Supreme Court Happenings - 3.4.19

Lloenflys

"Certainty is an illusion ..."
Honoured Citizen
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Nearly a month later and I'm finally getting around to reading some Court opinions. Yikes, it's been awhile! Now, here's the writeup on the three cases decided by the Court on March 4, including one that would have seen me joining the Gorsuch movement ... at least until the end of his opinion, where he pulls an attempted brainwashing about Chevron deference. Yikes.

Fourth Estate Public Benefit Corp v. Wall-Street.com, Inc. - 17-571 (11th Circuit Court of App.)
MAJ: Ginsburg (Unanimous)

I've said plenty of times that the work of the Supreme Court is often decidedly unsexy, far removed from the huge Constitutional issues that we all anticipate eagerly. This is such a case. The question is whether section 411(a) of the Copyright Act of 1976 considers a work to be registered by the Copyright office at the point when a person seeking the copyright submits all of the necessary paperwork to the copyright office, or alternatively at the point when the copyright office has reviewed the application and either approved or denied it.

This is significant onsofar as an unregistered work cannot be defended in Court. Under section 501(b) of the Copyright Act, a copyright owner can file a civil action for infringement of copyright, but per section 411(a) this can only occur once "registration of the copyright has been made." This really is, however, just a formal requirement because registration doesn't create the right - the right exists independently and apart from the act of registration, and attaches upon creation of the "original work of authorship ... fixed in any tangible medium of expression." 17. U.S.C. sec. 102(a). Registration is simply an administrative procedure designed to assure the Courts that a valid copyright claim is being dealt with and remove the court from having to make a determination on the question of original authorship in the first instance.

What is especially odd about this case is that ultimately, it doesn't matter a lot other than as a matter of timing. Because the copyright attaches at the moment of creation, registration itself is not necessary to perfect the right, just to sue. That means if you create a right and someone infringes on it, you still have the right to go to the copyright office, register your copyright, and then pursue an infringement suit. That makes this suit very narrow in time - whether a suit filed after an application has been filed but before the copyright office takes official action to complete the registration is "Registered" for purposes of section 411(a).

While there was a Circuit Split on this issue below, the Court unanimously found that there shouldn't be. The statutory language creates rights that inure to the benefit of the copyright holder after registration is completed that wouldn't be necessary if registration was automatic upon filing, and there's no reason for the Court to invalidate the necessity of those provisions by reading the statute in a way that makes them superfluous. That's really the extent of what this case comes down to - it's neither very exciting nor very difficult.

Indeed, the Court nods to the fact that Court more than likely started ruling differently because backlogs in the copyright office have become more and more lengthy as time has gone on, now often lasting into the months instead of days or weeks. But the Court points out that Congress has the power to fix this by providing more money for more copyright clerks. It is not on the Courts to fix it by changing the rules and just declaring that copyrights are "registered" as soon as applications are filed.

No separate analysis section is needed here - this is obviously the right decision, based on a very straight-forward and simple textual analysis of the Copyright Act.

BNSF Railway Co. v. Loos, 17-1042 (8th Circuit Court of Appeals)
MAJ: Ginsburg, joined by Roberts, Breyer, Alito, Sotomayor, Kagan, and Kavanaugh
DIS: Gorsuch, joined by Thomas

Continuing the theme of unexciting Supreme Court cases interpreting obscure legal provisions, this case asks the question of whether compensation awarded as damages in a lawsuit for negligence against a railroad employer is taxable under the Railroad Retirement Tax Act (RRTA). In case you are wondering why railroad worker's have a specific retirement tax act, the answer is that when Social Security was created, railroad worker's were exempted. Back in the 1930's, the railroad industry (which was exceedingly powerful, wanted an exemption from social security and to be treated separately. Congress acquiesced and created a system where railroad employee's would pay higher taxes but be eligible for higher benefits after retirement. Just like social security payments, payments under the RRTA are taken from an employee's compensation. The railroads then send those payments to the IRS.

