United States: Supreme Court Docket Report - 1999 Term, Number 14 / May 22, 2000

Today the Supreme Court granted certiorari in four cases, three of which are of potential interest to the business community. Amicus briefs in support of the petitioner are due on Thursday, July 6, 2000, and amicus briefs in support of the respondents are due on Monday, August 7, 2000. 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. Clean Water Act — Commerce Clause — Migratory Bird Rule. The Supreme Court granted certiorari in Solid Waste Agency of Northern Cook County v. United States Army Corps of Engineers, No. 99-1178, to determine whether the Army Corps of Engineers may exercise Clean Water Act jurisdiction over isolated intrastate waters solely because those waters do or potentially could serve as habitat of migratory birds.

The Clean Water Act gives the Corps jurisdiction over the dredging and filling of "navigable waters," which the statute defines as "waters of the United States." 33 U.S.C. §§ 1344(a), 1362(7). The Corps has interpreted its authority under the Clean Water Act to extend to intrastate waters and wetlands, "the use, degradation or destruction of which could affect interstate commerce" (33 C.F.R. § 328.3(a)(3) (1998)), and to intrastate waters "which are or would be used as habitat" by migratory birds which cross state lines or are protected by migratory bird treaties (51 Fed. Reg. 41,206, 41,217 (Nov. 13, 1986)). The latter assertion of jurisdiction is known as the "migratory bird rule."

The Solid Waste Agency of Northern Cook County, Illinois ("SWANCC") purchased a 500-acre site to construct an urgently needed balefill facility to dispose of non-hazardous municipal waste for the approximately 700,000 people who live in its 23 member communities. SWANCC’s plans called for filling some 17 acres of permanently or seasonally wet depressions left by earlier strip mining operations. After twice informing SWANCC that it lacked jurisdiction, the Corps abruptly changed its mind, relying solely on the migratory bird rule. Because the Corps asserted jurisdiction, SWANCC was required by Section 404 of the Clean Water Act to apply for a permit to fill the waters on the site. The Corps denied the permit.

SWANCC sought review in the Northern District of Illinois, arguing that the Corps’ exercise of jurisdiction pursuant to the migratory bird rule exceeds its statutory authority under the Clean Water Act and violates the Commerce Clause. The district court rejected both arguments. 998 F. Supp. 946 (1998).

The Seventh Circuit affirmed. 191 F.3d 845 (1999). The court of appeals held that the scope of the Clean Water Act "reaches as many waters as the Commerce Clause allows" and that the Commerce Clause was satisfied even though the Corps made no showing that the use of SWANCC’s balefill site by migratory birds had any effect on interstate commerce. Id. at 851. The court concluded that "destruction of the natural habitat of migratory birds in the aggregate ‘substantially affects’ interstate commerce" because "millions of people annually spend more than a billion dollars on hunting, trapping, and observing migratory birds," including by "trave[l] across state lines." Id. at 850.

The Seventh Circuit’s decision accords with the decision of the Ninth Circuit in Leslie Salt Co. v. United States, 55 F.3d 1388 (9th Cir. 1995). By contrast, the Fourth Circuit rejected — on both statutory and constitutional grounds — another attempt by the Corps to regulate isolated intrastate waters. United States v. Wilson, 133 F.3d 251 (4th Cir. 1997).

This case is of substantial importance to all businesses that may need to build or alter facilities in rural or suburban areas. If sustained, the Corps’ position would add an additional layer of federal regulation to the use of tens of millions of acres of isolated intrastate waters and wetlands. Mayer, Brown & Platt represents the petitioner in this case.

2. Enforceability of Agreements to Arbitrate Employment Claims. The Supreme Court granted certiorari in Circuit City Stores, Inc. v. Adams, No. 99-1379, to determine whether the Federal Arbitration Act (FAA), 9 U.S.C. §§ 1-16, applies to employment contracts.

