Decided: June 16, 2016
The Fourth Circuit reversed and remanded the administrative law judge’s decision.
In 2007, George Monroe filed for disability insurance benefits (DIB) and supplemental security income (SSI) for problems related to uveitis that started in December 2006. Monroe’s applications were denied initially and following reconsideration in 2008, Monroe requested a hearing before an administrative law judge (ALJ). Following the hearing, the ALJ denied the application as well. In 2011, the Appeals Council examined Monroe’s request for review, vacated the ALJ’s decision, and remanded to another ALJ for a new decision that would determine specific issues. The Appeals Council also noted that Monroe had filed for DIB and SSI claims in 2010 and the second ALJ’s decision would put all the files together to address all of Monroe’s claims. The second ALJ’s hearing determined that Monroe was not disabled from 2006 through the date of the decision in 2012. Monroe filed a complaint in district court where a magistrate judge recommended that the district court deny Monroe’s motion to grant benefits. The district court followed the magistrate judge’s recommendation of denial and Monroe appealed.
Monroe’s argued on appeal that the ALJ committed legal errors when analyzing the record. The Plaintiff’s first argument was the second ALJ erred in not giving great weight to the first ALJ’s findings regarding the Plaintiff’s severe impairments in the now-vacated 2010 decision. The court disagreed with the Plaintiff’s first argument based on the court’s interpretation of Lively v. Secretary of Health and Human Servs., 820 F.2d 1391, 1392 (4th Cir. 1987) stating that SSA must give such findings as evidence and only need to give it the appropriate weight in light of all relevant facts and circumstances when adjudicating a follow up disability claim involving a unajudicated period. Based on this interpretation, nothing indicates that findings in prior non-final decisions are entitled to any weight; therefore the second ALJ did not err in reviewing Monroe’s application de novo. The court agreed with the Plaintiff’s argument that the ALJ erred by not using a function-by-function analysis to determine his RFC. By expressing Monroe’s RFC first and then concluding the limitations caused by Monroe’s impairments were consistent with that RFC, the ALJ made the error of overlooking limitations and restrictions that narrowed the ranges of work that Monroe may be able to do. For example, while the ALJ determined that Monroe had sleep apnea and narcolepsy, the ALJ never made any specific findings about whether Monroe’s impairments would cause him to experience loss of consciousness that would require breaks from work. Instead, the ALJ simply concluded that Monroe was capable of light work and that Monroe’s claimed symptoms were not credible to the extent they are inconsistent with the RFC the ALJ identified. The court stated that on remand the ALJ would need to consider Monroe’s narcolepsy and sleep apnea and all Monroe’s other impairments to determine on a function-by-function basis how they affect his ability to work. The court also told the ALJ on remand to give a more specific explanation of the ALJ’s reasons for the differing weights he assigned to various medical opinions. The court reversed the district court’s judgment and remanded with instructions to vacate denial of Monroe’s application for benefits and remand for further administrative proceedings.
Decided: March 7, 2016
The Fourth Circuit affirmed the district court’s ruling.
Appellant Cumberland County Hospital Systems, Inc., (“the Hospital System”) commenced this action to obtain a writ of mandamus compelling the Secretary of the Department of Health and Human Services to adjudicate immediately its administrative appeals on claims for Medicare reimbursement. In 2012 and 2013, the Secretary denied payment to the Hospital System on over 900 claims (amounting to $12.3 million) for reimbursement for Medicare services that she had initially authorized. The Secretary has not acknowledged receipt of some of the appeals and for others has reported a delay of over two years. Because the funds are necessary to the Hospital System’s operations, it brought this claim asserting that over 750 appeals await assignment to an Administrative Law Judge (“ALJ”) and violate congressional mandate 42 U.S.C. § 1395ff(d)(1)(A) that states the appeals must be heard and decided by an ALJ within 90 days.
Both parties agree the Secretary has over 800,000 appeals awaiting assignment to an ALJ, creating a ten-year backlog. While acknowledging the unacceptability of the backlog, the Secretary attributes it to an increased number of appeals within the Medicare system and inadequate funding by Congress to hire additional personnel. The Health System contends the backlog is mainly due to the Secretary’s mismanagement of HHS resources.
To show the Hospital System is entitled to mandamus relief, a plaintiff must show it has a “clear and indisputable right to the relief sought” and that the responding party has a “clear duty to do the specific act requested.” The Court agreed that the delay in the administrative process for Medicare reimbursement is incontrovertibly grotesque and that the Act gives the Hospital System the clear and indisputable right to the administrative process. However, the Court held that the Medicare Act does not give a clear and indisputable right to adjudication of its appeals before an ALJ within 90 days, as the Hospital System claims. Furthermore, the issuance of a judicial order directing the Secretary to hear the claims in the middle of the administrative process would unduly interfere with the process and work of the political branches. It would also invite other healthcare providers suffering similar delays to seek a mandamus order, thereby causing the judicial process to replace and distort the agency process.
Because the Court affirmed the district court’s conclusion that the Hospital system failed to state a claim upon which mandamus relief could be granted, it accordingly dismissed the Hospital System’s declaratory judgment claim that the delay of adjudication violated federal law.
Accordingly, the Court affirmed the district court’s ruling.
Decided: February 9, 2016
The Fourth Circuit affirmed the district court’s ruling, which found that Maryland’s absentee voting program did not comport with ADA and Rehabilitation Act requirements, and further found that plaintiffs’ proposed remedy—the use of an “online ballot marking tool” that would enable disabled voters to mark their ballots electronically—was a reasonable modification that did not fundamentally alter Maryland’s absentee voting program.
Maryland allows any voter to vote via absentee ballot. A voter may obtain a blank hardcopy absentee ballot by mail, fax, or by downloading and printing one from a website. The hardcopy ballot must be marked by hand, signed, and returned via mail or hand-delivery to the voter’s local election board. Plaintiffs, the National Federation of the Blind and individual disabled Maryland voters, sued state election officials under Title II of the Americans with Disabilities Act (“ADA”) and Section 504 of the Rehabilitation Act. Plaintiffs alleged that marking a hardcopy ballot by hand without assistance was impossible for voters with various disabilities, and that they had therefore been denied meaningful access to absentee voting. Plaintiffs sought both a declaratory judgment to that effect as well as an injunction requiring state election officials to make an online ballot marking tool available for use starting with the 2014 general election. The district court found that the plaintiffs had established that they had been denied meaningful access to absentee voting in Maryland in violation of the ADA and the Rehabilitation Act, and thus entered a declaratory judgment to this effect. The district court entered a permanent injunction prohibiting defendants from violating plaintiffs’ rights and requiring defendants to make an online ballot marking tool available to plaintiffs for the 2014 general election.
To show a violation of Title II of the ADA, one of the elements plaintiffs must show is that they were denied the benefits of a public service, program, or activity on the basis of their disability. Plaintiffs argued that the proper way to define the scope of the program at issue was to focus on Maryland’s absentee voting program, while defendants argued that the scope should be defined broadly and the voting program should be looked at in its entirety, encompassing the various voting alternatives—including in-person voting—available to Maryland voters. The Court found that it is far more natural to view absentee voting, rather than the entire voting program, as the appropriate object of scrutiny for compliance with the ADA and the Rehabilitation Act. In determining whether absentee voting was accessible to disabled individuals as required by statute and implementing regulations, the Court found that Maryland’s absentee voting program does not provide disabled individuals an opportunity to participate equal to that afforded others. The Court noted the importance of the policy behind such regulations. Ensuring that disabled individuals are afforded an opportunity to participate in voting that is equal to that afforded others helps ensure that those individuals are never relegated to a position of political powerlessness. By effectively requiring disabled individuals to rely on the assistance of others to vote absentee, defendants have not provided plaintiffs with meaningful access to Maryland’s absentee voting program. Since an online ballot marking tool had already been developed by Maryland, the plaintiffs’ proposed use of the tool is a reasonable modification to Maryland’s absentee voting policies and procedures. The Court further agreed with the district court that defendants have not met their burden to show that plaintiffs’ proposed modification—use of the online ballot marking tool—would fundamentally alter Maryland’s voting program. The tool is reasonably secure, safeguards disabled voters’ privacy, and has been used in actual elections without apparent incident.
Accordingly, the Court affirmed the judgment of the district court.
Katie E. Lowery
Decided: February 9, 2016
The Fourth Circuit affirmed the district court’s ruling.
In 2012, Walter Terry formed a congregation called the Reconciling People Together in Faith Ministries for religious worship in Newport News, Virginia. Initially, the members of the congregation gathered for worship at a local business owed by Terry but they later sought a larger location that was owned by Andon. The property had been classified as “commercial use” since Andon had owned it. The City’s zoning ordinance only allowed a community facility to be used if it met four conditions. Terry and Andon knew that the property failed to satisfy the “setback” requirement regarding the location of the property to properties zoned for residential use. Knowing this, Terry and Andon still decided to a contingent agreement based on Andon getting approval from the City to use the property as a church. The board of zoning appeals (BZA) denied Andon’s variance request on the setback requirement because denial would not cause Andon a unique hardship. Plaintiffs filed suit claiming the City’s variance denial placed substantial burden on plaintiffs’ religious exercise in violation of the Religious Land Use and Institutional Persons Act (RLUIPA). The district court dismissed the complaint for failure to state a claim and granted the City’s motion to deny the plaintiffs’ request to file an amended complaint.
The plaintiffs alleged that RLUIPA had been violated because as a result of BZA’s action, the congregation had been unable to find a suitable location in the City for worship and the plaintiffs had suffered by the delay in establishing a church location. The plaintiffs relied on a RLUIPA provision that prohibited governmental regulation of land that imposes a substantial burden on the religious exercise of an assembly unless the burden furthers a compelling governmental interest and is the least restrictive means of furthering that compelling government interest. The Court found that the plaintiffs could not show the regulation caused a hardship that substantially affected the plaintiffs’ right of religious exercise. The Court distinguished this case from its decision in Bethel World Outreach Ministries v. Montgomery County Council, 706 F.3d 54 (4th Cir. 2013), because here the plaintiffs never had a reasonable expectation that the property could be used as a church. The plaintiffs knew before entering into the contingent lease agreement that the property failed to meet the required setback provision. The assumption of risk that the board of zoning appeals would deny the variance request and the burden it created on the plaintiffs were self-imposed hardships. Self-imposed hardships do not support substantial burden claims under RLUIPA because the hardship was not the result of government action altering a pre-existing expectation of land use. The district court did not abuse its discretion by denying the plaintiffs’ request to amend their complaint because the hardship was self-imposed. The plaintiffs would be unable to articulate any set of facts that would survive the City’s motion to dismiss, thus the Court agreed with the district court that any amendment to the complaint would have been futile.
Accordingly, the Court affirmed the judgment of the district court.
Decided: January 21, 2016
The Fourth Circuit denied Knox Creek’s petition for review.
This case stemmed from a series of inspections that the Mine Safety and Health Administration (“MSHA”) conducted in Knox Creek’s Tiller Mine, four citations of which are at issue in the case, three permissibility violations and one accumulations violation. Although the ALJ found that the Secretary had not provided sufficient evidence that the violations were “significant and substantial” (“S&S”), but on review, the Commission found that the ALJ had applied the test incorrectly, and when it clarified the standard, found that the permissibility citations were S&S. As to the accumulations violation, the ALJ determined that it too was not S&S, and the Commission reversed that decision as well. The Commission then remanded to the ALJ for it to recalculate the penalties in light of the violations’ S&S designation. Once the ALJ imposed the revised penalties, and the Commission denied Knox Creeks’ petition for review, the Fourth Circuit determined that it was then ripe for review.
The Fourth Circuit began its analysis by disposing the challenge that the Commission exceeded its statutory standard of review because it reversed findings of the ALJ that were supported by substantial evidence. The Court found that the Commission did not reverse the ALJ’s factual findings, and instead reversed solely based on the correction of the legal error and clarified the legal standard that the ALJ was to use in determining if the violations were S&S. The Court went through the familiar Chevron analysis when looking at ambiguities in the statute of the Mine Act, and found that the second requirement of Mead was lacking, so the Secretary’s litigation position was not entitled Chevron deference. However, the Court noted that some deference was still to be given to the Secretary’s interpretation. The Court then looked at the Mathies test, and found that the Secretary’s interpretation of its third prong was consistent with earlier precedent and legislative intent, that a reviewer is to assume the existence of the relevant hazard when analyzing the third prong. The Court also dismissed Knox Creek’s argument that such an interpretation would change the test to allow every violation to be deemed S&S, because the third prong still required evidence that the hazard was reasonably likely to result in an injury-producing event, and because the second prong was still necessary in the analysis. In applying the legal standard, the Court then found that the S&S determinations were supported by substantial evidence, and denied the petition for review.
Decided: December 18, 2015
The Fourth Circuit denied the petition for review.
The Fourth Circuit began by laying out the statutory and regulatory framework, looking at the creation of the Spectrum Act, specifically Section 6409(a) of the Act, and an Order issued by the FCC implementing that section. The Court focuses on two aspects of the Order, one that establishes a “deemed granted remedy,” and the other that clarifies the definitions of “substantial,” “wireless towers,” and “base stations.” After carefully describing both aspects of the Order, the Court then turned to Petitioners’ arguments that the FCC’s order violates the Tenth Amendment “by compelling the states to grant permit applications,” and that the definitions in the Order are inconsistent with the Act.
With respect to the Tenth Amendment argument, the Court determines that it has jurisdiction to review constitutional challenges, and that it is to set aside agency action that is “contrary to constitutional right.” Specifically, as delineated in case law, the Tenth Amendment does not allow the federal government to require states to enforce federal law, subject to certain exceptions. However, when the Court reviews the “deemed granted” procedure, it concludes that the procedure complies with the Tenth Amendment. The Order does not force the states to take action, because the “deemed granted” provision gets rid of the need for the states to “affirmatively approve applications,” instead allowed them to be granted by default without states’ approval. Therefore, there is no Tenth Amendment conflict.
The Court then turns to the Petitioners’ contentions that the FCC terms were unreasonably defined in the Act. However, the Court determined that it could set aside the Order only if concluded that the FCC’s rules were “arbitrary, capricious, an abuse of discretion, or otherwise not in accordance with law.” Furthermore, under Chevron, the FCC was entitled to deferential review of its interpretation of Section 6409(a). The Court then applied the Chevron analysis. First, the Court found that the terms at issue are ambiguous. Therefore, the sole inquiry before the Court under the analysis was whether the interpretation was “based on a permissible construction of the statute.” Specifically, the Court looked at how the FCC defined “substantially change” and “base station.” Petitioners argue that the FCC should have permitted municipalities to review applications on a case-by-case basis, and because of this, the Court determines that they are not arguing about the standards themselves, but about the fact that the FCC set those standards at all, an argument that the Court deems is improperly raised in the Court. However, the Court concludes that the standards do allow for the incorporation of some context, even if there is no case-by-case consideration. As to the definition of “base station,” the Court determines that its definition does align with the purpose of Section 6409(a), and that it is defined in accordance with the regulatory schemes; in this case, the definition is “consistent with Congress’s intent to promote the expansion of wireless networks through collocation.” Therefore, the Fourth Circuit held that the Petitioners failed to carry their burden, and denied their petition.
Decided: December 17, 2015
The Fourth Circuit reversed the order of the district court and remanded the case for further proceedings.
On February 5, 2009, Plaintiff Jeffrey Pearson (“Pearson”) was laid off from his most recent job. Six weeks later, Pearson applied for Social Security disability benefits under Titles II and XVI of the Social Security Act. Pearson claimed to be disabled due to arthritis of the spine, degenerative joint disease and a torn rotator cuff in his right shoulder, shin splints, degenerative artery disease in his feet, a hiatal hernia, irritable bowel syndrome, post-traumatic stress disorder, depression, and anxiety. Pearson’s application was initially denied and an administrative law judge (ALJ) affirmed the denial. The Social Security Appeals Council (Appeals Council) granted Pearson’s request for review and remanded the case for further consideration, including testimony from a vocational expert.
At the second ALJ hearing, the ALJ posed several scenarios to the vocational expert. The expert testified that the hypothetical individual with Pearson’s disabilities would have been unable to perform Pearson’s previous jobs, but that Pearson could perform many other jobs in the national economy The expert did not mention any conflicts between his testimony and what is contained within the Dictionary of Occupational Titles (“Dictionary”). As such, the ALJ affirmed its initial denial of benefits to Pearson. The ALJ concluded the Pearson could not perform his past jobs, but that he could perform jobs that exist in a significant number in the national economy. The Appeals Council denied a second review. Next, Person filed this action in federal court. The magistrate judge recommended a grant of summary judgment for the Social Security Administration Commissioner (“Commissioner”). Person filed objections, but the district court adopted the magistrate judge’s recommendation.
On appeal, the Fourth Circuit noted that it must uphold the determination of the ALJ when it has applied correct legal standards and the factual findings are supported by substantial evidence. Pearson argued that the ALJ must do more than simply ask the vocational expert if his testimony conflicts with the Dictionary. The Commissioner disagreed, and argued that the ALJ only has the single “affirmative responsibility” to ask the vocational expert whether his testimony conflicts with the Dictionary. The Court agreed with Pearson and held that the ALJ must independently identify conflicts between the expert’s testimony and the Dictionary. The Court found that, in this case, the expert’s testimony conflicted with the Dictionary. However, the Court noted that this simply “means that the ALJ and the expert should address exactly what form of reaching the stated occupations require and whether the claimant can fulfill those requirements.” Therefore, in this case, the vocational expert must testify as to how many of the possible positions do not require bilateral overhead reaching so that Pearson could perform all aspects of the job. If there are a sufficient number of the positions that do not require frequent bilateral overhead reaching, then the ALJ can properly find that Pearson is not disabled.
Accordingly, the Court reversed the judgment of the district court and remanded the case with instructions to remand it to the Commissioner for further proceedings.
Decided: December 4, 2015
The Fourth Circuit affirmed the district court’s decision finding no error in the release of the statutory damages claims as part of a Rule 23(b)(2) settlement, and no abuse of discretion in the approval of the settlement agreement.
This dispute involved Lexis’s sale of personal data reports to debt collectors. According to the class action plaintiffs, Lexis failed to provide the protections of the Fair Credit Reporting Act (FCRA) in connection with these identity reports (Accurint for Collections). However, according to Lexis, its data reports do not qualify as “consumer reports” within the meaning of the FCRA; therefore, it is not required to comply with the FCRA. After a large amount of time and expenses, a deal was agreed upon. Lexis would make changes to its product offerings in order to secure consumer information, and in exchange, the members of the class action would release any statutory damages claims under the Act. The district court certified a settlement class under Federal Rules of Civil Procedure Rule 23(b)(2) and approved the class action settlement. Here, a group of class members are seeking to undo that settlement agreement wanting to pursue statutory damages individually. In order for these members to receive statutory damages, they must prove not only that Lexis violated the FCRA, but also that it did so willfully. Unless Lexis was “objectively reasonable” in concluding its Accurint reports were not “consumer reports” subject to the FCRA, then there would be no liability for statutory damages.
First, the objectors challenged the district court’s certification of the (b)(2) class for settlement purposes. The decision to certify a class is reviewed for “clear abuse of discretion.” Substantial deference is given to the district court in making this decision. Under the Federal Rules of Civil Procedure, Rule 23(a), a party seeking class certification must first demonstrate “(1) the class is so numerous that joinder of all members is impracticable; (2) there are questions of law or fact common to the class; (3) the claims or defenses of the class; and (4) the representative parties will fairly and adequately protect the interests of the class.” Next, if these requirements are met, then the proposed class must fit within one of the three types of classes listed in Rule 23(b). Here, objectors take issue with Rule 23(b)(2), which allows certification where “the party opposing the class has acted or refused to act on grounds that apply generally to the class, so that final injunctive relief or corresponding declaratory relief is appropriate respecting the class as a whole.” Rule 23(b)(2) classes are to be a homogenous group with little conflicting views because “opt-out rights” for class members are not provided.
Rule 23(b)(2) classes can occasionally, but not often, be certified even when monetary relief is at issue; however, monetary relief must be incidental to injunctive or declaratory relief. However, the Fourth Circuit agreed with the district court in that the “meaningful, valuable injunctive relief” awarded by the Agreement is indivisible and benefits all members of the class at once. There are surely individualized monetary claims at issue; however, those are claims for actual damages and are retained by the (b)(2) class members. Additionally, the objectors argue that due process precludes the certification of a class without opt-out rights; however, the Fourth Circuit declined to go where the Supreme Court has not and followed the precedence of not recognizing the rigid opt-out rule proposed by the objectors. Further, the Fourth Circuit deferred to the judgment of the district court in approving the Class Representatives’ fee award because there was no conflict of interest between the Class Representatives and the rest of the class.
Next, the objectors challenge the approval of the district court regarding the (b)(2) class settlement, arguing that it was unfair and inadequate because it releases the statutory damages claims of the class members without providing any monetary relief in exchange. The Fourth Circuit concluded that the district court correctly considered the identified factors bearing on this issue: “(1) the posture of the case at the time the settlement was proposed, (2) the extent of discovery that had been conducted, (3) the circumstances surrounding the negotiations, and (4) the experience of counsel in the area of [FCRA] class action litigation.” In order to recover statutory damages under the FCRA, the plaintiffs would have to show a “willful” violation by Lexis, which in turn would require that Lexis adopted an “objectively unreasonable” reading of the FCRA when it concluded that its reports were not covered as “consumer reports.” Lexis had agency guidance from the Federal Trade Commission expressly stating that these reports are not subject to the FCRA. Therefore, the Fourth Circuit determined that Lexis did not act unreasonable by adopting that reading, and ultimately, the district court was appropriate to approve the settlement as fair, reasonable, and adequate under Rule 23(e).
Finally, a single objector challenged the district court’s approval of class counsel’s approximate $5.3 million dollar attorneys’ fee. The award of attorneys’ fees must be reasonable and will only be overturned if it is clearly wrong. The Fourth Circuit determined the district court’s approval of the fee award was appropriate because class counsel “expended large amounts of time and labor, and achieved an excellent result in this large and complex action.”
Austin T. Reed
Decided: December 1, 2015
The Fourth Circuit affirmed the ruling of the district court.
Plaintiff, Tommy Davis Construction, Inc. (“Davis Construction”), while developing a residential subdivision named Becker Woods, arranged to have Aqua NC provide water and sewer services to each lot in the subdivision. In February 2005, Davis Construction applied for building permits from the County for Becker Woods. The County informed Davis Construction that it would be required to pay “impact fees” to the Water and Sewer District, even though the County would not be providing water and sewer services to Becker Woods. Therefore, Davis Construction was required to pay fees to both Aqua NC and the County’s Water and Sewer District. Davis Construction objected repeatedly, but eventually paid the fees. Between March 2005 and July 2006, Davis Construction paid $34,268.96 in impact fees to build houses on 23 lots. In 2007, the County created Cape Fear Public Utility Authority (“Authority”), which assumed all the rights and liabilities of the Water and Sewer District and began operating the public water and sewer system in the region. During this period, the Authority and the County changed the prior impact fee policy, and as a result, when Davis Construction applied for another lot in Becker Woods, the County did not collect an impact fee. Davis Construction subsequently requested a refund for his previous impact fees, but the Authority denied the request. As a result, Davis Construction commenced this action, seeking a refund of the impact fees it paid to the Water and Sewer District in 2005 and 2006, plus interest and attorney’s fees.
The district court, on the parties’ cross-motion for summary judgment, ruled in favor of Davis Construction, holding that the Defendants’ collection of impact fees from Davis Construction for the Becker Wood property was “an ultra vires act beyond their statutory authority.” The court ordered Defendants to pay plaintiffs $34,268.96 with interest, plus attonrey’s fees of $20,000.
