SCOTUS News, May 25th, 2018: Epic Arbitration

This week SCOTUS only released two opinions. One of which, however, concerns three cases consolidated concerning employer-employee relations. With a decision in these consolidated cases, SCOTUS maintains a good pace, though still remains a bit sluggish compared to past terms.

Upper Skagit Tribe v. Lundgren

The Upper Skagit Tribe purchased a tract of land with the longer-term goal of adding it to their existing reservation. After conducting a survey of their new borders, the Tribe discovered an improperly placed border fence between their new property and the landowners next door, the Lundgrens. The Tribe told the Lundgrens they would be moving the fence. The Lundgrens filed suit, claiming the fence had been there for many years. The Tribe asserted sovereign immunity over the Lundgrens’ quiet title action.

The Supreme Court of Washington rejected the Tribe’s sovereign immunity claim, though. To do so, the court relied on precedent set by SCOTUS in County of Yakima v. Confederated Tribes and Bands of Yakima Nation. In this case, SCOTUS held that only taxes of land (i.e. “ad valorem”) could be levied on an Indian Tribe’s lands.

The Court distinguishes strongly between the Yakima decision and the case here. In this case, the Upper Skagit Tribe asserted sovereign immunity from suit, which the Washington Supreme Court interpreted as invalid. “This was error,” writes Gorsuch for the 7-member majority. “Yakima did not address the scope of tribal sovereign immunity. Instead, it involved only a … statutory interpretation concerning the Indian General Allotment Act of 1887”. Not only that, Gorsuch writes, but immunity principles applied in other areas don’t often apply the same way to Indian Tribes.

SCOTUS acts with a light touch here. In the main, they do not address the Lundgrens’ claim on its other grounds. This is because the Lundgrens brought up alternative grounds rather late in the procedural history. Rather, Gorsuch mentions that the principle most relevant to this case is the “immovable property” exception to sovereign immunity. This exception holds that all property within a sovereign territory is subject to that sovereign’s laws. If a foreign entity purchases land in that territory, that foreign entity is treated like a private individual, and does not enjoy sovereign immunity over that land. The land remains subject to the laws of the original sovereign. One cannot claim immunity from suit if one owns land under the domain of a sovereign.

But which sovereign? And how closely do Indian tribal rights cleave to those of other sovereigns? The Court declines to explore these issues in depth, as they are beyond the scope of the arguments properly raised. The resolution to this case is thus somewhat limited. What is clear, is that the Lundgrens have to use other means to litigate their land claim. SCOTUS rules 7-2 to vacate and remand the case back to Washington State. In a separate concurrence, Roberts – joined by Kennedy – reiterates this fact. There is not really an obvious remedy for the Lundgrens’ claim. They hope, along with the rest of the majority, that future cases will afford an opportunity for further clarification of tribal sovereign immunity, and of how that immunity pertains to land disputes.

Thomas, with Alito (dissenting)

Thomas takes issue with the fact that the main conclusion the Court draws is that Yakima doesn’t apply in this case. The disagreement that arose in this case will now persist at the state level and the federal level. In Thomas’ view, the judge-made doctrine of tribal immunity penetrates too far into the Constitution’s safeguards of state sovereignty. For that reason, he would affirm the lower court.

But one reason why Thomas and Alito stand alone in dissent without their fellow conservatives is that an Indian Tribe, by purchasing land adjacent to its reservation, could petition the US government to subsequently add the acquired land to their reservation. This question also remains unsettled at the level of SCOTUS. In his majority opinion, Gorsuch writes about the potential for a case to one day settle this matter; more than likely, this would require action by Congress or the Executive.


Epic Systems Corp. v. Lewis

(Ernst & Young v. Morris and NLRB v. Murphy Oil are both consolidated with this case.)

In these consolidated cases, employees at various companies entered into employment contracts that stipulated individual arbitration proceedings for dispute resolution. The employees here, though, tried to instead litigate their disputes as collective actions. Employers contend that these contracts force employees to forfeit the right to such concerted action. One of the major issues SCOTUS confronts in this case, is the interaction between the Federal Arbitration Act (FAA) and the National Labor Relations Act (NLRA).

Gorsuch writes again. Here he leads a slimmer majority than before, 5-4, holding that “arbitration agreements providing for individualized proceedings must be enforced…” The problem here, he writes, is that Congress never meant the NLRA to support class actions like those the employees are trying to assert. In fact, the NLRA was written before modern class actions even existed. The NLRA grants employees the right to collective bargaining, but neither class actions nor arbitration agreements are mentioned therein. This troubles the majority, especially because the NLRA is more specific about other aspects of labor law. No such level of detail exists in discussing arbitration agreements, though, or the potential for class status to contest such agreements.

