Rep. Zoe Lofgren (D-Calif), a senior member of the House Judiciary Committee, has indicated that she is drafting legislation that would seek to increase judicial oversight over prosecutors’ efforts to act against Internet domain names accused of copyright infringement. While the value of such legislation will depend on the details of the bill, the notion of creating greater control over prosecutorial seizure of domain names is laudable.
Lofgren is one of a small number of legislators who voted against the PRO-IP Act of 2008, which authorized the government to shut down websites accused of online piracy or copyright violations by seizing their domain names. Under the enforcement operation that followed passage of that Act – dubbed “Operation In Our Sites” – the U.S. Immigration and Customs Enforcement (ICE) has seized 1,630 domain names, of which 684 have been forfeited to the government. The increasing use of domain name seizures in this area tracks similar use of this tool in other areas of law enforcement such as internet gaming and online pharmaceutical sales.
Specifics about the contemplated legislation have not been disclosed, though Lofgren has been quoted as noting that there are “reasonable arguments” that the way in which the government has seized domain names under the PRO-IP Act violates the Constitution. Lofgren’s bill will apparently propose that the government must provide notice and an opportunity to be heard before domain names are seized or redirected.
The addition of a procedural requirement for notice and hearing prior to domain name seizure would clearly be a favorable development. There have been cases in which the government has seized a domain name and later permitted it to resume operations, under agreed-upon restrictions, pursuant to an arrangement with the affected business. To the extent that businesses may negotiate such arrangements with the government, those arrangements could be reached without the potentially devastating interruption of a seizure. By giving counsel for the affected business the opportunity to be heard, such a requirement may also chill the overuse of domain name seizure by government as a means of gaining unfair leverage in cases involving Internet-based businesses.
The devil, of course, is in the details. Lofgren has reportedly sought input from the online social media community on this bill – particularly from Reddit. Hopefully, she will also seek input from those members of the legal community who have been involved in litigation over domain name seizures as well in order to ensure that the bill presented for consideration is as effective as possible in balancing the interests of all affected parties.
The Supreme Court will soon be considering whether to take up an interesting question involving when monetary sanctions may be imposed for prosecutorial misconduct. More than 50 former federal judges and U.S. attorneys are pushing to get an 11th Circuit Court of Appeals ruling from last year overturned. In early August, the former judges and prosecutors signed onto an amicus brief that urges the Supreme Court to grant certiorari in United States v. Shaygan. The defendant is appealing the appeals court’s overturning of a lower court’s award of more than $600,000 in attorneys’ fees to him after the unsuccessful prosecution of his case.
Shaygan, a Miami doctor, was charged with trafficking illegal drugs following the overdose death of a patient. Events leading up to his trial demonstrated serious ethical questions about the prosecutors’ handling of the case. For instance, after Shaygan’s counsel moved to suppress testimony that was illegally obtained, in an act of retaliation the prosecution filed a 141-count superseding indictment. The prosecution initiated a collateral witness-tampering investigation in what defendants saw as a bad-faith effort to disqualify petitioner’s counsel on the eve of trial. And, in a “knowing and intentional” violation of court orders and discovery obligations, the prosecution withheld material information from both the court and the defendant. These actions led the trial court to impose sanctions because the prosecutors’ misconduct constituted “conscious and deliberate wrongs that arose from the prosecutors’ moral obliquity and egregious departures from the ethical standards to which prosecutors are held.”
The government appealed to the 11th Circuit, where a sharply divided panel overturned the trial court. The circuit’s rationale was based upon its interpretation of the statute,the Hyde Amendment, that provides for the award of attorneys’ fees and other litigation expenses “where the court finds that the position of the United States was vexatious, frivolous, or in bad faith, unless the court finds that special circumstances make such an award unjust.”
The circuit ruled that sanctions were not appropriate because the superseding indictment was objectively valid. And if the underlying (or superseding) indictment could be deemed objectively reasonable, the prosecution could not be held vexatious or frivolous and thus attorneys’ fees were not merited. See our earlier discussion of this issue in this blog.