On appeal, the Court first addressed the Defendants’ argument that the district court erred in refusing to dismiss Davis Construction’s claims as untimely. The Court found that while the federal due process claims were time barred, Davis Construction’s state claims were timely filed. The Court concluded that N.C. Gen. Stat. § 1-56, which provides a 10-year statute of limitations, applied to Davis Construction’s state-law claims, and were therefore filed well within the limitations period.
The Court next addressed whether the district court erred in concluding that Defendants’ collection of impact fees from Davis Construction was ultra vires. The district court concluded that the Defendants’ failed to show that they would be able to furnish water and sewer services, per the requirements of N.C. Gen. Stat. §162A-88, to Becker Woods within any meaningful time in the future. The Court agreed with the district court’s reasoning and concluded that the Defendants exceeded their statutory authority by requiring Davis Construction to pay the impact fees. Further, the Court held that the district court had authority to award attorney’s fees to Davis Construction.
Accordingly, the Court affirmed the district court’s judgment and its award of attorney’s fees.
Decided: November 13, 2015
The Fourth Circuit reversed and vacated the injunction.
Gavin Class (“Class”), who had been a member of the Towson University (“Towson”) football team, suffered heatstroke during practice, which resulted in numerous surgeries and a long recovery time. Although Class wanted to return to play football, he was unable to receive clearance from the Team Physician under the “Return-To-Play Policy,” (“Policy”) because although he underwent a rigorous training program, he could not pass the heat tolerance tests on numerous occasions. Class brought this action against Towson, claiming the decision violated Title II of the Americans with Disabilities Act (“ADA”), and Section 504 of the Rehabilitation Act, claiming that his inability to regulate his body temperature and susceptibility to heatstroke amounted to a “disability.” The district court ruled in favor of Class, and issued a permanent injunction prohibiting Towson from violating those two Acts. Towson appealed, claiming that the district court erred in holding that Class was disabled as defined by the Acts and that Class was “otherwise qualified” for the program.
The Fourth Circuit began by carefully reviewing the district court’s record, including testimony Dr. Kindschi, (“Kindschi”) the Team Physician, and Dr. Casa, (“Casa”) the Institute’s Chief Operating Officer. It then addressed Towson’s claim that the district court erred in finding that Class had a disability. Towson argued that although an impairment “that is episodic or in remission would qualify as a disability if it substantially “limits a major life activity when active,” Class’s limitations were not episodic or in remission. Towson also argued that intercollegiate football was not a major life activity. The Court carefully reviewed the statutory requirement for showing disability, including the definition of a “major life activity.” The Court specifically focused on the phrase “when active,” to determine the exact limits of the phrase, although declined to investigate whether the phrase extended to cover a condition that became active only under extreme conditions because it found that Class was not “otherwise qualified” to participate in the football program with accommodations.
In order to show that he was “otherwise qualified,” Class had to show the “academic and technical standards requisite to admission or participation in the school’s education program or activity,” with the term “technical standard” referring to all nonacademic admissions criteria. The Court acknowledged that it would allow a measure of deference to the school’s professional judgment when looking at whether an eligibility requirement was essential and had been met. Specifically, Towson contended that its Policy was an essential eligibility requirement, and the Court agreed that such a Policy that gave the Team Physician final clearance authority was consistent with NCAA guidelines and was a fair and reasonable method for Towson to employ. The Court thus concluded that the Towson’s requirement that a student-athlete needed to obtain the Team Physician’s clearance to return to play is an essential eligibility requirement. Nevertheless, Class argued that the specific decision to reject his proposed accommodations was unreasonable, because, he claimed, the decision was based on her feelings and not on medical or scientific evidence. In looking at whether the Team Physician’s opinion was reasonable, the Court pointed out that although the Team Physician was accorded some deference, the Court still needed to make sure that the decision was not a pretext for illegal discrimination. The Court specifically focused on whether the Team Physician and Towson reasonably considered the six proposed accommodations. Towson claimed that two of the accommodations were unreasonable, and although the Court dismissed some of Towson’s contentions, the Court accepted the contentions that the accommodations were not reasonable because they “would not effectively satisfy Towson University’s safety concerns” and “would require fundamental changes in the nature of its football program.” Looking at the record, the Court concluded that the Kindschi’s decision that Class couldn’t play football without substantial risk was well supported. Furthermore, the Court found that her opinion that the accommodation to monitor Class’s internal body temperature would not adequately meet the needs of health and safety was also supported. Finally, the Court agreed that the accommodations would fundamentally alter the nature of its football program, because it would substantially impinge on the Team Physician’s role.
For these reasons, the court vacated the injunction, and did not reach the challenges to the district court’s evidentiary rulings.
Decided: November 13, 2015
The Fourth Circuit held that the judgment of the district court involving the calculation of damages and late fees was appropriate.
In accordance to the Telecommunications Act of 1996, CoreTel and Verizon entered into interconnection agreements (ICAs). The Act requires incumbent local exchange carriers such as Verizon to allow competitive local exchange carriers such as CoreTel to connect with end users over the incumbent’s network. Carriers negotiate private agreements with each other to establish the rates and terms in which their networks will be interconnected. The ICAs govern certain aspects of interconnection such as CoreTel’s use of Verizon’s physical telecommunications facilities.
In CoreTel I, the Fourth Circuit addressed a dispute between the parties involving what rates CoreTel must pay to use Verizon’s facilities. The Court held that Verizon should have billed CoreTel for facilities at the total element long-run incremental cost (TELRIC) rate instead of the tariff rates. Therefore, CoreTel was entitled to summary judgment regarding Verizon’s claim for declaratory relief relating to Verizon’s facilities charges. The Fourth Circuit did not resolve Verizon’s claim for damages associated with CoreTel’s breach of the ICAs. Instead, the case was remanded so that the district court could apply the proper TELRIC rates to calculate what CoreTel owes Verizon for the use of Verizon’s facilities.
On remand, the district court held a bench trial, where Verizon presented the tariff-based monthly bills it had issued to CoreTel and the “pricing attachments” to the ICAs. These monthly bills explained “(1) what facilities Verizon provided to CoreTel; (2) whether the facility was provided by Verizon Virginia or Verizon South and, if split between those two, the percentage of the facility in each company’s service area; and (3) for transport facilities billed by the mile, the number of transport miles provided. From the evidence, Verizon developed a summary spreadsheet showing the specific amount owed for each at TELRIC rates. The entries totaled $227,974.22 in damages. Verizon also calculated late fees at 1.5% per month on the facilities charges under the ICAs, totaling $131,885.25. CoreTel objected to Verizon’s proposed damages calculations, but the district court rejected and entered judgment for Verizon in the full amount. This appeal followed.
Here, CoreTel argues (1) that the district court violated the Fourth Circuit’s mandate in CoreTel I by awarding as damages any TELRIC-based facilities charges at all; (2) that even if Verizon can recover facilities charges, the district court erred in calculating the total amount owed; and (3) that the district court also erred in its calculation of late fees. The Fourth Circuit clarified that the mandate rule applies, prohibiting lower courts from considering questions that the mandate of a higher court has laid to rest. CoreTel was incorrect in believing CoreTel I froze not only the law of the case but also all of the underlying facts. The only matter that the mandate of CoreTel I “laid to rest” was that TELRIC rates should apply, not tariff rates. The district court did not err and followed that ruling.
The Fourth Circuit determined that the district court did not err when it considered Verizon’s damages claim. In CoreTel I, the Court expressly did not resolve Verizon’s claim for damages associated with CoreTel’s breach of the ICAs. The case was remanded to the district court to consider Verizon’s damages claim, and the district court appropriately followed this mandate.
After discussing background information regarding the technical aspects of ICAs, the Fourth Circuit affirmed the district court’s calculation of the TELRIC-based facilities charges CoreTel owes Verizon. CoreTel must pay TELRIC based facilities charges for any Verizon facilities it uses to transport traffic between the point of interconnection (POI) and the relevant Verizon interconnection point (IP). The specific objections that CoreTel had with the district court’s damages calculations were addressed individually; however, the Fourth Circuit ultimately rejected each argument and affirmed the calculation of the facilities charges set forth by the district court.
Finally, CoreTel challenged the district court’s award of $138,724.47 in late fees to Verizon. CoreTel argued “(1) that it cannot owe late fees under the ICAs because Verizon has never issued it formal bills at the proper TELRIC rates, (2) that Virginia law limits any late fees to 5% per year rather than the ICA-prescribed 18% per year that the district court imposed, and (3) that the principal on which any late fees are calculated should be offset by certain payments Verizon has withheld from CoreTel during this course of litigation.” However, similarly, the Fourth Circuit rejected each of CoreTel’s arguments and concluded that the district court properly calculated the late-fees. Therefore, the ultimate judgment of the district court was affirmed.
Austin T. Reed
Decided: October 21, 2015
In a False Claims Act (FCA) case, the Fourth Circuit held that Pennsylvania Higher Education Assistance Agency (PHEAA) was not an arm of the State of Pennsylvania. As such, PHEAA was not immune to suit under the 11th Amendment. On this basis, the Fourth Circuit vacated the District Court’s grant of summary judgment to PHEAA, and remanded for further proceedings.
Oberg brought suit under the False Claims Act against PHEAA and other state-created student-loan providers alleging that from 2002 to 2006, the providers had fraudulently claimed federal student loan interest-subsidy payments. Over the history of the lawsuit, the other defendants settled or were dismissed, leaving PHEAA as sole defendant. On its first decision in this case, the Fourth Circuit held that the District Court erred by concluding PHEAA was a state agency, and dismissing the complaint without applying arm-of-state analysis. On a subsequent appeal, after the District Court applied arm-of-state analysis, the Fourth Circuit found that the District Court erred in dismissing the case against PHEAA, because Oberg had alleged enough to claim that PHEAA was not an arm-of-state. The Fourth Circuit engaged in an arm-of-state analysis, and found the factors mixed, but sufficient to overcome PHEAA’s motion for dismissal. On remand, after discovery, PHEAA moved for summary judgment on the arm-of-state issue, and the District Court granted the motion, finding that all factors in the analysis pointed towards PHEAA being an arm-of-state. The sole issue on appeal before the Fourth Circuit in the instant case was whether PHEAA was an arm-of-state of Pennsylvania, and thus immune from FCA liability.
The Fourth Circuit analyzed four factors to decide whether PHEAA was an arm-of-state. First, an entity is an arm-of-state if judgments against the entity will be paid by the state. This factor encompasses both legal and functional liability. Second, an entity is an arm-of-state if it is not autonomous from the state. Third, an entity is an arm-of-state if it is involved with state concerns rather than non-state concerns. Fourth, an entity is an arm-of-state if state law treats it as such.
The Fourth Circuit found that the first factor, liability, strongly suggested that PHEAA was not an arm-of-state. In its previous decision, the Fourth Circuit had found that Pennsylvania was not legally liable for judgments against PHEAA, and that finding remained controlling in regards to legal liability. The Fourth Circuit found in the instant case that Pennsylvania was not functionally liable for judgments against PHEAA. The Fourth Circuit made this finding based on PHEAA’s financial strength and independence, including gubernatorial recognition of PHEAA as having control over its own monies, PHEAA’s ability to settle previous suits against it, and PHEAA’s creation of its own charitable organization. Despite some degree of control over PHEAA funds, such as requiring that commercial funds be deposited in the State Treasury and that the Treasurer approve payments, the Fourth Circuit found, based on state law and the actual Treasury approval process, that these elements did not make PHEAA funds into state funds.
The Fourth Circuit found that the second factor – autonomy – also suggested PHEAA was not an arm-of-state. Because PHEAA was financially independent, granted broad statutory powers, and operated largely free of legislative interference, the Fourth Circuit found that PHEAA was autonomous from the state. The Fourth Circuit found that this independence outweighed factors which suggested state control, such as Attorney General review of contracts over $20,000, requiring commercial funds be deposited in the state treasury, and PHEAA being subject to state laws.
With respect to the state concerns factor, the Fourth Circuit found that the factor pointed weakly towards PHEAA being an arm-of-state. Although on remand, a discovery violations sanction established that PHEAA’s revenue should be considered majority out-of-state from 2002 to 2014, the Fourth Circuit found that PHEAA provides services to Pennsylvania citizens, and provides an “‘essential government function.’”
On the fourth factor, the Fourth Circuit found that PHEAA’s treatment under state law pointed towards it being an arm-of-state. The Fourth Circuit noted that the District Court found that PHEAA was created by, and its powers came from, the General Assembly, that PHEAA was exempt from state tax, subject to state law, and that PHEAA employees were state employees. The District Court thus found that this factor weighed heavily in favor of PHEAA being an arm-of-state. The Fourth Circuit agreed that the factor weighed in favor of PHEAA being an arm of Pennsylvania, but didn’t find the factor as weighty.
The Fourth Circuit’s analysis of the four factors was thus mixed. With that mixed analysis, the Fourth Circuit considered the purpose of 11th Amendment immunity – protecting state treasuries, and respecting the sovereignty of states. Given those purposes, and the mixed arm-of-state analysis here, the Fourth Circuit found that PHEAA should not be considered an arm-of-state, and thus should be subject to FCA liability. On this basis, the Fourth Circuit vacated the district court’s grant of summary judgment, and remanded for further proceedings.
Katherine H. Flynn
Decided: July 2, 2015
In a case under the False Claims Act (“FCA”), the Fourth Circuit affirmed the district court’s grant of a new trial to the government, although it did so based on different reasoning from the district court. The Fourth Circuit found no errors by the district court in the second trial. On this basis, the Fourth Circuit affirmed the district court.
Tuomey is a nonprofit hospital located in a rural, medically underserved area of South Carolina. Around 2000, doctors began moving from performing outpatient surgery at Tuomey to performing such surgeries in their offices or at off-site surgical centers. This shift represented a substantial loss in income for Tuomey, which tried to prevent the loss by employing local physicians part-time. In creating the employment contracts, starting in 2003, Tuomey sought advice from its law firm, a consulting firm, a former Inspector General with the U.S. Department of Health and Human Services, and an additional lawyer on the impact of the Stark Law, 42 U.S.C. § 1395nn. The Stark Law prohibits physicians from referring patients to health care entities where the physician receives compensation based on the volume or value of the referrals, and prohibits hospitals from submitting Medicare claims which violate this referral rule. The employment contracts Tuomey designed based compensation largely on the physician’s collections the previous year, and also paid an incentive bonus based on collections. The contracts required physicians to perform outpatient surgeries at Tuomey. Tuomey entered into these contracts with 19 physicians, but Dr. Drakeford objected, believing that the contracts violated the Stark Law. In 2005, Tuomey and Drakeford sought the advice of attorney Kevin McAnaney, who had experience in the federal government and the Stark Law, and who noted that the employment contracts raised “‘red flags’” under the Stark Law, and would be an easy case for the government to prosecute.
Drakeford sued the hospital in a qui tam action claiming the employment contracts violated the Stark Law, and thus the hospital knowingly submitted false payment claims to Medicare in violation of the FCA. The government intervened, and added equitable claims seeking return of payments made. At trial, McAnaney’s testimony and opinions were excluded as either an offer to compromise or settle under Fed. R. Evid. 408, or as a violation of the duty to his clients Tuomey and Drakeford. The trial court also excluded the deposition of Gregg Martin, Tuomey’s Senior Vice President and Chief Operating Officer, regarding a conversation he had with Tuomey’s attorney about McAnaney’s opinions as a way of getting McAnaney’s opinion admitted. The jury found that Tuomey had violated the Stark Law, but not the FCA. The government filed a motion for judgment on its equitable claims, and a motion for judgment as a matter of law on the FCA claim, or for a new trial due to the exclusion of McAnaney’s testimony and opinions and Martin’s deposition. The district court denied the motion for judgment as a matter of law, but granted the motion for a second trial, finding it committed a substantial error in excluding Martin’s deposition from the trial. The court also granted judgment for the government for nearly $45 million dollars plus interest on the Stark Law equitable claims. On appeal, the Fourth Circuit vacated the judgment, finding that the district court’s grant of a new trial made the finding of a Stark Law violation null, and remanded for a new trial on all claims.
At the second trial, the judge admitted both the Martin deposition and McAnaney’s testimony. The jury found for the government on both the Stark Law and FCA claims. Based on 21,730 false claims submitted to Medicare with a value of over $39 million, and trebling of actual damages and additional civil penalty required under the FCA, the trial court entered a judgment of more than $237 million against Tuomey. Tuomey appealed, arguing that the trial court erred in granting the government’s motion for a new trial on the FCA claim, or if not, the district court erred in either denying Tuomey’s motion for judgment as a matter of law or new trial following the second trial, or awarding damages based on the jury’s finding of an FCA claim.
The Fourth Circuit first held that the district court did not err in granting a new trial on the FCA claim. The Fourth Circuit found that the probative value of Martin’s deposition was low, and its exclusion thus did not substantially affect the government’s rights. The Fourth Circuit found, however, that McAnaney’s testimony was key on the issue of whether Tuomey knowingly submitted false claims in violation of the FCA, and that Tuomey failed to present a good reason for omitting the testimony. McAnaney, the Court noted, was an expert on the Stark Law hired as an advisor by Tuomey. The Court further reasoned that Fed. R. Evid. 408 was not properly applied to exclude McAnaney’s testimony, since McAnaney was arguably not hired to compromise or settle a disputed claim, and even if he was, Tuomey allowed admission of his testimony by defending itself on the basis of advice-of-counsel. Finally, the Court reasoned that Tuomey did not show how McAnaney’s duty of loyalty to his clients barred admission of his testimony under Fed. R. Evid. 403.
The Fourth Circuit next held that the district court did not err in failing to grant Tuomey’s motion for judgment as a matter of law or new trial following the second trial. The Fourth Circuit found that, as the employment contracts were actually implemented with physician pay varying to a large degree on collections, a reasonable jury could find that the contracts violated the Stark Law. The Fourth Circuit next found that, given the totality of the evidence, which showed that Tuomey tried to find positive opinions of its employment contracts while ignoring negative opinions, a reasonable jury could find that Tuomey knowingly submitted false claims in violation of the FCA.
The Fourth Circuit next found that the district court did not err in providing jury instructions, and thus Tuomey was not entitled to a new trial on that basis. The Fourth Circuit found that the jury instructions on Stark Law violations properly allowed for the admission of extrinsic evidence of intent. Further, since the jury found that Tuomey possessed scienter under the FCA, a separate jury instruction on knowledge under the Stark Law was unnecessary. Additionally, the Court found that since Tuomey either violated the Stark Law or didn’t, there was no need to charge the jury that “claims based upon differences of interpretation of disputed legal questions are not false under the FCA.” The Fourth Circuit found that the district court did not err by not charging the jury that Tuomey could rely on legal advice that turned out to be wrong because the instructions the district court gave covered that issue.
Finally, the Fourth Circuit found that the district court did not err in calculating the judgment against Tuomey. The Court reasoned, based on Stark Law language and case law, that the district court properly took into account both the inpatient and outpatient procedures in calculating the damages. Further, Tuomey offered no evidence that a claim for an improper referral must identify the referring physician, so the district court’s calculations were proper. Based on case law, the Court found that the district court properly calculated damages based on Medicare forms UB-92/04 submitted rather than cost reports. Based on the statutory language of the Stark Law, the court held that the district court properly based damages on the full amount of claims submitted, rather than on the difference between the services provided and the price paid. Finally, the Court found that the judgment against Tuomey was large, but not unconstitutional under the excessive fines clause of the Eighth Amendment or the due process clause of the Fifth Amendment to the U.S. Constitution. It found the judgment reasonable given the repeated actions and intentional conduct at issue here.
For the above reasons, the court affirmed the holding of the district court.
Judge Wynn wrote a concurring opinion to point out that the outcome in this case, with which he agreed, meant that a community hospital in an underserved community would likely be forced to close. He was concerned about this outcome given the complexities of the Stark Law, which make it difficult for medical entities to follow. The majority opinion acknowledged this concern, and left the issue to be addressed by Congress.
Katherine H. Flynn
Decided: April 2, 2015
The Fourth Circuit held that the Department of Labor acted within its regulatory authority in requiring the operators of coal mines to show, in the case of miners who meet the criteria under the Black Lung Benefits Act for the presumption, that “no part of the miner’s respiratory or pulmonary total disability was caused by pneumoconiosis.” 20 C.F.R § 718.35(d) (2014). Additionally, the Fourth Circuit held that the decision from the Administrative Law Judge (ALJ) to award benefits to the miner was supported by substantial evidence.
This appeal stemmed from an award of benefits to Page Bender, Jr. under the Black Lung Benefits Act. 30 U.S.C. §§ 901 through 945. The Act is intended to provide benefits to coal miners who are completely disabled due to pneumoconiosis (black lung disease) and to surviving family dependents of those miners who died due to the disease. Under § 921(c)(4) of the Act, there is a rebuttable presumption of total disability due to pneumoconiosis. This presumption exists if the miner worked for at least 15 years in underground coal mines, if a chest x-ray does not show the presence of complicated pneumoconiosis, and if there is other evidence that shows the existence of a totally disabling respiratory or pulmonary impairment. In 2013, the Department of Labor promulgated a revised regulation, which was at issue in this case. The regulation stated that the party opposing the award of benefits may rebut this presumption by “establishing that no part of the miner’s respiratory or pulmonary total disability was caused by pneumoconiosis….” 20 C.F.R. § 718.305(d)(1) (2014). Basically, any party who is looking to rebut the presumption must “rule out” any connection between a miner’s pneumoconiosis and his disability.
Bender was employed by an underground coal mine for 21 years and stopped working in the mines around 1995. Additionally, Bender smoked daily one to two packs of cigarettes for over 40 years, and Bender continues to smoke three to four cigarettes each day. Bender is in extremely poor health suffering from lung cancer and diabetes. Bender filed a claim to receive black lung benefits in 2009 after previously being denied benefits in 2003. The ALJ applied the statutory presumption due to the 21 years Bender had worked in the mine and the medical consensus of his disabling respiratory condition. At the time of the ALJ’s decision, the current “rule-out” version of the regulation providing the standard for rebuttal had not yet been promulgated. However, the ALJ applied an analogous “rule-out” standard that had been used in previous instances. During the hearing, the coal mine operator provided expert opinions from three physicians to rebut this presumption stating that Bender’s pneumoconiosis was not do to the inhalation of coal mine dust, but due to his cigarette use, lung surgery, and cancer treatments. The ALJ accorded very little weight to these opinions because the experts did not sufficiently explain why Bender’s worsened condition could not be due to coal workers’ pneumoconiosis, a progressive disease. Bender provided an expert with conflicting evidence, stating that Bender’s exposure to coal dust was a major contributor. The ALJ determined that the operator had failed to rebut the presumption by showing that Bender’s pneumoconiosis did not in any way contribute to his disability, and determined Bender should be awarded benefits.
In addressing the operator’s legal challenge to the “rule-out” rebuttal standard of the regulation promulgated by an executive agency, the Fourth Circuit applied the principles of deference presented in Chevron v. Natural Resources Defense Council. Under the first step of Chevron, the operator argued that the rebuttal standard in the statute is unambiguous and applied only to the Secretary. The operator believed the proper rebuttal standard would be one that would allow the operator to rebut the presumption in the statute through showing the miner’s pneumoconiosis is not a “substantially contributing cause” of their total disability. The Fourth Circuit distinguished the holding of the Supreme Court in Usery v. Turner Elkhorn Mining Co., where the “rule-out” standard did not apply to operators, by explaining that Usery was decided before the 1978 amendments to the Black Lung Benefits Act. Additionally, the Supreme Court in Usery did not answer whether Congress left a gap in § 921(c)(4) that the agency was permitted to fill by regulation, or whether application of the “rule-out” standard to coal mine operators in a regulation would be a reasonable exercise of agency authority in filling the gap in the statute. The Fourth Circuit determined that because the statute does not speak to the standard operators must meet to rebut the presumption, Congress intended for the “gap” to be filled by the agency.
