Rocky Mountain Appellate Blog

U.S. Supreme Court Upholds FCC Fines in Fox Indecency Case

In a decision yesterday, the U.S. Supreme Court, in a divided decision authored by Justice Scalia, upheld the FCC's findings of indecency against Fox Television for isolated utterances of the f- and s-words during two live broadcasts.  FCC v. Fox Television, No. 07-582.  The majority held that the findings were not arbitrary and capricious under the Administrative Procedure Act, and left the Second Circuit to address on remand whetherthe FCC's rules present a First Amendment problem.

Among other things, the majority opinion scoffed at the Second Circuit's suggestion that the FCC could not regulate more broadly without specific evidence that fleeting expletives are harmful:

There are some propositions for which scant empirical evidence can be marshaled, and the harmful effect of broadcast profanity on children is one of them.  One cannot demand a multiyear controlled study, in which some children are intentionally exposed to indecent broadcasts (and insulated from all other indecency), and others are shielded from all indecency. It is one thing to set aside agency action under the [APA] because of failure to adduce empirical data that can readily be obtained.  It is something else to insist upon obtaining the unobtainable. Here it suffices to know that children mimic the behavior they observe—or at least the behavior that is presented to them as normal and appropriate. Programming replete with one-word indecent expletives will tend to produce children who use (at least) one-word indecent expletives. Congress has made the determination that indecent material is harmful to children, and has left enforcement of the ban to the Commission.  If enforcement had to be supported by empirical data, the ban would effectively be a nullity.

Justice Kennedy joined the majority's opinion with the exception of Section III-E, in which Justice Scalia responded to the dissenting opinions of Justices Stevens and Breyer with an even more acerbic pen than usual.  One example:

Justice Breyer looks over the vast field of particular factual scenarios unaddressed by the FCC’s 35-page Remand Order and finds one that is fatal: the plight of the small local broadcaster who cannot afford the new technology that enables the screening of live broadcastsfor indecent utterances.  The Commission has failed to address the fate of this unfortunate, who will, he believes, be subject to sanction.

We doubt, to begin with, that small-town broadcasters run a heightened risk of liability for indecent utterances. In programming that they originate, their down-home local guests probably employ vulgarity less than big-city folks; and small-town stations generally cannot afford or cannot attract foul-mouthed glitteratae from Hollywood.

When Is It Too Late To Assert An Affirmative Defense?

When Is It Too Late To Assert An Affirmative Defense?

 

The Tenth Circuit recently held that a new affirmative defense may be asserted as late as the first day of trial so long as question relating to the defense had been posed in discovery.  In Creative Consumer Concepts, Inc. v. Kreisler, No. 07-3142, Creative sued Kreisler.  Kreisler asserted the defense of mutual release.  On the first day of trial Creative filed a supplemental brief with the Court in which it for the first time formally identified the affirmative defense of lack of authority by its employee to execute the release in question. 

 

The Tenth Circuit noted the general rule that the failure to raise an affirmative defense in the pleadings waives that defense.  However it also noted that under the liberal pleading rules it must “avoid hypertechnicality in pleading requirements.”  The Tenth Circuit concluded that because Kreisler had informal notice of the lack of authority defense based on questions asked of her in her deposition, the trial court did not err in allowing evidence regarding this defense to be presented.  The Tenth Circuit also concluded that the trial court “minimized any prejudice” to Kreisler because it “gave her time to read [the supplemental brief] and asked her to suggest evidence she might raise if granted a continuance.” The trial court refused to grant a continuance but “gave Ms. Kreisler the opportunity to fully brief and rebut the tardily raised affirmative defense after the trial.”  In her post-trial brief Kreisler “could not direct the [trial] court to any evidence, expected evidence, or theory of discovery that would impact the issue of authority.”

 

This decision has the potential to seriously undercut the pleading rules.  The purpose of pleadings and pretrial disclosures is to frame the issues for trial and prevent a party from having to guess at its opponent’s theories or suffer trial by ambush.  In this case, there is no indication that Creative ever amended its complaint to add its new affirmative defense or ever provided any explicit notice that it intended to assert this theory.  Kreisler was simply expected to intuit that Creative intended to assert it (despite its failure to amend) based on deposition questions.  The trial court’s efforts to “minimize any prejudice” to Kreisler appear to be the minimum allowed by due process (i.e. a chance to read the brief) rather than an attempt to allow Kreisler to meaningfully respond to a new theory of the case by developing evidence and shaping her trial strategy accordingly.  To the extent that the pleading rules require courts to allow the addition of new affirmative defenses literally at the last moment, fairness appears to require a continuance and a reopening of discovery on that defense before the case is tried.