Circuit City requires every job applicant to sign a Dispute Resolution Agreement (DRA), committing the applicant to resolve all "claims, disputes or controversies arising out of or relating to" his candidacy, employment, or termination "exclusively by final and binding arbitration." Applicants must sign the DRA in order to be considered for employment. The DRA states on its face that it does not "form a contract of employment between Circuit City" and the applicant.

Saint Clair Adams signed the DRA as part of his application for employment and was hired by Circuit City as a salesperson. Two years later, he sued Circuit City in California state court, alleging a variety of state law employment-related claims. Circuit City filed a petition in federal district court to compel arbitration of Adams’s claims pursuant to the FAA. The district court granted Circuit City’s petition and ordered arbitration.

The Ninth Circuit reversed. 194 F.3d 1070 (1999). While Adams’s appeal was pending, that court had held that the FAA does not apply to labor or employment contracts. See Craft v. Campbell Soup Co., 177 F.3d 1083, 1094 (9th Cir. 1999). Finding that Circuit City’s DRA was such a contract (despite the contrary language on the face of the agreement) because its execution "was a condition precedent to employment," the Ninth Circuit reversed the district court’s order in this case and remanded for dismissal.

Section 2 of the FAA provides in relevant part that an agreement to arbitrate in any "contract evidencing a transaction involving commerce" is "valid, irrevocable, and enforceable." 9 U.S.C. § 2. Section 1 of the statute, however, excludes from the Act’s coverage "contracts of employment of seamen, railroad employees, or any other class of workers engaged in foreign or interstate commerce." 9 U.S.C. § 1. A divided panel of the Ninth Circuit held in Craft that an employment contract is not a "contract evidencing a transaction involving commerce," as that term is used in Section 2, and therefore does not fall within the statute’s coverage. In reaching that conclusion, the court of appeals professed to glean congressional intent from the exclusion in Section 1, effectively extending that exclusion to all employees. Under the Ninth Circuit’s understanding of the view of the commerce power that prevailed when the FAA was enacted in 1925, Congress could regulate only employees who actually transported goods across state lines. Accordingly, the court reasoned that, "when Congress drafted Section 2, that section could only apply to those employees. Section 1, however, exempts those very same employees from the scope of the FAA. Thus, when Congress drafted the FAA in 1925, the Act did not apply to any labor or employment contracts." Craft, 177 F.3d at 1087. The court’s analysis of the legislative history also led it to conclude that "the FAA was part of an effort to gain uniformity in the application of agreements to arbitrate sales and commercial disputes. Congress never intended for the FAA to apply to employment contracts of any sort." Id. at 1090.

The decision of the Ninth Circuit conflicts with decisions from other courts of appeals, which have "uniformly reasoned that the strong federal policy in favor of arbitration requires a narrow reading of th[e] Section 1 exemption." O’Neil v. Hilton Head Hospital, 115 F.3d 272, 274 (4th Cir. 1997). According to this reading of the statute, Congress "had in mind the two groups of transportation workers as to which special arbitration legislation already existed and [it] rounded out the exclusionary clause by excluding all other similar classes of workers." Tenney Engineering, Inc. v. United Electrical Workers, 207 F.2d 450, 452-453 (3d Cir. 1953). The Ninth Circuit’s decision also is in tension with the Supreme Court’s recent holding (in a non-employment context) that the "involving commerce" language in Section 1 should be interpreted in light of the current meaning of the Commerce Clause, not the 1925 understanding. See Allied-Bruce Terminix Cos. v. Dobson, 513 U.S. 265 (1995).

This case is of substantial interest to all employers that prefer to arbitrate labor and employment disputes in order to avoid the delay, expense, and exposure of litigation.