The court’s holding raised the eyebrows of many former federal judges and prosecutors as well as scholars. Their main contention appears to be the 11th Circuit’s reading of the clause “vexatious, frivolous, or in bad faith.” The amicus brief filed on behalf of the former judges and prosecutors raised two main arguments for why the 11th Circuit’s decision was wrong: (1) based upon the canons of statutory construction, sanctions under the Hyde Amendment are appropriate when prosecutors act in subjective bad faith, even if an indictment is supported by probable cause; (2) acknowledging a subjective standard helps judges control their courtrooms and provides a necessary tool to address prosecutorial misconduct.
The first argument focuses on the “or” in the Hyde Amendment’s provision for sanctions where a prosecutor’s position is found to be “vexatious, frivolous, or in bad faith.” The amici argue that the disjunctive “or” separates the “bad faith” prong from the “vexatious” and “frivolous” prongs, indicating that bad faith can serve as an alternative basis for relief under the Hyde Amendment. Their reading of the statute, they argue, “comports with our basic principles of criminal justice. Our system’s greatness rests, in part, on our insistence that the process be conducted in a principled, clean manner. Thus, for example, we permit the guilty to go free when the evidence against them was obtained in violation of their Fourth Amendment rights. We suppress coerced confessions, even when they bear every indicia of reliability. And we do not permit the prosecution even of a guilty person on the grounds of that person’s race. ”
The amici’s second argument emphasizes the need to provide judges with control over their courtrooms, and the need to impose appropriate sanctions for prosecutorial misconduct. To rein in the overzealous, overreaching, or rabid prosecutor, the Hyde Amendment sanctions provide an important mechanism to restore control. The amici note that other sanctions, such as complaints with bar associations, have proved ineffective over the years and that prosecutors are immune from most lawsuits relating to their official conduct.
It remains to be seen whether the Court will take up the Shaygan case — the chances of the Court ever granting certiorari are pretty slim. But a strongly-worded amicus brief from more than 50 former prosecutors and judges and a notably sharp divide in the 11th Circuit could persuade the Court.
We recently blogged about the recent decision of the U.S. Court of Appeals for the 11th Circuit in Securities and Exchange Commission v. Goble, 2012 WL 1918819 (11th Cir. May 29, 2012). There, we discussed the appeals court’s limitation on the reach of the concept of “securities fraud” under Section 10(b) of the Exchange Act and Rule 10b(5).
Another aspect of that case is also quite noteworthy and may have an impact on many corners of white-collar criminal law. In the Goble case, the court vacated an injunction that simply tracked the language of the securities laws in defining what the defendant was barred from doing. This kind of injunction is often termed an “obey-the-law” injunction.
The court wrote: “Goble correctly identifies these paragraphs as an “obey-the-law” injunction and is rightly skeptical of their validity. As the name implies, an obey-the-law injunction does little more than order the defendant to obey the law. We have repeatedly questioned the enforceability of obey-the-law injunctions not only in the context of securities cases but other cases as well.”
The appeals court pointed out that any federal court injunction must comply with the requirements of Rule 65 of the Federal Rules of Civil Procedure:
“Glaringly absent from the SEC’s brief is any discussion explaining why the district court’s injunction complied with the requirements of Rule 65. Rule 65(d)(1) states that ‘Every order granting an injunction and every restraining order must: (A) state the reasons why it issued; (B) state its terms specifically; and (C) describe in reasonable detail — and not by referring to the complaint or other document—the act or acts restrained or required.’ Fed. R. Civ. P. 65(d)(1). We have never said that a court may simply ignore these requirements because it is entering an injunction in a securities case.”
The key issue that the appeals court pointed out is that an injunction requires a certain amount of specificity, so that the defendant is fully on notice about what he can or cannot do under the order.
“Plainly,” the court wrote, “Goble would need to look beyond the four corners of the district court’s injunction in order to comply with its strictures. The mere cross-reference to provisions of the United States Code and Code of Federal Regulations does not specifically describe the acts addressed by the injunction. And, without a compendious knowledge of the codes, Goble has no way of understanding his obligations under the injunction.”
