "saving to suitors" clause as establishing a "presumption in favor of jury trials and other common law remedies," id. at 905, but held that the clause "grant[s] claimants a choice of remedies, not a choice of fora." Id. at 909. Acknowledging that the Supreme Court had held that the clause applied to "remedies in equity," ibid. (quoting Red Cross Line v. Atlantic Fruit Co., 264 U.S. 109, 124 (1924)), the Eighth Circuit held that non-jury in personam judgments were not among those saved. Id. at 910.

The petition contended that Supreme Court precedent requires dissolution of a Limitation Act injunction if there is only a single claimant (see Langnes v. Green, 282 U.S. 531 (1930)) or if all claims asserted against the ship owner do not exceed the amount of the limitation fund (see Lake Tankers v. Henn, 354 U.S. 147 (1957). The petition also asserted conflicts with Red Cross Line and with decisions of other circuits finding that remedies to be awarded in non-jury trials came with the "saving to suitors" clause. See Kreta Shipping S.A. v. Preussag International Steel Corp., 192 F.3d 41 (2d Cir. 1999); Linton v. Great Lakes Dredge & Dock Co., 964 F.2d 1480 (5th Cir. 1992). This case is of obvious importance to ship owners who prefer to have as many maritime disputes as possible resolved by federal admiralty courts rather than by state-court juries.

* * * * *

The Supreme Court also invited the Solicitor General to express the views of the United States in Cement Masons Health & Welfare Trust Fund v. Stone, No. 99-1403. That case presents several questions regarding the ability of a fiduciary for a welfare benefit plan covered by the Employee Retirement Income Security Act (ERISA) to sue under that Act for reimbursement of medical expenses paid by the plan but later recovered by the beneficiary in a settlement with a third party. Opinion below: 197 F.3d 1003 (9th Cir. 1999).

Finally, on May 22, 2000, Mayer, Brown & Platt prevailed by a unanimous vote of the Supreme Court in a pro bono criminal case, Jones v. United States, No. 99-5739. Mindful of the limits of congressional power under the Commerce Clause, the Court held that the federal arson act, which makes a federal crime of any arson of property that is "used in any activity affecting interstate * * * commerce," 18 U.S.C. § 844(i), does not apply to the arson of a private residence that is not actively employed for a commercial purpose. Donald Falk, a partner in our Washington office, argued the case, and was assisted on the briefs by Sharon Swingle.