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Weekly litigation report — September 2, 2017

By James S. Burling Vice President for Litigation
  • Can the executive branch be the judicial branch?
  • When is “just compensation” unjust?
  • Meet the new boss, same as the old boss?
  • Seattle residents challenge the City’s arbitrary and unconstitutional tax on achievement
  • The twilight of California’s tax-revolt?
  • PLF asks the Supreme Court to bet on the Constitution
  • Argument held to release pond builder from federal prison
  • Adverse decision in Alaska wetlands case
  • Free speech not just for pro-union organizations
  • PLF questions school’s free-expression restriction

Can the executive branch be the judicial branch?

Yesterday, we filed a friend of the court brief in Oil States v. Greene’s Energy, a Supreme Court Case that will resolve whether the U.S. Patent and Trademark Office’s inter partes review process violates Article III and the Seventh Amendment of the Constitution. In 2011, Congress passed the America Invents Act, which authorized the formation of the Patent Trial and Appeal Board (PTAB). The PTAB is a panel of three administrative law judges who—on request of any third party—review the validity of one or more claims of a patent after the patent has been granted. Rather than raising patent invalidity as a defense, defendants are increasingly petitioning the PTAB in an effort to invalidate the patent at issue. The problem is that patents are private property rights that cannot be extinguished by an executive branch tribunal without a jury.

A fundamental rule of our federal system is that the judicial power belongs to the judiciary. Almost 120 years ago in McCormick Harvesting Machine Co. v. C. Aultman & Co., the Supreme Court considered the post-grant cancellation of patent claims by a patent examiner. And it held that “[t]he only authority competent to set a patent aside, or to annul it, or to correct it for any reason whatever, is vested in the courts of the United States and not in the department which issued the patent.” This stands true today—the power to invalidate a patent belongs only to the courts.

Moreover, the Seventh Amendment ensures a jury trial “[i]n all Suits at common law.” The purpose of the Amendment is to preserve the right to jury trials as it existed at the time the Amendment was adopted. The Supreme Court has long held that patent infringement cases must be tried before a jury. The inter partes review process unconstitutionally removes patent infringement claims from the province of juries and places them into the hands of potentially biased bureaucrats.

Pacific Legal Foundation filed the brief on behalf of itself and in collaboration with Arent Fox, which represented Pacific Legal Foundation, Southeastern Legal Foundation, and National Association of Reversionary Property Owners.

When is “just compensation” unjust?

PLF filed an amicus brief in Jarreau v. South LaFourche Levee District, urging the U.S. Supreme Court to decide whether a business owner is entitled to recover economic losses when the government condemns land that supports the business. In the past, the Supreme Court instructed that a dispossessed owner must be put in “as good position pecuniarily as he would have occupied if his property had not been taken.” United States v. Miller (1943). But the Louisiana Supreme Court, in South Lafourche Levee District v. Jarreau, held that an award of just compensation “is limited to that required by the Fifth Amendment, which is the fair market value of the property at the time of the appropriation, which does not include loss profits and other severance damages.” PLF’s brief argues that the Louisiana court’s adoption of a categorical rule barring recovery of economic damages frustrates the purpose of the Just Compensation Clause. For more, see our blog post here.

Meet the new boss, same as the old boss?

On behalf of its client the Marquette County Road Commission, on Thursday Pacific Legal Foundation filed its Reply Brief in Marquette County Road Commission v. EPA, a case now pending before the Sixth Circuit Court of Appeals in Cincinnati. In this important administrative and environmental law case, PLF represents a local government agency in Michigan as it takes on the federal government and its Environmental Protection Agency. and Army Corps of Engineers. We seek immediate court review of EPA’s veto of the wetlands permit that the State of Michigan planned to issue to our client. That permit would have allowed the Road Commission to build the important road project it had planned for the Upper Peninsula of Michigan, but the Obama Administration’s veto prevented the project from going forward. One question here: why is the Trump Administration standing in the way of a project that would be good for the environment, good for the people of Michigan, and good for the nation’s infrastructure? Read our blog post to find out more.

Seattle residents challenge the City’s arbitrary and unconstitutional tax on achievement

The Washington State Constitution prohibits the government from levying an income tax on targeted segments of the population—requiring instead that any income tax be uniform upon all citizens. Despite several State Supreme Court cases upholding this ban on discriminatory taxation, the City of Seattle enacted an income tax targeting those making in excess of $250,000 per year with a 2.25% tax rate, setting a 0% rate for everyone else. Sold as a “wealth tax,” the City’s income tax aims to punish achievement and success, while threatening poor and middle class families who could fall subject to new city, county, and state taxes if Seattle’s actions go unchallenged.

In a complaint filed on behalf of several Seattle residents this week, PLF argues that the City knowing violated the law and is attempting to subvert its citizens’ rights by seeking to exclude ‘income’ from the state constitutional protections for property. For more on Shock v. City of Seattle, see our blog post here.

The twilight of California’s tax-revolt?

Four times, voters in California amended their constitution so that new taxes and fees can be imposed only with supermajority votes. One way to impose new taxes is through an initiative. If enough voters sign a petition, then a tax-measure can be put on an election ballot and if a supermajority of voters approve, there is a new tax. Now a unique twist in California’s election law states that if an initiative receives enough signatures to be put on a ballot, then a city council may itself, by majority vote, adopt the initiative as law without an election. But what if the initiative is for new taxes? Can a city evade the constitution’s requirement that a supermajority of voters vote in favor?