This decision may open up new lines of argument for defendants in white-collar cases, and not only in securities actions. Since broad injunctions that do little more than track a statutory prohibition can be subject to challenge, defense attorneys may be able to argue convincingly that an injunction should be more specific and more narrowly tailored to a defendant’s past conduct.
On June 20, 2012, President Barack Obama escalated a battle with the GOP-controlled House of Representatives by claiming executive privilege for 1300 executive-branch documents that relate to the White House and the Justice Department’s response to subpoenas about the botched Fast and Furious gun-trafficking operation.
The House Oversight and Government Reform Committee, chaired by Rep. Darrell Issa (R-Calif.) then voted immediately along party lines to approve a contempt of Congress finding against Attorney General Eric Holder Jr. That recommendation is expected to go to the full House next week.
The committee asserts that it needs the documents in its investigation of Fast and Furious and of a possible executive-branch cover-up of that operation. The White House replies that handing over the documents would hamper the ability of government officials to discuss policy matters frankly and without fear that their deliberations would become public.
Confrontations between the President and Congress over documents and over claims of executive privilege are not new. In fact, executive privilege has been claimed by every president since President John F. Kennedy, and the roots of the doctrine go back to actions by President George Washington in 1792.
The privilege to withhold documents from a congressional committee is not found in the Constitution. It is, however, based on the constitutional principle of separation of powers, which provides that the three branches operate independently of each other. Although the Supreme Court rejected the application of executive privilege in 1974 when President Richard Nixon claimed it in relation to a criminal subpoena for Watergate tapes, there is no question that the privilege exists and can be properly claimed under some circumstances.
The problem is that Obama and Holder are claiming the privilege broadly, for all 1300 pages of documents, without specifying why each document or group of documents is privileged.
As Todd Gaziano, a former attorney in the Justice Department’s Office of Legal Counsel, which advises on executive privilege, wrote in the Heritage Foundation’s blog:
Even if properly involved, the Supreme Court has made clear that executive privilege is not absolute. DOJ must provide an explanation why all those documents fit one of the recognized categories of executive privilege. It is questionable whether they all are legitimately subject to executive privilege, for several reasons. First, the Supreme Court in United States v. Nixon (1974) held that executive privilege cannot be invoked at all if the purpose is to shield wrongdoing. . . . Congress needs to get to the bottom of that question to prevent an illegal invocation of executive privilege and further abuses of power. That will require an index of the withheld documents and an explanation of why each of them is covered by executive privilege—and more. Second, even the “deliberative process” species of executive privilege, which is reasonably broad, does not shield the ultimate decisions from congressional inquiry. Congress is entitled to at least some documents and other information that indicate who the ultimate decision maker was for this disastrous program and why these decisions were made.
At the very least, the Administration owes Congress and the American people a better explanation of what it is doing and why.
When you hear of FBI agents descending upon a place, you might think of a hostage situation, a drug raid, or the penetration of a terrorist cell. But you probably wouldn’t assume that those armed agents were working with the U.S. Department of Education on a raid on a Florida for-profit college.
FBI agents raided campuses of FastTrain College in May 2012 in order to obtain data (documents and a computer or two) in furtherance of a joint investigation of the FBI and DOE of allegedly deceptive practices. One might wonder why the drama was necessary: Couldn’t the government just subpoena the materials or go in with a little less gusto? Yes, but the drama may have been a part of the plan.
While on campus, the agents questioned students about their Pell grants, used for tuition and expenses. Not surprisingly, all this activity caused a good bit of chaos and stirred up concern among students. One student was quoted as saying he was glad he was on campus at the time of the raid, “because they could’ve took money from me, a lot of money from me, and I’d have been screwed.” Another student relayed concerns over whether FastTrain was going to continue to operate, and what would happen to his credits. The students’ statements demonstrate a real concern over the credibility and viability of the institution – a concern incited by the FBI’s dramatic entry.