In this case, an employee stepped in a hidden drainage grate and hurt his knee, resulting in lost work. Eventually, the employee would be terminated for excessive absences - absences that he blamed on the knee injury he allegedly suffered when he stepped in the grate. A jury awarded him damages, including $30,000 which was directly identified as being back pay for lost work. When the railroad paid out the damages, it withheld RRTA taxes from the $30,000 portion of the damages award and paid the rest in full.

The Eighth Circuit Court of Appeals found for the employee and ordered that the full $30,000 be paid out to him. In analyzing the case, the Court disagreed and instead found for the railroad. Of primary importance to the Court was an analysis of precedential cases that have previously interpreted the scope of the RRTA's compensation language. The language used in a companion statute - the Railroad Retirement Act - is also relevant and dovetails the RRTA in defining compensation as "any form of money remuneration paid to an individual for services rendered as an employee."

As early as 1938, in the year after the RRTA was enacted, the IRS interpreted the compensation provision very broadly to include not just money earned from working, but also money paid for periods of absence. In 1994 the IRS explicitly included the concept of compensation for taxation purposes including payments for periods of "lost work." Of course, the Court is not necessarily bound by an agency's interpretation of a statute (more on this later), so the Court must perform its own analysis.

Statutory analysis must begin with the text, and here the Court engages in a comparison between the language used in the RRTA and language used in various Social Security Act provisions defining "wages." Since the definition of "compensation" in the railroad context and the definition of "wages" in the social security context are functionally similar, the Court argues that cases interpreting the meaning of the Social Security Act and its associated set of laws provide precedential authority in the railroad context as well.

Two such cases are relevant. In 1946, the Court decided Social Security Bd. v. Nierotko, 327 U.S. 358, in which it ruled that an employee who received compensation for wrongful termination due to his engagement in union activity was subject to taxation under the theory that "wages" covers any money earned in the context of the entire "employer-employee relationship." Since this was effectively a payment for an employer caused absence, it was taxable. Next, in 2014, the Court decided United States v. Quality Stores, Inc., 572 U.S. 141, in which it ruled that severance payments qualify as "wages" for purposes of taxation because they stem directly from the employment relationship and are made to former/retiring employees.

From this basis, the Court has no difficulty arguing that when a railroad employee is injured by a railroad's negligence and receives damages specifically attributable to lost wages, that portion of the award is subject to taxation under the statutory definition of compensation. The Court refutes several counter arguments to buttress its claim, but perhaps the most interesting that hasn't already been touched on in this summary is a surplusage argument about exceptions that are in the statute for when payments for lost work is not to be classified as "compensation," and therefore isn't taxable, including certain types of sick pay and disability pay. The Court justifiably points out that no such exceptions would be necessary if the general rule wasn't "payments for lost work are to be considered compensation." Since the Court makes efforts not to interpret statutes in such a way that provisions are rendered meaningless, this argument favors the Court's analysis.

Gorsuch's Dissent

Justice Gorsuch and Thomas would actually rule for the employee, a somewhat unusual position for them to be in. As usual, Justice Gorsuch begins with the text. Unlike the Majority, however, he sees no basis for reading the statutory definition of compensation as "monetary remuneration ... for services rendered as an employee to one or more employers" as including payments for lost wages or lost hours worked. What "service," exactly, was the worker performing in receipt of the money paid for lost wages? While sick pay and disability pay may fit into the definition of compensation because benefits are part of the give and take in an employment negotiation, there is no such argument that compensation for negligence on the part of an employer is part of a negotiated employment agreement.

Further, the dissent's position is bolstered by the statutory history. While the original text of the RRTA specifically included time lost as being within the definition of "compensation," in 1975 and 1983 two Amendments removed all such references. The RRA, however, left such terms in place. While the Majority reads that as irrelevant, the Dissent uses the same surplusage trick used by the Majority. Under the Majority's reading, "compensation" always included payments for "lost time." That means Congress first included the language as merely "illustrative," and then removed the language because it was no longer necessary. In other words, despite the statutory changes in text, there was no intended change in meaning. The language was nothing but surplusage throughout its entire existence, in this view. Surplusage in this case certainly cuts both ways.

