SCOTUS: Employees win bankruptcy case

In a sweeping decision, the US Supreme Court held that bankruptcy courts may not approve structured dismissals that provide for distributions that do not follow ordinary priority rules without the consent of affected creditors. Czyzewski v. Jevic Holding Corporation (US Supreme Ct 03/22/2017) (6-2) [Opinion text].

In this case an official unsecured creditors’ committee and a secured lender negotiated a settlement under which the lender set aside some money to distribute to unsecured creditors – and totally cut out former employees who had priority claims under the Bankruptcy Code. This "structured dismissal" did not follow the bankruptcy priorities, which would have preferred the drivers' wage claims.

The Supreme Court would have none of that. And not merely in cases involving special priorities for employees. In sweeping terms, the Court rejected the notion that there could be "rare cases" in which courts could find "sufficient reasons" to disregard priorities. The Court identified potentially serious consequences that could flow from such an exception: departure from the protections granted particular classes of creditors, changes in the bargaining power of different classes of creditors even in bankruptcies that do not end in structured dismissals, risks of collusion, and increased difficulty in achieving settlements. "[W]e conclude that Congress did not authorize a “rare case” exception."

All bankruptcy lawyers will need to pay close attention to this case.

SCOTUS: NLRB's Acting GC was unlawfully appointed

Hundreds of NLRB decisions could be at risk after the Supreme Court's decision that for three years Lafe Solomon served improperly as the NLRB's Acting General Counsel. NLRB v. SW General US Supreme Ct 03/21/2017) (6-2) [Opinion text]. The NLRB's decision that SW General committed an unfair labor practice was vacated because the ULP complaint was issued at a time when Solomon lacked authority to issue the complaint.

NLRB decisions issued between January 5, 2011 and November 4, 2013 could now be at risk. The decisions are not automatically voided, but could be nullified if the losing party (usually an employer) properly raised and preserved an objection in proceeding before an ALJ or at the Board level. I assume the 180 days statute of limitations has run on these cases, so some folks are going to get a "get out of jail free" card.

When Ronald Meisburg resigned as General Counsel in June 2010, the President appointed Solomon as Acting GC. So far so good. About six months later – January 5, 2011 – the President nominated Solomon to be permanent GC, and sent his name to the Senate for confirmation. Solomon never got confirmed by the Senate. But he continued serving as Acting GC until the Senate confirmed Richard Griffin as permanent GC on November 4, 2013.

The problem was that the Federal Vacancies Reform Act (FVRA) is pretty specific. Subsection (b)(1) of the FVRA prevents a person who has been nominated to fill a vacant Presidential-appointment-and-Senate-confirmation office from performing the duties of that office in an acting capacity.

The Court rejected the government's argument that "we've always done it this way," saying:

"The Board contends that legislative history, purpose, and post-enactment practice uniformly show that subsection (b)(1) applies only to first assistants. The text is clear, so we need not consider this extra-textual evidence. * * * In any event, the Board’s evidence is not compelling."

The Court also rejected the argument that FVRA Subsection (b)(1) should be read as meaning that only first assistants are barred from serving in an acting position after being nominated for the permanent position.

As for the two dissenters, this is a good summary:

"Congressional silence in the face of a decade-plus practice of giving subsection (b)(1) a narrow reach casts serious doubt on the broader interpretation. It indicates that Congress, like the Executive Branch, interpreted subsection (b)(1) in line with its text to reach only first assistants to the vacant office serving pursuant to subsection (a)(1)."

[For recent decisions and pending employment law cases, see Supreme Court Watch.]

 

- Web site for Ross Runkel, Arbitrator & Mediator: https://www.RossRunkel.com/ -

Oxford comma drama

Are dairy delivery drivers exempt from Maine's overtime law? No, because of a missing comma – the one known as the Oxford comma. Here's the first paragraph of O'Connor v. Oakhurst Dairy (1st Cir 03/13/2017):

For want of a comma, we have this case. It arises from a dispute between a Maine dairy company and its delivery drivers, and it concerns the scope of an exemption from Maine's overtime law. 26 M.R.S.A. § 664(3). Specifically, if that exemption used a serial comma to mark off the last of the activities that it lists, then the exemption would clearly encompass an activity that the drivers perform. And, in that event, the drivers would plainly fall within the exemption and thus outside the overtime law's protection. But, as it happens, there is no serial comma to be found in the exemption's list of activities, thus leading to this dispute over whether the drivers fall within the exemption from the overtime law or not.