The drama also had major impact online, where several reports seem to have already decided the guilt of the college, inaccurately stating that the investigation found “deceptive and otherwise questionable sales and marketing practices.” This inaccurate quote, which was picked up and disseminated by the Huffington Post, goes to show how careless journalism can set the tone of a story. Here’s what appears to have happened:
• One report noted that “[t]here was a major undercover investigation by the General Accounting Office in 2010 of for-profit trade schools, which receive billions in federal loans and grants. The investigation uncovered ‘deceptive and otherwise questionable sales and marketing practices’ according to a government inquiry.”
• A later report peeled off the second sentence, stating, “Our news partner Channel 4 reports the investigation uncovered ‘deceptive and otherwise questionable sales and marketing practices,’ according to a government inquiry.”
• That quote itself was then picked up by Huffington Post contributor David Halperin, who stated “One report says the investigation found ‘deceptive and otherwise questionable sales and marketing practices.’”
These latter two stories missed the point that the identified deceptive practices were a part of the earlier 2010 GAO investigation and had nothing to do with the still-pending investigation of FastTrain. It appears that some writers are more than eager to jump to conclusions about the alleged greed of for-profit educators.
The DOE and the FBI have raided for-profit schools several times over the past several years – including at ITT and Corinthian College campuses. One source says that years into the ITT investigation, it finally concluded with no finding of wrongdoing. (Tell that to the students who fled from the school’s programs after the FBI raid.)
So why do the DOE and FBI keep up these shows of force at for-profit college campuses? Some of us skeptics may posit that they already have figured out for themselves that these institutions are bad, so they are making life difficult for the schools in order to give the industry a bad name in students’ eyes.
The FBI and DOE should follow the normal steps of investigation. Playing out drama and rigging public opinion before facts are gathered seems as incendiary as crying “fire” in a crowded theater or inspiring a bank run.
While the recent economic crisis brought newly invigorated political support for SEC enforcement against financial services companies, a recent case shows that the courts will still prevent the SEC from overreaching in its efforts to punish those it views as wrongdoers. In Matter of the Securities and Exchange Commission v. Richard L. Goble, a May 29, 2012, decision by the United States Court of Appeals for the 11th Circuit reversed an SEC victory in a lawsuit claiming a violation of Rule 10b-5, on the ground that this anti-fraud provision did not reach the conduct that formed the basis for the enforcement action.
The SEC brought a civil enforcement action against Goble and others in 2008 alleging that Goble, the founder and owner of a brokerage firm called North American Clearing, Inc., had orchestrated a scheme to manipulate the amount of money that North American was required to set aside to protect the assets of its customers. North American was a securities and clearing brokerage firm for about 40 small brokerage firms and cleared trades for more than 10,000 customer accounts with a total value of more than $500 million. The case arose after North American’s revenues declined during 2007 and 2008 and a March 2008 audit by the Financial Industry Regulatory Authority (FINRA) revealed irregularities in North American’s calculation of its reserves.
After a bench trial, a U.S. district judge in the Middle District of Florida found that Goble had directed an employee to make a false entry in the company’s books, and thus found Goble liable for securities fraud in violation of Section 10(b) of the Securities and Exchange Act of 1934, 15 U.S.C. § 78j(b) and Rule 10b-5, 17 C.F.R. § 240.10b-5. The Court also found Goble liable for aiding and abetting violations of the Customer Protection Rule, 15 U.S.C. § 78o(c)(3) and 17 C.F.R. § 240.15c3-3, and the books and records requirements of the Exchange Act, 15 U.S.C. § 78q(a) and 17 C.F.R. § 240.17a 3.
The 11th Circuit’s reversal of the finding that Goble had violated Rule 10b–5 was based on the question of materiality – that is, for a defendant to be liable, to what did the misrepresentation in question have to be material? The appellate court found that, while knowledge that Goble and his company had cooked their books might be material to a customer’s choice of whether to use him as a broker-dealer, that was not relevant to his liability under Rule 10b-5. Rather, the Court emphasized that to be a basis for a liability for securities fraud, the misrepresentation had to be material to an investment decision by a customer and therefore (to use the language of the statute and rule) “in connection with” the purchase or sale of securities. The Court declined the SEC’s invitation to expand the scope of potential liability to include Goble’s conduct.