Further, under the second step of Chevron, the Fourth Circuit determined that the regulation set forth by the Department of Labor was a reasonable exercise of authority within the gap left open to the agency by Congress. There was no showing that Congress intended a different interpretation of the statute, and the “rule-out” standard unquestionably advances Congress’ purpose and intent in enacting the statutory presumption. Congress implemented the statutory presumption to make it easier for those miners most likely disabled by the coal dust to obtain benefits. In practice, the operators will only have to satisfy the “rule-out” standard when necessary elements of presumption exist. The alternative rebuttal standard, suggested by the operators, would effectively nullify the statutory presumption for coal miners whom Congress intended to protect. Therefore, the “rule-out” standard presented in § 718.305(d) is a reasonable exercise of the agency’s authority under Chevron, and the regulation applies to both the Secretary and coal mine operators.
Finally, the operator argued that the decision of the ALJ to award benefits was not supported by substantial evidence due to the ALJ declining to give credit to the operator’s medical experts. Following the regulation, an operator must establish that the miner’s disability is attributable exclusively to a cause other than pneumoconiosis. A medical expert must explain why pneumoconiosis was not at least a partial cause of the disabilities of the miner. The Fourth Circuit deferred to the determination of the ALJ concerning the proper weight to be accorded competing medical evidence. It was clearly within the discretion of the ALJ to weigh the credibility of the experts. The Fourth Circuit concluded that they would not go against the decision of the ALJ to credit the opinion of one expert to another. Accordingly, the decision from the ALJ to award benefits to Bender was affirmed.
Austin T. Reed
Decided: October 17, 2014
The Fourth Circuit held that failure to register as a sex offender is not a crime of moral turpitude, and, therefore, the Board of Immigration Appeals (“BIA”) erred in relying on that conviction to initiate the petitioner’s removal. The Court reversed and remanded with instructions to vacate the petitioner’s order of removal.
The petitioner, Khalid Mohamed, born in Sudan and a lawful permanent resident of the United States as of 2003, pleaded guilty to sexual battery in Virginia in 2010. After he was convicted of failing to register as a sex offender in 2011, the Department of Homeland Security sought his removal under 8 U.S.C. § 1227(a)(2)(A)(ii), which deems an alien deportable after two convictions for crimes of moral turpitude. The petitioner sought cancellation of removal, claiming that failure to register as a sex offender was not a crime of moral turpitude; the immigration judge however denied his application. The BIA then denied the petitioner’s cancellation application and ordered his removal.
In determining that failure to register as a sex offender is not a crime of moral turpitude, the Court defined a crime of moral turpitude as one that “must involve conduct that not only violates a statute but also independently violates a moral norm.” The Court rejected the Government’s argument that because the purpose of the sex offender registration statute is to reduce the number of sex offenders that commit additional offenses, failure to register violates a moral norm. Instead, the Court concluded that the registration requirement is regulatory in nature and failure to register does not implicate any moral values. Accordingly, the Court held that the BIA erred in using the failure-to-register conviction as a basis for deportation pursuant to the federal alien deportation statute.
Amanda K. Reasoner
Decided: November 14, 2014
The Fourth Circuit held that the Board of Immigration Appeals (BIA) did not abuse its discretion when it refused to reopen the petitioner’s second motion to reopen his asylum claim because petitioner failed to provide sufficient evidence that Lin would be subject to China’s sterilization policies.
In 2007, the Department of Homeland Security initiated removal proceedings against the petitioner, Wanrong Lin, a Chinese citizen who entered the United States without inspection. At the time of the removal proceedings he was married to a U.S. citizen who was a Chinese native, and the couple had two children, both U.S. citizens. Lin applied for asylum on the grounds that due to China’s one-child family planning policy, he feared persecution, including forced sterilization, if he returned to China. An immigration judge (IJ) denied his application for asylum concluding that he did not find Lin’s testimony credible, nor his evidence sufficient to substantiate his claims that he would be tortured upon his return to China for having more than one child. The BIA denied Lin’s appeal. In 2010, Lin filed with the BIA to reopen his asylum claim on the grounds that he had new evidence that would show that conditions had changed in China since his previous application, and that he would face fines and sterilization if he returned. Lin also argued that the May 2007 Department of State Profile of Asylum Claims and Country Conditions on China (“2007 Profile”), which suggested that Lin was unlikely to experience the treatment he alleged, and on which the IJ and BIA relied, was unreliable. The BIA denied his motion to reopen. In 2012, Lin filed a second motion to reopen his asylum claim; again, the BIA denied his motion.
Generally, aliens are entitled to one motion to reopen an asylum claim. A petitioner can overcome this limitation when the motion to reopen is due to changed circumstances in the country to which the petitioner is to be deported. The evidence of the changed circumstances must be material and neither available nor discoverable at the time of the previous hearing. 8 C.F.R. § 1003.2(c)(2). For changed country conditions in China related to family planning policies, the BIA will only reopen an asylum claim when genuine, authentic, and objectively reasonable evidence proves that the country conditions changed; the applicant violated the family planning policies in place in the alien’s province or municipality; and the likely punishment for the violation would generate a well-founded fear of persecution. In re S-Y-G-, 24 I.N. Dec. 247, 251 (BIA 2007).
The Court relied upon four reasons for its conclusion that the BIA did not abuse its discretion in determining that Lin’s evidence did not support a finding that Lin would be subject to China’s sterilization policies. First, Lin failed to sufficiently authenticate many of the foreign documents he sought to introduce as evidence that he would be sterilized upon his return to China. Second, many of the documents he offered into evidence were previously available to him. Third, the documents that were new were immaterial because they filed to address Lin’s specific circumstances. Specifically, the evidence described the treatment of people in municipalities other than Lin’s; the treatment of women, rather than men; and the treatment of families in which all family members were Chinese citizens. Fourth, Lin failed to provide sufficient evidence to discredit the findings in the 2007 Profile. Accordingly, the Court denied Lin’s petition for review.
Amanda K. Reasoner
Decided: November 14, 2014
The Fourth Circuit denied Petitioner’s claim for review of the Board of Immigration Appeals’s (“BIA”) decision.
Petitioner (“Mulyani”) grew up as a Christian in Indonesia, which is a primarily Muslim country. Mulyani and her husband came to the U.S. in 2000 for vacation, and chose to stay in the U.S. when their vacation ended. Petitioner asserts that they would endure religious persecution if they were forced to return to Indonesia, describing several instances of religiously motivated violence she experienced during her youth because of her Christian faith. In September 2008, the Department of Homeland Security initiated removal proceedings against Mulyani. Petitioner conceded removability under the Immigration and Nationality Act (“INA”), but sought relief in the form of asylum by arguing that the Indonesian Government was indifferent, if not hostile, towards Christian rights. The immigration judge (IJ) denied all relief, and the BIA also concluded that she was not entitled to relief. Mulyani filed a petition with the Fourth Circuit for review.
The Fourth Circuit concluded that it lacked jurisdiction to consider whether Mulyani’s asylum application was untimely and qualified for an extraordinary circumstances exception to the one-year time limit because Congress has expressly restricted the Court’s power to review agency decisions that involve a time bar. Further, the Fourth Circuit found unpersuasive Mulyani’s argument that the Indonesian Government would be unwilling, or unable, to protect her from religious persecution, and that the BIA ruled in error on this issue. The Fourth Circuit stated that substantial evidence supported the BIA’s determination that Mulyani does not qualify as a “refugee,” and that Mulyani’s description of past experiences and articles recounting Christian persecution accompanying her application were insufficient to qualify her for asylum and withholding of removal. The Fourth Circuit also stated that Mulyani failed to offer any evidence that she was entitled to relief under the Convention Against Torture (CAT) because she failed to demonstrate that the Indonesian Government knows her identity or would harm her because of her Christian faith. Thus, Mulyani was not entitled to any relief.
Alysja S. Garansi
Decided: October 8, 2014
The Fourth Circuit held that the “recess session” appointment of a National Labor Relations Board (“NLRB”) member was valid under the U.S. Constitution. The Court also held that the General Counsel of the NLRB failed to establish a prima facie case that two Gestamp South Carolina, LLC (“Gestamp”) employees had been discharged in violation of the National Labor Relations Act (“NLRA”). Finally, the Court held that substantial evidence supported an Administrative Law Judge’s (“ALJ”) finding that a Gestamp supervisor had made a threat to one of the discharged employees for attempting to unionize.
David Kingsmore (“Kingsmore”) worked as a “quality inspector” and Reggie Alexander (“Alexander”) worked as a “supply coordinator” for Gestamp until both were fired in late February of 2010. Prior to being fired, Kingsmore had contacted United Steelworkers (“the union”) about unionizing Gestamp’s hourly employees. Alexander eventually joined Kingsmore on a small committee of Gestamp employees to explore unionization. Supervisors for the two employees were aware of the committee, and Kingsmore’s supervisor warned him that he would be “gone” for attempting to unionize. Shortly thereafter, Alexander was fired for falsifying one day on his timesheet. He failed to correct a discrepancy between when the company system automatically signed him in, and the time he actually arrived—a period of thirty-eight minutes. Meanwhile, Kingsmore had been denied access to a nearby BMW facility, which also happened to be his former employer, while making a trip to the facility on behalf of Gestamp. This incident prompted an inquiry in to whether Kingsmore had been truthful when he told Gestamp that his employment at BMW had ended on amicable terms. After Kingsmore was unable to explain why he was banned from the BMW facility, he was fired from Gestamp for “falsification of work history” and failure to present documentation from his previous employer.
First, the Court reasoned that the recess appointment of a NLRB board member was constitutional because it occurred during a two-week Senate recess. The Recess Appointment Clause gives the President power to fill vacancies during a Senate recess. Although the Supreme Court had previously held that a recess of less than ten days was presumptively not long enough, a two-week recess, according to the Court, was adequately long to fall within the Recess Clause.
Next, the Court reasoned that neither Kingsmore nor Alexander had been discharged from Gestamp in violation of the NLRA because neither was able to carry his burden of proving that the Gestamp employee who fired both of them did so with knowledge of their union activity. The Court rejected Kingsmore and Alexander’s assertion that the requisite knowledge of their union activity could be automatically imputed to that Gestamp employee merely because Kingsmore and Alexander’s supervisors were aware of their union activity.
Finally, the Court upheld the ALJ’s ruling that Kingsmore had been threatened for his union activities because there was “substantial evidence” presented to the ALJ that he was threatened, and that a qualified “supervisor” (as defined in the NLRA) made the threat. Gestamp appealed this ruling because the ALJ’s decision was based largely on Kingsmore’s testimony, and the ALJ had already determined that his testimony was “not fully reliable[.]” Further, the ALJ had determined that a Gestamp employee who testified on this issue was credible. However, that Gestamp employee admitted that he did not remember certain facts. Ultimately, the Court found that the ALJ’s decision as a whole was not so inconsistent with the testimony as to warrant reversal.
James Bull Sterling
Decided: July 22, 2014
The Fourth Circuit affirmed the district court, and held that the applicable Affordable Care Act (the “ACA”) statutory language is ambiguous and subject to multiple interpretations; applying deference to the IRS’s determination, the Court upheld the rule as a permissible exercise of the agency’s discretion.
Section 1401 of the Affordable Care Act (the “ACA”) provides for tax credits for eligible taxpayers purchasing insurance “through an Exchange established by the State under [ACA Section 1311].” ACA Section 1311 directs the states to establish health insurance exchanges, but does not refer to federally facilitated exchanges. Under ACA Section 1321, the federal government will “establish and operate” an exchange in a state that does not create one. The IRS authorized tax credits for insurance purchased on Exchanges from both the state and those federally facilitated.
Appellees contended that the IRS’s interpretation is contrary to the language of the statute, which, Appellees asserted, authorizes tax credits only for individuals who purchase insurance on state-run Exchanges.
In its reasoning, the Fourth Circuit relied on a test set out in Chevron U.S.A. v. NRDC. The Chevron test determines whether agency action is within the scope of the agency’s authority, and has two prongs:
In addressing the first prong, the Fourth Circuit determined that the ACA contained ambiguity, and moved to the second prong. The Court then reasoned that the IRS Rule should be upheld because the standard of review was highly deferential with a presumption in favor of finding the agency action valid.
Decided: July 18, 2014
In Cordova v. Holder, the Fourth Circuit granted Cordova’s petition for review, and remanded the case to the Board of Immigration Appeals (“BIA”) for further proceedings after concluding that the BIA had failed to provide an adequate basis for their legal conclusions.
Cordova, Petitioner, entered the United States without inspection in July 2010. Four months later the Government served Petitioner with a Notice to Appear on charges that he was an alien present in the U.S. in violation of 8 U.S.C. § 1182(a)(6)(A)(i). Petitioner submitted an application for asylum. Petitioner testified that he was attacked and threatened on multiple occasions by two El Salvador gangs, MS-13 and Mara 18, who demanded that Petitioner either join either of their respective gangs, or pay for their protection. Petitioner further testified that he feared he would be killed after members of MS-13 saw him with his cousin, who was a member of Mara 18. Based on his familial ties to the Mara 18 gang member, Petitioner claimed membership in a “particular social group” for purposes of 8 U.S.C. § 1101(a)(42)(A). The Immigration Judge (“IJ”) denied Petitioner’s application for asylum and concluded that Petitioner was merely a person from El Salvador who had experienced problems with a gang. The IJ reasoned that Petitioner had not suffered past persecution, and that his fears did not amount to “fear based on a reasonable probability of future prosecution.” The BIA affirmed the IJ’s denial of asylum and withholding of removal because it concluded that Petitioner’s relationship to gang members was not a “social group.” Additionally, the BIA concluded that Petitioner had failed to demonstrate a nexus between the proposed social group and the threats he had received.
The Fourth Circuit rejected both of the BIA’s conclusions, and found that Petitioner had demonstrated that he was part of a family-based social group. First, the Court noted that Petitioner’s familial relationships were a central reason that MS-13 threatened to kill him. Petitioner’s cousin and uncle, both of whom were associated with Mara 18, were killed as a result of their association with Mara 18. The Court emphasized that even the BIA’s opinion stated that the motivation of the gang members who attacked Petitioner “was . . . retaliation for [his cousin and uncle’s] membership in a rival gang.” Reviewing the BIA’s opinion, the Court concluded that Petitioner had demonstrated a cognizable family-based social group, and that the BIA had failed to provide an adequate basis for concluding otherwise. Accordingly, the Court held that the “proper course with regard to nexus is to ‘remand to the agency for additional investigation or explanation.’”
Decided: July 11, 2014
The Fourth Circuit affirmed the district court, and held that the “permit shield” defense for discharges of selenium was unavailable to a corporation that failed to disclose the presence of the pollutant during the permit application process.
A & G Coal Corporation (“A&G”) owned and operated the Kelly Branch Surface Mine (“Kelly Branch”) in Virginia. In 2010, A&G applied for a National Pollutant Discharge Elimination System permit from the Virginia Department of Mines, Minerals, and Energy. In its application, A&G provided information regarding the discharges from more than two-dozen existing and proposed discharge points, including two artificial ponds. However, the application failed to indicate whether or not A&G would be discharging selenium, an element that can be harmful in high doses, and is categorized as a toxic pollutant under the Clean Water Act (“CWA”). The permit does not restrict or authorize the discharge of selenium from the plant.
Appellee environmental groups (“SAMS”) tested water in the two ponds and found that they contained selenium. SAMS brought this action against A&G seeking declaratory and injunctive relief, as well as civil penalties, claiming A&G violated the CWA by discharging selenium without authorization. A&G contended that it properly complied with its legal obligations by disclosing those pollutants it knew, or had reason to know, were present at the site, which selenium was not among. Thus, A&G claimed it was protected by the “permit shield” provision of the CWA. The district court rejected this defense, and held that the defense was unavailable to A&G because of its failure to disclose selenium in its permit application.
The permit scheme requires individuals wishing to discharge one or more pollutants to apply for an individual permit from the appropriate state authority. Federal regulations require permit applications to include substantial detail about the nature and composition of expected discharges. For discharge points that discharge “process wastewater,” like some of the discharge points at Kelly Branch, applicants must report data on a large number of pollutants, including selenium. If the discharge is not “process wastewater,” applicants must still “indicate whether it knows or has reason to believe that any of the pollutants in table II or table III of appendix D to this part [including selenium] . . . for which quantitative data are not otherwise required . . . [is] discharged from each outfall.” 40 C.F.R. § 122.21(g)(7)(vi)(B). Additionally, the Environmental Protection Agency (“EPA”) requires that applicants mark whether each listed element, one of which is selenium, is “believed present” or “believed absent.” Thus, the disclosure process requires applicants to acknowledge either the presence or absence of a pollutant, like selenium. Virginia has adopted these same requirements under its state statutory permit scheme.
The CWA contains a “permit shield” provision, which provides that “[c]ompliance with a permit issued pursuant to this section shall be deemed compliance” with other sections of the CWA that detail effluent limitations and their enforcement. 33 U.S.C. § 1342(k). “By rendering permits final, the shield allows permit holders to conduct their operations without concern that an unexpected discharge might lead to substantial liability.” However, to be protected by the “permit shield,” applicants must fully comply with federal and state reporting requirements. The Fourth Circuit has adopted a two-part test to determine whether the “permit shield” defense protects a permit holder from liability:
Piney Run Pres. Ass’n v. Cnty. Comm’rs, 268 F.3d 255, 259 (4th Cir. 2001).
Under the first prong, A&G argued that it had no obligation to disclose selenium unless it knew or had reason to know it would be present, which it did not. The Court rejected this argument, noting that the discharges in A&G’s application met the regulatory definition of “process wastewater.” Thus, A&G was required to test for selenium, and other pollutants, and submit this information with its application, which it failed to do. Even if the discharge was not “process wastewater,” the Court noted that A&G still failed to comply with reporting requirements. The application required data about selenium, which A&G did not submit. Furthermore, at a minimum, A&G was required to acknowledge whether selenium was “believed to be present,” or “believed to be absent,” which it also did not do. Thus, the Court held that A&G failed to comply with its disclosure obligation as required by the first prong of the Piney test. Because A&G failed to meet the first prong of the test, the Court declined to address A&G’s claim that it was able to satisfy the second prong of the Piney test.
In sum, the Court found that “A&G was required by its DMME permit application instructions to test for the presence of selenium and by federal and state regulations to, at minimum, report whether it believed selenium to be present or absent.” A&G failed to fulfill these disclosure obligations, and therefore, could not assert a “permit shield” defense.
Decided: June 10, 2014
The Fourth Circuit affirmed the district court’s denial of a social security claimant’s motion for attorney’s fees under the Equal Access to Justice Act (“the Act”).
Social Security claimant, Meyer, appealed the district court’s denial of his motion for attorney’s fees under the Act. The Act provides that a party who prevails in litigation against the United States is entitled to an award of attorney’s fees unless “the position of the United States was substantially justified” or “special circumstances make an award unjust.” 28 U.S.C. § 2412(d)(1)(A). The district court determined that Meyer prevailed in his lawsuit against the Commissioner of Social Security, but that attorney’s fees were unwarranted because the Commissioner had pursued a substantially justified position when he weighed the evidence of Meyer’s claim. In determining whether the Government’s position in a case is substantially justified, the Court looked beyond the issue on which the petitioner prevailed to determine, from the totality of the circumstances, whether the Government acted reasonably in causing the litigation, or in taking a particular stance during the litigation. In applying this reasonableness standard, the Court emphasized that the standard required looking to whether a reasonable person could have believed that the litigation position was correct. In this case, the Court agreed with the district court and considered the weight of evidence in favor of the Commissioner’s position; therefore, the Court affirmed the district court’s decision.
Decided: May 1, 2014
The Fourth Circuit determined that physicians’ opinions provided sufficient evidence that a coal miner’s lung disease hastened his death. Accordingly, the Court reversed and remanded the administrative board’s decision.
Johnnie Collins (“Collins”) was a coal miner that contracted Chronic Obstructive Pulmonary Disease (“COPD”) after working in the mines. He successfully obtained benefits under the Black Lung Benefits Act (the “Act”) until his death in 1997. His wife applied for survivor benefits under the Act and received them until 2012, when they were denied by an administrative board for insufficient evidence showing that Collins died from his lung disease, rather than from smoking. Collin’s wife appealed that decision to the Fourth Circuit.
Collin’s treating physician had compiled a multitude of notes that showed the seriousness of Collin’s lung condition, and laid out the details of Collin’s final weeks in a letter to the Department of Labor. Another physician stated that in his opinion Collin’s lung disease caused his death, after a review of the case file, death certificate, and additional hospital records. All of this evidence was sufficient to show that Collin’s lung disease hastened his death.
Decided: March 27, 2014
The Fourth Circuit held that the Dickenson-Russell Coal Company (Dickenson Coal) had an unconditional duty—under Part 50 regulations to the Federal Mine Safety and Health Act of 1977, 30 C.F.R. § 50.20(a)—to file an MSHA Mine Accident, Injury, and Illness Report Form 7000-1 (Form 7000-1) within ten work days of Charlie Wood’s (Wood) occupational injury at a Dickenson Coal mine. The Fourth Circuit therefore denied Dickenson Coal’s petition for review.
Dickenson Coal owns and operates a coal mine, the Roaring Fork No. 4 Mine (Roaring Fork), in Virginia. Bates Contracting and Construction, Inc. (Bates), an independent contractor, provided miners to work at Roaring Fork. In May 2009, Wood—a Bates employee—suffered an occupational injury at Roaring Fork. Wood was under Dickenson Coal’s control and supervision on the day of the incident. Three days after the incident, Bates reported Wood’s injury to the Mine Safety and Health Administration (MSHA) by submitting a Form 7000-1; however, Dickenson Coal did not report the injury. In July 2009, the MSHA cited Dickenson Coal for “failure to timely report an occupational injury and file a Form 7000-1,” per the requirements of 30 C.F.R. § 50.20(a). Dickenson Coal then contested the MSHA citation before an Administrative Law Judge (ALJ) appointed by the Federal Mine Safety and Health Review Commission (the Commission). Dickenson Coal contended that Bates was an operator under § 50.20(a); thus, “either Bates or Dickenson Coal could have satisfied the obligation to report Wood’s injury.” The ALJ ruled against Dickenson Coal, finding that Bates was not an operator under the regulatory definition of the term, 30 C.F.R. § 50.2(c)(1), because it was not “operating, controlling, or supervising” activities at Roaring Fork at the time of the injury. Thus, the ALJ found that Bates was not a required reporter under § 50.20(a)—and therefore concluded that Bates’s Form 7000-1 filing was gratuitous and “did not relieve Dickenson [Coal] of its [reporting] obligations under section 50.20(a).” The Commission declined Dickenson Coal’s request for discretionary review, and Dickenson Coal petitioned the Fourth Circuit. On petition for review, Dickenson Coal argued that that ALJ incorrectly applied the regulatory definition of operator in § 50.2(c)(1) rather than the statutory definition of the term, 30 U.S.C. § 802(d)—under which, according to Dickenson Coal, independent contractors clearly qualify as operators. Dickenson Coal asserted that, where an incident involves more than one required reporter, only one of the reporters needs to file a Form 7000-1.
The Fourth Circuit found the language of § 50.20(a) unambiguous; thus, the Fourth Circuit declined to apply Auer deference to the agency’s interpretation of the regulation. Auer v. Robbins, 519 U.S. 452. However, the Fourth Circuit found the ALJ’s decision consistent with the plain language of § 50.20(a): the Fourth Circuit concluded that, even if Bates qualifies as an operator, Bates’s Form 7000-1 filing did not excuse Dickenson Coal from filing its own Form 7000-1—as § 50.20 requires every operator subject to the reporting requirement to report every relevant injury or accident. The Fourth Circuit also rejected Dickenson Coal’s argument that such an interpretation of § 50.20(a) will lead to absurd results, noting that the Secretary of Labor stated plausible reasons for requiring potentially duplicative reports under the regulation.
– Stephen Sutherland
Decided: March 25, 2014
The Fourth Circuit affirmed the district court’s decision ordering the Equal Employment Opportunity Commission (“EEOC”) to pay attorneys’ fees to Propak Logistics, Inc. (“Propak”) because the EEOC acted unreasonably in filing the complaint.