Policy Trumps Precedent -- CBA Arbitration Agreement for Statutory Claims Held Enforceable

    The Supreme Court recently handed down its decision in 14 Penn Plaza LLC v. Pyett et al. (07-581). In an apparent win for employers, the high court ruled 5-4 that employers can force unionized workers into arbitration over age discrimination claims. The Court, divided along traditional liberal/conservative lines, overturned a federal appeals court decision holding that a union’s agreement could not waive its members’ rights to take statutory age bias claims to a court.

    The case involved three night watchmen at a New York City office building owned by 14 Penn Plaza, LLC.  The three individuals were union members and covered by a collective bargaining agreement (“CBA”) between their union and a multi-employer bargaining association in which 14 Penn Plaza was a member. Under the CBA, union members were required to submit all employment claims, specifically including age bias claims under the Age Discrimination in Employment Act (“ADEA”), to binding arbitration. When the three individuals were reassigned to jobs as porters at a lower wage, they claimed their reassignment constituted age discrimination and they filed a grievance with the union. Although the union proceeded to arbitrate the individuals’ wage issues, it withdrew its request to arbitrate the ADEA claims. Faced with the burden of pressing their arbitration of these claims individually (and at their own cost), the respondents instead elected to file a lawsuit against 14 Penn Plaza alleging age discrimination. Relying on the Supreme Court’s decision in Alexander v. Gardner-Denver Co., 415 U.S. 36 (1974), the trial court denied 14 Penn Plaza’s motion to compel arbitration, holding that the employees had the right to have their claims heard in court and that a union could not waive such a right as part of a CBA.

    In overruling the Second Circuit, Justice Thomas, writing for the majority, stated that “a collective-bargaining agreement that clearly and unmistakably requires union members to arbitrate age discrimination claims is enforceable as a matter federal law.” In doing so, Justice Thomas relied on the language of the NLRA and the Court's 1991 holding in Gilmer v. Interstate/Johnson Lane Corp., 500 U.S. 20 (1991), which held that an individual’s contractual agreement to arbitrate statutory employment claims was enforceable in the context of age bias claims. In doing so, the Court deferred to the power of the bargained-for exchange of concessions in the labor relations context, and stated that such an agreement between an employer and a union expressly providing for arbitration of statutory claims is no different than a similar agreement to arbitrate between an employer and an individual employee.

    Justices Souter and Stevens both dissented, arguing that the majority’s decision abjectly disregards the Court’s 1974 ruling in Gardner-Denver -- traditionally thought to hold that a clause in a collective-bargaining agreement requiring arbitration of discrimination claims could not waive an employee’s individual right to a judicial forum for statutory claims Both dissents base their reasoning on stare decisis, arguing that Congress’s failure to legislatively overturn Gardner-Denver reflects a clear Congressional intent to prevent union members from collectively bargaining away their right to a judicial forum for statutory discrimination claims.

    Rather than address the seemingly irreconcilable holding of Gardner-Denver, Justice Thomas countered that the majority’s decision did not contradict the limited holding of Gardner-Denver, but rather sought to refute the widespread adoption of “broad dicta” from that case improperly criticizing the arbitration of statutory antidiscrimination claims. By declining to meet Justice Souter’s dissent head-on, the Court expressly held that it was not overruling Gardner-Denver, but rather reiterating its previous endorsement of arbitration as an appropriate venue for resolution of statutory claims. Thus, the majority’s decision serves to clarify the Court’s modern view of arbitration as a suitable venue for adjudication of statutory claims -- a view first expressed in 1991 in Gilmer v. Interstate/Johnson Lane Corp. It is unclear, of course, what remains of Gardner-Denver in light of the Court’s clear endorsement of collectively bargained-for arbitration provisions in the context of statutory claims. Justice Thomas acknowledged as much, stating that, “given the development of this Court’s arbitration jurisprudence in the intervening years, Gardner-Denver would appear to be a strong candidate for overruling, if the dissents’ broad view of its holding were correct.”

    While this decision presents sharply contrasting viewpoints in the ideological debate over the impact of the Court’s evolving policy favoring arbitration on past Court precedent, practically speaking, the decision provides limited guidance on the future enforceability of arbitration provisions because the majority expressly declined to resolve the highly related question of what happens if the union chooses not to pursue arbitration of a member’s statutory claims and that member does not have the right to proceed individually. As Justice Souter noted, it is “usually the case” that a union exclusively controls its membership’s access to and presentation of claims in arbitration. While Justice Thomas hinted that in such cases, the CBA’s arbitration provision may be unenforceable because it would create a “substantive waiver of federally protected civil rights,” the Court nevertheless expressly reserved this significant issue for a later date.