By rejecting the SEC’s overreaching, the Goble case is a reminder of the important role of the courts in checking the excesses of government enforcement against companies and individuals. And, given the availability of a private right of action under Section 10(b) and Rule 10b-5, the Court’s restriction on the scope of liability may serve to protect against some of the excesses of private securities fraud litigation as well.
A recent settlement by global pharmaceutical giant Abbott Laboratories over its promotion of the drug Depakote shows that federal regulators remain prepared to pursue drug manufacturers for promoting unapproved uses of their products. Abbott has agreed to pay federal and state governments a total of $1.6 billion in criminal and civil fines and to plead guilty to a criminal misdemeanor violation of the Food and Drug Act to resolve allegations against it. This makes the case the second-largest in a series of multi-million dollar settlements of enforcement actions by the U.S. Department of Justice and state regulators against drug makers. Abbott will be subject to monitoring and reporting requirements as a condition of its plea.
When the Food and Drug Administration approves a drug as “safe and effective” for sale to the public, it specifies that the approval is for one or more defined medical purposes. It is a common practice among doctors, however, to prescribe drugs for other uses based on their understanding of other effects of use of the drug, and such “off label” prescriptions are not illegal.It is illegal, however, for drug manufacturers to promote off-label use of their products.
In the Abbott case, federal and state regulators and law enforcement agencies alleged that the company had promoted off-label use of Depakote, which the FDA has approved to treat epileptic seizures, migraines and the manic episodes suffered by people with bipolar disorder. As part of its settlement, Abbott has admitted that, beginning in 1998, it trained a portion of its sales force to promote Depakote to nursing home personnel as a way to control agitation and aggression in elderly patients suffering from dementia. Abbott continued to do so through 2006 even after it was forced to discontinue clinical trial testing in 1999 of the use of Depakote to treat patients with dementia because the drug caused increased drowsiness, dehydration and anorexia in the elderly test subjects.
The use of Depakote by nursing homes for the off-label use promoted by Abbott was attractive because, as Abbott’s sales force highlighted, Depakote was not covered by the Omnibus Budget Reconciliation Act of 1987 (OBRA) and its implementing regulations designed to prevent the use of unnecessary medications in nursing homes. Thus, use of the drug for this purpose could help nursing homes avoid the administrative costs and other burdens of complying with that law.
In some ways, the Abbott settlement is simply another reminder that pharmaceutical manufacturers that “misbrand” drugs by promoting off-label use will face scrutiny and enforcement from federal and state governments. On the other hand, the Abbott case is particularly egregious given the allegations that, after tests showed poor effectiveness and possible problems with the off-label use of Depakote, Abbott failed to disclose to its sales force the results of those studies. In highly regulated industries such as pharmaceutical manufacturing, the case is a reminder that companies that fail to adhere closely to legal and regulatory requirements do so at great risk.
Judge Jed Rakoff’s November 2011 ruling rejecting Citigroup’s settlement with the Securities and Exchange Commission sent tremors through the securities compliance world by challenging the seemingly well-accepted practice of permitting corporations to settle civil claims with the agency without admitting wrongdoing. But in its order granting a stay of the Citigroup proceedings pending appeal, the U.S. Court of Appeals for the Second Circuit has raised significant questions about Judge Rakoff’s previous ruling.
As we reported earlier, in November 2011, Judge Rakoff rejected the SEC’s proposed $285 million settlement with Citigroup on the ground that it was not fair, adequate, reasonable or in the public interest – primarily because it followed the common practice of permitting Citigroup to settle the case without admitting the allegations against it. The SEC appealed the ruling and sought a writ of mandamus, seeking to set aside the order altogether. Citigroup joined in the SEC’s motion.