Michael Quintois, a former supervisor at Propak’s Shelby, North Carolina facility, filed a discrimination charge with the EEOC against Propak in January 2003. Quintois alleged that Propak terminated his employment based on his “American” national original after he complained that the company hired only Hispanic workers for certain supervisory positions. Based on Quintois’ discrimination charge, the EEOC initiated an investigation that lasted nearly six years. Among other things, the EEOC designated the matter as a “class case” in September 2004, yet failed to notify Propak of its procedural decision until about four years later in September 2008. In addition, the EEOC failed to contact Propak for about two years, between June 6, 2005 and June 7, 2007. In June 2007, the EEOC contacted Propak to speak with Kathy Ponder, the Propak manager responsible for hiring decisions at the Shelby, North Carolina facility during the period of Quintois’ employment. Propak, however, no longer employed Ponder and her whereabouts were unknown.
The EEOC concluded its investigation and issued a “determination letter,” in September 2008, which stated the EEOC had found reason to conclude that Propak violated Title VII by failing to hire a class of non-Hispanic job applicants because of their race or national origin. In the letter, the EEOC invited Propak to participate in informal conciliation to resolve the matter. In attempting to conciliate the matter, the EEOC proposed certain remedial measures concerning Propak’s facilities in North Carolina and South Carolina. These measures would have required Propak in these locations to offer certain employment opportunities, to provide training for supervisors and managers, and to post certain notices. By this time, however, Propak had closed all its facilities in those states, thereby rendering implementation of such remedial measures impossible. Propak advised the EEOC of this fact.
Nevertheless, the EEOC initiated a lawsuit in August 2009, seeking certain injective relief, including an order requiring Propak to institute policies and programs to benefit non-Hispanic person in order to mitigate the effects of the allegedly unlawful employment practices. The EEOC also sought monetary relief on behalf of the affected class of non-Hispanic employment applicants. In response, Propak filed a motion to dismiss arguing that the doctrine of laches barred the action. The district court denied the motion and ordered the parties to engage in limited discovery on the issue of whether Propak suffered prejudice resulting from the EEOC’s extensive delay in initiating the litigation. At the conclusion of this discovery period, Propak filed a motion for summary judgment, again based on the doctrine of laches. This time, the district court granted Propak’s motion, concluding that the EEOC’s delay in initiating the litigation was unreasonable. The EEOC initially filed an appeal but later sought dismissal, which the Fourth Circuit granted.
Propak later filed a motion seeking attorneys’ fees incurred by Propak after the EEOC filed the complaint. The district court, relying on Supreme Court precedent, granted the motion, concluding that an award of attorneys’ fees was appropriate because the EEOC knew or should have known that its claim “was frivolous, unreasonable, or groundless.” The district court held that the EEOC acted unreasonably in filing the complaint because by the time the EEOC determined to bring the action it was clear that a lawsuit would be moot. And, the district court alternatively held that the EEOC acted unreasonably in continuing the litigation in view of the developing record because it reaffirmed that purported victims and witnesses could not be located and the facilities were closed. This appeal followed.
On appeal, the Fourth Circuit first discussed Title VII’s fee-shifting mechanism, which gives district courts the discretion to award reasonable attorneys’ fees to a prevailing party. The court observed that a heightened standard applies to a prevailing defendant seeking such an award in a Title VII action. For a prevailing defendant to receive such an award, the court must find that the plaintiff’s action was frivolous, unreasonable, or without foundation. The court then conducted a review for an abuse of discretion.
As an initial matter, the court rejected the EEOC’s request that it consider the issue of whether laches is available as an affirmative defense to an action filed by a United States agency because the EEOC abandoned its appeal of the summary judgment order. Next, the court rejected the EEOC’s contention that the district court improperly based its decision awarding attorneys’ fees on the court’s earlier laches ruling. In so doing, the court recognized that, while the district court referenced its previous findings of delay and prejudice from the summary judgment holding, the two holdings were based on different principles of law. Specifically, the summary judgment holding of laches was based on the EEOC’s unjustified delay in bringing the lawsuit, and on the resulting prejudice affecting Propak’s ability to defend itself in the action. In contrast, however, the district court awarded attorneys’ fees on the basis that the EEOC’s lawsuit effectively was moot at its inception. The district court’s fee award, therefore, reflected proper consideration of the Supreme Court’s standard articulated in Christiansburg Garment Co. v. EEOC, 434 U.S. 412 (1978), because it assessed whether the EEOC acted unreasonably in initiating the litigation.
Next, the court addressed the EEOC’s attack on the district court’s factual finding that the EEOC could not identify individual members of the class of victims eligible for monetary relief. The Fourth Circuit observed that the record showed that the EEOC made efforts to identify the class of victims. The record, however, lacked any indication that such efforts were successful. Thus, the court found no clear error in this factual finding. Lastly, the court rejected the EEOC’s alternative argument that the district court’s factual finding that the EEOC was unable to identify claimants was an “irrelevant consideration.” In doing so, the court noted that it had previously held that an award of attorneys’ fees to a defendant under the Christiansburg standard was justified in part because the plaintiff sought relief that it knew or should have known was unavailable.
The Fourth Circuit, therefore, concluded that the district court did not abuse its discretion in holding that the EEOC acted unreasonably. Consequently, it did not address the district court’s alternative holding that the EEOC’s continued pursuit of litigation was unreasonable in light of the developing record in the case.
– W. Ryan Nichols
Decided: March 6, 2014
The Fourth Circuit Court of Appeals affirmed the district court’s award of summary judgment to defendant Verizon Maryland, LLC (“Verizon”) on claims pursued by plaintiff Core Communications, Inc. (“Core”) for concealment and unfair competition. The Fourth Circuit also affirmed the district court’s award of nominal damages of only one dollar to Core on its breach of contract claim.
The Telecommunications Act of 1996 was designed to increase competition in local telephone markets. To that end, the Act required established telephone companies to enter into contracts known as interconnection agreements (in the singular, an “ICA”) with new market entrants seeking to connect with existing markets. Pursuant to the Act, Core, a market entrant, sought an ICA with Verizon, the established phone company in the Baltimore area. On July 14, 1999, the companies jointly submitted their proposed ICA to the Maryland Public Service Commission (the “PSC”) for approval. On July 27, 1999, while the ICA was pending approval, Core wrote Verizon to request that the proposed interconnection— as to which Core would be a wholesale customer of Verizon— be accomplished by September 10, 1999. At a meeting on August 11, 1999, the companies agreed that Core’s interconnection would occur at Verizon’s “Wire Center” in Baltimore, which is physically connected to Verizon’s central network and houses the needed equipment. However, Verizon estimated that it would take another four to six months before the essential new equipment for Core’s interconnection would be available for use. Hoping to avoid those months of delay, Core suggested that instead of installing new equipment, Verizon should utilize the existing equipment already in the Wire Center. Verizon acknowledged that this was technically feasible, but declined to do so. On August 15, 1999, Verizon advised Core that, in any event, the existing equipment were already assigned to a Verizon “customer of record.” Only later did Verizon disclose that the “customer of record” was Core itself, already a Verizon retail consumer in a separate context. The existing equipment was never used for the Core interconnection, and Verizon installed the new equipment in late November 1999. The Core interconnection was consummated on December 23, 1999.
On appeal, Core argued that the district court erred in: (1) allowing Verizon to invoke the ICA’s Exculpatory Clause, and then by enforcing the Clause as a bar to Core’s recovery of consequential damages; (2) awarding summary judgment to Verizon on Core’s concealment and unfair competition tort claims; and (3) ruling that Core was entitled to only nominal damages on its breach of contract claim.
First, the Fourth Circuit assessed the timeliness and application of the Exculpatory Clause. Core advanced two arguments: first, that Verizon failed to timely invoke the Clause; and second, that the Clause was void under principles of Maryland contract law. The Fourth Circuit noted that, in analyzing a party’s failure to timely invoke an exculpatory provision, it has recognized an exception to Rule 8(c) where, as here, the pertinent provision was “evident” in the contract before the trial court. Furthermore, the district court properly observed that Core was neither unfairly surprised nor unduly prejudiced by Verizon’s delay in invoking the Exculpatory Clause. Thus, the Clause was timely and appropriately invoked. Then, Core contended that the Exculpatory Clause nonetheless could not be enforced because Maryland law bars the use of “exculpatory agreements in transactions affecting the public interest.” However, because the Clause is enforceable under federal law, state law principles cannot, at this stage, void a provision of an ICA already approved by the appropriate State commission. The proper time for Core to object on the asserted basis of Maryland’s public policy was prior to PSC’s approval of the Core ICA.
Second, the Fourth Circuit assessed Core’s challenge to the district court’s summary judgment awards with respect to Core’s state law tort claims for concealment and unfair competition. Both claims require proof of intentional fraud or deceit. The Fourth Circuit concluded that no reasonable jury could find that Verizon unlawfully concealed any material fact from Core. Core offered no evidence suggesting that Verizon’s failure to identify Core as the “customer of record” was driven by any intent to defraud or deceive Core. Mingo, Core’s president, could merely assert that the failure to disclose occurred, and then theorize that Verizon must have done so intentionally in order to improperly delay the Core connection. Moreover, Mingo’s concession that he knew, and did not share, that Core was a retail customer in the Baltimore Wire Center establishes that Core could not have reasonably relied on the intentional concealment it alleges. Core’s unfair competition tort claim failed for the same reason. The Fourth Circuit also stressed its concern that both tort claims amounted to little more than “the assertion of a contract claim in the guise of a tort.” Where the essence of the relationship between the parties is contractual, the plaintiff only has an action for breach of contract, and tort claims are not available.
Third, the Fourth Circuit reviewed the district court’s judgment awarding nominal damages of one dollar to Core for Verizon’s breach of the Core ICA. Core contended that it was entitled to more for three reasons. First, Core argued that it could recover consequential damages because the breach involved “willful or intentional misconduct,” which the Fourth Circuit rejected. The “willful or intentional misconduct” exclusion to the Exculpatory Clause applies exclusively to actions sounding in tort, because an intent to defraud or deceive is ordinarily not an issue in a breach of contract claim. Second, Core argued that the Exculpatory Clause only limits Verizon’s liability for consequential damages in connection with services offered under the ICA, and that the interconnection was not a “service” within the meaning of the Clause. Although “interconnection” is not a “telecommunications service” for purposes of the Act, the parties did not use the term “Telecommunications Service” in the Clause, but instead used the single word “services.” Thus, the parties intended to draw a distinction between a “Telecommunications Service” and mere “services” and the word “service” in the Clause must include the provision of an interconnection at Core’s request. Finally, Core maintained that it was entitled to “performance penalties” under section 27.3 of the Core ICA, which provides for a limited remedy not barred by the Exculpatory clause. However, Core provided no evidence to satisfy the predicate conditions for the performance penalties provided for in section 27.3.
– Sarah Bishop
Decided: February 25, 2014
The Fourth Circuit Court of Appeals affirmed the district court’s judgment enjoining the defendant from participating in deceptive Internet advertising practices and holding her jointly and severally liable for equitable monetary consumer redress.
The Federal Trade Commission (the “Commission”) sued Innovative Marketing, Inc. (“IMI”), and several of its high-level executives and founders, including Kristy Ross (“Ross”), for running a deceptive Internet “scareware” scheme in violation of the prohibition on deceptive advertising in Section 5 (a) of the Federal Trade Commission Act. The defendants operated a massive, Internet-based scheme that tricked consumers into purchasing computer security software, referred to as “scareware.”
On appeal, Ross challenged the district court’s judgment on four bases: (1) the court’s authority to award consumer redress; (2) the legal standard the court applied in finding individual liability under the Federal Trade Commission Act; (3) the court’s prejudicial evidentiary rulings, and (4) the soundness of the district court’s factual findings.
First, Ross contended that the district court did not have the authority to award consumer redress—a money judgment—under the Federal Trade Commission Act. The Act authorizes the Commission to sue in federal district court so that “in proper cases the Commission may seek, and after proper proof, the court may issue, a permanent injunction.” However, although the statute’s text does not expressly authorize the award of consumer redress, precedent dictates otherwise. The Supreme Court in Porter v. Warner Holding Co. held that Congress’ invocation of the federal district court’s equitable jurisdiction brings with it the full “power to decide all relevant matters in dispute and to award complete relief even though the decree includes that which might be conferred by a court of law.” Here, by authorizing the district court to issue a permanent injunction in the Federal Trade Commission Act, Congress presumably authorized the district court to exercise the full measure of its equitable jurisdiction. Accordingly, absent some countervailing indication sufficient to rebut the presumption, the court had sufficient statutory power to award “complete relief,” including monetary consumer redress, which is a form of equitable relief. Congress does not need to use the magic words, “other order” to invoke the full injunctive powers of the district court.
Second, Ross challenged the legal standard for finding individual liability under the Federal Trade Commission Act. The district court held that there was individual liability if the Commission proves that the individual (1) participated directly in the deceptive practices or had authority to control them, and (2) had knowledge of the deceptive conduct, which could be actual knowledge, reckless indifference to the truth, or an awareness of a high probability of fraud combined with intentionally avoiding the truth (i.e., willful blindness). Ross proposed a standard that requires proof of an individual’s (1) “authority to control the specific practices alleged to be deceptive,” coupled with a (2) “failure to act within such control authority while aware of apparent fraud.” The Fourth Circuit adopted the district court’s standard, recognizing that Ross’ proposal would effectively leave the Commission with the “futile gesture” of obtaining “an order directed to the lifeless entity of a corporation while exempting from its operation the living individuals who were responsible for the illegal practices” in the first place.
Third, Ross mounted three evidentiary challenges. First, she contended that the district court improperly precluded her expert from testifying bout how “the advertisements linkable to Ross’ responsibilities’ were non-deceptive.” However, because the individual liability standard does not require a specific link from Ross to particular deceptive advertisements and instead looks to whether she had authority to control the corporate entity’s practices, the expert’s testimony was immaterial, and thus irrelevant, to the issue reserved for trial. Second, Ross challenged the admission of a 2004 to 2006 profit and loss statement that the district court relied on to calculate the amount of consumer redress. Ross’ co-defendant submitted an affidavit with this profit and loss summary. The Fourth Circuit recognized that although the district court admitted the profit and loss statement under the residual exception to the rule against hearsay, it may affirm on the basis of any ground supported by the record. The Fourth Circuit concluded the statement was admissible as an adoptive admission by Ross. Ross expressly adopted her co-defendant’s affidavit in her own affidavit. Third, Ross contended that the district court improperly admitted hearsay evidence: an email from a co-defendant to a payment processor, listing Skype numbers and titles for a group of high-level company executives. Ross’ telephone number is listed on the email, as is her title, “Vice President.” While it is true that the proponent for admission of a co-conspirator’s out-of-court statement “must demonstrate the existence of the conspiracy by evidence extrinsic to the hearsay statement,” that requirement was satisfied in this case. Moreover, the email was a quintessential example of a statement made “in furtherance” of the conspiracy because its role was to maintain the logistics of the conspiracy and “identify names and roles” of members of the deceptive advertising endeavor.
Fourth, Ross contended that the district court erred in finding that she had “control” of the company, participated in any deceptive acts, and had knowledge of the deceptive advertisements. The Fourth Circuit concluded Ross had “control,” based on her affidavit, in which she swore she was a high-level business official with “product optimization” duties, and based on evidence that other employees requested her authority to approve certain advertisements. The Fourth Circuit also concluded Ross “directly participated in the deceptive marketing scheme.” She directed the design of particular advertisements, as memorialized in chat logs between her and other employees. Ross was a contact person for the purchase of advertising space for IMI, and there was evidence that she had the authority to discipline staff and developers when the work did not meet her standards. Finally, the Fourth Circuit concluded Ross had actual knowledge or was at least recklessly indifferent or willfully blind to the deceptive marketing scheme. There was evidence that she edited and reviewed the content of multiple advertisements and, at one point, ordered the removal of the word “advertisement” from a set of ads. Also, Ross was on notice of multiple complaints about IMI’s advertisements, including that they would cause customers to automatically download unwanted IMI products.
– Sarah Bishop
Decided: February 21, 2014
The Fourth Circuit Court of Appeals affirmed the district court’s dismissal of relator’s False Claims Act (“FCA”) claim, which alleged that the defendants presented false claims to the government for reimbursement of drugs packaged in violation of Food and Drug Administration (“FDA”) regulations and, therefore, ineligible for reimbursement.
Omnicare provides certain pharmaceutical services to senior citizens through its drug repackaging and pharmacy facilities. Omnicare owned Heartland Repack Services, LLC (“Heartland”), the drug repackaging operation located in Toledo, Ohio (“the Toledo building”). Omnicare also operated the pharmacy that shared the Toledo building with Heartland. Although Heartland repackaged non-penicillin drugs for distribution, the Omnicare pharmacy that shared the Toledo building processed penicillin products. From 1997 until 2006, Relator Barry Rostholder (“relator”), a licensed pharmacist, was employed at Heartland. In 2004, when Omnicare executive Denis Holmes suggested that Heartland begin repackaging penicillin products, relator informed him that any repackaging of penicillin drugs would constitute a violation of FDA regulations requiring the separate processing of penicillin and non-penicillin products. In February 2006, relator resigned from Heartland due to his concerns about the facility’s quality control efforts. Relator then notified the FDA, which investigated Heartland and discovered that penicillin was being repackaged in the Toledo building.
The Fourth Circuit first addressed whether the district court lacked subject matter jurisdiction over the action due to the “public disclosure bar” in the FCA, which requires the person bringing the action be an original source of the information. The Fourth Circuit concluded relator had independent knowledge, apart from Securities and Exchange Commission’s filings regarding Omnicare’s revenue, that Omnicare caused claims to be submitted to the government for payment. Therefore, the public disclosure bar did not divest jurisdiction.
The Fourth Circuit then addressed whether the district court erred in dismissing relator’s complaint on the ground that he did not adequately allege a false statement or fraudulent course of conduct as required for an FCA claim. To plead an FCA claim, a relator must plausibly allege four distinct elements: (1) there was a false statement or fraudulent course of conduct; (2) made or carried out with the requisite scienter; (3) that was material; and (4) that caused the government to pay out money or to forfeit moneys due.
Relator’s assertion that Omnicare fraudulently made claims for payment for “adulterated” drugs was based on the statutes governing reimbursement under Medicare and Medicaid. Those statutes define “covered outpatient drugs” as those “approved for safety and effectiveness” under the FDCA. Therefore, to qualify as a “covered outpatient drug” as defined in the Medicare and Medicaid statutes, FDA must merely approve the drug. The relevant statues do not provide that when an already-approved drug has been produced or packaged in violation of FDA Safety regulations, that particular drug may not be the proper subject of a reimbursement request under Medicare and Medicaid. Therefore, the Fourth Circuit concluded that once a new drug has been approved by the FDA and thus qualifies for reimbursement under the Medicare and Medicaid statutes, the submission of a reimbursement request for that drug cannot constitute a “false” claim under the FCA on the sole basis that the drug has been adulterated as a result of having been processed in violation of FDA safety regulations.
Although compliance with FDA regulations is material to the government’s decision to provide reimbursement for regulated drugs, a relator must allege both materiality and a “false statement or fraudulent course of conduct” as distinct elements of an FCA claim. The Fourth Circuit noted that were it to accept relator’s theory of liability based merely on a regulatory violation, it would sanction use of the FCA as a sweeping mechanism to promote regulatory compliance, rather than a set of statutes aimed at protecting the financial resources of the government from the consequences of fraudulent conduct.
The Fourth Circuit further concluded that relator failed to allege Omnicare acted with the requisite scienter. The FCA requires actual knowledge, deliberate ignorance, or reckless disregard of the truth or falsity of the information. Because the Medicare and Medicaid statutes do not prohibit reimbursement for drugs packaged in violation of the FDA regulations, Omnicare could not have knowingly submitted a false claim for such drugs.
– Sarah Bishop
Decided: February 21, 2014
The Fourth Circuit held that the United States District Court for the Eastern District of Virginia properly dismissed Clear Sky Car Wash LLC’s (Clear Sky) complaint against the City of Chesapeake (the City), the Virginia Department of Transportation (VDOT), the United States Department of Transportation (USDOT), and certain employees and agents of the City (collectively, the defendants) because §§ 4651 and 4655 of the Uniform Relocation Assistance and Real Property Acquisition Policies Act of 1970 (URA) do not contain any individually enforceable rights, 42 U.S.C. § 1983 cannot be used to enforce §§ 4651 and 4655, and Clear Sky did not assert a claim under the Administrative Procedure Act (APA). The Fourth Circuit therefore affirmed the judgment of the district court.
In November 2008, the Chesapeake City Council approved a VDOT project (the project) to widen part of U.S. Route 17 and replace a bridge on the Elizabeth River. Though the City was going to manage the project, the funds for the project were to come from the City, VDOT, and USDOT. The project required the City to obtain a parcel of land owned by Clear Sky. The City hired two appraisers, each of whom valuated the parcel on a square-foot basis without examining the values of other “pad sites”—that is, other “freestanding parcel[s] of commercial real property located in front of or near a shopping center such that it benefits from traffic to the shopping center.” The City gave copies of the appraisals to Clear Sky in August 2011, stating that it was accepting the lower of the two appraisals—which valuated the parcel at $2.15 million. In January 2012, the City offered Clear Sky $2.15 million as just compensation; Clear Sky rejected the City’s offer. The City then initiated a quick take proceeding under Virginia Code §§ 33.1-119 and 33.1-120, filing a certificate of take and depositing the valuation amount with the Circuit Court for the City of Chesapeake.
Clear Sky filed a lawsuit against the defendants, claiming that the defendants violated Clear Sky’s rights under the URA—specifically, rights provided by §§ 4651 and 4655. The defendants then filed Rule 12(b)(a) and 12(b)(6) motions to dismiss, and the district court granted the defendants’ motions. On appeal, Clear Sky noted that, under § 4651 of the URA, federal agencies acquiring real property must follow ten specific policies “to [inter alia] assure consistent treatment for owners . . . and to promote public confidence in Federal land acquisition practices”; furthermore, because the federal government provided some of the funding in this instance, § 4655 made § 4651 applicable to the project. Thus, Clear Sky argued that it was entitled to enforce § 4651’s policies through a direct cause of action against the defendants, through a cause of action pursuant to 42 U.S.C. § 1983, and under the APA.
With regard to the purported direct cause of action, the Fourth Circuit noted that 42 U.S.C. § 4602(a) explicitly states that “[t]he provisions of section 4651 of this title create no rights or liabilities and shall not affect the validity of any property acquisitions by purchase or condemnation”; furthermore, § 4655 simply modifies the scope of § 4651 in certain instances and does not create any policies by itself. The Fourth Circuit then found that, because §§ 4651 and 4655 do not provide individually enforceable rights, Clear Sky had no remedy under 42 U.S.C. § 1983—as § 1983 does not confer substantive rights. Lastly, the Fourth Circuit found that Clear Sky’s brief reference to the APA in its opening statement of jurisdiction did not sufficiently plead a cause of action under the APA; furthermore, even under a liberal reading of the alleged facts in Clear Sky’s complaint, there was no “final agency action” that could be judicially reviewed under the APA.
– Stephen Sutherland
Decided: January 27, 2014
The Fourth Circuit held that it was without jurisdiction to consider a coal operator’s petition for review following the Federal Mine Safety and Health Review Commission’s (the “Commission”) decision to temporarily reinstate a coal miner.
Russell Ratliff (“Ratliff”) filed a discrimination complaint with the Secretary of Labor (“Secretary”), alleging that Cobra Natural Resources, LLC (“Cobra”) discharged him after he voiced safety concerns with respect to Cobra’s mining operation; thus violating the Mine Safety and Health Act of 1977’s (“the Mine Act”) whistleblower provision. In accordance with the Mine Act, after receiving Ratliff’s discrimination complaint, the Secretary determined it was not “frivolously brought” and applied to the Commission for an order temporarily reinstating Ratliff’s employment. Cobra, however, disagreed with the Secretary’s finding and requested a hearing before an ALJ, contending that Ratliff’s complaint was frivolous and also asserting a tolling defense. A coal operator’s temporary reinstatement obligation can be “tolled” by the occurrence of certain events, such as a subsequent reduction-in-force that would have included the miner.