    In addition to providing an unusual example of the conservative majority of the Court effectively overruling longstanding precedent in favor of providing more power to unions, this decision, along with the dissent’s vigorous invocation of the importance of Congress’s implicit legislative approval of Gardner-Denver, is relevant to a potential sea-change in the Legislature’s approach to the arbitrability of statutory claims -- H.R. 1020, the Arbitration Fairness Act (“AFA”). This legislation, currently pending before the House Judiciary Committee, proposes to amend the Federal Arbitration Act to invalidate any arbitration agreement that requires arbitration of “a dispute arising under any statute intended to protect civil rights” -- essentially ending the arbitration of statutory employment law disputes. Notably, the AFA, as currently drafted, does not apply to collective-bargaining agreements. It remains to be seen whether the Court’s holding in Pyett will provoke an amendment expanding the AFA’s reach to include collective bargaining agreements as well.

Colorado Administrative Law

Yesterday, the Colorado Supreme Court issued two opinions, Vance v. Wolfe, 07SA293, and Huber v. Kenna, 07SC657, which should be reviewed by those practicing administrative law in Colorado.  The opinions present an interesting contrast regarding the state of Colorado law with respect to the degree of deference the Court will provide to an agency’s interpretation of a statute which the agency enforces.  

In Vance, the Court considered whether the State Engineer and the Division Engineer (“Engineers”) for Water Division 7 were required to regulate the diversion of water by energy companies engaged in coalbed methane production.  The Engineers took the position that they were not required to regulate the use water because the water produced was not put to a “beneficial use,” instead it was merely a nuisance.  The Court affirmed the District 7 Water Court’s decision that the Engineers were required to regulate the water usage.  Of note in the opinion was the Court’s cursory dismissal of the deference owed to the agency’s interpretation of Colorado Groundwater Act.  The Court appeared to endorse a highly non-deferential standard, stating “[w]hile we may take into account agency interpretations [of an ambiguous statute], we are not bound by them.”  Vance, 07SA293, Slip Op. at 21.  The Court then dismissed the Engineer’s interpretation of “beneficial use” as being contrary to Colorado Groundwater Act’s definition of the term.

The Court’s possible paring back of agency deference is highlighted in Huber.  In that case, the Court upheld a rule published by the Colorado Department of Revenue regarding Conservation Easement Tax Credit Act.  The Court upheld the rule, holding that it was consistent with the unambiguous language of the Act.  In a concurring opinion, Justice Martinez, joined by Chief Justice Mullarkey, argued that, in fact, the Act was ambiguous, but that the Court should defer to the Department’s reasonable interpretation of the Act.  In doing so, Justice Martinez summarized Colorado law as providing a deferential standard of judicial review of agency action.  This assessment of Colorado law stands in stark contrast to the Court’s statement of the law in Vance.  Justice Martinez writes, “Courts may only disregard an agency’s interpretation of a statute it is charged with enforcing when that interpretation is inconsistent with the clear language of the statute or the agency has exceeded the scope of the statute.”  Huber, 07SC657, Slip Op. at 3.

It bears watching whether the non-deferential standard set forth in Vance is an anomaly or reflects a more fundamental shift in Colorado administrative law toward stricter judicial review of agency statutory interpretations.

Colorado Supreme Court to Tackle Tribal Sovereign Immunity

Among the cases on which the Colorado Supreme Court granted certiorari this week, clearly the most interesting is Cash Advance & Preferred Cash Loans v. Colorado, No. 08SC639.  In that case, the Attorney General's Office opened an investigation into two internet lending companies incorporated in Nevada, only to find out that the companies had been incorporated by Indian tribes located in Oklahoma and Nebraska. 

The AG issued investigative subpoenas against the companies, which the companies moved to dismiss based on tribal sovereign immunity.  The trial court denied the motions to dismiss, holding that whether or not the business possess tribal sovereign immunity, such immunity could not prohibit Colorado from investigating potential violations of state laws within its borders.

The court of appeals disagreed, and reversed and remanded for the trial court to determine in the first instance whether the companies possess tribal sovereign immunity.  The issues on which the Supreme Court granted cert include the following:

• Whether the court of appeals erred in holding petitioners do not have tribal sovereign immunity from Colorado trial court orders compelling them to produce information regarding their eligibility for tribal sovereign immunity.

• Whether the court of appeals contravened Congress's plenary power over Indian tribes by implementing it own test to determine if a tribe's commercial enterprise is sufficiently connected to the tribe such that the enterprise is protected by tribal sovereign immunity.

• Whether the court of appeals erred by stating that tribal officers are not protected by tribal sovereign immunity when acting outside state authority.

These are extremely interesting issues not often addressed by state courts.  Indeed, a Westlaw search for the phrase "tribal sovereign immunity" reveals that only one prior Colorado appellate court -- Rush Creek Solutions v. Ute Mountain Ute Tribe, 107 P.3d 402 (Colo. App. 2004), which addressed whether the tribe had contractually waived immunity -- has ever even mentioned this issue.