3. Constitutional Law — Administrative Law — Environmental Regulation — Nondelegation Doctrine — Air Quality Standards. Section 109 of the Clean Air Act, 42 U.S.C. § 7409, directs the Environmental Protection Agency to promulgate National Ambient Air Quality Standards (NAAQS). For each pollutant meeting certain statutory criteria, the EPA may set a "primary standard" at a concentration level "requisite to protect the public health" with an "adequate margin of safety," and a "secondary standard" at a level "requisite to protect the public welfare." 42 U.S.C. § 7409(b). The Supreme Court granted certiorari in Browner v. American Trucking Associations, No. 99-1257, to decide three questions about revised NAAQS for ozone and particulate matter: (1) whether Section 109, as interpreted by the EPA, is an unconstitutional delegation of legislative power to an executive-branch agency, (2) whether the court of appeals had jurisdiction to review the EPA’s preamble statements regarding its authority to implement revised NAAQS for ozone, and (3) whether the 1990 amendments to the Clean Air Act preclude the EPA from implementing stricter NAAQS for ozone before the standards addressed by the amendments have been attained.

In 1997, the EPA issued final rules containing stricter revised NAAQS for ozone and particulate matter (PM). Several potentially affected parties sought judicial review.

A divided panel of the D.C. Circuit rejected the new NAAQS, 175 F.3d 1027, and reaffirmed that view, with some modifications, on panel rehearing, 195 F.3d 4 (1999). First, the court of appeals held that the EPA’s interpretation of Section 109 rendered that provision an unconstitutional delegation of legislative power. Id. at 1034. In the court’s view, the EPA’s interpretation of its statutory authority would authorize the agency to set NAAQS at "any point between zero and a hair below the concentrations yielding London’s Killer Fog," and thus failed to articulate any "intelligible principle by which to identify a stopping point." Id. at 1037. The D.C. Circuit remanded the case to the EPA to formulate a statutory interpretation that contained an intelligible limiting principle. The court expressed some doubt as to whether the Clean Air Act was susceptible to such an interpretation, see id. at 1038-1040, but on panel rehearing emphasized that the EPA would receive Chevron deference if it succeeded in identifying one. See 195 F.3d at 7-8.

Part of the case addressed only the new ozone standards. The D.C. Circuit held that the 1990 Clean Air Act amendments did not deprive EPA of the power to designate localities as "nonattainment" areas under the revised ozone NAAQS. 175 F.3d at 1048. The court of appeals nonetheless held that the agency could not enforce revised primary NAAQS in areas that had not yet attained the original standards. Ibid. On rehearing, the court rejected the EPA’s contention that the agency had yet to take final action on the new standards and that the court therefore lacked jurisdiction to review the agency’s assertion of power to implement those standards. In the D.C. Circuit’s view, the determination of finality is "functional, not * * * formal." 195 F.3d at 8. The court held that EPA’s action was "undoubtedly final" because its interpretation of its power to enforce the new standards was neither tentative nor ambiguous, the scope of that power was "a pure question of law" that could be resolved without "a more concrete setting," and the promulgation of the revised ozone NAAQS already had triggered statutory requirements imposed on the States. Id. at 9.

Judge Tatel dissented in part. Judge Tatel believed that the delegation of authority in Section 109, as interpreted by the EPA, sufficiently cabined the agency’s discretion. 175 F.3d at 1057. He concurred only in the judgment as to the scope of the agency’s power to enforce the new standards. The EPA’s suggestion for rehearing en banc on the nondelegation issue was denied over the dissent of Chief Judge Edwards and Judges Silberman, Rogers, Tatel and Garland. 195 F.3d at 13-17.

This case is of obvious interest to all businesses that must comply with the Clean Air Act. In addition, the resolution of the nondelegation issue could affect a broad range of federal regulatory schemes that empower agencies to promulgate regulations or otherwise to enforce the "public interest" or similarly indistinct statutory standards. In addition, the resolution of the ripeness issue may determine the ability of businesses to get timely, effective review of new regulatory initiatives. Mayer, Brown & Platt represents one of the respondents in this case.