Maine's overtime law says it does not apply to:

The canning, processing, preserving, freezing, drying, marketing, storing, packing for shipment or distribution of:
  (1) Agricultural produce;
  (2) Meat and fish product; and
  (3) Perishable foods

So what does "packing for shipment or distribution" mean? Dairy drivers perform distribution, but they do not perform packing for distribution. If you stick in a comma just before the words "or distribution," then it would be clear that the drivers were exempt. But the court pointed out that lack of a comma simply makes the whole thing ambiguous, and ambiguities need to be resolved in favor of the employees.

<Sigh>

Transgender bathroom case vacated and remanded

This is what I suggested [here] and [here]. The US Supreme Court has sent Gloucester County School Board v. G.G. back to the 4th Circuit after the government withdrew a "guidance" letter that the 4th Circuit had relied on. So oral arguments that were scheduled for March 28 are cancelled. The Court's order says: 

The judgment is vacated, and the case is remanded to the United States Court of Appeals for the Fourth Circuit for further consideration in light of the guidance document issued by the Department of Education and Department of Justice on February 22, 2017.

This is a setback for G.G., a transgender high school student whose great transgression is that he wants to use the boys' restroom.

Both parties had requested the Supreme Court to go ahead with oral arguments, but the School Board was jockeying for a delay and had urged the Court to get a brief from the government before holding oral arguments. Here's a sketch of recent developments:

  • April 19, 2016: 4th Circuit held [opinion text] that G.G., a transgender high school student, must be allowed to use the boys' restrooms. The 4th Circuit relied on an interpretation of Title IX and its implementing regulations reflected in administrative guidance issued by the US Department of Education in 2015 and 2016.
  • June 23, 2016: District Court issued a preliminary injunction against the School Board.
  • August 3, 2016: Supreme Court issued a stay of the District Court's injunction.
  • October 28, 2016: Supreme Court granted writ of certiorari to review 4th Circuit's judgment.
  • February 3, 2017: Case set for oral argument on March 28.
  • February 22, 2017: The Department of Education and Justice Department withdrew the guidance documents that the 4th Circuit had relied on. [text]
  • February 23, 2017: Supreme Court requested the parties' "views on how this case should proceed in light of the guidance document issued by the Department of Education and Department of Justice on February 22, 2017."
  • March 1, 2017: The parties submitted letters to the Supreme Court with their suggestions on how to proceed:
    • G.G. recommended [text] going ahead with the March 28 arguments: "The new 'Dear Colleague' letter abstains from providing any guidance with respect to 34 C.F.R. § 106.33 and makes resolution of Question Two even more urgent. That question has been fully developed in the lower courts, is fully briefed by the parties and amici before this Court, and is appropriate for resolution now. Delaying resolution would provide no benefit to the Court and would needlessly prolong harm to transgender students across the country awaiting this Court’s decision."
    • The School Board made three suggestions [text]: (1) Ask the US Solicitor General for the current views of the United States. (2) Postpone oral arguments until the new briefing is completed. (3) "[I]f the Court chooses not to resolve either question presented in light of the withdrawn documents, the Court should vacate the decisions below and remand for further proceedings."
  • March 6, 2017: The Supreme Court ordered: "The judgment is vacated, and the case is remanded to the United States Court of Appeals for the Fourth Circuit for further consideration in light of the guidance document issued by the Department of Education and Department of Justice on February 22, 2017."

[For recent decisions and pending employment law cases, see Supreme Court Watch.]