Gorsuch ends his argument by taking a significant dig at the concept of Chevron deference, which is a view that the Court's should largely accept the interpretation of ambiguous terminology that is adopted by the executive agencies that have oversight in a particular field. Conservatives have long despised Chevron, and Gorsuch is no exception. Gorsuch's dislike of Chevron comes out loud and clear in the paragraph that ends his opinion, in which he states the following:

Instead of throwing up our hands and letting an interested party—the federal government’s executive branch, no less—dictate an inferior interpretation of the law that may be more the product of politics than a scrupulous reading of the statute, the Court today buckles down to its job of saying what the law is in light of its text, its context, and our precedent. Though I may disagree with the result the Court reaches, my colleagues rightly afford the parties before us an independent judicial interpretation of the law. They deserve no less.​
Not too hard to see here that Gorsuch wanted to continue building the Chevron coffin that almost certainly will come into use soon with a conservative Court.

Analysis

Believe it or not, with the exception of the Chevron analysis in Justice Gorsuch's dissent I think he has the better argument, simply based on the textual analysis. To be clear, both opinions have logical points and can't point to surplusage problems with the other sides interpretation. That's essentially a draw. I have a couple of issues with the Majority opinion this case, however:

(1) A common sense reading of "compensation for services rendered," which is the basis of the statutory authorization to tax, would not include compensation for payments resulting from negligence. Payments under some sort of employ insurance program due to time lost from any cause would clearly fit under such a definition, but not so damages coming from negligence. Now, let's be clear - Congress can define "compensation for services rendered" however it wants to define it, but in the absence of a clear definition in the statute, the ordinary meaning should govern. The Majority opinion does not respect that typical cannon of construction.

(2) The Majority's analogy to the Social Security provisions is unconvincing. Just because the two programs both deal with Retirement accounts doesn't mean Congress had any intention of administering them the same way. In fact, the very existence of the RRTA suggests that they did not want them administered the same way. I can see no reason whatsoever to assume that the SSA and RRTA should be analyzed together, even if they seem to employ similar language. There certainly is no reason that cases decided under the SSA should have any precedential effect on cases involving the RRTA.

(3) Justice Gorsuch's argument that Congress systematically removed language that supports the Majority's position is extremely compelling and hard to refute.

I would join the dissent if I were on the Court except for the Chevron paragraphs.


Rimini Street, Inc. v. Oracle USA, Inc. 17-1625 (9th Circuit Court of Appeals)
MAJ: Kavanaugh (Unanimous)

This was the second Copyright Act case of the day, and it also was a unanimous decision. The question in this case was straight forward - how much discretion does a district court have under the Copyright Act to award costs under section 505? That provision authorizes courts to award "full costs." Historically, this has been understood to mean all of the costs listed in a cost schedule found in the act, but nothing more. The 9th Circuit in 2005, however, began allowing for additional fees that were outside of the statutory cost schedule, including things like expert witness fees, arguing that those were part of the "full costs" associated with the litigation in question.

This unanimous opinion put the kibosh on that activity. With a short, straight-forward argument Justice Kavanaugh establishes that the Copyright Act includes two sections, 1821 and 1920, that establish six classes of costs that are recoverable under the act. Noticeably, those six classes of costs do not include attorney's fees or expert witness costs. The Court makes clear in its opinion that Congress is perfectly capable of offering those fees if it wants to simply by including them in the schedule of costs. Failure to do so is presumptive evidence that they had no intention to do so.

There really isn't a lot more to this case. The Respondents (and presumably the 9th Circuit, which was overruled in this case) attempted to argue that the term "full" can go beyond the schedule, and that historically fees outside the schedule could be awarded. The Court essentially bats this to the side without much difficulty, and even points out that from 1831 (when the first Copyright Act was passed) to 1976 (when there were some Amendments to the law), not a single court awarded fees outside of the fee schedule mentioned in the statute ... in over 800 cases. That's a pretty brutal record.

Bottom line: full costs under the Copyright Act means the six things laid out in the statute and nothing more. This was the right decision, and the 9th Circuit was justifiably overturned.
 
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