Apparently, the answer is yes.

In California Cannabis Coalition v. City of Upland, the Cannabis Coalition drafted and submitted an initiative that included new taxes.  The City of Upland refused to schedule a special election for the residents to vote on the initiative. Ultimately, the appellate court ordered an election, which was lost. That should have ended the case. Nevertheless, the California Supreme Court went ahead and reviewed the case. Now it has decided that the constitutional requirements allowing taxpayers to vote on new taxes in a general election, “only apply when a local government seeks to impose, extend, or increase a general tax.” (emphasis added) Taxes imposed by citizen sponsored initiatives are not required to be submitted to the voters at a general election.

In concurring and dissenting opinion, two justices disagreed, citing the intent of the voters to allow Californians to vote on all new taxes, whether those taxes are suggested by citizens or a local government. Despite that, we now have a loophole large enough to drive a truckload of new taxes through.

This ruling could allow for all manner of sweetheart tax deals, where a local pro-tax advocacy group (such as a government employee union) manages to get enough signatures on an initiative, only to have a local tax-friendly city council adopt the tax without a vote of the people. The court’s ruling will not only generate more litigation, but may lead to new initiative to clarify the voters’ intent to vote on all new taxes.

We filed this amicus brief arguing that the California Supreme Court should protect the hard-fought right of taxpayers to vote on all new taxes imposed by initiative.

PLF asks the Supreme Court to bet on the Constitution

We filed an amicus brief in the Supreme Court, joined by our friends at the Competitive Enterprise Institute, Cato Institute, and Wisconsin Institute for Law and Liberty, supporting New Jersey’s effort to repeal its own sports gambling laws. That reform effort, overwhelming supported by New Jersey voters, has been stymied by the federal Professional and Amateur Sports Protection Act, through which Congress has forbidden states from “authoring” sports gambling “by law.” By dictating to New Jersey and other states what their own sports gambling laws shall be, PASPA violates the Constitution’s protections against federal commandeering of the states. Our blog post explains that it also undermines political accountability, by making it more difficult for voters to know which politicians to blame for the policy. The Supreme Court will hear this blockbuster federalism case later this fall.

Argument held to release pond builder from federal prison

This week the Ninth Circuit Court of Appeals heard oral argument in U.S. v. Robertson, in which 78-year-old Joseph Robertson is appealing his criminal conviction for building two ponds without permission from the U.S. Army. Mr. Robertson is currently in federal prison in Colorado, finishing an 18 month sentence for his purportedly felonious impoundments. PLF filed an amicus brief supporting his case, arguing that the legal test used in the Ninth Circuit for identifying “navigable waters” under the Clean Water Act is wrong. As our brief demonstrates, careful analysis is necessary to identify the correct test, since no test has the support of a majority of the Supreme Court, and many courts disagree on how to apply Supreme Court decisions with no majority opinions. One of Robertson’s arguments on appeal is that even under the test used in the Ninth Circuit, there is no way for an ordinary citizen to know whether the Act applies to any particular property, and thus there is a failure of constitutionally required fair notice of what the law requires and forbids. At least one of the judges on the panel clearly agreed with this argument, pressed the government’s attorney on the point repeatedly, and did not seem satisfied with the answers. Whether this leads to reversal of Robertson’s conviction remains to be seen, but at least one judge out of three sees the light. See our blog post for a link to watch the argument.

Adverse decision in Alaska wetlands case

In Universal Welding & Fabrication Co. v. United States Army Corps of Engineers, the Ninth Circuit affirmed the Army Corps’ assertion of Clean Water Act jurisdiction over our client Universal Welding’s Fairbanks, Alaska, property. The case concerned the Corps’ regulatory exception for wetlands adjacent to other wetlands, which we contended applied to the 14 acres of low-functioning wetlands on the Universal Welding site. The Ninth Circuit, in an unpublished decision, ruled for the Corps on the ground that the agency’s narrow interpretation of the exception merits deference and should prevail. For more, see our blog post here.

Free speech not just for pro-union organizations

Friday we filed our reply brief in the Ninth Circuit in ABC-CCC v. BecerraThis case concerns California’s attempt to defund organizations that advocate against unions’ policy preferences.  The state argues that the law is neutral–it just happens to burden organizations like our client, which advocate from an open-shop perspective. We think it’s no coincidence. Blog post here.

PLF questions school’s free-expression restriction

On Tuesday, we sent this letter to Barbers Hill Independent School District. The school district banned a four-year-old boy, Jabez Oates, from attending pre-K because he has long hair. While we’re not representing the boy or his parents, we told the school that its ban violates the Equal Protection Clause, which prevents schools from discriminating on the basis of gender. The ban also violates the Free Speech Clause of the First Amendment and the Texas Religious Freedom Restoration Act, because Jabez’s grows his long hair as a way of identifying with his Native American roots.Our, blog post, with super cute pic of Jabez, is here.

 

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Oil States v. Greene’s Energy

In 2011, the federal America Invents Act authorized the formation of the Patent Trial and Appeal Board (PTAB). On the request of any third party, this panel of three Administrative Law Judges reviews the validity of one or more claims of a patent after the patent has been granted. Rather than raising patent invalidity as a defense, defendants are increasingly petitioning the PTAB in an effort to invalidate the patent at issue. The problem is that patents are private property rights that cannot be extinguished by an executive branch tribunal without a jury. The Supreme Court will decide whether this administrative tribunal is constitutional and PLF’s amicus brief argues that it is not.

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