On March 15, 2012, the Second Circuit granted the stay. In doing so, the court focused on three factors. First, the court faulted Judge Rakoff for failing to give sufficient weight to the SEC, as an executive administrative agency, to make discretionary decisions of governmental policy in the public interest. Second, in addressing Judge Rakoff’s stated concern that the settlement was not fair to Citigroup (because it imposed substantial relief without any proof of the underlying allegations), the court noted that it was unnecessary for the courts to protect a private, sophisticated, well-counseled litigant like Citibank from entering into a voluntary settlement in which it gives up things of value without admitting liability. Finally, the court noted that a rule that would not permit settlements without proof (or admission) of liability would be tantamount to a rule barring parties from compromising, and observed that there was no precedent to support the existence of such a rule.
The appellate court noted that both parties were united in seeking the stay and in opposing the district court’s order, with the result that the panel did not have the benefit of adversarial briefing. For that reason, the Court stated that it would appoint counsel to argue in support of the district court’s position.
Given the enormous resources that would be expended if the SEC’s case against Citigroup were to go forward without the settlement, and given that Judge Rakoff’s ruling would invalidate a common practice in securities regulatory litigation, it is not surprising that the Second Circuit was willing to stay the trial court proceedings until it has a full opportunity to consider this case. The unsettled status of the issues presented in the Citigroup appeal will obviously pose significant challenges to parties seeking to settle SEC litigation in the near term. How the Second Circuit resolves the matter could have a significant effect on the SEC’s enforcement practice during a period in which it claims to be ramping up its efforts in this arena
Recent headlines about the Securities and Exchange Commission have focused on Judge Jed S. Rakoff’s recent rejection of the agency’s proposed settlement of fraud charges with Citigroup Global Markets. In that case in the U.S. District Court for the Southern District of New York, Judge Rakoff rejected the Citigroup settlement because, in his view, there were no established facts on which to base a decision whether the settlement was “fair, reasonable, adequate and in the public interest.” The SEC and Citigroup have appealed Judge Rakoff’s decision, which is on hold as the U.S. Court of Appeals for the Second Circuit decides whether to grant an expedited hearing in the case.
Judge Rakoff’s decision is already having significant ramifications. In a December 20, 2011, letter to the SEC, Judge Rudolph T. Randa of the U.S. District Court for the Eastern District of Wisconsin cited Judge Rakoff’s Citigroup decision and requested that the commission provide a factual predicate showing the fairness and appropriateness of its proposed settlement of fraud charges against Koss Corporation, a Milwaukee-based maker and seller of stereo headphones. Like Judge Rakoff, Judge Randa would like the SEC to provide to the Court a factual predicate showing “the proposed final judgments are fair, reasonable, adequate and in the public interest.”
Koss and its chief executive, Michael J. Koss, were accused of maintaining materially inaccurate financial statements, books and records from 2005 through 2009 – a period during which the company’s chief accountant embezzled more than $30 million from the company. Koss and the company were also charged with failing to maintain adequate financial controls.
In addition to asking for a more detailed factual presentation, in his December 20 letter, Judge Randa also questioned whether he should – or even could – grant the relief that is specified in the proposed SEC-Koss settlement. The agreement would settle the case without any admission or denial of the charges (as is customary in SEC civil settlements). But the agreement also proposes the entry of an injunction restraining Koss from violating the same securities laws it was accused of violating, and would require the company to maintain adequate records and a system of internal accounting controls.
“If enforcement becomes necessary,” Judge Randa noted in his letter, “the terms of such a vague injunction would make it difficult for the court.”
The SEC has until January 24, 2012, to respond to Judge Randa’s letter, and an SEC spokesman has indicated that the agency intends to “provide the court with the information as requested.”
Citigroup and Koss are not the first companies to have judges call into question the adequacy of their proposed settlements with the SEC. In 2009, Judge Rakoff questioned the adequacy of a proposed settlement with the Bank or America, and settlements with Barclays and in an unrelated case with Citigroup were also questioned by federal district judges in Washington, D.C.
Going forward, the SEC may have to reconsider the way in which it settles civil enforcement matters with companies or, at a minimum, the way in which it presents those settlements to the courts for approval. The interesting question will be whether the need to present a factual predicate for the fairness of a settlement will still permit the SEC to settle cases with companies allowing the companies to avoid any admission of liability.