 

- Web site for Ross Runkel, Arbitrator & Mediator: https://www.RossRunkel.com/ -

Transgender bathroom case next steps

Final update: Transgender bathroom case vacated and remanded

Both parties in Gloucester County School Board v. G.G. have requested the Supreme Court to hold oral arguments, but the School Board is jockeying for a delay and thinks the Court should get a brief from the government before holding oral arguments. Here's a sketch of recent developments:

  • April 19, 2016: 4th Circuit held [opinion text] that G.G., a transgender high school student, must be allowed to use the boys' restrooms. The 4th Circuit relied on an interpretation of Title IX and its implementing regulations reflected in administrative guidance issued by the US Department of Education in 2015 and 2016.
  • June 23, 2016: District Court issued a preliminary injunction against the School Board.
  • August 3, 2016: Supreme Court issued a stay of the District Court's injunction.
  • October 28, 2016: Supreme Court granted writ of certiorari to review 4th Circuit's judgment.
  • February 3, 2017: Case set for oral argument on March 28.
  • February 22, 2017: The Department of Education and Justice Department withdrew the guidance documents that the 4th Circuit had relied on. [text]
  • February 23, 2017: Supreme Court requested the parties' "views on how this case should proceed in light of the guidance document issued by the Department of Education and Department of Justice on February 22, 2017."
  • March 1, 2017: The parties submitted letters to the Supreme Court with their suggestions on how to proceed:
    • G.G. recommended [text] going ahead with the March 28 arguments: "The new 'Dear Colleague' letter abstains from providing any guidance with respect to 34 C.F.R. § 106.33 and makes resolution of Question Two even more urgent. That question has been fully developed in the lower courts, is fully briefed by the parties and amici before this Court, and is appropriate for resolution now. Delaying resolution would provide no benefit to the Court and would needlessly prolong harm to transgender students across the country awaiting this Court’s decision."
    • The School Board made three suggestions [text]: (1) Ask the US Solicitor General for the current views of the United States. (2) Postpone oral arguments until the new briefing is completed. (3) "[I]f the Court chooses not to resolve either question presented in light of the withdrawn documents, the Court should vacate the decisions below and remand for further proceedings."

It seems likely that the School Board's idea of delay and further briefing would throw the case over into next fall. Although unsaid in the Board's letter, the Court should be at full strength by then.

My view is that the Court should cancel arguments, vacate the 4th Circuit's judgment, and remand. Technically, of course, one issue presented in the petition for certiorari deals with Title IX by itself without the gloss of the earlier "guidance" letters. But the 4th Circuit's reasoning was dependent on those guidances, which are now gone and not replaced by anything else. So the whole reasoning process is different now. It's a different legal landscape. Let the lower courts work on this.

Whither Gloucester County School Board v. G.G.?

Final update: Transgender bathroom case vacated and remanded

The government has withdrawn its prior "guidance" that said school districts should “treat transgender students consistent with their gender identity.” That prior guidance was the underpinning of the 4th Circuit's decision that G.G., a transgender student, must be allowed to use the boys' restrooms.

Gloucester County School Board v. G.G. is the case in which the US Supreme Court has agreed to review the 4th Circuit's judgment, and is set for argument on March 28.

On Thursday the Court asked the parties to advise the Court on how to proceed. The docket entry says:

Request from the Clerk that the parties submit their views on how this case should proceed in light of the guidance document issued by the Department of Education and Department of Justice on February 22, 2017. The parties' views should be in the form of letters delivered to the Court and served upon counsel by 2:00 p.m. on Wednesday, March 1, 2017.

I think there is little doubt as to how the parties will respond. My predictions:

G.G. will say to plow ahead because G.G. is arguing that he should win under the language in Title IX – with or without the previous guidance. Also, the Court granted certiorari on the issue without any dependence on the government's former guidance.

The School Board will urge that oral arguments be cancelled, that the 4th Circuit's judgment be vacated, and the case be remanded to the 4th Circuit for further proceedings in light of the change in guidance.

There seems to be a high probability that the Court will remand the case without holding oral arguments. The 4th Circuit's judgment was dependent on a guidance that no longer exists, so that makes the case pretty messy at this point. Also, this hot-button issue probably should be heard by a nine-Justice Court.

EEOC subpoenas and the 9th Circuit's outlier standard of review

McLane Co. v. EEOC, up for argument at the US Supreme Court on February 21, is an odd duck because both parties agree that the 9th Circuit got the law wrong, and the Court had to appoint an amicus curiae to present arguments in favor of the 9th Circuit's position.

The legal issue will bore you to tears if you're not a Title VII litigator. The 9th Circuit reviews district courts’ orders concerning enforcement of EEOC administrative subpoenas de novo. Most other courts of appeals review decisions concerning enforcement of administrative subpoenas for abuse of discretion. This includes the 3rd, 4th, 7th, 8th, and DC. (The 2nd and 11th Circuits' decisions are a bit more complex.) 