The Ninth Circuit had interpreted a savings clause in the FAA differently. They held that the savings clause removed the obligation to arbitrate if the agreement violates some other federal law. SCOTUS overturns this interpretation, because they do not think the NLRA and FAA can override each other. “The [FAA] requires courts to enforce agreements to arbitrate, including the terms of arbitration the parties select.” There is no indication that the NLRA can override or otherwise negate this aspect of the FAA, despite employees’ objections. In fact, the majority writes that their job is to make sure both Acts of Congress can work in tandem with each other. Many precedents show that other courts have had little difficulty navigating conflicts between the FAA and other statutes. In addition, Congress hasn’t been shy about enacting dispute resolution measures under other circumstances, including those related to the FAA. Congress has even amended the FAA before. Why not again? The upshot: Declaring primacy of one Act over another requires express congressional intent. The majority finds no evidence of such intent here.

The majority invites the employees to look elsewhere for relief. The NLRA does not extend the right to act collectively when dealing with arbitration agreements, but the FLSA (Fair Labor Standards Act) may be an avenue that does. The employees brought up Chevron deference, stating that the NLRB should have control over how to interpret the NLRA. But Chevron only applies when ambiguity exists in a statute. The majority does not see the ambiguity the employees see; it’s quite clear from reading the FAA’s savings clause, and from reading past decisions, that the FAA controls the arbitration process, and that the NLRA is largely silent on the issue.

SCOTUS reverses in Ernst & Young and Epic Systems, and affirms the lower court in NLRB v. Murphy Oil.

Ginsburg, with Breyer, Sotomayor, and Kagan (dissenting)

The best summary of Ginsburg’s deep and detailed dissent is the following: “Employees’ rights to band together to meet their employers’ superior strength would be worth precious little if employers could condition employment on workers signing away those rights.”

The NLRA guarantees employees the right to organize via labor organizations. It also gives employees the right “to engage in other concerted activities for the purpose of collective bargaining or other mutual aid or protection.” The employers in this case argue that the FAA allows waiver of those rights in favor of individualized arbitration agreements. Essentially, though, they are taking away their employees’ right to organize. Employers are interpreting the FAA incorrectly, infringing the language and intent of the NLRA. In the dissent’s view, the concerted activity that employees attempted in this case – litigation as a class – stands squarely protected by the NLRA.

One action by the employers in this case that Ginsburg finds particularly heinous: Telling employees that merely continuing to work their jobs means they assent to the arbitration agreements. This goes against the NLRA’s express purpose.

The dissent pushes back against the majority on exactly what the express purpose of the NLRA is. Ginsburg reminds the Court that Congress intended the NLRA to be embracive and expansive. To read a narrow definition of the kinds of collective action the statute allows would be missing the point. Where the majority finds the NLRA’s vagueness troubling, Ginsburg sees this embracive intent. “For going on 80 years now, the [NLRB] and federal courts – including this one – have understood Section 7 to protect numerous activities for which the Act provides no “specific” regulatory guidance.” This leads Ginsburg to a parry of Gorsuch’s assertion that, because class actions didn’t exist in the ’30s, the NLRA can’t possibly protect them. Ginsburg uses the interpretation, the precedents, and the clear markers of congressional intent to argue that the NLRA is actually responsible for adapting to changing economic and industrial circumstances in precisely the way employees wish to do so here.

And is waiving the right to concerted action unlawful? Gorsuch favors the FAA’s interpretation that it is not. Ginsburg asserts that the waiver of the right to organize is in fact unlawful. The FAA was written to address arbitration in commercial disputes only. Congress specifically added language suggested by President Hoover that clearly stated the FAA did not apply to workers’ contracts of employment.

“We note that categories of contracts otherwise within the Arbitration Act but in which one of the parties characteristically has little bargaining power are expressly excluded from the reach of the Act…”

But a decades-long trend of court decisions has widened the scope of the FAA. This widening scope has led to a larger and larger percentage of employers including arbitration agreements in their employee contracts. This was not the intent of the FAA.

From this evidence, the dissent concludes, employees’ arbitration agreements unlawfully infringe on their right to collective and class action.

The Crowd

Wow. Both G’s of the Court fired off arguably their best writing of the term so far this week. The Crowd, meanwhile, is vindicated by their foreseeable divisions of opinion. The 5-4 decision in the consolidated labor cases has healthy hues of red and green:

epic systems lewis murphy oil nlrb ernst & young morris

Epic Systems Corp. v Lewis

When it came to the land rights case, the Crowd was less certain of which Justice would fall where. But it’s telling that Roberts and Kennedy – who joined the majority here – seemed the hardest for the Crowd to guess.

upper skagit indian tribe lundgren

Upper Skagit Indian Tribe v. Lundgren

In sum: Few surprises this week. Only two opinions in four total cases, but the Crowd batted a thousand. There are many more decisions on their way next week, and probably some more surprises lurking. Stay tuned.

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