At the hearing, the ALJ agreed with the Secretary that Ratliff’s discrimination complaint was not frivolously brought and also rejected Cobra’s tolling contention, concluding that Cobra had failed to show that work was not available to Ratliff because of an asserted multi-employee layoff. As a result, Ratliff was immediately reinstated with the same hours of work, rate of pay, and benefits received. Cobra next sought Commission review. The Commission affirmed the ALJ’s decision. Cobra then filed this petition for review, summarily asserting jurisdiction under the collateral order doctrine and contending that the Commission erroneously denied Cobra’s tolling defense.
On appeal, the Fourth Circuit found that it was without jurisdiction to consider Cobra’s petition for review. In doing so, it noted that the Mine Act authorizes “any person adversely affected or aggrieved by an order of the Commission” to seek review in the appropriate court of appeals. Importantly, although the Act uses the term “order” rather than “final order,” the Court recognized that only final Commission orders are entitled to review. Thus, the issue before the Court was whether the Commission’s decision granting temporary reinstatement was immediately appealable by Cobra under the collateral order doctrine.
Having explained the issue before it, and having noted the limited persuasive effect of sister circuit court decisions on the issue, the Court assessed each requirement of the collateral order doctrine. Analyzing the first requirement: that a putatively appealable order conclusively determine a disputed question, the Court held that, because an order of temporary reinstatement remains subject to modification during the pendency of a coal miner’s discrimination complaint, it fails to satisfy this initial requirement. Next, the Court held that, because the considerations involved in the temporary reinstatement process are deeply enmeshed with the same issues comprising the miner’s underlying discrimination claim, it plainly failed the collateral order doctrine’s “separate” requirement. Lastly, the Court addressed the doctrines third requirement: that the order be “effectively unreviewable on appeal from a final judgment.” Again, the Court held that this requirement was not met because Cobra’s implicated interest was primarily economic in nature. In so holding, the Court noted that a coal operator’s financial interest in avoiding wage payments to a reinstated miner who returns to his job in the coal mines pales in comparison to those interests that have been deemed sufficiently important to give rise to collateral order jurisdiction.
– W. Ryan Nichols
Decided: January 24, 2014
The Fourth Circuit, “[c]onstrained by the standard of review,” held that the Federal Energy Regulatory Commission (“FERC”) properly exercised its discretion in declining to grant the North Carolina Utilities Commission (“NCUC”) rehearing and in evaluating the Virginia Electric and Power Company’s (“VEPCO”) application for incentives. Therefore, FERC’s decision was affirmed.
Under the Federal Power Act (“FPA”), FERC has jurisdiction over all rates, terms, and conditions of interstate electric transmission services provided by public utilities. In response to concerns about the reliability of the country’s aging transmission system, the FPA required FERC to promulgate a rule establishing incentive-based rate treatments for qualifying projects to spur infrastructure investment. The final rule established the following three-prong test for evaluating applications for incentives: (1) the utility must show that its infrastructure project will increase reliability or reduce congestion; (2) the utility must demonstrate a nexus between the requested incentive and the project; and (3) the utility must prove that its resulting rates with the incentive remain “just and reasonable.”
In 2008, VEPCO sought incentives for eleven transmission projects. After notice of VEPCO’s filings was published, NCUC and numerous other parties moved to intervene. The parties challenged the grant of incentives to five of the eleven projects. On appeal to FERC, NCUC challenged only one project under prong one, arguing that it would not increase reliability. It challenged all five projects under prong two, however, contending that they failed to meet the nexus requirement. FERC ultimately granted VEPCO’s application in full. NCUC filed a petition for rehearing on September 29, 2008. In its request for rehearing, NCUC reiterated its objections to the incentives for the five challenged projects and identified other errors in FERC’s order as well. On May 22, 2012, FERC finally issued its Order Denying Rehearing almost four years after its initial order. In the meantime, in 2010, a policy change was instituted with respect to the nexus requirement. Nonetheless, FERC declined to grant rehearing to apply the change. This appeal followed.
Noting the extremely deferential standard of review constraining it, the Fourth Circuit addressed in turn NCUC’s arguments: (1) that FERC erred by declining to grant rehearing to apply the 2010 policy change with respect to the nexus test; and (2) that FERC abused its discretion by granting VEPCO incentives based on the five challenged projects. In addressing NCUC’s first contention, the Court first determined it had jurisdiction because NCUC adequately exhausted its administrative remedies. Next, it explained that FERC’s decision whether to apply the new policy on rehearing is committed to the agency’s sound discretion. Noting that VEPCO was entitled to rely on consistent application of administrative rules, the Court found no error in FERC’s decision to deny NCUC’s rehearing request to apply the policy change.
Then, the Court addressed NCUC’s challenges based on the grant of incentives to certain projects. Looking for a “rational connection between the facts found and the choice made,” the Court found the first two projects satisfied this requirement of the nexus test by resulting from a regional planning process, facing ongoing and significant local opposition, and involving construction challenges based on changeable elevation and the use of new technology. For two other projects, the Court found FERC’s decision was supported by substantial evidence because the projects’ construction risks, ongoing local opposition, and impact on regional reliability satisfied the nexus test. Likewise, the Court affirmed FERC’s decision as to the final project even though it twice incorrectly stated that the project involved the replacement of only nine, instead of the actual thirty-two, transformers. In so holding, the Court concluded that, based on the record as a whole, FERC fully understood the nature of the project and believed it would increase reliability. It further determined it was innovative and a large-scale undertaking. Consequently, the Court concluded FERC’s decision was supported by substantial evidence.
-W. Ryan Nichols
Decided: November 20, 2013
The Fourth Circuit = affirmed the district court’s grant of summary judgment in favor of the defendant, the United States Coast Guard (“USCG”), in a personal injury and wrongful death action. The Fourth Circuit held that the Coast Guard did not breach a duty of care in attempting to rescue Susan Turner and her husband, Roger Turner, Jr. and, therefore, that the Coast Guard was not liable for Mrs. Turner’s injuries or Mr. Turner’s death.
On July 4, 2007, Mrs. Turner and her husband (collectively, the “Turners”) left home on their private 20-foot long motorboat, intending to watch holiday fireworks. Before leaving, Mr. Turner told his father that the Turners would be going to one of three possible locations. After leaving a party on the Perquimans River, Mrs. Turner fell overboard, nearly one and half miles offshore. At some point thereafter, Mr. Turner also entered the water. The Turners’ boat stayed afloat, drifting downriver. When the Turners did not return home by 9:30 p.m., Mr. Turner’s father called 911. The USCG decided that, due to the number of potential locations and the current deployment of search assets on a confirmed emergency mission (a missing jet ski), the USCG would not initiate an active search for the Turners’ overdue boat at that time. Instead, the USCG would begin making radio calls and would inquire with local marinas later that morning. When the USCG discovered the Turners’ empty boat on the morning of July 5, it launched an air and sea search. During the night of July 4 and into the morning of July 5, Mrs. Turner tread water for nearly 12 hours, surviving by clinging to crab pot buoys. The USCG, despite extensive search efforts, did not find Mr. Turner; his body washed ashore two days later.
On appeal, Ms. Turner first argued that the Coast Guard breached a duty of care in attempting to rescue the Turners. The USCG’s enabling statute, 14 U.S.C. § 88, authorizes the USCG to undertake rescue efforts, but does not impose any affirmative duty to commence such rescue operations. However, pursuant to the Good Samaritan doctrine, once the Coast Guard undertakes a rescue operation, it must act with reasonable care. The Court held that this doctrine sets a high bar to impose liability on a rescuer: the evidence must show that the rescuer failed to exercise reasonable care in a way that worsened the position of the victim. The Turners did not show that the USCG’s actions worsened their position. The thrust of the plaintiff’s case was that the USCG should have done something to alleviate the Turners’ predicament sooner; however, the USCG was under no obligation to do so. Nor did the USCG’s actions worsen the Turners’ position by inducing reliance on the part of either the Turners or a third party. Because the Turners themselves never spoke with the Coast Guard, they could not have relied on representations by the USCG.
Second, Mrs. Turner demanded sanctions premised on the USCG’s alleged deliberate spoliation of evidence, which the court denied. A party seeking sanctions based on the spoliation of evidence must establish that the alleged spoliator had a duty to preserve material evidence. Here, Mrs. Turner said that the USCG wrongfully destroyed audio recordings of telephone calls to the Coast Guard by recycling them and recording over them. The Court found, however, that Mrs. Turner did nothing to trigger a duty to preserve evidence on the part of the USCG. She did not send the USCG a document preservation letter, or any other correspondence threatening litigation.
Third, Mrs. Turner challenged the propriety of USCG’s responses to Turner’s Freedom of Information (“FOIA”) request. A valid FOIA claim requires three components: the agency must have (1) improperly (2) withheld (3) agency records. Here, Mrs. Turner argued that the USCG’s failure to retain voice tapes and emails should stand as proof that the USCG’s search for such responsive documents was inadequate. However, the lack of responsive documents does not signal a failure to search.
Finally, Mrs. Turner argued that the district court deprived her of due process by permitting the USCG to file its summary judgment motion more than 12 months after the deadline for filing dispositive motions. However, the district court gave Mrs. Turner the opportunity to file a brief in opposition to USCG’s motion for summary judgment, and Mrs. Turner did so. Therefore, her due process rights were not violated.
– Sarah Bishop
Decided: November 20, 2013
The Fourth Circuit held that (1) there is no clear statement of Congressional intent in the Fair and Equitable Tobacco Reform Act (FETRA), 7 U.S.C. §§ 518 et seq., regarding the applicable excise tax rates to be used in determining the total national FETRA assessment paid by the collective manufacturers of each class of tobacco product, and that (2) the United States Department of Agriculture (USDA) permissibly interpreted FETRA by using only 2003 tax rates to determine this assessment allocation. The Fourth Circuit therefore affirmed the United States District Court for the Eastern District of Virginia’s decision to grant the USDA’s motion for summary judgment.
FETRA created the Tobacco Trust Fund (the Fund), which funds “a temporary system of periodic payments to tobacco growers and other holders of tobacco quotas.” The Fund is administered by the Commodity Credit Corporation (CCC), which is funded with CCC assets and assessments taken from manufacturers of tobacco products. Under FETRA, the USDA—which administers the CCC—must annually determine the total funds that must be raised through the assessments (the initial allocations). This determination involved two steps: determining the total national assessment to be paid by the collective manufacturers of each class of tobacco product (inter-class allocations)—including cigarettes and cigars—and determining the individual liability of each manufacturer. FETRA provides that the assessment burden for each class—measured in percentages of the total nation assessment—must be adjusted “to reflect changes in the share of gross domestic volume” held by each class of tobacco product. FETRA includes specific percentages of the initial allocations to be applied to the respective classes of tobacco products in fiscal year 2005, 7 U.S.C. § 518d(c)(1), and the USDA determined that, to calculate these allocations, Congress converted the applicable class volumes into dollars “by multiplying each class’s volume by the maximum excise tax rate applicable to that class.” However, FETRA does not actually direct the USDA to use this method of calculating initial allocations.
Congress subsequently passed the Children’s Health Insurance Program Reauthorization Act of 2009 (CHIPRA), which increased excise taxes on each class of tobacco product and equalized the tax rates for small cigars and cigarettes. The equalization resulted in a much larger relative increase in tax rates for cigars than cigarettes. Because the USDA’s regulations implied that inter-class allocations would be determined with current tax rates, CHIPRA would have increased the liability of the cigar industry and decreased the liability of the cigarette industry. However, the USDA subsequently promulgated a technical amendment to 7 C.F.R. § 1463.5, in which the USDA stated it would continue to apply 2003 tax rates—which Congress used to set the initial allocations for fiscal year 2005.
Philip Morris contented that, under the new calculation framework, it would experience higher assessments than it would have if the USDA had applied current tax rates. After unsuccessfully appealing the assessment and pursuing rulemaking from the USDA, Philip Morris brought the present lawsuit, arguing that the technical amendment was inconsistent with FETRA. The district court granted summary judgment to the USDA, finding that the USDA calculation method “faithfully adjust[s] the percentage of the total amount required to be assessed against each class of tobacco product” and “reasonably reflects the congressional intent underlying FETRA.” Philip Morris appealed.
Applying the two-part test from Chevron, U.S.A., Inc. v. Natural Resources Defense Council, Inc., 467 U.S. 837, the Fourth Circuit first determined that Congress had not “directly spoken to the precise question at issue.” The Fourth Circuit noted that FETRA does not direct the USDA to use any specific tax rate to calculate the inter-class allocations. The Fourth Circuit also concluded that Philip Morris’s various arguments did not meet its burden of proving the USDA’s decision “contrary to the unambiguously expressed intent of Congress.” The Fourth Circuit then determined that the USDA’s interpretation of FETRA was reasonable, given Congress’s intent in passing it. The Fourth Circuit stated that “there is no evidence that Congress intended for FETRA to do anything more than provide a workable methodology for the allocation of assessments across manufactures of tobacco product,” and found that Philip Morris could not provide anything more than a plausible alternative reading of the applicable statutes.
– Stephen Sutherland
Decided: October 29, 2013
On appeal, the Fourth Circuit Court of Appeals held that the district court did not err in its application of Listing 1.04A, the Social Security Administration regulation identifying disorders of the spine that merit an award of social security disability benefits. However, the Fourth Circuit vacated the district court’s judgment because its decision to direct the Administrative Law Judge to award benefits was an abuse of discretion.
Radford worked as a tree trimmer, and sustained an injury in 2002 lifting part of a tree at work. For the next five years, Radford consulted several doctors who collectively observed different symptoms of nerve root compression. In 2007, Radford applied for social security disability benefits. Under the Social Security Administration regulation, Listing 1.04A, a claimant is entitled to a conclusive presumption that he is disabled if he can show that his disorder results in compromise of a nerve root or the spinal cord. In addition, Listing 1.04A describes the criteria a claimant must “meet or equal” to merit this presumption. An Administrative Law Judge (“ALJ”) denied Radford’s claim, finding that he was not disabled because his back impairment did not “meet or equal” Listing 1.04A. The federal district court found that the evidence did show that Radford met Listing 1.04A and reversed the decision of the ALJ as unsupported by substantial evidence, and remanded for an award of benefits.
The issues on appeal were whether the district court applied the wrong legal standard in ruling that Radford’s condition met or equaled Listing 1.04A and whether the district court erred in remanding with instructions to award benefits.
The Fourth Circuit held that the district court applied the correct legal standard. The Social Security Commissioner argued that the district court improperly interpreted the regulation to require intermittent, rather than simultaneously present signs and symptoms for establishing a lasting impairment. The Fourth Circuit rejected the Commissioner’s argument, based on the text and structure of the regulation. The listed symptoms are connected by the word “and,” which means that all of the symptoms must be present, but not necessarily at the same time. The provision does not specify when the symptoms must be present. Moreover, the regulation already imposes a duration requirement on the claimant, who must prove the impairment lasted for a continuous period of at least 12 months. Furthermore, a court owes no deference to an agency’s interpretation where the regulation’s meaning is unambiguous. Because Listing 1.04A says nothing about a claimant’s need to show symptoms present simultaneously or in close proximity, the regulation is unambiguous and, therefore, the court owes no deference to the Commissioner’s interpretation.
Finally, the Fourth Circuit held that the district court erred in reversing and remanding with instructions to award benefits to Radford, and should have vacated and remanded with instructions for the ALJ to clarify why Radford did not satisfy Listing 1.04A. If the reviewing court has no way of evaluating the basis for the ALJ’s decision, then the proper course, except in rare circumstances, is to remand to the agency for additional investigation or explanation. Because the ALJ provided no explanation for his conclusion that Radford’s impairment did not meet or equal a listed impairment, the district court had no way of reviewing the basis of his decision. In addition, the ALJ cited to state medical opinions in support of his conclusion, rather than the opinions of Radford’s treating physicians, which is especially suspect. The Court explained that remand would not be futile where there is at least conflicting evidence in the record as to whether Radford satisfied the listing. Moreover, the Court noted that it was not the province of the appellate or district court to reweigh conflicting evidence, make credibility determinations, or substitute its judgment for that of the ALJ.
– Sarah Bishop
Decided: October 23, 2013
The Fourth Circuit Court of Appeals reversed and remanded the district court’s dismissal of plaintiffs’ Commerce Clause claim against the state of Virginia, for hindering the plaintiffs from opening facilities in the state through a certificate-of-need requirement. However, the Fourth Circuit affirmed the district court’s dismissal of plaintiffs’ Fourteenth Amendment claims.
Virginia requires medical providers to obtain a “certificate of public need” in order to launch a medical enterprise in the state. Applicants must demonstrate to the State Health Commissioner that a sufficient public need exists for the proposed medical services. The certificate application process is potentially lengthy, costly, and unpredictable. Plaintiffs, Colon Health Centers and Progressive Radiology, are medical providers who sought to avoid the burdens of this process. Colon Health combines the advantages of the two prevailing colon-cancer screening methods in a “one-stop shop” that screens, diagnoses, and treats colon cancer, all in one visit. Progressive Radiology specializes in using magnetic resonance imaging to diagnose neurological and orthopedic injuries.
On appeal, the plaintiffs challenged the certificate program as a violation of the dormant Commerce Clause and the Fourteenth Amendment’s Equal Protection, Due Process, and Privileges or Immunities Clauses.
With respect to the dormant commerce clause argument, the Fourth Circuit held that the district court erred in dismissing plaintiffs’ claim. The Court remanded for a factual investigation by the lower court as to whether the certificate program has a discriminatory effect on interstate commerce. In order to prove discriminatory effect, plaintiffs must demonstrate that the challenged statute would negatively impact interstate commerce to a greater degree than intrastate commerce. State laws that discriminate against interstate commerce can be per se invalid in three ways: facially, in practical effect, or in purpose. Under strict scrutiny analysis, a court must invalidate the challenged law unless the state demonstrates that it serves a legitimate purpose, which could not be better served by available nondiscriminatory means. In this case, plaintiffs alleged discrimination in both purpose and effect. Because the purpose of Virginia’s certificate program is to protect current healthcare providers from competition, the plaintiffs alleged the purpose is to protect in-state entities at the expense of out-of-state entrants. Because the certificate application process requires a lengthy fact-finding process, the plaintiffs alleged it grants in-state economic interests the power to obstruct the market entrance of new-, primarily out-of-state competitors. The Fourth Circuit held that determining whether Virginia’s certificate-of-need law discriminates, in either purpose or effect, necessarily requires looking behind the statutory text to the actual operation of the law, i.e. by proper fact-finding. In any event, plaintiffs’ claims of discrimination are sufficient to raise their right to relief above the speculative level and, therefore, satisfy the standard for surviving a motion to dismiss.
Moreover, even if the Virginia law discriminates neither in purpose nor in effect, it may still be unconstitutional under Pike v. Bruce Church, Inc., if it places an “undue burden” on interstate commerce in relation to the putative local benefits, under a rational basis test. The plaintiffs argued that Virginia’s certificate requirement does not actually achieve any legitimate local benefits. Because the challenge presented issues of fact that cannot be properly resolved on a motion to dismiss, the Fourth Circuit held that the district court erred in dismissing appellant’s Pike claim. However, The Fourth Circuit directed the lower court on remand to focus primarily on the discriminatory effects test, rather than the Pike test, which fails to properly cabin the judicial inquiry or effectively prevent the district court from assuming a super-legislative role. Under the discriminatory effects test, the proceedings must investigate the differential burdens imposed on out-of-state and in-state firms subject to the certificate-of-need process.
Regarding the plaintiffs Fourteenth Amendment claims, the affirmed the district court’s dismissal. First, plaintiffs’ alleged a violation of the Equal Protection clause, which centered on the state’s treatment of nuclear cardiac imaging, which is exempted from the certificate-of-need requirement, although similarly situated to other types of medical imaging. However, non-suspect classifications are accorded a strong presumption of validity. The Fourth Circuit held that Virginia articulated sufficient justifications for the nuclear cardiac imaging exemption to survive rational basis scrutiny. Next, plaintiffs alleged a violation of the Due Process clause, contending that the certificate program irrationally burdened their right to earn a living and failed to advance any state purpose other than bald economic protectionism. Because the program does not infringe on a fundamental right, it is subject to rational basis scrutiny, which is quite deferential. In addition, the Fourth Circuit held the certificate program served a variety of legitimate purpose. Finally, plaintiffs alleged a violation of the Privileges or Immunities Clause, contending that the certificate program contravenes the “right to earn an honest living” embodied in the clause, which provides that “No State shall make or enforce any law which shall abridge the privileges or immunities of citizens of the United States.” However, the plaintiffs conceded that the Supreme Court’s decision in Slaughter-House Cases confined the reach of this clause to a set of national rights that does not include the right to pursue a particular occupation.
– Sarah Bishop
Decided: August 27, 2013
The Fourth Circuit found that, although the claims asserted involve a sensitive area of North Carolina public policy, resolving them would not be sufficiently disruptive of that policy to warrant abstention and therefore reversed the district court’s decision to abstain and remanded for further proceedings.
This case arose out of a dispute between the Town of Nags Head (the “Town”), a coastal municipality bordered by the Atlantic Ocean, and Nags Head beachfront property owners, Matthew and Lynn Toloczko (the “Toloczko’s”). The Town’s beaches enjoy legal protection under the “public trust doctrine,” which entitles the state of North Carolina to appropriate title to tidal lands in trust for the public. Although the vagaries of beach topography make it difficult to delineate a fixed boundary, the Town and North Carolina both define the relevant areas as “seaward of the mean high water mark.” Historically, prevailing environmental conditions have pushed the high tide line westward resulting in the gradual migration of private beachfront property into public trust lands. Consequently, beachfront owners, like the Toloczko’s, have periodically replaced displaced sand and raised the height of their cottages to endure tidal surges. However, when a tropical storm inflicted serious damage on the Toloczko’s cottage in November 2009, the Town condemned the structure and found it was beyond rehabilitation because it was located within public trust lands and therefore a nuisance under the Town’s Nuisance Ordinance. The Town refused to allow the Toloczko’s to abate any nuisance by acquiring a permit to make repairs and began assessing daily fines to compel the Toloczko’s to demolish the structure. After the Toloczko’s refused to demolish their cottage, the Town sued them in North Carolina state court, seeking to collect the assessed fines and demolish the cottage. Based on diversity, the Toloczko’s removed the case to federal court and filed twenty-one counterclaims alleging violations of state and federal law. The district court, however, finding that the dispute involved “profound, unresolved state-law issues that transcend the case at hand,” invoked the Burford doctrine of abstention and declined to exercise federal jurisdiction. This appeal followed.
On appeal, the Fourth Circuit first considered whether the district court correctly abstained from resolving the claims for declaratory relief asserted by the Toloczko’s, the substance of which concerned the Town’s authority to ratify and enforce an ordinance regulating structures on public trust lands. After examining intermediate developments in North Carolina precedent, the court found that, because North Carolina law already bars the Town from enforcing its Nuisance Ordinance under the facts presented, continued abstention was not appropriate. Next, the court held that the district court improperly abstained from deciding the Toloczko’s claim under 42 U.S.C. § 1983 alleging due process and equal protection violations. Lastly, the court reviewed the district court’s dismissal of the Toloczko’s regulatory takings claim and its decision to stay the inverse condemnation claim because the Toloczko’s failed to obtain an inverse adjudication—the relevant state law remedy—in state court before removal to federal court in violation of the Williamson County ripeness doctrine. Recognizing that Williamson County is a prudential rather than a jurisdiction rule, the court exercised its discretion to suspend the state-litigation requirement in the interests of fairness and judicial economy and therefore remanded the federal and state law takings claim to the district court.