Facts: Damiana Ochoa filed an EEOC charge alleging sex discrimination based on pregnancy. She claimed she was fired because she failed a strength test following maternity leave. The EEOC issued a subpoena that included a request for "pedigree information" such as names, addresses, and social security numbers of employees who had been required to take strength tests.

The district court declined to enforce the subpoena as to pedigree information, writing that the pedigree information was “not relevant at this stage to a determination of whether the [test] systematically discriminates on the basis of gender.” 

On appeal, the 9th Circuit held that the subpoena should be enforced. In reaching that conclusion, the 9th Circuit reviewed the district court's decision de novo.

McLane Co's position is that the correct standard of review is whether the district court abused its discretion. 

EEOC's position is the same, so EEOC informed the Court that it would not defend the 9th Circuit's use of a de novo standard.

Court-appointed amicus: The Court had to appoint an amicus curiae to present arguments in favor of the 9th Circuit's position. The Court appointed Stephen B. Kinnaird, Co-chair of Paul Hastings' appellate practice group. His brief [here] is excellent.

The case is McLane Co. v. EEOC (US Supreme Court 09/29/2016) [briefs]. The case being reviewed is EEOC v. McLane Co (9th Cir 10/27/2016) [text of 9th Circuit decision].

Seattle University law professor Charlotte Garden has an interesting argument preview at SCOTUSblog: Feats of strength and standards of review. I agree with her comment that "this case is an unnecessary procedural sideshow."

[For recent decisions and pending employment law cases, see Supreme Court Watch.] 

Delayed arguments in class-action waiver case

Epic Systems Corp v. Lewis is the most important employment law case of the current session of the US Supreme Court, and the Court told the lawyers today that oral arguments will be put off until the next session which begins in October. This means a decision might not come out until early 2018.

The Court doesn't announce its reasons for when it schedules oral arguments, but I'll be bold enough to speculate. It's a combination of (1) this is an extremely important case that will have an impact on thousands of employers and millions of employees, (2) for a big case the Court likes to have a full boat of nine Justices, and Circuit Judge Neil Gorsuch - the President's nominee - should be confirmed before October. There's also the possibility that the Court already sees itself split 4-4, which would create a big problem because there are three consolidated cases with conflicting results and a 4-4 decision would affirm all of them.

Class action waivers – NLRA v. FAA: Ever since D.R. Horton (NLRB 2012), the NLRB has said that it's an unfair labor practice for an employer to require employees to agree that they will not bring a class-action or collective-action case, either in litigation or in arbitration. The NLRB's jurisdiction includes non-union workplaces in the private sector, so there's an impact on most private sector employees.

Meanwhile, the Federal Arbitration Act requires courts to enforce arbitration agreements as written.

As you might expect, federal circuit courts are split. Some say D.R. Horton is simply wrong. Some say the FAA compels enforcement of an employment arbitration agreement that prohibits employees from bringing a class-arbitration, notwithstanding D.R. Horton. Others won't enforce such agreements because they interfere with employees' right "to engage in … concerted activities for the purpose of … mutual aid or protection."

The Supreme Court has consolidated three cases that raise these issues.

One is Ernst & Young v. Morris [9th Circuit opinion] [Supreme Court briefs]  ("an employer violates the National Labor Relations Act by requiring employees to sign an agreement precluding them from bringing, in any forum, a concerted legal claim regarding wages, hours, and terms of conditions of employment.")

The others are NLRB v. Murphy Oil [5th Circuit opinion] [Supreme Court briefs] (refusing to enforce the NLRB's D.R. Horton rule) and Epic Systems Corp v. Lewis [7th Circuit opinion] [Supreme Court briefs] (class action waiver in arbitration agreement violates NLRA and is unenforceable under the FAA).

The Court neither granted nor denied one other petition in Patterson v. Raymours Furniture Co  [Cert petition] [2nd Circuit opinion] [Supreme Court briefs] (enforcing class action waiver in arbitration agreement).

The Court is delaying oral arguments until October at the earliest, so a decision might not come out until early 2018.