Tenth Circuit: Possessing an Unregistered Firearm Is Not a "Crime of Violence"

In an issue of first impression, the Tenth Circuit yesterday issued an opinion, United States v. Serafin, addressing whether possession of an unregistered weapon qualifies as a crime of violence under 18 U.S.C. § 924(c).  Section 924(c) provides that any person who uses, carries or possesses a firearm "during and in relation to any crime of violence" shall, in addition to the punishment provided for such crime of violence, be sentenced to five years in prison.

The Tenth Circuit held, in a thoroughly reasoned opinion by Judge Tymkovich, that the defendant's possession of an unregistered weapon was not, by itself, a "crime of violence" within the meaning of section 924(c).  The court disagreed with the government's assertion that possession of an unregistered rifle is imbued with the "inevitability that such possession will result in violence":

It is true that certain individuals, when possessing such weapons, will almost assuredly cause violence.  But the [National Firearms Act] statute to which Serafin pleaded guilty does not differentiate between individuals having violent criminal histories and those that do not.  And it is important to note Congress did not outlaw these weapons outright.  Rather, it imposed a tax and registration requirement.  Individuals are not prevented from owning these weapons and may actually use them for target practice or for display in a collection.  It can hardly be said that an individual who possesses such a weapon, unregistered and in violation of the NFA, necessarily or "inevitably" will use force against another.

The court noted that the unregistered rifle that Serafin was charged with possessing was disassembled at the time of his arrest, but it does not appear from the analysis that the court's conclusion would have been different had the weapon been assembled and fully loaded. 

Reasoned Decisions Required

I am not a bankruptcy lawyer, but a recent opinion from the United States Bankruptcy Appellate Panel of the Tenth Circuit caught my attention. In In Re Picht (No. KS-08-076) the bankruptcy court issued a ruling without explanation and informed the parties that it would “explain the legal and factual basis for its decision if, and only if,” there was an appeal.  The Appellate Panel held that “bankruptcy courts are bound, both by federal rule and by general principals of jurisprudence, to explain the legal and factual basis for their decisions in each and every contested matter, and may not condition this obligation upon the filing of a notice of appeal.”   The Panel further held that, absent extraordinary circumstances a court lacks jurisdiction to enter findings of fact and conclusions of law once a decision has been appealed.  More generally, the Panel noted that “[u]nder the rules that govern our judicial system, the decision making process of our judges must be transparent.  Judges are obligated to explain the legal and factual bases for their decisions.” The Panel remanded to the bankruptcy court to allow it to enter its finding and conclusions.  Interestingly, this issue was raised sua sponte by the Panel rather than by the parties.

The Denver Yankees

It's Opening Day at Coors Field, which means it's a good time to revisit one of the more interesting legal opinions involving Major League Baseball.  In 1983, the old Yankee Stadium was undergoing renovations, but there was some question about whether the city would complete the renovations in time for the Yankees' home opener.  When George Steinbrenner threatened to take his team on the road, and hold the Yankeees' "home" opener at the old Mile High Stadium in Denver, the city brought a preliminary injunction action against the Yankees to prevent the execution of an agreement with Denver.

The trial court's opinion, City of New York v. New York Yankees, 458 N.Y.S.2d 486 (N.Y. Sup. 1983), is delightfully written.  Although it does not appear that Steinbrenner ever explicitly threatened to actually move the team to Denver, the court playfully considered Steinbrenner's implicit threat:

Any reduction in the number of home games, especially if it involves the home opening games eagerly awaited by the real fans after a long winter in the hot stove league, erodes the ties of loyalty between the people of the City and their team.  Dare one whisper the dreaded words:  "The Denver Yankees."

I don't remember any mention of this back then; I imagine the prospect of the Yankees playing in Denver, if even for a single series, must have created quite a buzz.  And while the prospect of the Yankees ever leaving New York is ridiculously far-fetched, the court's opinion notwithstanding, it is fun to think of what kind of damage the likes of Henderson, Mattingly and Winfield might have done in the thin air of Denver.

City of Pueblo Tax Case

Last week, the Colorado Supreme Court released its opinion in

Catholic Health Initiatives Colo. v. City of Pueblo, No. 07SC90.  In Catholic Health Initiatives, the majority

considered  the City of Pueblo tax code, and held that that Villa Pueblo, a senior housing facility run by the Catholic Church, was not entitled to a tax exemption as a charitable or religious organization.  The Court further held that this interpretation of Pueblo’s tax law did not violate the Establishment Clause and Free Exercise Clause of the United States Constitution.

One interesting aspect of the case is the lineup of the justices.  The Chief Justice authored the majority opinion, joined by Justices Martinez, Bender, and Coats.  Justice Eid authored the dissent and was joined by Justices Hobbs and RIce.  It is notable that the Chief Justice was able to forge a majority including Justice Coats, who, along with Justice Eid, is generally considered to be one of the conservative pillars of the Court.