– W. Ryan Nichols
Decided: July 22, 2013
The Fourth Circuit held that the district court lacked subject matter jurisdiction to consider a petition brought by a detained ship and its owner for release because the United States Coast Guard’s decision to detain the ship was subject to agency discretion alone. Therefore, the decision to detain was not appealable to the district court.
The United States Coast Guard (“Coast Guard”), acting through the Department of Homeland Security, detained the Antonis G. Pappadakis (“the ship”), a bulk cargo carrier owned by Angelex, Ltd. (“Angelex”) at port in Norfolk, Virginia under suspicion that the ship had likely been discharging pollution and failed to keep adequate records under federal and international law. After several days of negotiation, the Coast Guard agreed to release the ship upon the posting of a $2.5 million bond and complying with a number of non-monetary obligations to ensure the cooperation of crewmembers and officials in its ongoing investigation. Angelex refused to pay the required $2.5 million bond and filed a petition in the Eastern District of Virginia seeking release of the ship or imposition of an appropriate bond for release. The district court asserted jurisdiction based on the Administrative Procedure Act (“APA”), or, in the alternative, admiralty jurisdiction. The district court granted the petition, finding that the bond was excessive and exceeded the Coast Guard’s authority, and set a new bond at $1.5 million. The United States of America, the Coast Guard, and the United States Customs and Border Protection Agency (collectively the “Government”) appealed the district court’s order on the grounds that the district court lacked subject matter jurisdiction to consider Angelex’s petition.
The Fourth Circuit held that the district court lacked subject matter jurisdiction to hear Angelex’s petition under both the APA and admiralty jurisdiction. The APA allows a court to set aside agency action that are found to be “arbitrary, capricious, an abuse of discretion, or otherwise not in accordance with the law.” The APA provides to exceptions to judicial review of agency action: (1) where the “statute precludes judicial review,” or (2) “when agency action is committed to agency discretion.” In the present case, the Fourth Circuit found that the Coast Guard’s decision to detain the ship was a decision that fell within the latter exception, and was thus, not reviewable. Under the applicable law, the Coast Guard has the authority to determine the amount of the bond required to avoid detainment, or it may determine that it will not accept a bond at all. Thus, the Coast Guard has near complete discretion and the court may not question the reasonableness of the Coast Guard’s decision. In fact, the Fourth Circuit described the Coast Guard’s discretion to deny departure clearance as “limitless.”
The Fourth Circuit further held that the court could not hear the case under admiralty jurisdiction. The district court determined that the withholding of the ship was “tantamount to an arrest of the ship,” which is a dispute that falls within the court’s admiralty jurisdiction. The Fourth Circuit disagreed, finding that the denial of departure clearance was not sufficiently analogous to “arrest of the ship” to confer admiralty jurisdiction. The court also held that the denial of departure clearance was not sufficiently similar to an admiralty lien to confer jurisdiction. Therefore, the court found that the Coast Guard’s decision to detain the ship was squarely within its congressionally conferred discretion and was not subject to review in the district court.
– Wesley B. Lambert
Decided: July 19, 2013
The Fourth Circuit reversed Defendant Joe Lanning’s (“Defendant”) conviction and remanded for a judgment of acquittal as a result of his involvement in a sting operation targeting gay men. The Defendant was convicted for disorderly conduct under 36 C.F.R. § 2.34, which prohibits conduct considered “obscene,” “physically threatening or menacing,” or “likely to inflict injury or incite an immediate breach of the peace.” The court held that the term “obscene” was unconstitutionally vague and determined that no rational finder of fact could find beyond a reasonable doubt that Defendant’s conduct was “physically threatening or menacing” or “likely to inflict injury or incite an immediate breach of the peace.”
The National Park Service and the U.S. Forest Service set up a joint operation that was designed to enable officers to identify and arrest men who were involved in sexual solicitation and activity with other men in the Sleep Gap Overlook area of the Blue Ridge Parkway in Buncombe County, North Carolina. In November 2009, a thirty-three year old, two hundred pound park ranger participated in the operation as an undercover operation. During the course of his duties, he came upon Defendant, a sixty-two year old retiree, on a nearby trail. When the undercover officer walked past, Defendant grabbed his groin and continued walking. A few moments later, after walking around the area, the undercover officer went looking for Defendant and found him standing by himself. The undercover officer engaged Defendant in conversation for a few minutes then commented, “Asheville was ‘an open community,’ accepting of a homosexual lifestyle.” Defendant then indicated he wanted to engage in sexual relations with the undercover officer. The undercover officer indicated that he was wiling to participate. Defendant then turned around and backed up to the undercover officer and “touched [the officer’s] fully-clothed crotch.” The undercover officer characterized the touch as ‘a fairly firm grasp’ that lasted until the officer stated: ‘Police officer, you’re under arrest.’ Defendant was subsequently charged with disorderly conduct in violation of 36 C.F.R. § 2.34(a)(2). Defendant unsuccessfully moved to dismiss the case and the magistrate judge found him guilty of disorderly conduct, providing no specific reasons for the decision and was sentenced to 15 days’ imprisonment, a $1,000 fine, and a two-year ban on visiting government forests and parks. Defendant appealed to the district court, which affirmed the conviction concluding that there was enough evidence that indicated Defendant’s “conduct was obscene and physically threatening and/or menacing.” However, the district court vacated and remanded his sentence because the magistrate judge did not have the authority to ban Defendant from government parks. The magistrate judge subsequently dropped the ban and reduced the fine to $500 upon which the district court affirmed. Defendant appealed to the Fourth Circuit.
On appeal, the Fourth Circuit found that the “obscene” standard encapsulated in the regulation was unconstitutionally vague based on a common understanding of the word’s definition. The court held that the Section 2.349a)(2) did not provide Defendant, nor would it provide any other person of ordinary intelligence, with “notice” that such conduct was obscene. Moreover, the court held that the facts of the case illustrated “the real risk that the provision may be ‘arbitrarily and discriminatorily enforced.” The court highlighted the fact that the sting operation “was aimed not generally at sexual activity in the Blue Ridge Parkway; rather, it specifically targeted gay men” and presented a “real threat of anti-gay discrimination.” The court cautioned that its decision was limited to Defendant’s conduct at issue and did not mean that the statute was impermissibly vague per se. The court also held that the regulation’s second element, whether Defendant’s conduct was “physically threatening or menacing” was not satisfied. The court held that “no rational fact finder could conclude that a reasonable person would feel physically threatened or menaced by Defendant’s conduct,” under the facts presented. Because neither prong could serve as a basis for Defendant’s conviction, the court turned to the final prong of the regulations second element: “conduct ‘done in a manner that is likely to inflict injury or incite an immediate breach of peace.’” Again, the court agreed with Defendant that the government had failed to provide enough evidence to support his conviction for disorderly conduct because no rational finder of fact would conclude that the undercover officer likely would have reacted violently to Defendant’s “fleeting touch.”
– John G. Tamasitis
Decided: July 5, 2013
The Fourth Circuit affirmed the judgment of the Secretary of the U.S. Department of Housing and Urban Development (“HUD”) and rejected Corey’s challenges to the Secretary’s order, which found him in violation the Fair Housing Act (“FHA”) by discriminating on the basis of disability.
Corey, a landlord, violated the FHA when he made written and oral statements with respect to the rental of a dwelling indicating a preference based on disability. When Ms. Walker informed Corey that her brother and potential co-habitant, Mr. Walker had “severe autism,” Corey insisted Ms. Walker obtain a bond to protect the property and issued three other written preconditions for rental: 1) a note from the disabled’s doctor indicating he did not pose a liability threat, 2) a rental insurance policy with $1M in liability coverage, and 3) assumption of responsibility for any damage Mr. Walker might cause to the property. Even though Ms. Walker never submitted the required rental application, HUD filed a charge of discrimination against Corey, which was heard by an Administrative Law Judge (“ALJ”). The ALJ originally found that Corey’s rental requirements were reasonable requests for additional information and not in violation of the FHA. However, the Secretary reversed the ALJ’s decision on each charged violation and remanded the case for a hearing on damages. After the damages award, both parties petitioned for Secretarial Review of the ALJ’s remand decision. In a Final Agency Order (“the Order”), the Secretary denied Corey’s petition as untimely, granted in part the Department’s petition, and imposed a steeper damages award and a civil penalty.
The Fourth Circuit took up Corey’s challenge to the Final Agency Order and HUD’s Cross-Application for Enforcement of the Order. Pursuant to the Administrative Procedures Act, federal courts may overturn agency decisions if they are arbitrary and capricious and unsupported by substantial evidence. The Fourth Circuit first applied the “ordinary listener” standard to Corey’s oral and written statements and found direct evidence that Corey violated the FHA by making statements that an ordinary listener would deem reflected a “preference or limitation” against the Walkers based on Mr. Walker’s disability. Furthermore, the Fourth Circuit found by direct evidence that Corey violated the FHA by imposing more burdensome application procedures and generally discouraging the potential tenants’ application because of a disability. Finally, the Fourth Circuit determined that the “direct threat” exception to the FHA does not apply because Corey provided no objective evidence that Mr. Walker posed a direct threat to persons or property, as is required to trigger the exception.
– E. Leary McKenzie
Date Decided: June 14, 2013
The Fourth Circuit affirmed the district court’s ruling that a rule promulgated by the National Labor Relations Board (the “NLRB”) requiring employers to notify employees of their rights under the National Labor Relations Act (the “NLRA”) exceeded the statutory authority granted by the NLRA. The Fourth Circuit held that the powers granted to the NLRB by the NRLA are primarily reactive and thus, because Congress did not explicitly grant the NLRB authority to promulgate notice-posting rules, the NLRB did not have the authority to promulgate the challenged rule.
On August 30, 2011, the NLRB promulgated a rule comprised of three subparts. Subpart A provides that “all employers subject to the NLRA must post notices to employees, in conspicuous places, informing them of their NLRA rights, together with the [NLRB] contact information and information concerning basic enforcement procedures.” Subpart B makes the failure to post the employee notice an “Unfair Labor Practice” (“ULP”) under the NLRA. Furthermore, under the rule, if the NLRB found that the employer failed to post the required notice, the NLRB could require the employer to post notice and toll of the statute of limitations for any employee ULP complaints. Subpart C allowed the board to “consider a knowing and willful refusal to comply with the requirement to post the employee notice as evidence of unlawful motive” in other proceedings. The NLRB passed the rule primarily based on the finding that “American workers are largely ignorant of their rights under the NLRA,” citing the “changing nature of the American Workforce” and “the overwhelming majority of private sector employees…not represented by unions” as the reasons for the employees’ ignorance of their rights under the NLRA. Before the rule went into effect, the Chamber of Commerce for the United States and for South Carolina (collectively, “Chamber”) filed a complaint in the District Court for the District of South Carolina for injunctive relief against the rule. The district court granted summary judgment to the Chamber.
On appeal, the NLRB first argues that the notice-posting rule should be analyzed under the deferential standard set forth in Mourning v. Family Publications Service, Inc. According to the court in Mourning, the NLRB’s rules should be upheld if they are “reasonably related” to the purposes granted under the NLRA. The Fourth Circuit disagreed, siding with the Chamber that the rule should be analyzed under the more common two-step approach laid out by the Supreme Court in Chevron, U.S.A., Inc. v. Natural Resources Defense Council, Inc. The court found that Mourning only applies where “Congress delegated appropriate authority” under the board to make the rule. In this case, the court found that Congress did not specifically grant the NLRB the power to make notice-posting rules, and thus, the deferential standard did not apply.
Second, the NLRB argued that the court should uphold the rule “unless Congress expressly withheld the authority” to make the rule. The Chamber argued, on the other than, that the court should invalidate the rule unless the court found “that Congress intended to delegate to the [NLRB] the power to issue it.” The Fourth Circuit again agreed with the Chamber. The court found that in other contexts, such as the Food and Drug Administration, the court “deemed the question of whether Congress intended to grant authority” the appropriate consideration for determining rulemaking authority. The court further struck down the NLRB’s argument, finding that the NLRB had not been legislatively granted authority to promulgate a notice-posting rule. The court concluded instead that the NLRB’s power was specifically limited by congress to two functions: addressing ULP charges and conducting representation elections.
After resolving these two preliminary issues, the court analyzed the rule under the Chevron framework. First, in addressing the issue of “whether Congress has directly spoken to the issue,” the court applied traditional rules of statutory construction and found that the NLRA was unambiguous in requiring explicit or implicit authority to issue a rule. Thus, the court held that because the NLRA does not charge the NLRB to inform employees of their rights under the NLRA, the NLRB did not have the power to promulgate the notice-posting rule. Furthermore, the court found that the NLRA made clear that the NLRB is a “reactive entity,” and thus, does not have the power to affirmatively require employers to post notice without a finding of an ULP. Second, the court found that the NLRA’s structure does not provide the NLRB with the authority to promulgate notice-posting rules. Most importantly, the court held that the notice-posting rules are not “necessary to carry out” the NLRB’s responsibilities under the NLRA. The Fourth Circuit said that “the [NLRB] may not justify an expansion of its role to include proactive regulation of employers’ conduct by noting its reactive role under the [NLRA].” Third, the court held that the history of the NLRA “provides no countervailing evidence of an intent to bestow the [NLRB] with the power to enact the challenged regulation.” The court found that the history indicates that the NLRB was designed to serve a reactive role, limited to the functions expressly delegated by the NLRA. Finally, the court noted that Congress expressly provided for notice provisions in other labor laws, indicating that Congress would have expressly delegated notice-posting authority to the NLRB if it intended the NLRB to have such authority. Therefore, the court affirmed the district court’s holding that the NLRB did not have the authority to promulgate a notice-posting rule.
– Wesley B. Lambert
Decided: June 4, 2013
The Fourth Circuit affirmed the Administrative Law Judge’s (“ALJ”) decision to award black lung benefits under the Black Lung Benefits Act (the “Act”) to Cochran, a former Westmoreland Coal Company (“Westmoreland”) employee, finding that there was sufficient evidence to find that Cochran suffered from “legal pneumoconiosis.”
Plaintiff, Jarrell Cochran worked for the Westmoreland in West Virginia for at least sixteen years. Cochran also smoked cigarettes, consuming about a pack of cigarettes every week. In February of 2008, Cochran filed a claim for black lung benefits under the Act. The Department of Labor awarded benefits, which were affirmed by the ALJ. Under the Act, former coal miners are able to claim benefits by showing that they suffer from the lung disease called pneumoconiosis. One can prove pneumoconiosis by establishing either “legal” or “clinical” pneumoconiosis. “Legal pneumoconiosis” is broader than “clinical pneumoconiosis” and requires a showing of “any chronic lung disease or impairment…arising out of coal mine employment…includ[ing]…any chronic restrictive or obstructive pulmonary disease.” Westmoreland and Cochran presented competing experts at the hearing before the ALJ. The ALJ ultimately sided with Cochran’s expert, finding that his testimony established that Cochran suffered from legal pneumoconiosis.
On appeal, Westmoreland first argued that the expert’s testimony was insufficient to support the ALJ’s finding of legal pneumoconiosis, claiming that his testimony merely established the possibility that coal mine dust contributed to Cochran’s pneumoconiosis. The Fourth Circuit disagreed, finding that the expert’s testimony established that both coal dust and cigarette smoke were causes of pneumoconiosis, supporting the ALJ’s finding of legal pneumoconiosis. Second, Westmoreland argued that the ALJ erred by improperly discounting the testimony of its competing experts based on the court’s reliance on the Act’s preamble. The Fourth Circuit again affirmed the ALJ’s decision, finding that the preamble of the Act was an appropriate consideration. Furthermore, the Fourth Circuit emphasized that the preamble was only one of a number of factors that the ALJ considered in making his decision. The ALJ most heavily discounted Westmoreland’s experts because they failed to address legal pneumoconiosis in their analysis. The court concluded that at its core, the case was simply a battle of the experts, and after thoughtful and reasoned analysis, the ALJ was justified in finding Cochran’s expert more believable. Finally, Westmoreland argued that the ALJ erred by placing the burden of proof on Westmoreland to “rule out coal mine dust as a cause of Cochran’s respiratory impairment.” The Fourth Circuit disagreed, finding that Westmoreland’s reliance on the ALJ’s statement that “it is not established that coal dust did not aggravate [Cochran’s] asthma” was taken out of context. The court found that it was simply a part of the ALJ’s broader analysis and the ALJ properly placed the burden of proof on Cochran to establish the existence of legal pneumoconiosis. Therefore, the Fourth Circuit affirmed the ALJ’s conclusion that Cochran suffered from legal pneumoconiosis.
– Wesley B. Lambert
Decided: May 10, 2013
The Fourth Circuit dismissed an appeal of a preliminary injunction granted by the United States District Court for the Eastern District of North Carolina against the Piedmont Behavioral Healthcare (“PBH”) and the director of PBH. The preliminary injunction ordered the defendants to reinstate plaintiffs’ Medicaid services and provide the plaintiffs’ with notice and an opportunity for a hearing. The Fourth Circuit dismissed the appeal primarily because the Secretary of the North Carolina Department of Health and Human Services (“the Secretary” or “the NCDHHS”), a co-defendant in the case decided by the district court, had failed to join in the appeal.
The class plaintiffs in the case were North Carolina Medicaid recipients who suffered from chronic disabilities that could qualify for institutional placement, but the plaintiffs were able to live in certain community environments with the help of certain services. Plaintiffs received these services through a type of Medicaid known as “managed care Medicaid.” Under this Medicaid program, the state contracts with a managed care organization (“MCO”) that supervises the delivery of medical services to the beneficiaries. For this case, the PBH was the MCO for the plaintiffs’ services and had contracted with the NCDHHS to provide such services. As part of the process, PBH set annual budgets for each beneficiary. However, due to budget shortfalls and increased demand, PBH designed a new system to develop the annual budgets. This new system resulted in significant reductions in annual budget amounts for certain Medicaid beneficiaries. The plaintiffs in this case all received letters from PBH indicating that their annual budget for services would be reduced in graduated steps. In July 2011, plaintiffs filed a class action against the NCDHHS and PBH. The plaintiffs sought preliminary and permanent injunctions to restore their services to previous levels and enjoin the defendants from reducing these services without providing notice and hearing as required by the Medicaid statute and the Fourteenth Amendment. The district court ruled in favor of the plaintiffs on the motion for a preliminary injunction because it found that the defendants had taken “action,” as defined by the Medicaid regulations thus entitling plaintiffs to notice and an appeal. Defendant PBH and its director filed a timely notice of an interlocutory appeal of the district court’s order. Critically, NCDHHS and its Secretary did not join in this notice.
The Fourth Circuit rejected PBH’s initial argument that the question before the court was whether the budget letters sent to the plaintiffs constituted agency action as defined by the applicable regulations. Rather, before reaching that decision, the court addressed whether PBH could even litigate the appeal given that NCDHHS had not decided to appeal. The Fourth Circuit explained that the relevant provisions of the Medicaid statute and regulations establish that each state must ‘provide for the establishment or designation of a single State agency to administer or supervise the administration’ of its program. The court identified this principle as the ‘single state agency requirement.’ The requirement, in turn, creates two important values espoused by the rules and regulations: “an efficiency rationale and an accountability rationale.” The efficiency rationale ensures that the final decision making authority rests with a single agency and avoids confusion. The accountability rationale guards against states attempting to evade federal requirements by “passing the buck” to other agencies. The court generally held that because North Carolina had decided to vest all the administration of its Medicaid program within NCDHHS, then PBH was bound by its decision not to appeal. The court’s decision was based on two main reasons. First, the court held that because NCDHHS had contracted with and delegated certain authority to PBH, as it is authorized to do, then PBH became a de facto agent of NCDHHS with respect to the administration of the State’s Medicaid program. Therefore, pursuant to Federal Rules of Civil Procedure (FRCP) 65(d)(2), an injunction is binding not only on NCDHHS, but also on its ‘agents’ and any one who is in ‘active concert or participation’ with it. PBH argued that the decision to appeal does not seek to change an “administrative decision” by NCDHHS and therefore the agency relationship did not exist in the litigation context. The court disagreed and held that litigation decisions are not “categorically precluded” as an “administrative decision” and a decision not to appeal an injunction order is tantamount to a policy decision. The court also ruled against PBH because, even if PBH was successful on the merits of the case, it would still not receive the redress it sought because it would still be bound by the NCDHHS decision not to appeal. The court rejected PBH’s argument that a favorable decision on the merits would automatically release NCDHHS from the injunction. Rather, the court held that that basic appellate practice requires a party to actually seek an appeal in order for a judgment against them to be altered in their favor and NCDHHS’s decision not to appeal left the court with no option but to uphold the preliminary injunction against the state agency
Finally, the Fourth Circuit took up a separate issue dealing with NCDHHS’s motion after oral argument seeking leave to file a ‘Memorandum in Response to Questions Raised at Oral Argument.’ The Secretary of NCDHHS requested the court’s consent to clarify its position with respect to its decision not to appeal. The motion was filed under Rule 2 of the Federal Rules of Appellate Procedure, which allows a court to ‘suspend any provision of the Rules for good cause.’ The court held that no “good cause” existed because NCDHHS did nothing in its motion to show good cause. The court asserted that NCDHHS’s failure, as a sophisticated state agency, to simply sign a joint notice with PBH before the deadline was inexcusable and it would not grant the leave that NCDHHS requested.
– John G. Tamasitis
May 2, 2013
Reversing the District Court for the Eastern District of Virginia, the Fourth Circuit held that administrative remedies had been constructively exhausted under the Freedom of Information Act (FOIA) when the Drug Enforcement Administration (DEA) did not respond to Coleman’s FOIA request for over four months.
Coleman, a researcher and author, sent a FOIA request to the DEA seeking documents about carisoprodol on February 29, 2008. Coleman offered to reimburse the government up to $1,000 for searching and reproducing the requested documents. The DEA received this request on March 4, 2008. Without communicating with Coleman since his request, on July 14, 2009, the DEA denied the FOIA request because the $1,000 promise was insufficient to cover the costs, and the DEA required $1,640 to begin the search. On July 31, 2009, Coleman appealed the fee assessment to the Office of Information Policy (OIP), and he raised, for the first time, an argument that he was not a commercial requester and requested that his fees be waived because of the excessive delay. The OIP received the appeal on August 18, 2009. On March 29, 2010, the OIP ruled for Coleman, stating that the DEA’s action was not consistent with its own regulations, and the OIP sent its opinion to the DEA. To ensure that the DEA met his request, Coleman resubmitted his FOIA request on April 22, 2010. In this resubmitted FOIA request, Coleman reiterated that he was not a commercial requester. After four more months of waiting, Coleman filed this suit against the DEA. A day before answering the complaint, the DEA denied his FOIA request.
The District Court granted summary judgment to the DEA because Coleman had not exhausted his administrative remedies and because he did not pay the necessary processing fees. Coleman appealed to the Fourth Circuit. The Fourth Circuit addressed two issues.
The first issue was whether Coleman had exhausted his administrative remedies. The Fourth Circuit held that when an agency does not act within the timeframe provided by the FOIA (20 days), the requester has constructively exhausted administrative remedies. Because the DEA waited over four months on the last request, Coleman constructively exhausted his administrative remedies. The Court further held that the DEA could not prevent constructive exhaustion by denying his request after the suit was filed, rather an agency can only defeat a potential suit by ruling on the FOIA request prior to the suit is initiated.
The second issue was whether judicial review is inappropriate because Coleman failed to pay the $1,640 partial search fee assessed by the DEA. The Fourth Circuit distinguished this case from Pollack v. Department of Justice, 49 F.3d 115 (4th Cir. 1995) because Coleman had not refused to pay any fee at all, which is what Pollack had done. Since Coleman is challenging the substance of the agency’s fee and requesting a bona fide fee waiver, judicial review is appropriate in this case. The Fourth Circuit remanded the case to the District Court to determine what fee category applies and whether Coleman is eligible for a fee waiver.