For those defendants – particularly companies – that seek to settle cases without admissions of liability, increased judicial scrutiny of SEC settlements may make it harder for them to resolve civil enforcement matters easily. In addition, if that scrutiny leads to more settlements in which companies admit liability, it may become more difficult for individual targets of investigations to defend themselves against legal claims and in the court of public opinion. The resolution of the Citigroup and Koss cases may give some hint of where things may be headed for those seeking to settle SEC cases in the future.
In 2001, federal inmate Richard Lee Pollard sustained two broken elbows after tripping over a cart in a privately operated prison housing federal inmates. He sued five prison employees for their actions after his injuries. On Nov. 1, 2011, the Supreme Court held oral argument in Minneci v. Pollard and considered the possibility of creating a new federal remedy against private employees who work for a federal government agency.
Pollard claimed that after his injuries, prison employees put him back to work before his arms were healed, causing him extreme pain in violation of his Eighth Amendment right against cruel and unusual punishment. Pollard pursued his claims under the authority of the 1971 Supreme Court case Bivens v. Six Unknown Federal Narcotics Agents, which held that, under limited circumstances, a plaintiff could bring a private cause of action for damages against federal employees who violated a constitutional right when there was no other adequate remedy under federal law.
While there was concern at the time that Bivens would open the door to a slew of federal cases, the Court has been reluctant to extend its holding beyond the facts of the Bivens case, and has done so only three times since 1971. The Supreme Court has not recognized a new Bivens right in the past 31 years.
In this oral argument, the Supreme Court was reviewing a Ninth Circuit ruling granting Pollard a Bivens right to sue the private employees in a prison for federal inmates. The issue that the justices focused on was whether the availability of a state law cause of action would be an “adequate remedy” for a plaintiff when there was no adequate remedy under federal law.
The attorney for the prison workers, Jonathan S. Franklin, argued against the creation of liability for employees of a private firm working for the government under contract, at least when the suing individual has an alternative remedy in state court. The court seemed inclined to agree with Franklin’s argument that since every state provides a state law remedy for such a claim, there is an adequate remedy available under law and therefore there is no need to create a federal cause of action for damages.
The federal government also sided with the prison workers. The Solicitor General submitted a merits brief that argued that Pollard could sue for damages under California law and probably receive a better result than he would in a Bivens lawsuit because California tort law imposes a lower standard of liability than the Eighth Amendment. At oral argument, Pratik A. Shah, assistant to the Solicitor General, focused on the language of prior Court opinions suggesting that the availability of an alternative remedy was likely fatal to any attempt to establish a new Bivens right.
The Justices’ line of questioning indicated that they found the state law claim to be an adequate remedy. Justice Elena Kagan questioned why Pollard brought the claim under Bivens. She said, “It seems mysterious to me. If you bring it as a negligence claim, you get a lower standard of liability, negligence versus deliberate indifference. You get vicarious liability. So I have been trying to puzzle out, why aren’t these brought as negligence claims rather than as Bivens claims?”
Pollard’s attorney, John F. Preis, struggled to give satisfactory answers as to why Bivens should apply. He tried to reframe the question in his opening argument, stating that this issue is “whether a Federal prisoner’s access to constitutional remedies should turn on the mere happenstance of where the prisoner is detained.”
Preis argued that federal remedies should be available to Pollard because it is not certain that state law remedies would be available for Pollard’s claims. The Justices seemed unconvinced by this argument. Justice Stephen Breyer pressed, “Tell me your specific claim that does not arise under state tort law, that’s all I want to know, which is the same question I heard – I just didn’t hear the answer to.” Preis could not satisfactorily answer this question, as every answer he gave — inadequate health care, deprivation of nutritious food, and others — the Justices believed could be addressed by state law tort claims. In the end, Preis had to weakly answer that this was brought as a federal claim because Pollard only had access to books on federal law in the prison library.
The Justices’ questioning indicates that they are unlikely to extend Bivens to cover cases against private employees where there is an adequate remedy under state law. Defendants will likely have to wait for another case before the holding in Bivens is extended again.