 

House Republicans rip NLRB GC on college athlete stance

Are college athletes "employees"? NLRB General Counsel Richard Griffin sent out a memo [Memo text] on January 31 expressing the opinion that "scholarship football players at NCAA Division I Football Bowl Subdivision (“FBS”) private colleges and universities are employees under the [National Labor Relations Act], and therefore are entitled to the protections of Section 7 of the Act."

In Northwestern University, 362 NLRB No. 167 (August 17, 2015), the Board declined to exercise jurisdiction to certify the union’s proposed bargaining unit of scholarship football players. However, the Board specifically did not decide whether the players were statutory "employees." The General Counsel is convinced that they are.

In GC Griffin's words:

Thus, for instance, scholarship football players should be protected by Section 7 when they act concertedly to speak out about aspects of their terms and conditions of employment. This includes, for example, any actions to: advocate for greater protections against concussive head trauma and unsafe practice methods, reform NCAA rules so that football players can share in the profit derived from their talents, or self-organize, regardless of whether the Board ultimately certifies the bargaining unit.

Two days later, Rep. Virginia Foxx (R-NC), chairwoman of the House Committee on Education and the Workforce, and Rep. Tim Walberg (R-MI), chairman of the Subcommittee on Health, Employment, Labor, and Pensions, called on Griffin to "abandon his partisan agenda or step down immediately."

The Congressmembers issued a joint statement:

Last November, the American people demanded real change from Washington. They rejected the failed status quo that puts powerful special interests before the best interests of working families and small businesses. Richard Griffin is refusing to accept the lessons of the last election.
This partisan memorandum puts the interests of union leaders over America’s students, and it has the potential to create significant confusion at college campuses across the nation. It’s an affront to hardworking Americans for Griffin to double down on his extreme, Big Labor agenda, especially at a time when a new president is entitled to move the NLRB in a new direction.
Griffin should respect the will of the American people and rescind this memorandum immediately. If he is unwilling to set aside his extreme and partisan agenda, then he should step aside as general counsel.

Of course the handwriting is on the wall. GC Griffin's term will expire in November, and the new GC will reverse course. Whatever the current Board may do, please do not expect the soon-to-be-revealed Republican-dominated Board to adopt Griffin's position.

 

- Web site for Ross Runkel, Arbitrator & Mediator: https://www.RossRunkel.com/ -

Government's SCOTUS brief supports hospitals in ERISA church plan cases

"We've always done it that way" seems to be the main argument advanced by the government's amicus curiae brief [Text of brief] in the consolidated cases of Advocate Health Care Network v. Stapleton [Supreme Court briefs], Saint Peter’s Healthcare System v. Kaplan [Supreme Court briefs], and Dignity Health v. Rollins [Supreme Court briefs].

The brief is signed by the Deputy Solicitor General and supported by the Department of the Treasury, Internal Revenue Service, Department of Labor, and Pension Benefit Guaranty Corporation.

The controversy has to do with "church plans," which are specifically exempt from ERISA. Thus, church plans can ignore the many requirements and restrictions that ERISA requires of pension and benefit plans that are maintained by other private employers. The central issue is whether an employee benefit plan must be initially established by a church in order to qualify for ERISA's church plan exemption, or whether it is enough that the plan is maintained by a church or by a church-controlled or church-affiliated organization.

Here is a summary of the government's four main argument points, all of which lean heavily on the fact that the Internal Revenue Service, Department of Labor, and Pension Benefit Guaranty Corporation have always interpreted the statute as applying the church plan exemption to plans that were not initially established by a church:

  1. The agencies' interpretation reflects the natural reading of the statutory text. [I actually have some doubts about this, and the recent Circuit courts' decisions don't buy it.]
  2. The agencies' interpretation is supported by the context, history, and purpose of the Multiemployer Pension Plan Amendments Act of 1980 (MPPAA).
  3. The Court should give deference to the agencies' interpretation, citing Skidmore v. Swift & Co, 323 US 134 (1944).
  4. Nobody has come up with a good reason to upset decades of reliance interests.

Oral argument has not yet been scheduled. A decision is expected by July. For my previous comments on these cases: Ross Runkel Report - Supreme Court will decide 3 ERISA church-plan cases.

[For recent decisions and pending employment law cases, see US Supreme Court Watch.]

 

- Web site for Ross Runkel, Arbitrator & Mediator: https://www.RossRunkel.com/ -