– Jeffrey K. Gurney
Decided: April 26, 2013
The Fourth Circuit granted South Carolina’s petition for review and remanded the case to allow the Secretary of the U.S. Department of Education (“USDOE”) to provide South Carolina with notice and an opportunity for a hearing before making a final decision on South Carolina’s waiver for reducing its financial support for special education below the preceding fiscal year in order to receive federal funding under the Individuals with Disabilities Education Act (“IDEA”).
IDEA provides for grants of federal funding to States for the education of disabled children. In order to be eligible, States cannot reduce the amount of its own funding for special education below the amount that was provided by the State the previous year. If a State fails to meet this “maintenance-of-effort” condition, as it has been defined, then the Secretary of USDOE has to reduce the level of federal funding for subsequent years by the amount of the shortfall. In 2011, South Carolina requested a wavier of its “maintenance-of-effort condition” under the IDEA for approximately $67.4 million for the fiscal year ending in 2010. The Secretary of USDOE granted a partial waiver and denied it “to the extent of $36.2 million.” South Carolina then sought a hearing on the decision, but was advised by the USDOE that IDEA does not provide for such a hearing because such a hearing was only limited to situations where the USDOE rejected eligibility of a State for funding or the withholding of funds – neither of which occurred here. South Carolina then filed a petition for review to the Fourth Circuit challenging the denial of the request for a full waiver and requesting a full hearing. The USDOE filed a motion to dismiss and asserted that the Fourth Circuit did not have jurisdiction to consider the petition because the waiver determination was “a final agency action” and “subject to review only in the district court” pursuant to the Administrative Procedure Act (APA).
The Fourth Circuit first addressed the issue of whether it had jurisdiction to consider the petition. South Carolina argued that IDEA’s provisions allows a State to file a petition for review in the court of appeals when the State is arguing an issue with respect to eligibility of the State to receive funding under IDEA. The USDOE asserted that South Carolina was challenging was a USDOE action that did not involve an issue of “eligibility,” but rather death with an issue regarding South Carolina’s “compliance” under the statute. The court held that the language of the statute indicates that conditions on eligibility deal with forward-looking consequences of fund reductions, whereas a condition of non-compliance requires an evaluation of past performance. In this case, the court held that South Carolina’s petition for review of a full waiver of the “maintenance-of-effort” is an “action with respect to eligibility” because it results in the loss of future funding. The court further asserted that a State does not have to be found “completely” ineligible for funding for the court to have jurisdiction. It is enough that the action was based on a partial reduction of funding based on a failure to satisfy an eligibility condition like the “maintenance-of-effort” condition. The court next turned to whether South Carolina was entitled to notice and an opportunity for a hearing. On this second issue, the USDOE again argued that South Carolina’s waiver request was not an eligibility determination and did not involve a withholding and, as such, the statute did not require notice and a hearing. Based largely on its prior reasoning, the court held that the partial denial of the maintenance-of-effort waiver does constitute an eligibility action and, therefore, South Carolina is entitled to notice and a hearing. The court’s logic focused on the fact that “[w]hen the USDOE decided that South Carolina was only entitled to partial wavier . . . it made a determination that the ‘State was not eligible’ for the funding it otherwise would have received.” Therefore, South Carolina was entitled to notice and a hearing.
– John G. Tamasitis
Decided: April 15, 2013
The Fourth Circuit affirmed the district court’s dismissal of plaintiffs’ complaint under the Administrative Procedures Act (APA) for lack of subject matter jurisdiction because the U.S. Army Corps of Engineers (“Corps”) failed to take “final agency action” that is subject to judicial review under the APA. The Fourth Circuit also affirmed the dismissal of plaintiff’s breach of contract action, finding that the letters at issue did not create a contract that would justify the exercise of admiralty jurisdiction.
In the 1980s and 1990s, the Corps advanced proposals to widen and deepen the 37-mile channel in Cape Fear that allows access to the deep-water port in Wilmington, North Carolina. Before beginning construction in 2000, the Corps discovered rock at the bottom of the channel, requiring the Corps to revise its original harbor project. Plaintiff contended that the revisions would cause ecological damage to its beaches. After exchanging letters, the Corps adopted a plan agreeable to the plaintiff. The plan included semi-yearly maintenance programs designed to replenish sand on the plaintiff’s beaches. The Corps completed the harbor project in 2002. In the winter of 2011, the Corps informed the plaintiff that it had to curtail the maintenance program for budgetary reasons. Plaintiff filed a complaint against the Corps alleging breach of the maintenance plan, seeking specific performance. The district court dismissed the complaint for lack of subject-matter jurisdiction, holding that the claims under the APA were not “final agency action” that was subject judicial review, and that the court lacked admiralty jurisdiction over the remaining claims. Plaintiff appealed on both counts.
On appeal, plaintiff first argued that its APA claims constitute “final agency action” subject to judicial review either as “physical activities in the field,” or, in the alternative, as a reviewable “failure to act.” The Fourth Circuit disagreed, holding that performance of the maintenance plan failed to meet the definition of “agency action,” much less “final agency action” under the APA. The court determined that “agency action” under the APA concerns project approval rather than the project performance, which the plaintiff challenged in this case. Additionally, the Corps’ performance in maintaining the plaintiff’s beaches could not be “agency action” because it was ongoing and not “circumscribed and discrete” as required by the APA. The court said that injecting itself into the Corps’ maintenance plan would place itself into “the role of monitoring whether the Corps had complied with vague, undefined corrective measures,” which was far from a discrete agency action. Furthermore, even assuming that the Corps’ maintenance plan constituted agency action, the court held that it still failed to rise to the level of “final agency action,” finding that the final action occurred when the Corps approved the plan in 2000, and not when the Corps implemented the maintenance plan. Similarly, the court held that the failure to comply with the maintenance plan was not a reviewable “failure to act” because failing to perform the maintenance plan did not equate to a failure to take a discrete “agency action.” The court found that the plan was only a projection of its performance, and thus, not a binding commitment to the plaintiff.
Plaintiff also argued on appeal that the district court erred in holding that it did not have admiralty jurisdiction over the contract that the plaintiff alleges was created in the the letters between itself and the Corp. The Fourth Circuit disagreed, finding that the alleged contract concerned the maintenance of beaches, rather than the required “maritime commerce” that gives rise to admiralty jurisdiction. While the harbor project as a whole constituted “maritime commerce,” the letters expressed concerns about the preservation of the plaintiff’s recreational and aesthetic interests. Moreover, the court reiterated its earlier holding that the letters did not create binding commitments on the Corps that gave rise to an enforceable contract.
– Wesley B. Lambert
Decided April 1, 2013
The Fourth Circuit Court of Appeals reversed the district court’s holding that it could not compel arbitration based on the unconscionability of three provisions in the parties’ franchise agreement. The Fourth Circuit did not find these contractual provisions unconscionable and, therefore, vacated the district court’s judgment and remanded the case for entry of an order compelling arbitration.
The plaintiff, Samuel Muriithi, brought suit based on the franchise agreement he signed as part of his employment with the defendant taxicab service, Shuttle Express, Inc (“Shuttle Express”). Muriithi claims that Shuttle Express induced him to sign a Unit Franchise Agreement that improperly classified him as an “independent contractor,” rather than an “employee” and thereby afforded him lesser compensation. Muriithi asserted claims against Shuttle Express based on the Fair Labor Standards Act and Maryland state law. Shuttle Express moved to dismiss the complaint or to compel arbitration. Shuttle Express based its motion to compel arbitration on the Arbitration Clause included in the parties’ Franchise Agreement. The district court held that because Muriithi’s claims “arise out of” the Franchise Agreement, they were within the scope of the Arbitration Clause. However, the district court concluded that the Arbitration Clause was not enforceable based on three unconscionable provisions in the Franchise Agreement: (1) the fee-splitting provision, (2) the class action waiver, and (3) the one-year limitations provision.
The Fourth Circuit first addressed the enforceability of the class action waiver. The district court held that the class action waiver prevented Muriithi from fully vindicating his statutory rights and thereby rendered the Arbitration Clause unconscionable. On appeal, Shuttle Express cited the Supreme Court’s recent decision in Concepcion, which held that “[r]equiring the availability of class-wide arbitration interferes with the fundamental attributes of arbitration and thus creates a scheme inconsistent with the FAA.” Although Muriithi tried to argue that the Supreme Court’s holding is limited in scope to the FAA’s preemption of state law on this issue, the Fourth Circuit disagreed and concluded that the Supreme Court’s holding was not merely an assertion of federal preemption, but also plainly prohibited application of the general contract defense of unconscionability to invalidate an otherwise valid arbitration agreement under these circumstances.
The Fourth Circuit next addressed the enforceability of the fee-splitting provision. The district court held that this provision imposed prohibitive arbitration costs on Muriithi and thereby rendered the Arbitration Clause unconscionable. However, the Fourth Circuit indicated that the party seeking to invalidate an arbitration agreement based on prohibitive costs bears the “substantial” burden of showing a likelihood of incurring such costs. The Fourth Circuit concluded that Muriithi did not meet this burden because he merely alleged the likelihood of incurring prohibitive costs, rather than establishing the likelihood with firm proof. Muriithi also failed to provide evidence about the value of his claim. Further, Shuttle Express agreed to pay all arbitration costs if this case is referred to arbitration. Therefore, the Fourth Circuit concluded that Muriithi has not carried his burden of showing that he likely would incur prohibitive costs as a result of arbitration subject to the fee-splitting provision.
Finally, the Fourth Circuit addressed the enforceability of the one-year limitations provision, which the district court found unconscionable because it unreasonably restricted Muriithi’s ability to arbitrate “employment-related statutory claims.” Because the one-year limitations provision is not referenced in the Arbitration Clause, but is only applicable generally to the Franchise Agreement, the Fourth Circuit concluded that it was not properly considered by the court in a motion to compel.
– Sarah Bishop
Decided on: February 21, 2013
The Fourth Circuit addressed whether a “biological opinion” (“BiOp”) issued by the National Marine Fisheries Service (“the Service”) to the Environmental Protection Agency (“EPA”) is arbitrary and capricious under the Administrative Procedure Act. The BiOp concluded that pesticides in question would jeopardize several endangered species and their habitats and therefore could not be reregistered without substantial restriction. The Fourth Circuit held that the BiOp was in fact arbitrary and capricious.
Dow AgroSciences and other manufacturers (“Manufacturers”) hold EPA registrations for various pesticides. The Manufacturers’ pesticides had to be reregistered. If the proposed action is likely to affect an endangered species, the agency must consult with the Secretary of the Interior to obtain an opinion evaluating the agency’s action under the Endangered Species Act. The Service agency issued a BiOp that explains whether the proposed action will jeopardize the continued existence of endangered species or their habitats. In reregistering, the Manufacturers agreed to voluntarily take measures to reduce the impact of their products on the environment, but the EPA did not consult with the Secretary of the Interior to obtain a BiOp, prompting several environmental groups to file suit. After several years, the Service issued a draft BiOp, which the EPA, the Manufacturers, several states, and others criticized. After the Service revised the BiOp, the Manufacturers commenced an action under the Administrative Procedure Act, alleging that the BiOp was arbitrary and capricious. The district court dismissed the complaint on the ground that the BiOp was judicially reviewable only after the EPA issued a final reregistration order. On appeal, the Fourth Circuit reversed and remanded. On remand, the district court granted summary judgment to the Service.
On appeal, the Manufacturers argued that the district court erred in permitting the Service to supplement the record and the BiOp with post hoc justifications. In reviewing the Service’s decision, a court can only consider the record before the agency at the time it acted and contemporaneous justifications. The district court concluded that the record before the service was inadequate on certain points and inappropriately admitted new evidence and permitted post hoc justifications. The Manufacturers also argued that the BiOp was arbitrary and capricious, namely in: (1) failing to provide support for its use of a 96-hour modeling assumption; (2) relying on a U.S. Geological Survey’s water monitoring study; and (3) failing to justify uniform buffers. The Fourth Circuit agreed with the Manufacturers as to all of these arguments, stating that the Service may have had satisfactory explanations for the choices it made, but failed to adequately reflect those explanations in the BiOp. Accordingly, the Fourth Circuit reversed.
Decided: January 9, 2013
The Fourth Circuit affirmed the district court’s grant of summary judgment to the Army. The Army satisfied its burden of showing that disclosure of the documents requested by Pinnacle under the Freedom of Information Act (“FOIA”) would impair the Government’s ability to obtain necessary information in the future.
The Army privatized family housing at several Army installations. The privatization was accomplished through bids from the private sector to develop, own, manage, and maintain family housing. The Army owned percentages of the managing entities. One of the involved entities, Clark Realty Capital, LLC (“Clark”) discovered evidence of alleged fraud being committed by another involved entity, American Management Services, LLC, d/b/a Pinnacle (“Pinnacle”). As a result, Clark wanted to appoint a replacement property manager and initiate litigation against Pinnacle. Under its operating agreement, Clarke was obligated to obtain the Army’s approval. Clark met with the Army on May 6, 2010, and provided the Army with a binder of documents prepared by Clark’s outside counsel. The Army approved Clark’s plan of action. Pinnacle then sought the documents shared by Clark’s counsel, among others, in discovery and then through a FOIA request to the Army. The Army refused the request.
The court reasoned that the Army could not be compelled to share such documents because public disclosure of such documents would make entities like Clark “less willing to share information with the Army, which would aversely impact decision-making processes with regard to taking actions on behalf of a housing LLC.” J.A. 67. Disclosure would have a chilling effect on a company’s decision to initiate litigation or provide a government agency with the same quality and quantity information that it might otherwise receive. Furthermore, the Army and Clark shared a common interest when the Army approved Clark’s course of action on May 14, 2010. Thus the communications between Clark and the Army after May 14 are protected by the common interest doctrine and qualify as intra-agency communications exempt from disclosure.
Decided: December 21, 2012
The Fourth Circuit Court of Appeals affirmed the district court’s ruling that regulatory action by the Department of Labor (“the Department”), which suspended some regulations and reinstated others regarding temporary agricultural workers, was rule making under the Administrative Procedures Act (“APA”). Furthermore, the Department failed to comply with the APA’s “notice and comment” requirement.
The Department of Labor promulgated regulations in 1987 in order to effectuate Congressional intent under the Immigration Control and Reform Act to give preference to domestic agricultural workers over foreign agricultural workers, known as H2-A workers. These regulations set up procedures for hiring H2-A workers, which included a formula for paying the workers known as the “adverse effect wage rate” (AEWR). The AEWRs provide for a minimum hourly wage rate for H2-A workers and ensure that H2-A wages do not have an adverse effect on domestic agricultural wages. In 2008, the Department passed new regulations which changed the way AEWRs are calculated. It is not disputed that the 2008 regulations were validly promulgated. Many agricultural employers relied on the 2008 regulations when planning for the 2009 growing season. In 2009, the new Secretary of the Department sought to suspend the 2008 regulations for numerous reasons, mainly dealing with the complexity of a new regulatory scheme and the economic impact of the new regulations. The proposed suspension would reinstate the 1987 regulations and would allow for those that filed under the 2008 regulations to continue to employ that scheme. The suspension would only be in effect for a nine month period. In May of 2009, the Department published a final rule suspending the 2008 regulations. In June, 2009, the N.C. Growers Association (NCGA) and other similar organizations filed suit seeking an injunction. The district court granted summary judgment and a preliminary injunction on the basis that the 2009 suspension violated the APA. The United Farm Workers’ and other farm labor unions (Farm Workers) intervened and filed a counter-claim, seeking the difference in wage rates between the 1987 and the 2008 regulations. The district court, based on the fact that the 2009 suspension was arbitrary and capricious, dismissed the Farm Worker’s suit with prejudice. This appeal followed.
The Fourth Circuit agreed, stating that while review of agency decisions is narrow, courts must be strict in reviewing an agency’s compliance with procedural rules. If the agency action consists of “rule-making” as defined in the APA, the Department would be required to comply with a “notice and comment” period before promulgating a rule. The Court first said that the 2009 suspension constituted “rule-making” because the 1987 regulations had no legal effect at the time, and reinstatement of them was equivalent to formulating a new rule. Furthermore, this suspension was not similar to previous precedent because in those instances, Congress caused the suspension of the regulation and the APA’s focus on notice and comment is not affected when Congress compels agency action. In addition, the Department cannot rely on the good cause exception to the APA notice requirement because the Department did not implicitly or explicitly rely on the exception in its proposed rule. Instead, the Department concluded that notice and comment did apply and that the Department had complied with the requirements by republishing the previous comments to the 1987 and 2008 regulations. Finally, the Departments restriction of content and brief 10-day comment period did not fully comply with the APA requirements.
-Jonathan M. Riddle
Decided: November 21, 2012
The Fourth Circuit Court of Appeals held that the Surface Transportation Board’s (“STB”) denial of the Maryland Transit Administration’s (“MTA”) would not be overturned under the arbitrary and capricious standard.
MTA owns the railroad right-of-way running between Clayton, Delaware and Easton, Maryland; MTA applied to the STB to stop using it for freight transportation use and convert it to a recreational trail as authorized by the National Trails System Act (“the Trails Act”). The Trails Act is a federal program that prevents revisionary property interests from vesting, as normally would happen when a railroad is abandoned and the federal government remains potentially liable to land owners for takings challenges based on the delayed vesting of reversionary interests. In exchange for these benefits, which the Fourth Circuit concluded qualified as a “federal gift,” the railroad owners must assume liability arising out of the recreational use. At the time MTA filed the notice to the STB, MTA included a “statement of willingness” to assume “full responsibility” for legal liability and payment of taxes as required by the Trails Act. However, MTA changed course after two years of extensions and submitted new trail use agreements whereby the Delaware Department of Natural Resources and Environmental Control and the Maryland Department of Natural Resources agreed to assume responsibility. However, these statements of responsibility were qualified by provisions that stated this would not constitute an obligation of appropriations by the Delaware General Assembly and the Maryland Sponsor would retain immunity provided under the Maryland Tort Claims Act. The STB denied their petitions because the sponsors failed to comply with the Trails Act Regulations. On appeal, the Board affirmed the Acting Director’s denial.
The Fourth Circuit could not conclude that the STB acted arbitrarily and capriciously in concluding that the agreements did not satisfy the statutory and regulatory obligations that the sponsors assume responsibility for any liability. Further, the court concluded that the requirement to assume liability did not constitute an unconstitutional requirement to waive its sovereign immunity because a requirement that is a condition of a federal benefit or gift that a state agency elects to receive is permissible. Finally, MTA argued that the STB improperly discharged its duties by functioning ministerially and refusing to evaluate the substance of the indemnity provisions. However, the court acknowledged that an agency is permitted, through rulemaking, to remove discretion from its determinations. Therefore, the judgment of the STB was affirmed.
-Jennifer B. Routh
Decided: November 9, 2012
The Fourth Circuit Court of Appeals reversed a district court opinion that denied the plaintiff-appellant, Earl M. Bird (“Bird”), Social Security Benefits. The Court of Appeals held that the lower court erred in failing to consider medical evidence that was created after the last date of Bird’s insurance coverage, and in failing to give adequate weight to a disability determination made by the Department of Veterans Affairs (VA).
Bird served in the United States Marine Corps for several years and suffered from Post-Traumatic Stress Disorder (PTSD) as a result of his time in Vietnam. The VA awarded Bird 100 percent disability rating on November 14, 2007 for his PTSD. This disability rating was effective on the date Bird applied for the benefits, June 9, 2006. Bird applied for disability benefits with the Social Security Administration (SSA) in May 2009 and was denied because the Administrative Law Judge (ALJ) found his PTSD to be insufficient to qualify him for coverage.
The court of appeals found that retrospective consideration of medical evidence created after Bird’s date last insured (DLI) was required. This medical evidence was contained in the VA rating and report. The court stated that “post-DLI medical evidence generally is admissible in an SSA disability determination in such instances in which that evidence permits an inference of linkage with the claimant’s pre-DLI condition.”
The court also concluded that the ALJ did not afford the appropriate weight to the VA rating decision. Although the court had not previously determined the precise weight that must be afforded to a VA disability rating, the SSA is required to consider the evidence. The court held that substantial weight must be given to a VA disability rating, unless the ALJ clearly demonstrates that a deviation from this standard is appropriate in a given case.
Decided: October 22, 2012
The Fourth Circuit Court of Appeals affirmed the district court’s ruling that the U.S. Customs and Border Protection (“CBP”) did not act outside its authority under the Convention on Cultural Property Implementation Act (“CPIA”) by seizing various Chinese and Cypriot coins that were under import restrictions. Furthermore, the government action under the CPIA did not violate the Administrative Procedures Act (“APA”), First, or Fifth Amendments.
The CPIA gives the government a scheme to enforce the U.N. Convention on Cultural Property. The Convention and the CPIA seek to protect cultural property of member States, defined as articles of importance to archaeology, history, art and literature. If a member State makes a request, the State Department and Customs and Border Protection refer the request to a panel of experts to determine what import restrictions are available and what items should have the restrictions. From there, if the panel decides import restrictions are necessary, the United States Information Agency (“USIA”) can take action by putting in place regulations that will restrict the import of cultural property. The CPIA requires notice in the Federal Register that informs importers of the restrictions and a detailed list of the articles restricted. The CPIA also gives the right to a forfeiture proceeding and sets out narrow exceptions around import restrictions. In this case, both China and Cyprus requested import restrictions on various cultural articles. The USIA enforced import restrictions on numerous articles, including coins. The government followed all notice provisions in the CPIA. The Ancient Coin Collector’s Guild attempted to import certain Cypriot and Chinese coins, which were seized by Customs and Border Protection. Before the government started forfeiture proceedings, the Guild brought an action challenging the seizure on the grounds the government acted ultra vires, violated the APA, and violated the First and Fifth Amendments. The district court found that the government acted within its power under the CPIA, that the State department, USIA, and CBP were exempt from the APA as an extension of the State department and not an “agency” under the APA, that the First Amendment was not violated because the action fell under the United States v. O’ Brien exception, and the Fifth Amendment was not violated by a delay in bringing forfeiture proceedings.
The Fourth Circuit agreed, stating that the government’s import restrictions conformed to the procedural requirements of the CPIA. Furthermore, the Court felt that it could not read any more additional requirements into the Act because it would involve the judiciary into a sensitive area of international relations best left to the Executive Branch and Congressional oversight. The Court wanted to preserve the balance that Congress sought to maintain between the need for notice and transparency and for confidentiality in diplomacy by not requiring more stringent restrictions on the notice requirements in the act. In turning to the APA claim, the Court stated that CBP was just enacting restrictions under the procedure in the CPIA and if Congress wanted to it could reject the restrictions or amend the law to provide a more detailed procedure. Finally, the Fifth Amendment claim was without merit due to the availability of a forfeiture procedure, which puts the burden on the government to prove the coins were restricted under the CPIA and has available exceptions to an import restriction.
-Jonathan M. Riddle
Decided: August 20, 2012
Westmoreland Coal Company petitioned the Court of Appeals for review after the Benefits Review Board reversed an administrative law judge’s denial of Mae Ann Sharpe’s claim for survivor benefits from her husband under the Black Lung Benefits Act, 30 U.S.C. § 932.
William A. Sharpe, a coal miner, was awarded total disability benefits in 1993, and received those benefits until he died in 2000. A week after Mr. Sharpe’s death, his widow, Mae Ann Sharpe, made a claim for survivor’s benefits. Within two months of Mrs. Sharpe’s claim being filed, Westmoreland Coal Company, Mr. Sharpe’s employer, filed a modification request seeking reconsideration of Mr. Sharpe’s 1993 award of benefits. In 2004, an administrative law judge (ALJ) agreed to modify the 1993 award, retroactively denying Mr. Sharpe’s living miner’s claim and rejecting Mrs. Sharpe’s survivor’s claim. The Benefits Review Board (BRB) affirmed the ALJ’s decision in 2005. Mrs. Sharpe petitioned for review and the Court of Appeals vacated and remanded the case for further proceedings, because the ALJ had failed to exercise the discretion accorded to him with respect to the Modification Request. On remand, the ALJ again denied Mr. Sharpe’s living miner’s claim and Mrs. Sharpe’s survivor’s claim, and the BRB reversed.
In reversing the ALJ, the BRB concluded that retroactively denying Mr. Sharpe’s living miner’s benefits award in order to prevent Mrs. Sharpe’s survivor claim would not render justice under the Black Lung Benefits Act. The Court of Appeals upheld the BRB’s decision ruling that the ALJ abused his discretion in granting the employer’s modification request, explaining that unlike the BRB’s previous ruling in Sharpe I, the BRB was mindful of the deferential standard of review. Since the BRB properly concluded that the ALJ was guided by erroneous legal principles and abused his discretion in granting Westmoreland’s modification request, the Court of Appeals held that the BRB was correct to reverse ALJ’s ruling outright, rather than vacating and remanding for further proceedings. The Court of Appeals further held that the Board appropriately applied the doctrine of offensive nonmutual collateral estoppel to prove the elements of Mrs. Sharpe’s survivor’s claim based on its prior ruling in Collins v. Pond Creek Mining Co. The Court of Appeals ultimately denied Westmoreland’s petition for review and affirmed the BRB decision denying modification of Mr. Sharpe’s living miner’s benefits award and granting survivor’s benefits to Mrs. Sharpe.
Judge Agee wrote in dissent, arguing that the majority erred by improperly substituting the judgment of the appellate court, in this case the BRB, for that of the ALJ. Judge Agee further explained that BRB did not adhere to its statutory standard of review that findings of fact in the decision under its review should be conclusive if supported by substantial evidence in the record considered as a whole. Since BRB did not give proper deference to the ALJ’s decision, Judge Agee argued that Westmoreland’s petition for review should be granted, reversing the BRB’s decision and affirming the ALJ’s decision denying Mrs. Sharpe’s survivor benefits.
Decided: July 18, 2012
The Equal Employment Opportunity Commission (EEOC) appealed from the denial of judicial enforcement of an administrative subpoena served in the course of investigating charges brought against Randstad. The Court of Appeals reversed the order of the district court, holding that the EEOC had authority to investigate the charges under two independent bases and the materials requested were within the scope of the EEOC’s investigatory authority.
Kevin Morrison, a resident of Maryland, was born in Jamaica and cannot read or write English. He filed a charge of discrimination with the EEOC asserting that Randstad, a temporary staffing agency, terminated his employment pursuant to a requirement that its employees read and write English for light industrial clients that use laborers in manufacturing or warehouse settings. Morrison alleged that Randstad’s literacy policy violated Title VII of the Civil Rights Act by discriminating against his national origin. Two years later, after a psychological evaluation revealed he had an intellectual disability that prevented him from reading and writing, Morrison filed an amended charge asserting that the literacy policy violated the Americans with Disabilities Act (ADA). The EEOC filed an administrative subpoena in the course of its investigation of Randstad that Randstad resisted in part. When the EEOC sought judicial enforcement, the district court denied relief because it disagreed with the EEOC’s alleged factual nexus between national origin discrimination and literacy requirements and rejected the EEOC’s arguments that the ADA claim should relation back to the date the Title VII claim was filed.
The Court of Appeals began by noting that a district court’s role in enforcing administrative subpoenas is “sharply limited,” and that to obtain judicial enforcement the EEOC need only demonstrate that it is authorized to make an investigation and the materials requested are relevant. A district court reviewing an administrative subpoena is not to determine the underlying claim on the merits; that role is delegated to the discretion of the administrative agency. Explaining that the EEOC need only present an arguable basis for jurisdiction over the investigation, the Court of Appeals held that the amended charge of discrimination based upon the same set of factual allegations allowed the charge to relate back to the date of the original charge, thus giving the EEOC authority to investigate the claims under both the ADA and Title VII. Once the EEOC is on notice that a particular employer may be violating discrimination statutes, it may access virtually any material that might cast light on the allegations, a broad definition of relevance. Holding that the district court committed legal error by applying an unnecessarily strict standard of relevance, the Court of Appeals noted that applying the correct standard, with deference to the EEOC’s definition of relevance, led to the conclusion that all of the EEOC’s requested materials fell within the broad definition applicable to EEOC administrative standards. Further holding Randstad’s affidavit that production of the materials would be unduly burdensome was insufficient as a matter of law, the Court of Appeals reversed the district court and remanded the case for entry of an order granting the EEOC’s application for enforcement.
-Nora Anne Bennani
Decided: July 13, 2012
Appellants filed suit challenging the United States Department of Agriculture’s (USDA) decision to construct a dam as part of a larger project along the Lost River Subwatershed. Appellants alleged that the USDA, through its agency the Natural Resources Conservation Service (NRCS), failed to comply with the National Environmental Policy Act (NEPA) — a procedural statute that “sets forth a regulatory scheme for major federal actions that may significantly affect the natural environment.” The district court considered each alleged violation, and ultimately concluded that the USDA complied with the NEPA’s procedural requirements. As such, the district court granted USDA’s motion for summary judgment, and the appellants appealed. The court of appeals affirmed.
This case involves a NRCS project to provide watershed protection, flood prevention, water supply, and recreation along the Lost River Subwatershed. The project involves a combination of land-treatment measures, dams, and impoundments. To comply with the NEPA, the NRCS was required to follow set procedures, including a scoping process and issuance of an environmental impact statement.
On appeal, the appellants raised eight issues, all of which deal with alleged violations of the NEPA. Appellants first alleged that the NRCS did not comply with the NEPA requirements in declaring watershed protection, flood prevention, and water supply as the stated purposes and needs for the dam at issue. The court of appeals disagreed, holding that the NRCS’s decision to include watershed protection, flood prevention, and water supply as the purposes underlying the dam’s construction was an appropriate exercise of its discretion. The court dismissed the appellants’ next contention as well, holding that the NRCS was not required to engage in a second scoping process when it issued a supplemental environmental impact statement.
Appellants next alleged that the NRCS’ supplemental environmental impact statement omitted information that is necessary to a complete analysis of the potential environmental impacts and benefits of the dam’s construction. The court disagreed, finding that the supplemental environmental impact statement contained all the necessary information. The court also rejected the appellants’ fourth and fifth contentions, finding that the NRCS considered all reasonable alternatives and all the environmental effects that would result from the dam’s construction.
Appellants then alleged that the NRCS presented a misleading and inaccurate cost-benefit analysis and failed to provide sufficient detail about planned mitigation measures. The court rejected these allegations, holding that the cost-benefit analysis was not misleading or inflated in any way, and that the NRCS provided the appropriate amount of detail for the environmental impact statement stage. Appellants’ eighth and final contention was that the NRCS violated the NEPA by failing to invite a cooperating agency to participate in preparing the supplemental environmental impact statement. The court dismissed this argument, noting that even if the NRCS failed to ask the cooperating agency to participate, such error was harmless.
In summary, the court of appeals rejected all eight allegations of a NEPA violation and affirmed the district court’s judgment granting summary judgment to the USDA.
– Kassandra Moore
Decided: June 29, 2012
The Fourth Circuit Court of Appeals affirmed the conviction of G. Martin Wynn for mail and wire fraud related to his engineering services undertaken for Oconee County, South Carolina to extend the runway at Oconee County Regional Airport. Wynn was required to obtain a permit from South Carolina Department of Health and Environmental Control (“DHEC”), but instead, cut a permit off an older set of plans for a previous project and fraudulently attached it to the current project. He then mailed and emailed the plans to DHEC. Severe rains in February 2010 generated complaints from nearby residents about runoff, DHEC inspectors visited the site, and asked to see the plans for the project. DHEC discovered the fraudulent permit and ordered that construction on the project stop.
Wynn appealed his conviction claiming that the jury was improperly instructed regarding the requisite “intent to harm” the County. The required mens rea for mail and wire fraud is a defendant must intend “to lie or cheat or misrepresent with the design of depriving the victim of something of value.” The Fourth Circuit determined that the jury charges were consistent with this mens rea requirement. Wynn also contended that the fraudulent permit was not a material misrepresentation, but the Court disagreed with Wynn holding that Oconee County did rely on the plans. Wynn also challenged the amount of restitution, but the Fourth Circuit concluded that the District Court did not clearly err in its calculation. Therefore, the judgment of the District Court was affirmed.
Decided: June 27, 2012
Jane Huggins, trading as SADISCO of Maryland, appealed the district court’s grant of summary judgment in favor of Prince George’s County and five County officials. In November 2001, SADISCO purchased a 99.7 acre parcel of land in the County, with the intention of operating a salvage automobile wholesaling business on the parcel. The Property directly abuts a portion of the Andrews Air Force Base, a designated superfund site by the Environmental Protection Agency, which requires priority remedial attention because of the presence of a dangerous accumulation of hazardous wastes. The purchas contract SADISCO signed acknowledged the condition of the property and that the purchaser would have no recourse against the Seller with respect to the environmental condition of the property. On December 20, 2011 SADISCO applied to the County for a use and occupancy permit, and three months later applied for a permit to temporarily house a construction trailer on the Property. On June 12, 2002, the County issued a permit for the trailer, but by the end of October 2002, the County had revoked all outstanding permits to SADISCO based upon violation of numerous County Code provisions, particularly performing grading work on the property without the proper permits and impermissibly operating its business out of the construction trailer.
SADISCO continued to operate its business on the property, and in May 2003, the County filed two petitions in Maryland state court for injunctive relief against SADISCO’s grading permit violations and zoning code violations. On September 2, 3002, SADISCO and the County entered into two consent orders for each petition for injunctive relief, providing that within 60 days SADISCO would obtain the required grading permit and within 90 days vacate the premises until a valid use and occupancy permit as well as a building permit for the trailers. The day before SADISCO signed the consent orders, its attorney sent a letter to a County attorney describing the standard practice of the county to work with property owners to resolve county code violations and to forbear from enforcement as long as the property owner was making good faith efforts to cure its violations. According to SADISCO, the letter memorialized an oral contract between SADISCO and the County that predates the consent orders. The County then granted SADISCO a series of extensions of the deadline for compliance with the consent orders, however on March 18, 2004 the county notified SADISCO of its intention to enforce the Zoning Consent Order as of March 28. At an April 27 meeting various County officials decided to padlock the gate onto SADISCO’s property the next day and allow access only to remove cars and perform other tasks that would bring SADISCO into compliance.
Almost three years later, on March 30, 2007, SADISCO filed the present action against the County and five officials, alleging: 1) violation of SADISCO’s substantive due process rights under the Due Process Clause; 2) violation of SADISCO’s substantive due process rights under the Maryland Declaration of Rights; 3) breach of contract; 4) tortious interference with economic relations; and 5) negligent misrepresentation. In February 2008 the district court dismissed Counts 2, 4, and 5 for failure to comply with the pre-suit notice requirements of the Local Government Tort Claims Act. Count 3 was dismissed as time barred as to a written contract, and proceeded with discovery as to two alleged oral contracts. On July 24, 2009, the district court granted the County summary judgment, dismissing the Officials in their individual capacities from the action on the basis of qualified immunity, as well as the remaining portion of Count 3. On November 9, 2010, the district court granted summary judgment to the county as to Count 1. On appeal, SADISCO challenged all of the district court’s rulings.
As to the breaches of two oral contracts, the district court held that no consideration in favor of the County existed to support a valid oral contract which predated the Consent Orders. The Court of Appeals upheld that determination, and further explained that the parol evidence rule barred the admission of an oral contract because such evidence directly contradicts the terms of the two subsequent written consent orders. As to Count 1, the district court held that SADISCO had not forecast sufficient evidence that it had a property interest protected by the Due Process Clause, as SADISCO did not hold a valid permit at the time the county locked its gates. The Court of Appeals agreed, further stating that even if SADISCO had been in possession of a valid permit, the County’s conduct did not rise to the level of arbitrary or conscience shocking. As to Counts 2, 4, and 5, the district court held that SADISCO failed to comply with the notice requirements of the LGTCA and failed to show good cause for its noncompliance. The LGTCA prohibits an action for unliquidated damages against a local government or its employees unless the plaintiff provides notice of the claim within 180 days after the injury. The doctrine of substantial compliance allows an exception where a plaintiff has sufficiently apprised local governments of their possible liability at a reasonable time thereafter to conduct an investigation. Furthermore, a suit can still proceed if a plaintiff is able to show good cause to waive the requirements and the defendant cannot affirmatively show that its defense has been prejudiced by a lack of required notice. The Court of Appeals held that the district court had not committed an abuse of discretion in finding that SADISCO had failed to comply with the notice requirements and failed to show good cause for their noncompliance.
Decided: June 21, 2012
On appeal to the Fourth Circuit, Gwyniece Hutchins challenged the district court’s determination that federal law required her to reimburse the Department of Labor (“DOL”) for compensation that she received after she was awarded a monetary judgment in a state court proceeding against the Town of Ninety Six, South Carolina (the “Town”) for the same underlying injury. The Fourth Circuit affirmed the district court’s decision in favor of the Town, and against Hutchins.
This case arose out of an injury Hutchins sustained while carrying out her duties as a U.S. Postal Service employee. In August 2004, Hutchins stepped on an improperly fitted manhole cover maintained by the Town, the manhole flipped up, and Hutchens fell into the manhole and sustained serious injuries. Hutchins was awarded lost wages and medical benefits under the Federal Employees’ Compensation Act (“FECA”) and later accepted a judgment of $275,000 in a state court action that she brought against the Town. The DOL, the federal agency that awarded Hutchins’ benefits under FECA, then asserted a claim to recover a portion of this judgment, but Hutchins argued that the Town was not a “person,” and therefore allowing the Town’s claim would be unconstitutional pursuant to 5 U.S.C. §§ 8131, 8132. The DOL’s Office of Workers’ Compensation (“OWC”) rejected Hutchins’ arguments and determined that the DOL was entitled to reimbursement based on Hutchins’ state court judgment. Hutchins paid the amount requested by DOL but appealed the OWC’s decision to the Employees’ Compensation Appeals Board, which affirmed the OWC’s decision. Hutchins then filed the claim underlying this case in the U.S. District Court for the District of South Carolina.
After Hutchins filed her complaint pursuant to the Administrative Procedures Act, both Hutchins and the DOL filed cross-motions for summary judgment, and the district court granted the DOL’s motion, finding that Hutchins was required to reimburse the DOL. The district court denied Hutchins’ motion, and Hutchins appealed the decision to the Fourth Circuit.
On appeal, Hutchins first argued that because the Town is not a “person” as used in 5 U.S.C. § 8132, the statute does not require her to reimburse the DOL. In the alternative, Hutchins argued that if the Town, as a political subdivision, is determined to be a “person,” then § 8131 is unlawful. The Fourth Circuit began by analyzing the text of § 8132, the statute that requires a person who receives compensation for an injury to reimburse the U.S. for any compensation paid under FECA for the same injury. The Court determined the issue to be “whether the Town qualifies as a ‘person other than the United States,’ such that Hutchins is liable to reimburse the [DOL] out of her state court judgment.”
The Court first interpreted § 8132 and found that its language makes it clear that “person” includes political bodies, such as the Town. To further support this finding, the Court also looked to the Dictionary Act’s definitions of “person,” as well as to Supreme Court precedent indicating that “person” includes municipal corporations unless a more limited use is indicated by the context of the statute. Next, the Court declined to address Hutchins’ second argument that if “person” is construed broadly, the statute would allow the DOL to sue states, and such action would violate the Constitutional principles of federalism. The Court found that such circumstances were not present in Hutchins’ case. In sum, the Court found that “the statutory language and Supreme Court precedent indicate that a municipality such as the Town constitutes a ‘person’ for purposes of reimbursement under 5 U.S.C. § 8132,” and held that the district court correctly determined that Hutchins’ recovery from the Town for her injuries was properly subject to refund under FECA.
– Allison Hite
Decided: June 19, 2012
The Plaintiff in this case, Carolyn Snydor, appeals the district court’s dismissal of her discrimination claim. In January 2009, Snydor, a public health nurse in Fairfax County, underwent surgery on her left foot. She returned to work in March and was then terminated by Fairfax County in November because her medical restrictions following surgery limited her “capacity to perform the full clinical duties of a public health nurse.” Following her termination, Snydor filed an administrative charge with the Equal Employment Opportunity Commission alleging that the County had discriminated against her on the basis of her disability in violation of the Americans with Disabilities Act. In her charge, Snydor stated she had “requested a reasonable accommodation” from her manager, but was denied relief. She also completed an EEOC intake questionnaire, where she described her disability as limited walking ability and explained that she must use an electric wheelchair when moving for any length of time. Her questionnaire stated that she had requested “to be assigned as Nurse of the Day and to be in the clinic doing lighter duty work” and that in response, her supervisor said “she did not want me around the patients in the clinic because of [her] wheelchair.”
The EEOC issued Snydor a right-to-sue notice and she filed a complaint against the County in federal court. The County moved for summary judgment following discover, and the district court denied the motion finding that it remained in dispute whether Snydor could have served as a public health nurse while in a wheelchair. The County then filed a motion in limine seek to exclude the evidence that Snydor had requested to work in the clinic in her wheelchair, asserting that the sole accommodation she informed the EEOC she had requested was light duty work, never stating that she would have been able to perform her duties in a wheelchair. The district court agreed that Snydor did not file her proposed accommodation with the EEOC and dismissed the case sua sponte because of her failure to exhaust administrative appeals.
The ADA includes the requirement that a plaintiff must exhaust her administrative remedies by filing a charge with the EEOC before pursuing a suit in federal court. This requirement ensures that the employer is put on notice of the alleged violations and gives it a chance to address the discrimination prior to litigation, often allowing the injured party to obtain relief much sooner than in the courts. The goals of notice and opportunity for an agency response would be undermined by allowing a plaintiff to raise claims in litigation that did not appear in her EEOC charge, thus a plaintiff fails to exhaust their administrative remedies where the charges reference different time frames, actors, and discriminatory conduct than the central allegations in her suit. Examples are where a charge alleges only racial discrimination but the complaint includes sex discrimination, or where a charge alleges only retaliation but the complaint alleges racial discrimination as well. However, the exhaustion requirement is not meant to be construed so strictly as to bar suit where a plaintiff’s claims are reasonably related to her EEOC charge and can be expected to follow from a reasonable administrative investigation.
On appeal, the Fourth Circuit found it clear that Snydor’s charge claimed what her suit claimed – she had been discriminated against based on her disability by being denied a reasonable accommodation. Holding that the requirement for exhaustion is whether the plaintiff’s administrative and judicial claims are reasonably related, not precisely the same, the court found sufficient similarities between the two to find that Snydor satisfied the requirement. The type of prohibited action she alleged, discrimination on the basis of disability by failing to provide a reasonable accommodation, remained consistent throughout. She did not attempt to raise new disabilities for the first time in court, and mentioned several times in her EEOC questionnaire the issue of her wheelchair. Furthermore, a wheelchair is a logical accommodation for her difficulties in walking, one that could be expected to follow from a reasonable administrative investigation by the EEOC and that should not have caused the County to be caught off guard when it was raised. The Fourth Circuit further concluded that sending Snydor back to the beginning of the process would undermine the congressional preference for agency resolution in the area, reversing the district court’s holding and remanding the case for further proceedings.
Decided: June 18, 2012
A developer proposed building a mooring facility and concrete boat ramp (the “Project”) about 3,000 feet back from the Back Bay National Wildlife Refuge (the “Refuge”) in Virginia Beach. The approved permit authorized channel dredging and excavation and relocation of silt and other material. Because the project would require clearing wetlands, the permit required the creation of equivalent wetlands nearby and relocation of plants displaced by new construction. There were also operational conditions to the project, such as horsepower limitations on boat motors, restrictions on who may use the facility, and the installation of signs informing the public that there is a no-wake zone within the Refuge. Prior to issuing the permit, the Army Corps of Engineers (the “Corps”) solicited public comment and most of the responses opposed the project.
The Fish and Wildlife Service (“FWS”) suggested that the Corps prepare an Environmental Impact Statement (“EIS”) to address the potential impact the project would have on federal resources. An EIS is prepared in connection with “every recommendation or report on proposals for … major Federal actions significantly affecting the quality of the human environment.” Agencies draft an Environmental Assessment (“EA”) to determine whether environmental quality is “significantly affect[ed].” In this case, the Corps determined that no EIS was required as the no-wake zone would be a significant measure of protection to the Refuge and its resources. The Corps stated that the no-wake zone could be enforced by any federal, state, local, or county agency or private security firm so long as the entity has the authority to enforce the no-wake zone under the appropriate law. Enforcement was problematic due to lack of funding. The building permit did not mandate enforcement nor did it guarantee funding for enforcement.
Friends of Back Bay and Back Bay Restoration Foundation filed a complaint seeking review of the Corps’s decision to allow dredging and relocation of silt and fill material and challenging the determination that issuance of the permit did not qualify under NEPA as a federal action requiring an EIS. The district court ultimately entered summary judgment in favor of the defendants, rejecting the plaintiffs’ contention that harm to the Refuge from boating could be considered a legitimate secondary effect of the dredging. Regarding the NEPA challenge, the district court concluded that the Corps’s decision to grant the permit without preparing an EIS was within the agency’s broad discretion and not contrary to law. The plaintiffs appealed.
The APA provides that a reviewing court is bound to “hold unlawful and set aside agency action” for certain specified reasons, including whenever the challenged act is “arbitrary, capricious, an abuse of discretion, or otherwise not in accordance with law.” This gives rise to a highly deferential standard of review with a strong presumption in favor of finding agency action valid. The court must carefully inquire into the record and consider whether the agency considered all relevant factors and whether there was clear error. The reasonableness of the Corps’s decisionmaking will be reviewed de novo.
The parties debated how to characterize the EA, with the plaintiffs arguing that the Corps found that granting the permit would affect the environment to the degree necessary to trigger the need for an EIS, but establishing the no-wake zone would ameliorate adverse effects. The defendants maintained that the no-wake zone was in effect for nearly two years before the EA, thus it constituted a baseline condition. A material misapprehension of the existing baseline conditions can be a foundation for an arbitrary and capricious decision. In North Carolina Wildlife Federation v. North Carolina Department of Transportation, No. 11-2210, 2012 WL 1548685 (4th Cir. May 3, 2012), federal and state agencies were charged with evaluating the construction of a proposed toll highway and erroneously adopted the assumption that the road would be built in estimating the resulting consequences. This was an “obvious and fundamental blunder,” and required reconsideration. Additionally, this case stood for the proposition that, when an agency miscalculates the underlying baseline, courts frequently find NEPA violations.
In this case, the creation and continued existence of the no-wake zone is a foundational proposition upon which the Corps’s decision was premised. However, the no-wake zone is entirely unenforced. Citing Nat’l Audubon Soc’y v. Hoffman, 132 F.3d 7, 17 (2d Cir. 1997), the Fourth Circuit stated that measures designed to minimize an action’s effect on the environment are more likely to be effective when they are policed, either through the imposition of a mandatory permit condition or literal police presence, neither of which was present in Back Bay. Because the decision to not issue an EIS was based upon a misapprehension of the baseline conditions, the judgment below must be vacated and the matter remanded.
On remand, the Corps should consider ten factors promulgated by the Council on Environmental Quality. Two of these factors especially support the plaintiffs’ contention that an EIS should be prepared: the unique characteristics of the geographic area and the degree to which the effects on the quality of the human environment are likely to be highly controversial. The Refuge and its vicinity are unique and “ecologically critical.” Furthermore, the debate of the potential effects on the environment has proved to be highly controversial. The FWS specifically recommended preparation of an EIS, a conclusion with which the Fourth Circuit agreed.
The plaintiffs also reasserted that the permit should not have been issued pursuant to § 404 of the CWA, but the Fourth Circuit declined to address the issue at this time. Accordingly, the judgment was vacated and remanded.